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EPA knocks $900,000 off value of a life

07/10/2008

$900,000 taken off in what critics say is way to weaken pollution rules

The Associated Press

updated 4:34 p.m. ET, Thurs., July. 10, 2008

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The "value of a statistical life" is $6.9 million in today's dollars, the Environmental Protection Agency reckoned in May — a drop of nearly $1 million from just five years ago.

The Associated Press discovered the change after a review of cost-benefit analyses over more than a dozen years.

Though it may seem like a harmless bureaucratic recalculation, the devaluation has real consequences.

When drawing up regulations, government agencies put a value on human life and then weigh the costs versus the lifesaving benefits of a proposed rule. The less a life is worth to the government, the less the need for a regulation, such as tighter restrictions on pollution.

Consider, for example, a hypothetical regulation that costs $18 billion to enforce but will prevent 2,500 deaths. At $7.8 million per person (the old figure), the lifesaving benefits outweigh the costs. But at $6.9 million per person, the rule costs more than the lives it saves, so it may not be adopted.

Some environmentalists accuse the Bush administration of changing the value to avoid tougher rules — a charge the EPA denies.

"It appears that they're cooking the books in regards to the value of life," said S. William Becker, executive director of the National Association of Clean Air Agencies, which represents state and local air pollution regulators. "Those decisions are literally a matter of life and death."

Dan Esty, a senior EPA policy official in the first Bush administration and now director of the Yale Center for Environmental Law and Policy, said that "it's hard to imagine that it has other than a political motivation."

Agency officials say they were just following what the science told them.

How figure is reached
The the EPA figure is not based on people's earning capacity, or their potential contributions to society, or how much they are loved and needed by their friends and family — some of the factors used in insurance claims and wrongful-death lawsuits.

Instead, economists calculate the value based on what people are willing to pay to avoid certain risks, and on how much extra employers pay their workers to take on additional risks. Most of the data is drawn from payroll statistics; some comes from opinion surveys. According to the EPA, people shouldn't think of the number as a price tag on a life.

The EPA made the changes in two steps. First, in 2004, the agency cut the estimated value of a life by 8 percent. Then, in a rule governing train and boat air pollution this May, the agency took away the normal adjustment for one year's inflation. Between the two changes, the value of a life fell 11 percent, based on today's dollar.

EPA officials say the adjustment was not significant and was based on better economic studies. The reduction reflects consumer preferences, said Al McGartland, director of EPA's office of policy, economics and innovation.

"It's our best estimate of what consumers are willing to pay to reduce similar risks to their own lives," McGartland said.

Economist at odds
But the EPA's cut "doesn't make sense," said Vanderbilt University economist Kip Viscusi. The EPA partly based its reduction on his work. "As people become more affluent, the value of statistical lives go up as well. It has to." Viscusi also said no study has shown that Americans are less willing to pay to reduce risks.

At the same time that the EPA was trimming the value of life, the Department of Transportation twice raised its life value figure. But its number is still lower than the EPA's.

The environmental agency traditionally has placed the highest value of life in government and still does, despite efforts by administrations to bring uniformity to that figure among all agencies.

Not all of the EPA uses the reduced value. The agency's water division never adopted the change and in 2006 used $8.7 million in current dollars.

From 1996 to 2003, the EPA kept the value of a statistical life generally around $7.8 million to $7.96 million in current dollars, according to reports analyzed by The AP. In 2004, for a major air pollution rule, the agency lowered the value to $7.15 million in current dollars.

Just how the EPA came up with that figure is complicated and involves two dueling analyses.

Viscusi wrote one of those big studies, coming up with a value of $8.8 million in current dollars. The other study put the number between $2 million and $3.3 million. The co-author of that study, Laura Taylor of North Carolina State University, said her figure was lower because it emphasized differences in pay for various risky jobs, not just risky industries as a whole.

