A New Cost-Benefit Regulation Test

The Obama Environmental Protection Agency forced dozens of coal plants into premature retirement with its mercury rule that was belatedly struck down by the Supreme Court. While those plants can’t be restored, the Trump EPA is at long last reinstating more rigorous cost-benefit analysis to its rule-making.

As is its wont, the Obama EPA bent the law to its political agenda by mandating in 2012 that coal plants apply stringent mercury emissions controls. Section 112 of the Clean Air Act provides that the EPA may regulate “hazardous air pollutants” such as mercury from power plants “if the Administrator finds such a regulation is appropriate and necessary.”

But EPA failed to consider the cost of regulating mercury to determine whether doing so would be appropriate. EPA estimated that its mercury rule would cost consumers and the electric industry $9.6 billion annually—among the most expensive rules in the Federal Register—only after finalizing regulations.

The agency also calculated that the mercury rule would yield only $4 million to $6 million annually in direct benefits. But the agency puffed up the figures to $37 billion to $90 billion by claiming “co-benefits” from cutting emissions of particulate matter and sulfur dioxide, which are not regulated under Section 112’s “hazardous air pollutants” program.

In Michigan v. EPA (2015), Justice Antonin Scalia concluded that it is not “even rational, never mind ‘appropriate,’ to impose billions of dollars in economic costs in return for a few dollars in health or environmental benefits.” He added that “even if the Agency could have considered ancillary benefits when deciding whether regulation is appropriate and necessary—a point we need not address—it plainly did not do so” until later.

Photo: Luke Sharrett/Bloomberg News