Economist Don Fullerton co-authors study to identify modeling techniques to assist U.S. EPA

Wednesday, May 30, 2018

Economist Don Fullerton co-authors study to identify modeling techniques to assist U.S. EPA

The U.S. Environmental Protection Agency has recently released a 150-page study on the use of economy-wide modeling for assessing benefits, costs and economic impact of air pollution regulations. The study was completed by a panel of economists that included Professor Don Fullerton, an economist at IGPA and in the Department of Finance at the University of Illinois at Urbana-Champaign.

The 22-member advisory panel was appointed by the EPA’s Science Advisory Board to (1) evaluate the merits, challenges, and potential value of using economy-wide models as a supplement to the EPA’s existing analytical tools; and (2) to suggest paths forward that would improve the usefulness of economy-wide models for regulatory analysis. 

The study produced by the panel recommended that the EPA adopt wider use of computable general equilibrium (CGE) modeling to supplement the agency’s existing tools for analyzing the impact of air regulations. The CGE approach uses economic data in models of interactions among multiple sectors of production to estimate how an economy might react to changes in policy, technology or other external factors. Fullerton, also the Gutgsell Professor of Finance at the University of Illinois at Urbana-Champaign, drafted major sections of the study and assisted in the editing of others.

Fullerton notes that “The release of this comprehensive study highlights the hard work not only of the outside advisory panel, but also of the expert civil servants inside the U.S. EPA who work tirelessly not just to protect human health but to do it the most cost-effective way.”

The EPA said in its response letter, dated October 2017 but just recently posted online, that it is pleased with the effort. “Your advice is very helpful as we refocus efforts on regulations that protect human health and the environment while allowing for economic growth,” the letter said.