Mercury Rising?

The EPA's new plan for mercury reduction may be a sham.

The American public has long known, at least in a vague sense, that mercury poses a serious health hazard. Nevertheless, the largest domestic source of mercury pollution—U.S. coal-driven energy plants, which release an estimated 60 percent of the mercury entering our environment—is still unregulated. The Environmental Protection Agency (EPA) has long acknowledged this problem, going so far as to back an amendment to the Clean Air Act in 1990, which required both an investigation into the dangers of mercury and the development of appropriate strategies to clean the plants up. But fifteen years later, after endless litigation, missed deadlines, and despite a growing awareness of the dangers of mercury, a real mercury-reduction plan has yet to come into existence.

A court decision gave the EPA until March 15th of this year to implement a mercury-reduction plan, and to that end the agency has submitted the Clean Air Mercury Rule, which promises historic mercy reductions and tough new regulations. Yet a recent investigation by the EPA's Office of the Inspector General (OIG) casts doubt on the new proposal's ability to achieve any meaningful change. Most strikingly, the investigation found that the EPA's emission-reduction targets had been predetermined by high-level administration, so as to cater to industry demands, and the standards aren't nearly as rigorous as they appear. The OIG also uncovered major flaws in the EPA proposal's design, flaws that threaten to undermine the new rule's effectiveness, as well as several loopholes that would allow hundreds of plants to avoid regulation altogether.

The EPA's is offering two alternative proposals for mercury reduction. The first alternative is called the Maximum Achievable Control Technology (MACT) plan, and involves setting requirements for individual plants, while mandating the use of the most effective mercury-reduction technology available. The MACT plan aims to reduce mercury emissions from the current level of 48 tons per year down to 34 tons per year by 2008. The EPA's second proposal, meanwhile, is a cap and trade program which would allow companies to buy and sell "rights to pollute." The cap and trade plan aims for a reduction to 34 tons by 2010 and to 15 tons by 2018.

The problem here is that the targets for the MACT plan seem to be far too lax, which appears to have been done intentionally in order to make the plan less appealing to policy makers. (Power companies, for the most part, would much prefer the cap and trade plan, which allows them to delay action on reduction for some time.) The OIG report did not say exactly how the final standards were arrived at, though several staffers were told by their managers that decisions were being made at a "higher level." Indeed, initial analysis by EPA suggested that MACT could reasonably set reduction targets at 27 to 29 tons per year, or far lower, but their assertions went unheard.

What do these numbers mean? The target set by the EPA—34 tons a year—could be achieved if power plants simply reduced their emissions of sulfur dioxide and nitrogen oxides. (These two gases interact with airborne mercury to produce a reactive form that, when it falls to earth and reacts with water, produces the poisonous methylmercury). Reducing these gases would be sufficient; the plants wouldn't need to reduce the actual mercury they emit themselves, a process which tends to be more expensive and effort-intensive. There's another catch: under the Clean Air Interstate Rule—an emissions standard set to go into effect if Congress votes down the Clear Skies Act today—power plants will already be required to reduce sulfur dioxide and nitrogen oxides. In essence, then, the EPA's mercury proposal wouldn't ask power plants to do anything that wasn't already required of them under other rules and regulations.

The decision to set a target of 34 tons per year also represented a breach of standard EPA procedure. By law, MACT plans must make mercury-reduction targets for the entire nation either equal to or stricter than the emission standards exhibited by the cleanest 12 percent of all utilities. But the EPA never tried to figure out what this baseline number might be. Indeed, independent studies of MACT requirements indicate that had the EPA performed this study, it might have been required to set targets as low as 6 or 7 tons per year, far below what the current proposal aims for.

In essence, then, the MACT plan was designed to be so laughably non-rigorous that policymakers would have no choice but to choose the EPA's cap and trade alternative. It's true that cap and trade programs, when designed properly, are usually preferable to MACT, because they allow power plants more flexibility and keep the cost of reducing pollution down. For instance, the Acid Rain program implemented during the 1990s achieved greater-than-anticipated reductions of sulfur dioxide emissions at a less-than-anticipated cost. However, according to the Inspector General's report, the EPA's cap and trade proposal for mercury had several glaring flaws that could undermine the entire project.

The plan's greatest flaw is that it effectively sets the cost of polluting lower than the cost of compliance. This breaks the cardinal rule of the cap and trade concept: there needs to be a market-based incentive to lower emissions. Under a well-designed system, power plants that have trouble reducing emissions can buy allowances (the right to pollute) from other plants that have actually been able to implement cost-effective solutions. Usually a "safety valve price" is set which, as an upper estimate on the cost of emission reduction, is the lowest cost at which allowances can be purchased. If the safety valve price is too low, it becomes cheaper for many plants to keep polluting (and buy pollution rights if needed) than to clean up (and sell their excess rights). Internal EPA analysis and Department of Energy estimates suggest that the EPA's safety valve price was 50-100 percent lower than it should have been.

Moreover, in many cap and trade programs, polluters are often allowed to borrow against their future right to pollute, so that they can essentially buy time to prepare before they clean up their act. However, in the EPA's proposal no limits are placed on how long this borrowing can go on. Take this together with the low safety valve price and it means that plants can theoretically continue to pollute indefinitely into the future for less money than it would cost to comply.

Another major loophole in the cap and trade system involves an exemption for plants that emit less than 25 tons of mercury per year. These plants emit only 3.9 percent of mercury emissions in the country. The EPA claims that excluding these plants, many of which are very old and would be especially expensive to clean up, would not affect the overall program's ability to reach its targets. This may be true, but as other plants clean up their act, these plants will eventually emit a far greater portion of the nation's mercury, and there are no limits on how much these plants can be expanded in the future.

Overall, the EPA aims to reduce mercury pollution 70 percent by 2018, which seems as good a place as any to start. But the proposal falls apart in the details, and at this point, the mercury reduction plan could be held up by further litigation as a result of its inadequacies. In that case, nothing at all will get done.