The Cato Review of Business & Government
The Cato Review of Business & Government
Jonathan H. Adler is the Director of Environmental Studies at the Competitive Enterprise Institute.
For 25 years the federal government has regulated emissions from factory smokestacks and automobiles. Last year the Environmental Protection Agency (EPA) added lawnmowers and motorboat engines to the list of controlled items. This year it will propose controlling air pollution from paints and hair sprays. Beginning next year new regulatory mandates are scheduled to take effect. Despite significant air quality improvements over the past several years, the EPA is under a statutory mandate to extend regulatory controls to a whole new range of potential emission sources.
A Broad-Brush Approach
Section 183(e) of the Clean Air Act Amendments of 1990 requires the EPA to regulate emissions of volatile organic compounds (VOCs) from the use, consumption, storage, disposal, destruction, or decomposition of consumer and commercial products. VOCs are a component of urban smog. Products that fall under this designation include everything from aerosol spray paints and wood-furniture coatings to air fresheners, underarm deodorants, and floor waxes. Anything that contains potentially evaporative VOCs can be included on the list, and by 2003 most such products will be regulated. The EPA estimates that such items are responsible for over one-quarter of manmade VOC emissions and represent perhaps the last unregulated source of significant smog-causing emissions.
A primary target of section 183(e) is paint, whether used to cover the walls of ones living room or to dot the midstrip of a two-lane highway. The EPA is now seeking to regulate paint content in the hope that this will lead to a reduction in pollution-causing emissions. The EPA's rules set maximum VOC content, as a percentage of the product's weight, for a wide range of paint types. The first round of standards will take effect in 1996, with more to follow.
It is unarguable that drying paints can emit VOCs. It is the solvent or water content of paints that makes them wet-and the water and solvents evaporate as the paint dries. Some paints, particularly solvent-based paints, have significantly higher-VOC content than others. Latex paints, such as those frequently used for painting homes, have relatively low-VOC content. However, many high-VOC paints often have particular uses for which there is no ready low-VOC substitute, due to their enhanced gloss and durability. Barring some tremendous technological breakthrough, controlling VOC content effectively bans certain paints.
As is often the case with EPA rules, there is significant evidence that the federal government is overestimating the environmental benefits of regulating paint. For starters, the regulations do not address the emissions from particular paints; rather, the rules are based on a paint's VOC content. The EPA merely assumes that VOC content is always a fair indicator of a paint's potential to contribute to smog formation. Moreover, not all VOCs are created equal. Some are far more likely to contribute than others. Some, such as acetone, hardly contribute to smog formation at all. The less reactive a VOC, the more likely content standards are to be met by replacing it with a more reactive substitute. This will not reduce air pollution.
Controlling all VOC content is a drift-net approach that may not achieve the desired result, a point that the EPA actually acknowledges. Yet due to "uncertainties, inconsistencies, and lack of reactivity data on individual compounds," the EPA could not take such considerations into account during the formulation of its rule.
There is also reason to believe that the EPA's efforts may undercut themselves. Some high-VOC paints have specialty applications for which there are no ready substitutes. If a lower-quality, low-VOC paint must be applied in greater volume, with greater frequency, or must be thinned with additional solvent to achieve the desired result, it is possible that net VOC emissions could actually increase as a result of the rule.
This issue has been raised before. Environmental officials in California have been regulating paints for quite some time. In the late 1980s some regional authorities sought to control certain high-VOC paints, but their actions were successfully challenged in court when paint manufacturers accused local regulators of ignoring the negative environmental effects the rules could produce.
Stifling Small Businesses
The EPA's paint regulations are largely the result of a statutory mandate; however, the agency has also had some encouragement from paint producers themselves. Stringent regulations requiring reductions in the VOC content of paints will not impact all segments of the industry equally. Indeed, it is smaller, regionally based firms that will bear the brunt of any effort to control VOC content.
It is well known that smaller firms have a more difficult time shouldering regulatory costs and that regulation tends to increase firm concentration within an industry. Smaller companies are typically without the armies of lawyers, regulatory specialists, and professional staff necessary to ensure regulatory compliance, and regulatory costs often serve as a powerful barrier to entry for new firms. Moreover, when new technical requirements must be met, smaller firms also lack sizable research and development teams that can find new ways of meeting the federal standards. Since the required VOC content reductions go beyond existing technology for certain coatings, this creates a real concern.
The discriminatory impact in the paint industry will be particularly severe. By recent estimates, there are over 500 makers of architectural coatings in the United States. Approximately two-dozen such firms produce over half of the industry's coatings. Those firms are large, national manufacturers. The remainder are smaller, regional firms. The larger paint manufacturers specialize in producing latex and other water-based paints-those that are used most often by consumers. The smaller firms, in contrast, are the primary suppliers of specialty coatings and fill many niche markets. Because the EPA is seeking to control VOC content, this rule will undoubtedly have its greatest impact on the smaller, regional firms. For this reason, smaller paint producers would prefer to see regional or state-based regulations-and then only when absolutely necessary.
Some states are certain to regulate even if the EPA does not. The Clean Air Act Amendments require states to meet emissions reduction targets, and addressing paint emissions is one way to get credit with the EPA. This only strengthens the larger corporations' tendency to urge national regulations to gain competitive advantage. Faced with the choice between a patchwork of state and local laws and a single nationwide standard the national paint manufacturers would prefer the latter, even if a national standard is to be more stringent. Marketing a single product line in all 50 states is far preferable to large firms than being forced to tailor goods for particular markets. The voicing of this concern has allowed the EPA to claim that issuing a national rule is actually pro-business because "representatives of the consumer product industry . . . [have] urged the EPA to issue rules for consumer products to provide consistency across the country." Indeed, in 1994 the larger paint manufacturers, represented by the National Paint and Coatings Association, proposed a framework for the regulation of paint VOC content that would establish a nationwide rule.
Smaller firms have protested the EPA's move toward national paint-content standards. In a letter to the EPA, an association of small and regional producers complained that "the perceived benefits of national regulation would be reaped by one segment of industry . . . yet the burdens would fall on a different segment of the industry. . . . Many industry observers believe that a substantial portion of smaller and local or regional manufacturers would not survive for long under stringent regulation."
Proprietors of smaller firms might be less upset were there a clear justification for the EPA's rules. Yet the EPA itself has acknowledged their deficiency, and, to make matters worse, evidence suggests that poor regulation would actually do more environmental harm than good. It seems the federal government might have better things to do than regulate how paint dries.
Regulation is published four times a year by the Cato Institute. Editorial and business offices are located at 1000 Massachusetts Avenue, N.W., Washington, D.C., 20001. For subscription information, please write to Circulation Department, Cato Institute, same address, or call (202) 842-0200.
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