Climate Compass Blog
While Environmental Protection Agency (EPA) regulations on greenhouse gases (GHGs) and other air pollutants are on firm political and legal footing, attacks on them continue. Claims have been made that the costs of regulation are extreme or, contradictorily, that the government has not conducted any cost analysis of these regulations.
On the side that the costs are too high, one figure bandied about recently is that all government regulations are costing the economy $1.75 trillion annually, and $280 billion of that stems from compliance with existing environmental regulations. Those figures came from a study by two Lafayette College professors done for the Small Business Administration (SBA). Yet, as widely reported, the Congressional Research Service, and even the professors themselves have disputed the methodology of the study and its use in the current frenzy of political shots at environmental regulations. In a Congressional Research Service (CRS) report, the methodology of the SBA report was faulted for, among other things, allowing for double counting of costs. The Lafayette College study simply adds together other previous studies on individual regulations, regardless of the approaches and methodologies of those calculations. The CRS report quotes the Office of Management and Budget (OMB) as having written that such a methodology is an “inherently flawed approach.”
More distressingly for those who care about making informed decisions about the economic impacts of regulation, that large figure is not balanced against any benefits those regulations might have. According to the CRS report, the authors of the Lafayette College stated that they were never asked to include benefits in their analysis. The authors were quoted as saying the report was “not meant to be a decision-making tool for lawmakers or federal regulatory agencies to use in choosing the ‘right’ level of regulation. In no place in any of the reports do we imply that our reports should be used for this purpose. (How could we recommend this use when we make no attempt to estimate the benefits?)” On the contrary, as we have explained before, the benefits of Clean Air Act regulations have far outstripped the costs in major studies.
As for those who say no economic analyses were ever done of these regulations, all federally promulgated regulations undergo a cost-benefit analysis before implementation. This requirement stretches back many presidential administrations, with each administration offering adjustments to the process. The basis for current analysis is found in Executive Order 12866, signed in 1993 by President Clinton, which provided a significant overhaul to the review process and, among other things, requires
Each agency [to] assess both the costs and the benefits of the intended
regulation and, recognizing that some costs and benefits are difficult to
quantify, propose or adopt a regulation only upon a reasoned determination
that the benefits of the intended regulation justify its costs.
President Obama reaffirmed the inclusion of cost-benefit analysis in the regulatory process in Executive Order 13563 at the beginning of 2011.
Turning specifically to the GHG regulations implemented by the Administration, where regulatory requirements have been imposed the analyses required by OMB have been conducted and are readily available. Some critics have complained that there was not a cost-benefit analysis done of the EPA’s 2009 Endangerment Finding for GHGs. Such claims miss the fact that the Endangerment Finding was a scientific ruling that GHGs cause climate change, posing a threat to public health and welfare, and motor vehicles emit GHGs contributing to those risks. Since there were no regulatory requirements to reduce GHG emissions in this rulemaking, a cost-benefit analysis was inappropriate.
When it comes to actually reducing GHGs from emitting sources, such analyses would be appropriate, and federal agencies are required to include them as part of the rulemaking process. EPA has done so. The first rule on GHGs , the light-duty vehicle GHG emission standards promulgated jointly with Department of Transportation’s Corporate Average Fuel Efficiency standards, was issued with a Regulatory Impact Assessment that offered almost five hundred pages of detailed qualitative and quantitative analysis of the costs and benefits of the rules. The findings were that the GHG standard for light duty vehicles has an estimated cost of $52 billion and benefits of $240 billion: benefits outweighing costs by better than 4 to 1.
Upon the implementation of the light duty vehicle standards, the New Source Review program for stationary sources of GHGs was automatically triggered – without any regulatory action taken by EPA – therefore no separate cost-benefit analysis was legally required of this step. However, when EPA went through the regulatory process to create the tailoring rule to lower the compliance requirements for stationary sources, it was required to undertake an analysis. The Regulatory Impact Assessment of EPA’s tailoring rule is available on its website and includes an in-depth qualitative and quantitative analysis of the reduced permitting costs from the tailoring rule regulation now in effect for stationary sources. As EPA continues its rulemaking for New Source Performance Standards for utilities and refineries, fully documented regulatory impact analyses will be conducted and made available for comment with the proposed rule.