Advisor: 'Numerology,' not science
The EPA took portions of each study and essentially split the difference — a decision two of the agency's advisory boards faulted or questioned.

"This sort of number-crunching is basically numerology," said Granger Morgan, chairman of EPA's Science Advisory Board and an engineering and public policy professor at Carnegie Mellon University. "This is not a scientific issue."

Other, similar calculations by the Bush administration have proved politically explosive. In 2002, the EPA decided the value of elderly people was 38 percent less than that of people under 70. After the move became public, the agency reversed itself.

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As Climate Issue Heats Up,Questions of Cost Loom

07/10/2008

Leaders of the Group of Eight major industrialized economies, meeting in Japan, issued their first long-term target for cutting global-warming emissions. But their pronouncement failed to address the two toughest questions: How will the world do it, and who will pay?

The answer to the money question is clear: Consumers will pay -- at the gasoline pump, at the car dealership and on the monthly electric bill. If the campaign against global warming gets serious, it will transform today's esoteric environmental threat into a fundamental pocketbook issue for people from Boston to Beijing.

But how much it will cost and how much it will do for the planet depend on the gritty details of how policy makers decide to attack greenhouse-gas emissions. Those details were in short supply this week, because the diplomats disagree -- and because nobody knows.

G-8 leaders on Tuesday set a goal to halve greenhouse-gas emissions by 2050. The most common manmade greenhouse gas, carbon dioxide, is belched out whenever fossil fuel -- such as oil, natural gas or coal -- is burned. Slashing the current level of greenhouse-gas emissions without injuring the global economy would likely require a range of technologies that today are still in the lab.

A separate diplomatic group that met on Wednesday and that included representatives from developing nations declined to endorse even the G-8's broad goal. Fast-growing countries like China and India don't want to commit themselves to an emissions-cut target, saying rich countries should ante up first.

Reaching the G-8's goal would go a long way toward preventing dangerous consequences from global warming but not all the way, according to many scientists. Some have called for even deeper cuts.

Many studies have tried to quantify what this would cost. A United Nations panel, for instance, said last year that reducing greenhouse-gas emissions enough to avoid the worst consequences could cut projected global economic output in 2030 by as much as 3% below the level it would otherwise reach that year.

Whether that is a reasonable price is a matter of debate. But even those who think the cost is worth it admit such studies have two whopping caveats.

The studies assume the world will cut emissions in the most economically rational way. And the studies acknowledge that the cost will hit some countries, companies and consumers harder than others.

The cost is "meaningful, but not devastating, to the economy," says Scott Nyquist, a director and co-head of the energy practice at consulting firm McKinsey & Co., which recently has issued several studies of the cost of curbing emissions. "But the point is, there are individual parts of the world that get hit harder." Consumers in countries -- or regions within them -- that rely more heavily on coal, for example, would likely face bigger increases in energy prices.

Two hints that consumers will significantly bear the costs of fighting global warming have cropped up in recent weeks.

One came from California, which proposed new rules in late June to cut its greenhouse-gas emissions to 1990 levels by 2020. Among the measures California is considering is a fee of between $10 and $50 per ton of carbon dioxide that is emitted. Translation: a potential increase in the wholesale price of gasoline of between 10 cents and 50 cents per gallon, the state said.

Congress also recently acknowledged that it will have to provide financial help for consumers if it is to make cutting greenhouse gases politically feasible.

In early June, the Senate considered and rejected what broadly amounted to a mandatory U.S. version of the G-8's nonbinding global pledge. The bill sought to cut U.S. emissions about 65% from current levels by 2050. Included in the bill was a provision for tax relief for Americans whose bills for coal-fired electricity would rise as a result.

Among the few specifics in the G-8 proposal was for more research and development of new technologies to burn coal more cleanly. Many of the world's biggest economies have huge stores of coal buried within their borders. As energy prices soar, these countries intend to burn more of that coal than ever before.

