EPA’s PM2.5 Co-Benefits PR Trick Exposed

Summary

• If we consider just the hazardous air pollutants (HAPs) targeted by EPA’s Mercury Air Toxics Standards (MATS) rule, costs exceed quantifiable benefits by 1,600 times to 2,400 times–a potential PR disaster for the agency.
• To sell the rule to Congress and the public, EPA touted the “co-benefits” of the rule’s coincidental reductions in fine particulate matter (PM2.5) pollution.
• In fact, EPA attributes more than 99 percent of the rule’s monetized health benefits to collateral reductions in PM2.5-related emissions.
• But about 99 percent of those co-benefits occur in areas projected to be in attainment with the National Air Quality Standard (NAAQS) for PM2.5.
• To calculate the MATS rule’s PM2.5-related health benefits, EPA ascribes equal value to PM2.5 reductions in areas below and above the NAAQS.
• That is inconsistent with the basic concept of the NAAQS program, which is to set concentration standards at a level “requisite to protect public health . . . allowing an adequate margin of safety.”
• Once we factor in the lower probability of PM2.5 health effects in areas where exposures are already below the NAAQS, the value of the MATS rule’s co-benefits falls nearly to zero.
• The lion’s share of EPA-estimated Clean Power Plan health benefits also disappears.
• Unless EPA makes its impact assessments consistent with its NAAQS determinations, the agency’s benefit estimates will become increasingly overstated and less credible over time.

MATS Back in the News

EPA’s 2012 Mercury and Air Toxics Standards (MATS) rule, which established maximum achievable control technology (MACT) standards for mercury and other hazardous air pollutant (HAP) emissions from power plants, is again in the news. The Supreme Court on Monday rejected a petition by Michigan and 26 other states to freeze the rule.

Petitioners complained that EPA continued to implement MATS even though the Court last year deemed the rule to be unlawful. The Court held that EPA “strayed well beyond the bounds of reasonable interpretation in concluding that cost is not a factor relevant to the appropriateness of regulating [HAP emissions from] power plants.”

Although EPA did not compare costs and benefits when deciding whether to regulate power plant HAP emissions, it did compare costs and benefits when promoting the rule to Congress and the public. EPA boasted that although MATS would cost utilities $9.6 billion to implement in 2016, it would generate $37 billion to $90 billion in health benefits in the same year (77 FR 9306).

However, EPA attributed more than 99 percent of the quantified benefits to coincidental reductions in fine particulate matter (PM2.5)–a pollutant not directly targeted by the rule and not classified as a HAP in the Clean Air Act. Specifically, EPA’s Regulatory Impact Analysis (p. 5-93) claimed that reductions in PM2.5-related emissions would avert 4,200 to 11,000 premature deaths in 2016–annual “co-benefits” valued by the agency at $36 billion to $89 billion.

A study by economist Anne Smith of NERA Economic Consulting finds that even if we accept the epidemiological literature supporting an association between mortality and PM2.5 at today’s historically-low levels (skepticism is justified), the MATS rule’s co-benefit estimates are flimflam.

About 99 percent of the PM2.5 reductions attributable to MATS–and thus about 99 percent of the rule’s monetized health benefits–are projected to occur in areas already in attainment with EPA’s National Ambient Air Quality Standard (NAAQS) for PM2.5. In monetizing the co-benefits of collateral PM2.5 reductions in MATS and numerous other rules, EPA assumes the link between PM2.5 and mortality is as probable in areas below the NAAQS as in areas above it. That is inconsistent with the basic concept of the NAAQS program, which is to set pollution concentration standards at a level “requisite to protect public health . . . allowing an adequate margin of safety.”

Smith finds that “nearly 100 percent” of the PM2.5 co-benefits claimed for the MATS rule and EPA’s so-called Clean Power Plan exceed what “can be reasonably inferred” from the epidemiological studies on which the PM2.5 NAAQS is based.

In a commentary article, Smith’s colleague Scott Bloomberg contends that EPA’s penchant for overstating regulatory benefits is getting worse over time. He cautions that as PM2.5 concentrations continue to decline, EPA’s regulatory benefit estimates will become increasingly inflated and implausible.

EPA’s PR Problem 

EPA estimated that meeting the MATS rule’s emission standards would cost utilities $9.6 billion in 2016 yet would achieve only $4 million to $6 million in mercury-related health benefits in the same year (77 FR 9306). EPA did not even try to estimate the benefits of the Rule’s MACT standards for other HAPs such as chromium, nickel, and acid gases. For the HAP reductions that are the Rule’s statutory purpose, estimated costs are between 1,600 and 2,400 times greater than estimated benefits.

The actual benefit-cost ratio is likely even more abysmal. EPA not only had to skew the epidemiological evidence to infer health benefits worth $4 million to $6 million from the rule’s mercury reductions. It also had to make the unprovable claim that the required mercury reductions would boost the brainpower of a typical child born into a subsistence fishing household by an unmeasurable 0.00209 IQ points.

So if we consider just the rule’s HAP reductions, MATS is the poster child of all-pain-for-no-gain environmental regulation. A big PR problem for the agency.

EPA’s solution, as noted above, is to claim gigantic co-benefits from coincidental reductions in PM2.5 pollution.

EPA’s Co-Benefits PR Trick Exposed

Smith finds a pervasive “quantitative inconsistency” between the procedure EPA uses to set NAAQS and the benefit estimates EPA publishes in Regulatory Impact Analyses (RIAs) and elsewhere to promote its regulations.

Smith begins by noting that for the two main NAAQS pollutants, PM2.5 and ozone, epidemiological studies do not find a sharp threshold below which all adverse health effects can be ruled out. How then does EPA decide where to set the NAAQS so that allowable pollution concentrations are low enough to protect public health with an adequate margin of safety?

