With the federal government set to regulate greenhouse gas emissions from factories and power plants, manufacturers and industry groups are bracing for seismic change.
On Jan. 2, the Environmental Protection Agency enacted what are the first regulations of major stationary sources of greenhouse gases.
Though the EPA has promised to take slow, measured steps, industry groups such as the National Association of Manufacturers and the American Petroleum Institute have warned that the agency is laying out the most far-reaching environmental regulatory scheme in decades.
But according to Victor Flatt, a University of North Carolina environmental law professor and a scholar with the Center for Progressive Reform, the first wave of regulations will affect only a tiny handful of companies in the U.S.
More importantly, he says, how the EPA works with these companies that are to be regulated will go a long way toward easing the fears about further rollouts down the road.
"This is going to be the dog that didn't bark," says Flatt. "There's going to be this first wave of permits and I think companies are going to see that the sky didn't fall and prices didn't increase dramatically. And that will pave the way for some legislative movement."
The new rules will be modest at first, affecting only new plants or existing plants that are undergoing major upgrades. Last month, the EPA said it wouldn't propose standards for existing power plants -- meaning those that aren't being upgraded or overhauled -- until July, and for refineries until the end of 2011. Final standards wouldn't come until even later.
According to Flatt, the regulations will differ in aim from that of previously proposed carbon cap-and-trade legislation in that the EPA's emphasis will be on plants running at higher levels of efficiency and using cleaner fuels by requiring the use of best-available technology to reduce emissions.
"There's probably going to be less than 50 companies in the whole country that are going to be impacted this year," says Flatt. "But what's good is that the EPA is giving pretty clear directions on what they're expecting. And, more importantly, the permitting process is going to be on an individualized basis.
"Companies will have their environmental attorneys work with their states, then it will be run by EPA," adds Flatt. "What companies don't want is uncertainty. And at least with this, the EPA is being fairly straightforward."
The initial companies affected will be primarily coal-fired power plants and refineries, along with chemical manufacturers that derive their energy resources from coal.
A dozen states have already filed suit to block the EPA's the ability to regulate greenhouse gases, though so far federal courts have not stopped the first round of regulations from going into effect. Texas, however, isn't even bothering with legal challenges and instead simply refusing to comply with the new rules.
Jay Timmons, president of the National Association of Manufacturers, warned that the EPA's efforts would only raise energy costs for manufacturers and crush economic growth.
"It's questionable whether the EPA has the resources or the capacity to implement these burdensome and complicated regulations," says Timmons.
There will, ultimately, be downstream costs, says Flatt, especially in the coming years if the EPA continues its regulation rollout. But that difference will be 3% to 4%, he says, or slightly higher in areas that are primarily coal-powered.
"It's not going to increase prices dramatically," says Flatt. "But people are very upset, especially in industry. I understand that because there's a sense of uncertainty. But when push comes to shove and the EPA starts working with companies on the permits, I don't think it's going to be that bad."