“The third part of my plan is to reform the bureaucracy, in particular the EPA, so that it focuses on regional and cross-state issues, providing scientific research, as well as environmental analysis and cost-comparison studies to support state environmental organizations. We will return greater regulatory authority to the states to manage air and water quality rather than imposing one-size-fits-all federal rules.”

- Gov. Rick Perry,  Energizing American Jobs and Security, October 14, 2011.

Part I yesterday described Governor Rick Perry’s call for greater oil and gas resource access to government land to help create economic and job growth–and open-ended opportunity given technological developments.

Indeed, ‘peak oil’ and ‘peak gas’ concerns have been waylaid by reality. At a recent conference of the U.S. Association for Energy Economics in Washington, D.C., it was clear that energy economists believe that demand for petroleum will not fall around the globe for many years, decades, and possibly centuries to come.

Therefore, if we do not produce it here, production will occur by countries, such as China and Venezuela, that do not currently have the resources we do to efficiently drill for oil and take care of our beautiful planet. Moreover, many of these countries are not friendly to us and will use the funds in a way that may not be helpful for future peace and prosperity.

EPA’s Ram: The ‘Precautionary Principle’

Governor Perry is correct that individual states are better prepared to decide on public policy initiatives that reflect the needs of their citizens. Allowing for a competitive environment between states will bring about innovation and quality energy production that is beneficial to the states and the nation.

Regulations put in place by the U.S. Environmental Protection Agency (EPA) are based on the precautionary principle, which is defined at dictionary.com as follows:

In environmental matters, the theory that if the effects of a product or actions are unknown, then the product should not be used or the action should not be taken.

This better-safe-than-sorry principle, however, does not take into account the real costs, which include opportunity costs, to the economy and society. Therefore, making policy based on the precautionary principle is misguided and could do more harm than good in reducing greenhouse gas emissions and providing healthier outcomes for citizens.

In a recent Washington Post op-ed, Senator Rand Paul writes quite succinctly how burdensome the EPA has become:

Since its creation in 1970, the Environmental Protection Agency has done more harm than good. EPA regulations cost more than 5 percent of our annual gross domestic product – the equivalent of the costs of defense and homeland security combined. Since EPA regulations have expanded, unemployment in America has increased by 33 percent. This abuse of power by the implementation of regulations infringes upon our basic constitutional rights.

Marlo Lewis notes another reason why the precautionary principle is inept in providing clear choices for effective policies based on marginal (economic) analysis by stating that it “supplies no rational guidance for choosing between competing public policies.”

Giving the power back to the states would allow for competing regulations to bring about the best types of regulations based on which ones stand up against others. Unfortunately, the EPA currently has a monopoly on regulating many aspects of our energy sector.

Mirage of ‘Green’ Energy

The precautionary principle has also led many to believe that we should move away from fossil fuels no matter what means achieves this end. No other place can we find this more apparent than with the Obama Administration’s push towards “green energy.”

During a speech in March 2011, President Obama touted the spending from the government that has went into firms that produce renewable sources of energy. “And I’ve seen the scientists that are searching for the next big breakthrough in energy. None of this would have happened without government support.”

Well, the amount of subsidies and loans that these firms receive still cannot keep these firms in business (i.e. Solyndra) because they lack sufficient demand for their products. No amount of government intervention can keep them afloat forever nor should they. Firms come and go and resources come and go. Let’s stop the policies of the government picking winners and losers and instead allow tax dollars to go to more valuable purposes and create an environment where real economic growth and job creation can occur.

Indur Goklany’s book, The Precautionary Principle, summarizes why policymakers should caution against being hyperactive with trying to use this approach and what may work better to maximize the outcomes to individuals and our planet. He states:

A more aggressive strategy could retard increases in global wealth, which could lead to greater hunger, poorer health, and higher mortality, as well as retard progress toward environmental improvements such as safer water, better sanitation, reduced habitat loss, and lowered threats to biodiversity. Specifically, the precautionary principle argues against forcing the pact of GHG controls beyond what would occur with secular improvements in technology.

Conclusion

Policies made on faulty science and the lack of looking at the true costs of regulation are widely viewed as preventing the economic recovery that 99% of Americans want. A better solution could certainly be private regulation, as noted by this CATO Policy Analysis, but it appears that this may not happen for quite some time.

In the meantime, Governor Perry’s approach of releasing the federal shackles on our energy sector stands as a marker for a new approach to both energy and economic recovery.

————————

Vance Ginn earned a BBA in Economics and Accounting and minored in Political Science and Mathematics at Texas Tech University where he is completing his doctorate in economics. He recently joined the economics faculty at Sam Houston State University (Huntsville, Texas) where he teaches micro and macro economics.

[Ed. Note: Also see Mr. Vaughn's previous post: The U.S. EPA’s Regulatory Clean Air Benefit-Cost Estimates (30 free lunches for the price of 1?)]

President Obama’s deferment of the EPA’s latest ozone standards puts on hold annual compliance costs that the Agency estimated at $90 billion by 2020. The Wall Street Journal termed the $90 billion figure an “undoubtedly lowball estimate.” [1]

Undoubtedly, to be sure (more on that in a moment). Even so, it’s news when the EPA ‘fesses up to costs as serious as $90 billion, instead of estimating chump change, such as the $0.8 billion a year estimated for the proposed “Clean Air Transport Rule” (CATR) aimed at utilities.

Getting Into the Numbers

The $0.8 billion estimate has flown under the media’s radar but—in its own way—merits more media attention than the $90 ozone number. That’s because the $0.8 billion plays the role of denominator in the EPA’s nuttiest claim of all time: a benefit-cost ratio of 350-to-1 for a proposed regulation written under the Clean Air Act (CAA). Playing the role of numerator in that ratio are $280 billion of annual (mostly human health) benefits. [2]

Heretofore, the EPA’s benefit-cost ratios for its CAA regulation were only about one-tenth as grandiose—in the vicinity of 35-to-1. [3] Even 35-to-1 is mind-boggling enough but 350-to-1? That’s the equivalent of a private-sector CEO claiming that the company’s latest “must-have” gizmo will attract 350 willingly-paid dollars out of customers’ wallets for every dollar’s worth of resources consumed in the process—or $349 of pure profit out of every $350 of revenue. Wall Street would dismiss that CEO as obviously delusional.

The EPA, however, caters not to Wall Street cynics but to audiences wanting to believe that yet another CAA regulation will crank out phenomenal benefits at almost no cost. So, in that respect, the 350-to-1 claim is just more of the same from the EPA. But, the ratio is so obviously way-over-the-top that it signals something way out of the ordinary: a jihad against the regulated power industry.

Obama vs. the Math

A 350-to-1 benefit/cost ratio thumbs its nose at the Obama Administration’s latest directive to reconsider seriously actions that might impose “unjustified costs.” [4] What Agency is going to reconsider a regulation after claiming that benefits outweigh costs by 350-to-1?

That ratio puts President Obama in an uncomfortable position: question the EPA’s benefit/cost methodology in front of his base of faithful enviros or be seen by the rest of the public taking seriously a claim that—if actually true—would mean:

• Annual CATR benefits would “cover” compliance costs in a few hours. Annual benefits of $280 billion work out nearly $0.77 billion a day. At that rate, benefits would cover the entire $0.8 billion increase in Americans’ electric bills (as the compliance costs get passed along) in a mere 25 hours after the New Year rings in!
• Annual CATR benefits will go from $0 to more than twice annual Iraq War expenditures in only two years. According to the Congressional Budget Office, the U.S. spent $124 billion in 2007 conducting the Iraq war—including “the surge” approved by then-President George Bush. More than twice that amount of CATR benefits ($280 billion) will be rolling in during 2014—scarcely two years from right now.
• Total annual benefits from all CAA regulations can approach the economy’s entire annual GDP. A long list of enormous estimated human health benefits for now-existing CAA regulations precede the EPA’s enormous benefits estimate for the proposed CATR. Adding all the benefit estimates together shows that the American people would be willing to spend more than four-fifths of the country’s entire gross domestic product (GDP), rather than do without the health benefits from already-existing CAA regulations. [5] 

Taking into account the dollars Americans spend directly on doctors, hospitals, prescription drugs and so on, shows that Americans would be willing to spend approximately 100% of the GDP on health care, leaving approximately $0 to spend on such discretionary items as food, shelter, and clothing. And, that’s before the CATR would add annual benefits more than twice what Americans spend on dental care.

I could continue with my numerical scoffing but why bother? Anyone willing to spend even a moment’s reflection on the implications flowing from the EPA’s off-the-wall benefit numbers can easily deduce that those estimates are pure fantasy.

EPA’s Compliance Costs

But, what of the EPA’s estimated compliance costs—the denominator of the benefit/cost ratio? One must snap on the green eyeshades to explain why and how the EPA’s accounting procedures are designed to produce laughably-low estimates of direct compliance costs. But, snapping on the eyeshades also makes eyes glaze over. So, right about now, you may want to reach for another cup of coffee.

The Wall Street Journal’s reference to the EPA’s ozone compliance cost estimate—“$90 billion by 2020”—makes unwitting reference to the Agency’s primary abuse of regulatory cost accounting. Sure, the $90 billion figure gets attention (which is why The Journal mentioned it) but who cares about 2020?

Certainly not President Obama. He’s interested in 2012—specifically November 2012. Therefore, President Obama’s deferment of the ozone standards must mean that the compliance costs for 2012 are much higher than the $90 billion for 2020.

But, you won’t hear from the EPA just how much higher. The EPA has always couched its cost, benefit, and resulting B-C ratio estimates in terms of a single year of its own choosing—and always for a year that poses it the least political problems. For ozone, the EPA anointed 2020. For CATR, the EPA anointed 2014 [6]—not as distant as 2020 but still several months after November 2012.

Net Present Value of Cost Streams, Not Isolated Single-Year Annual Costs

NERA Economic Consulting in a May 2011 study done for the American Coalition for Clean Coal Electricity [7]estimates that the EPA’s related CATR and MACT (Utility Maximum Achievable Control) proposals would have a net present value of $184 billion (in $2010). [8] The EPA’s RIAs on CATR and MACT reference annual compliance costs of $0.8 billion in 2014 for CATR [9]and $10.9 billion in 2016 for MACT. [10]

The major difference between NERA and the EPA analysis lies—not in their disparate dollar estimates—but in their units of measure: net present value of multi-year cost streams (NERA) vs. annual cost for a single year (EPA).

NERA points out—correctly—that adoption of the CATR and MACT proposals would increase compliance costs indefinitely into the future. Hence, the net present value of this prospective multi-year cost stream is the appropriate measure.

In a true benefit/cost ratio estimate, the net present value of the cost stream would occupy the denominator and in the numerator would be the net present value of the prospective multi-year benefit stream. And, this true benefit/cost ratio estimate would apply right now—in 2011—and, so, provide truly useful information to Americans on the proposed regulation’s prospects for making them better (or worse) off on net.

But, the EPA resists net present values of multi-year cost (and benefit) streams as tenaciously as a Three-Card-Monte dealer resists the loss of two of his three cards. Estimating net present values would close off the accounting trick that the EPA uses in the shadows of its opaque RIAs to lowball cost estimates: “allocate” as many costs as possible to years other than the anointed year.

EPA’s anointed year also bears the weight of the estimated benefit/cost ratio; e.g., the estimated 350-to-1 ratio for CATR compares estimated benefits for 2014 and estimated costs for 2014. What about benefit-cost ratios for years like 2013, 2015, 2016, 2017 and so on? Fuhghedaboutem. The EPA certainly has.

