The Environmental Protection Agency just announced plans to study the effects of carbon pollution from airplanes. It’s the first step toward regulating emissions from commercial airlines.
The move is part of a broader effort by the Obama administration to impose strict carbon guidelines on the energy sector.
Two years ago, the agency finalized emission rules regarding greenhouse gas emissions from motor vehicles. This summer, the EPA released its most aggressive plan for cutting carbon emissions to date. According to the new rule, power plants must reduce emissions by 30 percent from 2005 levels by 2030.
If unchecked, this ongoing cascade of regulations could have dire consequences for the nation’s economy.
For evidence, look to the states. Recent history shows that states that have implemented restrictive energy regulations have suffered higher unemployment and slower growth.
If the EPA ignores these lessons from the states, it will consign the entire country’s future growth to slower than even the current weak recovery.
The EPA’s policies distort the way businesses and individuals allocate resources. Consumers experience those distortions in the form of higher prices for energy, fewer job opportunities, and less vibrant economies.
That’s what we found when we investigated energy regulations at the state level for our new report, the 50 State Energy Regulation Index.
We ranked all 50 states according to how severely their energy regulations distorted their economies. States that ranked near the bottom — including New York, California, Wisconsin, and Connecticut — maintained economically inefficient rules, like restrictions on how utilities can price their services or energy efficiency standards for appliances that don’t comport with consumers’ needs and preferences.
The bottom ten states in our rankings had the lowest average economic growth between 2007 and 2010. This group also had the lowest employment growth over that period.
Such poor economic performance shouldn’t be surprising. After all, restrictive energy regulations often force businesses to divert resources from more productive uses to less productive uses.
For instance, many states require that utilities generate a certain proportion of electricity from renewable sources, such as wind or solar. Wisconsin, which ranks third-to-last in our study, is currently aiming to generate about 10 percent of its electricity from renewables by next year.
But renewables tend to be far costlier than fossil-fuel based energy sources. One kilowatt-hour of electricity from an offshore wind farm, for example, is nearly three times as expensive as the same amount of energy from a conventional natural gas plant.
These renewable mandates burden consumers and firms with excess costs. The end result is slower growth and slower job creation.
States that fared better in the index — including Alabama, Alaska, South Dakota, and Texas — had much less restrictive energy policies. Texas, for instance, allows its residents to choose from a variety of electricity providers, encouraging competition and efficiency in the process. The state also has no energy-efficiency rules governing appliances.
These less meddlesome regulatory regimes have paid off. Average economic growth in the top 10 states in the index was the fastest over the past 5-year and 10-year periods. The same pattern held for employment growth as well.
The Obama administration seems intent on ignoring these lessons from the states.
The EPA’s new limits on power plant emissions, for example, essentially force utilities to rely on less efficient and more expensive energy sources — and thereby create damaging market distortions. The U.S. Chamber of Commerce estimates that these rules will cost the economy $51 billion and 224,000 jobs a year through 2030.
The EPA — and regulators at all levels of government — should think twice before implementing rules that could rob ordinary Americans of both their hard-earned dollars and potential economic opportunities.
Marc Miles, Ph.D., is President of Global Economic Solutions. Wayne Winegarden, Ph.D., is a Senior Fellow in Business and Economics at the Pacific Research Institute and a Partner in the consulting firm Capitol Economic Advisors. Thinking of submitting an op-ed to the Washington Examiner? Be sure to read our guidelines on submissions for editorials, available at this link.
