WASHINGTON, DC—A new working paper from Resources for the Future (RFF) and the National Bureau of Economic Research (NBER) finds that a substantial amount of Clean Air Act benefits are indirect. The study authors assert that, far from excluding them, regulators should routinely consider these co-benefits when analyzing the effectiveness of potential Clean Air Act regulations.
When a policy has positive effects beyond its stated goal, these effects are referred to as "co-benefits" or ancillary benefits of the policy. For example, a regulation intended to reduce carbon dioxide emissions might have the co-benefits of reducing local air pollutants, such as nitrogen oxides and sulfur dioxide. These co-benefits can improve human health, energy security, and water quality in quantifiable ways.
EPA has accounted for co-benefits in their assessments of the benefits and costs of rules under Republican and Democratic presidents for four decades. Since 2017, however, the Trump administration has questioned the consideration of co-benefits in a variety of Clean Air Act rules.
When co-benefits are accounted for, virtually every Clean Air Act regulation between 1997 and 2019 is estimated to deliver monetized benefits in excess of monetized costs; therefore, the removal of any of these rules through deregulatory actions would impose social costs in excess of the benefits. To assess a policy’s economic efficiency, the study authors assert that co-benefits should be included in benefit-cost analyses.
Among the study’s top findings:
- The inclusion of co-benefits has been critical in the majority of EPA analyses to determine whether a policy promotes economic efficiency.
- Co-benefits make up a significant share of the monetized benefits in EPA impact analyses from 1997–2019.
- Among the categories of co-benefits, those associated with reductions in health effects due to fine particulate matter are the most significant.
- Consideration of co-benefits should account for the prospect of double-counting benefits across regulations.
- Although targeting co-benefits themselves is possible in theory, it is not necessarily more efficient.
The paper, “Co-Benefits and Regulatory Impact Analysis: Theory and Evidence from Federal Air Quality Regulations,” was written by Joseph Aldy (Harvard University & NBER), Matthew Kotchen (Yale University & NBER), Mary Evans (Claremont McKenna College), Meredith Fowlie (University of California, Berkeley & NBER) Arik Levinson (Georgetown University & NBER), and Karen Palmer (Resources for the Future). The paper was prepared for inclusion in the May 2020 NBER Environmental and Energy Policy and Economy conference.
Resources for the Future (RFF) is an independent, nonprofit research institution in Washington, DC. Its mission is to improve environmental, energy, and natural resource decisions through impartial economic research and policy engagement. RFF is committed to being the most widely trusted source of research insights and policy solutions leading to a healthy environment and a thriving economy.
Unless otherwise stated, the views expressed here are those of the individual authors and may differ from those of other RFF experts, its officers, or its directors. RFF does not take positions on specific legislative proposals.