Twelve states, several cities and multiple environmental groups have joined the battle against the Environmental Protection Agency for not limiting carbon dioxide emissions under the federal Clear Air Act of 1990, and the outcome of the case will likely have a meaningful impact on the manufacturing industry.
The group is arguing that the EPA has an obligation to limit carbon dioxide emissions due to the belief that it is considered the primary greenhouse gas causing global warming as a major pollutant. The EPA, however, argues that carbon dioxide is not a pollutant, unlike other chemicals that dissipate into the air and are regulated under the Clean Air Act. The EPA goes further to say that even if it were considered a pollutant it is up to the discretion of the Bush Administration to regulate it
Greenhouse gases occur when sunlight strikes the earth’s surface and reflect back forwards space as infrared radiation. The gases absorb this infrared radiation and trap heat in the atmosphere, much like in a greenhouse when growing plants.
The case was argued before a three-judge panel of the U.S. Circuit Court of Appeals for the District of Columbia in July of 2005. The 2-1 decision, siding with the Administration, further confused the issue. The Supreme Court will hear the case this fall and likely make a decision by the spring of 2007.
There are two main issues for consideration by the Supreme Court: Does the EPA have the authority under the Clean Air Act to limit the emission of greenhouse gasses, and if so, is the agency obligated to limit carbon dioxide emissions due to the potentially detrimental ramifications of these gasses on the climate?
Mary Nichols, Director of the UCLA Institute of the Environment, has concerns about the case going before the high court.
“When the Supreme Court takes a case, you are always in danger,” Nichols said. “I wish the case hadn’t been taken.”
Nichols feels the best way to approach the issue is to have Congress take action and pass legislation, since the Supreme Court will be setting precedent. When individual states pass their own regulations, which has been the case thus far, the issue becomes more confusing for manufactures, who can’t simply focus on just one mandate.
“Manufacturers are already being hurt,” Nichols said. “I would think manufacturers would have a strong interest in getting a sense of direction for their business climate.”
According to Nichols, the European Union is much further ahead than the U.S. in regulating gases like carbon dioxide. Every major manufacturing business is subject to a carbon cap based on the Kyoto Protocol. By working to meet the cap, manufacturers can earn “emissions credits” to meet the Protocol, which cites a different reduction percentage for each country. In 2001, the U.S. received wide-spread criticism for rejecting the Protocol and refusing to sign on. According to the United Nations Framework Convention on Climate Change (UNFCCC), the U.S. is responsible for annually releasing approximately 25% of the greenhouse gases found in the environment.
Economist Garrett A. Vaughn agrees that the outcome of the case could have serious implications for manufacturers.
“Assuming that the court finds in favor of the states, the manufacturing sector would be more directly affected than other industries,” Vaughn said. “Especially since India and China are exempt from Kyoto.
The Kyoto Protocol is an addendum to the UNFCCC that was adopted in December 1997. It represents a binding international treaty that requires actions to be taken by nations to combat global climate change. Six specific greenhouse gases are regulated under the Kyoto Protocol, including carbon dioxide.
Vaughn believes that the automotive sector stands to lose the most. Companies like GM and Ford will be at a competitive disadvantage as compared to Nissan and Toyota, who already make smaller, more fuel-efficient cars.
“The only way to reduce emissions is to reduce the size of the car,” Vaughn said. “If I were GM or Ford, I would be very concerned.”
If this case is successful, according to Vaughn, ultimately any process or industry that uses energy could come under restriction, from home heating to lawnmowers. Even alternative fuels could fall under the double-edge sword of industry restrictions.
“Ethanol takes energy to make, so emissions on that process could be regulated as well,” Vaughn said.
Ultimately, the way the EPA protects the health of Americans can prove costly to the national economy, resulting in higher cost of living and lower pay, citing the implementation of the Clean Air Act.
“They chose a pretty high-cost way of doing things,” Vaughn said.
At the time the Kyoto Protocol was drafted, India and China were considered “emerging countries,” therefore they are exempt from any emissions limitations. Vaughn feels that this could put additional economic pressure on the manufacturing industry.
“When the decision comes to build a new plant, the company may want to move out of the U.S,” Vaughn said. “Business could migrate away from the U.S., both in businesses and jobs.”
There could also be political consequences related to the outcome of this case, especially if businesses decide to move operations to countries that are exempt from Kyoto.
“Just imagine the political ramifications if India and China gain business from the case’s outcome,” Vaughn said. “I think the implications can be very far reaching.”