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NEED TO KNOW: ENERGY

Living Wage

In calculating climate rules, the White House puts a value on human life. Republicans think it might be too high.

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Towering cost? How much harm do emissions cause?(AP Photo/Paul Foy)

What’s the value of a human life? That would be $9.1 million, according to the Environmental Protection Agency. EPA uses that figure, derived from a hefty body of economic research, to weigh the costs and benefits of new pollution rules slashing coal-plant emissions of mercury, soot, arsenic, and other toxins.

Those regulations, of course, are now the target of an all-out assault by Republicans and the coal industries. They say that the rules, which will require power plants to install costly pollution-control technology—and, sometimes, to shut down entirely—represent too great an economic burden. GOP presidential candidates and members of Congress have already made attacks on EPA’s “job-killing” pollution rules a centerpiece of the 2012 campaigns.

 

The White House Office of Management and Budget concedes that the clean-air rules are among the most expensive regulations the government has issued. But because they’ll save so many lives—each one valued at $9.1 million—the economic benefits appear to far outweigh the costs.

Take a controversial rule due out by Dec. 16 that would require coal plants to slash toxic mercury emissions by more than 90 percent. Power plants will have to install pricey “scrubber” technology, passing those charges on to customers at an annual cost, EPA calculates, of $10.9 billion per year. But removing that mercury from the atmosphere will prevent 6,800 to 17,000 premature deaths, 11,000 nonfatal heart attacks, 5,300 hospitalizations for respiratory and heart diseases, 850,000 lost work days, and the loss of 510 IQ points in babies born near the emitters. Each of those gains comes with a price attached (each IQ point is worth $13,000, for instance, and the value of a lost workday is $130), adding up to a whopping $59 billion to $140 billion in benefits.

A July rule requiring power plants to cut emissions that could affect human health downwind in other states will cost the industry $800 million annually, EPA estimates, but produce $280 billion in benefits. A Dec. 2 rule reducing soot emissions from industrial boilers is projected to cost $2.3 billion and yield benefits of $28 billion to $68 billion. In each of these cases, economists say, two factors chiefly  drive the huge benefit ratio: the dollar value of a human life multiplied by the number of lives projected to be saved.

 

Under a 1993 executive order, federal agencies must accompany “economically significant” regulations—defined as those costing the economy $100 million or more per year—with an economic-impact analysis showing the costs and benefits. Republican politicians and businesses are attacking the Obama administration’s analyses, asserting that they paint a false picture. That argument puts the opponents in a tricky spot: No one wants to be on the record as calling for the devaluation of human life.

But liberals and conservative have long argued over those figures, regulators say. During the George W. Bush administration, for example, EPA estimated the value of human life at $6.8 million. Some critics of EPA’s accounting have also proposed a new formula that would lower the dollar value of the life of those over age 75—an estimation that some economists say would probably yield a more accurate analysis of the rules but would infuriate a key political constituency.

More and more, economists also question how many lives a rule would save. Analysts derive those numbers from epidemiological studies conducted in the 1980s and 1990s; critics say that the data are outdated and the modeling is sloppy. “The incredible difference between the benefits and the costs suggest that the Clean Air Act regulations are the greatest deal in the history of time—or that there’s something wrong with the calculations,” said a current academic researcher who is deeply familiar with EPA’s regulatory data and modeling methods and asked to speak anonymously in order to be candid.

Republicans are going further. “In many cases, these required cost-benefit analyses appear designed to provide political cover for a more stringent regulatory agenda rather than to objectively inform policy decisions,” wrote GOP Reps. Andy Harris of Maryland and Paul Broun of Georgia—both physicians—in a Nov. 15 letter to Cass Sunstein, the White House’s regulatory czar.

 

Sunstein told National Journal that career experts conduct the technical analyses, which are based on rigorous data and methods, and are divorced of political considerations. “We have two rounds of internal scrutiny,” he said. “The rules are submitted for regulatory impact analysis by Office of Budget and Management and the Council of Economic Advisers. They’re subject to scrutiny by technical analysts and made available for public scrutiny before they’re finalized.” But despite affirmations of rigor, the data modeling of clean-air regulation—once one of Washington’s wonkiest issues—is turning into the fight of a lifetime. 

This article appears in the December 10, 2011 edition of National Journal Magazine.

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