Smog in a fog: President Obama abandons the ozone standard, killing jobs rather than protecting them
Posted September 7, 2011 in Curbing Pollution
Last Friday, just before the holiday weekend, President Obama caved to GOP demands by withdrawing plans to strengthen the nation’s public health standard for ozone pollution (“smog”) under the Clean Air Act.
It’s hard to make sense of. Tightening the ozone public health standard to 70 parts per billion (as EPA intended) from the current level of 75 ppb would save 4,300 lives and prevent 23,000 cases of aggravated asthma, 770,000 hospital visits, 2,200 heart attacks, and 2.6 million days of missed work or school, every year. All told, it would bring an estimated $37 billion per year in health benefits for kids and adults (and that’s only the ones you can monetize), with compliance costs between $19 and $25 billion.
The most unfortunate aspect of this bad decision is that the president has given an official blessing to the polluters’ worst propaganda and perpetuated the decades-old myth that public health and environmental protection must be traded off against jobs. But public health and environmental safeguards don’t destroy jobs, they create them -- especially during a recession or a weak recovery.
Though the political class falls prey to the myth of the public health/jobs tradeoff, the public doesn’t buy it: across the political spectrum, the public strongly supports the Environmental Protection Agency (EPA) and its record in protecting their health.
There are many reasons why environmental protection creates rather than destroys jobs. Some of the most important are:
- Producing, installing, and maintaining pollution control equipment requires labor and capital.
- There is plenty of unused labor and capital during a weak recovery, and both are a bargain (witness near zero interest rates now).
- The costs of complying with environmental regulations are an extremely small portion of total production costs.
- Regulations are phased in over many years, giving plenty of time for innovation and creative solutions.
The rest of this blog provides real data on:
- Job creation in the pollution control sector
- Compliance costs in impacted sectors
- Employment trends in impacted sectors
1. Job creation in the pollution control sector
I’ve written extensively on the substantial job creation resulting from the nation’s environmental regulations, and the lack of evidence pointing to any significant job losses (more on this below under section 3).
The fact is pollution control equipment is a big business. According to the U.S. Department of Commerce, “[T]he U.S. is regarded as a world leader in many environmental technology categories including: engineering, design, construction, consulting services;…stationary and mobile air pollution monitoring and control equipment;…and information systems/software for environmental management analysis.” In 2007, air pollution control equipment alone generated more than $18 billion in revenue (see p.5 for citations). One example: the International Brotherhood of Boilermakers reported that the number of boilermakers in the United States increased by 35 percent over just two years – from 1999 to 2001—as a result of the EPA’s standards to implement the Clean Air Act (see p.6 for citation).
Any air pollution standard we promulgate today will unquestionably create jobs in the pollution control sector, especially now during our anemic recovery. With weak demand, investment has come to a near standstill—with no obvious place to turn. As Paul Krugman aptly put it:
“[Y]ou can see why tighter ozone regulation would actually have created jobs: it would have forced firms to spend on upgrading or replacing equipment, helping to boost demand. Yes, it would have cost money — but that’s the point! And with corporations sitting on lots of idle cash, the money spent would not, to any significant extent, come at the expense of other investment.”
With this decision, the Administration is likely killing jobs, not protecting them. We cannot say exactly how many jobs would be created by the ozone standard being strengthened, but based upon analyses of other pending Clean Air Act rulemakings, probably somewhere in the tens of thousands (click here for one study that estimates two rulemakings creating 290,000 jobs, and here for another estimating 90,000 jobs for another rulemaking). That would certainly help right now. (Note: you cannot add cost or employment estimates for separate analyses of air standards, as pollution control methods used to comply with one standard are often the same as those needed for another).
2. Compliance costs in impacted sectors
Polluters always scream that the cost of regulation will be enormous, resulting in such high price increases that demand for their products will crash. In turn, they say, they will be forced to lay off huge numbers of workers. But, if you look retrospectively at past rounds of clean air standards, they can’t produce any data supporting their apocalyptic projections.
After 40 years of cleaning up a polluted America, one cannot find any example of industries’ dire predictions coming true. I know because I have tried.
One reason for this is that costs almost always end up being far less than projected, even those estimated by the EPA. In fact, ironically, the exact opposite happened with projected electricity prices resulting from the 1990 Clean Air Act Amendments. The power sector, the industry most heavily affected by the Amendments, saw electricity prices actually decline during the 1990s, alongside dramatic reductions in pollution (See Figure 1).
Environmental compliance costs are also a very small portion of production costs. The U.S. Census Bureau conducted an annual survey of the U.S. manufacturing sector and found that pollution abatement operating costs were on average only 0.4% of overall manufacturing costs, including not just air pollution controls but all other abatement costs. Since 1980, the share of total revenues allocated to pollution abatement by U.S. manufacturing has been small, ranging from 0.4% to 0.6%, despite a substantial increase in the number and scope of environmental regulations impacting this sector. Even for the most heavily regulated industries, the figure is typically between 1% and 1.5% (see p.7 for citations).
3. Employment trends in impacted sectors
We also have actual experience with changes in employment and the Clean Air Act. A fellow economist (Helene Jorgensen) and I compared employment trends in the decade prior to the 1990s with those in the 1990s, in industries expected to be directly impacted by the Amendments.
We were surprised by the results:
While employment trends in manufacturing continued on their downward path of the last four decades, with the de-industrialization and outsourcing of American production, the rate of job losses slowed for industries directly affected by the Amendments, while it increased for other manufacturers.
Specifically, in the business cycle preceding the Amendments, 1979-1989, total employment in these sectors declined about 10%--versus roughly 2.5% between 1989-2000. In contrast, the rest of the manufacturing sector saw employment losses of almost 5% in the first time period, versus 8% in the second. (Controlling for the business cycle avoids selectively choosing beginning and ending dates to give desired but misleading results).
These overall trends of course don’t show the Clean Air Act made the employment picture better in these industries. We can say, however, that one would expect the exact opposite outcome if the industry allegations had merit.
With the ozone standard, we can also look at geographical data. A recent study by the Center for American Progress reported that parts of the nation failing to meet current smog standards – thereby necessitating stronger clean air measures – had job growth and employment statistics similar to the rest of the country. The report shows that previous industry claims that ozone standards were unachievable have been shown time and again to be false.
Industry’s dire claims about the ozone standard and other pending measures protecting public health simply lack credibility. When President Obama delivers his jobs-plan speech tomorrow, Americans will want to know whether this is the president’s first Clean Air Act cave, or the last. He didn’t have to pick a poison.
 The sectors we chose were those identified in the two prominent industry studies criticizing the Amendments, as well as industries that are relatively energy-intensive and therefore the most likely to be affected by increasing electricity costs. Combined, these included the following sectors: stone, clay and glass; primary metals; fabricated metals; electrical equipment; petroleum refining; miscellaneous petroleum and coal activities; iron and steel foundries; paper mills; agricultural chemicals; plastic materials & resin; pharmaceutical preparations; rubber and plastics; transportation equipment; instruments; and industrial machinery. The two industry-funded studies were funded by the Business Round Table and the National Association of Manufacturers (NAM), respectively. NAM also claimed that the energy price increases they predicted, which did not occur, would decimate the housing industry. Instead, the 1990s saw a housing boom, spurred by low interest rates and lax financial market regulations.
Comments are closed for this post.