Saturday, August 5, 2017

The Price of Climate Deregulation: Adding Up the Costs and Benefits of Federal Greenhouse Gas Emission Standards

Federal climate regulations are currently under attack, in part due to the perception that these regulations will impose excessive costs on regulated industries and society as a whole. But according to federal projections, the benefits of these regulations would significantly outweigh the costs. In a new paper, we added up the projected economic impacts of major federal rules aimed at reducing greenhouse gas emissions and found that the net benefits could reach nearly $300 billion per year by 2030. The rules will also generate a variety of non-monetized benefits, such as improved public health outcomes and the creation of jobs, as well as climate mitigation benefits that will extend well beyond 2030.

Jessica Wentz and Nadra Rahman analyzed the projected economic impacts of major regulations aimed at controlling carbon dioxide and methane: U.S. EPA’s Clean Power Plan, the Bureau of Land Management’s Methane and Waste Prevention Rule, EPA’s 2016 New Source Performance Standards for the oil and gas sector, and EPA’s emissions standards for both light-duty and heavy-duty vehicles.

Rahman and Wentz primarily aggregated EPA and Interior’s own cost-benefit projections of the Obama-era regulations. They also compared the values to separate cost-benefit analyses developed by independent researchers, a number of whom challenged the agencies’ analyses of the regulations, alternately stating that EPA and BLM had overestimated benefits or underestimated costs.
The $370 billion in gross benefits includes the positive impacts of reducing 980 million metric tons of carbon dioxide equivalent by 2030, along with the health benefits of also reducing other pollutants, such as nitrogen oxides.

These benefits would be four times greater than the projected $84 billion in total costs of implementing major regulations crafted under the Obama administration, said researchers in a paper published on the center’s website yesterday.

On a year-to-year basis, the economic benefits can either significantly exceed, or at the very least match, the cost of implementation. Some of the highest potential benefits come from implementing the Clean Power Plan and from standards for medium- to heavy-duty vehicles. The total does not include other benefits like job creation and long-term climate change mitigation benefits.

Clean Power Plan
Based on EPA’s estimates, the net economic benefits of the rule could be around $7 billion in 2020, and then rise to $46 billion in 2030.  These figures included: compliance costs, an estimated reduction of 74 million metric tons of CO2 emissions in 2020 and a reduction of 375 million metric tons in 2030. The dollar values also counted health benefits resulting from the reduction of other pollutants like sulfur dioxide and nitrogen oxides. The economic benefits don’t include other potential positives of the rule like avoided premature deaths, lower exposure to hazardous air pollutants and impacts on ecosystems.

The researchers note that the economic benefits are calculated using a social cost of carbon, a complex metric that puts a dollar value on the emission of 1 ton of carbon. The value takes into account how rising global temperatures will affect the planet and society. In the president’s “energy independence” executive order, Trump signaled that the administration would seek to alter this method of calculating the costs of climate change, though agencies could use a related metric that would only take into account domestic impacts of climate change.

Motor Vehicle Emissions
Light-duty vehicles: The fuel efficiency improvements alone for light-duty vehicles are enough to offset the costs of implementing rules on emissions from these vehicles, according to the EPA figures the researchers cited. The net economic benefits of fuel efficiency standards for model years 2012 to 2016 are expected to be $34.7 billion in 2020 and $100.4 billion in 2030. Meanwhile, standards for model years 2017 through 2025 could lead to net benefits of $168 billion in 2020 and $81.4 billion in 2030. Medium and heavy-duty vehicles: According to EPA data, phase one of emissions standards for these vehicles, for model years 2014 to 2018, could lead to net benefits of $10 billion in 2020 and $27.3 billion in 2030. Phase two, for model years 2019 to 2028, could have net benefits of $31.5 billion in 2020 and $74.4 billion in 2030.

New Source Performance Standards for the Oil and Gas Sector
As with the Clean Power Plan, EPA used the social cost of carbon metric to calculate the net monetary benefits of controlling methane, volatile organic compounds and toxic air pollutants emitted from new and modified sources. The net benefits of the rule could be $37 million by 2020 and go up to $180 million in 2025. These numbers consider compliance costs and methane emissions reductions of 300,000 short tons in 2020 and 510,000 short tons in 2025. Not all benefits were included. EPA did not put a dollar value on the health benefits of potential reductions in ozone, which is formed from volatile organic compounds. Estimates also did not include potential natural gas savings from captured methane.

By Nadra Rahman and Jessica Wentz
August 3rd, 2017       

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