of the regulation, a partial equilibrium approach will miss these
effects. In this case, a general equilibrium approach may be more
appropriate to more adequately estimate social cost.
    A general equilibrium approach, which captures linkages between
markets across the entire economy, is most likely to add value when
both relevant relationships among sectors and pre-existing market
distortions are expected to be significant. Market distortions are
factors such as pre-existing taxes, externalities, regulations, or
imperfectly competitive markets that move consumers or firms away from
what would occur in the absence of such distortions. For example, when
an environmental regulation affects the real wage such that individuals
opt to work fewer hours, it can exacerbate pre-existing inefficiencies
in the labor market due to taxes, regulatory barriers, or other market
imperfections. This represents a welfare cost not captured by
compliance cost estimates. The impacts of a regulation also may
interact with pre-existing distortions in other markets, which may
cause additional impacts on welfare either positively or negatively. In
cases such as these, a general equilibrium approach may be capable of
identifying how the costs of complying with a regulation flow through
the economy, such as through changes in substitution among factors of
production, trade patterns, and demand for goods and services. These
effects are partially or wholly missed by compliance cost and partial
equilibrium approaches. For further discussion, see EPA's Guidelines
(2010), Chapter 8, Analyzing Costs, 8.1. The Economics of Social Cost.
    The estimated social benefits reported in a BCA should link
regulatory requirements to the value that individuals place on the
beneficial outcomes,\33\ or benefit endpoints, that can be meaningfully
expected as a result of those requirements. Benefits assessment is,
therefore, typically a multi-step process. The starting point is
identifying the changes in environmental contaminants or stressors that
are likely to result from policy options relative to the baseline.
These changes are often characterized through air quality modeling. The
next step is to identify the benefit endpoints that may be affected by
changes in environmental quality, such as human health improvements,
ecological improvements, aesthetic improvements, and reduced materials
damages. The EPA recognizes that the strength of scientific evidence
for different health or environmental endpoints varies, and that
strength of scientific evidence should be strongest when the benefits
are estimated. As further discussed in OMB's M 19-15, this concept is
referred to as ``fitness for purpose,'' whereby information anticipated
to have a higher impact must be held to higher standards of
quality.\34\
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    \33\ As a practical matter, the value of any adverse public
health or welfare outcomes (sometimes referred to as
``disbenefits'') resulting from the regulatory requirements are
usually also included on the benefits side of the ledger in
regulatory BCAs, although it is theoretically appropriate to include
them on the cost side. Such adverse outcomes could include adverse
economic, health, safety, or environmental consequences that occur
due to a rule (e.g., adverse safety impacts from vehicle emission
standards) and are not already accounted for in the direct cost of
the rule.
    \34\ OMB's M-19-15 refers back to OMB's 2002 Guidelines, which
characterize a subset of agency information as ``influential
scientific, financial, or statistical information'' that is held to
higher quality standards. This is scientific, financial, or
statistical information that ``the agency can reasonably determine .
. . will have or does have a clear and substantial impact on
important public policies or important private sector decisions.''
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    Once benefit endpoints are identified, analysts need to decide
whether and how to quantify changes in each endpoint. From among the
endpoints identified above, the EPA will quantify effects for endpoints
which scientific evidence is robust enough to support such
quantification. If the Agency determines that some benefits should be
discussed only qualitatively, for example, due to limited scientific
evidence or limited resources for developing concentration response
functions, the final rule requires the Agency to provide a reasoned
explanation for that decision. Additional requirements for choosing and
quantifying health endpoints are described further below.
    Quantification is then followed by valuation of these endpoints
when data and methods allow. There are well-defined economic principles
and well-established economic methods for valuation as detailed in OMB
and Agency guidance, including OMB's Circular A-4 and the EPA's
Guidelines. It will not always be possible to express in monetary units
all of the important benefits and costs. When it is not, the most
efficient alternative will not necessarily be the one with the largest
quantified and monetized net-benefit estimate. In such cases, the EPA
will exercise its subject matter expertise in determining how important
the non-quantified benefits or costs may be in the context of the
overall analysis. Even when a benefit or cost cannot be expressed in
monetary units, the EPA will try to measure it in terms of its physical
units. If it is not possible to measure the physical units, the EPA
will describe material benefits or costs qualitatively.
    Finally, the valued endpoints should be aggregated to the extent
possible and supported by scientific and economic practice to provide
the basis for characterizing the benefits of each policy option.

    In some instances, it may be possible to value bundles of
attributes or endpoints using reduced-form techniques, such as the
hedonic property method. Care and professional judgment are necessary
in determining the appropriateness of bundling of several endpoints
versus modeling separate endpoints. Even if bundling is thought to be
appropriate, it can be useful to think through the multi-step process
above conceptually to: (a) Assess whether there are benefit endpoints
not reflected in the reduced form valuation estimate that should be
included through additional analysis, or (b) compare the magnitudes of
multi-step and reduced-form, revealed-preference benefits estimates so
that each can provide a check on the reliability of the other.
    In summary, this final rule requires that, to the extent supported
by the scientific criteria, as discussed above, as well as practicable
in a given rulemaking, (1) BCAs will quantify all benefits; (2) BCAs
will monetize all the benefits by following well-defined economic
principles using well-established economic methods, appropriate data
and/or studies; and (3) BCAs will qualitatively characterize benefits
that cannot be quantified or monetized. In addition, the final rule
requires the Agency to explain any departure from the best practices
for the BCA described in Circular A-4; this includes discussing the
likely effect of the departures on the size of the benefits estimate.
More discussion of these best practices and estimation methods is
provided in OMB's Circular A-4 and the EPA's Guidelines, and the
literature cited therein.
    7. Selecting and Quantifying Health Endpoints in a BCA. The EPA
received numerous comments on the proposed requirements for selecting
and quantifying health endpoints in a BCA. Many public commenters were
critical of the lack of definitions for key terms in this section,
especially ``causal'' and ``likely causal'' though some of these
commenters supported the proposed requirements while providing more
specific definitions that could improve the terms. Other commenters
were generally critical of the proposed requirements that any linkage
between regulatory requirements and benefits be based on ``a clear
causal or likely causal relationship'' and argued such requirements
will restrict the assessment of the health benefits of proposed CAA
regulations. With respect to determining what concentration-response
functions to use to quantify changes in the selected endpoints, some
commenters argued that the proposed criteria for selecting studies from
the literature are too restrictive. Others recommended that the EPA
consider different criteria entirely or require a more systematic
review approach for evaluating the scientific literature to quantify
health impacts. For example, one commenter noted that while the list of
proposed criteria referred to study features that should be evaluated
under a systematic review framework, it was not exhaustive or complete
and does not provide a systematic approach for the integration of this
evidence to prioritize studies that provide the accurate
characterization of health impacts. Some commenters stated that the
rule would contradict advice the EPA has received from the National
Academies and SAB and/or questioned why, in their view, the EPA is re-
inventing the wheel. Some commenters emphasized that best practices for
characterizing uncertainty should reflect more probabilistic techniques
and that EPA should also use a risk of bias approach when selecting
among studies.
    In their review of the proposed rule, the SAB also provided
recommendations related to the selection and quantification of health
endpoints. First, the SAB recommended that the EPA clarify the
requirements for estimation of benefits to incorporate systematic
review approaches, better define causality, and include effects for
which causal or likely causal relationships may be less certain. In
particular, the SAB advised that no ``one size fits all'' approach to
causality should be mandated because a variety of approaches may need
to be taken (some data driven, some based on systematic review of the
biology, toxicology and epidemiology). Instead, the SAB recommended
that the EPA should include reference to and support for relevant
guidance from current best Agency practices for evaluating causality.
The SAB also advised that the EPA modify the proposed requirement to
include in the benefits analyses the effects for which causal or likely
causal relationships may be less certain, but the impact would be
substantial.
    Second, the SAB provided recommendations for how the EPA could
adjust the proposed requirements for selection of health endpoints to
provide greater clarity and transparency, especially with regard to the
selection of concentration response functions. The SAB recommended that
the final rule should clarify the specific scientific rationale for
endpoint selection and promote transparency by defining specific terms
used in the requirements, or the Agency should replace all of the
specific criteria on the selection of health endpoints with ``an
overall framework outline of the systematic review principles it would
follow for the evaluation of human health hazard data for the purposes
of concentration-response selection and quantification of benefits.''
The SAB also advised the Agency to discuss how relevant advice from the
National Academies and the SAB on systematic review as well as the
approaches under development by the EPA in the Consolidated Human
Toxicity Assessment Guidelines \35\ will be evaluated and incorporated.
The EPA agrees with the recommendations from the SAB and commenters on
the importance of using a systematic review process to evaluate the
scientific literature for the purposes of determining which health
endpoints to include in a BCA and what concentration-response functions
to use to quantify changes in these endpoints. Therefore, the EPA is
revising the requirements in this section of the rule as described
below.
---------------------------------------------------------------------------

