January 18, 2019
EPA Reconsiders Basis for Mercury and Air Toxics Standards
In late 2018, the U.S. Environmental Protection Agency
environmental effects of mercury emissions from these
(EPA) proposed to reverse its previous determinations that
sources and available control technologies and their costs,
limits on hazardous air pollutants from coal- and oil-fired
and to determine whether regulation of power plant HAPs
power plants are “appropriate and necessary” under Clean
was “appropriate and necessary” (42 U.S.C. §7412(n)).
Air Act (CAA) Section 112(n) (EPA, “Reconsideration of
Supplemental Finding and Residual Risk and Technology
In 2000, EPA determined that it was “appropriate and
Review,” December 27, 2018) (hereinafter, “A&N
necessary” to regulate coal- and oil-fired power plants
proposal”). While the A&N proposal would not revoke the
under CAA Section 112, and it added them to the Section
mercury and acid gas emissions limits established in the
112 list of source categories.
2012 Mercury and Air Toxics Standards (MATS) Rule, it
has raised questions about whether EPA will take additional
In 2005, EPA changed course. EPA withdrew the 2000
action on MATS.
“appropriate and necessary” finding and finalized a rule to
remove coal- and oil-fired power plants from the Section
The A&N proposal also reveals changes in EPA’s
112 list. Rather than establishing maximum achievable
interpretation of the CAA and use of benefit-cost analysis.
control technology (MACT) standards to control mercury
EPA’s analysis for the 2018 A&N proposal excludes co-
emissions under Section 112, EPA promulgated a cap-and-
benefits—the human health benefits from reductions in
trade program to limit power plant mercury emissions under
pollutants not targeted by MATS—from its consideration of
Section 111. These 2005 actions, however, were vacated by
whether MATS is “appropriate and necessary” under CAA
the U.S. Court of Appeals for the DC Circuit in 2008 before
Section 112(n). With this exclusion, the 2018 analysis finds
EPA could implement the cap-and-trade program. The DC
that monetized costs outweigh monetized benefit estimates
Circuit ruled that EPA unlawfully delisted coal- and oil-
by several orders of magnitude. EPA previously
fired power plants from the Section 112 list because EPA
determined—in 2000, 2012, and 2016—that it was
failed to comply with the statutory delisting criteria.
appropriate and necessary to regulate hazardous air
pollutants from power plants. EPA’s 2011 MATS analysis
In 2012, EPA reaffirmed the 2000 “appropriate and
counted co-benefits and concluded that the rule’s benefits
necessary” finding and promulgated MATS. The MATS
outweighed the costs. This In Focus provides background
Rule, which remains in effect today, established MACT
on MATS, discusses EPA’s reconsideration of benefits and
standards to reduce mercury and acid gases from most
costs, and concludes with potential issues for Congress. A
existing coal- and oil-fired power plants.
detailed summary of the proposal and legal issues is beyond
the scope of this product.
EPA’s accompanying analysis, published in late 2011,
estimated that the annual benefits would be between $37
Background
billion and $90 billion in 2016. Nearly all of the monetized
Hazardous air pollutants (HAPs), also known as air toxics,
benefits were from the rule’s particulate matter co-benefits.
are pollutants known or suspected to cause cancer or other
EPA monetized one of the expected mercury impacts—IQ
serious health effects, such as reproductive issues or birth
loss to children exposed to mercury from recreationally
defects. Among the HAPs emitted by power plants,
caught freshwater fish—but could not monetize other
mercury has been the principal HAP of concern. Mercury is
mercury impacts. Such non-monetized impacts may
a neurotoxin that travels through the air to water, where it is
include, according to EPA, other neurologic effects (e.g.,
converted to methylmercury, which moves through the food
memory and behavior), cardiovascular effects, and effects
chain as larger organisms consume smaller ones.
on wildlife. Factors that precluded comprehensively
Consumption of fish and shellfish contaminated with
monetizing mercury and other HAP benefits from the
methylmercury is the primary source of mercury exposure
MATS rule included gaps in toxicological data,
for humans. Fetuses and children are particularly vulnerable
uncertainties in estimating human effects based on animal
to methylmercury, which may impair neurological
experiments, and insufficient economic research to translate
development. Mercury exposure at high levels may also
the health and environmental effects to dollar value terms.
harm the brain, heart, kidneys, lungs, and immune system
(EPA, “Basic Information about Mercury”).
Regulatory impact analyses dating back to 2000 have
acknowledged the difficulty in monetizing HAP reduction
The CAA Amendments of 1990 required EPA to study the
benefits, emphasizing that the lack of monetized estimates
“hazards to public health reasonably anticipated to occur”
does not mean the benefits lack value. Previous
from HAPs emitted by coal- and oil-fired power plants,
administrations have concluded that such benefits justify
after imposition of other CAA requirements (42 U.S.C.
emission standards, albeit under different authorities of the
§7412(n)). It also required EPA to examine the health and
CAA. For example, during the George W. Bush
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EPA Reconsiders Basis for Mercury and Air Toxics Standards
Administration, the EPA’s 2004 analysis of a proposed
important benefit of the air toxics program” (81 Federal
action to reduce power plant mercury emissions concluded
Register 24439, April 25, 2016).
