Refer to the “In the News” below: As the Obama administration and industry group
ID: 1112809 • Letter: R
Question
Refer to the “In the News” below:
As the Obama administration and industry groups go to war over the costs of a high-stakes climate rule, the White House has released a new study showing that the benefits of major federal regulations vastly exceed the costs.
Major rules issued by federal agencies over the past decade have estimated benefits between $217 billion and $863 billion per year, compared with estimated annual costs of between $57 billion and $84 billion, according to the recent draft report from the White House.
The White House Office of Information and Regulatory Affairs within the Office of Management and Budget sends a draft report on costs and benefits of federal rules to Congress every year.
For its proposed rule to clamp down on power plants’ greenhouse gas emissions, the EPA has estimated that in 2020, the proposal will yield climate benefits of $17 billion or $18 billion depending on its approach (in 2011 dollars) and between $15 billion and $40 billion in additional benefits from cutting down on ozone and particle pollution. The EPA said total compliance costs in 2020 would be $5.5 billion to $7.5 billion.
Research fellows at the Mercatus Center at George Mason University took issue with the OMB report’s methodology.
-Robin Bravender, E&E Reporter
Source: Greenwire, June 12, 2014
Using the high estimate of costs and low estimate of benefits for pollution controls from the draft report issued by the White House, what is the average benefit per dollar spent?
Instructions: Enter your response rounded to two decimal places.
$
As the Obama administration and industry groups go to war over the costs of a high-stakes climate rule, the White House has released a new study showing that the benefits of major federal regulations vastly exceed the costs.
Major rules issued by federal agencies over the past decade have estimated benefits between $217 billion and $863 billion per year, compared with estimated annual costs of between $57 billion and $84 billion, according to the recent draft report from the White House.
The White House Office of Information and Regulatory Affairs within the Office of Management and Budget sends a draft report on costs and benefits of federal rules to Congress every year.
For its proposed rule to clamp down on power plants’ greenhouse gas emissions, the EPA has estimated that in 2020, the proposal will yield climate benefits of $17 billion or $18 billion depending on its approach (in 2011 dollars) and between $15 billion and $40 billion in additional benefits from cutting down on ozone and particle pollution. The EPA said total compliance costs in 2020 would be $5.5 billion to $7.5 billion.
Research fellows at the Mercatus Center at George Mason University took issue with the OMB report’s methodology.
-Robin Bravender, E&E Reporter
Source: Greenwire, June 12, 2014
Explanation / Answer
Total compliance cost would be between $5.5 billion and $7.5 billion.
So, high estimate of cost is $7.5 billion
The propsal will yield climate benefit of $17 billion or $18 billion based on the approach adopted and between $15 billion and $40 billion in additional benefit.
So, low estimate of benefit is ($17 billion + $15 billion) $32 billion.
Calculate the average benefit per dollar spent -
Average benefit per dollar spent = Low estimate of benefit/High estimate of cost
Average benefit per dollar spent = $32 billion/$7.5 billion = $4.27
The average benefit per dollar spent is $4.27
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