EPA's Clean Power Plan Will Create Quarter-Million Jobs

New study shows that job gains, not the losses the industry predicted, would follow if new carbon rules are implemented.

Merrimack coal-fired power station in New Hampshire. Credit: PSNH

The Environmental Protection Agency's proposal to crack down on carbon pollution from power plants would create more than a quarter of a million additional jobs, according to a new analysis by economists using a trusted, sophisticated model.

The findings support the EPA's argument that the benefits of its approach exceed the costs, and undermine the claims of the fossil fuel industry that the rules would cripple the economy.

"The proposed Clean Power Plan is likely to increase U.S. employment by up to 273,000 jobs," said the report, which extends the forecast out to the year 2040. "For perspective, this is roughly the equivalent of one month of healthy job gains."

Significant job losses at shuttered coal-fired plants and at coal mines would be offset not only by investments in cleaner sources of power, but also by productivity gains across the whole economy—and by overall reductions in wholesale prices of electricity, the authors said. Many households and businesses would end up with extra cash in hand to spend on other goods and services. The overall effect of the rules would boost economic growth, but not significantly.

The study was done by two economists, Doug Meade of the University of Maryland's inter-industry forecasting project, and Jason Price of Industrial Economics, a private consulting firm. They applied a complex economic model to examine the impact of the proposal on jobs much more broadly than the agency has previously done.

Their work was funded by the Energy Foundation, a nonprofit group that promotes energy efficiency and renewable energy. Supported by philanthropies, it draws its board from industry, academia, and non-governmental organizations.

"We really didn't have any prior notion going into the study" about what the analysis would show, said Price. The finding on jobs growth, said Meade, was "relatively small but we are very happy to say it was not negative." Tom Lyon, a specialist in corporate environmentalism at the University of Michigan who reviewed their work to assess its credibility, called it "very impressive." All three spoke on a conference call with reporters.

Job growth, the researchers concluded, would be about five times faster than the EPA had projected, because the agency had looked only at the direct impact of its proposal while the new analysis calculated the ripple effect across the whole economy.

The fastest gains would come during the first 10 years of the new regulations. Proposed last year, the rules are due to be published in final form this summer and, if they survive challenges in Congress and through the courts, would begin to take effect by about 2020.

The EPA rules seek for the first time to reduce carbon dioxide emissions from power plant smokestacks, one of the main sources of the principal greenhouse gas. The proposal is a central feature of the Obama administration's climate action plan. Without a plan like this, the United States will be unable to meet its pledge to cut emissions sharply in the coming decade. That, in turn, could undermine progress toward a new global climate treaty.

The EPA rule gives states a broad menu of possible approaches to cutting carbon dioxide emissions: encouraging power plants to burn coal more efficiently; urging grid operators to choose natural gas over coal-fired power; offering incentives for consumers to conserve electricity; spurring the use of renewables, and broadly accelerating the shift to a carbon-free energy economy. States would be encouraged to expand regional cap-and-trade programs, adding more flexibility – and complexity.

Without broad changes like these, scientists have warned, the world is headed toward dangerous warming in the coming century.

The economic tremors are hard to predict. Business as usual, however, means a growing buildup of greenhouse gases.

Last week, in its annual energy outlook, the Energy Department's statistical branch didn't take into account the Clean Power Plan as it made its predictions about energy supply, demand, prices and pollution from now until 2040. (The omission follows the agency's practice of not factoring in proposals until they take effect.)

With a business-as-usual baseline, the forecast said that greenhouse gas emissions would barely budge.

The new study issued on April 21 described at length how complicated it is to explore the many repercussions of such a complex rule. It said the EPA's earlier estimates was "a reasonable first approximation."

This time, the economists used a macro-econometric model known by the acronym LIFT, a tool that connects data from 97 different industrial sectors and attempts to show how changes in one part of the economy affect the others. "That is, the model works like the actual economy," they wrote.

Even though jobs would be lost among workers at money-losing coal mines (perhaps 10,000 jobs) and at old, inefficient power plants that would be shut down rather than cleaned up (about 40,000), there would be many times more jobs created among those hired to build cleaner new plants or to install pollution controls. And because the EPA's plan also encourages conservation of electricity and switching to renewable fuels, jobs in those sectors would grow, as well.

The authors said it is also important to look at the ripple effect on jobs, because electricity affects the whole economy in one way or another.

Partly for that reason, EPA is proposing to let states meet carbon pollution goals in part by encouraging conservation, emissions trading, renewable power, and other steps beyond the fossil fuel plants. The agency says that feature of the plan makes it more efficient. Critics have said it represents an over-reaching regulatory intrusion into the economy at large.

Either way, the ripple effect on jobs has been debated since the proposal was issued a year ago. Even before the proposal was put out for public comment, industry groups were predicting that it would cost jobs.

At a Congressional hearing last year, one of the Republican opponents of the rule, Bill Cassidy of Louisiana, pressed the EPA's witness, Janet McCabe, on exactly this point: "Has the EPA examined the ripple effects of this throughout the economy?"

"No," she told him. "No, we haven't."

Next time the question comes up, the agency will have new evidence on its side.

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