Trump's "2 for 1" EO: Can You Say "Arbitrary and Capricious"?

Posted on June 6, 2017 by Seth Jaffe

Last month, Mark Walker posted about Executive Order 13771.  Mark’s post was generally favorable, noting that a number of other countries have implemented some version of what is known as a “regulatory budget.”  This post provides something of a counterpoint to Mark’s. 

Put simply, I think that the Order is indefensible.  It’s not about regulatory reform.  It’s a transparent attempt to halt environmental regulation in its tracks, without regard to the benefit those regulations provide.

This week, on behalf of our client, the Union of Concerned Scientists, Foley Hoag filed an amicus brief in support of the plaintiffs in the case challenging the EO.  One paragraph from the brief pretty much summarizes the argument:

It is important to note, as Executive Order 13771 acknowledges, that agencies are already required, where not prohibited by law, to ensure that the benefits of regulations exceed their costs. Thus, the only impact of the Executive Order is to prohibit agencies from promulgating regulations whose benefits exceed their costs, unless they eliminate two other regulations whose benefits also exceed their costs. This is the definition of unreasoned decisionmaking. It is also a thumb in the eye of Congress, which enacted public health and environmental statutes in order to benefit the public.

It is a bitter irony that the government is defending the EO in part on the basis that it is just another in a long line of regulatory reform EOs, even though the EO is in fact a repudiation of those prior orders, not an extension of them.  This order is not about cost-benefit analysis; it is about cost-only analysis.  By definition this approach ignores the public benefits that the underlying statutes are intended to provide.  Thus, the “savings clause” cannot save the EO, because there is nothing left to save.

OMB Seeks Public Comment on Social Cost of Carbon

Posted on December 5, 2013 by Carol Dinkins

For the first time, the Office of Management and Budget ("OMB") is soliciting public comment on the Social Cost of Carbon ("SCC").  The SCC is a series of published values that represent the monetary impacts of marginal reductions in carbon emissions reductions, which are to be used by federal agencies when conducting cost-benefit analysis for rulemaking activities. 

First published in 2010, the SCC is prepared by an interagency working group and is based upon three different integrated assessment models that project the economic impacts of climate change.  The 2010 document setting for the SCC called for periodic review and update of the SCC as the science and economic understanding of climate change improves over time. The SCC values were updated in November of 2013 and have been increased to reflect improvements in the underlying integrated assessment models, including incorporation of the projected costs of sea level rise.  Although OMB guidance directs that regulatory cost-benefit analyses should normally focus upon domestic costs and benefits, the SCC is a measure of the global benefits that are projected to result from marginal reductions in GHG emissions.  The interagency working group concluded that the use of a global measure for carbon was appropriate because greenhouse gas emissions create a global externality, and the United States cannot resolve the projected impacts of climate change acting alone.

OMB is seeking public comment on the technical support document that explains how the SCC is set and specifically requests comment on (i) the selection of the integrated assessment models, (ii) how the distribution of SCC estimates should be used in regulatory impact analyses, and (iii) the strengths and limitations of the overall approach.   The SCC is likely to be increasingly important as EPA proceeds with rulemaking activities to regulate greenhouse gas emissions from various sources.  In fact, EPA employs the SCC in the regulatory impact analysis for the currently-pending proposal for New Source Performance Standards for power plants.  The public comment period on the SCC runs through January 27, 2014.

Climate Change and Cost Benefit Analysis: Cass Sunstein Is Talking, But Is Anyone Listening?

Posted on November 16, 2012 by Seth Jaffe

Sunday’s New York Times had an op-ed piece by Cass Sunstein, recently departed head of the Office of Information and Regulatory Affairs, advocating for sensible measures to address global climate change. Sunstein’s argument is that

"Economists of diverse viewpoints concur that if the international community entered into a sensible agreement to reduce greenhouse gas emissions, the economic benefits would greatly outweigh the costs."

I don’t disagree with anything he says; I only wonder whether anyone is paying attention. On one hand, while Sunstein notes that President Obama supports cost-benefit analysis, Democrats in Congress – and many environmentalists – have long been skeptical, treating environmental questions as moral issues that should not be subject to something as crass as cost-benefit analysis.

Republicans used to support cost-benefit analysis. Indeed, Sunstein opens the op-ed with a discussion of the Reagan administration’s support of the Montreal Protocol on ozone-depleting chemicals. However, for the past ten years or so, Republicans have abandoned cost-benefit analysis for something much simpler – cost analysis. Today, if regulations cost too much – whatever that means – then they are “job-killers” and thus bad, even if the benefits exceed costs, sometimes by several multiples.

Maybe four years at MIT brainwashed me into blind acceptance of quantitative analysis, but this stuff doesn’t seem that hard to me. It is profoundly depressing that a significant number of environmentalists look only to the benefits of environmental regulation, while a similar percentage of conservatives now only look at its costs.

Somehow, we’ve got to get the twain to meet.