New Study: The Economic Benefits of EPA Regulations Massively Outweigh The Costs

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"New Study: The Economic Benefits of EPA Regulations Massively Outweigh The Costs"

EPA_Building_croppedFrom the 2012 Presidential campaign onwards, Republicans have railed against the regulations of the Environmental Protection Agency (EPA) as “job-killing,” as a threat to freedom, and as a drag on economic growth. The claim has never comported with evidence, but like a zombie it just refuses to die.

The latest effort to kill it comes via a new study from the White House’s Office of Management and Budget, which found that the benefits EPA regulations bring to the economy far outweigh the costs.

The way this works is pretty straight-forward. Environmental regulations do impose compliance costs on businesses, and can raise prices, which hurt economic growth. But they also create jobs by requiring pollution clean-up and prevention efforts. And perhaps even more importantly, they save the economy billions by avoiding pollution’s deleterious health effects. Particles from smoke stacks, for example, are implicated in respiratory diseases, heart attacks, infections and a host of other ailments, all of which require billions in health care costs per year to treat. Preventing those particles from going into the air means healthier and more productive citizens, who can go spend that money on something other than making themselves well again. Another example is carbon emissions, which will impose costs on the economy in the form of future disruption to food supplies, destruction from extreme weather, and other upheavals if they’re not curbed. Researchers generally put those costs at around $20 to $25 per ton of carbon, but estimates vary widely. Other regulations are actually aimed at reducing red tape, improving communication between agencies, and facilitating the flow of information.

The OMB study looked at a range of regulations across the economy, and found their benefits outweighed their costs across the board. The blue and red bars below represent the range of estimates for what the respective costs and benefits of regulations were. In very few instances was even the very upper limit of cost estimates equal to the very lower limit of benefit estimates.

Source: Office of Management and Budget

But no where was the effect greater than with EPA regulations themselves. Over the last decade, they imposed as much as $45 billion in costs on the economy, but they also drove as much as $640 billion in benefits:

The OMB found that a decade’s worth of major federal rules had produced annual benefits to the U.S. economy of between $193 billion and $800 billion and impose aggregate costs of $57 billion to $84 billion. “These ranges are reported in 2001 dollars and reflect the uncertain benefits and costs of each rule,” the report noted.

Rules from the EPA added significantly to both sides of the ledger. “It should be clear that the rules with the highest benefits and the highest costs, by far, come from the Environmental Protection Agency and in particular its Office of Air and Radiation,” the OMB study said. EPA regulations accounted for between 58% and 80% of the benefits the study found as well as 44% to 54% of the costs. Air regulations accounted for nearly 99% of EPA rule benefits, according to the report.

Getting into the numbers, the single biggest effect from any of the EPA’s rules came from the recently enacted Mercury and Air Toxics Standards (MATS), which Republicans have vociferously opposed. MATS also brought the biggest effect of any of the 14 rules issued in fiscal year 2012 — resulting in an estimated cost of $8.1 billion annually, but also offsetting benefits of $28 to $77 billion annually. The runner-up, which along with MATS made up the vast majority of 2012′s costs and benefits, were the vehicle fuel efficiency standards jointly issued by the EPA and Transportation Department.

Since this is a study by the executive branch that endorses policies preferred by the executive branch, it’s worth pointing out that similar findings have been regularly dug up by other researchers. In 2011, an analysis by the Economic Policy Institute (EPI) found that job loss due to increased energy prices from MATS would be swamped by new jobs in pollution abatement and control. It also found that for each major EPA rule finalized by the Obama Administration at the time, annual benefits exceeded costs by $10 to $95 billion a piece. EPI even returned to the question in 2012, and found net job gains from MATS would reach 117,000 to 135,000 in 2015. The San Francisco Federal Reserve even ran an analysis of regulations more broadly, and found that in states where businesses expressed more concern about regulations over time, employment actually went up slightly.

Surveys of small businesses routinely fail to find compelling evidence that firms view taxes and regulations as a major impediment to hiring, an EPA-mandated clean-up of the Chesapeake BAY is anticipated to create 35 times as many jobs as the proposed construction of the Keystone XL pipeline, and jobs in the coal industry actually increased by 10 percent after the EPA cracked down on mountaintop-removal mining in 2009.

Update

This post has been edited for clarity.

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21 Responses to New Study: The Economic Benefits of EPA Regulations Massively Outweigh The Costs

  1. fj says:

    Great news.

    Is this the beginning of the end of voodoo economics?

    • Barry says:

      Jeff, could you normalize things a bit more? For example as a Michigander, I have no idea of what the normal fire season is, or what it means when something happens in May, etc.

      • Barry says:

        Sorry, I was juggling windows – this was for the California wildfire article.

    • Barry says:

      Of course not – like zombies, it never dies.

    • Mulga Mumblebrain says:

      No-merely the end of the beginning.

    • Mulga Mumblebrain says:

      Not while the zombies still run the planet.

