Study: EPA plan would spike MI electrical costs

Apr 25, 2016

A new study has found Michigan will feel an economic squeeze if and when the EPA’s Clean Power Plan is implemented. We look at that and other findings in the study with analyst Traci Taylor of East Lansing’s Anderson Economic Group.


Electric power plants that burn fossil fuels are the top contributor of carbon dioxide to the atmosphere in the U.S.

The Obama administration’s Clean Power Plan – unveiled last year and awaiting review by the U.S. Supreme Court – seeks to reduce those emissions.

The U.S. Environmental Protection Agency claims the plan would result in cleaner air, better health and a cooler planet – benefits it says would save tens of billions of dollars.

The Clean Power Plan would allow individual states to develop their own approaches toward lowering carbon dioxide emissions.

But a recent study conducted by an East Lansing policy organization concludes it would have a negative economic impact in Michigan.

The Anderson Economic Group considered three policy scenarios, and then analyzed the numbers.

Current State talked with Traci Taylor from Anderson to discuss the group’s findings.

Taylor says her analysis first explored a baseline scenario that assumes no changes in state policy—only those that already exist or are planned.  

“What we found under this scenario is that Michigan will not be in compliance with their CPP carbon emission goals without additional action,” says Taylor.

Next, the analysis explored a “cap and trade” scenario, with the state allocating allowances or permits for carbon emissions.   Power plants would be able to buy and sell permits to each other.

“We found that there would be significant costs for complying with the CPP [under this scenario],” says Taylor.

Those total about $2 billion annually. They also projected electricity prices to increase about 12 percent compared to the baseline scenario.

The third scenario includes a potential excise tax on carbon emissions.

“Similar to under the cap and trade scenario, we estimate that the cost to comply would increase by about $2 billion annually by 2030 – and a 10 percent increase on electricity,” Taylor says.

“Due to the potential costs under both of the CPP approaches, the personal income in the state would be about 10 percent lower compared to the baseline scenario.”

Taylor is not convinced that an expanding green energy sector would be able to cover this deficit.

“Those initiatives do employ people who contribute to Michigan’s economy,” she says. “However, some of those benefits might be offset by losses to fossil fuel generators.”

“For example, the people who work for those plants would then have to find work elsewhere.”

The study’s results can be found at AndersonEconomicGroup.com.

Article by Ethan Merrill, Current State intern