	Introduction

The electric utility industry is a major source of air pollution, particularly sulfur dioxide(SO 2 ), nitrogen oxides (NOx), and mercury (Hg), as well as suspected greenhouse gases, particularlycarbon dioxide (CO 2 ). On October 27, 2005, the Environmental Protection Agency (EPA) releaseda long-awaited analysis comparing the costs and benefits of alternative approaches to controlling thispollution. Called multi-pollutant proposals, the alternative schemes focus on using market-orientedmechanisms to achieve health and environmental goals in simpler, more cost-effective ways. EPA'snew analysis compares four versions of the Administration-based "Clear Skies" proposal to billsintroduced by Senator Jeffords ( S. 150 ) and Senator Carper ( S. 843 of the108th Congress), which would impose more stringent requirements. Options Examined in EPA's Analysis

The cost-benefit analysis released by EPA, October 27, (6) examined sixoptions: four of the six were variants of the Administration's Clear Skies bill or itsregulatory counterparts (7) ; the other two options were Senator Carper's CleanAir Planning Act ( S. 843 in the 108th Congress, but as of the date of theanalysis, not yet introduced in the 109th) and Senator Jeffords' Clean Power Act( S. 150 ). (8) 

	Discussion and CRS Reanalysis

		Choice of Baseline Assumptions

EPA's Multi-Pollutant Regulatory Analysis assumes as a baseline that in theabsence of new legislation, EPA and the states will take no additional action tocontrol SO 2 , NOx, Hg, or CO 2 emissions beyond those rules, regulations, oragreements finalized by mid-2004. This baseline is put forth despite three rulesrecently finalized by EPA that directly bear on SO 2 , NOx, and Hg. (10) Instead,EPA included the three regulations as a "sixth proposal" for controlling thesepollutants -- a curious designation for finalized rules. This report uses EPA's Demand Response Scenario as the benchmarkanalysis. Asindicated by Tables 2 and 3 , Senator Jeffords' bill would have the greatest benefits. In 2010, its benefits would be $83 billion annually, $32 billion more than those of theCarper bill, and about 14 times the benefits of Clear Skies. Compared with theassumptions of the EPA Base Case, the effect of higher growth and natural gas costsin the context of zero demand response is most pronounced in the case of S.150 and puts even more pressure on EPA's assumption of zero demandprice elasticity, particularly for 2020. (18) 
 Table 5. Those analyses used cost and cost-effectivenessdata collected in 2003. Benefits Estimates

EPA's analysis and CRS's reanalysis of the data show benefits substantiallyoutweighing costs for both S. 150 and S. 843 . The omission of environmental benefits has its greatesteffect on S. 150 and S. 843 which have more aggressiveSO 2 , NOx, and Hg control schemes. Finally, the analysis did not attempt to estimate the possible benefits ofcontrolling CO 2 emissions. Still, the absence of such a factor in the analysis may be a significantomission, which understates the potential benefits of the Jeffords and Carper bills. The EPA analysis does not reflect current data on costs of Hgcontrols.
The electric utility industry is a major source of air pollution, particularly sulfur dioxide(SO 2 ), nitrogen oxides (NOx), and mercury (Hg), as well as suspected greenhouse gases, particularlycarbon dioxide (CO 2 ). On October 27, 2005, the Environmental Protection Agency (EPA) releaseda long-awaited analysis comparing the costs and benefits of alternative approaches to controlling thispollution. The alternative schemes focus on using market-oriented mechanisms directed at multiplepollutants to achieve health and environmental goals. The new analysis compares four versions ofthe Administration-based "Clear Skies" proposal to bills introduced by Senator Jeffords( S. 150 ) and Senator Carper ( S. 843 of the 108th Congress), which wouldimpose more stringent requirements.
This report, which will not be updated, examines EPA's analysis and adjusts some of itsassumptions to reflect current regulations. The most important adjustment is the choice of baseline. The agency's analysis assumes as a baseline that, in the absence of new federal legislation, EPA andthe states will take no additional action to control SO 2 , NOx, Hg, or CO 2 emissions beyond thoseactions finalized by mid-2004. This baseline is put forth despite three rules recently promulgated byEPA that limit SO 2 , NOx, and Hg emissions on a timeframe similar to that proposed by the ClearSkies legislation.
CRS reexamines EPA's data, producing cost and benefit estimates for each bill incrementalto the costs and benefits of current law and promulgated regulations. The reanalysis finds that ClearSkies would have negligible incremental costs and added benefits of $6 billion in 2010 and $3 billionin 2020. For the same years, S. 843 would have annual net benefits 8 and 5 times asgreat as Clear Skies at annual costs of $4.2 billion and $3 billion, and S. 150 wouldhave annual net benefits 10 and 16 times those of Clear Skies at annual costs of $23.6 billion and$18.1 billion.
EPA conducted limited sensitivity analyses to examine the effect on cost of selectcombinations of assumptions, including (1) the responsiveness of electricity demand to changes inprice; (2) the availability of skilled labor to install control equipment; and (3) the growth ofelectricity demand and natural gas prices. However, some potentially useful combinations ofassumptions were not examined. For example, if EPA had combined a relaxed skilled laborconstraint with some responsiveness of electricity demand to changes in price, the cost of S. 150 and S. 843 would be substantially reduced. CRS also concludedthat the Hg control costs used in the analysis may be substantially overstated because of datedassumptions.
Numerous benefits were not estimated by EPA, partly because of methodologicaldifficulties. Benefits not estimated include the environmental (as opposed to health) benefits ofcontrolling the pollutants; the health effects of mercury control; and any benefits from controllingCO 2 emissions. Thus, even though benefits exceeded costs for each of the options in both EPA's andour analysis, one should perhaps view the benefit estimates as a floor rather than a best estimate,particularly for S. 150 and S. 843 , which include significant Hg and CO 2 reductions.