Clean power plan repeal shows strengths — and limits — of policy analysis

Last week, the Trump Administration EPA finalized both its repeal of the Clean Power Plan (CPP), and its replacement, the Affordable Clean Energy (ACE) regulation. At the center of the debate over these actions were the cost-benefit analyses that the EPA was required to prepare when proposing the repeal and finalizing it.

The initial proposal for repealing the Clean Power Plan contained an economic analysis that was widely criticized by economists as deeply flawed. By changing how the future is valued, and by ignoring impacts of climate change outside the United States, the administration was able to argue in that analysis that repealing the Clean Power Plan was a benefit to society.

Despite their best effort to adjust assumptions to make their policy change look good, the analysis of the proposed repeal and replacement of the Obama era Clean Power Plan opened the Trump Administration up to significant criticism. A detailed examination of the analysis revealed that the ACE regulation would lead to 1,400 more deaths per year than the CPP. Needless to say, that lead to some unpleasant headlines.

The Trump Administration thus faced a dilemma when finalizing its climate change plan. How could they avoid highlighting the additional risk of their preferred policy while still calculating the costs and benefits as required by law? They found their answer by using an old trick, changing the baseline against which repeal and replace was being compared.

In the proposal, EPA compared ACE to CPP which led to the agency disclosing the additional mortality risk associated with ACE. In the final regulation, EPA argued that because the CPP never went into effect, and because of changed circumstances, there was little harm in repealing it. And since it never went into effect, ACE could be compared with the status quo which was no regulation at all.

Voila, no more need to discuss the additional risk to life and health.

And yet again, EPA did not get off completely free in their final analysis. In comparing ACE to the status quo, they could not claim benefits from reducing climate change (because they had already argued that such benefits were negligible if you don’t care about the future or other countries). So instead, they relied on “co-benefits” to claim that ACE would help social welfare.  Co-benefits are a category of benefits that arise from reducing other pollutants (in this case, pollutants besides carbon).

The Trump Administration EPA has already indicated a deep reluctance to consider co-benefits in other contexts. But if they did not count co-benefits in this case, the ACE rule would demonstrate net costs of over $200 million. So EPA either had to undermine their own argument on co-benefits or admit that ACE imposed a huge cost on the fossil fuel industry with no benefit.

Cost-benefit analysis has been required for major regulations since the Reagan Administration. The actions by the Trump Administration have shown both the benefit and the cost (pun intended) of this requirement. On the one hand, analysis is inherently uncertain and dependent upon assumptions. This makes it subject to manipulations unless best practices are followed. The analyses by the Trump Administration are rife with examples of such manipulations and as such diminish public faith in economic analysis.

On the other hand, it is the fact that analysis is required that has made it clear that both ACE is less protective of human health and the climate than CPP was, and that ACE has costs in the hundreds of millions of dollars. One did have to dig through the analyses carefully to understand these impacts, but at least there is an analysis to dig through.

The analyses conducted both at the proposed and final stage of the CPP repeal will likely figure in the eventual court decisions on its legitimacy. Requiring agencies to disclose the costs and benefits of their actions increases transparency, no matter how much an agency tries to obfuscate the impact of their actions. That allows courts, Congress, and the public to better evaluate their actions.

Stuart Shapiro is professor and director of the Public Policy Program at the Bloustein School of Planning and Public Policy at Rutgers University, and a member of the Scholars Strategy Network. Follow him on Twitter @shapiro_stuart.