What will new EPA rules mean? Depends who you ask


When the Environmental Protection Agency , its decisions are likely to have broad effects across the U.S. economy. Exactly what those effects will be, however, is a matter of some contention.

Groups on both sides of the carbon regulation issue released studies this week that draw diametrically opposed conclusions: One from the U.S. Chamber of Commerce that says the EPA's new policy could slow American economic growth and hurt households. Analysis from the Natural Resources Defense Council, meanwhile, suggests that Americans will actually save money on a well-crafted carbon pollution policy.

A US coal-burning plant.
Michael Williamson | The Washington Post | Getty Images

"We are already seeing clear examples of efficiency in action, with huge job and money-savings benefits based on real-world experience by states," Sheryl Carter, co-director for NRDC's Energy Program said in a press release. "This analysis shows that carbon standards that use efficiency as a key strategy will expand these benefits to a much bigger scale. We need to do this now."

The NRDC analysis, which was conducted by ICF International, estimated that American households would save $13 billion on their electric bills, and U.S. businesses will net $24.3 billion in similar savings by 2020. The study also estimated that the movement for energy efficiency spurred by a new EPA policy would create 274,000 new jobs in that time.

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These findings fly directly in the face of a new report from the Chamber of Commerce's Institute for 21st Century Energy. That analysis argues that any potential positive economic results of carbon regulations would be more than offset by costs on the rest of the economy.

The report estimates that the U.S. economy could lose more $50 billion in investment every year until 2030 as a result of new regulations on carbon emissions. As a function of this estimated decrease, the report also estimated an average of 224,000 fewer American jobs each year until 2030 because of the new policy.

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The Chamber of Commerce also contradicts the NRDC findings by reporting an expected increase in U.S. electricity costs. Because energy and utilities companies will be forced to spend on compliance for new emissions regulations, the Chamber's report estimates that these costs will be passed on to consumers to the tune of a potential $289 billion increased by 2030.

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Laurie Johnson, chief economist at the NRDC's climate and clean air program, wrote in response to the Chamber's analysis that they underestimate the savings of efficient energy production, overestimate the cost of new technologies and compliance, and misrepresent how much electricity demand will grow.

"We don't see why there needs to be any downside in terms of economic impact," Jake Thompson, an NRDC spokesman, said. "In fact, taking those steps [that are expected from the EPA announcement] will have benefits by several orders of magnitude to our health and environment, which would help the economy too."

The positive economic effects of new carbon regulations have been touted by other organizations as well. A study from the Union of Concerned Scientists argues that the monetized benefits of a hypothetical carbon reduction plan outweigh the compliance costs by a factor of 3-to-1 in 2020, and surge of 17-to-1 by 2030.

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Rachel Cleetus, senior climate economist at UCS and author of the study, said the Chamber of Commerce "made outrageous assumptions" in its analysis, and instead argued that there would be "significant benefits to our economy" from state-directed carbon regulation.

"Americans around the country are paying for the environmental and health impacts—it's not as if 'business as usual' is free," she said. "The opportunity here is to move towards a situation where we are addressing climate change, but also reaping the economic benefits of the new technologies."

Despite the many prognostications about the effects of a new EPA policy, Josh Freed, the vice president for clean energy at Third Way think tank, said he doesn't expect a significant negative impact.

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In fact, he said, trends in the energy industry—such as an increase in domestic natural gas resources and the falling cost of wind and solar technologies—may render the costs of regulatory compliance inconsequential.

"[These trends] will enable most utilities and most states to comply with these regulations without a significant impact on the economy," he said. "There will be new investments required, and this could mean modest increases in electricity prices, but we want the utilities sector to invest in new infrastructure."

Although he could not specifically corroborate the Chamber of Commerce figures, Richard Hastings, a macro strategist at Global Hunter Securities, said he largely agrees with the conclusions drawn by its report.

"The move towards increased emissions regulations will cause costs of energy across the board to go up," Hastings said. "And therefore, it will affect everything."

Hastings argued that the elevated costs to electricity providers for keeping up with regulations—especially to the coal industry—will "wind up going through so many different sectors" that he expects a potential suppression of GDP growth rates. As for the household and business savings estimated by the NRDC, Hastings said "that's nothing" in the grand scheme of the American economy.

But investors need not despair at any potential EPA emissions cap, he said, noting that some sectors may be able to navigate the new regulatory environment without hurting their bottom lines. Wind and solar energy companies will see some initial benefit from carbon regulations, he said, and the struggling U.S. nuclear energy sector may "very slowly wake up."

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Even utilities companies—perhaps counterintuitively—may also do well from EPA regulations. Hastings said he expects equities in that sector to respond negatively at first blush to the EPA announcement, but those companies may ultimately be able to pass on any new costs without hurting their earnings.

"Will the market make a mistake and assume that [utilities] have to take a beating on EPA rulings?" Hastings said. "The evidence shows that they can pass the beating along."

—By CNBC's Everett Rosenfeld