that the non-monetized benefits were “large enough to
justify substantial investment in emission reductions”
EPA’s 2018 proposal revised the 2016 benefit-cost
(EPA, “Benefit Analysis for the Section 112 Utility Rule,”
comparison by excluding the monetized co-benefits. This
p. 49).
resulted in the estimated compliance costs—$9.6 billion in
2015—outweighing the monetized HAP benefit
Numerous parties petitioned the courts to review MATS.
estimates—$0.5 million to $6 million, depending on the
Among other things, some petitioners disagreed with EPA’s
discount rate, in 2016. (As in previous analyses, compliance
conclusion that it was not appropriate to consider costs
cost projections for 2016 were not available due to model
when making an “appropriate and necessary” finding under
configuration.) EPA concluded that HAPs regulation is not
CAA Section 112. In 2015, the Supreme Court agreed with
appropriate and necessary under Section 112(n) because
the petitioners and remanded the rule for further
monetized costs exceed monetized HAP benefits.
consideration (Michigan v. EPA, 135 S. Ct. 2699 (2015)).
EPA also asserted that the non-monetized HAP benefits are
In 2016, EPA finalized a supplemental “appropriate and
less than the monetized compliance costs but did not
necessary” finding based on its review of the 2012 rule’s
explain the basis for this conclusion. EPA stated, without
estimated costs. EPA used two approaches. The agency’s
further elaboration, that identifying the unquantified HAP
first and preferred approach evaluated whether compliance
benefits “is not sufficient, in light of the gross imbalance of
costs were reasonable based on the industry’s historical
monetized costs and HAP benefits, to support a finding that
annual revenues and capital expenditures, retail electricity
it is appropriate and necessary to regulate” power plants
rates, and potential impacts on reliability. The second
under CAA Section 112 (2018 proposal, p. 27).
approach involved a direct comparison of the estimated
compliance costs and the estimated benefits, which
Available rulemaking documents do not explain why EPA
included co-benefits. The 2016 Supplemental Finding
disagrees with its previous conclusions about non-
concluded that under both approaches, it is appropriate and
monetized HAP benefits. EPA’s 2011 MATS analysis
necessary to regulate HAPs, including mercury, from power
stated that non-monetized benefits “could be substantial,
plants after considering regulatory costs.
including the overall value associated with HAP reductions,
value of increased agricultural crop and commercial forest
2018 Reconsideration
yields, visibility improvements, and reductions in nitrogen
In late 2018, EPA proposed to reverse the 2016
and acid deposition and the resulting changes in ecosystem
Supplemental Finding based on its new conclusion that the
functions” (EPA, Regulatory Impact Analysis for the Final
monetized compliance costs greatly outweigh the
Mercury and Air Toxics Standards, 2011, p. 28).
monetized benefits of HAPs reductions.
Potential Issues for Congress
The Trump Administration determined that EPA’s benefit-
In addition to uncertainty about whether EPA will take
cost comparison for the 2016 Supplemental Finding was
additional action on the MATS emission standards, the
flawed because it included co-benefits from non-HAP
2018 proposal raises questions about how EPA should
pollutants. While EPA acknowledged that estimation of all
factor benefits and costs into regulatory decisions. As
benefits and costs, including ancillary impacts, is consistent
discussed above, it raises questions about EPA’s
with federal guidance and standard economic practice, the
consideration of non-monetized HAP benefits and whether
agency concluded that it erred when it gave benefits (HAP
excluding co-benefits is consistent with the CAA. Such
reductions) and co-benefits (non-HAP reductions) equal
questions are relevant in light of the Administration’s
consideration when making its 2016 “appropriate and
reconsideration of existing CAA regulations.
necessary” finding under Section 112(n). The 2018 A&N
proposal describes CAA Section 112(n)(1)(A) as “focused
Federal guidance directs agencies to assess whether the
on hazards resulting from HAP-specific emissions” and
benefits of a proposal justify the costs but does not require
concludes “it is not proper to place much weight” on non-
monetized benefits to outweigh monetized costs. The
HAP co-benefits (p. 27).
guidance recognizes that quantified benefit and cost
estimates may not capture all anticipated benefits and costs
This interpretation marks a change from the Obama
and directs analysts to identify non-quantified impacts “of
Administration, which concluded that nothing in the CAA
sufficient importance to justify consideration in the
prohibits EPA from considering co-benefits in a benefit-
regulatory decision” (OMB Circular A-4, p. 10).
cost analysis for an “appropriate and necessary” finding.
The 2016 Supplemental Finding characterized the non-HAP
Determining whether non-monetized health and
reductions as a “direct result of achieving the HAP
environmental benefits and co-benefits (monetized or not)
emission limits under MATS” and included these
justify monetized compliance costs is inherently difficult
monetized co-benefits in the total benefits estimate. EPA’s
and may continue to spark debate. In 2015, the Supreme
2016 Supplemental Finding also pointed to the legislative
Court rejected arguments that costs are irrelevant to an
history, noting that Senate Report 101-228 “recognized that
“appropriate and necessary” finding under CAA Section
MACT standards would have a collateral benefit of
112(n), but it did not address whether EPA has authority to
controlling criteria pollutants as well and viewed this as an
consider monetized co-benefits in evaluating the cost of
MATS (Michigan v. EPA, 135 S. Ct. 2699, 2711 (2015)).
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EPA Reconsiders Basis for Mercury and Air Toxics Standards

IF11078
Kate C. Shouse, Analyst in Environmental Policy


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