    \35\ For more information about the development of the
Consolidated Human Toxicity Assessment Guidelines, see: https://yosemite.epa.gov/sab/sabproduct.nsf//LookupWebProjectsCurrentBOARD/DF0F42C34645448685258570005ADFFF?OpenDocument.
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    It is essential for analyses to characterize health effects for
which the science indicates the likelihood that changes in exposure
would provide positive benefits. The EPA requires that BCAs performed
under this final rule will include benefit endpoints for which the
scientific evidence indicates there is (a) a causal or likely causal
relationship between pollutant exposure and effect, and subsequently,
(b) sufficient data and understanding to allow the agency to reasonably
model the anticipated change in that effect in response to changes in
environmental quality or exposures expected as a result of the
regulation under analysis.
    As stated in the proposal, decisions about whether and which
changes in the health endpoints should be quantified should be informed
by an evaluation of the relevant scientific literature studying the
strength of the association between exposure to a pollutant and the
health endpoint and the nature of the concentration-response function
(i.e., the amount of change in the frequency or severity of the health
endpoint expected as the distribution of air quality changes). Benefits
may be quantified for associations that meet the criteria for
causality, considering, for example, the biologic plausibility,
consistency, temporality, strength, and specificity of the effect.

    In this final rule, the EPA is clarifying that for human health
endpoints, a systematic review process must be used to evaluate the
hazard data for the purposes of determining which endpoints to include
in a BCA and what concentration-response functions to use to quantify
changes in these endpoints. As described by Institute of Medicine
(IOM), ``systematic review is a scientific investigation that focuses
on a specific question and uses explicit, pre-specified scientific
methods to identify, select, assess, and summarize the findings of
similar but separate studies. The goal of systematic review methods is
to ensure that the review is complete, unbiased, reproducible, and
transparent'' (IOM, 2011).
    The systematic review process, at a minimum, consists of: Problem
formulation and protocol development, evidence identification, evidence
evaluation, and evidence integration (National Research Council, 2014).
Problem formulation should identify the specific question to be
addressed in the review and the protocol should specify the methods
used to address the question, making these methods and the review
process transparent. Evidence identification should follow a search
strategy written into the protocol that explicitly states the inclusion
and exclusion criteria for studies. Importantly, a study's inclusion in
the review should not depend upon that study's findings. When feasible,
the evidence evaluation should include a risk of bias assessment to
determine how confidently conclusions can be drawn from the data. For
example, the EPA began incorporating a risk of bias assessment into its
Integrated Science Assessments (ISAs), starting with the recently
published ozone ISA (EPA, 2020).\36\ Finally, evidence integration
should provide a structured approach to drawing conclusions considering
all appropriate and available lines of scientific evidence, including
epidemiologic, toxicologic, and mechanistic lines of evidence.
---------------------------------------------------------------------------

    \36\ The EPA prepares ISAs to provide the scientific foundation
for setting standards for the 6 criteria air pollutants under the
National Ambient Air Quality Standards program. This assessment is a
comprehensive review, synthesis, and evaluation of the most policy-
relevant science, including key science judgments that are important
to inform the development of the risk and exposure assessments, as
well as other aspects of the NAAQS review. The preamble to the ISAs
describes the five-level causal framework for evaluating weight of
evidence and drawing scientific conclusions and causal judgments.
See https://www.epa.gov/isa.
---------------------------------------------------------------------------

    Applying the systematic review process described above, the final
rule requires the EPA to identify concentration-response relationships
from the scientific literature that take into account the breadth and
quality of the available evidence regarding the nature and magnitude of
the risk to the populations affected by the regulation. More weight
should be given to higher quality studies or analyses that have been
peer reviewed. To the extent possible, the studies or analyses should:
(1) Be based upon human data when available; (2) specify the exposure
route, duration, and levels, with preference given to those studies
assessing exposure similar to those experienced by the general
population; (3) employ a design or analysis that adequately addresses
relevant sources of potential critical confounding; (4) consider how
exposure is measured, particularly those that provide measurements at
the level of the individual and that provide actual measurements of
exposure; and (5) be able to reliably distinguish the presence or
absence (or degree of severity) of health outcomes. Studies
demonstrating more of the attributes listed above, and those which
demonstrate the considerations to a greater extent, are expected to
provide more accurate concentration-response relationships and
associated risk estimates. Consistent with the general process of
systematic review, the evaluation should emphasize transparency and
replicability in the evaluation process.
    When utilizing multiple concentration-response functions to
estimate impacts on a single health outcome, the BCA must quantify
risks in such a way that the heterogeneity in the estimated health
impacts is clearly characterized. The EPA will present results in a
manner that promotes transparency in the assessment process by
selecting and clearly identifying concentration-response functions best
characterizing risk for affected populations, as well as evidence
necessary to demonstrate the sensitivity of the choice of the
concentration-response function on the magnitude and the uncertainty
associated with air pollution-attributable effects. Evidence from
epidemiologic, experimental, and controlled human exposure studies may
suggest that certain demographic subgroups are subject to risks that
differ from the general population; in these instances, it may be
appropriate to select concentration-response relationships that
quantify risks among these specific subgroups, abiding by the overall
framework of the systematic review process.
    In cases where existing Agency documents (e.g., ISA for criteria
pollutants) provide the review and synthesis consistent with the
process described above, the final rule allows a BCA to reference this
synthesis.
    Conceptually, BCA requires a comparison of expected costs and
expected benefits, so BCA for CAA regulations should include the
determination of expected benefits. When sufficient data exist, a
probability distribution of risk is appropriate to use when determining
the expected benefits for CAA regulations. When it is infeasible to
estimate a probability distribution, measures of the central tendency
of risk may be used. Upper-bound risk estimates must not be used
without also presenting lower bound and central tendency estimates.
    8. Uncertainty Analysis. Many public commenters supported the
proposed rule's codification of best practices for uncertainty analysis
and further contended that the EPA's past uncertainty analyses in CAA
BCA vary in their quality, scope, and rigor. Some of these commenters
provided additional recommendations for uncertainty analyses in the BCA
including using probability distributions of risk when calculating
benefits. For example, one commenter recommended that the EPA analyze
assumptions embedded in the EPA's environmental Benefits Mapping and
Analysis Program (BenMAP) tool \37\ in its uncertainty assessment as
well as further aligning with numerous EPA recommendations from the SAB
and the National Academies. Some commenters recommended that the EPA
should also quantify the effect of the major sources of uncertainty and
variability on the risk estimates, benefit estimates, and cost
estimates as well as transparently documenting key assumptions that
drive uncertainty analyses.
---------------------------------------------------------------------------

    \37\ https://www.epa.gov/benmap.
---------------------------------------------------------------------------

    Some commenters opposed the EPA's proposed requirements for an
uncertainty analysis in the BCA, stating that these proposed provisions
are arbitrary, capricious and not appropriate. One of these commenters
said that the EPA unjustifiably weights the burden of uncertainty
assessment on benefits rather than costs by placing more prescriptive
requirements on the analysis of the uncertainty of benefits, thus
skewing the assessment of uncertainty towards benefits more than costs,
and by depicting benefits as more uncertain than costs. Additional
commenters opposed to the EPA's proposal argued that the proposed
requirements add seemingly endless layers of analyses and potentially
import substantive constraints and judgments under the guise of
characterizing uncertainty.

