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For the last four decades, benefit–cost analysis has been a mainstay of the U.S. federal regulatory process and, under Executive Orders in effect since 1981, such analysis must generally be...

As threats from climate change become more urgent, the US Supreme Court has responded by erecting a new roadblock to effective climate policy. Last month, it struck down the Clean Power Plan, the Obama administration’s never-implemented regulation of greenhouse gas emissions from existing power plants. The ruling [ West Virginia v. Environmental Protection Agency (EPA)] is a blow to climate action and could signal the court’s hostility to a wide range of future regulations within and beyond the climate and environmental sphere, including those related to consumer protection and worker safety. Although the immediate effects on US climate policy aren’t pervasive, EPA now needs to evaluate the emissions-reduction potential and legal risks of alternative regulatory approaches for the power sector.

The Supreme Court has made clear, in the five cases in which it has dealt with this issue, that the major questions doctrine applies only in exceptional cases. In contrast, during its four years in office, the Trump Administration invoked the doctrine routinely in support of its deregulatory assault on the administrative state. In doing so, the Trump Administration construed the major questions doctrine enormously expansively and inconsistently, in ways untethered to the Court’s jurisprudence, turning it into little more than an invitation for courts to strike down regulations the Administration did not favor for policy-based reasons. This pattern is especially problematic considering that unlike individual private litigants, the Justice Department normally strives to develop a consistent approach to important legal doctrines. The Trump Administration’s most sustained weaponization of the major questions doctrine was against the Clean Power Plan, which regulated the greenhouse gas emissions of existing power plants. And, under the similarly wrongheaded and even broader arguments made by its allies, all greenhouse gas regulations could be suspect on major question grounds. The Trump Administration’s arguments with respect to the major questions doctrine are not merely of historical interest. They have already found support in lower court decisions and are still being pressed by state attorneys general and other influential litigants; bringing to light their enormously problematic application is important to foreclose their successful revival in future administrations.

The Trump administration has, at every turn, taken actions to reverse the climate progress achieved during the Obama administration, moving to repeal or significantly roll back three significant rules to reduce the emissions of greenhouse gases from existing power plants, passenger cars and light trucks, and oil and gas installations. To mask the true effects of its policies, the Trump administration has targeted the social cost of carbon, which quantifies the harm caused by a ton of carbon dioxide emissions. It has used two principal techniques, unsupported by economic theory, to reduce the estimate of the damages of greenhouse emissions by a factor of about 10.

The Obama administration was remarkably successful in mitigating intraparty conflict while moving forward with major rulemakings. When challenged in court, many of these rules were upheld, and have proven difficult to reverse, because they were supported by rigorous analysis. Over the course of its eight years, the administration pursued rulemakings on a large number of subjects. Political considerations and the demands of party constituencies no doubt influenced the direction of policy, but so too did evidence, analysis, and expertise, in keeping with the practices of prior administrations. President Obama and senior officials showed considerable respect for the system of governance that they inherited, with its established methods for incorporating analysis and evidence into regulatory decision making. Their personal policy preferences and perspectives were tempered by these long-standing practices, which ultimately led to better decision making.

Despite objections from certain constituencies, President Obama placed cost-benefit analysis at the very center of his administration’s governing philosophy. He also pursued an aggressive agenda of new regulatory protections for public health, consumers, and the environment. His time in office demonstrated in powerful terms that cost-benefit analysis need not be associated with an anti-regulatory agenda. The synthesis of cost-benefit analysis and a progressive regulatory agenda helped mitigate intraparty conflict among Democrats but also opened up fissures among prior supporters of cost-benefit analysis, who assumed that its use would generally lead to less regulation.

The core of the Trump administration’s regulatory agenda is to focus on the costs of regulations while ignoring, trivializing, and mischaracterizing their benefits. The administration has made significant regulatory efforts to delay or repeal important initiatives of the Obama administration designed to protect public health and the environment. In some of these proceedings, the Trump administration has altogether ignored the benefits of the rules it seeks to eliminate or suspend, instead focusing solely on cost savings to regulated industry. For example, Trump’s Executive Order 13,771 directs agencies to control costs and eliminate two regulations for every new one. This one-sided approach makes a mockery of cost-benefit analysis. Saving regulatory costs is attractive only if the benefits forgone as a result of these savings are lower than those costs. A rule that reduces compliance costs by giving up an even larger set of social benefits is hardly an attractive proposition.

In a 1981 Executive Order, President Ronald Reagan placed cost-benefit analysis at the heart of the US regulatory system. In the following decades, many progressives opposed cost-benefit analysis, arguing that it was a tool to undermine protections for consumers, public health, and the environment. Notwithstanding this resistance within their own party, Presidents Bill Clinton and Barack Obama embraced cost-benefit analysis and showed how the technique could be used while implementing a protection-oriented regulatory agenda. As Democratic constituencies became more comfortable with cost-benefit analysis, conservatives and industry trade associations became more skeptical. This trend ultimately culminated in the Trump administration’s rejection of expertise, analysis, and evidence and its open manipulation of cost-benefit analysis to obscure the true effects of an overzealous deregulatory agenda that is often at odds with the public interest.

