News - American Energy Alliance

Breaking Down EPA’s Light-Duty GHG Emission Standards

May 2, 2012 by AEA 4 Comments

On February 13, 2012, IER submitted its comment on EPA’s proposed light-duty truck greenhouse gas emissions standards. As we will see, even relying on the EPA’s own analysis shows just how absurd federal intervention into energy markets has become. The debate would be funny, if it didn’t have such serious consequences in terms of economic welfare and indeed traffic fatalities.

Takeaway Messages

For those readers with a busy schedule, the following bullet points summarize the main issues raised in IER’s comment:

EPA’s proposed regulation:

Would force 6 million drivers out of the market, according to one estimate.
Would increase the price of a new car by thousands of dollars.
Assumes that Americans are too dumb make good decisions about fuel economy, even when those mistakes add up to billions of dollars per year.
Is supposed to do something about global warming, but according to EPA itself the rule would, at most, reduce global temperatures by 0.02 degrees C in the year 2100.

From the Introduction of IER’s Comment

On December 1, 2011, the Environmental Protection Agency (EPA) and National Highway Traffic Safety Administration (NHTSA) proposed light-duty vehicle greenhouse gas emission standards and corporate average fuel economy standards for light-duty vehicles for model year 2017–2025. In other words, EPA is proposing to regulate carbon dioxide emissions from cars and trucks.

This comment explains that EPA, and by extension NHTSA, fail to justify increasing the greenhouse gas emissions standards for light-duty vehicles. According to EPA, the entire reason it is regulating carbon dioxide emissions from cars and trucks is to reduce global warming and climate change, but EPA’s rule does not affect the pace of climate change in any meaningful way. Therefore, this rule is fatally flawed or the endangerment finding is fatally flawed.

EPA’s cost-benefit analysis for this rule is also fatally flawed. EPA’s cost-benefit analysis shows positive net benefits only because EPA omits the cost to consumers of limiting consumer choice. Instead, EPA credits forced fuel savings as a benefit. Because the rule increases the upfront cost of buying a car, the rule forces 7 million drivers out of the car market. This means that 7 million people will not be able to enjoy the fuel savings calculated by EPA because they will not be able to afford a car in the first place.

Furthermore, EPA’s cost-benefit analysis utilizes the “social cost of carbon.” The “social cost of carbon” is a metric developed to try to estimate the impact of emitting on ton of carbon dioxide. The estimates developed through EPA’s social cost of carbon analysis, however, are arbitrary and capricious. In reality, the social cost of carbon is an unsupportable metric for use in federal rulemaking. Even on its own terms, the social cost of carbon estimate is inapplicable for EPA’s analysis, because of what is called “leakage” in the climate change literature. Specifically, EPA ignores the possibility that its rule will increase greenhouse gas emissions outside of the United States, through mechanisms such as a lower world price of oil due to restricted American demand.

For these reasons, EPA should not regulate greenhouse gases from vehicles using the Clean Air Act.

Consumers Massively Dumb?

Perhaps the most revealing aspect of the paternalism underlying the EPA’s position is how thoroughly it relies on massive consumer error. It’s true, standard economic theory allows a role for government intervention to correct “market failures” arising from the negative externalities of greenhouse gas emissions. However, that’s not what EPA’s case focuses on. Instead, depending on the parameters, anywhere from 56 to 73 percent of EPA’s claimed “net benefits” from its rule, derive from EPA’s assumption that motorists irrationally fail to understand how much money they could save by buying more fuel-efficient vehicles.

For example, in the year 2040 alone, EPA’s analysis estimates that American car buyers—in the absence of the farsighted rule on light-duty trucks—will miss out on $104 billion in savings they could have reaped, had they paid higher sticker prices for vehicles that would get better fuel economy. In contrast, EPA’s estimate for the total gains from avoided climate change damages as well as other factors (such as reduced macroeconomic volatility from reduced reliance on oil imports), might yield as little as $29 billion in the year 2040, in the scenario where the “social cost of carbon” is relatively low.

The reader should not be fooled that EPA is promulgating this rule in order to combat climate-change damages. When trying to justify the higher sticker prices its methods will impose on vehicle buyers, EPA’s analysis rests primarily (again, 56 to 73 percent, depending on the other assumptions) on the view that it will be directly doing these buyers a favor, by making them buy more fuel efficient cars that will pay for themselves.

EPA Rule Will Lead to More Traffic Fatalities

Besides the generic harm to consumers coming from government intervention, a specific consequence of the new rule will be increased traffic fatalities, relative to what the trend otherwise would have been. EPA’s analysis (from which it derived estimates of the impact on vehicle prices) assumed that all other vehicle attributes would be held constant, and that the increased cost of production (to meet the higher fuel economy standard) would be passed entirely on to the final buyer.

However, in reality what will happen is that in the new equilibrium, manufacturers will produce vehicles that are lighter than otherwise would have been the case, and hence they will not need to be as expensive as EPA assumes. In other words, in practice consumers will not choose to have the full brunt of the new rule show up merely in higher sticker prices, but they will spread the pain around to other dimensions, such as vehicle safety.

As we document in the comment (pp. 14-15), estimates of excess traffic fatalities attributable to the introduction of CAFE standards in the 1970s range from 42,000 to 125,000 deaths.

But At Least the Rule Will Halt Climate Change, Right?

The most alarming and yet humorous piece of IER’s comments revolves around EPA’s own discussion of the rule’s effect on climate change. Here is EPA making the case for its rule:

The results of the analysis demonstrate that relative to the reference case, projected atmospheric CO2 concentrations are estimated by 2100 to be reduced by 3.29 to 3.68 part per million by volume (ppmv), global mean temperature is estimated to be reduced by 0.0076 to 0.0184 °C, and sea-level rise is projected to be reduced by approximately 0.074–0.166 cm, based on a range of climate sensitivities.

Yes, you read that right: EPA itself suggests that the upper range of the likely impact of the proposed rule will slow global warming by less than 2 hundredths of a degree Celsius…by the year 2100. It is for this social goal (as well as the free money EPA will give to ignorant consumers who can’t calculate fuel savings on their own) that justifies—again, according to EPA’s own numbers—imposing aggregate costs on vehicle buyers of $36 billion in the year 2030 alone (to pick just one year’s figure).

Conclusion

As a cursory examination of IER’s formal comment shows, the proponents of government intervention into the energy sector simply cannot make a decent case, when they are asked to come up with actual numbers. As IER’s analysis of EPA’s own table shows, the only way to ensure that the purported benefits of the rule exceed the admitted costs is to invoke massive and systematic consumer irrationality. The innocent layperson may have thought that looming climate change damages would be enough, but that isn’t the case for the lower range of sensitivity estimates, again as EPA’s own table shows.

Rather than imposing new regulations that will stifle the manufacturing sector and lead to a higher rate of traffic deaths, the government would be better advised to remove other interventions and let the market work.

Correcting Krugman on Ozone

May 1, 2012 by AEA 2 Comments

Nobel laureate and New York Times columnist Paul Krugman has been known to say some wacky things. After the 9/11 attacks, he opined that they “could even do some economic good.” In 2002 he wrote that only a housing bubble could rescue the U.S. economy. After the tsunami, Krugman argued that the Japanese nuclear disaster “could end up being expansionary.” And this past August, Krugman went on CNN to claim that a fake alien invasion could pull the world out of recession in 18 months — 8 months later and there still remains a lot to be desired in terms of economic growth.

