WHAT would life in America be like
if the Clean Air Act of 1970 had never been passed? In terms of breathing, an
activity that's easy to overlook until it becomes difficult, it would probably
resemble life in many of today's developing countries, where factories and cars
are multiplying unhindered by environmental regulations. In Hanoi, where I
lived in the mid- to late 2000s, the importance of breathing really started to
make itself felt five or six years ago, and at that point a number of my
friends decided to leave. By the time my wife and I left too, at the end of
2010, our then 8-year-old daughter had a persistent thick yellow slime in her
throat that she would periodically cough up (it went away after about a year
living in the clean air of the Netherlands). Things are even worse in large
Chinese cities, where coal fumes, auto exhaust, smog and particulate matter are
so coruscating that most Americans would consider raising a family there an act
of child abuse. Rich people send their children to private schools with
pressurised domes over the sports fields. Every well-off family owns an air
purifier. Poor people cannot afford air purifiers; they and their children will
die earlier.
American cities once looked rather
similar, in the 1950s and ‘60s. And if the coal, electric power and automotive
industries had had their way in the early 1970s, American cities would look
like Chinese cities today, too. As Tom Zeller notes at Bloomberg View, the
adoption of the 1970 Clean Air Act triggered the same kind of hysterical
industry denunciations we are seeing today in response to Barack Obama's move
to force the electric power industry to reduce greenhouse gas emissions. Ford
Motor Company claimed the 1970 act "could cut off automobile production in
just five years, lead to huge price increases for cars even if production were
not stopped, do 'irreparable damage' to the American economy—and still lead to
only small improvements in the quality of the air." The auto industry
reprised that act in 1972, when Congress was considering forcing them to adopt
catalytic converters: the vice president of General Motors said "complete
stoppage of the production line could occur," while Lee Iacocca, then
president of Ford, claimed it would "cause Ford to shut down", cut
gross national product by $17 billion, and raise unemployment by 800,000. The
mining and electric power industries made the same sorts of wild claims. In
1974, as Congress debated amendments to the act cutting sulfur emissions, the
head of American Electric Power spent $3.1m on an ad campaign to convince the
American public that installing scrubbers on coal-fired power plants would be a
disaster.
Needless to say, this was all
nonsense. Since the Clean Air Act was signed in 1970, America's GDP has grown
212% while emissions of traditional air pollutants fell by 68%. Without the
Clean Air Act's pollution reductions, adult mortality in the United States
would have increased by 160,000 in 2011 alone. Over the course of 40 years, the
act's pollution reductions have quite literally saved millions of lives. This
follows a fairly reliable pattern: whenever the government considers
environmental or safety regulations, manufacturing and energy companies and
industry associations put out "studies" that grossly overestimate the
costs and understate the benefits. In retrospect, the industry response to
environmental regulation in the 1970s can best be described as mendacious,
homicidal, greedy whingeing.
Predictably, the US Chamber of
Commerce's Energy Institute and the American Petroleum Institute have recently
released reports warning of economic disaster if Mr Obama's new rules limiting
greenhouse-gas emissions are implemented. The CoC report, carried out by an
economic research bureau called IHS, is typical: it finds that the rules will
lead American GDP to be about $50 billion per year (around 0.3% of total GDP)
lower than it otherwise would be, but does not provide any estimate of the
value of lower carbon and other emissions the rules will produce. This is akin
to doing a cost analysis of the Clean Air Act without trying to account for the
value of your kids being able to breathe. And why does IHS think the rules will
lower GDP? Because of the opportunity cost of forcing utilities to replace
coal-fired power plants early; this, they say, takes up capital that otherwise
would have been employed in ways that generate more economic activity. How do
they know that? They know it because they plugged it into their economic model,
which assumes that capital generates more economic activity when its use is not
dictated by regulations. Other economists have other models, some of which take
into account the fact that in conditions like those we have today, with a glut
of capital, low aggregate demand and little productive lending or borrowing
going on, regulatory requirements can actually increase GDP by forcing companies
to invest. Obviously, though, those economists would not get hired by the CoC.
