Cost benefit analysis flawed
Sarah McCoin stands along Swan Pond Circle Road near the TVA Kingston Power Plant.
(This is the latest in a weekly series of 50 Tr-Ash Talk blogs discussing the dangers of coal ash. Earthjustice hopes that by December 2011, the third anniversary of the TVA coal ash spill, the EPA will release a coal ash rule establishing federally enforceable regulations ensuring the safe disposal of this toxic waste.)
Today, the House Energy & Commerce Subcommittee on Oversight and Investigations heard Office of Management and Budget (OMB) official Cass Sunstein speak on the Obama Administration’s view of regulatory reform. Sunstein trumpeted the economic benefits of President Obama’s new Executive Order – Improving Regulation and Regulatory Review.
President Obama’s new executive order, publicly announced in a Wall Street Journal article is widely regarded as a giveaway to industry, providing a set of economic criteria to consider when developing, changing or repealing regulations. This reinforces the administration’s stance on weighing economic costs against public health benefits using techniques like cost-benefit analysis. Cost-benefit analysis attempts to monetize the actual impacts of regulations like missed school and work days due to sickness, deaths from cancer resulting from exposure to pollution as well as economic impacts. While this is theoretically a useful tool, the analysis has a long list of shortcomings that ultimately results in uncalculated, therefore unconsidered, harm to our health, environment and wallets. In the case of the coal ash rule, the analysis was grossly inaccurate, resulting in a cost figure more than 20 times the actual number ($23 billion vs. $1.5 billion).
The inaccuracies included double counting of pollution reductions that the EPA has already claimed would occur separately under Clean Air Act rules adopted in August 2010, unreasonable predictions regarding behavior of the recycling market and unrealistic assumptions about potential energy savings. The findings are detailed in the recent report "Re-evaluation of Estimates in USEPA Regulatory Impact Analysis" by Earthjustice, Environmental Integrity Project and Stockholm Environment Institute’s U.S. Center (based at Tufts University).
It is absurd that these inaccuracies were not caught in a rule development process that started in October 2010 and survived an unprecedented six-and-a-half month review at OMB (OMB's staff are the cost-benefit analysis experts and are under executive order to review a regulation for no more than 90 days, with an occasional 30 day extension – the coal ash rule was there for nearly twice that).
Beyond the inflated numbers in this case, there are ever-present limitations with cost-benefit analysis. It cannot and does not thoroughly account for health costs or benefits. Typically, as with coal ash rule, cost-benefit analysis accounted for costs from associated cancer deaths from some pollutants (in the case of coal ash - from only one pollutant), but by no stretch of the imagination does the analysis fully consider health costs from multiple pollutants and non-cancer impacts. Further, cost-benefit analysis never fully takes into account the following big questions:
- How much should be invested in saving lives?
- Should those without money only get the care they can afford?
- What do we owe future generations?
- Are we willing to destroy species and irreplaceable natural resources in exchange for other goods, or do we think they are qualitatively different and worthy of special treatment?
Yale Law Professor Douglas Kysar articulates these shortcomings through a legal lens in his recent book "Regulating from Nowhere: Environmental Law and the Search for Objectivity"
Cost-benefit analysis, as used in the coal ash rule, failed to fully consider environmental damage, while assiduously counting and irrationally inflating costs on the other side of the ledger. The analysis doesn’t do justice to the TVA spill’s neighbors like Sarah McCoin (pictured), those drinking from arsenic-laden wells everyday, communities breathing toxic dust blowing off uncovered ash dump sites, and future generations who will have to clean up the mess we make.
While the administration’s application of cost-benefit analysis was wholly disappointing with the proposed coal ash rule, we ask them to employ the protective tenants of the new EO as religiously as they will be following the economic criteria when finalizing the rule and considering other regulations. By executive instruction, the government is to use the best available science in decision-making, allow public participation and open exchange and stick to the 120-day maximum OMB review period. Additionally, they’ve been directed to ensure the costs calculated using techniques like cost-benefit analysis are as accurate as possible in quantifying the benefits that matter most to people, not industry’s bottom line.