Obama’s smog backdown won’t help sick U.S. economy

September 2, 2011

By Christopher Swann
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

President Barack Obama’s environmentally-minded backers have every reason to feel let down. In blocking a new Environmental Protection Agency rule on smog, the White House has bowed to critics in Congress and industry who said new air quality rules would kill jobs.

With the U.S. creating zero jobs in August, economic scare tactics are bound to register. And America’s big emitters — the coal, oil and chemical industries — are masters of the art. They have been fighting hard to prevent the EPA from tightening a raft of emissions rules. Dow Chemical, for instance, has claimed that updated smog rules alone would cost as much as $90 billion. The Edison Electric Institute, speaking for electricity generators, warns that the EPA’s full slate of proposals could compel the industry to spend $129 billion on upgrades, force the closure of a fifth of coal generators, and lead to blackouts. Republican critics have branded the new rules job-killers and a brake on business activity and hence the economy.

But dire predictions from affected industries in the past have proved wildly exaggerated — or just plain wrong. During the Clean Air Act debate 20 years ago, the EEI warned that tightened standards would lift electricity prices by up to 13 percent by around 2009. In fact they fell by some 20 percent as of 2006.

And in 1997 the American Petroleum Institute, an oil industry group, warned that smog rules would wreak economic havoc. Yet regions that might have been affected actually had slightly better job creation rates on average than the nation as a whole in following years, according to a study by the Center for American Progress. Dropping the new rule also undermines generators that have tried to clean up ahead of time, including Exelon and GenOn Energy.

Then there are the benefits that would have come with stricter standards, primarily in terms of health. The EPA reckons new emissions regulations could save as much as $100 billion in healthcare costs. Such numbers are also open to question. But the case for significant savings is strong. In giving in to polluters Obama may deflect criticism over red tape — and the rule could come back into consideration in 2013. But barring possible tiny, short-lived effects, the supposed economic benefits of caving in are a smokescreen for political maneuvering.

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