Do Environmental Rules Really Cost Jobs?

To the disbelief of environmentalists and the subdued anger of his Environmental Protection Agency’s administrator, Lisa Jackson, President Obama postponed

for two years ozone emission restrictions, saying they could cost jobs. That he did so just days before his jobs speech before Congress says that he didn’t want to hand Republicans the rejoinder that he was destroying jobs at the same time as he was giving speeches about creating jobs. In other words, Obama’s decision was entirely political.

Pollutants — ozone, mercury, arsenic, chromium, sulfur dioxide, nitrogen oxide emitted by power plants and certain heavy manufacturing such as cement — cost lives. No one disputes that. So Obama has decided that lives are to be lost. But our question is: do these environmental rules actually cost jobs? Republicans will tell you they do. Rick Perry says, “the EPA regulations are killing jobs all across America”. At a rally in Iowa, Michelle Bachman said, “I guarantee you the EPA will have doors locked and the lights turned off” if she is elected, calling it “the job-killing organization of America”.

But the fact is that no one really knows if the rules cost jobs. Claims by the EPA versus those in industry are therefore wildly divergent. Republicans in Congress and business groups say that curtailing what is called ground-level ozone will cost billions of dollars and hundreds of thousands of jobs. But neither industry nor the EPA can offer past results as proof. In a memo targeting 10 proposed clean air resolutions, House Republican Leader Eric Cantor claims the ozone rule alone will result in “an estimated cost of $1 trillion or more over a decade and millions of jobs”. A trillion dollars? Millions of jobs?

There is something akin to an oxymoron in this. How would all that money spent retrofitting industries with pollution controls not create jobs? Construction jobs at the plants, manufacturing jobs where controls are fabricated. The $10 billion to control mercury and other pollutants from coal-burning plants would create 31,000 short term construction jobs and 9,000 permanent jobs in the utilities sector, according to the EPA.

Yet the couplet that spending equals job loss is ritualistically recited by Republicans as a given. Where do they think the money goes?

Industry Doesn’t want to spend

Industry has regularly exaggerated both cost in money and cost in jobs in a fight to avoid the former. The job loss referred to comes from threatened plant closings. Utilities such as American Electric Power say it is not worth the money to upgrade old plants. AEP would instead shutter two dozen plants and fire hundreds of workers. What they do not say is that those units are an average of 55 years old, operate at way below capacity (explaining only “hundreds” of workers), and are due for closing anyway. In fact, AEP is required to close those plants under a settlement with the Bush administration over their violating the Clean Air Act.

An industry report of November 2010 said that hundreds of coal, gas and oil-powered plants with a collective capacity of 70,000 megawatts could be shuttered if new rules were implemented too quickly.

The cement industry says that sulfur dioxide and nitrogen oxide rules could force closure of 18 of 100 plants with a loss of 13,000 jobs. The EPA claims only 600 lost with 1,300 jobs gained at equipment makers. An industry-funded study says this rule will cost tens of thousands of jobs and cost customers a 20% rise in electricity rates. The EPA says society would benefit by as much as $120 to $240 billion from less hospitalization and work time lost to respiratory illness.

They Protest Too Much?

Back and forth go the threats and the counterclaims with little certainty as to how much is bluff and how much is guess. There is one example, though: When the original sulfur dioxide rules were announced, the power industry claimed that it would cost $7.5 billion to fit plants with scrubbers and filters to rid the air of acid rain caused by sulfur dioxide emissions — that or a loss of tens of thousands of jobs instead. In fact, it cost more like $1 billion with no evidence of extensive job loss.

The energy industry protests are not universal. Rather, they come from a rearguard of resisting companies. Close to half the country’s more than 400 coal-burning plants have already outfitted emission controls in varying degrees and a third of the states already have set their own standards for mercury.

Adding Some Context

Peel away industry’s latest attempts to ward off costs and you come upon some history. The Clean Air Act is 41 years old. Immensely popular amongst the citizenry, it was signed into law by Richard Nixon in 1970. Industry has been fighting it ever since.

Early on, the Act was relaxed, requiring energy companies to retrofit their plants with pollution controls only when significant modifications beyond “routine maintenance” were made. That was in deference to the great expense to energy companies that immediate and unconditional replacement would have caused.

But the energy industry chafed under even this accommodation, referred to as “new source review”, often disguising major construction as “routine”. The Reagan administration was, of course, averse to regulation whether law or not, so only in the Clinton years did the EPA take action against the industry’s subterfuge. It initiated investigations that led to lawsuits against 51 power plants for violating the Clean Air Act.

When George W Bush took office, Vice President Cheney huddled with energy executives in an infamously secret meeting (that excluded any environmental representatives) to set energy policy. One outcome was that the lawsuits were dropped. The energy companies had been some of the biggest Bush campaign contributors.

The Bush administration in 2005 set about revising sulfur dioxide and nitrogen oxide rules downward, but the courts in 2008 ruled the changes to be in violation of the Clean Air Act. Only now is the Obama administration putting the regulations back on track. Unless it doesn’t.

Stated simply, a large swath of the energy industry has successfully fought off installing pollution controls for decades.

Health Effects

The EPA regularly justifies its action by citing health benefits. They say that stricter sulfur dioxide/nitrogen oxide rule will save 34,000 premature deaths, 15,000 non-fatal heart attacks, asthma and respiratory ailments at an annual cost to industry of $1 billion a year. The agency says that mercury, lead, arsenic and chromium pollutants, addressed by that forthcoming rule, will save 17,000 lives a year. Mercury is especially hazardous for pregnant women and their fetuses. The EPA estimates the annual cost of compliance at $10 billion a year compared with $100 billion in alleged costs of hospital visits and lost time on the job. Again, hard to know how such accuracy can be known. But the president of the American Academy of Pediatrics, who stood with EPA chief Lisa Jackson in announcing the mercury rule said, “If you think it’s expensive to put a scrubber on a smokestack, you should see how much it costs to treat a child over a lifetime with a birth defect”.

Obama’s Next Move?

Mr. Obama has set aside the ozone rule. The question now is whether he will again buy into only industry claims about job loss and jettison the sulfur dioxide/nitrogen oxide revisions and the first ever control of mercury, both due to be announced this fall.