Environmental regulations hit manufacturing hardest

Betsi Fores | The Daily Caller News Foundation

Environmental regulations are a leading regulatory burden on the manufacturing and energy industries, according to a new study released Tuesday by the economic consulting firm NERA on behalf of Manufacturers Alliance for Productivity and Innovation. Overall, regulations have grown much faster than the economy.

“Looking at all regulations across the board, it’s in environmental regulations that we’ve seen the largest costs and the most rapid increase in costs,” the study’s author, David Montgomery, told The Daily Caller News Foundation.

“The cost of regulation has been growing much faster than the output of the manufacturing sector, which means it’s been an increasing tax, if you’d like, on every dollar’s worth of output that the manufacturing sector produces,” Montgomery continued. “And since the pace of regulation has also been increasing, there is a real conflict there.”

Montgomery explained that environmental regulations affect the manufacturing industry both directly, through costs of environmental compliance, and indirectly, through the increased costs of electricity and transportation fuels.

“If these regulations were not in place,” Montgomery continued, “there would be substantially higher output for manufacturing than we’re now seeing.” He added that “regulations have been a drag on manufacturing because we’ve had essentially no growth in manufacturing for the last twenty years while the economy has for most of that period been growing at quite a healthy rate.”

“[I]t is imperative that the pace of new regulations be controlled and the cumulative burden of existing regulations be reduced,” the study warns.

Regulations have significantly increased over the last twenty years. The study, titled “Macroeconomic Impacts of Federal Regulation of the Manufacturing Sector”, estimates “2,183 unique regulations have been imposed on the manufacturing sector between 1981 and April 2012,” most of those coming from the EPA.

Regulation costs the manufacturing industry between $265 billion and $726 billion a year, a large chuck of the $1.7 trillion a year manufacturing industry, according to the National Association of Manufacturers.

“Some of the most onerous regulations imposed on the manufacturing sector over the last decade involve those affecting the manufacturing sector’s energy use and emissions from its facilities,” the report points out.

The Washington Post faulted the report for not looking at benefits as well as costs.

In a report last year, the EPA estimated that under the 1990 Clean Air Act’s rules “the cost of compliance would be about $65 billion annually in 2020. But it estimated the value of the benefits — health effects and visibility improvements — at almost $2 trillion,” the Washington Post reported.

Regulations also impact American families. The study found the regulatory burden for the average  U.S. household “could be as great a loss of $5,000 per year,” based on an estimate of regulatory growth under the Obama administration.

“Wage income losses could be as much as 5% in 2012 under the scenario that includes costs of all major regulations,” the study adds.

The report also suggests that the cost of regulatory burden is likely underestimated, given that they did not include local and state regulations or the cost of any minor regulations in the analysis.

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