I woke up at 4 am today so that I could scoop all of the other environmental economics bloggers:
The Environmental Protection Agency on Wednesday proposed the first national standard for emissions of mercury and other pollutants from coal-burning power plants, a rule that could lead to the early closing of a number of older plants and one that is certain to be challenged by the some utilities and Republicans in Congress.
Lisa P. Jackson, the agency’s administrator, said control of dozens of poisonous substances emitted by power plants was long overdue and would prevent thousands of deaths and tens of thousands of cases of disease a year. ...
She estimated the total annual cost of compliance at about $10 billion, in line with some industry estimates (although some are much higher), and the health and environmental benefits at more than $100 billion a year. She said that households could expect to see their electric bills rise by $3 to $4 a month when the regulation was fully in force after 2015....
She said that installing and maintaining smokestack scrubbers and other control technology would create 31,000 short-term construction jobs and 9,000 permanent utility sector jobs.
A few comments and then I might try to go back to sleep:
- Suppose the costs are underestimated, as industry argues, and the benefits are overestimated because the health effects of lowering mercury don't materialize. Doubling costs and using the lower bound of the benefits (RIA here) still generates net benefits of $30+ billion. And note that the health benefits from lowering mercury is only about 10% of the benefit estimate. The majority of benefits comes from reductions SO2 and other "PM2.5 precursors" leading to reductions in mortality (according to the RIA -- 6.8k to 17k fewer deaths at $6m per yields undiscounted benefits of $41b to $102b).
- Costs could be lowered if the Bush Administration's cap-and-trade proposal was followed but, as I learned back then, mercury isn't so good for a cap-and-trade program because the worst power plants would buy the permits creating hot spots. In other words, there would be lots of birth defects near the oldest power plants. The RIA mentions that costs could be lowered if energy efficiencies are achieved but you've got to think that impact would be low.
- The green job creation is part of the cost of the regulations, not the benefits. Think of it this way, employing 9000 people to permanently dig holes with shovels and then turn around and fill the holes would create permanent jobs too. But, clearly, those jobs are a waste of the labor resource (a cost). Jobs created by environmental policy should be considered in the same way ... when doing the micro-level benefit-cost analysis. The benefits generated by those jobs are not the wages but the positive health impacts.Thinking of these jobs as benefits isn't such a bad thing, per se, but it could lead to trouble (and does) if this sort of thing becomes our macroeconomic employment policy. The trouble is the incredibly costly job creation -- those 9000 jobs come at a cost of $1m each.