Valuing and Devaluing Regulatory Benefits

The Environmental Protection Agency’s decision to decline to monetize effects from air pollution prompts reactions by regulatory experts.

The estimation of benefits and costs has a long tradition in U.S. regulatory decision-making. President Ronald Reagan, in issuing Executive Order 12,291 in 1981, called upon federal agencies to ensure that the benefits of their most significant regulations would “outweigh” their costs. In 1992, President William Clinton replaced the Reagan order with Executive Order 12,866, but still demanding that agencies seek to determine that a regulation’s benefits “justify” its costs.

Agencies’ practice of conducting benefit-cost analysis grew more widespread in the ensuing years. Many agencies—including the U.S. Environmental Protection Agency (EPA)—would not only seek to quantify benefits and costs, but they also would place monetary values on those regulatory impacts. By monetizing benefits and costs—that is, putting both in dollar units—these impacts could be compared to determine if the benefits outweighed or justified the costs.

But last month, the Trump Administration’s EPA signaled a change in that longstanding practice. In announcing a deregulatory action over national air pollution standards, the agency declared it would no longer monetize certain health effects associated with exposures to ozone and small particulate matter. Departing from past practice, the agency cited uncertainties in estimating those monetary values and, as a result, decided in effect not to give them any monetary value at all in the agency’s regulatory analysis underlying its deregulatory decision-making.

In this series of essays in The Regulatory Review, three leading regulatory experts offer their assessments of the EPA’s changed approach to placing monetary values on certain regulatory benefits. Contributors to this series are: Caroline Cecot, the Oswald Symister Colclough Dean’s Research Professor of Law at The George Washington University Law School; Cary Coglianese, the Edward B. Shils Professor of Law and the Director of the Penn Program on Regulation; and Susan E. Dudley, a distinguished professor of practice at the Trachtenberg School of Public Policy and Public Administration at The George Washington University and director of The George Washington University Regulatory Studies Center.