In this context, it’s not surprising that Krugman thought that the EPA should have gone forward with its plan to tighten ozone regulations—in order to create jobs. That’s right, Krugman wasn’t arguing (as an environmentalist economist might) that the benefits in human health outweighed the direct economic costs in terms of reduced output (and hence lower employment). No, Krugman actually claimed that it would stimulate the economy if businesses had been forced to spend money complying with the more stringent regulations.

Krugman on How to Fix the Economy

Let’s quote Krugman in his own words:

Let’s talk about the economics. Because the ozone decision is definitely a mistake on that front.

As some of us keep trying to point out, the United States is in a liquidity trap: private spending is inadequate to achieve full employment, and with short-term interest rates close to zero, conventional monetary policy is exhausted.

This puts us in a world of topsy-turvy, in which many of the usual rules of economics cease to hold. Thrift leads to lower investment; wage cuts reduce employment; even higher productivity can be a bad thing. And the broken windows fallacy ceases to be a fallacy: something that forces firms to replace capital, even if that something seemingly makes them poorer, can stimulate spending and raise employment.

Indeed, in the absence of effective policy, that’s how recovery eventually happens: as Keynes put it, a slump goes on until “the shortage of capital through use, decay and obsolescence” gets firms spending again to replace their plant and equipment.

And now you can see why tighter ozone regulation would actually have created jobs: it would have forced firms to spend on upgrading or replacing equipment, helping to boost demand. Yes, it would have cost money — but that’s the point! And with corporations sitting on lots of idle cash, the money spent would not, to any significant extent, come at the expense of other investment.

There are (at least) two main problems with Krugman’s analysis. First and most important, he is neglecting the (obvious) fact that adding new constraints on economic activity is hardly the way to jumpstart a stalled economy. Second, he is wrong when he claims that business investment to comply with the new regulations would largely come out of “idle” cash. On the contrary, much of their spending would come at the expense of other investments—assuming the firms in question didn’t go out of business or relocate out of the country.

Kicking the Economy When It’s Already Down

Although he acknowledges the “Broken Window” fallacy (which I discuss at length in this article), Krugman nonetheless violates its commonsense lesson: It doesn’t “help the economy”—certainly not in any meaningful sense—to force businesses to spend money just in order to get back to their original starting position. Contrary to Krugman’s earlier analyses, the 9/11 attacks, the Japanese nuclear scare, and a hypothetical alien invasion hoax would not help us out of recession.

In the case of the proposed ozone regulations, Krugman doesn’t even discuss the disastrous impact on the “supply side.” Instead, he narrowly focuses on demand. Krugman thinks the problem with the economy right now is that people aren’t spending enough; he doesn’t realize that the EPA would have seriously hampered the economy’s ability to produce enough.

The EPA had proposed to reduce ozone standards down to 0.06 parts per million, or 60 parts per billion. That concentration works out to less than a cup of water in an Olympic-sized swimming pool. To understand just how draconian that threshold would have been, consider that the EPA itself conjectured that up to 96 percent of the monitored counties in the nation would have been in non-attainment. One study estimated that the tighter threshold would cost more than $1 trillion.

Environmental economists can argue about the pros and cons of such regulations. (Even the EPA’s own numbers, however, make a dubious case.) Yet Krugman hasn’t even attempted such a balancing act. What if the EPA banned the use of all fossil fuels? Imagine the huge burst of investment spending, as Americans loaded up on bicycles and skateboards!

This suggestion isn’t merely intended for humor. It is the same principle as that espoused by Krugman; the difference is merely one of degree. It would obviously be economic suicide if the EPA banned the use of fossil fuels. By the same token—though of course not nearly to the same extreme—it would be economically damaging if the EPA had gone through with its tighter ozone regulations.

“Idle” Cash Isn’t Really Idle

Krugman commits a subtler mistake in his analysis when he says that new spending on regulatory compliance wouldn’t come at the expense of other investment spending. He claims that because firms are currently sitting on huge balances of “cash” (which means short-term, liquid assets, such as Treasury bills, and not paper currency in a piggy jar), they would have no reason to curtail other expenditures if the EPA foisted new rules on them.

Krugman is simply wrong on this count. Just like households, firms hold liquid assets for a reason. They are currently holding large sums not because they “did all their spending” and had a bunch left over. Rather, when determining the optimal composition of their portfolios, firms have decided—because of the tremendous economic uncertainty—that it is prudent to carry a much larger share of their wealth in the form of “cash” than they normally do.

The EPA certainly wouldn’t make firms more relaxed about the future, if it tightened the screws on ozone regulations and thereby rendered the firms even more financially precarious. It’s true, firms might pay the compliance expenses partially by drawing down their cash balances, but they would also spread the pain around their other investments too. Ironically, Krugman has to agree with me, because I am merely repeating the same analytical framework that he deployed to (erroneously) criticize Eric Cantor’s position on hurricane disaster spending.

Conclusion

Contrary to the views of Nobel laureate Paul Krugman, shackling the economy is not the way to grow out of a recession. Rather than imposing new regulations that would drive up the prices of energy and other goods, the government should remove constraints on production.

Filed Under: Emissions Standards, News, Products and Power Tagged With: Krugman, Ozone

EPA Should Do “Impact Assessment” of Tier 3 Regulations

April 30, 2012 by AEA Leave a Comment

Those familiar with federal regulations know that when an owner seeks to do develop his or her property—perhaps by clearing a marsh in order to build a shopping mall—there must often be an “impact” assessments (relating to the local environment, economy, etc.), which can cost a pretty penny. In addition to the direct burden of taxes, such regulations stifle innovation and job creation.

In an interesting twist, in late March Rep. Ed Whitfield (R-Ky.) proposed that the EPA get a taste of its own medicine. Whitfield introduced

new legislation that would require a presidential commission to investigate the impact of Environmental Protection Agency regulations on consumer gas prices. A discussion draft of the bill would also clamp down on any new regulations until six months after the commission issues a report to Congress.

…

The bill would specifically stop the agency from issuing so-called Tier 3 regulations to reduce sulfur in gasoline, new source performance standards for petroleum refiners, renewable fuel standards, ozone standards and some greenhouse gas regulations. [Bold added.]

As explained in this post, the EPA is moving ahead with its efforts to impose a “Tier 3” tightening of standards that would reduce the permissible levels of sulfur in refined gasoline. According to a study by Baker & O’Brien, Tier 3 standards would impose upfront costs on refiners of just under $10 billion, and cause a permanent increase in refining costs of 6 to 9 cents per gallon of gasoline. These economic harms would come with only a relatively small reduction in sulfur content, because previous regulations have already greatly reduced the sulfur content in gasoline.

Regardless of the specifics in the bill, the concept behind Whitfield’s proposal is refreshing because it underscores the fact that there are always tradeoffs. The reason refiners don’t currently meet the stringent new Tier 3 guidelines (which technically haven’t been formally announced yet, making it even harder for industry to plan) is that it is more expensive to produce gasoline with such low concentrations of sulfur.

