Obama’s CO2-cutting rules would be ‘crippling’ to Wisconsin factories, economy

M.D. Kittle
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Jun 02, 2014 6:35 PM
Obama’s CO2-cutting rules would be ‘crippling’ to Wisconsin factories, economy

By M.D. Kittle and Ryan Ekvall | Wisconsin Reporter

MADISON, Wis. — As President Obama goes about trying to save the world, his proposed rule to cut carbon emissions could kill tens of thousands of Badger State manufacturing jobs, industry officials warn.

“It’s just going to be so devastating for states like Wisconsin that have such a strong and significant concentration of manufacturing jobs,” said Scott Manley, vice president of government relations for Wisconsin Manufacturers & Commerce, the state’s leading business advocate.

Hear more from Kittle and Manley.

With Wisconsin and the rest of the nation mired in anemic economic recovery worsened by first-quarter contraction, one manufacturing sector expert says Obama’s plan to reduce CO2 emissions by 30 percent in 15 years could be a recipe for disaster.

“When you make the Midwest a more expensive place to do business compared to other regions in other places around the globe. It’s going to cost jobs and it’s going to hurt our region’s economy,” said Steve Baas, vice president of government relations for the Metropolitan Milwaukee Association of Commerce. The group represents about 1,800 member businesses with 300,000 employees in Milwaukee, Waukesha, Washington and Ozaukee counties and beyond.

SPARKS FLY: The Obama administration's proposed rule ratcheting up carbon emission limits could hit Wisconsin's manufacturing sector especially hard, industry experts say.

SPARKS FLY: The Obama administration’s proposed rule ratcheting up carbon emission limits could hit Wisconsin’s coal-dependent manufacturing sector especially hard, industry experts say.

The Environmental Protection Agency on Monday released its draft rule that would regulate carbon emissions of the nation’s fossil fuel-fired power plants, the marrow of Obama’s “moral obligation” climate-change agenda.

“We have a moral obligation to leave our children a planet that’s not polluted or damaged,” the White House said in a statement, part of a media blitz Monday morning.

The administration said it has struck the middle ground between aggressive greenhouse reductions environmentalists have screamed for and what the utility and manufacturing sectors have begged for — standards that won’t destroy them.

EPA’s proposed rule does not lock in a single reduction standard for each state, but it demands cutting CO2 output nationally 20 percent by 2020 and 30 percent by 2030. A less robust rule would seek a 24 percent reduction by 2025. The starting line for both proposals would begin measuring CO2 emissions from 2005. Because the nation has seen reductions since that time — thanks in large part to cleaner energy and production investments by the energy and manufacturing sectors — the mark will be that much easier to hit, the EPA says.

“(A)nd by taking an all-of-the-above approach to develop homegrown energy and steady, responsible steps to cut carbon pollution, we can protect our kids’ health and begin to slow the effects of climate change so we leave a cleaner, more stable environment for future generations,” the administration added.

Critics, however, contend Obama has a moral obligation to get out of the way of job creation, and the EPA’s draft rule would put in peril tens of millions of jobs.

A U.S. Chamber of Commerce study last week estimated deep cuts in CO2 could steal $51 billion in annual economic output and mean the loss of 224,000 jobs per year through 2030. The Midwest region, including Wisconsin, could see an average of 31,700 fewer jobs per year.

The conservative Heritage Foundation projected $2.2 trillion in lost gross domestic product, should a more stringent rule go into effect.

Wisconsin’s manufacturing sector through September 2013 employed 456,723 people, accounting for 19.2 percent of private-sector jobs, and 16.6 percent of all jobs, according to the U.S. Bureau of Labor Statistics. Between November 2013 and April this year, Wisconsin’s manufacturing added an estimated 5,200 jobs. And there are many, many more jobs dependent on the producers of goods.

As Manley puts it, manufacturing is Wisconsin’s “super sector,” with compensation running on average 50 percent higher than positions in other sectors.

“It really has led the recovery over the past few years. We’ve been in the top 10 in the country in manufacturing growth,” he said.

While the Obama administration talks in lofty language about more government rules, Wisconsin manufacturers worry about input costs, global competition, losing customers.