EPA Gimmickry: Browner to Jackson

Up-front capital expenditures are the single most important category of direct compliance costs and are the cost dollars most abused by the EPA’s “allocation” scheme. Research and development (R&D), new capital equipment, product redesign, product testing, factory retooling all must be done before arrival of the regulatory deadlines (if the companies are to meet those deadlines).

The EPA’s menu of accounting gimmicks keep from the anointed year (and, hence, also from the benefit/cost ratio) most, and sometimes all, of these up-front costs. Nothing quite pumps up a benefit/cost ratio estimate fed to unsuspecting media than $0 of included up-front capital expenditures.

EPA benefit/cost studies are notorious for ignoring second-round impacts; e.g., the impacts on industries that buy the regulated products or services as inputs. Less commonly recognized, however, is that the Agency’s benefit/cost ratios also exclude gobs of first-round cost impacts.

The EPA has been cranking out benefit/cost ratio estimates shorn of up-front capital expenditures for a very long time. For instance, in 2000 with Carol Browner as Administrator, the EPA executed this scam to perfection in estimating (a relatively paltry 16-to-1) benefit/cost ratio that included exactly $0 of up-front capital expenditures.

Browner’s regulation targeted the emissions of nitrous oxides (NO_x) and particulate matter (PM) from heavy-duty diesel trucks and buses. That regulation’s RIA allocated the up-front capital expenditures over the first few years that would follow the initial appearance of compliant vehicles—taking care in that process to allocate $0 of those expenditures to 2030 (a nuance the EPA overlooked in its December 2000 press release). For obscure and economically-irrelevant reasons, the EPA anointed 2030 to bear the weight of its benefit/cost ratio estimate.

Who in 2000, besides the EPA’s accounting wizards, cared a fig about 2030—some three decades into the future? The directly-regulated companies (and their customers) cared far more about 2007—the first year that compliant vehicles had to show up in the marketplace per the EPA’s diktat.

For the proposed CATR, Lisa Jackson’s EPA allocates nearly $0 of up-front capital costs to the benefit/cost ratio, instead of the literal $0 allocated by Carol Browner’s EPA to the benefit/cost ratio for the heavy-duty diesel rule. The EPA’s estimate of $0.8 billion in annual costs for CATR covers the up-front capital costs along with “annual incremental operating expenses.” [11]

So, the EPA’s mysterious “capital recovery factor” allocates an unspecified amount of up-front capital costs that must be somewhere between $0 and $0.8 billion. Suppose, for the sake of argument, that capital costs account for more than half of the $0.8 billion—say, $0.5 billion. The EPA’s analogue to annual revenues—$280 billion of benefits—would “recover” capital costs in less than a day. That’s literally unbelievable.

In short, the EPA’s once again allocated the vast majority of up-front capital costs to years other than its anointed year (2014, in this particular case). That ploy ensures the end result will be “undoubtedly” a “lowball” cost estimate.

That ploy would be impossible, however, if the EPA estimated the net present value of the CATR’s compliance cost stream, as done by the NERA study. An honest net present value would provide a credible cost number, relevant for voters ahead of the November 2012 election.

Election Politics ….

For that very reason, the EPA won’t provide such a cost estimate. Doing so would explode the myth that the CAA’s historical benefits exceed costs by around 35-to-1 (let alone by 350-to-1).

An honest cost number would also hinder the EPA’s jihad against the U.S. electric power industry. Its 350-to-1 benefit/cost ratio serves as a rallying cry for the faithful, not as an honest estimate for the sober-minded to consider before the November 2012 elections.

[1] The Wall Street Journal, “Obama in the O-zone,” September 3-4, 2011, p. A14.

[2] U.S. Environmental Protection Agency (EPA): Office of Air and Radiation, Regulatory Impact Analysis for the Federal Implementation Plans to Reduce Interstate Transport of Fine Particulate Matter and Ozone in 27 States: Correction of SIP Approvals for 22 States, EPA-HQ-OAR-2009-0491, June 2011, p. 1. Depending on the discount rate applied in the analysis, “the benefits outweigh social costs from 150 up to 350 to 1, or from 110 up to 335 to 1.”

[3] For instance, see Fred Krupp, President, Environmental Defense Fund, “The New Path Forward on Climate Change,” November 16, 2010: “There may be no greater governmental success story than the Clean Air Act. The benefits of that law to our economy and our health have outweighed costs by more than 30 to 1.”

[4] Andrew Restuccia, “EPA Will Review Regulations to Eliminate ‘Unjustified Burdens’,” The Hill, August 23, 2011.

[5] Garrett A. Vaughn, Clearing the Air on the EPA’s False Regulatory Benefit-Cost Estimates and Its Anti-Carbon Agenda, CEI, March 17, 2011, p. 2.

[6] EPA, June 2011, p. 1. “This Regulatory Impact (RIA) presents the health and welfare benefits, costs, and other impacts of the Transport Rule focusing primarily on 2014.”

[7] NERA Economic Consulting (NERA), Proposed CATR + MACT, May 2011.

[8] NERA, May 2011, p. 4.

[9] EPA, June 2011, p.

[10] EPA, Regulatory Impact Analysis of the Proposed Toxics Rule: Final Report, March 2011, p. 1-1.

[11] EPA, June 2011, p. 271.

CSAPR Rule

The rule requires 23 states to reduce annual SO2 and NOx emissions to help downwind areas attain particulate matter and ozone ambient air quality standards. This rule replaces EPA’s 2005 Clean Air Interstate Rule with three different cap programs.

A 2012 annual SO2 cap is set at 3,385,929 tons as compared to the recent (average 2008 to 2010) emissions of 5,216,931 tons. There is a 2012 annual NOx cap set at 1,245,869 tons compared to the recent emissions of 1,595,756 tons.

Finally, EPA established a 2012 Ozone Season NOx cap 495,314 tons compared to recent emissions of 566,363 tons. In all three programs there is another round of reductions in 2014.

Cap-and-Trade Problems

According to EPA, Cap and Trade is a market-based policy tool for protecting human health and the environment. A cap-and-trade program first sets an aggressive cap, or maximum limit, on emissions. Sources covered by the program then receive authorizations to emit in the form of emissions allowances, with the total amount of allowances limited by the cap. Each source can design its own compliance strategy to meet the overall reduction requirement, including sale or purchase of allowances, installation of pollution controls, implementation of efficiency measures, among other options.

Individual control requirements are not specified under a cap-and-trade program, but each emissions source must surrender allowances equal to its actual emissions in order to comply. Sources must also completely and accurately measure and report all emissions in a timely manner to guarantee that the overall cap is achieved.

Unfortunately, there are significant problems with CSAPR cap and trade. EPA’s approach is completely dependent upon electrical generating system modeling analyses. The methodology used to calculate the cap is markedly different than any used previously. The stringency of the reductions proposed is more stringent than likely possible and is remarkable for the time frame required. Previous programs phased in compliance with the allowance budget whereas CSAPR does not.

The Integrated Planning Model (IPM) is used by EPA to analyze the projected impact of environmental policies on the electric power sector in the 48 contiguous states. IPM is a proprietary multi-regional, dynamic, deterministic linear programming model of the U.S. electric power sector. It provides forecasts of least-cost capacity expansion, electricity dispatch, and emission control strategies for meeting energy demand and environmental, transmission, dispatch, and reliability constraints. Because the model cannot include all real-world unit-specific constraints there are significant issues related to a general model’s predictions of unit-specific operations, controls and emissions.

CSAPR calculated the caps differently than past practice. The allowance caps in earlier cap and trade programs were calculated by determining an overall emission rate that could be achieved and calculating the allowance budgets based on historical operations. For CSAPR, EPA relied on modeling analyses that accounts for both “highly cost-effective” controls per IPM and air quality improvements necessary to limit state impacts on other states from a simple air quality impact model. EPA estimated potential direct “cost-effective” control efficiencies for all affected units, adjusted for impacts, and totaled the resulting unit emissions to get a state cap.

Because the caps were calculated based on the model projections of individual units and the model does not incorporate specific site-specific constraints, the calculated cap is likely more stringent than actually possible. As a result, this is a direct control approach masquerading as cap-and-trade.

The implementation schedule is another ramification of the new approach. EPA’s modeling presumed that sources that have control equipment installed that was not operating at the levels the generic model assumed were possible, would be able to simply operate at the more stringent levels by throwing a switch.

In addition, EPA has assumed that the sector will “take advantage of the substantial new pollution control technology that is already on the way for deployment by 2012.” In both cases, dependency on a generic model’s estimated unit-specific control implementation capabilities probably over-estimates the ability of sources to reduce emissions starting in a few months.

Other Problems

One of the bigger problems with the rule is that there are no provisions to ease into the program. In previous programs banking and early reduction options provided early benefits and flexibility for sources to comply with the rule and implement the control strategies necessary for long-term compliance. In the proposed rule, EPA permitted the use of allowances from previous programs for compliance. Ignoring the lessons learned from previous programs, CSAPR eliminated that provision entirely rather than including a phase-out of those allowances.

There also is a presumption that the allowance trading market will be robust and efficient. The projected margin between emissions and allowances will be tight so the market may not have many allowances available. While on one hand EPA’s rule discourages allowance trading between states, within states the unit allocations are determined by historical operations, not historical emissions.

As a result more trades will be required within states and that will increase transaction costs and also decrease allowances available. In addition, even though EPA cap and trade programs have been in place since 1995, because much of the previous trading was done within company systems and the margins were not as tight, there is not as much experience with trading as a compliance option as one might expect.

Lastly, there are also reasons while companies with surpluses might not trade, e.g., due to uncertainties in a regulated environment or future requirements. As a result the presumption that the allowance market will be robust and efficient could be a stretch.

The result is a cap and trade program that could run out of available allowances for compliance. If a source fails to have appropriate allowances in its account at the compliance date, then the penalties are severe. They must provide — for deduction by the Administrator from the source’s compliance account — one allowance as an offset, and one allowance as an excess emissions penalty, for each ton of emissions (i.e., excess emissions) in excess of the amount of allowances held. The offset and the excess emissions penalty are automatic requirements in that they must be met without any further action by EPA (e.g., any additional proceedings) regardless of the reason for the occurrence of the excess emissions.

In addition, each ton of excess emissions, as well as each day in the averaging period (i.e., the control period of one calendar year), constitute a violation of the CAA, and the maximum discretionary civil penalty is $25,000 (inflation-adjusted to $37,500 for 2010) per violation under CAA section 113. Therefore, any source that continues to operate after it exceeds the number of allowances it has on hand is taking an enormous risk. The only alternative available then is for the unit to shut down. But if enough units become unavailable, reliability issues could arise.

Summary

In summary, the CSAPR cap-and-trade program ignores the key lessons learned that EPA described as components of successful cap and trade programs. The hopes and aims (in black) must be tempered by reality (in blue):

• Because cap and trade costs less than direct control, EPA can pursue more substantial reductions than would otherwise be attainable.

The CSAPR budget allocation methodology determined maximum potential direct control emissions all the while assuming that additional reductions would occur because this is a “cap and trade” program.

• Greatest reductions have occurred where emissions are highest.

The most effective dollar per ton reduced decreases occur where emissions are highest so this should occur for CSAPR.

• Trading provides regional emissions reductions which can be augmented by local direct controls.

