Electricity Cost Matters
By: Steve Miller
Congress and several states are in the midst of intense debates about new controls on power plant
emissions. These policy decisions will have enormous implications to both the cost of energy and continued environmental progress for our nation. The good news is that we
don't have to choose between economic prosperity and a cleaner environment. By continuing to use coal,
America's fuel, to generate electricity, we can fuel our nation's economic engine and move aggressively to an era of ultra-low power plant emissions.
Both federal and state policy makers should keep three central facts in mind as they engage in this debate.
First, economic growth and electricity use are inextricably linked. For several decades, growth in the U.S. Gross Domestic Product has been accompanied by increases in electricity use, on almost a 1:1 basis. While we must take additional steps to improve energy efficiency, we will not conserve ourselves to prosperity. American businesses need a reliable supply of electricity to remain competitive in the global economy. That supply of electricity will depend on building new power plants and using coal to fuel many of these new plants.
Second, energy costs matter a great deal to millions of American families. Last year, CEED commissioned research that married information from the U.S. Census Bureau with data about household spending for energy costs from the U.S. Department of Energy. This research showed the highly regressive nature of energy expenditures. Households earning at least $50,000 spend about 4% of their income on energy costs, transportation along with home heating and cooling. More than three in ten American families have annual income between $10,000 and $25,000. Those families expend 13% of their income to pay for energy. The story for the one in ten families is even starker. These families spend about 30% of their income for energy costs. Public policies that would cause spikes in energy costs will force millions of Americans to make heartrending choices between heating and eating.
Third, the United States is making incredible progress in ensuring a cleaner environment—and
coal-based electricity has played a key role in this progress. In the three decades since Congress passed the Clean Air Act, coal use has almost tripled. At the same time, criteria air pollutants (those determined by the Environmental Protection Agency to have the potential to harm human health) have declined by about half. And, we can expect further reductions in these pollutants we more fully implemented the Clean Air Act.
In fashioning new environmental policies, decision makers should keep those three critical facts squarely before them. Additionally, these policy makers should embrace the concept of prudent, federal multi-emission legislation as the best course to ensure sustained environmental improvement.
The best alterative under consideration by Congress is S.131, the Clear Skies Act of 2005. This bill is tough; it calls for 70% reductions in NOx, SO2, and mercury (for the first time) emissions. Utilities across the nation would spend more than $50 billion to comply with S.131. Still, the market-based emission trading provisions of this bill make these tremendous costs much more manageable than other options under consideration. S.131 also maintains the option of using coal to generate electricity, which will help to buffer against price spikes and permit the United States to rely on our most abundant domestic natural resource.
Federal multi-emissions legislation would reduce the chance that litigation would delay environmental improvements as challenges to federal regulations crawl through the court system. Additionally, federal legislation of this kind would create greater investment certainty, allowing more rational outlays for emission control equipment and speeding installation of this equipment.
Recently the U.S. Senate Environment and Public Works Committee failed to advance S.131 on a 9-9 vote. My view is this vote is the beginning of the congressional debate on clean air issues in 2005, not the end. The Committee may reconsider its vote or Senate leadership may decide to bring the bill to the Senate floor despite the tie vote.
I believe it is imperative that Congress act favorably on S.131 this year. With such legislation in place, we can avoid piecemeal state laws and get about the work that all Americans want us to carry out: promoting economic prosperity for all Americans and leaving a legacy of a cleaner environment for generations to come.
Steve Miller has served as President of the Center for Energy and Economic Development in Alexandria, Virginia since 1994. cl
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