07/14/2020 - Legal Analysis

EPA’s Benefit-Cost Proposal in the Context of PM Pollution Regulation

by Joe Goffman, Laura Bloomer

Introduction

Over the past three years EPA has made it more difficult to achieve greater reductions in fine particle pollution (PM2.5). New studies continue to link long-term exposure of PM2.5 with serious health effects, including at levels meeting the current national standards. Particle pollution also affects populations differently. In a 2017 study, researchers at the Harvard Chan School of Public Health found that men, Black people, and people with low incomes had higher risks of death from PM2.5 exposure. A more recent study found a connection between higher PM2.5 levels, which often occur in lower income communities and communities of color, and higher COVID-19 death rates.

Existing PM2.5 control programs are inadequate. The American Lung Association found that particle pollution increased in many US counties in recent years. As a result, the number of people living in areas with unhealthy air is increasing. Experts agree that the current national standards for PM2.5 don’t adequately protect public health.[1] Despite this, EPA is still pushing rollbacks that allow greater PM2.5 concentrations and foster doubt about, or find ways to ignore, the science that calls for tighter PM2.5 standards.

While EPA’s recent proposed rule offers a relatively straight-forward approach to benefit-cost analysis under the Clean Air Act, it bears traces of this resistance to further PM regulation. Provisions in the proposal echo some of the logic EPA applied in its recent reversal of the Mercury and Air Toxics Standards (MATS) appropriate and necessary finding. That reversal relied in part on down-weighting, or minimizing, the value of PM2.5 reductions in its benefit-cost analysis.

EPA Administrator Wheeler complicated the public’s expectations for the benefit-cost proposal with his statements on the proposal and the MATS rollback. He first described EPA’s down-weighting of PM2.5 reductions in the MATS reversal as “foreshadowing” the benefit-cost proposal, emphasizing that “Co-benefits should never be the driver of a regulation.” Wheeler made this statement despite the fact that EPA insisted the MATS reversal was based on a narrow legal interpretation specific to the relevant provision of the Clean Air Act and was not a generalizable approach to Clean Air Act regulation. But Wheeler’s comment signaled that future rules, including the forthcoming benefit-cost rule, may only partially count the value of co-benefits. Then, at the release of the benefit-cost proposal he stated, “[Today’s] proposed action corrects another dishonest accounting method the previous administration used to justify costly, ineffective regulations.” Observers expected to see significant changes to the Administration’s approach to co-benefits in the proposed text.

Though the benefit-cost proposed rule doesn’t match Wheeler’s statements, the context in which EPA is issuing the proposal is important for commenters. In the following sections we describe the Trump EPA’s treatment of PM2.5, the benefit-cost proposal, and an aspect of the proposal that is most similar to EPA’s deregulatory approach in the MATS rollback.

Timeline of EPA’s Treatment of PM2.5

Limiting the Science EPA Considers

Previously, EPA proposed a rule that would limit the science the agency can consider by prohibiting EPA from considering results from studies if the underlying data cannot be made publicly available. [2] This requirement targets landmark research connecting PM2.5 pollution with harmful health outcomes, as well as epidemiological studies more generally. Because researchers leading these studies analyze confidential health data, the data cannot be made available in a way that matches EPA’s requirements, which allows EPA to willfully ignore science that would compel the agency to tighten the national PM2.5 standards.

Questioning Epidemiological Studies

EPA frequently discounts scientific evidence that compels reductions in PM2.5 pollution below the current national standards. The Trump EPA included similar language in multiple rulemakings about the uncertainties associated with the benefits of lowering PM2.5 concentrations to below the current national standards.[3] EPA’s political appointees, and the scientific advisory panels those appointees have selected, also allege that recent epidemiological studies fail to show a sufficient causal relationship between PM2.5 and mortality – a claim that the scientific community soundly rejects.

In April 2020, this effort culminated in the Trump EPA’s proposed decision to retain the current national air quality standards for PM2.5. EPA cites “uncertainties” as the primary reason behind its decision, refusing to lower the standards until experimental studies are done to confirm that the current PM2.5 standards cause adverse health effects. Emphasizing these uncertainties despite the contrary epidemiological evidence serves EPA’s broader deregulatory purpose. If EPA accepts the benefits of lower levels of PM2.5, it will be significantly harder to justify the status quo for the national PM2.5 standards, let alone EPA’s many Clean Air Act rollbacks.