Basically, it’s a matter of expert judgment. As explained in the 2013 NAAQS for PM2.5, EPA examines the epidemiological literature reporting associations of PM2.5 and health effects, assesses the uncertainties, and decides where the “evidence of associations” is “strongest” and, where, conversely, the agency has “appreciably less confidence” in the reported associations. EPA sets the NAAQS at the point where its “confidence in the magnitude and significance of the associations is reduced to such a degree that a standard set at a lower level would not be warranted to provide requisite protection that is neither more nor less than needed to provide an adequate margin of safety” (78 FR 3139, 3161).

Smith brings out the inescapable implication. The likelihood that PM2.5 emission reductions will produce public health benefits must be less in NAAQS attainment areas than in non-attainment areas. By the same token, EPA must have lower confidence that PM2.5 reductions will produce health benefits in NAAQS attainment areas than in non-attainment areas.

Indeed, Smith argues, EPA’s confidence in the health benefits of PM2.5 reductions in attainment areas should be close to zero:

In order for a selected NAAQS level to be deemed as requisite to protect the public health, EPA’s subjective probability that the relationship exists at and below the selected NAAQS level must, logically, be very nearly zero. (Indeed, the subjective probability of continued effects must fall to nearly zero at an ambient concentration somewhere above the selected NAAQS level. This is because the NAAQS needs to include at least some margin of safety, and thus must be set at least somewhat lower than the level where expected risk is deemed to become too small to be considered a public health concern.)

Yet in the MATS and Clean Power Plan rules, EPA monetizes PM2.5 co-benefits as if the likelihood of health effects at levels below the NAAQ were equal to the likelihood above the NAAQS. That does not compute:

At the same time that EPA is setting NAAQS at levels where it has minimal confidence that the public health is affected at lower concentrations, the Agency’s RIAs are giving the same weight to risks calculated for population exposures below the NAAQS level as they do to risks calculated for population exposures above the NAAQS level. That is, RIAs assume elevated hazards exist with 100 percent certainty for all ambient pollutant exposure levels down to a zero concentration, inconsistent with EPA’s judgments (formed when assessing those pollutants’ hazards), which imply nearly zero percent certainty. EPA does not explain or try to justify why data that are too uncertain to use in the NAAQS preamble context are certain enough to use in the RIA context.

The final point in the paragraph above is the crux of the matter. EPA does not explain or try to justify why associations between PM2.5 and health that are too weak or uncertain to be used to determine what is requisite to protect the public health with an adequate margin of safety are strong and certain enough to calculate regulatory benefits.

MATS, Clean Power Plan Co-Benefits: Nearly Zero

The MATS rule’s collateral PM2.5 reductions will supposedly save 4,200 to 11,000 lives in 2016. But, Smith notes, Figure 5-15 of the MATS rule RIA “reveals that over 99 percent of those projected benefits are projected to occur in areas where the PM2.5 levels will already be below the PM2.5 NAAQS of 12 μg/m3.”  Which means: “If the MATS rule’s co-benefits are calculated probabilistically, accounting for the very low subjective probability that EPA assigned to the existence of the PM2.5-health effects relationships at levels below the NAAQS, the resulting estimate of expected benefits from the MATS rule becomes nearly zero.”

The Clean Power Plan RIA projects PM2.5 co-benefits of up to 4,100 lives saved in 2020 and 6,200 in 2030. In this case, too, Smith comments, “more than 99 percent of the co-benefits would be discounted if health risks below the NAAQS are assigned a much lower probability (or confidence weight) of risks above the NAAQS.”

PM2.5 Co-Benefits: Increasingly Implausible

EPA’s overstatement of PM2.5 co-benefits is increasing, argues NERA economist Scott Bloomberg in a commentary article on Smith’s study:

As the ambient air in the U.S. gets cleaner, a greater share of the population will be living in areas where confidence in the continued association between PM2.5 and mortality is near zero. Thus, the degree of overstatement in co-benefits estimates from one regulatory analysis to the next has been increasing over time and will continue to do so.

The Power Plan RIA projects tens of billions of dollars in annual health benefits from coincidental PM2.5 reductions. Recall that EPA’s NAAQS for PM2.5 is 12 micrograms per cubic meter (12 μg/m3). According to Bloomberg, recent NERA analysis “determined that 99 percent of the 2025 PM2.5 precursor emission reductions in the proposed climate rule were projected to occur in counties with an expected PM2.5 concentration in 2020 less than 12 μg/m3, of which 97 percent are below 10 μg/m3 and 55 percent are below 7.5 µg/m3.”

Bloomberg reports that, compared to the MATS rule, “the proposed climate rule has double the co-benefits in areas with expected PM2.5 concentrations very far below the ambient air quality standards (55 percent versus 27 percent in areas less than 7.5 µg/m3), while the fraction of co-benefits in areas at least 15 percent below the air standard (i.e., less than 10 µg/m3) has also increased substantially (i.e., to 97 percent from 89 percent).”

Why so?  “The simple reason for this is that the mercury co-benefits were based on air quality projected in 2015, while the Clean Power Plan co-benefits were based on air quality from 2020 and later—a much cleaner environment due to a very large number of emissions regulations poised to take effect after 2015.”

Consequently, the climate rule’s PM2.5 co-benefits “are even more unreliable and overstated because a far greater share of those co-benefits are associated with ever lower PM2.5 concentrations for which the EPA itself has significantly reduced confidence in PM2.5 mortality associations.”

Bloomberg concludes that, unless EPA makes its impact assessments consistent with its NAAQS determinations, the agency’s benefit estimates will become increasingly overstated and less credible “in each incremental air regulatory impact analysis going forward.”