EPA’s Fuzzy Math

In my opinion piece yesterday I argued that the Environmental Protection Agency (EPA) is using fuzzy math to justify massive regulations:

MATS claims to target one pollutant but draws all of its benefits from another pollutant that is already below EPA-approved safe levels. The air is cleaner than it’s ever been, but at $10 billion a year, MATS will be the most expensive EPA air regulation ever. Last week, the closure of nine power plants in four states was announced directly because of the regulation, and more are looming. Affordable energy is key to a recovering economy and when the costs and benefits are weighed, it’s clear that this regulation’s costs are enormous and the benefits to society are minimal at best.

MATS is supposed to target reductions of mercury and other toxic emissions. But by EPA’s own calculations, benefits from reductions in mercury will result in between $500,000 and $6 million in benefts. As I noted, EPA is able to justify a regulation costing $10 billion a year by inflating the benefits that come from reductions in a pollutant that is already below levels that the EPA considers safe.

The Economist has more commentary on this today:

The minutiae of how regulators calculate benefits may seem arcane, but matters a lot. When businesses complain that Mr Obama has burdened them with costly new rules, his advisers respond that those costs are more than justified by even higher benefits. His Office of Information and Regulatory Affairs (OIRA), which vets the red tape spewing out of the federal apparatus, reckons the “net benefit” of the rules passed in 2009-10 is greater than in the first two years of the administrations of either George Bush junior or Bill Clinton.

But those calculations have been criticised for resting on assumptions that yield higher benefits and lower costs. One of these assumptions is the generous use of ancillary benefits, or “co-benefits”, such as reductions in fine particles as a result of a rule targeting mercury.

For more information on EPA’s latest $10 billion regulation, see my commentary here.