The EPA Mercury Rule: State of the Cost-Benefit Debate; Are Generators Collateral Damage?

The Environmental Protection Agency recently “completed a reconsideration of the appropriate and necessary finding for the Mercury and Air Toxics Standards.”  The main elements of the finding address the appropriate metrics for the underlying cost-benefit analysis.   The focus was on whether to include co-benefits in determining what is required to meet the “appropriate and necessary” standard to be applied to its rules under the Clean Air Act. In doing so, EPA left the pre-existing mercury rule in place but removed its factual and analytical underpinning.  The decision raises policy, legal, and practical issues. On the policy front, what role, if any, should co-benefits play in determining what is “appropriate and necessary”?  This is related to other issues such as the definition of the relevant beneficiaries, as in the case of carbon emissions that affect the whole world, or the data and analytical underpinnings of constructs such as the value of statistical life.   Should cost-benefit analysis be limited to the specific emissions for which the rule is intended, or should co-benefits be considered, and if so, just how broad a sweep of co-benefits should be included in the analysis?  This matter will go to the Courts.  How do the legal issues play out?  On a short-term term and more practical level, how should generators manage in a regime where the rule, itself, remains intact, but its foundation has been removed? For competitive generators, how will this influence market strategy and impact the markets themselves?  For regulated generators, what risks, if any, exist for disallowances or recovery of ongoing costs? Does the change in the analytical framework create risks for stranded assets for all generators?

Panelists:  

Joseph Aldy, Faculty Chair, Regulatory Policy Program, Harvard Kennedy School

Kim Adelberg, Environmental Policy and Engagement, Southern Company 

Kate Konschnik, Director, Climate and Energy Program, Duke University

Kathleen Robertson, Director, Genco and Environment, Exelon

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