Alan Krupnick:
Monday, the US Court of Appeals for the District of Columbia vacated the Trump administration’s recent decision to delay the Environmental Protection Agency’s (EPA’s) rule limiting methane emissions from the oil and gas industry, the largest source of methane emissions in the United States. The rule, which was finalized in June 2016 under the Obama administration, would reduce methane emissions from new oil and gas sources as well as emissions of volatile organic compounds (VOCs), which are a precursor to ozone.
Assuming this rule goes into effect, is this a good or bad thing for the nation? … we can first look to the benefit–cost analysis that was issued with the rule. It stated that significant climate, air quality, and public health benefits would occur, with climate benefits alone estimated to be $690 million in 2025 (calculated by multiplying the estimated methane reductions by the social cost of methane, which was estimated by EPA to be $1,500 per ton). In contrast, industry’s compliance costs (net of the value of the methane captured and sold) would be about $520 million, with net benefits to society of $170 million.
Are there factors either included in or missing from EPA’s analysis that would dramatically change this conclusion? The answer is yes. A failure to account for a few things bias the net benefits downward—including the air quality and health benefits from reduced VOC emissions and ozone, as well as the likelihood that innovation in leak detection and repair would lead to either greater methane capture (hence more benefits and greater gas recovery and sales) or cheaper mitigation approaches, or both. On the other side, the key issue is the estimated social cost of methane used in EPA’s analysis. The Trump administration reportedly wants to use an estimate that would count the benefits of less global warming only to the United States, rather than to the world—an approach that would dramatically cut the rule’s estimated methane reduction benefits. There are other uncertainties that could cut either way, such as the future price of natural gas. The higher the price, the greater the value of the methane captured and the greater the net benefits of the rule. …
via www.rff.org
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