This post was originally published on Legal Planet. Republished with permission.
In its closing days, the Trump administration issued a rule designed to tilt EPA's cost-benefit analysis of air pollution regulations in favor of industry. Recently, the agency rescinded the rule. The rescission was no surprise, given that the criticisms of the Trump rule by economists as well as environmentalists. EPA's explanation for the rescission was illuminating, however. It sheds some important light on how the agency views the role of cost-benefit analysis in its decisions.
The Trump rule contained an industry wish list of provisions, all of them designed to make regulation more difficult. At the time, the provision that got the most attention related to co-benefits. Co-benefits are the beneficial side effects of a regulation. For example, a regulation designed to reduce mercury emissions from power plants also cut emissions of fine particulates, thereby saving thousands of lives.
Anti-regulatory advocates argue that these co-benefits shouldn't count as part of the cost-benefit analysis. From an economist's point of view, it makes no sense to exclude co-benefits. Although the Trump administration clearly wanted to exclude consideration of co-benefits, in the end, it only required them to be analyzed separately from the "direct" benefits of the rule, such as the reduction in mercury in the case of the rule I mentioned.
Although they got much less attention at the time, the Trump rule contained numerous other provisions, smuggled in under the guise of clarifying agency procedures. It attempted to set out methodological requirements to govern the agency's use of scientific research on pollution risks. It expanded the number of regulations requiring quantitative cost-benefit analysis and tried to expand the role that the cost-benefit analysis would play in the final decision. It also invited courts to review EPA's compliance with these requirements.
These provisions were essentially an effort to straitjacket the agency's decision-making process. Much of EPA's rescission is dedicated to explaining how the effort to mandate certain methodologies conflicted with good science.
A series of executive orders requires agencies to conduct cost-benefit analysis for rules having costs over $100 million a year. The Trump rule expanded this mandate to include rules that were significant on other grounds, such as raising novel legal issues or being controversial. The Trump rule also required EPA to include consideration of the cost-benefit analysis in its decisions about issuing future rules, except for regulations that preclude consideration of cost.
EPA explained why expanding cost-benefit analysis to rules with smaller economic impacts was unwise. It emphasized that conducting a cost-benefit analysis is a complex task requiring significant agency resources. The process "takes considerable Agency resources often spanning a year or more and frequently involves the development of policy relevant emissions inventories, photochemical air quality modeling, engineering research assessments and analyses, engineering cost assessments, and benefits assessments for human health, climate, visibility, ecological and/or other categories of benefits." While this laborious process may be worthwhile for the regulations with the largest economic impact, it's a poor investment for less costly regulations. Indeed, it seems to me, it might be worth considering whether to raise the threshold higher than $100 million per year, given the delay and resource commitments involved.
Even more interesting is the EPA's explanation of why cost-benefit analysis can be a bad fit for making regulatory decisions. Some important provisions of the Clean Air Act prohibit consideration of cost altogether. Many others do contain language either explicitly referring to costs or implying that costs can be considered as a factor in a regulation's feasibility. But, EPA points out, these provisions vary widely in terms of the role of costs. Many make cost a secondary factor compared to a regulation's environmental benefits. Other regulations involve important benefits that cannot be easily quantified or converted into monetary terms. Rather than assuming that cost-benefit analysis is the appropriate method for considering costs, the agency needs to consider "the statutory context, legislative history, and the nature of the program or environmental problem to be addressed to determine a reasonable manner of considering cost."
Some advocates of cost-benefit analysis see it as the ideal method for making regulatory decisions. That group has included some past incumbents in the White House office that reviews regulatory actions by EPA and other agencies. The Biden EPA clearly rejects that view.
Notably, the Biden White House apparently went along with EPA's position when it reviewed the rescission. That suggests that, unlike some past administrations, the Biden White House is not going to prioritize cost-benefit analysis as the standard for issuing regulations.
Top photo by the Natural Resources Defense Council, used under a Creative Commons license.
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Daniel Farber | May 21, 2021
In its closing days, the Trump administration issued a rule designed to tilt EPA's cost-benefit analysis of air pollution regulations in favor of industry. Recently, the agency rescinded the rule. The rescission was no surprise, given that the criticisms of the Trump rule by economists as well as environmentalists. EPA's explanation for the rescission was illuminating, however. It sheds some important light on how the agency views the role of cost-benefit analysis in its decisions.
Brian Gumm | May 20, 2021
In the latest episode of Connect the Dots Season 5, host Rob Verchick and his guests discuss the fiscal complexities and possibilities of a just, equitable transition to clean, renewable energy. When it comes to innovation and clean energy, there’s a wide range of players building new technology and sourcing terrains to scale renewables as wide as the great unknown. Funding for those projects comes from a host of financiers, from banks to private equity firms to, perhaps, everyday consumers. The drive behind financing the energy transition results from a dedicated consortium of political agendas, business prerogatives, and consumer demand.
