U.S. EPA's proposed plan to regulate carbon emissions from power plants would result in an increase in jobs economywide -- mainly because of a drop in electricity prices over the long term, according to a new report from the University of Maryland and consulting firm Industrial Economics.
The Clean Power Plan would increase overall U.S. employment by 74,000 jobs in 2020 and up to 273,000 in 2040 -- or about a 0.2 percent increase in civilian employment, according to the report.
It "is an important feature for understanding how the rule's direct impacts for the electric power sector affect other industries," the report said. The study was funded by the Energy Foundation, an organization that provides grants to promote a transition to a "sustainable future by supporting energy efficiency and renewable energy."
EPA estimated the Clean Power Plan would result in a direct employment loss of 77,900 job years (one year of one job) on the supply side in 2025 and gains of 112,000 job years on the demand side.
The new report also concluded the proposed rule would have a negative effect on jobs in the electricity sector -- down 40,000 jobs by 2040 -- and the coal mining sector, which would see a decrease of 10,000 jobs, because of the drop in electricity demand and fuel switching to natural gas and renewable energy.
The main drivers of the report's findings are based on data that show lower electricity costs allows consumers to buy other goods and services with those savings, and that lower wholesale electricity prices and greater efficiency allow a more productive economy with greater output for less cost, according to Doug Meade, director of research at Inforum -- an organization affiliated with the University of Maryland, where Meade is also a lecturer, that works to improve business planning, government policy analysis and understanding of the economic environment.
"We are finding an increase in jobs, which are relatively small, but we are happy to say it is not negative," Meade said on a media call on the report.
The report's assessment relied upon Inforum's Long-term Interindustry Forecasting Tool (LIFT), a macroeconometric model that uses a 97-sector dynamic representation of the U.S. national economy.
It was calibrated using the U.S. Energy Information Administration's 2013 Annual Energy Outlook data. But the study also relies on inputs from EPA's Regulatory Impact Analysis and Integrated Planning Model (IPM) that forecasts the ability of industry and states to meet the CO2 emission cuts, which industry and other critics have challenged as inaccurate.
EPA's rule bases state targets on assumptions about what each can do to reduce power-sector emissions via four "building blocks" -- potential for heat-rate improvements at coal-fired plants, capacity to shift from coal to combined-cycle natural gas, zero-carbon energy and demand-side efficiency.
The new study tried to incorporate a lot of different variables including, for example: efficiency gains of adding insulation to a hot water heater but also the cost of that insulation; changes in the prices of coal and natural gas; the changes in investments in generation capacity; job losses from early plant retirements; and a decrease in demand for air pollution control devices, according to Jason Price, a principal at Industrial Economics.
"We went to great lengths to capture the full range of influences of the Clean Power Plan," Price said on the call.
Reviewing EPA analysts' engineering data related to energy efficiency wasn't within the scope of the analysis, Price added in an email. "IPM, in particular, is well-known to likely consumers of our report, and in the interest of transparency and consistency we thought it would be helpful to use the IPM data as inputs for our analysis," he said.
This piece originally appeared in E&E Greenwire.