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Policy: Environment & Energy

EPA must explain the costs of its rules better, federal watchdog says

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The Environmental Protection Agency needs to do a better job explaining and disclosing the data it uses to determine the costs of proposed regulations, particularly those regarding climate change, according to a Government Accountability Office report released Monday.

While the agency adhered to many of the guidelines outlined by the White House Office of Management and Budget when describing the economic effects of proposed rules and potential alternatives, the report said the information EPA used was "not always clear."

"As a result, EPA cannot ensure that its [regulatory impact analyses] adhere to OMB’s guidance to provide the public with a clear understanding of its decision making," the report said.

The report could have implications for the EPA proposal to reduce carbon emissions from power plants, which won't be finalized until June 2015. The report suggested that "OMB clarify the application of guidance for estimating the benefits of reducing greenhouse gas emissions," a topic of much debate between supporters and detractors of the proposed rule.

The EPA pushed back against some of the report's characterization, saying that some of the issues raised were not unique to the agency.

"The EPA stands behind the quality of [regulatory impact analyses] that we conduct and believes the GAO findings do not point to systematic deficiencies with respect to the accuracy of our analytical work," Joel Beauvais, assistant administrator for the EPA's office of policy, said in response. "That said, the agency supports GAO's emphasis on the importance of transparency and clarity and will continue to strive to enhance these qualities in our [regulatory impact analyses]."

Still, the report will likely be a launching pad for GOP attacks on the EPA, as Republicans have slammed the agency for inflating the benefits of its regulations and withholding data used to arrive at its conclusions.

“The independent study released today demonstrates that the Obama administration failed to provide thorough, transparent cost-benefit analyses for major environmental rules that cost American jobs,” said House Oversight and Government Reform Committee Chairman Darrell Issa, R-Calif., who requested the study in 2011. “Rather than using a fair and open rulemaking process, EPA pushed through regulations using sloppy analysis without sufficiently informing Congress or the public of the economic impact.”

The GAO reviewed seven analyses of recent rulemakings and determined that the EPA did not adequately monetize the costs and benefits of their effects, such as improving water quality and reducing hazardous air pollutants. It also questioned how the EPA arrived at the employment effects of its regulations, suggesting the agency relied on an old and potentially ill-suited study, saying it "was based on data that were more than 20 years old and may not have represented the regulated entities addressed in the [regulatory impact analyses]."

The EPA said its practices were "up-to-date and consistent with sound science and economics."

The report noted inconsistencies between OMB's guidance for calculating cost-benefit analyses and future benefits from the "social cost of carbon" — a measurement that monetizes the damages of incremental carbon emissions increases — used by the EPA "places greater weight on carbon dioxide emission reductions when calculating the overall net benefits of a rule."

Industry groups and conservatives are making a similar case about EPA rules, particularly the power plant proposal that aims to cut power-sector emissions 30 percent below 2005 levels by 2030. Using the social cost of carbon calculation, the EPA estimates up to $93 billion in benefits by 2030 at a cost of up to $8.8 billion.

But the EPA said OMB guidelines allow it to include the social cost of carbon. OMB also backed up the EPA, saying the calculation was unavoidable because waiting to reduce carbon emissions would compound costs over time as the effects of climate change become more deeply entrenched.

"In GAO’s examination of a very small subset of the rules which the EPA has issued in recent years, it found that the EPA generally adhered to OMB guidance for regulatory analysis. GAO acknowledges that the results of its review “cannot be generalized” to the EPA’s economic analysis overall because it looked at only a small sample," the EPA said in a statement.

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Zack Colman

Staff Writer
The Washington Examiner

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