In the News

The politics of how environmental regulations affect hiring and firing is distorted by campaign rhetoric that often gives short shrift to the uncertainties surrounding economic models, New York University researchers argue in a report released today.

NYU’s Institute for Policy Integrity looked at the complex relationship between the labor market and regulations in the report and determined politicians on either side of the fight often fail to call attention to the limits and assumptions of such models.

THE Environmental Protection Agency’s proposal earlier this week to reduce greenhouse gases from new power plants was hailed by many environmentalists, but unless steps are taken quickly to bring existing plants under the rule, it will create a perverse incentive for companies to keep running older, more heavily polluting power plants. That’s bad economics that could lead to dirtier air.

The proposal would regulate carbon emissions from future power plants but leave existing sources untouched. This is yet another instance in a more than 40-year pattern under the Clean Air Act in which old and outdated technology has avoided new environmental standards. The result is continuing unhealthy levels of pollution.

“To get CCS going, you’d have to have a rule that was so strict you couldn’t even build a natural gas plant, you’d have to move to CCS,” said Michael Livermore, executive director of the Institute for Policy Integrity at the New York University School of Law. “You’d have to make CCS plants cleaner than natural gas.”

“The option of building new, efficient natural gas plants remains a viable alternative for companies that want to construct,” said Jason Schwartz, legal director for the Institute for Policy Integrity at New York University. “They’re allowed to look into the future and use their best judgment and set standards in anticipation of the growth of technology.”

“EPA’s not denying, of course, and they won’t deny, … that there’s going to be costs” from the regulation, said Michael Livermore, executive director of the Institute for Policy Integrity and adjunct professor at New York University School of Law who focuses on cost-benefit analysis. “The question is whether the costs are justified by the benefits.”

But a clear point, he said, is that the industry study is “not a prediction about gasoline” costs.

“It seems unlikely that they’ll be able to pass on 100 percent of their costs,” Livermore said of the oil companies. “If they can just pass along the costs to consumers, then why fight [the new regulations] tooth and nail?

“It’s not the role of EPA to keep every polluting business in the country open,” Livermore said. “It’s actually businesses’ job to comply with environmental regulations at the cheapest possible cost.”

Michael Livermore, executive director of New York University’s Institute for Policy Integrity, called the failure to cover existing plants “a big problem,” noting that the move might encourage utilities to keep operating conventional coal plants operating longer.

“When you want to reduce pollution, you need to go where the pollution is, and that’s existing sources,” he said, adding that when the government grandfathers existing plants and raises the standards for building new ones, “you increase the incentives to keep existing facilities around.”

In addition to lucrative tax breaks and subsidies from the government, many fossil fuel producing companies also enjoy another type of built-in bonus: they don’t have to pay for a lot of the harm they cause to public health. If they did, it could cost billions per year and make investing in renewable energy much more attractive.

If citizens could send an invoice to coal, oil, and gas companies for all of the damage they did—medical bills, reimbursements for sick days taken thanks to illnesses caused by pollutants in the air, even funeral costs—it would amount to a staggering bill.

“You have to focus on what you’re buying,” said Michael Livermore, executive director of the Institute for Policy Integrity at the New York University School of Law. “If you just look at the price, you don’t know what you’re getting. Are these wise investments? That’s the question.”

An example of a regulation that is paying off, according to Livermore, is the Environmental Protection Agency’s mercury and air toxics rule, which caps pollutants emitted by power plants. It will cost utilities about $9.6 billion per year and is projected to yield up to $90 billion in benefits in terms of saved lives, reduced illness and jobs created, according to the EPA.

But Michael Livermore, executive director of the Institute for Policy Integrity, said EPA’s soon-to-be final rule for boilers is reasonable, if not a little too lax. “EPA has been working on this for a long time, and they’ve done a lot to address industry concerns,” he said.

He added that manufacturers would criticize the rule almost no matter what it looked like, because environmental regulations do not contribute to their bottom line.

“Industry is going to oppose the rule no matter how large the benefits are for the American public,” he said.

But said Jason Schwartz, legal director for the Institute for Policy Integrity at New York University, believes focusing on the numbers is too narrow. In the broader sense, the tailoring rule works if the court allows EPA to take a “step-by-step piecemeal approach” by focusing on the big sources first.

“The agency is looking at all of the language together and coming to the closest reading they can get,” he said.