Even though cost-benefit analysis is a tool designed to evaluate whether a policy is going to be effective, it does not necessarily fulfill the intention. Thousands of regulatory economic analyses have been prepared by federal administrators; yet, it is difficult to estimate the costs and benefits accurately (Rosenbaum 149). For example, the U.S. Army Corps of Engineers conducts cost-benefit analyses for civil works projects including levees, dams, and drainage canals. For almost a century, these projects have frequently been justified by inaccurate cost-benefit analyses, which Congress who favors the benefits uncritically accepts because doing so works to the advantage of local constituencies. As a result, policy implementation is significantly flawed due to bias. Also, considering the Reagan and George W. Bush administrations, cost-benefit analyses is vulnerable to partisan manipulation that it is often not respected by officials even when they are allowed to consider the economics of regulation (Rosenbaum 151). As former adviser to President Richard Nixon recalls, “the EPA staff repeatedly seemed to minimize pollution costs, while other agencies weighed in with high costs to meet the identical pollution standard” (Rosenbaum 151). With the potential drawbacks of cost-benefit analysis being said, it is interesting to explore how it could be applied to a policy going forward.
Cost-benefit analysis needs to be applied to the Resource Conservation and Recovery Act (RCRA). The act has been criticized for failing to require specifically that regulatory agencies consider costs, among other factors, in setting environmental standards (Rosenbaum 143). Similar to the example I described above with the U.S. Army Corps of Engineers, the costs were expected to be lower than they are in reality. The outlined RCRA policy’s costs lacked in specificity which ultimately led to inaccurate cost-benefit analysis. Illustrated by the comparison between the Reagan and Bush administrations, the political climate at the time also enabled the act to pass even though the government was not equipped to take on the costs required for the policy to be thoroughly carried out. There is a carelessness about costs among RCRA regulators that inflict economic penalties on regulated interests (Rosenbaum 143). That said, the application of cost-benefit analysis would improve the policy because it would allow for polluters to be held accountable, and as a result, inflict less damage on the environment. With full acknowledgement of all the potential costs during the policy formation stage, the government would have been well-prepared at the implementation stage. That way, the benefit of the policy, essentially focused on cleaning up contaminated sites, would actually be realized.
Rosenbaum, Walter A. 2020. Environmental Politics and Policy. Los Angeles, California: Sage.
Comment by Jenny Murphy:
The town of Dungeness (no longer in existence) flooded multiple times back in the 1960’s. The Army Corp of Engineers built a levee that spans approximately 2.5 mile of the Dungeness river on both sides to protect the farms and homes of the people that resided in the area. After more than 80 years, the river has been reduced to bedrock for the 2.5 mile stretch due to the channelizing that occurred in the years since the levees were installed. The Dungeness is host to multiple species of endangered salmon, and the lack of gravel beds prevent them from laying eggs. This is just one issue among many other issues that have occurred due to placement of the levee. Although this may have been more of an adaptive management issue or just simply unknown consequences of the levee placement, I can fully agree that better evaluations need to occur prior to completing some of these projects. It may have been more cost effective both financially and to the damage done to the habitat to just move the houses and/or farms.
Awesome example! It is important to consider costs beyond just monetary. It matches up with the description of the Army Corp of Engineers from my initial post. Although the intention was there to protect the farms and homes of the people that resided in the area, the project was not analyzed enough so to fulfill its purpose. Considering the salmon, it would be interesting to use the Endangered Species Act to call for a new cost-benefit analysis to be conducted for the purpose of evaluating the Dungeness project in the case policy-makers are aiming to implement a similar contraption in another area.
I wonder how the people would respond to being told they have to move their houses/farms.
Comment by Professor Morgan:
Great job of pulling examples from Rosenbaum that really make the point. The Army Corps of Engineers are downright notorious for inflated benefits and minimizing costs in their costs benefits analysis. They seem to be an agency in search of a meaning other than delivering large federal dollars to localities. Unfortunately this political game has real environmental consequences that will only grow as we deal with the impacts of climate change.
Original Post by Chris Bonham:
A cost-benefit analysis (CBA) is one of several frameworks used to develop environmental policy. Although it has its limitations, CBA can provide useful policymaking information, as it weighs the net costs such as: cost of abatement technology or methods; monitoring and enforcement costs; and social costs, to the net benefits such as: improved air quality; preserving biodiversity; or saving human lives (Rosenbaum 2020, 142-143). The CBA framework involves four steps: specify a policy; quantitatively calculate both expected net inputs and outputs; estimate social costs of the inputs and outputs; and compare the costs against the benefits. (Field and Field 2015, 113). If the benefits outweigh the costs than the policy is expected to be efficient and successful.
