vvEPA
            United States
            Environmental Protection
            Agency
                 Office of Air and Radiation
                 Office of Policy, Planning and
                 Evaluation
EPA-410-R-97-002
October 1997
The Benefits and Costs of
the Clean Air Act
1970 to 1990
EPA Report to Congress
                   Internet Address (URL) ••http://www.epa.gov
       Recycled/Recyclable • Printed with Vegetable Oil Based Inks on Recycled Paper (Minimum 30% Postconsumer)

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The Benefits and Costs of the
  Clean Air Act, 1970 to 1990
              Prepared for
              U.S. Congress

                 by
       U.S. Environmental Protection Agency
              October 1997

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Abstract
    Section 812 of the Clean Air Act Amendments of 1990 requires the Environmental Protection Agency
(EPA) to periodically assess the effect of the Clean Air Act on the "public health, economy, and environment of
the United States," and to report the findings and results of its assessments  to the Congress. Section 812 further
directs EPA to evaluate the benefits and costs of the Clean Air Act's implementation, taking into consideration
the Act's effects on public health, economic growth, the environment, employment, productivity, and the economy
as a whole. This EPA Report to Congress presents the results and conclusions of the first section 812 assess-
ment, a retrospective analysis of the benefits and costs of the Clean Air Act from 1970 to 1990. Future reports
will detail the findings of prospective analyses of the benefits and costs of the Clean Air Act Amendments of
1990, as required by section 812.

    This retrospective analysis evaluates the benefits  and costs of emissions controls imposed by the Clean Air
Act and associated regulations. The focus is primarily on the criteria pollutants sulfur dioxide, nitrogen oxides,
carbon monoxide, particulate matter, ozone, and lead since essential data were lacking for air toxics. To deter-
mine the range and magnitude of effects of these pollutant emission reductions, EPA compared and contrasted
two regulatory scenarios. The "control scenario" reflects the actual conditions  resulting from the historical
implementation of the 1970 and 1977 Clean Air Acts. In contrast, the "no-control" scenario reflects expected
conditions under the assumption that, absent the passage of the  1970 Clean Air Act, the scope, form, and
stringency of air pollution control programs would have remained as they were in 1970. The no-control scenario
represents a hypothesized "baseline" against which to measure the effects of the Clean Air Act. The differences
between the public health, air quality, and economic and environmental conditions resulting from these two
scenarios  represent the benefits and costs of the Act's implementation from 1970 to  1990.

    To identify and quantify the various public health, economic,  and environmental differences between the
control and no-control scenarios, EPA employed a sequence of complex modeling and analytical procedures.
Data for direct compliance costs were used in a general equilibrium macroeconomic model to estimate the
effect of the Clean Air Act on the mix of economic and industrial activity comprising the nation's economy.
These differences in economic activity were used to model the corresponding changes in pollutant emissions,
which in turn provided the basis for modeling resulting differences  in air quality conditions. Through the use of
concentration-response functions derived from the scientific literature, changes in air quality provided the basis
for calculating differences in physical effects between the two scenarios (e.g, reductions in the incidence of a
specific adverse  health effect, improvements in visibility, or changes in acid deposition rates). Many of the
changes in physical effects were assigned an economic value on the basis of a thorough review and analysis of
relevant studies from the economics, health effects, and air quality literature. The final analytical step involved
aggregating these individual economic values and assessing the related uncertainties to generate a range of
overall benefits estimates.

    Comparison of emissions modeling results for the control and no-control scenarios indicates that the Clean
Air Act has yielded significant pollutant emission reductions. The installation of stack gas scrubbers and the use
of fuels with lower sulfur content produced a 40 percent reduction in 1990  sulfur dioxide emissions from elec-
tric utilities; total suspended particulate emissions were 75 percent lower as  a result of controls on industrial and
utility smokestacks. Motor vehicle pollution controls adopted under the Act were largely responsible for a 50
percent reduction in carbon monoxide emissions, a 30 percent reduction in emissions of nitrogen oxides, a 45

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The Benefits and Costs of the Clean Air Act, 1970 to 1990
percent reduction in emissions of volatile organic compounds, and a near elimination of lead emissions. Several
of these pollutants (primarily sulfur dioxide, nitrogen oxides, and volatile organic compounds) are precursors
for the formation of ozone, particulates, or acidic aerosols; thus, emissions reductions have also yielded air
quality benefits beyond those directly associated with reduced concentrations of the individual pollutants them-
selves.

    The direct benefits of the Clean Air Act from 1970 to 1990 include reduced  incidence of a number of
adverse human health effects, improvements in visibility, and avoided damage to agricultural crops. Based on
the assumptions employed, the estimated economic value of these benefits ranges from $5.6 to $49.4 trillion, in
1990 dollars, with a mean, or central tendency estimate, of $22.2 trillion. These estimates do not include a
number of other potentially important benefits which could not be readily quantified, such as ecosystem changes
and air toxics-related human health effects. The estimates are based on the assumption that correlations between
increased air pollution exposures and adverse health outcomes found by epidemiological studies indicate causal
relationships between the pollutant exposures and the adverse health effects.

    The direct costs of implementing the Clean Air Act from  1970 to 1990, including annual compliance expen-
ditures in the private sector and program implementation costs in the public sector, totaled $523 billion in 1990
dollars. This point estimate of dkect costs does not reflect several potentially  important uncertainties, such as
the degree of accuracy of private sector cost survey results,  that could not be  readily quantified. The estimate
also does not include several potentially important indirect costs which could not be readily quantified, such as
the possible adverse effects of Clean Air Act implementation on  capital formation  and technological innova-
tion.

    Thus, the retrospective analysis of the benefits and costs of implementing the Clean Air Act from 1970 to
 1990 indicates that the mean estimate of total benefits over the period exceeded total  costs by more than a factor
of 42. Taking into account the aggregate uncertainty in the estimates, the ratio of benefits to costs ranges from
 10.7 to 94.5.

    The assumptions and data limitations imposed by the current state of the art in each phase of the modeling
and analytical procedure, and by the state of current research on air pollution's effects, necessarily introduce
some uncertainties in this result. Given the  magnitude of difference between the estimated benefits and costs,
however, it is extremely unlikely that eliminating these uncertainties would invalidate the fundamental conclu-
sion that the Clean Air Act's benefits to society have greatly exceeded its costs. Nonetheless, these uncertainties
do serve  to highlight the need for additional research into the public health, economic, and environmental
effects of air pollution to reduce potential uncertainties in future prospective analyses of the benefits and costs
 of further pollution controls mandated by the Clean Air Act Amendments of 1990.

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 Contents
Tables	xi


Figures	xv


Acronyms and Abbreviations	^vii


Acknowledgments	.	xxm


Executive Summary	ES-1
       Purpose of the Study	ES-1
       Study Design	ES-1
       Study Review	ES-1
       Summary of Results	ES-2
           Direct Costs	ES-2
           Emissions	ES-2
           Air Quality	ES-3
           Physical Effects	ES-5
           Economic Valuation	ES-7
           Monetized Benefits and Costs	ES-8
       Alternative Results	.'	ES-9
       Conclusions and Future Directions	;	ES-9


Chapter 1: Introduction	1
       Background and Purpose	1
       Clean Air Act Requirements, 1970 to 1990	1
       Section 812 of the Clean Air Act Amendments of 1990	2
       Analytical Design and Review	       2
           Target Variable	2
           Key Assumptions	2
           Analytic Sequence	3
       Review Process	6
       Report Organization	6


Chapter 2: Cost and Macroeconomic Effects	7
       Direct Compliance Costs	7
       Indirect Effects of the CAA	!!"!""!!!"!'."!."!!."!!""!!!"! 9
           Sectoral Impacts	9
           Aggregate Effects	9
       Uncertainties and Sensitivities in the Cost and Macroeconomic Analysis	10
           Productivity and Technical Change	10
           Discount Rates	   \\
           Exclusion of Health Benefits from the Macroeconomic Model	12

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The Benefits and Costs of the Clean Air Act, 1970 to 1990
Chapter3:  Emissions	13
       Sector-Specific Approach	15
       Summary of Results	15
       Uncertainty in the Emissions Estimates	17


Chapter 4:  Air Quality	19
       General Methodology	20
       Sample Results	21
           Carbon Monoxide	.	21
           Sulfur Dioxide	,	22
           Nitrogen Dioxide	22
           Particulate Matter	23
           Ozone	23
               Urban Ozone	23
               Rural Ozone	24
           Acid Deposition	24
           Visibility	25
       Uncertainty in the Air Quality Estimates	25


Chapter 5:  Physical Effects	29
       Human Health and Welfare Effects Modeling Approach	29
           Air Quality	29
           Population	29
           Health and Welfare Effects	29
       Key Analytical Assumptions	30
           Mapping Populations to Monitors	32
           Choice of Study	..	33
           Variance Within Studies	33
           PM-Related Mortality	34
              Short-Term Exposure Studies	34
              Long-Term Exposure Studies	35
       Health Effects Modeling Results	37
           Avoided Premature Mortality Estimates	37
           Non-Fatal Health Impacts	37
       Other Physical Effects	38
           Ecological Effects	38
              Aquatic and Forest Effects	38
              Quantified Agricultural Effects	39
           Effects of Air Toxics	39
           Uncertainty in the Physical Effects Estimates	41


Chapter  6: Economic Valuation	43
       Methods for Valuation of Health and Welfare Effects	.43
           Mortality	44
           Survey-Based Values	45
              Chronic Bronchitis	45
              Respiratory-Related Ailments	46
              Minor Restricted Activity Days	46
              Visibility	46
       Avoided Cost Estimates	46
           Hypertension and Hospital Admissions	46
           Household Soiling	47

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                                                                                          Contents
       Other Valuation Estimates	47
           Changes in Children's IQ	47
           Work Loss Days and Worker Productivity	48
           Agricultural Benefits	48
       Valuation Uncertainties	48
           Mortity Risk Benefits Transfer	48


Chapter 7: Results and Uncertainty	51
       Quantified Uncertainty in the Benefits Analysis	51
       Aggregate Monetized Benefits	52
       Comparison of Monetized Benefits and Costs	55
       Major Sources of Uncertainty	56
       Alternative Results	57
           PM Mortality Valuation Based on Life-Years Lost	57
           Alternative Discount Rates	58


Appendix A: Cost and Macroeconomic Modeling	A-l
       Introduction	A-l
       Macroeconomic Modeling	A-l
       Choice of Macroeconomic Model	A-2
       Overview of the Jorgenson-Wilcoxen Model	A-2
           Structure of the Jorgenson-Wilcoxen Model	A-3
           The Business Sector	,	A-4
           The Household Sector	'.	.	A-4
           The Government Sector	A-5
           The Rest-of-the-World Sector	A-5
           Environmental Regulation, Investment, and Capital Formation	A-5
           The General Equilibrium	A-5
           Configuration of the No-control Scenario	A-6
              Elimination of Compliance Costs in the No-Control Case	A-7
              Capital Costs - Stationary Sources	A-7
              Operating and Maintenance Costs - Stationary Sources	A-8
              Capital Costs - Mobile Sources	A-8
              Operating and Maintenance - Mobile Sources	A-8
       Direct Compliance Expenditures Data	A-8
           Sources of Cost Data	A-8
              Cost of Clean Data	A-8
              EPA Data	;	A-8
              Commerce Data	A-9
           Stationary Source Cost Data..	A-9
              Capital Expenditures Data	A-9
              Operation and Maintenance Expenditures Data	A-10
              Recovered Costs	A-10
           Mobile Source Cost Data	A-ll
              Capital Expenditures Data	A-ll
                  Operation and Maintenance Expenditures Data	A-ll
                  Fuel Price Penalty	A-ll
                  Fuel Economy Penalty	A-l2
                  Inspection and Maintenance Programs	A-13
                  Maintenance Credits	A-13
                  Fuel Density Credits	A-13
           Other Direct Cost Data	A-13

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The Benefits and Costs of the Clean Air Act, 1970 to 1990
       Assessment Results	A-14
           Compliance Expenditures and Costs	A-14
              Annualization Method	A-16
              Discounting Costs and Expenditures	A-19
           Indirect Economic Effects of the CAA	A-20
           GNP and Personal Consumption	A-20
           Prices	A-23
           Sectoral Effects: Changes in Prices and Output by Industry	A-23
           Changes in Employment Across Industries	A-25
       Uncertainties in the Cost Analysis	A-26
           Potential Sources of Error in the Cost Data	A-26
           Mobile Source Costs	A-28
           Stationary Source Cost Estimate Revisions	A-29
           Endogenous Productivity Growth in the Macro Model	A-29
           Amortization Period for Stationary Source Plant and Equipment..	A-30
       Cost and Macroeconomic Modeling References	A-31


Appendix B: Emissions Modeling	B-l
       Introduction	B-l
       Comparison of Emissions Projections with Other EPA Data	B-l
           Control Scenario Projections Versus EPA Trends Projections	B-l
           No-Control Scenario Projections Versus Historical EPA Trends Data	B-3
       Industrial Boilers and Processes	,	B-4
           Overview of Approach	B-4
              Industrial Boilers	B-4
              Industrial Processes and In-Process Fuel Combustion	B-4
              Establishment of Control Scenario Emissions	B-5
              Control Scenario Boiler Emissions	B-5
              Control Scenario Industrial Process Emissions	B-7
       Development of Economic Driver Data
         for the Control Scenario - Industrial Boilers and Processes	B-7
           Economic Driver Data for Industrial Boiler Approach	B-7
           Economic Driver Data for the Industrial Process Approach	B-8
           No-control Scenario Emissions	B-8
              Industrial Boiler Emissions of SO2, NOx, and TSP	B-8
              Industrial Boiler Emissions of CO and VOC	,	B-9
              Industrial Process Emissions	B-9
              Lead Emissions	B-9
       Off-Highway Vehicles	;	B-10
           Overview of Approach	B-10
              Development of Control Scenario	B-ll
              No-control Scenario  Emissions Estimates	B-ll
           National and State-Level Off-Highway Emission Estimates	B-ll
       On-Highway	B-l-2
           Overview of Approach	B-l 3
              Personal Travel	B-13
                  Iterative Proportional Fitting (DPF)	B-13
                  Vehicle Ownership Projection (VOP)	B-14
                  Projection of Vehicle Fleet Composition	B-14
                  Activity/Energy  Computation	B-14
              Goods Movement	B-l 5
              Other Transportation Activities...	B-15
           Lead Emissions	B-15
           Estimation of No-control Scenario Emissions	B-15
              Development of Emission Factors	B-15
              Allocation of Highway Activity to States	B-16
                                              IV

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                                                                                           Contents
              Development of Highway Pollutant Estimates	B-16
                  Control Scenario Emissions Calculation	B-16
                  No-control Scenario Emissions	B-21
       Utilities	B-24
           Overview of Approach	B-24
              Establishment of Control Scenario Emissions	B-24
                  Key Assumptions in the Development of the ICF Analysis	B-24
                  ARGUS Modeling Assumptions	B-26
              No-control Scenario Emissions	B-27
                  ICF Estimates of SO2, TSP, and NOx Emissions in the No-control Scenario	B-27
              ARGUS No-control Scenario	B-29
           Estimation of Lead Emissions from Utilities	B-29
           CEUM Sensitivity Case	B-30
       Commercial/Residential	B-30
           Control Scenario Emissions	B-31
              Emissions Data	B-32
              Energy Data	B-33
              Economic/Demographic Data	B-33
           No-control Scenario Emissions	B-34
              Emissions Data	B-34
              Energy Data	B-34
              Economic/Demographic Data	B-35
       Emissions Modeling References	B-39


Appendix C: Air Quality Modeling	C-l
       Introduction	C-l
       Carbon Monoxide	C-l
           Control scenario carbon monoxide profiles	C-l
           No-control scenario carbon monoxide profiles	C-2
           Summary differences in carbon monoxide air quality  	C-4
           Key caveats and uncertainties for carbon monoxide	C-4
       Sulfur Dioxide	C-5
           Control scenario sulfur dioxide profiles	C-5
           No-control scenario sulfur dioxide profiles	C-5
           Summary differences in sulfur dioxide air quality	C-6
           Key caveats and uncertainties for sulfur dioxide	C-6
       Nitrogen Oxides	C-6
           Control scenario nitrogen oxides profiles	C-7
           No-control scenario nitrogen oxides profiles	C-8
           Summary differences in nitrogen oxides air quality	C-8
           Key caveats and uncertainties for nitrogen oxides	C-8
       Acid Deposition	C-8
           Control scenario acid deposition profiles	C-9
           No-control scenario acid deposition profiles	C-l 1
           Summary differences in acid deposition	C-12
           Key caveats and uncertainties for acid deposition	C-12
       Paniculate Matter	C-13
           Control scenario paniculate matter profiles	C-14
           No-control scenario paniculate matter profiles	C-15
           Summary differences in paniculate matter air quality	<	C-16
           Key caveats and uncertainties for paniculate matter	C-16
       Ozone	C-18
           Control scenario ozone profiles	C-21
           No-control scenario ozone profiles	C-21
           Summary differences in ozone air quality	C-23
           Key caveats and uncertainties for ozone	C-24

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The Benefits and Costs of the Clean Air Act, 1970 to 1990
       Visibility	,	C-25
           Control scenario visibility.	C-25
           No-control scenario visibility	C-26
           Summary differences in visibility	C-26
              DeciView Haze Index	C-26
              Modeling Results	C-28
           Key caveats and uncertainties for visibility	C-28
       Air Quality Modeling References	C-30


Appendix D: Human Health and Welfare Effects of Criteria Pollutants	D-l
       Introduction	D-l
       Principles for the Section 812 Benefits Analysis	D-l
       General Modeling Approach	D-2
       Quantifying Changes in Pollutant Exposures	D-2
           Air Quality	D-2
           Population Distribution	D-3
              Census Data	D-3
              Gridding U.S. Population	D-4
              Allocating Exposure Estimates to the Population	D-4
                  Method One	D-4
                  Method Two	D-4
       Estimating Human Health Effects of Exposure	D-5
           Types of Health Studies	D-5
              Epidemiological Studies	D-6
              Human Clinical Studies	D-7
           Issues in Selecting Studies To Estimate Health Effects	D-9
              Peer-Review of Research	D-9
              Confounding Factors	D-9
              Uncertainty	D-10
              Magnitude of Exposure	D-ll
              Duration of Exposure	D-ll
              Thresholds	D-ll
              Target Population	D-ll
              Statistical Significance of Exposure-Response Relationships	D-12
              Relative Risks	D-12
              Baseline Incidence Data	D-12
           Estimating Mortality Effects	D-13
              Using PM as an Indicator	D-13
              Estimating the Relationship Between PM and Premature Mortality	D-13
              Prematurity of Mortality: Life-Years Lost as a Unit of Measure	D-16
           Estimating Morbidity Effects	D-19
              Overlapping Health Effects	D-19
              Studies Requiring Adjustments	D-19
           Concentration-Response Functions: Health Effects	D-19
              Paniculate Matter	D-19
              Ozone	D-26
              Nitrogen Oxides	D-34
              Carbon Monoxide	D-36
              Sulfur Dioxide	D-38
       Estimating Welfare Effects of Exposure	D-40
           Agricultural Effects	'.	D-40
           Materials Damage	D-41
           Visibility	D-41
           Worker Productivity	D-41
           Ecological Effects	D-41
       Modeling Results	,	D-44
       Human Health and Welfare Effects References	D-48
                                                VI

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                                                                                          Contents
Appendix E: Ecological Effects of Criteria Pollutants	E-l
       Introduction	E-l
       Benefits From Avoidance of Damages to Aquatic Ecosystems,	E-l
           Acid Deposition	E-2
              Background	E-2
              Current Impacts of Acid Deposition	E-2
                  Effects on Water Chemistry	E-2
                  Effects on Fish Habitat Quality	E-4
                  Economic Damages to Recreational Fishing	E-5
              Benefits From Acid Deposition Avoidance Under the CAA...	E-5
                  Recreational Fishing	E-5
           Eutrophication	E-6
              Atmospheric Deposition and Eutrophication	E-7
              Valuing Potential Benefits from Eutrophication Avoidance Under the CAA	E-7
           Mercury	E-8
       Benefits from Avoided Damages to Wetland Ecosystems	E-9
           Introduction	E-9
           Effects of Acidification	>	E-9
           Effects of Nutrient Loading	E-10
           Summary of Wetland Ecosystem Effects	 E-ll
       Benefits from Avoided Damages to Forests	E-l 1
           Introduction	E-ll
           Current Air Pollutant Effects on Forests	E-12
              Acid Deposition Impacts	E-12
              Ozone Impacts	E-12
                  Experimental Evidence	,	E-12
                  Observational Evidence	'.	E-l3
              Endangered species	E-14
           Valuation of Benefits From CAA-Avoided Damages to Forests	E-14
              Background	E-14
              Commercial Timber Harvesting	E-15
              Non-marketed Forest Services	E-16
       Ecosystem Effects References	'..	E-l 8


Appendix F: Effects of Criteria Pollutants on Agriculture	F-l
       Introduction	F-l
       Ozone Concentration Data	F-l
           Control and No-control Scenario Ozone Concentration Data	F-2
           Calculation of the W126 Statistic	F-2
           Aggregating Ozone Data to the County Level	F-3
       Yield Change Estimates	F-3
           Exposure-Response Functions	F-3
              Minimum/Maximum Exposure-Response Functions	F-4
           Calculation of Ozone Indices	F-4
           Calculations of County Weights	F-5
           Calculation of Percent Change in Yield	F-5
       Economic Impact Estimates	F-5
           Agricultural Simulation Model (AGSIM)	1	F-5
       Conclusions	F-9
       Agricultural Effects References	F-10


Appendix G:  Lead Benefits Analysis	G-l
       Introduction	G-l
       Methods Used to Measure and Value Health Effects	'.	G-2
           Health Benefits to Children	G-2

