Report to Congress confirms large benefits, modest costs of new EPA rules

The Office of Management and Budget just posted a draft of its annual report to Congress on the benefits and costs of federal regulations. This official documentation of all major regulations reviewed by OMB includes an individual listing of the benefits and costs of all such rules finalized by the Obama administration through Sept. 30, 2011 (the end of fiscal year 2011). This listing, Table D-3 found on pages 126-128, includes nine final rules issued by the Environmental Protection Agency and two final rules issued jointly by EPA and the Department of Transportation.

If the monetized benefits and costs of these 11 individual rules are tabulated (hereafter referred to as the “Obama EPA rules”), the results are strikingly positive. As the table at the end of this post indicates:

  • The benefits of the finalized Obama EPA rules are valued at $98 billion a year (all figures in 2010 dollars).  Most of the benefits come from saving lives and other health benefits, but also include economic benefits such as reduced fuel expenditures by consumers or increased worker productivity.
  • The compliance costs of the Obama EPA rules amount to just $8.3 billion a year, or far below one one-thousandth of the economy.
  • The net benefits from these rules is $90 billion a year. The ratio between benefits and costs is 12-to-1.
  • Using methodology I wrote up previously, I estimate the economic benefits from the joint EPA/DOT rules alone, connected to fuel efficiency and greenhouse gas standards for cars, amount to about $13 billion a year, or more than the compliance costs for all 11 Obama EPA rules.

Since the OMB report is designed to cover data only through the end of the previous fiscal year, it does not include EPA’s “air toxics” rule that was finalized on Dec. 16, 2011. This rule has significant compliance costs, amounting to $10 billion a year, but much larger benefits, amounting to $64 billion a year (using the midpoint of the benefit range). Combining this rule with the rules in the OMB report, the benefits of Obama EPA rules finalized to date amount to $162 billion a year, compared to compliance costs of $18.3 billion a year (about one one-thousandth of the economy). The net benefit figure for this combination of EPA rules is $144 billion a year.

Cost-benefit data should not be considered precise, and there are many complexities to such analysis that have not been fully addressed (such as many benefits are not monetized). Nonetheless, the magnitude of the net benefits of the Obama EPA rules shown by this data indicates that they are likely to be of much value to the nation.

(continued)

Annual costs and benefits of major EPA rules finalized during the Obama administration, through Sept. 30, 2011 (in millions of 2010 dollars)

Rule Costs Benefits
Revisions to the Spill Prevention, Control, and Countermeasure -99
NESHAP: Reciprocating Internal Combustion Engines (Diesel) 380 1,604
Light-Duty Vehicles Greenhouse Gas Emission Standards and CAFÉ Standards* 4,060 14,574
Lead: Amendment to the Opt-out and Recordkeeping Provisions in the Renovation, Repair, and Painting Program 354 2,282
Review of the National Ambient Air Quality Standards for Sulfur Dioxide 836 12,860
NESHAP: Portland Cement Notice of Reconsideration 1,038 13,666
NESHAP: Reciprocating Internal Combustion Engines–Existing Stationary Spark Ignition (Gas-fired) 255 838
Water Quality Standards for Florida’s Lakes and Flowing Waters 171 28
SPCC milk amendments -147
Greenhouse Gas Emissions Standards and Fuel Efficiency Standards for Medium- and Heavy-Duty Engines and Vehicles* 606 3,129
Cross-State Air Pollution 843 48,926
           Total 8,297 97,907

*These rules are joint EPA/DOT rules

Source: Table D-3, Draft 2012 Report to Congress on the Benefits and Costs of Federal Regulations and Unfunded Mandates on State, Local, and Tribal Entitities.  EPI converted the data from 2001 dollars to 2010 dollars using the GDP deflator