Is the EPA really a 'jobs killer'?

For Republicans, the EPA ranks up there with the IRS as one of the most-reviled agencies in Washington, calling it a 'jobs killer.' The record of the Obama EPA, though, is more nuanced.

Newt Gingrich and Michele Bach­mann want to abolish it. Rick Perry vows that he would declare a moratorium on all its activities the moment he becomes president. Herman Cain wants it replaced by an independent commission.

The Environmental Protection Agency (EPA), clearly, is not on many Republicans' Christmas card list. In their debates and in speeches, the GOP presidential candidates have crystallized conservatives' charge against the agency: Its regulations kill jobs.

Under a Democratic president – and at a time of economic turbulence – the EPA faces harsh criticism from the political right for being heavy-handed. But unraveling its actual impact on the economy suggests that its influence is more nuanced, according to several economic analyses.

To be sure, President Obama's EPA has undertaken several key environmental initiatives, such as ozone and greenhouse-gas regulation. But attempts to paint these new rules as economic game changers often overstate their importance, say several independent economists.

"There's certainly a lot of use of this phrase that 'new environmental regulations are job killers' or the flip side: We can 'grow the economy by focusing on green jobs,' " says Wayne Gray, an economist at Clark University in Worcester, Mass. "But either perspective misses the scale of the cost of environmental regulations, which just are not a very large scale of costs for most in the economy."

Among the moves by the Obama EPA that businesses say are most damaging:

•It proposed in January 2010 to tighten standards for smog-forming ozone, though Mr. Obama backed off on Sept. 3, bowing to the "importance of reducing regulatory burdens and regulatory uncertainty, particularly as our economy continues to recover." The proposal could be reimplemented in 2013 if Obama is reelected.

•It is expected to unveil next month a "toxics rule" under the Clean Air Act that would require power plant operators to filter out mercury and other pollutants.

•Its studies found that greenhouse gases were a danger to public health, meaning that it must regulate them, according to a US Supreme Court ruling.

•It revised a rule put in place by the George W. Bush EPA but overturned by the courts that reduces permissible smokestack emissions of sulfur dioxide and nitrogen oxide in Eastern states. The rules are scheduled to go into effect Jan. 1, 2012.

Scores of power plants and as many as 1.6 million jobs would be lost between 2012 and 2020 if the EPA proceeds with air- and water-quality regulations, according to a recent study by the American Coalition for Clean Coal Electricity.

"In the area of energy, EPA has been very, very aggressive, much of this based on their global-warming campaign, and the effect is troubling on the energy sector," says Diane Katz, a research fellow with the conservative Heritage Foundation. "If coal plants are closing down because they can't meet standards EPA is setting, well, those are jobs lost."

That could be true, some economists say. But others say that industry-paid studies (as is the one cited above) often include questionable assumptions and economic models not validated by broad peer review. They also note that jobs could also be created, not just destroyed, by regulation. The EPA's rules are required to undergo a transparent cost-benefit analysis that is peer reviewed by others. But business groups, like the US Chamber of Commerce, say the EPA analysis is flawed.

An economic analysis of the "toxics rule" by the Economic Policy Institute, a Washington think tank that studies policy effects on low- and middle-income workers, suggests that it "would have a modest positive net impact on overall employment, likely leading to the creation of 28,000 to 158,000 jobs between now and 2015."

A February report by University of Massachusetts economists came to similar conclusions. Investments driven by the EPA's new air-quality rules on ozone and toxics "will create nearly 1.5 million jobs, or nearly 300,000 jobs a year on average, over the next five years."

Some business executives acknowledge that regulations can spur hiring. "We have to hire plumbers, electricians, painters, folks who do that kind of work when you retrofit a plant. Jobs are created in the process – no question about that," Mike Morris, chief executive officer of American Electric Power, recently told The Washington Post.

But most business leaders reject the notion that EPA regulations have benefits. John Engler, president of the Business Roundtable, said that "establishing these new ozone standards would be tantamount to putting 'not open for business' signs in counties across the country at precisely the wrong moment, when unemployment is high and on the rise."

Republicans in the GOP-controlled House of Representatives agree, seeking to undo the actions of the Obama EPA. Since 2010, the House has weighed 17 measures to reduce or restrict environmental controls, approving 10, according to the League of Conservation Voters.

Most will have no effect because the Senate won't pass them. But the trend shows Republican fervor. In the Senate on Nov. 10, a resolution to roll back the EPA's smokestack emissions regulations failed, 41 to 56. Its sponsor was Sen. Rand Paul (R) of Kentucky, whose state produces a lot of coal. The EPA, he argued, was issuing "radical, extremist regulations" that kill jobs.

Many economists reject such language as overstatement. Though environmental regulation has become more stringent, US manufacturers have faced only a moderate increase in their spending on pollution controls, says Dr. Gray of Clark University. Those costs, for instance, have risen from roughly 0.3 percent of total manufacturing shipments in 1973 to 0.4 percent in 2005.

Some highly polluting and highly regulated industries do face higher pollution-control costs. But even oil refining spent only about 1 percent of its shipments to comply with environmental regulations in 2005, Gray explains.

The numbers aren't big enough to cause serious economic hardship. "The idea that environmental regulations would wipe out an industry or have a serious impact is implausible," Gray says. "Early estimates of cleanup costs are often substantially overstated."

[Editor's note: The original version of the above quote has been corrected.]