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The Benefits and Costs of the Clean Air Act, 1970 to 1990
               Changes in IQ	G-2
                  Quantifying the Relationship Between Blood Lead Levels and IQ	G-2
                  Valuing Changes in Children's Intelligence	G-3
               Children with IQs Less Than 70	G-7
                  Quantifying the Number of Children with IQs Less than 70	G-7
                  Valuing the Reduction in Number of Children with IQs less than 70	G-8
               Changes in Neonatal Mortality	G-8
                  Quantifying the relationship between PbB levels and neonatal mortality	G-8
                  Valuing changes in neonatal mortality	G-8
           Health Benefits to Men	G-8
               Hypertension	G-9
                  Quantifying the relationship between PbB levels and hypertension	G-9
                  Valuing reductions in hypertension	G-9
               Quantifying the relationship between blood lead and blood pressure	G-9
               Changes In Coronary Heart Disease	G-10
                  Quantifying the relationship between blood pressure and coronary heart disease	G-10
                  Valuing reductions in CHD events	G-l 1
               Changes in Initial Cerebrovascular Accidents
                and Initial Atherothrombotic Brain Infarctions	G-12
                  Quantifying the relationship between blood pressure and first-time stroke	G-12
                  Valuing reductions in strokes	G-12
               Changes in Premature Mortality	G-13
                  Quantifying the relationship between blood pressure and premature mortality	G-13
                  Valuing reductions in premature mortality	,	G-13
           Health Benefits to Women	G-13
               Changes in Coronary Heart Disease	G-14
                  Quantifying the relationship between blood pressure and coronary heart disease	G-14
                  Valuing reductions in CHD events	G-14
               Changes in Atherothrombotic Brain Infarctions and Initial Cerebrovascular Accidents ...G-14
                  Quantifying the relationship between blood pressure and first-time stroke	G-14
                  Valuing reductions in strokes	G-15
               Changes in Premature Mortality	G-15
                  Quantifying the relationship between blood pressure and premature mortality	G-15
           Quantifying Uncertainty	G-15
               Characterizing Uncertainty Surrounding the Dose-Response Relationships	;	G-15
               Characterizing Uncertainty Surrounding the Valuation Estimates	G-15
       Industrial Processes and Boilers and Electric Utilities	G-16
           Methods Used to Determine Changes in Lead Emissions
            from Industrial Processes from 1970 to 1990	G-16
               TRIData	G-16
               Derivation of Industrial Process Emissions Differentials 1970-1990	G-17
                  Data sources	G-17
                  Estimates of industrial process emissions in the control scenario	G-17
                  Estimates of industrial process emissions in the no-control scenario	G-l8
               Matching TRI Data to Industrial Process Emissions Differentials	G-l8
           Methods Used to Determine Changes in Lead Emissions
            from Industrial Boilers from 1970 to 1990	G-19
               TRIData	G-19
               Derivation of Industrial Combustion Emissions 1970-1990	G-20
                  Estimates of combustion emissions under the control scenario	G-20
                  Estimates of combustion emissions under the no-control scenario	G-20
               Matching TRI Data to Industrial Combustion Emissions Data	G-21
           Methods Used to Determine Changes in Lead Emissions
            from Electric Utilities from 1975 to 1990	G-21
               Coal-Use Data	G-21
               The EPA Interim Emissions Inventory	G-21
               Matching the Coal-Use Data to the Interim Emissions Inventory	G-22
               Emissions Factors and Control Efficiencies	G-22
                                               Vlll

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          Use of Air Dispersion Modeling to Estimate Ambient Air Lead Levels	G-23
          Determination of Blood Lead Levels from Air Lead Concentrations	G-23
              Relationship Between Air Lead Concentrations and Blood Lead Levels	G-23
                  Children	,	G-25
                  Adults	G-25
                  Individuals with initial blood lead levels of 30 ug/dL and greater	G-26
              Estimates of Initial Blood Lead Concentrations	G-26
          Combination of Air Concentration Estimates with Population Data	G-27
          Results	•	•	G~28
       Reduction in Health Effects Attributable to Gasoline Lead Reductions	G-31
          Estimating Changes in Amount of Lead in Gasoline from 1970 to 1990	G-31
          Estimating the Change in Blood Lead Levels
            from the Change in the Amount of Lead in Gasoline	G-31
              1970-Forward and 1990-Backward Approaches	G-32
              Relating Blood Lead Levels to Population Health Effects	G-32
              Changes in Leaded Gasoline Emissions
                and Resulting Decreased Blood Lead Levels and Health Effects	G-32
       Lead Benefits Analysis References	G-36


Appendix H: Air Toxics	•	H-l
       Introduction	H-l
       Limited Scope of this Assessment	-H-l
       History of Air Toxics Standards under the Clean Air Act of 1970	H-2
       Quantifiable Stationary Source Air Toxics Benefits	H-3
          EPA Analyses of Cancer Risks from Selected Air Toxic Pollutants	H-3
          Cancer Risk Estimates from NESHAP Risk Assessments	H-4
       Non-utility Stationary Source Cancer Incidence Reductions	H-4
          PES Study	H-5
              Methodology	•	H-5
              Findings ..;.	•„.=	H-6
          ICF Re-analysis	H-7
              Methodology	H-7
              Findings	•	•	H-8
       Mobile Source HAP Exposure Reductions	H-9
          Methodology	H-10
          Results	H-10
       Non-Cancer Health Effects	,	:.H-11
       Ecological Effects	H-ll
       Conclusions — Research Needs	H-12
           Health Effects	H-12
           Exposure Assessment	:	—	H-l3
           Ecosystem Effects	H-13
           Economic Valuation	H-13
       Air Toxics References	H-14


Appendix I:  Valuation of Human Health and Welfare Effects of Criteria Pollutants 1-1
       Methods Used to Value Health and Welfare Effects	1-1
           Valuation of Specific Health Endpoints	1-3
               Valuation of Premature Mortality Avoided	1-3
               Valuation of Hospital Admissions Avoided	1-3
               Valuation of Chronic Bronchitis Avoided	1-4
               Valuation of Other Morbidity Endpoints Avoided	1-6
           Valuation of Welfare Effects	1-6
               Visibility Valuation	1-6
       Results of Valuation of Health and Welfare Effects	1-16

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The Benefits and Costs of the Clean Air Act, 1970 to 1990
       Uncertainties	1-16
           The Effect of Discount Rates	1-20
           The Relative Importance of Different Components of Uncertainty	1-20
           Economic Benefits Associated with Reducing Premature Mortality	1-21
       Economic Valuation References	1-27
Appendix J:  Future Directions	J-l
       Research Implications	J-l
           Research Topics to Reduce Uncertainty	J-l
           Research Topics to Improve Comprehensiveness	J-3
       Future Section 812 Analyses	J-4

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 Tables
Table ES-1    Criteria Pollutant Health Benefits - Distributions of 1990 Incidences of Avoided
              Health Effects (In Thousands of Incidences Reduced) for 48 State Population	ES-4
Table ES-2    Major Nonmonetized, Adverse Effects Reduced by the Clean Air Act	ES-5
Table ES-3    Central Estimates of Economic Value per Unit of Avoided Effect
              (In 1990 Dollars)	ES-6
Table ES-4    Total Monetized Benefits by Endpoint Category for 48 State Population for 1970
              to 1990 Period (In Billions of 1990 Dollars)	ES-7
Table ES-5    Alternative Mortality Benefits Mean Estimates for 1970 to 1990 (In Trillions
              of 1990 Dollars) Compared to Total 1970 to 1990 Compliance Costs	ES-9

Table 1        Estimated Annual CAA Compliance Costs ($Billions)	8
Table 2        Compliance Cost, GNP, and Consumption Impacts Discounted to 1990
              ($1990 Billions)	11
Table 3        Summary of Sector-Specific Emission Modeling Approaches	14
Table 4        Uncertainties Associated with Emissions Modeling	18
Table 5        Key Uncertainties Associated with Air Quality Modeling	26
Table 6        Human Health Effects of Criteria Pollutants.	31
Table 7        Selected Welfare Effects of Criteria Pollutants	32
Table 8        Percent of Population (of the Continental US) Within 50km of a Monitor (Or in a
              County with PM monitors), 1970-1990	33
Table 9        Criteria Pollutants Health Benefits — Distributions of 1990 Avoided Premature
              Mortalities (Thousands of Cases Reduced) for 48 State Population	37
Table 10      Criteria Pollutants Health Benefits — Distributions of 1990 Non-Fatal Avoided
              Incidence (Thousands of Cases Reduced) for 48 State Population	38
Table 11.      Health and Welfare Effects of Hazardous Air Pollutants	40
Table 12      Uncertainties Associated with Physical Effects Modeling	42
Table 13      Health and Welfare Effects Unit Valuation (1990 Dollars)	44
Table 14      Summary of Mortality Valuation Estimates (Millions of $1990)	45
Table 15      Estimating Mortality Risk Based on Wage-Risk Studies: Potential Sources
              and Likely Direction of Bias	;	50
Table 16      Present Value of 1970 to 1990 Monetized Benefits by Endpoint Category for 48
              State Population (Billions of $1990, Discounted to 1990 at 5 Percent)	52
Table 17      Total Monetized Benefits for 48 State Population (Present Value in Billions of
              1990 Dollars, Discounted to 1990 at 5 Percent)	53
Table 18      Quantified Uncertainty Ranges for Monetized Annual Benefits and Benefit/Cost
              Ratios, 1970-1990 (In Billions of 1990-Value Dollars)	55
Table 19      Alternative Mortality Benefits Mean Estimates for 1970 to 1990 (in Trillions of
              1990 Dollars, Discounted at 5 percent) Compared to Total  1970 to 1990
              Compliance Costs	57
Table 20      Effect of Alternative Discount Rates on Present Value of Total Monetized
              Benefits/Costs for 1970 to 1990 (In Trillions of 1990 Dollars)	57

Table A-l     Key Distinguishing Characteristics of the Jorgenson-Wilcoxen Model.	A-3
Table A-2     Definitions of Industries Within the J/W Model	A-4
Table A-3     Estimated Capital and O&M Expenditures for Stationary Source Air Pollution
              Control (Millions of Current Dollars)	A-10
Table A-4     Estimated Recovered Costs for Stationary Source Air Pollution Control
              (Millions of Current Dollars)	A-ll
Table A-5     Estimated Capital and Operation and Maintenance Expenditures for Mobile
              Source Air Pollution Control (Millions of Current Dollars)	A-12

-------
 The Benefits and Costs of the Clean Air Act, 1970 to 1990
 Table A-6      O&M Costs and Credits (Millions of Current Dollars)	A-12
 Table A-7      Other Air Pollution Control Expenditures (Millions of Current Dollars)	A-14
 Table A-8      Summary of Expenditures and Conversion to 1990 Dollars
               (Millions of Dollars)	A-15
 Table A-9      Annualized Costs, 1973-1990 (Millions of 1990 Dollars; Capital Expenditures
               Annualized at 5 Percent)	A-16
 Table A-10     Amortization of Capital Expenditures for Stationary Sources
               (Millions of 1990 Dollars)	A-17
 Table A-l 1     Amortization of Capital Expenditures for Mobile Sources
               (Millions of 1990 Dollars)	A-18
 Table A-12     Compliance Expenditures and Annualized Costs, 1973 to 1990  ($1990 millions)	A-19
 Table A-13     Costs Discounted to 1990 ($1990 Millions)	A-20
 Table A-14     Differences in Gross National Product Between the Control and No-Control
               Scenarios	A-20
 Table A-15     Difference in Personal Consumption Between the Control and No-Control
               Scenarios	A-21
 Table A-16     GNP and Consumption Impacts Discounted to 1990 ($1990 Billions)	A-21
 Table A-17     Percentage Difference in Energy Prices Between the Control and No-Control
               Scenarios	A-23
 Table A-18     Potential Sources of Error and Their Effect on Total Costs of Compliance	A-26
 Table A-19     Stationary Source O&M Expenditures as a Percentage of Capital Stock
               (Millions of 1990 Dollars)	A-27
 Table A-20     Comparison of EPA and BEA Stationary Source Expenditure Estimates
               (Millions of Current Dollars)	A-28
 Table A-21     BEA Estimates of Mobile Source Costs	A-29
 Table A-22     Annualized Costs Assuming 40-Year Stationary Source Capital Amortization
               Period, 1973 to 1990 ($1990 Millions)	A-30
 Table A-23     Effect of Amortization Periods on Annualized Costs Discounted to 1990
               (Billions of $1990)	A-30

 Table B-l      Correspondence Between Process Emissions Categories Used by MSCET,
               Trends, and J/W Industrial Sectors and Identifier Codes	B-6
 Table B-2      Fuel Use Changes Between Control and No-control Scenarios	B-9
 Table B-3      Difference in Control and No-control Scenario Off-Highway Mobile Source
               Emissions	B-12
 Table B-4      Sources of Data for Transportation Sector Control Scenario Activity Projection	B-17
 Table B-5      Distribution of Households by Demographic Attributes for Control Scenario	B-l 8
 Table B-6      Economic and Vehicle Usage Data for Vehicle Ownership Projection Control
               Scenario	B-19
 Table B-7      Control Scenario Personal Characteristics	B-20
 Table B-8      Distribution of Households by Income Class for No-Control Scenario	B-21
 Table B-9      Economic and Vehicle Usage Data for Vehicle Ownership Projection
               No-Control Scenario	B-22
 Table B-10     Percent Changes in Key Vehicle Characteristics Between the Control and
               No-Control Scenarios	B-23
Table B-l 1      J/W Estimates of Percentage Increases in National Electricity Generation
               Under No-Control Scenario	B-29
Table B-12     Trends Source Categories and (1975 to 1985) Scaling Factors for TSP and CO.	B-33
Table B-l3      Percentage Change in Real Energy Demand by Households from Control to
               No-Control Scenario	B-34
Table B-14     Percentage Change in Commercial Energy Demand from Control to
               No-Control Scenario	B-35
Table B-15      J/W Percent Differential in Economic Variables Used in CRESS	 B-35
Table B-l6      TSP Emissions Under the Control and No-Control Scenarios by Target Year
               (In Thousands of Short Tons)	B-36
Table B-17      SO2 Emissions Under the Control and No-Control Scenarios by Target Year
               (In Thousands of Short Tons)	B-36
                                               Xll

-------
                                                                                            Tables
Table B-18    NOx Emissions Under the Control and No-Control Scenarios by Target Year
              (In Thousands of Short Tons)	B-37
Table B-19    VOC Emissions Under the Control and No-Control Scenarios by Target Year
              (In Thousands of Short Tons)	B-37
Table B-20    CO Emissions Under the Control and No-Control Scenarios by Target Year
              (In Thousands of Short Tons)	B-38
Table B-21    Lead (Pb) Emissions Under the Control and No-Control Scenarios by Target
              Year (In Thousands of Short Tons)	B-38

Table C-l     Summary of CO Monitoring Data	C-2
Table C-2     Format of Air Quality Profile Databases	C-3
Table C-3     Summary of SO2 Monitoring Data	C-5
Table C-4     Summary of NO2 Monitoring Data	C-7
Table C-5     Summary of NO Monitoring Data	C-7
Table C-6     Summary of TSP Monitoring Data	C-14
Table C-7     Summary of PM10 Monitoring Data	C-15
Table C-8     Fine Particle (PM2.5) Chemical Composition by U.S. Region	C-l6
Table C-9     Coarse Particle (PM2.5 to PM10) Chemical Composition by U.S. Region	C-17
Table C-10    PM Control Scenario Air, Quality Profile Filenames	C-17
Table C-ll    PM No-Control Scenario Air Quality Profile Filenames	C-l8
Table C-12    Urban Areas Modeled with OZEPM4	C-19
Table C-13    Summary of Ozone Monitoring Data	C-21
Table C-14    Apportionment of Emissions Inventories for SAQM Runs	C-22
Table C-15    1990 Control Scenario Visibility Conditions for 30 Southwestern U.S. Cities	C-27
Table C-16    1990 No-control Scenario Visibility Conditions for 30 Southwestern U.S. Cities	C-27
Table C-17    Summary of Relative Change in Visual Range and DeciView Between  1990
              Control and No-Control Scenario Visibility Conditions for 30 Southwestern
              U.S. Cities	..C-29

Table D-l     Criteria Air Pollutant Monitors in the U.S., 1970- 1990	D-3
Table D-2     Population Coverage in the "Within 50 km" Model Runs
              (Percent of Continental U.S. Population)	D-4
Table D-3     Population Coverage for "Extrapolated to All U.S." Model Runs (Percent of
              Continental U.S. Population)	D-5
Table D-4     Human Health Effects  of Criteria Pollutants	D-6
Table D-5     PM2.5/PM10 Ratios Used to Estimate PM2.5 Data Used With Pope et al. (1995)
              Mortality Relationship	D-16
Table D-6     Summary of Concentration-Response Functions for Particulate Matter	D-20
Table D-7     Summary of Concentration-Response Functions for Ozone	D-27
Table D-8     Summary of Concentration-Response Functions for NO2	D-35
Table D-9     Summary of Concentration-Response Functions for Carbon Monoxide	D-37
Table D-10    Summary of Concentration-Response Functions for Sulfur Dioxide	D-39
Table D-l 1    Selected Welfare Effects of Criteria Pollutants	D-40
Table D-12    Summary of Functions Quantifying Welfare Benefits	D-42
Table D-13    Criteria Pollutants Health Effects — Extrapolated to 48 State U.S. Population
              (Cases Per Year-Mean Estimates)	 D-45
Table D-l4    Mortality Distribution by Age: Proportion of PM- and Pb-related Premature
              Mortalities and Associated Life Expectancies	D-46
Table D-l5    Quantified Benefits Which Could Not Be Monetized — Extrapolated to the
              Entire 48 State Population	D-47

Table E-l     Summary of Biological Changes with Surface Water Acidification	E-3
Table E-2     Comparison of Population of Acidic  National Surface Water Survey (NSWS) by
              Chemical Category	E-4
Table E-3     Results from Benefits Assessments of Aquatic Ecosystem Use Values from Acid
              Deposition Avoidance	E-6

-------
The Benefits and Costs of the Clean Air Act, 1970 to 1990
Table F-l       Agriculture Exposure-Response Functions	F-4
Table F-2      Relative No-Control to Control Percent Yield Change (harvested acres) for the
               Minimum Scenario	•	F-6
Table F-3       Relative No-Control to Control Percent Yield Change (harvested acres) for the
               Maximum Scenario	•	F-6
Table F-4      Change in Farm Program Payments, Net Crop Income, Consumer Surplus,
               and Net Surplus Due to the CAA (Millions 1990 $)	F-8

Table G-l      Quantified and Unqualified Health Effects of Lead	G-l
Table G-2      Uncertainty Analysis: Distributions Associated With Dose-Response
               Coefficients Used to Estimate Lead Health Effects	G-16
Table G-3      Air Modeling Parameters.	G-24
Table G-4      Estimated Indirect Intake Slopes: Increment of Blood Lead Concentration
               (in ug/dL) per Unit of Air Lead Concentration (ug/m3)	G-26
Table G-5      Estimated Lead Emissions from Electric Utilities, Industrial Processes,
               and Industrial Combustion (in Tons)	G-28
Table G-6      Yearly Differences in Number of Health Effects Between the Control and
               No-Control Scenarios: Industrial Processes, Boilers, and Electric Utilities
               (Holding Other Lead Sources at Constant 1970 Levels)	G-29
Table G-7      Yearly Differences in Number of Health Effects Between the Controlled and
               Uncontrolled Scenarios:  Industrial Processes, Boilers, and Electric Utilities
               (Holding Other Lead Sources at Constant 1990 Levels)	G-30
Table G-8      Lead Burned in Gasoline (In Tons)	,	G-33
Table G-9      Yearly Differences in Number of Health Effects Between the Control and
               No-Control Scenarios: Lead in Gasoline only (Holding Other Lead Sources at
               Constant 1970 Levels)	G-34
Table G-10     Yearly Differences in Number of Health Effects Between the Control and
               No-Control Scenarios: Lead in Gasoline only (Holding Other Lead Sources at
               Constant 1990 Levels)	G-35

Table H-l      Health and Welfare Effects of Hazardous Air Pollutants	H-2
Table H-2      Cancer Incidence Reductions and Monetized Benefits for NESHAPs	H-5

Table 1-1       Summary of Mortality Valuation Estimates (Millions of 1990 Dollars)	1-3
Table 1-2       Unit Values Used for Economically Valuing Health and Welfare Endpoints	1-8
Table 1-3       Criteria Pollutants Health and Welfare Benefits — Extrapolated to Entire 48 State
               Population Present Value (In 1990 Using 5% Discount Rate) of Benefits from
               1970-1990 (In Billions of 1990 Dollars)	1-17
Table 1-4       Present Value of 1970 to 1990 Monetized Benefits by Endpoint Category for
               48 State Population (Billions of 1990 Dollars, Discounted to 1990 at 5 Percent)	1-18
Table 1-5       Monte Carlo Simulation Model Results for Target Years, Plus Present Value in
               1990 Terms of Total Monetized Benefits for Entire 1970 to 1990 Period
               (In Billions of 1990-Value Dollars)	1-18
Table 1-6       Comparison of 1990 (Single Year) Monetized Benefits by Endpoint for 48 State
               Population and Monitored Areas (In Millions of 1990 Dollars)	1-19
Table 1-7       Effect of Alternative Discount Rates on Present Value of Total Monetized
               Benefits for 1970 to 1990 (In Trillions of 1990 Dollars)	1-20
Table 1-8       Alternative Estimates of the Present Value of Mortality Associated With PM
               (Based on Pope et al., 1996, in Trillions of 1990 Dollars)	1-25
                                                xiv

-------
Figures
Figure ES-1    Total Direct Compliance Costs of the CAA (in billions of inflation-adjusted
              dollars.)	ES-1
Figure ES-2    1990 Control and No-control Scenario Emissions (in millions of short tons)	ES-2
Figure ES-3    Total Direct Costs and Monetized Direct Benefits of the Clean Air Act, 1970
              to 1990 (in trillions of 1990 dollars)	'.	ES-8

