Proposed ozone regulations may cost triple environmental agency projections

The Washington Examiner

Environmental Protection Agency officials are moving forward with proposed emissions regulations despite critics’ claims that the new rules could be the costliest in U.S. history.

The regulations would require ground-level ozone to decrease from present levels nationwide from 75 parts per billion to between 65 and 70 as early as 2020. The pollutant levels decreased by 23 percent from 1990 to 2013, according to the environmental agency.

The additional processes needed to reduce ground-level ozone are estimated to cost $1.7 trillion from 2017 to 2040 and could slash the nation’s gross domestic product by $140 billion each year, according to a recent study conducted by National Economic Research Associates, an independent group that conducts economic analyses.

Conversely, the environmental agency estimated that costs would be $15 billion annually starting in 2025, the year officials expect most states to reach the standards.

Assuming expenses begin in 2017, NERA’s predicted costs more than triple the agency’s for the 23-year period.

Additionally, officials estimate “that reducing pollution to meet the standards in 2025 will yield annual health benefits” worth between $19 billion and $38 billion, according to an EPA factsheet.

“The benefits of reducing smog-forming emissions outweigh the estimated costs,” said agency spokeswoman Liz Purchia. “Industry claims consistently ignore the health benefits and why an ozone standard is so important for improving the health of all Americans.”

The main cause of the enormous discrepancy between the two studies was the methodologies and assumptions underlying predictions of unknown compliance costs.

Some of the costs of emissions reduction methods are known, since they’ve been used for years. The new regulations, however, require much deeper cuts in emissions and that means businesses and governments must find new methods of getting into compliance. What those new methods will cost is extremely difficult to project with confidence.

The authors of the NERA analysis used what they described as “evidence-based analyses” to estimate the new compliance costs, while the environmental agency assumed that those new compliance costs would be the same as current ones.

“Frankly, there’s no real basis for it,” the NERA study’s co-author, David Harrison said. “They should develop much more detailed analyses in their costs. The reductions needed to get to a lower and lower standard are becoming increasingly more difficult to achieve. We’ve been reducing emissions for so long, all of the low hanging fruit is gone.”

Adding to the controversy over the cost of complying with EPA’s new regulations is the agency’s long record of exaggerating the benefits to be gained and minimizing the costs, according to a March 2014 report by Senate Environment and Public Works Committee Republicans.

Similarly, a July 2014 Government Accountability Office report found the environmental agency’s previous economic analyses were marred by serious methodological and analytical shortcomings “that limited the usefulnessof some of its estimates.”

For example, the agency neglected guidance from the Office of Management and Budget and failed to make its methodology public. Also, the study that the EPA used to project employment impacts relied on data that was more than 20 years old. Investigators for the congressional watchdog also pointed out that environmental agency officials failed to present their analyses in the way the public would understand, as required by law.

“Rather than using a fair and open rule-making process, EPA pushed through regulations using sloppy analysis without sufficiently informing Congress or the public of the economic impact,” said Rep. Darrell Issa, R-Calif., who requested the GAO report as chairman of the House Oversight and Government Reform Committee.

The environmental agency responded to GAO, saying the findings weren’t systematic and represented a small subset. The accountability office replied, however, that it examined more than one-third of the agency’s 20 most economically significant rules from 2009 to 2011 and that four of those rules had effects of over $1 billion.

Regardless of the compliance costs, 18 of the nation’s 20 top-performing metro economies currently have ground-level ozone amounts that exceed the proposed standards, according to the Baton Rouge Area Chamber.

The environmental agency predicts that most areas will be within the required range by 2025, the year most areas will need to be in compliance.

“EPA projections show the vast majority of U.S. counties would meet the proposed standards by 2025 just with the rules and programs now in place or under way,” according to an agency factsheet.

“This is not an argument in favor of establishing a new standard — but actually an argument for why this proposed new rule is unnecessary,” said Michael DiResto, a senior vice president of the Baton Rouge Area Chamber of Commerce in Louisiana.” The EPA’s own promotional materials actually help to show why the proposed regulation is a solution in search of a problem, but with very costly and harmful penalties for not meeting it on their arbitrary timeline.”

States’ compliance with the regulations will be determined by 2017, with penalties for offenders beginning as early as 2020.

“The non-attainment status will come into play, with all the negative impacts that designation entails, well in advance of these 2025 projections,” DiResto said.

Areas that don’t reach compliance face harsh restrictions from the environmental agency that force tighter emissions requirements, and may result in a loss of federal funding.

Furthermore, because of the method used to measure ground-level ozone, one state’s emission reduction efforts may affect another, allowing one to emit more pollution than permitted and still be designated as compliant.

Consequently, one state may incur higher costs than another. States that require little to no expenses to reduce emissions, mostly rural states that have little ground-level ozone, could still face an economic impact because of their interactions with other states that are heavily affected by the strict standards.

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