US environmental regulations defined by abrupt U-turns

Costly cycle when presidents undo previous policies

The Biden administration’s move on Thursday to strictly limit pollution from coal-burning power plants is a major policy shift. But in many ways it’s one more hairpin turn in a zigzag approach to environmental regulation in the United States, a pattern that has grown more extreme as the political landscape has become more polarized.

Nearly a decade ago, President Barack Obama was the Democrat who tried to force power plants to stop burning coal, the dirtiest of the fossil fuels. His Republican successor, Donald Trump, effectively reversed that plan. Now President Biden is trying once more to put an end to carbon emissions from coal plants. But Trump, who is running to replace Biden, has promised that he will again delete those plans if he wins in November.

The country’s participation in the Paris climate accord has followed the same swerving path: Under Obama, the United States joined the global commitment to fight climate change, only for Trump to pull the United States out of it, and for Biden to rejoin. If Trump wins the presidency, he is likely to exit the accord. Again.

Government policies have always shifted between Democratic and Republican administrations, but they have generally stayed in place and have been tightened or loosened along a spectrum, depending on the occupant of the White House.

But in the past decade, environmental rules in particular have been caught in a cycle of erase-and-replace whiplash.

“In the old days, the regulatory days of my youth, we were going back and forth between the 40-yard lines,” said Douglas Holtz-Eakin, who directed the nonpartisan Congressional Budget Office and now runs the American Action Forum, a conservative research organization. “Now, it’s back and forth between the 10-yard lines. They do it and undo it and do it and undo it.”

Economists and business executives say this new era of sharp switchbacks makes it difficult for industries to plan. If there is anything that companies like less than government regulation, it is an unstable business climate.

“If the regulatory changes are just whiplash or snapback, it creates a level of uncertainty that makes it very hard to build a vibrant economy,” said Marty Durbin, senior vice president for policy at the US Chamber of Commerce, the nation’s largest business lobby.

“It’s not about the specific regulation or the specific candidate,” Durbin said. “We’ve got to have more long-term certainty about how business is going to be regulated.”

The hairpin turns can lead to lost investments, said HoltzEakin, as companies pay to comply with one rule (for example, by shutting down coal plants or building new electric vehicle factories) and end up with sunk costs as the rules are rolled back, only for the rules to be restored four years later, often with new details, timelines, and technical requirements.

“Change is costly,” HoltzEakin said. “Even deregulation carries a cost. Doing and undoing these rules four times means four times the cost.” He estimated the cost of the whiplash to the economy to be at “easily billions and billions of dollars.”

The cycle of enacting and erasing environmental rules limits their capacity to protect the environment, Holtz-Eakin said.

In the past four months, the Biden administration has strengthened or restored rules that Trump had deleted, including regulations to cut greenhouse emissions from cars and oil and gas wells; to limit the pollution of toxic coal ash; to protect the habitat of the sage grouse and other endangered species; and to tighten safety controls at chemical plants. All of these rules are likely to be weakened or rolled back once again if there were to be a new Trump administration.

Some economists have sought to measure the economic impacts of climate regulation whiplash.

Costas Gavriilidis, who teaches at the University of Stirling in Scotland, developed a US Climate Policy Uncertainty Index charting the federal government’s wild swings on climate policy. He said he was inspired to create the index after watching incredulously from abroad as the United States joined, left, and then rejoined the Paris climate agreement in just over five years.

His research shows that whenever the index shoots up to about 50 points, it creates an economic shock of such magnitude that it leads to a 1.5 percent decrease in industrial production, a 0.4 percent increase in unemployment, a 2 percent increase in commodity prices, and a 0.4 percent increase in consumer prices, reflecting the fact that producers incorporate the risk of higher production costs associated with uncertain climate policy into their prices.

Since the Trump presidency, Gavriilidis’ index has remained at its highest levels.

“All of these regulations are occurring in industries where capital is really important — capital to generate power, abate pollution, invest in a long pipeline of research and development,” said Steve Cicala, co-director of the National Bureau of Economic Research’s Project on the Economic Analysis of Regulation. “If in the future the regulations end up not being binding, then these companies have just wasted a bunch of money.”