Major RFF Report On Reforming Regulatory Impact Analysis

Mar 31: A major and timely, 241-page report entitled, Reforming Regulatory Impact Analysis, has been put forward by the environmental think tank, Resources For the Future (RFF). The authors admit, "The federal rulemaking process will never be the subject of a great novel;" however, they say, "While the ponderous analyses and complicated calculations involved in federal rulemaking spark great passion and controversy among a hardy band of scholars and analysts, most citizens have little reason to think about the regulatory processes that affect much of modern commerce." In fact, the rulemaking process, incorporating regulatory impact analysis, is at the heart of most environmental issues, controversies and court cases.

Yesterday (April 1, 2009), the U.S. Supreme Court, in a split decision, upheld U.S. EPA use of controversial cost-benefit analyses in the case of Entergy Corp. v. Riverkeeper, Inc. [See related article above & WIMS 4/2/09]. Additionally, the Office of Management and Budget (OMB) has just completed a public comment period seeking comments on how to improve the process and principles governing Federal regulatory review, prompted by Presidential Obama's Memorandum on "Regulatory Review" [See WIMS 2/4/09 & 3/19/09] (See link to comments received below).

A simple review of the chapter titles reveals the timeliness of the report: Chapter 1. Controversies Surrounding Regulatory Impact Analysis; Chapter 2. The Clean Air Interstate Rule; Chapter 3. The Technocratic and Democratic Functions of the CAIR Regulatory Analysis; Chapter 4. The CAIR RIA: Advocacy Dressed Up as Policy Analysis; Chapter 5. The Clean Air Mercury Rule; Chapter 6. The Mathematics of Mercury; Chapter 7. The CAMR: An Economist’s Perspective; Chapter 8. The Cooling Water Intake Structures Rule; Chapter 9. Improving the CWIS Rule Regulatory Analysis: What Does an Economist Want?; Chapter 10. Fish Tales; and Chapter 11. What We Learned.

The authors explain the diverse and controversial differences that divide various interests on the issues of regulatory impact analysis saying, "Two quite divergent groups of scholars find these matters important enough to fight about. One group believes that economic analyses are critical to sound regulatory decisionmaking. The other group questions both the premise that economic considerations should play a prominent role and the particular methods used to develop quantitative estimates of benefits and, to a lesser degree, of costs. Although federal regulators have relied on cost–benefit analyses of regulatory impact analyses (RIAs) for close to four decades, the practice has remained controversial from its inception in the 1970s.

"The differences between the proponents and opponents of economic analysis are many and profound, but perhaps the most important are the contrasting attitudes about the value of environmental improvement. In one camp are those, mostly economists, who believe that environmental outcomes can, in principle, be valued just as market goods and services can: by finding what households are willing to pay to improve the quantity, quality, or their own access to the good in question. In the other camp are those who believe that simply asking the willingness-to pay question lessens the environmental values at stake, and that the answers tend to leave important considerations entirely out of the decisionmaking calculus.

"Over the continued and often passionate objections of the cost–benefit opponents, the RIA requirement has become firmly embedded in rulemaking procedures. For their part, the cost-benefit advocates, within both government and academia, have been content to expand the methods and improve the technical content of the analyses, largely ignoring the opponents. Not surprisingly, much of the debate has been expressed in largely philosophical and rhetorical terms -- from both sides. Largely absent has been a practical nuts and bolts approach to the problem, asking quite basic questions: What are current practices, and how can they be improved?"

The authors develop a series of specific reforms which they say they believe would enhance the overall quality and usefulness of the substantial studies that are conducted as part of the regulatory development process. They develop a dozen recommendations addressing the content of the RIAs as well as the process by which they are prepared. The recommendations cover five overarching topics including: (1) technical quality of the analyses; (2) relevance to the agency decisionmaking process; (3) transparency of the analyses; (4) treatment of new scientific findings; and (5) balance in both the analyses and the associated processes, including the treatment of distributional consequences.

Finally, the authors conclude, ". . .based on our review of the RIAs examined in this report, as well as other evidence, it is our judgment that recent RIAs have fallen well short of the mark in generating information and analyses that are truly useful to decisionmakers. We appear to be at a crossroads: either we fix the current system or we accept it without major reform. The recommendations developed here represent our judgment on an agenda for the former effort.We hope to spur further debate on these issues to stimulate constructive change."

RFF is a nonprofit and nonpartisan organization that conducts independent research -- rooted primarily in economics and other social sciences -- on environmental, energy, natural resource and public health issues. It prides itself in improving environmental and natural resource policymaking worldwide through objective social science research of the highest caliber. Headquartered in Washington, DC, the organization was founded in 1952, and became the first think tank devoted exclusively to natural resource and environmental issues. RFF neither lobbies nor takes positions on specific legislative or regulatory proposals, although individual researchers, speaking for themselves and not for RFF, do formulate specific policy recommendations based on the findings in their work.

Access the complete report (click here). Access the extensive list and comments received on OMB's regulatory review notice(click here). Access the original February 26, OMB FR announcement (click here). Access the March 17 OMB FR extension announcement (click here). Access the RFF website (click here). [*All]