Facts Not Fear on Air Pollution

Studies | Environment

No. 294
Monday, December 11, 2006
by Joel Schwartz


Myth No. 3: Federal Air Regulations Make Americans Better Off

"Air quality was improving for decades before the federal government became involved."

The Clean Air Act and federal regulation were not necessary to reduce air pollution.  Air pollution has indeed sharply declined since the Clean Air Act was adopted.  But regulators and environmentalists create the false impression that air pollution was on an ever-rising trajectory before the federal government stepped in to protect Americans from unrestrained capitalism and from state and local governments more interested in jobs and economic growth than their citizens' health.  This self-serving picture is false.  Air pollution had been dropping for decades before the federal government took over policy control in 1970. For example:

  • Pittsburgh reduced particulate levels by more than 75 percent between the early 1900s and 1970.73
  • Chicago, Cincinnati and New York all have records going back to the 1930s or 1940s showing ongoing reductions in particulate matter leading up to the Clean Air Act.74
  • Los Angeles began reducing ozone in the 1950s, soon after skyrocketing population and automobile use created the problem; ozone has been declining ever since.75 
  • Between 1960 and 1970, total suspended particulate levels declined nearly 20 percent nationwide,76 while average sulfur dioxide levels dropped 36 percent - nearly 60 percent in New York City.77

Through a combination of market forces pressing for greater energy efficiency and cleaner technologies, common law nuisance suits, and local and state regulation, Americans were addressing air pollution decades before the federal government took over policy control. Air pollution is not unique in this respect. Other environmental problems, such as water quality, were also improving before the federal government took over.78 

The Price of Clean Air Regulations.  If air pollution could be reduced for free we could be less concerned about the validity of alarming claims of harm from low-level air pollution. But reducing air pollution is costly. Attaining the federal 8-hour ozone and annual PM2.5 standards will cost tens to hundreds of billions of dollars per year.79  These costs are ultimately paid by people in the form of higher prices, lower wages and reduced choices.80  Spending more on air quality means spending less on other things that improve health, safety and welfare.

"Statistically, every $17 million in regulatory costs is associated with one additional death."

Lower Incomes - Not Pollution - Harm Health.  Higher incomes are associated with improved health because people spend a portion of each additional dollar of income on things that directly or indirectly improve health and safety, such as better medical care, more crash-worthy cars and more nutritious food.81  People made poorer by the costs of regulations do fewer of these things and are less healthy as a result.

Risk researchers estimate that every $17 million in regulatory costs induces one additional statistical death.82  Thus, regulations are not pure risk-reduction measures, but instead inevitably impose tradeoffs between the health benefits of the regulation and the harm from the regulation's income-reducing costs.  The costs of attaining EPA's current ozone and PM2.5 standards will likely be more than a thousand dollars per year for each American household.  In fact, the current ozone standard is so stringent that some areas may not be able to attain it.83  Nevertheless, EPA recently tightened its 24-hour PM2.5 standard and is in the process of tightening the 8-hour ozone standard, which will increase the burdens of air regulation still further.  These huge expenditures will at best eliminate a tiny fraction of all disease and disability.

Prioritizing Health Measures.  Even if additional air pollution reductions would confer net benefits, focusing on air pollution would still be a foolish policy because other measures would provide far greater health benefits per dollar invested.  Based on an assessment of more than 500 life-saving measures in four categories - environmental pollution reduction, workplace safety, injury prevention and medical care - researchers at the Harvard School of Public Health concluded that environmental measures saved by far the fewest years of life per dollar invested.84

Maximizing human welfare requires targeting scarce resources in ways that generate the greatest health and welfare improvements per dollar invested.  Spending money on air pollution means choosing to save fewer lives than if the same amount of money were spent in other ways.

One might argue that talking about other ways to reduce risk is irrelevant because it is not as if money is sitting around waiting to be spent on risk reductions, and air pollution is just one of many choices.  People can choose to reduce air pollution or not, but if they choose not to, this does not mean the government will fund some other risk-reduction measure(s).  This reasoning implicitly assumes that only publicly determined risk-reduction priorities and expenditures are legitimate.  But if people are not forced to spend money to attain EPA's standards, they will have more money to spend as they see fit.  People will spend these funds to improve their health, welfare and quality of life as they define it.  And as a result, they will be better off than if they had been forced to spend the money on air pollution reductions that deliver tiny benefits compared to the costs imposed.