The Trump administration has called into question the scientific studies supporting the most significant health benefits of regulations, principally from reductions in air pollution. By seeking to ignore validly conducted and well-respected peer-reviewed studies, the Trump administration is not just placing a light thumb on the scale against regulation—it is pressing down hard. This effort is part of an overarching strategy by the Trump administration to erase the significant benefits of regulation in general and of environmental regulation in particular. Some of the most serious risks posed by pollution could go unregulated if the administration has its way.

Reviving Rationality: Saving Cost-Benefit Analysis for the Sake of the Environment and Our Health explains how Donald Trump destabilized the decades-long bipartisan consensus that federal agencies must base their decisions on evidence, expertise, and analysis. Administrative agencies are charged by law with protecting values like stable financial markets and clean air. Their decisions often have profound consequences, affecting everything from the safety of workplaces to access to the dream of home ownership. Under the Trump administration, agencies have been hampered in their ability to advance these missions by the conflicting ideological whims of a changing cast of political appointees and overwhelming pressure from well-connected interest groups. Inconvenient evidence has been ignored, experts have been sidelined, and analysis has been used to obscure facts rather than inform the public. The results are grim: incoherent policy, social division, defeats in court, a demoralized federal workforce, and a loss of faith in government’s ability to respond to pressing problems. This experiment in abandoning the norms of good governance has been a disaster. Reviving Rationality explains how and why our government has abandoned rationality in recent years, and why it is so important for future administrations to restore rigorous and even-handed cost-benefit analysis if we are to return to a policymaking approach that effectively tackles the most pressing problems of our era.

Although the system of guardrails developed over the past several decades to balance the competing demands of competent administration and accountability to the political process was far from perfect, the Trump administration’s many failures demonstrate the value of this system for the American public. The question facing both political parties is whether they want to, and can, commit themselves to rebuilding the system that Trump inherited. There are many good reasons to believe that guardrails to constrain political influence at agencies is desirable, and good reasons to specifically endorse cost-benefit analysis and centralized review. But the past success of a practice or institution does not guarantee its future existence. It is possible that the party system has shifted in ways that generate incentives for both parties to defect from their prior consensus.

One of the defining features of politics in the contemporary United States is the central role played by the actions, or inactions, of federal administrative agencies. The complex nature of many policy problems, coupled with the limited ability of Congress to act, has frequently led to statutes that delegate to specialists the task of translating broad policy mandates into fine-tuned regulations. To balance the need for democratic accountability with values such as expertise and impartiality, both political parties have constructed a system of guardrails that cabins political influence over agencies. Some of these guardrails are external and include judicial review under the Administrative Procedure Act. Other guardrails are internal to the executive branch. Among the most important of these internal constraints is the use of cost-benefit analysis to inform regulatory decision making.

Future administration can begin undoing the mistakes of the Trump administration by reinstating prior norms concerning cost-benefit analysis and meaningful regulatory review. Several reforms can go even further and improve the regulatory system. One reform involves rethinking the role of ex-post analysis of regulation, to focus resources on identifying and addressing cross-cutting areas of uncertainty in regulatory decision making. A second area where improvements can be made is improving the quantification of costs and benefits that are currently left unquantified. A third area for improvement involves developing general guidelines for examining and weighing the distributional effects of regulatory decisions.

Established and well-accepted practices for conducting cost-benefit analysis require the consideration not only of the direct consequences of rules but also of their indirect consequences. Such indirect effects must be considered whether they are negative (indirect costs) or positive (indirect benefits, also referred to as ancillary benefits or co-benefits). The Trump administration is now calling into question the longtime reliance on the indirect benefits of regulation while at the same time urging that the indirect costs of regulation must be taken into account and interpreted expansively. Arguing, as the administration does, that the indirect consequences of regulation must be taken into account if they are negative and must be ignored if they are positive is a hallmark of irrationality.

The Trump administration is pushing an argument that is at odds with the scientific consensus, claiming that prevalent air pollutants have thresholds below which they produce no adverse health effects. In doing so, the administration can hide an important portion of the health benefits of regulation. A major focus of this effort is particulate matter, which poses extraordinarily serious threats to public health. The administration is engaged in this effort with the support of industry advocates, who have discredited themselves repeatedly over more than half a century by attacking the scientific consensus behind government regulation of tobacco, acid rain, and other threats to health and the environment. In contrast, the administration’s efforts are opposed by the leadership of the scientific community and by the EPA’s own science advisors.

After the election of Barack Obama, Republican politicians and elites largely adopted a strategy of wholesale opposition to the new president. This included attacking policy tools, such as cost-benefit analysis and the use of market-based mechanisms to control pollution, that had long been core Republican Party orthodoxy. The rise of the Tea Party and the 2010 midterm results only exacerbated the oppositional tendency of the Republican Party. With the financial crash-induced recession continuing to bite, a major talking point of Republican politicians was to accuse the administration of pursuing “job-killing regulations,” among other hyperbolic criticism of regulations that had strong cost-benefit justifications. In the aftermath of the 2016 election, the Trump administration accelerated the trend toward disregard for cost-benefit analysis. Agencies under Trump have engaged in absurd distortions, ignored evidence, and obviously twisted the methodology to achieve pre-desired outcomes.

