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Clean Air Act isn't pain free, but it pays off

Clean air is expensive, but it's good for the economy. By the government's measure,  the Clean Air Act's benefits exceed its costs by a factor of 25 to 1.
Image: W.A. Parish Electric Generating Station
Piles of coal are shown at NRG Energy's W.A. Parish Electric Generating Station in Thompsons, Texas. It's one of the largest power plants in the United States. The EPA will begin regulating mercury emissions from coal-fired power plants for the first time, the latest in a string of new regulations that has Republicans bent on reining in the federal body.AP
/ Source: Business Week

The Fisk Generating Station in the working-class Pilsen neighborhood on Chicago's Lower West Side once symbolized the future. The largest of its kind when it opened, the single-stack, coal-fired plant powered factories and residences throughout a growing metropolis.

That was in 1903. Today, Fisk and its slightly younger sister, the Crawford Generating Station, located nearby in another densely packed area, are relics: two of the more than 200 "legacy" coal-burning plants nationwide that were grandfathered in under 1977 amendments to the Clean Air Act. As a result of legislative compromise, these aging plants remain exempt from some of the act's main requirements that industrial facilities use modern pollution control methods.

Living in Pilsen provides a time-travel experience to an era when the air in American cities was grittier and more dangerous. "Around here, you get this thin gray film of dust on your windowpane and on the patio furniture," says Jerry Mead-Lucero, a local activist who lives near Fisk. "A lot of people don't have air conditioning, so the windows are open in the warm weather, and dust gets into your home or apartment."

And your lungs. Fine particulate matter, sulfur dioxide, and nitrogen oxide emitted by the Fisk and Crawford plants exacerbate respiratory and cardiac conditions, according to public health advocates. A study led by a Harvard School of Public Health professor and published in 2002 in the journal Atmospheric Environment linked the two Chicago plants to 41 premature deaths a year, as well as 550 emergency room visits. As if that weren't enough, Mead-Lucero points out, electricity from Fisk doesn't even go to local residents; the grid sends it to customers elsewhere.

Lawmakers gave Fisk, Crawford, and their ilk a Clean Air Act pass based on the expectation that the old plants would soon close anyway because of decrepitude and inefficiency. The act requires that if such plants are modernized, their owners have to bring them up to code. Congress didn't anticipate that some power companies would forgo modernization. "A lot of utilities have used chewing gum, duct tape, and rubber bands to keep the old plants running, while arguing in court that the changes are merely 'routine maintenance,'" says Henry Henderson, Midwest program director of the Natural Resources Defense Council. The nonprofit NRDC has sued—so far unsuccessfully—to try to force Fisk and Crawford to clean up or shut down.

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The plants' owner, Midwest Generation, a unit of Rosemead (Calif.)-based Edison International (EIX), says that it cares about the environment and public health. It also says it obeys the Clean Air Act and all other relevant laws. Over the years the company has reduced the release of mercury and certain other contaminants, adds Douglas McFarlan, Midwest Generation's senior vice-president for public affairs. "We have no problem with the rules continuing to get tougher and tougher," he says. "Our analysis shows, though, that even if our plants closed, you would not see a real difference in Chicago. There are a lot of sources of pollution, and you have to look at the situation holistically."

The confounding problem of Chicago's antiquated power plants is more than a local concern. The situation sheds light on a debate unfolding 700 miles away in Washington over whether to step up enforcement of the Clean Air Act or slip back in the direction of Pilsen.

At least 19 Republican-sponsored bills have been introduced in both houses of Congress seeking to prevent the Environmental Protection Agency from taking actions such as limiting emission of climate-warming greenhouse gases and imposing tougher rules for ground-level pollutants such as mercury. Republicans and their industry allies warn that assertive regulation will hurt energy providers like Midwest Generation, killing jobs in a fragile economy. "Left unchecked, EPA's actions would have a devastating impact on jobs, U.S. competitiveness, and domestic energy prices," Representative Fred Upton (R-Mich.), chairman of the House Energy and Commerce Committee, said on Apr. 7 after the House passed legislation he wrote forbidding the EPA from regulating greenhouse gases under the Clean Air Act.

