CO2 Regulation Would Affect One Million Smaller Businesses

Published September 1, 1998

EPA’s threat to classify carbon dioxide (CO2) as a regulated “pollutant” would generate an enormous bureaucracy and impose legal and economic burdens on at least one million businesses, “the entire heart of the American economy,” according to a study released on Capitol Hill.

As debate over the administration’s global warming policies unfolds, much attention has been devoted to the increased fuel prices expected to result from the energy-use restrictions contained in the Kyoto Protocol. Since fossil fuels supply 85 percent of all U.S. energy, the costs of reducing man-made emissions of greenhouse gases will be substantial.

“But missing from the economic analyses to date is inclusion of the regulatory and bureaucratic costs to businesses arising from complying with and enforcing federal pollution laws should CO2 be classified as a regulated pollutant,” writes Mark P. Mills, the study’s author. He warns that the regulatory infrastructure needed to track emissions of CO2 from over a million different sources would dwarf anything the country has ever seen.

Compliance with federal CO2 regulations, Mills says, would require farmers, truckers, manufacturers, building owners, and others businesses to hire staff “who will install, identify, evaluate, and operate emissions monitoring equipment; some other people to undertake record-keeping and documentation control; yet another team to become expert in and monitor regulatory compliance; still others to consider and implement engineering solutions to the problem of complying with emissions reductions.”

Moreover, Mills notes, legal staff will be needed to “consider the entire trajectory of legal exposure and compliance under current rules as well as the interpretations of the regulations as they evolve through inevitable legal battles.” Mills is a principal of Mills-McCarthy Associates, a Chevy Chase, Maryland-based consulting company. His study, “A Stunning Regulatory Burden: EPA Designating CO2 as a Pollutant,” was prompted by the April 10 announcement by EPA’s Office of General Counsel that the agency, under the Clean Air Act (CAA), has the legal authority to regulate CO2 as a pollutant.

Under the CAA, Mills points out, once an emission has been classified as a “pollutant,” a business that emits at least 100 tons per year of that substance becomes identified as a “stationary source” of emissions, thus falling under the authority of EPA. According to Mills’ calculations, a business will reach the 100 tons of CO2 emissions threshold if buys and burns in one year roughly $8,000 of either fuel oil or natural gas.

“It doesn’t take much imagination to see that this level of purchasing occurs at rather small industrial concerns; colloquially, the ‘mom and pop’ shops of America,” Mills observes. Sectors bearing the brunt of CO2 regulation would include:

  • Manufacturing. The majority of all small, mid-sized, and large manufacturing businesses–over 300,000 facilities–would become regulated stationary emissions sources. On average, any manufacturing firm with over 12,000 square feet of operations would be regulated for CO2.
  • Commercial Buildings. Over 400,000 buildings in the U.S. emit enough CO2 per year to become targets of EPA regulation. On average, a business operating in a building over 40,000 square feet in size would become a regulated stationary source. That threshold would include 28 percent of all educational buildings and 25 percent of all medical and health care facilities in the country.
  • Farms. Over 150,000 farms–85 percent of the nation’s total–would find themselves regulated for CO2. Hardest hit would be poultry and horticulture. Farms growing grains and raising livestock would also be severely affected.
  • Trucking. All aspects of transportation, but particularly the nation’s over 100,000 businesses, would be affected. Trucks account for 50 percent of the transportation sector’s CO2 emissions. Indeed, the average individual truck emits enough CO2 every year to exceed the emissions threshold of a stationary source.

Though EPA has yet to follow through on its threat to regulate CO2, Mills’ analysis shows just how seriously that threat should be taken.