Co-Benefits and Regulatory Impact Analysis: Theory and Evidence from Federal Air Quality Regulations

Indirect co-benefits play a significant role in determining the effectiveness of major Clean Air Act rules.



Aug. 3, 2020


Joseph E. Aldy, Matthew Kotchen, Mary Evans, Meredith Fowlie, Arik Levinson, and Karen Palmer


Working Paper

Reading time

1 minute


This paper considers the treatment of co-benefits in benefit-cost analysis of federal air quality regulations. Using a comprehensive dataset on all economically significant Clean Air Act rules issued by the EPA over the period 1997-2019, we show that (1) co-benefits make up a significant share of the monetized benefits; (2) among the categories of co-benefits, those associated with reductions in fine PM are the most significant; and (3) co-benefits have been pivotal to the quantified net benefit calculation in nearly half of cases. Motivated by these trends, we develop a simple conceptual framework that illustrates a critical point: co-benefits are simply a semantic category of benefits that should be included in benefit-cost analyses. We also address common concerns about whether the inclusion of co-benefits is problematic because of alternative regulatory approaches that may be more cost-effective and the possibility for double counting.

Key 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.


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