IHS Chemical Week


EPA's Ozone Standard: Another Recession?

10:31 AM MST | March 3, 2011 | By VINCENT VALK

As far as I know, "government regulation" has never been cited as the cause for any economic recession, ever. So when Manufacturers Alliance/MAPI came out with a study claiming that EPA's proposal to lower ozone standards from the current 84 parts-per-billion (ppb) to 60-70 ppb would cost the U.S. 7.3 million jobs by 2020, I was a bit incredulous.

If the phrase "7.3 million job losses" sounds kind of familiar to you, this might be why: in the 2008-09 downturn – the worst since the Great Depression – the U.S. economy lost 7.9 million jobs. So, MAPI is essentially claiming that a reduction in the ozone standard to 60 ppb would result in the nearly the same number of job losses as the worst economic crisis since the Second World War, albeit over a much longer period. Still, MAPI's projections work out to about 800,000 job losses per year over the next nine years, no trifling figure.

Industry groups love quoting this stuff, but is it real? Are EPA's greenhouse gas regulations "job-killing?" Are we regulating our way into economic stagnation?

According to most people not associated with industrial concerns, the answer to all these questions is a resounding "no." The Associated Press ran a story on the MAPI report noting that the author of the study acknowledges huge "uncertainty" around the huge job loss figure. In January, the New York Times discussed how President Obama's ballyhooed federal regulatory review is unlikely to amount to much. Even the example the President used to illustrate dumb regulations – saccharin's presence on a list of toxins until last year – didn't really make a difference.

Meanwhile, OMB Watch, a non-partisan government watchdog group, has some rather scathing things to say about what it calls "the jobs vs. regulations myth." Here are some choice quotes from OMB Watch's generally approving take on EPA's white paper on the Clean Air Act and the economy – which concluded that environmental regulations are a net economic benefit, due to improved health and productivity:

"As has been the case for decades, significant rules promulgated by agencies under mandates from Congress almost always result in economic benefits exceeding costs."

"EPA's paper contradicts the widespread notion that pollution abatement costs are a huge burden on manufacturing. Citing surveys of manufacturers, the paper reports abatement costs are less than one percent of total manufacturing costs and that these costs consistently represent less than 0.3 percent of the nation's gross domestic product (a measure of the nation's overall economic activity)."

OMB Watch also notes that Rep. Darrell Issa (R, CA), new chair of the House Oversight and Government Reform Committee, has solicited a "wish list" from industry, upon which he is basing opposition to EPA's regulatory efforts.

I read the section of Rep. Issa's 97-page report devoted to three EPA regulations – boiler MACT, GHG standards, and National Ambient Air Quality Standards. The section is full of claims that new rules are incoherent and burdensome and will lead to massive job losses, compliance costs in the billions and lost GDP in the trillions. The citations for no less than nineteen of these claims are letters from industry groups or companies. Three citations are from government reports, and one of those was prepared by Republican Senate staffers. Nowhere does the report cite an environmental advocacy group, and even citations of independent economic analysts are few and far between and rarely related to predictions of impending economic doom.

This is not to say that industry lobbyists are always wrong and environmentalist lobbyists are always right. But when claims of devastating job loss are almost entirely coming from one side, without so much as corroboration from independent observers, it is difficult to take them seriously.

Look, I realize this is a difficult issue for the chemical industry to face up to. Nobody is arguing that implementing regulatory directives is easy. And, to the chemical industry's credit, ACC has toed a pretty moderate line on regulations. Still, in a country where public sector unions are, reasonably, being asked to trim benefits and wages in the name of shared sacrifice, is it all that unreasonable to ask multibillion-dollar industries to bear the very modest costs of regulation for the public good? Industry has been grappling with EPA and other federal rules for decades. It strains credulity to think that, suddenly, it cannot.

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