Indiana U study suggests cost-effectiveness of EPA air quality regs more uncertain than commonly believed
27 May 2015
The US EPA estimates that its air pollution regulations save thousands of lives annually. A new study by researchers at Indiana University suggests the estimates are more uncertain than commonly accepted. An open-access paper on their study appear in the Journal of Cost-Benefit Analysis.
Researchers Kerry Krutilla, David H. Good and John D. Graham of the IU School of Public and Environmental Affairs analyzed the costs and expected lifesavings of nine EPA air quality regulations issued between 2011 and 2013. Tobe included in the study, rules had to target stationary source emitters, and have promulgation dates between 2011 and 2013. The bulk of these regulations require national emissions standards for hazardous air pollutants; analysis includes the Mercury and Air Toxic Standards and the Cross State Air Pollution Rule.
Regulations issued exclusively by the EPA account for 63%–82% of the total monetized benefits of all federal regulations, and 45%–56% of their total costs, with regulations having a primary or significant goal to improve air quality accounting for 98%–99% of these benefits.
The cost and consequences of regulations that reduce mortality risks, including those targeting air pollution, have drawn the attention of academic researchers, policy makers, and stakeholders. Two issues have been considered. The first is whether lifesaving regulations allocate resources cost-effectively. A second question concerns the effects of exposures to fine particulate matter on mortality risks, and whether these uncertainties are adequately reflected in regulatory benefit estimates. Reducing exposures to fine particulate matter often account for more than 90% of the monetized benefits of EPA’s air regulations.
The second question has been the subject of an enormous literature, the implications of which will be discussed in a later section of the article that presents an uncertainty analysis of the mortality risk reductions associated with air regulations.—Krutilla et al.
The researchers estimate that the lives saved from this group of regulations could plausibly range from none to more than 80,000 per year. The range reflects uncertainty about the health effects of fine particles, and the possibility that airborne exposures to fine particles do not increase mortality risks.
The higher bound for lives saved is comparable to estimates by the EPA, but the possibility that no lives are saved is not reflected in standard EPA analyses of these regulations. If exposures to fine particles do not increase the risk of premature deaths, then most of the regulations in the study are less likely to have economic benefits in excess of their costs.
The results show that the cost-effectiveness ratios exhibit considerable uncertainty individually and also vary widely across regulations. Within a simulated 90% confidence interval for the gross cost per life saved, for example, there is both the possibility that benefits from lifesavings alone are sufficient to cover the rules’ costs and the possibility that no lives will be saved and cost-effectiveness ratios will be infinite. The wide ranges for the confidence intervals suggest the need for better information about the effects of fine particle exposures on mortality risks.—Krutilla et al.
The IU research is based on a re-evaluation of an EPA-sponsored “expert elicitation” study conducted in 2006. The study surveyed the opinion of experts about the health effects of fine particle exposures. The elicitation format allows experts to synthesize and adjust the empirical findings for limitations in the research area.
Since 2006, the EPA has used other methods to assess expert opinion. However, Krutilla, Good and Graham recommend updating the 2006 elicitation study to reflect additional experience with the method and new scientific knowledge. The authors conclude that better information is needed on the economic effects of air regulations, given the wide range for the lives they are estimated to save and the potential impact of the regulations on the US economy.
Krutilla and Good are associate professors at the School of Public and Environmental Affairs at IU Bloomington; Graham is the school’s dean. A team of graduate students assisted the study.
Kerry Krutilla, David H. Good and John D. Graham (2015) “Uncertainty in the Cost-Effectiveness of Federal Air Quality Regulations” Journal of Benefit-Cost Analysis 6, pp 66-111 doi: 10.1017/bca.2015.7