CSAPR allocation methodology used direct local controls to determine the regional emission reductions.

• Caps, not allocation methodology, protect the environment.

The allocation methodology established the cap.

• Accountability and transparency are keys to program success and acceptance.

Given the significant differences between the draft and final rules, one could argue that accountability and transparency have been compromised.

• “Banking” enables early emission reductions, providing early benefits and flexibility for sources and reducing costs.

There are no provisions for early emission reductions which eliminates early benefits and flexibility.

• Virtually 100% compliance is possible.

Unfortunately 100% compliance may only be possible if sources stop operating when their emissions exceed the allowances the source has on hand and can reasonably be expected to purchase in the allowance market.

• State and pace of controls is important, especially to see cost advantages.

The stringency and pace of controls in this rule significantly reduces cost advantages relative to command and control rules.

————————-

Mr. Caiazza is a meteorologist (BS and MS degrees) who has worked in the air quality field for over 35 years, first as a consultant to EPA and then with an electric utility. In the latter capacity, his time was spent about equally doing regulatory analysis of air quality regulations and initiatives and doing day-to-day compliance work for cap-and-trade programs.

He is currently Director of the Environmental Energy Alliance of New York, which supports the electric companies of New York State by addressing regulatory and industry policy issues that are most effectively approached on a statewide basis.

This analysis does not reflect the position of any of his employers either present or past nor do they reflect the position of Environmental Energy Alliance of New York member companies.

Deja Vu: EPA’s 1997 Study

Back in 1997, the EPA credited itself with providing $22.2 trillion in benefits at a cost of a half trillion dollars from enforcing the CAA from 1970 (when the EPA was established) through 1990 (when Congress amended the CAA in stricter form)—a B/C ratio of more than 40-to-1.

Of the EPA’s $22 trillion net benefit estimate (gross benefits less cost), economists Randall Lutter and Richard B. Belzer wrote: “We know of no professional economist independent of EPA who takes the EPA’s estimate seriously,” for—if actually true—the sum would equal “roughly the aggregate net worth of all U.S. households.”

Lutter and Belzer scoffed convincingly but not enough to change the EPA’s penchant for grandiosity. Hence, more yardsticks are needed to measure the absurdity of the EPA’s cost-benefit estimates, at both the “macro” and “micro” levels. Such a stock-taking points toward a do-over on the costs and benefits of clean air regulation by EPA.

Macro Level Issues

Regarding the 1997 study, Lutter and Belzer compare EPA’s finding to other major statistics for the entire economy. Here are some more “macro” yardsticks to measure the EPA’s astounding B/C claims:

Comparison to U.S. Defense Spending. The EPA’s August 2010 study’s estimate of the annual clean air benefits amount to nearly twice U.S. defense spending, including operations in Iraq and Afghanistan. Plausible?

Comparison to GDP. Incredibly, the EPA’s total net benefit estimate is far higher still. The EPA subdivides the clean air benefits into: (A) the benefits attributable to the amended CAA (as already noted, nearly twice annual defense spending); plus (B) the benefits attributable to the CAA of 1970 – 1990, the legislative foundation on which the amended CAA rests. Including the benefits from Part B would push the grand total to as much as 60% or 70% of annual U.S. GDP—a result so obviously absurd that EPA’s August 2010 study obscures it with a schematic diagram.

Composition of EPA’s claimed clean air benefits. Human health benefits account for nearly all of the estimated clean air benefits. Who knew that health care accounts for more than half of the country’s GDP with the EPA as chief health provider? The nation’s most skilled neurosurgeon is a piker compared to a run-of-the-mill EPA regulation writer.

Implausible “profits.” The EPA cranks out more pure profit than all U.S. private corporations combined–if one takes the EPA’s B/C estimates seriously. Clean air benefit dollars are the EPA’s analogue to a private company’s revenues—dollars that customers are (or would be) willing to spend to receive the EPA’s “product” of fewer emissions. Under a 31-to-1 B/C ratio, Americans would be willing to spend $31 (if necessary) to get the clean air benefits provided per dollar of cost—or $30 of pure profit out of every $31 of hypothetical consumer expenditure. For Exxon-Mobil to be as efficient, it would have to squeeze about $2.90 of pure profit from every $3.00 gallon of gasoline. Exxon’s CEO would have to wear tights and a cape plus possess profit superpowers to pull that off.

Brazen accounting gimmicks. For instance, the Agency’s 1997 study (scoffed at by Lutter and Belzer) estimated that in 1990 Americans spent $11.7 billion (in 1990$) on various kinds of capital equipment to meet the requirements of CAA regulations. The Agency treated all of those billions actually spent in 1990 as if spent instead in 1991—and, hence, one year “outside the scope” of its study entitled: The Benefits and Costs of the Clean Air Act, 1970 to 1990. (emphasis added)

Tossing billions of cost dollars overboard with time travel worthy of Captain James T. Kirk of the Federation Starship Enterprise helps goose the B/C ratio estimate but also detracts from the estimate’s gravitas.

Micro Level Issues

The EPA’s absurd macro estimates of clean air benefits and costs build up from the Agency’s benefit and costs estimates for individual regulations—the “micro” level. Consider, in particular, a regulation on heavy-duty (HD) trucks and buses proposed in 2000 under Carol Browner’s EPA, made final in early 2001 by the hapless Bush Administration, and effectively shredded by a regulation proposed in 2010 by Lisa Jackson’s EPA.

Implausible profits (again). In 2000, Carol Browner’s EPA estimated that the regulation limiting HD vehicles’ emissions of particulate matter (PM) and nitrous oxides (NO_x) would return $16 of clean air benefits for every dollar of cost, “once the program is fully implemented.” The 16-to-1 B/C ratio is more modest than 31-to-1 but still implausible. To match a 16-to-1 performance, Exxon-Mobil would have to provide its shareholders $2.80 in pure profit out of every $3.00 gallon of gasoline sold to motorists—a feat beyond the powers of corporate CEOs and other mere mortals.

Accounting gimmicks (again). The phrase “once the program is fully implemented” is the most important phrase in EPA’s December 2000 press release touting Browner’s HD vehicle regulation. Those new to EPA-speak might interpret the phrase to mean “2010” when 100% of all new HD vehicles sold would have to meet the standard. [The regulation first started to bite in 2007 when 25% of all new heavy-duty vehicles sold had to meet the standard.] Instead, the phrase means “2030” (never mentioned explicitly in the press release).

Why so far into the future? Two reasons. First, the country’s HD vehicle fleets would not fully “turn over” until 2030. A new, compliant vehicle provides $0 of clean air benefits for the B/C ratio’s numerator until it actually replaces an existing, dirtier vehicle. Hence, the selection of 2030 provided the first year of maximum annual clean air benefits to put in that numerator. Contrast that with, say, 2011 which would provide negligible benefits for the B/C numerator.

Second, the selection of 2030 to base its B/C ratio facilitated an accounting gimmick that reduced to $0 what is probably the single largest category that directly-affected manufacturers face in preparing themselves to meet regulated deadlines: the up-front capital expenditures for research and development (R&D), product testing, and factory retooling. By basing its B/C ratio on 2030, the EPA pretended that none of the up-front costs remained to plug into the B/C denominator. Vehicle manufacturers would have long since “recovered” all of those costs via higher prices as the regulatory costs got passed through. This “cost recovery” is a neat accounting trick but an economic fiction. Reshuffling costs between manufacturers and their customers does not recover even a dime for society as a whole.

Implausible profits (yet again). Any private company would court face financial ruin from a new product that would: (1) be a cost drain for the first six years; (2) begin a trickle of revenue in year 7; and, then (3) need another 23 years to fully overcome customers’ preference for their existing stock. Yet, the EPA turned such thin economic gruel into a profit feast. Only the likes of the Sierra Club could swallow that.

Back to the Future

In late 2010, Jackson’s EPA proposed a regulation that would impose mileage standards on new heavy-duty vehicles to restrict CO₂ emissions—and trashing Browner’s 16-to-1 B/C ratio in the process.

Browner’s NO_x and PM standards turned out to worsen mileage as reported in a Wall Street Journal article noted in April 2007. So, Jackson’s proposed mileage standards makes illegal the very vehicles that Browner was counting on to provide $16 of benefit per dollar of cost when 2030 finally rolls around.

How seriously can the latest EPA B/C estimate be taken when the very same EPA may blow it to smithereens in a few years?

Final Note

Actions speak louder than words. The Obama Administration’s actual behavior (distinct from its rhetoric) “dissed” the EPA’s B/C estimates. Otherwise it would never have risked the Democratic majorities in Congress in the 2010 mid-term elections by pushing for carbon taxes (“cap-and-trade”) as a means far superior to direct regulation for restricting CO₂ emissions. Why take many dollars out of voters’ pockets with a heavy new tax when, instead, the EPA could literally keep many dollars in voters’ pockets by preventing all manner of adverse health effects? The Administration’s support of cap-and-trade provides strong—albeit indirect—evidence that the EPA’s astounding B/C estimates are bogus.

EPA, The Benefits and Costs of the Clean Air Act, 1970 to 1990, October 1997, Table 18, p. 56.

Randall Lutter and Richard B. Belzer, “EPA Pats Itself on the Back,” Regulation 23, no. 3 (1999), p. 23.

Garrett A. Vaughn, “Clearing the Air on EPA’s False Regulatory Cost-Benefit Estimates and it’

Vaughn (2011).

EPA (2010), Figure 1-1, Chapter 1, p. 3.

EPA, 1997, Appendix A, p. 16.

[8] EPA, “EPA Dramatically Reduces Pollution from Heavy-Duty Trucks and Buses; Cuts Sulfur Levels in Diesel Fuels,” December 21, 2000.

Robert Guy Matthews, “Trucking Firms Bemoan Stricter Emissions Rules,” The Wall Street Journal, April 24, 2007, p. A6. “Some loss of fuel economy was inevitable for engines to comply with the new standards. Certain parts of the engine must run at a higher temperature to burn off the [PM and NO_x] pollutants, and that requires more fuel.”

——————————–

Garrett Vaughn (Ph.D. Economics, Duke University) has held a variety of positions in his forty year career.  In addition to teaching economics on the faculty of University of Tennessee, Knoxville, he has been Industry Economist at the Federal Communications Commission; Manager, Tax & Economics at the American Petroleum Institute; and Economist and Council Director at the Manufacturers Alliance/MAPI.

Dr. Vaughn is currently and independent economic consultant specializing in energy and the environment.

President Obama energetically promotes wind and solar projects that require millions of acres of land and billions of dollars in subsidies to generate expensive, intermittent electricity and create (really centrally plan) jobs that cost taxpayers upwards of $220,000 apiece – most of them in China.

His Interior Department is locking up more coal and petroleum prospects, via “wild lands” and other designations, and dragging its feet on issuing leases and drilling permits.

Meanwhile, his Environmental Protection Agency is challenging shale gas drilling and fracking, and imposing draconian carbon dioxide (CO2) emission rules, now that Congress and voters have rejected cap-tax-and-trade.

Across agencies, the war is on against the dense, reliable energies that were part of the Industrial Revolution (see the posts on W. S. Jevons for more) and are behind modern society today.

The beat-down of carbon-based energy goes on. Oil, gas and coal provide approximantely 84% of the energy that keeps America humming, but the administration is doing all it can to reduce each and all. American voters, consumers and workers may want more drilling, mining and use of hydrocarbons, to get the economy going again. But the administration has a different agenda.

