Cost-Benefit Politics in U.S. Energy Policy
David B. Spence
University of Texas at Austin – McCombs School of Business – Department of Business, Government & Society; University of Texas at Austin - School of Law; University of Texas at Austin - Kay Bailey Hutchison Center for Energy, Law & Business
David E. Adelman
University of Texas School of Law; University of Texas at Austin - Kay Bailey Hutchison Center for Energy, Law & Business
August 11, 2015
KBH Energy Center Research Paper No. 2015-12
U of Texas Law, Law and Econ Research Paper No. E560
U of Texas Law, Public Law Research Paper No. UTPUB635
The political economy of energy policy in the United States is dominated by partisanship and industry lobbying. Both are reflected in the widespread belief that the Environmental Protection Agency (EPA) is engaged in a misguided “war on coal” - despite decades of regulatory delays, the coal industry’s status as the leading industrial source of air pollution, and compelling evidence that the benefits of EPA’s regulations vastly exceed their costs. The politics are compounded by tensions between electricity managers and environmental regulators. Much of this is driven by competing perspectives: EPA tends to have a national focus, whereas grid managers operate regionally. This Article resolves the apparent conflicts by downscaling the regulatory analyses of three high-profile EPA rules that cover conventional pollutants, air toxics, and greenhouse gases associated with climate change. We utilize complementary EPA databases and draw on several model estimates to examine the regional impacts, both costs and benefits, of regulations targeting coal-fired power plants.
Overall we find little evidence of significant regional disparities, as the distribution of compliance costs and benefits is roughly commensurate with each regions’ reliance on coal-fired power, and particularly older facilities. This result follows naturally from the benefits of reducing emissions under these rules being predominantly local; as a consequence, regulatory benefits exceed costs at the regional level and typically by large margins. Further, with a few important caveats, we find that while the EPA rules will encourage many power-plant closures, most will occur in electricity markets that have sufficient excess capacity to mitigate potential threats to electricity supplies and reliability. We conclude that while interest group opposition and political partisanship are clearly both important in this context, the latter appears to hold greater sway based on varying levels of political opposition regionally and may - incrementally - be shifting in EPA’s favor.
Number of Pages in PDF File: 50
Keywords: Energy, Regulation, Public Utility, Environment
Date posted: August 13, 2015 ; Last revised: October 9, 2015