That suggests the debate over what to do about global warming is about to get a lot more personal for consumers, says Billy Pizer, a senior fellow at Resources for the Future, a Washington think tank that focuses on energy issues. The relatively easy step is setting broad goals for emission cuts decades hence. But whatever progress that represents doesn't answer the stubborn question, he says: "What are we actually going to do?"

Write to Jeffrey Ball at jeffrey.ball@wsj.com¹

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Your Carbon Ration Card

07/07/2008

While American politicians mull a carbon cap-and-trade system for industry, our British cousins are already contemplating the next step: personal CO2 rations.

A Parliamentary committee in May proposed giving all British adults "carbon allowances" that they would be required to spend – along with, you know, real money – when buying gasoline, airline tickets, electricity or natural gas. Britons who wanted more credits than they were issued could try to buy them – again, with real money – from those who hadn't spent their allotment. All of this is supposed to give people a financial incentive to reduce energy consumption and thus their carbon "footprint."

The Labour government, already in a precarious political state, isn't dumb enough to support the rationing plan, which Environment Minister Hilary Benn calls "ahead of its time." Instead, it favors a climate-change bill that Parliament is on the verge of passing that would lay much of the necessary groundwork. But eco-eager Britons don't have to wait for Westminster. A private test program for personal cap-and-trade began recently with 1,000 volunteers keeping tabs of their gasoline use.

It would cost a country like Britain billions of dollars a year to run a personal cap-and-trade system nationwide, but set that aside. War-time-like energy rations are a clear illustration of the extent to which environmentalists hope to control every aspect of modern life. Do you really want to blow much of your annual "ration" on that long carbon-spewing jet flight to Florida, or should you swap that summer AC for weekend drives in the country?

The global warmists want you to sacrifice for their cause. And the duration of their war on carbon will make the decade-and-a-half of British rationing during and after World War II seem like a fleeting moment. The pending climate-change bill calls for a 60% cut in carbon emissions from their 1990 levels by 2050. Once 2050 rolls around, who exactly will declare the end of hostilities?

The prospect of personal CO2 rations should debunk the idea that the cost of curbing carbon emissions would fall on the owners of dirty old factories. That notion was always a green herring: Like corporate taxes, the business costs of carbon reduction will be passed on to consumers. In that sense, we should be grateful to the Brits for showing us where this anticarbon crusade really ends up.

See all of today's editorials and op-eds, plus video commentary, on Opinion Journal¹.

And add your comments to the Opinion Journal forum².

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Biofuels in Brazil Lean, green and not mean

06/26/2008

The United States may drop a tariff on Brazilian ethanol. But the industry is still the victim of much misplaced criticism

WHEN John McCain laid out his plans for reducing America’s dependence on oil to an audience in California on June 23rd, the candidate’s keenest listeners were 6,000 miles away in São Paulo. Mr McCain argued that the tariff on imported ethanol of 54 cents per gallon should be scrapped. Others in the Senate (though not Barack Obama) are pushing for it to be reduced. Either way, the case against the tariff has been strengthened by high oil prices and by the June floods that damaged the mid-western corn (maize) crop. That sent corn prices soaring and made subsidising corn to produce ethanol look like an even worse idea than it did before, given the greener, cheaper ethanol that the United States could buy from Brazil instead.

America’s thirst for ethanol is set to grow in line with targets in last year’s Energy Independence and Security Act. Brazil would like to sell more to Europe and Japan too. Yet just when it seems poised to reduce the world’s dependence on oil, its largely sugar-based ethanol industry stands accused of being less wonderful than it looks. Campaign groups lump it together with biofuels elsewhere, which they blame for raising food prices. Some environmentalists claim that Brazilian farmers have torn up forest to plant cane. Some media reports allege ill-treatment of farm workers. More prosaically, some American officials question how much ethanol Brazil can supply.

