Monday, June 29, 2015

U.S. Surpeme Court decision goes against EPA mercury rule - inefficiently.

Much attention is being given to a U.S. Supreme court ruling which likely won't mean much - because it avoids attempts at being substanive.

Here's the brief overview from Brad Plumer:
The Supreme Court just threw a wrench into the Environmental Protection Agency's efforts to regulate mercury pollution from coal plants — one of the most sweeping environmental policies of President Obama's first term.
In a 5-4 majority opinion written by Justice Antonin Scalia, the Court ruled that the EPA didn't properly consider costs when crafting its mercury rule, which was finalized back in 2012 and would require coal-fired power plants to spend an estimated $9.6 billion per year cleaning up mercury and other toxic air pollutants.
The mercury rule will remain in effect for now, but the EPA will have to review and reconsider it in the months ahead. A final decision on how to proceed will be left to the DC Circuit Court, which has to follow this guidance from Scalia: "EPA must consider cost—including cost of compliance—before deciding whether regulation is appropriate and necessary. It will be up to the Agency to decide (as always, within the limits of reasonable interpretation) how to account for cost."
Image from the Fraser Institute
Let me be clearer.
The EPA's accounting of benefits came after the regulation was planned and, since the expensive regulation is considered to be about mercury, and mercury abatement isn't seen to have much benefit at all, any cost benefit analysis based on only mercury would kill the regulation.

But the technology to abate the mercury reduces other contaminants as well, and the ruling allows those to be tallied up too. From Dan Farber writing on Legal Planet:
Some background may help in understanding the ruling. In 2011, EPA issued a rule limiting mercury pollution from power plants. It estimated that the rule would save thousands of lives annually and prevent hundreds of thousands of heart and asthma attacks per year, easily passing cost-benefit analysis. The large majority of these benefits stemmed from reduction in particulate pollution, because the technology needed to control mercury would automatically cut particulates. Taking those benefits into account, EPA concluded that the benefits of regulation would be three to nine times larger than the cost.
Taking whatever benefits can be imagined, regulators tend to show such numbers.

I've been a fan of Brad Plumer at Vox, but worried about the quality displayed in his reporting on a closely related energy efficiency story days earlier.
...there were three notable aspects of the E2e study: First, it was a randomized controlled trial — the gold standard of evaluations, but something that's rarely done for efficiency efforts. Second, the study found that the actual energy savings from weatherizing Michigan homes was just 39 percent of what models had predicted beforehand. Third, the study argued, the upfront cost of boosting efficiency in Michigan under the federal Weatherization Assistance Program greatly exceeded the estimated monetary benefits that accrued from saving energy.
Martin Kushler, a senior fellow at the American Council for Energy-Efficient Economy,cites a Department of Energy evaluation pegging these "non-energy benefits" at around $3,466 per household. "Viewed in that comprehensive manner," Kushler writes, "programs like WAP are cost effective from that broader societal perspective — as a public policy, they make sense."
See a problem?

When a program is closely studied and found not to be delivering as promised (I cited a different conservation work here), the routine will be to expand the criteria to something that isn't studied closely. Inflating "non-energy benefits" is likely to become a standard play in the energy game as people become more aware of the over-promised savings.

Farber's Legal Planet blog post foresees the overstatement becoming a duty:
There could be a pro-environmental aspect to this decision. The Court said it was not rational to ignore costs entirely, but it included environmental harms as part of costs. This suggests that agencies have a general duty to consider those harms in making those decisions unless precluded by statute.
Here's what Brian H. Potts wrote on the topic earlier this year:
Look, it may be the case that mercury emissions have acute health effects on some marginalized populations. And it may be good public policy to issue this rule—despite all its costs—to protect those people. If that’s the rationale for issuing the rule, fine. But EPA, don’t play with the numbers and try to make the rule something it’s not—namely, a boon for the economy.
And here's Farber's conclusion.
Presumably, on remand, EPA will stick to its guns since it plainly considers the regulation to be justified by cost-benefit analysis.
No wonder the court is divided.

Ross McKitrick recently released a paper titled The Principle of Targeting in Energy and Environmental Policy. It's hard for me to see accountability existing without some targeting being very explicit.

addendum June 30:

First: Can agencies consider ancillary benefits? At oral argument, some justices seemed to suspect it was inappropriate to consider the benefits associated with pollutants other than mercury. After all, if the other pollutants are the problem, why not adopt regulations aimed at the other pollutants?
Second: How much cost-benefit analysis will the Court require for other regulations? Today’s decision may be seen as part of a trend that is making cost-benefit analysis a kind of default background principle for agency decision-making.


The SCOT|US ruling is here wrote a differing opinion in Supreme Court Strikes Down EPA’s MATS Rule

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