| OAQPS establishes standards
and regulations to improve the nation’s air quality subject
to the provisions of the Clean Air Act (CAA). Specific
provisions of the CAA require that an economic impact assessment
(EIA) be conducted for individual regulatory actions under the
Act’s authority. Requirements for economic analysis
can be viewed in the broader context of overarching requirements
for all Federal regulations as stipulated by the presidential
executive order on regulatory review. EO 12866 requires
regulatory agencies to submit all proposed and final regulations
to the Office of Management and Budget (OMB) for review. Agencies
must demonstrate that the regulation is necessary and that the
potential benefits of the intended regulation justify its costs.
For any “significant regulatory action,” the
Agency is required to prepare a comprehensive EA, which contains
descriptions of the benefits and costs of the proposed rule
and of alternative approaches. |
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| In the past, as stipulated
in EO 12291, the comprehensive set of analyses sent to OMB for
review was referred to as a “regulatory impact analysis
(RIAs).” EO 12866 replaced EO 12291 and simply requires
that benefits, costs, and other economic impacts be examined.
Since EO 12866 did not provide a specific name for these
reports, the naming convention has become somewhat loose. Therefore,
even though the term RIA is still widely used throughout the
Agency and OMB, the term “Economic Analysis (EA)”
will be used in this document to refer to the assessment of
benefits, costs, and other impacts required by EO 12866. The
key point to be made here is that, whichever term is used, the
analyses called for under EO 12866 are broader in scope than
an EIA. The analyses include an assessment of benefits
in quantified and monetized terms when possible and a comparison
of benefits and costs to address the “cost justification”
issue just described. The notion, under EO 12866, that
a rule’s benefits must justify its costs is a less
restrictive requirement than existed in the predecessor, EO
12291, wherein benefits must be shown to exceed costs
for the regulation to proceed. EO 12866 and EO 12291 are
further contrasted in Section 2 of this document. It is
important to recognize that EO 12866 does not supercede the
authority to regulate under the CAA or any other statutory authority.
EO 12866 cannot, for instance, negate a regulation based
on benefit-cost criteria if the statutory authority precludes
that from affecting the regulatory decision. |
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| The regulatory context
of OAQPS regulations and the corresponding requirements for
economic analysis change through time as legislation and administrative
policies are updated in response to a myriad of societal forces.
For example, in the 5 years immediately preceding the
preparation of this document, the White House has issued a number
of EOs affecting the nature and scope of EAs performed in support
of Federal regulations. In addition, Congress has adopted
legislation requiring specific forms of economic impacts be
analyzed and considered in the design of Federal regulation.
Other legislation affecting economic analysis requirements
is pending, though not necessarily assured of passage. In
short, the regulatory background described here provides a snapshot
of the situation in early 1999. The reader is advised
to recognize these dynamics and to remain current with changes
in the regulatory environment that determine the requirements
for economic analysis. |
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| 2 The definition of a significant
regulatory action is discussed in Section 2 of this document.
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