State should prep for costly Power Plan

The Clean Power Plan would significantly harm Michigan’s economy beyond spiking electricity bills. The behemoth energy regulations could hurt personal incomes and slow the economy generally.

That shouldn’t be a surprise to anyone. But there have been only a few bright spots in the economy since the Great Recession, and America’s energy economy and automaking have been among them.

That’s been important especially for Michigan, which relies so heavily on a manufacturing core that needs an affordable, reliable energy supply.

The McKinsey Global Institute found a robust energy sector could be one of the few game-changing opportunities for the country’s economic renewal and growth. Encouraging shale gas and oil production could add as much as $690 billion a year to GDP and create up to 1.7 million jobs across the economy by 2020.

But Michigan must prepare for the power rules, especially since an evenly divided Supreme Court will likely uphold them.

A report released this week by the Niskanen Center in Washington, D.C., and conducted by Anderson Economic Group of Lansing, analyzed potential scenarios the state could enact to comply with the federal plan.

If no current energy policies in the state change, the report found Michigan would be out of compliance with the CPP from the beginning. That differs from the Michigan Agency for Energy’s projections, which found the state would be compliant until about 2025.

If the latter is true, total personal income would increase to $469 billion in 2020 and $605 billion by 2030, according to the report. But the state can’t count on that.

One option for the state to comply with the plan is a cap-and-trade system in which the state government allocates allowances to power plants for carbon emissions. It’s what the EPA is pushing for, and the power plan is stacked to encourage states toward this system.

But the Niskanen report found it would increase costs on electric utilities and energy providers by about $2.2 billion annually, which would be passed onto consumers through higher prices.

Another possibility is to implement a carbon tax the state would collect.

This is the better solution, and really the only way to influence or control the behavior and energy consumption of the mass market.

But a carbon tax, too, would have a slowing affect on the state’s economy.

Both measures significantly affect Michigan’s personal income. Cap-and-trade would push it 12 percent below what it could be without the regulations, according to the report, and the carbon tax would push it 10 percent lower by 2030.

These scenarios might seem far off or unlikely, but President Obama has set into motion a new kind of energy economy that businesses must plan around and work with, and it has serious costs for them and Michigan residents.

The state should be prepared.

The Detroit News