    The SAB also made several recommendations related to the proposed
requirements for uncertainty analysis. First, the SAB recommended that
the preamble of the final rule discuss the broader purposes of
uncertainty analysis beyond simple transparency. Second, the SAB
explained that because best practices require that the analysis be
appropriate for the policy context, uncertainty analysis should only be
required to the extent feasible ``and appropriate.'' Third, the SAB
advised that the discussion in the final rule be broadened to reflect
the fact that outcomes other than the expected value may be very
important for policies involving low-probability, high consequence
hazards. Also, when presenting quantitative results, the SAB
recommended that the final rule require the EPA to clearly note when
there are unquantified benefits or costs that could be significant.
Finally, the SAB recommended that the EPA acknowledge in the final rule
that uncertainty analysis will not correct errors resulting from the
inclusion of ``poor science'', which arguably has a greater impact on
policy choices than the lack of uncertainty analysis.
    None of the public comments received have led the EPA to materially
change its views from the proposal. The EPA disagrees with the comment
that the requirement to conduct uncertainty analysis is arbitrary,
capricious and not appropriate. The EPA is codifying into regulation
procedures that are consistent with the principle of transparency
discussed at length in OMB's Circular A-4 (OMB, 1993) and the EPA's
Guidelines (EPA, 2010), which are the existing peer reviewed guidance
documents implementing E.O. 12866. The EPA agrees with the principles
emphasized in the SAB's comments on the proposed rule. The Agency has
reviewed the discussion of uncertainty analysis below to ensure it is
consistent with these principles and has made clarifying revisions in
this preamble and final regulatory text where helpful. The final rule
includes requirements pertaining to uncertainty analysis as provided
below.
    For various reasons, including the reason that the future is
unpredictable, the benefits and costs of future regulatory options are
not known with certainty. The EPA is finalizing requirements for BCAs
to identify uncertainties underlying the estimation of both benefits
and costs and, to the extent feasible and appropriate, quantitatively
analyze those that are most influential. Specifically, the final rule
requires the EPA to characterize, preferably quantitatively, sources of
uncertainty in the assessment of costs, changes in air quality,
assessment of likely changes in health and welfare endpoints, and the
valuation of those changes. The EPA will be required to also present
benefit and cost estimates in ways that convey their uncertainty,
including acknowledging unquantified benefits and costs, where
appropriate. Because information on the range of outcomes from policy
may be an important consideration in decision-making, the final rule
requires EPA to also characterize the range of likely outcomes. BCAs
will be required to include a reasoned explanation for the scope of the
uncertainty analysis and to specify specific quantitative or
qualitative methods chosen to analyze uncertainties. Quantitative
uncertainty analyses may consider both statistical and model
uncertainty where the data are sufficient to do so. Furthermore, where
data are sufficient to do so, the rule requires BCAs to consider
sources of uncertainty both independently and jointly. The BCA should
also discuss the extent to which qualitatively assessed costs or
benefits are characterized by uncertainty.
    Probabilistic uncertainty analysis involves greater effort than
other quantitative characterizations of uncertainty but can add
insights into the role of uncertainty in a BCA. When simpler
quantitative analysis may not sufficiently describe uncertainty, and
where probability distributions for relevant input assumptions are
available and can be feasibly and credibly combined, BCAs should
characterize how the probability distributions of the relevant input
assumption uncertainty would impact the resulting distribution of
benefit and cost estimates. The EPA should report probability
distributions for each health benefit whenever feasible. In addition to
characterizing these distributions of outcomes, it is useful to
emphasize summary statistics or figures that can be readily understood
and compared to achieve the broadest public understanding of the
findings. In instances when calculating expected values is not feasible
or appropriate due to data or other limitations, the EPA should strive
to present a range of benefits and costs. Additional discussion of
these best practices related to uncertainty analysis is provided in
OMB's Circular A-4, Treatment of Uncertainty, and throughout the EPA's
Guidelines.
    9. Principle of Transparency. Several commenters supported the
general concept of transparency in conducting BCA, because transparency
improves the quality of regulatory decision-making. Some commenters
further stated that providing information on the data, models,
assumptions, and uncertainties will increase public participation by
improving the dialog between the EPA and stakeholders and creating a
better-informed public.
    Several commenters objected to the transparency provisions of the
rule with one commenter stating that it is unclear what is meant by the
statement that the EPA's presentation of BCA results should be
``reproducible to the extent reasonably possible.'' Commenters argued
that the preamble offers no basis for concluding that the EPA in the
past has not been transparent in presenting the results of their
analysis of regulatory options. Other commenters further contended that
the proposed requirements would obscure the basis for the EPA's
decisions and the proposal is inappropriate to require ``consistency
across the Clean Air Act'' given the differences in statutory
obligations for different pollutants. Several of these commenters
claimed that the EPA's regulatory assessments already are transparent,
and the proposed rule would lead to confusion on the regulatory
analysis and not increase transparency. One of these commenters further
claimed that BCA does not increase transparency because it can distract
from the statutory basis of regulations, since most CAA standards are
health-based or technology-based standards, which involve a unique set
of factors to consider.
    None of the comments received have led the EPA to materially change
its views from the proposal. The EPA disagrees with the comment that it
is inappropriate to impose consistent requirements related to
transparency across the CAA given the differences in statutory
obligation for different pollutants in various provisions of the Act.
The requirements in this final rule aimed at providing transparency do
not bar the Agency from complying with any requirements of the Act. The
EPA is codifying into regulation procedures that are consistent with
the principle of transparency discussed at length in OMB's Circular A-4
(OMB, 1993) and the EPA's Guidelines (EPA, 2010), which are the
existing peer reviewed guidance documents implementing E.O. 12866. For
example, the practice of ensuring that results are reproducible is
taken directly from OMB's Circular A-4. Therefore, after reviewing
public comments, the EPA is finalizing the transparency requirements as
proposed.
    This final rule provides that BCA of significant CAA regulations
will include, at a minimum, a detailed and clear explanation of:

     The overall results of the BCA. The benefits, costs, and
net benefits of each regulatory option evaluated in the BCA will be
presented in a manner designed to be objective, comprehensive, and
easily understood by the public.
     How the benefits and costs were estimated, including the
assumptions made for the analysis. BCAs must include a clear
explanation of the models, data, and assumptions used to estimate
benefits and costs, and the evaluation and selection process for these
analytical decisions. This explanation must also include an explanation
of procedures used to select among input parameters for the benefit and
cost models. Such an explanation could include methods used to quantify
risk and to model the fate and transport of pollutants.
     A description, consistent with the best available
scientific information, of the non-monetized and non-quantified
benefits and costs of the action. The description must include
available evidence on all non-monetized and non-quantified benefits and
costs, including explanations as to why they are not being monetized or
quantified and what the potential impact of those benefits and costs
might be on the overall results of the BCA.
     The primary sources and potential effects of uncertainty.
The BCA must present the results of the assessment of the sources of
uncertainty that are likely to have a substantial effect on the
results. Any data and models used to analyze uncertainty must be fully
identified, and the quality of the available data must be discussed.
    Finally, to the extent permitted by law, the Agency must ensure
that all information (including data and models) used in the
development of the BCA is publicly available while consistent with
protections for privacy, confidentiality, confidential business
information (CBI), and national and homeland security. If data and
models are proprietary, the Agency must make available, to the extent
practicable, the underlying inputs and assumptions, equations, and
methodologies used by EPA.
    Additional discussion of these best practices related to
transparency is provided in OMB's Circular A-4, Transparency and
Reproducibility of Results, and throughout the EPA's Guidelines (2010).

