EPA Regulation of Carbon Emissions

Gary Wolfram
Issue CCLXII - October 28, 2010
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The Environmental Protection Agency (EPA)  is finalizing regulations under the Clean Air Act that will add more uncertainty to an already uncertain economic environment.  These regulations should be opposed for a myriad of reasons.  First, they will add to add to the joblessness of our recovery. Employers will know even less what the rules of the game are going to be.  Imagine you own four car washes and are considering hiring 3 more people. You don’t have any idea whether you will have to change your health care plan, what that will cost, or what the 2300-page financial regulation bill will do to your ability to get credit to fund an expansion.  Now the EPA will be imposing regulations on your energy provider, which will increase your energy costs by a large but unknown amount. Would you hire anyone full-time?

We have 9.6% unemployment with nearly 15 million people out of work.  Another 8.9 million people are employed part-time when they would rather be working full-time.  The percentage of unemployed who have been unemployed for 27 weeks or more is extremely high, having risen from 18.3% in January of 2008 to 42% in August.  The National Federation of Independent Business survey has found small business reducing their work force every month since 2007. Why in the world would we want to increase the costs of production in such an environment? 

Second, if there were to be large benefits to offset the drain on the economy that will come from these regulations, we might be willing to make the trade of higher unemployment and lower production for these benefits.  But while it is certain that the regulations will increase cost and lower employment, the benefits from these regulations are particularly uncertain.

The scientific evidence that global warming is being caused by man-made carbon emissions is not settled.  The well-known “climate-gate” emails certainly cast doubt on the validity of both the evidence for man-made global warming and the computer models that predict how much warming will occur.  There are numerous scientists who believe that the contribution of man-made carbon emissions to global warming is minimal.  Anyone interested in the controversy should look to the Heartland Institute, which has held four conferences on the topic and has conducted a good deal of research on the matter.    

Even if there is scientific consensus on climate change, those old enough to remember will recall the June 24, 1974, Time Magazine article discussing how scientists believed another ice age was upon us.  Newsweek had an April 28 article the same year about our cooling planet.

Even if one accepted that global warming existed and it was man-made, it would still not be clear that the EPA should regulate carbon emissions.  While some places might suffer negative consequences from warming, others may gain from a longer growing season and other consequences of warmer temperatures.  If the United States is to suffer reduced production from carbon-emission regulation, we should have some certainty as to the net benefits and costs of a warmer environment.

The costs of regulating carbon will be disproportionally borne by lower-income people and, regionally, the Midwest.  Michigan will be particularly hard-hit. Since a substantial amount of Michigan’s power is from coal and natural gas, our state, already burdened with unemployment in excess of 13%, will suffer increased costs of production and therefore reduced employment. The EPA regulations will have a large effect on agriculture, one of our largest industries, because it is particularly energy-intensive.

Third, it is important to know the marginal effect reduced carbon emissions from the US will have on something which is global in scale.  India and China have made it clear that they will not be reducing their carbon emissions.  The developing world became a larger emitter of carbon than the developed world in 2005, and its carbon emissions are increasing at a much faster rate than those in the developed world. 

If the US reduces its carbon emissions, the total effect on global warming may not just be negligible, but there might be an increase in emissions as production shifts from the US to China and India.  The United States produces less than half as much carbon dioxide emissions per unit of Gross Domestic Product as does China. 

Congress must assert itself and enact legislation to keep the EPA from further burdening our economy with costly regulations that are likely have no overall positive effect on the global environment. 

A version of this article was published in The Detroit News, October 5, 2010.

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This TRA feature has been edited in accordance with TRA's Statement of Policy.

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