A report yesterday from Inside EPA offered a fascinating overview of the agency’s struggle to update the way it assigns dollar values to the suffering and premature death that its regulations prevent. Seriously, as far as economic esoterica goes, this stuff is riveting. What’s more, your life may depend on it.
Currently, EPA values each statistical human life saved by its rules at $7.9 million. This number is derived from so-called “wage-risk premium” studies that examine large data sets on employment and occupational risk. The idea is that, if you control for education, job sector, geographic region, and other relevant factors, then you should be able to come up with a number representing the portion of an employee’s wage that compensates for higher on-the-job health or safety risks. Depending on how a worker values health and safety compared to other goods, he – and he is an important distinction here since the value-of-life studies tend to only look at male-dominated blue collar jobs – might be willing to take a higher wage in exchange for accepting higher levels of occupational risk. In theory, then, the studies can pull out the amount at which workers themselves value risk exposure, which can then be converted into a uniform “value of a statistical life” (VSL) for policy analysis. By using the VSL number to value the health and safety benefits of regulations, EPA can avoid the messy task of government deciding on its own how much protection is worth investing in.
Full textCross-posted from Environmental Law Prof Blog.
Energy efficiency policy is one of the few areas where we might still expect some progress at the federal level toward reducing greenhouse gas emissions in the next few years. Predictably, energy efficiency has become the target of criticism. Republican senators argue that phasing out inefficient incandescent light bulbs is anti-consumer even though it would save consumers money on their energy bills. And in a New York Times article, John Tierney took aim at energy efficiency standards by implying that energy efficiency improvements don’t actually save energy on account of the “rebound effect.” The rebound effect expresses the idea that energy efficiency improvements result in a reduction in the price content of energy in the final consumer product or service, and consumers may respond to this cost savings by consuming more of that product or service (the direct rebound effect) or more of other products and services (the indirect rebound effect). This increased consumption negates the presumed one-to-one relationship between efficiency improvements and energy savings.
While theoretically plausible, the important question regards the actual size of the rebound effect. Tierney suggests that the rebound effect may swallow the energy savings of energy efficiency, but the available empirical evidence does not bear this out. The direct rebound effect has been much better studied than the indirect rebound effect (see Sorrell et al. 2009). In the transport sector, where the rebound effect has been most studied, the effect is likely to lie between 10 and 30%. In other words, 70 to 90% of the energy savings achieved by a more efficient car are actually saved (and not negated in the form of higher consumption). When more efficient heating is installed, about 80% of the energy savings remain intact. From my perspective, a 70 to 90% energy savings looks pretty good.
As for the indirect rebound effect, Sorrell et al. 2007 find that there are few published studies and that they are flawed. In other words, there is little empirical support for the indirect rebound effect. According to Sorrell it has two components: the embodied energy in energy efficiency improvements (the energy required to produce and install the measures that improve energy efficiency) and “secondary effects,” which refer to the change in demand for other goods and services spurred by energy efficiency improvements. From what I can tell, these secondary effects seem to amount largely to the idea that consumers will spend whatever money they have on something, and that something is likely to require the use of energy. While I can certainly see bemoaning the energy consumption of overconsumption (and I probably will in a future post), I just can’t see blaming it on energy efficiency.
Full textNot to be outdone by the Small Business Administration’s aptly named Office of Advocacy, the Chamber of Commerce has issued its own breathless report on how many jobs we could save if we did away with environmental, land use, and utility regulations. Crunching a bunch of dubious numbers, the SBA Office of Advocacy’s consultants, Nicole and Mark Crain, claim that regulations cost $1.75 trillion a year, a number several of my CPR colleagues thoroughly debunked in a report issued in February. Undeterred and not to be outdone, the Chamber’s feverish Project No Project, released yesterday, claims that citizen opposition to polluting plants combined with “excessive” government permitting requirements to deny the economy a “$1.1 trillion short-term boost” and “1.9 million jobs annually.”
The premise of the Chamber’s report is that if busybody neighbors and fussy regulators would just get out of the way, 333 proposed “solar wind, wave, bio-fuel, coal gas, nuclear, and energy transmission projects” around the nation could be under way pretty darn quick, and if they were, they’d produce loads of money for the Chamber’s members and local economies, and a raft of new jobs. “In aggregate, planning and construction of the subject projects would generate $577 billion in direct investment,” says the Chamber. “The indirect and induced effects would generate an approximate $1.1 trillion increase in U.S. GDP, including $352 billion in employment earnings.”
