Ignoring health benefits of air quality improvements costs everyone
We’re all suffering from post-election exhaustion. As we slip back into business-as-usual, it’s tempting to pay less attention to the politics of everything. But there’s some high-stakes maneuvering that we should be following. This includes efforts to knock some teeth out of federal air pollution regulations.
This campaign is advancing on multiple fronts. I want to focus on two in particular. First, a proposed reform of cost-benefit analysis protocols which aims to discount “co-benefits” of air pollution regulation. Second, a move to change how health-based air quality standards get set. Taken together, the sum of these developments is even more concerning than the individual parts.
Discounting “Co-benefits” in cost-benefit analysis
For decades, Republican and Democratic administrations have agreed that costs and benefits should be considered in the rulemaking process. The EPA has a statutory obligation to estimate the costs and benefits of major regulations. Cost-benefit analysis cannot be used to directly determine health-based standards for criteria pollutants, but it can dictate the choice between regulatory alternatives (see here for details).
If you want to dismantle a cost-effective environmental regulation, you need to find a way around these obligations. One strategy involves meddling with how benefits are defined and quantified. And that’s precisely where the EPA is heading.
We’ve blogged about some of these tactics already. But the accounting change I want to focus on involves the counting of “co-benefits”. These are benefits from pollution reductions (such as avoided premature deaths) that are caused by a regulation but associated with pollutants that are not directly targeted by the regulation.
Air pollution problems are interconnected (source)
Let’s think about this co-benefit idea for a minute. We’ve all made big decisions that impact our lives in lots of ways. Focusing narrowly on one objective when there are many important factors to consider can lead to some bad choices. Extend this rationale to environmental regulations, and it seems quite sensible to count all significant impacts of a regulation (good or bad) in cost-benefit analysis. This approach is not only rational, but it’s also totally consistent with law and historical precedent.
Under the Trump Administration, however, the EPA has been pushing an alternative approach that considers only the benefits from reductions in the pollutant that is directly targeted by a rulemaking. This seemingly small tweak could have surprisingly large health consequences.
Consider, for example, the Clean Power Plan (CPP) which was designed to reduce greenhouse gas emissions (GHGs) from the electric power sector. The graph below summarizes recently re-estimated costs and benefits reported by the Trump administration in an assessment which aims to repeal this Obama-era rule:
The graph summarizes annual costs and benefits projected for 2030 (3% discount). Estimates are taken from this Regulatory Impact Assessment (Table ES-9)
Total benefit re-estimates are less than a third as large as those estimated by the Obama administration for a number of reasons. But these changes notwithstanding, the CPP rule still sails through the cost-benefit test … so long as “co-benefits” associated with air quality improvements are counted.
Another striking example can be found in the “mercury rule” which also regulates emissions from power plants. Under the Obama administration, annual costs were estimated at $9.6 billion. Benefits from decreasing mercury were estimated at only $4-$6 million. Annual co-benefits (mainly from reductions in particulate matter pollution) were estimated at $37-$90 billion. This heavy reliance on co-benefits to cost-justify has been controversial. The current EPA has reportedly submitted a draft revision that removes co-benefits from the analysis (turning this net-winner into a net-loser).
Why are health co-benefits so darn big?
The Wall Street Journal will tell you this is just the EPA “juking the numbers”. Other critics suggest that co-benefits accounting is double counting. But this is wrong. These co-benefits estimates include only the incremental benefits caused by the rule being evaluated, over and above the expected benefits generated by other rules on the books.
In fact, the outsized role of co-benefits can be traced back to how we regulate tiny and pernicious particulate matter pollution (known as PM2.5).
Image courtesy of the US EPA
In the above examples, a majority of the co-benefits are associated with reductions in PM2.5 exposure. Recall that these estimated health co-benefits (including estimates generated by the current administration) significantly exceed abatement costs. This suggests that regulations directly targeting PM2.5 are leaving lots of room for cost-effective improvements.
There are a number of reasons why current PM2.5 regulations might fall short.
- One has to do with the PM2.5 regulatory framework. For example, once national PM2.5 standards have been met, there’s little incentive to reduce exposure-levels further (even in places where the health benefits of exceeding the standard clearly exceed costs).
- Another has to do with regulatory lag. Today’s PM2.5 standards were based on the state of the science back in 2009 which had yet to clearly demonstrate the health benefits associated with lowering the standard below current levels.
We are now on the cusp of a review of federal PM2.5 standards. In preparation, the EPA has recently fulfilled its obligation to gather the most recent and relevant science on health impacts. The science has advanced considerably since 2009. Among the highlights: A growing body of evidence shows a relationship between PM 2.5 exposure and mortality at exposure levels well below (i.e. less than half) the current standard. And mounting evidence that health benefits from incremental reductions in PM exposure are increasing as air quality improves.
If you’re hoping that this expanded scientific understanding will lead to more stringent PM2.5 limits, don’t hold your breath. As part of a larger effort to “better separate scientific judgments from policy decisions”, the EPA recently abolished the science advisory panels that have informed standard setting since the 1970s. This leaves a seven-member committee of Trump administration appointees responsible for advising the EPA on what level of pollution exposure is safe enough.
A one-two punch to air quality improvements
If the revised PM2.5 standards fail to mobilize cost-effective opportunities to reduce harmful exposure, there will be health benefits ripe for the co-benefit picking. Achieving cost-effective reductions in particulate pollution via co-benefits may not be first-best. But given binding regulatory constraints, this can be a second-best approach worth taking. Proposed cost-benefit reform would fence off this approach, making it much harder to opportunistically pursue cost-effective health co-benefits.
In past years, federal environmental regulations have delivered significant and cost-effective improvements in our air quality. Rigorous consideration of the science, costs, and benefits have been guiding principles in this endeavor. A departure from these principles is not reform. It’s a move in the wrong direction.