Magazine article Regulation

Beyond the Low-Hanging Fruit: How Should Policymakers Judge Environmental Regulations When Marginal Costs Are Rising and Marginal Benefits Are Falling?

Magazine article Regulation

Beyond the Low-Hanging Fruit: How Should Policymakers Judge Environmental Regulations When Marginal Costs Are Rising and Marginal Benefits Are Falling?

Article excerpt

How clean should our air and water be? One would think that the federal Clean Air Act and Clean Water Act would answer that question. But they do not. Instead they instruct the administrator of the U.S. Environmental Protection Agency to issue ambient air and water quality standards for substances that would reasonably be expected to endanger public health or welfare. The standards are to be set to protect the public health with an adequate margin of safety, and so the EPA reviews the scientific literature for any evidence of harms to any subgroup of the population and then establishes standards at lower levels. Over time, the results of those requirements have been increasingly stringent standards.

Early pollution control efforts were often able to take advantage of simple, relatively inexpensive technologies and focused mostly on obvious problems (e.g., undrinkable river water). Those efforts usually resulted in obvious benefits at modest cost. That "low-hanging fruit" was often followed by further regulations requiring more sophisticated technologies or systems that improved environmental quality further, but at higher cost. The results of those efforts were the nation's air and water becoming markedly cleaner than they were 100 years ago.

But the tightening of regulations has continued. Recent updates of pollution standards have often been very costly (and in some cases impossible) to achieve, and the incremental improvements in health have often been vanishingly small if not zero.

We believe that environmental laws should be amended to eliminate low-benefit, high-cost policies. In plain language, we believe that environmental regulation should be subject to a budget constraint. We do not spend unlimited amounts of money to reduce auto fatalities, nor should we do so to improve environmental quality.

BENEFITS AND COSTS

The rationale for ambient air and water quality standards is reduced morbidity and mortality. The evidence for the ill effects of exposure to pollutants comes from epidemiological studies or experiments. Because current levels of pollutants are low relative to the past and relative to background levels that occur from natural sources or pollution from outside the United States, studies that can reliably distinguish small health effects from no effects would require very large sample sizes that are impossibly expensive to administer. So the evidence used to set standards comes from exposure evidence at much higher doses, which is then extrapolated statistically to predict what occurs at the lower exposures that are actually experienced by people in the environment.

Many argue that such low-dose extrapolations mischaracterize the current level of harm from the low levels of radiation, mercury, airborne particulates, or ozone experienced in the United States. As a result, these extrapolations overestimate the health benefits of more stringent regulation. In our view the EPA has made health benefit claims that seem overly generous. How can large reductions in mortality be attributed to new rules on ozone and fine particulate matter when direct links of these pollutants to health (e.g., asthma) are tenuous at best? (See "The EPA's Implausible Return on its Fine Particulate Standard," Spring 2013, and "OMB's Reported Benefits of Regulation: Too Good to Be True?" Summer 2013).

Costs / In order to maximize the net benefits of environmental regulation, one must know not only the benefits but also the costs. To economists the most dubious provisions in environmental law are those that prohibit the consideration of costs. The standards set for particulates (soot), sulfur dioxide, nitrogen dioxide, carbon monoxide, ozone, and lead under the National Ambient Air Quality Standards section of the Clean Air Act cannot take cost into account, by law.

Other sections of the Clean Air Act regulating other pollutants do not explicitly prohibit the consideration of costs. …

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