Waiting to Exhale: Regulating CO2 a Good Way to Move Economy into Depression

Many believe the U.S. economy is in its worst slump since the Great Depression. Michigan's economy, however, has been in recession since the beginning of this century. Matters certainly will get even worse if federal and state elected officials and government bureaucrats carry out their plan to regulate carbon dioxide.

Carbon dioxide is a major greenhouse gas, comprising about 85 percent of the greenhouse gas emitted in the United States. CO2 emissions are ubiquitous and are created from many sources including breathing, driving automobiles and heating homes and businesses.

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Many elected officials, including President-elect Obama, have promised to control carbon dioxide emissions through a national cap-and-trade system — in effect government-imposed energy rationing. The proposed cap-and-trade system sets a limit on CO2 emissions from sources such as factory smokestacks and utility boilers. If a source exceeds its government allotment, operations must be cut back or shut down unless credits can be purchased from another source with a remaining allotment.

Government officials walk a fine line in setting emissions caps. If set too low, the cost of producing energy and manufacturing goods increases as manufacturers and utilities are forced to switch from less expensive coal to more expensive natural gas. Set CO2 caps too high and little or no energy savings occur. The United States need only look to Europe as an example. Most countries in the European Union set CO2 caps liberally trying not to damage their already underperforming economies, thereby resulting in CO2 emission reductions falling drastically short of Kyoto Protocol targets. England, however, set its CO2 limits much lower and suffered dire economic consequences.

And that's not all. Reminiscent of the television infomercial catchphrase — "Wait there's more!" — the U.S. Environmental Protection Agency has given notice it wants to regulate CO2 emissions through the Clean Air Act, which is a chilling thought based on my considerable experience implementing the Clean Air Act as director of Michigan's Department of Environmental Quality.

Using the Clean Air Act to regulate CO2 would impose huge transaction costs on an already sputtering economy. Shopping malls, restaurants, retail stores, farms and all but the smallest of businesses would be subject to regulation due to the 250 tons per year regulatory trigger in the act. The cost of obtaining and complying with the necessary air permits typically runs in the hundreds of thousands of dollars. Additionally, obtaining permits often requires a year or more. The EPA workload would increase at least tenfold just to process and track the additional permits.

It is obvious, even to a casual observer, that when Congress crafted the Clean Air Act it never intended that the act be used to regulate CO2. Utilizing the Clean Air Act to regulate CO2 would lead to such perverse results it is hard to believe that it actually could happen.

Perhaps there is another motive in suggesting such an illogical use of the Clean Air Act. Jason Grumet, energy adviser to Barack Obama, commented during the campaign that "if elected, Sen. Barack Obama will classify CO2 as a pollutant and instruct the EPA that it can use the 1990 Clean Air Act to regulate CO2 emissions." Grumet added that Obama would give Congress 18 months to pass its own comprehensive climate bill, stating "if there's no action by Congress in those 18 months, I think any responsible president would want to have the regulatory approach."

Lawmakers should not be bullied into accepting a CO2 cap-and-trade system as the lesser of two evils. The Michigan congressional delegation should stand united against CO2 cap-and-trade legislation or allowing EPA to regulate CO2 via the Clean Air Act. The environmental benefits of regulating CO2 are so small as to be almost immeasurable, but the cost in lost jobs is huge.


Russ Harding is director of the Property Rights Network at the Mackinac Center for Public Policy, a research and educational institute headquartered in Midland, Mich. Permission to reprint in whole or in part is hereby granted, provided that the author and the Center are properly cited.