April 12, 2012

National Emission Standards for Hazardous Air Pollutants for Coal- and Oil-Fired Electric Utility Steam Generating Units

Summary

Score: 33 / 60

Additional details
Agency
Environmental Protection Agency
Regulatory Identification Number
2060-AP52
Rule Publication Date
05/03/2011
Comment Closing Date
07/05/2011
Dollar Year
Millions of 2007$ estimated for 2016
Time Horizon (Years)
Not Reported by Agency

RULE SUMMARY

The United States (U.S.) Environmental Protection Agency (EPA or Agency) is proposing national emission standards for hazardous air pollutants (NESHAP) from coal- and oil-fired electric utility steam generating units (EGUs) under Clean Air Act (CAA or the Act) section 112(d) and proposing revised new source performance standards (NSPS) for fossil fuel-fired EGUs under CAA section 111(b). The proposed NESHAP would protect air quality and promote public health by reducing emissions of the hazardous air pollutants (HAP) listed in CAA section 112(b). In addition, these proposed amendments to the NSPS are in response to a voluntary remand of a final rule. We also are proposing several minor amendments, technical clarifications, and corrections to existing NSPS provisions for fossil fuel-fired EGUs and large and small industrial-commercial-institutional steam generating units.

COMMENTARY

"The rule allows for emission averaging for firms; it does not allow emission averaging across types of fuels or across firms. The rule does not allow electricity producers that face high costs of emission reduction to buy the right to produce additional emissions from those with low costs, thereby lowering the overall cost of meeting this new, more stringent standard. The rule explicitly states that the estimated effect of the rule will only be estimated in the final rule. The rule also fails to address how potential future coal-fire plant operators may build smaller (under 25 megawatts), less permanent plants in order to avoid these emission rules.

MONETIZED COSTS & BENEFITS (AS REPORTED BY AGENCY)

Dollar Year
Millions of 2007$ estimated for 2016
 
Time Horizon (Years)
Not Reported by Agency
 
Discount Rates
3%
7%
Expected Costs (Annualized)
$10,900
$10,900
Expected Benefits (Annualized)
$59,000 to $140,000
$53,000 to $130,000
Expected Costs (Total)
Not Reported by Agency
Not Reported by Agency
Expected Benefits (Total)
Not Reported by Agency
Not Reported by Agency
Net Benefits (Annualized)
$48,000 to $130,000
$42,000 to $130,000
Net Benefits (Total)
Not Reported by Agency
Not Reported by Agency

METHODOLOGY

There are twelve criteria within our evaluation within three broad categories: Openness, Analysis and Use. For each criterion, the evaluators assign a score ranging from 0 (no useful content) to 5 (comprehensive analysis with potential best practices). Thus, each analysis has the opportunity to earn between 0 and 60 points.

Criterion Score

Openness

1. How easily were the RIA , the proposed rule, and any supplementary materials found online?
Could find the proposed rule and final rule on regulations.gov using a RIN and a short phrase search. Was able to find the RIA on the EPA website using a word search.
5/5
2. How verifiable are the data used in the analysis?
Data sources are clearly defined and often, though not always, listed with a URL. Numerous studies discussed with citations listing where they are located and/or published. Studies discuss their data sources and where they are located.
4/5
3. How verifiable are the models and assumptions used in the analysis?
Most aspects of models and assumptions are based on cited literature or at least clearly spelled out when they are not based on published studies. Most of the assumptions are verifiable.
4/5
4. Was the analysis comprehensible to an informed layperson?
An informed layperson would be overwhelmed. The analysis is heavy reading for those without detailed knowledge of toxic hazards and methods of risk analysis. Over two pages of acronyms and abbreviations are listed at the beginning of RIA, which indicates the level of experience required. However, this listing does not include HAP (hazardous air pollutants) even though the executive summary opens with this acronym; perhaps it is an incomplete listing. There are a vast number of assumptions and models used to determine the effects of the regulation.
3/5

