Working Paper: NBER ID: w27603
Authors: Joseph E. Aldy; Matthew Kotchen; Mary F. Evans; Meredith Fowlie; Arik Levinson; Karen Palmer
Abstract: This paper considers the treatment of co-benefits in benefit-cost analysis of federal air quality regulations. Using a comprehensive data set on all major Clean Air Act rules issued by the Environmental Protection Agency over the period 1997-2019, we show that (1) co-benefits make up a significant share of the monetized benefits; (2) among the categories of co-benefits, those associated with reductions in fine particulate matter are the most significant; and (3) co-benefits have been pivotal to the quantified net benefit calculation in exactly half of cases. Motivated by these trends, we develop a simple conceptual framework that illustrates a critical point: co-benefits are simply a semantic category of benefits that should be included in benefit-cost analyses. We also address common concerns about whether the inclusion of co-benefits is problematic because of alternative regulatory approaches that may be more cost-effective and the possibility for double counting.
Keywords: cobenefits; regulatory impact analysis; air quality regulations; benefit-cost analysis
JEL Codes: D61; Q53; Q58
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Compliance with regulations (G18) | Reductions in pollutants (Q53) |
| Reductions in pollutants (Q53) | Health benefits (cobenefits) (I14) |
| Compliance with regulations (G18) | Health benefits (cobenefits) (I14) |
| Inclusion of cobenefits (Q51) | Net positive benefits in BCAs (H43) |
| Inclusion of cobenefits (Q51) | Shift net benefits from negative to positive (H23) |