Jan 21st, 2011 by Prof. Coplan, Karl S.
by Karl Coplan
There has been quite a bit of discussion about President Obama’s issuance of an executive order providing for a retrospective review of existing regulations (including existing environmental regulations) that are unduly burdensome to industry, with much fretting that this regulatory review represents a significant anti-regulatory shift in the Administration’s philosophy, and threatens EPA’s current efforts to regulate greenhouse gas emissions under existing Clean Air Act authorities. I say let’s wait and see. On paper, other than directing a review of existing regulations, President Obama’s executive order does not significantly change the substantive standards for review of regulations by the Office of Information and Regulatory Affairs, nor does it change procedures or standards for review of new regulations, such as those regulating greenhouse gas emissions.
This week’s executive order, available here, specifically incorporates and reaffirms the open-textured cost-benefit approach adopted by President Clinton in executive order 12866, issued in 1993. The Obama Executive order, like President Clinton’s, provides that regulation
must take into account benefits and costs, both quantitative and qualitative. It must ensure that regulations are accessible, consistent, written in plain language, and easy to understand. It must measure, and seek to improve, the actual results of regulatory requirements.
(b) This order is supplemental to and reaffirms the principles, structures, and definitions governing contemporary regulatory review that were established in Executive Order 12866 of September 30, 1993. As stated in that Executive Order and to the extent permitted by law, each agency must, among other things: (1) propose or adopt a regulation only upon a reasoned determination that its benefits justify its costs (recognizing that some benefits and costs are difficult to quantify); (2) tailor its regulations to impose the least burden on society, consistent with obtaining regulatory objectives, taking into account, among other things, and to the extent practicable, the costs of cumulative regulations; (3) select, in choosing among alternative regulatory approaches, those approaches that maximize net benefits (including potential economic, environmental, public health and safety, and other advantages; distributive impacts; and equity); (4) to the extent feasible, specify performance objectives, rather than specifying the behavior or manner of compliance that regulated entities must adopt; and (5) identify and assess available alternatives to direct regulation, including providing economic incentives to encourage the desired behavior, such as user fees or marketable permits, or providing information upon which choices can be made by the public.
(c) In applying these principles, each agency is directed to use the best available techniques to quantify anticipated present and future benefits and costs as accurately as possible. Where appropriate and permitted by law, each agency may consider (and discuss qualitatively) values that are difficult or impossible to quantify, including equity, human dignity, fairness, and distributive impacts.
While these regulatory principles are not identical to those stated in Clinton’s executive order 12866, they are roughly parallel, and both include a requirement to adopt regulations only where “benefits justify costs (recognizing that some benefits are difficult to quantify.)” Obama’s order adds specific recognition that “equity, human dignity, fairness, and distributive impacts” must be considered in cost benefit analysis.
I am no fan of cost benefit analysis, since any attempt to quantify and monetize environmental values is pure fiction. But this executive order at least recognizes that cost benefit analysis has distributive impacts — that is, any time you put a dollar value on public goods like environmental values, you tend to promote the privatization and transfer of these public goods from the public to those private interests with existing wealth, increasing wealth concentration and taking value away from the least well off who share public goods but not private goods. And it recognizes these distributive, equity, fairness, and dignity impacts should be considered. That is a good thing. (The Clinton executive order included distributive impacts only in its consideration of cost effectiveness, not as part of a cost benefit analysis).
Yes, the Obama executive order “directs” agencies to perform a retrospective review of existing regulations, taking agency resources away from their current regulatory agenda. But by its terms, the executive order requires agencies to do nothing more than come up with a “plan” for periodic review of existing rules, “consistent with law and its resources and regulatory priorities.” Clinton’s 1993 executive order also directed agencies to conduct a review of existing regulations in almost identical terms.
Ultimately, the question whether Obama’s executive order constitutes a change in direction, or simply a political act, will be apparent from agency actions. So far Lisa Jackson’s EPA has shown uncommon backbone in pursuit of regulating greenhouse gas emissions and, more recently, in vetoing the Spruce No. 1 mine — something the Clinton Administration never dared to do. It is hard to believe that EPA is taking these actions without the acquiescence of President Obama as well as Cass Sunstein at OIRA.
So, this executive order will actually be news if EPA announces it is revoking a significant rule based on this review. I am not terribly worried.