F. Requirements for the Presentation of BCA Results

    In the proposed rule, the EPA proposed to codify a standardized
presentation of the results of the BCA in the preamble of significant
regulations. Regarding these presentational requirements, many
commenters supported providing additional details and disaggregated
data with a focus on the specific objective of the CAA provision or
provisions under which the rule is promulgated. These commenters
supported the increased transparency that this presentation of BCA
results in the preamble will provide to the public on an EPA rulemaking
action. Some commenters were supportive of adding even more
requirements to enhance transparency (e.g., to include a disaggregation
of impacts on small entities).
    Other commenters opposed the proposal's presentational
requirements, especially the requirement to provide an additional
reporting in the preamble of the public health and welfare benefits
that pertain to the specific objective of the CAA provision under which
the rule is promulgated. Commenters interpreted this proposed
requirement as barring consideration of all benefits that do not stem
directly from the statutory objective and they argued that such
ancillary benefits developed for a BCA are important for the EPA to
take into consideration. Some commenters stated that distinguishing
between benefits ``targeted by the statutory provision'' versus ``other
welfare effects'' can be a complex, controversial, and ultimately
fruitless endeavor, and that analysts should not assume, absent
explicit statutory language, that any statute has the objective of
barring consideration of important indirect effects. For example, any
broad statutory language, like ``reasonable'' or ``appropriate,''
should be read broadly to authorize consideration of all important
effects, whether direct or indirect. The SAB did not comment on this
element of the proposed rule.
    The proposed rule also solicited comment as to whether non-domestic
benefits and costs of regulations, when examined, should be reported
separately from domestic benefits and costs of such regulations,
analogous to the proposed requirement for a separate presentation of
benefits limited to those targeted by the relevant statutory provision
or provisions. The EPA received wide ranging comments on this issue.
Many commenters voiced support for separately reporting, or only
reporting, domestic benefits and costs. These commenters stated that
separate reporting of domestic and non-domestic benefits and costs
would allow stakeholders to better understand who would experience the
costs and benefits before regulatory action is taken. Several
commenters also stated that a disaggregated reporting would be
consistent with guidance in OMB Circular A-4 that states that the ``. .
. . analysis should focus on benefits and costs that accrue to citizens
and residents of the United States;'' and in the case where a
regulation is evaluated that ``is likely to have effects beyond the
borders of the United States, these effects should be reported
separately.'' One commenter stated that separate reporting of domestic
impacts would assist EPA in transparently fulfilling the CAA's primary
purpose ``to protect and enhance the quality of the Nation's air
resources.'' Many other commenters were opposed to disaggregated
reporting of domestic and non-domestic benefits and costs. Some stated
that separate reporting is unnecessary and counterproductive. For
example, one commenter stated that identification and communication of
subcategories of benefits (such as benefits accruing outside the United
States), where practical, is already accommodated and frequently done
under existing procedures. Others stated that a policy of breaking out
non-domestic benefits only ``when examined'' de-values non-domestic
benefits and ignores the impacts that occur outside of the United
States but that harm individuals in and outside of the United States
directly and indirectly. Others emphasized that certain classes of
effects cannot be meaningfully disaggregated. Some argued that a BCA
which does not allow for benefits and costs to be calculated outside of
the United States fails to include the ``best available science''.
These commenters stated that EPA's request for comment on separate
presentation of domestic benefits and costs vs. non-domestic benefits
presumes, wrongly, that ``non-domestic'' benefits and costs can be
accounted separately while meeting the agency's obligations to use the
``best available science'' and reasoned decision-making. One commenter
pointed to recent National Academies findings that the calculation of a
domestic benefit in the case of greenhouse gas emissions reductions
cannot be credibly done using current models, as they ignore important
spillover effects given the global nature of climate change (National
Academies 2017).
    None of the comments received pertaining to the proposed additional
presentation of benefits limited to those targeted by the relevant
statutory provision have led the EPA to materially change its views
from the proposal. The EPA disagrees with the comment that
distinguishing the benefits pertaining to the CAA statutory objective
means that other benefits (or disbenefits) are not to

be considered. The proposed presentational requirements do not bar
consideration of any part of the BCA. As described in Section V.D of
this preamble, the final rule requires that the Agency consider the BCA
in the decision-making process when permitted to do so. However, the
EPA declines to formulate a specific test or mandate of how to consider
the BCA or what weight the BCA, or particular elements of it, should be
given in such a future rulemaking. The precise details of what test
would be appropriate could differ from one CAA provision to another,
and the EPA has not proposed or requested comment on how such tests
would be formulated under those specific provisions.
    On the issue of separate reporting of domestic and non-domestic
benefits and costs, the EPA agrees with commenters who stated that this
disaggregation would enhance transparency. Separate reporting is
consistent with both guidance in OMB's Circular A-4 and with the CAA
which is concerned with ``enhanc[ing] the quality of the Nation's air
resources so as to promote the public health and welfare and the
productive capacity of its population'' (CAA 101(b)). The EPA disagrees
with commenters who stated that a disaggregation would de-value non-
domestic benefits and ignore the impacts that occur outside of the
United States but that harm individuals in and outside of the United
States directly and indirectly. A separate reporting does not prohibit
calculating or considering non-domestic benefits, but rather helps to
allow costs and benefits to be compared in an apples-to-apples manner,
whether domestic or not.
    Aside from separate reporting of domestic impacts, the EPA
disagrees with commenters who stated that additional disaggregation of
benefit and cost results in the preamble presentation are needed to
enhance transparency. For example, CAA rules will continue to comply
with the requirements of the Regulatory Flexibility Act so it is
unclear why an additional requirement to discuss or present impacts to
small entities is needed in this final rule. Therefore, the EPA is
finalizing the presentational requirements as proposed, as described in
detail below, along with two additional requirements. First, the final
rule requires that any benefits and costs accruing to non-U.S.
populations be reported separately to the extent possible in the
summary of BCA results in the preamble. Second, the final rule requires
that the BCA include a description in the preamble of how the Agency
considered the results of the BCA.
    Following the principle of transparency, the EPA agrees with
commenters that when presenting the results of a BCA, it is important
to clearly distinguish between the social benefits attributable to the
specific pollution reductions or other environmental quality goals that
are targeted by the statutory provisions that give rise to the
regulation, and other welfare effects. The disaggregation of welfare
effects will be important to ensure that the BCA may provide, to the
maximum extent feasible, transparency in decision-making. These other
welfare effects could include both favorable and adverse impacts on
societal welfare. Analogous to how a regulation's interactions with
existing imperfections or distortions in other markets (e.g., due to
pre-existing taxes) could lead to additional social costs, a regulation
could ameliorate or exacerbate other pre-existing externalities. For
example, more stringent vehicle emissions standards could affect
upstream refinery emissions or reduce the marginal cost of driving due
to greater fuel efficiency and could lead to an increase in vehicle
miles traveled that affects road safety, congestion, and other
transport-related externalities.
    Other welfare effects could also occur as a direct or indirect
result of the compliance approaches used by regulated entities. For
example, changes in other environmental contaminants may arise from the
regulated sources. Likewise, the use of an abatement technology that
reduces the emissions of hazardous air pollutants into one medium
(e.g., air) may change the emissions of another pollutant into the same
medium (e.g., coming out of the same smokestack) or cause changes in
emissions of pollutants into another medium (e.g., water) by the
regulated sources. Changes in other environmental contaminants may also
occur as a result of market interactions induced by the regulation. For
example, a regulation may cause consumers or firms to substitute away
from one commodity towards another, whose increased production may be
associated with changes in various environmental contaminants or other
externalities.
    The welfare effects associated with these changes should be
accounted for in a BCA to the extent feasible, as it is the total
willingness to pay for all changes induced by a regulation that
determines their relative importance in evaluating economic efficiency.
    Disaggregating benefits into those targeted and ancillary to the
statutory objective of the regulation may cause the EPA to explore
whether there may be more efficient, lawful and defensible, or
otherwise appropriate ways of obtaining ancillary benefits, as they may
be the primary target of an alternative regulation that may more
efficiently address such pollutants, through a more flexible regulatory
mechanism, better geographic focus, or other factors. This may be
relevant when certain benefits are the result of changes in pollutants
that the EPA regulates under a different section of the CAA or under
another statute.
    In this final rule, the EPA is codifying into regulation several
presentational requirements for the preamble of all future significant
CAA regulations.
    First, in order to ensure standardized presentation of the summary
of the BCA results consistent with E.O. 12866 in CAA rulemakings, the
EPA is codifying into regulation the requirement to present a summary
in the preamble of the overall BCA results, including total benefits,
costs, and net benefits. Within this summary presentation, if any
benefits and costs accrue to non-U.S. populations they must be reported
separately to the extent possible.
    Second, to enhance transparency about the extent to which a rule is
achieving its statutory objectives, the EPA is required to provide, in
addition to a clear reporting of the overall results of the BCA, an
additional presentation in the preamble of the public health and
welfare benefits that pertain to the specific objective (or objectives,
as the case may be) of the CAA provision or provisions under which the
rule is promulgated. This second presentation would include a listing
of the benefit categories arising from the environmental improvement
that is targeted by the relevant statutory provision, or provisions and
would report the monetized value to society of these benefits. If these
benefit categories cannot be monetized, the final rule requires the EPA
to report the quantified estimates of these benefits to the extent
practicable and to provide a qualitative characterization if they
cannot be quantified. Similarly, if the statute directs or allows the
Agency to consider costs, the EPA should also provide a disaggregation
of all relevant cost categories to the extent feasible in this section.
This requirement would serve as a supplement to the BCA that is
developed and presented according to best practices as outlined in
Section V.E of this preamble. It does not replace or change any part of
the RIA or the section of the preamble that summarizes the BCA results
consistent with E.O. 12866.
    Finally, as described in Section V.D of this Preamble, to provide
the public with as much information and