EPA Administrator Lisa Jackson has unveiled another 946 pages of regulations that she claims will protect public health. The regs cover 84 “dangerous pollutants” that are already being scrubbed out of power plant emission streams by a host of innovative technologies. In fact, coal-fired generators now emit a fraction of what they did just 40 years ago.

The most frequently cited of these pollutants is mercury. Higher doses cause well-known ill-health effects, from severe neurological damage to brain damage and death. However, it has been all but eliminated in herbicides, light switches, thermometers and other products.

Its presence in coal and power plant emissions is likewise minimal and declining. The last serious cases of human health impacts from mercury poisoning in the U.S. occurred decades ago – and coal-fired power plants remain the largest source of US-based manmade mercury only because other human sources are essentially gone.

Exaggerating Mercury

Nevertheless, EPA and its anti-energy, anti-job allies like Climate Progress and Greenpeace are using mercury to spearhead their latest campaign against a fuel that provides half of all US electricity, and up to 95% in many manufacturing states.  Even worse, they claim minorities somehow are especially at risk from mercury and other power plant pollutants. They even went so far as to hold a people-of-color-only press conference, to stir up fears and persuade minority interest groups to support the new regulations.

A few elemental facts put the alleged “dangers” power plant mercury emissions in perspective – which EPA and its fellow campaigners steadfastly refuse to do. They also illustrate how EPA abuses science, statistics and tax-funded “education” campaigns to promote needless public anxiety and expand its control over our lives, jobs and consumer choices, on a host of pollutants that pose little actual risk.

First and foremost, we are talking about a mere 41 tons of mercury per year. If that sounds like a lot, consider the following.

The United Nations Environment Program estimates that the cremation of human remains results in 26 tons of atmospheric mercury per year – from mercury-silver amalgams in teeth fillings.

China’s coal-fired power plants emit six times more mercury than their US counterparts, and power plants worldwide emit nearly twelve times as much, according to UN and other data. Since the atmosphere, jet streams and weather systems are global phenomena, all this mercury is mixed with US emissions,

But even these manmade sources are dwarfed by natural sources.

According to the National Center for Atmospheric Research, forest fires in the Lower 48 States and Alaska annually put over 44 tons of mercury into the air. Root systems carry naturally occurring mercury from soils into their leaves and wood; forest fires release the mercury into the atmosphere and also “roast” it out of burned soils. (Maybe it’s time to ban forest fires – and wood-burning stoves.)

Recent studies by two Cambridge University scientists calculate that man and Mother Nature discharge up to 9100 tons of mercury into the global atmospheric every year. Most comes from volcanoes, but subsea vents (the Mid-Atlantic Ridge and elsewhere), geysers and forest fires also play major roles.

In other words, U.S. power plants account for less than 0.5% of all the mercury in the air that we Americans breathe. Even eliminating every ounce of this mercury will do nothing about the other 99.5% of that pollutant in America’s atmosphere.

And yet EPA & Company demand that we do just that – at a cost of billions of dollars per year, to “protect” us from infinitesimal or imaginary risks.

Perhaps our helpful bureaucrats and activists could put a Plexiglass bubble over the entire United States, to keep those evil natural and Chinese gases out; plug Old Faithful and Kilauea; keep people (especially minorities) away from Yellowstone National Park; and ban curly mercury-enhanced CFL bulbs.

EPA’s Agenda: Not In the Family Budget

Add up everything EPA is doing to tax, obstruct and penalize coal use, and we are looking at Obama’s ”skyrocketing”  electricity-price agenda in slow motion. But such regulatory taxation hammers family budgets, especially in minority communities, impairing nutrition and health, making it harder for many families to heat, cool and pay for their homes, and increasing illness and death.

Soaring energy prices will also force numerous companies to outsource manufacturing operations and jobs. Electricity is a major cost for factories, offices, stores, hospitals and schools. Every price hike hits them with another $10,000 to $1,000,000, or more, in new annual expenses that they must pass on to consumers – or address by laying off more employees, whose families then suffer even more.

These hard realities must be viewed against 8.9% national, 11.6% Hispanic and 15.3% black joblessness.  (These figures do not include people who have given up on finding a job, or have been forced to take part-time or temporary work.) EPA’s unelected and unaccountable bureaucrats are being completely disingenuous when they say their latest ten-pound stack of rules will bring one milligram of net benefit to human health and welfare, especially for minorities.

EPA’s special “stakeholder briefing” on March 16 certainly conveys the correct image. Environmental activist groups are holding the stake that this rogue agency intends to pound through the heart of America’s economic recovery and civil rights progress.

The Path Not Taken

EPA needs to start basing its policies and rules on science, reality, common sense, and comprehensive public health considerations. Congress needs to reassert its authority over EPA to these ends.

Both need to focus on responsible, science-based air and water quality standards that address real health and economic needs – and recognize that “human health and welfare” means more than eliminating every vestige of U.S. manmade emissions, especially when we can do absolutely nothing about the vast majority of natural and manmade global emissions.

Americans of all stripes await.

____________

Paul Driessen is senior policy advisor for the Congress of Racial Equality and Committee For A Constructive Tomorrow, and author of Eco-Imperialism: Green power – Black death. His previous post at MasterResource is “Dear EPA: Why is Wind Okay and Shale Gas Not?“

[Editor note: This new white paper by the Electric Reliability Coordinating Council (ERCC) is summarized by director Scott Segal (full bio below). ERCC is a coalition of power companies that works with labor unions, consumers, and manufacturing and service businesses on clean air issues.]

The U.S. Environmental Protection Agency (EPA) has now signed a proposal to advance a new maximum achievable control technology (MACT) standard for the electric utility industry, known as the Utility MACT.

Back in 1998, the EPA made a finding regarding the need to regulate mercury emissions from power plants. At the time, EPA made clear that there were no incremental benefits associated with addressing any other hazardous air pollutants (HAPs) from the power sector other than mercury. Specifically, no health benefits were found from addressing non-mercury HAPs such as acid gases.

Such controls are extraordinarily costly with profound impacts on electricity supply and price, and job creation. In the intervening years, no additional data has been added to the Agency record that asserts any specific benefits to regulating for non-mercury HAPs. And yet, in the proposal issuing from EPA, the Agency seeks to regulate these non-mercury HAPs at great expense for no incremental benefit.

A Wave of Regulations

EPA admits the pending proposal will cost at least $10 billion, making it one of the most expensive rules in the history of the Agency. And this cost does not include indirect costs nor does the Agency attempt to estimate the total cost associated with overlapping rules due to be adopted at or around the same time. Even focusing primarily on Utility MACT itself, other credible analyses have found direct cost estimates literally an order of magnitude higher than EPA, at or near $100 billion. These other analyses make more realistic assumptions about technologies likely to be required to meet the terms of proposed rule.

EPA has or will promulgate numerous new rules in 2010 – 2012 with compliance deadlines on, before or near 2015. In 2015, due to the timetables established by EPA, the industry will face perhaps its costliest and most pressing challenge in Utility MACT. Other rules include regulations for:

• Greenhouse Gases (GHG) from new and modified sources;
• Ash and other residuals from the combustion of coal either under Subtitle C as a hazardous waste or Subtitle D as a solid waste of Resource Conservation and Recovery Act (RCRA);
• National Ambient Air Quality Standards (NAAQS) for SO2, NO2, Ozone, and PM, including a utility-specific SO2-and-NOx-emissions-limiting transport rule; and
• Cooling water intake structure requirements under section 316(b) and new discharge limiting effluent standards under the Clean Water Act.

Taken together, these regulations will impact roughly 400,000 megawatts of oil and coal-fired generation, which is about 40 percent of the current available capacity in the U.S., and makes up nearly 50 percent of the U.S. total electricity generation.

Jobs, Economic Recovery Compromised

Adaptation to the all the proposed rules, with Utility MACT being the most immediate threat, constitutes an extraordinary threat to the power sector – particularly the half of U.S. electricity derived from coal-fired generation. The industry is concerned about the ability to retrofit environmental controls or build replacement capacity in the three years to comply with the Utility MACT rule (and then other rules).

Construction time frames are also expected to increase due to the logistics of simultaneous installations, industry-wide competition for materials and craft labor, and increasing permitting requirements. The North American Electric Reliability Corporation (NERC) report notes that the “overlapping compliance schedules for the air and solid waste regulations, along with required compliance for rule 316(b) following shortly thereafter, may trigger a large influx of environmental construction projects at the same time as new replacement generating capacity is needed. Such a large construction increase could cause potential bottlenecks and delays in engineering, permitting and construction.”

As a frame of reference, consider the contribution likely to be made by the affected part of the power sector if allowed to continue and to innovate. Adam Rose and Dan Wei of Penn State University set out to estimate the total economic footprint of coal-fueled electric generation by 2015. They found that coal-fueled generation will contribute:

• $1.05 trillion (2005 $) in gross economic output;
• $362 billion in annual household incomes, and
• 6.8 million jobs.

To break it down further, IHS/Global Insight estimates that every $1 billion spent on upgrade and compliance costs will put 16,000 jobs at risk and reduce U.S. GDP by as much as $1.2 billion.

Aside from direct economic impacts to industry and manufacturers, the impact of increased costs on consumers is particularly troubling. Consumer energy cost impacts are likely to be regressive. Bills paid by the consumers with significant coal resources “will rapidly become the most expensive. Electric bills make up the majority of low-income household expenditures today.” In a recent study on Public Opinion on Poverty, it was reported that one-quarter of Americans report having problems paying for several basic necessities. In this study, currently 23% have difficulty in paying their utilities – that is, one out of four Americans.”

Offsetting Economic Benefits? Unlikely

Some have claimed that the suite of power-sector regulations will stimulate new investment in technology of various descriptions, creating so-called “green jobs.” While this may be true, heavy regulatory burdens have never been truly conducive to business confidence, investment and job creation. Data has shown that salaries paid for jobs classifiable as “green” are far below the national average. European experience demonstrated that for every four green jobs created, nine higher paying industrial jobs are lost. At the very least, flimsy or overly optimistic economic benefit analysis can not be the basis for risking millions of industrial jobs and billions of dollars in GDP.

David Montgomery of Charles River Associates, a noted economist with 40 years of work in energy and environmental policy, recently testified that:

The serious debate in environmental policy is about how the costs of new regulations compare to their benefits, and how to design the regulations to minimize cost, uncertainty and disruption. Claims that regulations that raise the cost of doing business will create new jobs are, at best, a sideshow. Such claims only distract attention from the difficult tradeoffs that must be made between costs and benefits. ‘Green jobs’ is not a subject that leading economists have usually taken seriously enough to criticize in professional journals.

As most economists agree, a policy of “regulating ourselves to prosperity” seems suspect at best.

Double Counting (Alleged) Health Benefits

The generation of sufficient, affordable and reliable electric power is a complex business. Policy makers in the past have established a balanced approach that allows both health benefits and energy policy goals to be realized. Contrary to the statements of some in the environmental community, this balanced approach has resulted in substantial reductions in critical air emissions.

The U.S. electric power sector has reduced air emissions substantially under existing programs. The industry has cut sulfur dioxide (SO2) and nitrogen oxides (NOX) emissions by 57 percent emissions between 1980 and 2008. The power sector also has cut emissions of mercury by about 40 percent through efforts to reduce other pollutants. Electricity use increased 85 percent during this time period. While demand for electricity has tripled the industry’s coal use between 1970 and 2005, emissions have declined significantly, and continue to decline thanks to emissions-reducing programs enacted by electric companies.

