Grab and Keel

One of the dark clouds on the week that was in the U.S. Supreme Court was the decision in Michigan v. the Environmental Protection Agency, one portion of which reads:

“Our reasoning so far establishes that it was unreasonable for EPA to read §7412(n)(1)(A) to mean that cost is irrelevant to the initial decision to regulate power plants. The Agency must consider cost—including, most importantly, cost of compliance—before deciding whether regulation is appropriate and necessary,…”

Important Distinctions

First, let’s differentiate between a CBA (a cost benefit analysis) and a Cost Effectiveness Analysis (CEA). There are two important functions of a CBA: (1) To determine if an investment or a decision is justifiable or feasible. (2) To provide a way to compare and contrast alternative projects or proposals. Additionally, “In CBA, benefits and costs are expressed in monetary terms, and are adjusted for the time value of money