The Environmental Protection Agency is going through the motions of responding to a Supreme Court order requiring it to consider whether a $9.6 billion annual increase in Americans’ electric bills is “appropriate and necessary” to reduce emissions of hazardous air pollutants. In a perfunctory 18-page notice, EPA proposes to conclude that even after considering costs, its regulations of electric generating units should stand. EPA reaches this conclusion by narrowly defining costs, making generous assumptions about the country’s ability to bear those costs and diverting attention away from the small risk reductions expected.
The Supreme Court Directed EPA to Consider Mercury Rule’s Costs
In June, the Supreme Court concluded that, by ignoring the costs of its Mercury and Air Toxics (MATS) regulation, EPA had violated its statutory authority to regulate when “appropriate and necessary.” Noting that EPA estimated the costs of the rule at $9.6 billion per year, and the benefits from reducing hazardous air pollutants (HAP) at between $4 million and $6 million per year, the majority observed “[o]ne would not say that it is even rational, never mind ‘appropriate,’ to impose billions of dollars in economic costs in return for a few dollars in health or environmental benefits.”
In response to the Court’s opinion, on December 1, 2015, EPA published a brief supplemental notice that proposes to find “consideration of cost does not alter the agency’s previous conclusion that it is appropriate and necessary to regulate coal- and oil-fired electric utility steam generating units (EGUs) under section 112 of the Clean Air Act.”
EPA’s Response Falls Short
EPA’s response not only fails to adequately respond to the Supreme Court decision, but it fails to meet its own standard for the decision. The supplemental finding emphasizes EPA’s “view that the consideration of cost in the appropriate finding should be weighed against, among other things, the volume of HAP emitted by EGUs and the associated hazards to public health and the environment.”
Despite EPA’s emphasis on the importance of weighing the costs against the anticipated reduction in risks from HAP, EPA does no such thing in the supplemental notice. Its preferred method compares utility sector costs to total power sector sales or capital expenses, and not only appears to have methodological problems that bias the resulting percentages, but fails to address the Court’s directive to balance the harm of the regulation against the good. EPA does not explain why its measures are relevant for determining whether costs are appropriate and necessary and nowhere in Clean Air Act Section 112 nor in EPA’s explanation of its authority under this section are either affordability measures mentioned.EPA grudgingly presents evidence on estimated benefits compared to costs (in keeping with the Court’s direction and EPA’s own emphasis on the importance of weighing costs against health risk reduction), but this calculation is dominated by ancillary benefits that are not subject to its authority under Clean Air Act section 112. In fact, EPA gets 99% of the benefits attributed to the MATS rule by assigning high dollar values to reductions in fine particles, not HAP, emissions. This is particularly troubling because other sections of the Act provide EPA direct authority to regulate fine particles and because direct regulation of a substance is not only a more transparent, but likely a more cost-effective, way to achieve any risk reduction benefits.
Knowing that the benefit Congress sought to achieve through Section 112 represents only 1% of the total benefits EPA claims for the rule, a reasonable observer might question whether the standards are appropriate and necessary. As the Supreme Court observed, EPA valued the benefits of HAP reductions at $4 to $6 million per year, meaning “the costs to power plants were thus between 1,600 and 2,400 times as great as the quantifiable benefits from reduced emissions of hazardous air pollutants.”
The Rule’s High Costs Increase Fatalities
Furthermore, the $9.6 billion cost of the rule itself will have great detrimental effects on public health. Though the cost discussion in the supplemental finding is focused largely on electric utilities’ compliance costs, the incidence of these regulatory costs will ultimately fall on households and individuals who will face higher electric bills. These price increases could have a significant negative impact on the health and welfare of families, particularly those with low incomes. Not only will these increases directly affect the affordability of such essentials as heat and air conditioning, but higher electricity prices will increase the costs of food and other goods, and divert families’ scarce resources away from priorities such as their children’s education or health care.
Statistical research into this wealth-health tradeoff suggests that every $21 million increase in regulatory cost induces one fatality. If true, the high costs of the rule would translate into more than 400 deaths per year.
In contrast, EPA does not predict a single fatality from HAP emissions.
