Limited in their usefulness—that is the message one walks away with from the Government Accountability Office’s (GAO) evaluation of the reports from the Environmental Protection Agency (EPA) on recent environmental regulations.
The EPA is required to produce the reports to help the public, policymakers, and the regulated community understand the economic impact of a regulation. The EPA issued 21 major rules during President Obama’s first term, costing $37.8 billion annually.
GAO reviewed the EPA’s economic analyses—called Regulatory Impact Analyses (RIAs)—of seven major rules finalized between 2009 and 2011. While GAO was quick to say its findings couldn’t be generalized, what it found was not assuring:
- The EPA “did not explicitly describe the problem the rule sought to address.… [W]ithout a clear description of the problem the regulation is intended to address in the RIA, the context and rationale for the analysis is unclear” (p. 11).
- “When EPA does not present summary-level information in RIAs clearly, accurately, or completely…the executive summaries do not provide decision makers and the public with a simple and understandable summary” (p. 12).
- “EPA has not fulfilled its responsibility to provide the pubic with a clear explanation of the economic information supporting its decision-making process” (p. 13).
- “EPA did not…provide a transparent pathway for understanding the rationale for its selected regulatory approach” (p. 16).
- “EPA’s RIAs may be limited in their usefulness for helping decision makers and the public understand these important effects” (ES-1 and repeated in some variation 10 more times on pages 16, 19, 20, 22, 28, 29, and 32).
GAO analyzed the quality of the EPA’s economic models for determining a rule’s economic costs and benefits. Apparently, the EPA used a model that was not peer reviewed and was found after the fact to have flawed data and assumptions (pp. 27–28, referring to the Boiler MACT rule costing $1.4 billion annually and New Source Performance Standards for Commercial and Industrial Solid Waste Incineration Units costing $232 million annually).
Further, in most of the rules GAO reviewed, the EPA assessed employment impacts using a study built on employment data from 1979 to 1991 and of which even the lead author of the study has said should not be used (pp. 21 and 32). According to GAO: “EPA generally assumed the economy was at full employment and, accordingly, that the regulations would displace few workers over the long term, and any individuals laid off as a result of the regulations would quickly find new jobs at comparable wages.” The economy has changed a bit since then.
The GAO report again documents the persistent problems at the agency. GAO’s findings are especially important as many environmental regulations chase smaller and smaller benefits at significantly greater cost to Americans. Congress should not presume that the EPA will make the necessary changes all by itself. Instead, lawmakers should proactively resume their constitutional role to legislate.