Thus, despite the claims to the contrary, EPA has in the past and will continue in the future to analyze the costs and benefits of GHG regulations. It is also clear that, to date, GHG regulations imposed by the EPA under the Clean Air Act have vastly greater benefits than costs.
Michael Tubman is the Congressional Affairs Fellow
This post first appeared in Txchnologist.
It is too early to pick the ultimate car of the future. Plug-in electric, hydrogen fuel cell, and biofuel vehicles are currently in contention, but it is quite possible that no single alternative will dominate the future the way that gasoline-powered cars own our roads today. The competition will be fierce because these new technologies will not only be competing against each other, but also against the ever-improving internal combustion engine. By 2035, it’s quite possible a new gasoline-powered car will get 50 mpg and a hybrid-electric car (like the Toyota Prius) will achieve 75 mpg.
Whatever technologies win out, it is clear the societal costs of oil are too high. The price at the pump fails to include all the national security and environmental costs of exploration, extraction, distribution, and consumption of oil. Since oil appears cheaper to the consumer than its true cost to society, we end up consuming more than we should. We send hundreds of billions of dollars out of our economy each year – $330 billion in 2010 alone – to oil producers with monopoly power instead of investing the money here at home.
The State of Maryland released a new report earlier this year recommending a course of action to adapt to our changing climate. This report is the latest in a series that began in 2007 when Governor Martin O’Malley issued an executive order to establish the Maryland Commission on Climate Change. The commission was charged with addressing the causes of climate change and adapting to the most likely impacts. In 2008, the Maryland Climate Action Plan was released, addressing impacts, mitigation, and economic concerns.
Among the impacts highlighted in the Climate Action Plan was sea level rise, projected to be more than a foot by mid-century and as much as 3 feet by 2100. If the highest rates are realized, most tidal wetlands would be lost and about 200 square miles of land would be inundated. The bay would also suffer additional stresses as restoration goals become more difficult to achieve. Aquatic species composition will change and increased nutrient runoff into the bay will make water quality goals much harder to meet. Impacts are projected to occur inland as well with heat waves greatly increasing the risk of illness and death. The average year will have 24 days above 100°F by the end of the century. Ground level ozone, formed under prolonged, high temperatures will increase, resulting in more respiratory illnesses, especially among vulnerable populations.
The Action Plan addressed the adaptation needs of coastal regions but only highlighted the need to pursue the development of adaptive strategies for other affected sectors. In response, work began on a report specifically for adaptation in these other sectors. Earlier this year, the culmination of this effort was released as the Comprehensive Strategy for Reducing Maryland’s Vulnerability to Climate Change, Phase II: Building societal, economic and ecological resilience. The report provides the basis for guiding and prioritizing state-level activities with respect to both the climate science and adaptation policy within short to medium-term timeframes.
- Human Health: Conduct vulnerability assessments to gain a better understanding of risks and inform preventative responses by assessing potential health threats and the sufficiency of Maryland’s response capacity. The impacts to food safety and availability must also be evaluated.
- Agriculture: Increase crop diversity, protect against incoming pests and disease, and intensify water management through research, funding and incentives. Enhance existing Best Management Practices (BMPs) and land conservation targets including revising targets for agricultural land preservation. BMPs that are geared toward protecting water quality in the Chesapeake Bay are likely to be significantly shifted as changes in seasonality and precipitation occur.
- Forests and Terrestrial Ecosystems: Expand land protection and restoration and revise targeting priorities. This includes integrating climate data and models into existing resource assessments and spatial planning frameworks as well as developing adaptation guidance for local government planning. Management practices to reduce existing forest stressors should also be adjusted. High elevation forest species such as the red spruce or Eastern hemlock will likely disappear from Maryland as will the Baltimore Checkerspot butterfly and ecosystem management plans must reflect these future changes.
- Bay and Aquatic Ecosystems: Restore critical bay and aquatic habitats to enhance resilience. It is recommended that the state be proactive in the design and construction of habitat restoration projects due to their importance in enhancing the resilience of aquatic ecosystems. Dam removal projects on Octoraro Creek in Cecil County and Raven Rock Creek in Washington County have resulted in reduced stream temperatures and moderated stream flow, boosting connectivity between habitats and resilience of fish and other transient species.