This Article, written as part of a conference honoring Professor Richard Stewart on his 50 years as a legal academic, focuses on the inconsistent manner in which the Trump Administration has dealt with three of the most important conceptual issues that are central to the design of environmental policy: cost-benefit analysis, federalism, and the treatment of dirty, old sources of pollution. It has acted in a patently inconsistent way in different proceedings, embracing co-benefits in some cases and decrying their use in others; extolling the virtues of state decision-making in some cases and running roughshod over such decision-making in others; taking extreme actions to protect existing, dirty sources in some cases, and celebrating their replacement in others. The Trump Administration has simply taken whichever side of each of these arguments would advance its deregulatory policies. Though inconsistencies across different regulations — as opposed to inconsistencies within a single regulation — have not been a core concern of the Administrative Procedure Act, its prohibition on “arbitrary and capricious” agency action is sufficiently capacious to embrace egregious actions of this type.

This chapter reviews the relevant intellectual traditions in economics, political science, and law. It considers the demand for environmental policy instruments and examines the supply side. The federal environmental statutes further the disparities by bifurcating the regulatory requirements that apply to new and existing sources. By contrast, political scientists and economists studying the supply side of regulation have focused on the voting behavior of legislators and the institutional structure of the legislature. The chapter explores the nature of demand by firms and individuals, dividing the latter category into several overlapping groups, and then considers the role of interest groups in the political rlarket. It focuses on the origins of supply and demand for a single policy instrument. There are several plausible positive political economy explanations for the nature of the supply of environmental policy instruments. The market model will, in the end, be an imperfect and incomplete description of political behavior.

Presidents have long sought to roll back their predecessors’ regulatory policies. They have typically relied on efforts to repeal regulations and to withdraw unpublished or non-final regulations pursuant to “stop-work” orders directed at agency heads. President Trump is no exception. But rather than stick to the typical playbook, he also made aggressive use of three other instruments: Congressional Review Act disapprovals, requests that courts hold in abeyance pending cases challenging Obama-era regulations, and suspensions of final regulations. Through these strategies, the Trump administration was able to reach a far greater proportion of regulations than would have been possible under prior practices. This Article identifies this new trend in aggressive regulatory rollbacks and argues that it is likely to become an enduring feature of American politics. In the current climate, aggressive rollback strategies will lead to an important reconceptualization of the Executive Branch in which future one-term presidents are unlikely to see a significant portion of their regulatory output on important matters survive. As a result, when fashioning regulatory policy, future presidents will face significantly different incentives, which will affect a broad set of decisions, from transition planning for an incoming administration, to the timing of regulatory actions relative to a president’s reelection campaign, to electoral strategies. With reelection now a prerequisite for leaving a durable regulatory legacy, regulatory policy will take on characteristics that are similar to electoral schemes in which multiple votes are necessary for significant decisions. But the justifications that undergird these multiple-vote requirements—legitimacy, stability, and quality—do not support the transformation occurring with the Executive Branch’s regulatory policymaking power. Despite that fact, these features are likely to remain part of the political and administrative landscape, and future presidential administrations will need to adjust to them.

Recently, critics of the administrative state have been urging Congress to reassert itself and rein in regulatory action that they maintain is both undesirable as a matter of policy and in violation of constitutional principles. This anti-regulatory position is unwarranted. While regulatory agencies have indeed been more active in recent decades, in part due to increasing gridlock in Congress, the resulting regulatory actions produced large net benefits to the American people and were carried out pursuant to authority delegated by Congress and reviewed by the courts. By contrast, more robust action by Congress, as long as Congress continues to exhibit its current pathologies, is unlikely to be beneficial. Furthermore, in a troubling development, the Trump Administration’s has turned away from cost-benefit analysis in order to carry out its anti-regulatory agenda, disregarding an established bipartisan consensus that stretched back several decades.

This Article tackles a question that has vexed the administrative state for the last half century: how to seriously take account of the distributional consequences of regulation. The academic literature has largely accepted the view that distributional concerns should be moved out of the regulatory domain and into Congress’ tax policy portfolio. In doing so, it has overlooked the fact that tax policy is ill suited to provide compensation for significant environmental, health, and safety harms. And the congressional gridlock that has bedeviled us for several decades makes this enterprise even more of a non-starter. The focus on negative distributional consequences has become particularly salient recently, playing a significant role in the 2016 presidential election and threatening important, socially beneficial regulatory measures. For example, on opposite sides of the political spectrum, environmental justice groups and coal miner interests have forcefully opposed the regulation of greenhouse gases through flexible regulatory tools, in California and at the federal level, respectively. The time has come to make distributional consequences a core concern of the regulatory state; otherwise, future socially beneficial regulations could well encounter significant roadblocks. The success of this enterprise requires significant institutional changes in the way in which distributional issues are handled within the Executive Branch. Every President from Ronald Reagan to Barack Obama has made cost-benefit analysis a key feature of the regulatory state as a result of the role played by the Office of Information and Regulatory Affairs, and the Trump Administration is keeping that structure in place. In contrast, executive orders addressing distributional concerns have languished because of the lack of a similar enforcement structure within the Executive Branch. This Article provides the blueprint for the establishment of a standing, broadly constituted interagency body charged with addressing serious negative consequences of regulatory measures on particular groups. Poor or minority communities already disproportionally burdened by environmental harms and communities that lose a significant portion of their employment base are paradigmatic candidates for such action.