Distinguishing Between Targeted and Non-Targeted Benefits

Finally, EPA has continually questioned the validity of fully crediting co-benefits in making policy decisions, distinguishing between benefits from reducing emissions of pollutants targeted by each rule and the benefits of other reductions in pollution also resulting from compliance with the rule. The Trump EPA’s implication that there is a relevant distinction between reducing targeted and non-targeted pollutants conflicts with the uniform practice of experts inside and outside the government.[4] This attack on co-benefits also targets PM2.5 in particular, because reductions in PM2.5 emissions are the largest co-benefit of many Clean Air Act regulations.

EPA’s reversal of the finding underpinning MATS provides the clearest example of the Trump EPA’s approach to co-benefits. In May 2020, EPA determined that it wasn’t “appropriate and necessary” to regulate emissions of hazardous air pollutants from power plants, reversing EPA’s previous finding. To reach this conclusion, the Trump EPA performed a benefit-cost analysis that severely discounted the large emissions reductions in PM2.5 and other pollutants that occur as a result of the technology power plants use to curb mercury and toxic emissions. EPA then explicitly relied on the benefit-cost analysis to find that it was not “appropriate and necessary” to promulgate MATS. Both steps were unprecedented.

EPA argued that since other provisions of the Clean Air Act are intended to address PM 2.5, the MATS appropriate and necessary determination must discount reductions in PM 2.5 resulting from MATS compliance. EPA suggested that its reversal doesn’t deny communities additional PM2.5 reductions, because they can count on other Clean Air Act authorities to achieve those reductions. But EPA’s original analysis of MATS reflected nearly all of the measures already in place targeting PM2.5, meaning that MATS would achieve PM2.5 reductions that the existing measures didn’t reach. Discounting those benefits by claiming that other programs could provide them makes no sense. Meanwhile, EPA’s proposal to leave the PM2.5 national standards unchanged further undercut the logic of its “other authorities” argument.

Proposal to Regulate Consideration of Costs and Benefits in Clean Air Act Rulemaking

On June 11, 2020, EPA published a proposed rule to establish regulatory guidelines for considering the costs and benefits of Clean Air Act regulations. The proposal doesn’t seem to track with Wheeler’s preview emphasizing the treatment of co-benefits. Instead, the proposed rule purports to provide consistency in EPA’s analysis, and it reflects methodologies EPA has long used in its analyses of Clean Air Act regulations. The rule would require that EPA prepare a benefit-cost analysis for all significant proposed and final Clean Air Act rules.

The proposed rule is open for public comment until August 3, 2020. EPA seeks comment on how it should consider the results of this benefit-cost analysis in its rulemaking. EPA also seeks comment on when EPA should determine a regulation be promulgated only if the benefits exceed the costs. How EPA incorporates answers to these questions in its final rule could change significantly the impact of the proposal.

Beyond the specifics, the proposal has a status quo bias. It doesn’t claim that this new benefit-cost analysis would be the basis of agency decisions, and it’s described as a procedural rule. But EPA already conducts benefit-cost analysis for economically significant rules when fulfilling the requirements of Executive Order 12866. The White House established economic guidelines for conducting these analyses, and the rule largely reflects those guidelines. Given that the White House reviews each rule before it can be published, it’s unlikely EPA would be able to diverge from the existing benefit-cost methods. EPA also has its own comprehensive guidelines for preparing economic analyses, which the agency is currently updating. By requiring that EPA perform this additional benefit-cost analysis separate from the analysis already required, this proposal serves only to add burdens to and slow the rulemaking process.

Disaggregating Benefits

EPA only distinguishes between targeted and non-targeted benefits twice in the benefit-cost proposal. First, EPA seeks to disaggregate benefits to encourage the agency to consider other regulatory options that may better achieve the non-targeted benefits. Second, the proposal would require that EPA present direct and indirect benefits separately in a chart at the beginning of each rule’s preamble

EPA states that disaggregating benefits could enable the agency to consider other regulatory options:

Disaggregating benefits into those targeted and ancillary to the statutory objective of the regulation may cause the EPA to explore whether there may be more efficient, lawful and defensible, or otherwise appropriate ways of obtaining ancillary benefits, as they may be the primary target of an alternative regulation that may more efficiently address such pollutants, through a more flexible regulatory mechanism, better geographic focus, or other factors.[5]

