White House report says benefits of EPA rules far outweigh costs

Source: Robin Bravender, E&E reporter • Posted: Friday, June 13, 2014

As the Obama administration and industry groups go to war over the costs of a high-stakes climate rule, the White House has released a new study showing that the benefits of major federal regulations vastly exceed the costs.

Major rules issued by federal agencies over the past decade have estimated benefits between $217 billion and $863 billion per year, compared with estimated annual costs of between $57 billion and $84 billion, according to the recent draft report from the White House. Those estimates were reported using 2001 dollar values.

The draft report notes that some rules are anticipated to produce far higher net benefits than others and that there’s substantial variation across agencies in the net benefits expected from new requirements.

Still, the numbers give fodder to backers of stricter regulations who argue that industry groups and critics of new rules consistently overestimate costs and play down the likely benefits of new regulations.

“The history of this is crystal-clear — clean air standards have produced benefits far, far beyond any cost associated with them, and this is from an office of the White House that’s in charge of counting money,” said Frank O’Donnell, president of the advocacy group Clean Air Watch. “I’m very confident that on the climate rule, history is going to repeat itself and that ultimately EPA will put forward something that produces very huge benefits compared to associated costs.”

The White House Office of Information and Regulatory Affairs within the Office of Management and Budget sends a draft report on costs and benefits of federal rules to Congress every year.

The benefits have greatly exceeded the costs for 34 major EPA rules issued from 2003 until 2013, the report says. Estimated benefits (using 2001 dollars) range from $136.4 billion to $703.1 billion, while estimated costs of those rules are between $31.6 billion and $38.2 billion.

“It should be clear that across the federal government, the rules with the highest estimated benefits as well as the highest estimated costs, by far, come from the Environmental Protection Agency and in particular its Office of Air and Radiation,” the report says. “Specifically, EPA rules account for 63 to 82 percent of the monetized benefits and 46 to 56 percent of the monetized costs.”

Several of the rules were issued under the George W. Bush administration.

Of the 24 air rules studied, the highest estimated benefits came from two Bush-era regulations — a particle pollution rule issued in 2007 and the Clean Air Interstate Rule issued in 2005 — and a 2011 Obama administration hazardous pollution rule known as utility MACT. The utility MACT rule is also estimated to be the costliest of the 24 air rules surveyed.

For its proposed rule to clamp down on power plants’ greenhouse gas emissions, EPA has estimated that in 2020, the proposal will yield climate benefits of $17 billion or $18 billion depending on its approach (in 2011 dollars) and between $15 billion and $40 billion in additional benefits from cutting down on ozone and particle pollution. EPA said total compliance costs in 2020 would be $5.5 billion to $7.5 billion.

GOP lawmakers and industry groups, including the U.S. Chamber of Commerce, have warned that the EPA rule could be devastating to industry and lead to widespread job losses (Greenwire, May 28).

“If these rules are allowed to go into effect, the administration for all intents and purposes is creating America’s next energy crisis,” Mike Duncan, president and CEO of the coalition, said in a statement after the rule was released (Greenwire, June 2).

Research fellows at the Mercatus Center at George Mason University took issue with the OMB report’s methodology.

“We agree with the OMB that their estimates ‘have significant limitations,'” Patrick McLauglin and Sherzod Abdukadirov of the Mercatus Center, a think tank that is often critical of regulation, wrote in an op-edpublished today. They said the exemption of independent agencies and “poor execution of analysis render this report practically useless.”