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The six elements of the EAP:
State law and subsequent public comment have resulted in the proposed
framework for the Cal/EPA Boards, Departments, and Office (BDOs) to incorporate into their regulatory process.
For the framework to be meaningful to all Cal/EPA BDOs, which have varying statutory requirements, and to consider
public input, the methodologies for the economic analyses will evolve over time. In the interim, a policy document has been issued
and is in full effect.
This document outlines the policy document. The policy document discusses
the legal background to the Economic Analysis Program and suggests some of the methodologies for the analyses.
It is intended to serve as a basis for further discussion of the process and methodology. An expanded version of
the policy document in the form of a handbook that incorporates public and other comments and describes other methodologies
will be available later.
The Cal/EPA Economic Analysis Program has six elements that may apply
at different points in the regulatory process.
1. Economic Impacts on California Businesses and Individuals
Regulatory actions may impose costs or encourage savings in the regulated
community. The costs or savings may lead to a creation, elimination, expansion, or reduction in business activities.
As businesses are affected, so are jobs. New regulations may cause an increase in expenditure on items that create
jobs, or a decrease in expenditures on other items that decrease jobs. New regulations may reduce or enhance
competitiveness of California business enterprises vis a vis firms in the rest of the nation or the world.
A major element of the Cal/EPA Economic Analysis Program is to analyze,
describe, and to the extent possible, quantify the impacts on California businesses and individuals. The analyses
are performed at the development stage of the regulatory process and with public input at workshops, before the
regulation is publicly proposed.
2. Cost Analysis of Alternatives Prior to Public Notice
Cal/EPA BDOs develop programs with considerable study of different options
and alternatives to achieve statutory mandates. Cost is an important factor that is used in the internal decision
making process. A second element of the Economic Analysis Program analyzes the costs of alternatives or combinations
of alternatives that may have different environmental protection levels from the regulation under development.
The analysis would help decision makers select the most cost-effective alternative to comply with statutory mandates.
3. Risk comparisons and Benefits of Regulations
Cal/EPA regulations reduce risks to the public health, safety, and the
environment. These risk reductions accrue benefits to the public. A third element in the Program is to explicitly
put the risk reductions and the benefits in perspective by comparing the proposed risk reductions, to the extent
possible, to other environmental regulatory actions. The benefits of the risk reductions to the public health,
safety, and welfare would be identified and presented in a matrix format that helps place the regulatory decision
making process in a somewhat wider context.
4. Cost Analysis of Submitted Alternatives to Proposed Regulation
After Public Notice
Once a regulation is publicly announced, the BDOs will also consider
alternatives to the proposed regulation submitted by the public. The submitted alternatives are subject to a cost
evaluation according to guidelines provided by the Cal/EPA. The evaluation would be performed on alternatives that
are equally as effective as the proposed regulation. The cost analysis determines whether a less costly alternative
to the draft regulation has been proposed.
5. Analysis of Proposed State Regulations Differing From Federal Regulations
In some instances, protection of public health, safety, and welfare in
California may require regulations that differ from those adopted by the federal government. If a Cal/EPA proposed
regulation is similar to the federal regulation, the BDOs would explain and describe their efforts to avoid unnecessary
duplication or conflicts with the federal regulations. If a differing proposed State regulation is explicitly authorized
by law, then additional economic analysis is not required. However, if the proposed regulation differs significantly
from Federal regulations, then the fifth element in the Cal/EPA Economic Analysis Program analyzes the costs and
justifies the costs by comparing them to the benefits afforded by the proposed State regulation.
6. Analysis of Costs or Savings to State and Local Governments
A sixth element in the Program focuses on estimation of any costs or
savings that a proposed regulation imposes on State agencies, local governments, or school districts.
It would also determine whether the proposed regulation would create any costs or savings in federal funding to
the State. Detailed information on the costs and savings can be found in the State Administrative Manual, section
6050 et seq.
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