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Co-Benefits and Regulatory Impact Analysis: Theory and Evidence from Federal Air Quality Regulations

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  • 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.

Suggested Citation

  • Joseph E. Aldy & Matthew Kotchen & Mary F. Evans & Meredith Fowlie & Arik Levinson & Karen Palmer, 2020. "Co-Benefits and Regulatory Impact Analysis: Theory and Evidence from Federal Air Quality Regulations," NBER Working Papers 27603, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:27603
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    Cited by:

    1. Mark Colas & John M. Morehouse, 2022. "The environmental cost of land‐use restrictions," Quantitative Economics, Econometric Society, vol. 13(1), pages 179-223, January.
    2. Cao, Jing & Ma, Rong, 2023. "Mitigating agricultural fires with carrot or stick? Evidence from China," Journal of Development Economics, Elsevier, vol. 165(C).
    3. Shupeng Zhu & Michael Mac Kinnon & Andrea Carlos-Carlos & Steven J. Davis & Scott Samuelsen, 2022. "Decarbonization will lead to more equitable air quality in California," Nature Communications, Nature, vol. 13(1), pages 1-10, December.

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    More about this item

    JEL classification:

    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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