The Hamilton Project

A Better Approach to Environmental Regulation: Getting the Costs and Benefits Right

ABSTRACT

Cost-benefit analysis of environmental regulation plays a key role in determining how to achieve our environmental goals without imposing unnecessary costs on the economy. This paper proposes three reforms that address several problems that undermine the role played by cost-benefit analysis in environmental regulation. First, agencies should be required to use a checklist of good empirical practices and should promote decentralized evaluations of data and research. Second, absent compelling systematic evidence to the contrary, agencies should presume that consumers are best able to make their own energy-saving decisions, and should focus on regulations that address the harm that people impose on others. Third, a six-month early regulatory review process should be established for particularly important regulations to allow sufficient time for a thorough cost-benefit analysis and the incorporation of the results into the final regulations.


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