Downwind Coal Plant Pollution Affects Labor, Insurance, and Productivity Costs

Report sponsors say that the economic benefits, including health benefits, will far outweigh the costs of complying with EPA's proposed Transport Rule.

Pollution from coal-fired power plants that have failed to install pollution controls is costing businesses in affected states nearly $6 billion annually – about $17 million per day – because of higher labor and insurance costs, lost work days, and lost productivity, according to a report (pdf) by Charles J. Cicchetti, Ph.D., a senior adviser to Navigant Consulting Inc.

The report also was sponsored by the Clean Air Council, Chester Environmental Partnership (CEP), Public Interest Law Center of Philadelphia and Eddystone Residents for Positive Change.

The report, “Expensive Neighbors: The Hidden Cost of Harmful Pollution to Downwind Employers and Businesses,” quantifies the costs avoided by reducing sulfur dioxide (SO2) and nitrogen oxides (NOx) emissions in downwind states and concludes that under any reasonable set of assumptions, the benefits of the U.S. Environmental Protection Agency’s proposed “Transport Rule” under the Clean Air Act far outweigh any associated compliance costs.

The EPA’s proposed “Transport Rule” requires that by 2014, 31 states and the District of Columbia significantly reduce harmful power plant emissions that contribute to pollution in other states. Today, harmful emissions, primarily from coal-fired power plants that have failed to install pollution controls, are carried hundreds of miles in the air stream, causing massive health and economic losses in downwind regions. The proposed new rule is designed to reduce the concentration of these air pollutants while also controlling downwind transport by requiring plants to install pollution controls like scrubbers. Most plants already comply but some owners have refused to make the investments.

“The EPA’s analyses of its Transport Rule understate its benefits and overestimate its costs by focusing almost exclusively on health-related benefits and not considering interstate pollution transfer costs,” said Cicchetti. “Under any reasonable set of assumptions, the Transport Rule’s benefits far outweigh compliance costs: each dollar invested in necessary pollution controls avoids $50-100 in downwind costs annually.”

As a result of pollution created between 2005 and 2012, the report finds the following adverse impacts on business, government and jobs in downwind states:

  • Businesses will suffer more than $47 billion in costs;
  • More than 360,000 jobs will be lost;
  • State and local governments will lose $9.3 billion in tax revenue; and
  • Families and businesses will pay $26 billion more for reformulated gasoline.

According to EPA, the proposed rule would yield more than $120 to $290 billion in annual health and welfare benefits in 2014, including the value of avoiding 14,000 to 36,000 premature deaths. The healthcare costs alone far outweigh the estimated annual compliance costs of $2.8 billion.

“This report complements the Environmental Law & Policy Center’s (ELPC) analysis finding that pollution from just four coal plants in the Chicago area caused about $2 billion of health and related environmental damages over the past eight years,” said Howard Learner, executive director of ELPC. “Based on a model developed by the National Research Council, Chicago area residents are paying for pollution from the Fisk, Crawford, State Line and Waukegan coal plants with our health and our wallets, and people in downwind states also bear these burdens.”

In addition to healthcare costs, businesses that generate emissions must pay more to locate in downwind “nonattainment areas,” which may cause companies to shift operations and jobs elsewhere to avoid these additional compliance costs if they want to expand or modernize.

“In effect, the airstream has operated as a free waste transfer system that transports air pollution from older, uncontrolled coal-fired power plants to downwind populations,” said Joseph Otis Minott, Esq., of the Clean Air Council, a co-sponsor of the report. “The Clean Air Act was a landmark piece of legislation and has improved the environment and people’s health. The Transport Rule will prove to be an essential next step that will help ensure a healthy future for everyone.”

The Rev. Horace Strand of CEP in Pennsylvania, underscored the importance of the report’s findings, “The transport of air pollution to the poorest downwind communities directly violates the principles of environmental justice,” said Strand. “It is essential to protect low-income and minority communities because we are the least able to cope with missed school and work, higher health insurance costs, and job loss when businesses and jobs shift to less affected areas.”

Cicchetti concluded: “There is no economic rationale justifying further delay on implementing the Transport Rule. On the contrary, requiring the installment of pollution controls on the minority of plants that have failed to do so will stimulate the economies, increase employment and tax revenue, and hasten economic recovery in downwind areas.”

Third-party review of the report was provided by the Academy of Natural Science’s Center for Environmental Policy and A. Myrick Freeman III, the William D. Shipman Professor of Economics Emeritus at Bowdoin College.