Government officials have the power to issue new edicts, and to levy fines on private-sector producers who are caught violating the regulations. Yet not even the federal government has the power to repeal economic law. Imposing an artificial constraint on refiners—by forcing them to produce gasoline with lower sulfur concentrations than they otherwise would have chosen—necessarily raises costs of production. Since refiners are in business to make money, ultimately motorists will see higher prices at the pump.

Just because a policy is costly, doesn’t mean it’s a bad idea; we have to compare the costs with the benefits. Yet since sulfur concentrations have already come down more than 90 percent since the late 1990s, the marginal benefits become ever more elusive. Particularly when Americans are groaning under high gas prices, EPA needs to offer a much stronger case for the tighter Tier 3 standards.

Filed Under: News, Products and Power, Tier 3 Standards Tagged With: Tier 3

AEA Statement on EPA Administrator’s Resignation

April 30, 2012 by Benjamin Cole Leave a Comment

WASHINGTON D.C. — American Energy Alliance Senior Vice President Daniel Kish released the following statement on the resignation of EPA Region 6 Administrator Al Armendariz, announced earlier today:

“Like a shamed Roman soldier who dishonored Caesar in battle, EPA Administrator Al Armendariz fell on his own sword today, hoping that professional suicide would save the EPA and the Obama White House from more political fallout. But there is no indication that the regulatory crucifixions that Al Armendariz’s proposed will stop, despite damage control efforts being coordinated from the Obama campaign and the White House.

“The loss of one rogue regulator will not change the culture of arbitrary enforcement and politicized rule making that has developed at Lisa Jackson’s EPA. Congress must continue its vigilant oversight efforts to determine how pervasive Administrator Armendariz’s views are at the agency, and how consistently his proposed enforcement strategy has been applied. How many other EPA political appointees hold similar views, but have yet to be caught on tape advocating them so brazenly?

“From discredited studies attacking hydraulic fracturing to phony science behind the agency’s regulatory assault on conventional energy sources, there’s overwhelming evidence that the fish rots from the head. The American people deserve answers, especially given President Obama’s public assurances that his administration would find more ways to ‘skin the cat’ after the failure of his cap-and-trade policies.”

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Filed Under: Press Releases

National Survey: Wrong Direction for Obama Energy Policies

April 30, 2012 by Benjamin Cole 2 Comments

Americans see Direct Connection Between Domestic Energy Production and Lower Prices

WASHINGTON D.C. – As a part of an ongoing multi-million dollar initiative to educate the American public about energy issues, the American Energy Alliance (AEA) released today results of a national survey of likely voters that reveals overwhelming support for increased energy production and widespread acknowledgment that a healthy energy industry – which not only provides us with our basic energy needs, but also is responsible for hundreds and hundreds of products we use every day – is a critical link to lower energy prices and an improved economy.

“Americans see a clear connection between a robust energy industry and lower energy prices here at home,” said Tom Pyle, President of AEA. “A solid majority of likely voters want our government to promote policies that increase energy production and help guarantee energy security. Americans overwhelmingly agree that more production from U.S. lands will reduce our level of imported oil and help moderate gasoline price spikes,” Pyle added.

Highlights of the survey include:

Almost three-quarters of respondents (77%) said yes when asked whether increasing U.S. production could help moderate gasoline prices. 4 in 5 said that such an increase in production could help either “some” (32%) or “quite a lot” (57%). Even 52% of moderates and 38% of liberals think that additional production of oil would help moderate gas prices ‘quite a lot’. Additionally, 83% of total respondents agreed that increased U.S. production would reduce our dependence on imported oil.
Respondents rejected the Obama Administration’s approach that emphasizes making the economy less dependent on fossil fuels versus increased production. In that hard test, more than half (51%) preferred increased American production, while 38% said that the right answer was to reduce our overall dependence on fossil fuels.
Respondents think that the federal government can do more. When asked (on a scale of one to ten, with ten being “quite a lot”) how much the federal government could do to affect the price of gasoline, the mean response was 6.5 (and the median response was 7). When asked what the President was actually doing, the mean response was 3.6 (and the median was just 3). Voters perceive a fairly significant gap between what can be done and what is being done.

Respondents are clear that the President is not as committed to traditional fuels as he is to alternative fuels. Almost two thirds (64%) agreed that the President would rather focus on alternative energy instead of oil and gas. It appears that the President has been branded as an alternative energy fan; that means that his efforts to seem to be in favor of more oil and gas production ring hollow (which is probably why respondents rate his efforts so low).

The national telephone survey of 1000 likely voters was conducted by MWR Strategies on April 6^th through April 13^th, 2012, and has a margin of error of 3.1%.

To view the actual survey questions, click here.

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Filed Under: Press Releases

The Costs of Tier 3 Regulations

April 28, 2012 by AEA 1 Comment

The Environmental Protection Agency (EPA) is moving ahead with its efforts to impose a “Tier 3” tightening of standards that would further reduce the permissible levels of sulfur in refined gasoline. According to a study by Baker & O’Brien, Tier 3 standards would impose upfront costs on refiners of just under $10 billion, and cause a permanent increase in refining costs of 6 to 9 cents per gallon of gasoline. These economic harms would come with only a relatively small reduction in sulfur content, because previous regulations have already greatly reduced the sulfur content in gasoline.

Tightening Standards

In 1999 EPA issued its Tier 2 regulatory framework, which for the first time including all passenger vehicles (including SUVs and light-duty trucks) to the same emission standards as cars. The Tier 2 framework also began treating “vehicles and fuels as a system,” so that standards for tailpipe emissions were linked to stringent requirements on sulfur concentrations in gasoline. (It is easier for passenger vehicles to comply with emission limits, if the gasoline they use has a reduced sulfur content.)

In its December 1999 document, EPA proudly announced how drastic the Tier 2 measures were: “These new standards require passenger vehicles to be 77 to 95 percent cleaner than those on the road today and reduce the sulfur content of gasoline by up to 90 percent.” Specifically, here is their discussion of the sharp reduction in permissible sulfur concentrations:

Beginning in 2004, the nation’s refiners and importers of gasoline will have the flexibility to manufacture gasoline with a range of sulfur levels as long as all of their production is capped at 300 parts per million (ppm) and their annual corporate average sulfur levels are 120 ppm. In 2005, the refinery average will be set at 30 ppm, with a corporate average of 90 ppm and a cap of 300 ppm….Finally, in 2006, refiners will meet a 30 ppm average sulfur level with a maximum cap of 80 ppm.

To clarify, EPA makes a distinction between the average sulfur content for the entire mix of output, and the maximum permissible sulfur content on any particular product. As the earlier EPA quote illustrated, the Tier 2 regulations, when fully phased in over a few years, would reduce gasoline sulfur content by up to 90 percent, depending on the benchmark.

