Jul 29, 2014 - 5:30pm

3 Potent Arguments Against EPA’s Carbon Regulations

Senior Editor, Digital Content

A circus atmosphere surrounds the locations of EPA's two days of public hearings on its proposed carbon regulations. For example, campaign-style rallies are being held in Atlanta—where the hearings were moved due to power outage, and Ben & Jerry’s is dishing out free ice cream in Washington, DC.

Let me remind you that of the locations where EPA is holding public hearings, none will take place in any of the ten states most reliant on coal for electricity. For EPA Administrator Gina McCarthy, this is what she considers to be part of her agency's “unprecedented outreach.”

There may be a carefree atmosphere outside, but it’s serious inside the hearings where over the next two days 1,600 people will testify on EPA’s costly regulations that will reshape America’s power system. One of those was Mary Martin, energy, clean air, and natural resources policy counsel for the U.S. Chamber. She delivered three potent arguments against the proposed regulations.

1. EPA failed to study how the proposed regulations will affect small businesses.

EPA has taken a “very myopic view” and avoided how the proposed regulations will affect small businesses, Martin explained:

As EPA itself admits, electricity prices — which are one of the largest concerns of small businesses — will go up as a result of this proposal. In fact, energy costs are one of the top three business expenses for 35% of small businesses.

Yet, EPA hasn’t convened a Small Business Advocacy Review as it’s obligated to do under the Regulatory Flexibility Act. The review would look at how electricity price increases as well as possible compliance burdens imposed by state and regional plans would affect small businesses.

2. EPA is rushing the proposed regulations.

Because of the vast scope and complexity of the proposed regulations, more time is needed to analyze them, Martin argued:

Based solely upon the magnitude and breadth of this proposed regulation, the comment period should be extended by at least 60 days to give the various stakeholders more time to understand and analyze the potential impacts of the proposal. Additionally, there should be more time in the process for the states to understand the complexities of an extremely technical rule that goes beyond traditional environmental regulation and delves into the world of energy generation and distribution.

3. There are major problems with EPA’s cost-benefit analysis.

While the proposed regulations are about reducing greenhouse gas emissions, much of the benefits come from reductions in other emissions, Martin stated:

The EPA continues to justify a regulation with benefits that are derived not from the pollutant that the EPA cites as the justification for promulgating the regulation (carbon dioxide), but from pollutants incidentally reduced by the primary regulatory requirements (ozone and particulate matter). For example, under the state compliance approach, the EPA estimates that “the climate benefits in 2020 are expected to be approximately $18 billion ...“ while the “[h]ealth co-benefits are estimated to be $17 to $40 billion.”

She also noted that the carbon benefits are based in part on a “social cost of carbon” estimate that lacks transparency and hasn’t gone through the rulemaking process.

This isn’t the only instance of EPA puffing up the potential benefits from its proposed carbon regulations. EPA Administrator Gina McCarthy has stated that by 2030, the proposed regulations will deliver $30 billion in climate benefits. What she didn’t say, and what was noted by scholars from the Brookings Institution, is that most of those benefits will be global benefits. “Only 7 to 23 percent of these benefits would be domestic benefits,” write Ted Gayer and Kip Viscusi.

There are problems on the cost side of the equation as well. Martin points out that EPA hasn’t analyzed the proposed regulations’ effects on jobs:

Finally, the EPA persists in its failure to consider in any significant way the employment impacts of Clean Air Act regulations like this one. The Agency did not use a whole-economy modeling approach here, which would have captured a much more accurate picture of the likely job losses from this proposal. The EPA also continues to avoid undertaking an employment analysis under Section 321(a) of the Clean Air Act, which requires the continuous review of potential job losses and shifts in employment due to the implementation of the Act.

Let’s sum this up:

  1. EPA hasn’t examined possible effects of its proposed carbon regulations on small businesses, as it’s obligated by federal law,
  2. Despite its scope and complexity, EPA is rushing them through the process;
  3. EPA’s cost-benefit analysis is questionable at best.

That’s all that could fit into five minutes, but this only scratches the surface on why this proposed regulation is bad policy. There’s more to come.

Follow Sean Hackbarth on Twitter at @seanhackbarth and the U.S. Chamber at @uschamber.

About the Author

About the Author

Sean Hackbarth
Senior Editor, Digital Content

Sean writes about public policies affecting businesses including energy, health care, and regulations. When not battling those making it harder for free enterprise to succeed, he raves about all things Wisconsin (his home state) and religiously follows the Green Bay Packers.