Articles by Richard L. Revesz

Richard Revesz responds to Lisa Heinzerling, defending cost-benefit analysis

This post continues a dialogue with professor Lisa Heinzerling: see Revesz's initial post and Heinzerling's response.

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Cost-benefit analysis, correctly applied to many environmental problems, will show that strong environmental regulation is often economically efficient. Although some environmentalists, including Lisa Heinzerling in a recent post, have expressed reservations about the use of cost-benefit analysis to evaluate environmental rules, rejecting cost-benefit analysis instead of seeking to reform it would be a major strategic error for the environmental movement.

The green community should mend, not work in vain to end, cost-benefit analysis

Failing the cost-benefit test

The R. Gallagher coal-fired power plant in Indiana emits over 50,000 tons of sulfur dioxide per year. Sulfur dioxide is a major component of particulate matter -- a form of pollution known to cause adverse cardiovascular and respiratory health effects. Sulfur dioxide also mixes with other pollution in the atmosphere to form acid rain. As a result of these adverse health effects, the Office of Management and Budget estimates that each ton of sulfur dioxide released into the atmosphere imposes $7,300 in costs on the American public. This means that the R. Gallagher facility imposes over $370 million worth of costs each year.

Environmentalists have fought for years to clean up or shut down dirty power plants like R. Gallagher. According to an analysis by the Environmental Integrity Project, the dirtiest fifty plants account for 40 percent of sulfur dioxide emissions, but only 13.7 percent of the electric generation. If we cleaned up the worst of the worst, we would make tremendous progress in improving the quality of the nation's air.

What makes the existence of plants like R. Gallagher so galling is that there is absolutely no reason why they should be allowed to pollute the way they do. Given the massive social costs imposed by plants like R. Gallagher, it makes basic economic sense to invest in pollution control technology -- or even build an entirely new efficient plant next door and shut the facility down entirely.

The Bush administration has had almost eight years to fix the problem of R. Gallagher. Despite its professed allegiance to the cost-benefit principles that reveal pollution from the plant as an economic disaster, the administration has done nothing to stop it. Congress, which contains many ostensible fans of cost-benefit analysis as well, hasn't closed the grandfathering loophole in the Clean Air Act that keeps R. Gallagher in business. When tougher environmental regulation is so clearly backed by sound economic analysis, the only explanation for the policy gap is a failure of the political process. This is not an ideological question; it is not a question of competing values. R. Gallagher, and similar polluting plants, stand as perfect monuments to a political system that has failed the American public.