transparency as possible, the EPA will be required per the final rule
to identify when the CAA provision or provisions under which the future
rule is promulgated permit consideration of the BCA, and if so, the
Agency is required to provide a description in the preamble of how the
results of the BCA were considered. If the provision or provisions
under which the rule is promulgated prohibit the consideration of the
BCA, the final rule requires the Agency to identify the specific
provision which bars such consideration. The presentational
requirements described above should be provided in the same section of
the preamble of future CAA significant rulemakings.

G. Additional Comment Responses

    1. Planning for Retrospective Analysis. As discussed in the ANPRM,
a lack of data, and a lack of a regularized process for ongoing or
retrospective review after rules have been implemented, inhibits the
EPA's ability to gain insights about the realized costs and benefits of
actions that may help inform how the Agency designs future regulations
and conducts prospective BCA of future rules. Many previous
administrations have periodically undertaken programs of retrospective
review or issued executive orders urging or requiring agencies to
reassess existing regulations and to eliminate, modify, or strengthen
those regulations that have become outmoded in light of changed
circumstances. But for the most part, retrospective review has not
become institutionalized practice within the EPA. When they occur,
these reviews rarely involve ex post BCA of the original EPA
regulations. The EPA received many comment letters on the ANPRM voicing
support for increased retrospective analysis of Agency rules or
programs to evaluate the effectiveness of regulations, to design future
improvements to increase efficiency, and to improve methods of ex ante
analysis. In the proposed rule, the EPA requested comments on this
issue, including whether EPA should include a requirement for
conducting retrospective analysis of significant CAA rulemakings and
how the Agency can overcome the challenges for conducting retrospective
analysis in cases where the EPA's ability to collect information about
the costs of compliance is limited or otherwise influenced by other
statutes.
    The EPA received comments from a variety of stakeholders supporting
the idea of conducting more retrospective analysis. Many commenters
emphasized that retrospective analyses could provide useful data to
help the EPA improve environmental outcomes while minimizing regulatory
burdens, promulgate better regulations, and improve the analytical
framework the Agency uses to make regulatory decisions. However, some
questioned the need and appropriateness of a rule-based approach to
institutionalizing the practice of retrospective analysis of existing
regulations. Some commenters stated that the Agency should not compel
companies to provide information necessary to conduct high quality
retrospective analysis unless the impacted industry is interested and
willing to participate in a retrospective review prior to beginning the
information collection process. Others recommended that the EPA adopt
specific guidance establishing a retrospective analytic process within
its rulemaking procedures. One commenter specified that this guidance
should include criteria for selecting the set of rules to be studied
and establishing at the outset a rule design that facilitates such
analyses; that the plan for ex post review should identify at the time
of rulemaking the measurable outcomes to be chosen for retrospective
analysis, the data needs, the time period for evaluation, and set out
and justify a specific plan for data collection. Others stated that any
potential requirements regarding retrospective analysis should be
concretely proposed in a separate notice that fully explains the need
for a rule-based solution to this issue and that allows a new and
adequate opportunity for public comment. Finally, some commenters
voiced concern that retrospective economic analyses have always been
problematic and have many practical challenges. These commenters noted
the difficulty in obtaining updated, accurate data for use in
retrospective analyses and believe the EPA should focus its efforts to
invest in high-quality, robust economic analyses using best-available
science and following best economic practices in BCAs prepared for
current rulemakings. Additionally, some commenters argued that
retrospective analyses could lead to unacceptable regulatory and legal
uncertainty especially should previously implemented regulations be
undone and past investments based on those regulatory decisions be
undermined or reversed.
    The EPA agrees with commenters that conducting retrospective
analyses of an implemented regulation can provide valuable information
that, if considered, can more fully inform public decision-making. In
many cases, retrospective analysis provides an opportunity to
understand whether a regulation achieved its objectives--for example,
whether the regulation, once implemented, promoted economic efficiency
as expected compared to a baseline without the regulation.
Retrospective analyses may also lead to improved methods for
prospective analysis and ultimately improvements in regulatory design.
The Agency also agrees with those commenters that said guidance was a
more appropriate way to better institutionalize best practices when
planning for and conducting retrospective analysis. This approach is
also consistent with recent recommendations the EPA received from the
SAB during the course of their review of the forthcoming update of the
EPA's Guidelines. In that review, the SAB recommends that the EPA
should consider expanding discussion in the Guidelines of how
regulatory approaches can be designed to promote effective
retrospective analysis and, in the future, possibly devote a chapter to
best practices for conducting such analysis.
    Given this advice, the EPA is not including a requirement in this
final rule that retrospective analysis be undertaken for all
significant regulations. Instead, EPA is committing to taking
additional steps to better institutionalize the practice of conducting
high quality retrospective review and analysis, which could be
accomplished through the development of guidance on best practices for
conducting retrospective analysis and how to plan for different types
of retrospective analysis within its rulemaking procedures including
how to address data needs. This guidance could, for example, include
criteria for identifying rules that might be most amenable to
retrospective analysis and direction on how to identify analytic
requirements for such analysis at the outset when a regulation is
promulgated. Data needs could be identified and avenues for ex post
data collection integrated into the regulation (while also accounting
for the cost and time needed for firms to collect such information). In
this way, the EPA could learn from past experience and improve both
policy designs and analytic approaches to prospective benefit and cost
estimation. Regardless of the specific administrative procedure pursued
for institutionalizing retrospective analysis at the EPA, it is the
intention of the Agency to engage experts, including academics and
practitioners, and to ultimately peer review any guidance that is
developed.
    2. Comments pertaining to Executive Order 12898. Numerous
commenters

