EPA Regulations Cause Uncertainty, Hurt Jobs

By October 25, 2011Energy

Yesterday, The Hill’s Congress Blog posted two pieces on the impact and costs of the Environmental Protection Agency’s (EPA) regulations on manufacturing and economy. The EPA’s overreaching regulations have caused great uncertainty among manufacturers and businesses, both large and small, across the country.

The first post “EPA’s proposed power-sector air rules will weaken American Manufacturing”  is by Bernard Weinstein, associate director of the Maguire Energy Institute and an adjunct professor of business economics in the Cox School of Business at Southern Methodist University. In his piece Mr. Weinstein discusses the ramifications of the EPA’s Utility MACT and Cross-State Air Pollution Rules (CSAPR):

As designed, the Utility MACT would be the most expensive direct rule in EPA history.  Indeed, the EPA itself has estimated it would impose costs of about $11 billion a year on the U.S. economy, though third-party estimates of compliance costs are considerably higher.

For example, a recent analysis by National Economic Research Associates (NERA) finds that complying with the proposed standards would cost power companies close to $18 billion per year for the next 20 years.  Some coal-fired plants would be so expensive to retrofit they would simply be shut down.  The NERA study also projects that about 48 gigawatts of coal generation would be retired over the next five years, representing a 13 percent decline. 

Manufacturers use one-third of our nation’s energy supply and access to affordable sources of energy is crucial to our competitiveness. Utility MACT and CSAPR will have a severe impact on manufacturers and cost valuable jobs.

Though most recent discussion has focused on the implications of these rules for the utility sector, little attention has been directed at how higher electric power costs would affect America’s energy-intensive manufacturing industries. The most recent U.S. Census of Manufacturers found that the ten most energy-intensive manufacturing industries—including chemicals, cement, and iron and steel—employed almost 1.2 million workers. 

Because these industries have strong upstream and downstream linkages, also called “multipliers,” they support at least 9.6 million additional workers across the economy.  Should America’s manufacturers, and in particular our energy-intensive industries, be forced to reduce capacity and lay off workers in response to externally-imposed energy cost increases such as those that would inevitably attend the rapid implementation of CSAPR and MACT, job losses would be recorded in many non-manufacturing industries as well. 

The secong post, “The high price of EPA regulations” is by Dr. Margo Thorning, senior vice president and chief economist at the American Council for Capital Formation. Dr. Thorning writes about the impact of the 1990 Clean Air Act Amendments on jobs:

Ironically, EPA’s own simulations with its macroeconomic model stand in stark contrast to its WTP claims.  Its modeling shows that the CAAA has significant negative impacts on U.S. GDP growth over the 2010-2020 period. GDP declines by $79 billion in 2010 and by $110 billion in 2020 relative to the baseline forecast.

By 2020, there is a tiny increase in GDP ($5 billion) under the labor force adjusted case. Note that EPA’s calculation of a $5 billion increase in GDP in 2020 when health benefits are included is only a tiny fraction (0.25 %) of the $2 trillion in claimed “economic benefits” from the CAAA.

Dr. Thorning concludes that additional EPA regulations enacted and pending should be evaluated using accepted methods to quantify their costs and benefits. Manufacturers have invested billions of dollars in new technology to reduce emissions and the impact on the environment. The EPA’s aggressive pending regulations such as Boiler MACT, Utility MACT, CSAPR, and coal ash will only cost more jobs and stifle the economy at a time when we should be focused on job creation.

Join the discussion One Comment

  • Florian Schach says:

    EPA regulations can sometimes stand in the way of economic prospetity. . We do need them for protection but within certain sectors Job Security is sometimes at risk. In recent years, Regulations have cost companies somewhere in the neighborhood of $40 Billion in the period during 2009 until now. From 2001-2008 however, the costs equaled approximately $60Billion over a period of 8 years (http://eng.am/niOH2Y). The money that is paid by companies to stay in line with certain regulations can be used to create jobs, and sometime save companies a bit of money . Of course one shouldn’t advocate for doing away with regulation, but reviewing it and implementing what’s necessary would be a great help to businesses both large and small.

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