An Analysis of the Use of EPA's Clean Air Benefit Estimates in OMB's Draft Report on the Costs and Benefits of Regulation

Abstract

Many advocates of regulatory reform recommend more and better benefit-cost analyses. Perhaps the single most ambitious and sophisticated such analysis ever conducted is the retrospective report on the benefits and costs of clean air recently completed by the Environmental Protection Agency. But EPA's estimates of trillions of dollars in benefits from the Clean Air Act depend on a few arbitrary assumptions about the nature and value of health improvements. Although a panel of well-respected scientists and economists reviewed the EPA's report, the Office of Management and Budget should not include it in its own report to Congress without more extensive discussion of key limitations. In particular, OMB should include a quantitative illustration of how alternative assumptions as plausible as those in the EPA report could shrink the expected value of benefits to a fraction of those reported.