A new series of studies examines the benefits and costs of federal environmental regulations.
Policy leaders in the regulatory community, Congress, and academia, along with some in the broader public, have long expressed an interest in documenting the extent to which the expected benefits of regulations have been accomplished, and at what cost. Such studies, which are known as retrospective analyses, can illuminate the effects of a given regulation on different communities, regions, industries, and socioeconomic groups, along with any unintended consequences, such as adverse outcomes and conflicts with other federal regulations. Retrospective analysis also can support innovation in regulatory design and help guide the reform of poorly performing regulations.
Although preparing estimates of the expected benefits and costs a of a prospective regulation has become routine for major new rules, retrospective analyses of actual outcomes are rare, and few of the lookbacks that government agencies have conducted over the past four decades meet the rigorous tests that would demonstrate that a given regulation caused an observed outcome. In practice, many of these analyses give only limited consideration to what actually happened after a regulation was implemented.
Retrospective analysis could consider a wide range of possible economic effects, such as employment rates and the potential closure of manufacturing plants under alternative regulations. This type of analysis also could identify unrecognized benefits and costs, such as health risks, environmental risks, and the growth of market power. In short, retrospective analysis could describe the actual responses of entities to new regulations, alongside the resulting outcomes.
Credit: Viviana Rishe / Unsplash
Resources for the Future (RFF) has developed seven new quantitative analyses of major federal environmental regulations for a project on retrospective analysis. The analyses focus on specific outcomes of regulations rather than broad-brush results, and they differ from studies that simply update assumptions. The seven studies, the findings of which we discuss further in a separate overview of the project, include the following:
- “Localizing Environmental Regulation: The Case of Boutique Fuels,” a forthcoming working paper that investigates the fuel content standards established by the US Environmental Protection Agency and their effects on reducing airborne pollutants and gasoline prices;
- “The Impact of the Clean Air Act on Particulate Matter in the 1970s,” which examines the effect on air quality in US counties in 1972 with the implementation of Clean Air Act standards for particulate matter;
- “Effects of Early Childhood Exposure to Ambient Lead and Particulate Matter on Adult Personality,” which examines how reductions in childhood exposure to emissions of lead and particulate matter in the 1970s has affected personality traits in adulthood;
- “Regulating Untaxable Externalities: Are Vehicle Air Pollution Standards Effective and Efficient?,” which examines the cost-effectiveness of past vehicle emission regulations and the potential cost-effectiveness of alternative regulatory approaches, including tighter exhaust standards and increased registration fees;
- “Valuing Statistical Life Using Seniors’ Medical Spending,” which uses Medicare records to develop estimates of willingness to pay for reducing mortality risks among senior citizens;
- “Emissions Standards and Electric Vehicle Targets for Passenger Vehicles,” which examines the interaction between federal regulations and California’s requirements for market shares of plug-in passenger vehicles;
- “Environmental Regulation, Imperfect Competition, and Market Spillovers: The Impact of the 1990 Clean Air Act Amendments on the US Oil Refining Industry,” which examines the cost of two US Environmental Protection Agency regulations that establish specific requirements for the constituents of vehicle fuels.
Advancing Retrospective Analysis within Agency Processes
Two recent pieces of legislation include provisions for retrospective analysis within federal agencies: the Foundations for Evidence-Based Policymaking Act, which became law in 2019, and the Setting Manageable Analysis Requirements in Text (SMART) Act, a bill that was introduced in the Senate in 2022. The Foundations for Evidence-Based Policymaking Act is an important step forward, and the pending SMART Act could further advance retrospective analysis of federal regulations.
The Foundations for Evidence-Based Policymaking Act requires agencies to develop questions that can guide the evaluation of their programs, devise plans for data collection, and designate experts that can support the evaluation process. The law doesn’t require retrospective analysis of agency regulations, but it does provide a framework and tool kits for agency reviews.
The case for retrospective analysis has become stronger, because regulations tend to cost more and have more complexity than in the past—all the more important, then, that agencies understand the effects of regulations.
However, a variety of obstacles to a robust program of retrospective analysis remain. Experts discussed these obstacles in the context of the Foundations for Evidence-Based Policymaking Act and the SMART Act at an RFF workshop in March 2022. Panelists at the workshop fully embraced the need to focus on retrospective analysis as a way for agencies to learn from past experience and improve current and future regulations, rather than using these analyses as a means of politicizing potential shortcomings in existing regulations. The panelists noted that the case for retrospective analysis has become stronger, because regulations tend to cost more and have more complexity than in the past—all the more important, then, that agencies understand the effects of regulations.
Although the panelists did not reach a consensus on how to improve retrospective analysis, a general theme emerged about the importance of providing adequate funding and staff support for retrospective analysis. Panelists also expressed support for an executive order that would require such analysis, or legislation like the SMART Act, both of which would require retrospective analysis and provide funding for it.
The RFF project to promote retrospective analysis of environmental regulations contributes to a growing effort to introduce greater rigor and accountability in the federal regulatory process. The major accomplishments of our project include new and refined methods of data development and analysis, policy recommendations, lessons learned for future analyses, and the identification of challenges that agencies need to tackle when conducting retrospective analyses.
