Retrospective cost analyses of EPA regulations: a case study approach

Abstract

Abstract:EPA has conducted several ex post assessments of regulatory compliance costs, with the ultimate goal of identifying ways to improve ex ante cost estimation. The work to date has culminated in four case studies that examine five regulations using a common conceptual framework. The standardized framework provides a systematic way to investigate key drivers of compliance costs to see if judgments can be made about why and how ex ante and ex post estimates of costs differ. In addition to describing this conceptual framework, we describe the criteria used to select the rules to be analyzed, summarize the main hypotheses for why ex ante and ex post cost estimates may differ and discuss some of the challenges encountered in conducting these ex post analyses.

Retrospective evaluation of costs associated with methyl bromide critical use exemptions for open field strawberries in California

“…There are several key components of costs that can be potentially examined ex post [see Kopits et al (2014) for a discussion of the conceptual framework for costs]: what types and how many entities comply with the regulation; what technologies or strategies are used to comply; the initial and ongoing costs of compliance; any indirect costs such as quality tradeoffs or missed market windows; and other opportunity costs in related markets. For this study we largely rely on publically available data.…”

Uncertainty in the Cost-Effectiveness of Federal Air Quality Regulations

“…It is not uncommon for retrospective evaluations to find unit costs to be less than 50% to more than double the estimates in RIAs. Although the retrospective evaluation literature is spotty, there does not seem to be a directional bias in unit cost estimates (Harrington et al, 2000;Kopits et al, 2014). However, transactions costs will impose a downward bias to unit cost estimates in the RIAs, and are not measured in retrospective evaluations.…”

“…This approach has the important implication that uncertainties about costs and lives saved can be treated independently, and channels the uncertainty analysis into particular areas. On the cost side, the analysis has to focus on uncertainties around the compliance cost per emission or exposure risk reduced, or "unit cost" as described in the literature on retrospective evaluation (Harrington, Morgenstern & Nelson, 2000;Kopits et al, 2014). In terms of outcomes, the assumption that exposures can be taken as given implies that uncertainty about the mortality risks per unit of exposure reduction is the relevant issue.…”

“…Minor administrative reconsiderations and proposed changes have continued beyond the time frame illustrated inTable 1, and additional legal actions are likely. 16 Given this uncertainty about costs, NAAQS are also excluded from the EPA's ongoing retrospective studies of major rules (seeKopits et al, 2014). 17 Unless otherwise indicated, the Federal Register notices indicated in Appendix A and the RIAs listed in Appendix B provide the information and data for this section.…”

A retrospective assessment of the costs of EPA’s 1998 Locomotive Emission Standards

“…This is not an evaluation of how well EPA conducted the ex ante analysis at the time of the rulemaking. As Kopits et al (2014) discuss, even the most credible ex ante analysis of compliance costs will vary from actual costs for a large number of reasons. For instance, it is possible that market conditions, energy prices, or available technology change in unanticipated ways.…”