Business Breakdown: New Pollution Rules to Close Coal Plants

Rolling blackouts, asthma attacks and cost-benefit analysis, oh my!

This week, the Environmental Protection Agency released a new set of rules limiting the amount of mercury, arsenic, and other poisons that power plants can pump into the air. Originally mandated under the bipartisan Clean Air Act in 1990, the rules have been delayed by fossil fuel industry challenges in court and Congress. Tougher limits will force coal- and oil-burning power companies to spend billions on scrubbers and other clean emissions technology over the next several years—and where that’s not economical, will close down between 30 and 60 of the most polluting plants in the country—average operating age, 51 years.

Why is there so much controversy over these rules? Fossil-fuel-burning companies don’t want to have to spend money out of their bottom line to cover the external costs of emitting toxic chemicals. Environmentalists and health advocates are up in arms about the illness caused by these chemicals, which have a significant negative impact on public health. The EPA says the rules will prevent 11,000 premature deaths a year, 5,700 hospital and emergency room visits, and 540,000 days of missed work or school, for a final cost-benefit analysis of $9 in health benefits for ever $1 spent complying with the rules.

Will this make electricity scarce or expensive? Industry sources have argued that the rules will cause rolling blackouts and chaos in the grids by diminishing our power generation capacity, but independent assessments find that unlikely—an Associated Press survey of power plants found that few expected to compromise service to their customers. Power companies can ramp up production at cleaner plants, or work with regulators to make sure the transition is as smooth as possible when the rule goes into affect two years from now.

Will this help clean energy companies? In general, anything that raises the cost of producing fossil fuel power helps clean energy companies gain market parity. These rules will give power producers added incentive to add clean energy plants to their portfolios, both to make up shortfalls from closed plants and to prepare for future restrictions on emissions. The measure will also help companies that manufacture emissions scrubbing technology, giving them plenty of new business. The biggest benefit here, though, is to public health.

Will this hurt jobs? Closing power plants means ending jobs, perhaps tens of thousands, which is not something anyone wants to hear during a time of high unemployment. Proponents of the rules argue that retrofitting efforts and the need to build new, cleaner plants will create construction jobs. The University of Massachusetts at Amherst estimates that the new rule will create nearly 300,000 jobs a year over the next five years; the Economic Policy Institute estimates a more conservative net increase in jobs, between 28,000 and 158,000 in the next five years.

These long-overdue rules will make the air we breathe cleaner. They’re also going to force transformation in the coal power sector, much to the consternation of executives and stakeholders. But even if it’s costly, it’s the first step on a necessary path towards a clean energy economy. That’s the breakdown.

Photo via (cc) Flickr user eutrophication&hypoxia

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