EPA Reconsiders Benefits of Mercury and Air Toxics Limits

Updated May 19, 2020

EPA Reconsiders Benefits of Mercury and Air Toxics Limits

In April 2020, the U.S. Environmental Protection Agency

(EPA) concluded that limits on hazardous air pollutants

(HAPs) from coal- and oil-fired power plants are not

“appropriate and necessary” (A&N) under Clean Air Act

(CAA) Section 112(n)(1) (“Reconsideration of

Supplemental Finding and Residual Risk and Technology

Review,” April 16, 2020). The 2020 A&N rule reversed

prior A&N determinations, which led to the 2000 listing of

coal- and oil-fired power plants as a major source of HAPs

and the 2012 Mercury and Air Toxics Standards (MATS)

limiting those HAPs. Notwithstanding the 2020 A&N rule,

the 2012 MATS limits remain in effect for power plants

because EPA determined that it could not meet the criteria

under CAA 112(c)(9) to delist them. Furthermore, the A&N

finding does not change the regulatory status of other

pollution sources because CAA Section 112(n)(1) applies

only to power plants. Some have raised questions about

why EPA reversed the A&N finding and how it might

affect regulated entities. For example, some power plant

owners are concerned the A&N reversal may compromise

their ability to recover from ratepayers the costs of

installing MATS pollution controls. Others find this

unlikely, but legal challenges to the 2020 A&N rule are

expected.

The 2020 A&N rule reveals a change in EPA’s

interpretation of a unique statutory provision—Section

112(n)(1)—which may nonetheless set a precedent for

EPA’s consideration of benefits under other CAA

authorities. EPA stated that the 2020 A&N rule corrects

errors in the agency’s consideration of benefits in a prior

A&N finding. In its determination for the 2020 A&N rule,

EPA excluded from consideration any co-benefits to human

health from reductions in pollutants not targeted by MATS.

This In Focus discusses EPA’s reconsideration of benefits

and costs and potential issues for Congress. Section 112(c)

delistings and legal issues are beyond this product’s scope.

Historical EPA Actions

Hazardous air pollutants (HAPs) are pollutants known or

suspected to cause cancer or other serious health effects,

such as reproductive problems or birth defects. Among the

HAPs emitted by power plants, mercury has been of

principal concern. Mercury, which occurs naturally in coal,

travels through the air to water, where it is converted to

methylmercury and moves up the food chain. Consumption

of fish and shellfish contaminated with methylmercury is

the primary source of human mercury exposure. Fetuses

and children are particularly vulnerable to methylmercury

exposure, which may impair neurological development.

Methylmercury exposure at high levels may harm the brain,

heart, kidneys, lungs, and immune system.

CAA Section 112(n)(1) required EPA to study the “hazards

to public health reasonably anticipated to occur” from

HAPs emitted by power plants after imposition of other

CAA requirements. It also required EPA to examine the

health and environmental effects of mercury emissions

from these sources, available control technologies and their

costs, and whether regulation of power plant HAPs was

“appropriate and necessary” (42 U.S.C. §7412(n)).

In 2000, EPA determined that it was appropriate and

necessary to regulate hazardous air pollutants from coaland oil-fired power plants. This determination required

EPA to take additional steps to regulate HAPs. EPA added

coal- and oil-fired power plants to the Section 112 list of

source categories in 2000.

In 2005, EPA changed course. EPA withdrew the 2000

A&N finding and finalized a rule to remove coal- and oilfired power plants from the Section 112 list. Instead, EPA

promulgated a cap-and-trade program to limit power plant

mercury emissions under Section 111. The U.S. Court of

Appeals for the D.C. Circuit vacated these 2005 actions,

however, and ruled that EPA unlawfully delisted coal- and

oil-fired power plants from the Section 112 list because

EPA failed to comply with the statutory delisting criteria.

In 2012, EPA reaffirmed the 2000 A&N finding and

promulgated the Mercury and Air Toxics Standards Rule.

The rule, which remains in effect, established emissions

standards to reduce mercury and acid gases from most

existing coal- and oil-fired power plants.

EPA’s accompanying analysis, published in 2011, projected

annual benefits between $37 billion and $90 billion in 2016.

Nearly all of the monetized benefits were from the rule’s

particulate matter co-benefits. EPA monetized one of the

expected mercury impacts—intelligence quotient loss to

children exposed to mercury from recreationally caught

freshwater fish—but could not monetize other mercury

impacts. Such non-monetized impacts may include other

neurologic effects (e.g., memory and behavior),

cardiovascular effects, and effects on wildlife.

EPA’s regulatory impact analyses have historically reported

difficulty in monetizing HAP reduction benefits but have

also noted that the lack of monetized estimates does not

mean the benefits lack value. Previous Administrations

concluded that such benefits justify emission standards,

albeit under different CAA authorities. For example, EPA’s

2004 analysis of a rule to reduce power plant mercury

emissions concluded that non-monetized benefits were

“large enough to justify substantial investment in emission

reductions” (“Benefit Analysis for the Section 112 Utility

Rule”).

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EPA Reconsiders Benefits of Mercury and Air Toxics Limits

Numerous parties petitioned the courts to review MATS.

Among other things, some petitioners disagreed with EPA’s

conclusion that it was not appropriate to consider costs

when making an A&N finding under CAA Section 112. In

2015, the Supreme Court agreed with the petitioners and

remanded the rule for further consideration, but it did not

address whether EPA has authority to consider monetized

co-benefits in evaluating the cost of MATS (Michigan v.

