EPA to Put Environmental Justice on the Cost-Benefit Ledger

The U.S. Environmental Protection Agency (EPA) needs to better account for environmental justice when analyzing the costs and benefits of proposed regulations, experts said yesterday at an EPA symposium. BNA news service (subscription) reports:

Participants in a panel discussion on economic analysis frameworks suggested that EPA consider new methods that allow regulators to measure the broadest health impacts and compare those health benefits with those resulting from policies that protect the most vulnerable populations. […]

While cost-benefit analyses have traditionally focused on how efficiently a rule can provide health benefits, they do not often consider how equitably those benefits are distributed, panel moderator Kelly Maguire, an economist at EPA's National Center for Environmental Economics, said. 

Under the leadership of administrator Lisa Jackson, EPA has shown a renewed spirit for environmental justice, which EPA defines as “the fair treatment and meaningful involvement of all people regardless of race, color, national origin, or income with respect to the development, implementation, and enforcement of environmental laws, regulations, and policies.” Too many environmental hazards disproportionately impact low-income and minority communities.

I would be wary of attempts to assign a dollar figure to environmental justice impacts, but in principle I do believe it is important to more fully gauge the distribution of environmental regulations’ benefits – and, more importantly, the risks of not regulating – across all peoples and places. (Costs are already well counted.)

The strategy of accounting for environmental justice seems consistent with the cost-benefit analysis philosophy of Cass Sunstein, administrator of the White House Office of Information and Regulatory Affairs (OIRA). OIRA sets economic analysis guidelines for all regulatory agencies, and reviews the individual cost-benefit analysis accompanying significant proposed and final rules.

In a speech at the American University Washington College of Law last month, Sunstein spoke of the Obama administration’s cost-benefit strategy:

“We’ve tried to engage in cost-benefit analysis…in a way that is at least as rigorous as ever before, I hope more rigorous than ever before, but also in a way that is humanized in the sense that it takes account of qualitative and well as quantitative considerations – monetized values aren’t all that matter; it takes account of distributional considerations – are people in distress being helped or hurt?; and it takes account emphatically of the interests of future generations.” 

Again, while I fret over the rigor of cost-benefit analysis, Sunstein’s comments sound good in principle. Unfortunately, OIRA has not revised its cost-benefit guidelines to reflect this shift in priorities (I’d prefer they scrap all together the current guidelines written by Bush-era administrator John Graham). It is unclear whether agencies are better accounting for those benefits of regulation that cannot be “monetized” – things like lives saved, hardships avoided, cleaner skies and waters, good health, and other types of social gains that can be achieved through environmental justice.

EPA expects to issue this year its own guidelines for the consideration of environmental justice in rulemaking, according to BNA. OIRA ought to follow suit, overhauling cost-benefit guidance for all agencies in a way that ensures it is a helpful tool for decisionmakers, not a deregulatory wedge. A new, “humanized” approach, to borrow Sunstein’s term, could be reflected in new cost-benefit guidelines and/or in the new regulatory executive order President Obama promised last year.

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