The Trump administration proposed last month to change the way it calculates the costs and benefits of environmental regulations. The move is yet another to add to a long list of efforts by the Trump administration to roll back environmental regulations. Many of these efforts are now being fought in the courts—and not just by environmental and health advocates. Economists, energy modelers, electric grid engineers, and even former FERC commissioners are pushing back—and for good reason.
As one example, the Trump administration replaced the flagship Obama-era environmental rule the Clean Power Plan last summer with the Affordable Clean Energy (ACE) Rule. While the Clean Power Plan set ambitious targets to reduce carbon emissions from existing coal-fired power plants, the ACE Rule could potentially increase emissions by eliminating those targets and making it cheaper to produce power from coal plants. In doing so, the U.S. Environmental Protection Agency’s (EPA) own estimates show thousands more could die prematurely every year, along with a jump in the number of people suffering from respiratory disease. Experts across the spectrum agree that the rule doesn’t pass the test on the basis of critical science, industry experience, or technological feasibility.
On the science, the Rule vastly underestimates the cost per ton of carbon, or the “social cost of carbon,” which provides a gauge to justify stronger limits on carbon. While the Clean Power Plan put the social cost of carbon at around $45 per ton, the Trump Administration placed it between $1 and $6 per ton. The EPA erroneously arrives at this absurdly low value for carbon through two main changes to the way it calculated the social cost of carbon, and my colleagues and I at the University of Chicago Law School have challenged ACE based on these arguments.
First, the EPA considered only direct domestic impacts to the territorial United States—both failing to account for U.S. citizens, investments, and military assets abroad, and undermining the nation’s role in leading a global solution to climate change. Some would argue that by only considering domestic benefits, the United States loses its leadership role in the global fight against climate change and provides other countries like China and India with an excuse to follow in suit.
Second, to arrive at the low social cost of carbon value, the EPA used an outdated, high discount rate. The discount rate demonstrates how highly future benefits are valued. A low discount rate puts a high value on the future—it’s like purchasing insurance to protect against future disruptive events. Instead, the Trump administration chose to ignore the science that is already playing out and set a high discount rate. Putting aside what the administration may think about climate change, the dramatic decline in global interest rates over the last decade should have led the EPA to use lower discount rates.
If the Trump administration did not use the best available science, how did it fair on industry experience and technical feasibility? A look to what experts in those areas are saying paints a clear picture. For example, a group of former Federal Energy Regulatory Commissioners argue that, contrary to the EPA’s assertions, the Clean Power Plan was a cost-effective scheme to reduce emissions without compromising grid reliability or affordable electricity. They also say the Clean Power Plan was consistent with the Federal Power Act, the federal-state balance of power in energy regulation, and power sector trends. In other words, the reasons that the Trump Administration’s EPA gave for rejecting the Clean Power Plan were wrong.
Experts in the field of energy modeling point to the EPA’s own analysis to show that new efficiency requirements at existing coal-fired plants will produce electricity at a lower cost per unit, and therefore lead to more use of coal plants over cleaner sources—in turn leading to more CO2 pollution, not less. Along with more CO2 pollution, generating more electricity from coal-fired power plants will also increase toxic sulfur dioxide and nitrous oxides emissions that hurt public health. These modelers question whether no rule would be better than the ACE Rule when it comes to climate change, public health and the environment.
The Rule also lacks understanding of how complex and interconnected the U.S. power system is, according to electrical grid engineers. Where the Clean Power Plan leveraged the benefits of shifting generation to lower-emitting and often lower-cost sources of power such as renewable energy and natural gas, the ACE Rule’s approach to regulating “within the fence line” of a power plant effectively precludes the use of more economically-efficient market mechanisms that would have shifted generation to lower-emitting sources. The Clean Air Act requires the “Best System of Emissions Reductions.” This Rule does not meet that requirement.
Climate and environmental regulations necessitate policies based on facts and experience. Throughout the EPA, this basic justification is not being met— that is clear when looking at the Affordable Clean Energy Rule. Although one would hope our government would listen to and deploy real expertise, for now, we must depend on the courts to ensure the EPA adopts scientific- and experience-based approaches.
Alexander Valdes, University of Chicago Law School class of 2020, provided significant contributions to this article, and he, Benjamin Nickerson (also class of 2020), Robert Weinstock and I drafted the amicus brief that Professor Michael Greenstone submitted in this case.