Monday, September 9, 2019

New Study Shows Effects of Enforcement Actions on Emissions from Power Plants

One of the joys of working as an academic is that part of our job is just to read and learn from the works of others, even if it is not directly relevant to our own research.  Having recently shed significant administrative responsibilities, I have had more time to read some of the interesting scholarship that is being released.  One study that caught my eye over the summer was a working paper by Sam Krumholz, a PhD student at UC San Diego, entitled The Effectiveness and Incidence of Litigation as a Policy Instrument: The Case of the New Source Review Settlements.  The study immediately interested me for a couple of reasons.  First, I enjoy reading research about the law by non-legal academics, who tend to bring a different perspective to their analysis of legal topics.  Second, Krumholz’s study investigates the effects of enforcement actions that were underway during the time I was working as an environmental lawyer at the Justice Department, although I did not work on the cases Krumholz analyzes.  One of the debates at the Department was whether the enforcement cases being brought against coal-fired power plants for alleged violations of the New Source Review requirements under the Clean Air Act were accomplishing results that justified the considerable investment of resources by EPA and DOJ to litigate the cases.  Krumholz’s study offers important evidence about the positive impacts of the litigation.

Krumholz’s study evaluates the impacts of EPA’s New Source Review (NSR) Initiative, a series of enforcement actions taken in the early 2000s against certain coal-fired power plants, alleging that the plants had violated the Clean Air Act by undertaking major modifications without going through the New Source Review permitting process that would have led to more stringent emissions limitations.  As Krumholz notes, the NSR Initiative ultimately encompassed more than one-third of coal-fired power plants in the United States and required compliance measures estimated to cost more than $25 billion. 

Krumholz’s objective was to use empirical analysis to determine the effects of the consent decrees that settled enforcement actions brought under the Initiative.  Krumholz found the following:

  • Consent decrees were associated with significant emissions reductions (-20%) of nitrogen oxides and sulfur dioxide from the power plants.
  • Ambient pollution levels near the power plants fell significantly for sulfur dioxide (-33%) and ozone (-4%). The smaller decrease for ozone probably reflects the fact that power plants are just some of the many contributors to ozone pollution.
  • Cardiovascular mortality in counties near the power plants fell significantly (-1.5%).
  • For power plants owned by investor-owned utilities, almost all of the cost of the settlements was passed on to ratepayers in the form of higher rates. Investor-owned utilities are subject to cost-of-service regulation, which allows them to recoup their costs in the rates they charge for their power. Due to data limitations, Krumholz was unable to analyze the impact on rates from consent decrees involving power plants in areas with competitive wholesale electricity markets.  Standard economic theory, however, would reason that power plants in competitive markets would not be able to pass on as much of their compliance costs in the form of higher rates.

Most legal scholars are familiar with regulatory impact analyses that prospectively project the costs and benefits of new regulatory proposals and regulations.  Less common are economic studies that retrospectively analyze the costs and benefits of regulations.  Krumholz’s study is an example of a third category, of which I have not seen many in environmental law:  empirical studies of the impacts of strategies to enforce environmental standards. 

One of my favorite pieces of environmental law scholarship has long been Dan Farber’s 1999 Taking Slippage Seriously article in the Harvard Environmental Law Review, which argues that environmental law should pay more attention to slippage—the gap between regulatory standards and the actual conduct of regulated parties.  Krumholz’s study provides an empirical basis for understanding the impacts of enforcement actions that reduce slippage, and therefore helps us understand both the impacts of slippage and the material benefits of enforcement actions.  It would be great to see more empirical studies of the effects of environmental enforcement and litigation.

--Todd Aagaard

https://lawprofessors.typepad.com/environmental_law/2019/09/new-study-shows-effects-of-enforcement-actions-on-emissions-from-power-plants.html

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