cost-benefit

Although much of the discussion about climate change impacts has focused on increases in temperature and the rise in sea level, changes that impact our nation’s water resources could have the greatest impact on society. A quick glance at recent newspaper headlines—heavy spring rains leading to massive flooding of the Mississippi River, historic drought covering large parts of Texas, and extensive wildfires spreading across Arizona—provides more than enough evidence of how vulnerable we are to water-related extreme events. 

While these events have led some to ask whether they are caused by climate change, this question misses the mark. Individual weather events are not “caused” by any single phenomenon—and climate change’s contribution to individual events will not be resolved cleanly in the years to come. What virtually all climate scientists agree on, however, is that the climate is already changing, all weather events now form under different conditions than they used to, and this change is increasing the probability of extreme weather events happening. It makes sense to learn what we can from actual events and avoid getting caught up in an irresolvable debate about why a particular event happened. We would be better served by learning more about what is at risk from extreme events and what we can do to better manage and minimize those risks.

A recent interagency draft report, National Action Plan: Priorities for Managing Freshwater Resources in a Changing Climate, highlights both the extensive economic and social risks that we face as a nation from the impact of climate change on water resources and the critical steps we need to take to begin facing up to these challenges. 

Source: US Global Change Research Program: Climate Change Impacts in the United States

The report documents the changes in our climate system that are already evident and are likely to increase over time. Warmer air and sea surface temperatures and rising sea levels are only part of the picture. Total precipitation has increased by about 5 percent over the past 50 years, and the amount of precipitation that occurs during the heaviest downpours has increased by 20 percent. However, regional variations appear likely with increased precipitation in the northern part of the country while areas in the south, particularly in the southwest, are likely to get drier. The strengthened hydrologic cycle puts wet areas at risk of getting wetter while dry areas are at increased risk of drought. Areas dependent on water from melting snow packs may also face substantial changes as more precipitation falls as rain rather than snow and as earlier snowmelt changes the timing and quantity of water availability.

The implications of these changes cut a wide swath across our economy and environment. Water availability is critical in sectors as diverse as agriculture, electricity generation (hydroelectric, but also fossil fuel generation and nuclear power), heavy transport, mining and mineral exploration, and storm water management. Beyond economic factors, water is also critical to ecosystem wellbeing, wildfire management, and public health.

In order to more effectively manage these risks, and to enhance the resiliency of our water resource  systems,  the report sets out six general recommendations and 24 specific actions that should be undertaken by federal agencies and their partners. It calls for a more formal planning process, highlights the need for improved information, enhanced capacity building, better integration across related issues, and better tools for assessing vulnerabilities, and recommends expanded water use efficiency.

These actions are by no means a cure-all for the challenges we face in managing the increasing demands on our water resources in a changing climate. Nor are they a substitute for slowing the rate and magnitude of climate change through reducing emissions of greenhouse gases. The most effective risk management strategy is to avoid the risk all together. But with climate change already underway, we are too late to avoid some changes, and adaptation will be critical to reducing economic and environmental costs. We need only to look at the costs and suffering from recent extreme weather events to understand the risks we face.

Comments on the draft plan are being accepted until July 15, and can be submitted to: http://www.whitehouse.gov/administration/eop/ceq/initiatives/adaptation/freshwater-plan
 

Steve Seidel is Vice President for Policy Analysis

While Environmental Protection Agency (EPA) regulations on greenhouse gases (GHGs) and other air pollutants are on firm political and legal footing, attacks on them continue. Claims have been made that the costs of regulation are extreme or, contradictorily, that the government has not conducted any cost analysis of these regulations.

