(Bloomberg Opinion) -- Andrew Wheeler, administrator of the Environmental Protection Agency, recently released an important memorandum that makes terrific sense. In principle, it should improve the EPA’s performance -- and receive bipartisan applause.
In practice? Well, that might be another story.
The background is provided by two Supreme Court decisions. In 2009, the court ruled that whenever a congressional enactment is ambiguous, the EPA has the authority to consider the costs of its regulations and to weigh them against the benefits.
In 2015, the court went much further and ruled that whenever the EPA has the authority to consider costs but refuses to do so, it is acting unreasonably and thus in violation of law. In short: The EPA is required to weigh benefits against costs.
Taken together, the two rulings reflect the success of the cost-benefit revolution – a movement embraced by both Democratic and Republican presidents and designed to ensure that agencies do more good than harm. It is essential to see that careful attention to costs and benefits can help spur, and often has spurred, aggressive environmental regulation, not least in the domain of air pollution and climate change.
Consistent with the court’s rulings, Wheeler’s memorandum directs EPA officials to be guided by four principles (to the extent permitted by law).
First, they have to evaluate and consider both benefits and costs in deciding what to do.
Second, they must be consistent in their interpretation of statutory terms. If Congress uses a word such as “reasonable” or “feasible,” different offices within the EPA should not diverge from one another.
Third, those offices must be transparent. They must clearly identify which factors were and were not considered in their cost-benefit analysis. They must also specify “how these factors were weighed to arrive at a particular regulatory outcome.”
Fourth, they must follow best practices in analyzing costs and benefits. That means they must adhere to “peer-reviewed standards.”
This might sound like technical stuff, but it’s real progress. Suppose that a regulation would cost $100 million per year and would deliver $500 million in benefits. If so, Wheeler’s memorandum seems to require EPA to go forward.
The Trump administration has rightly tried to rein in the costs of regulations. But in some cases, it has given too little attention to benefits. Wheeler’s memorandum corrects the balance, requiring the EPA to focus on both.
Transparency is exceedingly important. Assessment of costs and benefits can be opaque and complicated. The EPA should always make its conclusions and assumptions clear, preferably in an executive summary for all to see.
It’s also right to emphasize the importance of adherence to peer-reviewed standards, which increase the likelihood that the agency won’t be playing politics with matters of life and death.
In practice, of course, things might not be so rosy.
A warning sign comes from Wheeler’s own memorandum, which notes that in 2018 the agency asked for comments on its agenda to reassess and reform its regulations. Wheeler emphasizes that “a large cross-section of stakeholders identified instances when the agency underestimated costs” and “overestimated benefits.”
Those “stakeholders” are not exactly neutral observers following peer-reviewed standards. Many of them are interest groups, unenthusiastic about environmental protection.
Here’s a giveaway: Wheeler does not refer to comments pointing to instances where the agency overestimated costs or underestimated benefits.
Environmentalists are right to note that this happens a lot. Retrospective review of regulations finds important cases in which agencies greatly inflated costs.
Those skeptical of Wheeler’s order will also point to cases in which his own EPA has not shown sufficient interest in “peer-reviewed standards.”
In the context of climate change, its low number for the “social cost of carbon” (a critical figure for regulations that reduce greenhouse-gas emissions) seems to be driven by politics, not science or economics. With that low figure, the benefits of greenhouse-gas regulations shrink substantially.
A similar indifference to “peer-reviewed standards” can be found in the context of regulation of toxic air pollutants, where the EPA has proposed to disregard “co-benefits” (the benefits that come when, for example, mandatory reduction of mercury emissions leads to adoption of technologies that reduce other air pollutants as well). Disregarding co-benefits is bad economics, and it would threaten public health.
With these and other examples in mind, it is not crazy to fear that Wheeler’s memorandum is a wolf in sheep’s clothing – a directive that will encode not the best science and economics, but a general aversion to environmental protection and the longstanding views of polluters (“stakeholders”) about how to value costs and benefits.
Maybe so. But for now, let’s focus on Wheeler’s admirable text. If the EPA actually followed it, it would make the air and water a lot cleaner -- and save money in the process.
To contact the editor responsible for this story: Katy Roberts at kroberts29@bloomberg.net
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Cass R. Sunstein is a Bloomberg Opinion columnist. He is the author of “The Cost-Benefit Revolution” and a co-author of “Nudge: Improving Decisions About Health, Wealth and Happiness.”
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