Yet even though the Tier 2 standard has already reduced gasoline sulfur content some 90 percent, down to an average level of 30 parts per million (ppm), EPA wants to ratchet up the standard yet again. Although it hasn’t explicitly announced the specific standard in its Tier 3 regulations, EPA officials (e.g. Margo Oge in late January of this year) have publicly stated that the standard will probably be 10 ppm. That is to say, on top of the 90 percent reduction in sulfur content that Tier 2 involved, the move to Tier 3 (if Oge is correct in her statement) would require a further reduction of 67 percent from the Tier 2 baseline.

The Baker & O’Brien Analysis

The American Petroleum Institute (API) commissioned Baker & O’Brien to perform a study that was originally released in July 2011 on the impact of Tier 3 regulations on the refining sector and gasoline market. In light of criticism from EPA—claiming that the original study should not have included a scenario considering a 5 ppm standard, but instead a looser 10 ppm standard—API commissioned Baker & O’Brien to issue a March 2012 addendum. In this addendum, the analysts consider a “Case 4” that keeps all other regulations constant, and only changes the gasoline sulfur content from the current 30 ppm down to 10 ppm.

Before reporting the results of the addendum, we should point out that the regulatory uncertainty itself is costly and inhibits the U.S. refining sector, and thus raises gasoline prices relative to what would occur in a more predictable setting. After all, even now EPA hasn’t officially said what the Tier 3 standard will actually be, so the original Baker & O’Brien study—which was released in July 2011—can hardly be faulted for including a spectrum of scenarios, one of which was more draconian than what EPA officials are now telling us will likely be the actual rule.

In any event, the new Case 4 scenario—which models only the tightening of gasoline sulfur standards, in light of the recent remarks from EPA officials—projects the upfront compliance costs to refiners at $9.8 billion. Furthermore, the total annual compliance cost (which includes capital recovery) is estimated at $2.4 billion. Spread out over the range of projected gasoline production, this higher operating cost works out to 6 to 9 cents per gallon in increased costs. (The addendum does not explicitly model the gasoline market directly, and thus does not say how much of this burden will be borne by shareholders in the refining sector versus motorists in the form of higher prices at the pump.)

Ironically, the study also finds that even under the milder Case 4 assumptions, refiners would be forced to alter their activities in ways that would end up emitting an extra 1.7 million tons of carbon dioxide per year. This counteracts one of the primary purposes of the program, which is to produce gasoline low in sulfur and thus make vehicle emissions targets (including CO₂ emissions) easier to achieve.

Conclusion

The EPA’s Tier 2 standards for gasoline have already reduced its sulfur content by 90 percent relative to 1999 levels. EPA’s consideration of further tightening the regulations is harmful to the refining sector both for its ambiguity—we still don’t know what the rule eventually will be—but also because it will likely impose billions of dollars in upfront and annual compliance costs on the sector. Refiners won’t stay in business if they are losing money, and so the new measure will reduce growth and employment in the refining sector, while raising gasoline prices for motorists.

Filed Under: Facts, News, Products and Power, Tier 3 Standards Tagged With: Tier 3

Impact of EPA’s Regulatory Assault on Power Plants–April 19 Update

April 27, 2012 by AEA 1 Comment

“So if somebody wants to build a coal-fired plant they can. It’s just that it will bankrupt them…”
– Barack Obama speaking to San Francisco Chronicle, January 2008

**Update April 19, 2012**

Thirty-four gigawatts (GW) of electrical generating capacity are now set to retire because of the Environmental Protection Agency’s (EPA) Mercury and Air Toxics Rule (colloquially called Utility MACT)[i] and the Cross State Air Pollution Rule (CSAPR)[ii] regulations. Most of these retirements will come from coal-fired power plants, shuttering nearly 10 percent of the U.S.’s coal-fired generating capacity.

This report is an update of a report we issued in October 2011.[iii] Last October in the original report, we calculated that 28.3 GW of generating capacity would close as a result of EPA’s regulations. At the time, we warned that “this number will grow as plant operators continue to release their EPA compliance plans.” Unfortunately, this statement has proven to be true. This update, a mere four months later, shows that 33.8 GW of electrical generating capacity will close—a 5.5 GW increase.

According to EPA, their modeling of Utility MACT and CSAPR indicates that these regulations will only shutter 9.5 GW of electricity generation capacity. But events in the real world already show that EPA’s modeling is a gross underestimate.

To calculate the impact of EPA’s rules, we first assumed that EPA’s modeling of the regulation correctly predicted which power plants would close as a result of the regulations. Then, we looked at statements, filings, and announcements from electrical generators where the generators were closing power plants and in which they cited EPA’s regulations as the precipitating cause of the plant closures. We then compared EPA’s modeling outputs with the announcements and created a master list of plant closures as the result of EPA regulations (the master list is below).

Combining actual announcements with EPA’s modeling shows that EPA’s modeling grossly underestimates the actual number of closures. As noted above, EPA calculated that only 9.5 GW of electrical generating capacity would close as a result of its rules. But the reality is that nearly 34 GW of power generating capacity will close—over three times the amount predicted by EPA modeling. Worse, as utilities continue to assess how to comply with EPA’s finalized Utility MACT rule and CSAPR, there will likely be further plant closure announcements in the coming weeks and months.

Since Our First Report was Released in October, an Additional 5 GW of Retirements Due to EPA Regulations Have Been Announced

Operators in Georgia, Maryland, Michigan, New Mexico, Ohio, Pennsylvania, and Wisconsin have announced new closures since we first published our closure list four months ago. Additionally, operators in Minnesota announced they would cease plans to convert a coal plant to natural gas, letting the plant retire due to EPA regulations.[iv] In just six months, retirements related to EPA regulations have grown by 5 GW, more than the 4.7 GW of closures EPA predicted for the entire Utility MACT.

NERC is Concerned about Reliability even though It Underestimates the Amount of Closures

It should be further noted that the North American Reliability Corporation’s (NERC) modeling of the MACT rule and CSAPR estimate that under the worst case, or “strict” scenarios, 16.3 GW of electricity capacity will be closed due to the regulations, and the Department of Energy’s (DOE) “stringent” test shows that only 21 GW of generating capacity will be closed. Even though NERC’s estimate is much lower than what our analysis shows, NERC is concerned that the closures will cause electricity reliability problems.[v] How much greater will the reliability problems be, given that retirements appear to be twice as great as NERC estimates?

Announced and EPA Projected Retirements Are Significantly Higher than DOE’s Worst Case Scenarios

In public statements and the Utility MACT itself, EPA relies heavily on a DOE study claiming that even under a theoretical “stringent” test, EPA regulations would only close 21 GW of generation. EPA has since claimed this study proves regulations will not threaten reliability. Our analysis, however, shows that between EPA projections and operator announcements, nearly 34 GW of generation will close—almost 13 GW more than DOE’s supposedly ultra-strict test scenario.

Michigan and Ohio Hit Worst By Latest Announcements

In our updated analysis, the vast majority of new announced retirements will occur in Michigan and Ohio. Operators in Michigan have announced more than 1 GW of closures due to EPA regulations.[vi] Michigan, already reeling from record high unemployment, has warned that further closures due to the regulations could threaten reliability in both the Upper and Lower Peninsulas. The situation is even worse in Ohio, which is now facing 6 GW of closures, the most in the entire country.[vii]

Updated List of Power Plants Set to Close According to EPA’s Modeling and Public Disclosures

The following is a list of all of the power plants that are set to close according to EPA’s modeling combined with public disclosures. A complete explanation of the methodology we used to compile this list is in the Appendix.

