Assessing Regulatory Costs and Benefits

Efforts to reduce environmental hazards almost inevitably involve trading off expenditures on pollution abatement efforts with expenditures on other desired goods and services. As a result, many governments now require that agencies formally assess the impacts of their major environmental regulations, to determine whether the benefits of the resulting actions are likely to be commensurate with the costs. For example, when selecting among air pollution standards that vary in stringency, agencies may estimate the value of the associated mortality and morbidity risk reductions as well as the effects on the natural and built environment. These benefits can then be compared to the government and private industry expenditures required to comply with each set of standards. Such analyses may also present information on impacts that cannot be quantified or monetized and explore the uncertainty in the results. In addition, they can provide information on how the impacts are distributed across population subgroups, so that decision-makers can weigh the equity implications of the options as well as their economic efficiency. These analyses are one of many inputs into regulatory decisions, which must comply with legal requirements and often include substantial public involvement.