Figure 1       Summary of Analytical Sequence and Modeled versus Historical Data Basis.	4
Figure 2       Control and No-control Scenario Total SO2 Emission Estimates	16
Figure 3       Control and No-control Scenario Total NOx Emission Estimates	16
Figure 4       Control and No-control Scenario Total VOC Emission Estimates	16
Figure 5       Control and No-control Scenario Total CO Emission Estimates	..16
Figure 6       Control and No-control Scenario Total TSP Emission Estimates	16
Figure 7       Control and No-control Scenario Total Pb Emission Estimates	16
Figure 8       Frequency Distribution of Estimated Ratios for 1990 Control to No-control
              Scenario 95th Percentile  1-Hour Average CO Concentrations, by Monitor	 21
Figure 9       Frequency Distribution of Estimated Ratios for 1990 Control to No-control
              Scenario 95th Percentile  1-Hour Average SO2 Concentrations, by Monitor	22
Figure 10     Frequency Distribution of Estimated Ratios for 1990 Control to No-control
              Scenario 95th Percentile  1 -Hour Average NO2 Concentrations, by Monitor	23
Figure 11     Distribution of Estimated Ratios for 1990 Control to No-Control Annual Mean
              TSP Concentrations, by Monitored County	23
Figure 12     Distribution of Estimated Ratios for 1990 Control to No-control OZIPM4
              Simulated 1-Hour Peak Ozone Concentrations, by Urban Area	23
Figure 13     Distribution of Estimated Ratios for 1990 Control to No-control SAQM Simulated
              Daytime Average Ozone Concentrations, by SAQM Monitor	24
Figure 14     Distribution of Estimated Ratios for 1990 Control to No-control RADM Simulated
              Daytime Average Ozone Concentrations, by RADM Grid Cell.	24
Figure 15     RADM-Predicted Percent Increase in Total Sulfur Deposition (Wet + Dry)  Under the
              No-control Scenario	24
Figure 16     RADM-Predicted Percent Increase in Total Nitrogen Deposition (Wet + Dry) Under
              the No-control Scenario	25
Figure 17     RADM-Predicted Increase in Visibility Degradation, Expressed in DeciViews, for
              Poor Visibility Conditions (90th Percentile) Under the No-control Scenario	25
Figure 18     Monte Carlo Simulation Model Results for Target Years (in billions of 1990 dollars)	54
Figure 19     Distribution of 1990 Monetized Benefits of CAA (in billions of 1990 dollars)	 54
Figure 20     Uncertainty Ranges Deriving From Individual Uncertainty Factors	55

Figure A-l    Percent Difference in Real Investment Between Control and No-control Scenarios	A-22
Figure A-2    Percent Difference in Price of Output by Sector Between Control and No-control
              Scenario for 1990	A-22
Figure A-3    Percent Difference in Quantity of Output by Sector Between Control and
              No-control Scenario for 1990	A-24
Figure A-4    Percent Difference in Employment by Sector Between Control and No-control
              Scenario for 1990	A-24

Figure B-l    Comparison of Control, No-control, and Trends SO2 Emission Estimates	 B-2
Figure B-2    Comparison of Control, No-control, and Trends NOx Emission Estimates	B-2
Figure B-3    Comparison of Control, No-control, and Trends VOC Emission Estimates	B-2
Figure B-4    Comparison of Control, No-control, and Trends CO Emission Estimates	B-2
Figure B-5    Comparison of Control, No-Control, and Trends TSP Emission Estimates	B-2

-------
The Benefits and Costs of the Clean Air Act, 1970 to 1990
Figure C-l     Frequency Distribution of Estimated Ratios for 1990 Control to No-Control
              Scenario 95th Percentile 1-Hour Average CO Concentrations, by Monitor	C-4
Figure C-2     Frequency Distribution of Estimated Ratios for 1990 Control to No-control
              Scenario 95th Percentile 1-Hour Average SO2 Concentrations, by Monitor	C-6
Figure C-3     Frequency Distribution of Estimated Ratios for 1990 Control to No-control
              Scenario 95th Percentile 1-Hour Average NO2 Concentrations, by Monitor	C-8
Figure C-4     Location of the High Resolution RADM 20-km Grid Nested Inside the 80-km
              RADM Domain	C-9
Figure C-5     RADM-Predicted 1990 Total Sulfur Deposition (Wet + Dry; in kg/ha) Under the
              Control Scenario	C-IQ
Figure C-6     RADM-Predicted 1990 Total Nitrogen Deposition (Wet + Dry; in kg/ha) Under the
              Control Scenario	•	C-10
Figure C-7     RADM-Predicted 1990 Total Sulfur Deposition (Wet + Dry; in kg/ha) Under the
              No-control Scenario	C-ll
Figure C-8     RADM-Predicted 1990 Total Nitrogen Deposition (Wet + Dry; in kg/ha) Under the
              No-control Scenario	C-ll
Figure C-9     RADM-Predicted Percent Increase in Total Sulfur Deposition (Wet + Dry; in kg/ha)
              Under the No-control Scenario	C-12
Figure C-10   RADM-Predicted Percent Increase in Total Nitrogen Deposition (Wet + Dry;
              in kg/ha) Under the No-control Scenario	C-12
Figure C-ll   Distribution of Estimated Ratios for 1990 Control to No-Control Annual Mean
              TSP Concentrations, by Monitored County	- C-18
Figure C-12   RADM and SAQM Modeling Domains, with Rural Ozone Monitor Locations	C-20
Figure C-l3   Distribution of Estimated Ratios for 1990 Control to No-control OZIPM4
              Simulated 1-Hour Peak Ozone Concentrations, by Urban Area	C-23
Figure C-14   Distribution of Estimated Ratios for 1990 Control to No-control RADM-Simulated
              Daytime Average Rural Ozone Concentrations, by RADM Grid Cell	C-23
Figure C-15   Distribution of Estimated Ratios for 1990 Control to No-control SAQM-Simulated
              Daytime Average Ozone Concentrations, by SAQM Monitor	C-23
Figure C-16   RADM-Predicted Visibility Degradation, Expressed in Annual Average
              DeciView, for Poor Visibility Conditions (90th Percentile) Under the Control
              Scenario	C-26
Figure C-l7   RADM-Predicted Visibility Degradation, Expressed in Annual Average
              DeciView, for Poor Visibility Conditions (90th Percentile) Under the No-Control
              Scenario	C-26
Figure C-18   RADM-Predicted Increase in Visibility Degradation, Expressed in Annual
              Average DeciView, for Poor Visibility Conditions (90th Percentile) Under the
              No-Control Scenario	C-28

Figure H-l    PES Estimated Reductions in HAP-Related Cancer Cases	H-7
Figure H-2    ICF Estimated Reductions in Total HAP-Related Cancer Cases Using Upper
              Bound Asbestos Incidence and Lower Bound Non-Asbestos HAP Incidence	H-8
Figure H-3    ICF Estimated Reduction in Total HAP-Related Cancer Cases Using Upper
              Bound Incidence for All HAPs	H-8
Figure H-4    National Annual Average Motor Vehicle HAP Exposures (ug/m3)	H-11

Figure 1-1     Monte Carlo Simulation Model Results for Target Years
              (in billions of 1990 dollars)	 1-19
Figure 1-2     Uncertainty Ranges Deriving From Individual Uncertainty Factors	1-21
                                               xvi

-------
 Acronyms  and Abbreviations
ueq/L
ug/m3
l-ig
urn
ACCACAPERS

AGSIM
AIRS
A13+
ANC
ANL
APPI
AQCR
ARGUS
ASI
ATERIS
.ATLAS
AUSM
BEA
be«
BG/ED
BI
BID
BP
BTU
c.i.
CA
CAA
CAAA90
CAPMS
CARB
CASAC
CDC

CERL

CEUM
CHD
CIPP
CO
C02
COH
COHb
COPD
Council
CPUE
microequivalents per liter
micrograms per cubic meter
micrograms
micrometers, also referred to as microns
SAB Advisory Council on Clean Air Compliance Analysis Physical
Effects Review Subcommittee
AGricultural Simulation Model
EPA Aerometric Information Retrieval System
aluminum
acid neutralizing capacity
Argonne National Laboratories
Argonne Power Plant Inventory
Air Quality Control Region
Argonne Utility Simulation Model
Acid Stress Index
Air Toxic Exposure and Risk Information System
Aggregate Timberland Assessment System
Advanced Utility Simulation Model
Bureau of Economic Analysis
total light extinction
Block Group / Enumeration District
atherothrombotic brain infarction
Background Information Document
blood pressure
British Thermal Unit
confidence interval
cerebrovascular accident
Clean Air Act
Clean Air Act Amendments of 1990
EPA's Criteria Air Pollutant Modeling System
California Air Resources Board
SAB Clean Air Scientific Advisory Committee
Centers for Disease Control (now CDCP, Centers for Disease Control
and Prevention)
EPA/ORD Corvallis Environmental Research Laboratory (old name; see
NERL)
ICF Coal and Electric Utility Model
coronary heart disease
changes in production processes
carbon monoxide
carbon dioxide
coefficient of haze
blood level of carboxyhemoglobin
chronic obstructive pulmonary disease
SAB Advisory Council on Clean Air Compliance Analysis
catch per unit effort

-------
The Benefits and Costs of the Clean Air Act, 1970 to 1990
CR
CRESS
CSTM
CTG
CV
CVM
D.C.
DBF
DDE
DDT
DFEV,
dL
DOC
DOE
DOI
DRI
dV
DVSAM
EC
EDB
EDC
EFI
El
EIA
EKMA
ELI
EOL
EPA
EPRI
ESEERCO
ESP
FERC
FEV,
FGD
FHWA
FIFRA
FDP
FR
FRP
GDP
GEMS
GM
GNP
GSD
ha
HAP
HAPEM-MS
HNO3
hp
HTCM
ICARUS
concentration-response
Commercial and Residential Simulation System model
Coal Supply and Transportation Model
Control Techniques Guidelines
contingent valuation
contingent valuation method
District of Columbia
diastolic blood pressure
dichlorodiphenyldichloroethylene
dichlorodiphenyltrichloroethane
decrement of forced expiratory volume (in one second)
deciliter
Department of Commerce
Department of Energy
Department of Interior
Data Resources Incorporated
DeciView Haze Index
Disaggregate Vehicle Stock Allocation Model
extinction coefficient
ethylene dibromide
ethylene dichloride
Electronic Fuel Injection
Electronic Ignition
Energy Information Administration
Empirical Kinetics Modeling Approach
Environmental Law Institute
end-of-line
Environmental Protection Agency
Electric Power Research Institute
Empire State Electric Energy Research Corporation
electrostatic precipitator
Federal Energy Regulatory Commission
forced expiratory volume (in one second)
flue gas desulfurization
Federal Highway Administration
Federal Insecticide, Fungicide, and Rodenticide Act
Federal Information Processing System
Federal Register
Forest Response Program
gross domestic product
Graphical Exposure Modeling System
geometric mean
Gross National Product
geometric standard deviation
sulfuric acid
hectares
Hazardous Air Pollutant
Hazardous Air Pollutant Exposure Model - Mobile Source
nitric acid
horsepower
Hedonic Travel-Cost Model
Investigation of Costs and Reliability in Utility Systems
                                             xvui

-------
                                                                         Acronyms and Abbreviations
ICD-9
ICE
ffic
ffiUBK
IMS
IFF
IQ
ISCLT
J/W
kg
km
Ibs
LRI
m/s
m
m3
Mm
MMBTU
MOBILESa
mpg
MRAD
MSCET
MTD
MVATS
MVMA
Mwe
N
NA
NAAQS
NAPAP
NARSTO
NATICH
NCLAN
NBA
NERA
NERC
NERL

NESHAP
NHANES
NHANES H
NIPA
NMOCs
NO
NO2
NO3-
N0x
NPTS
NSPS
NSWS
O&M
O,
International Classification of Diseases, Ninth Version (1975 Revision)
Industrial Combustion Emissions model
Industrial Economics, Incorporated
EPA's Integrated Exposure Uptake Biokinetic model
Integrated Model Set
iterative proportional fitting
intelligence quotient
Industrial Source Complex Long Term air quality model
Jorgenson / Wilcoxen
kilograms
kilometers
pounds
lower respiratory illness
meters per second
meters
cubic meters
megameters
million BTU
EPA's mobile source emission factor model
miles per gallon
minor restricted activity day
Month and State Current Emission Trends
metric tons per day
EPA's Motor Vehicle-Related Air Toxics Study
Motor Vehicle Manufacturers Association
megawatt equivalent
nitrogen
not available
National Ambient Air Quality Standard
National Acid Precipitation Assessment Program
North American Research Strategy for Tropospheric Ozone
National Air Toxics Information Clearinghouse
National Crop Loss Assessment Network
National Energy Accounts
National Economic Research Associates
North American Electric Reliability Council
EPA/ORD National Exposure Research Laboratory (new name for
CERL)
National Emission Standard for Hazardous Air Pollutants
First National Health and Nutrition Examination Survey
Second National Health and Nutrition Examination Survey
National Income and Product Accounts
nonmethane organic compounds
nitric oxide
nitrogen dioxide
nitrate ion
nitrogen oxides
Nationwide Personal Transportation Survey
New Source Performance Standards
National Surface Water Survey
operating and maintenance
ozone

-------
The Benefits and Costs of the Clean Air Act, 1970 to 1990
OAQPS
OAR
QMS
OPAR
OPPE
ORD
OZEPM4
PACE
PAN
PAPE
Pb
PbB
PCB
PES
pH
PIC
PM
   10
POP
P°Pmi!d
Pernod
ppb
PPH
pphm
ppm
PPRG
PRYL
PURHAPS
PVC
r2
RAD
RADM
RADM/EM
RAMC
RfD
RIA
ROM
RRAD
RUM
s.e.
SAB
SAI
SAQM
SARA
SARMAP
SCC
SEDS
SIC
SIP
SJVAQS
SMSA
EPA/OAR Office of Air Quality Planning and Standards
EPA Office of Air and Radiation
EPA/OAR Office of Mobile Sources
EPA/OAR Office of Policy Analysis and Review
EPA Office of Policy Planning and Evaluation
EPA Office of Research and Development
Ozone Isopleth Plotting with Optional Mechanism-IV
Pollution Abatement Costs and Expenditures survey
peroxyacetyl nitrate
Pollution Abatement Plant and Equipment survey
lead
blood lead level
polychlorinated biphenyl
Pacific Environmental Services
the logarithm of the reciprocal of hydrogen ion concentration, a measure
of acidity
product of incomplete combustion
particulates less than or equal to 10 microns in aerometric diameter
particulates less than or equal to 2.5 microns in aerometric diameter
population
exposed population of exercising mild asthmatics
exposed population of exercising moderate asthmatics
parts per billion
people per household
parts per hundred million
parts per million
Pooling Project Research Group
percentage relative yield loss
PURchased Heat And Power
polyvinyl chloride
statistical correlation coefficient, squared
restricted activity day
Regional Acid Deposition Model
RADM Engineering Model
Resource Allocation and Mine Costing model
reference dose
Regulatory Impact Analysis
Regional Oxidant Model
respiratory restricted activity day
Random Utility Model
standard error
Science Advisory Board
Systems Applications International
SARMAP Air Quality Model
Superfund Amendment Reauthorization Act
SJVAQS/AUSPEX Regional Modeling Adaptation Project
Source Classification Code
State Energy Data System
Standard Industrial Classification
State Implementation Plan
San Joaquin Valley Air Quality Study
Standard Metropolitan Statistical Area
                                              xx

-------
                                                                         Acronyms and Abbreviations
S02
so42-
SOS/T
SRaw
STAR
TAMM90
TEEMS
TIUS
TRI
TSP
U.S.
UAM
URI
USDA
USEPA
VC
VMT
VOC
VOP
VR
W126
WLD
WTP
sulfur dioxide
sulfate ion
State of Science and Technology (refers to a series of NAPAP reports)
Specific Airway Resistance
Stability Array weather database
Timber Assessment Market Model (revised version)
Transportation Energy and Emissions Modeling System
Truck Inventory and Use Surveys
Toxic Release Inventory
total suspended particulate
United States
Urban Airshed Model
upper respiratory illness
United States Department of Agriculture
United States Environmental Protection Agency
vinyl chloride
vehicle miles traveled
volatile organic compounds
Vehicle Ownership Projection
visual range
index of peak weighted average of cumulative ozone concentrations
Work Loss Day
willingness to pay

-------
The Benefits and Costs of the Clean Air Act, 1970 to 1990
                                                  xxu

-------
 Acknowledgments


    This project is managed under the direction of Robert D. Brenner, Director of the U.S. EPA Office of Air
 and Radiation/Office of Policy Analysis and Review and Richard D. Morgenstern, Associate Assistant Admin-
 istrator for Policy Planning and Evaluation, U.S. EPA (currently on leave as Visiting Scholar, Resources for the
 Future). The principal project managers are Jim DeMocker, EPA/OAR/OPAR; Al McGartland, Director, EPA/
 OPPE/OEE; and Tom Gillis, EPA/OPPE/OEE.

    Many EPA staff contributed or reviewed portions of this draft document, including Joel Schwartz, Michael
 Shapiro, Peter Preuss, Tracey Woodruff, Diane DeWitt, Dan Axelrad, Joel Scheraga, Anne Grambsch, Jenny
 Weinberger, Allyson Siwik, Richard Scheffe, Vasu Kilaru, Amy Vasu, Kathy Kaufmann, Mary Ann Stewart,
 Eric Smith, Dennis J. Kotchmar, Warren Freas, Tom Braverman, Bruce Polkowsky, David Mobley, Sharon
 Nizich, David Meisenheimer, Fred Dimmick, Harvey Richmond, John Haines, John Bachmann, Ron Evans,
 Tom McMullen, Bill Vatavuk, Larry Sorrels, Dave McKee, Susan Stone, Melissa McCullough, Rosalina
 Rodriguez, Vickie Boothe, Tom Walton, Michele McKeever, Vicki Atwell, Kelly Rimer, Bob Fegley, Aparna
 Koppikar, Les Grant, Judy Graham, Robin Dennis, Dennis Leaf, Ann Watkins, Penny Carey, Joe Somers, Pam
 Brodowicz, Byron Bunger, Allen Basala, David Lee, Bill O'Neill, Susan Herrod, and Susan Stendebach. Allyson
 Siwik of EPA/OAR/OAQPS and Bob Fegley of EPA/ORD/OSPRE played particularly important roles in coor-
 dinating substantive and review contributions from their respective offices.

    A number of contractors developed key elements of the analysis and supporting documents.  These contrac-
 tors include Bob Unsworth, Jim Neumann, Mike Hester, and Jon Discher of Industrial Economics, Incorporated
 (lEc); Leland Deck, Ellen Post, Lisa Akeson, Brad Firlie, Susan Keane, Kathleen Cunningham, and John Voyzey
 of Abt Associates; Bruce Braine, Patricia Kim, Sandeep Kohli, Anne Button, Barry Galef, Cynde Sears, and
 Tony Bansal of ICF Resources; John Langstaff, Michelle Woolfolk, Shelly Eberly, Chris Emery, Till Stoekenius,
 and Andy Gray of ICF/Systems Applications International (ICF/SAI); Dale Jorgenson, Peter  Wilcoxen, and
 Richard Goettle of Jorgenson Associates; Jim Lockhart of the Environmental Law  Institute  (ELI); Beverly
 Goodrich, Rehan Aziz, Noel Roberts, and Lucille Bender of Computer Sciences Corporation; Margaret Sexsmith
 of Analytical  Sciences, Incorporated; Ken Meardon of Pacific Environmental Services (PES); David South,
 Gale Boyd, Melanie Tomkins, and K. Guziel of Argonne National Laboratory (ANL); Don Garner; Rex Brown
 and Jacob Ulvila of Decision Science Consortium; and Jim Wilson and Dianne P. Crocker of Pechan Associ-
 ates. John Pitcher and H. Glenn Court of STRA managed the technical production of an earlier version of the
 draft document. The SARMAP AQM runs were provided by Carol Bohnenkamp of EPA Region 9 and Saffet
 Tanrikulu of the California Air Resources Board.

    Science Advisory Board review of this report is supervised by Donald G. Barnes, Director of the SAB Staff.
 SAB staff coordinating the reviews have included Jack Fowle, Jack Kooyoomjian, Sam Rondberg, Fred Talcott,
 and Randall Bond.  Diana Pozun provided administrative support.

    The SAB Council was chaired by Richard Schmalensee of MIT throughout the development of the present
 study.  The Council is now chaired by Maureen Cropper of the World Bank as the Council's focus shifts to the
 upcoming prospective studies.  Members who have participated in the review of this draft report include Morton
 Lippmann of New York University Medical Center, William Nordhaus of Yale University, Paul Portney of
 Resources for the Future, Kip Viscusi of Harvard University, A. Myrick Freeman of Bowdoin College, Maureen
Cropper, Ronald Cummings of Georgia State University, Daniel Dudek of the Environmental  Defense Fund,
Robert Mendelsohn of Yale University, Wayne Kachel of MELE Associates, William Cooper of Michigan
State University, Thomas Tietenberg of Colby College, Paul Lioy of the Robert Wood Johnson School of
Medicine, Roger McClellan of the Chemical Industry Institute of Toxicology, George T. Wolff of General
Motors, Richard Conway of Union Carbide Corporation, and Wallace Gates of the University of Maryland.

-------
The Benefits and Costs of the Clean Air Act, 1970 to 1990
    The SAB Council Physical Effects Review Subcommittee was chaired by Morton Lippmann.  Members
who have participated in the review include David V. Bates of the University of British Columbia, A. Myrick
Freeman of Bowdoin College, Gardner Brown, Jr. of the University of Washington, Timothy Larson of the
University  of Washington, Lester Lave of Carnegie Mellon University, Joseph Meyer of the University of
Wyoming,  Robert Rowe of Hagler Bailly, Incorporated, George Taylor of the University of Nevada, Bernard
Weiss of the University of Rochester Medical Center, and George Wolff of the General Motors Research Labo-
ratory.