EPA Regulations are Already Causing Electricity Prices to Dramatically Rise

Pricing trends in the PJM Interconnection are showing troubling signs concerning the impact on electricity rates of power-plant retirements due EPA regulations. EPA has called PJM Interconnection’s operating region “one of the largest and most heavily dependent on coal-fuel generation in the country.” Much of this coal generation is in an area PJM calls the “RTO,” which encompasses states like Ohio, Indiana and Illinois. Last May, PJM Interconnection held its Future Capacity Auction for 2014/2015, the first to incorporate Utility MACT requirements. During that Auction, future capacity prices in the RTO increased by an incredible 350 percent. PJM concluded the vast majority of this increase was due to requirements “to meet increasingly stringent environmental regulations.” According to the Chicago Tribune, these price increases will cause Chicago-area electricity bills to go up $107 to $178 per year and raise annual costs for Chicago Public Schools by $2.7 million, $3.3 million for the Metropolitan Water District, and $5.4 million for Chicago’s city government.

Northern Ohio Expected to See Disproportionally High Electricity Prices

Financial analysts now expect prices to increase even higher in northern Ohio due to recent power-plant closures caused by Utility MACT. UBS projects future capacity prices in this May’s Future Capacity Auction for 2015/2016 will increase at least 60 percent in northern Ohio. According to UBS, this increase is due to significant transmission congestion caused by recently announced Utility MACT-related power-plant closures. Deutsch Bank has said that prices could increase by as much as 300 percent. Ratepayers in northern Ohio are paying a high price for EPA’s regulatory agenda.

[i] Environmental Protection Agency, Regulatory Impact Analysis of the Proposed Toxics Rule, Mar. 2011, http://www.epa.gov/ttn/atw/utility/ria_toxics_rule.pdf

[ii] Environmental Protection Agency, Regulatory Impact Analysis (RIA) for the final Transport Rule, http://www.epa.gov/airtransport/pdfs/FinalRIA.pdf

[iii] Institute for Energy Research, IER Identifies Coal Fired Power Plants Likely to Close as Result of EPA Regulations, Oct. 7, 2011, http://www.instituteforenergyresearch.org/2011/10/07/ier-identifies-coal-fired-power-plants-likely-to-close-as-result-of-epa-regulations/.

[iv] David Shaffer, Xcel’s power pullback, Star Tribune, Dec. 1. 2011, http://www.startribune.com/business/134825258.html.

[v] See North American Electric Reliability Corp, 2011 Long-Term Reliability Assessment, Nov. 2011, http://www.nerc.com/files/2011LTRA_Final.pdf.

[vi] Cassandra Sweet, Michigan Utility to Scrap ‘Clean-Coal’ Plant, Shut Older Coal Unit, Wall Street Journal, http://online.wsj.com/article/BT-CO-20111202-713204.html

[vii] See e.g. FirstEnergy, FirstEnergy, Citing Impact of Environmental Regulations, Will Retire Six Coal-Fired Power Plants (Press Release), Jan. 26, 2012, http://www.prnewswire.com/news-releases/firstenergy-citing-impact-of-environmental-regulations-will-retire-six-coal-fired-power-plants-138115263.html; Dow Jones Newswires, Midewest Generation, GenOn Energy Announce Power Plant Closings—WP, Feb. 29, 2012, http://www.foxbusiness.com/news/2012/02/29/midwest-generation-genon-energy-announce-power-plant-closings-wp/.

Filed Under: News, Products and Power Tagged With: MACT

National Academy of Sciences: Renewable Fuel Standard Goals Unlikely To Be Met

April 27, 2012 by AEA Leave a Comment

The National Academy of Sciences (NAS) released a report in 2011 on the feasibility of meeting the Renewable Fuel Standard (RFS) passed during the Bush administration. To no one’s surprise, the NAS found that the United States could not meet the mandated 2022 biofuels targets for cellulosic ethanol without unexpected technological breakthroughs. The Energy Information Administration (EIA) has been forecasting that result since the passage of the Energy Independence and Security Act of 2007[i] that mandated the biofuels production levels.[ii] The report also concludes that the RFS “may be an ineffective policy for reducing global greenhouse gas emissions,” since the full life cycle of the fuel, including its transport, could result in higher emissions than conventional petroleum.

The Energy Independence and Security Act

In 2005, during the Bush administration, Congress passed the Renewable Fuel Standard (RFS) as part of the 2005 Energy Policy Act. In 2007, the RFS was amended in the Energy Independence and Security Act. To evaluate these policies, Congress asked the National Academy of Sciences to evaluate the Renewable Fuel Standard (RFS) goals,[iii] the potential environmental benefits and harm from biofuels production, and barriers to achieving the RFS mandate.

The Energy Independence and Security Act mandates 36 billion gallons of biofuels to be produced by 2022, of which 21 billion gallons must come from advanced biofuels by 2022 and the remainder, 15 billion gallons, from corn-based ethanol. Of the 21 billion gallons of advanced biofuels, 16 billion gallons must come from cellulosic biofuel by 2022 and 1 billion gallons must come from biomass-based diesel by 2012.[iv] Because cellulosic biofuel is not yet commercially viable, the Environmental Protection Agency (EPA) “is required to set the cellulosic biofuel standard each year based on the volume projected to be available during the following year.” In 2011, the EPA reduced the mandated level of 250 million gallons of cellulosic biofuel to 6.6 million gallons. EPA’s proposed 2012 standard sets the cellulosic ethanol level at 3.45 to 12.9 million gallons[v], well below the 500 million gallons mandated in the 2007 law.

The NAS Study

The National Academy of Sciences study was authored by a commission of researchers in transportation, economics and environmental studies and is not connected with the government. It is an independent group of specialists and experts that Congress can consult for expertise on issues.[vi] They were tasked to

Describe the biofuels that were produced in 2010 and expected to be produced and consumed in 2022.
Discuss the environmental harm and benefits of biofuels production and the barriers to achieving the mandates.
Review estimates of achieving the mandates on the prices on land, food, feed, and forest products; imports and exports of relevant commodities, and federal revenue and spending.