The passage in the IHS report that
really jumped out at me was this one:
“The required capital expenditures
are essentially unproductive uses of capital because one source of electricity
generation (i.e., coal-fired plants) will simply be replaced by an alternative
source (i.e., natural gas–fired plants, renewables, nuclear).”
This, as far I can tell, is
gibberish. The productive difference between a coal-fired power plant and a
solar one is that the solar one does not produce carbon dioxide. That is the
added value, just as the added value in switching from a crummy old refrigerator
to a frost-free one is that you don't have to clean out the ice. The need to
build solar power plants will drive the development of new technologies and of
a whole new chain of suppliers, just as any other technology investment drives
innovation and supports new chains of suppliers. IHS's attempt to call the
switch to renewable energy "essentially unproductive" is hocus-pocus,
strangely akin to the manoeuvre Soviet economists used to pull off claiming
that Ladas were just as valuable as Mercedes because they're both cars.
All of which might just occasion a
bit of eye-rolling, were it not for the fact that the carbon which utility
companies churn out is gradually cooking the climate. It is difficult to decide
what tone to adopt when speaking of organisations that spew foulness for a
living, and then employ their free-speech rights to advocate for their interest
in spewing more of it. Mr Zeller takes a modest, reasonable tack, writing that
one should “[keep] the end-times wailing of the fossil-fuel lobby in
perspective” when considering the CoC's and API’s claims. This is one way to
phrase it: when considering the industry response to stronger greenhouse gas
limits, one should keep in perspective that in the past they have been
laughably wrong, and that the positions they have advocated would have led to
the deaths of millions. But Mr Zeller also writes, in passing, that businesses
can be expected to protect their bottom lines, and are "right to do
so."
That's clearly true in general, but
I don't think it bears any application to this situation. Even people who
believe the debatable proposition that corporations have no responsibilities
except to maximise shareholder return recognise that there are some limits to
the arguments a business can make. Raytheon might sell more missiles if the
United States were to go war against Iran, but the American public would react
with disgust if a defence industry association were to put out a report arguing
that war against Iran would be great for the economy. If the electric power
industry wants to "talk its book", that's fine, but there need to be
consensual limits set by the public's sense of the decent interests of society.
The tone of hard-line, toes-in-the-dirt opposition to any and all
greenhouse-gas regulation that we see from industry today is in some ways more
extreme than what one saw in the 1970s; in those days, one would sometimes find
business leaders expressing a recognition that they had to strike deals with
government based on the broad public interest.
The obvious environmental challenge
America faced 40 years ago, and which China and other developing nations face
today, was the struggle for clean air. Executives in the power, mining and
automotive industries made fools of themselves at the time by cooking up
economic and scientific arguments against pollution regulations that turned out
to be utterly wrong. Today the glaring environmental challenge is the effort to
reduce carbon emissions and avoid catastrophic climate change. If America's
power industry had any sense, it would have spent the past four years backing
the cap-and-trade approach to reducing carbon emissions, which gives businesses
more flexibility to adapt. By helping lead the campaign to defeat
cap-and-trade, as Mr Zeller writes, power industry leaders have brought Mr
Obama's more rigid regulatory approach on themselves. It is infuriating to see
them now cough up the same tired, half-baked arguments against carbon-emissions
limits that they have been making, wrongly, for four decades against the whole
slate of government environmental and safety regulations—the very regulations
that have made America the cleaner, safer country we know it to be. We have
become so accustomed to seeing industry leaders spew this stuff out that we
shrug and accept it; what do we expect them to say? We ought to expect them not
to insult our intelligence. We ought to expect them to show some respect for
our health, and that of the planet.
* * *
M.S., Democracy in America, “Claws
in the Dirt,” The Economist, June 4, 2014.
