The Relief Report ®


A newsletter covering regulatory reform efforts in Washington and across America, published by The National Center for Public Policy Research

501 Capitol Court, N.E.
Washington, D.C. 20002
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Issue #80 * September 14, 2000 * David A. Ridenour, Editor

 SPECIAL GASOLINE ISSUES EDITION

Contents:

EPA Regulations Helping to Fuel Spike in Gasoline Prices

Clean Air Regulations Harmful to Minority Economic Gains

 

EPA Regulations Helping to Fuel Spike in Gasoline Prices

Regulations recently implemented by the Environmental Protection Agency (EPA), that require one-third of the nation's gasoline supply to be reformulated gasoline (RFG) ostensibly to reduce air pollution, are significantly contributing to a sudden increase in gasoline prices nationwide that is especially severe in the Midwest. The EPA issued these costly regulations this spring despite a May 1999 report from the National Research Council (NRC), an arm of the National Academy of Sciences and the National Academy of Engineering, which concluded that RFG would do little to reduce air pollution.

The EPA developed the RFG regulations pursuant to the 1990 Clean Air Act amendments which require the use of reformulated gasoline with oxygen additives in parts of the nation that the agency has designated as having excessive ozone -- a major component of smog. The oxygen additives, RFG and Methyl Tertiary-Butyl Ether (MTBE), are supposed to lower the emissions of vehicle pollutants that contribute to the formation of smog. But the 1999 NRC study by a 12-member panel of scientists found that oxygen additives have only a minimal impact on reducing smog. Committee Chair William Chameides, Regents Professor of Earth and Atmospheric Sciences at the Georgia Institute of Technology, said that while RFG and MBTE "do reduce some pollutants from motor vehicle emissions, the oxygenates appear to have little impact on lowering ozone levels. Moreover, it is not possible to attribute a significant portion of past reductions in smog to the use of these gasoline additives."

Although the EPA funded the NRC study, the agency ignored the study's conclusions and proceeded with its plans to implement the costly rules. Now, gasoline prices are rising so rapidly that Indiana suspended its 5% sales tax and the governors of Illinois, Wisconsin and Michigan want a temporary waiver from the EPA RFG regulations. A report just prepared by the Congressional Research Service for Rep. James Sensenbrenner (R-WI), Chairman of the House Science Committee, estimates that Midwestern consumers are paying an additional 50 cents per gallon of gasoline largely due to the RFG regulatory mandate.

"As usual, the EPA employs junk science to justify burdensome and costly regulations while ignoring the advice of sound science," says John Carlisle, director of the National Center's Environmental Policy Task Force. "This time, the EPA's flawed RFG regulations -- which will do little to help the environment -- are forcing Americans to pay millions of additional dollars for gasoline just as they are preparing to enjoy their summer vacation season. This is truly a new low for the EPA."

 

Clean Air Regulations Harmful to Minority Economic Gains

Black Americans have made remarkable progress in recent decades. The income levels of black households have tripled over the past 24 years, and the number of black-owned businesses more than doubled between 1987 and 1997. If these trends hold, racial economic parity may become reality in the not-too-distant future.

But not if the Environmental Protection Agency (EPA) has anything to say about it.

For progress in the black community to continue, the government must allow a free economy where businesses can grow and consumers can accumulate wealth. At the same time, the government must ensure its policies are not harmful to the environment. In the past, however, policies that realized environmental and economic goals were not thought possible - a trade-off was always made between the two.

It was with this trade-off in mind that the EPA implemented the Clean Air Act Amendments (CAAA) of 1990. They set acceptable limits on the emissions of certain air pollutants. They also outline specific programs state governments and private businesses must comply with to reduce air pollution. The EPA believes its restrictions on business are necessary to provide Americans with cleaner and healthier air.

But this trade-off is not necessary. Air quality levels across the country are improving dramatically, but these improvements are often not due to the government's anti-pollution regulations. In addition to being unnecessary, the CAAA are also extremely flawed in their factual foundation and the policies they prescribe. As implemented, they may be the most expensive and flawed piece of environmental legislation in American history.

The "one-size-fits-all" approach of the CAAA is inappropriate since the levels and causes of air pollution - as well as meteorological conditions - vary widely between different regions. Therefore, the best and least-intrusive environmental regulations are those designed to suit specific regions. For example, it is not logical that, in the middle of January, the same air quality control program can effectively address problems in both Minneapolis and Miami.

This same flawed methodology is present at a narrower level, too. For example, the CAAA imposes the same maintenance and inspection regulations on all cars. Yet the EPA acknowledges that only "ten to 30% of cars are causing the majority of the vehicle-related pollution problems." It would be much more effective to focus and tailor policy to only apply to the few, primarily older, cars that create the majority of the pollution.

But, in targeting older cars, the EPA risks unfairly imposing more regulatory pressure on urban and minority populations. In economically depressed areas, residents tend to have older cars that are not maintained as well as the average vehicle. While there is no doubt that these cars are greater contributors to air pollution, no adjustments currently exist to ease the economic pressure that is imposed on these residents to repair or replace their cars.

Similar flaws are present in the data that forms the premise for the CAAA. To design the CAAA, the EPA examined the severity of air pollution in various metropolitan areas in 1988. The amount of air quality-improving regulations that a city must administer depends on how poor the region's air quality was at that time. Climatologically, 1988 was a dramatically hot and dry year - to record-breaking degrees in many areas. Therefore, air pollution levels were also unusually high. In using this data as the norm, the CAAA imposes unnecessarily high levels of regulation. When one takes into consideration that the levels of regulations are high based on flawed data, it is not a stretch to say that these mandates are oppressive.

