EPA Moves Closer to Finalizing Most Expensive Rule in Agency’s History

By at 12 September, 2014, 2:26 pm

New Ozone Standard Could Reduce GDP by $270 Billion a Year

Center for Regulatory Studies

By Karen Kerrigan

On September 8, the Environmental Protection Agency (EPA) quietly published three final documents in the federal register that serve as the basis for its forthcoming rulemaking on ozone: the Policy Assessment, the Health Risk and Exposure Assessment, and the Welfare Risk and Exposure Assessment. Beneath this mountain of technical and scientific jargon lies one of the most expensive rulemakings ever promulgated by EPA.

Let’s review the bidding.  In July, the National Association of Manufacturers released an economic analysis of a new ozone rule, and the results should give every lawmaker pause.  NERA Economic Consulting found that, under a 60 parts per billion (ppb) ozone standard, “potential emissions control costs would reduce U.S. Gross Domestic Product (GDP) by $270 billion per year on average over the period from 2017 through 2040 and by more than $3 trillion over that period in present value terms.”

For households and workers, the results are equally grim.  According to NERA, a 60 ppb ozone standard would result in the following:

  • “Average potential household consumption would be reduced by about $1,190 in 2017 and by about $1,830 in 2038, with an average annual (present valued) reduction over the period from 2017 through 2040 of $1,570 per household.”
  • “Lower potential wage rates by an average of 1.2% over the period from 2017 through 2040.”
  • “Total labor income declines by a greater percentage than does the wage rate (an average of 1.9% over the period)”
  • “A potential increase in average delivered residential electricity price of 3.3% over the period from 2017 through 2040.”

As I’ve noted previously, small businesses are concerned about the “non-attainment” designations for areas that fail to meet new national ambient air quality standards—in this case, for ozone.  “Non-attainment” is the technical term from the Clean Air Act that obscures an unsettling and devastating reality for local communities.  As NERA explained in its analysis:

[B]eing in nonattainment of a NAAQS triggers more regulatory burdens than just reducing emissions to achieve attainment. A number of regulatory programs are also imposed on nonattainment areas. Significant among these is a requirement that any economic entity that wishes to obtain a permit to establish a new facility that will emit the pollutant(s) of concern in a nonattainment area must first find an offsetting reduction of those same emissions from another facility that is exiting the area, or has voluntarily reduced its own emissions below its permitted level. Markets for these “offsets” often develop, but offsets can be exceedingly costly or difficult to find if there are few existing emitting facilities in the area to create a supply.

So while EPA plods forward in developing the ozone rule, local communities and the small businesses that serve as their economic lifelines, nervously await yet another regulatory burden from the federal government, one that will choke off new investment, job growth, and innovation.

Karen Kerrigan is president & CEO of the Small Business & Entrepreneurship Council. The Center for Regulatory Solutions is a project of SBE Council.

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