Cost-Benefit Analysis Can Be Useful in Assessing Environmental Regulations, Despite Limitations
RCED-84-62
Published: Apr 06, 1984. Publicly Released: Apr 06, 1984.
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Highlights
GAO reported on the Environmental Protection Agency's (EPA) major efforts to prepare cost-benefit analyses to support regulatory decisions, as required under Executive Order 12291. In addition, it discussed the Office of Management and Budget's (OMB) review of those analyses and identified many problems that affect the potential usefulness of cost-benefit analyses for assessing environmental regulations.
Recommendations
Matter for Congressional Consideration
| Matter | Status | Comments |
|---|---|---|
| Congress may wish to reexamine the need for restrictions which prohibit or limit cost-benefit analyses results from being used in environmental rulemaking in laws such as the Clean Air and Clean Water Acts, in light of subsequent improvements in environmental protection, and consider easing or eliminating such restrictions on a case-by-case basis. |
Closed – Not Implemented
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This recommendation was intended for Congress to consider over the next several years as it reauthorizes such legislation as the Clean Air Act and the Clean Water Act. As Congress has yet to reauthorize these acts, this recommendation has not been implemented. It would not be realistic to expect Congress to implement it in the near future. |
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Environmental Protection Agency | The Administrator, EPA, should direct the program offices performing cost-benefit analyses to use special techniques for analyzing uncertainty so that the most likely estimates of key regulatory effects can be isolated. |
Closed – Implemented
In August 1987, EPA released a report entitled "EPA's Use of Cost-Benefit Analysis: 1981-1986." The report discusses, among other things, the uncertainty issue and outlines steps that EPA has taken, or plans to take, to strengthen its analytic capabilities and focus its research efforts.
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| Environmental Protection Agency | The Administrator, EPA, should direct the Budget Office to highlight, in its annual budget submission to Congress, the priorities it has assigned to address the most critical data gaps affecting the precision of cost-benefit analyses and the measures planned to narrow those gaps. |
Closed – Implemented
The August 1987 EPA report entitled "EPA's Use of Cost-Benefit Analysis: 1981-1986" describes the environmental and economic research needs of EPA. The report also discusses procedures that EPA offices should follow to identify those data gaps that need to be addressed.
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| Environmental Protection Agency | The Administrator, EPA, should transmit to the cognizant oversight committees in Congress, in executive summary form, those cost-benefit analyses that cannot be used in environmental rulemaking because of legal restrictions. |
Closed – Implemented
In August 1987, EPA released a report that discussed the statutory restrictions that limited EPA use of cost-benefit analysis. EPA identified 9 of 15 regulations where legal restrictions precluded use of all, or a portion of, the analyses.
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| Environmental Protection Agency | The Administrator, EPA, should require that all elements of costs be considered and consistently applied when determining whether regulations are major or minor. |
Closed – Implemented
An accomplishment report was approved on September 11, 1984.
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| Environmental Protection Agency | The Administrator, EPA, should prominently document, for inclusion in the public record, and transmit to OMB, a thorough explanation of the regulatory alternatives considered prior to the EPA decision to perform or not perform a cost-benefit analysis. This documentation should include a clear explanation as to why a particular alternative was considered and others were not so that decisionmakers and reviewing officials will have a complete understanding of the process. In addition, the Administrator should require that future cost-benefit analyses prominently include, in the executive summary: (1) a clear recognition of all costs and benefits, even those that cannot be quantified; (2) the range of uncertainties associated with those cost and benefit figures, as well as the sources of uncertainty; and (3) a comparison of all feasible alternatives. |
Closed – Implemented
EPA completed only one regulatory analysis since the issuance of this report. That analysis did discuss alternatives considered, and highlighted in its executive summary information on these alternatives, costs and benefits considered, and ranges of uncertainties.
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Topics
Cost effectiveness analysisEnvironmental impact statementsEnvironmental lawEnvironmental policiesFederal regulationsPollution controlAir qualityPollutionEnvironmental protectionWater quality