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Pollution rules outweigh costs: study

The White House office in charge of reviewing federal regulations has reported that the benefits of some major environmental rules appear to exceed the costs by several times and that the net benefits may be even larger than previously acknowledged.

In its annual review of the costs and benefits of regulations, the Office of Management and Budget examined a sampling of major rules and found that the total benefits -- to the extent they can be measured -- were at least triple the costs.

The conclusion is not surprising. Most agencies calculate the anticipated costs and benefits of rules before they are issued. While the estimates are often challenged, the agencies seldom issue major rules that are thought to cost more than their benefits would justify.

The budget office itself often challenges agency estimates of costs and benefits in the preliminary rule making process. But its annual report simply adds up the final estimates produced by the agencies, and therefore is little more than an aggregate balance sheet. The report was required by Congress several years ago, when lawmakers were trying to rein in what some believed to be unduly burdensome federal rules.

In this report, which was described on Saturday in The Washington Post, the Environmental Protection Agency was found to have produced significantly greater net benefits than last year's report acknowledged. But the change was mainly due to accounting technicalities, not to any fundamental reassessment of the value of environmental controls.

In one change, the budget office expanded its review by looking back 10 years. This meant the latest report included the effects of the successful efforts of the 1990s to rein in the pollution that causes acid rain, a program that ended up costing much less than originally estimated and whose net benefits are estimated at US$80 billion a year.

In another change, the budget office corrected an error that it said had made recent rules controlling smog and soot in the air appear to cost US$20 billion a year too much. Costs and benefits of these rules have been disputed for many years, but a consensus has emerged recently that the benefits in lives saved and illness avoided are substantial.

After prolonged challenge, the rules, issued by the Clinton administration, were upheld by the Supreme Court and are now beginning to take effect.

Just four clean-air rules, the report said, are producing benefits of US$100 billion a year or more at a cost less than one-tenth of that amount.

The 233-page report counted the costs and benefits of only a handful of the 4,135 final rules published in the Federal Register during the fiscal year that ended on Sept. 30 last year. The principal focus this year was on three rules issued during that year by the Energy Department, the Transportation Department and the EPA. They imposed estimated annual costs of US$1.6 billion to US$2 billion, but produced estimated annual benefits of US$2.4 billion to US$6.5 billion.

Looking back at 107 major regulations issued from 1992 to 2002, the budget office calculated that estimated annual costs were US$36.6 billion to US$42.8 billion, and annual benefits were US$146.8 billion to US$230.9 billion. For every dollar spent complying with these regulations, in other words, the public got roughly at least three to eight dollars of benefits.
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