Recently the EPA issued a draconian rule that it’s now calling the “Clean Power Plan,” which it expects to cost $10 billion in burdens on the economy. With such a big impact, you’d expect EPA to have a good explanation for why it’s necessary, right? Wrong.

Here’s part of what they said in the 343-page Regulatory Impact Assessment for this massive, 1560-page monstrosity of a regulation:

GHG emissions impose costs on society, such as negative health and welfare impacts, that are not reflected in the market price of the goods produced through the polluting process. For this regulatory action the good produced is electricity. If a fossil fuel-fired electricity producer pollutes the atmosphere when it generates electricity, this cost will be borne not by the polluting firm but by society as a whole, thus imposing a negative externality. The equilibrium market price of electricity may fail to incorporate the full opportunity cost to society of generating electricity. All else equal, given this externality, the composition of EGUs used to generate electricity in a free market will not be socially optimal, and the quantity of electricity generated may not be at the socially optimal level. Fossil fuel-fired EGUs may produce more electricity than would occur if they had to account for the cost associated with this negative externality. Consequently, absent a regulation on emissions, the composition of the fleet of EGUs used to generate electricity may not be socially optimal, and the marginal social cost of the last unit of electricity produced may exceed its marginal social benefit. This regulation will regulation will work towards addressing this market failure by causing affected EGUs to begin to internalize the negative externality associated with CO2 emissions.

If your eyes glazed over during the economic boilerplate that explains how to calculate utility maximization in the presence of externalities, look carefully at the italicized sentence at the end. EPA doesn’t say that its rule actually maximizes social utility. All it says is that the regulation will “work towards” addressing the externality issue – not by ensuring that the regulated parties actually internalize the costs of the externality – but that they “begin to” internalize them. Who knows whether the “beginning” is enough or too much? Not EPA.

And there’s more.

The rule is supposed to reduce reliance on coal-generated electricity. But they buried this little factoid right in the middle of the rule at page 636:

. . . As indicated in the RIA for this rule, we expect that the main impact of this rule on the nation’s mix of generation will be to reduce coal-fired generation, but in an amount and by a rate that is consistent with recent historical declines in coal-fired generation. Specifically, from approximately 2005 to 2014, coal-fired generation declined at a rate that was greater than the rate of reduced coal-fired generation that we expect to result from this rulemaking from 2015 to 2030. In addition, under this rule, the trends for all other types of generation, including natural gas-fired generation, nuclear generation, and renewable generation, will remain generally consistent with what their trends would be in the absence of this rule.

Let’s get this straight: even without the EPA rule, coal-generated electricity was already declining and the EPA thinks that the decline would continue at the same rate without it?

Here’s my paraphrased version of the agency’s argument: “We don’t know whether this is actually the right regulatory burden and we are pretty sure it won’t change the trend toward less coal power, but congratulations: Our new rule will definitely cost America $10 billion.”