    The SAB Council Air Quality Subcommittee was chaired by George Wolff. Members who have partici-
pated in the review include Benjamin Liu of the University of Minnesota, Peter Mueller of the Electric Power
Research Institute, Warren White of Washington University, Joe Mauderly of the Lovelace Biomedical & En-
vironmental Research Institute, Philip Hopke of Clarkson University, Paulette Middleton  of Science Policy
Associates, James H. Price, Jr. of the Texas Natural Resource Conservation Commission, and Harvey Jeffries of
the University of North Carolina,  Chapel Hill.

    This report could not have been produced without the support of key administrative support staff.  The
project managers are grateful to Catrice Jefferson, Nona Smoke, Carolyn Hicks, Eunice Javis, Gloria Booker,
Thelma Butler, Wanda Farrar, Ladonya Langston, Michelle Olawuyi, and Eileen Pritchard for their timely and
tireless support on this project.
                                               XXIV

-------
 Executive  Summary
 Purpose of the Study

    Throughout the history of the Clean Air Act, ques-
 tions have been raised as to whether the health and
 environmental benefits of air pollution control justify
 the costs incurred by industry, taxpayers, and consum-
 ers. For the most part, questions about the costs and
 benefits of individual regulatory standards continue
 to be addressed  during the regulatory development
 process through Regulatory Impact Analyses (RIAs)
 and other analyses which evaluate regulatory costs,
 benefits, and such issues as scope, stringency, and tim-
 ing. There has never been, however, any comprehen-
 sive, long-term, scientifically valid and reliable study
 which answered the broader question:

       "How do the overall health, welfare,
    ecological, and economic benefits of Clean
     Air Act programs compare to the costs of
                these programs?"

    To address this void, Congress added to the 1990
 Clean Air Act Amendments a requirement under sec-
 tion 812 that EPA conduct periodic, scientifically re-
 viewed studies to assess the benefits and the costs of
 the Clean Air Act. Congress further required EPA to
 conduct the assessments to reflect central tendency,
 or "best estimate," assumptions rather than the con-
 servative assumptions sometimes deemed appropri-
 ate for setting protective standards.

    This report is the first in this ongoing  series of
 Reports to Congress. By examining the benefits and
 costs of the 1970 and 1977 Amendments, this report
 addresses the question of the overall value of
 America's historical investment in cleaner air. The
 first Prospective Study, now in progress, will evalu-
 ate the benefits and costs of the 1990 Amendments.

 Study Design

    Estimates of the benefits and costs of the histori-
cal Clean Air Act are derived by examining the dif-
ferences in economic, human health, and environmen-
tal outcomes under two alternative scenarios: a "con-
 trol scenario" and a "no-control scenario." The con-
 trol scenario reflects actual historical implementation
 of clean air programs and is based largely on histori-
 cal data. The no-control scenario is a hypothetical sce-
 nario which reflects the assumption that no air pollu-
 tion controls were established beyond those in place
 prior to enactment of the  1970 Amendments. Each of
 the two scenarios is evaluated by a sequence of eco-
 nomic, emissions,  air quality, physical effect, eco-
 nomic valuation, and  uncertainty models to measure
 the differences between  the scenarios in economic,
 human health, and  environmental outcomes. Details
 of this analytical sequence are presented in Chapter 1
 and are summarized in Figure 1 of that chapter.

 Study Review

    EPA is required, under section 812, to consult both
 a panel of outside  experts and the Departments of
 Labor and Commerce in designing and implementing
 the study.

    The expert panel  was organized in 1991  as the
 Advisory  Council  on Clean Air Act Compliance
 Analysis (hereafter "Council") under the auspices of
 EPA's Science Advisory Board (SAB). Organizing
 the external panel under the auspices of the SAB en-
 sured that the peer review of the study would be con-
 ducted in  a rigorous, objective, and publicly open
 manner. Eminent scholars and practitioners with ex-
 pertise in economics, human health sciences, envi-
 ronmental sciences, and air quality modeling served
 on the Council and  its technical subcommittees, and
 these reviewers met many times throughout the de-
 sign and implementation phases of the study. During
 this ongoing, in-depth review, the Council provided
 valuable advice pertaining to the  development and
 selection of data, selection of models and assumptions,
evaluation and interpretation of the analytical find-
 ings, and characterization of those findings in several
 successive drafts of the  Report to Congress. The
present report was vastly  improved as a result of the
Council's rigorous and constructive review effort.
                                              ES-1

-------
The Benefits and Costs of the Clean Air Act, 1970 to 1990
    With respect to the interagency review process,
 EPA expanded the list of consulted agencies and con-
 vened a series of meetings during the design and early
 implementation phases from 1991 through late 1994.
 In late  1994, to  ensure that all interested parties and
 the public received consistent information about re-
 maining analytical issues and emerging results, EPA
 decided to use the public SAB review process as the
 primary forum for presenting and discussing issues
 and results. The Interagency Review Group was there-
 fore discontinued as a separate process in late 1994.

    A final, brief interagency review, pursuant to Cir-
 cular A-19, was organized in August 1997 by the Of-
 fice of Management and Budget and conducted fol-
 lowing the completion of the extensive expert panel
 peer review by the SAB Council. During the course
 of the final interagency discussions, it became clear
 that several agencies held different views pertaining
 to several key assumptions in this study as well as to
 the best techniques to apply in the context of environ-
 mental program benefit-cost analyses, including the
 present study. The concerns include: (1) the extent to
 which air quality would have deteriorated from 1970
 to 1990 in the absence of the Clean Air Act, (2) the
 methods  used to estimate the number of premature
 deaths and illnesses avoided due to the CAA, (3) the
 methods  used to estimate the value that individuals
 place on avoiding those risks, and  (4) the methods
 used to value non-health related benefits. However,
 due to the court deadline the resulting concerns were
 not resolved during this final, brief interagency re-
 view. Therefore, this report reflects the findings of
 EPA and not necessarily  other agencies  in the Ad-
 ministration. Interagency discussion of some of these
 issues will continue in the context of the future pro-
 spective section 812 studies and potential regulatory
 actions.

 Summary of Results

 Direct Costs

    To comply  with the Clean Air Act, businesses,
 consumers, and government entities all incurred higher
 costs for many goods and services. The costs of pro-
 viding goods and services to the economy were higher
 primarily due to requirements to install, operate, and
 maintain pollution abatement equipment. In addition,
 costs were incurred to design and implement regula-
 tions, monitor and report regulatory compliance, and
 invest in research and development. Ultimately, these
 higher costs of production were borne by stockhold-
 ers, business owners, consumers, and taxpayers.
    Figure ES-1  summarizes the historical data on
 Clean Air Act compliance costs by year, adjusted both
 for inflation and for the value  of long-term invest-
 ments in equipment. Further adjusting the direct costs
 incurred each year to reflect their equivalent worth in
 the year 1990, and then summing these annual results,
 yields an estimate of approximately $523 billion for
 the total value of 1970 to  1990 direct'expenditures
 (see Appendix A for calculations).

 Emissions

    Emissions were substantially lower by 1990 un-
 der the control scenario than under the no-control sce-
 nario, as shown in Figure ES-2. Sulfur dioxide (SO2)
 emissions were 40 percent lower, primarily due to
 utilities installing scrubbers and/or switching to lower
 sulfur fuels. Nitrogen oxides (NOX) emissions were
 30 percent lower by 1990, mostly because of the in-
 stallation of catalytic converters on highway vehicles.
 Volatile organic compound (VOC) emissions were 45
 percent lower and carbon monoxide (CO) emissions
 were 50 percent  lower, also primarily due  to motor
 vehicle controls.

    For paniculate matter, it is important to recog-
 nize  the distinction between reductions  in directly
 emitted particulate matter and reductions in ambient
 concentrations of particulate matter in the atmosphere.
 As discussed further in the next section,  changes in
 particulate matter air quality depend both on changes
 in emissions of primary particles (i.e., air pollution
 which is already in solid particle form) and on changes
 in emissions of gaseous pollutants, such as sulfur di-
 oxide and nitrogen oxides, which can be converted to
 particulate matter through chemical transformation in
 the atmosphere.  Emissions of  primary particulates
Figure ES-1. Total Estimated Direct Compliance Costs of
the CAA (in billions of inflation-adjusted dollars).
  30 ,
  20
   10
o
      1975
                                              1990
                                                ES-2

-------
                                                                                        Executive Summary
Figure ES-2. 1990 Control and No-control Scenario
Emissions (in millions of short tons).
   200
         TSP
                                  CO
 were 75 percent lower under the control scenario by
 1990 than under the no-control scenario. This sub-
 stantial difference is primarily due to vigorous efforts
 in the 1970s to reduce visible emissions from utility
 and industrial smokestacks.

     Lead (Pb) emissions for 1990 are reduced by about
 99 percent from a no-control level of 237,000 tons to
 about 3,000 tons under the control scenario.1 The vast
 majority of the difference in lead emissions under the
 two scenarios .is attributable to reductions in the use
 of leaded  gasoline.

     These reductions were achieved during a period
 in which population grew by 22.3 percent and the na-
 tional economy grew by 70 percent.

 Air Quality

     The substantial reductions in air pollutant emis-
 sions achieved by the Clean Air Act translate into sig-
 nificantly improved air quality throughout the  U.S.
 For sulfur dioxide, nitrogen oxides, and carbon mon-
 oxide, the improvements in air quality under the con-
 trol scenario are assumed to be proportional to the
 estimated reduction in emissions. This is because, for
 these pollutants, changes in ambient concentrations
 in a particular area are strongly related to changes in
 emissions in that area. While the differences in con-
 trol and no-control scenario air quality for each of these
 pollutants vary from place to place because of local
 variability in emissions reductions, by 1990 the na-
 tional average improvements in air quality for these
pollutants were: 40 percent reduction in sulfur diox-
ide, 30 percent reduction in nitrogen oxides, and 50
percent reduction in carbon monoxide.

    Ground-level ozone is formed by the chemical re-
action of certain airborne pollutants in the presence
of sunlight. Reductions in ground-level  ozone are
therefore achieved through reductions in emissions
of its precursor pollutants, particularly volatile organic
compounds (VOCs) and nitrogen oxides (NOX).2 The
differences in ambient ozone concentrations estimated
under the control scenario vary significantly from one
location to another, primarily because of local differ-
ences in  the relative proportion of VOCs and NOX,
weather conditions, and specific precursor emissions
reductions. On a national average basis, ozone con-
centrations in  1990 are about 15 percent lower under
the control scenario. For several reasons, this overall
reduction in ozone is significantly less than the 30
percent reduction  in precursor NOX and 45. percent
reduction in precursor VOCs. First, significant natu-
ral (i.e., biogenic)  sources of VOCs limit the level of
ozone reduction achieved by reductions in man-made
(i.e., anthropogenic) VOCs. Second, current knowl-
edge  of  atmospheric photochemistry suggests that
ozone reductions will tend to be proportionally smaller
than reductions  in precursor  emissions. Finally, the
plume model system used to estimate changes in ur-
ban ozone for this study is incapable of handling long-
range transport of ozone from upwind areas and multi-
day pollution events in a realistic manner.

    There are many pollutants which contribute to
ambient concentrations of particulate matter. The rela-
tive contributions  of these  individual pollutant spe-
cies to ambient particulate matter concentrations vary
from one region of the country to the next, and from
urban areas to rural areas.  The most important par-
ticle species, from a human  health standpoint, may be
the fine particles which can be respired deep into the
lungs. While some fine particles are directly emitted
by sources, the most important fine particle species
are formed in the atmosphere through chemical  con-
version of gaseous pollutants. These species are re-
ferred to  as secondary particles. The three most im-
portant secondary particles are (1)  sulfates, which
derive primarily from sulfur  dioxide emissions; (2)
nitrates, which derive primarily from nitrogen oxides
emissions; and (3) organic aerosols, which can be di-
rectly emitted or can form from volatile organic com-
     1 Results for lead are not shown in Figure ES-2 because the absolute levels of lead emissions are measured in thousands, not
 millions, of tons and will not be discernible on a graph of this scale.
     2 Ambient NOx concentrations are driven by anthropogenic emissions whereas ambient VOCs result from both anthropogenic
 and biogenic sources (e.g., terpenes emitted by trees).	
                                                  ES-3

-------
The Benefits and Costs of the Clean Air Act, 1970 to 1990
Table ES-1. Criteria P
of Avoided Health
                                               ff     <.  <,'   "'&'•*
                                                Beaef%^Jstimate|
           Endpolnt
                                  ,  F^Iirtantfs)
Premature Mortality         -.-,--  -- -VSMA'
Premature Mortality     „   \  •-
Chronic Bronchitis       ":;"'
Lost IQ Points
IQlessthan70
Hypertension            .„,'' -
Coronary Heart Disease "  ~;''
Atherolhrombotie brain infarcttdn
Initial cerebrovascular accident „ s. „, -  -tead  ' - >"«	
Hospital Admissions      *,.,_  -s,«i,,,->-,,?A*.<>-'--,'Av ,--
   All Respiratory          -,-<•'•* ,-r.v,PM*O2idne -•
   Chronic Obstructive Pulmonary *"v *- PM^'Qzofie';;'
     Disease & Pneumonia'    ^
   laheraic Heart Disease        ,,:
   Congestive Heart I'aiiuce -   ,'--«
Other RespJratory-Retated Ailments-
   Shortness of breath, days -K'.^*'1
   Acute Bronchitis
             Symptoms
    Asthma Attacks
    Increase in Respiratory Illness     ,  H02, ,,
    Any Symptom                   $02  ,
 Restricted Activi^r and WtaJt toss Days
    Minor Restricted ActivitjHDays  ,  ,
    Work toss Days	,.-. j,iiiwi'AHV»r,
                                                                           26"'""'"  264 "'"':'1<)^~
                                                                           •,  '' fj ' /'j>'fj'      , s
                                                                    V, 107^)00 pend5x^i«-ueu»us.
                    .  . 	    .„•<*•-, ""^'^^il^^^l^i^aa (pfe) criteria pdEMt'ants,wh5ehjina.v,coBttibute
                                              ^ ** 'v>sN' penffitx D for additional discussion.
pound emissions. This highlights an important and
unique feature of particulate matter as an ambient pol-
lutant: more than any other pollutant, reductions in
particulate matter are actually achieved through re-
ductions in a wide variety of air pollutants. In other
words, controlling particulate matter means control-
ling "air pollution" in a very broad sense. In the present
analysis, reductions hi sulfur dioxide, nitrogen oxides,
volatile organic compounds, and directly-emitted pri-
mary particles achieved by the Clean Air Act result in
a national average reduction in total suspended par-
ticulate matter of about 45 percent by 1990. For the
smaller particles which are of greater concern from a
health effects standpoint (i.e., PM10 and PM25), the
national average reductions were also about 45 per-
cent.
                                                      Reductions in sulfur dioxide and nitrogen oxides
                                                  also translate into reductions in formation, transport,
                                                  and deposition of secondarily formed acidic com-
                                                  pounds such as sulfate and nitric acid. These are the
                                                  principal pollutants responsible for acid precipitation,
                                                  or "acid rain." Under the control scenario, sulfur and
                                                  nitrogen deposition are significantly lower by  1990
                                                  than under the no-control scenario throughout the 31
                                                  eastern states covered by EPA's Regional Acid Depo-
                                                  sition Model (RADM). Percentage decreases in sul-
                                                  fur deposition range up to more than 40 percent in the
                                                  upper Great Lakes and Florida-Southeast Atlantic
                                                  Coast areas, primarily because the no-control scenario
                                                  projects significant increases in the use of high-sulfur
                                                  fuels by utilities  in the upper Great Lakes and Gulf
                                                      ES-4

-------
                                                                                         Executive Summary
Coast states. Nitrogen deposition is also signifi-
cantly lower under the control scenario, with per-
centage decreases reaching levels of 25 percent or
higher along the Eastern Seaboard, primarily due
to higher projected emissions of motor vehicle  ni-
trogen oxides under the no-control scenario.

    Finally, decreases in ambient concentrations of
light-scattering pollutants, such as sulfates and  ni-
trates, are estimated to lead to perceptible improve-
ments in visibility throughout the eastern states and
southwestern urban areas modeled for this study.

Physical Effects

    The lower ambient concentrations of sulfur  di-
oxide, nitrogen oxides, particulate matter, carbon
monoxide, ozone and lead under the control sce-
nario yield a substantial variety of human health,
welfare and  ecological benefits. For a number of
these benefit categories, quantitative functions are
available from the scientific literature which allow
estimation of the reduction in incidence of adverse
effects. Examples of these categories include the
human  mortality and morbidity effects of a num-
ber of pollutants, the neurobehavioral effects among
children caused by exposure to lead, visibility im-
pairment, and effects  on yields for some  agricul-
tural products.

    A number of benefit categories, however, can
not be quantified and/or monetized for a variety of
reasons. In  some cases, substantial scientific un-
certainties prevail regarding the existence and mag-
nitude of adverse effects  (e.g., the contribution of
ozone to  air pollution-related mortality). In other
cases, strong scientific evidence of an effect exists,
but data are still too limited to support quantitative
estimates of incidence reduction (e.g.,  changes in
lung function associated with long-term exposure
to ozone). Finally, there are effects for which there
is sufficient information to estimate incidence re-
duction, but  for which there are no available eco-
nomic value measures; thus reductions in adverse
effects cannot be expressed in monetary terms. Ex-
amples of this last category include relatively small
pulmonary function decrements caused by  acute
exposures to ozone and reduced time to onset  of
angina pain caused by carbon monoxide exposure.

    Table ES-1 provides a summary of the key dif-
ferences in quantified human health outcomes esti-
    mated under the control and no-control scenarios.
    Results are presented as thousands of cases avoided
    in 1990 due to control of the pollutants listed in the
    table and reflect reductions estimated for the entire
    U.S. population living in the 48 continental states. Epi-
    demiological research alone cannot prove whether a
    cause-effect relationship exists between an individual
'-Table fi'Sp2.'  Major Nontaometized, Adverse- Effects
         ''''Air'Act.-;,;,;     " - >••
    Pollutant
  Parti<;u!ate
  Matter
    > "'  '
  Ozone
Dioxide
  ,- • >> -,--•>,;
  Oxides,,,
                        Nonmonetfzed-Adverse Effects
              Large Qftanges?iti"Palmcmky Function
              Other Ctemic ReJpi
              Inflatianation -oft hfe^i
                Chroflic'Respiratojy Diseases"^"  „
                ExSrapnlmoRary Effects £ie:y other- drgan-sxstems-5
                Forest aad other Ecological Effects  ,  ;
               'Pecreased Ttoe-tp^O^aset of An^tia.
                                   ,
               -Other-Cardiovascular Effects
                Hospital  dHJJssloas
               - Materials Damage v';x"
               -Ecological Effects   "s'--"
                                          to Stitaut!
             De<;i;ea,s,ed Pttoionary,.?
             'iMJararaiEottofth'eJL'URg
                              ^
                  rophicatioB <£&,; Chesape;ake Bay)   " ••> -
                            '^ "  '"*'   """
               ,CaM'ovaf4|j.faT Diseases ,,    ":'v-,iv
                R«|)toductive^Eff^ts-m,;'^;o,men  ^-^
                Other Nearobe^aViorafc>hys»loglcaTEffect<'siri'?<',>
                        '^      '&>«(      '-
                Ecological Effects  .....
'l sIQ loss Mil dlreet,"'as op
         %!
                                                  ES-5

-------
The Benefits and Costs of the Clean Air Act, 1970 to 1990
    In addition to controlling the six cri-
teria pollutants, the 1970 and 1977 Clean
Air Act Amendments led to reductions
in ambient concentrations of a small
number of hazardous air pollutants. Al-
though they are not fully quantified in
this report, control of these pollutants
resulted both from regulatory standards
set specifically to control hazardous air
pollutants and from incidental reductions
achieved through programs aimed at
controlling criteria pollutants.

    Existing scientific research suggests
that reductions  in both hazardous air
pollutants and criteria pollutants yielded
widespread improvements in the func-
tioning and quality of aquatic and ter-
Table BS-
ftvoided
pollutant and an observed health effect. Although not
universally accepted, this study uses the epidemiologi-
cal findings about correlations between pollution and
observed health effects to estimate changes in the num-
ber of health effects that would occur if pollution lev-
els change. A range is presented along with the mean
estimate for each effect, reflecting uncertainties which
have been quantified in the underlying health effects
literature.

