This is what he tried to due as EPA Director and why I went to D.C. to testify:
Administrator Wheeler is trying to pull the wheels off 50 years-worth of bipartisan economic analysis as he deconstructs Cost Benefit Analysis
By
James F Casey
Department of Economics
Washington and Lee University
One of the accepted tenets of economics is that markets are NOT efficient, please allow me to repeat that, ARE NOT EFFICIENT, unless the full cost of the last unit of production is equal to the full benefit of the last unit of consumption. In order for a market to work efficiently we must be able to measure ALL the costs and ALL the benefits of the activity. A perfectly efficient market exists in theory only, but we can use public policy to move our actually markets toward this efficient outcome. This is where Cost Benefit Analysis comes into play. In the context of environmental policy, or any policy for that matter, we must attempt to, objectively, weigh all the costs against all the benefits of any rule, policy, or activity.
According to the EPAs own website, the mission of the Environmental Protection Agency is to protect human health and the environment. Mercury is a known neurotoxin. Effects of exposure include IQ deficits in prenatally exposed children and cardiovascular effects in, both, children and adults. Why are these effects important? Because WHAT we count as the benefits of reducing mercury emissions determines the value of that benefit.
According to an EPA Fact sheet in 2011, benefits of the Mercury and Air Toxins Standards (MATS) were estimated at 37 to 90 billion dollars per year with a cost of 9.6 billion dollars annually. The revised cost findings of the MATS, in a 2018 EPA Fact Sheet, estimates the costs at between 7.4 and 9.6 billion dollars a year and the benefits at 4 to 6 million dollars annually. HOW IS IT POSSIBLE TO HAVE AN ORDER OF MAGNITUDE DISCREPANCY?
The first estimate, correctly, counts ALL of the benefits of the policy, which is standard in the economics profession, and the new estimate only calculates the direct effect of mercury exposure. EPA is proposing to eliminate the effects of particulate matter (PM) as a co-benefit, therefore, proposing that it is not “appropriate and necessary” to regulate Hazardous Air Pollutant emissions from coal- and oil-fired power plants under section 112 of the CAA because the costs of such regulation grossly outweigh the benefits. THIS IS A FATALLY FLAWED USE OF Cost Benefit Analysis!
A 1996 statement of principles pertaining to CBA, work jointly sponsored by the American Enterprise Institute, the Annapolis Center, and Resources for the Future, supported and continues to support the methodology used by EPA until the current administration has tried to change it. According to (1) standard economic theory; (2) OMB’s and EPA’s own guidance documents on the conduct of the CBA of the impacts of rules and statutes); and (3) current case law—ALL benefits and costs of any rule must be considered.
What is at stake here is the future of objective, science-driven, non-partisan, cost-benefit analysis. Perhaps a few simple examples can help to illustrate. If I eat oatmeal and I enjoy its taste, then is that the only benefit of eating oatmeal? Certainly not, there are all the associated health benefits. How about if we set up traffic lights to reduce automobile collisions and we also end up with safer pedestrian crossings – should we not count the reduction in car-pedestrian collisions as a benefit? What about the case of smoking bans reducing alcohol consumption for women? Is the reduction in alcohol consumption not a benefit? What if I take medicine to lower my blood pressure and it also happens to lower my cholesterol – should we not count that benefit?
Yet, this is exactly what the Trump administration has proposed to do – eliminate all co-benefits of environmental regulation. Since the early days of the Reagan administration, CBA has been an important tool in Environmental Policy. It can remain an important tool, but only if it is not abused by those in power to make decisions.
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