6 July 2015. Last week, the U.S. Supreme Court ruled that the Environmental Protection Agency (EPA) did not appropriately consider costs when preparing its legislation that requires coal-fired power plants to spend an estimated $9.6 billion per year cleaning up mercury and other toxic air pollutants. The EPA had estimated that the quantifiable benefits from the resulting reduction in hazardous-air-pollutant emissions would only be $4 to $6 million a year – much, much less than the costs of the regulation. In the words of the 5-4 majority of the Court, “[i]t is not rational, never mind “appropriate,” to impose billions of dollars in economic costs in return for a few dollars in health or environmental benefits.” Fair enough, but what are the implications?
CNN interpreted the ruling as a “loss for the Obama administration”, because “the Supreme Court ruled that the EPA unreasonably interpreted the Clean Air Act”. That may be true, but that is not the whole story. The good news is that the mercury rule will remain in effect for now, although the EPA must review and revise the justification for the rule-making in the months ahead. Then the lower court will have to decide whether the EPA has appropriately considered the costs and benefits of the legislation. The rule has already resulted in lower mercury pollution, and these benefits cannot (and should not) be rolled back.
But how large are the benefits? The good news is in fact that EPA made a serious blunder (although the EPA may not agree that this is good news) when calculating the benefits of protecting the next generation’s brains against mercury. From all we know today, EPA’s numbers are gross underestimates. So, although some like CNN see the Supreme Court decision as a wrench thrown in the EPA’s crackdown on mercury pollution, the updated calculations could potentially justify the EPA taking even stronger action.
This type of economic calculations involves some complexities, as outlined in Wired, so the benefit estimates cannot be updated overnight. Still, there are several published reports that the EPA can rely upon. Thus, already ten years ago, the New England states sponsored an economic evaluation that showed that the investment in preventing power plant pollution was feasible and advantageous. The health economists calculated that IQ losses due to mercury exposure from coal-fired power plants would cost society between $75 and $194 million per year. However, the economists used a rather flat dose-response curve that suggested that each increase in mercury exposure that corresponds to 1 ppm in the mother’s hair-mercury concentration will cause a loss in IQ of her child of -0.6 points. This calculation relied in part on data from the Seychelles that were later found to underestimate the brain toxicity.
Better data were applied in subsequent studies, and the costs rose substantially. A major reason is that better information was available on the dose-dependence of mercury toxicity. The most recent calculation suggests that current methylmercury exposures in the US are associated with an annual loss of 264,000 IQ points per year. As power plants constitute a major source of mercury pollution in the US, much of that IQ loss could be regained by pollution abatement.
So how much are such IQ losses worth to society? Economists suggest to use information on life-time income as that depends – on average – on the IQ. In fact, an increase in IQ by one point is associated with an increased income by at least 1 percent. As money in the hand today is worth more than money some time in the future, income in future years is discounted (by 3% per year) and then added up. All told, one IQ point is worth about $18,000. Given the number of IQ points lost per year, the annual economic loss in the US due to mercury brain drain is about $5 billion. Again, much of that can be ascribed to the mercury from coal-burning.
But $5 billion is one thousand times higher than EPA’s own estimate!
Hopefully, the U.S.EPA has access to some superb brains that can help correct the erroneous estimate that the Supreme Court criticized. That would turn the Supreme Court ruling into a major victory and throw the wrench back toward the polluters.