President Obama says that critics of his plan to decarbonize the economy are “the special interests and their allies in Congress” repeating “the same stale arguments” about “killing jobs and businesses and freedom.” He adds that “even more cynical, we’ve got critics of this plan who are actually claiming that this will harm minority and low-income communities.”
Is he thinking of critics who work at the Environmental Protection Agency? Perhaps so, because multiple new antipoverty transfer programs are built into the EPA’s new Clean Power Plan. The fine print is there, for anyone who cares to look, 1,317 pages into the rule’s 1,560-page preamble.
Got that? The EPA admits it will hurt the poor and has wealth transfer plans to remedy the effects.
Question: should a regulatory agency be able to create new social programs?
The EPA authors are careful to reiterate that “its benefits will greatly exceed its costs.” (Sure.) But then they ever so gingerly observe that “it is also important to ensure that to the extent there are increases in electricity costs, that those do not fall disproportionately on those least able to afford them.”
In particular, the EPA is concerned about “low-income communities, communities of color, and indigenous communities.” The agency orders states “to evaluate the effects of their plans on vulnerable communities and to take the steps necessary to ensure that all communities benefit from the implementation of this rule.” These are the themes of “environmental justice,” the political grievance school that argues for income redistribution to offset the allegedly disproportionate damage to the poor and minorities from pollution.
It is more accurate to say that any economic disparities arise from the rule itself. Regulations that artificially raise energy prices are regressive. By definition the poor—er, low-income community members—spend a larger share of their incomes on fuel and utilities than the well-to-do climate activists of Marin County and Hyde Park.
As energy prices rise, they spill into other basic needs like food, via fertilizer and feed, and housing, via building materials like cement. Everyone ends up with less disposable income and a diminished standard of living, but low-income workers really are worst off.
The EPA thus requires states to set up “financial assistance programs” only for those living near or below the poverty line. As a model other than straight cash subsidies, the EPA cites a Maryland program that offers “free installation of energy conservation materials” such as window insulation and furnace retrofits. Another is New York, which hands out compact florescent lightbulbs and even new refrigerators. The resulting energy efficiency savings, the EPA helpfully notes, are “of particular value to low-income households who can least afford high energy bills.”
At the federal level, the EPA is creating a program that gives twice as large a subsidy for renewable and efficiency projects that are built in inner-city neighborhoods and disadvantaged rural areas. There will be job retraining for laid-off coal miners. The agency also plans to install more solar generation on top of or around public housing. So while it will raise their utility bills, at least the poor will get a complementary photovoltaic panel.
Perhaps it is bad manners to suggest that the poor themselves might prefer higher incomes rather than the EPA’s form of carbon justice. U.S. economic growth is already much slower than it should be, and the new EPA climate-change rule will make it worse by subtracting billions of dollars every year from potential GDP by misallocating capital and undermining business confidence. This will result in few opportunities and smaller wage gains, with damage to the poorest Americans in particular.
For these reasons, a recent study commissioned by the National Black Chamber of Commerce estimates that the EPA plan will increase the black poverty rate to 32% in 2025 from 26% today. Hispanic poverty will rise to 29% from 23%. No fewer than 28 states raised such economic hardships in their comments to the EPA, to no avail.
The contradiction of modern climate liberals is that they promise lower energy bills and a wind-and-solar jobs boom, with zero trade-offs. But then they demand more redistribution to mitigate the economic and human damage that are the real outcome of their policies. Instead of offering to weatherize the homes of the least fortunate, how about trying to increase prosperity?