Cross-posted from Legal Planet.
Cost-benefit analysis has become a ubiquitous part of regulation, enforced by the Office of Management and Budget. A weak cost-benefit analysis means that the regulation gets kicked back to the agency. Yet there is no statute that provides for this; it’s entirely a matter of Presidential dictate. And reliance on cost-benefit analysis often flies in the face of specific directions from Congress about how to write regulations. There are a few exceptions, such as regulations involving pesticides, bans on toxic substances, and thermal water pollution, where Congress called for EPA to balance costs and benefits equally. But almost all environmental laws direct agencies to use some standard other than cost-benefit analysis. The statutes generally place a greater weight on environmental quality and public health than on cost.
For example, it’s fairly obvious that Congress did not contemplate much of a role for cost-benefit analysis when it passed the Clean Air Act. Some key provisions of the Act are based completely on health risks and do not allow consideration of costs. When costs are a factor, Congress carefully specified factors to be taken into account and provided different standards for different situations. All of the fine distinctions in the table below would be erased if all regulations are simply based on the same cost-benefit standard.
| CAA Standards (in order of increasing stringency): | |||
| Standard: | Applies to: | Statute §: | Impact: |
| RACT
(Reasonably Available Control Technology) |
Existing sources in nonattainment areas | § 172(c)(1) | Requires all such sources to use average existing technology (not cutting-edge “best” technology) |
| BDAT
(Best Demonstrated Available Technology) |
Stationary sources under NSPS (New Source Performance Standards) | § 111(a)(1) | Specifically considers cost, but can require matching reductions of best-controlled similar source |
| BACT
(Best Available Control Technology, sometimes given as BAT) |
New major sources in PSD (prevention of significant deterioration) areas | § 165(a)(4) | Requires maximum feasible pollution reduction, considering cost and other factors on case-by-case basis; must be at least as stringent as NSPS under § 111 |
| MACT
(Maximum Achievable Control Technology) |
Major sources of hazardous air pollutants | § 112(d)(2) § 112(d)(3) | Requires existing major sources to match best 12% of industry; new major sources to match best-controlled similar source |
| LAER
(Lowest Achievable Emissions Reduction) |
New or modified major stationary sources in nonattainment areas | § 171(3) § 173(a)(2) | Requires most stringent existing emissions limit, whether achieved in practice or included in any SIP, for the applicable source category |
How does OMB get away with strong-arming agencies into violating their legal mandates by using cost-benefit analysis rather than the true legal standard? Basically, the trick is accomplished through a legal fiction — or more bluntly, through a transparent falsehood. The falsehood is that the cost-benefit analysis is merely informational and is not really the basis for the ultimate decision. If this were true, OMB wouldn’t pay any attention to the bottom-line of the cost-benefit analysis, only to making sure the methodology is OK. Everyone knows this is false. OMB cares a great deal about the balance between costs and benefits. But this legal fiction allows the executive branch to continue to maintain that it is executing the laws made by Congress rather than flouting them.
Legally, OMB gets away with this fairly transparent veil over its activities because of the limits of judicial review. The final decision is written up in terms of the statutory standard, and courts don’t look past the written document. Judges don’t want to inquire into whether the agency really based the regulation on the true legal standard or merely rationalized a decision made on other ground like cost-benefit analysis or a desire to placate voters in swing states.
Maybe it seems a little naive to worry about this situation, but our society does claim to believe in the rule of law. The disconnect between EPA’s legal mandates and the standards imposed by OMB is troubling, at least if we think the role of the executive branch is to carry out the law rather than to rewrite it to favor a different view of public policy.
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Daniel Farber | December 12, 2009
Cross-posted from Legal Planet. Cost-benefit analysis has become a ubiquitous part of regulation, enforced by the Office of Management and Budget. A weak cost-benefit analysis means that the regulation gets kicked back to the agency. Yet there is no statute that provides for this; it’s entirely a matter of Presidential dictate. And reliance on cost-benefit […]
Holly Doremus | December 12, 2009
This posting is reprinted, by permission from Legal Planet. The Fish and Wildlife Service yesterday announced some very good news — the brown pelican will soon be removed from the list of endangered and threatened species. This enormous fish-eating bird has been protected since 1970, when it was included on the very first list of […]
Rena Steinzor | December 12, 2009
This post was written by CPR President Rena Steinzor and CPR Policy Analyst Michael Patoka. On Friday, the White House Office of Information and Regulatory Affairs (OIRA) returned a proposed rule on air pollution standards for oil refineries to EPA, insisting that the agency complete “additional analysis” before moving forward. EPA’s efforts to reduce hazardous pollutants from these […]
Rena Steinzor | December 11, 2009
Dear Cass: As you know, we picked a spat with the Office of Information and Regulatory Affairs (OIRA) last week over Randy Lutter’s supposedly temporary detail appointment to your office. It’s not the first time we’ve criticized the workings of OIRA, and almost certainly won’t be the last. I’ve spoken to a number of people in […]
David Hunter | December 11, 2009
As the first week of formal negotiations at the Copenhagen Climate Summit comes to a close, the United States and China are exchanging barbs and little progress is being made … but behind the scene many negotiators remain confident that at least some form of a political agreement can be reached that will move global […]
Ben Somberg | December 10, 2009
The below item is written by Celeste Monforton and cross-posted from The Pump Handle. The first regulatory agenda under OIRA chief Cass Sunstein was published Monday in the Federal Register (link to its 237 pages.) The document includes a narrative of Labor Secretary Solis’ vision for worker health and safety, mentioning these specific hazards: crystalline silica, […]
Ben Somberg | December 9, 2009
A few notes on the Chinese drywall issue from the past weeks: The CPSC announced that it was expanding its investigation to include some American-made drywall, following some reports of similar problems — bad odors and pipe corrosion. But meanwhile, the Bradenton Herald asked “Is scope of Chinese drywall problem exaggerated?” Reporter Duane Marsteller notes […]
Daniel Farber | December 7, 2009
Today, EPA made its long-expected official finding: climate change is real, and we human beings are the cause. More than two years after the Supreme Court ordered EPA to address the issue, EPA has now formally ruled that greenhouse gases cause climate change that endangers human health or welfare. EPA also found that motor vehicles […]
Victor Flatt | December 7, 2009
Today, the 15th Conference of the Parties (COP) to the United Nations Framework Convention on Climate Change (UNFCCC) opens in Copenhagen. I will be a credentialed observer from non-governmental academic and research organizations including the Center for Progressive Reform and the Center for Law, Environment, Adaptation, and Resources (CLEAR) at the University of North Carolina […]