The EPA estimates that by 2015 the benefits of the Clean Air Interstate Rule (CAIR) are $85-$100 billion (depending on whether a 7% or 3% discount rate is used) while the costs are $3.6 billion. Benefits are greater than costs which is good news, but let's look at the numbers a bit more closely (here is the Regulatory Impact Analysis; easy now, it is 421 pages).
Tim finds that with 84 million households in the 28 affected eastern states and DC, the cost is $48/household (I come up with $43=3600/84 but who's counting?). Using the same logic, each household benefits by $1012 (using the lower total benefit estimate).
Most of the benefits of CAIR are health improvement values, including the value of:
- 17,000 premature deaths
- 22,000 non-fatal heart attacks
- 12,300 hospital admissions
- 1.7 million lost work days
- 500,000 lost school days
A similar study conducted by RFF for agencies in NY state also finds large benefits relative to costs. The big difference is that the EPA uses a $6.1 million value of statistical life (VOSL) while RFF uses $2.2 million (more on the VOSL someday soon).
According to the EPA's RIA over 90% of the total benefits are accounted for by the value of avoiding 17,000 premature deaths so this divergence is a big deal. But, again, either way the benefits exceed the costs by a healthy margin.
One quibble though, the average benefit that I calculated, $1012/household, is very misleading. Considering the 7% benefit numbers, the non-premature death benefits are only $8.2 billion. These are enjoyed by, again, about 84 million households. The average non-premature death benefits are $98/household. Not as impressive in terms of comparison with costs but the household benefits are still twice as great as the household costs.
Well, I did my best but I couldn't find much not to like about the CAIR's benefits and costs. Next up, sometime next week, a closer look at the cap and trade provisions of CAIR.
And stay tuned for these on the environmental regulatory horizon (from the EPA/CAIR website):
- In upcoming but closely related action, EPA will impose the first ever federally-mandated requirements that coal-fired electric utilities reduce their emissions of mercury. Together the Clean Air Mercury Rule and the Clean Air Interstate Rule create a multi-pollutant strategy to reduce emissions throughout the United States.
- The Bush Administration continues to believe that the President’s Clear Skies legislation is a more efficient, effective, long-term mechanism to achieve large-scale national reductions. Clear Skies legislation applies nationwide and is modeled on the highly successful Acid Rain Program. The Agency remains committed to working with Congress to pass legislation
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