The Economic Benefits of Permitting Reform
Executive Summary
The Council of Economic Advisers (CEA) has estimated the economic benefits of permitting reform. The National Environmental Policy Act (NEPA) acts as an umbrella for environmental review, requiring agencies to evaluate environmental impacts before projects can proceed. Impacted projects include both direct federal actions and private projects requiring federal permits. An environmental impact statement (EIS) typically catalogs the other federal permits that must be obtained – under laws such as the Clean Water Act, Endangered Species Act, and National Historic Preservation Act – for the project to proceed. EISs published in recent years have averaged roughly 1,700 pages including appendixes, and agencies took on average 4.2 years to complete them. Long implementation delays discourage investment because they force investors to wait longer for returns to be realized, resulting in insufficient infrastructure investment and a lower quantity of capital per worker, which leads to higher prices and lower output.
We develop a model to analyze reforms which limit how long projects may be delayed. The Bipartisan American Affordability and Jobs Act (BAAJA) would institute enforceable NEPA review deadlines. In particular, agencies would be required to complete EISs within two years. We find that reducing review times down to the levels required by the BAAJA would:
Reducing completion time even more aggressively – all the way down to 1 year – would:
Our findings are likely conservative for two reasons. First, we limit our analysis to Environmental Impact Statements (EIS) and do not account for Environmental Assessments (EA). While EAs are less onerous, they are significantly more numerous and similarly add to delays in realized investment. Second, NEPA allows for litigation delays, which introduces additional uncertainty to the investment decision. In standard models of investment, additional uncertainty leads to lower investment. Our analysis does not quantify the effects of this potential reduction in uncertainty nor the reduction in the financial costs of litigation.