    Adverse human health effects of the Clean Air
Act "criteria pollutants" sulfur dioxide,
nitrogen oxides, ozone, particulate mat-     •
ter, carbon monoxide, and lead dominate
the quantitative estimates in part be-
cause, although there are important re-
sidual uncertainties, evidence of physi-
cal consequences is greatest for these
pollutants. The Clean  Air Act yielded
other benefits, however, which are im-
portant even though they are uncertain
and/or difficult to quantify. These other
benefit categories include (a) all benefits
accruing from reductions in  hazardous
air pollutants (also referred to as air
toxics), (b) reductions in damage to cul-
tural resources, buildings, and other ma-
terials, (c) reductions in adverse effects
on wetland, forest,  and aquatic ecosys-
tems, and  (d) a variety  of additional hu-
man health and welfare effects of crite-
ria pollutants. A more complete list of
these nonmonetized effects is presented
in Table ES-2.
            restrial ecosystems. In addition to any intrinsic value
            to be attributed to these ecological systems, human
            welfare is enhanced through improvements in a vari-
            ety of ecological services. For example, protection of
            freshwater ecosystems achieved through reductions
            hi deposition of acidic air pollutants may improve com-
            mercial and recreational fishing. Other potential eco-
            logical benefits of reduced acid deposition include im-
            proved wildlife viewing, maintenance of biodiversity,
            and nutrient cycling.  Increased growth and produc-
            tivity of U.S. forests may have resulted from reduc-
                   Estimates of Ec'bttoitjic yalue per Unit of
                                   '   *'                '

tost 10 'Point's ',„;
JiQjJsmha-B 70
                          Led ,„-,-,-/--
                         ?-Lead
                                            $4i,00()
                                            ' "
                                                    per «ase
Stroke*-/? *
                                            $200,080 "per «ase-males^
                                                   *
Hospital Admissions'
  Ischemic HeartJDisea-ss, ,,
  Congestive Heart Failure
                           ,EM-
                               O^one
                                                  , per, Case
                                          $10,300 -percale
                                           3$,,30(>, per case
                                          • $S,~!00'"oer case
                           PM &"Ozojie-
.Respiratory Illness aodjSyroptoros"
  •-Acute 8K»ttchitfs,,"
                           Pljil,
                           "''
                                    N'Oi,'
  Upjiat fiesplratoty Symptoms
  tower Respiratory' Symptoms,
Work tossWys * * ' '  [ 'v
^sid1 Restricted Activity £>a'y$.''
"Welfare Benefits  -  <-«.'  -"
                            PM
                            PM   ,,,,„„,,
                            PM '
                            PM
                                 , , ^ *
                            PM & Ozaiie
                                            - $19 per case
                                            ,,5,531,2-. per «ase
                                            $5.'30 °per day
                                            '*'$$&.
                                              , $14,,      ,,_
                                                   in Dec»Via,w,.,,
                                              $2,50', pat household,
                                              ^   ,,,perJ?M-10  ""
                                              , ;, %  change
                                                ia'Eeonotnic iSu^ilus
                aSed^oii aS&igBJJig a vftlue of $29^,006 for eAob life*year lost are
                  ?£ll'l:,,-' ,    ',,>'"        v''''
        are <}Qiapr!si;ed Qfjifyettghratabotic btaia
                         ^^
            valttations for i'trolffi'olsffis wflectdiffe'reSces ia lost Batran|s between
                             '        iignpsfete discussion o?valuing'
                                    '            '
                                  ,                ,     ,,
                           anjgein1 daily ;w8$*s:$t pat worker p'ar'fOfo'"
                           -^
                                                    ES-6

-------
                                                                                     Executive Summary
tions in ground-level ozone. More vigorous forest eco-
systems in turn yield a variety of benefits, including
increased timber production; improved forest aesthet-
ics for people enjoying outdoor activities such as hunt-
ing, fishing, and camping; and improvements in eco-
logical services such as nutrient cycling and tempo-
rary sequestration of global warming gases. These im-
provements in ecological structure and function have
not been quantified in this assessment.

Economic Valuation

   Estimating the reduced incidence of physical ef-
fects provides a valuable measure of health benefits
for individual endpoints. However, to compare or ag-
gregate benefits across endpoints, the benefits must
be monetized. Assigning a monetary value to avoided
incidences of each effect permits  a  summation, in
terms of dollars, of monetized benefits realized as a
result of the Clean Air Act, and allows that summa-
tion to be compared to the cost of the Clean Air Act.

   Before proceeding through this step, it is impor-
tant to recognize the substantial controversies and un-
certainties which pervade attempts to characterize ad-
verse human health and ecological effects of pollu-
tion in dollar terms. To many, dollar-based estimates
of the value of avoiding outcomes such as loss of hu-
man  life, pain and suffering, or ecological degrada-
tion do not capture the full and true value to society as
a whole of avoiding or reducing these effects. Adher-
ents to this view tend to favor assessment procedures
which (a) adopt the most technically defensible dol-
lar-based valuation estimates for analytical purposes
but (b) leave the moral dimensions of policy evalua-
tion to those who must decide whether, and how, to
use cost-benefit results in making public policy deci-
sions. This  is  the paradigm adopted in the present
study. Given the Congressional mandate to perform a
cost-benefit study of the Clean Air Act, the Project
Team has endeavored to apply  widely-recognized,
customary techniques of Applied Economics to per-
form this cost-benefit analysis. However, EPA be-
lieves there  are social and personal values furthered
by the Clean Air Act which have not been effectively
captured by the dollar-based measures used in this
study. Therefore, EPA strongly encourages readersto
look beyond the dollar-based comparison of costs and
benefits of the Clean Air Act and consider the broader
value of the reductions in adverse health and environ-
mental effects which have been achieved as well as
any additional  adverse consequences of regulation
which may not be reflected in the cost estimates re-
ported herein.

    For this study, unit valuation estimates are derived
from the economics literature and reported in dollars
per case (or, in some cases, episode or symptom-day)
avoided  for health  effects and dollars per unit of
               g-4< Tpt4JpstiWed-Moiieti|edf-BenBfits t>y EMpoi-nt Category-for-48 State Population
                    $90 period (i^MMans'.of &9& 'dollars}/'      ,     ""''"'.
                       .\ '.,..'.'  .. >  J ''''.'?&,  ',    ' . S+i&f *••*,%* p,^*"-.        ,V .. .
Endpoint „, , PoUutant(s)
Mortality , '--, , " :,;•"'•> PM ' •- •"
Mor^lily /*V',PM-, ,,„ , ,',,,-,
4o5m$t '^ *S^!f W;L^-- \~ : ,f „ - ^
tHy'fierten&iw' '-'''"-.-'- '>L«a ••'---.
' Hospit a! Act^isMotts ,;^» » /' 'PM^Ozone^ Lf^ ^ '
- Reapiratory-llel|^| ^ - „ , -^^H Ozone, M02, 
-------
The Benefits and Costs of the Clean Air Act, 1970 to 1990
avoided damage for human welfare effects. Similar to
estimates of physical effects provided by health stud-
ies, each of the monetary values of benefits applied in
this analysis can be expressed in terms of a mean value
and a range around the mean estimate. This range re-
flects the uncertainty in the economic valuation lit-
erature associated with a given effect. These value
ranges, and the approaches used to derive them, are
described in Chapter 6 and Appendix I for each of the
effects monetized in this study. The mean values of
these ranges are shown in Table ES-3.

Monetized Benefits and Costs

   The total monetized economic benefit attributable
to the Clean Air Act is derived by applying the unit
values (or ranges of values) to  the stream of
monetizable physical effects estimated for the 1970
to 1990 period. In developing these estimates, steps
are taken to avoid double-counting of benefits. In ad-
dition, a computer simulation model is used to esti-
mate ranges of plausible outcomes for the benefits
estimates reflecting uncertainties in the physical ef-
fects and economic valuation literature (see Chapter
7 and Appendix I for details).

    The economic benefit estimation model then gen-
erated a range of economic values for the differences
in physical outcomes under the control and no-con-
trol scenarios for the target years of the benefits analy-
sis: 1975,1980, 1985, and 1990. Linear interpolation
between these target years is used to estimate ben-
efits in intervening years. These yearly results are then
adjusted to their equivalent value in the year 1990 and
summed to yield a range and mean  estimate for the
total monetized benefits of the Clean Air Act from
Figure
theCAj
50-
5240 -
_CO
I30'
o>
°20-
.g
£10-
0 -
ES-3. Total Estimatt
\ (in trillions of infl




;d Dkec
ation-ad


— —



t Compliance Costs of
usted dollars).
-^ 95th peicentile

•^ Mean

•^ 5th percentile
Costs Benefits
1970 to 1990. These results are summarized in Table
ES-4.

    Combining these benefits results with the cost es-
timates presented earlier yields the following analyti-
cal outcomes.3

    •   The total monetized benefits of the Clean
       Air Act realized during the period from
       1970 to 1990 range from 5.6 to 49.4 trillion
       dollars, with a central estimate of 22.2 tril-
       lion dollars.

    •   By comparison, the value of direct compli-
       ance expenditures over the same period
       equals approximately 0.5 trillion dollars.

    •   Subtracting costs from benefits results in
       net, direct, monetized benefits ranging
       from 5.1 to 48.9 trillion dollars, with a cen-
       tral estimate of 21.7 trillion dollars, for the
       1970 to 1990 period.

    •  The lower bound of this range may go down
       and the upper bound may go up if analyti-
       cal uncertainties associated with compli-
       ance costs, macroeconomic effects, emis-
       sions  projections, and air quality model-
       ing could be quantified and incorporated
       in the uncertainty analysis. While the range
       already reflects many important uncertain-
       ties in the physical effects and economic
       valuation steps, the  range might also
       broaden further if additional uncertainties
        in these two steps could be quantified.

    •   The central estimate of 22.2 trillion dollars
        in benefits may be a significant underesti-
        mate due to the exclusion of large numbers
        of benefits from the monetized benefit es-
        timate (e.g., all air toxics effects, ecosystem
        effects, numerous human health effects).

    Figure ES-3 provides a graphical representation
 of the estimated range of total monetized benefits and
 compares this range to  estimated direct compliance
 costs. Clearly, even the lower bound estimate of mon-
 etized benefits substantially exceeds the costs of the
 historical Clean Air Act. As shown by the yearly data
 presented in Chapter 7, monetized benefits consis-
 tently and substantially exceeded costs throughout the
 1970 to  1990 period.
                                                ES-8

-------
                                                                                     Executive Summary
tables ES;5, ^tern>tiye%6ilaHl^ BeneftiEs, Mean,,, *'-,:
"dollars) feompated WTodht 970 to
 -,   _ '»-~V  r'<"-"  -     s       --.
 Cosjs,     ?-\	
                               V9J;,^10.'f": '-«•
                             •.-.,....,-;'- .%..«. ,Q.S ,  » ;
 Alternative Results

    The primary results of this analysis, including ag-
 gregate cost and benefit estimates which reflect many
 elements of the uncertainty associated with them, are
 presented above. However, some additional analysis
 is required to address an important issue raised by the
 EPA Science Advisory Board Council on Clean Air
 Act Compliance Analysis (a.k.a. Council) charged
 with reviewing the present  study. Specifically, the
 Council believes it is appropriate to also display al-
 ternative premature mortality results based on an ap-
 proach which estimates, and assigns a value to, the
 loss of life-years (i.e., the reduction, in years of re-
 maining life expectancy) resulting from the pollution
 exposure. The Council's position is based on the con-
 clusion that older individuals are more susceptible to
 air pollution-induced mortality. EPA believes, how-
 ever, that the simplifying assumptions which must be
 adopted to implement a life-years lost approach ren-
 der its results  less  reliable, even for the purposes of
 economic efficiency analysis, than a value of statisti-
 cal life approach. In addition, EPA is concerned about
 any analytical methodology which may be interpreted
 to justify conferring less environmental protection on
 particular individuals  or groups of individuals (e.g.,
 the elderly and/or sick). EPA therefore prefers at this
 time to continue with its current practice of assigning
 the same economic value to incidences of premature
 mortality regardless of the age and health status of
 those affected, and the primary results presented above
 reflect this view. Nevertheless, complete alternative
 results based on a  value of statistical life-years lost
 (VSLY) approach are presented in Chapter 7 and Ap-
 pendix I and are summarized below.
    Table ES-5 summarizes and compares the results
 of the mortality benefits estimates based on the value
 of statistical life (VSL) and VSLY approaches. Esti-
 mated 1970 to 1990 benefits from PM-related mor-
 tality alone and total mortality (i.e., PM plus Lead)
 benefits are reported, along with total compliance costs
 for the same period. Adding the VSLY-based mortal-
 ity benefits estimates to the non-mortality benefits
 estimates from Table ES-4 yields the following re-
 sults for the overall analysis.

    •  Alternate Result: The total monetized ben-
        efits of the Clean Air Act realized during
        the period from 1970 to 1990 range from
        4.8 to 28.7 trillion dollars, with a central
        estimate of 14.3 trillion dollars.

    •  Alternate Result: Subtracting costs from
        benefits results in net, direct, monetized
        benefits ranging from 4.3 to 28.2 trillion
        dollars, with a central estimate of 13.7 tril-
       lion dollars, for the 1970 to 1990 period.

    The results indicate that the choice of valuation
 methodology significantly affects the estimated mon-
 etized value of historical reductions in air pollution-
 related premature mortality. However, the downward
 adjustment which would result from applying a VSLY
 approach in lieu of a VSL approach does not change
 the basic outcome of this study, viz. the estimated
 monetized benefits of the historical Clean  Air Act
 substantially exceed the estimated historical costs of
 compliance.


 Conclusions and Future
 Directions

    First and foremost, these results indicate that the
 benefits of the Clean Air Act and associated control
 programs substantially exceeded costs. Even consid-
 ering the large number of important uncertainties per-
 meating each step of the analysis, it is extremely un-
 likely that the converse could be true.

    A second important implication of this  study is
 that a large proportion of the monetized benefits of
 the historical Clean Air Act derive from reducing two
pollutants: lead and paniculate matter4 (see Table ES-
4). Some may  argue that, while programs to control
these two pollutants may have yielded measurable
   4 Ambient paniculate matter results from emissions of a wide array of precursor pollutants, including sulfur dioxide, nitrogen
oxides, and organic compounds.	
                                                ——

-------
The Benefits and Costs of the Clean Air Act, 1970 to 1990
benefits in excess of measurable costs, estimates of
measurable benefits of many other historical Clean
Air Act programs and standards considered in isola-
tion might not have exceeded measurable costs. While
this may or may not be true, this analysis provides no
evidence to support or reject such conjectures. On the
cost side, the historical expenditure data used in this
analysis are not structured in ways which allow attri-
bution of control costs to specific programs or stan-
dards. On  the benefit side, most control programs
yielded a variety of benefits, many of which included
reductions in other pollutants such as ambient par-
ticulate matter. For example, new source performance
standards for sulfur dioxide emissions from coal-fired
utility plants yielded benefits beyond those associated
with reducing exposures to gaseous sulfur dioxide.
The reductions  in sulfur dioxide emissions also led to
reductions in ambient fine particle sulfates, yielding
human health, ecological,  and visibility benefits.

    This retrospective study highlights important ar-
eas of uncertainty associated with many of the mon-
etized benefits  included in the quantitative analysis
and lists benefit categories which could not be quan-
tified or monetized given the current state of the sci-
ence. Additional  research  in these areas may reduce
critical uncertainties and/or improve the comprehen-
siveness of future assessments. Particularly important
areas where further research might reduce critical
uncertainties include particulate matter-related mor-
tality incidence, valuation of premature mortality, and
valuation of particulate-related chronic bronchitis and
cardiovascular  disease. Additional research on haz-
ardous  air pollutants and on  air pollution-related
changes in ecosystem structure and function might
help improve the comprehensiveness of  future ben-
efit studies. (See Appendix J for further discussion.)

    Finally, the results of this retrospective study pro-
vide useful lessons with respect to the value and the
limitations of cost-benefit analysis as a tool for evalu-
ating environmental programs. Cost-benefit analysis
can provide a valuable framework for organizing and
evaluating information on the effects of environmen-
tal programs. When used properly, cost-benefit analy-
sis can help illuminate important effects of changes
in policy and can help set priorities for closing infor-
mation  gaps and reducing uncertainty. Such proper
use, however, requires that sufficient levels of time
and resources be provided to permit careful, thorough,
and technically and scientifically sound data-gather-
ing and analysis. When cost-benefit analyses are pre-
sented without effective characterization of the un-
certainties associated with the results, cost-benefit
studies can be used in highly misleading and damag-
ing ways. Given the substantial uncertainties  which
permeate cost-benefit assessment of environmental
programs, as demonstrated by the broad range of esti-
mated benefits presented in this study,  cost-benefit
analysis is best used to inform, but not dictate, deci-
sions related to  environmental protection  policies,
programs, and research.
                                                ES-10

-------
  1
 Introduction
Background and Purpose

    As part of the Clean Air Act Amendments of 1990,
Congress established a requirement under section 812
that EPA develop periodic Reports to Congress esti-
mating the benefits and costs of the Clean Air Act
itself. The first such report was to be a retrospective
analysis, with a series of prospective analyses to fol-
low every two years thereafter. This report represents
the retrospective study, covering the period beginning
with passage of the Clean Air Act  Amendments of
1970, until 1990 when Congress enacted the most re-
cent comprehensive amendments to the Act.

    Since the legislative history associated with sec-
tion 812 is sparse,  there is considerable uncertainty
regarding Congressional intent behind the requirement
for periodic cost-benefit evaluations of the Clean Air
Act (CAA). However, EPA believes the principal goal
of these amendments was that EPA should develop,
and periodically exercise, the ability to provide Con-
gress and the public with up-to-date, comprehensive
information about the economic costs, economic ben-
efits, and health, welfare, and  ecological effects of
CAA  programs. The results of such analyses might
then provide useful information for refinement of CAA
programs during future reauthorizations of the Act.

    The retrospective analysis presented in this Re-
port to Congress has been designed to provide an un-
precedented examination of the overall costs and ben-
efits of the historical Clean Air Act. Many other analy-
ses have attempted to identify the isolated effects of
individual standards or programs, but no analysis with
the present degree of validity, breadth and integration
has ever been  successfully developed. Despite data
limitations, considerable scientific uncertainties, and
severe resource constraints; the EPA Project Team was
able to develop a broad assessment  of the costs and
benefits associated with the major CAA programs of
the 1970 to 1990 period. Beyond the statutory goals
of section 812, EPA intends to use the results of this
study to help support decisions on future investments
in air pollution research. Finally, many of the meth-
odologies and  modeling systems developed  for the
retrospective study may be applied in the future to the
ongoing series  of section 812 prospective studies.
 Clean Air Act Requirements,
 1970 to 1990

    The Clean Air Act establishes a framework for
the attainment and maintenance of clean and health-
ful air quality levels. The Clean Air Act was enacted
in 1970 and amended twice:— in 1977 and most re-
cently in 1990. The  1970 Clean Air Act contained a
number of key provisions. First, EPA was directed to
establish national ambient air quality standards for the
major criteria air pollutants. The states were requked
to develop implementation plans describing how they
would control emission limits from individual sources
to meet and maintain the national standards. Second,
the 1970 CAA contained deadlines and strengthened
enforcement of emission limitations and state plans
with measures involving both the states and the fed-
eral government. Third, the 1970 Act forced new
sources to meet standards based on the best available
technology. Finally, the  Clean Air Act of 1970 ad-
dressed hazardous pollutants and automobile exhausts.

    The 1977 Clean Air Act Amendments also set new
requirements on clean areas already in attainment with
the national ambient air quality standards. In addition,
the 1977 Amendments set out provisions to help ar-
eas that failed to comply with deadlines for achieve-
ment of the national ambient air quality standards. For
example, permits for new major sources and modifi-
cations were required.

    The 1990 Clean Air  Act Amendments consider-
ably strengthened the earlier versions of the Act. With
respect to nonattainment, the Act set forth a detailed
and graduated program, reflecting the fact that prob-
lems in some areas  are more difficult and complex
than others. The  1990 Act also established a list of
189 regulated hazardous air pollutants and a multi-
step program for controlling emissions of these toxic
air pollutants. Significant control programs were also
established for emissions of acid rain precursors and
stratospheric ozone-depleting chemicals. The biggest
regulatory procedural change in  the Act is the new
permit program where all major sources are now re-
quired to obtain an operating permit. Finally, the
amendments considerably expanded the enforcement
provisions of the Clean Air Act, adding administra-
tive penalties and increasing potential civil penalties.

-------
The Benefits and Costs of the Clean Air Act, 1970 to 1990
Section 812 of the Clean Air Act
Amendments of 1990


    Section 812 of the Clean Air Act Amendments of
1990 requires the EPA to perform a "retrospective"
analysis which assesses the costs and benefits to the
public health, economy and the environment of clean
air legislation enacted prior to the 1990 amendments.
Section 812 directs that EPA shall measure the effects
on "employment, productivity, cost of living, economic
growth, and the overall economy of the United States"
of the Clean Air Act. Section 812 also requires that
EPA consider all of the economic, public health, and
environmental benefits of efforts to comply with air
pollution standards. Finally, section 812 requires EPA
to evaluate the prospective costs  and benefits of the
Clean Air Act every two years.

Analytical Design and Review

Target Variable

    The retrospective analysis was designed to answer
the following question:

       "How do the overall health, welfare,
    ecological, and economic benefits of Clean
    Air Act programs compare to the costs of
               these programs?"

    By examining the overall effects of the Clean Air
Act, this analysis complements the Regulatory Impact
Analyses (RIAs) developed by EPA over the years to
evaluate individual regulations. Resources were used
more efficiently by recognizing that these RIAs, and
other EPA analyses, provide  complete  information
about the costs and benefits of specific rules. Further-
more, in addition to the fact that the RIAs already pro-
vide rule-specific benefit and cost estimates, the broad-
scale approach adopted in the present study precludes
reliable re-estimation of the benefits and costs of in-
dividual standards or programs. On the cost side, this
study relies on  aggregated compliance  expenditure
data from existing surveys. Unfortunately, these data
do not support reliable allocation of total costs incurred
to specific emissions reductions for the  various pol-
lutants emitted from individual facilities. Therefore,
it is infeasible in the context of this study to assign
costs to specific changes in emissions. Further com-
plications emerge on the benefit side.  To estimate
benefits, this study calculates the change in incidences
of adverse effects implied by changes in ambient con-
centrations of air pollutants. However, reductions
achieved in emitted pollutants contribute to changes
in ambient concentrations of those, or secondarily
formed, pollutants in ways which are highly complex,
interactive, and often nonlinear. Therefore, even if
costs could be reliably matched to changes in emis-
sions, benefits cannot be reliably matched to changes
in emissions because of the complex, nonlinear rela-
tionships between emissions and the changes in am-
bient concentrations which are used to estimate ben-
efits.

    Focusing on the broader target variables of "over-
all costs" and "overall benefits" of the Clean Air Act,
the EPA Project Team adopted an approach based on
construction and comparison of two distinct scenarios:
a "no-control scenario" and a "control scenario." The
no-control scenario essentially freezes federal, state,
and local air pollution controls at the levels of strin-
gency and effectiveness which prevailed in  1970. The
control scenario assumes that all federal,  state, and
local rules promulgated pursuant to, or in support of,
the CAA during 1970 to 1990 were implemented. This
analysis then estimates the differences between the
economic and environmental outcomes associated
with these two scenarios. For more information on
the scenarios and their relationship to historical trends,
see Appendix B.

