EPA Rollback of Mercury Rule Relies on Flawed Analysis, Yale Economist Asserts

An attempt by the U.S. Environmental Protection Agency to roll back federal limits on mercury emissions ignores important public health benefits, an economist at the Yale School of Forestry & Environmental Studies writes in a new paper. And it could set a dangerous precedent.
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In 2012, the U.S. Environmental Protection Agency (EPA) issued regulatory limits on the emissions of mercury and other hazardous pollutants from coal-burning power plants. Now, however, the EPA is trying to roll back the legal basis of the rule, known as the Mercury and Air Toxics Standards (MATS), arguing in part that the benefits don’t justify the costs.
In a new paper published in Science, Matthew Kotchen, a professor of economics at the Yale School of Forestry & Environmental Studies, and a team of colleagues argue that the proposed EPA roll back is “seriously flawed.” The authors argue that the analysis disregards public health benefits, recent scientific findings, and transformative change in the electric sector over the past decade. If the proposed roll back happens — as it could any day — it will not only undermine implementation of the rule, but set a dangerous precedent that might make it harder to justify other environmental regulations on an economic basis.
The article published in Science is based on a more extensive report that the authors wrote as part of the External Environmental Economics Advisory Committee (E-EEAC), an independent organization estab­lished after the dissolution in 2018 of the original EEAC that had operated for more than 25 years within the EPA’s science advisory board structure, and of which Kotchen was a member.
This week, we talked with Kotchen about the direct and indirect benefits of MATS and why weakening it might be a threat to public health and public policy.

What were the goals of MATS?

Matthew Kotchen: It was the first federal regulation of mercury emissions from power plants. And, it is kind of a big deal because, at the time the policy was implemented several years ago, the estimated benefits were really large relative to the costs. This was considered an incredibly beneficial policy from an economics perspective, owing to the fact that the anticipated reductions in mercury and the other pollutants were expected to have very significant public health benefits.

What is the rationale for how EPA is trying to weaken this regulation?

Kotchen: Well, there is a subtlety here compared with other Trump administration rollbacks, many of which have tried to re-interpret numbers to make an economics case, as they just did with the fuel economy standards. This one actually isn’t a rollback of the regulation, itself. It’s a rollback of the legal basis for making the regulation. When they first did MATS, they had to first satisfy a legal hurdle known as the “appropriate and necessary” criterion to regulate under the Clean Air Act. The proposed rule is to roll back the “appropriate and necessary finding.”
With this move, the EPA’s strategy is more indirect than in other cases: if they remove the legal foundation, it leaves open the possibility for legal challenges that will eventually undermine the regulation. It would be very difficult for the EPA to defend a regulation that it has declared has no legal basis.

In this new paper you write that the EPA is neglecting key “co-benefits” of the regulation. What are those co-benefits?

Kotchen: Well, reducing mercury emissions requires you to do certain things at a power plant, including changing the fuel that you use or adding a scrubbing technology to take out the target pollutant. And, when you do that, you often reduce other pollutants as a matter of course because it's difficult to surgically remove just one.

In this case, while the policy was targeting mercury, a significant category of co-benefits arose because of the coincident reduction in particulate matter, which is particularly harmful to people’s health. Underlying the EPA proposal to change the “appropriate and necessary” finding is a benefit-cost analysis that eliminates the inclusion of co-benefits — the largest category of benefits by far. In doing so, the EPA arbitrarily flips its previous finding and now shows that the costs exceed the benefits. The problem is that this is fundamentally not how you do a benefit-cost analysis — co-benefits are benefits that should count.

What else has the EPA done to justify its new positon?

Kotchen: Unfortunately, the agency misses the boat on two other important things. The first is new science on how mercury pollution from power plants affects human health. And this omission raises questions about whether the direct benefits of MATS might exceed the costs, providing another fundamental flaw in the EPA’s argument. The second is that electricity utilities have been complying with the MATS already for several years, meaning that we can actually get real estimates for the benefits and costs to make judgements now, rather than relying on a revisionist reinterpretation of an analysis done nearly a decade ago. Such an analysis now would also account for the significant changes that have occurred in the electric generation sector (such as the shift to natural gas and renewables) that have certainty affected both the benefits and costs that were expected a decade ago.

What type of precedent might a weakening of this regulation create?

Kotchen: I think the main risk is that if the EPA begins dropping co-benefits from these benefit-cost analyses — which is a fundamentally wrong way to do an economic analysis — then it will make it harder to justify environmental regulations on an economic basis. But, not only that, it will be more likely that you get these policies wrong from an economics perspective, reducing the chances of getting support for policies that would be economically efficient, and increasing the odds of support for those that are not.
– Kevin Dennehy    kevin.dennehy@yale.edu    203 436-4842
PUBLISHED: April 9, 2020
Note: Yale School of the Environment (YSE) was formerly known as the Yale School of Forestry & Environmental Studies (F&ES). News articles posted prior to July 1, 2020, refer to the School's name at that time.

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