It is important to realized that the two prospective analyses do not represent

It is important to realized that the two prospective

This preview shows page 81 - 84 out of 85 pages.

It is important to realized that the two prospective analyses do not represent the costs and benefits of the entire Clean Air Act because they do not use a baseline associated with a world without the Clean Air Act. An analysis of the entire Clean Air Act would require modeling the emission trajectory continuing from the “Pre - CAA” line into the future.
Slide 82 Considerations for Retrospective vs. Prospective BCA For regulatory policy, the majority of BCA are forward-looking, prospective, analyses. The baseline is the world without the policy action being considered arguably easier to model since is most likely a business-as-usual scenario. The policy scenario requires additional assumptions about the effectiveness of the policy and behavioral and market responses to the policy. A retrospective analysis compares the effectiveness of an existing policy to the world if the policy had never been enacted. The policy scenario is the evolution of the world that actually occurred and may be easier to model. The baseline is the “counterfactual” scenario that requires additional behavioral and economic assumptions. Introduction to Benefit-Cost Analysis The three studies done for the Clean Air Act illustrate the difference in the baseline when conducting either a retrospective or a prospective analysis. For regulatory policy, the majority of BCA are forward-looking, prospective, analyses, evaluating the anticipated effectiveness of a policy compared to the world without that policy. In this case, the baseline is the world without the policy action being considered and is, arguably, easier to model since is most likely a business-as-usual scenario. Demographic and economic activity projections are generally available and the resulting environmental conditions can be modeled from those projections. The policy scenario requires additional assumptions about the effectiveness of the policy and behavioral and market responses to the policy. In contrast, a retrospective analysis of a policy compares the effectiveness of an existing policy to the world if the policy had never been enacted. In this case, the policy scenario is easier to model, because it is the evolu tion of the world that actually occurred, and the baseline is the “counterfactual” scenario that requires additional behavioral and economic assumptions.
Slide 83 Including Finalized Regulation The baseline needs to reflect actions that have already been taken or committed to. Actions that have already been promulgated should be included, even if those effects have not yet occurred but will occur in the future. Future effects should also reflect the anticipated level of compliance. The less businesses comply with promulgated regulation, the less the effect that regulation will have. Introduction to Benefit-Cost Analysis Mercury emissions in 2001 and the estimated 2020 (with CAIR) baseline Emissions Source Total Mercury Emissions (tons) 2001 Base Year 2020 (with CAIR) Baseline EGUs 48.57 34.42 Non-EGU Point 58.78 45.01 Non-point 7.54 7.76 Total, All Sources 114.89 87.19 Source: Adapted from EPA, Regulatory Impact Analysis of the Final Clean Air Mercury Rule , p. 8

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture