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Costs Swamp Benefits . . .

November 07, 2000|RANDALL LUTTER | Randall Lutter, a fellow with the AEI-Brookings Joint Center for Regulatory Studies, served at the federal Office of Management and Budget from 1991 to 1997

The clamor of the election campaign has diverted attention from a momentous Supreme Court case about perhaps the most important regulation of the Clinton administration. The court today will hear arguments about the Environmental Protection Agency's 1997 air quality standards, which established stringent new maximum levels for ozone and fine particles in outdoor air.

According to the EPA, in 2010 alone, these national ambient air quality standards would prevent 15,000 deaths and cost $50 billion--big numbers even in Washington.

Echoing a recent appeals court finding, lawyers representing trucking and other industries will argue that the EPA's standards are unconstitutional. They will claim that the agency, by choosing standards without an intelligible principle derived from the Clean Air Act, violated the constitutional clause giving "all legislative powers" to Congress. Since balancing costs and benefits could provide the missing intelligible principle, the lawyers also will ask the court to reverse a 1980 lower court decision that keeps the EPA from considering costs in any form.

Government lawyers are expected to claim that the EPA simply is following a congressional directive to set air quality standards "requisite to protect public health," a directive that they think implicitly means irrespective of cost or feasibility. They will add that this directive makes sense because the EPA will consider cost in subsequent "implementation" decisions.

The court's decision could rein in administrative agencies' authority and reestablish the principle that regulators should consider all anticipated effects of their decisions.

The EPA's customary method of setting standards without regard to cost has become distressingly, if not completely, arbitrary in light of recent scientific insights. The method made some sense when scientists thought that there was no pollution damage below identifiable concentrations. In that context, the EPA had only to find that threshold concentration and then set a standard somewhat lower.

But before the EPA issued its 1997 standards, its science advisors cautioned that damages from ozone were likely to vary in proportion to pollution even at very low concentrations. For the other pollutant in question, fine particle matter, the EPA assumed a similar relationship, because scientists had no evidence to the contrary.

Such a relationship means that any standard (other than a utopian standard of zero pollution) would allow some risk, so the choice of a standard irrespective of costs or feasibility boils down to how much risk is too much.

The EPA's standard-setting process has a second and largely overlooked flaw in addition to its arbitrariness. The EPA's pledge to consider costs when reviewing states' plans to meet the standards rings hollow if the standards require impossibly low emissions.

The agency's data indicate that in five cities the emissions reductions needed to meet the ozone standard are at least seven times greater than the emissions cuts achievable from known control measures. Eliminating all motor vehicles emissions would not be enough to meet the standards in Los Angeles and San Francisco. A plain reading of the EPA's data suggests that meeting the ozone standard is simply out of reach. The EPA dodged this conclusion by constructing flawed cost estimates.

New scientific research shows that emissions cuts of 95% in Southern California would not bring ozone levels anywhere close to the EPA's standard.

The infeasibility of the EPA's air standards should be no surprise. The EPA admits it sets standards without considering feasibility. And although ozone levels have fallen dramatically, 90 million people still live in areas that violate the ozone standard issued in 1979.

Infeasible standards are nonetheless bad government. The costs of the last emissions reductions needed to (almost) meet infeasible standards swamp the associated benefits. Such standards give enforcement officials too much authority to decide whose emissions to cut. Infeasible standards based on unattainable health benefits are intrinsically hypocritical.

Regulations that are infeasible and binding demean both the integrity of law and the social covenant to be law-abiding. Considering costs in setting standards would promote respect for the law by deterring federal agencies from issuing infeasible regulations that ask people to accept the impossible as binding. The Supreme Court should encourage the EPA to consider costs in setting air quality standards.

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