August 12, 2020

Private: Ann Jaworski

Smoke and Mirrors on Clean Air Cost-Benefit Analysis

“Consistency and Transparency” sound like good things, but a new rule from the Trump EPA would be bad on many levels.

The proposed rule, Increasing Consistency and Transparency in Considering Benefits and Costs in the Clean Air Act Rulemaking Process is unnecessary and duplicative, and it is downright harmful. By limiting EPA’s ability to consider important health studies and co-benefits, this proposal encourages low-quality analysis and benefits polluters over people. In the midst of a respiratory pandemic that disproportionately affects pollution-plagued communities, EPA should not be impairing the process to improve air quality. That’s why ELPC and number of other environmental groups recently submitted comments opposing EPA’s proposal.

The Proposal is Unnecessary and Duplicative

Federal agencies have been analyzing the costs and benefits of proposed rules for decades. An executive order, signed by President Clinton in the 1990s and still in effect today, requires agencies to do a regulatory impact analysis for any rules that will have a significant impact on the economy. Sometimes agencies do this analysis even when not required, as a matter of public transparency and good rulemaking practice. The federal Office of Management and Budget has issued a guidance document instructing all federal agencies on best practices for economic analyses, and EPA also has its own hundreds-of-pages-long guidelines on the subject. The EPA guidelines are currently being revised by EPA’s National Center for Environmental Economics and will be peer reviewed by a panel of outside experts from EPA’s Science Advisory Board.

This procedural rule is not necessary, it impedes EPA’s duty to use the best available science in setting regulations, and it interferes with EPA’s ability to further the Clean Air Act’s statutory mission.

Given that there is already extensive guidance for best practices in analyzing costs and benefits, EPA hasn’t identified any problem that this additional rule would solve. EPA also hasn’t explained why it needs a separate process specifically for the Clean Air Act, rather than applying its revised guidelines agency-wide. The agency’s only attempt to justify this proposal is a vague reference to public comments that alleged that prior Clean Air Act rulemakings have consistently overestimated expected benefits, a premise which is patently false. Multiple studies have shown that EPA is far more likely to underestimate benefits and overestimate costs than the reverse.

Instituting this proposal as a rule (which can only be adopted or repealed through a lengthy public notice and comment process) instead of a guidance document seems like an attempt to bind future administrations to a particular, flawed process of economic analysis. There are many ways to assess costs and benefits, and EPA’s proposal would require one specific type of analysis: Cost-Benefit Analysis (CBA), in which an action’s costs and benefits are monetized and compared directly against each other to determine that action’s net benefit. There’s nothing inherently bad about CBA, but the way EPA proposes to do it will distort the outcome, as discussed further below.

Additionally, while some Clean Air Act provisions require EPA to consider costs when enacting rules, some make only certain costs relevant, and some prohibit consideration of economic costs entirely. Requiring EPA to go through an overly-complicated and flawed CBA process even when it legally cannot rely on the outcome is wasteful.

The proposal could lead to lower quality analyses that ignore relevant scientific studies and important benefits.

The proposal is at times vague and confusing, but it raises the troubling possibility that EPA’s CBA could ignore important scientific studies and benefits of rulemakings, which would lead to distorted analyses that don’t reflect reality.

Under the proposal, scientific studies must meet certain requirements before EPA can rely on them to quantify the expected benefits of a rule. For instance, the rule would prevent EPA from relying on studies if the underlying data is not available to the public. But the data behind large epidemiological studies often can’t be fully released because of HIPAA (the Health Insurance Portability & Accountability Act) and other privacy concerns. Other data might contain confidential business information that is protected under federal and state law. Such sensitive data should remain private, and the anonymity of such studies in no way detracts from their scientific validity.

These “transparency” requirements could rule out many relevant studies that would help to more accurately estimate the health benefits of a rule. The tactics are similar to those in EPA’s recently proposed science “transparency” rule, which would place limitations on the scientific studies EPA could use in setting substantive regulatory standards. While it’s somewhat unclear whether this proposal merely duplicates that one, or adds additional requirements, either way it limits EPA’s ability to rely on many scientifically-valid studies.

The proposal’s treatment of “co-benefits”—also called “indirect benefits”—is also troubling. If you’re deciding whether to start exercising to achieve the direct benefit of controlling your blood sugar, you would probably also consider co-benefits of exercise like better mood, increased endurance, and better cardiovascular health. Ignoring co-benefits when deciding whether to take an action defies both logic and the current OMB guidance and EPA guidelines, which state that co-benefits should be counted. This proposal doesn’t clearly say that it would require—or even allow—EPA to ignore co-benefits, but Administrator Wheeler has publicly stated that under this proposal “[c]o-benefits would not be used to justify the rule.” And in a recent rulemaking, EPA ignored thousands of yearly deaths prevented by reduced particulate matter pollution because these avoided deaths were co-benefits of a rule intended to reduce mercury pollution from power plants. It’s illogical that saving a life is worth nothing if it’s saved as a side effect of a regulation intended to prevent different harms.

EPA claims to be adopting this rule under a provision of the Clean Air Act that gives it legal authority to issue rules “necessary” to implement the statute. The purpose of the Clean Air Act is to protect human health and the environment from dangerous air pollution. This procedural rule is not necessary, it impedes EPA’s duty to use the best available science in setting regulations, and it interferes with EPA’s ability to further the Clean Air Act’s statutory mission. ELPC will continue to fight back, to protect clean air in the Midwest and beyond.