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EPA accused of 'cooking the books' to drive up Clean Power Plan costs

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Essential Energy Insights - September 17, 2020

Essential Energy Insights September 2020

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EPA accused of 'cooking the books' to drive up Clean Power Plan costs

The U.S. Environmental Protection Agency made three seemingly simple changes in its cost-benefit analysis of the Clean Power Plan that boosted the cost of compliance with the rule by tens of billions of dollars.

Those changes, according to the EPA, are an effort to "increase transparency and illuminate the uncertainties associated with assessing benefits and costs" of the Clean Power Plan. It added that they provide a "bridge" to future analyses the agency intends to conduct on the Clean Power Plan's costs and are based on more current power sector assumptions.

Specifically, the agency has reprioritized the domestic benefits of the rule over the international impacts of reducing carbon, eliminated the reliance on co-benefits of reducing carbon and moved energy efficiency from the category of "cost savings" to "benefit." While seemingly subtle, the rejigged math pushed the EPA's 2015 highest range estimate of the cost of compliance in 2030 from $8.4 billion to $33 billion in costs to be avoided, according to a new regulatory impact analysis, or RIA, of the agency's repeal proposal.

The agency formally announced the Clean Power Plan would be repealed in an Oct. 10 press release, later releasing the regulatory documents associated with the rule. While the repeal proposal tracked closely to a draft copy of the document released Oct. 6, the previously unreleased RIA provides in depth detail on how the EPA arrived at its latest conclusions.

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Recalculating energy efficiency

The Obama administration's cost analysis considered energy efficiency to be a negative cost, which was used to adjust downward the cost of complying with the rule. The Trump administration is now changing that, switching energy efficiency to a benefit and adjusting the numbers to account for the cost of additional generation resources that would have been needed without assumed demand reductions from energy efficiency programs.

David Doniger, director of the Natural Resources Defense Council's Climate and Clean Air Program, said in a media call held Oct. 10 that the energy efficiency recalculation allows EPA Administrator Scott Pruitt to magnify the cost of compliance with the Clean Power Plan enormously, when the cost associated with meeting the rule's requirements are in fact going down.

The Sierra Club similarly asserts that the EPA has left out reduced fuel expenditures and other savings that power companies would achieve from energy efficiency investments, according to an Oct. 9 blog post from Sierra Club Climate Policy Director Liz Perera.

"Instead of considering these savings as reduced costs — which they are — EPA shifts these to the benefits side of the ledger. This allows the agency to tell the public that the Clean Power Plan's costs are dramatically higher than they actually would be in reality," Perera wrote.

Benefits of carbon reduction

President Barack Obama and his EPA Administrator Gina McCarthy touted the co-benefits of the Clean Power Plan as an added justification for the rule. The proposed repeal would shift away from that thinking, and environmental groups say that in doing so, the agency is ignoring the public health benefits of curbing carbon pollution.

Without the Clean Power Plan, the RIA noted, carbon emissions are projected to be between 413 million and 415 million short tons higher in 2030 than they would have been with the rule in place. Sulfur dioxide, or SO2, emissions are projected to be between 280,000 and 318,000 short tons higher, while nitrogen oxide, or NOx, emissions are estimated to be 278,000 to 282,000 short tons higher.

Instead of considering other pollutants, the EPA has determined that the focus should remain on the "targeted pollutant": carbon.

Doniger also takes issues with the EPA's interpretation of the science behind particulate matter and ozone. The agency now assumes a threshold exists under which human exposure to those pollutants is not harmful, but Doniger said the scientific consensus is that any exposure to those pollutants is harmful, however higher concentrations are certainly more so.

The social cost of carbon

Finally, the new analysis departed from the Obama-era calculation of the social cost of carbon by considering the domestic benefits of the rule over the international impacts of reducing the U.S. power industry's carbon pollution. The new analysis used a variation of the social cost of carbon to do so, which applies a dollar figure to every ton of carbon emitted. The metric is widely used by companies, governments and others inside and outside of the U.S.

In this instance, the EPA narrowed the social cost of carbon's scope to apply to domestic impacts consistent with President Donald Trump's executive order on energy independence. The RIA recalled that the White House's Office of Management and Budget has stated that the updated value is to be used in regulatory analyses until an improved estimate of the impacts of climate change to the U.S. can be developed.

This approach steps back from the EPA's previous practice of considering all of the damage a pollutant can cause both internationally and to future generations, according to Doniger. "These are math tricks, and they hide the real damage that is being done" by carbon, he said.

Obama-era calculations flawed

Altogether, the three changes are an attempt to erase the benefits of cleaning up older, inefficient coal-fired power plants, said Sierra Club Managing Attorney Joanne Spalding in an Oct. 6 interview. Spalding called the shift away from valuing co-benefits "disheartening," and she worries this change could set the tone for an EPA review of any number of extant regulations addressing other pollutants.

"By discounting the benefits to health and to children and to communities, EPA is completely prioritizing the fossil fuel interests. It's not surprising, but it's surprising that they would be so blatant about it, I guess," Spalding said. "By minimizing the harm that they cause, there's the opportunity to revisit all sorts of rules and say we got them all wrong."

Doniger charged the EPA with "cooking the books on the science and the economics" of the Clean Power Plan.

But EPA spokeswoman Liz Bowman said in an Oct. 6 statement that the Obama administration's calculation of the Clean Power Plan's benefits were flawed.

"The facts are that the Obama administration's estimates and analysis of costs and benefits was, in multiple areas, highly uncertain and/or controversial. The Trump administration is, in a robust, open, and transparent way, presenting a wide range of analysis scenarios to the public," Bowman said.

For coal miner Murray Energy Corp., the EPA's plan to repeal the regulation will have significant benefits for employment in the coal industry. In a statement, the company said 25,000 American jobs have been saved since the rule was placed on hold by the U.S. Supreme Court in February 2016.

National Mining Association president and CEO Hal Quinn similarly noted that repealing the rule will save an estimated 240 million tons of annual coal production and safeguard more than 27,000 mining jobs and an additional 100,000 jobs throughout the supply chain.

"A far better approach to achieving environmental improvement will rely on sound legal rules and proven technologies that can sustain the impressive reductions in emissions achieved over the past decades," Quinn said. "Such an approach is consistent with EPA's basic mission and will restore the important balance between costs and benefits that have been missing from federal regulatory policies."