Business media have been spreading the myth that the Environmental Protection Agency's plan to rein in carbon pollution will harm the American manufacturing industry by increasing electricity prices. But a new report by a group of business leaders found that the manufacturing industry is at far greater economic risk from the extreme weather events that the EPA's clean power plan would help prevent.
When the EPA proposed standards for the carbon pollution driving climate change for existing power plants, several top U.S. business media outlets promoted claims that the rules would harm manufacturers. Reuters published two articles that uncritically repeated utility industry lobbyists' claims that the rules will "destroy jobs" at "manufacturing plants." The Wall Street Journal cited a steel industry spokesman that claimed the rules will "impede the post-recession growth of American manufacturing" without criticism, and the newspaper's editorial board suggested that the rules will "punish" regions that rely on manufacturing. Fox Business' Lou Dobbs Tonight hosted Steve Milloy, a policy director at coal giant Murray Energy, who lambasted the rules, stating: "if you work in manufacturing, do you want to see your job exported to China?"
However, an analysis by Business Forward -- an association of American business leaders focused on sound public policy -- found that extreme weather events will have severe economic impacts on the automotive manufacturing industry in the United States, while any increase in electricity prices as a result of turning to clean power will have minimal costs for the manufacturing industries. The analysis has not been covered* by the prominent business media outlets that promoted claims that the standards would harm manufacturers.
For example, automakers, who represent the nation's largest industrial sector, are extremely vulnerable to disruptions in the global supply chain caused by extreme weather events. The study found that extreme weather events -- many of which are happening more frequently -- can cause an auto assembly plant to shut down at immense costs of $1.25 million or more per hour. Business Forward explained that even when extreme weather events happen on the other side of the globe, they impact manufacturers:
Because supply chains are global, disruptions on the other side of the planet can slow down or shut down an American factory. For example, in October 2011, severe floods in Thailand affected more than 1,000 industrial facilities. Production by consumer electronics manufacturers in the U.S. dropped by one-third.
The carbon standards, by contrast, would cost the automotive industry far less because electricity is a "comparatively small portion" of their total costs. The report found that if electricity costs increased by 6.2 percent by 2020, it would add less than $7 to the cost of producing car that sells on average for $30,000. Overall, this would cost the average auto assembly plant about $1.1 million, or the equivalent of less than an hour of assembly line downtime at a single auto plant each year. The EPA estimates that electricity prices will increase slightly as a result of the standards, but efficiency improvements will lower electric bills by 2025.
While conservative media have tried to portray carbon pollution standards as a death knell for all types of businesses, the reality is that that standards are only a big hit for the oldest, dirtiest power plants that have refused to clean up and are now desperately fighting them. For example, many members of the Chamber of Commerce, which released a dire report in advance of the standards, told ThinkProgress that they did not oppose the standards. A recent Brookings Institution report that found that "by nearly every measure" delaying climate policy produces "worse economic outcomes" may be one reason why over 170 companies and investors have come out in support of the EPA's carbon standards.
*Based on a Factiva search for Reuters and Wall Street Journal and a TV Eyes search for Fox Business for the terms "EPA and (manufacturing or jobs)" from June 1 to June 11, 2014.