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NAM study finds stricter new federal ozone regulation could be “self-inflicted wound to the U.

It looks like the EPA is at it again, and this time, states are not left with much time to react. In this alert, the National Association of Manufacturers calls attention to new ozone limits that are scheduled to go into effect in December.

According to the study conducted for NAM by NERA Economic Consulting, once the new ozone rules are fully implemented, Missouri residents would suffer. Some of the findings:

  1. $29 Billion Gross State Product Loss from 2017 to 2040

  2. 40,249 Lost Jobs or Job Equivalents per Year

  3. $9.4 Billion in Total Compliance Costs

  4. $1,060 Drop in Average Household Consumption per Year

  5. $932 Million More for Residents to Own/Operate Their Vehicles Statewide (2017 to 2040)

  6. Up to a 15 Percent Increase in Residential Electricity Prices (National Average)

  7. Up to a 32 Percent Increase in Residential Natural Gas Prices (National Average)

  8. Shutdown of 78 Percent of Missouri’s Coal-Fired Generating Capacity

See the full report on the ozone rule’s impact on Missouri here. Below, you will find a summary of the rest of the report, the impact of the rule on the U.S as a whole. The numbers and impacts are quite staggering. NAM President and CEO Jay Timmons in a press release earlier this week said “…tightening the current ozone standard to near unachievable levels would serve as a self-inflicted wound to the U.S. economy at the worst possible time.”

New Ozone Rule Forthcoming: In December 2014, the Environmental Protection Agency (EPA) will likely propose a more stringent National Ambient Air Quality Standard (NAAQS) for ground-level ozone. The EPA’s most recent draft policy statement for NAAQS for ground-level ozone recommends tightening the standard to as low as 60 parts per billion (ppb) from the 2008 standard of 75 ppb.

NAM Study Finds Rule Could Be Costliest in U.S. History: A new study by NERA Economic Consulting and commissioned by the National Association of Manufacturers (NAM) reveals that a more stringent ozone standard from the Obama Administration could reduce GDP by $270 billion per year and carry a compliance price tag of $2.2 trillion dollars from 2017 to 2040, drastically increasing energy costs and placing millions of jobs at risk. At this price, the NAM estimates that it would be the most expensive regulation the U.S. government has ever issued.

Study Highlights: The study found that a stricter new ozone regulation could:

  1. Reduce U.S. GDP by $270 billion per year and $3.4 trillion from 2017 to 2040;

  2. Result in 2.9 million fewer job equivalents per year on average through 2040;

  3. Cost the average U.S. household $1,570 per year in the form of lost consumption; and

  4. Increase natural gas and electricity costs for manufacturers and households across the country.

  5. In brief, such a rule could place tremendous cost and compliance burdens on states and their resources.

  6. Significant Impacts on Energy Industry: New oil and gas production could be significantly restricted in areas of “nonattainment” (those areas of the country that do not meet federal ozone limits). This would impact energy production and increase costs for manufacturers and households—a dynamic the EPA has not considered sufficiently. When considering these impacts, the study finds that new ozone regulations could carry an even heavier economic toll:

  7. Reduce the present value of GDP by nearly $4.5 trillion through 2040, result in a loss of 4.3 million job equivalents per year and cost households $2,040 annually.

  8. Increase industrial natural gas costs by an average of 52 percent and electricity costs by an average of 23 percent over what they would be if the current ozone standard was unchanged. The NAM cautions that new energy costs of this nature could hurt America’s manufacturing comeback and the U.S. energy advantage.

  9. S. Investment in Jeopardy; Manufacturing Heavily Impacted: More stringent ozone standards would discourage investment and render industry expansion nearly impossible in communities across the nation. While no community would be immune, the impact would be felt significantly in manufacturing-heavy states, such as Illinois ($229 billion in lost GDP), Ohio ($204 billion in lost GDP), Pennsylvania ($193 billion in lost GDP) and North Carolina ($150 billion in lost GDP) over the study period from 2017 to 2040.

  10. The EPA Does Not Identify Ways That States Are Able to Comply; Points to Unknown Controls:

  11. The EPA has only identified one-third of the emissions controls needed to meet a new 60 ppb ozone standard; the other two-thirds must come from controls even the EPA has not identified. These unknown controls are likely to include the shutdown, scrappage or modification of power plants, factories, heavy-duty vehicles, off-road vehicles and even passenger cars and would be exorbitantly costly.

  12. NAM Recommendation: Maintain Current Standard, Revise Clean Air Act: The NAM urges the EPA and the Obama Administration to maintain the current protective ozone standard—the most stringent standard ever, which has not even been implemented yet. Ozone precursor emissions are as low as they have been in decades, and air quality continues to improve. A new standard would impact the economy significantly and would be likely unachievable, and its costs may greatly outweigh its benefits.

Manufacturers call on Congress to reevaluate the provisions of the Clean Air Act that govern NAAQS for ground-level ozone, as we have reached the point at which significant further reductions simply cannot be accomplished in any cost-effective manner.

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