White House to agencies: Tally projects’ financial damage to ecosystems

By Jean Chemnick | 08/01/2023 06:30 AM EDT

“Failing to fully account for nature’s bounty has led to undervaluing and erosion of our nation’s natural assets,” the Biden regulatory chiefs wrote.

Richard Revesz, administrator of the Office of Information and Regulatory Affairs.

Richard Revesz, administrator of the White House Office of Information and Regulatory Affairs, testifies on Capitol Hill last year. Francis Chung/POLITICO

Federal agencies would be required to do a full accounting of how their decisions affect ecosystems the public depends on under a draft guidance that the White House will release Tuesday.

The Office of Management and Budget and Office of Science and Technology Policy guidance targets the benefits people derive from forests, wetlands and waterways.

While ecosystems have sometimes appeared in the cost-benefit assessments that agencies must write to support their rules, policies and projects, there has never been a governmentwide directive or guidance for doing that accounting.


As a result, ecosystem values are treated as secondary to more easily quantified benefits, Richard Revesz, administrator of OMB’s Office of Information and Regulatory Affairs, and OSTP Director Arati Prabhakar wrote in a joint blog post Tuesday.

“Failing to fully account for nature’s bounty has led to undervaluing and erosion of our nation’s natural assets,” they wrote.

The draft guidance is part of a larger Biden administration push to update the government’s decades-old regulatory schemes.

First floated in April, the administration’s plans for a regulatory overhaul focus on how agencies tally the costs and benefits of a broad swath of actions — from setting environmental standards and leasing decisions to procurement and construction.

The draft guidance being released Tuesday will undergo a period of public comment and peer review after it is published Tuesday on the Federal Register website. The White House’s goal is to finalize it within a year.

The draft focuses on the nature’s values for human health and the economy. Trees are a salable crop, but also offer shade, climate benefits and wildlife habitat. Wetlands protect against property damage from flooding. New York City owes its high-quality drinking water to the Catskill and Delaware watersheds.

Non-economic benefits are also considered, such as environmental impacts on physical and mental health and recreation. If an ecosystem underpins a Native American tribe’s religious practice, for example, that’s also an ecosystem service.

The guidance sets best practices for agencies to ensure that these social goods are given equal footing with other costs and benefits during regulatory review.

“We must measure what we value, not just value what is simple to measure,” Revesz and Prabhakar wrote.

The draft guidance directs agencies to broaden the scope of their analyses to fully account for ecosystem services. It requests a clear description of the link between the proposed action and any changes to the ecosystem that could harm or benefit humans.

Where possible, agencies are asked to assign a dollar value to a policy’s effect on an ecosystem service.

Methodologies to measure the financial value of the environment have become more sophisticated in recent years. The Biden administration is in the midst of updating social cost of greenhouse gas metrics to incorporate fresh scholarship about what each incremental ton of emissions costs humanity. The values allow climate change to be considered beside a rule’s other economic impacts.

Similar global metrics don’t exist for many ecosystem services. But Eli Fenichel, a professor of natural resource economics at Yale University, said those other factors are often easier to tag with financial values because they’re narrower in scope — for example, a rule that effects urban cooling in Phoenix.

“For many of these other ecosystem services, because they are local, when we do get numbers, we actually have a lot of confidence in them,” he said.

The guidance document stresses that it doesn’t impose any new requirements on agencies. And Fenichel noted that the OMB cost-benefit guidance that has been in place for 20 years doesn’t exclude natural resources or the environmental impacts from consideration. There just hasn’t until now been a clear blueprint for how agencies consider those benefits and costs, he said.

“This has been a long time coming,” said Gernot Wagner, a climate economist at Columbia Business School.

Wagner pointed to a 1999 paper by economists William Nordhaus and Edward Kokkelenberg that urged the U.S. government to improve its environmental accounting, which he said was finally realized when the White House released an economic accounting road map earlier this year that for the first time included environmental assets.

This week’s guidance, Wagner said, brings those social goods into the regulatory review process, affirming that “yes, nature provides crucial services that ought to be considered when making decisions.”

When those benefits aren’t considered, he added, “we basically treat natural assets as if they’re simply there for the taking.”

Under that scheme, he said, a tree is only valuable when it is harvested as timber and not when it is preserved as a source of shade, natural carbon removal, wildlife habitat and scenic beauty. There’s no cost assigned to policies or decisions that degrade watersheds that cities depend on for drinking water or the wetlands that guard them against storm surges — even though replacing those natural features with man-made alternatives would be costly.

The draft guidance would also inform projects by by the Army Corps of Engineers or the Federal Emergency Management Agency, Fenichel said.

“For example, a decision related to building, say, a sea wall versus using wetlands restoration to manage coastal flooding — this could very much tip the scales in a decision like that,” he said.

James Goodwin, a senior policy analyst at the Center for Progressive Reform who is skeptical of cost-benefit analysis as a predicate for rulemakings, said the new guidance is an improvement.

“Obviously, an acre of wetland is worth much more than just the ‘ecosystem services’ that it provides. But that is a component of its value,” he said. “And that is a component of its value that I think is not ethically troublesome to put a monetary value on.”