Life Worth $10 Million, Tears Averted $16 Under EPA Plan

Photographer: Gabriel Bouys/AFP via Getty Images

Downtown Los Angeles on a smoggy afternoon. Close

Downtown Los Angeles on a smoggy afternoon.

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Photographer: Gabriel Bouys/AFP via Getty Images

Downtown Los Angeles on a smoggy afternoon.

Most of the economic gain that President Obama cites in his proposal to cut carbon emissions would come from a healthier population.

Instead of added jobs or more spending to develop alternative energy sources, a majority of the benefits are calculated in terms of fewer illnesses, less health-care spending and more productive individuals.

An asthma attack averted, for example, is worth $58. Preventing 140,000 to 150,000 asthma attacks by reducing soot and smog -- a side benefit of the carbon dioxide reductions -- adds about $9 million to the benefits column by 2030. The list includes everything from heart attacks to nasal congestion.

In all, the administration sees $55 billion to $93 billion in economic gains from the proposed rules.

The macabre accounting is part of a cost-benefit analysis that government regulators perform to show whether a proposed rule generates enough value to justify the costs of compliance.

For Obama, the calculation is a core part of his message to the American public that the rules would be a net benefit for the country, countering the argument from Republicans and industry that the regulations will put economic growth at risk.

“Every time America has set clear rules and better standards for our air, our water, and our children’s health, the warnings of the cynics have been wrong,” Obama said in his weekly address on May 31. “Our air got cleaner, acid rain was cut dramatically, and our economy kept growing.”

Compliance Costs

The administration calculates that utilities and their customers will spend as much as $8.8 billion to comply. Barclays Plc yesterday forecast that the rules would add 10 percent to electric utility rates in 2030.

Jay Timmons, president and chief executive officer of the National Association of Manufacturers, said that U.S. companies “rely on secure and affordable energy to compete in a tough global economy.”

Obama’s proposal “could singlehandedly eliminate this competitive advantage,” he said.

For the specifics of Obama’s health argument, the government determines values in a couple of ways. It looks at the average cost of medical care and estimates of lost wages. Non-fatal heart attacks consequently count for less among the young, who are not yet in their peak earning years. The price rises from $98,000 among under-25-year-olds to $200,000 among 55- to 64-year-olds.

Paying Out

In other cases, the regulators study how much Americans are willing to pay to avoid illness, either based on surveys or on behavior, such as the wage premiums paid to workers whose jobs involve health risks. The government calculates that Americans in 2020 on average would be willing to pay $33 to avoid upper respiratory symptoms, such as nasal allergies. Averting a six-day bronchitis episode is valued at $430.

On the other side of the ledger, the administration estimates compliance with the limits will cost utility companies and their consumers $7.3 billion to $8.8 billion in 2030. The regulations would add roughly six to seven percent to electricity rates nationwide in 2020 and three percent a decade later, according to the EPA.

The EPA also projects that by 2030, the regulations will cause the loss of between 79,900 and 80,400 full-time equivalent jobs in power generation and fossil fuel industries, including between 16,600 and 18,000 in coal production. The agency forecasts 111,800 full-time equivalent jobs in 2030 in energy efficiency work, including weatherization of old homes and manufacture of more efficient appliances.

Opponent’s View

Laura Sheehan, a spokeswoman for the American Coalition for Clean Coal Electricity, coalition of industries involved in power generation from coal, said the health benefits claim from Obama’s greenhouse-gas plan is “is disingenuous at best.”

“Reductions in carbon have not an iota to do with reducing asthma or other health related issues,” Sheehan said. “As for premature deaths, ask EPA to show you a death certificate that says cause of death -- carbon.”

Many of the health and economic benefits the Environmental Protection Agency attributes to the climate change regulations aren’t directly from limiting carbon emissions. They are mostly driven by the cuts in soot and smog the administration expects as utilities shut coal power plants and take other steps to meet the standards.

Premature Deaths

The EPA estimates air-quality improvements from lower levels of fine particles and ozone precursors will prevent between 2,700 and 6,600 premature deaths during 2030, accounting for between $27.3 billion and $66.7 billion in benefits.

The formulas for quantifying the impact of air pollutants such as fine particles and ozone on asthma and other ailments are well-established, said Jack Lienke, a legal fellow at the New York University Law School’s Institute for Policy Integrity.

“If you’re going to perform a cost-benefit analysis, you have to attempt to quantify the benefits as well,” he said. It’s “not unusual” for the EPA to count such ancillary benefits along with indirect costs in making a cost-benefit determination, citing a regulation requiring reductions in mercury emissions as a precedent.

While global warming is expected to increase levels of allergens such as pollen and ozone levels, both of which can trigger asthma attacks and contribute to respiratory ailments, the scale of that impact isn’t as well established, said John Balbus, a senior adviser for public health at the National Institute of Environmental Health Sciences.

To contact the reporter on this story: Mike Dorning in Washington at mdorning@bloomberg.net

To contact the editors responsible for this story: Steven Komarow at skomarow1@bloomberg.net Joe Sobczyk

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