Who wants more coal company pollution in water streams?

That is one of the news stories of the end of this week, namely that the Trump administration eliminated a previous Obama administration ruling on this, see Brad Plumer for details.  That sounds horrible, doesn’t it?

I took a look at the cost-benefit study (pointed out on Twitter by Claudia Sahm, or try this link, and please note it was prepared by consultants, not by the government itself).  I spent some time with these hundreds of pages, and they are not always easy to parse (my apologies to the authors for any misunderstandings).  Anyway, I quickly came upon this and related passages (p.45, passim):

In summary, the Final Rule is expected to reduce employment by 124 jobs on average each year due to decreased coal mined while an additional 280 jobs will be created from increased compliance activity on average each year.

Of course those “newly created jobs” are a cost, not a benefit, and should be switched to the other side of the ledger.  That is not what this study did.  And if I understand p.4-31 correctly, this study is using a multiplier of about 2.  This approach is completely wrong, and if it were right Appalachia would love a lot of this coal regulation for its job-creating proclivities, but of course the region doesn’t.

The claimed annual benefit from the changes, from the side of coal demand (not the only effects), is $78 million, fairly small potatoes.  Note the study doesn’t consider what are commonly the most significant costs of regulation, namely distracting the attention of managers and turning companies into legal and regulatory cultures rather than entrepreneurial cultures.  The study does mention uncertainty costs from regulation, although I could not find any quantification of them.

Furthermore, I am not able to scrutinize the introductory section “SUMMARY OF BENEFITS AND COSTS OF THE STREAM PROTECTION RULE” and figure out the final assessment of net benefits for the rule and where that assessment might come from.  I find that worrisome, and paging through the study did not put my mind at ease in this regard.

Now, I know how this works.  Many of you probably are thinking that we need to do whatever is possible to attack or shrink the coal industry, because of climate change.  Maybe so!  Maybe we want to stultify the coal companies, for reason of a greater global benefit.  But a) there is still a role for evaluating individual policy changes by partial equilibrium methods and reporting on those results accurately, and b) “putting down the coal companies,” as you might a budgie, is not what the law says is the proper goal of policy.

Imagine holding an attitude that places the Trump administration as the actual defenders of the rule of law!  Besides, don’t get too worked up (p.174):

Our analysis indicates that there will be no increase in stranded reserves under any of the Alternatives.

There is, however, a very small decline in annual coal production (pp.5-20, 5-21) from the rule that had been chosen.  Water quality is improved in 262 miles of streams (7-26), in case you are wondering, that’s something but hardly a major impact and that almost entirely in underpopulated parts of the country.  All the media coverage I’ve seen implies or openly states a badly exaggerated sense of total water impact, relative to this actual estimate (are you surprised?).  Returning to the study, there is also no region-specific estimate of how large (or small) those water benefits might be, at least not that I could find (again, maybe I missed it, but I did find some language suggesting that no such estimate would be provided).

Chapter seven calculates the benefits of the resulting carbon emissions, but after reading that section my best estimate for those marginal benefits is zero, not the postulated $110 million.  The “social cost of carbon” is actually an average magnitude, and it does not measure benefits from very small changes.  Again, you might think there is an imperative to consider “this policy is conjunction with numerous other anti-coal changes,” but that is not what the law stipulates as I understand it and furthermore it hardly seems that many other anti-coal regulatory changes are on the way.

If it were up to me, I would not have overturned the coal/stream regulations, and my personal inclination is indeed to fight a war on coal.  But if you look at the grounds for evaluation specified by law, and examine the cost-benefit study with even a slightly critical mindset, we don’t know what is the right answer on this individual policy decision.  The study outlines nine different regulatory alternatives and it is not able to conclude which is best, nor is the quantitative thrust of the study aimed toward that end.

Mood affiliation aside, to strike this regulation down, as the Trump administration has done, is in fact not an indefensible action.

On a more practical political level, Trump wishes to send a signal to Appalachian voters that he is looking out for coal and looking out for them.  This is actually a very weak action, and it was chosen because for procedural reasons it was quite easy to do.  The more you complain about it, the stronger it looks, and that’s probably a more important fact than any of the particular details of this study.  Whether you like it or not, the coal debate is not really one that favors the Democrats.

Addendum: Here is the CRS paper, which seems to be derivative of other work, most of all this study.


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