As was noted above, EPA found benefits attributable only to mercury reductions and has not supplemented the record specifically regarding non-mercury HAPs. Industry, for its part, is committed to working with EPA on sensible mercury regulations in order to achieve those benefits properly identified. So why then does EPA cite benefits to reducing non-mercury HAPs that form the basis for overblown claims by environmental organizations? The answer may surprise you. Rather than identifying any incremental benefit associated with very costly actual reductions in non-mercury HAPs, the Agency uses reductions in particulate matter, or PM, as a surrogate or a stand-in for real data that might be relevant. The trouble with this approach is that the control of PM has already been addressed by Congress and EPA in specific programs designed to focus on PM directly – like the national ambient air quality standard for PM.

As in 1998, the Agency still can find no direct or incremental health benefit associated with reduction of non-mercury HAPs. The only real “attribute” of such controls is to increase the cost of power generation while decreasing its reliability. The “benefits” that are alleged – from the control of PM – are already the product of existing, specifically targeted parts of the Clean Air Act unrelated to the MACT program. This is the same kind of double accounting that, frankly, corporations are forbidden to do in their own affairs.

What Can Be Done? Follow the President’s Executive Order on Regulations

President Obama himself embraced the need to closely scrutinize the cost and economic impact of new agency regulations. His January 18th Executive Order laid out the new review process for regulations, stated that an agency should “tailor its regulations to impose the least burden on society, consistent with obtaining regulatory objectives, taking into account, among other things, and to the extent practicable, the costs of cumulative regulations.” The accompanying memo issued with the Executive Order sought to clarify the order, by highlighting a basic tenet of the Order; Agency’s must “consider costs and how best to reduce burdens for American businesses and consumers.” We believe Congress and the EPA should honor the spirit of the President’s position and address the timeframe and content of overlapping rules for the power sector, beginning with the Utility MACT.

Taking into account the multiple and overlapping rules facing the power sector, the spirit of the President’s Executive Order should force EPA to choose a formulation of the proposed Utility MACT that imposes the “least burden” on society. Where EPA has the capacity for flexibility – such as in the control of non-mercury HAPs, sub-categorization, determination of the MACT floor, and other areas, EPA should do so, particularly in light of the high costs and weak incremental benefit analysis. The Agency has a long distance to travel from the options suggested by the current proposal.

Adam Z. Rose and Dan Wei, The Economics of Coal Utilization and Displacement in the Continental United States, 2015 (July 2006).

HIS/Global Insight, The Economic Impact of Proposed EPA Boiler/Process Heater MACT Rule on Industrial, Commercial, and Institutional Boiler and Process Heater Operators, Report to the Council of Industrial Boiler Owners, August 2010.

Statement of Daryl Bassett, Director, Empower Consumers, Panel on Allocation Policies to Assist and Benefit Consumers, Subcomm. on Energy and the Environment, House Comm. on Energy and Commerce, April 23, 2009.

Editorial, “How Green Is Your Lost Job?,” Investor’s Business Daily, March 1, 2011(citing green jobs data from Denmark, Germany, Scotland and Spain).

Senate Committee on Environment and Public Works, Subcommittee on Green Jobs and the New Economy hearing entitled, “Green Jobs and Trade,” February 15, 2011.

EEI, Cleaner Air: Great Progress Has Been Made, Even As Demand for Electricity Increases, 2011, available at http://www.eei.org/ourissues/ (citing EPA Clean Air Trends data).

The history of federal PM regulation from 1971, including revisions in 1987, 1997, and 2006 are discussed at EPA, PM Standards, last updated October 28, 2010, available at http://www.epa.gov/pm/standards.html.

E.O. 13653, 76 Fed. Reg. 3821, published Jan. 21, 2011

—————-

Scott Segal, Director of the Electric Reliability Coordinating Council, is a partner in the Government Relations and Strategy Section of Bracewell & Giuliani, LLP. For the last twenty years, Scott has focused on environmental and energy policy development in Washington, D.C., representing a range of industry and non-profit interests. He also is widely published and quoted on Clean Air Act issues and has argued several major Air Act cases before the Circuit Court of Appeals for the District of Columbia.

He graduated from Emory University with a BA received his JD from the University of Texas School of Law. He lives in Washington, D.C.

One new strategy is to use the Clean Water Act to justify curbing CO2 emissions because they lead to ocean acidification (an impact which itself seems to be overblown). Another is to explore seeking greenhouse gas emissions controls at a local level, under the guise that concentrated local CO2 emissions (i.e. in cities) change the local environment in such a way as to elevate human mortality there.

Never mind that such an impact will never be detectable.

My colleague Pat Michaels refers to this as the EPA’s “whack-a-mole” strategy—while effort is concentrated on trying to beat down one of its pesky and ill-founded CO2-regulating proposals, the EPA pops up another and another and another. The EPA hopes that after a while, one mole sneaks through unnoticed and manages to grab the prized (CO2-enriched) carrot.

Currently most of the whacking is aimed at trying to halt EPA’s use of the Clean Air Act as a mechanism for sweeping CO2 regulation. The ocean acidification issue is just starting to get some attention. We have briefly touched on ocean acidification here at MasterResource, and found it to be an issue in which it seems that the more that is known the less of a problem it appears to be (i.e. the real world is a pretty adaptable and responsive place). Hopefully, the EPA’s recently announced solicitation of public comment “on what considerations EPA should take into account when deciding how to address listing of waters as threatened or impaired for ocean acidification” will garner some deserved response before the May 21, 2010 deadline.

In this post, I want to take a look at a novel mole that needs attention: the idea that local CO2 produces any sort of impact on local mortality that could be detectably reduced by local CO2 restrictions.

Background

In taking questions from the Senate’s Environment and Public Works Committee last year, EPA Administrator Lisa Jackson insisted that that EPA needed to retain certain performance based standards setting for new and existing power plants in order to address local pollution. Senator Arlen Specter was amazed, saying there is no localized impact from CO2.

But apparently Jackson knew something that Senator Specter didn’t—the EPA was funding a study that was to conclude that, indeed, local CO2 emissions do raise local mortality in the U.S.—by three one-hundredths of one percent—or by about 792 deaths out of 2,700,000 deaths annually (from these numbers it would seem that Senator Specter wasn’t that far off).

The information that Administrator Jackson probably had in her back pocket has now been formalized in the just-published paper by Stanford’s Mark Jacobson in the journal Environmental Science and Technology, titled “Enhancement of Local Air Pollution by Urban CO2 Domes.” In this paper, Jacobson concludes that local CO2 emissions raise the local level of low-level ozone and fine particulate matter, PM2.5, which, in turn, raise the rate of local mortality. This finding prompted Jacobson to remark “This study establishes a basis for controlling CO2 based on local health impacts.” No doubt just what the EPA wanted to hear.

Nowhere did anyone mention that the results of this study were, for all intents and purposes, known a priori, virtually guaranteed by the methodology employed by Jacobson.

After all, climate models (like the one used by Jacobson) produce higher temperatures and higher water vapor content when they are driven with higher CO2 emissions, and air pollution models (like the ones used by Jacobson) produce more low-level ozone and PM2.5 with higher temperature and moisture, and epidemiological models (like the ones used by Jacobson) produce more deaths with higher levels of ozone (O3) and fine particulate matter (PM2.5). So, the result—more CO2=more deaths—is assured.

The only thing that was really missing in this chain of reasoning was whether local CO2 emissions lead to higher local CO2 concentrations (CO2 is often described as being “well-mixed”, that is, evenly distributed in the atmosphere). But, local CO2 “domes” have been documented for more than a decade, so it is a wonder that it has taken so long for the local-CO2-emissions-lead-to-more-local-deaths meme to be hoisted. Seems like a missed opportunity for all these years!

Main Problems of the Jacobson Study

Here is how the Stanford University press release sums up the import of Jacobson’s findings:

In the first study ever done on the local health effects of the domes of carbon dioxide that develop above cities, Stanford researcher Mark Jacobson found that the domes increase the local death rate. The result provides a scientific basis for regulating CO2 emissions at the local level and points out a significant oversight in the carbon dioxide “cap-and-trade” proposal that was passed by the House of Representatives in June 2009 and is awaiting definitive action by the Senate.

But is a relationship between local CO2 emissions and local enhanced mortality in the real world demonstrable, universal, or even detectable?

No, no, and no.

The signal is far too small and the noise is far too great. Thus, the effect of local CO2 on local mortality is simply undetectable and thus, it is impossible to determine whether or not it even exists, much less whether it could be altered by regulating local CO2 emissions.

Take, for instance, the impact of local CO2 emissions on local temperature. CO2 “domes” can and do form over large cities as the CO2 emissions generated from within, under some meteorological conditions, enhance the local atmospheric CO2 concentration faster than it is mixed away. Early work to try to quantify this effect was performed by Robert Balling and colleagues for the city of Phoenix, AZ. They found that under certain meteorological conditions, urban CO2 concentrations could be as high as 550-600 ppm (some 200ppm higher than the surrounding countryside). Running this CO2 enhancement though a radiation model, Balling et al. calculated that local CO2 emissions raised the local temperature by a bit more than one-tenth of one degree Celsius—a very small amount. In fact, Balling et al. commented on just how insignificant this temperature rise is by comparing it to the overall urban heat island in Phoenix which typically adds 5 to 10 degrees C to the urban temperatures, “[w]e conclude that the majority of the surface heating associated with the urban heat island effect is due to forcing by phenomena other than the urban CO2 dome. We suggest that the absorption of solar energy by surface materials and lower soil moisture levels in the urban core would be likely factors in explaining most of the observed surface heating.”

In other words, other processes associated with urbanization are 50 to 100 times more influential than local CO2 emissions. And not to mention that the atmospheric conditions aren’t always conducive to a big local CO2 build-up.

The situation is little different in Los Angeles, the city that Jacobson most intently examined with his climate model and determined that the peak air temperature increase from local CO2 emissions was about 0.1°C—about the same as in Phoenix. But the climatalogical conditions in L.A. are much different than those in Phoenix and Jacobson’s climate model indicated an increase in atmospheric moisture to accompany the temperature rise, something the Balling et al. did not document in Phoenix. However, as with the temperature increase, the moisture increase was small as well. Typical values of atmospheric water content are measured in terms of kilograms/m² and can vary by several tens of kilograms on a daily basis—Jacobson reports changes resulting from local CO2 emissions to be in tens of grams/m²—a thousand times less than daily variability. This renders such changes observationally undetectable.

Virtually undetectable, too, are all of the knock on air-pollution impacts in the L.A. basin predicted by Jacobson’s models: higher low-level ozone (projected to increase by 0.1 to 0.2 ppbv), more fine air particulates, PM2.5, (projected to increase by less than 1 microgram/m^3), and enhanced peroxyacetyl nitrate, PAN, (projected to increase by less than 0.02ppbv).

But, the beauty of the mortality models is that no matter how small the changes in air pollutants like O3, PM2.5 and PAN, they will produce fractionally more mortality. Sum these fractional changes over a large enough population and you start to produce whole numbers.

For instance, for L.A., summing over the population of 17.3 million people, Jacobson gets about 14 extra deaths/yr from the O3 enhancement and 81 extra deaths/yr from the PM2.5 enhancement. So, according to the models, that is 95 extra deaths as a result of local CO2 emissions out of the approximately 144,109 deaths that occur in L.A. every year. Try finding that in the observations.

