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2. Historical Development of the Economic Assessment

Economic analysis of environmental regulations began shortly after the creation of EPA in 1970. President Nixon instituted a "Quality of Life" review for regulations proposed by the Occupational Safety and Health Administration (OSHA), the EPA, and a number of other regulatory agencies, calling for an assessment of the objectives of the regulation, the alternatives that were considered, a comparison of the benefits and costs of the alternatives, and the rationale for selecting the proposed alternative. President Ford's 1974 Executive Order 11281 required an evaluation of the inflationary impact of "major" federal regulatory proposals issued through calendar year 1976. Among the criteria used to decide if a rule were "major" were the cost to consumers, businesses and government; effects on productivity; competitive effects; impacts on the supplies of strategic materials; employment effects; and impacts on energy supply and demand. The executive order called for: (1) a review of alternatives to the proposed regulation, including costs, benefits, risks, and inflationary impacts of the proposal and the alternatives; (2) the effects of the proposed action on business, consumers and markets; and (3) a comparison of benefits and costs for the proposed action. President Carter issued Executive Order 12044 in March 1978 requiring executive agencies to conduct Regulatory Analyses that assessed the economic impacts of the proposed regulatory actions as well as the economic consequences of the principal alternatives under consideration. The RA had to contain a "statement of the problem; a description of the major alternative ways of dealing with the problem that were considered by the agency; an analysis of the economic consequences of each of these alternatives and a detailed explanation of the reasons for choosing one alternative over the others." The executive order also imposed other requirements such as a semiannual regulatory agenda of regulations under development, a process for public comment, and a sunset review for existing regulations, In 1981 President Reagan issued Executive Order 12291 requiring Regulatory Impact Analyses (RIA) for major federal regulatory initiatives. Affected rules included those having an annual effect on the economy of $100 million or greater, those causing significant increases in costs or prices, and those having important adverse effects on competition, investment, productivity, employment or the international competitive position of firms in the United States. Benefits of proposed regulations had to be quantified to the extent feasible. President Clinton issued Executive Order 12866 in 1993 calling for a continuation of cost and benefit analysis of major federal regulatory actions affecting health safety and the environment. The order breaks new ground in its treatment of distributional effects and cumulative effects of regulations. The reports called for in this executive order have come to be termed "Economic Assessments" or EAs. In addition to these Executive Orders, guidance documents have been prepared by the Office of Management and Budget and by the Environmental Protection Agency to assist in preparing the required analyses.

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