Analysis

5. How well does the analysis identify the desired outcomes and demonstrate that the regulation will achieve them?
5/5
Does the analysis clearly identify ultimate outcomes that affect citizens’ quality of life?
The proposed Toxics Rule reports the scientific evidence behind the expected significant public health benefits, most notably neurological and cardiovascular, of reducing emissions not only of HAP (hazardous air pollutants) such as mercury and hydrogen chloride, but also significant co-benefits due to reductions in direct fine particles and two key contributors to fine particle formation. Although not quantified by EPA, this rule is also expected to produce significant ozone-related benefits.
5/5
Does the analysis identify how these outcomes are to be measured?
The outcomes used to support the rule include a range of health benefits, including 510 fewer mercury-related IQ points lost as well as a variety of avoided PM2.5-related (air pollutants with a diameter of 2.5 micrometers or less that stem from activities that burn fossil fuels) impacts, including 6,800 to 17,000 premature deaths, 11,000 nonfatal heart attacks, 5,300 hospitalizations for respiratory and cardiovascular diseases, 850,000 lost workdays, and 5.1 million days when adults restrict normal activities because of respiratory symptoms exacerbated by PM2.5.
5/5
Does the analysis provide a coherent and testable theory showing how the regulation will produce the desired outcomes?
The credible chain of causation is that proposed standards significantly reduce emissions of Hg (mercury) and many other toxic pollutants from coal- and oil-fired EGUs (electric generating units). Mercury is a highly toxic pollutant released into atmosphere into a more toxic MeHg (methyl mercury) that accumulates in the food chain, especially tissue of fish. Consumption may cause neurotoxin effects, and children and developing fetuses are especially susceptible. As a result of HAP and particulate reductions, many premature deaths from exposure to air pollution are avoided by application of controls that EPA argues are well-known and supported by health research.
5/5
Does the analysis present credible empirical support for the theory?
EPA concluded in 2000 that it was appropriate to regulate HAPs from EGUs. EPA now reconfirms this finding and believes EGUs are the largest anthropogenic (i.e., produced by humans) sources of mercury (Hg) emissions and other HAPs. Using various published studies, the EPA estimates 7 percent of women of childbearing age are exposed to MeHg levels, causing adverse effects in developing fetuses. EPA believes exposures among subpopulations (anglers, Asian-Americans, and some Native Americans) may be more than two-times greater than those experienced by average population. Three key metal HAP emitted by EGUs (As, Cr, and Ni) have been classified as human carcinogens. Current national emissions inventories indicate EGUs are responsible for 62 percent of emissions of As, 22 percent of emissions of Cr, and 28 percent of emissions of Ni.
4/5
Does the analysis adequately assess uncertainty about the outcomes?
EPA acknowledges and summarizes in RIA 3 uncertainties regarding costs and 12 major uncertainties regarding benefits or proposed rule. These include errors in measurement and projection for variables such as population growth and baseline incidence rates; estimates of future-year emissions inventories and air quality; variability in estimated relationships between changes in pollutant concentrations and resulting changes in health and welfare effects; and uncertainties in exposure estimation. For some outcomes, the proposed rule does list ranges of potential effects given various cited research parameters. For others, the rule simply mentions the direction of the effects of the uncertainty.
4/5
6. How well does the analysis identify and demonstrate the existence of a market failure or other systemic problem the regulation is supposed to solve?
3/5
Does the analysis identify a market failure or other systemic problem?
The rule simply assumes that EGUs emit too much pollution and impose these costs on citizens. No mention of "market failure" is found throughout the 469-page RIA or the 172 pages in the Federal Register. The EPA does not elaborate on why the current market has not evolved in the direction of cleaner air. The systemic problem potentially stems from previous regulations granting older EGUs the option to continue using now-obsolete and inefficient technologies. Today, new units are believed to be far more efficient in their production of electricity, their use of fuel, and the relative quantities of pollution emitted. Some of the oldest, least efficient, least controlled units are predicted to be retired by companies who elect not to invest in controlling them according to proposed rule, and EPA argues this makes the market for electricity no longer skewed in favor of higher polluting units previously exempted from Clean Air Act.
2/5
Does the analysis outline a coherent and testable theory that explains why the problem (associated with the outcome above) is systemic rather than anecdotal?
The rule does provide evidence that EGUs are emitting such elements and chemicals and that these chemicals have been shown to cause negative health effects. However, the implied assumption is that current standards allow too many older plants using now-obsolete technologies and that the only means of promoting public health is through mandating stronger regulation on energy suppliers. Analysis does not clearly explain why the industry behaves in this manner nor whether past government regulation has played any part in encouraging or ignoring such past behavior.
2/5
Does the analysis present credible empirical support for the theory?
The theory is that mercury and other molecules emitted from EGUs contribute to negative health effects. There is credible empirical support that EGU emissions contain these molecules. A number of studies are presented on the negative IQ effects of certain levels of Hg as well as the negative health and habitat effect of certain levels of molecules and particulate matter. There is less evidence on whether this is due to externalities, government failure, or both. The rule implies, but does not clearly explain, that old plants have been grandfathered in by previous legislation so that they emit more of these molecules per kwh. Although the estimated costs and benefits suggests that the problem is larger than the cost of reducing pollution, there is little explanation as to why this is the case. There is also some uncertainty that a one unit reduction in emissions will result in a one unit reduction in exposure to these molecules.
3/5
Does the analysis adequately assess uncertainty about the existence or size of the problem?
The EPA acknowledges uncertainties in its analysis which could lead to under- or over-prediction of risk to public health from EGU Hg emissions. The proposed rule does report a range of estimates on the effects of IQ loss from HG and premature death from other pollutants. The EPA's sensitivity analyses allow it to conclude that even under reasonably different assumptions, EGU's emissions constitute a hazard to public health. EPA is also obtaining outside peer review to comment on its own risk analyses.
4/5
7. How well does the analysis assess the effectiveness of alternative approaches?
2/5
Does the analysis enumerate other alternatives to address the problem?
