When President Obama announced steps to rein in greenhouse gases last week, the condemnation was swift and fierce.
“It is astonishing that President Obama is unilaterally imposing new regulations that will cost jobs and increase energy prices,” House Speaker John Boehner said of Obama’s plan, which would heavily target emissions from coal-fired power plants.
How steep of a cost do critics fear? Some 500,000 jobs lost and $1.65 trillion shaved off the national income by 2030 if all coal plants have to close, according to a Heritage Foundation report released the day after Obama announced his plan.
Yet there’s reason to doubt these and similarly dire predictions.
Environmental clean up is a difficult thing to measure. Early estimates on how much it would cost to clean air or water have often turned out to be way off. The debate over acid rain is a good example. In the late 1980s, the nation was considering tough new rules on coal-fired power plants and other industrial emitters to curb what was then a major problem.
The Environmental Protection Agency estimated the new rules would total $6 billion in both retrofit costs and in knock-on effects to the economy — such as higher energy prices that cause manufactures to set up shop elsewhere — according to Robert Stavins, director of the Environmental Economics Program at Harvard University. Some industry estimates had the cost as high as $8 billion.
Actual cost? About $1 billion.
“Some of these projections do come from parties that have an interest, and they are gong to use the highest estimates,” said Stavins. “Then there’s technological change that brings down costs.”
A similar thing happened with rules that took lead out of gasoline and ozone-depleting CFCs out of refrigerants.
On cost projections studied for 25 environmental regulations by economists at the research group Resources for the Future, two underestimated the cost, five got it right, six were inconclusive, and 12 — nearly half — overestimated how much the rules would cost to implement.
But Heritage’s David Kreutzer, one of the economists that wrote the report, argues that historically, not all environmental regulations end up being cheaper than predicted.
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