On the side that the costs are too high, one figure bandied about recently is that all government regulations are costing the economy $1.75 trillion annually, and $280 billion of that stems from compliance with existing environmental regulations. Those figures came from a study by two Lafayette College professors done for the Small Business Administration (SBA). Yet, as widely reported, the Congressional Research Service, and even the professors themselves have disputed the methodology of the study and its use in the current frenzy of political shots at environmental regulations. In a Congressional Research Service (CRS) report, the methodology of the SBA report was faulted for, among other things, allowing for double counting of costs. The Lafayette College study simply adds together other previous studies on individual regulations, regardless of the approaches and methodologies of those calculations. The CRS report quotes the Office of Management and Budget (OMB) as having written that such a methodology is an “inherently flawed approach.”

More distressingly for those who care about making informed decisions about the economic impacts of regulation, that large figure is not balanced against any benefits those regulations might have. According to the CRS report, the authors of the Lafayette College stated that they were never asked to include benefits in their analysis. The authors were quoted as saying the report was “not meant to be a decision-making tool for lawmakers or federal regulatory agencies to use in choosing the ‘right’ level of regulation. In no place in any of the reports do we imply that our reports should be used for this purpose. (How could we recommend this use when we make no attempt to estimate the benefits?)” On the contrary, as we have explained before, the benefits of Clean Air Act regulations have far outstripped the costs in major studies.

As for those who say no economic analyses were ever done of these regulations, all federally promulgated regulations undergo a cost-benefit analysis before implementation. This requirement stretches back many presidential administrations, with each administration offering adjustments to the process. The basis for current analysis is found in Executive Order 12866, signed in 1993 by President Clinton, which provided a significant overhaul to the review process and, among other things, requires

Each agency [to] assess both the costs and the benefits of the intended
regulation and, recognizing that some costs and benefits are difficult to
quantify, propose or adopt a regulation only upon a reasoned determination
that the benefits of the intended regulation justify its costs.

President Obama reaffirmed the inclusion of cost-benefit analysis in the regulatory process in Executive Order 13563 at the beginning of 2011.

Turning specifically to the GHG regulations implemented by the Administration, where regulatory requirements have been imposed the analyses required by OMB have been conducted and are readily available. Some critics have complained that there was not a cost-benefit analysis done of the EPA’s 2009 Endangerment Finding for GHGs. Such claims miss the fact that the Endangerment Finding was a scientific ruling that GHGs cause climate change, posing a threat to public health and welfare, and motor vehicles emit GHGs contributing to those risks. Since there were no regulatory requirements to reduce GHG emissions in this rulemaking, a cost-benefit analysis was inappropriate.

When it comes to actually reducing GHGs from emitting sources, such analyses would be appropriate, and federal agencies are required to include them as part of the rulemaking process. EPA has done so. The first rule on GHGs , the light-duty vehicle GHG emission standards promulgated jointly with Department of Transportation’s Corporate Average Fuel Efficiency standards, was issued with a Regulatory Impact Assessment that offered almost five hundred pages of detailed qualitative and quantitative analysis of the costs and benefits of the rules. The findings were that the GHG standard for light duty vehicles has an estimated cost of $52 billion and benefits of $240 billion: benefits outweighing costs by better than 4 to 1.

Upon the implementation of the light duty vehicle standards, the New Source Review program for stationary sources of GHGs was automatically triggered – without any regulatory action taken by EPA – therefore no separate cost-benefit analysis was legally required of this step. However, when EPA went through the regulatory process to create the tailoring rule to lower the compliance requirements for stationary sources, it was required to undertake an analysis. The Regulatory Impact Assessment of EPA’s tailoring rule is available on its website and includes an in-depth qualitative and quantitative analysis of the reduced permitting costs from the tailoring rule regulation now in effect for stationary sources. As EPA continues its rulemaking for New Source Performance Standards for utilities and refineries, fully documented regulatory impact analyses will be conducted and made available for comment with the proposed rule.

Thus, despite the claims to the contrary, EPA has in the past and will continue in the future to analyze the costs and benefits of GHG regulations. It is also clear that, to date, GHG regulations imposed by the EPA under the Clean Air Act have vastly greater benefits than costs.

Michael Tubman is the Congressional Affairs Fellow