Kenall Manufacturing last year announced plans to build a 354,000-square foot manufacturing plant in Kenosha, moving its operations and some 620 employees from Illinois to Wisconsin by 2018.

Randy Hernandez, executive vice president of operations for the lighting manufacturer, tells Wisconsin Reporter he supports a long-term approach to curtail carbon output, but “doing something cold turkey” like what the EPA proposes will “negatively impact our industry with the amount of energy we use.” And that could affect Kenall’s Wisconsin employment plans.

“That’s only going to get passed on to manufacturers,” he said. “Any cost increase of our product will ultimately impact the hiring we do.”

Kenall, like so many other Wisconsin manufacturers, competes globally. Manufacturing executives like Hernandez say Obama’s climate change cause may show the world the U.S. government means business, but it will put American business and workers at a competitive disadvantage. They ask, will China follow Obama’s lead? They think not.

The EPA’s proposed rule change would hit Wisconsin’s pulp and paper industry particularly hard, according to Jeff Landin, president of the Wisconsin Paper Council.

Landin said paper mills are generating utility bills in excess of $1 million to $2 million a month. If utilities are forced to upgrade their systems quickly, those expenses will be passed along to major industrial customers like the paper industry, which boasts a Wisconsin workforce of some 31,000 employees — earning average annual incomes of $60,000, according to the Paper Council.

“A lot of these mills are in places that don’t have a lot of industry, places like Park Falls, Ladysmith, small communities that are dependent on these mills for these jobs,” Landin said.

Many pulp and paper shops run their own boilers. Landin said industry officials worry that the EPA will go after them next.

“It’s crippling,” he said. “There has been a tremendous sea change in the attitude of business about state government in Wisconsin since Gov. Scott Walker took office, but now we’re looking at a rule from the federal government that can halt everything in the states … All the good things we do here, Washington wants to put a stop to it.”

Hernandez said Kenall’s new plant in Kenosha will include cutting edge, sustainable technology, from motion sensor lighting to “harvesting heat” from the paint lines’ industrial, infrared ovens. In other words, it’s not waiting for Washington’s lead on energy-efficiency standards.

But will any of that matter in the Obama’s administration’s carbon calculus? Baas, of the Metropolitan Milwaukee Association of Commerce, said there is so much uncertainty surrounding such federal regulations, and much is subject to change.

“It’s a high stakes game of poker right now, and it’s a little tougher to take in Wisconsin,” Baas said.

“We’ve invested heavily in making our coal plants and coal infrastructure some of the cleanest in the nation and we have seriously reduced carbon emissions over the past few decades. The rules proposed now don’t seem to give us any allowance that (the EPA) would recognize those investments and reductions, and that’s something that is really unfair to ratepayers and employers in Wisconsin.”

The Obama administration likes to boast that, through the president’s leadership, between 2008 and 2011 carbon emissions from the power sector decreased more than 5 percent in Wisconsin.

Alliant Energy, a multi-state utility, says it will invest $1.4 billion through 2017 in larger, newer plants to improve air quality in Wisconsin and Iowa, and it has retired several smaller, less-efficient coal-fired plants. Alliant plans to mothball 738 megawatts of old power plants in the next few years.

Utility spokesman Scott Reigstad said Alliant since 2005 has reduced CO2 output by about 15 percent.

“In general, we support efforts to decrease greenhouse gases,” he said. “Our efforts to date have given us a good starting point to that.

“We feel like it’s something we can manage, but the devil is going to be in details,” Reigstad added.

But could Alliant and other power providers meet the EPA rule without dramatically increasing costs to ratepayers — residential and industrial? That’s the big question. If they can’t, the sluggish U.S. recovery could be in for a world of hurt.

Manufacturers worry what the answer may be.

“It would be one thing if (the EPA was) inflicting all of this economic pain on our state workers and energy consumers if we actually got something out of it, but we don’t. This is a tremendously ineffective policy,” Manley said.

Contact M.D. Kittle at mkittle@watchdog.org

Contact Ryan Ekvall at rekvall@watchdog.org