Which is the overall problem in a nutshell. All of Jacobson’s reported changes, with the exception of the transient existence of the CO2 dome itself, are only detectable in computer-model world, where all other factors are controlled for and each model in each step is presumed correct. In the real world, it is impossible to find these extra deaths, even if they did occur exactly as Jacobson describes—there are just too many other confounding factors.

Further, all throughout the Jacobson analysis, the changes are so small that tiny tweaks to any of the employed models—climate, air pollution, or epidemiology—will have the potential to significantly alter the results as currently reported. And such tweaks are always occurring as none of these model-types are set in stone and each is an active and evolving field of scientific study.

Other Problems of the Jacobson Study

And the problems don’t stop here. In fact, there are myriad other areas of concern. Here are brief summaries of a few:

• Jacobson uses his models to scale the results to the state and national level (he reports about 792 extra deaths nationally from local CO2 emissions), but in scaling up, the spatial resolution of his climate model drops, and thus local (and complex) meteorological processes are not well-handled. As Jacobson described these local processes as being important in L.A., and as Balling et al. have shown the effect to be different in Phoenix, not having a good handle on local meteorology—which itself is influenced by the very existance of the city—makes state and national impact estimates unreliable.

• Jacobson does not discuss the notion of “mortality displacement”—that is, some deaths from a particular event may simply be moved up a few days, and so the impact on total mortality averaged over a longer period of time may be much lower. Mortality displacement has been shown to account for a significant portion (~10-30%) of excess mortality associated with heat waves. So it is a potential issue in Jacobson’s analysis as well. In other words, his total elevated mortality estimates which are already too low to be detected, probably should be even lower.

• The epidemiological models are far from being certain, and even further from being universally applicable. There are many studies which suggest that different populations show different responses to environmental stressors. This limits the ability of up-scaling to provide reliable results

• Despite rising urban temperatures and urban CO2 domes, air quality has been getting demonstrably better in American cities. So any local CO2 negative effect is being overwhelmed by other phenomena.

• Despite rising urban temperatures and urban CO2 domes, heat-related mortality (to which most of the projected elevated CO2 mortality is associated) has been demonstrably declining in American cities. So any local CO2 negative effect is being overwhelmed by other adaptive measures.

Conclusion

Hopefully, the Jacobson study was just supposed to get folks thinking about this issue. However, I hope that my article gets the same people to understand that the issue is far more complex than the Jacobson study seems to indicate.

Let this serve as a shot across the bow to the EPA that pursuing the idea of regulating local CO2 emissions in the name of decreasing local mortality is not going to go uncontested—when/if this mole sticks its head up, it is going to get whacked.

References:

Balling, Jr., R.C., Cerveny, R.S., and C. D. Idso, 2001. Does the urban CO2 dome of Phoenix, Arizona contribute to its heat island? Geophysical Research Letters, 28, 4599-4601.

Jacobson, M. Z., 2010. Enhancement of local air pollution by urban CO2 domes. Environmental Science and Technology, 44, 2497-2502.

Synopsis: The U.S. Environmental Protection Agency, by pulling its punches in the Massachusetts v. EPA Supreme Court case, granting California a waiver to regulate greenhouse gas emissions from motor vehicles, and declaring greenhouse gas emissions a danger to public health and welfare, has positioned itself to regulate fuel economy, set climate and energy policy for the nation, and amend the Clean Air Act – powers never delegated to EPA by Congress. It is time to rein in this rogue agency. The Congressional Review Act Resolution of Disapproval introduced by Sen. Lisa Murkowski (R-AK) is the way to do it.

When did Congress tell the U.S. Environmental Protection Agency (EPA) to license California and other states to adopt non-federal fuel economy standards within their borders? When did Congress tell EPA to act as co-equal or even senior partner with the National Highway Traffic Safety Administration (NHTSA) in setting fuel-economy standards for the auto industry?

When did Congress tell EPA to establish climate and energy policy for the nation? And when did Congress tell EPA to “tailor,” that is amend, the Clean Air Act to avoid an administrative debacle of its own making?

The answer, of course, is never, never, never, and never. EPA is flouting federal law and the Constitution. 

Murkowski Resolution: Averting the Regulatory Avalanche

Congress may soon get its first real opportunity to rein in this rogue agency. Sometime between now and May 25th the Senate is expected to vote on Sen. Lisa Murkowski’s Congressional Review Act (CRA) Resolution of Disapproval. This measure would veto the legal force and effect of EPA’s endangerment finding – the agency’s official determination that greenhouse gas (GHG) emissions endanger public health and welfare. If allowed to stand, the endangerment finding will trigger a regulatory cascade through multiple provisions of the Clean Air Act.  As explained in previous posts (here, here, and here), America could end up with a regulatory regime far more costly than any climate bill Congress has either rejected or failed to pass, yet without the people’s elected representatives ever voting on it.

By EPA’s own admission, the endangerment finding leads to “absurd results” — administrative burdens that undermine environmental protection, economic growth, and congressional intent.

For example, EPA and its state counterparts would have to apply the Clean Air Act’s Prevention of Significant Deterioration (PSD) preconstruction permitting program to an estimated 41,000 previously unregulated small entities each year, and the Act’s Title V operating permits program to an estimated 6.1 million previously unregulated small entities. These administratively impossible undertakings would induce regulatory paralysis, bring construction activity to a screeching halt, and force millions of firms to operate in legal limbo — all in the midst of the worst economic downturn since the Great Depression.

EPA says relax, don’t worry, we can “tailor” the PSD and Title V programs so that they apply only to large industrial facilities emitting 25,000 tons per year (TPY) — or maybe even 100,000 TPY — of CO2-equivalent greenhouse gases. But the Act plainly states that a source is subject to PSD if it has a potential to emit 250 TPY of a regulated air pollutant and Title V if it has a potential to emit 100 TPY. In effect, EPA proposes to re-write, that is amend, the statute.

Even if courts uphold this obvious breach of the separation of powers, the Tailoring Rule’s protections for small entities would phase out after six years, whereupon EPA plans to extend PSD and Title V requirements to smaller and smaller entities. Absurd results are to be delayed rather than avoided. Because these small business protections are by design temporary — and are legally dubious – they leave a cloud of regulatory uncertainty hanging over the economy.      

The Tailoring Rule also offers zero protection from what is arguably the most absurd result of the endangerment finding — the obligation to establish National Ambient Air Quality Standards (NAAQS), set below current atmospheric concentrations, for CO2 and other GHGs.

Section 108 of the Clean Air Act obligates EPA to initiate a NAAQS rulemaking for ”air pollution” from “numerous or diverse mobile or stationary sources” that may ”reasonably be anticipated to endanger public health or welfare.” Carbon dioxide is obviously emitted from numerous and diverse mobile and stationary sources, and EPA’s endangerment finding declares that the associated “air pollution” (whatever that is) endangers public health and welfare.

What is more, EPA attributes endangerment to the “elevated concentration” of GHGs in the atmosphere (p. 66516). By “elevated,” EPA means elevated above pre-industrial levels.  Substantively, EPA has already made the case for establishing NAAQS for CO2 set below current atmospheric levels.

And there’s the rub. Even a global depression lasting several decades would not be enough to lower CO2 concentrations from today’s level (389 parts per million) to 350 ppm – the new politically-correct “stabilization” target advocated by Jim Hansen, Al Gore, Rajendra Pachauri, the Center for Biological Diversity, and many others. Yet under the Clean Air Act, states are obligated to attain NAAQS within five years or at most 10 years. The endangerment finding thus sets the stage for eco-litigation groups to transform the Clean Air Act into a deindustrialization mandate — an economic suicide pact. The Murkowski resolution would nip all this mischief in the bud.

Smear Campaign

Since many in Congress are loath to take responsibility for the costs of climate policy, and since many in the environmental movement are heirs to the “by any means necessary” ethos of ’60s New Left radicalism, it is hardly surprising that many talk trash about the Murkowski resolution, which would stop EPA from doing an end-run around the democratic process.

Climate Progress (CP) calls the Murkowski resolution the “Dirty Air Act,” claiming it is “polluter crafted.”  Specifically, CP claims former Bush EPA air administrator Jeffrey Holmstead helped Murkowski “write her proposed amendment” to block Clean Air Act regulation of CO2 “last fall,” and Holmstead is a registered lobbyist for Bracewell and Giuliani, which represents coal companies and electric utilities. That may be correct, but it is false evidence for the smear CP is trying to paint on the Murkowski resolution.

As explained in an earlier post:

Murkowski’s draft legislation “last fall” was an amendment to the Debt Ceiling bill. It would have prohibited EPA from spending money to regulate CO2 from stationary sources. Conceivably, industry lawyers could have “crafted” it. But Murkowski’s CRA Resolution of Disapproval is a completely different animal. Its form is fixed by the CRA itself. A lawmaker seeking via the CRA to veto an agency action has one choice and one choice only — which rulemaking to insert into the blank space. There is simply no room for “crafting,” whether by polluters or anyone else!

MoveOn.Org is running TV ads against three Democratic Senators — Mary Landrieu of Lousiana, Ben Nelson of Nebraska, and Blanche Lincoln of Arksansas — who are co-sponsors of the Murkowski resolution. The ads castigate these Senators for working to ”roll back” the Clean Air Act, which we’re supposed to be outraged about because, according to MoveOn, “Many Americans are already smoking the equivalent of a pack a day just from breathing the air.”

The MoveOn ads are absolute rubbish. Smoking just one cigarette a day delivers 12–27 times the daily dose of fine particulate matter (PM2.5) that non-smokers get from the air in cities with high PM2.5 levels, according to an American Heart Association study by C. Arden Pope and colleagues. Pope, be it noted, was a key figure in the campaign to establish NAAQS for PM2.5. MoveOn is blowing smoke — nowhere in the United States is breathing the equivalent of a pack a day or even one cigarette a day.

Contrary to MoveOn’s propaganda, the Murkowski resolution would in no way hinder EPA’s efforts to clean the air. Carbon dioxide emissions do not damage air quality, U.S. air quality has improved decade by decade without controls on CO2 emissions, and under current law U.S. air quality will continue to improve whether the Murkowski resolution passes or not.

Nor would the Murkowski resolution “roll back” the Clean Air Act. It would not change one word of the statute. It would not alter any program that EPA currently administers under the Act. It would not reduce funding for any current EPA program. The Murkowski resolution would, however, avert an era of unaccountable regulation and bureaucratic empire building. It’s this defense of democracy that MoveOn.org vilifies.

Senator Barbara Boxer (D-CA) and others contend that vetoing EPA’s endangerment finding would be like vetoing the Surgeon General’s 1964 report linking cigarette smoking to cancer. This is a false analogy. The Surgeon General’s report was purely that – an assessment of the medical literature. It had no regulatory force or legal effect. In fact, it proposed no remedies at all. It was Congress, not the Surgeon General or any executive agency that, in 1965, required all cigarette packages to carry a health warning, and that later banned cigarette advertizing on television and radio.

If the endangerment finding were simply EPA’s assessment of the scientific literature, Congress would have no business voting on it. However, it is much more than that. It is the legal trigger and precedent for sweeping regulatory changes that Congress never approved.

