MATS, Take Two: EPA Still Supports the Rule (And EPA Is Correct)

Late last week, EPA issued a Supplemental Finding, concluding that it is still “appropriate and necessary” to regulate hazardous air pollutants from coal- and oil-fired electric generating units.  The Supplemental Finding was necessary after the Supreme Court ruled earlier this year that EPA’s original decision to regulate HAP emissions from EGUs was flawed because EPA did not consider costs in making the decision.  Is the Supplemental Finding enough to ensure that the Mercury and Air Toxics rule mercuryis upheld this time around?  Time will tell, but it should be.

EPA actually provided a separate Legal Memorandum in support of the Supplemental Finding.  It makes interesting reading and it should be persuasive to any court that still takes Chevron seriously.  Basically, EPA has reviewed the benefits of the rule and found that they are sufficient to justify the costs that would result from regulating HAP emissions from EGUs.  Here are the highlights.

  • EPA is not required to conduct a formal cost-benefit analysis and, indeed, it would not be possible for EPA to do so. As EPA notes, what the Supreme Court required was that EPA take costs into account at the listing stage, before it has even written the regulations.  At this point in EPA’s analysis, there is no specific set of standards on the table and we therefore cannot know with any certainty either the costs or the benefits of the ultimate rule.  Of course, this argument also suggests that the dissent was correct in Michigan v. EPA, but that’s beside the point at this late date.
  • Even if EPA were required to conduct a cost benefit analysis, the benefits, including non-monetized benefits and ancillary benefits, justify the costs. Here, EPA attempts – successfully, I think – to hoist its critics on their own petard.  Critics complain that most of EPA’s benefits are “co-benefits” – reductions in emissions of non-hazardous particulates that will result from the rule.  However, as EPA notes, the entire reason we are in this mess is that Congress told EPA not to regulate EGU HAP emissions until it had studied whether the acid rain program would itself reduce HAP emissions sufficiently so that separate listing of EGUs as a HAP emissions source would be unnecessary.  In other words, EPA was supposed to take into account the co-benefits of acid rain regulation in deciding whether to regulate HAP emissions.  Is EPA not barred from considering the converse – whether HAP regulation would itself have ancillary benefits?  I don’t think so.

EPA should thus win this case, but that doesn’t mean I’m happy with the agency.  EPA refused to monetize all of the benefits of the rule and referred to “the known limitations on the Agency’s ability to monetize HAP-specific benefits.”  What are these limitations?  Assuming the rule survives, it will in fact result in certain costs.  It will also result in certain benefits.  Call me simplistic, but to me, by definition, we as a society would then be saying that the benefits of the rule exceed the costs.  We are thus implicitly monetizing the benefits of the rule simply by deciding to promulgate it.

Oh well, someday EPA and the environmental community will have their “Nixon in China” moment and embrace rigorous cost-benefit and cost-effectiveness analysis.  Until that happens, I’ll just have to keep ranting periodically.

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