The Biden Administration is in the process of revising a cog fundamental to federal policymaking. The cog, a guidance document issued by the Office of Management and Budget’s (OMB) entitled Circular A-4, has the potential to dramatically alter the regulatory environment. We break down proposed changes, and their potential impact, below.

Circular A-4 stems from Executive Order 12866, which established the OMB’s Office of Information and Regulatory Affairs (OIRA) as the “repository of expertise concerning regulatory issues, including methodologies and procedures that affect more than one agency.” OIRA was directed to assist agencies in considering “distributive impacts when deciding among alternatives.” Putting these directives into practice, Circular A-4, first issued in 2003, provides OIRA’s guidance to federal agencies on the development of regulatory analysis envisioned by Executive Order 12866.

The Biden Administration has engaged in various big-picture regulatory reform efforts to make the process more equitable (see here) and in-step with issues relevant to policy making today. (Social cost of carbon, which we discussed here, falls into this bucket.) Key policy documents related to these efforts include a January 20, 2021, White House memorandum entitled “Modernizing Regulatory Review,” which partly focuses on ensuring that “regulatory initiatives appropriately benefit and do not inappropriately burden” disadvantaged communities and Executive Order 13985, entitled “Advancing Racial Equity and Support for Underserved Communities Through the Federal Government.”

Biden Administration Changes

Since Circular A-4 was issued in 2003, issues including climate change, social equity, and income distribution have risen in prominence. The Biden Administration proposed modifying Circular A-4 to:

• better address modern policy problems;
• address inconsistencies between analyses of benefits and costs accruing to non-citizens abroad;
• recognize agencies’ increased understanding of the interconnectedness of the various impacts from regulatory action;
• and the increase importance of international regulatory cooperation since 2003; and
• clarify language which — two decades in — was found to be unclear.

While there are some housekeeping aspects to these changes, some changes tie directly to substantive changes in law. Climate change, for instance, has been addressed in legislation including the Inflation Reduction Act (see here) and recently proposed US Environmental Protection Agency (EPA) federal vehicle emissions standards intended to reduce carbon dioxide emissions and accelerate the transition to electric vehicles (see here). The government’s engagement in this space necessitated some revision to Circular A-4 to ensure that the effects of these policies could be estimated.

While the policy disputes seem hyper-technical, they have real-world effects. For example, using lower discount rates increases the value of future benefits verses current-day costs, and is, accordingly, supported by environmental, labor, and health groups. Organizations such as the Center on Budget and Policy Priorities (CBPP), support the related concept, “the incorporation of income weighting, the renewed focus on distributional effects, and the modernization of the discount rate.” Weighting future effects imposes present-tense costs which businesses would bear today. Predictably some business interests have opposed the changes, with Republican Congressional leaders claiming that these “regulatory review measures would upend the process and open the doors to vast economy-crushing regulations.”

Next Steps

The Biden Administration intends for revisions to Circular A-4 to be completed in April 2024. The comment period for these revisions is closed, with a total of 4,402 comments submitted as of June 8, 2023. OIRA will continue these comments as part of the revision process.

The firm’s Environmental and Energy & Cleantech teams routinely monitor federal environmental and energy policy efforts. Stay tuned here for further developments.

Additional research and writing from Errin D. Jones, a 2023 summer associate in ArentFox Schiff's Chicago office and a law student at University of Chicago.

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