Whose Interests Count? And How Much?
This post was originally published on Legal Planet. Reprinted with permission.
Should regulators take into account harm to people in other countries? What about harm to future generations? Should we give special attention when the disadvantaged are harmed? These questions are central to climate policy and some other important environmental issues. I’ll use cost-benefit analysis as a framework for discussing these issues. You probably don’t need my help in thinking about the ethical issues, so instead I’ll focus on legal and economic considerations.
Other countries. When the Trump administration estimated the harmfulness of climate change, its answer was about a tenth of the Obama administration’s estimate. The main difference is that Trump counted only impacts within the borders of the United States. There’s been considerable discussion of this issue among academics. Generally, cost-benefit analysis of government regulations has focused on harm within the United States.
On the other hand, it’s quite common for U.S. regulators to coordinate with regulators in other countries and to take the benefits of coordination into account in issuing their own regulations. The case for doing so is especially strong regarding climate change in legal terms. The U.S …
This post was originally published on Legal Planet. Reprinted with permission.
In describing cost-benefit analysis to students, I've often told them that the "cost" side of the equation is pretty simple. And it does seem simple: just get some engineers to figure out how industry can comply and run some spreadsheets of the costs. But this seemingly simple calculation turns out to be riddled with uncertainties, particularly when you're talking about regulating the energy industry. Those uncertainties need more attention in designing regulations.
The U.S. Environmental Protection Agency (EPA) confronted some of these issues recently in its reevaluation of a regulation limiting mercury emissions from coal power plants. (You might wonder why EPA was taking this look backwards; the reason was basically that the U.S. Supreme Court told them to do so.) In 2011, EPA had estimated that the compliance cost would work out to …
Imagine you're in the market for a new furnace. You decide to buy a more fuel-efficient system — even though the price tag is higher — because it will lower your monthly heating bills. Another selling point: The fuel-efficient furnace emits less carbon into the atmosphere — a benefit you can't quite quantify but that you value nonetheless for its small salubrious effect on the planet.
Policymakers go through a similar — though much more complex — process when implementing laws. But an obscure federal mandate known as cost-benefit analysis renders them unable to fully account for costs and benefits that are difficult to measure in dollars and cents, like the large-scale value to society of federal rules that protect public and environmental health.
Despite its name, a true analysis of a rule's full benefits is impossible.
I mean, really: How can public officials put a price on a stable climate or …
This post was originally published on Legal Planet. Reprinted with permission.
Cost-benefit analysis is required for all major regulations. It's also highly controversial, as well as being a mysterious procedure unless you're an economist. These FAQs will tell you what you need to know about how cost-benefit analysis (CBA) fits into the regulatory process, how it works, and why it's controversial.
Q: Let's start with a basic question. Exactly what is cost-benefit analysis?
A: The term cost-benefit analysis is sometimes used to mean any comparison of pros and cons, which is something we all do every day in ordinary life. For present purposes, though, it means a very rigorous way of balancing pros and cons, using economic analysis to quantify the costs and benefits of an action. Basically, everything gets converted into dollar equivalents in this process.
Q: Why do agencies conduct cost-benefit analyses?
A: A few …
This post was originally published on LPE Blog and is part of a symposium on the future of cost-benefit analysis. Reprinted with permission.
In the actual work of crafting the regulatory safeguards that protect our environment and health, cost-benefit analysis has been largely ineffectual and irrelevant. Indeed, its ineffectiveness has been so profound as to prompt even its most ardent practitioners and proponents to question whether it has any impact on agency decisions at all. Meanwhile, it plays at best a minor role in the legal standards that actually govern agency decision-making. Despite all this, a certain cost-benefit orthodoxy has become remarkably entrenched in environmental policy circles. Especially in an era when so many progressive ideas are in ascendance, why does the idea of regulatory review based on CBA, first brought to us half a century ago by the two Ronalds—Ronald Coase and Ronald Reagan—have …
This post was originally published on LPE Blog and is part of a symposium on the future of cost-benefit analysis. Reprinted with permission.
Over the last 40 years, the U.S. regulatory system has played an increasingly influential role in redefining our political and economic relationships in fundamentally neoliberal terms. A key but often overlooked institutional force behind this development is the peculiar form of cost-benefit analysis that now predominates in regulatory practice. Building a new regulatory system befitting our vision of a post-neoliberal America requires a formal rejection of prevailing cost-benefit analysis in favor of a radically different approach—one that invites public participation, permits open and fair contestation of competing values at the heart of policy debates, and recognizes and honors our social interdependencies.
The predominant form of cost-benefit analysis—one embraced by neoliberals—finds its theoretical underpinning in the controversial ideology of welfare economics …
This post was originally published on LPE Blog and is part of a symposium on the future of cost-benefit analysis. Reprinted with permission.
Cost-benefit analysis (CBA) is inherently classist, racist, and ableist. Since these are foundational problems with CBA, and are not simply issues with its implementation, they can never be fixed by mere methodological improvements. Instead, the ongoing modernization of centralized regulatory analyses must focus on "moving beyond" CBA, and not on fixing it or improving it. Thus, in implementing President Biden's memorandum on Modernizing Regulatory Review (the Biden Memorandum), the Office of Management and Budget (OMB) should make explicit that regulatory review no longer requires CBA, even—as will be true in the typical case—when regulatory review does demand economic analysis as part of a holistic, multi-factor regulatory impact analysis.
The Biden memorandum endorses a series of goals that are not premised in the …
This post was originally published on LPE Blog and is part of a symposium on the future of cost-benefit analysis. Reprinted with permission.
President Biden has made climate change and racial justice central themes of his presidency. No doubt with these problems in mind, he has signaled a desire to rethink the process and substance of White House review of agencies' regulatory actions. On his very first day in office, Biden ordered administrative agencies to ensure that this review does not squelch regulatory initiatives nor brush aside "racial justice, environmental stewardship, human dignity, equity, and the interests of future generations." At the same time, however, Biden reaffirmed the "basic principles" of a Clinton-era executive order on White House regulatory review, subjecting agencies' major rules to a cost-benefit test.
These twin inclinations – toward acting boldly on climate change and racial justice, and toward judging regulation using cost-benefit …
This op-ed was originally published in The Hill.
The surging COVID-19 delta variant is sending thousands of people to the hospital, killing others, and straining several states' hospital systems to their breaking point. The climate crisis is hurting people, communities and countries as we write this piece, with apocalyptic wildfires, crippling droughts and raging floodwaters. Systemic racism continues unabated, leading to vast economic and environmental injustices. It's beyond time for urgent action, but to get there, the federal government must reform the opaque, biased method it uses to evaluate our nation's public health, economic and environmental protections.
The day President Joe Biden took office, he ordered executive branch agencies to evaluate and reform the regulatory review process to “ensure swift and effective Federal action” to address the urgent problems we currently face. The administration is unlikely to live up to this goal unless the White House addresses …
The Biden administration's Environmental Protection Agency (EPA) is currently seeking public input on its efforts to revamp an important Clean Air Act program called the Risk Management Plan (RMP) rule for facilities that produce, store, or use large amounts of dangerous chemicals. It is meant to prevent catastrophes — like the 2017 Arkema explosion in Crosby, Texas — which not only put human lives and health in danger (especially for the communities of color that are disproportionately overrepresented in the shadows of these facilities), but also cause costly disruption for local economies.
My CPR colleagues contributed to a timely new policy brief explaining how the EPA must be particularly attentive to the new and unique threats posed by climate change as it goes about revamping its RMP rule to prevent "double disasters" that will become increasingly common unless chemical facilities are forced to take preventative action. They presented the …
