The Business Case for EPA Rulemaking

Why Boosting Our Health Boosts Our Economy, Too

Susan Lyon and Kate Gordon detail how EPA’s regulations help give businesses the certainty they need to innovate and create jobs.

More on the EPA from CAP: EPA and Greenhouse Gases 101 by Jake Caldwell and Caring for God’s Creation by Marta Cook and Annelisa Steeber

Efforts to stop the Environmental Protection Agency from doing its job would stifle job creation, hamper economic growth, and thwart the passage and implementation of rules meant to safeguard Americans, the air we breathe, and the water we drink. Yet hostile voices in Congress are currently trying to do just that. Top dirty energy lobbyists such as the Koch Brothers are allying with conservatives in Congress to make the EPA their top target. They don’t realize, though, that they are advocating for an outdated, 20th century economy instead of an innovative 21st century one.

Many top businesses are fighting back against these efforts—and with good reason. As conservatives and dirty energy lobbyists gather on Capitol Hill this month to conduct a series of hearings and investigations hostile to EPA rules and rulemaking authority, several major utilities came together this winter in a Wall Street Journal letter to the editor to voice their support for the EPA’s authority to set safeguards and standards to promote public health and the economy, which is currently under attack:

Contrary to the claims that the EPA’s agenda will have negative economic consequences, our companies’ experience complying with air quality regulations demonstrates that regulations can yield important economic benefits, including job creation, while maintaining reliability. The time to make greater use of existing modern units and to further modernize our nation’s generating fleet is now.

It’s not shocking that top business executives are openly supporting EPA regulations. Businesses require certainty and reliability so they can plan ahead and make the proper investments needed now to prosper down the road. These economic benefits come on top of a host of other benefits of environmental regulations, including most importantly the benefits to public health that these safeguards provide in communities across America.

Let’s review these benefits in more detail.

Regulations such as the Clean Air Act are a bargain to protect our health and environment

The bipartisan Clean Air Act, originally passed in 1970, requires the EPA to set and enforce standards to curb dangerous pollution. It continues to produce great public health and environmental results. The EPA is also currently working to reduce dangerous carbon pollution.

EPA Administrator Lisa P. Jackson recently noted the impressive returns on investment of the Clean Air Act, which “returns $40 dollars in health and environmental benefits for every dollar of compliance costs.” An August 2010 cost-benefit analysis of EPA costs and benefits from 1990 through 2020 finds that the economic value of the combined direct benefits is projected to be $2 trillion for the year 2020, vastly exceeding costs of compliance.

Further, a retrospective EPA study assessing the net benefit of the Clean Air Act from 1970 through 1990 determined that Americans have already gained $21.4 trillion in health and environmental benefits. It also found that the Clean Air Act prevented 205,000 premature deaths and millions of cases of asthma, heart disease, and child IQ loss. Benefits are expected to grow further.

Regulations create good jobs while improving our health

President Barack Obama reminded Americans about the multiple benefits of strong, reasonable, and predictable rules governing our air and water in a speech this month to the Chamber of Commerce:

Few of us would want to live in a society without rules that keep our air and water clean; that give consumers the confidence to do everything from investing in financial markets to buying groceries.

The president, however, pointed out that the case for EPA authority goes far beyond public health and the environment. American businesses need to know which rules will apply to their industries so that they can plan ahead for future investments and business growth strategies. Well-designed rules can create jobs, spur innovation and investment, and strengthen the economy while protecting our health and the environment.

A new report by Ceres and the PERI Institute at the University of Massachusetts, Amherst, finds vast economic benefits from two Clean Air Act rules expected to be finalized in 2011: the Clean Air Transport Rule and the Utility Maximum Achievable Control Technology.

The report outlines the jobs impact of “investments in pollution controls, new plant construction, and the retirement of older, less efficient coal plants as the country transitions to a cleaner, modernized generation fleet under new EPA clean air standards.” Key findings include:

  • Total employment created by capital improvements over the next five years is estimated at 1.46 million jobs, or about 290,000 jobs on average in each of the next five years.
  • Installing modern pollution controls and building new power plants creates a wide array of skilled, high-paying installation, construction, and professional jobs.

The American auto industry provides a prime example of how well-crafted rules can translate directly into new jobs and new export-driven industries. A new fleet of fuel-efficient vehicles would put auto workers and many others back to work while reducing dangerous carbon pollution, enhancing America’s energy security, and allowing the American auto sector to sell its new technologies on the global market.

The recent analysis “Driving Growth: How Clean Cars and Climate Policy Can Create Jobs,” conducted by the Center for American Progress, United Auto Workers, and the Natural Resources Defense Council found that strengthening automotive fuel efficiency standards through streamlined federal standards can spark the investment and innovation needed to reach new levels of efficiency while creating jobs. The analysis found that supplying the U.S. automobile market with more efficient cars could create up to 150,000 new jobs for U.S. workers by 2020 from improvements to fuel economy alone, all things being equal.

And cleaner cars both create jobs and strengthen the auto manufacturing industry at home while producing a set of low-carbon technologies that can be supplied to markets across the world. The California-based auto manufacturer Coda Automotive, for example, builds its vehicles in China but does so using American-made electric drive trains, which are considered the most efficient and innovative drive trains on the market today.

Regulate to innovate: Reliability encourages investment and innovation

Strong, well-designed regulations can also provide the impetus needed for increased competitiveness and innovation—essential building blocks of our economy.

The Porter Hypothesis, named for economist Michael Porter, posits that well-designed regulation can spur innovation and enhance competitiveness, particularly within industries with strict performance standards. Setting strict performance standards creates business certainty and enables innovation by using phase-in periods and ensuring a predictable evolution of standards over time.

President Obama noted that industry opponents have mounted dire predictions about proposed rules. But more often than not they are dead wrong.

The example of new efficiency standards for refrigerators shows how new guidelines can propel companies to compete and produce better products. As President Obama pointed out, rather than hurt the industry, new efficiency standards spurred refrigerator producers to innovate and compete, eventually surpassing expectations over time:

Companies competed to hit these markers. And they hit them every time, and then exceeded them. And as a result, a typical fridge now costs half as much and uses a quarter of the energy that it once didand you don’t have to defrost, chipping at that stuff(laughter)and then putting the warm water inside the freezer and all that stuff. It saves families and businesses billions of dollars.

So regulations didn’t destroy the industry; it enhanced it and it made our lives betterif they’re smart, if they’re well designed.

America needs to compete and innovate to win the future, and well-designed rules are essential to do so.

Let the EPA do its job and help America succeed

Preventing EPA from setting regulations to curb pollution is ultimately flat-out bad for jobs and the economy. Not only do we need strong, science-based safeguards to protect the public and the environment, but businesses also need to know the lay of the land in order to thrive, profit, and grow jobs.

Susan Lyon is Special Assistant for Energy Policy and Kate Gordon is Vice President for Energy Policy at American Progress.

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Kate Gordon

Senior Fellow