Environmental regulation, particularly proposed regulation of greenhouses gases, poses a major threat to the economic future of many Americans.
Under the Obama administration, the Environmental Protection Agency has proposed and promulgated numerous rules without a complete and accurate assessment of their impacts on consumers, jobs and small businesses. These rules include limits on the emissions of greenhouse gases, more stringent regulations for particulate matter and ozone, and "maximum achievable control technology" standards for power plants. Each will likely raise production costs, reduce economic output and reduce employment in affected industries.
The Comprehensive Assessment of Regulations in the Economy Act, recently introduced by Sen. James Inhofe, R-Okla., would require independent assessment of the economic impact of mandates issued by the EPA since Jan. 1, 2010. The bill would set up a committee to assess the effects of EPA regulatory mandates, including key provisions of the Clean Air Act, Clean Water Act and Solid Waste Disposal Act. Assessments would include an evaluation of the cumulative effects of EPA mandates on employment, economic development, electric reliability, energy security, retail electricity rates, gasoline prices, state and local governments (including state and local taxes), small businesses, agriculture and trade in energy-intensive industries.
Although levels of ozone and particulate matter permitted under existing standards may be harmful to health, the question arises -- are the benefits of more stringent standards worth the cost, in terms of reduced output, economic growth and employment?
But regulation of greenhouse gases raises a much more fundamental question: Does the EPA have any business regulating greenhouse gases as pollutants when scientific debate continues to rage concerning whether anthropogenic greenhouse gases cause enough climate change to harm human beings, and when economic evidence strongly indicates that the costs of reducing global warming will far outweigh the benefits? In light of these uncertainties, an independent assessment of the energy and economic impacts of regulating greenhouse gas emissions, by revealing the high costs, would raise serious questions.
Some proponents of regulating greenhouse gases have downplayed the regulations' harmful effects, pointing to economic benefits from the Clean Air Act in the past. In the past, however, the Clean Air Act resulted in clear economic benefits when it was used to reduce emissions of pollutants that were clearly harmful to people's health or property. Given the uncertain link between CO2 and climate change and the small impact that proposed regulations could have on temperature, regulating greenhouse gases promises few, if any, comparable economic benefits. Those employed by regulatory agencies and in some alternative-energy-producing businesses might profit, but most Americans would pay more for almost everything they consume.
Also, a policy to regulate greenhouse gases would work like a regressive tax, harming the poor the most by raising the cost of energy, which has a major impact on the cost of food, shelter, transportation and almost everything else they need, all of which constitute higher proportions of their spending than of average Americans'.
The EPA can play an important role in protecting vulnerable groups from harm caused by traditionally defined pollution, but evidence of harm from CO2 is inadequate. Thus the economic impacts of greenhouse gas regulation need to be carefully assessed.
Although Sen. Inhofe's CARE Act would be a step in the right direction, it does not go far enough. It would permit the EPA to count new jobs and production from renewable energy projects to offset jobs and production lost because of regulations. But most renewable energy projects, though they may create jobs, are government subsidized. The taxes required to fund the subsidies destroy other jobs and reduce economic growth. Thus, assessments of regulations should count offsetting benefits only from energy projects that are ultimately self-supporting, not those that are viable only because of government subsidies.
As the EPA considers regulating CO2 despite scientific uncertainty about how harmful this might be, Congress needs the guidance and information that would come from analyzing the economic impact of such regulations. With accurate information, Congress could prevent the EPA from imposing costly restrictions on greenhouse gas emissions while preventing or delaying implementation of other rules whose costs outweigh their benefits.
Dr. Tracy C. Miller is associate professor of economics at Grove City College and a contributing writer for The Cornwall Alliance for the Stewardship of Creation.