Biden's EPA can justify his new EV rules only by cooking the books

Before federal regulations are implemented, they must be justified with an extensive analysis of costs and effects. The new Environmental Protection Agency rule forcing a massive shift toward electric vehicles is no exception. Weighing in at 1,181 pages, it is accompanied by an additional 884 pages of “regulatory impact analysis."

The EPA analysis justifying this rule is not unique in its length, but it is unique in its dishonesty.

EPA claims that the rule will reduce total greenhouse gas emissions over 2027-2055 by 7.2 billion metric tons. But despite a long and disingenuous discussion of the purported adverse effects of greenhouse gas emissions, EPA admits that it “did not…specifically quantify changes in climate impacts resulting from this rule in terms of avoided temperature change or sea-level rise.”

The reason for that failure is obvious: The answer would be embarrassing. If we apply EPA’s own climate model, with assumptions that exaggerate the climate effects of reductions in GHG emissions, the rule would reduce global temperatures in 2100 by 0.0068 degrees Celsius — an effect far too small to be detectable.  

Yet somehow, EPA claims that the rule will yield “climate benefits” of $1.6 trillion. How is that possible for a near-zero effect on temperatures? As with the entire Biden climate regulatory regime across all agencies, EPA multiplies asserted reductions in greenhouse gas emissions by the “social cost of carbon,” a fictitious number that supposedly measures damage caused by the emissions.

This multiplier is fictitious because it is derived from an assumed future emissions scenario (“Representative Concentration Pathway 8.5”) so extreme that it has virtually no chance of becoming reality. And this is incorporated into climate models that already overstate the actual satellite temperature measurements by a factor of about 2.5. The result? Climate doom and gloom predictions wholly at odds with the actual evidence.

It gets worse. EPA claims fuel savings of about $30 billion annually as a benefit of the regulation. This is bizarre. If there are significant fuel savings to be had, why do individuals need regulatory coercion to adopt the vehicle choices preferred by the Biden administration?

The answer is that vehicles consuming fuel must offer benefits in terms of the quality of transportation services greater in value than the cost of fuels. If fuel savings are a benefit of the regulation, then any decline in the quality of transportation services — comfort, reliability, range, safety, resilience in the face of temperature and weather fluctuations, et cetera — must be taken into account as a cost. Yet EPA ignores this, arguing instead that because of fuel savings, people will drive more, thus receiving “drive value benefits” of an additional $2 billion per year. Based on this flawed mode of analysis, we could get even greater benefits from savings on fuel if we banned all cars and went back to horse-drawn stage coaches and carts.

No joke, as Biden would say: That is actually how the EPA analysis works.

What about the cost of recharging the vehicle? EPA says not to worry. If EV owners charge their vehicles when electricity demand is low, “already low” recharging costs for EVs will be reduced even more, and “the overall costs of electricity generation and delivery to all electricity rate payers, not just those charging electric vehicles” will be reduced. So just ignore the massive additional costs of the Biden administration's intended electricity transition to wind and solar technologies. Under EPA's regulation, everybody is a winner!

And then there is the way that EPA evaluates far-off benefits and costs relative to those that would occur soon. The appropriate approach is to reduce ("discount") far-off effects at an annual rate ofroughly 7 percent. That is what federal agencies were instructed to do until recently.But because the supposed climate benefits are far in the future,only a much lower discount rate can make those benefits look big. And so the EPA electric vehicle rule uses discount rates much lower — 2 or 3 percent for the most part.

The Biden administration has mandated the use of an artificially low discount rate across all agencies, introducing a huge bias in favor of government regulation, distorting the allocation of capital between private investment and that driven by regulatory requirements.

Moreover, the common argument that a low discount rate is needed to incorporate the interests of future generations is not correct. Future generations are interested in a bequest of an aggregate capital stock — both natural and manmade — that is more rather than less valuable. This requires efficient resource allocation by the current generation, and therefore the application of the correct discount rate to regulatory policy.

Such are the fruits of wholly politicized regulatory policymaking unconstrained by congressional authorization through statute. Any law authorizing this kind of regulation would result from a bargaining process driven by important tradeoffs. The Biden “whole of government” climate agenda is the opposite: It excludes Congress, ignores the crucial tradeoffs, and represents a fundamental threat to the constitutional separation of powers and the consent of the governed.

Let us pray that the courts apply the West Virginia v. EPA precedent on “major questions” and put a stop to this madness.

Benjamin Zycher is a senior fellow at the American Enterprise Institute.