Friday, May 3, 2013

Benefits and Costs of Federal Regulations, 2003-2012

These estimates come from a new draft report to Congress from the President's Office of Management and Budget (see here, p. 19), an agency which many environmentalists and environmental law scholars believe possesses an anti-regulatory bias (see, e.g., here, p. 86, n. 165). Note that these figures are for all major federal agency rules, not just EPA's environmental regulations.

Table 1-3: Total Annual Benefits and Costs of Major Rules by Fiscal Year, (billions of 2001 dollars)

Fiscal Year
Number of
Rules
Benefits
Costs

2003
6
$1.6 to $4.5
$1.9 to $2.0
2004
9
$8.8 to $69.7
$2.6 to $2.8
2005
12
$27.9 to $178.1
$3.8 to $6.1
2006
6
$2.5 to $5.0
$1.1 to $1.4
2007
12
$28.6 to $184.2
$9.4 to $10.7
2008
12
$8.6 to $39.4
$7.9 to $9.2
2009
15
$8.6 to 28.9
$3.7 to $9.5
2010
17
$18.6 to $85.9
$6.4 to $12.4
2011
12
$34.3 to $89.5
$5.0 to $10.1
2012
14
$53.2 to $114.6
$14.8 to $19.5

Broken down by agency, EPA issued 32 major rules between Oct. 1, 2002 and Sept. 30, 2012. The OMB estimated aggregate benefits of those regulations at $112 to $637.6 billion (2001 dollars). Estimated costs were $30.4 to $36.5 billion (2001 dollars). The benefit-cost ratios ranged from approximately 4:1 to more than 200:1.

For those who are unfamiliar with the process of benefit-cost analysis, it is common for estimates of benefits to have a much wider range than cost estimates mainly because nearly all costs of regulations arise in markets, which makes the process of cost estimation much easier. Many benefits of regulations arise outside of markets, which makes estimation a much less precise business. It should also be noted that in conducting benefit estimates, administrators typically focus only on relatively easy to measure categories, such as human health effects. Purely environmental benefits often are ignored. So, if anything, the OMB's calculations are likely to systematically under-estimate the extent to which social benefits of environmental regulations exceed social costs.

In any case, the OMB's draft report serves as a strong reminder that strong environmental protections are good for the economy (even if conventional measures of economic growth, such as GDP, fail to grasp them). Of course, so-called "Conservative" opponents of EPA and its environmental regulations will studiously ignore the actual data and continue to rant about "overly expensive" and "job-killing" regulations.

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