Memo on Increasing Consistency and Transparency in Considering Benefits and Costs in the Rulemaking Process

Policy Details

Policy Details

Last Action
Made public.
Date of Last Action
May 21 2019
Date Introduced
May 13 2019
Publication Date
May 22 2019
Date Made Public
May 21 2019

SciPol Summary

On May 13, 2019, EPA Administrator Andrew Wheeler issued a memo entitled "Increasing Consistency and Transparency in Considering Benefits and Costs in the Rulemaking Process."  The memo directs the EPA Office of Policy to update its Guidelines for Preparing Economic Analyses to "clarify best practices for how to conduct benefit-cost analysis, including guidance on key methodological and modeling choices [and] assumptions."  Importantly, the Guidelines instruct EPA staff on how to estimate "the value of reduced health risks and improved environment quality."  In other words, they guide the monetary cost EPA assigns to the human health impact of pollution, an the benefits that it assigns to reducing pollution and improving the environment. 

Because EPA is required to show that the benefits outweigh the costs of each regulatory--and deregulatory--action it takes, re-examining the assumptions underlying the agency's cost-benefit analyses will impact a broad range of regulatory decisions affecting the energy sector.  Suppose, for example, that the Obama Administration had decided to impose strict limits on a certain pollutant in power plant emissions, saving human lives and human life years quantified at $100 million, at a cost to industry of $50 million. If the new Administration wanted to roll back that regulation, it would have to show that the roll back saved more money than it cost.  The new Administration can do so by showing that the Obama Administration had underestimated the costs to industry, or overestimated the savings in human lives and life years. Administrator Wheeler's May 13 Memo has launched a process that may make this possible, by lowering the values that EPA assigns to each human life and life year saved through pollution control technology.        

Beyond its instructions to revise the Guidelines, May 13 Memo further asks the individual Assistant Administrators for Air, Water, Chemical Safety, and Land and Emergency Management to "develop reforms ... that outline how benefit-cost considerations will be applied in areas that are in need of greater clarity, transparency and consistency."   These reforms are expected to, among other things, instruct agency regulators that they may no longer take co-benefits--that is, benefits from reducing pollutants other than those specifically targeted by a regulation--into account when doing cost-benefit analysis.  According to Scientific American, industry representatives such as the National Association of Manufacturers, and the American Chemistry Council welcome the shift.  Environmentalists have assailed the memo as a calculated move to underestimate the benefits of clean air and other pollution rules. 

Making it clear that he is particularly interested in changing the cost-benefit analyses used in making decisions about regulating air pollution, Administrator Wheeler's Memo directs the Office of Air and Radiation to be "the first to issue a proposal later this year." 

 

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