The Economic Impact of the New Boiler MACT Rule

In June 2010, the Environmental Protection Agency proposed a new Industrial Boiler Maximum Achievable Control Technology (MACT) Rule. This version replaced the original 2004 standard that was vacated in 2007 by the U.S. Court of Appeals for being too lenient. The new rule lumps many wood-burning boilers with incinerators, a move which will drastically increase regulation and oversight on wood-power facilities. The MACT standards as outlined in the proposed rule are so severe and costly to implement that many proposed facilities are being reconsidered or re-engineered for natural gas, since the rule does not currently apply to natural gas burning boilers.

A new study commissioned by the Council of Industrial Boiler Owners (CIBO) and conducted by IHS Global Insight quantifies the economic impact the rule will have on the industry. With data provided by CIBO members and other experts, IHS Global Insight looked at the negative impact the rule will have. The report considers five key areas of economic activity: employment, labor income, value added, industry output, and tax implications. The study also looks at total economic impact, or the total direct, indirect and induced impacts the rule will have.

In total, the IHS Global estimates, “Every billion dollars spent on MACT upgrades and compliance costs will put 16,000 jobs at risk and reduce US GDP by as much as $1.2 billion.” When it proposed the rule, the EPA estimated that the cost of compliance with the proposed rule would cost $9.5 billion industry wide. However, IHS Global updated the EPA's assumptions with input from CIBO members and URS Corporation, a major supplier of emissions control technology to the industry. Their findings: compliance with the new rule will cost the industry $20.7 billion.

To put the potential effect of the Boiler MACT rule in context, Thomas McLain, head of wood science and engineering at Oregon State University and one of over 100 forestry scientists who in July sent a letter to Senate leaders expressing their concerns over the impact of the Boiler MACT rule, said: “Biomass energy is economically marginal. Anything you do to (increase) the cost means it won’t happen. It will go away.”

Read the entire IHS Global Insight report.