Aldy, Joseph E.
[Author];
Kotchen, Matthew J.
[Author];
Evans, Mary
[Author];
Fowlie, Meredith
[Author];
Levinson, Arik
[Author];
Palmer, Karen L.
[Author]
Co-benefits and regulatory impact analysis
: theory and evidence from federal air quality regulations
Description:
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 nearly 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