Cobenefits and Regulatory Impact Analysis: Theory and Evidence from Federal Air Quality Regulations

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This paper considers the treatment of cobenefits in benefit-cost analysis of federal air quality regulations. Using a comprehensive data set on all major Clean Air Act rules issued by the Environmental Protection Agency over the period 1997-2019, we show that (1) cobenefits make up a significant share of the monetized benefits; (2) among the categories of cobenefits, those associated with reductions in fine particulate matter are the most significant; and (3) cobenefits have been pivotal to the quantified net benefit calculation in nearly half of cases. Motivated by these trends, we develop a simple conceptual framework that illustrates a critical point: cobenefits are simply a semantic category of benefits that should be included in benefit-cost analyses. We also address common concerns about whether the inclusion of cobenefits is problematic because of alternative regulatory approaches that may be more cost-effective and the possibility for double counting.