Fact-Checkers: Chamber Of Commerce Study Assumed Stricter Standards Than Those Announced

Wash. Post Fact Checker Gives Politicians Who Cite Study “Four Pinocchios,” Notes That Nearly Three-Fourths Of Cost Estimate Came From Erroneous Assumption. The Washington Post's Fact Checker gave politicians continuing to cite the Chamber's numbers its worst rating, “Four Pinocchios,” which it reserves for “Whoppers.” The Fact Checker explained that the Chamber assumed the rule would impose a 42-percent reduction in carbon dioxide emissions from existing power plants by 2030, when the actual rule only required a 30-percent reduction. It also noted that nearly three-fourths of the cost estimate from the Chamber came from erroneously assuming that the rule would require new natural gas plants to have carbon capture technology:

The Obama administration on Monday proposed to cut carbon dioxide emissions from existing power plants by up to 30 percent by 2030, compared to 2005 levels.

[...]

But on page 15 of the Chamber report, the Chamber says it assumed the rule would impose a 42 percent reduction[.]

[...]

Oops. That's a rather large gap between assumption and reality, as the Chamber of Commerce conceded to The Fact Checker. “It's a big difference,” said Matt Letourneu, senior director for communications and media at the U.S. Chamber's Institute for 21st Century Energy, which produced the study. “We are going to have to see where the numbers fall.”

[...]

The Chamber assumed that $339 billion of an estimated $478 billion in compliance costs would result from having to build new power plants. But that in turn depended on the [erroneous] assumption that more expensive carbon capture plants would need to be built.

[...]

Some might argue this was only an innocent mistake, but the EPA last week in a blog post on the Chamber's study noted that it would not require carbon capture technology for new natural gas plants. [Washington Post, 6/3/14; Washington Post, accessed 6/3/14]

Politifact Rated It "False" To Continue To Cite Chamber Of Commerce's Study. Politifact agreed with The Fact Checker, noting that even the Chamber acknowledged that its numbers were only for the scenario that it put forward. Based on this, Politifact rated Speaker John Boehner's citation of the Chamber study to claim large job losses and electricity rate hikes “False.” From Politifact's June 2 post:

[T]he chamber study that Boehner and other Republicans cite assumed that the Obama administration would want to decrease carbon emissions by 42 percent -- not 30 percent -- before 2030 (a number Obama first suggested in 2009 during the Copenhagen international climate change talks). When it comes to the pace for reducing CO2 levels, this is a significant difference.

This is a point even the chamber made to PolitiFact now that Obama's regulations have been released.

“We were never saying those were the numbers for any scenario other than the ones that we put forward,” said Matt Letourneau, spokesman for the Institute for 21st Century Energy at the U.S. Chamber of Commerce. “Now that we have a different benchmark, we're taking a look at the rule and the analysis and the model and we'll see what we can do (to update the study).”

Why don't the numbers work? By assuming a much more difficult goal, the chamber also predicted that by 2022, the EPA (under a different president) will have to change course to meet the 42 percent threshold. The only means to accomplish this, the chamber concluded, was to force new natural gas plants to use carbon capture and storage technology. In September, the EPA said new natural gas plants would not need to include carbon capture in their facilities.

A large chunk of the chamber's estimated costs of the carbon rules comes from the assumption that new natural gas plants will require carbon capture technology, which they say is 50 percent more expensive to build and also more expensive to operate. Therefore, their assumption that power companies face $478 billion in compliance costs -- $339 billion from construction -- is likely overblown. [Politifact, 6/2/14]

Yet Editorial Boards Continue To Cite Flawed Chamber Of Commerce Study On Carbon Pollution Standards

Detroit News Cites Chamber To Claim EPA Rules Will Make Americans “Hungrier.” A June 3 Detroit News editorial acknowledged that the new EPA standards limiting carbon emissions from existing power plants will have health benefits and create cleaner air for Americans, but claimed they also “risk making them hungrier, less prosperous and more likely to be unemployed as the nation's economy slows and jobs disappear.” The editorial cited the Chamber of Commerce's study as proof:

The White House cites as myth the projections by the U.S. Chamber of Commerce that the regulations will reduce employment by 224,000 jobs annually, hike electricity bills by $289 billion and trim $500 billion from household incomes.

Europe's experience with such hardline carbon rule-making would suggest the chamber's claims are more credible than the administration's. Clean energy investment among European Union members dropped 14 percent in the third quarter of last year, as governments reconsidered policies similar to the ones Obama is putting in place.

The reason: Electricity costs in Europe are the highest in the world, and are helping to drive away manufacturing jobs. Instead of shutting down coal plants, Europe is actually building them again as a way of dropping those crushing electricity costs. [Detroit News, 6/3/14]

Boston Herald Cites Chamber To Claim EPA Rules “Would Seriously Set Back The Nation's Economic Growth.” A June 3 editorial in the Boston Herald cited the Chamber of Commerce study to claim that the rules will hurt the United States' economic growth while legal challenges are “the only hope to keep the nation from heading off this economic cliff”:

The Environmental Protection Agency's proposed regulation on power plant carbon emissions looks on the surface like a model of its kind -- there's time to comply (by 2030), a reasonable baseline year (2005) for a nationwide 30 percent reduction, and flexibility for states to pick their own compliance strategies.

