NCPA - National Center for Policy Analysis

The EPA's Misleading Cost-Benefit Calculations

September 12, 2014

When the Environmental Protection Agency issues new regulations, it sometimes provides an estimate of costs and benefits justifying the new regulatory measures, with benefits outweighing the costs. But according to Diane Katz, research fellow at the Heritage Foundation, the agency's calculations are not all that they appear.

A new report from the U.S. Chamber of Commerce analyzing federal agency rulemaking looked into how the EPA calculates costs and benefits, as the EPA issues some of the most expensive rules from the Executive Branch. After assessing 45 rules from 2000 to 2013 for which the agency had calculated benefits, the Chamber discovered a stunning fact: 97.2 percent of all benefits were from reductions in fine particulate matter (also known as PM2.5), not from reductions in the actual element targeted by the agency.

As Katz explains, the rules at issue were not rules targeting PM2.5, rather the regulations aimed at curbing emissions of mercury, lead, carbon dioxide, sulfur and the like. The fact that particulate matter happened to drop as a result of the EPA's regulatory proposals was merely incidental and unconnected to the target of the rulemaking.

Moreover, the Chamber report noted another fact: "While EPA claims significant co-benefits from reducing PM2.5, nationwide emissions of the pollutant are below the national standard set by EPA in 2013." As Katz explains, emissions of fine particulate matter are already well below the health standard already set by the EPA itself. This sneaky assertion of benefits is something that NCPA Senior Research Fellow Ann Norman noted in a recent report on "sue and settle" litigation, as it is how the EPA justified its Utility MACT regulation of coal plants.

The agency's methods of calculating benefits is especially significant when one looks at just how much influence the EPA has over the economy. According to the Chamber report, the EPA issued 17 of the 30 rules with more than $1 billion in annual costs that were issued from 2000 to 2013, for a total cost of more than $90 billion. For comparison, the other 13 rules totaled just $19 billion.

Source: Diane Katz, "EPA Fakes Regulatory Cost-Benefit Calculations," Daily Signal, September 5, 2014; William L. Kovacs, Joseph M. Johnson and Keith W. Holman, "Charting Federal Costs and Benefits," U.S. Chamber of Commerce, August 2014. 


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