April 7, 2014

Draft Supporting Materials for the Science Advisory Board Panel on the Role of Economy-Wide Modeling in US EPA Analysis of Air Regulations

Key materials

This comment addresses Environmental Protection Agency’s request for advice in “developing an ‘analytic blueprint’ of materials on the technical merits and challenges of using economy-wide models to evaluate the social costs, benefits, and economic impacts associated with EPA’s air regulations.” The agency plans to present these materials to a new Science Advisory Board (SAB) panel with “expertise in economy-wide modeling.”

The EPA wishes comments to evaluate whether the agency has identified the “most relevant technical materials in the analytic blueprint to help inform the SAB panel in its deliberations” and if the agency has “identified the most relevant charge questions to the SAB regarding the technical merits and challenges of using economy-wide models” in this context.

The quality of the results from simulation models, including economy-wide models of the sort considered by the agency here, are strongly dependent on the quality of the input. Transparency in modeling efforts is critical, as is avoiding poorly designed models. Economy-wide models should be used to study the employment effects of regulations, which often extend into occupations and industries beyond the one directly regulated. The SAB panel should also consider the issue of modeling nonmarket benefits and distributional effects. Most economy-wide models are static, and the panel should offer advice to the agency on attempting to model dynamic effects of regulations. The trade liberalization literature can offer considerable insight to economy-wide modeling, and these materials should be included in presentations to the SAB panel.

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