Supreme Court Ruling Allows EPA to Base Decisions on Cost-Benefit Analysis
In a 6-3 decision, the Supreme Court ruled that the Clean Water Act gives the EPA authority to use cost-benefit analyses as the basis for such decisions, but the Court stopped short of saying the EPA was required to base its decisions on a cost-benefit analysis.
What’s at Stake?
The EPA was planning to require more than 500 older power plants to upgrade their systems that use water to cool machinery before the lawsuits began. The water intake systems used by older power plants kill an estimated 3.4 billion fish and shellfish every year. Such power plants draw 214 billion gallons of water from U.S. waterways every day. Billions of fish and other aquatic creatures are sucked into the cooling systems or crushed against intake screens and killed.
The closed-cycle cooling systems used by newer plants reduce the death rate by 98 percent, but installing closed-cycle systems in older power plants would cost $3.5 billion annually. Alternative technology could reduce the number of fish killed by 80 percent to 95 percent, according to the EPA, and would cost roughly one-tenth as much to install.
Installing closed-cycle cooling systems at older power plants might also force electricity costs to rise by 2.4 percent to 5.3 percent, the EPA said. Closed-cycle systems would reduce the amount of electricity the power plants generate, and would require utilities to build 20 new 400-megawatt power plants to replace the lost electricity. Installation and construction of the new cooling systems could also force some plants to close down for a few months, resulting in even more costs.
What’s the Background?
The Supreme Court decision overruled an earlier decision by the 2nd U.S. Circuit Court of Appeals in New York, which ruled that the Clean Water Act does not allow cost to be used when deciding what technology would best minimize environmental impacts. The Clean Water Act requires remedies that "reflect the best technology available for minimizing adverse environmental impact."
The three dissenting Supreme Court justices—John Paul Stevens, Ruth Bader Ginsburg, and David Souter—argued that, in passing the Clean Water Act, Congress never intended for agencies to base their decisions on cost-benefit analyses because its members understood that it is nearly impossible to put a dollar value on the loss of wildlife.
What’s the Problem?
And that’s the primary problem most environmentalists have with the notion of using cost-benefit analyses to make conservation decisions—it’s difficult to find a valuation method that everyone can agree on, or that even makes sense.
In the current case, the EPA analysis placed a value of $83 million per year on the fish that would be saved by installing close-cycle cooling systems at older power plants. But that number only takes into account the value of fish that are caught by either sport or commercial fishermen—less than 2 percent of all the fish currently killed by water-intake systems. The EPA assigned no value at all to more than 98 percent of the fish, shellfish and other aquatic life killed by power plants each year.
My Take on the Issue
Don’t get me wrong. Balancing the needs of business and consumers with what it takes to protect and preserve the natural environment is essential. We are, after all, part of the environment we are trying to manage. Yet, in failing to address the value of a living resource, and the benefit of conserving it, both the EPA and the Supreme Court have clearly demonstrated the shortcomings of the agency’s current cost-benefit method and its application to important environmental decisions.
By clearing the way for the EPA to base critical decisions on a flawed method, with no mandate for the agency to first improve its cost-benefit calculations, the Supreme Court may have inadvertently laid the groundwork for a series of short-sighted environmental decisions with no long-term benefits for anyone.
Comments
ONLY IN THE UNITED STATES
The report on the Supreme Court decision is important. It is also a commentary on U.S.’s politicized environmental regulatory system, whose origin and evolution are traced in the new book by F.T. Manheim (”The Conflict over Environmental Regulation in the United States: Origins, Outcomes, and Comparisons with the EU and other Foreign Regions”. Springer, 329 p., 2009)
No other advanced nation has the U.S.’s command & control environmental regulatory system -that is little changed from the laws passed during the decade of the 1970s.
The book by Manheim points out that whereas the revolutionary 1970s laws promoted rapid progress against pollution, their massive complexity and adversarial provisions against industry created a rift in U.S. society. Congress had no built-in scientific or professional expertise – nor ability to oversee the programs it created. Neither does the civil court system, which got the responsibility to resolve conflicts, have such expertise.
As a result, we developed continuous battles over the past 25 years, along with gridlock that has not even allowed update or modification of the Clean Water Act Amendments since 1987.
The reason that this decision ended up in the Supreme Court is that 13 out of the 18 major laws enforced by EPA – including CWA allowed no legal status to economic effects in enforcement. That, in principle would mean no renewable energy development if there were conflicts with even minor environmental protection.
In contrast, all 27 EU member nations have accepted the policy of sustainable development, which requires integrated consideration environment (and sustainability) and economy. Gro Harlem Brundtland, former Norwegian Prime Minister and a UN environmental pioneer, pointed out that neither environment nor economy can be effectively served without considering both. Moreover, leaders’ environmental progress – far greater than the U.S.’s is achieved through cooperation and oversight by professional agencies, not political debating bodies.
There are no winners in the current U.S. system, which has polarized both environmental and industry leaders and their political supporters. It will be important to see whether the Obama Administration recognizes our problem of America-centrism and the need to deal with our outdated structures. If not, we’ll continue to expend energies in conflict rather than innovation and efficient solutions to our massive problems.
Excellent comment, Nnamelet!
Some arithmetic: 500 power plants killing 3.5 billion “fish” per year = each plant killing 300,000 “fish” per hour. Change filters every 12 seconds? Highly unlikely. Unless they’re trying to impress us with numbers by counting each microscopic copepod as a “fish”. Perhaps the problem is not as big as Obstructionist, Unscientific Greenies want us to think.
I agree the Court’s decision leaves uncertainty in the details and room for unforseen consequences in the practice.
3.500.000.000/500 power plants = 7.000.000 fish per power plant
7.000.000/365 days = 19.178,08 fish per day
19.178,08/24 hours = 799,08 fish & shellfish per hour
… but your point was ‘obstructionist, unscientific greenies’, I guess.
Thank you for astutely pointing out my careless computational error, but even at 800 fish per hour, I doubt the accurracy of their data. Not to mention that 800 is insignifcant for organisms that lay a million eggs at a time by each female. And I’m sure “they” want us to believe that’s 800 sturgeon and 12 lb trout, not the minnows & plankton that they actually are. The natural populations are not affected by such small losses.
All engineering solutions are compromises among the conflicting factors. Cost to benefit ratio must be considered. In this case, cost is high & benefit low.