Katlyn Schmitt | May 13, 2021
Dirty, polluted stormwater that runs off of industrial sites when it rains is a major cause of pollution to Maryland’s streams and rivers, and ultimately to the Chesapeake Bay. Maryland is home to thousands of such industrial sites, all of which are required by law to obtain a stormwater discharge permit from the Maryland Department of the Environment (MDE) to prevent pollution and protect public and environmental health. Unfortunately, many of these sites do not have a permit. For example, our research in one small area of Anne Arundel County found that only four out of 12 industrial sites possessed a current permit. Of the industrial sites that hold a permit, many are not in compliance with the permit requirements. Between 2017 and 2020, MDE conducted just under 2,000 inspections of permitted sites throughout Maryland and found that more than two-thirds (68%) were violating the terms of their permits. These industrial sites are commonly clustered in urban areas, creating pollution hot spots of runoff that can include heavy metals and other toxins. Such polluted waters threaten the health of those who live nearby, who are more likely to be low income and populated by people of color.
Daniel Farber | May 7, 2021
Chlorpyrifos is one of the most widely used pesticides in America, although it has been banned in the European Union. Last week, the Ninth Circuit took the extraordinary step of ordering the U.S. Environmental Protection Agency (EPA) point-blank to ban or reduce traces of chlorpyrifos in food. A dissenter accused the majority of misreading the statute in question and abusing its discretion by limiting EPA's options so drastically and giving it only 60 days to act. Warning: The majority and dissenting opinions cover 116 pages, so I'll necessarily be leaving out a lot of details and nuances.
Brian Gumm | May 6, 2021
Companies using fossil fuels like oil, natural gas, and coal are facing heavy pressure to reduce their carbon footprint. If they don’t, they could get hit with financial penalties or be completely shut down. In response, these corporations have come up with a treatment of sorts -- it’s called carbon capture and sequestration, or CCS. The idea is that the industry can continue operating as it always has, but as a caveat, it will install a system to strip carbon from emissions. The carbon will be funneled through pipelines deep into the ground, where it will be buried forever. As a result, plants can keep running, businesses rally on as usual, there’s less pollution in the air, everyone wins. Right? Not exactly. As Connect the Dots host Rob Verchick and his guests discuss in this episode, CCS is not nearly comprehensive enough to reduce emissions at a level and rate necessary to make a difference.
James Goodwin | May 4, 2021
By the time the environmental justice movement began taking shape in the 1980s, communities of color had already been suffering from the disproportionate burdens of pollution for decades. Since then, evidence of racially discriminatory patterns in the distribution of environmental harms has only continued to mount.
Karen Sokol | May 4, 2021
A week after taking office, President Joe Biden issued an executive order “on tackling the climate crisis” that aims to face the challenge comprehensively and equitably. Biden has quickly appointed and seen confirmed a team of leaders who are committed to all aspects of this mission. Our country is finally on the cusp of meaningful climate action. The climate action train is so popular that even fossil fuel companies, which have historically sought to derail it, are now saying they’re on board. We should, of course, welcome all sincere collaborators; the fossil fuel industry is not among them.
David Flores | May 3, 2021
As Maryland heads into the final stretch of a collective effort to clean up the Chesapeake Bay, it has inexplicably passed over its best opportunity in years to modernize regulation of industrial stormwater -- rain and snow that collects toxic pollution as it runs off factories, warehouses, scrap metal dealers, and other industrial sites. Earlier this year, Maryland released a proposed revision of its general water pollution permit, which limits the type and amount of pollutants that facilities can discharge into public waters and sets monitoring and reporting requirements to protect public and environmental health. Unfortunately, the state missed an important opportunity to bring stormwater regulation from the last century into the present -- but it’s not too late to change course.
Alina Gonzalez | April 29, 2021
In 2017, Puerto Rico was hit hard by two major hurricanes, Irma and Maria. First came Irma, a Category 5 storm that pummeled the island, leaving a trail of destruction. Less than two weeks later came Maria, another Category 5 storm that directly hit the island in what became the worst natural disaster in the U.S. territory's history. The storm moved directly across the island, knocking out electricity and inundating towns with floodwaters and mudslides. Historically, Puerto Rico's ability to recover from tropical storms and other disasters has depended on the federal government's efforts to ensure that communities get the funds they need to reignite economic growth and development. However, the Trump administration greatly slowed -- and deliberately obstructed -- Puerto Rico's progress in repairing and rebuilding the island's infrastructure. Thankfully, the Biden administration has reversed course by lifting Trump-era restrictions on disaster relief.