The Government Accountability Office (GAO) released a report yesterday critical of the cost benefit analysis (CBA) used by the Environmental Protection Agency (EPA) as justification for its proposed approach to the control or mercury. The GAO found,

“GAO identified four major shortcomings in the economic analysis underlying EPA’s proposed mercury control options that limit its usefulness for informing decision makers about the economic trade-offs of the different policy options. First, while Office of Management and Budget (OMB) guidance directs agencies to identify a policy that produces the greatest net benefits, EPA’s analysis is of limited use in doing so because the agency did not consistently analyze the options or provide an estimate of the total costs and benefits of each option… Second, EPA did not document some of its analysis or provide information on how changes in the proposed level of mercury control would affect the cost-and-benefit estimates for the technology-based option, as it did for the cap-and-trade option. Third, EPA did not estimate the value of the health benefits directly related to decreased mercury emissions and instead estimated only some secondary benefits, such as decreased exposure to har!
mful fine particles. However, EPA has asked for comments on a methodology to estimate the benefits directly related to mercury. Fourth, EPA did not analyze some of the key uncertainties underlying its cost-and benefit estimates.”

At issue here is the inevitable conflict between having an agency responsible for developing an honest-broker approach to inventing and considering policy options while at the same time having a clear preference for one of those options. This sets the stage for a clear conflict between analysis and advocacy. It is a bit like putting an intelligence agency under the Department of Defense. As the Washington Post reported today, “the EPA had tipped the scales to favor the market-based plan.”

The GAO’s recommendation to EPA to reconsider their cost-benefit analysis does not appear to go far enough in dealing with the structural reforms needed to insure the institutional independence and authority needed to proffer analyses free from political suasion.