Accounting for Ecosystem Services in Benefit-Cost Analysis
By OIRA Administrator Richard L. Revesz and OSTP Director Arati Prabhakar
The environment benefits our lives every day: Timber provides the structure of buildings that underlie our economy. Pollinators help grow our food. Healthy forests reduce wildfire risk and improve air quality. Wetlands help to manage flood risks and provide habitat for fish and wildlife that support an outdoor recreation economy.
Because nature provides us with so many things without cost, these benefits—called “ecosystem services”—are not always fully captured in benefit-cost analysis, which the U.S. government has used for decades as a way to check that regulations and investments are making a positive impact on Americans’ lives. Failing to fully account for nature’s bounty has led to under-valuing and erosion of our nation’s natural assets. When we account for our environment, we are able to harness opportunities to confront climate change, promote prosperous and resilient communities, and invest in strong infrastructure. We must measure what we value, not just value what is simple to measure.
Today, the Office of Information and Regulatory Affairs (OIRA)—part of the Office of Management and Budget (OMB)—is taking a critical step to help agencies account more fully for costs and benefits linked to the environment. In collaboration with the Office of Science and Technology Policy (OSTP), OIRA is releasing a draft of the federal government’s first-ever guidance on accounting for ecosystem services in benefit-cost analysis. Once the draft is finalized, this guidance will advance and strengthen analyses of regulations and government investments.
Thoughtful consideration of the whole country’s long-term wellbeing, based on the best available economics and science, is a core motivation of OIRA’s broader ongoing efforts to Modernize Regulatory Review. Today’s draft guidance advances those efforts, and fulfills instructions from President Biden’s Executive Order 14072, “Strengthening the Nation’s Forests, Communities, and Local Economies.” The Biden-Harris Administration has made investing in nature a priority, including through the America the Beautiful initiative, the White House Nature-Based Solutions Roadmap. This new draft guidance is an important step in implementing these investments and promoting better policy choices.
This guidance complements a roadmap released earlier this year by OSTP, OMB, and the Department of Commerce to expand the nation’s economic accounting system to include natural capital. Both that roadmap and this guidance will help inform decisions that affect nature, and will better reveal how those changes ultimately affect people.
The draft ecosystem services guidance for benefit-cost analysis reflects collaborations with ecologists and economists across departments and agencies, and it aligns best practices within government with state-of-the-art scientific knowledge. Input from the public is an important part of creating this guidance. That’s why we are seeking public comment on the draft guidance, which will also undergo peer review. The related Federal Register Notice has instructions on how to submit a public comment.
We look forward to continuing this work to help ensure that benefit-cost analyses make seen the unseen: how healthy ecosystems protect people, support jobs, and strengthen the economy.
