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It takes up to 500 highly specialized chemicals to manufacture one semiconductor chip. Some of these will soon be subject to misguided new environmental rules that will spike costs and effectively ban the production of these chemicals for U.S. producers. This will shut down domestic production and hands our overseas competitors an advantage in the global marketplace.
For his own sake and the country’s, President Joe Biden would be wise to change course. This regressive regulatory approach will work against his environmental and economic goals by driving manufacturers to outsource production to other countries with lax environmental standards and increasing prices for the everyday products we need to thrive.
Virtually all household and commercial goods–everything from computer chips and medicines to the materials that built your home to the energy that fuels your life–start with chemical manufacturing. Innovation in this sector over the past century has powered the creation of new industries, helping our country become a dominant force in the world. But we are now approaching a dangerous tipping point where sweeping new restrictions threaten to overwhelm what is already one of the most heavily regulated industries.
After decades of success and reducing chemical-related incidents by 80%, the Environmental Protection Agency (EPA) recently introduced new regulations for chemical plants, saddling companies with unworkable mandates that will impact our nation’s ability to deliver safe food, clean water, and reliable energy. The rule restores and expands upon restrictions the Obama Administration introduced a decade ago, which the Trump Administration rolled back due to crucial economic and national security risks. The scope and cost of these mandates on chemical companies are massive. They’ve more than tripled from EPA’s initial proposal in 2022 and will create serious compliance challenges for many facilities.
Impeding America’s ability to produce these chemicals at home doesn’t eliminate the need for them. It only pushes companies to source from countries that don’t share our commitment to environmental and health standards, and it forces American companies to offshore production. This is a major drag on innovation, redirecting capital that could be spent on research and development toward setting up new supply chains abroad and importing finished goods.
The warning signs for this chilling effect on innovation are evident in a recent survey of chemical companies. Two-thirds said the current regulatory environment threatens their efforts to achieve clean energy goals, for example by stifling production of lithium-ion batteries for electric cars and grids. About half were discouraged from investing in medical equipment needed to diagnose and treat disease, as well as keep hospitals sterile and safe. And most of the companies lamented the impact on domestic semiconductor manufacturing–a pressing national security concern.
China is already the world’s leading manufacturer and exporter of chemicals, and many of the rules federal agencies are proposing seem designed to keep it that way. They threaten more than a million jobs and $110 million in salaries for hardworking Americans.
Before implementing more rules, President Biden should consider creating an Interagency Policy Committee led by the director of the White House National Economic Council to coordinate an economic impact analysis. He should require all cabinet departments to evaluate these regulatory proposals’ impact on American jobs, domestic manufacturing, and especially on the Infrastructure Investment and Jobs Act, the Inflation Reduction Act, and the CHIPS and Science Act.
The committee should also consult industry leaders who bear the brunt of these regulatory burdens. There is precedent for such a move from presidents of both parties. The Obama Administration worked with industry groups to implement some of its climate objectives. And early in his term, former president Trump established a Strategic and Policy Forum that included some of the most prominent business leaders, including Blackstone’s Stephen Schwarzman, Disney’s Bob Iger, and JP Morgan’s Jamie Dimon.
President Biden could do the same. A rigorous, balanced analysis of the costs and benefits of sweeping new environmental rules would help him steer clear of raising the cost of living for our already struggling families and sending high-wage American jobs overseas. With one of the most consequential elections in a generation bearing down, he can’t afford to make any unforced errors.
Chris Jahn is the president and CEO of the American Chemistry Council.
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