A key Environmental Protection Agency effort to cut power plant emissions of toxic metals and gases is up in the air, so to speak. Industry groups have asked the Supreme Court to overturn the rule, arguing that the EPA should have weighed the costs of regulating those pollutants in deciding whether taking any action at all was “appropriate and necessary” under the law. And at first blush Wednesday, the court’s four-member conservative wing seemed sympathetic to that argument.
This procedural question that’s at stake in the lawsuit — whether the EPA erred in not considering costs from the very beginning — also helps highlight a more general concern about the rule among industry groups. They’re worried that the rule might cost billions of dollars a year while yielding far fewer benefits. The EPA counters that the rule’s benefits would outweigh its costs by at least a factor of four and possibly as high as a factor of 10.
Who’s right? In part, it depends on what you count as a benefit. But it also depends on another factor that is often overlooked: Some benefits of cutting toxic pollutants aren’t quantifiable at all, because we don’t have the data or the procedures needed to calculate them. That showcases just how tough it can be for regulators to determine a policy’s true value.
The idea of cost-benefit analysis isn’t new or controversial, including at the EPA. Any time the agency proposes a major policy, it typically publishes its best estimates of the policy’s benefits and costs. When it comes to costs, we might think of how the policy would influence jobs, prices and production in the regulated industries.
Calculating a policy’s benefits, on the other hand, can be tougher. We’re talking about avoided deaths, avoided illnesses, as well as the aesthetic value of cleaner air. We can get a sense of how many fewer illnesses and deaths a policy might yield — at least for the pollutants we know a lot about.
But how do you quantify the dollar value of those benefits so you can weigh them against costs? How do you put a dollar figure on a human life, or on the economic productivity gains and health-care savings from one less heart attack, or on the aesthetic value of cleaner air? It’s not a straightforward task at all, as many scholars have pointed out.
And that challenge is front-and-center in the broader policy debate over this rule. The rule in question, the Mercury and Air Toxic Standards, would require power companies to install technologies that clean up toxic metals (such as mercury, arsenic and nickel) and toxic gases like hydrogen chloride, which transforms into hydrochloric acid, from power plants’ air waste.
The power and coal industries are calling this rule a waste of money. They cite the EPA’s own studies in saying the benefits would be just $4 million to $6 million a year, and only from cutting mercury emissions, which would reduce damage to children’s developing brains.
The remainder of the rule’s $37 billion to $90 billion in annual benefits, the EPA says, will come from reductions in soot pollution, which can damage the heart and lungs. The rule itself doesn’t target soot, but the devices that clean up toxic metals and gases would also cut out a lot of soot.
Industry groups aren’t denying that soot pollution is dangerous. Rather, they’re arguing that the benefits of cutting it don’t matter to whether the EPA should have moved forward with a costly rule that doesn’t even target soot. Chief Justice John G. Roberts Jr. appeared sympathetic to that view during oral arguments. The rules’ defenders would counter that benefits are benefits, no matter where they come from.
Suppose we ignore the benefits of soot reductions and focus only on the toxic pollutants at hand, though. The rule’s benefits are still probably much higher than $4 million to $6 million a year. Here’s why: Other metal and gas emissions are also known to be harmful (we know that these substances are toxic), and cutting mercury emissions does more than just reducing damage to developing brains. But we don’t have good enough data or methods to put dollar figures on those benefits.
That same problem applies to other potential benefits the EPA says the rule would bring, such as increased forest yields, visibility improvements, reduced acid deposits in ecosystems and the resulting benefits to wildlife.
As a result, instead of giving a bad numerical estimate of these benefits, the EPA is giving no estimate at all. “EPA believes these unquantified benefits could be substantial,” the agency’s study said. And that’s one of many reasons the rule’s defenders, such as the Environmental Defense Fund, are calling baloney on the industry’s own allegation of baloney.
These points may or may not help the EPA overcome its key challenge involving when it should have considered costs. But it does showcase a key limitation of the cost-benefit paradigm that has governed how we assess our policies’ economic value.