Guidelines for Preparing Economic Analysis (2000)
Paper Number: EE-0228C
Document Date: 09/01/2000
Author(s): U.S. Environmental Protection Agency, National Center for Environmental Economics
Economic Analysis, Benefit-Cost Analysis, Regulatory Impact Analysis, Cost-Effectiveness Analysis
Keywords: Economic Analysis, Benefit-Cost Analysis, Cost-Effectiveness Analysis, Regulatory Impact Analysis
EPA’s Guidelines for Preparing Economic Analyses replace the 1983/1991 Guidelines for Performing Regulatory Impact Analysis (see series listing above for link). They establish a sound scientific framework for performing economic analyses of environmental regulations and policies. They incorporate recent advances in theoretical and applied work in the field of environmental economics. The Guidelines provide guidance on analyzing the economic impacts of regulations and policies, and assessing the distribution of costs and benefits among various segments of the population, with a particular focus on disadvantaged and vulnerable groups.
The Guidelines contain several important advances: (1) they assist policy makers in developing regulations that achieve the highest environmental quality and human health standards at the lowest costs; (2) provide analysts with information needed to prepare high quality economic analyses; (3) develop an overarching framework for economic analyses throughout the Agency and across EPA Program Offices; and (4) ensure that important subjects such as uncertainty, sensitivity analysis, timing, and valuation of costs and benefits, described below, are treated consistently in all economic analyses at EPA. EPA will use the Guidelines to evaluate the economic consequences of its regulations and policies to insure that they contribute to a safe environment and a healthy economy.
The Guidelines address seven major analytical issues:
- Estimating the value of benefits not easily quantified (e.g., valuing how changes in intelligence from lead exposures result in lower lifetime incomes, or how the protection of wetlands can reduce the risks of flooding and enhance property values).
- Estimating the value of reducing fatal risks (e.g. measuring the economic benefits from reducing the number of pollution-induced cancer fatalities).
- Defining baseline conditions (i.e., contrasting the state of the economy and environment with and without a proposed regulatory policy).
- Examining environmental justice concerns in economic analyses (e.g., displaying economic data on the risks, benefits and costs to households located adjacent to hazardous waste sites).
- Comparing differences in the timing of benefits and costs (e.g., investing in CFC control strategies today reduces future generations’ UV radiation risks).
- Acknowledging uncertainties in the calculation of costs and benefits (e.g., presenting range of costs an industry might face when choosing among strategies to reduce environmental discharges).
- Measuring who pays the costs and receives the benefits of regulations (e.g., showing how different groups; such as children, small businesses, or persons more susceptible to environmental hazards; receive differing levels of protection or costs).
The main audiences for the Guidelines are those performing or using economic analysis, including policy makers, the Agency's Program and Regional Offices, and contractors providing economic reports to the EPA. In addition, college and university professors have also expressed an interest in using the Guidelines for their environmental economics and policy analysis classes.
Report available at EPA's National Service Center for Environmental Publications.
This paper is part of the Environmental Economics Research Inventory.
Guidelines for Preparing Economic Analyses (pdf)
EPA’s Guidelines for Preparing Economic Analyses replace the 1983/1991 Guidelines for Performing Regulatory Impact Analysis (see series listing above for link). They establish a sound scientific framework for performing economic analyses of environmental regulations and policies. They incorporate recent advances in theoretical and applied work in the field of environmental economics.