Abstract: Pricing Human Health: EPA’s Ozone Standard in the Era of Regulatory Review

Charles Halvorson

Abstract

In January 1979, several of Jimmy Carter’s advisors briefed the president on a serious policy dispute within the administration. The head of the Environmental Protection Agency (EPA) was refusing to ease the national standard for smog-causing ozone from 0.12 parts per million to 0.15 parts per million. If that adjustment appeared trivial, both sides assured the president that the stakes were in fact quite high – the 0.03 difference represented $5 billion in annual compliance costs but also raised the risk of illness and death for asthmatics and other infirm citizens.   

The ozone saga found EPA in the midst of an internal debate about the economics of regulation. Career staff declared cost considerations off-limits per the Clean Air Act and looked suspiciously at new reformers who touted emissions trading programs and funded research on the dollared benefits of regulation. The Carter administration’s decision to review EPA’s proposed ozone standard brought the dispute to a head. Pricing the Air shows how EPA came to embrace economic valuation as a crucial defense against industry complaints about excessive costs while at the same time rejecting attempts to take comparative risks and cost-effectiveness into account in setting the underlying regulatory standards.