One specific problematic provision of the CAAA is the Reformulated Gasoline (RFG) requirement. RFG is blended to burn more completely and evaporate less than conventional gasoline, supposedly creating less pollution. A key feature of RFG is oxygenates, which are meant to increase the combustion efficiency of gasoline and reduce carbon monoxide (CO) emissions. The only two realistic oxygenate alternatives are MTBE and ethanol, but neither are examples of good policy in practice. A 1999 report conducted by the National Academy of Sciences conclude that such oxygenates "do little to reduce smog." They also damage both the environment and the economy.

Scientists have linked MTBE to cancer, reproductive and developmental issues, increased incidences of asthma, general adverse effects on the central nervous system, liver abnormalities, damage to the tissues of the heart and other similar effects. What makes the situation scarier is that a large quantity of MTBE has already managed to seep into the environment. In fact, MTBE is the most widely-detected gasoline compound found in Northeast drinking water supplies.

Ethanol creates similar problems, including increased emissions of acetaldehyde - a probable human carcinogen - by up to 70%.

Beyond environmental problems, the Department of Energy's Energy Information Administration estimates the increased costs an ethanol-mandate would impose would force consumers to pay $5 billion more for gas in 2005 than they do today.

In the case of RFG, not only are poorer Americans being forced to spend a higher percentage of their incomes to pay for them, but they are also the segment of the population most likely to suffer the most from the environmentalharm they cause. Urban areas, where gas stations abut apartments and homes, pose a significant risk of poisonous RFG infecting residents. The concentration of air pollution due to factors like vehicle exhaust is also higher in these urban areas.

Meanwhile, other parts of the CAAA are simply unreasonable. Electric cars are one such provision. Battery packs cost $10,000 and must be replaced after only a few years of use. Drivers must also recharge current batteries approximately every 100 miles, a process that takes several hours. This constant need to recharge batteries is not convenient for business use and makes such cars unreliable. In a family emergency, who would want to have to depend on such a car? Even the type of informal electric vehicle mandate endorsed by the CAAA will need to be subsidized by price increases for other cars so manufacturers can comply with them. Such cost increases could cost consumers an additional $1,000 per car. Again, the hard-working consumer is punished for an ill-thought government program.

The CAAA's expensive, poorly-designed and time-consuming vehicle inspection and maintenance program (IM240) punishes consumers as well. Consistent with the fact that a small percentage of cars create the majority of air pollution is the fact that over half of the potential emissions reductions from IM240 come from the small fraction of cars that fail the test. To subject every single vehicle in the nation to the exact same tests is, therefore, impractical. Thus, the benefits of the program come purely from its scope, not from its efficiency.

Another flaw with this one-size-fits-all approach is that not all cars can accurately be tested in the same way. Older cars do not emit consistent levels of emissions. According to the General Accounting Office, over a quarter of the vehicles that failed the initial emissions test passed a second one, even though no repairs were made. This proves that heavily-polluting vehicles simply cannot be diagnosed efficiently and accurately through such "snapshot" tests.

As stated earlier, even with improvement, these regulations are essentially outdated and unnecessary. Because cars produced today are over 90% cleaner than those produced just a couple of decades ago, smog levels throughout the country have dramatically improved. The mandates also fail to take into account the disproportionate pollution caused by older vehicles. A vast program regulating every car would be better designed to just regulate older cars.

The effects of today's cleaner-running cars can already be observed in the net reduction in pollution levels outside of California between 1985-87 and 1992-93 of 57%. If current trends continue and cleaner cars continue to replace older ones, emissions levels in most regions can reach the CAAA's "target" emissions levels by 2005 without the oppressive measures that the amendments impose.

At a price somewhere between $25 and $35 billion dollars, these flawed, damaging and unnecessary Clean Air Act Amendments of 1990 are the most expensive piece of environmental legislation ever enacted. And one group of Americans especially hard hit by them are African-Americans.

By imposing heavy restrictions on behaviors thought to produce air pollution, the standards by which existing businesses operate are raised by the regulations and new barriers for people who want to go into business for themselves are erected. They discriminate against black entrepreneurs who have a small pool of resources with which to start their businesses. Going so far as to regulate emissions from dry cleaners, bakeries and other small businesses, the adverse economic effects can provide an especially heavy blow to all African-Americans. Blacks who try to start a business tend to pay higher initial costs, while those already in business must pay higher operating costs. These higher operating costs also force black consumers to pay more money.

These high prices and operating costs could compromise the economic progress made by African-Americans in recent decades. As mentioned before, today's black Americans operate more businesses and are wealthier than ever before, causing the racial economic gap to close rapidly. However, the CAAA take money away from minorities. Therefore, rather than being able to continue to invest their money in activities that will help them someday to achieve the racial parity for which they have fought for so long, they must instead help fund an oppressive, flawed and completely unnecessary program. In this way, the EPA threatens black progress.

By Syd Gernstein




Editorial correspondence to The Relief Report should be directed to: The National Center for Public Policy Research * 501 Capitol Ct., N.E. * Washington, D.C. 20002 * (202) 543-4110 * Fax (202) 543-5975 * E-mail [email protected] * Web http://www.nationalcenter.org. Copyright 2000, The National Center for Public Policy Research. Coverage of meetings, activities or statements in the Relief Report does not imply endorsement by The National Center for Public Policy Research. Reprints of material in the Relief Report permitted provided source is credited. To receive all National Center newsletters free by e-mail, visit http://www.nationalcenter.org or send an e-mail to: mailing [email protected].


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