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

From 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.

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.