Environment Picture

President's Column: Lost amid tax cut fever

Energy bills exceed tax bills in Michigan, creating huge untapped potential to stimulate economy, keep investment dollars in state
Chris Kolb
Lowering the cost of doing business in Michigan to grow our state’s economy has been a huge priority in Lansing this year. That focus has been almost entirely centered on taxes, including a $1.7 billion business tax cut by 2013.

There is an overlooked cost center with more money-saving potential than tax cuts and far greater benefits for Michigan businesses and residents: energy costs. The amount Michiganders pay for energy rivals that of taxes, yet it has not been in the current administration’s sight lines.

According to the nonpartisan Tax Foundation, Michigan residents and businesses paid $36.3 billion in state and local taxes in 2008. Michigan’s energy costs were $37 billion, according to the Michigan Public Service Commission.

Of that $37 billion, $26 billion was for energy resources (oil, coal, etc.) imported from other states and nations. That is 26 billion hard-earned dollars leaving the state of Michigan to support other states each year. And that number is going up.

An opportunity
The good news is that there is great opportunity to lower the cost of doing business in Michigan with a more balanced energy portfolio—much like what financial advisors suggest for sound investment strategy. This approach will increase dollars spent within our state and create more jobs for Michigan workers.

Michigan’s current electricity mix is 58% coal, 26% nuclear, 11% natural gas, and almost 4% renewable energy. Both coal and nuclear plants import 100% of their fuels; natural gas plants import 80% of their fuel. Obviously, Michigan’s energy portfolio is not a balanced approach. More balance would be good for Michigan’s economy, producing much-needed jobs and economic development activities across our state.

Step one
The first step toward modernizing Michigan’s energy framework is to increase our efforts in efficiency. It is the cheapest and most long-lasting of our options. Energy efficiency costs one-tenth as much as electricity from a new coal plant (1.3 cents per kilowatt hour (kWh) vs.13.3 cents/kWh).

The second step is to increase our use of renewable power. Currently, 3.7% of Michigan’s electricity comes from renewable energy. According to a February 2011 report from the Michigan Public Service Commission, renewables cost 25% less than energy from a new coal plant (9.9 cents/kWh vs. 13.3 cents/kWh).

Investing in energy efficiency and renewable energy saves money, and the savings is spent on Michigan workers and businesses. In 2008, Michigan spent $1.4 billion to import coal from other states. We can cut that figure, as surely as we can cut taxes, and arguably with more benefits to the state.

Green jobs are growing faster and pay better than other occupations, as reported in a recent report by the Brookings Institute. This report found that “green jobs” in the clean-tech sector grew at double the rate (8.3% to 4.2%) of other occupations from 2003 to 2010. These jobs also paid a median wage 20% higher than other occupations in 2010. The clean-tech sector now has a total job count higher than the oil industry.

Our potential
Increasing Michigan’s reliance on renewable energy and energy efficiency beyond our current statute requirements could produce even more savings, jobs, and economic development here in Michigan. A recent study by The Union of Concerned Scientists showed that if Michigan required 30% of its electricity to be from renewable sources by 2030 and required utilities to save 2% annually through efficiency programs, the results would be:
  • $9 billion in energy costs savings for Michigan residents and business
  • 15,300 new Michigan jobs
  • Almost $5.7 billion in new capital investments
  • $320 million in new property tax revenue for our communities
  • $120 million in new revenue for farmers and landowners from growing biomass feedstock
  • Reduced health care costs and threat from air pollution sources
  • Lowered greenhouse gas emissions
Employing energy efficiency and renewable energy also helps to avoid the health costs that come from burning coal.

A report commissioned by MEC and released this summer shows that Michigan’s nine oldest coal plants cost Michigan residents $1.5 billion annually in health care costs and damages. That’s more than $500 per year for a family of four. And those costs are from particulate matter alone—only one of coal’s many pollutants that impact human health.

Replacing these nine coal plants with clean options could prevent 180 premature deaths, 233 hospital admissions or emergency room visits, 68,000 asthma exacerbations and 72,000 instances in which children are restricted from school or other activities.

The same study found on a national basis that these nine coal plants were responsible for $5.4 billion in health care costs, including 660 premature deaths, 250,000 asthma-related incidents and more than 800 hospital visits for admissions annually.

Clearly, we can do better for Michigan. If a dollar saved through tax cuts will stimulate the economy, as our governor and many lawmakers believe, surely a dollar saved through smarter energy choices will do the same—and protect the health of our natural resources and citizens at the same time.
-Chris Kolb
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