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Tallying up the impact of new EPA rules

Briefing Paper #311

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Note: Several significant changes to EPA regulations have been made since this paper was issued.  These changes were incorporated into a second tally of EPA regulations under the Obama administration that was issued in September 2011 and can be found here.

Combined costs of Obama EPA rules represent a sliver of the economy and are far outweighed by cumulative benefits

President Obama’s Environmental Protection Agency has been under wide-scale attack this year. A series of congressional hearings and industry statements have argued that particular EPA regulations, especially in combination with one another, will damage the economy and lower employment. A recent Economic Policy Institute analysis discussed the relationship between regulations and employment in detail (Shapiro and Irons 2011). This paper examines the combined effects of the major EPA regulations that the Obama administration has already finalized as well as the regulations that it has proposed but not finalized. The paper focuses on major rules for which cost and benefit data are available.

Two broad conclusions emerge from this analysis. First, the dollar value of the benefits of the major rules finalized or proposed by the EPA so far during the Obama administration exceeds the rules’ costs by an exceptionally wide margin. Health benefits in terms of lives saved and illnesses avoided will be enormous. Expressed in 2010 dollars:

• The combined annual benefits from all final rules exceed their costs by $32 billion to $142 billion a year. The benefit/cost ratio ranges from 4-to-1 to 22-to-1.
• The combined annual benefits from four proposed rules examined here exceed their costs by $160 billion to $440 billion a year. The benefit/cost ratio ranges from 12-to-1 to 32-to-1.

Second, the costs of all the finalized and proposed rules total to a tiny sliver of the overall economy, suggesting that fears that these rules together will deter economic progress are unjustified. The calculations below describe the costs of the rules when “fully in effect.” A complete explanation of the calculations can be found in the text, but for now it is worth noting that it takes several years for most rules to take full effect.

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