Regulation is one of the principal tools the federal government uses to implement public policy. Agencies’ rulemaking processes generally share three basic phases: (1) initiation of rulemaking actions, (2) development of proposed rules, and (3) issuance of final rules. Agencies’ rulemaking processes include opportunities for internal and external deliberations and reviews, and, as appropriate, procedures for the development of an RIA. Figure 1 provides an overview of these rulemaking phases, including how agencies incorporate RIAs into the overall rulemaking process, when applicable. During initiation, agency officials identify issues that may result in a rulemaking, including those resulting from statutory requirements or management agendas, for example. During this phase, agencies gather information that allows them to determine the need for a rulemaking. The second phase of the rulemaking process starts when an agency begins developing the proposed rule. During this phase, an agency will draft the rule and begin to address the analytical and procedural requirements, including commencing work on the RIA, when applicable. Rule development generally includes input from a wide range of disciplines, including engineers, scientists, economists, lawyers, and policy and subject matter experts, among others. For each rule the agency or the Administrator of the Office of Information and Regulatory Affairs (OIRA) within OMB identifies as an economically significant regulatory action, the agency develops the proposed rule and associated RIA and submits them to OIRA for formal review. After OIRA completes its review, and the agency incorporates resulting changes, the agency publishes the proposed rule in the Federal Register for public comment. In the third phase, development of the final rule, the agency responds to public comments, in some cases modifying the proposed rule in response to the comments. This phase also includes further internal and external review. The agency submits the final RIA and rule to OIRA for review before it publishes the final rule. While agencies’ rulemaking processes generally share these basic process steps, the agencies may vary in managing them. EPA uses the Action Development Process (ADP)—a series of steps the agency follows when it develops actions such as regulations and policy statements—to ensure that the agency adequately addresses scientific, economic, and policy issues at appropriate stages. In addition, the ADP provides opportunities for senior management to provide guidance and direction to staff and helps ensure input from across EPA offices. For economically significant rules, ADP steps generally include forming a workgroup of representatives from various EPA offices who will develop the action; preparing and executing an analytic blueprint for analyses needed to support the action; receiving early guidance from management; developing and selecting options that best achieve the goal of the action; drafting the proposed rule; and conducting final agency review. The lead program office uses the ADP to direct the workgroup and their managers who provided policy direction and to help ensure the integrity of the process. In addition, EPA’s National Center for Environmental Economics provides guidance for performing economic analysis and performs a regulatory review function for the agency by reviewing economic analysis underlying significant regulatory actions. It also conducts research and development on methods for analyzing economic effects. Overall, OMB guidance states RIAs should measure the benefits and costs of a proposed action and the alternatives in comparable terms to ensure a reasonable determination of net benefits. When estimating net benefits, the guidance states that agencies should generally estimate benefits and costs that accrue to society, including those that accrue only to private entities. In addition, agencies should measure benefits and costs against a baseline that generally describes the expected state of the world without the regulation. The guidance also states that agencies should monetize benefits and costs whenever possible. Where agencies cannot monetize or quantify benefits and costs, guidance directs agencies to present the relevant qualitative information along with a description of the unquantified effects, and a discussion of the strengths and limitations of the qualitative information. According to OMB guidance, the 7 percent rate approximates the average before-tax rate of return on capital investments in the private sector, whereas the 3 percent rate approximates the rate at which consumers discount future consumption flows to their present value. Generally, using a higher discount rate gives less weight to future year benefits and gives more weight to near-term benefits. reasonably obtainable scientific, technical, and economic information. OMB guidance allows agencies to use professional judgment regarding the thoroughness of the analysis, while stressing the importance of full disclosure, including whether and how clearly the agencies explained their methods. OMB last revised its guidance for regulatory analysis in 2003. Since that time, greater emphasis has been placed on agencies’ ability to analyze certain effects—including the effects of regulations on employment and reductions in greenhouse gas emissions, such as carbon dioxide—that OMB’s Circular A-4 does not specifically address. To ensure consistency across agencies in estimating