White House Regulation Plan Sets Path for Tougher Climate Rules

The White House issued new guidance Thursday that clears the way for agencies to write tougher rules governing greenhouse gases, chemicals, and a wide range of other pollutants.

The change to the estimated value of regulatory benefits over time, called the discount rate, makes it easier for proposed rules whose benefits lie mostly in the future to survive the rigorous analysis agencies must undertake.

Rules meant to curb carbon emissions could fit in that category because the full effect of greenhouse gas emissions on climate change don’t kick in right away. The same is true of chemicals that cause cancer decades after they’re ingested.

“A lower discount rate will make the present value today of future social benefits greater, whether for climate change policies or any other policy,” said Cary Coglianese, an administrative law professor at the University of Pennsylvania.

The Office of Information and Regulatory Affairs’ new guidance doesn’t lay out an automatic glide path for tougher EPA rules. Rather, by lowering the discount rate that agencies must use from a default estimate of 3% to 2%, the Office of Management and Budget has merely increased the likelihood that stringent rules will survive the cost-benefit analysis agencies have to undertake.

The change is consistent with voluminous academic research into discounting, and is “actually a conservative estimate,” said Peter Howard, economics director at the New York University School of Law’s Institute for Policy Integrity.

A future administration could raise the discount rate again, but would “have to provide a rational justification” for doing so, Howard said.

Agencies will also have to tweak the way they discount the costs of regulations. But because compliance costs tend to accumulate in a shorter time frame than benefits, those new calculations aren’t expected to be as significant as the increased valuation of benefits.

Environmental Justice

Another part of the guidance could benefit environmental justice communities that suffer a disproportionate share of burdens. The changes give more detail on how agencies should determine the ways their rules will have different effects on different people.

Many federal agencies, including the Environmental Protection Agency and Interior Department, have already been taking a harder look at the distributional effects of their rules under President Joe Biden. But the issue has often been bypassed historically, so the new guidance formally underscores its significance in agency decision making.

OIRA’s guidance also lays out instructions on how agencies should consider the non-monetary benefits of their rules.

Agencies are already required to consider qualitative costs and benefits that are hard to quantify, but as with distributional impacts, agencies have sometimes “conflated what cannot be monetized with what is insignificant, speculative, or unimportant,” OIRA said in a statement.

Often those decisions were made because agencies have struggled to put dollar figures on non-monetary benefits like human dignity or aesthetic beauty. But under the new changes, agencies are advised to include a summary table of all important non-monetized effects, along with descriptions of why they are important.

Examples of non-monetary benefits could include the beauty of a natural landscape, the protection of an endangered species, or water quality, said Max Sarinsky, senior attorney at the Institute for Policy Integrity.

“It varies from case to case, and some agencies have given it serious consideration,” Sarinsky said. “But what we’ve seen over decades—particular under Trump, is that these effects that weren’t given value at all.”