Their major findings are:

Without major technological breakthroughs, the cellulosic biofuel mandate of 16 billion gallons in 2022 is unlikely to be met because no commercially viable bio-refineries exist for converting cellulosic biomass to fuels. The 2022 mandate for corn-based ethanol of 15 billion gallons is achievable since the United States had the capacity to produce 14.1 billion gallons from corn grain at the end of 2010. And, the mandate for biodiesel of 1 billion gallons is also achievable since the United States had the capacity to produce 2.7 billion gallons of biodiesel from vegetable oils and animal fats at the end of 2010. In 2010, 13.2 billion gallons of corn-based ethanol and 311 million gallons of biodiesel were produced.
The RFS may be an ineffective policy for reducing greenhouse gas emissions because the impact of biofuel production on those emissions depends on a wide range of land-use and other management factors. The production of biofuels could result in an increase in greenhouse gas emissions compared to conventional petroleum because manufacturing and transporting the biofuel burns additional fossil fuels. Displacing current crops with biofuel crops could result in other land being converted for farming that carries with it a large one-time greenhouse gas emission increase. Depending on how feedstocks are planted, they can have a negative or positive environment on water quality, soil and biodiversity. And, the use of fertilizers and certain water treatments to grow the feedstocks could harm the local ecosystem.[vii]
Biofuels would only be cost effective with conventional petroleum in an environment of high oil prices, high carbon prices, technological breakthroughs, or a combination thereof. The study found that they would become economic if oil prices hit $191 per barrel in 2022 (2008 dollars), which is EIA’s high oil price case[1]; a carbon price of $118 to $138 per tonne of carbon dioxide equivalent with an oil price of $111 per barrel, EIA’s reference case oil price; or if government subsidies are high enough. The current subsidy of $1.01 per gallon of cellulosic biofuel blended with fossil fuels is insufficient at the $111 per barrel oil price to make them economic.
Because additional land (30 to 60 million acres) would be required for cellulosic feedstock production, the mandates are expected to increase competition between land uses and increase land prices and the cost of feed.
The mandate would increase federal budget outlays due to increased spending on payments, grant, loans, and loan guarantees and foregone revenue from biofuel tax credits, which currently end in 2012 but have historically been renewed. Federal programs that could be affected by increased spending are Agricultural Commodity Payments; Conservation Reserve Program; Nutritional and Other Income Assistance Program; and Grants, Loans, and Loan Guarantees.
The major barriers to cellulosic biofuel production are the high cost of production and the uncertainty regarding future markets. For example, bio-refineries are only willing to pay $25 for a ton of corn byproducts used in cellulosic ethanol production, but suppliers (farmers) say they need $92 to break even assuming a world oil price of $111 per barrel and no policy incentives. Likewise, there is a $106-per-ton price gap for switchgrass produced in the Midwest.[viii] Further, if the biofuel is ethanol, infrastructure and blending issues need to be resolved. Currently, gasoline can be a blend of 90 percent petroleum and 10 percent ethanol that would amount to an ethanol demand of about 14 billion gallons, lower than the mandate in 2022. Thus, either the blending level would need to be raised or flex fuel vehicles would need to make a major headway into U.S. auto market sales, raising infrastructure issues for sale of E85, a blend of 85 percent ethanol and 15 percent petroleum. Earlier this year, the EPA upped the blending share for ethanol in gasoline to 15 percent for vehicles of model year 2001 or newer, but the agency is facing law suits that claim it violated the Clean Air Act by approving E15 for use in some vehicles, but not in others.[ix]

The Cost of Producing Biodiesel

Neste oil, the world’s largest renewable diesel firm just upped its production costs for producing biodiesel from feedstocks consisting of oils, greases, and fats. Production costs, excluding feedstock costs, increased 25 percent from its 2009 level.[x] The increased production cost is primarily due to elevated utility costs and the increasing price of hydrogen, which are unlikely to decline. The communications manager of sustainability, oil products and renewables at Neste Oil stated:

“The production costs of our conventional fossil diesel are significantly lower than those of renewable NExBTL diesel. Petro-diesel is a “bulk product” produced at large refineries. NExBTL, on the other hand, is a small-volume specialty product when compared to fossil diesel. This is naturally reflected in the higher cost per unit.”

Obama Administration Investment in Biofuels

The Obama administration is spending up to $510 million in advanced biofuels over the next 3 years to fuel military and commercial ships and jets. Under the agreement, the Department of Energy, the Department of Agriculture and the U.S. Navy will each contribute $170 million to the program, which is to be matched by industry. The Navy sees this investment as part of the way to meet its portion of the administration’s goal of cutting the federal government’s dependence on fossil fuels by 50 percent by 2020, and it is expected to contribute to President Obama’s goal of cutting foreign oil imports by one-third by 2025.[xi]

Conclusion

Clearly, cellulosic ethanol is not ready for prime time, nor will it be by 2022 without an unexpected major breakthrough, according to the NAS report. Wallace Tyner, co-chair of the NAS panel, a professor of agricultural economics at Purdue University and co-director of the Center for Research on Energy Systems and Policy sums up the study as follows: “Whereas the technology and costs of making ethanol fuel from corn are well known, cellulosic on the other hand is new technology. We don’t know how it works. We don’t know how much it will cost. There are no plants in operation. Here we are in 2011 at 0 gallons and we have to get to 16 billion gallons by 2022. That’s double or triple how fast ethanol fuel became commercially viable. Everybody in the industry wants to build the fourth or fifth plant. Nobody wants to build the first.”[xii]

Lately, much has been made with the Solyndra bankruptcy. Some people claim that it was an isolated incident, but that is incorrect. Solyndra was a product of policymakers thinking they were smarter than the market. They argued that Solyndra could “work” if the government would provide loan guarantees. With cellulosic ethanol, the Bush administration argued that a guaranteed market through a renewable fuel standard would “work.” In both these cases and in many others, the loan guarantees, the mandates, and the subsidies did not work because the technology is just too expensive even with millions or even billions of dollars in special treatment.

So, it is unlikely that the cellulosic biofuel mandates in the Energy Independence and Security Act will be met. Hopefully, the Administration and Congress will use this as a lesson for the future and not mandate production levels or provide loan guarantees for technologies not commercially viable.

[1] The breakeven price was not calculated, but would be between EIA’s reference oil price and high oil price, i.e. between $111 and $191 per barrel (2008 dollars).

[i] http://energy.senate.gov/public/_files/getdoc1.pdf

[ii] See Energy Information Administration, Annual Energy Outlook 2011 and preceding editions,http://www.eia.gov/forecasts/aeo/

[iii] National Academy of Sciences, Renewable Fuel Standard Potential Economic and Environmental Effects of U.S. Biofuel Policy, October 2011, http://www.nap.edu/openbook.php?record_id=13105&page=R1

[iv] http://energy.senate.gov/public/_files/getdoc1.pdf

[v] The Hill, Next-wave ethanol falls short in EPA’s new 2012 fuel standards, June 21, 2011, http://thehill.com/blogs/e2-wire/677-e2-wire/167651-next-wave-ethanol-falls-short-as-epa-sets-2012-fuel-standard

[vi] USA Today, Ethanol fuel use goal likely a bust, science panel says, October 4, 2011,http://content.usatoday.com/communities/driveon/post/2011/10/report-biofuels-loing-failure-more-greenhouse-gas-unprofitable-subsidy-oil-cellulosic-ethanol-/1

[vii] EE News, BIOFUELS: Study raises questions about RFS impacts, goals, October 4, 2011, http://www.eenews.net/Greenwire/2011/10/04/3

[viii] EE News, BIOFUELS: Study raises questions about RFS impacts, goals, October 4, 2011,http://www.eenews.net/Greenwire/2011/10/04/3

[ix] Institute for Energy Research, March 28, 2011, http://www.instituteforenergyresearch.org/2011/03/28/epa-pushes-ethanol-on-american-consumers/

[x] Auto Blog Green, World’s largest renewable diesel refiner says cost of fuel is way more than anticipated, September 28, 2011, http://green.autoblog.com/2011/09/28/worlds-largest-renewable-diesel-refiner-says-cost-of-fuel-is-wa/