Key Assumptions

    Two key assumptions were made during the sce-
nario design process to avoid miring the  analytical
process in endless speculation. First, the "no-control"
scenario was defined to reflect the assumption that no
additional air pollution controls were imposed by any
level of government or voluntarily initiated by pri-
vate entities after 1970. Second, it is assumed that the
geographic distribution of population and  economic
activity remains the same between the two  scenarios.

    The first assumption is an obvious oversimplifi-
cation. In the absence of the CAA, one would expect
to see some air pollution abatement activity, either
voluntary or due to state or local regulations. It is con-
ceivable  that state and local regulation  would have
required  air pollution abatement equal to—or even
greater than—that required by the CAA; particularly
since some states,  most notably California,  have done
so. If one were to  assume that state and local regula-
tions would have been equivalent to CAA  standards,
then a cost-benefit analysis of the CAA would be a
meaningless exercise since  both costs and benefits
would equal zero. Any attempt to predict  how state
and local regulations would have differed from the
CAA would be too speculative to support the  cred-
ibility of the ensuing analysis. Instead, the no-control
scenario has been  structured to reflect the assumption
that states and localities would not have invested fur-
ther in air pollution control programs after 1970 in
the absence of the federal CAA. That is, this analysis
accounts for the costs and benefits of all air pollution

-------
                                                                                   Chapter 1: Introduction
control from 1970 to 1990. Speculation about the pre-
cise fraction of costs and benefits attributable exclu-
sively to the federal CAA is left to others. Neverthe-
less, it is important to note that state and local govern-
ments and private initiatives are responsible for a sig-
nificant portion of these total costs and total benefits.
At the same time, it must also be acknowledged that
the federal CAA played an essential role in achieving
these results by helping minimize the advent of pollu-
tion havens1, establishing greater incentives for pol-
lution control research and development than indi-
vidual state or local rules could provide; organizing
and promoting health and environmental research,
technology transfer and other information management
and dissemination services; addressing critical inter-
state air pollution problems, including the regional fine
particle pollution which is responsible for much of
the estimated monetary benefit of historical air pollu-
tion control; providing financial resources to state and
local government programs; and many other services.
In the end, however, the benefits of historical air pol-
lution controls were achieved through partnerships
among all levels of government and with the active
participation and cooperation of private entities and
individuals.

    The second assumption concerns changing demo-
graphic patterns in response to  air pollution. In the
hypothetical no-control world, air quality is worse than
that in the historical "control" world particularly in
urban industrial areas. It  is possible that in the no-
control case more people, relative to the control case,
would move away from the most heavily polluted ar-
eas. Rather  than speculate on the scale of population
movement,  the analysis assumes  no differences in
demographic patterns between the two scenarios. Simi-
larly,  the analysis assumes no changes in the spatial
pattern of economic activity. For example: if, in the
no-control case, an industry is expected to  produce
greater output than it did in the control case, that in-
creased output is produced by actual historical plants,
avoiding the need to speculate about the location or
other characteristics of new plants providing additional
productive capacity.

Analytic Sequence

    The analysis was designed and implemented in a
sequential manner following seven basic steps which
are summarized below and described in detail later in
this report. The seven major steps were:
        direct cost estimation
        macroeconomic modeling
        emissions modeling
        air quality modeling
        health and environmental effects estimation
        economic valuation
        results aggregation and uncertainty character-
        ization
    By necessity, these components had to be com-
pleted sequentially. The emissions modeling effort had
to be completed entirely before the air quality models
could be configured and run; the air quality modeling
results had to be completed before the health and en-
vironmental consequences of air quality changes could
be derived; and so on. The analytical sequence, and
the modeled versus actual data basis for each analyti-
cal component, are summarized in Figure 1 and de-
scribed in the remainder of this, section.

    The first step of the analysis was to estimate the
total direct costs incurred by public and private enti-
ties to comply with post-1970  CAA requirements.
These data were obtained directly from Census Bu-
reau and Bureau of Economic Analysis (BEA) data
on compliance expenditures reported by sources, and
from EPA analyses. These direct cost data were then
adopted as inputs to the macroeconomic model used
to project economic conditions-such as production
levels, prices, employment patterns, and  other eco-
nomic indicators-under the two scenarios. To ensure
a consistent basis for scenario comparison, the analy-
sis applied the  same macroeconomic modeling sys-
tem to estimate control and no-control scenario eco-
nomic conditions.2 First, a control scenario was con-
structed by running the macroeconomic model using
actual historical data for input factors such as eco-
nomic growth rates during the 1970 to 1990 period.
The model was then re-run for the no-control scenario
by,  in essence, returning all post-1970 CAA compli-
ance expenditures to the economy. With these addi-
tional resources available for capital formation, per-
sonal consumption, and other purposes, overall eco-
nomic conditions under the no-control scenario dif-
fered from those of the control scenario. In addition
to providing estimates of the difference in overall eco-
nomic growth and other outcomes under the two sce-
narios, these first two analytical steps were used to
define specific economic conditions used as inputs to
the emissions modeling effort, the first step in the es-
timation of CAA benefits.3
    1 "Pollution havens" is a term used to identify individual states or localities which permit comparatively high levels of pollution in
order to attract and hold polluting industries and other activities.
    2 Using modeled economic conditions for both scenarios has both advantages and disadvantages. The principal disadvantage is that
historical economic conditions "predicted" by a macroeconomic model will not precisely duplicate actual historical events and condi-
tions. However, this disadvantage is outweighed by the avoidance of distortions and biases which would result from comparing a
modeled no-control scenario with actual historical conditions. By using the same macroeconomic model for both scenarios, model errors
and biases essentially cancel out, yielding more robust estimates of scenario differences, which are what this analysis seeks to evaluate.
    3 For example, the macroeconomic model projected different electricity sales levels under the two scenarios, and these sales levels
were used as key input assumptions by the utility sector emissions model.	^^^^

-------
The Benefits and Costs of the Clean Air Act, 1970 to 1990
     Figure 1. Summary of Analytical Sequence and Modeled versus Historical Data Basis.
              Control Scenario
      No-Control Scenario
                                       Compile historical compliance expenditure
                                       data
       Develop modeled macroeconomic scenario
       based on actual historical economic data

Develop modeled macroeconomic scenario
by rerunning control scenario with
compliance expenditures added back to the
economy
       Project emissions by year, pollutant, and
       sector using control scenario
       macroeconomic projection as input to
       sector-specific emissions  models
Re-run sector-specific emissions models
using no-control scenario macroeconomic
projection
       Develop statistical profiles of historical air
       quality for each pollutant based on
       historical monitoring data (plus
       extrapolations to cover unmonitored areas)
Derive no-control air quality profiles by
adjusting control scenario profiles based on
differences in air quality modeling of
control scenario and no-control scenario
emissions inventories
       Estimate physical effects based on
       application of concentration-response
       functions to historical air quality profiles
Estimate physical effects based on
application of concentration-response
functions to no-control scenario air quality
profiles
                                       Calculate differences in physical outcomes
                                       between control and no-control scenario
                                       Estimate economic value of differences in
                                       physical outcomes between the two
                                       scenarios*
                                       Compare historical, direct compliance costs
                                       with estimated economic value of
                                       monetized benefits, considering additional
                                       benefits which could not be quantified
                                       and/or monetized
     * In some cases, economic value is derived directly from physical effects modeling (e.g., agricultural yield loss).

-------
                                                                                     Chapter 1: Introduction
    Using appropriate economic indicators from the
macroeconomic model results as inputs, a variety of
emissions models were run to estimate emissions lev-
els under the two scenarios. These emissions models
provided estimates of emissions of six major pollut-
ants4 from each of six key emitting sectors: utilities,
industrial processes, industrial combustion, on-high-
way vehicles, off-highway vehicles, and commercial/
residential sources. The resulting emissions profiles
reflect state-wide total emissions from each pollut-
ant-sector combination for the years 1975,1980,1985,
and  1990.5

    The next step toward estimation  of benefits in-
volved translating these emissions inventories  into
estimates of air quality conditions under each scenario.
Given the complexity, data requirements, and operat-
ing costs of state-of-the-art air quality models-and the
afore-mentioned resource constraints-the EPA Project
Team adopted simplified, linear scaling approaches
for a number of pollutants. However, for ozone and
other pollutants or air quality conditions which involve
substantial non-linear formation effects and/or long-
range atmospheric transport and transformation, the
EPA Project Team invested the time and resources
needed to use more sophisticated modeling systems.
For example, urban area-specific ozone modeling was
conducted for 147 urban areas throughout the 48 con-
tiguous states.

    Up to this point of the analysis, both the control
and no-control scenario were based on modeled con-
ditions and outcomes. However, at the air quality
modeling step, the analysis returned to a foundation
based on actual historical conditions and data. Spe-
cifically, actual historical air quality monitoring  data
from 1970 to 1990 were used to define the control
scenario. Air quality conditions under the no-control
scenario were then derived by scaling the historical
data adopted for the control scenario by the ratio of
the modeled control and no-control scenario air qual-
ity. This approach took advantage of the richness of
the historical data on air quality, provided a realistic
grounding for the benefit measures, and yet retained

    4 These six pollutants are total suspended particulates  (TSP), sulfur dioxide (SO2), nitrogen oxides (NOp, carbon monoxide (CO),
volatile organic compounds (VOCs), and lead (Pb). The other CAA criteria pollutant, ozone (Oj), is formed in the atmosphere through
the interaction of sunlight and ozone precursor pollutants such as NOx and VOCs.
    5 By definition, 1970 emissions under the two scenarios are identical.
    6 The one exception is particulate matter (PM). For PM, air quality profiles for both Total Suspended Particulates (TSP) and
particulates less than or equal to 10 microns in diameter (PM10) were constructed at the county level rather than the individual monitor
level.
    7 Or, for PM, by county.
    8 For example, changes in forced expiratory volume in one second (FEV,) as a result of exposure to ozone were quantified but
could not be expressed in terms of economic value.
    9 Although considerable uncertainties surround the direct cost, macroeconomic modeling, emissions modeling,, and air quality
modeling steps, the ranges of aggregate costs and benefits presented in this analysis do not reflect these uncertainties. While the
uncertainties in these components were assessed qualitatively, and in some cases quantitatively, resource limitations precluded the
multiple macroeconomic model, emissions model, and air quality model runs which would have been required to propagate these
uncertainties through the entire analytical sequence. As a result, complete quantitative measures of the aggregate uncertainty in the cost
and benefit estimates could not be derived. However, the ranges presented do reflect quantitative measures of the uncertainties in the
two most uncertain analytical steps: physical effects estimation and economic valuation.	_^
the analytical consistency conferred by using the same
modeling approach for both scenarios. The outputs of
this  step of the analysis were statistical profiles  for
each pollutant characterizing air quality conditions at
each monitoring site in the lower 48 states.6

    The control and no-control  scenario air quality
profiles were then used as inputs to a modeling sys-
tem  which translates air quality to physical outcomes
-such as mortality,  emergency room visits, or crop
yield losses- through the use of concentration-re-
sponse functions. These concentration-response func-
tions were in turn derived from studies found in  the
scientific literature on the health and ecological  ef-
fects of air pollutants. At this point, estimates were
derived of the differences between the two  scenarios
in terms of incidence rates for a broad range of human
health and other effects of air pollution by year,  by
pollutant, and by monitor.7

    In the next step, economic valuation models or
coefficients were used  to estimate the economic value
of the reduction in incidence of those adverse effects
which were amenable to such monetization. For ex-
ample, a distribution of unit values derived from  the
economic literature was used to estimate the value of
reductions in mortality risk associated with exposure
to particulate matter. In addition, benefits which could
not be expressed in economic terms were compiled
and  are presented herein. In some cases, quantitative
estimates of scenario differences in the incidence of a
nonmonetized effect were calculated.8 In many other
cases, available data and techniques were insufficient
to support anything more than a qualitative character-
ization of the change in effects.

    Finally, the costs  and monetized benefits were
combined to provide a range of estimates for the par-
tial,  net economic benefit of the CAA with the range
reflecting quantified uncertainties associated with  the
physical effects and economic valuation steps.9 The
term "partial" is emphasized because only a subset of
the total potential benefits  of the CAA could be rep-
resented hi economic terms due to limitations in ancal

-------
 The Benefits and Costs of the Clean Air Act, 1970 to 1990
 cal resources, available data and models, and the state
 of the science.10 Of paramount concern to the EPA
 Project Team was the paucity of concentration-re-
 sponse functions  needed to translate air quality
 changes into measures of ecological effect. In addi-
' tion, significant scientific evidence exists linking air
 pollution to a number of adverse human health ef-
 fects which could not be effectively quantified and/or
 monetized."

 Review Process

     The CAA requires EPA to consult with an out-
 side panel  of experts-referred to statutorily as the
 Advisory Council on Clean Air Act Compliance
 Analysis (the Council)-in developing the section 812
 analyses. In addition, EPA is required to consult with
 the Department of Labor and the Department of Com-
 merce.

     The Council was organized in 1991 under the aus-
 pices and procedures of EPA's Science Advisory
 Board (SAB). Organizing the review committee un-
 der the SAB ensured that review of the section 812
 studies would be conducted by highly qualified ex-
 perts hi an objective, rigorous,  and publicly open
 manner. The Council has met many times during the
 development of the retrospective study to review meth-
 odologies and interim results. While the full Council
 retains overall review responsibility for the section
                                                    peer review by the SAB Council. During the course
                                                    of the final interagency discussions, it became clear
                                                    that several agencies held different views pertaining
                                                    to several key assumptions in this study as well as to
                                                    the best techniques to apply in the context of environ-
                                                    mental program benefit-cost analyses, including the
                                                    present study. The concerns include: (1) the extent to
                                                    which air quality would have deteriorated from 1970
                                                    to 1990 in the absence of the Clean Air Act, (2) the
                                                    methods used to estimate the number of premature
                                                    deaths and illnesses avoided due to the CAA, (3) the
                                                    methods used to estimate the value that individuals
                                                    place on avoiding those risks, and (4)  the methods
                                                    used to value non-health related benefits. However,
                                                    due to the court deadline the resulting concerns were
                                                    not resolved during this final, brief interagency re-
                                                    view. Therefore, this  report reflects the findings of
                                                    EPA  and not necessarily other agencies in the Ad-
                                                    ministration. Interagency discussion of some of these
                                                    issues will continue in the context of the future pro-
                                                    spective section 812 studies and potential regulatory
                                                    actions.

                                                    Report Organization

                                                        The remainder of the main text of this report sum-
                                                    marizes the key methodologies and findings of retro-
                                                    spective study. The direct cost estimation and macro-
                                                    economic modeling steps are presented in Chapter 2.
                                                    The emissions modeling is summarized in Chapter 3.
                                                    Chapter 4 presents the air quality'modeling method-
                                                    ology and sample results. Chapter 5 describes the ap-
                                                    proaches used and principal results obtained through
                                                    the physical effects estimation process. Economic
                                                    valuation methodologies are described in Chapter 6.
                                                    Chapter 7 presents the aggregated results of the cost
                                                    and benefit estimates and describes and evaluates
                                                    important uncertainties in the results.

                                                        Additional details regarding the methodologies
                                                    and results are presented in the appendices and in the
                                                    referenced supporting documents. Appendix A cov-
                                                    ers the direct cost and macroeconomic modeling. Ap-
                                                    pendix B provides additional detail on the sector-spe-
                                                    cific emissions modeling effort. Details of the air qual-
                                                    ity models used and results obtained are presented or
                                                    referenced in Appendix C. The effects of the CAA on
                                                    human health and visibility; aquatic, wetland, and for-
                                                    est ecosystems; and agriculture  are presented in Ap-
                                                    pendices D, E, and F, respectively. Appendix G pre-
                                                    sents  details  of the lead (Pb) benefits analysis. Air
                                                    toxics reduction benefits are discussed  in Appendix
                                                    H. The methods and assumptions used to value quan-
                                                    tified effects of the CAA in economic terms are de-
                                                    scribed in Appendix I. Appendix J describes some ar-
                                                    eas of research which may increase comprehensive-
                                                    ness and reduce uncertainties in effect estimates for
                                                    future assessments, and describes plans for future sec-
                                                    _tion 812 analyses.
    10 It should be noted that there is some uncertainty associated with the estimates of economic costs as well and that some omitted
components of adverse economic consequences of pollution control programs may be significant. For example, some economists
argue that the economic costs of the CAA reported herein may be significantly underestimated to the extent potential adverse effects
of regulation on technological innovation are not captured. Nevertheless, it is clear that the geographic, population, and categorical
coverage of monetary cost effects is significantly greater than coverage of monetized benefits in this analysis.
    " For example, while there is strong evidence of a link between exposure to carbon monoxide and reduced time of onset of
angina attack, there are no valuation functions available to estimate the economic loss associated with this effect.	
                                                 6                                 -
 subcommittees comprised of both Council members
 and members of other SAB committees. The Council's
 Physical Effects Review  Subcommittee met several
 times and provided its own review findings to the full
 Council. Similarly, the Council's Air Quality Subcom-
 mittee, comprised of members and consultants of the
 SAB Clean Air Scientific Advisory Committee
 (CASAC), held several teleconference meetings to
 review methodology proposals and modeling results.

    With respect to  the interagency review  process,
 EPA expanded the list of consulted agencies and con-
 vened a series of meetings during the design and early
 implementation phases from 1991 through late 1994.
 In late  1994, to ensure that all interested parties and
 the public received consistent information about re-
 maining analytical issues  and emerging results, EPA
 decided to use the public SAB review process as the
 primary forum for presenting and discussing issues
 and results. The Interagency Review Group was there-
 fore discontinued as a separate process in late 1994.

    A final, brief interagency review, pursuant to Cir-
 cular A-19, was organized in August 1997 by the Of-
 fice of Management and Budget  and  conducted fol-
 lowing the completion of the extensive expert panel

-------
 2
 Cosf and Macroeconornic  Effects
    The costs of complying with Clean Air Act (CAA)
 requirements through the 1970 to 1990 period affected
 patterns of industrial production, capital investment,
 productivity, consumption, employment, and overall
 economic growth. The purpose of the analyses sum-
 marized in this chapter was to estimate those direct
 costs and the magnitude and significance of resulting
 changes to the overall economy. This was accom-
 plished by comparing economic indicators under two
 alternative scenarios: a control scenario serving as the
 historical  benchmark,  including the historical CAA
 as implemented; and a no-control scenario which as-
 sumes historical CAA programs did not exist. The
 estimated economic consequences of the historical
 CAA were taken as the difference between these two
 scenarios.

    Data used as inputs to the cost analysis can be
 classified into two somewhat overlapping categories
 based on the information source: survey-based infor-
 mation (generally gathered by the Census Bureau) and
 information derived from various EPA analyses. For
 the most part, cost estimates for stationary air pollu-
 tion sources (e.g., factory smokestacks) are based on
 surveys of private businesses that attempt to elicit in-
 formation on annual pollution control outlays by those
 businesses. Estimates of pollution control costs for
 mobile sources (e.g., automobiles) are largely based
 on EPA analyses,  rather than on direct observation
 and measurement of compliance expenditures. For
 example, to determine  one component of the cost of
 reducing lead  emissions from mobile sources, the
 Project Team used an oil refinery production cost
 model to calculate the incremental cost required to
 produce unleaded (or less-leaded,  as appropriate)
 rather than leaded gasoline, while maintaining the
 octane level produced by leaded gasoline.

    As is  the case with many policy analyses, a sig-
 nificant uncertainty  arises in the cost analysis as  a
consequence of constructing a hypothetical scenario.
With this retrospective analysis covering almost
twenty years, difficulties arise in projecting alterna-
 tive technological development paths. In some cases,
 the analytical assumptions used to project the alterna-
 tive scenario are not immediately apparent. For ex-
 ample, the surveys covering stationary source com-
 pliance expenditures require respondents to report
 pollution abatement expenditures—implicitly asking
 them to determine by how much the company's costs
 would decline if there were no CAA compliance re-
 quirements. While a response might be relatively
 straightforward in the few years following passage of
 the CAA, a meaningful response becomes more diffi-
 cult after many years of technical change and invest-
 ment in less-polluting plant and equipment make it
 difficult to determine the degree to which total costs
 would differ under a "no CAA" scenario. In cases such
 as this, assumptions concerning the alternative hypo-
 thetical scenario are made by thousands of individual
 survey respondents. Where cost data are derived from
 EPA analyses, the hypothetical scenario assumptions
 are, at least in theory, more apparent.  For example,
 when determining the incremental cost caused by pol-
 lution-control requirements, one needs to make as-
 sumptions (at least implicitly) about what an auto
 would look like absent pollution control requirements.
 In either case, the need to project hypothetical tech-
 nology change for two decades introduces uncertainty
 into the assessment results, and this uncertainty may
 be difficult to quantify.

    The remainder of this chapter summarizes the
 basic methods and results of  the direct compliance
 cost and macroeconomic analyses. Further details re-
 garding the modeling methods and assumptions em-
 ployed,  as well as additional analytical results, are
 presented in Appendix A.


