Benefits and Costs
of EPA’s Clean-up
and Reuse Programs
Robin R. Jenkins
National Center for Environmental Economics
Office of Policy, Economics and Innovation
U.S. Environmental Protection Agency
Any opinions, findings, and conclusions or recommendations expressed
in this presentation are those of the author and do not necessarily reflect the
views of the Environmental Protection Agency.
April 3, 2004
Outline of Presentation
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Economic Analysis at EPA
Social Benefits of Cleanup and Reuse
Social Costs of Cleanup and Reuse
Economic Impacts of Cleanup and Reuse
Issues in Estimating Social Benefits
Future Objectives for Analysis at EPA
At EPA, economics is one
of many perspectives in
regulatory decision-making
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Political Concerns
Legal Concerns (e.g., statutory instruction)
Institutional Feasibility
Technical Feasibility
Enforceability
Ethics
– Distributive Justice
– Environmental Justice
• Sustainability
• Benefits and Costs (Economic Efficiency)
Executive Orders and Statutes
that Require Economic Analysis
•Regulatory Right-to-Know Act (2001) - Benefits and
costs of Federal rules (a) in the aggregate (b) by agency
and agency program; and (c) by major rule.
•E.O. 12866 - assess benefits and costs of regulatory
alternatives for significant actions (>$100m annually)
•Other E.O.s and statutes - Two examples:
•E.O. 13045 “Children’s Health”
•Regulatory Flexibility Act as amended by The Small
Business Regulatory Enforcement Fairness Act (1996)
Two Important Types of Economic
Analyses at EPA
• Benefit-Cost Analysis - Examines change in
overall social welfare. (Takes the sum of
individual changes in welfare.)
– Social benefit - Improvements in welfare.
– Social cost - declines in welfare.
• Economic Impact Analysis - Examines the
magnitudes of specific economic changes
and who they affect
Social Benefits of
Cleanup and Reuse
• Standard benefits for all sites
– Increased value of site due to construction
– Willingness-to-pay for output produced by the reuse
– Human health effects (off- and on-site)
• mortality
• morbidity
– Ecological benefits at developed site
Social Benefits of
Cleanup and Reuse (continued)
• Preservation benefits. (Applicable if can
demonstrate that reuse preserves green space.)
– Ecological benefits at the preserved green space.
– Reduced negative environmental externalities due to
developing an urban site instead of a suburban fringe
site
• reduced emissions due to less travel,
• reduced costs and ecosystem damage due to avoidance of new
infrastructure construction
Social Benefits of
Cleanup and Reuse (continued)
• Socioeconomic benefits. (Applicable if can
demonstrate that reuse occurs in disadvantaged
community.)
– Efficiency gains due to better functioning labor and
product markets; e.g. unemployed neighborhood
residents can now find work, residents interested in
purchasing the product produced by the reuse now can.
Social Costs of
Cleanup and Reuse
• Cost of cleanup
• Cost of development (including infrastructure)
• Cost of ongoing production
Common Economic Impacts of
Cleanup and Reuse
• Jobs
– Cleanup
– Construction/Development
– Production (long-term jobs)
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Income from jobs
Tax Revenues
Property value changes
New homes
New businesses
Issues in Estimation
of Social Benefits of
EPA’s Cleanup Programs
• Available risk measures are ill-suited to economic
analysis
– Maximally exposed individual (MEI)
– 95 percent upper confidence intervals on cancer potency
– reference doses/concentrations include built-in margins
of safety for non-carcinogens
Issues in Estimation
of Social Benefits of EPA’s
Cleanup Programs (continued)
• Transferring benefit values - policy case differs
from available study cases
– contaminants
– exposure routes
– health effects
Issues in Estimation
of Social Benefits of EPA’s
Cleanup Programs (continued)
• Ecological benefits
– identification
– quantification
– Ecological Benefits Assessment Strategic Plan
Issues in Estimation of
Economic Impacts of Reuse
• Even measuring impacts is difficult
– data limitations
– inconsistencies in how impacts are measured
Objectives for Economic Analysis
of Cleanup and Reuse at EPA
• Improve consistency and quality across EPA
programs
– transparency in measurement of impacts
– study random sample of sites
• Characterize impacts better with more details about
socioeconomics of recipient neighborhoods
• Develop measures of social benefits