Behind the Myth: The Politics of Air Pollution Policy

Despite what are at worst minor risks from current air pollution, the EPA's war on air pollution continues unabated.  Already-adopted regulations will eliminate most remaining pollution emissions during the next two decades.  And EPA is in the process of adopting tougher pollution standards that will be unattainable in many areas of the country.  Despite ongoing declines in air pollution, these tougher standards will be exceeded more frequently and over a wider area, increasing the number of public air pollution alerts.  This will further contribute to mistaken public perceptions of worsening air pollution and serious, pervasive health risks.

"The 1970 Clean Air Act put federal bureaucrats in charge of air quality."

Federalizing Pollution Control: The Clean Air Act.  How did air pollution regulation get this way?  It all goes back to the nationalization of air pollution control in 1970, with the enactment of the Clean Air Act.  In several key ways, the Act created a system geared toward growing the power and budgets of regulatory agencies and activist groups, rather than solving real problems by the most rapid and least costly means available.

If Congress and the president had wanted states to achieve given air pollution levels, they could simply have told states: 1) the air quality standards and the dates by which they must be achieved, 2) how attainment would be measured and 3) the penalties for failure.  Given sufficiently large penalties, states would have had incentives to find effective means of meeting their obligations.  Furthermore, such measures could be written on a few pages and would require few or no federal regulations.

Instead, the Clean Air Act is hundreds of pages long, and EPA has written thousands of pages of regulations to implement the requirements, along with tens of thousands of pages of guidance documents to explain what the regulations mean.  States must develop their own laws and regulations to implement the federal requirements, and businesses must obtain permits to operate.  Business permits often specify operating conditions and pollution control methods unit by unit and process by process.  They must be amended any time a production process changes.  Legions of lawyers and consultants help businesses figure out what the rules mean and how to comply with them.  The vast majority of this activity has nothing to do with reducing air pollution, but instead involves creating and then demonstrating compliance with administrative requirements.  Indeed, just a few emissions requirements - mainly for motor vehicles and power plants - are responsible for most air pollution reductions achieved since the Clean Air Act was passed.85

State Compliance.  One window into the process-focused nature of air quality regulation is the State Implementation Plan (SIP) - the centerpiece of the Clean Air Act - through which states demonstrate to EPA how they plan to reduce pollution and ultimately attain federal air standards.  A SIP includes state and local air pollution officials' inventory of estimated pollution emissions from all sources in a region, a series of pollution control measures the region commits to implement, and an "attainment demonstration" - a combination of computer modeling and other analyses that purports to demonstrate that the region will attain federal pollution standards once the SIP control measures are fully implemented. Once approved by EPA, the SIP becomes legally enforceable.

"The states must satisfy federal bureaucrats, rather than improve air quality."

But despite the ostensible goal of improving air quality, it is far more important to have an EPA-approved SIP than to actually reduce air pollution or attain federal air standards. If a state fails to obtain approval for its SIP, the EPA can withhold federal highway funds and limit economic development in areas of the state violating federal standards.  In contrast, if a state fails to actually clean the air or attain federal air standards, the main "consequence" is that the EPA can, and typically does, extend the attainment deadline and require the state to submit a new SIP.86  The paper plan is more important than actual air pollution levels.

The SIP planning process is more about fulfilling administrative requirements that often have little to do with reality, rather than actually reducing air pollution.  For example, the emissions inventories used in SIPs have been known since at least the late 1980s to be inaccurate and have repeatedly failed real-world validation tests.87  EPA has since gone through three revisions of its computer model for predicting vehicle emissions; the latest version is MOBILE6.  And still, real-world validation tests continue to reveal considerable discrepancies between the model and actual on-road measurements.88 

One important discrepancy is that the model overpredicts the emissions of new cars relative to old cars.89 This means SIPs, which must be prepared using MOBILE6, are overestimating future vehicle emissions.  As a result, the SIP process may force the nation to waste perhaps tens of billions of dollars on measures to reduce phantom future vehicle emissions, while ignoring other possible sources of pollution that are not accounted for in regulators' models.

Ineffective and Counterproductive Regulations.  Federal air pollution regulation also includes many ineffective or even counterproductive programs. One key example is a requirement for industrial plants called New Source Review (NSR). NSR requires businesses to install "state-of-the-art" pollution controls when they build new plants or make major modifications to existing ones.

"Perversely, regulations encourage continued use of older, more polluting power plants."

