Can the U.S. manufacturing industry afford to comply with U.S. EPA's pending greenhouse gas regulations? During today's OnPoint, James Bradbury, senior associate in the climate and energy program at the World Resources Institute, discusses new research on the impacts of EPA regulation of emissions on U.S. manufacturing. He explains why he believes industry could actually benefit from the new standards and discusses how efficiency improvements could balance the costs of compliance.
Monica Trauzzi: Hello and welcome to OnPoint. I'm Monica Trauzzi. With me today is James Bradbury, senior associate in the climate and energy program at the World Resources Institute. James, thanks for coming on the show.
James Bradbury: Happy to be here, thanks for having me.
Monica Trauzzi: James, WRI has recently released a series of articles on the impacts of EPA's regulation of greenhouse gas emissions on the economy and one of the biggest concerns is how EPA regulation will impact U.S. manufacturers and whether it will make them less competitive. You found that this is not true. They won't be less competitive if EPA regulates. So explain that. How do you think that this regulation is actually going to spur domestic manufacturing?
James Bradbury: Well, EPA regulation, first of all, I think it's important to take a step back and recognize that EPA is moving forward in a way that's consistent with the law as Congress established in the Clean Air Act and consistent with, backed up by the U.S. Supreme Court. And they're moving forward in a way that's quite reasonable and there's a lot of attention, of course, to delay that, by certain members of Congress and industry. There are a couple of important reasons why that shouldn't happen, where it shouldn't be delayed in terms of the public interest. The first is it's clear that EPA will be focusing on the largest emitters, which is what the tailoring rule does. And the most recent guidance we saw last week says that this is only going to be affecting the, sorry, this will be affecting, be requiring efficiency improvements. And, really, that's the focus of the permitting agencies, that's what the guidance said the permitting agency should focus on. And efficiency improvements are something that industry frequently does anyway. And they do it because it's in their own interest and it's in their interest from a competitiveness standpoint once those costs are paid back, usually within a year or two, and then there's a long-term competitiveness benefit of making those efficiency investments. The other important reason why the regulation should be delayed, from a public-interest standpoint, is that climate change is a serious problem and greenhouse gas emissions are something that we really need to start addressing now, as soon as possible. And the authorities have the Clean Air Act, under the Clean Air Act that EPA is using are the most important tool available to the federal government do that.
Monica Trauzzi: But industry has described what sounds like a catastrophe if EPA moves forward with this type of regulation. They say that we'll see a shutdown in construction, we'll see power plants shutting down. So what's your take on all of that? Do you think that industry is just trying to use a scare tactic here or is there some truth to that?
James Bradbury: Certainly industry is making a lot of noise and there is some misinformation. I think there's some fear that a lot, which was based on a lack of information, before we had, for example, the BACT guidance which came out last week. What I found looking at the data is a couple of two really important things. First, the total environment cost to all of U.S. manufacturers complying with federal and state laws, both air, water, and waste regulations, is that that total cost equals less than half a percent of the total value of shipments of all of the products manufactured, the value of those products manufactured in the U.S.. And that's a pretty small cost considering the benefit of these regulations, today's regulations, which is keeping neurotoxins out of our food supply, mercury for example. That's the first major finding and that is that these costs are actually very low considering the benefit. Focusing on the most energy intensive pollution heavily regulated sectors, paper and pulp, cement, steel. In that case there are, the environmental regulations are higher, the cost of environmental regulations is higher. But these are typically very energy intensive industries and the available efficiency opportunities, if you survey, look at the research that surveyed the efficiency opportunities in these sectors says that by capturing those efficiency opportunities, you can offset a significant amount, in some cases much more than the total cost of existing environmental regulations.
Monica Trauzzi: So, we're talking about huge gains just for efficiency?
James Bradbury: That's right. Take the flat glass manufacturing sector for example. This is a sector that's very energy intensive. There was a fairly recent DOE study that said that by using existing efficiency technologies and best practices, they could reduce, improve the efficiency by 40 percent across the entire sector. And if they did that they would way more than offset the cost of current environmental regulations.
Monica Trauzzi: Why is this point been missed then up until this point?
James Bradbury: Well, I think part of it is, as I said, there's been a lack of information. Before we saw the BACT guidance, the guidance to states and localities to implement the BACT standard, best available control technologies to address emissions there were concerns that there would be, EPA would be requiring fuel switching from coal to natural gas. For some industries that would be a substantial concern in terms of driving up demand for natural gas. There was a lot of concern that they may force or require the use of carbon capture and storage technologies, which are expensive, but, and not commercially available yet. So EPA, I think, took the reasonable step of not requiring those. So I think what they required is something that's actually in the interest, in the long-term interest of industries and the communities around those facilities that rely on the income and the jobs that come from them.
Monica Trauzzi: So, is the Clean Air Act a meaningful enough tool for regulating greenhouse gas emissions?
James Bradbury: Well, we at WRI certainly, along with many others, would prefer a legislative approach for Congress to take a comprehensive approach to reducing emissions of greenhouse gases. And indeed, there was a study that some of my colleagues at WRI released this past summer that surveyed all of the available authorities at the federal government's disposal to address and reduce greenhouse gas emissions and found that the Clean Air Act authorities are the most important. And what they also found though is it's not quite enough and even under a scenario where EPA is quite aggressive, that it would not be, well, it would not be enough to really get us on track to reducing emissions to the levels we need to reduce them to avoid dangerous levels of climate change. It's still an important first step and an important signal to the market that says this is coming and the industry needs to start thinking about reducing emissions.
Monica Trauzzi: OK, we'll end it there. Thank you for coming on the show.
James Bradbury: OK, thanks.
Monica Trauzzi: And thanks for watching. We'll see you back here tomorrow.
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