Category — Ozone standards

[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. [Read more →]