Cobenefits and Regulatory Impact Analysis: Theory and Evidence from Federal Air Quality Regulations
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This paper considers the treatment of co-benefits in benefit-cost analysis of federal air quality regulations. Using a comprehensive data set on all major Clean Air Act rules issued by the Environmental Protection Agency 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 particulate matter 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.
The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
Matthew J. Kotchen
Matthew Kotchen received an honorarium from the "External Environmental Economics Advisory Committee" for his work on the "Report on the Proposed Changes to the Federal Mercury and Air Toxics Standards (MATS)," which is an earlier paper upon which some of the material here is based.