Washington Post Trashes EPA Benefit Cost Analysis Rule

The Washington Post last week published an inaccurate and misleading analysis of the Environmental Protection Agency’s (EPA) recently finalized benefit-cost analysis (BCA) rule (hat tip Daren Bakst).

The Post article begins by asserting that the BCA rule “could make it more difficult to enact public health protections, by changing the way the Environmental Protection Agency calculates the costs and benefits of new limits on air pollution.” The Post explains:

The new cost-benefit requirements, which apply to all future Clean Air Act rules, instruct the agency to weigh all the economic costs of curbing an air pollutant but disregard many of the incidental benefits that arise, such as illnesses and deaths avoided by a potential regulation. In other words, if reducing emissions from power plants also saves tens of thousands of lives each year by cutting soot, those “co-benefits” should not be counted.

That is a total falsehood. Exclusion of incidental benefits is nowhere advocated or implied in the rule. Apparently, the Post did not bother to read the BCA rule and instead relied on the allegations of New York University (NYU) Law School professor Richard Revesz, who claims the EPA’s approach is “inconsistent” with existing federal guidance, which requires cost-benefit analysis to take all benefits into account, “whether they’re direct or indirect.”

The Post goes on to quote Revesz’s comments at a recent panel discussion hosted by the NYU Law School’s Institute for Policy Integrity, which he directs:

They’re basically saying that the indirect consequences of regulation must be taken into account if they’re negative and should be ignored if they are positive. I mean, there’s no scenario under which an approach like that is rational in any way.

However, no part of the BCA rule fits that description. For all the wailing and gnashing of teeth, the rule is a simple, straightforward, “good government” initiative. It includes three basic requirements. The rule binds the EPA to:

1. Prepare a BCA for all future significant proposed and final regulations under the Clean Air Act (CAA) and consider such analyses when promulgating rules to the extent allowed by law.
2. Develop the BCA using the best available scientific information and in accordance with best practices from the economic, engineering, physical, and biological sciences.
3. Include in the preambles of all proposed and final significant CAA rules the overall results of the BCA, including total costs, benefits, and net benefits; separately show the costs and benefits pertaining to the specific objectives of the provision under which the rule is promulgated; and if possible, report any costs or benefits accruing to non-U.S. populations.

All those requirements are best practices established over many decades by presidential executive orders, Office of Management and Budget guidance, academic literature, and the EPA’s own economic analysis and risk assessment guidelines.

What is new here is that the EPA, for the first time, is binding itself to practice what it preaches by codifying BCA best practices for significant CAA regulations. The aim is to make the EPA a more accountable agency. The rule explains: “Thus, the agency believes that this Final Rule is binding upon the Agency for significant CAA regulations, and that EPA’s compliance with these procedural requirements is subject to judicial review in challenges to such rulemakings” (p. 35).

Although some free marketers hoped, and many regulatory advocates feared, that the BCA rule would prevent repeat performances of the EPA’s mercury rule, in which the agency invoked the “co-benefits” of collateral fine particulate matter (PM_2.5) reductions to justify controls on power plant mercury emissions for which costs exceeded benefits by as much as 2,400 to 1, the BCA rule does nothing of the kind.

Yes, the rule requires the preambles of significant future Clean Air Act regulations to report both total regulatory benefits and the subset of direct benefits related to the rule’s statutory objectives. But that in no way obscures or hides the “co-benefits.” It just ensures that direct and indirect benefits are clearly and transparently presented. Moreover, disaggregating total benefits into those specifically required by a rule’s statutory basis and other benefits arising from collateral reductions in other pollutants has been common practice for more than two decades.

There is a strong case that the Obama-era EPA abused the use of PM_2.5 co-benefits, but that is a topic for another post—and the BCA rule does not purport to cure that problem. If the rule limits such abuse at all, it will do so only by virtue of enhancing the transparency, consistency, and rigor of EPA benefit-cost analyses.