Assessing health benefits of policies addressing environmental contaminants is important for decision-making and for informing the public about how policy affects their welfare ( 1 ). Benefits analysis, one side of benefit-cost analysis (BCA), can be relatively straightforward when sufficient data are available on dose-response relationships, changes in exposure expected from a proposed policy, and other key inputs. But despite progress, benefits analysis for health effects is needlessly constrained by analytic practices that are scientifically outdated and inconsistent with economic theory. These limitations can result in exclusion of important health effects from the estimated benefits of reducing exposure to toxic environmental contaminants, which, in turn, affects net benefits calculations that inform public policy. Fortunately, economic theory and scientific advances in the risk assessment literature provide a way forward.

Since the publication of Revesz and Stavins (2007), there have been some significant normative advances in the area of environmental law and economics. For example, the emergence of climate change as the area of central concern for environmental regulation has brought a great deal of attention to the question of how to discount benefits that accrue into the far future and primarily affect individuals not yet born. Also, the rise of behavioral law and economics has created a shift away from exclusive reliance on neoclassical models.But the most significant changes have been on the positive side. In particular, the traditional alignment of interest groups has come close to experiencing an about-face. Conservative, anti-regulatory groups traditionally favored cost-benefit analysis, market-based instruments, and decentralization. Progressive, pro-regulatory groups traditionally opposed these approaches. In recent years, however, the tables have often been turned. These shifts suggest that commitment to principles is secondary to commitment to substantive regulatory outcomes, with groups of both sides of the spectrum availing themselves of whatever argument will better promote their preferences concerning the stringency of regulation.

In the preceding chapters, we’ve focused largely on what is often called “traditional pollution”: soot and smog and their precursors, sulfur dioxide and nitrogen oxides. But power plants are also the nation’s largest source of a very different sort of pollutant: carbon dioxide. Unlike traditional pollution, atmospheric CO2 does not pose a threat to public health through inhalation. As every schoolchild learns, humans exhale CO2 during normal respiration, and plants absorb it as part of the photosynthesis that fuels their growth. Carbon dioxide does, however, act as a “greenhouse gas.” Like the glass of a greenhouse, molecules of CO2 let sunlight pass through to warm the earth but then trap some of the heat that radiates back from the planet’s surface. Up to a point, this heat-trapping effect is beneficial; without it, the earth would be too cold to support life. But when humans burn fossil fuels, carbon that has been sequestered underground for millions of years is rapidly released in the form of CO2, and the natural carbon cycle is altered. As the concentration of CO2 in the atmosphere increases, the greenhouse effect becomes stronger, and the earth’s surface temperature rises. Over time, warming driven by ever-increasing industrial emissions of CO2 is expected to have serious, possibly devastating consequences for all corners of human society. (There are other greenhouse gases, like methane, but CO2 is by far the most common, accounting for more than 75 percent of global greenhouse gas emissions and almost 85 percent of U.S. emissions.) And yet, when President Obama took office in 2009, almost forty years after the U.S. Congress passed a piece of legislation designed to eliminate all air pollution that posed a threat to public health and welfare, emissions of carbon dioxide were still entirely unregulated at the federal level. As the President observed in his first Earth Day address on April 22, 2009: “[W] e place limits on pollutants like sulfur dioxide and nitrogen dioxide and other harmful emissions. But we haven’t placed any limits on carbon dioxide and other greenhouse gases. It’s what’s called the carbon loophole.”

This book chronicles almost five decades of efforts by the United States government to reduce the air pollution associated with burning coal, along with the often misleading political rhetoric surrounding those efforts. Given the central role that coal and its environmental consequences will play in our story, it’s helpful at the outset to understand some basic facts about the fuel. Short Answer: A combustible rock. Longer Answer: Coal is a fossil fuel—“fossil” because it’s primarily composed of the preserved remains of ancient plants and “fuel” because it can be burned to create energy. Most of the coal we use today was formed hundreds of millions of years ago when large swaths of the earth were covered in swampy forests. As plant life in these swamps died, it sank to the bottom of the water, where it was eventually buried under additional layers of sediment and slowly decomposed into a soggy, carbon-rich, soil-like substance known as peat. As still more time passed, this peat was further transformed by heat and pressure, a process known as carbonization, into the sedimentary rock we call coal. Short Answer: We mine it, mostly in Wyoming and Appalachia. Longer Answer: There are two basic methods of mining coal: underground mining and surface mining. Surface mining is typically used for shallow coal beds—those buried less than 200 feet deep. Miners access the fuel by simply removing (often with explosives) the trees and soil and rocks that sit atop it. Underground mining, by contrast, is used to extract coal that sits between 300 and 1,000 feet deep. The surface is left relatively undisturbed, and miners dig tunnels through which to enter the mine and retrieve the coal. Historically, underground mining was the more common of these two methods, but today, the majority of U.S. coal is produced at surface mines, which require far fewer workers to produce the same amount of coal. In addition to being cheaper to operate, surface mines are safer: both fatal and serious nonfatal injuries occur about three times more often in underground mines.

