EPA’s new regs will cost U.S. about 1.4 million new jobs annually; hammer auto, oil sectors

FLINT, Michigan—In recent months, the Environmental Protection Agency has proposed a laundry list of mandates designed to implement President Barack Obama’s “climate action plan.”

The three most disruptive and expensive mandates are the EPA’s proposed new standards for ozone, carbon emissions from power plants, and methane releases related to oil and gas production. While all US businesses will be adversely affected to some degree, the automotive and electric power industries stand to be hit hardest. Because both of these industries contribute significantly to the American economy, the fallout could be substantial. Ground level ozone is caused largely by tailpipe emissions. Ozone regulations were most recently tightened in 2008 to 75 parts per billion (ppb). Now the EPA wants to lower the acceptable level to 65 ppb. If implemented, the new standard could be the costliest regulation ever, potentially reducing economic output by about $140 billion annually for the next 25 years according to a recent study prepared for the National Association of Manufacturers. Further, there would be adverse effects on US employment income that would be equivalent to an annual loss of 1.4 million jobs. As with other EPA regulations, the agency has not conducted a careful cost-benefit assessment of the new ozone standard.

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The EPA argues ozone is a major cause of asthma. But under the existing standards, which have resulted in an 18 percent decrease in ozone since 2000, the number of asthma cases has actually increased. In short, the proposed new standards cannot be justified either by science or economics. Even though carbon emissions have fallen in recent years to their lowest level in 20 years, the EPA unveiled a set of regulations last month designed to further reduce emissions from the nation’s power plants by 32 percent no later than 2030. If they withstand legal challenges, hundreds of coal-fired power plants could be forced to shut down over the next 15 years, while natural-gas generating plants may eventually face the same fate. Though the first iteration of the rules envisioned a large shift to natural gas, the current proposed regulations mandate that utilities use more renewable energy sources like wind and solar power. And zero-carbon emissions nuclear plants aren’t even in the picture. The costs of attaining these carbon reduction targets will be astronomical. According to the Energy Department, the current cost of producing a megawatt-hour of electricity from coal and natural gas ranges between $38 and $49. Installing and operating new wind facilities would cost $107 per megawatt-hour, largely due to the natural intermittency of wind that forces base-load generators to operate at higher costs. Solar power suffers from the same deficiency. Who pays the bill? A recent study estimates the EPA power plan will raise household electric and heating bills by an average of $680 annually. Higher power costs will also erode the competitive advantage of America’s rebounding manufacturing sector. Most recently, the EPA has a proposed rule that would mandate a 45 percent reduction in methane emissions related to oil and gas production within a decade. Because individual states already regulate these releases, the proposed EPA rule would be duplicative and simply increase the industry’s regulatory compliance costs. Here again, the administration has ignored the fact that methane emissions from natural gas production have decreased 38 percent since 2005 while those from hydraulically fractured wells have dropped 79 percent. In all of these examples, the EPA is mandating solutions in search of problems. Existing regulations, combined with market forces and new technologies, have already greatly improved the nation’s air quality and overall public health. Justifying new and costly federal regulations with exaggerated and unscientific estimates of their benefits will improve neither the environment nor the economy. The public would be better served by a “rethink” of these costly regulations or, at least, an extension of their compliance dates.