 Direct Compliance Costs

    Compliance with the CAA imposed direct costs
 on businesses, consumers, and governmental units; and
triggered other expenditures such as  governmental
regulation and monitoring costs and expenditures for

-------
The Benefits and Costs of the Clean Air Act, 1970 to 1990
    Table 1.  Estimated Annual CAA -
    Compliance Costs
Exnenditures

Year
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990

^current
7.2
8.5
10.6
11.2
11.9
12.0
14.4
16.3
17.0
16.0
15.5
173
19.1
17.8
18.2
18.2
19.0
190

$199O
19.6
21.4
24.4
24.1
24.1
22,6
24.8
25.7
24.4
21.6
20,1
21.6
22,9
20,8
20.6
19.8'
19.8
19 0
' An'ntiallTfeia'Costs
'
2%.
11.0
13.2
13,3
' 14.1
'15.3
15,0
17.3
19.7
19.6
18.6
19:1-
JOfl
'22^5
• 21.1
22.1
22.0
.22.9-
23.6
$1990 'a
...5%
11.0
13,4
43.fr -
•14,6 -;
15.9 v*
15.8-
18.3 ^
2Q,8 S-
20.9*V
' 20U' "
20.7 '
21.9 '
24.4
23.2'
l-24.^f
"*2^73* f/"
-*25:#f?
26.1 '•'
t:
7%
11. 1
13.7'
14.0 ;
415!4'"'
-16*6*
163-;
19.3-
-22:0
22,3;*
'Si'!? '\
22,5;'
23.8
26,5'
25^.
'}i>>. x"1"1
*wv»U
IpxJ^
^JS^
IX .7
research and development by both government and
industry. Although expenditures unadjusted for infla-
tion — that is, expenditures denominated in "current
dollars"— increased steadily from $7 billion to $19
billion per year over the 1973 to 1990 period,12 an-
nual CAA compliance expenditures adjusted for in-
flation were relatively stable, averaging near $25 bil-
lion (in 1990 dollars) during the 1970s and close to
$20 billion during most of the 1980s (see Table 1).
Aggregate compliance expenditures were somewhat
less than one half of one percent of total domestic
output during that period, with the percentage falling
from two thirds of one percent of total output in 1975
to one third of one percent in 1990.

    Although useful for many purposes, a summary
of direct annual expenditures may not the best cost
measure to use when comparing costs to benefits.
Capital expenditures are investments, generating a
stream of benefits and opportunity cost13 over the life
of the investment. The appropriate accounting tech-
nique to use for capital expenditures in a cost/benefit
analysis is to annualize the expenditure. This tech-
nique, analogous to calculating the monthly payment
associated with a home mortgage, involves spreading
the cost of the capital equipment over the useful life
of the equipment using a discount rate to account for
the time value of money.

    For this cost/benefit analysis, "annualized" costs
reported for any given year are equal to O&M expen-
ditures  — including R&D and other similarly recur-
ring expenditures — plus amortized capital costs (i.e.,
depreciation plus interest costs associated with the
existing capital stock) for that year. Stationary source
air pollution control capital costs were amortized over
20 years; mobile source air pollution control costs were
amortized over 10 years.14  All capital expenditures
were annualized using a five percent, inflation-ad-
justed rate of interest. Additionally, annualized costs
were calculated using discount rates of three and seven
percent to determine the sensitivity of the cost results
to changes  in the discount rate. Table 1 summarizes
costs annualized at three, five, and seven percent, as
well as annual expenditures.

    Total expenditures over the 1973-1990 period,
discounted to 1990 using a five percent (net  of infla-
tion) discount rate, amount to 628 billion dollars (in
1990 dollars). Discounting the annualized cost stream
to 1990 (with both annualization and discounting pro-
cedures using a five percent rate) gives total costs of
523 billion dollars (in 1990 dollars). Aggregate annu-
alized costs are less than expenditures because the
annualization procedure spreads some of the capital
cost beyond 1990.15
     12 Due to data limitations, the cost analysis for this CAA retrospective starts in 1973, missing costs incurred in 1970-72. This
limitation is not likely to be significant, however, because relatively little in the way of compliance with the "new" provisions of the
1970 CAA was required in the first two years following passage.
     13 In this context, "opportunity cost" is defined as the value of alternative investments or other uses of funds foregone as a result of
the investment.
     14 Although complete data are available only for the period 1973-1990, EPA's Cost of Clean report includes capital expenditures
for 1972 (see Appendix A for more details and complete citation). Those capital expenditure data have been used here. Therefore,
amortized costs arising from 1972 capital investments are included in the 1973-1990 annualized costs, even though 1972 costs are not
otherwise included in the analysis. Conversely, some capital expenditures incurred in the 1973-1990 period are not reflected in the
1973-1990 annualized costs — those costs are spread through the following two decades, thus falling outside of the scope of this study
(e.g., only one year of depreciation and interest expense is included for 1989 capital expenditures). Similarly, benefits arising from
emission reductions realized after 1990 as a result of capital investments made during the 1970 to 1990 period of this analysis are not
included in the estimates of benefits included in this report.
     13 This adjustment is required because many 1970 to 1990 investments in control equipment continue to yield benefits beyond
1990. Annualization of costs beyond 1990 ensures that the costs and benefits of any particular investment are properly scaled and
matched over the lifetime of the investment.
                                                      8

-------
                                                                 Chapter 2: Cost and Macroeconomic Effect
 Indirect Effects of the CAA

     Through changing production costs, CAA imple-
 mentation induced changes in consumer good prices,
 and thus in the size and composition of economic out-
 put. The Project Team used a general equilibrium
 macroeconomic model to ,assess the extent of such
 second-order effects. This type of model is useful be-
 cause it can capture the feedback effects of an action.
 In the section 812 macroeconomic modeling exercise,
 the feedback effects arising from expenditure changes
 were captured, but the analogous effects arising from
 improvements in human health were not captured by
 the model. For example, the macroeconomic model
 results do not reflect the indirect economic effects of
 worker productivity improvements and medical ex-
 penditure savings caused by the CAA. Consequently,
 the macroeconomic modeling exercise provides lim-
 ited and incomplete information on the type and po-
 tential scale of indirect economic effects.

    The effects estimated by the macroeconomic
 model can be grouped into two broad classes: sectoral
 impacts (i.e., changes in the composition of economic
 output), and aggregate effects (i.e., changes in the
 degree of output or of some measure of human wel-
 fare). The predicted sectoral effects were used as in-
 puts to the emissions models as discussed in Chapter
 3. In general, the estimated second-order macroeco-
 nomic effects were small relative to  the size of the
 U.S. economy. See Appendix A for more detail on
 data sources, analytical methods, and results  for the
 macroeconomic modeling performed for this assess-
 ment.

 Sectoral Impacts

    The CAA had variable compliance impacts across
 economic sectors. The greatest effects  were  on the
 largest energy producers and consumers, particularly
 those sectors which relied most heavily on consump-
 tion of fossil fuels (or .energy generated from fossil
 fuels). In addition, production costs increased more
 for capital-intensive industries than for less capital-
intensive industries under the control scenario due to
a projected increase in interest rates. The interest rate
increase, which resulted in an increase in the cost of
capital, occurred under the control scenario because
CAA-mandated investment in  pollution abatement
reduced the level of resources available for other uses,
including capital formation.
     Generally, the estimated difference in cost impacts
 under the control and no-control scenarios for a par-
 ticular economic sector was a function of the relative
 energy-intensity and capital-intensity of that sector.
 Increased production costs in energy- and capital-in-
 tensive sectors under the control scenario were re-
 flected hi higher consumer prices, which resulted hi
 reductions in the quantity of consumer purchases of
 goods and services produced by those sectors. This
 reduction in consumer demand under the control sce-
 nario led, ultimately, to reductions in output and em-
 ployment in those sectors. The sectors most affected
 by the CAA were motor vehicles, petroleum refining,
 and electricity generation. The electricity generation
 sector, for example, incurred a two to four percent
 increase in consumer prices by 1990, resulting in a
 three to five and a half percent reduction in output.
 Many other manufacturing sectors saw  an output ef-
 fect in the one percent range.

    Some other sectors, however, were projected to
 increase output under the control scenario. Apart from
 the pollution control equipment industry, which was
 not separately identified and captured in the macro-
 economic modeling performed for this study, two ex-
 ample sectors for which output was higher and prices
 were lower under the control scenario are  food and
 furniture. These two sectors showed production cost
 and consumer price reductions of one to two percent
 relative to other industries under the control scenario,
 resulting in output and employment increases of simi-
 lar magnitudes.

 Aggregate Effects

    As noted above, the control and no-control sce-
 narios yield different estimated mixes of investment.
 In particular, the control scenario was associated with
 more pollution control capital expenditure and less
 consumer commodity capital expenditure. As a result,
 the growth pattern of the economy under the control
 scenario differed from the no-control scenario. Under
 the control scenario, the macroeconomic model pro-
jected a rate of long-run GNP growth about one twen-
 tieth of one percent per year lower than under the no-
 control scenario. Aggregating these slower growth
 effects of the control scenario over the entire 1970 to
 1990 period of this study results, by 1990, in a level
 of GNP one percent (or approximately  $55 billion)
 lower than that projected under the no-control  sce-
nario.

-------
 The Benefits and Costs of the Clean Air Act, 1970 to 1990
    Although small relative to the economy as a whole,
 the estimated changes hi GNP imply that the poten-
 tial impact of the CAA on the economy by 1990 was
 greater than that implied by expenditures ($19 billion
 in 1990) or annualized costs ($26 billion in 1990, an-
 nualized at five percent). Discounting the stream of
 1973-1990 GNP effects to 1990 gives an aggregate
 impact on production of 1,005 billion dollars (in 1990
 dollars discounted at five percent). Of that total, $569
 billion represent reductions in household consump-
 tion, and another $200 billion represent government
 consumption, for an aggregate effect on U.S. consump-
 tion of goods and services equal to 769 billion dol-
 lars. Both the aggregate GNP effects and aggregate
 consumption effects exceed total 1973-1990 expen-
 ditures ($628 billion) and annualized costs ($523 bil-
 lion, with all dollar quantities in $1990, discounted at
 five percent).

    Changes in GNP (or, even, changes in the national
 product account category "consumption") do not nec-
 essarily provide a good indication of changes  in so-
 cial welfare. Social welfare is not improved, for ex-
 ample, by major oil tanker spills even though mea-
 sured GNP is increased by the "production" associ-
 ated with clean-up activities. Nevertheless, the effects
 of the CAA on long-term economic growth would be
 expected to have had some effect on economic wel-
 fare. One of the characteristics of the macroeconomic
 model used by the Project Team is its ability to esti-
 mate a measure of social welfare change which is su-
 perior to GNP changes. This social welfare measure
 estimates the monetary compensation which would be
 required  to offset the losses hi consumption (broadly
 defined)  associated with a given policy change. The
 model reports a range of results, with the range sensi-
 tive to assumptions regarding how cost impacts are
 distributed through society. For the CAA, the model
 reports an aggregate welfare effect of 493 billion to
 621 billion dollars (in  1990  dollars), depending on
 the distributional assumptions used. This range does
 not differ greatly from the range of results represented
 by 1973-1990 expenditures, compliance costs, and
 consumption changes.
 Uncertainties and Sensitivities in
 the Cost and Macroeconomic
 Analysis

    The cost and macroeconomic analyses for the
 present assessment relied upon survey responses, EPA
 analyses, and a macroeconomic simulation model.
 Although the Project Team believes that the results of
 the cost and macroeconomic analyses are reasonably
 reliable, it recognizes that every analytical step is sub-
ject to uncertainty. As noted at the beginning of this
 chapter, explicit and implicit assumptions  regarding
 hypothetical technology development paths are cru-
 cial to framing the question of the cost impact of the
 CAA. In addition, there is no way to verify the accu-
 racy of the survey results used;16 alternative, plausible
 cost analyses exist that arrive at results that differ from
 some of the results derived from EPA analyses; and it
 is not clear how the use of a general equilibrium mac-
 roeconomic model affects the accuracy of macroeco-
 nomic projections in a macroeconomy characterized
 by disequilibrium. For many factors engendering un-
 certainty, the degree or even the direction  of bias is
 unknown. In several  areas, nevertheless, uncertainties
 and/or sensitivities can be identified that may bias the
results of the analysis.

 Productivity and Technical Change

    An important component of the macroeconomic
model used by the Project Team is its treatment of
technical change and productivity growth. Three fac-
tors associated with productivity and technical change
have been identified  which may bias the results of the
macroeconomic simulation: (1) the long-run effects
of reducing the "stock" of technology, (2) the pos-
sible "chilling" effect of regulations on innovation and
technical change, and (3) the role of endogenous pro-
ductivity growth within the macroeconomic model.

    The macroeconomic model projected a decrease
in the growth of GNP as a result of CAA compliance.
Decreased growth was due not only to decreased capi-
tal investment, but also to decreased factor productiv-
ity. The annual decrement in productivity can be
thought of as a reduction of the stock of available tech-
nology. That reduction in stock could be expected to
affect macroeconomic activity after 1990, as well as
    16 For an example of the difficulties one encounters in assessing the veracity of survey results, see the discussion in Appendix A
on the apparently anomalous growth in stationary source O&M expenditures in relation to the size of the stationary source air
pollution control capital stock.
                                                10

-------
                                                                   Chapter 2: Cost and Macroecoaomic Effect
 during the 1973-1990 period studied by the Project
 Team. Thus, to the extent that this effect exists, the
 Project Team has underestimated the macroeconomic
 impact of the CAA by disregarding the effect of 1973-
 1990 productivity change decrements on post-1990
 GNP.

    Some economists contend that regulations have a
 "chilling" effect on technological innovation  and,
 hence, on productivity growth. Two recent studies by
 Gray and Shadbegian,17 which are sometimes cited in
 support of this contention, suggest that pollution abate-
 ment regulations may decrease productivity levels in
 some manufacturing industries. The macroeconomic
 model allowed policy-induced productivity change
 through the mechanism of price changes and result-
 ant factor share changes. To the extent that additional
 policy-induced effects on productivity growth exist,
 the Project Team has  underestimated the impact of
 the CAA on productivity growth during the 1973-1990
 period, and, thus, has underestimated macroeconomic
 impacts during the 1973-1990 period and beyond.

    The macroeconomic model allowed productivity
 growth to vary with changes in prices generated by
 the model. This use of "endogenous" productivity
 growth is not universal in the economic growth litera-
 ture — that is, many similar macroeconomic models
 do not employ analogous forms of productivity growth.
 The Project Team tested the sensitivity of the model
 results to the use of endogenous productivity growth.
 If the model is run without endogenous productivity
 growth, then the predicted macroeconomic impacts
 (GNP, personal consumption, etc.) of the CAA are
 reduced by approximately 20 percent. That is, to the
 extent that use of endogenous productivity growth hi
 the macroeconomic model is an inaccurate simulation
 technique, then the Project Team has overestimated
 the macroeconomic impact of the CAA.

 Discount Rates
approximates the social rate of tune preference — that
is, the rate of return at which individuals are willing
to defer consumption to the future. A three percent
rate would approximate the social rate of time prefer-
ence (all rates used here are "real", i.e., net of price
inflation impacts). Others believe that a rate that ap-
proximates the opportunity cost of capital (e.g., seven
percent or greater) should be used.18 A third school of
thought holds that some combination of the social rate
of time preference and the opportunity cost of capital
is appropriate, with the combination  effected either
by use of an intermediate rate or by use of a multiple-
step procedure employing the social rate of time pref-
erence as the "discount rate," but still accounting for
the opportunity cost of capital.

    The Project Team elected to use an intermediate
rate (five percent), but recognizes that analytical re-
sults aggregated across the study period are sensitive
to the discount rate used. Consequently, all cost mea-
sures are presented at three and seven percent, as well
as the base case five percent.  Table  2 summarizes
major cost and macroeconomic impact measures ex-
pressed in  constant 1990 dollars, and discounted to
1990 at  rates of three, five, and seven percent.
-,-417 ':-
 8SO -  "
                                  , ,62,? '  ", 761 ,
                                  /523, ,„ '657
                                   569;-,
                                   769    RR1
    There is a broad range of opinion in the econom-
ics profession regarding the appropriate discount rate
to use in analyses such as the current assessment. Some
economists believe that the appropriate rate is one that


    17 Gray, Wayne B., and Ronald J. Shadbegian, "Environmental Regulation and Manufacturing Productivity at the Plant Level,"
Center for Economic Studies Discussion Paper, CES 93-6, March 1993. Gray, Wayne B., and Ronald J. Shadbegian, "Pollution
Abatement Costs, Regulation, and Plant-Level Productivity," National Bureau of Economic Research, Inc., Working Paper Series,
Working Paper No. 4994, January 1995.

    18 Some would argue that use of the opportunity cost of capital approach would be inappropriate in the current assessment if the
results of the macroeconomic modeling (such as GNP) were used as the definition of "cost," since the macro model already accounts
for the opportunity cost of capital. The appropriate rate would then be the social rate of time preference.
                                            —   —

-------
The Benefits and Costs of the Clean Air Act, 1970 to 1990
Exclusion of Health Benefits from the
Macroeconomic Model

    The macroeconomic modeling exercise was de-
signed to capture the second-order macroeconomic
effects arising from CAA compliance expenditures.
Those predicted second-order effects are among the
factors used to drive the emissions estimates and, ul-
timately, the benefits modeled for this assessment. The
benefits of the CAA, however, would also be expected
to induce second-order macroeconomic effects. For
example, increased longevity and decreased incidence
of non-fatal heart attacks  and strokes would be ex-
pected to improve macroeconomic performance mea-
sures. The structure of the overall analysis, however,
necessitated that these impacts be excluded from the
macroeconomic simulation.

    The first-order CAA beneficial effects have been
included in  the benefits analysis for this study, includ-
ing measures that approximate production changes
(e.g., income loss due to illness,  or lost or restricted
work days; income loss due to impaired cognitive abil-
ity; and income loss due to reduced worker produc-
tion in certain economic sectors). These measures are
analogous  to compliance expenditures in the cost
analysis. The second-order benefits impacts, which
would result from price changes induced by CAA-
related benefits, have not been estimated. It is likely
that the estimated adverse second-order macroeco-
nomic impacts would have been reduced had the im-
pact of CAA benefits been included in the macroeco-
nomic modeling exercise; however, the magnitude of
this potential upward bias in the  estimate of adverse
macroeconomic impact was not quantitatively as-
sessed.
                                                12

-------
3
Emissions
    This chapter presents estimates of emissions re-
ductions due to the Clean Air Act (CAA) for six crite-
ria air pollutants. Reductions are calculated by esti-
mating, on a sector-by-sector basis, the differences in
emissions between the control and no-control sce-
narios. While the relevant years in this analysis  are
1970 through 1990, full reporting  of emissions was
only made for the  1975 to 1990 period  since 1970
emission levels are, by assumption, identical for the
two scenarios. The criteria pollutants for which emis-
sions are reported in this analysis are: total suspended
particulates (TSP),19 carbon monoxide (CO), volatile
organic compounds (VOC), sulfur dioxide (SO2), ni-
trogen oxides (NOx), and Lead (Pb).

    The purpose  of the present study is  to estimate
the differences in economic and environmental con-
ditions between a scenario reflecting implementation
of historical CAA controls and a scenario which as-
sumes that no additional CAA-related control pro-
grams were introduced after 1970. Because of the fo-
cus on differences in -rather than absolute levels  of-
emissions between the scenarios, the various sector-
specific emission models were used to estimate both
the control and no-control scenario emission invento-
ries. This approach ensures that differences between
the scenarios are not distorted by differences between
modeled and actual historical emission estimates.20

    Despite the use of models to estimate control sce-
nario emission inventories, the models used were con-
figured and/or calibrated using historical emissions
estimates. The control scenario utility emissions esti-
mates, for example,  were based on the ICF CEUM
model which was calibrated using historical emissions
inventory data.21 In other cases, such as the EPA Emis-
sions Trends Report (Trends) methodology22 used to
estimate industrial process emissions,  historical data
were used as the basis for control scenario emissions
with little or no subsequent modification. Neverthe-
less, differences in model selection, model configura-
tion, and macroeconomic  input data23 result in un-
avoidable, but in this case justifiable, differences be-
tween national total historical emission estimates and
national total control scenario emission estimates for
each pollutant. Comparisons between no-control, con-
trol, and official EPA Trends Report historical emis-
sions inventories are presented in Appendix B.24
     19 In 1987, EPA replaced the earlier TSP standard with a standard for paniculate matter of 10 microns or smaller (PM10).
     20 By necessity, emission models must be used to estimate the hypothetical no-CAA scenario. If actual historical emissions data
were adopted for the control scenario, differences between the monitoring data and/or models used to develop historical emission
inventories and the models used to develop no-control scenario emission estimates would bias the estimates of the differences between
the scenarios.
     21 See ICF Resources, Inc., "Results of Retrospective Electric Utility Clean Air Act Analysis -1980,1985 and 1990," September
30, 1992, Appendix C.
     22 EPA, 1994a: U.S. Environmental Protection Agency, "National Air Pollutant Emission Trends, 1900-1993," EPA-454/R-94-
027, Office of Air Quality Planning and Standards, Research Triangle Park, NC, October 1994.

     23 The Jorgenson/Wilcoxen macroeconomic model outputs were used to configure both the control and no-control scenario
emission model runs. While this satisfies the primary objective of avoiding "across model" bias between the scenarios, the macroeco-
nomic conditions associated with the control scenario would not be expected to match actual historical economic events and condi-
tions. To the extent actual historical economic conditions are used to estimate official historical emission inventories, conformity
between these historical emissions estimates and control scenario emission estimates would be further reduced.
     24 In general, these comparisons show close correspondence between control scenario and Trends estimates with the largest
differences occurring for VOC and CO emissions. The Trends report VOC estimates are generally higher than the control scenario
estimates due primarily to the inclusion of Waste Disposal and Recycling as a VOC source in the Trends report. This inconsistency is
of no consequence since Waste Disposal and Recycling sources were essentially uncontrolled by the historical CAA and therefore do
not appear as a difference between the control and no-control scenarios. The higher CO emission estimates in the Trends Report are
primarily associated with higher off-highway vehicle emissions estimates. Again, since off-highway emissions do not change between
the control and no-control scenario in the present analysis, this inconsistency is of no consequence.

                                                      13

-------
The Benefits and Costs of the Clean Air Act, 2970 to 1990
    To estimate no-control scenario emissions, sec-
tor-specific historical emissions are adjusted based on
changes in the following two factors:  (1) growth by
sector predicted to occur under the no-control scenario;
and (2) the exclusion of controls attributable to spe-
cific provisions of the CAA.

