The latest print edition of The Economist features an interesting article by Greg Ip highlighting some important facts about how the Obama EPA has been justifying new environmental regulations. Ip notes that under Obama the EPA has increasingly justified its regulations by relying on the “co-benefits” that the regulations supposedly produce from reductions in fine particulates, rather than on benefits from reducing the substance directly regulated. For example, in December, EPA enacted emissions standards for mercury and other toxics from coal-fired power plants. EPA claimed that the new regulations would produce $140 billion in health benefits. Out of that $140 billion, however, only $6 million, or 0.004 percent come from reducing mercury. The other 99.996 percent stem from the fact that, by reducing mercury emissions, coal plants will also be reducing emissions of particulate matter.
The Mercury rule is hardly the only recent EPA regulation to pump up its claimed health benefits by including co-benefits from particulate matter. Since 2009, EPA has released thirteen cost-benefit analyses for new regulations. In eleven of those cases, co-benefits from particulate matter were responsible for the majority of the claimed health benefits, and in six cases 100 percent of the claimed benefits came from reductions in particulate matter, not from the ostensible target of the regulation.
As Ip notes, EPA’s increasing reliance on co-benefits from particulates has coincided with a large increase in the benefits EPA claims will result from reducing particulate matter. In 2009 EPA began assuming that benefits from reducing particulate matter would continue to accrue regardless of the ambient level. This single change more than tripled the amount of health benefits EPA calculated would come from reducing particulate matter.
Writing in response to Ip, liberal blogger Matt Yglesias argues that the fact the Obama Administration changed the way health-benefits are calculated doesn’t mean the new calculations are wrong: “Isnt it possible that the industry-friendly and regulation-averse Bush administration spent its time dramatically underrating the public health benefits of reduced fine particulate emissions? Anything’s possible, but a closer look at EPA’s calculations suggests that’s not what happened here. As detailed in a recent paper for NERA Economic Consulting by Anne E. Smith, EPA’s calculations imply that 13 percent of all deaths in America are due to particulate matter, and that particulate matter is responsible for between 16 and 22 percent of all deaths in much of the eastern United States. Particulate matter is itself a criteria pollutant listed under the Clean Air Act, and EPA is required to set a national air quality standard for particulate matter protective of with public health with an additional margin of safety.
If reducing particulate matter has the enormous benefits that EPA’s analysis claims, it has a responsibility to lower the national ambient standard to a level that is actually protective of human health. That it has not done so suggests that EPA doesn’t really believe its own numbers.
Of course, even if the claimed benefits from reducing particulate matter were real, the fact that co-benefits were the driver of so many other EPA rules would be troubling. EPA’s new calculations give the agency a huge pool of co-benefits that it can tap as justification for other regulations. This not only gives a misleading picture of the relative costs and benefits of EPA regulations, it allows EPA to selectively punish politically disfavored industries and groups. This, and not conservative foot-dragging, is the real public choice issue involved here.
-Josiah Neeley