New Source Review has a number of perverse effects.90  First, it makes new and upgraded facilities relatively more expensive than existing ones and therefore has encouraged businesses to put their research and development funds into finding ways to keep older, less-efficient and higher-polluting plants operating well beyond their useful lives.  Second, all new or modified facilities are required to install state-of-the-art pollution controls, even if the facility is already comparatively low-emitting. NSR thus funnels resources into comparatively high-cost/low-benefit pollution reductions.

Power plants tend to be long-lived and are therefore a prime example of NSR's perverse incentives. For example:

  • New natural gas-fired power plants - without any add-on pollution controls - emit 85 percent to 97 percent less NOx than old coal-fired plants.
  • Some of the older coal-fired power plants could reduce NOx for as little as $300 per ton of pollution eliminated.91
  • Nevertheless, NSR requires new gas plants to meet the Lowest Achievable Emission Rate at a cost of $2,500 to more than $10,000 per ton, or 8 to 33 times more than the cost of reducing the same amount of pollution from old coal-fired plants.92

NSR in effect requires the most expensive and inefficient pollution reductions and greatly increases the costs of building new and efficient power plants.  The predictable result is that NSR has encouraged the continued operation of older coal-fired power plants and has therefore caused higher pollution levels than might have occurred under a regulatory system that treated old and new sources equally.

Protecting Special Interests.  NSR has slowed progress in reducing air pollution and it is the reason why many old, high-polluting power plants are still running.  Yet for environmentalists and regulators, New Source Review is a sacred cow.  Why do activists and regulators love NSR and hate less expensive and more effective programs, such as "cap-and-trade" programs that place a declining cap on total emissions from a group of industrial facilities and allow them to trade pollution credits with each other?  One explanation is that NSR creates a complex administrative system which confers greater power and oversight to regulators and limits private decisions by third parties.  It also creates a ready-made environment for public relations campaigns and ongoing opportunities for lawsuits by environmentalists and other special interest groups. Large businesses also often find NSR to be advantageous, because it protects them from competition. Although NSR can sometimes cost existing businesses money, its more important feature is that it protects existing businesses from upstart competitors who would have to incur the costs of NSR in order to build a competing facility.

In contrast, under a cap-and-trade program the key political decision - how much to reduce pollution - is made up front and covers a wide range of facilities. Pollution reductions occur quietly on a predetermined schedule, driven by the incentives created by the declining cap at each facility and without the opportunity or need for micromanagement.93 

"Special interests benefit from federal air regulations."

The much higher costs of NSR relative to cap-and-trade are also advantageous for environmentalists, since one of their goals is to make fossil fuel energy as expensive as possible.  Thus, while they would never say so explicitly, NSR provides environmentalists and regulators with benefits that trump their concern for air quality. NSR is thus a triple whammy for American consumers: it slows the pace of pollution reductions, raises the cost of any pollution reductions that do occur, and increases the prices of consumer goods by slowing innovation and reducing competition.

Regulations and Programs Driven by Special Interests.  There are many more examples of ineffective or counterproductive Clean Air Act programs.  For example, many cities have automobile emissions inspection and maintenance (I/M) programs. A range of evidence shows they do little to reduce emissions and devote most money to testing clean cars, rather than repairing the few broken ones.94  I/M is like trying to stop drunk driving by giving people a sobriety test once a year at the Department of Motor Vehicles. We know from on-road studies that a small fraction of all cars (mainly old and middle-aged ones) produce most pollution from cars.  For example, the worst 5 percent of cars produce 50 percent of automobile VOC emissions.95 

Although fleet turnover to 21st century automobiles will eventually mitigate this problem, emissions from the "gross polluters" could be reduced much more rapidly with an effective program to identify and either repair or scrap them. Instead of testing the whole vehicle fleet in a scheduled I/M program, the technology has existed for more than 15 years to detect emissions from each car as it passes a pollution sensor on the roadway.  Car owners could be subject to fines or incentives to encourage repair or scrapping of high-polluters. But traditional I/M programs are protected by state and federal bureaucracies that oversee them, and by businesses that make money testing cars.  Environmentalists also support and protect I/M programs in order to further their social agenda, because I/M programs help to make motorists feel sinful for driving their cars. Furthermore, by requiring all cars to be tested, I/M programs create the false appearance that all cars, rather than just a few gross polluters, make a significant contribution to air pollution.

