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.
Two years ago the idea of reforming the 1990 Clean Air Act Amendments was a pipe dream for free-market advocates and regulated industries. The environmental poster child of the Bush administration, the 1990 act was off limits, despite its status as the single most expensive environmental law ever enacted.
Lobbyists who worked on the amendments for years seeking a passable compromise have little interest in reopening this can of worms. Even environmentalists and government regulators who recognized the flaws in the law had no interest in putting federal clean air laws on the table, lest they trigger a feeding frenzy of special interests seeking special deals.
That was how it was, but by 1995 the excessive costs of federal clean air regulations had become too much to bear. Clean air reform is now back on the table-if only for a moment.
Burdens on the States
The impetus for reform is not industry griping; corporate whining about the excessive costs of compliance would not have been enough to bring the issue into play. Rather, the key factor has been the concerns raised by state and local governments, led by a handful of outspoken and influential Republican governors, such as George Allen of Virginia and John Engler of Michigan. Both appeared before congressional committees in 1995 demanding changes in the act. Some in Congress were obviously listening, because not long after a reform proposal drafted by Sen. Lauch Faircloth (R-N.C.) began circulating on Capitol Hill.
The most vociferous complaints about the Clean Air Act Amendments result from its draconian regulations governing automobiles. Metropolitan areas designated as "serious" or "severe" ozone nonattainment areas-in other words, cities the federal government declares are "smoggy"-must implement enhanced automobile inspection and maintenance programs, federal clean fuel programs, and prepare to implement "transportation control measures" that will induce car owners to drive less often (though the compulsory nature of this last measure was eliminated by a congressional "correction" signed into law by President Clinton in December 1995).
These policies are all extremely costly, but not all promise significant environmental benefits. Indeed, the sort of "drift net" strategies in the act achieve reductions due to their scope, not their efficiency. A minority of the automotive fleet is responsible for a disproportionate share of the emissions. Yet the 1990 amendments fail to target emission reductions on the greatest emission sources, so they are far less effective and equitable than other potential approaches.
To make matters worse, so-called stationary emission sources-firms and factories-must deal with Title V, the 1990 amendment's onerous permitting provisions, and Title III, governing air toxics. Under Title V, some 34,000 industrial facilities around the country must file voluminous permit applications to state environmental agencies and revise them each time they wish to modify existing production procedures. This paperwork-producing program comes at significant cost. Chemical manufacturer Elf Atochem, for example, estimated that the permits for its larger facilities will cost $150,000 to $200,000 each.
Title V not only makes companies bristle, it imposes a significant burden on state regulators as well, as state agencies are required to process Title V permit applications for the federal Environmental Protection Agency (EPA). This is no easy task. In Ohio, for instance, the state EPA planned to hire more than 100 new employees simply to process the 1,500 permits that are expected within the state. All told, the federal EPA estimates that Title V will cost over $500 million per year (more, according to outside analysts) for little environmental benefit. In fact, Title V has no explicit environmental component. It is simply a means for the government to acquire information (read: generate paperwork).
Then there is Section 112(g), an air toxics provision that requires states to impose facility-by-facility emission controls as temporary measures before federal, industry-wide rules are enacted. The provision only applies to sites that are undergoing modifications, but it still creates the awful specter of companies wasting thousands of dollars to comply with state-level regulations that will be supplanted by EPA-generated rules. In other words, some companies will pay to comply twice in order to achieve one goal, a requirement that even the EPA acknowledges will not do much for environmental protection. In some cases the cost may be high enough for companies to shelve planned modifications that would actually reduce emissions.
The Faircloth Proposal
To address these concerns and a few others, Senator Faircloth drafted the Clean Air Simplification and Efficiency Act to eliminate needless provisions within the 1990 amendments and expand flexibility at the state level. Specifically, the act would eliminate Section 112(g), allow states to design their own vehicle emission inspection programs, enable states to opt out of the federal Title V program in favor of a state-designed operating permit program, and make some additional definitional revisions. The proposal would also provide a good-faith exception to the imposition of sanctions for states that fail to meet regulatory deadlines.
Faircloth's is a modest proposal, but one that could provide significant benefits for both states and regulated industries. If there is a surprise in the draft bill, it is that with so much that is wrong in the 1990 amendments, it would change so little.
The modest nature of Senator Faircloth's plan has not deflected criticism, however. In fact, some environmental groups have reacted as if it threatens the lives of countless Americans. When early drafts of the bill were leaked, environmentalists hurled angry accusations that Faircloth was in the pocket of chemical companies. Some even tried to suggest that Faircloth was motivated by his interest in commercial ventures-hog farms-that could be subject to clean air rules. Despite all this, the severest attack on the proposal came not from Washington's private environmental lobbies, but from the federal EPA.
The EPA Defends Its Turf
On December 18, 1995 the EPA released an analysis of the draft proposal. The report, requested by Senator Faircloth's office, was supposed to be a technical analysis of the proposal. Upon review, however, it is clear that the EPA is more concerned with preventing any legislative changes to the Clean Air Act than with the specifics under consideration. Faircloth's office called a spade a spade when referring to the report as a "political document." This is the only way to explain the EPA's conclusion that the Faircloth proposal would "substantially impede ongoing efforts, by both states and industry, to clean the air and protect public health."
Far from a technical document, the EPA report is replete with misleading analysis and arguable claims. Its overall thrust is to suggest that giving states increased flexibility to meet federal air quality standards compromises clean air efforts and risks Bhopal-like disasters. The analysis goes so far as to suggest that the proposed revisions "would take clean air policy back to the failed approaches of the l970s," even though the EPA has trumpeted the air quality improvements of the past decade during recent congressional debates over funding of EPA programs.