EPA, 135 S. Ct. 2699 (2015)).

In 2016, EPA finalized a supplemental A&N finding based

on its review of the 2012 rule’s estimated costs. EPA

evaluated whether compliance costs were “reasonable” and

compared the estimated compliance costs to the estimated

benefits, including co-benefits. EPA concluded that it was

appropriate and necessary to regulate mercury and other

HAPs from power plants after considering regulatory costs.

2020 Appropriate and Necessary Finding

In 2020, EPA reversed the 2016 supplemental finding,

concluding that HAPs regulation is not appropriate and

necessary under Section 112(n) because monetized costs

exceed monetized HAP reduction benefits. The 2020 A&N

rule revised the 2016 benefit-cost comparison by excluding

the monetized co-benefits. This exclusion resulted in the

estimated compliance costs ($9.6 billion in 2015),

outweighing the monetized HAP benefits ($0.5 million to

$6 million, depending on the discount rate, in 2016).

The 2020 A&N rule concluded that EPA’s benefit-cost

comparison for the 2016 supplemental finding was flawed

because it included co-benefits from non-HAP pollutants.

While EPA acknowledged that estimation of all benefits

and costs, including ancillary impacts, is consistent with

federal guidance, the agency concluded that it had erred

when it gave equal consideration to benefits (HAP

reductions) and co-benefits (non-HAP reductions) when

making its 2016 A&N finding under Section 112(n). The

2020 A&N rule concluded that an A&N finding under

Section 112(n)(1) must instead be justified

“overwhelmingly” by HAP reduction benefits.

This interpretation marks a change from that of the prior

Administration’s EPA, which concluded that nothing in the

CAA prohibits EPA from considering co-benefits in a

benefit-cost analysis for an A&N finding. The 2016

supplemental finding characterized the non-HAP reductions

as a “direct result of achieving the HAP emission limits

under MATS” and included these monetized co-benefits in

the total benefits estimate. EPA’s 2016 supplemental

finding also pointed to the CAA legislative history, noting

that Senate Report 101-228 expected that HAP limits

“would have a collateral benefit of controlling criteria

pollutants as well and viewed this as an important benefit of

the air toxics program” (81 Federal Register 24439, April

25, 2016).

The 2020 A&N rule also reveals a potential shift in EPA’s

assessment of non-monetized benefits. EPA’s 2011 MATS

analysis stated that non-monetized benefits “could be

substantial, including the overall value associated with HAP

reductions, value of increased agricultural crop and

commercial forest yields, visibility improvements, and

reductions in nitrogen and acid deposition and the resulting

changes in ecosystem functions” (“Regulatory Impact

Analysis for the Final Mercury and Air Toxics Standards,”

2011). The 2020 A&N rule acknowledges HAP reduction

benefits from MATS that cannot be monetized but finds

that the value of those benefits is unlikely to alter the

agency’s conclusion. Specifically, EPA determined that the

costs of the MATS would likely outweigh the HAP

reduction benefits even if the agency were able to monetize

all of them. EPA noted that many of the non-monetized

HAP reduction benefits relate to illnesses, which have had

lower economic values than mortality effects in its past

analyses.

Federal Guidance on Benefit-Cost

Analysis

Separate from the CAA, federal guidelines inform EPA’s

benefit-cost analyses. For example, Office of Management

and Budget Circular A-4 directs agencies to assess whether

the benefits of a proposal justify the costs. It does not

require monetized benefits to outweigh monetized costs.

Circular A-4 recognizes that quantified benefit and cost

estimates may not capture all anticipated benefits and costs

and directs analysts to identify non-quantified impacts “of

sufficient importance to justify consideration in the

regulatory decision.”

EPA has also developed its own guidance, Guidelines for

Preparing Economic Analyses, to complement Circular A-4

and other guidance. EPA has recently drafted updates to its

Guidelines, which its Science Advisory Board is reviewing.

Among other things, the draft update affirms that economic

analysis should account for all benefits and costs of a

proposal and advises distinguishing benefits from cobenefits. It also advises considering whether “more

economically efficient or appropriate ways” are available to

obtain co-benefits if the proposal is expected to “induce

large” co-benefits. In addition, EPA’s forthcoming

proposed rule is expected to provide guidance regarding the

agency’s approach to benefits assessment.

Potential Issues for Congress

EPA’s approach to benefits in the 2020 A&N rule may set a

precedent for future rulemakings. Although EPA linked the

2020 A&N analysis to its interpretation of CAA Section

112(n)(1), the EPA Administrator has said on the record

that the analysis foreshadows a more general analytical

approach in future air pollution rulemakings. EPA has not

specified whether that means it would exclude or give less

weight to co-benefits in other air rulemakings. Such

modification of co-benefit estimates would result in less

favorable assessments, on a benefit-cost basis, of the rules.

As EPA develops its benefits proposal and updates its

Guidelines, Congress may exercise oversight over how

EPA factors benefits and costs into regulatory decisions.

Issues include consideration of non-monetized benefits and

whether excluding co-benefits is consistent with the CAA.

Kate C. Shouse, Analyst in Environmental Policy

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IF11078

EPA Reconsiders Benefits of Mercury and Air Toxics Limits

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