By Guest Contributor Robert Kappelmann and
Dr. Dan Eichenbaum of Dr. Dan’s Freedom Forum
Just when America is bracing for another downgrade of our national debt, the EPA, has miraculously come forward to save the day. For years EPA has suffered from the charges from American industry that regulations in the EPA’s Clean Air Act (CAA) cost too much, send jobs overseas, and are ultimately paid for by the American consumer through higher prices. The EPA, on the other hand, claims that the economic benefits of the Clean Air Act vastly exceed the cost to the American consumer and help create high paying green jobs that replace the manufacturing jobs fleeing to China.
In 2011, the Environmental Protection Agency (EPA) claimed that the Clean Air Act would provide $2 trillion in annual monetized health benefits to American citizens by the year 2020 that would continue to increase annually in perpetuity. Federal agencies have the authority to drastically change our lifestyle through regulatory power, but they fail to provide the necessary facts to justify the assumptions used in their economic models to substantiate the $2 trillion claim. National Weather Service, a non-regulatory agency, for example, rarely gives an absolute value in their predictions for the chances of rain. Rather they give a percentage for a chance of rain at a certain future time. Anyone planning outdoor activities knows that their prediction is not truly reliable!
This is not the first time a government agency with regulatory power has skewed data and variables in their computer modeling to bolster a political agenda. While National Weather Service can give us a probability of what our weather might be several days in advance, the further out the prediction the lower the chance that it will be correct. The EPA and other federal regulatory agencies claim to be able to predict a change in earth’s temperature in the year 2100 over 70 years from now, but these predictions are from computer models that utilize cherry picked data and variables to reach a predetermined result. The federal government relies on outcome-based science and economics to justify a political agenda. That should result in a healthy skepticism of any public benefit claims from government programs as well as the endgame of that program.
In March of 2011, the EPA released a congressionally mandated report to blunt criticism and prove that the EPA’s aggressive Clean Air Act regulations were a boon to the US economy. The report calculated the cumulative costs and benefits of the Clean Air Act from 1990 to 2020, and, as you might have guessed, the results were astounding. The EPA claimed that those regulations will result in annual financial benefits to the American people of nearly $2 trillion by 2020. The cumulative benefits, therefore, would total over $12 trillion by that year. The EPA used the value of the 2006 dollar to avoid possible criticism that they had skewed their estimates by using inflated currency values. Until recently, that was almost enough to eliminate half our National Debt.
But why stop there? The EPA then used optimistic computer projections to estimate that those monetized benefits could approach $6 trillion annually by 2020, creating a cumulative benefit to the US economy of $35 trillion by that year. This would be more than enough to pay off the National Debt and still leave a few trillion dollars to spend on worthwhile government endeavors. The EPA report pointed out, with a certain amount of falsely justified pride, that the monetized benefits to our economy will exceed the cost by a factor of 30 to one using their average projections and 90 to one with their overly optimistic computer model. Who in their right mind would not give a dollar to get back a cool $30 or even $90? Reasonable citizens would wonder if EPA will share this windfall with U.S. Treasury so we can finally have federal budget surpluses in perpetuity.
In the fine print, the EPA also claimed that Americans had already received $1.2 trillion in monetized benefits from CAA regulations as early as 2010 mostly through reductions in fine particulate matter in the air we breathe. The EPA further speculated that reduced air pollution will postpone and/or prevent as many as 230,000 premature deaths by 2020. According to the EPA, delaying the “Grim Reaper” would provide $1.7 trillion to the economy or about $7.4 million per premature death avoided. This still seems like a lot of money to avoid a premature death considering that the average annual value of the GDP per person in the US in 2010 was about $48,650.
Although the EPA does not provide the average length of time a premature death is avoided, it would have to be about 152 years based on annual US GDP per person to reach $7.4 million. The EPA, however, does not rely on direct economic value of a premature death avoided but rather on the value of a statistical life (VSL). The calculation of the dollar value of avoiding a premature death is based on the public’s willingness to pay. The VSL is very simple to calculate and avoids dealing with economic realities. First, you must estimate the amount the average person is willing to pay to allow someone to live longer. A simple VSL survey might begin with a question like this: “Would you be willing to pay a $100 a year to lower the death rate from air pollution from 20 people per million to 10?” A “yes” allows the surveyor to calculate a VSL as follows: A million people willing to pay $100 a year yields a $100 million. Ten lives would be saved so avoiding a premature death would be equal to $100 million divided by 10 or $10 million per life saved. In this EPA study it seems that people would only pay $74 to save a life.
This brings us to the issue of just how the EPA calculated the 230,000 people saved from death in 2020. The EPA uses a statistical method that estimates premature deaths based on fine particulate levels in the air we breathe. It is well accepted by government health experts as a scientific fact that reducing the fine particulate level in the air we breathe lowers the rate of premature death. Numerous peer reviewed European studies have found that virtually all the premature deaths in Europe from air pollution are due to organic fine particulate from diesel truck exhaust. In this study, however, the EPA assumes that a drop in premature deaths will occur by dramatic reduction of inorganic fine particulate air pollution from fossil fuel electric power generation. This remains unproven. Looking at the life expectancy in countries that do not have abundant and economic electric energy, however, reveals that the life-extending benefit from fossil fuel powered electricity far exceeds a reduction in fine particulate pollution. If you are of a mind to reduce the world’s human population, eliminating economic and reliable electric energy would be a good start.
Americans have demonstrated a willingness to pay for having a cleaner environment for themselves and their children. That goal is just plain common sense. Nevertheless, Americans are beginning to tire of paying for federal regulations with hard currency only to get play money and unfulfilled promises in return.
Resist Tyranny and Trust in Freedom!
Robert Kappelmann ME. PE. is an energy and environmental policy consultant. He has provided economic analyses of the cost impacts of proposed federal and state environmental legislation and the EPA regulations for electric utilities throughout the US. Prior to starting his own consulting firm, he served as Legislative Director for JEA. He received a BS from Stetson University and completed graduate studies in environmental engineering and research in atmospheric photochemistry at University of Florida under an EPA fellowship. He also is a graduate of the Government Management Program at Jacksonville University.
