Monday, December 14, 2009

The EPA's New CO2 Teeth

The U. S. Environmental Protection Agency has just got itself a new pair of choppers. It did this last week (Dec. 7, to be exact) by finding that greenhouse gases (GHGs) such as carbon dioxide, in the EPA's own words, "threaten the public health and welfare of the American people." Their reasoning is that if we keep emitting GHGs at the current rate, we will contribute to the apocalyptic disaster of global warming that many nations of the world are currently talking about in Copenhagen. And admittedly, if Manhattan turned into a scuba-divers-only tour and the entire Midwest became a North American version of the Sahara, you could argue that the public health and welfare of the American people was threatened, to say the least. But there is more to the story than that.

Why does just finding this officially give the EPA sweeping new powers? Because in 2007, the U. S. Supreme Court found that GHGs fit within the Clean Air Act's definition of air pollutants. In calling these findings "long overdue," EPA head Lisa Jackson managed to get in an indirect swipe at the Bush Administration, which quite reasonably refused to rush out a bunch of new regulations following the Supreme Court ruling. What does this latest EPA action mean for industries and consumers who depend on engineered products such as gasoline and automobiles?

Potentially, a lot. Earlier in the fall, the EPA announced a new set of fuel-economy standards it was hoping to implement, once it figured out if GHGs were really a threat. Now that it has done that, there's nothing other than Congress to stand in the way of the EPA implementing those standards. Briefly, they ramp up the light-duty vehicle average fleet fuel economy from about 30 MPG to over 35 MPG by 2014. Something bad will happen to any automaker whose fleet doesn't meet these standards. There are other ways of meeting these standards besides raising fuel economy, but they are things like increasing the number of all-electric vehicles in the fleet, which is even harder than making cars that guzzle less gas.

In times of low to moderate fuel prices, the American consumer has historically shown little interest in fuel-efficient cars. But if the EPA has its way, Mr. Consumer will buy fuel-efficient vehicles or go without. I drive a Honda Civic that gets just about 35 MPG, and I like it. But some people have large families or other valid, non-environmentally-hostile reasons for needing a bigger vehicle that gets fewer miles per gallon. To me, it is a restriction of freedom to tell these people that they simply can't get what they need, or if they do, there better not be very many of them because the automakers can't make that many gas-guzzlers without making an equal number of toy cars that get 50 MPG or something. The whole thing becomes a headache, and starts reminding me of old stories out of the former Soviet Union.

Forgive me if I've told this one before, but it's supposedly true. After the Revolution of 1917, a bureaucrat was put in charge of nail production. His job was to figure out how to set the goal for nail factories. So he decided to make them produce X number of nails per year, and sent out telegrams to all the factories with the order.

Only a couple of months later, he got back telegrams reporting compliance with his order—somehow the factories had fulfilled their entire year's quota in only a few weeks. This pleased him greatly. Then he started hearing rumors on the street that all was not well at hardware stores. Going to a nearby store, he found that the only nails you could get were tacks and finishing nails—in other words, the smallest nails the factories could make and still call them nails.

Well, he knew how to fix that. He went back to his office in the Kremlin and sent out another telegram revoking the first order, and setting the new quota in terms of pounds of nails. You can imagine what happened next. Pretty soon he went to the hardware store and found the only kind of nail you could buy were giant spikes weight a couple of kilograms each.

I never found out how the bureaucrat solved his nail problem, but the point is clear. When the free-market mechanism of prices and supply in response to prices is replaced by any kind of government-imposed regulation, things tend to get out of whack, and the wants and even needs of consumers tend to go by the wayside. The right to drive a big gas-hungry car is not enshrined as such in the Constitution, but the right of property is. And if the EPA starts biting the industry which helps make Texas the largest emitter of carbon dioxide in the nation—the oil-refining industry—it may effectively render this multi-billion-dollar investment worthless, and drive refining offshore to countries whose regulations are less hostile to industry, but whose governments may be more hostile to us—Venezuela, for instance. How would you like our gasoline supply to depend on whether Hugo Chavez got up on the right side of his bed this morning? That seems to be a "threat to the public health and welfare of the American public" that takes precedence over some longer-term, uncertain, and politically charged issue which in any case could turn out to be a waste of our effort if the other countries of the world don't regulate GHGs as strenuously as we do. And China and India have so far shown very little inclination to get serious about it.

Before we wreck our economy in order to help fix something that others may break anyway (if it breaks at all), I hope the Congress will take a second look at what the EPA is doing and have a spell of calm reasonableness, which will allow them to restrain that agency from doing serious and perhaps irrevocable harm to the U. S. economy. But their recent performance does not encourage me in this hope.

Sources: The EPA's own news release on its finding is at A Wall Street Journal article describing some industries' reaction to the finding is at The Dec. 21, 2009 issue of National Review (p. 40) carries an excellent article "Priceless is Worthless" by Kevin D. Williamson on how necessary prices are to the proper functioning of any important sector of the economy. And I blogged on the EPA's proposed finding last Apr. 20, 2009 when they announced it for public comments, 380,000 of which did not dissuade the agency from going ahead anyway.

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