Cobenefits and Regulatory Impact Analysis: Theory and Evidence from Federal Air Quality Regulations

Joseph Aldy, Matthew J. Kotchen, Mary Evans, Meredith Fowlie, Arik Levinson, Karen Palmer

Chapter in NBER book Environmental and Energy Policy and the Economy, volume 2 (2021), Matthew Kotchen, James H. Stock, and Catherine Wolfram, editors (p. 117 - 156)
Conference held 2020-05-21
Published in February 2021 by University of Chicago Press
© 2021 by the National Bureau of Economic Research
in NBER Book Series Environmental and Energy Policy and the Economy

This paper considers the treatment of co-benefits in benefit-cost analysis of federal air quality regulations. Using a comprehensive data set on all major Clean Air Act rules issued by the Environmental Protection Agency over the period 1997-2019, we show that (1) co-benefits make up a significant share of the monetized benefits; (2) among the categories of co-benefits, those associated with reductions in fine particulate matter are the most significant; and (3) co-benefits have been pivotal to the quantified net benefit calculation in nearly half of cases. Motivated by these trends, we develop a simple conceptual framework that illustrates a critical point: co-benefits are simply a semantic category of benefits that should be included in benefit-cost analyses. We also address common concerns about whether the inclusion of co-benefits is problematic because of alternative regulatory approaches that may be more cost-effective and the possibility for double counting.

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Supplementary materials for this chapter:

• Database of Major Clean Air Act Regulations, 1997-2019
• Database of Major Clean Air Act Regulations, 1997-2019

Acknowledgments and Disclosures

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Document Object Identifier (DOI): 10.1086/711308