Take this last point first. Demand for ethanol is growing fast in Brazil because 90% of new cars have flex-fuel engines that can run on any mixture of petrol and ethanol. Even so, ethanol remains cheap. This is because producers have invested in expanding capacity (see chart), partly because they hope for export markets, but mainly because they reckon they must sell at a 30% discount to petrol to keep the custom of Brazilians. The price of petrol has not risen for three years because the government has opted to hold it down.

This year Brazil hopes to export up to 3 billion litres of ethanol to the United States. But this market depends on the corn price being so high as to make it profitable to pay the import tariff. That was not the case last year and it may not be the case next year. Brazil could expand output much more, but will do so only when export markets are less unpredictable. That is because supplying them requires investment in pipelines and port equipment.

For those worried about climate change, Brazilian ethanol is worth buying only if it is as green as it claims to be. It is certainly much greener than its corn-based rival in America: it packs 8.2 times as much energy as is used in its production, compared with just 1.5 times for corn ethanol, according to the Woodrow Wilson Centre, a Washington think-tank. Some greens say that the spread of sugar is deforesting the Amazon. That is not true. The vast majority of the sugar crop is grown thousands of miles away from the forest, in São Paulo state or the north-east. Some 65% of new planting of sugar cane has been on land that was previously pasture; the rest was previously used for other crops, according to Conab, a government agency.

But might ethanol be indirectly responsible for lifting food prices and for pushing cattle ranchers into the Amazon? Such concerns look premature. Sugar cane occupies only 7m hectares (17m acres) of Brazil’s farmland (and only about half of the crop is distilled into ethanol). This compares with some 200m hectares devoted to cattle ranching, much of which is extensive (a Brazilian cow enjoys, on average, a lordly hectare of grazing). Sugar could expand on degraded pasture with little or no effect on beef prices.

Besides, the ethanol industry may be poised for a leap in productivity. “The sugar-cane plant is now where corn was at the beginning of the 20th century,” reckons Fernando Reinach, a biologist turned venture-capitalist at Votorantim, a conglomerate. His fund has backed two start-ups in Campinas in São Paulo state.

One of them, CanaVialis, breeds better varieties. The other, Alellyx, alters the genes in the plant to give them new properties (one strain being tested gives about 80% more sucrose; another can go for 45 days without water). It is run by Paulo Arruda, a Brazilian who led a team of 200 people in sequencing the DNA for sugar cane. Across the road is Amyris, a Californian company which has developed enzymes that in laboratory experiments have turned sugar into substitutes for motor and jet fuel.

In this high-tech environment, it is easy to forget that the early part of the ethanol production line consists of labourers spending long days swinging machetes in hot fields of charred cane. The Brazilian labour ministry sometimes uncovers cases where workers are paid almost nothing and live in squalid conditions. Cane-cutting is back-breaking work, and every year some people die during the harvest.

Yet the sugar industry may be less deadly than many others. In 2005, of its 440,000 workers, 453 died; of these 17 (or one in 26,000) were killed in accidents, according to a study by Márcia de Moraes of the University of São Paulo. In the same year 2,900 of the 2.16m workers toiling in other branches of Brazilian farming died. Of them, 135 were killed in accidents, giving a higher accidental death rate of one in 16,000, even though the sugar harvest lasts much longer than that for any other crop.

In fact the most noticeable thing about cane-cutting labourers is how fast they are disappearing. At Santelisa Vale, a collection of mills in Ribeirão Preto whose owners include Goldman Sachs, an investment bank, 60% of cane-cutting is already mechanised. The remaining manual cane-cutters will go by 2012. The story is similar across São Paulo state. This may make for a safer industry, but it threatens to leave a large, unskilled workforce unemployed.

To Brazilians, outsiders who want to block their ethanol in the name of environmentalism or concern about food prices or labour conditions look like old-fashioned protectionists in hypocritical disguise. When addressing a United Nations food summit in Rome recently, President Luiz Inácio Lula da Silva said that he was fed up with “fingers soiled with oil and coal” being pointed at his country’s ethanol industry. Quite so: the tariff should go.