For polluters, America in 1970 was still something of a Wild West. A number of federal, state, and municipal laws aimed at improving air quality were already on the books, but few were enforced, and pollution from the nation’s ever-growing stock of motor vehicles, power plants, and factories remained uncontrolled in much of the country. A passage from the Ralph Nader Study Group’s Vanishing Air, published in May 1970, vividly illustrates the extent to which dirty air was a fact of life for city dwellers of the period: . . . The New Yorker almost always senses a slight discomfort in breathing, especially in midtown; he knows that his cleaning bills are higher than they would be in the country; he periodically runs his handkerchief across his face and notes the fine black soot that has fallen on him; and he often feels the air pressing against him with almost as much weight as the bodies in the crowds he weaves through daily. . . . New York’s problems with air quality were hardly unique. In an October 1969 letter to the Senate Subcommittee on Air and Water Pollution, a resident of St. Louis expressed similar sentiments about the sheer pervasiveness of pollution in her community: . . . What really made me take the time to write this letter was the realization that I had begun to take the haze and various odors for granted. Close the doors and windows and they’ll be less noticeable[. I]t is very disturbing to think I’ve become used to the burning-rubber smell in the evening and the slightly sour smell in the morning. What does air smell like? . . . And air pollution’s costs went far beyond sour smells and dirty handkerchiefs, as a series of deadly “inversions” both here and abroad had made dramatically clear beginning in the late 1940s. Typically, the air at higher altitudes is cooler than that below. This is because the surface of the earth absorbs sunlight and radiates heat, warming the air closest to the ground. That warm surface air then cools as it rises higher into the atmosphere.

The Walter C. Beckjord Generating Station sits on the banks of the Ohio River, less than twenty miles southeast of Cincinnati, in Clermont County, Ohio. Beckjord offers a near-perfect case study of the costs of grandfathering. Construction of the plant was announced in November 1948, and its first 100-megawatt coal unit was operational by June 1952. Five additional units came online between 1953 and 1969. Because the units were constructed prior to 1971, all were exempt from the EPA’s New Source Performance Standards. For most of the 1970s, they also managed to avoid complying with any emission limitation under Ohio’s implementation plan for meeting the sulfur dioxide NAAQS, even though Ohio’s original plan, approved by the EPA in 1972, would have subjected Beckjord to a state emission standard—1.6 pounds of SO2 per million Btus of heat input—that was only 33 percent less stringent than the federal new-source standard of 1.2 lbs/MMBtu. In 1973, Ohio utilities convinced the U.S. Court of Appeals for the Sixth Circuit to invalidate the Ohio plan on procedural grounds. The court ordered the EPA to hold an additional hearing at which regulated plants could voice their objections, but before the agency could oblige, the governor of Ohio withdrew the plan from consideration. A year later, Ohio submitted a far less stringent proposal that would have allowed Beckjord to continue emitting at its uncontrolled level: 4.8 lbs/MMBtu. But that plan, too, was struck down on procedural grounds, this time by a state environmental review board. In 1976, after Ohio failed to offer any replacement for its second proposal, the EPA stepped in with a federal plan that would limit Beckjord’s emissions to 2.02 lbs/MMBtu. (This, according to the latest EPA computer modeling, was the level necessary for Ohio to attain the sulfur dioxide NAAQS.) After yet more litigation by Ohio utilities—including Beckjord’s owner, Cincinnati Gas & Electric—the bulk of the federal plan was upheld in 1978. (In rejecting the utilities’ challenge, the Sixth Circuit noted that Ohio was the only state in the country that still lacked an enforceable SO2 implementation plan.)

Imagine a large wooden ship, in service for generations. As its planks decay, they are swapped out for new—but otherwise identical—timbers. Over time, every piece of the ship is replaced in this manner so that eventually not one of its original planks remains. Is it still the same ship? If not, when did it lose its identity? When the first plank was replaced? The last? At some point in between? This ancient brainteaser, commonly known as the Ship of Theseus (after the mythical, Minotaur-slaying king of Athens), illustrates the classic philosophical problem of “Identity Through Time.” How much can an object change before it simply becomes something else? Philosophers have been debating that question for thousands of years. And so, since 1970, have the federal regulators charged with implementing the Clean Air Act. As we explained in Chapter 3, the Clean Air Act authorized the EPA administrator to create performance standards only for “new” stationary sources of pollution. But there was a twist: the statute defined a “new source” as “any stationary source, the construction or modification of which is commenced after the publication of [an applicable New Source Performance Standard].” In other words, the Act included a mechanism—“modification”—by which a source’s identity might change from “existing” to “new.” In theory, treating modified sources as “new” could have served as a de facto limit on the duration of grandfathering, preventing old plants from permanently avoiding compliance with federal performance standards. After all, no plant could keep running forever without requiring at least some upgrades. But what sort of upgrades should qualify as a “modification” within the meaning of the Clean Air Act? For Congress and the EPA, answering this question proved every bit as difficult as determining whether it was the third, thirteenth, or thirtieth replacement plank that transformed the Ship of Theseus into a different vessel. As a result, many of the nation’s power plants have managed to enjoy seemingly indefinite immunity from New Source Performance Standards, even after undertaking comprehensive renovations. Why did Congress decide to treat modified sources differently than other existing sources?