The EPA considers one basic approach: setting a standard. There is no discussion of alternatives such as taxes, selling pollution permits, or any other intervention that environmental economists might consider. The EPA does not attempt to limit the overall level of Hg emissions in the US and then allow each plant to bid for the right to pollute. That is, the rule requires each firm to reduce its emissions of Hg, HCl, and particulate by the same rate without accounting for the possibility that individual sites may face large differences in the costs of reducing emissions. This results in a higher overall cost of emission reduction. The closest EPA gets to alternatives is to proposed alternate equivalent emission standards (for certain subcategories) to the proposed surrogate standards in three areas: SO2 (in addition to HCl), individual non-Hg metals (for PM), and total non-Hg metals (for PM). These alternative equivalent emission standards simply recognize that emissions equipment that limits SO2 also reduces HCl and that equipment that limits non-Hg metals limits particulate matter.
2/5
Is the range of alternatives considered narrow (e.g., some exemptions to a regulation) or broad (e.g., performance-based regulation vs. command and control, market mechanisms, nonbinding guidance, information disclosure, addressing any government failures that caused the original problem)?
The rule presents one standard. The rule discusses various emission level alternatives for Hg and the dollar benefit of higher IQ; however, the costs associated with each one of these alternative emission levels is not present. The rule does grant each plant the ability to determine how to meet the emissions standard—for instance, the blending of coals, cleaning of coal, or the installation of additional pollution controls—but it does not allow plants to negotiate ways to lower the overall cost of reducing emissions. It does allow this if a firm owns multiply cites. So for firms, yes; for individual plants owned separately, no. It also mentions various types of technology: wet and dry scrubber and dry sorbent injection.
1/5
Does the analysis evaluate how alternative approaches would affect the amount of the outcome achieved?
The analysis assumes only one emission standard. Each EGU can meet this standard using a variety of means, but the EPA does not investigate the effects of different standards or alternative implementations.
1/5
Does the analysis adequately address the baseline? That is, what the state of the world is likely to be in the absence of federal intervention not just now but in the future?
EPA considered all Clean Air Act requirements, known state actions, the NSR/PSD (new source review/prevention of significant deterioration) enforcement, as well as the continuing emission reductions plan in the eastern US under the CAIR actions in the baseline used to develop estimates of benefits and costs for proposed rule. EPA did not consider actions states may take in the future to implement existing ozone and PM2.5 NAAQS (national ambient air quality standards) in baseline. Year 2016 is compliance year, though 2015 is proxy for compliance in 2016 due to modeling complications. No mention is made of whether private industry would provide more emission control or whether consumers would demand it. Baseline thus assumes the only entity interested in controlling emissions is EPA itself.
3/5
8. How well does the analysis assess costs and benefits?
3/5
Does the analysis identify and quantify incremental costs of all alternatives considered?
The proposed rule presents no alternatives. To report incremental costs of the rule, the EPA reports how this rule interacts with two other potential rules: (1) state adopted ratepayer funded energy and (2) Department of Energy (DOE) implementation of appliance efficiency standards mandated by existing statutes but not yet implemented efficiency programs, such as energy efficiency resource standards, integrated resource planning, and demand side management plans.
3/5
Does the analysis identify all expenditures likely to arise as a result of the regulation?
The power industry’s compliance costs are changes in generation costs between base case and proposed rule. EPA projects annual incremental compliance cost is $10.9 billion in 2015 ($2007). Annualized incremental cost is projected additional cost of complying with proposed rule in year analyzed, and includes amortized cost of capital investment and ongoing costs of operating additional pollution controls, needed new capacity, shifts between or amongst various fuels, and other actions associated with compliance.
4/5
Does the analysis identify how the regulation would likely affect the prices of goods and services?
EPA believes proposed standards can be achieved without significantly affecting availability and cost of electricity to consumers. Contiguous U.S. electricity prices are estimated to increase from 2011 by 0.33 (2007 cents/kWh) or 3.8 percent in 2015; 0.23 percent in 2020; 0.19 percent in 2030. In instances in which such concerns rise, EPA states the federal government will work with companies to ensure a reliable and reasonably priced supply of electricity.
3/5
Does the analysis examine costs that stem from changes in human behavior as consumers and producers respond to the regulation?
To some extent. The regulation does look at the EGUs that close and how other plants might respond by using technology and new fuels. It acknowledges that this might increase the use of sulfur rich coal, given that the required controls to reduce HG, HCl, and particulates will also lower sulfur emissions. The models assume electricity demand is inelastic. EPA identified three economic mechanisms by proposed rules that can influence jobs: higher production costs raise market prices, higher prices reduce consumption, and employment within an industry falls. Based on earlier studies, it concludes that each additional $1M million spending on pollution abatement results in small net increase of 1.6 jobs, but estimated effect is not statistically significant different from zero. Nonetheless, EPA still concludes that more jobs will be created in air pollution control technology production field than may be lost. It also does not appear to look into whether firms might merge so that they can take advantage of averaging emission reductions across various plants that is not allowed if plants are owned by separate entities. It also does not look into whether new plans might always be small (less than 25Mgw) so as to not be covered by regulation.
3/5
If costs are uncertain, does the analysis present a range of estimates and/or perform a sensitivity analysis?
The agency does a sensitivity analysis but only with respect to the costs with and without various energy efficiency rules for appliances and such. Comparing the base relative to the toxic rule plus proposed energy efficiency simply shows that included energy efficiency lowers the energy productions cost effect of the toxic rule (through lower electricity demand) but does not note the overall effect of costs through higher prices for appliances that use electricity.
2/5
Does the analysis identify the alternative that maximizes net benefits?
The agency reports one range of benefits and one expected cost of implementing the standard. No alternative standards are presented, nor are other methods of implementation.
0/5
Does the analysis identify the cost-effectiveness of each alternative considered?
No alternative standards or implementation methods are presented, and thus the agency does not present cost-effectiveness of alternatives.
0/5
Does the analysis identify all parties who would bear costs and assess the incidence of costs?
For the most part, yes, by electricity consumers given the assumption that demand is relatively inelastic. The losses are concentrated in the electric generation sector (45.4 percent) and other services (29.9 percent). Other services include information, finance and insurance, real estate, professional services, management, administrative services, education, health care, arts, accommodations, and public services.
4/5
Does the analysis identify all parties who would receive benefits and assess the incidence of benefits?
The benefits for prenatally exposed children in angler households; African American, low income anglers; Hispanic anglers; certain Asian anglers; certain Native American anglers; white anglers in the southeastern US, and low income females in the US are all listed separately.
4/5