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Democrats and environmentalists, who vow to stop the Senate version of Upton's bill, say that the act not only protects human health but actually strengthens the economy and more than pays for itself.

So, which is it?

The Clean Air Act, originally enacted in 1970, has been around long enough to allow for heavy-duty number crunching. By sharply reducing pollution from cars, factory smokestacks, and power plants, the law has saved thousands of lives a year and reduced the prevalence of asthma, emphysema, and heart disease, according to a pair of congressionally mandated EPA cost-benefit studies issued in October 1997 and this past March. The gains are not free; the EPA estimates that in 2010 compliance with the Clean Air Act required industry expenditures of $53 billion. Monetizing the corresponding benefits—things like extending life spans and avoiding hospital stays and sick days from work—produces a figure of $1.3 trillion. By the government's measure, therefore, the act's benefits exceed its costs by a factor of 25 to 1.

"The economic case is pretty convincing," says William K. Reilly, a senior adviser to the private equity firm TPG Capital. Reilly, a Republican who headed the EPA during the George H.W. Bush Administration and co-chaired President Barack Obama's commission on the 2010 Gulf of Mexico oil spill, points out an additional byproduct of the Clean Air Act: the growth of the environmental technology industry. Cleantech, comprised mostly of small businesses, generated $282 billion in revenue and supported 1.6 million American jobs in 2007, according to the EPA.

Environmentalism is not pain-free, nor are the politics around it simple. In mid-May, a labor union that normally backs the Obama Administration announced that it would join with industry giant American Electric Power (AEP) to lobby Congress to delay the EPA's planned imposition later this year of stringent new rules restricting emissions of mercury, lead, arsenic, and acid gases by coal-fired power plants. The facilities that would be affected emit some 386,000 tons of toxic air pollution a year. That makes them the country's largest industrial source of such contamination. Exposure to these pollutants can cause birth defects, as well as lung and heart illnesses.

Edwin D. Hill, president of the 725,000-member International Brotherhood of Electrical Workers, appreciates the hazards, but said in a May 16 statement that unless utilities were given an extra five or six years to modernize or close their oldest coal plants, about 50,000 workers in power, mining, and railroads would lose their jobs. The EPA concedes that its forthcoming mercury and air toxins rule (which the agency is under court order to issue) would cost industry nearly $11 billion a year in estimated compliance expenditures. Utilities, unsurprisingly, warn that the cost figure would be much higher. On the other side of the ledger, the EPA has estimated that the monetized value of health benefits from reduced mercury and other air toxins would far exceed expenditures.

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All of which brings us back to Chicago's Fisk and Crawford power stations. Aggressive EPA action—on either greenhouse gases or mercury and more terrestrial pollutants—would present owner Midwest Generation with a dilemma: Are the antiquated plants worth expensive upgrades, as opposed to just shutting them down? The facilities directly employ a total of 200 people.

"We think we are well-positioned to comply with what the EPA is prepared to do on mercury," says McFarlan, the company spokesman. Beyond that, however, Midwest Generation has "not made final capital investment decisions." Those jobs, in other words, could be in jeopardy.

"The employment question is real," says the NRDC's Henderson. "The question is whether we want to preserve ancient plants that are making people sick—and costing us money for hospital stays—or we want to get to work on training workers for the jobs of the future in cleaner energy production and renewables."

That suggests an alternative to the traditional view of environmental enforcement as a cruel choice between employment and breathable air. The Clean Air Act can serve as a goad to generating better jobs in more innovative technologies—and as a mechanism to reduce health-care costs. The benefits seem worth the price.

Barrett is an assistant managing editor at Bloomberg Businessweek.