Guidelines for Preparing Economic Analyses

Preface

The U.S. Environmental Protection Agency (EPA), Regulatory Policy Council oversees regulatory planning by the Agency. In this capacity, the Council establishes analytical procedures on risk management issues to ensure that high quality and consistent practices are followed in accordance with Federal and Agency regulatory procedures. In early 1996, the conduct and consistency of economic analyses prepared in support of regulatory actions were identified as areas in need of updated and more specific guidance than was presently available in the Agency. The Regulatory Policy Council assembled a group economists and policy analysts serving in offices throughout the EPA to serve on an Economic Consistency Workgroup. The Council instructed the Workgroup to develop a series of issue papers to assess important economic analytical issues facing the Agency. After discussing the results of the findings in the issue papers, the Council charged the Workgroup with preparing a guidance document to assist in the preparation of economic analyses used for regulatory development and policy evaluation conducted by the Agency.

The Guidelines for Preparing Economic Analyses (or EA Guidelines) is part of a continuing effort by the EPA to develop improved guidance on the preparation and use of sound science in support of the decision making process. The EA Guidelines provide guidance on analyzing the benefits, costs, and economic impacts of regulations and policies. The document draws from several previously published sources, including existing economic guidelines materials prepared by the EPA in the mid-1980s, other Agency economic analyses and handbooks, and materials prepared by the Office of Management and Budget in support of Executive Order 12866 on regulatory planning and analysis. It seeks to incorporate recent theoretical, empirical, and modeling advances in environmental economics, drawing upon the considerable body of scholarly literature.

In an effort to ensure the EA Guidelines presents sound, scientific information consistent with mainstream practices in environmental economics, the Agency's Science Advisory Board (SAB) was charged with undertaking an extensive peer review of the document. The review was performed by the SAB's Environmental Economics Advisory Committee (EEAC), comprising leading U.S. environmental economists affiliated with major colleges, universities and economic research institutions. The EEAC provided substantial input on the content and organization of the document, reviewing the materials for accuracy in both economic theory and practice. In their final review report to the Agency (included as Appendix A in this document), the SAB concluded that the EA Guidelines receive an overall rating of "excellent," saying it "succeed(s) in reflecting methods and practices that enjoy widespread acceptance in the environmental economics profession."

Constant advances in theoretical and empirical research in the field of environmental economics will require that the Agency reexamine the EA Guidelines on a continual basis. The Agency will again enlist experts in the field of environmental economics and engage in an open review of the scientific basis of the document when it is reevaluated in the future.