  2. Joan Savage says:

    It looks like Climate Progress relied on the SNL summary. SNL drew material from other sources than the OMB report, so the SNL numbers are a composite.

    For example, “$45 billion in costs” looks like someone added the $8 billion in MAPS enforcement to the high end of the OMBs “$30.4 to $36.5″ range for EPA costs. However, the benefits were not similarly modified as the OMB’s “$112.0 to $637.6″ billion in EPA benefits doesn’t reflect the added benefit of MAPS enforcement.

    Page 11 of the OMB study has the numbers I’m talking about, and is available from the White House.

    http://www.whitehouse.gov/sites/default/files/omb/inforeg/2013_cb/draft_2013_cost_benefit_report.pdf

    • Joan Savage says:

      I’m finding this even more confused in that the OMB report actually had included “Mercury and Air Toxics Standards (MATS) rule” in the $30.4 to $36.5 billion range of EPA costs , though OMB excluded the benefit of EPA’s 2005 “Clean Air Mercury Rule.”

      So what is source of the $8+ billion difference between OMB’s $30.4 to $36.5 billion range and the SNL/CP number of $45 billion?

      • Chris Winter says:

        Help me out here, please. I know CBO, EPA, EPI, MATS, and OMB. But SNL stumps me. I know it doesn’t mean “Saturday Night Live” here. Would it refer to SNL Financial?

        (One time I suggested Joe should make up a glossary for these acronyms. It didn’t happen. The impetus on that occasion was SLR. From context, this obviously meant Sea Level Rise, but my brain persists in tagging it as “single-lens reflex.”)

        • Joan Savage says:

          Chris,
          Jeff Spross’s earlier edition had linked “new study” to an SNL Financial piece by Corbin Hiar, reviewing the OMB report.

    • Joan Savage says:

      The OMB report evaluates monetized benefits, such as health care cost savings.

      It does not venture into what some call market externalities, a topic of ecological economists. The EPA and other federal agencies don’t get a dollar value credit for protecting natural resources that provide services, like water supply, water storage and water purification. If these natural resources were assessed a replacement cost value it would be mind-boggling.

      The value of the EPA, National Parks Service, US Fish & Wildlife and other agencies that protect natural resources are chronically underestimated.

  3. BillD says:

    It looks to me like our friends in the GOP would prefer adding a cost of 100 billion to citizens, government and nonpolluting groups and industries if it can avoid a cost of 10 billion to energy companies and other companies causing pollution. From a moral point of view, I think that the trade-off should be reversed. For example, health costs of citizens should be given greater weight than an equivalent profit to companies that are causing pollution and destruction

    • Mulga Mumblebrain says:

      But Bill, that’s the Rightwing mind at work. Any loss for the Rightist is anathema, even if it is gained at the expense of others. Human empathy being totally absent. And any gain for ‘others’ (aka in the Rightwing mind as ‘the enemy’)no matter how great, is irrelevant at best or another affront, the Rightwing pathopsychology being repulsed by the happiness or betterment of ‘other people’. So, if you say that the EPA gives a hundred billion to people that the Rightwinger doesn’t actually feel any human fellowship with, you will only incite him to more frenzied opposition and hatred.

  4. SecularAnimist says:

    More evidence that the policies needed to rapidly reduce GHG emissions will be an economic boon — and will not, as the fear-mongering defeatists proclaim, necessitate “draconian sacrifices”.

    • catman306 says:

      But SecuarAnimist, hiring people and contractors, thus cutting into profits, ARE ‘draconian sacrifices’ for our Business As Usual leaders and their invest portfolios.
      But you already know that.

    • Mulga Mumblebrain says:

      It all depends on whom will benefit from the ‘economic boon’. Those who will not will resist it to the death-of us all.

  5. TRL says:

    SO let me get this strait makeing sure that corperations DONT pollute our water air and land is a good thing?? and that corperations that follow the health and safety rules about our food and products help the economy instead of damageing it?? who wouldda thought well not republicans theres to much money in not thinking about the good of us

  6. Jackie says:

    GOP Rep. Pat Toomey said it loud and clear the Republicans/Tea Party will vote on on anything Obama wants and will never work on his agenda. Speaker Boehner assured this by his 2013 posted schedule of 124 days of work and 241 days vacation/recess. With few work days nothing will be done. Just think who wouldn’t want a job that gives full time pay with perks/benefits but only work 4 months. Once voter give the Senate majority GOP the schedule will be 30 days work and 11 months vacation/recess with the American people approving.

  7. DallasNE says:

    Two Words: West, Texas

    I’m not sure if it was the December 2006 lame duck session or not but Congress moved regulation of chemical plants from the EPA to Homeland Security. Since DHS was not even made aware that the West, TX plant even existed this move by Congress effectively deregulated a large segment of the chemical industry. That made it only a matter of time before something like the deadly explosion that hit the West, TX fertilizer plant would occur. That is criminal.