For decades, American legislators have been passing laws and regulations designed to help protect our environment. One notable example is the passing of the Clean Air Act, which was designed to combat the issues of airborne pollutants that could pose a hazard to public health and the environment.
From the perspective of reducing health risks from airborne pollution, the Clean Air Act (CAA) has been a resounding success. As shown on a chart on the epa.gov website, the percentage change in emissions since 1980 have been significant, with:
- Carbon Monoxide (CO) emissions falling 69% from 1980 to 2014
- Lead (Pb) emissions falling 99% from 1980 to 2014
- Nitrogen Oxides (NOx) emissions falling 55%
- Volatile Organic Compounds (VOC) emissions falling 53%
- Sulfur Dioxide (SO2) emissions falling 81%
These are big changes, ones that have helped to make America much more environmentally friendly than before. However, despite these massive improvements in emissions reduction, the EPA is considering even tighter restrictions for American industries.
Overall, this is a good thing. However, is the EPA reaching too far? Could newer, and more aggressive, environmental regulations be having an adverse impact on the U.S. manufacturing industry?
The Clean Power Plan and its Potential Impact on American Manufacturers
On August 3, 2015, the EPA and President Obama finalized what they called the Clean Power Plan (CPP), which is designed as an “important step in reducing carbon pollution from power plants.”
This new plan has manufacturers across the country suffering from anxiety attacks.
Because, the regulations proposed in the CPP will add to the costs of energy producers, which will very likely drive up energy costs for manufacturers (and everyone else as well). Also, it is projected that these new regulations might have a significant impact on the ability of manufacturers to add new jobs.
According to an NBCC (National Black Chamber of Commerce) report cited by a manufacturing.net article, “the rules would significantly reduce U.S. GDP each year over the next two decades (more than $2.3 trillion) destroy millions of jobs; and more than double the cost of power and natural gas.”
Will Natural Energy Be the Solution? Or, Will Manufacturers Be Hit with a Double-Whammy?
This is a huge concern for manufacturers in America. The shale gas boom only recently slashed energy costs for manufacturers, helping to fuel a surge in jobs and growth. Natural gas harvested in this boom is, as pointed out in a Forbes.com article about the longevity of the shale gas boom, “the cleanest-burning fossil fuel… it has also helped to justify tough new federal emissions regulations for existing power plants.”
In the article, the author paraphrases an entry from renowned science journal Nature, stating that “forecasts for the longevity of the shale gas boom… are little better than guesswork. Multiple indicators suggest that boom might go bust much sooner than expected, critics say – perhaps just a few years from now.”
If this assertion proves true, these new energy regulations might create a double-whammy for the energy industry, and by extension the manufacturing industry.
“How so,” you ask?
One, the shale gas boom has been responsible for the large reduction in energy costs for manufacturers, making manufacturing in America more affordable and helping free up funds for hiring extra personnel or adding new equipment to handle larger, more lucrative orders. The sudden end of the supply of cheap natural gas would naturally lead to a surge in energy costs as energy production switches back to more expensive generation methods.
Two, energy producers, deprived of their cheaper, “clean” energy source that allowed them to easily meet emissions standards, would have to resort to less clean-burning fuel sources. This, in turn, would lead to them having to invest in more filtration technologies to make up the difference in carbon dioxide emissions. This would result in further increases to the cost of producing energy, driving up costs for American manufacturers.
More On the Potential Impact of the CPP
Even without the risk of running out of cheap natural gas, the manufacturing.net news article shows research from the National Economic Research Associates that states “electricity for the consumer will be 15% higher (on average) each year under the Clean Power Plan (CPP) than it would be without the rule.”
An in-depth study by the MIT Center for Energy and Environmental Policy Research (MIT CEEPR) corroborates these findings. In the study, the researchers used detailed production data from 1.2 million plant observations, noting that there would be a reduction in Total Factor Productivity (TFP) of “4.8 percent… This corresponds to an annual economic cost from the regulation of manufacturing plants of roughly $21 billion, which is about 8.8 percent of manufacturing sector profits in this period.”
Reducing pollution in manufacturing and energy production is a worthwhile goal. However, reforms to current EPA rules and regulations should be focused on making it easier for manufacturers and energy producers to comply with existing goals, not on making it harder or more expensive to do so.
For example, finding ways to streamline or eliminate redundant red tape would be a good start. Simply keeping up with all of the paper documentation invites costly mistakes such as missing a single signature on a 20+ page document, which can cost thousands of dollars in some cases.
Changes to EPA regulations and standards can have far-reaching consequences, which is why Marlin Steel works with organizations such as the National Association of Manufacturers to bring the potential consequences of these issues to the attention of policymakers on Capitol Hill.
Do you think the EPA has too much reach? Contact your representative and make your voice heard!