Fiscal Notes and CostBenefit Analysis Maggie Monast Policy Analyst Environmental Defense Fund 150B214 Fiscal notes on rules The fiscal note must state the amount of funds that would be expended or distributed as a result of the proposed rule change and explain how the amount wa ID: 1027562
Download Presentation The PPT/PDF document "Environmental Economics:" is the property of its rightful owner. Permission is granted to download and print the materials on this web site for personal, non-commercial use only, and to display it on your personal computer provided you do not modify the materials and that you retain all copyright notices contained in the materials. By downloading content from our website, you accept the terms of this agreement.
1. Environmental Economics: Fiscal Notes and Cost-Benefit AnalysisMaggie MonastPolicy Analyst, Environmental Defense Fund
2. § 150B‑21.4. Fiscal notes on rules.“The fiscal note must state the amount of funds that would be expended or distributed as a result of the proposed rule change and explain how the amount was computed.”Must include impacts on DOT and local governments.Must describe the purpose and benefits of the proposed rule change.
3. The Economist’s Rationale for RegulationEconomic activity can cause negative externalitiesMarkets do not include all benefits and costs to society Market FailureEnvironmental regulations are often designed to correct market failures Goal: Maximize Net Benefits to Society
4. How to Maximize Net Benefits?Cost-benefit analysis is a tool to compare policy alternatives.Policy A is more efficient than policy B if the net benefits are greater under policy A.AB
5. Three Major Steps:Identify impacts and their benefits and costs.Measure the costs and benefits on a common yardstick.Compare the costs and benefits.
6. Measuring Costs and BenefitsNot all costs and benefits have a price tag.Why are some impacts difficult to measure?Public goods are not traded in marketsDifferent types of value: use and non-use
7. “Willingness to Pay”Basic concept: In a world of limited resources, we must be willing to give something up in order to get something else.Inherently human-centered, and time/space specific.Does NOT = willingness to accept.
8. How to Measure WTP?Revealed PreferenceStudies of related markets, e.g. products, house prices, recreationStated PreferenceStructured surveys + statistics = WTP
9. How to Measure WTP?Benefit transferTransfer values or equations from previous studies.Context and quality of the original study are key when transferring these values.
10. Criticisms of Cost-Benefit Analysis:1. Omits fundamental rights or duties.Sections of the Clean Air Act do not allow agencies to consider costs when making regulations to protect public health.
11. Criticisms of Cost-Benefit Analysis:2. Privileges current generations at the expense of future ones.When costs and benefits occur over time, economists translate them to their present value.The discount rate essentially makes the future go away after a certain number of years. With a discount rate of 7%, a rule that has a benefit of $100 would only have a present value of $3.40 if the benefit accrues 50 years from now.
12. Criticisms of Cost-Benefit Analysis:3. Obscures the distributional equity of the benefits and costs.
13. When should cost-benefit analysis be used?When comparing multiple policy alternatives.When distribution of impacts is not a major concern.When time/resources permit it to be done well.
14. The Consensus Among Economists:Cost-benefit analysis should be viewed as a means of improving the information available to decision makers – not as the sole guide to decision making.So how can this information help you?
15. Example EmailWhat is the source of this information?Different YardsticksFundamental RightDistributional Impact
16. Final Points:DENR does not have the statutory mandate or the resources to conduct a full cost-benefit analysis.Fiscal notes and cost-benefit analyses provide valuable information, but should not be viewed as the sole guide to decision-making.Understanding the basics of these analyses can help you ask the right questions.
17. Questions and Contact InformationMaggie MonastPolicy AnalystEnvironmental Defense Fund(919) 881-2919mmonast@edf.org