Obama Postpones New Ozone Standards, Has More Work to Do

President Obama may have finally added or saved a few jobs—7.3 million to be specific.
In a surprising but welcome move, the President asked Environmental Protection Agency (EPA) Administrator Lisa Jackson to withdraw the agency’s draft for more stringent Ozone National Ambient Air Quality Standards (NAAQS).
This is an important victory for businesses as well as the additional 565 U.S. counties that would have been pushed into non-attainment status and suffered economically as a result.
The EPA’s regulatory overreach on this one rule would have destroyed 7.3 million jobs and nearly $700 billion in economic activity by 2020, and the EPA significantly overestimated the purported health benefits from a lower standard.
The President says he wants to provide regulatory certainty and will stick with the schedule of reviewing the rule in 2013. That’s a good start to helping the economy recover, but if he truly wants to provide regulatory certainty, he should tell the EPA not to revisit the ozone rule at all and should re-examine other environmental regulations with massive economic costs and dubious environmental benefits.
The costs for states to comply with a tightened ozone standard would have been substantial. These federal mandates for more strict ozone pollution can discourage companies from expanding, and counties that do not meet attainment measures could have lost federal transit funding. As Heritage Visiting Fellow Andrew Grossman writes:

The economic consequences of non-attainment are severe. New and modified sources—factories, power plants, and the like—in non-attainment areas must employ costly emissions control technologies and offset emissions by taking other industrial capacity offline, directly costing jobs. At best, this drives up the cost of development and discourages businesses from expanding. At worst, it is a near prohibition on new industry. And where businesses are unable to relocate—such as is often the case with utilities—the result is higher costs for consumers.

Clearly, no one wants to breathe dirty air, but the reality is that the ozone standards are already stringent to the point where they have a miniscule additional effect on public health. The costs of tightening the standard have outweighed the benefits in the past, and the new proposal would have demonstrated diminishing marginal returns—possibly to the vanishing point.
Further, the EPA wildly inflates the alleged benefits of the new standards. A reduction in ozone-level standards would make sense if the economic benefits of better health (fewer doctor visits, fewer inhalers, higher work and school attendance, etc.) convincingly outweighed the costs of implementing the standard. But the reality is that the causality between a more stringent ozone standard and better health effects—especially for respiratory complications—is unclear, to say the least.
From 1980 to 2005, when levels of ozone and other pollutants fell in the United States, the number of asthmatics increased by 75 percent. In fact, some of the lowest asthma rates in the world are found in highly polluted developing countries in the former Soviet Union, while countries in Western Europe have considerably higher asthma rates and relatively lower levels of air pollution.
What is clear and well established, however, is that improved economic well-being means that people are healthier and live longer. A tighter ozone rule would slow economic growth, reducing economic well-being.
President Obama should be commended for asking the EPA to withdraw this rule, but the ozone regulation is just one railcar saved from the EPA’s regulatory train wreck. The Administration should take further steps to provide businesses with regulatory certainty so they can expand and create jobs. There are a few other proposed rules the Administration needs to revisit, because they all miserably fail the cost–benefit test as well.