Use

9. Does the proposed rule or the RIA present evidence that the agency used the analysis?
RIA appears to justify the proposed rule rather than model the problem first and then design alternative rules that might mitigate the problem with the end result choosing the rule that best deals with the problem.
1/5
10. Did the agency maximize net benefits or explain why it chose another alternative?
No alternative standards or methods are presented and thus one is not able to determine if agency maximized net benefit.
0/5
11. Does the proposed rule establish measures and goals that can be used to track the regulation's results in the future?
The proposed rule clearly establishes measurement methods and goals for emissions. On page 25086, the rule states: "The proposed work practice standard, which requires implementation of an annual performance (compliance) test. This estimate includes initial and annual performance test, conducting and documenting a tune-up, semiannual excess emission reports, maintenance inspections, developing a monitoring plan, notifications, and recordkeeping." The rule also uses measurement methods for public health that include fewer premature deaths, nonfatal heart attacks, and hospitalizations for respiratory and cardiovascular diseases. The rule does not set goals that can be used to track the effectiveness of the rule.
2/5
12. Did the agency indicate what data it will use to assess the regulation's performance in the future and establish provisions for doing so?
While it is true that EPA has goals and provisions on how it plans to measure emissions, the rule does not establish a provision for measuring health, habitat, and visibility outcomes. Moreover, the rule notes "at the outset that EPA rarely has the time or resources to perform extensive new research to measure directly either the health outcomes or their values for regulatory analyses."
1/5
 
Total 33 / 60