A very rudimentary example of how a CBA might be beneficial can be seen when applying it to the Clean Water Act (CWA) of 1972, set a standard for water quality with the United States and implemented a pollution discharge permit system (Rosenbaum 2020, 8). The CBA for a project this size would be enormous as 99% of American citizens live within 50 miles of a publicly owned body of water (Rosenbaum 2020, 182). For this policy implementation, some examples of costs might have been: scientific research and water sampling; loss of economic income as waterways might have been hazardous and closed until determined safe; loss of social recreational opportunities; risk of contaminated drinking water; wildlife and human health risks; and many more. A few examples of net benefits from the CWA implementation include; improved water quality; additional economic and social opportunities; increased wildlife biodiversity; clean drinking water; improved human health; and the list could go on and on. Policy makers also must consider the distribution of costs and benefits, as it is essential to maintain environmental justice (Field and Field 2015, 122).
Quite frankly, I am very impressed at how much thought goes into the CBA and am amazed that something like social costs can be quantified. It was quite overwhelming to even begin to think about how many costs and or benefits could possibly be considered in the grand scheme of things. How does one calculate the price or benefit of clean water 50 or 100 years from now? If we could set a higher water quality standard that would save even just one life, wouldn’t it be worth raising the bar, no matter the cost? The eco-centric or deep ecologist in me has a hard time even fathoming that money spent is being considered over saving lives. Even still, CBA can be useful and does at least offer additional information when making difficult environmental policy decisions.
Field, Barry C., and Martha K. Field. 2015. Environmental Economics: An Introduction.7th ed. New York: McGraw Hill/Irwin.
Rosenbaum, Walter A. 2020. Environmental Politics and Policy. Thousand Oaks, California: Sage.
There definitely are remaining challenges to keeping our waters clean even before Trump took office. The National Resources Defense Council’s website goes into detail about how lakes, ponds, rivers, streams and wetlands are still heavily covered with contamination (National Resources Defense Council 2017). It is widely debated whether the money put into the CWA is worth the benefit from merely a mathematical standpoint (Keiser and Shapiro 2018). Essentially it’s not cost-effective while results of the CAA from 1990 to 2020 reveal the act’s benefits exceeds costs by a factor of 30 to one (Environmental Protection Agency). However, simply putting the CWA in place has led to many of the fascinating bills we researched for the Water Legislation discussion through congress.gov. and has protected some of the individual waters that have special places in our hearts. It led to the safe drinking water standards of the 1970s, wetlands protections in the 1980s, and amendments including control of toxic pollutants and stormwater discharges (Walter 2012). With the overwhelming challenge of purifying all the nation’s waters, the CWA needs to refine its procedures to be even more effective rather than rolling back the standards. For example, there needs to be increased focus on pollutants from agricultural sources while WOTUS is designed to decrease environmental regulations for farmers. Overall, it’s important to highlight successes of the CWA because we do still need it to be functioning at maximum capacity.
Environmental Protection Agency. n.d. “Benefits and Costs of the Clean Air Act 1990-2020, the Second Prospective Study.” Accessed June 2 2020. https://www.epa.gov/clean-air-act-overview/benefits-and-costs-clean-air-act-1990-2020-second-prospective-study
Kaiser, David and Shapiro, Joseph. October 2018. “How the Clean Water Act has Served the Environment and Economy.” Accessed June 2 2020. https://voxeu.org/article/impact-clean-water-act
National Resources Defense Council. 2017. “Clean Water Act at 45: Despite Success, It’s Under Attack.” Accessed June 2 2020. https://www.nrdc.org/experts/jon-devine/clean-water-act-45-despite-success-its-under-attack
Walter, Laura. March 2012. “Water is Worth It: EPA Celebrates 40th Anniversary of the Clean Water Act.” Accessed June 2 2020. https://www.ehstoday.com/standards/epa/article/21915078/water-is-worth-it-epa-celebrates-40th-anniversary-of-the-clean-water-act
Response by Chris Bonham:
You’re exactly right that there has been an issue with CWA for decades, and it’s not just in this country either. Something about restoring water seems to be expensive. In 2015, France developed a Water Framework Directive policy aimed at improving the countries surface waters to “good” condition. However, after over 700 cost-benefit analyses were conducted, the cost would have been $235 million whereas the benefits only $18 million. Since there was a clause in the policy that allowed for economic considerations, 75% of Frances surface water remains “not good” (Feuillette and colleagues 2016).
I agree that we need to be strengthening the CWA and not rolling back regulations. In fact, we have learned and you mentioned, what the CWA really needs is an upgrade to include all of the knowledge and technology we have today, not to mention account for environmental justice.
Feuillette, Sarah, Herold Levrel, Blandine Boeuf, Stephanie Blanquart, Olivier Gorin, Guillaume Monaco, Bruno Penisson, and Stephane Robichon. 2016. “The Use of Cost–benefit Analysis in Environmental Policies: Some Issues Raised by the Water Framework Directive Implementation in France.” Environmental Science & Policy 57: 79-85. https://doi.org/10.1016/j.envsci.2015.12.002.