Environmental Regulations During the Pandemic

Guest post by my colleague and Assistant Professor of Economics Akhil Rao:

The Environmental Protection Agency (EPA) recently announced it won’t be enforcing environmental regulations during the pandemic. The announcement on March 26th (feels like it was at least a month ago) specified the following:

  • The EPA will “exercise enforcement discretion… for noncompliance” during and resulting from the COVID-19 pandemic.
  • States and tribes can take a different approach where they have the authorities to do so.
  • This doesn’t apply to any criminal violations, Superfund sites, or imports.

As usual, Vox has a nice summary article. The piece mentions some important context: Prior to the pandemic, the American Petroleum Institute (API) was among industry trade groups lobbying for laxer enforcement. And unless you’ve been living under a rock for the last four years, it’s pretty easy to see this as part of a pattern of the Trump administration reducing regulatory oversight, environmental and otherwise. The Trump administration has also been working to undercut states’ authorities to regulate emissions, e.g. the challenge to California’s vehicle emissions standards.

I think the API lobbying context is especially relevant here given the freefall oil markets are currently in. With prices in some areas going negative (subject of a future post), the U.S. oil and gas sector is experiencing unprecedented stress. That stress will continue while demand for oil products (e.g. airplane fuel) stays low. A number of producers will likely go out of business as deposits made economical by fracking and horizontal drilling become uneconomical. From a national security perspective, maintaining a healthy domestic energy production capacity is a plus. If you were really just trying to keep this sector alive till demand picks up and OPEC stops feuding, a targeted approach would have been better. But then there’s that deregulatory pattern from this administration…

A couple notes on incentives and externalities, taking the policy in good faith and at face value:

  • There are clearly worker safety issues here. Our electric grid, for example, is critical infrastructure, and many generating plants produce emissions. Sending workers to check on many plants could spread the virus to critical infrastructure. So far we haven’t seen a wave of illnesses force natural gas or coal plants offline. But were it to happen, it could be bad. Hospitals and ventilators need power. Electricity demand also seems to be falling as economic activity slows down, which may allow for some buffer against supply disruptions.
  • There are health concerns from pollution. Back on the energy example, coal plants are especially nasty for folks with respiratory or cardiovascular conditions (like a certain virus…). Power plants are intensive emitters, and where they’re in populated areas (e.g. Houston) the additional emissions will likely induce more asthma and heart attacks. So reducing monitoring and enforcement will add more stress on our medical infrastructure at a time when we can ill afford it, and in a way that could interact with the pandemic. As a health expert quoted in the article notes, “There is no known threshold below which air pollution has no effect.”

So even if you take this in good faith and at face value, it’s complicated and unclear you’d want to do something as sweeping as the current rule. We don’t want companies to face incentives to unnecessarily expose workers to pandemic risk (it’s not clear how the EPA will distinguish between virus-related violations vs. other violations). But we also don’t want to do things that might put more stress on medical infrastructure. Balancing these two externalities as the pandemic unfolds is not a trivial job, even for an administration with credibility on regulatory policy.

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