Although a strong case can be made that EPA’s endangerment finding is scientifically flawed, that is not what the Murkowski resolution is about. Contrary to Sen. Boxer’s misrepresentation, the Murkowski resolution is not a referendum on climate science. It is a referendum on who shall make climate policy — politically-unaccountable bureaucrats or the people’s elected representatives. The resolution would veto the ”legal force and effect” of the endangerment finding — not its scientific reasoning or conclusions. Indeed, Sen. Murkowski is not a global warming skeptic, nor is she opposed in principle to greenhouse gas regulation. She simply believes that climate policy is too important to be made by non-elected bureaucrats.

The Strange Case of the Disappearing, Reappearing Patchwork

In her Feb. 22 letter to Sen. Jay Rockefeller (D-WV), EPA Administrator Lisa Jackson observes that vetoing the endangerment finding would scuttle the joint EPA/NHTSA GHG/fuel economy standards rulemaking. That, in turn, would undo the “historic agreement” whereby California and other states agreed to deem compliance with federal GHG/fuel economy standards as compliance with their own.  And that, she warns, would be very bad, because California and other states would be free to enforce their own standards, creating a regulatory patchwork inimical to a healthy auto industry.

Well, excuse me for pointing out the resemblance between EPA’s actions and a protection racket! Ms. Jackson neglects to mention that the patchwork threat exists only because she, reversing Bush EPA Administrator Stephen Johnson’s decision, granted California a waiver to implement its own GHG/fuel economy program. Had Jackson reaffirmed Johnson’s denial, there would be no danger of a patchwork, hence no ostensible need for the joint EPA/NHTSA rulemaking to “protect” the auto industry.

That the waiver would lead to a regulatory patchwork was one of Johnson’s reasons for rejecting it. Johnson’s critics vehemently denied that the waiver would create a patchwork. California Governor Arnold Schwarzenegger and 12 other Governors denied it in their January 23, 2008 joint letter to Johnson. David Doniger of the Natural Resources Defense Council,  Connecticut Gov. M. Jodi Rell, Maryland Gov. Martin O’Malley, and Pennsylvania Gov. Edward G. Rendell denied it in their testimonies before the Senate Environment and Public Works Committee (January 28, 2008). Yet now the anti-Murkowski forces warn of a regulatory patchwork. Predictably, they do not confess to having changed their tune, nor acknowledge that Johnson was correct.

Unlawful, Incompatible Standards

Ms. Jackson should have denied the waiver. California and other states opting into the California program cannot enact their own GHG/fuel economy standards without violating the 1975 Energy Policy and Conservation Act (EPCA), which states:

When an average fuel economy standard prescribed under this chapter is in effect, a State or a political subdivision of a State may not adopt or enforce a law or regulation related to fuel economy standards or average fuel economy standards for automobiles covered by an average fuel economy standard under this chapter.

Note the broad language. States are prohibited from adopting or enforcing any law or regulation “related to” fuel economy standards. This means a state may not adopt a fuel economy standard by relabeling it as something else (e.g., “climate protection”) or commingling it with other measures (e.g., controls on air-conditioner refrigerants based on their global-warming potentials). 

Carbon dioxide makes up 94-95% of all GHG emissions from motor vehicles, and there is no commercially-proven technology to filter or capture CO2 emissions from tailpipes. Consequently, the only way to achieve significant decreases in GHG emissions per mile is to decrease fuel consumption per mile. As EPA and NHTSA state in their joint rule (p. 49458), “there is a single pool of technologies” for reducing fuel consumption and, thereby, CO2 emissions from motor vehicles.  The California Air Resource Board’s (CARB) motor vehicle GHG standards program is basically fuel economy by another name. As such it is preempted by EPCA, and Jackson had no business approving it.

Indeed, granting the waiver allows California and other states to adopt fuel-economy standards that are not only different from but also incompatible with federal standards. The waiver is an affront to the Supremacy Clause.

Specifically, the CARB program conflicts with fuel economy reforms that Congress enacted in the 2007 Energy Independence and Security Act (EISA). In EISA, Congress replaced the “flat-rate” standards of the original Corporate Average Fuel Economy (CAFE) program, which apply to an automaker’s entire fleet, with “attribute-based” standards that vary according to a vehicle’s “footprint” (the area formed by the wheel base multiplied by vehicle track width).

The original program had serious drawbacks, including an adverse impact on vehicle safety. The easiest way to comply with flat-rate standards is to make the average car lighter and smaller. Lighter vehicles have less mass to absorb collision forces; smaller vehicles provide less space between the occupant and the point of collision. NHTSA estimates that CAFE contributed to an additional 1,300 to 2,600 fatalities and 13,000 to 26,000 serious injuries per year.

Although California’s GHG standards are calibrated in grams CO2-equivalent per mile rather than miles per gallon, they are “flat-rate” rather than “attribute-based.” Since the California standards substantially regulate fuel economy, they conflict in basic approach with the EISA reforms.

The “flat-rate” character of the CARB program is also what produces the “patchwork” incompatible with a competitive auto industry. Consumer preferences differ from state to state, so the same automaker typically sells a different mix of vehicles in each state. Only by sheer improbable accident would the average fuel economy (or grams CO2/mile) of an automaker’s vehicles delivered for sale in one state be identical to that in other state. But under the CARB program, each automaker would have to achieve the same average fuel economy in every “California” state. If all 50 states adopt the California program, then each automaker would have to manage 50 separate fleets, reshuffling the mix in each state regardless of consumer preference. A more cockamamie scheme would be hard to imagine. 

The solution to the patchwork threat should be obvious — overturn the California waiver. Instead of allowing EPA to deal itself into a position to regulate fuel economy and determine climate policy for the nation, Congress should uphold EPCA and reassert its authority under the Supremacy Clause.

Granted, vetoing the waiver might be even more difficult politically than vetoing the endangerment finding, because congressional delegations from the “California” states would fight it tooth and nail. But if denied the cover of the endangerment finding and the “historic agreement,” they would be in the awkward position of claiming a right to wreck what remains of the U.S. auto industry. Litigation to overturn the waiver is another option. U.S. automakers are too financially dependent on the Obama administration to consider mounting such a challenge, but others, such as the National Association of Auto Dealers and the U.S. Chamber of Commerce, have already filed suit. 

Dirty Deal

Rep. Darrell Issa (R-CA), ranking member of the House Oversight and Government Affairs Committee, spotlights another reason to nix the “historic agreement” – it was reached in violation of federal law. In a Mar.  24, 2010 letter to White House Counsel Robert Bauer, Issa argues that Obama Administration Energy and Environment Czar Carol Browner “may have deliberately violated” the Presidential Records Act (PRA) when she brokered the fuel-economy/GHG standards deal with California and the auto industry. Sec. 2203(a) of the PRA states: 

Through the implementation of records management controls and other necessary actions, the President shall take all such steps as may be necessary to assure that the activities, deliberations, decisions, and policies that reflect the performance of his constitutional, statutory, or other official or ceremonial duties are adequately documented and that such records are maintained as Presidential records pursuant to the requirements of this section and other provisions of law [emphasis added].

Yet the Browner-led negotiations culminating in the “historic agreement” appear to be completely undocumented. Citing a May 20, 2009 New York Times article, Issa describes the agreement as a “secret deal” behind “closed doors” under a “vow of silence”:

There was a deliberate “vow of silence” surrounding the negotiations between the White House and California on vehicle fuel economy standards. Great care was taken to “put nothing in writing ever.” These meetings culminated in a Rose Garden Ceremony on May 19, 2009, where President Obama announced an “historic agreement” between the Automobile industry, the State of California, and the Obama Administration to set fuel economy standards through 2016.   

Noting that the industry faced the “alarming possibility” of having to comply with conflicting fuel economy requirements, and that General Motors and Chrysler were concurrently “engaged in separate negotiations with the Obama Administration to develop restructuring plans in an attempt to avoid bankruptcy,” Issa writes that the agreement “reeks of back room deals and pay-for-play strong arm tactics on the part of this administration.” At a minimum, the Browner-led back-room negotiations make a mockery of Lisa Jackson’s and President Obama’s high-profile commitments to transparency and openness in environmental policymaking.

NHTSA Will Miss Its CAFE Deadline: Boo-Hoo!

In recent letters to the Hill, the Auto Alliance , UAW, and NHTSA offer a new reason to oppose the Murkowski resolution: NHTSA won’t be able to “de-couple” its half of the joint GHG/fuel economy rulemaking quickly enough to meet the April 1, 2010 deadline for finalizing federal fuel economy regulations for the 2012 model year. Well, NHTSA could probably accomplish this feat in a few days if it weren’t so busy lobbying against the Murkowski resolution. NHTSA should wake up! The Murkowski resolution would restore NHTSA’s statutory leadership in fuel economy regulation.

Besides, what’s so terrible about fuel-economy standards not ratcheting up as fast as CARB and EPA would like? Retaining model-year 2011 fuel economy standards for an additional year would make no perceptible difference in either average global temperature or U.S. energy security, but would save the distressed auto industry an estimated $5.4 billion (Table I.E.2-4, p. 49481).

Another benefit of NHTSA missing its deadline is that fewer motorists will die! Even “attribute-based” fuel-economy regulation induces some downsizing. EPA and NHTSA estimate that their joint fuel economy/GHG rule could cause an additional 493 fatalities in 2016 (Table IV-G-7-1, p. 49730). A less aggressive schedule for tightening fuel economy standards during 2012-2016 would mean fewer deaths.

EPA’s Pattern of Self-Dealing Exposed

Let’s review the steps by which EPA is amassing powers not delegated by Congress.

1. EPA grants California a waiver repugnant to both federal law and the Supremacy Clause.
2. The waiver threatens to subject the auto industry to a patchwork of conflicting fuel-economy requirements.
3. The patchwork threat enables the White House to broker a deal whereby EPA gets to be co-equal or even senior partner to NHTSA in regulating fuel economy — a power not granted to EPA in the Clean Air Act. 
4. The joint GHG/fuel economy regulation compels EPA to regulate CO2 from stationary sources – another power Congress never delegated to EPA.
5. EPA is now in a position to regulate fossil-energy production and use in all sectors (manufacturing, power generation, commmercial, and residential) and, thus, to determine climate policy for the nation — an issue of vast economic and political significance that Congress is still debating.
6. In addition, because applying the Clean Air Act to CO2 leads inexorably to “absurd results,” EPA gets to amend (“tailor”) the Act to save us from another regulatory nightmare of its own making. 
7. In sum, by granting the California waiver and issuing the endangerment finding, EPA not only gets to play in NHTSA’s fuel-economy sandbox and expand its control over the economy, it also gets to play lawmaker.

In light of all the new powers EPA is poised to acquire, it is not unreasonable to wonder whether the agency deliberately pulled its punches in Massachusetts v. EPA, the April 2007 Supreme Court decision that authorized and indeed pushed the agency to find endangerment and regulate GHG emissions from new motor vehicles under Sec. 202 of the Clean Air Act.

Here’s the strong case against regulating GHG emissions under Sec. 202 that EPA neglected to argue before the Court:

• EPA cannot regulate GHG emissions from new motor vehicles under Sec. 202 without regulating CO2 under the Act as a whole, including PSD, Title V, and NAAQS.
• Applying the Act as a whole to CO2 leads ineluctably to absurd results – “extreme measures” (Mass. v. EPA, 531) that directly conflict with congressional intent.
• Therefore, Congress could not have intended for EPA to regulate GHG emissions under Sec. 202.