Copyright © 2008 The Economist Newspaper and The Economist Group. All rights reserved.

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Take Out the Trash Precisely, Now. It’s the Law.

06/27/2008

Whitehaven Journal

WHITEHAVEN, England — The citizens of Whitehaven try, really they do. They separate out their cans, their paper, their cardboard and their glass, and they recycle them all. They compost. They jump up and down on their trash to cram it into their government-issued garbage cans, and they put the trash out for collection at exactly 7 a.m., twice a month.

But when Gareth Corkhill, a bus driver, was fined $215 — and given a further $225 fine and a criminal record when he failed to pay — for leaving his garbage can lid slightly ajar this spring, Whitehaven’s residents banded together in dismay. They raised the money to pay the fine, and they began to complain.

“I consider the fine against Mr. Corkhill to be a matter of injustice, really, and as a Christian minister I’m required to speak out against injustice,” declared the Rev. John Bannister, the rector of Whitehaven, a seaside town in Cumbria, in the far northwest. Referring to the garbage cans residents here use, he said, “To be given a criminal record for leaving your wheelie bin open by three inches has, I think, really gone beyond the bounds of responsible behavior.”

Across Europe, residents are struggling to adjust to a new era of garbage rules. Britain, particularly, is in the midst of a trash crisis, with dwindling landfill space and one of Europe’s poorest recycling records. Threatened with steep fines if they dump too much trash, local governments around the country are imposing strict regimens to force residents to produce less and recycle more.

Many now collect trash every other week, instead of every week. They restrict households to a limited amount of garbage, and refuse to pick up more. They require that garbage be put out only at strict times, reject whole boxes of recyclables that contain the odd nonrecyclable item and employ enforcement officers who issue warnings and impose fines for failure to comply.

In an era of dwindling environmental resources, garbage-heavy societies like Britain’s are under growing pressure to change their profligate ways. “These are challenging times, and the U.K. is behind the game when it comes to relying on landfills,” said Beverley Parr, a spokeswoman for the Department of Environment, Food and Rural Affairs. Or, as Ian Curwen, a spokesman for Copeland Borough Council, which encompasses Whitehaven, said: “Ultimately as a country, we have to do more. We can’t just keep producing and throwing things away.”

But Britons do not like being told what to do. Encouraged by anti-government newspapers, they particularly resent government meddling, as they see it, in such intimate matters as the contents of their garbage cans. As regulations get more stringent and enforcement more robust, there have been reports across the country of incensed residents shouting and throwing trash at garbage collectors, illegally dumping and burning excess garbage, and even surreptitiously tossing trash in — or stealing — their neighbors’ garbage cans.

“It’s like something out of ‘Mad Max,’ ” Paul Nicholls, a resident of Cannock, near Birmingham, told the newspaper The Guardian recently, describing the free-for-all in his town at garbage-collection time. “Every man for himself, scavenging for an extra bin.”

The government says the new regulations are necessary if Britain is to adjust to the changing times. Along with the rest of Europe, Britain has been ordered to reduce the waste it puts in landfills — by 2015, to 50 percent of what it was in 1995 — or face untold millions of dollars in European Union fines.

That means that people have to completely rethink their relationship to their refuse, said Paul Bettison, chairman of the environment board of the Local Government Association.

“It’s a sad thing to have to shatter people’s illusions, but gone are the days when we could put all our rubbish and junk in a big bag and overnight the fairy would come and take it away, and that would be the end of it,” Mr. Bettison said. “The rubbish fairy is dead.”

The twice-a-month collection regime, now in use in more than half the country, is particularly unpopular and became a contentious issue in recent local elections, in which the ruling Labor Party was trounced by its opponents. Among other things, said Doretta Cocks, who runs the 22,000-member Campaign for Weekly Waste Collection, having infrequent collections creates a health hazard, what with the smell, the maggots and the rats.

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