Energy

Let’s Talk About The ‘Fuzzy Math’ Behind Obama’s Climate Plan

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Michael Bastasch Energy Editor
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The Trump administration seems poised to repeal the Clean Power Plan, and the media is warning Environmental Protection Agency (EPA) officials could use “fuzzy math” to justify rescinding the rule.

Indeed, “fuzzy math” may be involved, but that obscures the fact that “fuzzy math” was exactly how the Obama administration justified regulating power plant emissions in the first place.

The Obama administration claimed the Clean Power Plan (CPP) would only cost $8.4 billion and deliver public health and climate benefits ranging from $14 to $34 billion by 2030. The rule aimed to cut power sector carbon dioxide emissions 32 percent below 2005 levels by 2030.

Leaked documents suggest the Trump administration will make two major changes to its cost-benefit analysis of the CPP: use a more restrictive “social cost of carbon” metric and count fewer of the potential health benefits from reduced pollution.

Liberal groups promised to take EPA to court over its “cooking of the books,” which emphasizes the CPP’s cost over its alleged benefits. But their complaints largely echo those of conservative academics and groups critical of the CPP when it was released in 2015.

So, let’s take a trip back in time to see the two main ways the Obama administration “cooked the books” to justify its sweeping regulation of power plants.

Social Cost Of Carbon

The Obama administration claimed the CPP would yield $34 billion in monetized public health and climate benefits.

By climate benefits, they mean the economic cost of producing a ton of carbon dioxide from fossil fuels. This metric is called the “social cost of carbon” (SCC), and it’s a number that’s widely debated among economists.

Let’s just assume EPA’s number is the “right” one. EPA claims the CPP will generate $20 billion worth of climate benefits as utilities shift away from coal and toward natural gas and green energy.

But EPA’s $20 billion figure represents global benefits, most of which Americans are unlikely to see — assuming all EPA’s science and assumptions are correct.

That means Americans will be paying to shift to green energy, but most of that would benefit people in other countries. The Obama administration argued it was appropriate to count global benefits because “the world’s economies are now highly interconnected.”

“Adverse impacts on other countries can have spillover effects on the United States, particularly in the areas of national security, international trade, public health and humanitarian concerns,” EPA wrote in its 2015 regulatory analysis.

Global warming is a global phenomenon, so we should count the global benefits of U.S. action, right? Brookings Institution scholars addressed this problem when the rule was released, and again in recent testimony.

“The use of a global social cost of carbon to estimate benefits means that agencies will adopt regulations that could cost Americans more than they receive in climate-related benefits,” Brookings scholar Ted Gayer told Congress in February.

Basically, using global benefits makes the rule look more beneficial than it would otherwise be. Gayer said “the estimated domestic climate benefits only amount to $2-$7 billion, which is less than EPA’s estimated compliance costs for the rule of $7.3 billion.”

Co-Benefits

The Obama administration also argued the CPP would yield $14 to $34 billion in public health benefits from fewer people dying from air pollution, mostly from fine particulate matter and ground-level ozone.

Cutting traditional pollutants, not carbon dioxide, is where most of the CPP’s benefits come from. It’s also one of the most contentious areas of regulatory analysis given the uncertainties linking pollutants to deaths.

EPA says fine particulates, or PM2.5, and ozone contribute to premature death and illnesses, like asthma and lung disease. EPA admits the “reduction in premature fatalities each year accounts for over 98 percent of total monetized co-benefits from PM2.5 and ozone.”

EPA also counts pollution reductions in areas that already meet federal pollution standards. Environmentalists favor this approach since it inflates the benefits of regulation, and also “because further curbing those pollutants means people will be even healthier,” Politico noted.

The Trump administration reportedly won’t count pollution co-benefits in areas that already meet EPA standards. That would deflate the potential benefits to reducing coal use.

There are a lot of uncertainties when determining how pollutants impact public health. Most of the evidence we have is based on epidemiological studies showing associations between pollution levels and premature death.

The George Washington University Regulatory Studies Center director Susan Dudley and Business Roundtable executive vice president Marcus Peacock noted the pitfalls of EPA’s methodology in a recent study.

Dudley and Peacock note that while “EPA assumes a causal relationship based on epidemiological evidence of an association between PM concentrations and mortality” the agency “has not been able to identify a biological mechanism to explain the observed correlation.”

Furthermore, EPA estimates public health impacts based on a linear relationship, so that pollution at every level have the same impacts on public health.

“Both theory and data suggest that thresholds exist below which further reductions in exposure to PM2.5 do not yield changes in mortality response, and that one should expect diminishing returns as exposures are reduced to lower and lower levels,” Dudley and Peacock wrote.

EPA’s regulatory analysis of the CPP tacitly the broad assumptions made about pollutants.

EPA’s models “assume that all fine particles, regardless of their chemical composition, are equally potent in causing premature mortality,” noting “the scientific evidence is not yet sufficient to allow differentiation of effect estimates by particle type,” the document reads.

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