The Tailoring Rule and EPA’s earlier (July 2008) Advanced Notice of Proposed Rulemaking leave no doubt that regulating GHGs under Sec. 202 automatically leads to regulation under other provisions, produces absurd results, and inexorably expands EPA’s power far beyond any visible congressional mandate. Why didn’t EPA point this out when it really mattered? 

There are two possibilities: (1) EPA didn’t understand how the Clean Air Act works, (2) EPA wanted to be thrown into the greenhouse briar patch all along. EPA is the expert on the Clean Air Act. Ergo . . .

Imagine my surprise when I encountered a novel Request for Proposals at their National Center for Environmental Research seeking to recruit people at non-profit institutions to dredge through EPA’s databases in order to gin up new new things for the agency to worry about and possibly regulate.

Specifically,

The U.S. Environmental Protection Agency (EPA), as part of its Science to Achieve Results (STAR) program, is seeking applications proposing to use existing datasets from health studies to analyze health outcomes for which the link to air pollution is not well established, or to evaluate underlying heterogeneity in health responses among subgroups defined by susceptibility or extent and/or composition of exposure.

And, ever helpful, EPA gives some examples of what such data-dredging exercises might look like:

For example, while air pollution associations with respiratory and cardiovascular disease have been studied most extensively, evidence is beginning to emerge of possible air pollution impacts on additional health conditions including diabetes, neurological disorders, and reproductive and developmental outcomes. Studies also might evaluate factors that confer increased sensitivity to air pollution effects such as compromised health status, genetic variants, social and neighborhood conditions, higher exposure and others. In addition, some research groups have developed innovative methods and models to characterize exposure that might be applied to health effects analyses in other cohorts to understand whether certain sources or atmospheric components contribute to observed geographic heterogeneity in health-exposure associations.

Further, EPA has specific outcomes in mind. This is not random data dredging, which would be bad enough. This program seeks to fund directional data dredging that looks only for relationships suggesting that exposures to various air pollutants causes harm to human health. In EPA’s words:

EPA is interested in research to explain heterogeneity in health responses to air pollutants. Heterogeneity might be explained by: 1) Individual characteristics and other environmental/social conditions that increase the likelihood of an adverse health outcome among a subset of the population. [emphasis mine]

To pay for this innovative regulatory fishing expedition, EPA proposes to give away $1.4 million dollars in portions up to $300,000, for projects that could last up to three years.

Now, there’s nothing wrong with trying to ensure that people’s health is protected from dangerous air pollutants (in fact, I’d argue that it’s a very legitimate function of government), but there is something wrong with organizing taxpayer funded fishing expeditions to probe for new regulatory potential by seeking out obscure relationships in large databases. And those problems are intrinsic to data dredging, an frequently abused form of data mining.

Data dredging, according to Wikipedia, is “the inappropriate (sometimes deliberately so) use of data mining to uncover misleading relationships in data. These relationships may be valid within the test set but have no statistical significance in the wider population.” Wikipedia gives a particularly relevant example: “Suppose that observers note that a particular town appears to be a cancer cluster, but lack a firm hypothesis of why this is so. However, they have access to a large amount of demographic data about the town and surrounding area, containing measurements for the area of hundreds or thousands of different variables, mostly uncorrelated. Even if all these variables are independent of the cancer incidence rate, it is highly likely that at least one variable will be significantly correlated with the cancer rate across the area.”

Or, as the Congressional Research Office explains (in the context of fishing for terrorists in air-travel databases):

Although data mining can help reveal patterns and relationships, it does not tell the user the value or significance of these patterns. These types of determinations must be made by the user. Similarly, the validity of the patterns discovered is dependent on how they compare to “real world” circumstances. For example, to assess the validity of a data mining application designed to identify potential terrorist suspects in a large pool of individuals, the user may test the model using data that includes information about known terrorists. However, while possibly re-affirming a particular profile, it does not necessarily mean that the application will identify a suspect whose behavior significantly deviates from the original model.

Another limitation of data mining is that while it can identify connections between behaviors and/or variables, it does not necessarily identify a causal relationship. For example, an application may identify that a pattern of behavior, such as the propensity to purchase airline tickets just shortly before the flight is scheduled to depart, is related to characteristics such as income, level of education, and Internet use. However, that does not necessarily indicate that the ticket purchasing behavior is caused by one or more of these variables. In fact, the individual’s behavior could be affected by some additional variable(s) such as occupation (the need to make trips on short notice), family status (a sick relative needing care), or a hobby (taking advantage of last minute discounts to visit new destinations).

In other words, with data dredging, it really is a situation of “Seek and ye shall find.”

It is one thing for scientists to identify sick populations, and to investigate what it is that might be making them sick. It is another thing entirely to sift through large data bases in order to come up with correlations that may have no causal relationship, but that might, nonetheless, cause EPA to spend scarce taxpayer money researching the potential linkage, or worse, to endlessly dredge through databases in search of ever lower, ever more obscure health impacts to justify expanded regulation and EPA intrusion into the economy. This is one EPA funding proposal that should be scrapped. If EPA has more money than it knows what to do with, there’s always the crazy idea of giving it back to the taxpayer.

[Editor note: For more background and the likely consequences of EPA's endangerment finding, see Marlo Lewis, "CO₂ Regulation under the Clean Air Act: Economic Train Wreck, Constitutional Crisis, Legislative Thuggery"]

In their recent draft of an endangerment-finding technical support document (TSD), scientists at the U.S. Environmental Protection Agency (EPA) conclude that carbon dioxide emissions are a public health hazard and should be regulated under the Clean Air Act. Federal law requires that regulations be based on scientific information that is “accurate, clear, complete, and unbiased”; the most recent available; and collected by the “best available methods.” The EPA’s TSD on carbon emissions violates all of these requirements.

Staff researcher Dr. Alan Carlin, given just a few days to review the draft TSD, took EPA to the woodshed because the report offered little more than a bibliography of out-of-date reports and research rather than a rigorous scientific inquiry into the subject. The Carlin report’s preface clearly shows that the EPA abdicated its position of scientific authority on the subject: “Our conclusions do represent the best science in the sense of most closely corresponding to available observations that we currently know of [and] are sufficiently at variance with those of the IPCC, CCSP, and the Draft TSD that we believe they support our increasing concern that EPA has not critically reviewed the finding by these other groups.”

Both of EPA’s recent attempts to regulate additional pollutants under the Clean Air Act have had poor results. The TSD for the Clean Air Interstate Rule (vacated, reinstated, waiting for a “fix’ by EPA) and the Clear Air Mercury Rule (vacated, EPA wondering what to do next) took many years to prepare. The shortcut science exhibited by the EPA’s Draft TSD on carbon dioxide illustrates that perhaps the EPA is now incapable of conducting unbiased and rigorous scientific inquiry.

Rush to Judgment

Lisa Jackson, the new EPA administrator, gave her staff only a few weeks to prepare a TSD for carbon emissions. It should have taken a year or two at least. The TSD is the technical documentation that must be finalized before the EPA can promulgate carbon regulations, hence the haste.

To put the enormity of the task into some perspective, the TSD for the Clean Air Interstate Rule (CAIR) took about four years to prepare before it was released in early 2005. The U.S. Court of Appeals for the District of Columbia vacated CAIR on July 11, 2008, because it “had more than several fatal flaws.” However, that same court issued a reversal of its earlier decision on December 23, 2008, allowing CAIR to remain in effect while EPA “fixes” the rule.

The short schedule to prepare the TSD forced EPA staff scientists to pick between two poor choices. Their first choice was to maintain the required scientific checks and balances but miss Jackson’s directive to release the TSD by April 2, the second anniversary of the Supreme Court’s decision allowing EPA to regulate CO₂ under the Clean Air Act. Their second choice was to compromise their internal scientific review processes and meet the schedule. They chose option two.

The EPA working group that authored the TSD circulated its draft in mid-March for an internal review. Staff researcher Dr. Alan Carlin, a 38-year EPA veteran, was given less than five days to prepare his comments. Carlin prepared a blistering 98-page report that was extremely critical of the TSD’s scientific rigor because EPA “decisions [were] based on a scientific hypothesis that does not appear to explain most of the available data.”

Action, Meet Reaction

The EPA’s overreaction was immediate when Carlin’s report went out within the agency. The EPA’s director of the National Center for Environmental Economics (NCEE), Al McGartland, first worried about the inevitable political fallout in a March 17 e-mail: “The administrator and the administration has decided to move forward . . . and your comments do not help the legal or policy case for this decision.” But McGartland obviously missed Jackson’s January memo promising to keep politics out of scientific inquiry: “I will ensure EPA’s efforts to address the environmental crises of today are rooted in three fundamental values: science-based policies and programs, adherence to the rule of law, and overwhelming transparency.”

McGartland’s next knee-jerk response was to issue a gag order: “Please do not have any direct communication with anyone outside of (our group) on endangerment. There should be no meetings, e-mails, written statements, phone calls, etc.” In an interview with CBSNews.com, Carlin said, “I was told . . . not to work on climate change.”

The EPA’s final comments were simply outrageous—they seek to discredit the messenger. In a written statement in response to media questions about Carlin’s report, the EPA noted that “The individual in question is not a scientist and was not part of the working group dealing with this issue.” The EPA completely ignores Carlin’s credentials (a BS in physics from CalTech and PhD in economics from MIT), yet he was sufficiently qualified to be part of the internal review team of the draft TSD and to work at the NCEE for many years. Carlin suddenly became unqualified when he asked hard questions and was unwilling to rubber-stamp the TSD.

Three Categories of Errors Found

In its first section, Carlin’s report outlines six specific reasons for believing that the scientific basis for the TSD is flawed; the second section cites “critical inconsistencies between the Draft TSD and data concerning the causes of global warming”; the third section presents “data showing continuing increases in US health and welfare despite increasing GHG levels.” Section 4 provides general comments on the Draft TSD. The report is persuasive and is certainly worth reading.

Carlin succinctly summed up the TSD’s flawed science this way: “Until and unless these and many other inconsistencies . . . are adequately explained it would appear premature to attribute all or even any of what warming has occurred to changes in GHG/CO2 atmospheric levels.”

Carlin pointed out that the EPA used science short-cuts to buttress the endangerment findings. Much of the TSD is based on Intergovernmental Panel on Climate Change (IPCC) studies and models rather than on independent research and studies conducted by EPA scientists, as has been its historical practice. “These inconsistencies are so important and sufficiently abstruse that in our view EPA needs to make an independent analysis of the science of global warming rather than adopting the conclusions of the IPCC and the CCSP [Climate Change Science Program] without much more careful and independent EPA staff review than is evidenced by the TSD,” he wrote.

Carlin also pointed out that “there is an obvious logical problem posed by steadily increasing US health and welfare measures and the alleged endangerment of health and welfare discussed in this draft TSD during a period of rapid rise in at least CO2 ambient levels. This discontinuity either needs to be carefully explained in the draft TSD or the conclusions changed.”

The EPA has yet to respond to the concerns raised in Carlin’s critique of the TSD since it was made public.

The Essence of Science

Carlin wrote in his critique that the bedrock principle of good science is determining the correctness of an hypothesis by comparing empirical data with real world data. “We do not believe that science is writing a description of the world or the opinions of world authorities on a particular subject, …[it] is not a statement of belief by scientific organizations.” It’s also not about the new and improved EPA being dismissive of contrarian views that aren’t in synch with their leadership’s political agenda.

Here’s my critique of the TSD: It’s EPA’s scientific integrity that is endangered.

———————————

Portions of this article appeared in POWER magazine.