How an agency counts costs and benefits can often determine whether it will regulate at all. EPA’s reconsideration of its co-benefit accounting methodology in the context of its mercury standard could have significant implications for environmental regulation.
Since the Reagan Administration, federal agencies have been required by Executive Order to quantify the costs and benefits of significant regulatory actions, and to avoid regulations that do more harm than good. Some statutes also explicitly or implicitly require an agency to consider the costs of regulation. The Clean Air Act’s “hazardous air pollutants” provision is such a statute. In Michigan v. EPA, the Supreme Court held that the statutory limitation to “appropriate and necessary” regulation required EPA to consider cost. Justice Scalia’s opinion for the Court explained, “One would not say that it is even rational, never mind ‘appropriate,’ to impose billions of dollars in economic costs in return for a few dollars in health or environmental benefits.”
But what counts as a benefit when EPA is regulating air pollution? Just the health effects of reducing the targeted pollutant? Or all the ancillary benefits (known as “co-benefits”) of other pollutants that are reduced along with it? What if those secondary pollutants are already regulated under different provisions of the same act?
The Obama Administration’s Mercury and Air Toxics Standard was estimated to impose $9.6 billion in compliance costs on the energy sector in exchange for $4 to $6 million in mercury-related benefits. But the rule was also estimated to generate $37 to $90 billion in co-benefits from incidental reductions of particulate matter, a pollutant that is regulated under EPA’s National Ambient Air Quality Standards. In a “Revised Supplemental Cost Finding” EPA has recently proposed to re-do its cost-benefit assessment for the mercury standard, excluding the particulate matter co-benefits and rescinding the Obama Administration’s finding that the mercury standard was “appropriate and necessary.”
Professor Dan Farber and Adam Gustafson will discuss different possible approaches to valuing co-benefits in the context of hazardous air pollution and environmental regulation more broadly.
Featuring:
Prof. Dan Farber, Sho Sato Professor of Law and Faculty Director of the Center for Law, Energy, and the Environment, University of California, Berkeley
Adam Gustafson, Partner, Boyden Gray & Associates PLLC

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