EPA questions cost-benefit analysis underpinning rules and regulations

Through an Advance Notice of Proposed Rulemaking published in the Federal Register, the Environmental Protection Agency is soliciting input on whether and how to change the way it considers costs and benefits in making regulatory decisions, especially those linked to the Clean Air, Clean Water and Safe Drinking Water Acts.

Scott Pruitt signs the Advance Notice, likely leading to a review of the cost-benefit factors the Agency has used to craft new regulations on emissions from vehicles and industrial sources. PHOTO: EPA

“Many have complained that the previous administration inflated the benefits and underestimated the costs of its regulations through questionable cost-benefit analysis,” says EPA Administrator Scott Pruitt. “This action is the next step toward providing clarity and real-world accuracy with respect to the impact of the Agency’s decisions on the economy and regulated community.”

Multiple EPA-related statutes refer to cost and benefit calculation, he adds, but implementation has been inconsistent. As a result, the Agency has created a risk of uncertainty and confusion for states, local communities, and industry. EPA is now considering ways to codify common-sense, best practices for cost-benefit analysis in rulemaking. Consistent with the President Donald Trump’s Executive Order 13783, for example, EPA updated the social cost of carbon to reflect prior and best practices. While the Agency under President Barack Obama estimated the social cost of carbon to be an average of $36 per ton of carbon dioxide emitted, it now calculates an average of $5/ton. EPA has also proposed a different approach to analyzing co-benefits—those from reduced emissions of a pollutant that is not the actual rule or regulation target.

Particulate matter was the co-benefit most cited by the Obama EPA. In fact, particulate matter co-benefits accounted for more than 80 percent of the purported benefits of all of prior administration’s air rules. The Clean Power Plan, a rule aimed at carbon dioxide reductions, derived most of its benefits from a reduction in particulate matter. Upon issuing a proposed CPP repeal, EPA provided a transparent account of the impact of the rule on carbon dioxide, the “targeted pollutant.”