As distributed energy generation is becoming increasingly common, the debate on how a utility’s customers should be compensated for the excess energy they sell back to the grid is intensifying. And net metering, the practice of compensating for such energy at the retail rate for electricity, is becoming the subject of intense political disagreement. Utilities argue that net metering fails to compensate them for grid construction and distribution costs and that it gives rise to regressive cost shifting among its customers. Conversely, solar energy proponents argue that the compensation should be higher than the retail rate to account for other benefits that distributed generation systems provide, such as the resulting climate change and other environmental benefits, as well as the savings resulting from not needing to build new installations to provide additional capacity. This ongoing debate is leading to significant changes to net metering policies in many states. This Article provides a thorough analysis of the benefits and the costs of distributed generation and highlights the analytical flaws and missing elements in the competing positions and in all the existing policies. We propose an alternative approach that properly recognizes the respective contributions to the electric grid of utilities on the one hand and of distributed generators on the other. We show, however, that this policy is second-best as a result of certain constraints on how electricity can currently be priced. For the longer run, when these constraints might no longer be present, we discuss the need to consider net metering as part of a more comprehensive energy reform that would ensure the efficient integration of all distributed energy resources into the electricity grid. These reforms are needed to secure our Nation’s clean energy future.

The viability and desirability of conducting cost-benefit analysis of financial regulation is a subject of intense academic debate. Opponents claim that such analysis is feasible for environmental regulation but not for financial regulation because of the difference in the benefits that require monetization in the respective areas. This Article argues that the recent debate misses an important part of the problem. In large part, cost-benefit analysis of financial regulation cannot currently be performed successfully because of institutional shortcomings, not analytical difficulties. Compared to Executive Branch agencies, independent agencies, like the major financial regulatory agencies, lack the capacity to do cost-benefit analyses of acceptable quality. Fortunately, there are good Executive Branch models that could be exported to the financial regulatory agencies. In particular, the Financial Stability Oversight Council could implement a robust coordinating role diffusing macroeconomic expertise, learning from the experience of the Interagency Working Group set up to estimate the damage of one ton of carbon dioxide emissions. Moreover, the President could extend to independent agencies his Executive Order vesting in the Office of Information and Regulatory Affairs the responsibility to review significant federal regulations. Though no President has yet taken this step, in part because of fears of a congressional backlash, the time might now be ripe to do so. And, the financial regulatory agencies could learn from the experience of the Environmental Protection Agency in building significant economic expertise to aid the preparation of cost-benefit analyses.The Article also considers the role of judicial review. It takes issue with the influential argument that OIRA review can serve as an alternative to judicial review, showing that such an outcome would be inconsistent with settled principles of administrative law. But OIRA review can lead to more deferential judicial review, by serving as a signal that reviewing courts are likely to find reassuring.

Under the Clean Air Act, the U.S. Environmental Protection Agency (EPA) is required to determine the stringency of the National Ambient Air Quality Standards (NAAQS), arguably the most important federal environmental program, without considering the costs of achieving these standards. Instead, it must rely exclusively on health-related criteria. This Essay summarizes and updates arguments introduced in Rethinking Health Based Standards, 89 N.Y.U. L. Rev. 1184 (2014) that health-based standards like the NAAQS generate stopping-point problems and inadequacy paradoxes. Stopping-point problems arise because there is no coherent, defensible way for EPA to set the permissible level of pollution based on health considerations alone. Inadequacy paradoxes arise when health-based standards are set at levels that are less stringent than those that would result from the application of cost-benefit analysis. The NAAQS provide a case study of both pathologies at work.

In March, President Trump's Executive Order 13783 disbanded the Interagency Working Group on the Social Cost of Greenhouse Gases (IWG) ([ 1 ][1]). IWG developed estimates for federal agencies to use in cost-benefit analyses of climate policies. IWG's most recent central estimate was $50 in global

Costs of carbon emissions are being underestimated, but current estimates are still valuable for setting mitigation policy, say Richard L. Revesz and colleagues.

This article extends the author's prior work concerning how responsibility over environmental regulation in the United States should be allocated between the federal government and the states. It shows why the structure of the environmental regulation in the European Union is poorly suited for the control of interstate externalities, and exposes the weaknesses of arguments for the European Union's harmonization of process standards. It then explains that in the international community the arguments differ in large part because of the weak capacity for centralized environmental standard-setting. Trade measures can therefore be a desirable way of combatting overly lax process standards in exporting countries that lead to interjurisdictional spillovers. But such trade measures should not be permitted merely because the exporting country has less stringent environmental standards than the importing country. The article ends with an analysis of how race-to-the-bottom arguments in different regulatory contexts deal with analytically distinct phenomena.

