Public Comment on the EPA's Proposed Rule Repeal of Carbon Pollution Emission Guidelines for Existing Stationary Sources: Electric Utility Generating Units

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Brian F. Mannix
April 27, 2018

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The George Washington University Regulatory Studies Center improves regulatory policy through research, education, and outreach. As part of its mission, the Center conducts careful and independent analyses to assess rulemaking proposals from the perspective of the public interest. This comment on the Environmental Protection Agency’s Notice of Proposed Rulemaking (NPRM) to repeal the Agency’s Clean Power Plan does not represent the views of any particular affected party or special interest, but is intended to assist EPA in developing economically efficient options for its regulatory decisions and sound economic analyses to support them.

Introduction

The EPA has proposed to repeal the greenhouse gas (GHG) emissions guidelines for electric generating units issued on October 23, 2015—better known as the Clean Power Plan (CPP). The Agency has also sought comment separately on what, if anything, ought to replace it. I have filed a comment in that separate ANPRM docket with a number of suggestions for what a replacement rule might look like. I also filed an earlier comment in December 2014, offering advice to states on the best method of complying with the then-proposed CPP.

This comment will focus on the Regulatory Impact Analysis (RIA) that supported EPA’s 2015 CPP final rule. Quite apart from the Agency’s interpretation of its authority under the Clean Air Act, the deficiencies in the 2015 RIA are severe, and by themselves form a compelling basis for repeal of the CPP. EPA has proposed revisions to the RIA that would make a substantial improvement in its accuracy, and that also would undermine the Agency’s earlier claim that the benefits of the CPP outweighed the costs. Moreover, in many areas the proposed revisions do not go far enough in correcting the distortions of the original RIA. The comment below, often drawing on earlier comments and commentary, outlines those areas where the agency made major errors in the 2015 RIA, and where it could go further to improve the analysis.

What is the Purpose of an RIA?

In the case of the CPP, as in other rulemakings, highly consequential regulatory decisions can turn on the results of economic and related analyses published in the form of a Regulatory Impact Analysis—especially on the RIA’s assessment of benefits and costs. The Clean Air Act requires that the Agency consider costs as well as benefits when setting standards under §111(d). Benefit-cost balancing is required also by Executive Order 12866, signed by President Clinton and still in effect. And in recent decisions the Supreme Court has indicated that, unless a statute explicitly instructs an agency to ignore costs, taking regulatory action without considering costs could be found arbitrary under the Administrative Procedure Act.

I outline these developments in a forthcoming article,[1] and explain that a benefit-cost analysis (BCA) should not be viewed simply as a technical planning document for the agency’s use, but as a necessary demonstration that an agency is acting in the public interest. Courts increasingly are, and ought to be, reviewing the substance of agency benefit-cost analyses to determine if regulatory actions comply with requirements of the authorizing statute and of the Administrative Procedure Act.

[O]ur government is one of checks and balances, not of independent decision-makers… Agency officials are not principals; they wield whatever power they have as agents of the people. They ought to be able to demonstrate that their discretionary official actions serve the public interest, promote the general welfare, or otherwise advance the common good… BCA can help distinguish those actions that appear to be justified from those that clearly are not…

[B]enefit-cost analysis, as applied to regulation, should be viewed less as a tool to inform the regulators and more as a test to see whether the regulators are acting as faithful agents of the public’s interest.

It is helpful to keep that purpose in mind when reviewing agency RIAs, and to apply a healthy skepticism (rather than deference) towards the more extravagant economic claims that an agency might make in an attempt to justify its actions.

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[1]    Brian F. Mannix, “Benefit-Cost Analysis as a Check on Administrative Discretion” forthcoming, Supreme Court Economic Review.