And hey, if we just got rid of child labor laws and worker safety requirements, imagine how much more profitable all those projects would be!
Let’s get real for a moment. All major manufacturing and power plants in the United States must get a variety of permits before they can start construction. Environmental permits are key, as are local government zoning approvals, and, in the case of electric utilities, approvals from state agencies that supervise this still largely monopolistic industry’s pricing structure. It’s no surprise that all these approvals annoy utility executives, who nevertheless managed to record strong profits last year, as part of an industry that can brag of having three of the top ten spots in the Fortune 500’s list of most profitable corporations.
Full textBy Wednesday of next week, EPA is due to publish its long-anticipated rule controlling mercury emissions from coal-fired utilities. This is how we ought to judge the rule: does it follow the mandate of the Clean Air Act (CAA)? For too long, utilities have managed by various means to fend off regulation required by the CAA. Assuming EPA’s rule at long last complies with Congress’s directives, Americans may look forward to a day when they can again eat fish without serving their families a side of methylmercury.
The mercury that coal-fired utilities emit is highly toxic to humans. Exposure to even small amounts of methylmercury can lead to irreversible neurological damage. Methylmercury's neurodevelopmental effects place the developing fetus, children, and adults up to age 20 at particular risk. The most recent data also suggest adverse effects on the cardiovascular systems of adults. Mercury emitted to the air from coal plants and other sources gets deposited to surrounding land and waters; it makes its way into fish tissue in the form of methylmercury. The primary route of human exposure to methylmercury is through consumption of fish.
The saga of federal regulation of mercury emissions from coal-fired utilities is long and lamentable. Although the CAA Amendments of 1990 seemed to portend more determined efforts to reduce emissions of this potent neurodevelopmental toxin, utilities have successfully forestalled any federal requirements that they reduce their mercury pollution. The Bush Administration even attempted to remove utilities from the list of sources whose toxics emissions are to be regulated under section 112 of the CAA – an attempt the D.C. Circuit threw out in 2008. Utilities remain the single largest unregulated source of mercury emissions in the United States today; they contribute some 40% of U.S. mercury emissions.
Full textWhen it comes to the use of cost-benefit analysis in setting environmental rules, it looks like President Obama's EPA has taken a big swig of industry’s Kool-Aid. We'll know for sure soon: The EPA has a March 14 deadline to issue its proposed Clean Water Act rule on cooling water intake structures at existing power plants and other facilities. But all signs seem to be pointing toward a highly formalized cost-benefit analysis resulting in a weak rule – and a lot of dead fish.
Lisa Jackson has hinted that the rule will create a relatively toothless case-by-case permitting regime rather than simply mandating the more environmentally protective closed-cycle cooling technology that some plants already use. And the agency’s development over the past six months of an elaborate, controversial, and frankly misguided study to try to divine the dollar value members of the public attach to preserving fish species and aquatic ecosystems suggests that they plan to shackle their decision-making to a highly formalized cost-benefit analysis that will suck up a lot of resources and provoke a lot of controversy, but ultimately fail to produce meaningful results.
If EPA does weaken the rule on the basis of cost-benefit analysis, it will be particularly disappointing, because when the U.S. Supreme Court ruled on this issue two years ago in Entergy v. Riverkeeper, the high court specifically gave EPA the latitude to jettison rigid cost-benefit analysis from its rulemaking process if it wanted to. Moreover, the Court expressed skepticism about the kind of highly formalized, fully monetized cost-benefit analysis that EPA seems to be headed toward in this rulemaking.
Full textIndustry representatives have long made exorbitant claims about the costs of regulations, only to be proven wrong again and again. And despite that history, anti-regulatory campaigners repeat the scariest statistics their own experts come up with, even if those statistics were meant to include a range of possible outcomes, or included caveats of uncertainty.
An important batch of articles this week dug into these issues. Here are some of the highlights:
Yet in testimony before House committees now run by anti-regulation Republicans, industry witnesses repeat numbers from imprecise economic models. Members of Congress often cite the same figures without the researchers' caveats.
... industry lobbyists warned in 1990 that the latest round of Clean Air Act amendments would mean a “quiet death for businesses across the country.” Businesses claimed the acid rain emissions trading program would cost ratepayers $5.5 billion annually between 1990 and 2000 and increase to $7.1 billion per year after that. But as it turned out, the costs were between $1.1 billion and $1.8 billion per year, according to a 2005 White House report to Congress.
