Economic Analysis Program Framework

This page updated May 15, 2003


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.


Agency-Wide Economic Analysis Program