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An Evaluation of the PM2.5 Health Benefits Estimates in Regulatory Impact Analyses for Recent Air Regulations

31 December 2011
By Dr. Anne E. Smith

When preparing its Regulatory Impact Analyses (RIAs) for regulations under the Clean Air Act (CAA) that are not intended to control ambient fine particulate matter (PM2.5), the US Environmental Protection Agency (EPA) often predicts reductions of ambient PM2.5 that may occur coincidentally, and attributes so-called "PM2.5 co-benefits" to those coincidental reductions. In this report, prepared for the Utility Air Regulatory Group, NERA Senior Vice President Dr. Anne E. Smith reviews and evaluates EPA's practice of including PM2.5 co-benefits in its RIAs for non-PM rules. Based on review of the available cost and benefit information for 57 individual CAA-related regulations released since EPA promulgated its first PM2.5 national ambient air quality standard (NAAQS), the report finds that EPA has been relying on PM2.5 co-benefits estimates to create an apparent benefit-cost justification for almost all of its non-PM CAA rules. The report then evaluates that practice from multiple perspectives: theoretical, practical, scientific, and analytical.

Dr. Smith concludes that co-benefits from separately-regulated pollutants, such as PM2.5, should not be reported as part of the total benefits estimates in an RIA, nor should they be included in public announcements of the benefits of a new regulation. She argues that EPA's use of PM2.5 co-benefits in RIAs is inconsistent with the theoretical underpinnings of benefit-cost analysis, and that the use of these co-benefits subverts the practical purpose of RIAs as informational devices for improving policy-making. Dr. Smith suggests that EPA reform the manner in which it defines its baselines of emissions for each RIA, and provide more temporal information on benefits and costs to eliminate problems of double-counting. She also concludes that EPA should reform its current methods of calculating benefits from reductions in ambient PM2.5 even in its PM-related rules, because she finds that, as EPA's reliance on co-benefits has increased, EPA has shifted to less credible methods of estimating PM2.5 benefits.