- Water Resources: Ensure long-term safe and adequate water supply for humans and ecosystems. Reduce the impacts of flooding and stormwater by removing high-hazard water supplies and preventing inundation and overflow of on-site disposal systems. On-site disposal systems already lead to raw sewage leakage in Maryland are likely to worsen with increases in extreme precipitation. These failing septic systems must be improved or replaced.
- Population Growth and Infrastructure: Plan for precipitation-related weather extremes and increase resilience to rising temperatures by identifying investment needs to prepare for weather emergencies and improving stormwater management strategies. Urban tree canopy should also be increased to provide urban heat reduction, stormwater reduction, and air filtration.
Not every state has an adaptation plan, and Maryland is one of only two states (Virginia) in the Mid-Atlantic region to have completed one or made progress. However, both North Carolina and South Carolina have Climate Action Plans that call for an adaptation report and more states are moving towards producing adaptation plans. Maryland is at risk from a variety of ill-effects due to climate change and the identification and implementation of key adaptation measures will ensure the state minimizes the impacts and costs of climate change in the long run. Other states would do well to take heed, and move to minimize their costs as well.
Dan Huber is Science & Policy Fellow
A witty observer of the human condition Mark Twain wrote, “Few things are harder to put up with than the annoyance of a good example.” He likely would have had a few choice quips about opponents of greenhouse gas (GHG) regulation who have a lot to put up with these days. They continue claiming that new regulations are a de facto construction moratorium, a burden on the economy, the illegal act of unelected bureaucrats, and doomed to be overturned by Congress. Yet the facts themselves provide overwhelming evidence to the contrary.
Before the Environmental Protection Agency (EPA) began regulating GHGs this January, there were claims that these regulations would shut down entire industries and create a construction moratorium on new projects. In reality, the New Source Review program requires new sources of pollution and major modifications to existing sources of pollution, like power plants, refineries, and factories, to install the best available control technology to reduce GHG emissions. EPA’s guidelines for implementing these requirements focused mainly at increasing energy efficiency of facilities without requiring expensive add-on controls or fuel switching.
Despite these dire warnings, there are plenty of examples of how this scenario did not occur. Even before the regulations were in place, Calpine voluntarily and successfully underwent a determination of the best available control technology for its new natural gas power plant in the Bay Area. In a more recent example, one of the most vociferous industrial opponents of the regulations, Nucor Steel, came to Congress to testify at a hearing about the impossibility of compliance with the regulations, but the company had by that point already received a permit under that program for a facility in Louisiana. More permits have also been issued, and others are on the way.
Other attacks have fixated on the legality of the new regulations. Yet, in the 2007 case Massachusetts v. EPA, the Supreme Court ruled explicitly that EPA had the authority to regulate GHGs under the Clean Air Act if the Agency determined that they posed a significant threat to public health and welfare. This threat was overwhelmingly demonstrated in the 2009 endangerment finding, which documented the risks of climate change posed by GHGs. This endangerment finding was issued by the Obama Administration, but the Bush Administration had come to exactly the same conclusions. A Supreme Court ruling in favor of regulation is a hard example to be confronted with, but that hasn’t stopped opponents.
Although there has been little problem with implementation of these new requirements, it has taken the political rhetoric some time to catch up with the facts. Some on Capitol Hill have remained fixated on these regulations. This debate came to a head, as votes were taken to repeal or delay the EPA regulations. In the Senate, votes on four different permutations failed to meet the required 60-vote majority. The Baucus Amendment would have codified EPA’s tailoring rule and exempted agricultural sources from EPA GHG regulations. It failed 7-93. The Stabenow Amendment would have allowed EPA to continue work on drafting regulations, but it would have delayed implementation of existing GHG rules (except for the existing transportation standards) for two years, excluded the agriculture sector, and expanded some manufacturing tax credits. It also failed 7-93. The Rockefeller Amendment would have delayed the implementation of all EPA GHG regulations (except for car rules) by two years. It failed 12-88. The McConnell Amendment was a version of the Whitfield-Upton-Inhofe proposal that would have explicitly prohibited any GHG regulation using Clean Air Act authorities and repealed the EPA’s scientific finding about the dangers of climate change. The preferred bill of the Minority, it failed 50-50. In the House, a standalone bill (The Energy Tax Prevention Act) mirroring the McConnell amendment passed by a substantial, largely partisan majority, but with the failure of all four proposals in the Senate, it was clear that there was no hook to conduct a House-Senate conference on the legislation. For those who wanted a Congressional rebuke for action on climate, these votes should have served as an example of political opposition to repeal of regulatory authority.
