The Costliest EPA Rule Yet
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By Margo Thorning
A new proposal from the Environmental Protection Agency has already
forced four major industrial projects worth $7 billion in new investment
in the Baton Rouge area to be put on hold or redirected elsewhere. These
potential investments would have collectively contributed $86 million in
wages annually to the local economy and created 2,000 jobs.
Unfortunately Baton Rouge is just a microcosm of a phenomenon that will
spread nationwide. Under the new EPA proposal to lower ozone emissions,
18 of the nation's top-performing urban economies would suddenly find
In the history of an agency known for costing businesses dearly, the new
ozone proposal stands out. If adopted, it will likely become the most
expensive EPA regulation ever imposed in terms of impact on the U.S.
economy. Worst yet the proposed rule isn't needed.
Reducing the amount of ozone in the atmosphere is a laudable goal -- but
one that has already been achieved. Ambient national ozone levels dropped
by 27 percent between 1980 and 2010. Areas with high emission levels,
like Los Angeles, dropped by 67 percent.
In 1997 the EPA classified 113 metropolitan areas as not attaining the
required threshold, whereas today it classifies only 41 as such. In 2008,
the EPA set a limit on ozone concentration in the atmosphere at 75 parts
per billion, and while some areas struggled to meet the target, most have
Today Americans are breathing air that is cleaner and more ozone-free
than it has been in 35 years.
Now the Obama administration is poised to punish this success with
astronomically pricey regulation. The EPA's new proposed rule would
ratchet the limit down from 75 ppb to between 65 and 70 ppb. According to
NERA Economic Consulting, the expenses involved in meeting this goal
would reduce U.S. gross domestic product by $140 billion a year, or $1.7
trillion between 2017 and 2040. The regulation would cost the average
household $830 annually, and result in 1.4 million fewer jobs being
created by 2040. It would be detrimental to an economy still struggling
to recover from a recession.
No U.S. leader can in good conscience ignore the kind of burden this
regulation would impose on ordinary Americans. In 2011, Obama seemed to
agree when he squelched an earlier version of the job-killing proposal,
saying that he wanted to "underscore the importance of reducing
regulatory burdens and regulatory uncertainty." Now he seems to have
changed his mind.
There is no question that the burden will be high. According to the EPA's
own data, fifty-nine percent of the U.S. population lives in areas that
would be out of compliance. Even if the EPA adopts the less-stringent 70
ppb threshold, more than half the country will not measure up. In all
these areas, businesses will have to make costly investments in new
equipment to lower emissions, leading to layoffs and closures.
The proposed rule is especially galling given the onerous regulations
already imposed on business. Currently, small companies pay $35,000 a
year on regulatory compliance, and never know when a new cost might pop
up. Every dollar in compliance costs comes out of someone's paycheck.
The EPA will make a final decision in October. Presidents in their second
term care about legacy, not electability. That gives Obama seven months
to decide whether he wants to be remembered for having set the entire
American economy back in order to solve a problem that was already
Margo Thorning is Senior Vice President and Chief Economist for The
American Council for Capital Formation.
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