Federal law also requires motorists to use gasoline that contains ethanol.96  The requirement was implemented under the guise of improving air quality, but it actually makes air quality worse by increasing emissions of smog-forming pollutants - as well as increasing the cost of gasoline.97  But ethanol has survived in the political marketplace because it is made from corn, and therefore has powerful Midwest agribusinesses and legislators behind it.98 

Ineffective and counterproductive programs like I/M, NSR and ethanol harm ordinary Americans, but they are supported by special interests who gain money and/or power or who advance their ideological agendas through them.

Regulators Regulating Themselves.  Perhaps the most damaging aspect of the federal administrative state is that it has no negative feedbacks that would slow down or stop its bureaucratic expansion.  In fact, all the feedbacks are positive.  Regulators' budgets and powers depend on a public perception that air pollution is a serious and urgent problem.  But regulators are also major funders of the health research intended to demonstrate the need for more regulation.99  Regulators decide what questions are asked, which scientists are funded to answer them and how the results are portrayed in official reports. Thus, environmental health research is not merely a dispassionate scientific enterprise, but is funded with the goal of finding credible ways of maintaining and augmenting public anxiety over air pollution. Regulators also provide millions of dollars a year to environmental groups, who then use the money to foment public fear of air pollution and to agitate for increases in regulators' powers.100

"The Environmental Protection Agency, and the scientists it funds, have an incentive to find the air is unhealthy; their jobs and funding depend on it."

Scientific and medical research nominally has more checks and balances than more explicitly political activities, but environmental health research suffers from its own set of pressures to exaggerate or fabricate risks.  As previously discussed, studies that report harm from air pollution are more likely to be published and receive press coverage than studies that do not.  Government officials fund much of the research, and the funding is provided with the explicit intent to provide evidence of harm from air pollution. Researchers who believe low-level air pollution is a serious threat and who report larger health effects are more likely to attract this research funding.  Scientists who choose a career in air pollution health research are also more likely to hold an environmentalist ideology and believe air pollution is a serious problem.  Indeed, many environmental health researchers have overtly associated themselves with environmental groups and causes.101 

Regulators themselves also create fear through their regional air pollution alert systems. These are the "code red" days and "spare the air" days (promoting mass transit use) that regulators declare when they predict air pollution will exceed federal standards on a given day.  This constant stream of air pollution warnings maintains anxiety that air pollution is causing great harm. And as the standards are tightened, the number of warnings actually increases, creating a false appearance of increasing air pollution, even as actual air pollution has declined.

The Clean Air Act charges the EPA with setting air pollution health standards.  But this means federal regulators are the ones who decide when their own jobs are finished.  Not surprisingly, EPA has never declared the air safe and continues to tighten the standards to whatever extent is politically feasible at any given time. Congress also charges the EPA with evaluating the effectiveness of its own programs. The EPA is therefore like a company that gets to decide how much of its product customers must buy and to audit its own books.

This paper has focused on demonstrating how regulators, activists and scientists routinely provide the public and journalists with false information on air pollution levels, trends and health risks.  The incentives built in to the Clean Air Act to keep people scared go a long way toward explaining this behavior. 

"Regulations should solve real air quality problems rather than enhance federal power."

There are other ways regulatory agencies have missions and goals that are often at odds with the interests of the people they are supposedly protecting.  For example, the Clean Air Act Amendments of 1990 and the Intermodel Surface Transportation and Efficiency Act integrated air quality considerations into regional transportation planning via Metropolitan Planning Organizations (MPOs). These are the regional councils of governments that draw up transportation plans for the nation's metropolitan areas. Yet rather than a means to improve air quality, this policy linkage has largely been a pretext for implementing national anti-mobility, anti-suburb policies that are at odds with Americans' lifestyle and travel preferences. 

In fact, many activists, planners and regional transportation plans have the explicit goal of increasing road congestion in order to make driving less convenient and pleasant and to encourage people to use public transit.102  As with other aspects of Clean Air Act regulation, EPA also funds outside organizations to help carry out these anti-mobility efforts and lobby for greater regulatory powers.103

Americans use automobiles for about 88 percent of all travel.104  Efficient auto-mobility is key to people's economic prosperity and quality of life. And as shown earlier, it is clear that technology in the form of inherently clean automobiles is mitigating transportation-related air pollution without the need to restrict driving.  Yet activists and urban planners have been able to hijack air quality laws as a means to override Americans' lifestyle preferences.


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