US costs, foreign benefits

This article appears in the February 9, 2015 issue of National Review.

President Obama came into office with a plethora of policy objectives, from passing “card check” legislation to halting the rise of the oceans. For the most part, and perhaps as a student of the Constitution, he pursued these objectives in his first term with legislative action. Lately, though, the administration has used executive orders and regulatory actions to enact policy objectives by decree.

By far the most economically significant of these actions is the EPA’s decision to require states to reduce their carbon emissions by 30 percent. Such a reduction would increase the cost of coal-fired electricity, for example, by about 80 percent. Most observers believe that states could meet this objective only by enacting a cap-and-trade system, an approach Representatives Henry Waxman (D., Calif.) and Ed Markey (D., Mass.) tried and failed to legislate into federal law in 2009.

The courts will eventually decide whether Obama’s team has the legal authority under the Clean Air Act to enact such sweeping changes. In the meantime, the analysis that the Obama team provides to support its regulatory action sheds fascinating light on the global climate debate. This fact was made especially clear by a recent analysis of the EPA’s own data by Harvard professor Rob Stavins, a supporter of climate action but also an old-fashioned, honorable academic (who perhaps should be protected under the Endangered Species Act).

The accompanying table, which is reproduced from Stavins’s website, dissects the cost-benefit analysis that the EPA has provided to support its carbon actions. The first column provides the EPA’s estimate of the climate benefits of this large carbon reduction. Since climate is affected by global carbon concentrations, U.S. action would be a drop in the bucket, and would actually fail the EPA’s cost-benefit test.

The second column provides the cost-benefit analysis if the benefits to the rest of the world are included. In this calculation, the regulation passes the test. The remainder of the table includes estimates of the domestic health benefits of reduced particulates in the air (correlated pollutants). These are much larger than the benefits of reduced carbon emissions—again, by the EPA’s own estimates.

To be sure, this analysis is fairly tendentious. For example, the EPA predicts fairly low compliance costs by assuming that the cost of carbon capture will be about half of what it is today. Such a calculation assumes cost-saving effects from technological breakthroughs that have eluded scientists for a generation. Inclusion of health benefits having to do with correlated pollutants is also sketchy. Since these are 94 percent of the benefit, wouldn’t a regulation that addresses the correlated pollutants directly be more cost-effective?

But the really striking component of the analysis is the inclusion of the global benefits of climate reduction in a cost-benefit analysis of U.S. policy. The Obama administration appears to have concluded that our government is by the people and for the people of the Earth, not Americans. This sets a dangerous precedent that could easily lead to the adoption of policies that harm all 316 million Americans, so long as they provide a small benefit for the 7 billion or so other individuals on the planet.

Such policies might well be ivory-tower nirvana, but they clearly would not have been acceptable to our nation’s founders. Nor would a president who has decided that laws can be interpreted in whatever manner best suits his policy objectives.