This article compares the D.C. Circuit practice of announcing the composition of its panels before the parties have prepared their briefs with that of the remaining federal circuit courts, which announce their panels only after the filing of the briefs. The D.C. Circuit appears to have believed that its practice would reduce the court's adjudicatory burden as a result of the perception by litigants that D.C. Circuit judges vote in an ideological manner. This article shows that the D.C. Circuit practice gives rise to certain litigation-reducing and settlement-inducing incentives, but that it gives rise to countervailing incentives as well. The practice also has the effect of understating the court's ideological divisions. The analysis helps explain the incentives for litigation and settlement generated in other situations in which the identity of the adjudicator is thought to have an effect on the outcome of the case. It also provides an explanation unrelated to the existence of asymmetric information for settlements that are entered into after litigation has commenced. Copyright 2000 by the University of Chicago.

Part I: Introduction Foreword 1. Cost-Benefit Analysis Goes Global Michael A. Livermore, A.J. Glusman, and Gonzalo Moyano Part II: Valuation Issues 2. Cost-Benefit Analysis in Developing Countries: What's Different Euston Quah 3. The Benefit-Transfer Approach Lisa A. Robinson, and James K. Hammitt 4. Putting a Price on the Future of Our Children and Grandchildren Maria Damon, Kristina Mohlin, and Thomas Sterner 5. The Shape of Distributional Analysis Michael A. Livermore and Jennifer S. Rosenberg Part III: Institutional Matters 6. Changing Faces of Cost-Benefit Analysis: Alternative Institutional Settings and Varied Social and Political Contexts Jiunn-rong Yeh 7. Is There a Role for Cost-Benefit Analysis Beyond the Nation-State? Lessons from International Regulatory Cooperation Alberto Alemanno 8. The Diffusion of Regulatory Oversight Jonathan B. Wiener 9. The Role of the OECD in Capacity Building for Public Governance: Insights from the MENA-OECD Working Group on Regulatory Reform Miriam Allam Part IV: Case Studies in Pollution Control 10. Environmental Fuel Quality Improvements in Mexico: A Case Study of the Role of Cost-Benefit Analysis in the Decisionmaking Process Leonora Rojas-Bracho, Veronica Garibay-Bravo, Gretchen A. Stevens, and Georgina Echaniz-Pellicer 11. Healthcare Costs of Urban Air Pollutions in South Africa Anthony Leiman 12. Economic Costs of Air Pollution in Singapore Euston Quah, and Wai-Mun Chia 13. The Challenges of Estimating Compliance Costs in Developing Countries: Experiences from Brazil Emilio Lebre La Rovere, Martha Macedo de Lima Barata, and Amaro Olimpio Pereira Jr Part V: Case Studies in Protection of Natural Resource 14. Improving Cost-Benefit Analysis in the Assessment of Infrastructure Projects in the Brazilian Amazon Marcos Amend, Leonardo Fleck, and John Reid 15. A Cost-Benefit Analysis of Resettlement Policy in Southeast Asia Orapan Nabangchang 16. Cost-Beneft Analysis of Water Management Initiatives in China: A Case of Small, Multi-Purpose Reservoirs Shahbaz Mushtaq 17. Cost-Benefit Analysis of Water Projects in India Pawan Labhasetwar 18. The Role of Distributional Analysis in Cost-Benefit Analysis: A Case Study of Hydroelectric Projects in Panama Sarah Cordero 19. Assessing Potential Carbon Revenues from Reduced Forest Cover Loss in Liberia Jessica Donovan, Keith Lawrence, Christopher Neyor, Eduard Niesten, and Eric Werker Part VI: Paths Forward 20. Challenges and Opportunities Michael A. Livermore

Under the Clean Air Act, the U.S Environmental Protection Agency (EPA) is required to determine the stringency of the National Ambient Air Quality Standards (NAAQS), arguably the most important federal environmental program, without considering the costs of achieving these standards. Instead, it must rely exclusively on health-related criteria. This Article argues that health-based standards, which are one of the principal approaches to setting the stringency of environmental requirements in the United States, exhibit two serious pathologies: the stopping point problem and the inadequacy paradox. The stopping point problem arises because there is no coherent, defensible way for EPA to set the permissible level of pollution based on health considerations alone. Moreover, contrary to the commonly accepted view, the NAAQS have generally been set at levels that are less stringent than those that would result from the application of cost-benefit analysis, giving rise to the inadequacy paradox. We urge a reinterpretation of the Supreme Court’s important decision in Whitman v. American Trucking Associations that would solve the inadequacy paradox and explain how non-welfarist considerations, although they do not avoid the stopping point problem, could justify health-based trumps.