Critics of the new EPA regulations are claiming that the measures will undermine the weak-as-a-kitten economic recovery, perhaps leading to a million or more lost jobs in coming years. But a cadre of economists trying to puncture that widely held view – which they call a persistent "myth" – are turning to history in an attempt to show that the impact of environmental regulations is far more positive than negative.
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CPR President Rena Steinzor is testifying at 1pm today before the House Energy & Commerce Subcommittee on Environment and the Economy. The hearing will be the latest in a string attempting to make a case that public health and safety protections must be weakened right now given the state of the economy.
In her testimony, Steinzor argues:
I appreciate that the majority feels it has a mandate as a result of the election. But I would urge all Members to consider whether gutting environmental protection is really what voters had in mind, or whether this attack on regulation is simply an effort to re-fight past battles over the nation’s environmental laws, this time by objecting not to the laws themselves but to their enforcement. It’s bad enough that the agencies are underfunded to the point that they are barely able to do their jobs. But this fight is really about hobbling such legislative landmarks as the Clean Air Act, Clean Water Act, and outside the realm of the environment, the Occupational Safety and Health Act, banking reform, health care, and more.
The corporate and political voices in favor of deregulating today are, by and large, the same ones that opposed those laws from the outset. But Congress has already made the policy choices here, directing EPA, for example, to protect the water we drink and the air we breathe, and to make sure we are not bombarded by a variety of poisons in the food chain that ends in our lunch boxes and on our dinner tables. Those laws are already on the books, the product of lengthy consideration by Congress, following ample debate that included all voices. Many of those laws have been tested in court, too. For good reason, Congress delegated a measure of authority to the regulatory agencies to establish specific standards, the kind that require scientific expertise that Members could not reasonably be expected to possess. But Congress made clear in the law that the agencies must exercise that delegated authority within the specific parameters established by Congress.
The rest of the testimonies are up at the hearing page.
Full textOn last night’s PBS NewsHour, Rep. Darrell Issa (R-CA), chair of the House Oversight and Government Reform Committee, took a shot at CPR’s Sidney Shapiro, who was the lone witness that Committee Democrats were allowed to invite to testify at yesterday’s hearing on the costs of regulation. Issa badly mischaracterized Shapiro’s testimony, saying:
The minority chose a witness. Mr. Shapiro spoke on behalf of his views, which were, in a nutshell -- and he reiterated them -- that he sees no reason to have a cost-vs.-benefit analysis. He thinks it's futile, meaning that no matter how much it costs, go ahead and do regulations. I would hope that, instead of the progressive witness that they had, that they would have sensible groups that see an advantage to environmental progress, while at the same time getting business progress, that win-win that we often look for but don't find in government, but we find it in the private sector whenever possible.
It’s true that Shapiro and a host of other scholars think that cost-benefit analysis is hopelessly slanted toward industry’s interests, and that it’s a fatally flawed method of regulatory impact analysis. But that doesn’t mean, as Issa fabricates, that he’s opposed to any analysis and that “no matter how much it costs, go ahead and do it.” Shapiro and others believe that cost ought to be one of several important considerations. Under today’s cost-benefit analysis methods, if it costs a chemical company one penny more to avoid pumping cancer-causing emissions into the air or water than it costs the victims of those emissions to treat the cancer that results, a regulation to prohibit or otherwise mitigate emissions would probably fail a cost-benefit analysis. Note, by the way, who pays for what in that example. It’s not the chemical company paying medical bills, even though it’s their pollution. Cost-benefit analysis treats it as a simple mathematical equation, without worrying about such questions of morality. It proceeds from the premise that polluters have a presumptive right to do harm in pursuit of profit, and that the rest of us must accept the risks associated with their profit, unless the numbers don’t happen to add up.
That’s one of a number of reasons why cost-benefit analysis is ill-considered. Others include that it relies on industry’s inflated cost projections, and ignores some of the most important benefits. As Shapiro wrote in a recent post on CPRBlog,
Full textNeither does OMB’s methodology account well for items that defy monetization – the value of keeping people healthy rather than simply treating their pollution-caused illnesses, or the value of a great view from the top of a mountain that hasn’t been shorn clean by mountaintop mining. But even allowing for those shortcomings, all of which accrue to the anti-regulation side of the ledger, almost all regulations have greater economic benefit than cost.