contended that the EPA's proposed rule did not consider E.O. 12898
(Federal Actions To Address Environmental Justice in Minority
Populations and Low-Income Populations) and commenters stated that the
proposal language incorrectly asserts that ``this proposed action is
not subject to Executive Order 12898 . . . because it does not
establish an environmental health or safety standard.'' Commenters
further stated that air pollution disproportionately impacts minority
communities and the proposed rule would obstruct efforts to address
this disparity. Commenters further argued the proposed rule was unclear
on how the proposal's BCA analysis requirements would ascribe benefits
to communities of color that frequently bear the brunt of environmental
risks. One of these commenters contended that, although the list of
elements to consider in the BCA includes vulnerable and highly impacted
communities, the proposal failed to describe how these communities are
to be ``considered.''
    The EPA considered these comments but reiterates that this rule, as
a procedural rule, is focused on best practices for conducting BCA
analysis for CAA rulemaking with an aim to increase consistency and
transparency for these BCA analyses. As such, it does not establish an
environmental health or safety standard and is not subject to E.O.
12898. However, the EPA asserts that with the focus on increased
transparency and providing access to the underlying data as provided in
this final rule's provisions, the requirements will increase the
consistency and transparency of E.O. 12898 analyses. The additional
information available as a result of compliance with this final rule's
requirements will provide a better foundation for upcoming E.O. 12898
analyses of future CAA rulemakings and will improve the understanding
of the underlying issues highlighted by the commenters.

VI. References

    The following is a listing of the documents that are specifically
referenced in this document. The docket includes these documents and
other information considered by the EPA, including documents referenced
within the documents that are included in the docket, even if a
referenced document is not physically located in the docket. For
assistance in locating these other documents, please consult the person
listed under the ``For Further Information Contact'' section above.

    1. U.S. EPA (U.S. Environmental Protection Agency). Increasing
Consistency and Transparency in Considering Costs and Benefits in
the Rulemaking Process; Advance notice of proposed rulemaking. (83
FR 27524, June 13, 2018).
    2. OMB (Office of Management and Budget). (1996). Economic
Analysis of Federal Regulations Under Executive Order 12866.
    3. OMB (Office of Management and Budget). (2003). Circular A-4,
``Regulatory Analysis.''
    4. U.S. EPA (U.S. Environmental Protection Agency). (2010).
Guidelines for Preparing Economic Analyses.
    5. Arrow, K., M. Cropper, G. Eads, R. Hahn, L. Lave, R. Noll, P.
Portney, M. Russell, R. Schmalensee, V. Smith, and R. Stavins.
1996a. Benefit-Cost Analysis in Environmental, Health, and Safety
Regulation: A Statement of Principles. Washington, DC: American
Enterprise Institute, The Annapolis Center, and Resources for the
Future.
    6. Arrow et al. 1996b. Is There a Role for Benefit-Cost Analysis
in Environmental, Health, and Safety Regulation? Science 272: 221-
222.
    7. Institute of Medicine (IOM). 2011. Finding What Works in
Health Care: Standards for Systematic Reviews. Washington, DC: The
National Academies Press. https://www.nap.edu/catalog/13059/finding-what-works-in-health-care-standards-for-systematic-reviews.
    8. National Research Council. 2014. Review of EPA's Integrated
Risk Information System (IRIS) Process.

VII. Statutory and Executive Order Reviews

    Additional information about these statutes and Executive Orders
can be found at https://www.epa.gov/laws-regulations/laws-and-executive-orders.

A. Executive Order 12866: Regulatory Planning and Review and Executive
Order 13563: Improving Regulation and Regulatory Review

    This action is a significant regulatory action that was submitted
to the OMB for review. Any changes made in response to OMB
recommendations have been documented in the docket. The EPA does not
anticipate that this rulemaking will have an economic impact on
regulated entities. This is a rule of agency procedure and practice.

B. Executive Order 13771: Reducing Regulations and Controlling
Regulatory Costs

    This action is not subject to Executive Order 13771 because this
final rule is a rulemaking of agency organization, procedure, or
practice.

C. Paperwork Reduction Act (PRA)

    This action does not contain any information collection activities
and therefore does not impose an information collection burden under
the PRA.

D. Regulatory Flexibility Act (RFA)

    I certify that this action would not have a significant economic
impact on a substantial number of small entities under the RFA. This
action would not impose any requirements on small entities. This action
would not regulate any entity outside the federal government and is a
rule of agency procedure and practice.

E. Unfunded Mandates Reform Act (UMRA)

    This action does not contain any unfunded mandate as described in
UMRA, 2 U.S.C. 1531-1538, and does not significantly or uniquely affect
small governments. The action imposes no enforceable duty on any state,
local or tribal governments or the private sector.

F. Executive Order 13132: Federalism

    This action does not have federalism implications. It would not
have substantial direct effects on the states, on the relationship
between the national government and the states, or on the distribution
of power and responsibilities among the various levels of government.

G. Executive Order 13175: Consultation and Coordination With Indian
Tribal Governments

    This action does not have tribal implications as specified in
Executive Order 13175. Thus, Executive Order 13175 does not apply to
this action.

H. Executive Order 13045: Protection of Children From Environmental
Health Risks and Safety Risks

    The EPA interprets Executive Order 13045 as applying only to those
regulatory actions that concern environmental health or safety risks
that the EPA has reason to believe may disproportionately affect
children, per the definition of ``covered regulatory action'' in
section 2-202 of the Executive Order. This action is not subject to
Executive Order 13045 because it does not concern an environmental
health risk or safety risk.

I. Executive Order 13211: Actions Concerning Regulations That
Significantly Affect Energy Supply, Distribution or Use

    This action is not a ``significant energy action'' because it is
not likely to have a significant adverse effect on the supply,
distribution or use of energy and has not otherwise been designated as
a significant energy action by the Administrator of the Office of
Information and Regulatory Affairs.

J. National Technology Transfer and Advancement Act (NTTAA)

    This rulemaking does not involve technical standards.

K. Executive Order 12898: Federal Actions To Address Environmental
Justice in Minority Populations and Low-Income Populations

    The EPA believes that this action is not subject to Executive Order
12898 (59 FR 7629, February 16, 1994) because it does not establish an
environmental health or safety standard.

L. Congressional Review Act (CRA)

    This rule is exempt from the CRA because it is a rule of agency
organization, procedure, or practice that does not substantially affect
the rights or obligations of non-agency parties.

List of Subjects in 40 CFR Part 83

    Environmental protection, Administrative practice and procedure,
Reporting and recordkeeping requirements.

Andrew Wheeler,
Administrator.

    For the reasons set forth in the preamble, the EPA amends title 40,
chapter I of the Code of Federal Regulations by adding part 83 to read
as follows:

PART 83--INCREASING CONSISTENCY AND TRANSPARENCY IN CONSIDERING
BENEFITS AND COSTS IN CLEAN AIR ACT RULEMAKING PROCESS

Sec.
Subpart A--Analysis of Air Regulations
83.1 What definitions apply to this subpart?
83.2 How do the provisions of this subpart apply?
83.3 What requirements apply to EPA's preparations of Benefit-Cost
Analyses (BCAs) under the Clean Air Act?
83.4 What additional requirements apply to EPA's presentation of BCA
results for all significant rules promulgated under the Clean Air
Act?

    Authority: 42 U.S.C. 7601(a)(1).

Subpart A--Analysis of Air Regulations

Sec.  83.1   What definitions apply to this subpart?