This Article highlights the role of capture in providing a normative foundation for regulatory review of administrative action, which at the federal level is conducted by the Office of Information and Regulatory Affairs (OIRA) within the White House Office of Management and Budget (OMB). It also establishes a reform agenda to help bring the practice of review in line with its anti-capture justification. There are two traditional justifications for OIRA review: that centralized review facilitates the exercise of presidential authority over agencies; and that bureaucratic tendencies toward overzealousness require a centralized checking response. Both of these justifications are problematic, however. The normative desirability of maximizing presidential power is subject to debate, and OIRA’s contribution to increasing presidential control is minimal. Bureaucratic incentives can lead to both over- and underregulation, raising doubts about the need for a systematic check focused solely on the former. An anti-capture function for OIRA provides a more promising ground for regulatory review. OIRA has four important features that, in principle, can facilitate an anti-capture role: its generalist nature; its coordination function; its use of cost-benefit analysis; and a tradition of independent leadership. There are, however, elements of OIRA review that undermine its anti-capture potential, most importantly the near exclusive focus on the review of agency action. The failure of an agency to act can be just as detrimental to social well-being as overzealousness, and special interests may seek deregulation, delay, and weak regulation as often as over-regulation. This Article proposes a specific mechanism for OIRA to engage in review of agency inaction by examining petitions for rulemakings filed with agencies. This procedure cabins OIRA’s inaction review powers within a fairly limited field, making the task workable, and takes advantage of information held by parties outside the government.

Volumes have been written — both by courts and commentators — about the so-called independent agencies. These agencies are thought of as distinct from executive branch agencies and constitutionally insulated from presidential influence. Yet few have taken the time to ask even the most basic question: What features make an agency “independent” as opposed to “executive?” This Article is the first to systematically survey the administrative agencies for a broad set of indicia of independence — removal protection, multi-member structure, partisan balance requirements, budget and congressional communication authority, litigation authority, and adjudication authority — to answer that question. It also examines the functional differences between independent and executive agencies. As it turns out, there is no single feature, structural or functional, that every agency commonly thought of as independent shares, not even the for-cause removal provision commonly associated with independence. We therefore reject the binary distinction between independent and executive agencies. Instead all agencies should be regarded as executive and seen as falling on a spectrum from more independent to less independent. From this new understanding of administrative agencies flows a new and simpler theory of presidential control of agencies: A President can take an action with respect to an agency (assuming it is within his Article II powers) unless Congress has prohibited that action by statute. There is no tenable argument to justify any additional constitutional barrier to presidential interaction with agencies, and the dicta in Humphrey’s Executor suggesting otherwise is incorrect and should be abandoned. Most importantly, we believe there is no statutory or constitutional barrier to the extension of the regulatory review executive orders to all administrative agencies. These executive orders have long exempted “independent agencies." As a result those agencies perform shoddy cost-benefit analysis when promulgating regulations, when they do so at all. The Dodd-Frank reform bill requires financial agencies, almost all of which are considered independent, to promulgate over 300 regulations. This upcoming flood of regulations underscores what has been obvious for decades that independent agencies impose massive regulatory costs, just like executive agencies. This Article aims to make it clear there is no legal barrier to the extension of the regulatory review executive orders in the hopes of emboldening a future President to overcome the political barriers to doing so.

* Professors of Law, New York University. We acknowledge the generous financial support of the Filomen D'Agostino and Max E. Greenberg Research Fund at the New York University School of Law and the support of the C. V. Starr Center for Applied Economics at New York University. Prior versions of this article were presented at the Conference on the Law and Economics of Environmental Policy, organized by the European Association of Law and Economics and the Geneva Association, Paris, April 1991; at the Comparative Law and Economics Forum, Berkeley, October 1992; and at workshops at the New York University School of Law, University of North Carolina School of Law, and Stanford University Law School. Edward Sherry's extensive comments were very helpful; we also appreciate the valuable suggestions of Marcel Kahan and Kathryn Spier. We are grateful for the research assistance of Kent Chen, Marcel Hawiger, and Jeffrey Spear. ' The classic single-defendant works are John P. Gould, The Economics of Legal Conflicts, 2 J. Legal Stud. 279 (1973); William M. Landes, An Economic Analysis of the Courts, 14 J. Law & Econ. 61 (1971); Richard A. Posner, An Economic Approach to Legal Procedure and Judicial Administration, 2 J. Legal Stud. 399 (1973). The problem of multidefendant settlements is analyzed in Frank H. Easterbrook, William M. Landes, & Richard A. Posner, Contribution among Antitrust Defendants: A Legal and Economic Analysis, 23 J. Law & Econ. 331 (1980); and A. Mitchell Polinsky & Steven Shavell, Contribution and Claim Reduction among Antitrust Defendants: An Economic Analysis, 33 Stan. L. Rev. 447 (1981). These articles deal with a case in which the plaintiff's probabilities of success against each of the defendants are perfectly correlated and thus cover only a narrow slice of the problem that we examine. The approach of the Easterbrook, Landes, & Posner article is followed, without major modification, in Jong Goo Yi, Litigations with Multiple Defendants: How to Settle under Different Apportionment Rules 73-82 (unpublished Ph.D. dissertation, Stanford Univ., February 1991). In a recent paper, Jeffrey Lange studies, in a multiple-defendant context, possible contractual arrangements between a plaintiff and one or more defendants. Jeffrey Lange, Litigation Risk Exchange: An Economic Analysis of Sliding-Scale Settlements (unpublished manuscript, Univ. Pennsylvania Law School 1993). He addresses only the case of perfectly