US Courts on Agency Valuation of Environmental Benefits

Environmental Valuation by US Regulatory Agencies:

Adequacy Challenges and Judicial Review

Sroyon Mukherjee*

US regulatory agencies frequently use cost-benefit analysis (‘CBA’) in their decision-making, and several such CBAs have been challenged in court.

In general, scholars such as Cass Sunstein, Jacob Gersen and Adrian Vermeule favour a deferential standard of judicial review, primarily on the basis that CBA involves technical questions which agency experts, as opposed to generalist judges, are better qualified to answer. Since CBA typically involves monetisation of costs and benefits and environmental benefits are notoriously hard to quantify, at first glance the argument for judicial deference appears, if anything, to be even stronger in the context of environmental regulation. This paper takes a contrary view.

Based on a review of US appellate court decisions involving valuation of environmental benefits, I argue that the difficulties inherent in such valuation are not only technical or methodological – the kind that experts are arguably better equipped to address. Before dealing with methodological questions, i.e. how benefits are to be measured, the valuer must first determine which benefits are relevant – a determination which involves value judgments, questions of policy and statutory purpose. As an empirical matter, I show that courts do in fact engage with these questions in the judicial review of CBA. As a normative matter, based on an evaluation of the case law, regulatory practice and the nature of questions at issue, I argue that this is how it should be.