    Baseline means the best assessment of the way the world would
evolve absent the regulation. It is the primary point of comparison for
assessing the effects of the regulatory options under consideration.
    Benefit-cost analysis (BCA) means an evaluation of the social
benefits and social costs of a policy action and other policy
alternatives. The social benefits of a policy are measured by society's
willingness-to-pay for the policy outcome. The social costs are
measured by the opportunity costs of adopting the policy. BCA addresses
the question of whether the benefits for those who gain from the action
are sufficient to, in principle, compensate those burdened by costs
such that everyone would be at least as well off as before the policy.
The calculation of net benefits (benefits minus costs) answers this
question and helps ascertain the economic efficiency of the policy.
Where all regulation attributable benefits and costs can be quantified
and expressed in monetary units, BCA provides decision makers with a
clear indication of the most economically efficient alternative, that
is, the alternative that generates the largest net benefits to society
(ignoring distributional effects).
    Compliance cost means the private cost that a regulated entity
incurs to comply with a regulation, such as through planning, design,
installation, and operation of pollution abatement equipment.
    Data means the set of recorded factual material commonly accepted
in the scientific community as necessary to validate research findings
in which obvious errors, such as keystroke or coding errors, have been
removed and that is capable of being analyzed by both the original
researcher and an independent party.
    Endpoint is the specific manifestation of the documented effect
that is to be quantified for the benefits analysis. It is a metric
(e.g., number of hospital admissions) that acts as a surrogate for some
aspect of a health or public welfare effect (e.g., respiratory system
effects).
    Expected value is the probabilistically weighted outcome that
defines a statistical mean and a measure of the central tendency of a
set of data. For a variable with a discrete number of outcomes, the
expected value is calculated by multiplying each of the possible
outcomes by the likelihood that each outcome will occur and then
summing all of those values.
    Model means a simplification of reality that is constructed to gain
insights into select attributes of a physical, biological, economic, or
social system. A formal representation of the behavior of system
processes, often in mathematical or statistical terms. The basis can
also be physical or conceptual.
    Opportunity cost means the value of the next best alternative to a
particular activity or resource.
    Publicly available means lawfully available to the general public
from federal, state, or local government records; the internet; widely
distributed media; or disclosures to the general public that are
required to be made by federal, state, or local law.
    Regulatory options means:
    (1) The proposed or finalized option, and at a minimum the
following;
    (2) A more stringent option which contributes to the stated
objectives of the Clean Air Act and that achieves additional benefits
(and presumably costs more) beyond those realized by the proposed or
finalized option; and
    (3) A less stringent option which contributes to the stated
objectives of the Clean Air Act and that costs less (and presumably
generates fewer benefits) than the proposed or finalized option.
    Sensitivity Analysis means an analysis that is used to assess how
the final results or other aspects of an analysis change as input
parameters change, particularly when only point estimates of parameters
are available. Typically, a sensitivity analysis measures how a model's
output changes as one of the input parameters change. Joint sensitivity
analysis (varying more than one parameter at a time) is sometimes
useful as well.
    Significant regulation means a proposed or final regulation issued
pursuant to authority provided by the Clean Air Act that is determined
to be a ``significant regulatory action'' pursuant to Section 3(f) of
E.O. 12866 or is otherwise designated as significant by the
Administrator.
    Social benefits, or benefits, means the sum of all positive changes
in societal well-being experienced as a result of the regulation or
policy action.
    Social costs, or costs, means the sum of all opportunity costs, or
reductions in societal well-being, incurred as a result of the
regulation or policy action. These opportunity costs consist of the
value lost to society of all the goods and services that will not be
produced and consumed as regulated entities reallocate resources to
comply with the regulation.
    Systematic Review Process is the process for evaluating the
scientific literature that includes:
    (1) Identification of the specific question to be addressed in the
review;
    (2) Pre-specified methods used to address the question, making
these methods and the review process transparent);
    (3) A search strategy written into the protocol that explicitly
states the inclusion and exclusion criteria for studies; and
    (4) A description of the structured approach used to draw
conclusions

considering all appropriate and available lines of evidence, including
epidemiologic, toxicologic, and mechanistic lines of evidence.

Sec.  83.2   How do the provisions of this subpart apply?

    (a) After December 23, 2020, the Agency must prepare a benefit-cost
analysis (BCA) for all significant proposed and final regulations,
except that the requirement to prepare a BCA for significant final
regulations does not apply to final regulations proposed on or before
December 23, 2020. Except where explicitly stated otherwise, the
provisions of this subpart do not apply to any other type of agency
action, including individual party adjudications, enforcement
activities, or actions taken in permit proceedings.
    (b) Except where the provision or provisions under which a
significant regulation is promulgated prohibit the consideration of the
BCA, the Agency must consider the BCA in promulgating the regulation.

Sec.  83.3   What requirements apply to EPA's preparations of Benefit-
Cost Analyses (BCAs) under the Clean Air Act?

    (a) A BCA prepared pursuant to this subpart must be developed by
the Agency in accordance with best available scientific information and
best practices from the economic, engineering, physical, and biological
sciences according to paragraphs (a)(1) through (12) of this section.
    (1) The BCA must include the following information:
    (i) A statement of need as defined in paragraph (a)(2) of this
section;
    (ii) An examination of regulatory options as defined in paragraph
(a)(3) of this section; and
    (iii) To the extent feasible, an assessment of all benefits and
costs of these regulatory options relative to the baseline scenario.
    (2) The BCA must include a statement of need that provides a clear
description of the problem being addressed, the reasons for and
significance of any failure of private markets or public institutions
causing this problem, and the compelling need for federal government
intervention in the market to correct the problem.
    (3) The BCA must include an analysis of the benefits and costs of
regulatory options, which would contribute to the stated objectives of
the Clean Air Act and an explanation as to why these regulatory options
were selected. Where there is a continuum of options (such as options
that vary in stringency), the regulatory options must include at a
minimum (as provided in Sec.  83.1): The proposed or finalized option;
a more stringent option that achieves additional benefits (and
presumably costs more) beyond those realized by the proposed or
finalized option; and a less stringent option that costs less (and
presumably generates fewer benefits) than the proposed or finalized
option. When a continuum of options is not applicable, the regulatory
options can include variation of key parameters, such as different
compliance dates, enforcement methods, standards by size or location of
facilities, and regulatory designs. If fewer than three options are
analyzed relative to the baseline, or if there is a continuum of
options and the options analyzed do not include at least one more
stringent (or otherwise more costly) and one less stringent (or
otherwise less costly) option than the proposed or finalized option,
then the Agency must provide an explanation of why it is not
appropriate to analyze more options.
    (4) The BCA must include a baseline that appropriately considers
relevant factors and relies on transparent and reasonable assumptions.
The baseline must account for, but is not limited to, the following
factors:
    (i) Exogenous changes in the economy that may affect benefits and
costs (e.g., changes in demographics, economic activity, consumer
preferences, or technology);
    (ii) Regulations promulgated by the Agency or other government
entities; and
    (iii) The degree of compliance by regulated entities with other
regulations.
    In rulemaking actions where the Agency determines it is appropriate
to consider more than one baseline (e.g., one that accounts for another
EPA regulation being developed at the same time that affects the same
environmental condition), the BCA must include a reasoned explanation
for the selection of the baselines used and must identify the key
uncertainties in the forecast(s).
    (5) In preparing the BCA, the Agency must rely on the use of a
framework that is appropriate for the characteristics of the regulation
being evaluated and must provide an explanation for the approach
adopted.
    (6) The Agency must consider how costs and benefits may be affected
by consumer and producer behavior in the baseline and potential
behavioral changes from the policy scenarios.
    (7) The BCA must include an estimation of benefits that links
regulatory requirements to the value that individuals place on the
change in benefit endpoints that can be meaningfully attributed to
those requirements.
    (8) The BCA must include, to the extent supported by scientific
literature as well as practicable in a given rulemaking:
    (i) A quantification of all benefits;
    (ii) A monetization of all the benefits that follows well-defined
economic principles using well-established economic methods,
appropriate data and/or studies; and
    (iii) A qualitative characterization of benefits that cannot be
quantified or monetized.
    (9) The process of selecting and quantifying human health benefit
endpoints in the BCA must be conducted according to paragraphs
(a)(9)(i) through (vii) of this section:
    (i) The process of selecting human health benefit endpoints will be
based upon scientific evidence that indicates there is:
    (A) A clear causal or likely causal relationship between pollutant
exposure and effect, and
    (B) Sufficient data and understanding to allow the agency to
reasonably model the anticipated change in that effect in response to
changes in environmental quality or exposures expected as a result of
the regulation under analysis.
    (ii) For human health endpoints, a systematic review process must
be used to evaluate the hazard data for the purposes of determining
which endpoints to include in a BCA and what concentration-response
functions to use to quantify changes in these endpoints. A study's
inclusion in the review must not depend upon that study's findings.
More weight should be given to higher quality studies or analyses that
have been peer reviewed.
    (iii) The studies or analyses used to quantify the concentration-
response relationships should take into account the breadth and quality
of the available evidence regarding the nature and magnitude of the
risk to the populations affected by the regulation. To the extent
possible, the studies or analyses should be:
    (A) Based upon human data when available;
    (B) Specific to the exposure route, duration, and levels, with
preference given to those studies assessing exposure similar to those
experienced by the general population;
    (C) Employ a design or analysis that adequately addresses relevant
sources of potential critical confounding;
    (D) Consider how exposure is measured, particularly those that
provide measurements at the level of the individual and that provide
actual measurements of exposure; and

