Bluegrass Energy Report: The EPA's Economic Impact on Kentucky
Since the “American Clean Energy and Security Act” was defeated in the U.S. Senate in 2009, the Environmental Protection Agency (EPA) has proposed multiple regulations which have especially large effects on Kentucky’s coal industry, including its coal-fired power plants. Research suggests that these regulations could result in significant industry job loss and higher energy costs for Kentucky’s citizens and businesses.
Although the EPA’s new policies directly impact Appalachia’s coal industry, evidence also suggests that other industries could be impacted through higher energy and operating costs. The National Association of Manufacturers reports that Kentucky’s energy intensive manufacturing sector would – like the automotive and metallic products industries – experience significant decreases in output due to an increase in energy costs.1
Other research focuses on the health and environmental benefits of the EPA’s new regulations. Kentucky power plants release a certain quantity of coal combustion residuals (CCR) into the atmosphere that potentially result in respiratory or other diseases. Another concern is that debris from certain forms of mining can result in a loss of biodiversity and wildlife. Such debris can also contaminate waterways, further affecting the health of nearby human populations.
The purpose of this study is to assess some of the effects of these new EPA regulations on Kentucky’s economy. In the first section, we identify specific regulations that impact the commonwealth’s economy through higher energy costs and industry job loss. In the next section, we demonstrate the effects of these higher costs on the average Kentucky family. In the third section, we show how the increased energy prices will affect Kentucky’s overall economy through industry job loss, a decrease in the rate of employment growth and a decrease in State Domestic Product (SDP) growth. Finally, in the last section we investigate the extent to which the environmental regulations specifically affecting Kentucky’s coal industry will reduce negative pollution externalities and contribute to the increased health of Kentuckians and our wildlife.
Overall, independent analyses of the EPA’s new regulations imply that the environmental benefits gained by Kentucky are quite small and are much lower than the costs they impose. The ensuing increases in energy costs will not only impact the average family in the Bluegrass State, but also will result in a loss of jobs since cheap energy is one of the commonwealth's comparative economics advantages.
Further, most of the environmental harms that the EPA’s new regulations are supposed to solve already are addressed by previous regulations. In fact, the data show that existing regulations have been increasingly effective at reducing toxic emissions. Therefore, we conclude that the EPA’s recent regulatory initiatives dealing with the coal and coal-related industries have not been, on net, beneficial.