CPR Member Scholar Noah Sachs has a piece on The New Republic's website dismantling the GOP House majority's favority piece of anti-regulatory legislation, the REINS Act. The proposal would block all regulations from taking effect unless they are specifically approved by both houses of Congress within 70 days of submission and then signed into effect by the President. He writes:
Last year, [the Office of Management and Budget] concluded that the annual cost of major rules issued between FY 1999 and 2009 was $43 to $55 billion, while the annual societal benefits of those same regulations ranged from $128 billion to $616 billion—an excellent return on investment by any standard. To see why the REINS Act would jeopardize these benefits, take a look under the hood. The bill would apply to any agency regulation with an expected annual economic impact of $100 million or more. Between 50 and 100 of these “major rules” are issued annually. [Speaker of the House John] Boehner dismisses them as “red tape,” but most are critically important, governing everything from food safety and housing discrimination to airline pilot training, accounting standards in financial statements, and air pollution control. Under the REINS Act, if just one house were to reject a rule, or simply didn’t act on it within the prescribed time period—70 legislative working days—the rule would be dispatched to the regulatory graveyard. Or, put another way, the bill would provide one house with veto power.
He continues:
by opening up a second front for corporate lobbyists to negatively influence policymaking. Consider the January 2010 Department of Transportation (DOT) regulation on Positive Train Control—GPS systems and computerized track controls that can help prevent train-to-train collisions and derailments. The rule was explicitly mandated in a 2008 statute signed by President Bush in the wake of a train collision in Los Angeles that resulted in 25 deaths and more than 135 injuries. To this day, however, the rule is opposed by major freight haulers and the Association of American Railroads, who object to the cost of the system. In all likelihood, had the REINS Act been in effect when the regulation was being considered, major railroads would have flooded Congress with campaign contributions and arguments against the rule, in hopes of killing it. The problem with this scenario is that, unlike a federal agency, which will always have to publicly justify its decisions with scientific and economic data, Congress could use the REINS Act to kill rules on virtually any premise it wanted—and do so behind closed doors or without much substantive debate. Politics, not sound policy, could rule the day.
Or, perhaps more accurately, politics and scheduling. REINS Act supporters know full well that Congress would never be able to debate and vote on 50 to 100 major federal regulations each year (certainly not within the 70-day window for each one). Already, budget negotiations drag on for months, while battles over confirming a single federal judge can rage for a year or more. And, although the Act includes some “fast-track” procedures, such as requiring that each house of Congress take an up-or-down vote on a regulation without amendments after two hours of debate, those hardly solve the problem: That’s still a lot of floor time devoted to regulations—too much, in fact, for most of them to stand a chance of survival. For REINS Act proponents, of course, this is all for the good: Under the guise of oversight, they want Congress’s notorious inability to act quickly to help kill important agency rules.
It's a great piece, well worth a read.
Full textGOP leaders in the House of Representatives will push a resolution today directing the various committees of the House to “inventory and review existing, pending, and proposed regulations and orders from agencies of the federal government, particularly with respect to their effect on jobs and economic growth.” Thus begins what Republicans and their industry friends hope will be a productive hunting season in the rich woods of regulatory safeguards that protect public health, worker and consumer safety, and the environment. Not content to leave the agencies alone to eliminate gratuitous and outmoded rules, as President Obama has directed them to do, House Republicans are in search of far bigger game.
They’ll have plenty of help. Also this week, House Government Oversight and Government Affairs Committee Chairman Darrel Issa released a passel of letters (57 megs and 1,947 pages in all) from a variety of corporate interests targeting virtually every conceivable kind of regulation. (If you’d like to cut to the chase and see the letters without their voluminous attachments, go to the OMBWatch site for a searchable, workable 606-page version.) In a move certain to attract lots of campaign cash for Republicans during next election cycle, Issa wrote to some 150 trade associations soliciting their nominations for a “job-killing” rules hall of fame.
Although most of the proposed targets from industry are quite specific, and many attach dozens of pages of past technical comments to agencies complaining about their every move, the spirit of the enterprise is best expressed by someone named Steve Towe, otherwise unidentified, who writes on page 1,820:
Full textBottom Line: Government has become massive, meddling, and for the most part useless. It's a parasite that takes and takes and gives next to nothing back. 90% of what government tries to do, it does so poorly, inefficiently, and at far too great of an expense. The Constitution limits government for that reason, and I contend that most of what government is trying to do today is patently unconstitutional.