EPA's Arsenic Rule: The Benefits of the Standard Do Not Justify the Costs

Abstract

The U.S. Environmental Protection Agency recently finalized a rule that would reduce the maximum allowable level of arsenic in drinking water by 80 percent. While arsenic is thought to be essential for the human body at low levels, it can cause cancer when consumed at higher concentrations for extended periods of time. This regulatory analysis evaluates the benefits and costs of the EPA's rule. On the basis of currently available information, we find that the EPA's standard cannot be justified on economic grounds. We estimate that the costs of the final rule will exceed the benefits by about $190 million annually. We also find that the rule probably will result in a net loss of life. We find that the rule probably will result in a net loss of life. The direct effect of the rule will be to save about ten lives annually in the future. After taking into account the indirect impacts of the cost of the rule on items like health care expenditures, however, we find that the rule is likely to result in a net loss of about ten lives annually. A question that the rule does not examine carefully is whether other regulatory alternatives could result in positive net benefits. We explore the option of targeting specific water systems and find that this strategy is unlikely to be very helpful. Instead of regulating more stringently now, the agency should wait until more information becomes available over the next few years. Such a strategy would have the advantage of avoiding large capital expenditures until the time that evidence suggests that risks posed by arsenic in drinking water are significant.