Last month, White House senior adviser John Podesta delivered a speech in which he laid out President Joe Biden’s efforts to revamp our nation’s industrial strategy and accelerate the adoption of clean energy technologies as part of his Investing in America agenda.
Specifically, Podesta highlighted the collective benefits of the Bipartisan Infrastructure Law, the CHIPS and Science Act and Inflation Reduction Act.
There’s just one problem: One of the Biden administration’s own regulatory proposals threatens to undermine all three of these pillars of its legislative agenda.
The Environmental Protection Agency’s proposed overhaul of the National Ambient Air Quality Standards (NAAQS) is a prime example of this cognitive dissonance. The agency is proposing to significantly tighten the limits on particulate matter known as PM2.5, and areas that are designated as being in non-attainment of the NAAQS regulations understandably face more restrictive permitting requirements, require obtaining expensive emission reduction credits to permit new projects and include restrictions on federal funding for transportation projects.
To be clear, reviewing these NAAQS and adjusting them when appropriate is critically important to maintain and improve the environment and the health of our citizens. But it is also critical to not make these decisions in a vacuum, not when regulated entities have already made significant changes that have resulted in PM2.5 levels in the United States dropping by an astounding 44% between 2000 and 2020. And not when those decisions will impair our nation’s ability to strike the right balance between environmental protection and economic growth.
This could prove very problematic for the infrastructure projects vying for funding from the bipartisan infrastructure law. The Clean Air Act requires highway and transit projects located in non-attainment and maintenance areas conform with NAAQS regulations.
EPA’s own analysis projects Cook County and several other parts of Illinois exceeding the PM2.5 limits contemplated in the proposed rule, setting the stage for arduous environmental assessments, project delays and the threat of withheld funding — and that’s just according to EPA’s sunny forecast.
It’s not just transportation infrastructure that could be facing headwinds if the turbocharged NAAQS rule is finalized. Semiconductor manufacturing projects, the bedrock of Biden’s CHIPS and Science Act, could be sitting in regulatory purgatory as they race to secure hard-to-find emission reduction credits needed to comply with the proposed NAAQS regulations.
Last month, Maricopa County, Arizona, a hotbed of semiconductor factories, proposed amending its local NAAQS rules in an effort to generate sufficient credits to offset the emission of PM2.5 precursor pollutants from the region’s chip manufacturers. If credits are already in short supply now, just wait until the new standards take effect, tightening their already limited availability.
While chipmakers are slated to get clobbered, it is manufacturers, in general, that are going to bear the brunt of this EPA action. In fact, a recent study from the National Association of Manufacturers estimates that the NAAQS PM2.5 proposal threatens $6.7 billion in manufacturing economic activity and over 28,000 jobs in Illinois alone. That doesn’t bode well for the clean tech investments included in the Inflation Reduction Act, Biden’s signature legislative achievement.
There is already a well-documented shortage of electrical steel, which is a critical component of electric vehicle engines and the electricity transmission infrastructure needed to power the cars themselves. The steelmaking industry will be one of the most negatively impacted sectors under the new EPA rule, and the stringent emission limits will make it increasingly harder to build new facilities and expand existing ones.
Biden has embarked upon an aggressive legislative agenda with the stated goal of re-establishing American manufacturing might. Unfortunately, his own regulatory actions are at cross purposes with that objective.
Alec Messina is a partner at the law firm of HeplerBroom and was director of the Illinois Environmental Protection Agency from 2016 to 2019.
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