The EPA shouldn’t regulate greenhouse gas emissions

Douglas Holtz-Eakin Former Director, CBO
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The Environmental Protection Agency (EPA) should keep its hands off greenhouse gases (GHGs). That doesn’t mean that emissions of carbon or other GHGs aren’t important national security, business investment, or pollution policy issues — that’s for citizens and policymakers to decide on the merits. It does mean that even if one decides in favor of limiting emissions, the EPA is the wrong way to go.

For nearly a century, the research community has recognized that market-based approaches provide the best combination of environmental benefits and economic growth incentives. Permit-trading systems, deposit-refund mechanisms, taxes on environmental “bads” and other approaches provide the means to reach environmental objectives at much lower economic cost than command-and-control regulatory systems that dictate technologies and other choices, and cost jobs, investment and growth in the process. Over the years, actual public policy has caught up with best practice, notably with the “acid rain” program that controls emissions of sulfur oxides (SOx) and nitrogen oxides (NOx). The permit-trading system has solved the problem at costs well below original estimates.

At a time when jobs and growth are the top national priorities, it would be a shame to take a strong step backward by using the EPA to impose a draconian regulatory regime. Unfortunately, this is a real risk that cannot be overlooked by free-market supporters.

First, the public apparently has either forgotten the lesson, or never knew. Recent polling released by the American Action Forum and Resurgent Republic, indicates that voters split almost evenly on whether the Environmental Protection Agency should regulate carbon without a law being passed by Congress. Given a choice, 46 percent of respondents support a representative who supports EPA regulation without Congressional approval compared to 49 percent for one who supports Congressional action before EPA regulation.

These numbers underscore the importance of winning this debate both in Washington and in the court of public opinion. Generally speaking, Americans do not think Washington knows best in terms of regulation. The same American Action Forum poll shows 60 percent of respondents believe state governments are better positioned to regulate businesses. The bottom line is that EPA regulations regulate businesses (read: jobs), but this point can be lost in debates over the environment.

Moreover, the EPA seems to have forgotten the lesson as well. Many believe that it could incorporate cost-reducing trading in its rulemaking, but it appears headed for flat-out technology regulation.

Any move to control GHG emissions should come from legislative action passed by Congress. The EPA might have the tools to implement an efficient, pro-market approach, but it has displayed no desire to do so. Instead, it is content to hamstring economic performance in pursuit of its policy aims, and unlike Congress it cannot be held accountable for its policy failures. One agency with that much authority is simply bad for business at a time we should be encouraging growth and development.

The EPA should keep its hands off GHGs, and thus keep its hands off badly needed jobs.

Douglas Holtz-Eakin is president of the American Action Forum. He was the director of economic policy for John McCain’s 2008 presidential campaign.