Digging a little deeper into the EPA's RIA for smog (see previous post for some background), it appears that the EPA is currently using a VSL estimate based on studies from 1974-1991 (I guess I should have known this already, but it has come as a surprise).
On page 23 the EPA says this:
In addition, both ozone benefits and PM2.5 co-benefits reflect EPA’s current interpretation of the economic literature on mortality valuation to use the value-of-a statistical life (VSL) based on meta-analysis of 26 studies.8
Footnote 8 says this:
For more information regarding mortality valuation, please consult section 5.7 of the proposed NO2 RIA (U.S. EPA, 2009b).
Unfortunately, I could not find the NO2 RIA in the reference section (U.S. EPA, 2009b is an NOx budget trading program glossy) but used the google and found a January 2010 document (pages 4-7 to 4-8):
Until updated guidance is available, the Agency determined that a single, peer-reviewed estimate applied consistently best reflects the SAB-EEAC advice it has received. Therefore, the Agency has decided to apply the VSL that was vetted and endorsed by the SAB in the Guidelines for Preparing Economic Analyses (U.S. EPA, 2000)10 while the Agency continues its efforts to update its guidance on this issue. This approach calculates a mean value across VSL estimates derived from 26 labor market and contingent valuation studies published between 1974 and 1991. The mean VSL across these studies is $6.3 million (2000$).11
The Agency is committed to using scientifically sound, appropriately reviewed evidence in valuing mortality risk reductions and has made significant progress in responding to the SAB-EEAC’s specific recommendations. The Agency anticipates presenting results from this effort to the SAB-EEAC in Spring 2010 and that draft guidance will be available shortly hereafter.
Footnote 10 explains where the $6.3 million estimate comes from:
In the (draft) update of the Economic Guidelines (U.S. EPA, 2008d), EPA retained the VSL endorsed by the SAB with the understanding that further updates to the mortality risk valuation guidance would be forthcoming in the near future. Therefore, this report does not represent final agency policy.
Here is the link to Appendix B that summarizes the 26 studies from 1974 to 1991.
Footnote 11 explains how to get the VSL for year 2020:
In this analysis, we adjust the VSL to account for a different currency year (2006$) and to account for income growth to 2020. After applying these adjustments to the $6.3 million value, the VSL is $8.9m.
So, based on this I have two comments. First, $8.9 million is not a lowball number, further condemning the net benefits of the smog rules to the negative realm. Second, and more troubling, the EPA is currently using old studies to inform current policy. There has been much research since 1991 considering the willingness to pay to avoid mortality risks and the policy number should reflect the current research. Did the Colbert Report and USAToday have that much impact on policy?