The EPA's claim that state efforts to improve air quality and meet federal air quality standards will be undermined by the Faircloth proposal is belied by the fact that the states have been the strongest and most consistent group agitating for modifications to the 1990 amendments, particularly those modifications that shift authority over the design of clean air programs to state agencies. Not only have numerous governors testified before Congress that legislative changes are necessary, but more recently the Republican Governors Association's Clean Air Task Force released a policy paper calling for significant changes to the 1990 amendments due to the "onerous problems States are experiencing with the implementation" of the act. The changes recommended in this paper include several of the items contained in the Faircloth proposal, among others. It is generally accepted by those close to this issue that the Governors Association paper, more than any other, was the primary influence on the Faircloth proposal. Still, just as Faircloth only targets the 1990 act's most glaring deficiencies, the Governors Association's Clean Air Task Force noted that "the policy paper is by no means a comprehensive list of all the problems identified with the Clean Air Act."
Impact of the 1990 Amendments
In seeking to deflect the calls for reform, the EPA attributes recent improvements in air quality to the Clean Air Act Amendments of 1990. This is preposterous. As anyone familiar with recent air quality trends is aware, there have been significant air pollution reductions throughout the past decade, particularly for ground-level ozone and carbon monoxide. In the case of carbon monoxide, the record is striking, as atmospheric concentrations of CO have consistently declined since 1970-a trend that not even the most ardent apologist for current regulatory programs would attribute to the 1990 amendments. There have been greater fluctuations in ambient ozone concentrations, but this is largely due to meteorological fluctuations. Temperature adjustments of the underlying data, such as those conducted by former Council on Environmental Quality analyst K. H. Jones, clearly show a downward trend predating the 1990 amendments by several years.
The claim frequently made by the EPA, that "in 1990, almost 140 million people still lived in communities that violated the health standard for smog," is equally misleading. It is true that approximately 140 million people lived in ozone nonattainment areas in 1990. This is due to the abnormally warm summer of 1988 that produced an unusual number of high ozone readings in metropolitan areas. By 1991, before the 1990 amendments had taken effect, the number of people living in nonattainment areas had been cut in half. Moreover, it is important to recognize that the nonattainment classification is based upon high one-hour pollution readings at a single monitor in a metropolitan area, and is not necessarily a valid indicator of threats to public health.
As to the effect of the 1990 amendments, they have yet to be fully implemented. Any air quality benefits attributable to the amendments, particularly in the area of ozone and carbon monoxide nonattainment, are not likely to be noticed for several years. This is a necessity in the case of attainment status, as such classifications are based upon a rolling three-year window. Yet neither the 1991-93 window, nor any later three-year window, shows a precipitous drop in ambient ozone levels that could be attributed to the 1990 amendments. Rather, as noted above, there has been consistent, if uneven, improvement in urban air quality over the past decade.
In many specific instances the EPA claims that legislative amendments are unnecessary because the desired changes can be achieved under current law: "Don't force us to be good because we can be good if we want to be." Yet for whatever reason, the EPA has opted to administer the act in a heavy-handed manner, disregarding the concerns of the states-that is, prior to congressional threats to reopen the act.
With the onset of political pressure, the EPA now claims to be modifying existing regulations to address the concerns that are prompting consideration of the Faircloth proposal. In at least one instance, the agency is proposing regulatory changes that were explicitly rejected when the Clinton administration took office. In July 1994 EPA administrator Carol Browner proclaimed that "the Quayle Competitiveness Council is officially out of business" when the EPA announced a tightening of Title V permit requirements. Now the EPA is reviving parts of the Quayle approach as part of the "reinventing government" initiative. What were once considered loopholes are now seen as common-sense regulatory reinventions. These most recent changes are clearly the result of political pressure and could easily be reversed by the EPA absent legislative action.
Washington Knows Best
An underlying premise of the EPA's resistance to reform seems to be that states are incapable of improving air quality absent complex, detailed mandates from the EPA. For instance, in opposing flexibility in the development of automobile emission inspection and maintenance programs, the EPA charges that eliminating the requirement that all moderate nonattainment areas adopt such programs will "exacerbate the difficulty" that "many" moderate nonattainment areas have meeting federal air quality goals. This is nonsense. There is no reason that a state cannot implement a program merely because the federal government no longer requires it. If implementing an inspection and maintenance program is a relatively cost-effective emission reduction measure for a moderate nonattainment area, it is likely that it will be implemented. If not, the area in question will impose some other measure, for there is nothing in the Faircloth proposal that relieves states of the obligation to meet federal air quality standards.
Similarly, the EPA assumes that any control measures that are not "federally enforceable," even those mandated by state agencies, cannot be relied upon to control emissions, and therefore should not be considered when determining a facility's "potential to emit." The draft Faircloth proposal would include "any physical, operational or federal, State, or local legal limit on the capacity of a source to emit any regulated air pollutant" as a limit on a facility's potential emissions "if the limitation is effective." The EPA claims that this would "enable facilities to avoid Clean Air Act requirements" and therefore presents a threat to public health. The agency even goes so far as to argue that under this provision, "There would be no way for a State air pollution agency to ensure that pollution control devices are in place and properly maintained." Again, the EPA presumes that states are environmentally impotent to implement particular measures. But it is simply not true that federal dictates are the only means of achieving environmental improvements. Each region of the country is different, and the proper mix of environmental measures is different from place to place. "One size fits all" is all too often "one size fits nobody." If there are to be continued environmental improvements in America, hey will result from decentralized, often state-driven, efforts. Whether the Faircloth clean air proposal pases or not, the era of "Wsahington-knows-best" environmental policy is over. It is time for the EPA to accept that fact.
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