Calculating the Costs of Pollution

on Thursday April 24, 2014

The EPA’s rule of mercury will save lives.

In a column in the Los Angeles Times, CEEPR faculty Michael Greenstone, with Francesca Dominici and Cass Sunstein of Harvard University commented on the recent decision by a US Court of Appeals over the EPA’s mercury standards.

Last week, the federal circuit court upheld the EPA’s Mercury and Air Toxics Standards, which was issued in 2012.  Mercury is a potent neurotoxin that poses significant health hazards to humans, especially developing fetuses and children.  Through natural processes airborne mercury from power plants that is deposited into water can become converted into methylmercury, a highly toxic form that accumulates in the food chain, particularly in fish.  Developing children exposed by methylmercury consumed by their mothers can suffer permanent adverse developmental effects.

The regulation is expected to prevent up to 11,000 premature deaths, 4,700 heart attacks, and 130,000 asthma attacks annually.  However, the EPA estimates the rule will incur a cost of $9.6 billion a year to implement, with most of the burden falling on electric utilities to implement plant modifications to adhere to the stricter standards.  The EPA is mandated under the Clean Air Act of 1990 to regulate electric utilities under its hazardous air pollutants program only if it finds that such regulation “is appropriate and necessary.”

Critics have focused on the expense of the MATS rule and indeed, Judge Brett M. Kavanaugh in his dissenting opinion asked how the EPA could conclude the rule is “appropriate” without considering the high costs, noting that the $9.6 billion could pay for health insurance premiums for 2 million Americans, among other alternative allocations.  The Court’s majority responded, in kind, that the EPA made their findings based on mercury’s effect on public health and that the EPA had considered the costs.  The benefits of the implementation of this rule is estimated to be worth from $37 billion to $90 billion, vastly outweighing the costs.

Greenstone, Dominici, and Sunstein noted two important lessons of this decision.  The first is that future environmental protection standards must be sensitive to the potential costs of the program.  The second is that the projected value of benefits should use the best available science.  The massive projected value of the MATS standard are estimated to come not from mercury reductions, but from the “co-benefits” – reductions in other pollutants that result from efforts to decrease mercury emissions.  The most important of these “co-benefit” reductions is a reduction in particulate matter, which can cause a variety of serious health issues and accounted for one-third to one-half of total monetized benefits of federal regulations from 2003 to 2012.

Going forward, the estimated monetized value of further reductions in particulate matter will be among the most contested issues in environmental regulation.  Though no one doubts that particulate matter posts a grave concern to human health, Greenstone, Dominici and Sunstein assert that answers are needed to important questions about which particles are the most hazardous and concerning and how much damage they can inflict at low concentrations.

For further reading, see the full article at the Los Angeles Times here.

(April 2014)