benefits and costs related to reducing greenhouse gas emissions, in 2009, OMB co-convened an interagency working group to assess the best methods for valuing the benefits of reducing carbon dioxide emissions, known as the social cost of carbon. The interagency working group produced a technical support document that summarized its work, including the assumptions and uncertainties that underlie the range of estimates it developed for quantifying the social cost of carbon. EPA generally used the seven RIAs we reviewed to inform decision making during the rulemaking process but did not always adhere to OMB guidance for selected elements of these RIAs. According to EPA officials, the agency most commonly used these RIAs to facilitate an iterative process with management, identify effects of regulations, and communicate the information supporting EPA’s regulatory decisions to Congress and the public. In addition, EPA’s adherence to OMB guidance varied across selected elements of the RIAs we reviewed: (1) statements of need and inclusion and usefulness of an executive summary; (2) treatment of regulatory alternatives; (3) estimation of benefits and costs; and (4) treatment of uncertainty, assumptions, and descriptions of data quality. For the seven RIAs we reviewed, EPA officials said they used RIAs to inform decision making but did not use them as the primary basis for selecting the final regulatory option, with one exception. For example, for the Medium- and Heavy-Duty GHG rule, EPA officials said they used the RIA as the primary basis for identifying and selecting from the alternatives considered the most technically feasible option with the greatest net benefits. However, for another rule—RFS2—EPA officials said the RIA played no role in selecting a regulatory approach because the approach resulted from a congressional mandate included in the Energy Independence and Security Act of 2007. Instead, EPA used this RIA to identify the effects of the mandate for Congress and the public, according to EPA officials. For the other five rules, EPA officials said the RIAs facilitated an iterative process with management and communicated information to Congress and the public that supported the regulatory decision. For example, for SPCC, EPA economists said they used information gathered during the analysis to clarify misconceptions decision makers had about the proposed regulation. In addition, EPA used the CISWI and Boiler MACT RIAs to communicate the effects of two standards to which their authorizing law—the Clean Air Act—refers. All seven of the RIAs we reviewed generally adhered to OMB guidance calling for statements of need for the proposed regulatory actions, but these statements were not always clear. OMB guidance states that an agency must demonstrate the need for the proposed action before recommending regulatory action and only promulgate those required by law, necessary to interpret the law, or made necessary by a compelling need, such as material failures of private markets to protect or improve the health and safety of the public or the environment. Accordingly, the guidance states that the RIA should include a statement of need that identifies and explains the problem that the proposed regulation seeks to address—for example, a market failure, or some other compelling public need. In several of the RIAs we reviewed, EPA clearly explained the problem the regulation intended to address and did so early in the analysis. For example, in the ELG RIA, EPA clearly identified and explained the market failure the regulation was intended to address and the authority under which it was promulgated. However, in other RIAs, EPA provided a less explicit explanation. For example, the CISWI RIA included information about the need for the rule, but it did not explicitly describe the problem the rule sought to address. Similarly, in the RFS2 RIA, EPA explained the need for the proposed rule—to assess the projected impacts of the renewable fuel volumes established through the Energy Independence and Security Act of 2007—but did not describe the problem the rule intended to address. According to EPA officials, in both of these cases, the preamble of the final rule published in the Federal Register included this information. Nonetheless, without a clear description of the problem the regulation is intended to address in the RIA, the context and rationale for the analysis is unclear. When the agency does not clearly describe the necessity of the action in the RIA, a third-party reader can not readily evaluate whether or not the proposed alternative addresses the intended need. Each RIA we reviewed provided an executive summary, including a standardized accounting statement with information on expected benefits and costs in accordance with OMB guidance. Recognizing that executive summaries need to reflect the unique circumstances of each rule, we found that the quality and type of information included in the executive summary was inconsistent across the RIAs. For example, two of the standardized accounting statements—those for CISWI and Boiler MACT—clearly summarized the overall benefits and costs for the selected option and regulatory alternative in the executive summary and compared costs, benefits, and net benefits in a table. Other RIAs, however, did not clearly present this information. For example, EPA listed, but it did not explain the benefits, costs, and other economic effects included in the RFS2 accounting statement.