Will New Clean-Air Laws Kill the Economy? We’re About to Find Out

Smog over Los Angeles Photograph by Rob Atkins

This week the American Petroleum Institute issued a dire warning: If the Obama administration insists on tightening rules to further reduce smog by limiting ozone emissions, economic activity across the country will grind to a halt, killing jobs, shutting down businesses, and choking out the recovery. “They’ll be the costliest regulations ever,” Howard Feldman, the API’s director of regulatory and scientific affairs, said during a conference call on Tuesday.

The API released a map showing what parts of the country are most at risk of economic annihilation: basically all of them, or at least the areas where 94 percent of the population lives.

The API says that if the EPA tightens ozone restrictions, business activity would stall across most of the U.S. Red is bad.
American Petroleum Institute

The Environmental Protection Agency’s science advisory board meets this week to discuss the agency’s ozone standards, which are up for their five-year review. The EPA’s recommendations on reducing ozone emissions were mostly ignored by the George W. Bush administration. Then, in 2011, President Obama delayed implementing strict federal rules that limit ground-level ozone, severely undercutting then-EPA Administrator Lisa Jackson and serving up a big win (or at least a reprieve) for the API, the U.S. Chamber of Commerce, and other industry groups that had set their sights on defeating clean-air policies. The majority of ozone emissions come from power plants, cars, and factories.

But in April, a federal judge in California ruled that the EPA was legally obligated to propose stricter air pollution standards by the end of this year, and complete them by October 2015.

Under the current rules, ozone levels are supposed to be reduced to 75 parts per billion. Most of the country passes the test. The red spots on the map below show those that don’t:


The EPA is mulling pushing requirements below 70 ppb to as low as 60 ppb. The agency estimates that doing so could cost businesses as much as $90 billion a year. It also predicts that stricter standards could save $100 billion a year in health-care costs and eliminate as many as 12,000 premature deaths and 111,000 cases of respiratory symptoms by 2020.

The API’s estimates are, of course, much more severe. In 2010 it said tougher ozone standards could cost the economy $1 trillion a year from 2020 to 2030 and cost 7 million jobs. A lot of things could weaken the economy’s potential growth, but cleaner air doesn’t often come up when you talk to economists who study those things.

There is, however, genuine debate over the health benefits of reducing ozone levels below 75 parts per billion. And serious questions remain about whether it’s even possible to get ozone levels below 60 ppb. Ozone is naturally occurring. In Yellowstone National Park, for example—hardly a place filled with factories and power plants—ozone levels in some spots are at 66 ppb. Cleaning the air is clearly a case of diminishing returns, and the more emissions are reduced, the more it actually does threaten to eat into economic activity. (Although, in the long run you could argue that it also drives innovation and investment in new technologies.)

The problem is the issue has become so politicized that it’s hard to have a rational debate about the balance between industry and environment. Since the Clean Air Act was passed in 1970, and the EPA created in 1971, big-business groups have screamed about how devastating antipollution rules would be for the economy. And yet here we are, with a $16 trillion economy and buses and trucks that are 90 percent cleaner than they were 40 years ago.

In the zero-sum game that is the battle over federal regulations, groups such as the API have every reason to set their hair on fire. The last time they did, the president delayed the rules. But the courts aren’t going to let that happen this time. So it looks like we’ll actually get to test the claims that cleaning the air is bad for the economy.

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