[xi] The Hill, Obama administration to invest $510M in biofuels industry to power ships, jets, August 16, 2011,http://thehill.com/blogs/e2-wire/677-e2-wire/177041-biofuel-grafs

[xii]USA Today, Ethanol fuel use goal likely a bust, science panel says, October 4, 2011,http://content.usatoday.com/communities/driveon/post/2011/10/report-biofuels-loing-failure-more-greenhouse-gas-unprofitable-subsidy-oil-cellulosic-ethanol-/1

Filed Under: News, Products and Power, Renewable Fuel Standard Tagged With: rfs

New EPA GHG Rule is Latest Assault on American Energy

April 26, 2012 by AEA Leave a Comment

“The Obama agenda seeks to control the way we live, work, and act by controlling the sources of energy we use. This rule gives more power to Obama regulators by giving fewer sources of affordable energy to American consumers.”
– IER President Thomas J. Pyle

WASHINGTON D.C. — The U.S. Environmental Protection Agency is preparing today to issue a proposed rule for greenhouse gas emissions from new power plants, a move that industry experts believe “effectively bans new coal plants” in the United States. Currently, coal-fired energy provides nearly 45 percent of America’s electricity needs, while solar and wind energy provide a combined 2.33 percent.

IER President Thomas Pyle released the following statement in advance of EPA’s proposed rule:

“President Obama promised to bankrupt coal-powered electricity in the United States, and this latest rule — when combined with the administration’s new rules for mercury emissions and cross-state pollution — makes good on that promise. Already, towns like Craig, Colo., whose economies rely on coal-fired electricity generation, are struggling under the burden of Obama regulations.

“Because the administration couldn’t shut down towns like Craig through cap-and-trade laws, the President has determined to impose his agenda through the EPA. This development is not surprising, given the president’s assurance that cap-and-trade was ‘just one way of skinning the cat.’

“The United States has the largest coal reserves of any country in the world with 486 billion short tons of technically recoverable resources. States like Wyoming, West Virginia, Kentucky, Pennsylvania, and Montana lead the nation in producing this valuable resource for affordable electricity. If the EPA’s new rules are finalized, entire industries across the United States will be pushed out of business — and jobs with them.

“The EPA’s increasingly politicized rule making is clear. Administrator Lisa Jackson and her regulatory enforcers are advancing an agenda that gives tremendous financial benefit and market advantage to the president’s closest allies in the renewable sector and satisfies the ideological demands of environmental extremists who want to destroy traditional energy in America.

Filed Under: News, Products and Power Tagged With: greenhouse gases

Death and Toxins: How Krugman Botched His Mercury Commentary

April 25, 2012 by AEA 1 Comment

Critics of NYT columnist and blogger Paul Krugman know that the economist—who won his Nobel award for work on international trade—has a habit of carelessly repeating the “facts” on environmental issues put out by his liberal colleagues. Yet Krugman’s blog post on the EPA’s decision to regulate mercury emissions from power plants was so factually mistaken and incredibly misleading that it was surprising even by his standards. In this post I’ll clarify the depth of the chasm between Krugman’s comments and reality.

Krugman on Mercury Regulation

Here is how Krugman used his extraordinary megaphone at the NYT blog to deal with the EPA’s decision. Krugman first quotes two paragraphs from Grist writer David Roberts, then returns to his own (Krugman’s) commentary:

David Roberts reports on the EPA’s decision, finally, to regulate mercury from coal plants:

Anyone who pays attention to green news will have spent the last two years hearing a torrent of stories about EPA rules and the political fights over them. It can get tedious. After a certain point even my eyes glaze over, and I’m paid to follow this stuff.

But this one is a Big Deal. It’s worth lifting our heads out of the news cycle and taking a moment to appreciate that history is being made. Finally controlling mercury and toxics will be an advance on par with getting lead out of gasoline. It will save…tens of thousands of lives every year and prevent birth defects, learning disabilities, and respiratory diseases. It will make America a more decent, just, and humane place to live.

[Back to Krugman writing:] Let me repeat part of that: it will save tens of thousands of lives every year and prevent birth defects, learning disabilities, and respiratory diseases. This is actually a much bigger issue, when it comes to saving American lives, than terrorism.

As Roberts explains, we’ve known about these costs of mercury pollution for decades, yet it took until now to get something done. The reason is, of course, obvious: special interests, hiding behind claims of immense economic damage if anything was done, were able to block action. [Emphasis in original.]

This is Krugman’s preferred M.O. when it comes to environmental issues: Copy-and-paste wild numerical claims, no matter how implausible on their face, and then pretend that all of the scientists agree with Krugman, while anyone who objects is either a fool or a paid shill of big business.

In this case, the numbers were so absurd that I decided to spend a few hours digging into the matter more deeply. Even those who are familiar with the progressive Left’s willingness to bend numbers to support their ideological causes may be surprised at what I uncovered.

The Origins of a Bogus Statistic: The Liberal Blogosphere Telephone Game

Most readers are probably familiar with the “telephone game,” in which one person whispers a statement to a second person, who whispers it to a third, and so on. With a big enough group, by the time the “statement” reaches the last person, it has morphed into something only faintly resembling the original utterance.

Something analogous partially explains what happened with Krugman’s over-the-top analysis. Glancing up again at the Krugman quotation, notice that the good doctor—in a post titled, “The Meaning of Mercury”—cited the claim that the EPA’s decision will “save tens of thousands of lives every year,” and then Krugman wrote, “[W]e’ve known about these costs of mercury pollution for decades.”

Because of Krugman’s title and discussion, the innocent reader would be led to believe that “the science” had shown that mercury pollution itself was responsible for at least 20,000 deaths annually, in the same way that (say) car crashes are responsible for a large number of deaths every year.

This is why my alarm bells went off. After all, in 2007 (the latest year of finalized data) the U.S. only had 2.4 million deaths total, with much of this number due to causes clearly unrelated to mercury. (For example, more than 123,000 died from accidents, some 35,000 were suicides, and 18,000 were homicides.) Was Krugman really telling us with a straight face that he thought at least 20,000—the lowest number that would render “tens of thousands” an accurate description—deaths were due to mercury emissions from coal-fired power plants?

We can see how Krugman’s version of reality starts to unravel, just by looking more closely at the very quote Krugman himself selected from David Roberts, who had written: “Finally controlling mercury and toxics will be an advance on par with getting lead out of gasoline” (italics added). Krugman, whether intentionally or through ignorance, led his readers to believe that this was a discussion about mercury, when, as we will see, the (bogus) statistic isn’t based on mercury emissions at all.

“Saving Lives” versus “Preventing Premature Deaths”

If we follow Krugman’s link to David Roberts’ piece, we don’t see any specific explanation of the “tens of thousands of lives” claim. However, in that piece Roberts’ links to this guest post at ClimateProgress (Joe Romm’s blog), by Daniel J. Weiss and Jackie Weidman. It is here that we start learning where the “tens of thousands of lives” number comes from, because the authors write, “These rules will remove millions of pounds of mercury, lead, arsenic and other dangerous pollutants from coal plants, preventing 17,000 premature deaths annually.”