In the face of those votes, opponents tried one more political maneuver: holding the federal budget hostage to the inclusion of the failed McConnell Amendment. After threatening a shutdown of the federal government to oppose regulations that have been shown not to prevent new facilities from being permitted, not to lead to economic destruction, and which were upheld by the Senate just days earlier, opponents eventually relented and withdrew their demands.
It has been tough to put up with these examples, but some opponents of the regulations are finally accepting the results. “I think this is probably the end of our EPA little session here,” said Sen. Jay Rockefeller (D-WV). “I’m not going to be pushing for another vote,” echoed Sen. Carl Levin (D-MI). After everything that has occurred on this matter, and regardless of other attempts that might be made, it’s clear that the existing regulations are here to stay and the path forward for future reasonable regulations has strong economic, legal, and political foundations. In the coming months, EPA will turn to the next step in its legally-required regulatory process, proposing New Source Performance Standards for the utility and refining sectors.
Our leaders should use their energies to ensure that these regulations result in low-cost emissions reductions rather than continuing to fight battles for which the outcomes are already known. There is a real possibility for positive engagement in this process but only if one is willing to take a rational look at the challenges and potential policy tools available. For those that want to continue to fight past battles in the face of all that has happened, another Twain quote comes to mind: “Denial ain’t just a river in Egypt.”
Michael Tubman is the Congressional Affairs Fellow
It’s an issue that will affect the prosperity of our children and our children’s children. It’s an issue that requires we make cuts today in order to avoid far greater burdens on future generations. It’s an issue that is steeped in complexities and arcane detail that is difficult to communicate to the public, and often requires advanced training in order to understand fully. And it’s an issue that requires bold public leadership today in order to avert consequences that will affect future well-being and quality of life.
Readers of this blog can be forgiven for immediately assuming that these statements are meant to describe the political challenges of climate change; but the political issue du jour in Washington these days is the federal budget deficit and mounting national debt, and these statements apply for that issue equally as well. We, here at Climate Compass, are not the first to note the similarities in the discourse – but for those of us working in the climate field, or who care deeply about the issue, the parallels are hard to ignore. There is an important difference, however, that seems to affect the public debate.
While both are complex issues that are at times inherently difficult to understand, the budget provides a much simpler scoring system of dollars and cents; in comparison to the climate debt that we are accruing in the form of greenhouse gases in the atmosphere. We can see on a chart or graph the totals that budget projections show – and we know from our daily household experiences that increasing debts imply increasing interest payments and costs.
The climate deficit that continues to accumulate, on the other hand, shows no clear balance of payments or future due dates. But make no mistake; the charges we are putting against our climate credit card will eventually create even greater costs over time as changes accelerate. Greenhouse gases, once emitted, stay in the atmosphere for centuries. Any emissions made today, tomorrow, and over the next several years commit the planet to warming over the lifetime of those gases.
Even though it is not as easy to track the mounting costs of our climate deficit, we know the debt will have to be paid in the form of increasingly severe weather events, changes in agricultural productivity, mass migrations, and sea level rise – just to name a few. This means that the unchecked emissions we continue to create are racking up a greenhouse gas debt that will force increasingly expensive costs on current and future generations.
So as the debate continues inside the beltway on how to address the federal deficit – remember that in the case of both the budget deficit and climate change, it will be far less expensive to pay a little today and avoid paying far more later.
Historical National Debt (to 2009): Congressional Budget Office - http://www.cbo.gov/ftpdocs/120xx/doc12039/historicalTables.xls
Projections of National Debt (from 2010): Congressional Budget Office - http://www.cbo.gov/ftpdocs/120xx/doc12039/BudgetTables.xls
Historical GHG Emissions (to 2009): EIA IES - http://www.eia.doe.gov/cfapps/ipdbproject/IEDIndex3.cfm
Projected GHG Emissions (from 2010): EIA AEO, Table A18 - http://www.eia.doe.gov/analysis/projection-data.cfm#annualproj
Russell Meyer is the Senior Fellow for Economics and Policy