Working Paper

The RFF Regulatory Performance Initiative: What Have We Learned?

Oct 29, 2015 | Richard D. Morgenstern

Summary

Retrospective analysis provides the opportunity to examine how rules actually performed, whether or not goals were fully achieved, and at what cost. Results from nine case studies suggest somewhat of a tendency to overestimate both costs and benefits.

Key Findings

  • The realized cost savings from emissions trading may fall short of the idealized textbook case of a least-cost outcome.
  • Emissions trading may lead to a spatial rearrangement of emissions that reduces overall benefits compared with a uniform performance standard with the same aggregate emissions.
  • Highly prescriptive congressional mandates warrant the same quality of analysis as other major regulations.
  • Up-to-date baseline information is essential for sound regulation.
  • Regulations based on new, noncommercial technologies require particularly rigorous assessments.

Abstract

Retrospective analysis of federal environmental regulation aims to rigorously document the extent to which key policy objectives have been attained and at what cost. This paper reports the results of nine new case studies involving a total of 34 cost or benefit/effectiveness comparisons from a highly diverse set of environmentally oriented rules. Despite limitations of the case study approach and the non-representative nature of the sample, the results suggest somewhat of a tendency to overestimate both costs and benefits/effectiveness of regulation. Recommendations for revisions to future policy and analysis include: estimation of cost savings and distributional impacts from emissions trading, approaches to new technology development, use of up-to-date baseline information, analysis of prescriptive congressional mandates, federally mandated programs implemented by states, heterogeneity of costs and benefits, and treatment of uncertainty in energy prices and other macro factors. Recommendations also consider enhancements to the federal role in future retrospective analyses.