Notice that the telephone game has struck again. Weiss and Weidman say the rules will prevent “17,000 premature deaths annually.” David Roberts incorrectly translated that into a claim that the rules will “save tens of thousands of lives.”[1] Besides being wrong numerically, it’s also misleading, since preventing a “premature death” doesn’t have quite the same ring as “saving lives.”

If a new air traffic control system reduces airplane crashes, so that fewer people die from “airplane crash” every year, then it is clearly saving lives, and the evidence for the efficacy of the new system is quite objectively verifiable. But if instead someone claims that a new pill will reduce “premature deaths” by a certain number each year, that is a much more abstract claim, dependent on a theoretical model. The new pill might in fact be a wonderful boon to public health, but the researchers in question have a lot more leeway to come up with a wildly wrong number when they can play with “preventing premature deaths.”

Reporting the Top of the Range Instead of the Range

Alas, even the “prevent 17,000 premature deaths” claim has fallen victim to the telephone game. If we follow the link that Weiss and Weidman provide, we are led to the EPA analysis fueling much of the progressive blogosphere’s commentary on the issue. Here we see, at long last, the origin of the factoid. On page 3 the report explains, “In 2016, these proposed rules would avoid: 6,800 – 17,000 premature deaths.” Thus, when Weiss and Weidman confidently asserted that the rules would “prevent…17,000 deaths annually,” they were reporting the very highest number in a range given by the EPA. (Note also that the low end of the range wouldn’t even constitute ten thousand, let alone “tens of thousands.”)

Bait and Switch: None of This Is About “Air Toxics” After All

We have already seen the telephone game’s ability to distort and inflate, resulting in Paul Krugman’s absurd implication that the scientific consensus has known for decades that mercury emissions from power plants currently cause at least 20,000 deaths annually, and that anyone who disagrees must be stupid or corrupt.

However, a reasonable person might respond, “Okay Murphy sure, the figures weren’t just about mercury, but ‘mercury and other air toxics.’ It’s also true Murphy that the actual number might be as low as 6,800 premature deaths avoided, rather than ‘tens of thousands of lives saved.’ But still, Krugman and his allies are only guilty of inflating the numbers and botching the summary of the facts. The basic spirit of their analysis is still sound, right?”

Unfortunately, what is happening here is far more Orwellian than a mere telephone game. The EPA’s analysis is based on a gigantic bait-and-switch, as Dr. Anne E. Smith explained in her August, 2011 technical commentary on the EPA’s proposed rule. From Smith’s summary of her findings:

EPA reports that the Proposed Rule will produce annual benefits of 6,800 to 17,000 avoided premature deaths and other types of health effects reductions, with an estimated value ranging from $53 billion to $140 billion, but these benefits have nothing to do with air toxics at all. The fact that none of these benefits are due to air toxics reductions is quite clear if one reads the Executive Summary (Chapter 1) of the RIA. [Emphasis in original.]

Indeed, if one knows what to look for, this shocking revelation is implicit in the EPA’s own fact sheet (which the ClimateProgress writers Weiss and Weidman linked to). On the very same page that provides the “6,800 – 17,000 premature deaths” bullet point, the EPA document says:

The updated standards will provide certainty and level the playing field so that all power plants will have to limit their toxic emissions – ultimately preventing 91 percent of the mercury in burned coal from being emitted into the air. The rule provides up to 4 years for facilities to meet the standards.

EPA did not estimate the benefits associated with reducing exposure to air toxics or other air pollutants, ecosystem effects, or visibility impairment. However, the proposed toxics rule would cut emissions of pollutants that are of particular concern for children. Mercury and lead can adversely affect developing brains – including effects on IQ, learning, and memory.

In addition to the benefits of reducing exposure to air toxics, these standards would reduce concentrations of fine particles (PM_2.5) in our air. This will significantly improve public health by preventing hundreds of thousands of illnesses and thousands of premature deaths each year. [Emphasis added.]

Thus we see that the figures (both for premature deaths and economic benefits) cited by the progressive bloggers refernot to emissions of mercury by itself or even of mercury plus all other “air toxics” combined, but rather to a certain type of fine “particulate matter,” denoted PM_2.5. In other words, EPA proposed a rule to limit mercury and other “air toxics” emissions and then, to justify the rule, almost completely relied on a model of the costs and benefits of reducing PM_2.5emissions, which would be an incidental byproduct of the rule. Thus, even if we accept the EPA’s analysis as gospel truth,the numbers of “lives saved” cited by Krugman have virtually nothing to do with mercury at all.

But wait, it gets worse. As Dr. Smith explains later (pp. 6-7) in her analysis, the modeling assumptions behind these PM_2.5 numbers are themselves quite dubious:

[R]eaders unfamiliar with the literature on PM_2.5 health risks should be aware that the estimates of PM_2.5-attributed deaths (such as the 6,800 to 17,000 that EPA is attributing to the Proposed Rule) are based entirely on statistical associations between total mortality rates in various locations of the US and their respective monitored, region-wide ambient PM_2.5 concentrations….EPA’s estimate of 6,800 to 17,000 PM_2.5-related premature deaths avoided in 2016 as a result of the Proposed Rule is based on an assumption that 130,000 to 320,000 deaths, respectively, of 2005’s US deaths were hastened by breathing ambient PM_2.5….And yet, EPA identifies not a single death during 2005 that was attributed, even in part, to exposure to ambient PM_2.5. If PM_2.5 is indeed having this estimated effect on the public health, there is no evidence indicating when or where these events occurred, or who was affected. Rather, these mortality estimates are merely inferences drawn after making a host of assumptions about how to convert a statistical association into a concentration-response function. No one really even knows what types of deaths might be implicated. A common belief among researchers is that the deaths are primarily cardiovascular in nature, but this is far from an established fact: everything from cardiovascular causes to diabetes to lung cancer has been mentioned as having such an association in one paper or another. There is no clinical evidence to inform these inferences either, despite at least 15 years of efforts by researchers to find a clear physiological mechanism to explain and lend credibility to these estimates based solely on statistical correlations.

Conclusion

The deeper one digs into the actual science backing up the wild claims of Krugman & Co. on mercury regulation, the weaker their rhetoric becomes. The implausible assertions in Krugman’s blog post were generated by a comedy of transgressions, ranging from (perhaps honest) poor paraphrasing, to reporting the top number of a wide range, to justifying regulations on air toxics emissions based on dubious models of the health effects of particulate matter.

In conclusion, let me be clear: No one is claiming that little kids should play with mercury. (In fact, will Krugman, David Roberts, et al. join IER in opposing the government’s phased-in ban on incandescent bulbs that will effectively force all schools and daycare centers—not to mention homes—to use mercury-filled CFLs? These guys keep telling us how dangerous mercury is, after all.) Yet the public should get mighty suspicious when the allegedly airtight evidence on the benefits of mercury regulation turns out to be so very fragile indeed.

[1] Maybe Roberts is adding EPA’s claim of avoiding 17,000 premature deaths to other numbers, but if so, he fails to note his source.

Filed Under: Facts, News, Products and Power Tagged With: coal, EPA, Krugman, MACT, Mercury Regulation