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OAQPS Economic Analysis Resource Document

1.1 Regulatory Context

    OAQPS establishes standards and regulations to improve the nation’s air quality subject to the provisions of the Clean Air Act (CAA).  Specific provisions of the CAA require that an economic impact assessment (EIA) be conducted for individual regulatory actions under the Act’s authority.  Requirements for economic analysis can be viewed in the broader context of overarching requirements for all Federal regulations as stipulated by the presidential executive order on regulatory review.  EO 12866 requires regulatory agencies to submit all proposed and final regulations to the Office of Management and Budget (OMB) for review.  Agencies must demonstrate that the regulation is necessary and that the potential benefits of the intended regulation justify its costs.  For any “significant regulatory action,” the Agency is required to prepare a comprehensive EA, which contains descriptions of the benefits and costs of the proposed rule and of alternative approaches.
    In the past, as stipulated in EO 12291, the comprehensive set of analyses sent to OMB for review was referred to as a “regulatory impact analysis (RIAs).”  EO 12866 replaced EO 12291 and simply requires that benefits, costs, and other economic impacts be examined.  Since EO 12866 did not provide a specific name for these reports, the naming convention has become somewhat loose.  Therefore, even though the term RIA is still widely used throughout the Agency and OMB, the term “Economic Analysis (EA)” will be used in this document to refer to the assessment of benefits, costs, and other impacts required by EO 12866.  The key point to be made here is that, whichever term is used, the analyses called for under EO 12866 are broader in scope than an EIA.  The analyses include an assessment of benefits in quantified and monetized terms when possible and a comparison of benefits and costs to address the “cost justification” issue just described.  The notion, under EO 12866, that a rule’s benefits must justify its costs is a less restrictive requirement than existed in the predecessor, EO 12291, wherein  benefits must be shown to exceed costs for the regulation to proceed.  EO 12866 and EO 12291 are further contrasted in Section 2 of this document.  It is important to recognize that EO 12866 does not supercede the authority to regulate under the CAA or any other statutory authority.  EO 12866 cannot, for instance, negate a regulation based on benefit-cost criteria if the statutory authority precludes that from affecting the regulatory decision.
    The regulatory context of OAQPS regulations and the corresponding requirements for economic analysis change through time as legislation and administrative policies are updated in response to a myriad of societal forces.  For example, in the 5 years immediately preceding the preparation of this document, the White House has issued a number of EOs affecting the nature and scope of EAs performed in support of Federal regulations.  In addition, Congress has adopted legislation requiring specific forms of economic impacts be analyzed and considered in the design of Federal regulation.  Other legislation affecting economic analysis requirements is pending, though not necessarily assured of passage.  In short, the regulatory background described here provides a snapshot of the situation in early 1999.  The reader is advised to recognize these dynamics and to remain current with changes in the regulatory environment that determine the requirements for economic analysis.

2 The definition of a significant regulatory action is discussed in Section 2 of this document.


1 Introduction

 1.0 Intro

 1.1 Regulatory Context

 1.2 Different Levels of
   Economic Analysis
   in OAQPS

 1.3 Scope of This

 1.4 Organization of
   This Document

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