Costs and benefits of EPA's new emissions rule for power plants

Yesterday, EPA Administrator Lisa Jackson announced the agency's new Mercury and Air Toxics Standards, which will reduce emissions of heavy metals and acid gases from coal- and oil-fired power plants. The approximately 1,400 units that EPA expects to be affected by the rule (because they aren't already meeting the standard) will have up to four years to come into compliance. An EPA fact sheet explains, "A range of widely available and economically feasible technologies, practices and compliance strategies are available to power plants to meet the emission limits, including wet and dry scrubbers, dry sorbent injection systems, activated carbon injection systems, and fabric filters."

In 2016, the rule is expected to deliver health benefits totaling between $37 billion and $90 billion. These come from avoiding:

  • 4,200 to 11,000 premature deaths,
  • 2,800 cases of chronic bronchitis,
  • 4,700 heart attacks,
  • 130,000 cases of aggravated asthma
  • 5,700 hospital and emergency room visits,
  • 6,300 cases of acute bronchitis,
  • 140,000 cases of respiratory symptoms,
  • 540,000 days when people miss work, and
  • 3.2 million days when people must restrict their activities.

Overall, the agency calculates "that for every dollar spent to reduce pollution from power plants, the American public will see up to $9 in health benefits." We can also expect to see a benefit in terms of jobs:

EPA estimates that manufacturing, engineering, installing and maintaining the pollution controls to meet these standards will provide employment for thousands, potentially including 46,000 short-term construction jobs and 8,000 long-term utility jobs.

The health and job benefits do come with a cost, of course: a nation annual price tag of $9.6 billion, according to EPA estimates. Plants that have already upgraded their equipment can now benefit from their investments, but those that haven't will have to spend some money. Some of those costs will be passed along to consumers - and, indeed, a couple of the commenters on EPA's blog post about the new standards refer to higher electric bills they expect to receive. EPA addressed the issue of electricity prices in their proposed rule, noting that costs to consumers in 2015 and beyond depend in part on how much energy efficiency improves. For instance, EPA modeling found the new rule to increase retail electricity prices by 3.7% in 2015, but that would drop to 3.3% with improved energy efficiency -- and in 2020 and 2030, the change could either be increases of 2.6% and 1.9%, respectively, or a decrease below baseline if energy efficiency policies are adopted.

We've all benefited financially from relatively cheap electricity, but we've all been paying the costs in terms of health. A 3.7% increase in an electric bill can certainly be a hardship for some families, but so is a heart attack or a bad case of childhood asthma.

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There have been a number of hectoring ads in the Washington Post decrying this decision, all of which mention the cost while ignoring the health benefits.

It's really amazing how many people think this sort of regulation is always bad, and conveniently ignore that it's simply the nature of markets to not price for externalities.

News flash: Your power bill may *seem* pricier, but it was artificially low because it wasn't adjusted for the damages to the larger society. The cost was always there, just shifted.