Unfortunately, EPA’s MATS reversal and previous treatment of PM2.5 may have poisoned the well for what would otherwise be a sound analytic exercise. In MATS, EPA relied on hypothetical other authorities to down-weight PM2.5 benefits, despite knowing that other regulations hadn’t delivered the reductions MATS would achieve. Imagine a scenario in which prior to issuing MATS, EPA applied the argument used in the MATS reversal and reinforced by the “alternative regulation” approach of the benefit-cost proposal. In that case, notwithstanding the inadequacy of existing programs, EPA’s determination that MATS was unnecessary would have denied the public the sweeping benefits of MATS, including an estimated  $28 billion to $77 billion in benefits of PM2.5 reductions.[6]

As it did in the MATS reversal, an EPA with a deregulatory mission could use other statutory authorities as foils to justify not finalizing the regulation in question. By pointing to other programs EPA could implement to achieve similar non-targeted benefits, EPA could then determine that the regulation in question is unnecessary, without creating any obligation to issue an alternative regulation aimed at the non-targeted benefits of the original rule.

Additionally, disaggregating co-benefits and comparing the regulation under consideration with potential alternatives changes the nature of benefit-cost analysis in the rulemaking process. The benefit-cost analysis accompanying a proposed or new rule evaluates the regulation at hand by answering the question: how do the costs and benefits of a specific rule compare? Demanding an additional analysis that compares the rule in question with a hypothetical alternative under a different legal authority obscures the fundamental benefit-cost question.

Finally, by requiring a chart at the beginning of the preamble, the proposal diverges from the Clean Air Act’s comprehensive approach to protecting public health and the environment. Distinguishing between targeted and ancillary benefits may be useful to economic analysis, but it is not an element of any of EPA’s Clean Air Act mandates or the Act’s specific purpose. While the Clean Air Act directs the agency to take into account a number of considerations when setting standards, the Act leaves little room for benefit-cost analysis to contribute to EPA’s threshold determinations to regulate.[7]

Conclusion

Notwithstanding Administrator Wheeler’s preview, the benefit-cost proposal may not be the expected apex of EPA’s three-year attack on PM2.5 regulation, but it advances EPA’s agenda in a subtler way. After down-weighting PM2.5 benefits in the MATS reversal, proposing to retain the current PM2.5 national standards, and continually questioning the scientific evidence, EPA has made clear that diminishing the importance of PM2.5 reductions is a key part of its deregulatory agenda. These previous actions provide an important context for scrutinizing the benefit-cost proposal and answering EPA’s specific requests for comment.


[1] EPA’s own scientific experts questioned the adequacy of the current National Ambient Air Quality Standards for PM. EPA, Policy Assessment for the Review of the National Ambient Air Quality Standards for Particulate Matter, at 3-106 (Jan. 2020) (“[The] available scientific evidence, air quality analyses, and the risk assessment…can reasonably be viewed as calling into question the adequacy of the public health protection afforded by the combination of the current annual and 24-hour primary PM2.5 standards. In contrast to this conclusion, a conclusion that the current primary PM2.5 standards do provide adequate public health protection would place little weight on the broad body of epidemiologic evidence reporting generally positive and statistically significant health effect associations, particularly for PM2.5 air quality distributions likely to have been allowed by the current primary standards.”).

[2] After receiving over 600,000 comments on the original proposal, EPA published a supplemental proposal on March 18, 2020. The supplemental proposal doesn’t address the fundamental flaws in the original proposed rule. This paragraph represents the impact of the proposed rule, as amended by the supplemental proposal.

[3] See e.g. The Affordable Clean Energy Rule, 84 Fed. Reg. 32,520, 32,564 (July 8, 2019); pre-publication of the Final Withdrawal of the Appropriate and Necessary Finding at 64 (“The Agency has also noted that it is less confident in risk and benefits estimated to occur at very low PM2.5 concentrations, particularly those that fall below the bulk of the observed data in underlying epidemiologic studies used to quantify PM-related risks of premature death. These uncertainties are particularly important because air quality has improved over time due to federal and state pollution control efforts, reducing the fraction of the U.S. population experiencing elevated PM2.5 exposures.”).

[4] Economists, including at the Office of Management and Budget, give full weight to all regulatory benefits when performing benefit-cost analyses. For decades, EPA has also followed this practice, and its own guidelines for performing economic analyses doesn’t differentiate among benefits resulting from reductions in different pollutants.

[5] Proposed Rule, 85 fed. Reg. 35,612, 35,622 (June 11, 2020).

[6] Numbers are in 2001$. OMB estimates that MATS has the second highest benefits of any Clean Air Act regulation, though it’s also among the costliest, with an estimated cost of $8.2 billion (2001$).

[7] EPA almost always makes a cost-effectiveness determination when setting the stringency and compliance schedule of a regulation or standard as part of applying statutory criteria.