Only two points are neglected: Such a drastic, and surely costly, overhaul of the electricity system will at the end of the day likely yield little benefit and would seriously set back the nation's economic growth.

[...]

The EPA asserts that the proposal will yield $55 billion to $93 billion in benefits in 2030 and even shrink electricity bills.

On the other hand, the U.S. Chamber of Commerce says it will reduce Gross Domestic Product by an average of $51 billion and lead to 224,000 fewer jobs a year -- each and every year -- between now and 2030. That's a tremendous drag on growth in an economy for which the annual rate of change in the last nine quarters has averaged only 1.8 percent.

The political class, which too easily believes in false Cassandras, will applaud this ineffective president now trying to work on his “legacy” issues. The only hope to keep the nation from heading off this economic cliff will rest in the inevitable legal challenges. [Boston Herald, 6/3/14]

Fort Wayne News-Sentinel Cites Chamber To Claim EPA Rules Will Greatly Increase Electric Bills. A June 3 editorial in the Fort Wayne News-Sentinel claimed that even though the Chamber of Commerce's “dire numbers” may be “somewhat exaggerated,” the new EPA rules could increase electricity bills by “80 percent” or “three times as much” as they are now:

If you think your electric bill is too high now, what would you think about paying 80 percent more? How about three times as much?

That's what is likely in our future if the Environmental Protection Agency's proposed new rules on carbon emissions take effect. The proposal mandates a 30 percent in carbon emissions at fossil-fuel burning plants by 2030.

Indiana Chamber of Commerce President and CEO Kevin Brinegar, citing an Institute for 21st Century Energy study, says the regulations will result “in a whopping $51 billion in economic losses” through 2030 and result in 224,000 Americans losing their jobs and consumers paying $289 million more for electricity. And all we'd get for that tremendous cost is a less-than-2 percent reduction of carbon emissions, not a whole lot in the totality of pollution spewed by countries like China and India.

[...]

Granted, we should consider those dire numbers somewhat exaggerated, since they are based on a study by an industry-friendly group. But we should also take with a grain of salt the bland assurances of the EPA that the plan is “tailored to each state's circumstances” and the opinion of the Indiana Sierra Club that “the goal is doable.” There is a lot of “see what you want to see” on this issue. [Fort Wayne News-Sentinel, 6/3/14]

Analysis Of Actual Rule Finds Significant Net Benefits, Lower Electric Bills

EPA Analysis: Standards Will Result In $20 To $50 Billion In Net Health Benefits. The EPA's Regulatory Impact Analysis concluded that the carbon pollution standards' “combined climate benefits and human health co-benefits associated with the reduction in other air pollutants substantial and far outweigh the compliance costs for all of the regulatory options and compliance approaches.” It estimated that the net benefits would be anywhere from $20 billion to $50 billion, depending on assumptions about the monetized benefit of reducing pollution contributing to climate change and health problems (click to enlarge):

Based upon the foregoing discussion, it remains clear that this proposal's combined climate benefits and human health co-benefits associated with the reduction in other air pollutants substantial and far outweigh the compliance costs for all of the regulatory options and compliance approaches. [EPA, June 2014]

EPA Estimates Electric Bills Will Decline By 2025 Due To Efficiency Improvements. The EPA estimates that electricity prices will slightly increase, but there will be “significant reductions in electricity demand” due to the rule, resulting in a 3.2- to 5.4-percent decline in average electric bills by 2025 (click to enlarge):

[EPA, June 2014]

Economists Indicate The Rules Will Have Little Employment Impact. The EPA estimated that the rules would add 112,000 full-time and part-time jobs in energy efficiency by 2025, while costing some jobs if coal plants retire. It noted that employment effects would likely be “small and transitory” if the U.S. economy is at full employment:

If the U.S. economy is at full employment, even a large-scale environmental regulation is unlikely to have a noticeable impact on aggregate net employment. Instead, labor would primarily be reallocated from one productive use to another (e.g., from producing electricity or steel to producing high efficiency equipment), and net national employment effects from environmental regulation would be small and transitory (e.g., as workers move from one job to another).

[...]

If the economy is operating at less than full employment, economic theory does not clearly indicate the direction or magnitude of the net impact of environmental regulation on employment; it could cause either a short-run net increase or short-run net decrease (Schmalansee and Stavins, 2011). [EPA, June 2014]

Nobel Prize-winning economist Paul Krugman argued that because the United States is in a depressed economy, “building new, low-emission power plants would employ both workers and capital that would otherwise be sitting idle, and would, if anything, give the U.S. economy a boost”:

[T]he U.S. economy is still depressed -- and in a depressed economy many of the supposed costs of compliance with energy regulations aren't costs at all. In particular, building new, low-emission power plants would employ both workers and capital that would otherwise be sitting idle, and would, if anything, give the U.S. economy a boost. [New York Times, 5/30/14]