Obama’s ‘billion-dollar’ rules could provide annual benefits approaching $200 billion

On Aug. 30, 2011, President Obama sent a letter to House Speaker John Boehner responding to his request that the administration supply Congress with any planned new rules costing more than $1 billion. The president provided a list of seven such rules, noting the cost (but not the benefits) for each. One of these potential rules, the Ozone standard, has since been withdrawn by the administration.

This exchange generated substantial press coverage, despite the conspicuous absence of information provided on the potential benefits from these rules. This information, however, is readily available, and these benefits would be enormous. Tabulating information from the regulatory impact analysis for each proposed rule indicates that the monetized benefits from the remaining six rules could amount to $218 billion a year. If these rules are finalized, the final versions might differ from the proposed versions or the estimates may change, so the overall cost and benefit figures may differ from those described here.

The combined annual benefits from these rules range from $83 billion to $218 billion a year, dramatically exceeding the range of costs of $19 billion to $20 billion a year. This means net benefits could range from $63 billion a year to close to $200 billion a year.

All figures are expressed in 2011 dollars:

Potential rule Costs Benefits
Air toxics $11.5B $56-148B
Boiler MACT  1.8  21-57
Coal ash  .6-1.5  2.6-7.6
Rearview mirror  2  .7-.8
On-board recorders  2-2.5  2.8
Hours of service  1.1  .3-2.5
Total  $19-20B  $83-218B

The first three rules are from the Environmental Protection Agency, while the last three rules are from the Department of Transportation. The air toxics rule (designed to reduce emissions of hazardous air pollutants from the electric power industry, including mercury, other metals such as cadmium and arsenic, acid gases, and organics) and the major source part of the Boiler MACT rule (designed to limit large emissions of hazardous air pollutants from industrial, commercial, and institutional boilers and process heaters) have the largest benefits; these benefits primarily reflect attaching a monetized value to various health benefits. In combination, the benefits from these two rules alone would include the following:

— 9,300-23,500 lives saved (which EPA describes as avoiding ‘premature mortality’)
— 15,000 fewer heart attacks
— 16,500 fewer hospital and emergency room visits
— 303,000 fewer cases of respiratory symptoms
— 1.16 million more work days (because workers are not too sick to go to work)

This exercise underscores the folly of considering the costs of rules, even if the price tags come in at above a billion dollars, without considering their benefits.

Note on coal ash calculation:  The table above includes the benefit range for the scenario EPA considers most likely, in which the regulation of coal ash will increase the use of coal ash for other purposes. Opponents of this regulation typically cite another scenario, in which the regulation of coal ash stigmatizes its use. The Environmental Integrity Project and the Institute for Policy Integrity have separately advanced strong arguments against the application of the worst-case “stigma” scenario, in which the regulation of coal ash is assumed to undercut the use of coal ash for other purposes.  Still, even if that unlikely worst case scenario applies, the combined benefits from the six billion-dollar regulations examined here would equal between $80 billion and $193 billion, and net benefits would range from $60 billion to $174 billion.