alan krupnick is a senior fellow at Resources for the Future, the Washington-based environmental economics think tank.
Published September 27, 2018
When the EPA promulgates a major regulation — or proposes the substitution of one regulation for another — it must estimate its benefits and costs. So when the Trump administration delivered on its promise to try to dump the Obama administration EPA’s Clean Power Plan in order to keep more coal-fired plants running, no one was surprised by its assertion that replacing the CPP would do more good than harm. But fancy footwork alone does not a policy justify.
Common Sense (Not)
Start with one of the most glaring issues in the Trump administration plan, called the Affordable Clean Energy (ACE) rule. Last month Bill Wehrum, the appointed head of the EPA’s Air Office, reiterated the administration’s position that ancillary benefits are not to be counted in the legally required comparison of the costs and benefits of proposed major rules. And by his reckoning, if only the direct benefits forgone by pulling back from the CPP are included, the cost savings by substituting ACE would outweigh those benefits.
That’s quite an “if.” The inclusion of the other health benefits that are lost with ACE — in particular, the value of some 1,400 lives lost each year from air pollution tied to greater coal use — turns the proposed rule into a loser, with overall costs exceeding benefits relative to the rule it would replace. And according to a new study, the costs of these deaths may be dwarfed by the impact of local air pollution on accelerating the onset of dementia.
Further, the Trump EPA’s decision to use only the domestic social cost of carbon emissions, rather than the global cost used by the Obama administration, low balls the effects of the proposal’s greater CO2emissions. After all, the U.S. as a wealthy country can largely protect itself against global warming. But our emissions affect the entire world, including the poorest and most vulnerable countries. Substituting the Obama approach for the parochial Trump approach raises the climate change benefits forgone from $0.4 billion in 2030 to $2.1 billion.
Now factor in the cost savings from dumping the CPP that would follow from giving a break to marginally economical coal-fired power plants. Even by the Trump EPA’s own reckoning, the net benefits of the administration’s proposals are mostly negative year-by-year, in spite of the fact that the calculations exclude both the health impact of local pollution and the social benefits from slowing climate change elsewhere in the world. But the EPA does manage to come up with a scenario in which forbearance on phasing out coal yields marginally better results in cost-benefit comparisons than the Obama approach looking out to 2030.
Of course, if you add back those pesky ancillary benefits linked to local air pollution, the ACE falls behind the CPP in cost-benefit comparisons by $3.7 billion in 2030 (and that’s the low end of the estimate). Also adding back the negative consequences to the rest of the world of greater CO2 emissions raises the net cost of Trump’s plan to $5.4 billion.
At the briefing, Wehrum defended his narrow approach:
We’re not dealing with SO2. We’re not dealing with NOX. We’re not dealing with particulate matter [PM]. … We have abundant legal authority to deal with those other pollutants directly, and we have very aggressive programs in place that directly target emissions of those pollutants. So our view is, if we want to regulate PM, we regulate PM straight up. If we want to regulate SO2, we regulate SO2 straight up.
I and the economics profession disagree with the general approach. It makes no sense to consider the damage done by pollutants individually when the rule in question will likely affect emissions of multiple pollutants. And, the government’s own guidance documents require ancillary benefits to be considered.
Then, there’s the not-so-small matter of how the courts have viewed the question. According to case law, all benefits and costs of a new government rule are to be considered. Just because the stated purpose of a rule is to reduce CO2 does not give regulators license to ignore other potential consequences.
The Regulator Is Who’s Friend?
Back to Wehrum’s line about EPA enforcement. He asserted that the public should trust the agency to “aggressively” protect it from pollutants including nitrogen oxides, sulfur oxides and tiny particles called acid aerosols that can penetrate deeply into the lungs (PM2.5). Yet, the administration’ proposed rule on the use of science at EPA is targeted at voiding the solid science linking PM2.5 to deaths.
If Wehrum really believes that we should regulate PM2.5, SOX and NOX “straight up,” to offset the increases in these pollutants caused by ACE, then the issuance of the proposed ACE rule should be accompanied by the issuance of mitigation rules that would bring these pollutants down to where they would have been under the CPP.
Don’t hold your breath. Well … maybe you should.