    (E) Reliably distinguish the presence or absence (or degree of
severity) of health outcomes.
    (iv) When utilizing multiple concentration-response functions to
estimate impacts on a single health endpoint, the BCA must quantify
risks in such a way that the heterogeneity in the estimated health
impacts is clearly characterized.
    (v) The presentation of results should characterize the sensitivity
of the choice of the concentration-response function on the magnitude
and the uncertainty associated with estimated benefits.
    (vi) When sufficient data exist, a probability distribution of risk
is appropriate to use when determining the expected benefits for CAA
regulations. When it is infeasible to estimate a probability
distribution, measures of the central tendency of risk may be used.
Upper-bound risk estimates must not be used without also presenting
lower bound and central tendency estimates.
    (vii) Consistent with the general systematic review process, the
evaluation and model specification processes conducted under all
subsections of (9) must emphasize transparency and replicability. This
includes:
    (A) An explanation of the basis for significant judgments,
assumptions, data, models, and inferences used or relied upon in the
assessment and decisions regarding the selection and quantification of
health endpoints; and
    (B) A description of the sources, extent and magnitude of
significant uncertainties associated with the assessment.
    (10) The BCA must include an identification of uncertainties
underlying the estimation of both benefits and costs and, to the extent
feasible and appropriate, quantitatively analyze those that are most
influential; and must present benefits and cost estimates in ways that
convey their uncertainty, including acknowledging unquantified benefits
and costs, where appropriate. The BCA must include a reasoned
explanation for the scope and specific quantitative or qualitative
methods chosen to analyze uncertainties. Specifically, the explanation
must include the following:
    (i) To the extent feasible and appropriate, the BCA must apply
quantitative methods to analyze uncertainties that have the largest
potential effect on benefits or cost estimates and include a
description of such methods.
    (ii) The BCA must characterize, preferably quantitatively, sources
of uncertainty in the assessment of costs, changes in air quality,
assessment of likely changes in health and welfare endpoints, and the
valuation of those changes. For example, the BCA could characterize
statistical, model or parameter uncertainty.
    (iii) Where data are sufficient to do so, the BCA must include a
consideration of sources of uncertainty both independently and jointly.
    (iv) To the extent feasible and appropriate, the BCA must also
include a consideration, and transparent acknowledgement of, the extent
to which qualitatively-assessed costs or benefits are characterized by
uncertainty.
    (v) When simpler quantitative analysis may not sufficiently
describe uncertainty, and where probability distributions for relevant
input assumptions are available and can be feasibly and credibly
combined, the BCA must include a characterization of how the
probability distributions of the relevant input assumption uncertainty
would impact the resulting distribution of benefit and cost estimates.
    (vi) Except as provided in this paragraph, the BCA must include a
characterization of the range of likely outcomes, including expected
value estimates of benefits and costs as well as distributions about
each of the estimates. In cases where estimates based on expected
values are not feasible or appropriate, the BCA must present a range of
benefits and costs.
    (11) The BCA must include a presentation that includes the
following elements:
    (i) A presentation of the overall results of the BCA (benefits,
costs, and net benefits of each regulatory option evaluated in the BCA)
in a manner designed to be objective, comprehensive, reproducible to
the extent reasonably possible, and easily understood by the public.
    (ii) A description of how the benefits and costs were estimated in
the BCA, including the assumptions made for the analysis. The
description must include the models, data, and assumptions used to
estimate benefits and costs, and the evaluation and selection process
for these analytical decisions. The description must also include an
explanation of procedures used to select among input parameters to the
benefit and cost models, and any methods used to quantify risk and to
model fate and transport of pollutants.
    (iii) A description, consistent with the best available scientific
information, of the non-monetized and non-quantified benefits and costs
of the action. The description must include available evidence on non-
monetized and non-quantified benefits and costs, including explanations
as to why they are not being monetized or quantified and discussions of
what the potential impact of those benefits and costs might be on the
overall results of the BCA.
    (iv) A presentation of the results of an assessment of the sources
of uncertainty that are likely to have a substantial effect on the
results of the BCA and present the results of this assessment. The
presentation must identify any data and models used to analyze
uncertainty in the BCA, and the quality of the available data shall be
discussed.
    (v) A reasoned explanation for any departures from best practices
in the BCA, including a discussion of the likely effect of the
departures on the results of the BCA.
    (12) To the extent permitted by law, the Agency must ensure that
all information (including data and models) used in the development of
the BCA is publicly available while consistent with protections for
privacy, confidentiality, confidential business information (CBI), and
national and homeland security. If data and models are proprietary, the
Agency must make available, to the extent practicable, the underlying
inputs and assumptions used, equations, and methodologies used by EPA.
    (b) [Reserved]

Sec.  83.4   What additional requirements apply to EPA's presentation
of BCA results for all significant regulations promulgated under the
Clean Air Act?

    (a) The Agency must provide a summary in the preamble of each
significant regulation of the overall BCA results, including total
benefits, costs, and net benefits. Within this summary, if any benefits
and costs accrue to non-U.S. populations they must be reported
separately to the extent possible.
    (b) The Agency must provide an additional presentation in the
preamble of each significant regulation of the public health and
welfare benefits that pertain to the specific objective (or objectives,
as the case may be) of the CAA provision or provisions under which the
significant regulation is promulgated.
    (1) This presentation must list the benefit categories arising from
the environmental improvement that is targeted by the relevant
statutory provision and report the monetized value to society of these
benefits.
    (2) If these benefit categories cannot be monetized, the Agency
must report the quantified estimates of these benefits to the extent
possible and provide a qualitative characterization if they cannot be
quantified.

    (c) When the CAA provision or provisions under which the
significant regulation is promulgated require the consideration of
specific costs, the Agency must provide a transparent presentation of
how those specific costs relate to total costs, to the extent possible.
    (d) When the CAA statutory provision or provisions under which the
significant regulation is promulgated does not prohibit the
consideration of the BCA, the Agency must provide a description in the
preamble of how the Agency considered the BCA. If the provision or
provisions under which the significant regulation is promulgated
prohibit the consideration of the BCA, the Agency must identify the
specific provision which bars such consideration.
    (e) The summary, description and presentations specified in
paragraphs (a), (b), (c), and (d) of this section must be placed in the
same section in the preamble of the regulation.

[FR Doc. 2020-27368 Filed 12-22-20; 8:45 am]
BILLING CODE 6560-50-P