In January, the federal Environmental Protection Agency announced a big change. In a new rule regulating power plant turbines run on fossil fuels, the agency said it would no longer consider the economic cost of harm to human health from certain air pollution: PM 2.5, or soot, and ground-level ozone, otherwise known as smog. Much of this pollution comes from industrial sources and transportation.
These pollutants are known to cause premature death, heart attacks and stroke and worse asthma outcomes. Karen Clay is a professor of economics and public policy at Carnegie Mellon University, who studies energy and climate issues from an economic perspective. The Allegheny Front’s Kara Holsopple spoke with Clay about how this change could impact air quality in our region.
LISTEN to the interview
Kara Holsopple: We’re going to talk about EPA’s decision to change how they have been crafting regulations. Let’s first understand how they were done in the past. How has EPA calculated the economic benefits of air quality regulations for human health in the past?
Karen Clay: Basically, they generate estimates, often using estimates from the literature, for example, about the relationship between particulate pollution and some outcome, like heart attacks or mortality. Once they have a number of estimated deaths avoided, for example, then they attach a dollar value.
People often find this a little bit shocking that we would attach a value to a human life. One thing to keep in mind is we’re not actually attaching a value to grandma, right? This is a value of a statistical life, and it’s based on these estimates of small trade-offs between money and the risk of something happening and risk of death. They then aggregate those numbers up and get a value of a human life. But again, you shouldn’t think about it as being attached to any one person.
It’s these little trade-offs that then get aggregated up. What they do then is they have a value of a statistical life, which today is probably $11 or $12 million. Then they multiply that by the number of deaths that are estimated to be avoided by, for example, reducing the levels of particulate matter. That gives you a value.
They then put that number into a cost benefit analysis where they’ve added up all the costs of complying with the regulation. They add up all of the benefits, so the avoided heart attacks, avoided asthma, avoided sick days, avoided deaths, and they look at the two numbers and if the benefits are bigger, then that suggests that they should enact the regulation. That’s the kind of thing that the EPA has done in the past, carefully weigh these costs and these benefits.
Kara Holsopple: I don’t know if you know the specific number, but in general, what is the ratio of benefit to cost of air pollution rules for ozone and particulate pollution?
Karen Clay: It’s going to vary, but typically the benefits are vastly larger. It’s not a close horse race in terms of costs and benefits. Mostly the benefits are just much bigger than the costs.
Kara Holsopple: The EPA said in a statement that the economic benefits of reducing PM2.5 and ozone were too uncertain. Were estimates unreliable?
Karen Clay: Estimates were not unreliable. The thing you should think about is, yes, there is some variation. Some studies will say the relationship is this. Some studies will see the relationship as that. But these all that say reducing pollution is going to reduce mortality, right? And so one estimate might be a little bit bigger than the other, but these are all estimates that suggest that this relationship is real.
Basically, the EPA has typically looked at all such estimates that they can find, often evaluated by a bunch of experts to make sure these are actually credible studies. Then typically they’ll pick the median number from that set of studies. The point is that this is a very careful analytic process to come to some number that they’re going to use.
Of course recognizing that if you chose a different one, you might get a slightly different answer, but also keeping in mind that these benefits are almost always vastly larger than the costs. And so in many, in pretty much all cases, it wouldn’t matter which of the set of estimates you chose, but they have to choose one just because the reality is it’s too complicated to choose five.
Kara Holsopple: What have been the gains – economic, health – of tighter air pollution regulation?
Karen Clay: First of all, there are just thousands of people who’ve lived longer lives. Some of those people are elderly people. So sometimes people say, well, okay, but we’re helping someone live from 80 to 81. There’s lots of evidence that PM 2.5 is also adversely affecting, for example, infants and young children. So to the extent that it’s causing mortality, these are people who are losing their entire lifespan.
These are really significant issues, even if you move away from the mortality angle, in terms of the quality of life components like avoided asthma, avoided emergency department visits, things like that. So it vastly improved our health.
There’s a sort of second thing and this goes back to Pittsburgh. What we used to see in Pittsburgh is people used to come in and they were dirty because they had been outside and the pollution was making their clothes dirty. If you had your windows open, it made the curtains and rugs dirty. So there was a lot of this cleaning and things like that, that was related to air pollution. It’s also the case that a lot of buildings were stained, for example, with air pollution.
There are a lot of things that we’ve forgotten because the air in many places across the United States, including Pittsburgh, has improved so dramatically over the last 80 or 90 years. And so there are lots and lots of ways in which our lives are better because we have lower air pollution.
Kara Holsopple: What is the likely outcome of EPA’s decision not to place a monetary value on health benefits in air pollution regulation or actually to set it at zero?
Karen Clay: There are a number of different dimensions. One dimension would be we’re not going to see the continued improvement that we had been seeing over the last 20 years. One tends to think about the early improvements, say in the 1950s, 60s, 70s, but that has continued to improve more slowly. So you may be seeing that improvement’s going to stop. You may see reversals.
It could be significantly worse than that because it’s not so much the legislation, although the legislation is important. It’s also enforcement. I think that what we saw during the first Trump administration was declines in enforcement. In principle, we could move to a setting where polluters just polluted as much as they wanted without recourse. That’s not what we’ve seen yet. I think that there may be some state and local constraints that will make that happen more gradually perhaps.
We may not see really super sudden reversals, in part because if you’re a company and you have been a low polluter and you suddenly become a high polluter, people are going to notice and there’s going to be social media and other kinds of media. So it may be, there may be compelling reasons to keep that from happening simply because of community members, stock market implications, et cetera.
But I think the more likely outcome would just be that you have a lot of sort of slow degradation. It goes up by one microgram this year and it goes up by one micro gram the next year and five or 10 years later, we’re suddenly back to 1990 or 2000 levels of pollution.
Karen Clay, Ph.D., is the Teresa and H. John Heinz III Professor of Economics and Public Policy at Carnegie Mellon’s Heinz College.
