Smoking Out the EPA's Bad Analysis

July 1, 2014

If a tree burns in the forest and no one’s there to breathe the smoke, does this reduce human health? Common sense would say "no." Yet, according to the Environmental Protection Agency’s new rule on residential wood heaters, the answer is: Yes!

Under the authority of the Clean Air Act, the EPA has recently proposed updating emission requirements for a broader list of wood-burning appliances. With more than 2.5 million homes currently using wood as their primary source of heat, the EPA estimates that the benefits of this rule outweighs the costs by a factor greater than 100. Almost all of the estimated benefits come from fewer premature deaths associated with the reduction in smoke particles, or particulates. But many of the assumptions used by the EPA leaves the agency precariously far out on a limb.

Unlike many other EPA proposals which use air quality models, the agency simply estimates benefits by using a national-average benefit-per-ton measurement. Even its analysis acknowledges that the estimates “may not reflect local variability in population density, meteorology, exposure, baseline health incidence rates, or other local factors for any specific location.” 

By failing to account for local variability, the EPA assumes that background-particulate levels do not alter the relationship between emission reductions and health. Moreover, because most of the emissions reductions will take place in rural areas with low population densities, the rule overestimates total health benefits realized by averaging these reductions across all U.S. residents. So a reduction in particulates in the rural community of Forest City, Maine, has the same estimated value as a reduction in the densely-populated urban city of Oakland, California.

And the overestimation does not end there. Much of the modernization of wood stoves over the last 20 years is due to consumer-driven improvements, not regulation. One innovative example I point out in this Mercatus Center public interest comment is the use of scrap wood and sawdust in wood pellet stoves. First sold in the 1980s, wood pellet stoves now account for about 30 percent of the U.S. wood stove market share. The average pellet stove emits under two grams of particulates an hour, two-times below this new standard. Therefore, it is likely that these emission improvements will continue without any new regulations.

The EPA also overestimates benefits by failing to recognize that higher priced units will alter consumer behavior. According to Susan Dudley, former administrator of the Office of Information and Regulatory Affairs and current director of George Washington University’s Regulatory Studies Center, the two types of appliances with the greatest estimated reductions in emissions will experience a doubling in price. With such an increase, many owners will seek to increase the lifespan of their older wood burning appliance. Others will switch to other methods of heating such as traditional fireplaces and personally constructed uncertified wood stoves that will likely increase emissions.

Others may switch to more traditional heating fuels, such as oil, gas and coal. But none of these sequester carbon dioxide. Using a full lifecycle measure, wood-based fuel produces much less net carbon dioxide emissions than other traditional fuel sources. Yet the EPA is silent on the additional emissions of carbon that will take place as citizens switch from wood to other fuel sources to avoid higher priced appliances.

And it is this increase in price that will likely have a larger negative impact on low-income households. Wood stoves often serve as a form of insurance for low-income households in two ways. First, wood stoves are a reliable source of heat and energy when storms result in power outages. Because low-income customers are often the last group to have their electricity restored, wood stoves enable these families to heat their houses for the duration. Second, because wood can often be obtained directly, especially for families living in rural areas, low-income households who experience income or job loss are able to produce energy and heat their houses with an alternate source that does not require the same level of cash flow as acquiring heat through a public utility. The income and insurance they would lose in complying with this regulation may be better utilized toward mitigating other risks.

By failing to account for local variability, behavioral changes and the regressive effects of the proposal, the cure proposed by the EPA may well produce more vapor and smoke and little, if any, improvement in human welfare.