Benefit Cost Analysis: The Real Deal Is Coming to EPA

Tom Shepstone
Shepstone Management Company, Inc.

The EPA has enacted regulations that now ensure real, honest to goodness, cost benefit analysis will be done in clean air rulemaking.

Benefit cost analysis has been a preceding feature of more and more governmental action in recent years, but it’s been a mess as the EPA, not to mention myriad other agencies, have used the tool in inconsistent ways that invariably justify whatever measure government wishes to take. You know it works; ABC agency decides it wants to impose a new rule that puts you out of business but justifies it on the basis of phony supposed benefits that will accrue from future generations not having to put up with you. Your cost is simply someone else’s benefit. Such is the nature of all governmental tradeoffs, of course, but EPA is now putting some manners on cost benefit analysis for new Clean Air Act rules.

benefit cost analysis

Says the EPA:

On December 9, 2020, the U.S. Environmental Protection Agency (EPA) announced a procedural rule establishing processes EPA will undertake when promulgating regulations under the Clean Air Act (CAA) to ensure that information regarding the benefits and costs of regulatory decisions are developed in a consistent and transparent manner, and considered to the extent allowed by law.

The goal of this rule is to ensure that all future significant regulations promulgated under the CAA are accompanied by a benefit-cost analysis (BCA) using the best available scientific information, in accordance with best practices from the economic, engineering, physical, and biological sciences, and ensuring transparency of the BCA.

How will the EPA do this? A fact sheet indicates three ways:

  • EPA will prepare a benefit cost analysis for all future significant proposed and final regulations under the Clean Air Act. EPA anticipates significant regulations will include those with the largest annual impact on the economy; those that would disproportionately affect an industry, group, or area; or those that are novel or relevant for other policy reasons.
  • An analysis must be developed in accordance with best practices from the economic, engineering, physical, and biological sciences. The rule outlines required elements of benefit cost analyses, following established protocols published by the Office of Management and Budget and further elaborated in EPA’s “Guidelines for Preparing Economic Analyses.” These include addressing all key elements of a benefit-cost analysis and — to the extent permitted by law — making underlying data available to the public.
  • EPA will increase transparency in the presentation of the benefits and costs resulting from significant Clean Air Act regulations. In addition to a clear reporting of the overall results of the benefit cost analysis, EPA will require separate reporting of the public health and welfare benefits that are specific to the objective of the Clean Air Act provision under which the rule is promulgated.

And, here is a video of EPA Administrator Andrew Wheeler presenting on the subject:

A press release was also issued. This new procedural rule is a necessary step in bringing responsibility to benefit cost analysis and making sure we’re getting the real story when it’s done. As Doug McLinko said here two months ago, the EPA is “making good on needed reforms to the agency’s benefit cost analysis strategy as part of a larger effort by the Trump Administration to fix our nation’s complex regulatory framework.” Yes, indeed!

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