Business Roundtable

Harmonizing Policies and Regulation for a Sustainable and Secure Future

December 8, 2010

Fast Facts

• The International Energy Agency predicts a 70% increase in global energy use by 2050
• Energy consumption in the U.S. should increase 14% by 2035, with more than three-quarters of that energy produced by fossil fuels
• By 2020, U.S. companies will invest between $60 and $100 billion in improving the electricity transmission system
• The EPA estimates that companies will need to spend anywhere from $19 to $90 billion to comply with its proposed ozone standards

The Issue

As the global population continues to grow rapidly and developing nations continue to modernize, energy consumption around the world will also continue to rise at a staggering pace. The International Energy Agency predicts a 70 percent increase in global energy use by 2050. In the U.S. alone, estimates show energy consumption growing 14 percent by 2035, with the vast majority (78 percent) of that energy coming from fossil fuels.

For the United States to meaningfully address climate change and other pressing environmental concerns, and, at the same time, ensure energy access and security for the American people without overburdening the U.S. economy, alternative sources of energy must be developed, energy conservation must be encouraged, new infrastructure must be constructed and advanced technologies must be developed and deployed.

Environmental, energy and economic policies are inextricably linked. Achieving America’s long-term environmental objectives must not come at the expense of its economic or energy security, or we simply will have exchanged one unsustainable approach for another. We cannot ignore our energy security or the cost of our energy as we devise new environmental policies, particularly policies relating to greenhouse gas emissions (GHGs).

Meeting the sustainable growth challenge will not be easy or cost-free, but we can significantly mitigate the costs associated with this transformation of our economy through sound policy choices that accelerate the deployment of key technologies. In a study released last year, “The Balancing Act: Climate Change, Energy Security and the U.S. Economy,” Business Roundtable concluded that investments in a balanced portfolio of advanced energy efficiency and production technologies, combined with strong policy leadership to speed deployment and market penetration of those technologies, could significantly reduce GHGs and increase energy security.

The transition to a low-carbon economy will take decades and will require many hundreds of billions of dollars in private sector investments. In the meantime, our economy will continue to require new supplies of reasonably priced fossil and other fuels to power our homes, shops, factories, cars and power plants.

Unfortunately, over the past year-and-a-half, the EPA has indicated that it will propose a series of new, tighter regulations on the emissions of sulfur dioxide, nitrogen dioxide, ozone, particulate matter, mercury, GHGs and coal ash, as well as tighter regulation of chemicals under the Toxic Substances Control Act.

This avalanche of new, more stringent regulations will create additional costs for both existing and new facilities and increase uncertainty. In particular, the EPA’s proposal to regulate GHGs under the Clean Air Act threatens to impose additional costs on U.S. manufacturers while doing little to reduce global GHG emissions. The economic impacts on areas that do not meet EPA air standards will be significant, constraining economic activity and job growth. To meet its proposed ozone standard, for example, the EPA estimates that compliance costs will range from $19-90 billion.

As the U.S. manufacturing sector continues to struggle and shed jobs, the EPA’s actions will impose additional expenses on U.S. manufacturers, adversely affecting American workers and placing U.S. companies at a competitive disadvantage to foreign firms. EPA’s regulatory agenda needs to be reassessed. Proposed regulations should be more carefully calibrated to ensure that they are cost-effective, achievable, rooted in the best science, coordinated with available technology and do not unreasonably impair our economic growth or energy security.

Business Roundtable is ready to work with policymakers to create legislation and regulations that can address the risk of climate change and improve environmental quality, while also maintaining robust economic growth and enhancing energy security.

The Solution

• Increase collaboration. Industry should be more involved in the regulatory development phase to ensure that new requirements are achievable and will encourage innovation to develop the most efficient methods for compliance. Therefore, regulations must be achievable and consistent with available technology, while regulators must be cognizant of their impact on economic growth, international competitiveness and other energy and environmental objectives.
• Streamline rules. Agencies, especially those with overlapping jurisdictions, should harmonize and simplify rules to avoid confusion and increase efficiency for both agencies and industry.
• Ensure fair regulation and enforcement. New requirements should be benchmarked against other advanced nations to ensure that U.S. regulations do not hinder U.S. competitiveness in the global market.
• Encourage the expansion of our nuclear fleet. Nuclear power currently generates approximately 20 percent of the power we use. As the only existing, scalable low-carbon baseload generation technology, nuclear power will be critical to developing the nation’s renewable energy potential, improving reliability and protecting the climate.
• Expand and modernize the electric grid. A modernized electric power grid can play an important role in meeting the sustainable growth challenge. U.S. companies are projected to invest $60 to $100 billion on transmission development by 2020. Federal policy regarding cost allocation, planning and siting of new transmission infrastructure will help remove barriers to the expansion of our nation’s electric grid and should improve reliability, reduce congestion and facilitate the increased penetration of renewable power as a viable source of energy.
• Maintain coal as a viable option to generate electricity. Robust R&D investments, cost-sharing, regulatory reform and incentives for the development of carbon capture and storage technologies are essential for reducing emissions while maintaining the long-term viability of coal, which generates nearly half of our nation’s electricity.
• Provide access for oil and natural gas exploration and production. Natural gas promises to be an important fuel for the future because of its environmental benefits and domestic availability. But many significant oil and natural gas prospects are now off limits. Greater access to these areas, including expediting a return to offshore drilling that has been restricted since the spill in the Gulf, will be required to provide us with reliable supplies of oil and natural gas for decades to come. As we transition to a low-carbon future, it is imperative that we ensure the availability of affordable and secure domestic supplies as alternative sources evolve and mature.
• Encourage renewable energy development and deployment. If the U.S. is to address climate change meaningfully and improve its energy security, it must continue to encourage the development and deployment of renewable technologies. Robust R&D investments, regulatory reform and targeted incentives will be essential for commercial scale deployment of many renewable energy and storage technologies.