The Biden administration is updating the federal regulatory review process through a broader assessment of benefits, a sharper focus on how regulations affect different populations and a wider public role.
Those changes announced April 6 will affect energy efficiency standards crafted by the Department of Energy and power plant-related regulations from the Environmental Protection Agency, among other federal rules.
The measures include changes to Circular A-4, the main guidance document telling federal agencies how to assess costs and benefits of proposed regulations. It hasn’t been updated since 2003.
The regulatory review revamp is being made through an executive order, guidance to agencies and a proposal governing meetings with the Office of Information and Regulatory Affairs, which is responsible for reviewing proposed executive branch regulations.
“The new [executive order] and updates to the Circular A-4 would produce a more efficient, effective regulatory review process that will help improve people's lives, from protecting children from harmful toxins and lowering everyday costs for families to improving rail safety, and growing our economy,” Richard Revesz, OIRA administrator, said Tuesday during a webinar hosted by the Coalition for Sensible Safeguards.
Some of the key elements of the initiative include increasing the “significance” threshold for triggering an OIRA review of proposed regulations to those that have an estimated $200 million annual cost or benefit impact, up from $100 million, according to Revesz, who started working at OIRA in January.
That increase will allow for a more focused and effective review of regulations, he said.
OIRA also wants to make sure groups that haven’t traditionally been involved in regulatory reviews are part of the process at OIRA and at federal agencies, Revesz said.
Their participation may help ensure that estimated costs and benefits of a regulation are more accurate, he said.
When agencies weigh the costs and benefits of a regulation under the updated process, they should generally use a 1.7% discount rate, down from the 3% to 7% rate that was set in 2003. The discount rate is used to assess future benefits of a regulation. A lower rate will lead to higher estimated benefits, especially when assessing a regulation’s long-term effects, according to Revesz.
Using a 3% discount rate, an interagency group in February 2021 set the social cost of carbon, a measure used in regulatory analysis, at $51 per ton of carbon dioxide. A 2% discount rate would have led to a $125/ton social cost of carbon, Revesz said.
Agencies will also use “distribution analysis” to consider how costs and benefits are spread across different populations, Revesz said, noting it hasn’t generally been used in the federal rulemaking process. It is an area that captures environmental justice and equity issues, he said.
Independent agencies, such as the Federal Energy Regulatory Commission, aren’t affected by the revamped regulatory review process, according to Revesz.
OIRA is taking comments on its proposal to change Circular A-4 through June 6. It plans to issue a final update within a year.
The update to how agencies assess costs and benefits of proposed regulations will help ensure that economic analysis applies state-of-the-art approaches to a range of issues, from valuing future impacts to considering distribution and equity, according to Max Sarinsky, senior attorney at the Institute for Policy Integrity at the New York University School of Law.
“This guidance will enable government agencies to more evenhandedly assess the benefits and costs of proposed regulations,” he said in a statement. “If applied faithfully, it should result in a regulatory system that better serves the public by ensuring that all regulatory impacts — including difficult-to-measure health and environmental effects such as impacts on climate change — receive due consideration.”
Before joining OIRA, Revesz was a professor at the NYU School of Law. He wrote Reviving Rationality: Saving Cost-Benefit Analysis for the Sake of the Environment and Our Health.