Trump Administration Changes the Way Environmental Costs and Benefits Are Calculated

Published May 11, 2020

In a move that has broad implications for changes to air pollution regulations going forward, the U.S. Environmental Protection Agency (EPA) finalized a new rule, proposed in 2019, altering the way the federal government calculates the costs and benefits of mercury and air toxins (MATS).

The move is another in a series of actions taken by the Trump administration in keeping with President Donald Trump’s stated commitment to boost jobs and economic growth by reducing regulations that are not justified economically or environmentally.

Proxy Battle

Under President Barack Obama, EPA imposed MATS in 2011. After it became clear Congress would not pass legislation limiting carbon dioxide emissions, the Obama White House enacted MATS to force reductions of greenhouse gas emissions from coal power plants by limiting mercury emissions, clearly covered under CAA, as a proxy for carbon dioxide.

Industry groups sued to block the rule, arguing it did not meet statutory requirements regarding costs, in a case that reached the U.S. Supreme Court in 2015.

The Court agreed, ruling five to four the high cost of the exceedingly stringent limits on mercury emissions from power plants enacted by the Obama administration were not justified by the negligible benefits. The Court directed the EPA to reconsider the rule and revise it to include consideration of costs.

“EPA strayed well beyond the bounds of reasonable interpretation in concluding that cost is not a factor relevant to the appropriateness of regulating power plants,” wrote the late Justice Antonin Scalia in the Court’s June 26, 2015 majority opinion. “It is not rational, never mind ‘appropriate,’ to impose billions of dollars of economic costs in return for a few dollars in health or environmental benefits. Statutory context supports this reading.”

A few months later, the Obama administration reaffirmed the rule, publishing an analysis saying the combined benefits of curbing mercury and other pollutants, such as soot, outweighed the costs and would prevent 11,000 premature deaths and produce $80 billion in health benefits annually.

MATS did more than any other regulation imposed by the Obama administration to force the premature closure of coal-fired power plants, resulting in a large-scale shift to natural gas plants rather than keeping existing plants open by installing expensive new pollution controls.

Current Standard Stands, For Now

In its April 16 statement announcing the rule, the EPA noted 99 percent  of the purported benefits of MATS came from ancillary or co-benefits from reductions in soot and other pollutants, not the reductions of mercury. EPA has determined it is not “appropriate and necessary” to count emissions reduction of soot and other pollutants, which were already regulated and declining because of other regulations.

The Trump administration confirmed the Obama administration’s calculations of the cost to industry of installing required pollution controls to limit mercury and certain other air toxins were accurate, at $7.4 billion to $9.6 billion per year. However, once the government stopped double-counting, EPA found the health and safety benefits of the mercury reductions alone were between $4 million and $6 million per year, and thus the costs far outweighed the benefits and were unjustified under the law.

EPA is following through on the Supreme Court’s direction and correcting the previous administration’s flawed cost finding in its original rule,” EPA Administrator Andrew Wheeler said in the agency’s statement, “We have put in place an honest accounting mechanism.

“Under this action, no more mercury will be emitted into the air than before,” said Wheeler. “One would not say it is even rational, never mind appropriate, to impose billions in economic cost in return for a few dollars in health benefits.”

Despite EPA determining the rule is not legally justified, the agency decided to leave the current standards in place, in light of the fact every utility in the nation has already complied with the 2011 standards.

Going forward, the new regulation means federal agencies will not count collateral benefits or co-benefits when it sets limits on air pollutants.

Too Late, But Appropriate

Although the new rule arrives too late to save coal power plants already closed to comply with the Obama-era MATS rule, it should help ensure future regulations of power plants are based on an accurate estimate of the costs and benefits, the National Mining Association (NMA) said in a statement.

“While the coal-fueled plants that were forced out of operation by this illegal rule can’t be resurrected, it’s an important lesson for the future,” said NMA’s statement. “No rule should be justified on co-benefits alone, and regulation should never be used as a weapon to manipulate the energy market.

“We’re pleased to see this return to reason from the EPA and hope it sets the standard for a more balanced approach in the future,” NMA said.

H. Sterling Burnett, Ph.D. ([email protected]) is a senior fellow at The Heartland Institute.