executive orders. The most important is Executive Order 12866, which requires benefit—cost analyses of proposed and final regulations that qualify as “significant” regulatory actions. The Safe Drinking Water Act, the Toxic Substances Control Act, and the Federal Insecticide, Fungicide, and Rodenticide Act require EPA to weigh benefits and costs in regulatory actions. Some environmental legislation requires benefit and cost evaluations outside the regulatory process. The leading example is Section 812 of the Clean Air Act Amendments of 1990, which requires EPA to develop periodic reports to Congress that estimate the economic benefits and costs of provisions of the act; program offices are responsible for regulatory impact assessments in their fields. EPA’s National Center for Environmental Economics offers a centralized source of technical expertise for economic assessments in the agency.
Evaluations of EPA economic assessments indicate that they can be useful and influential. For example, an early evaluation of economic assessments (EPA 1987) found that “economic analyses improve environmental regulation. EPA’s benefit—cost analyses have resulted in several cases of increased net societal benefits of environmental regulations.” The report also found that “benefit—cost analysis often provides the basis of stricter environmental regulations.…For example, the most dramatic increase in net benefits ($6.7 billion) from EPA’s [regulatory impact assessments] resulted from a recommendation for much stricter standards—to eliminate lead in motor fuels.” The report also noted that, “alternatively, benefit—cost analysis may reveal regulatory alternatives that achieve the desired degree of environmental benefits at a lower cost.”
There are many uncertain and potentially controversial dimensions associated with the use of benefit—cost analysis as conducted for regulatory impact assessments. In principle, such analyses identify, quantify, and monetize the multiple outcomes of an environmental decision or policy into a single indicator of economic efficiency. If multiple alternatives are considered in the analyses, benefit-cost analyses can support a solutions orientation by incorporating economics factors into the risk-based decision-making paradigm described earlier. Apart from procedural details, there is debate about the validity of economic concepts of value for environmental and some other goods (for example, the value of life), the capacity of economics to measure some types of values, the discounting of future costs and benefits, the treatment of uncertainty and irreversibility, and the relevance of economic efficiency, as one among many societal objectives, to environmental decisions (EPA 1987; Ackerman and Heinzerling 2004; Posner 2004; Sunstein 2005). Despite the controversies, the importance of benefit—cost analysis for regulatory impact assessments is recognized almost universally. Harrington et al. (2009) have produced a useful set of recommendations to improve the technical quality, relevance to decision-making, and transparency of regulatory impact assessments and their treatment of new scientific information and balance of efficiency and distributional concerns. If implemented, a number of those recommendations would help integrate benefit—cost analysis with other tools to support systems thinking, including a focus on comparing multiple policy alternatives, making decisions given multi-