EPA’s new ozone regulations will have a devastating impact on the nation’s economy

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New ozone regulations recently announced by the Environmental Protection Agency (EPA) are on the horizon and, once implemented, will have a devastating impact on the manufacturing industry, energy, and the nation’s economy, especially in the State of Alabama. The EPA is slated to issue final ozone standards by October 1, 2015.

Under the Clean Air Act (CAA), the EPA is tasked with setting National Ambient Air Quality Standards (NAAQS) for six different pollutants considered harmful to the nation’s public health, with ozone being one of those pollutants. Different from the protective layer of ozone found in the stratosphere, ground-level ozone (or “bad” ozone) is formed when emissions of nitrogen oxide (NOx) gases and volatile organic compounds (VOCs) react with sunlight to form smog and migrate to ground-level.[i] NOx and VOCs originate from burning fossil fuels, industrial facilities, automobiles, and other related sources.[ii]

The current NAAQS standard for ground-level ozone is 75 parts per billion (ppb), which was set by the EPA in 2008. Today, almost half of the United States population lives in a state or area that has not met the current ozone standard, also known as a “nonattainment” area. Typically, severe financial and economic penalties exist for nonattainment areas under CAA, including loss of highway funding. Instead of allowing these states to catch up to the 2008 standard, the EPA is now targeting power plants and factories in its plan to tighten the standards even further, to a range of 65-70 ppb, making them even more burdensome and unattainable for states. Further, the new and more stringent regulation is slated to be an expensive one, especially for the manufacturing industry.

A NERA Economic Consulting study assessing the new regulation’s potential impact projected an overall annual cost of $26 billion, an annual reduction in U.S. GDP by $270 billion, and a loss of approximately 609,000 jobs annually. The report goes further to point out a number of inaccuracies in the EPA’s regulatory impact analysis meant to support its decision, and it highlights the EPA’s failure to demonstrate that the benefits of additional ozone regulations trump the costs involved.

The regulatory burden will no doubt be a heavy one. In 2011, even President Obama acknowledged the burden this new regulation could potentially have on the manufacturing industry, in addition to the cost of millions of jobs, when he asked the EPA to withdraw this same rule. The National Association of Manufacturers predicts that the new ozone regulation will be “the most expensive regulation” ever issued by the U.S. Government.[iii] As it continues to raise its profile in top-notch manufacturing job recruits, the impact of the new regulations on both manufacturing and the energy industry will hit the state of Alabama especially hard. While Alabama’s energy sites are currently in compliance with federal ozone standards, that status will change once the new ozone standards are implemented. The state’s energy supplies would be affected when production of fossil fuels will have to be reduced in order to ensure compliance with the new standards.

While EPA’s new ozone regulation will dramatically reduce the amount of ozone allowed in the air, it will have a similarly dramatic effect on the economy, with no clear benefits for improving the air quality any more than has already been done over the past several years. With the removal of political accountability due to the EPA’s careful timing of its announcement, and no clear justification of the new standards from a health and scientific standpoint, it is clear that these regulations largely serve as a direct aim towards power plants and the manufacturing industry. This roundabout attack on energy by the EPA could lead the eventual closing of coal-fired power plants. As a result, the eventual increase in electricity prices and economic damage for families and the industrial sector will prove more harmful to everyone than the pollution the EPA is claiming to eradicate.