The Environmental Protection Agency on Thursday scrapped the justification underpinning its mercury limits for power plants, in a repudiation of Obama administration efforts to account more comprehensively for the costs of pollution.
The EPA concluded the Obama administration relied too heavily on so-called co-benefits or secondary benefits that arise from reductions in pollutants other than the one targeted by the regulation.
The Obama administration set the “cost-benefit scales” so that “any regulation could be justified regardless of cost,” EPA Administrator Andrew Wheeler said in remarks Thursday. “We believe this approach is not only dishonest but also counter to the Clean Air Act.”
Much of the projected benefits supporting the 2012 mercury and air toxics standards, known as the MATS rule, actually came from reductions in the fine particulate matter or soot pollution. According to the Trump EPA’s calculations, the costs to industry to comply with the MATS rule totaled up to $9.6 billion annually, while the direct benefits of mercury reductions were just $6 million each year.
The Trump EPA instead relied only on the direct benefits of mercury reductions in what Wheeler called an “honest accounting.” In doing so, it found it wouldn’t be “appropriate and necessary” to set standards for mercury, the legal test the agency must pass to regulate.
Environmentalists say the rule will create more harm to public health, and it comes just days after the EPA proposed to retain current standards for fine particulate matter, despite recommendations from its own staff to strengthen them.
The mercury rule “was about protecting our kids and protecting pregnant women from the dangers associated with mercury and lead and other toxic pollution,” said Gina McCarthy, head of the Natural Resources Defense Council and former Obama EPA administrator.
“It’s literally been working for years, and the industry doesn’t want it,” McCarthy said Thursday, adding the Trump administration is moving forward “solely for the purpose of making sure it’s harder in the future to regulate effectively to protect public health and safety.”
The rollback, though, will change little practically. The EPA is maintaining the actual Obama-era standards on mercury and other air toxics, even while eliminating the legal basis for the regulation, known as the MATS rule. Electric utilities already spent billions to install pollution controls to meet the rule’s 2016 compliance date.
Utility, labor, and industry trade groups, including the U.S. Chamber of Commerce, had asked the EPA to drop its efforts to rescind the basis for the MATS rule.
“The repeal of the underlying legal basis for MATS introduces new uncertainty and risk for companies that are still recovering the costs for installing those control technologies,” said Brian Reil, a spokesperson for the Edison Electric Institute, which represents all U.S. investor-owned utilities.
Nonetheless, the EPA has argued it was required by a 2015 Supreme Court ruling to review the legal justification for the MATS rule. The agency said it couldn’t defend the Obama administration’s finding, even after it was revised in 2016, because of how much it relied on co-benefits.
“It’s about what they think the proper role of EPA is,” said Jeff Holmstead, an attorney with Bracewell LLP who led the EPA’s air office during the George W. Bush administration. “They didn’t want to defend something that the Obama administration had done that the thought really was a huge overreach.”
The EPA’s action is also another domino to fall in a larger Trump administration battle to change how the EPA quantifies the costs and benefits of pollution regulations. Trump EPA officials have raised questions about the agency’s process, particularly how much weight to give to co-benefits and especially those associated with particulate matter reductions.
Environmental economists say that’s because the economic benefits of cutting particulate matter are often large and tend to tip the scales in favor of tighter air pollution standards.
“The benefits of reducing air pollution are disproportionately associated with reducing fine particulate matter because it kills people, a lot more than any other kind of air pollutant,” said Joe Aldy, a public policy professor at Harvard University and a fellow at Resources for the Future and the National Bureau of Economic Research.
The Trump EPA “is trying to say, ‘Wait, if we can just ignore the biggest public health benefits, then it makes it easier for us to try to roll back these clean air regulations,’” added Aldy, who served as a special assistant on energy and environment in the Obama White House.
Wheeler told reporters the EPA’s decision on MATS is “unique” to this program of the Clean Air Act, but he noted the agency is working on a separate proposal that would streamline cost-benefit analysis for all air rulemakings. The White House budget office began review of that proposal this week.
Nonetheless, Wheeler said the EPA’s decision “does foreshadow our approach” to broader changes to cost-benefit analysis “where we want to focus on the targeted pollutant.”
The EPA still believes it is “important to take a look at co-benefits,” Wheeler said, but he added “the co-benefits should never be the driver” to regulate.
Some in industry lauded the prospects of that change, even while acknowledging it won’t help coal plants that have already shuttered.
“No rule should be justified on co-benefits alone, and regulation should never be used as a weapon to manipulate the energy market,” the National Mining Association said in a statement.
Aldy and other environmental economists, though, say the EPA could have a hard time defending ignoring co-benefits.
There are areas of cost-benefit analysis where there is “genuine disagreement,” but “whether or not you should include co-benefits is just not one of them,” said Matthew Kotchen, a professor of economics at Yale University. Kotchen, along with Aldy and several other environmental economists who served on the EPA’s Environmental Economics Advisory Committee disbanded by Trump officials, found several flaws with the EPA’s MATS finding.
In fact, the EPA’s own science advisers said recently the agency’s decision to “categorically” exclude co-benefits “departs from the Agency’s long-standing practice and is contrary to both” the agency’s own guidance and recommendations from the White House budget office dating back to the Bush administration.
Not accounting for that long-standing practice could expose the EPA to some legal risk.
“The Trump administration must be mindful to adopt a position that will endure legal challenges, which means proper use of cost-benefit analysis,” said Devin Hartman, director of energy and environment policy for the R Street Institute. “This means accounting for direct and indirect costs and benefits.”
Even so, Hartman said accounting for indirect costs and benefits could still lead to “the conclusion that it is not appropriate and necessary to pursue a regulation primarily justified by reducing a criteria pollutant through a vehicle intended for toxic air pollutants.”
