EPA’s new rule fails to reform the agency’s methods for calculating benefits when regulating particulate matter.
The New York Times reported recently that the U.S. Environmental Protection Agency (EPA) no longer plans to quantify the benefits of reducing exposure to certain air pollutants as it evaluates the need for regulation. In a final rule governing combustion turbines issued in January, EPA expressed concerns that its past “analytical practices often provided the public with a false sense of precision and more confidence regarding the monetized impacts of fine particulate matter (PM₂.₅) and ozone than the underlying science could fully support.” The rule announced that “to rectify this error,” EPA will no longer monetize the benefits associated with reducing these two pollutants.
Although I am sympathetic to the idea that EPA’s past practices tended to put a thumb on the scale in a way that exaggerated the benefits of reducing fine particulate matter—particulate matter with a diameter of less than or equal to 2.5 micrometers—the solution cannot be to remove those benefits from the scale altogether.
Ever since President Ronald Reagan, Presidents of both parties have expected agencies to justify their regulations on the grounds that the benefits will justify the costs. The U.S. Congress has not explicitly mandated benefit-cost analysis for all regulations, but courts are increasingly interpreting statutory language to require, or at least allow, agencies to make decisions based on commonsense tradeoffs.
Benefit-cost analysis necessarily involves numerous assumptions about what the future state of the world will be under different interventions but, at its best, it offers a transparent accounting of what we know about the consequences of alternative actions—the good and the bad, the intended and the unintended.
I believe the Administration raises valid concerns about some of EPA’s past practices. EPA’s explicit approach to risk assessment has been, when faced with uncertainty, to rely on assumptions that err on overstating estimated exposure risks. Reliance on worst-case assumptions can compound when applied to multiple uncertainties, overstating likely benefits and leading policymakers to misallocate resources in ways that end up harming public health and environmental quality.
These concerns are especially valid with fine particular matter, the reduction of which, according to the Office of Management and Budget’s annual tally, accounts for half of the benefits of all federal regulations. It strains credulity to think that reducing this one pollutant provides benefits equal to the combined monetized benefits of all regulations governing food, health, workplace and transportation safety, drinking water, hazardous and nuclear waste, and more.
One practice that may lead to a systematic overstatement of the health benefits of reducing fine particulate matter is the benefits‑per‑ton method, which applies national average values to each ton of emission reduced, ignoring location‑specific exposure and risk. That approach may be particularly problematic because EPA lumps all forms of fine particles together and does not distinguish between fine particles composed of toxic substances and fine particles of ordinary dust.
This problem can be compounded by the agency’s practice of extrapolating mortality benefits, which comprise more than 90 percent of total fine particulate matter benefits, to levels below the lowest levels studied—and below the levels EPA has determined to protect “public health with an adequate margin of safety.” Critics also question whether associational evidence truly supports a causal relationship, especially at such low concentrations. Finally, many modeled “premature deaths” occur among elderly individuals with limited remaining life expectancy, yet EPA applies a uniform value of a statistical life rather than valuing life‑years gained due to the regulation, thereby overstating the dollar benefits attributed to incremental reductions in fine particulate matter.
To address these problems, EPA should do several things. First, it should endeavor to provide most-likely estimates of health effects rather than systematically overstating estimates. Second, it should present policymakers with a reasonable range of outcomes rather than a single estimate that hides uncertainty in the inputs and modeling. Third, it should invest in research that reduces uncertainties, specifically investigating the composition of fine particles and clarifying the extent to which the observed associations are causal. Finally, it should use valuation approaches that recognize that society is willing to pay more for interventions that allow an 8-year-old to live to 81 than those that allow an 80-year-old to live to 81.
The bottom line is that EPA has many avenues for improving how it estimates and presents the benefits of reducing exposure to fine particulates—but ignoring those benefits altogether is not one of them.
This essay is part of a series, titled “Valuing and Devaluing Regulatory Benefits.”