    To adjust emissions for economic changes under
                        the no-control scenario, activity levels that affect emis-
                        sions from each sector were identified. These activity
                        levels include, for example, fuel use, industrial activ-
                        ity, and vehicle miles traveled (VMT). The Jorgenson-
                        Wilcoxen (J/W) general equilibrium model was used
                        to estimate changes in general economic conditions,
                        as well as sector-specific economic outcomes used as
                        inputs  to the individual sector emission models.25
     Table 3.  Snmmarv of Sector-Secific Bnassid
                         rtfe:-Approad'hes,   ''"*
       Sector
                         » ^ -, »;>,i   , '   <>&i^ i' 'x^l' ** "  ^
gO analyzed i^(ijij5,tttal*proc;es& emissions basf'djf Breads- ra&fidds, Adjasteil
htstotieal etaiss|o|^^p4AVs-Aectotaichaagfes'in'QUtpitt, attd 1970 cotttroU- -
                                 ""'        *••*>•*'•
                                 •:t;e'ad;ejj|j|si.oas,calculated for JMastrial^rc^es'ses and-
                                  *"   ****'"*         ''   '"'- emissionfaetorsT;an
    a5 System
           *"
     25 For example, the change in distribution of households by income class predicted by the J/W model was used as input to the
 transportation sector model system. Changes in household income resulted in changes in vehicle ownership and usage patterns which,
 in turn, influence VMT and emissions. (See Pechan, 1995, p. 43).


-------
                                                                                   Chapter 3: Emissions
    The specific outputs from the J/W model used in
this analysis are the percentage changes in gross na-
tional product (GNP), personal consumption, and out-
put for various economic sectors under the control and
no-control scenario for the years 1975, 1980, 1985,
and 1990.26 The sectors for which the results of the J/
W model are used include: industrial processes, elec-
tric utilities, highway vehicles, industrial boilers, and
the commercial/residential sector. For the off-highway
sector, economic growth was not taken into account
as there was no direct correspondence between J/W
sectors and the off-highway vehicle source category
activity.

    In addition to adjusting for economic activity
changes, any CAA-related control efficiencies  that
were applied to calculate control scenario emissions
were removed for the no-control scenario. In most
instances, emissions were recalculated based on 1970
control levels.

    Uncertainty associated with several key model-
ing inputs and processes may contribute to potential
errors hi the emission estimates presented herein. Al-
though the potential errors are likely to contribute in
only a minor way to overall uncertainty hi the esti-
mated monetary benefits of the Clean Air Act, the most
significant emission modeling uncertainties are de-
scribed at the end of this chapter.

Sector-Specific Approach

    The approaches used to calculate  emissions for
each sector vary based on the complexity of estimat-
ing emissions in the absence of CAA controls, taking
economic activity levels and CAA regulations  into
account. For the off-highway vehicle and industrial
process sectors, a relatively simple methodology was
developed. The approaches used for the highway ve-
hicles, electric utilities, industrial boilers, and com-
mercial/residential sectors were more complex be-
cause the J/W model does not address all of the deter-
minants of economic activity in these sectors  that
might have changed hi the absence of regulation. The
approaches by sector used to estimate emissions for
the two scenarios are summarized hi Table 3, and are
described in more detail in Appendix B.

Summary of Results

    Figure 2 compares the total estimated sulfur di-
oxide emission from all sectors under the control and
no-control scenarios over the period from 1975 to

    26 For details regarding the data linkages between the J/W model and the various emission sector models, see Pechan (1995).
                                                 15
1990. Figures 3, 4, 5, 6, and 7 provide similar com-
parisons for NOx, VOCs, CO, TSP, and Lead (Pb) re-
spectively.

    Additional tables presented in Appendix B pro-
vide further breakdown of the emissions estimates by
individual sector. The essential results are character-
ized below. For most sectors, emission levels under
the control scenario were substantially lower than lev-
els projected under the no-control scenario. For some
pollutants, for example NOx, most of the reductions
achieved under the control scenario offset the growth
in emissions which would have occurred under the
no-control case as a result of increases in population
and economic activity. For other pollutants, particu-
larly lead, most of the difference hi 1990 emissions
projected under the two scenarios reflects significant
improvement relative  to 1970 emission levels. Ap-
pendix B also assesses the consistency of the control
and no-control scenario estimates for 1970 to 1990
with pre-1970 historical emissions trends data.

    The CAA controls that affected SO2 emitting
sources had the greatest proportional effect on indus-
trial process emissions, which were 60 percent lower
in 1990 than they would have been under the
no-control scenario. SO2 emissions from electric utili-
ties and industrial boilers were each nearly 40 percent
lower in  1990 as a result of the controls. In terms of
absolute tons of emission reductions, controls on elec-
tric utilities account for over 10 million of the total 16
million ton difference between the 1990 control and
no-control scenario  SO2 emission estimates.

    CAA regulation of the  highway vehicles sector
led to the greatest percent reductions hi VOC and NO .
Control scenario emissions of these pollutants hi 1990
were 66 percent and 47 percent lower, respectively,
than the levels estimated under the no-control scenario.
In absolute terms, highway vehicle VOC controls ac-
count for over 15 million of the  roughly 17 million
ton difference hi control and no-control scenario emis-
sions.

    Differences between control and no-control sce-
nario CO emissions are also most significant for high-
way vehicles. In percentage terms, highway vehicle
CO emissions were 56 percent lower in 1990 under
the control scenario than under the no-control scenario.
Industrial process CO emission estimates under the
control scenario were about half the levels projected
under the no-control scenario. Of the roughly 89 mil-

-------
  The Benefits and Costs of the Clean Air Act, 1970 to 1990
Figure 2.  Control and No-control Scenario Total SO2
          Emission Estimates.
       40
       30
 S     10
         1975
                                           (Control  I
                                           .No-Control
                  1980      1985
                      Year
                                   1990
                                                        Figure 5. Control and No-control Scenario Total CO
                                                                 Emission Estimates.
                                                                200
                                                                 150
                                                         .S =  10°
                                                          3 §

                                                         •1     50
                                                                  Ol_J_
                                                                    1975
                                                                                                 t Control
                                                                                                 . No-Control
                                                                           1980     1985
                                                                               Year
                                                                                             1990
1*
Emissions in Short Tons era'
Millions JJ
— to u «. to
00000 .
Control and No-control Scenario Total NOX
Emission Estimates.
.__-
^=^-m 	 m 	 •
1111
1975 1980 1985 1990
Year

v Control 1
^.No-ControB


Figure 6. (
1
40
I 3<>
1 s
•a 1 20
1 10
0
Control and No-control Scenario Total TSP
Emission Estimates.
»-- _ _
-•- 	 m 	 m
I I I i

jl Control
^. No-Control

1975 1980 1985 1990
Year
Figure 4. Control and No-control Scenario Total VOC
          Emission Estimates.
       40
J     30
i  20
2
   10
         1975
                  1980      1985
                       Year
                                    1990
                                                        Figure 7. Control and No-control Scenario Total Pb
                                                                 Emission Estimates.
                                                                200
                                                                 150
                                                           •3 I  100
                                                                 50
                                                                    1975
                                                                                                   I Control
                                                                                                   ..No-Control
                                                                           1980     1985
                                                                               Year
                                                                                             1990
                                                      16

-------
                                                                                   ChapterS: Emissions
 lion ton difference in CO emissions between the two
 scenarios, 84 million tons are attributable to highway
 vehicle controls and the rest is associated with reduc-
 tions from industrial process emissions.

    For TSP, the highest level of reductions on a per-
 centage basis was achieved in the electric utilities sec-
 tor. TSP emissions from electric utilities were 93 per-
 cent lower in 1990 under the control scenario than
 projected under the no-control scenario. TSP emis-
 sions from industrial processes were also significantly
 lower on a percentage basis under the control scenario,
 with the differential reaching 76 percent by 1990.

    This is not an unexpected result as air pollution
 control regulations in the 1970's focused on solving
 the visible particulate problems from large fuel com-
 bustors. In terms of absolute  tons, electric utilities
 account for over 5 million of the 16 million ton differ-
 ence between the two scenarios and industrial pro-
 cesses account for almost 10 million tons.

    The vast majority of the difference in lead emis-
 sions under the two scenarios is attributable to reduc-
 tions in burning of leaded gasoline. By 1990, reduc-
 tions in highway vehicle emissions account for 221
 thousand of the total 234 thousand ton difference in
 lead emissions. As shown in more detail hi Appendix
 B, airborne lead emissions from all sectors were vir-
 tually eliminated by 1990.

    As described in the following chapter and in Ap-
 pendix C, these emissions inventories were used as
 inputs to a series of air quality models. These air qual-
 ity models were used to estimate air quality condi-
 tions under the control and no-control scenarios.

 Uncertainty  in the Emissions
 Estimates

    The emissions inventories developed for the con-
 trol and no-control scenarios reflect at least two ma-
jor, sources of uncertainty. First, potential errors in the
 macroeconomic scenarios used to configure the sec-
tor-specific emissions model contribute to uncertain-
ties in the emissions model outputs. Second, the emis-
 sions models themselves rely on emission factors,
 source allocation, source location, and other param-
eters which may be erroneous.
    An important specific source of potential error
manifest in the present study relates to hypothetical
emission rates from various sources under the no-con-
trol scenario. Emission rates from motor vehicles, for
example, would have been expected to change during
the 1970 to 1990 period due to technological changes
not directly related  to implementation of the Clean
Air Act (e.g., advent of electronic fuel injection, or
EFT). However, the  lack of emissions data from ve-
hicles with EFI but without catalytic converters com-
pelled the Project Team to use 1970 emission factors
throughout the 1970 to 1990 period for the no-control
scenario. Although this creates a potential bias hi the
emissions inventories, the potential errors from this
and other uncertainties in the emissions inventories
are considered unlikely to contribute significantly to
overall uncertainty in the monetary estimates of Clean
Air Act benefits. This conclusion is based on the de-
monstrably greater influence on the monetary benefit
estimates of uncertainties in other analytical compo-
nents (e.g., concentration-response functions). A list
of the most significant potential errors in the emis-
sions modeling, and their significance relative to over-
all uncertainty in the monetary benefit estimate, is
presented in Table 4.
                                                 17

-------
The Benefits and Costs of the Clean Air Act, 1970 to 1990

! *













Iable4. Uncertainties iSsociatei-widj'^i
' ... fl
Potential Source of Error , ^
' ,'
•>
' r "-f t tf
Use of 1 970 motor vehicle emission factors"'1
for no-control scenario without adjustment .,'
for advent of Electronic Fuel fcjectjon - -
(EFT) and Electronic Ignition (El), ^ ; ,
Use of ARGUS for utility CB atid^VOG-*'-' '
ratherthan CBUM. ,- - ^. ^^^'
1 s* =' ,'^V^"^ '/'.', ''
Use of historical fuel consttmptiOft4o^^v " ;

emissions. - ->~" -f *-> *-^^^-^-
^ ^ "nf *&.!>*••*•'& v f\ " V
Adoption of assomptioa that.utiiit^iinite^V^
inventories remain fixed between the ~>.- -*'-j5-
control and no-control scenarios: •' • "* "^
f, ^^x^^S^^i:^**
- V ;- <" «" ' t'^-0^**''?
.,-.', ^ . -'-ft*"**
,, * ,-- • ! -<»<**•
, , > ^ <*^«<as -Modeling-, - -" ';
^ -B,!as4a'-lEsBniate of
^IntissSon, Eedac^on - -
	 ,,^«Be^fits
-'-ji-;4-%«^f«-% ; • ' ,,,,,'-
p^^jp1^---, ',„:,';;,'.
» , ;< >x<" *-«--»"-'; '• - ,<.^,^
, ,^ ,„ ,-- ,_ ,
' *s*i"--^Xv ,;• •
Unlcftown. .-,* ,---' ,
* ' '> "-"'y^S' /r
'*" ' ^ , \ftyfy > " "
, , ^f^fff^V ,^" *,
1 Ov^c^wtuili&tex x-s-v^ o s

*«>-«;--:,-- ,f,:'.",f~^ie»,,^
>S",,;/X. - -. .- ,^ ,<;-;,|<^^
'-t<*x''"i'''?';; ' ' -'-v*
^ ^wv^"''''V^ ;/ '
'0 Vvg'^V^,-^.1?.^. ,^^, , •- , / s
d^^v/X^^' ^* ' " "

, , f t ^^(.AW^'/A 'f't '' ^ ''"' f ' ' "oV* -5 _
'"''' 'J,.,/-,
''Unknp^nV,i(,at'-}iiely-to be minor |ae ,
t^°o^qyh.elBiing sigiaificance qt-,.,,,,
ckalysts in detetrninina emission

^Negligible,- -: '-; '-'\'- >- '^
Negligible, •- :- ' , , '
;*<•'><••''>""' ' , ^, ^ •
,'• «;,<,;,'«-" •?>--'-- t,^
Un known, b ut likely^tONbe snial
siace.theCAA had«v
1 cpmtprise,a.large',majo!ity- 
-------
4
Air  Quality
    Air quality modeling is the crucial analytical step
which links emissions to changes in atmospheric con-
centrations of pollutants which affect human health
and the environment. It is also one of the more  com-
plex and resource-intensive steps, and contributes sig-
nificantly to overall uncertainty hi the bottom-line
estimate  of net benefits  of air pollution control pro-
grams. The  assumptions required to estimate hypo-
thetical no-control scenario air quality conditions are
particularly  significant sources  of uncertainty in the
estimates of air quality  change, especially for  those
pollutants which are not  linearly related to changes in
associated emissions. Specific uncertainties are de-
scribed in detail at the end of this chapter.

    The key challenges faced by air quality modelers
attempting to translate emission inventories into air
quality measures involve modeling  of pollutant dis-
persion and atmospheric transport, and modeling of
atmospheric chemistry and pollutant transformation.
These challenges are particularly acute for those pol-
lutants which, rather than being directly emitted, are
formed through secondary formation processes. Ozone
is the paramount example since it is formed in the
atmosphere through complex, nonlinear chemical in-
teractions of precursor pollutants, particularly  vola-
tile organic compounds  (VOCs) and nitrogen oxides
(NOx). In addition, atmospheric transport and  trans-
formation of gaseous sulfur dioxide and nitrogen ox-
ides to particulate sulfates and nitrates, respectively,
contributes significantly to ambient concentrations of
fine particulate matter.  In addition to managing the
complex atmospheric chemistry  relevant for  some
pollutants, air quality modelers also must deal with
uncertainties associated with variable meteorology and
the spatial and temporal distribution of emissions.

    Given its comprehensive nature, the present analy-
sis entails all of the aforementioned challenges, and
involves additional complications as well. For  many
pollutants which cause a variety of human health and
environmental effects, the concentration-response
functions which have been developed to estimate those
effects require, as inputs, different air quality indica-
tors. For example, adverse human health effects of
particulate matter are primarily associated with the
respirable particle fraction;27 whereas household soil-
ing is a function of total suspended particulates, espe-
cially coarse particles. It is not enough, therefore, to
simply provide a single measure of particulate matter
air quality. Even for pollutants for which particle size
and other characteristics are not an issue, different air
quality indicators are needed which reflect different
periods of cumulative exposure (i.e., "averaging peri-
ods"). For example, 3-month growing season averages
are needed to estimate effects of ozone on yields of
some agricultural crops, whereas adverse human health
effect estimates require ozone concentration profiles
based on a variety of short-term averaging periods.28

    Fortunately, in responding to the need for scien-
tifically valid and reliable estimation of air quality
changes, air quality modelers  and researchers have
developed a number  of highly sophisticated atmo-
spheric dispersion and transformation models. These
models have been employed for years supporting the
development of overall federal clean air programs,
national assessment studies, State Implementation
Plans (SIPs), and individual air toxic source risk as-
sessments. Some of these models, however, require
massive amounts of computing power. For example,
completing the 160 runs of the Regional Acid Depo-
sition Model (RADM) required for the present study
required approximately 1,080 hours of CPU time on a
Cray-YMP supercomputer at EPA's  Bay City
Supercomputing Center.

    Given the resource-intensity of many state-of-the-
art models, the Project Team was forced to make dif-
ficult choices regarding where to invest  the limited
     27 Particles with an aerometric diameter of less than or equal to 10 microns.
     28 For example, ozone concentration-response data exists for effects associated with 1-hour, 2.5-hour, and 6.6-hour exposures.
                                                  _

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The Benefits and Costs of the Clean Air Act, 1970 to 1990
resources available for air quality modeling. With a
mandate to analyze all of the key pollutants affected
by historical Clean Air Act programs, to estimate all
of the significant endpoints associated with those pol-
lutants, and to do so for a 20 year period covering the
entire continental U.S., it was necessary to use sim-
plified approaches for most of the pollutants to be
analyzed. In several cases related to primary emissions
—particularly sulfur dioxide (SO2), nitrogen oxides
(NO ), and carbon monoxide (CO)— simple "roll-up
model" strategies were adopted based on the expecta-
tion that changes in  emissions of these pollutants
would be highly correlated with subsequent changes
in air quality.29 Significant pollutants involving sec-
ondary atmospheric formation, nonlinear formation
mechanisms, and/or long-range transport were ana-
lyzed using the best air quality model which was af-
fordable given time and resource limitations. These
models, discussed in detail in Appendix C, included
the Ozone Isopleth Plotting with Optional Mechanism-
IV (OZIPM4) model for urban ozone; various forms
of the above-referenced RADM model for background
ozone, acid deposition, sulfate, nitrate, and visibility
effects in the eastern U.S.; and the SJVAQS/AUSPEX
Regional Modeling Adaptation Project (SARMAP)
Air Quality Model (SAQM) for rural ozone in  Cali-
fornia agricultural areas. In addition, a linear scaling
approach was developed and implemented to estimate
visibility changes in  large southwestern U.S. urban
areas.

    By adopting simplified approaches for some pol-
lutants, the air quality modeling step adds to the over-
all uncertainties and limitations of the present analy-
sis. The  limited expanse and density of the U.S. air
quality monitoring network and the limited coverage
by available air quality models of major geographic
areas30 further constrain the achievable scope of the
present study. Under these circumstances, it is impor-
tant to remember the extent and significance of gaps
in geographic coverage for key pollutants when con-
sidering  the overall results of this analysis. Key un-
certainties are summarized at the end of this chapter
in Table 5. More extensive discussion of the caveats
and uncertainties associated with the air quality model-
ing step is presented in Appendix C. In addition, in-
formation regarding the specific air quality models
used, the characteristics of the historical monitoring
data used as the basis for  the control  scenario pro-
files, pollutant-specific modeling strategies and as-
sumptions, references to key supporting documents,
and important caveats and uncertainties are also pre-
sented in Appendix C.


General Methodology

    The general methodological approach taken in this
analysis starts with the assumption that actual histori-
cal air quality will be taken to represent the control
scenario. This may seem somewhat inconsistent with
the approach  taken in earlier steps of the analysis,
which used modeled macroeconomic conditions as the
basis for estimating macroeconomic effects and emis-
sions. However, the central focus of the overall analy-
sis is to estimate the difference in cost and benefit
outcomes between the control and no-control sce-
narios. It  is consistent with this central paradigm to
use actual historical air quality data as the basis for
estimating how air quality might have changed in the
absence of the Clean Air Act.

    The initial step, then, for each of the five non-
lead (Pb) criteria pollutants31 was to compile com-
prehensive air quality profiles covering the entke ana-
lytical period from 1970 to 1990. The source for these
data was  EPA's Aerometric Information Retrieval
System (AIRS), which is a publicly accessible data-
base of historical air quality data. The vast number of
air quality observations occurring over this twenty year
period from the thousands of monitors in the U.S. in-
dicates the need to represent these observations by
statistical distributions. As documented in detail in
the supporting documents covering SO2, NOx, CO, and
ozone,32 both lognormal and gamma distributional
forms were tested against actual data to determine the
    29 It is important to emphasize that the correlation expected is between changes in emissions and changes in air quality. Direct
correlations between the absolute emissions estimates and empirical air quality measurements used in the present analysis may not be
strong due to expected inconsistencies between the geographically local, monitor-proximate emissions densities affecting air quality
data.
    30 For example, the regional oxidant models available for the present study do not cover some key Midwestern states, where
human health, agricultural crop, and other effects from ozone may be significant.

    31 Lead (Pb), the sixth criteria pollutant, is analyzed separately. The ability to correlate emissions directly with blood lead levels
obviates the need for using air quality modeling as an intermediate step toward estimation of exposure.

    32 See SAISO2, NOx, and CO Report (1994) and SAI Ozone Report (1995).
                                                  20

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                                                                                     Chapter 4: Air Quality
form which provided the best fit to the historical data.33
Based on these tests, one or the other statistical distri-
bution was adopted for the air quality profiles devel-
oped  for each pollutant. In addition to reducing the
air quality data to a manageable form, this approach
facilitated transformations of air quality profiles from
one averaging period basis to another.

    Once the control scenario profiles based on his-
torical data were developed, no-control scenarios were
derived based on the results of the various air quality
modeling efforts. Again, the focus of the overall analy-
sis is to isolate the difference in outcomes between
the control and no-control scenarios.  The no-control
scenario air quality profiles were therefore derived by
adjusting the control  scenario profiles  upward (or
downward) based on an appropriate  measure of the
difference in modeled  air quality outcomes. To illus-
trate  this approach, consider a simplified example
where the modeled concentration of Pollutant A un-
der the no-control scenario is 0.12 ppm, compared to
a modeled concentration under the control scenario
of 0.10 ppm.  An appropriate  measure of the differ-
ence between these outcomes, whether it is the 0.02
ppm difference in concentration or the 20  percent per-
centage differential, is then used to ratchet up the con-
trol case profile to derive the no-control case profile.
Generally, the modeled differential is applied across
the entire control case profile to derive the no-control
case profile. As described below in the individual sec-
tions covering particulate matter and ozone, however,
more refined approaches are used where necessary to
take account of differential outcomes for component
species (i.e., particulate matter), long-range transport,
and background levels of pollutants.

Sample Results

    The results of the  air quality modeling effort in-
clude a vast array of monitor-specific air quality pro-
files for particulate matter (PM10 and TSP),34 SO2,
NO2, NO, CO, and ozone; RADM grid cell-based esti-
mates of sulfur and nitrogen deposition; and estimates
of visibility degradation for eastern U.S.  RADM grid
cells and southwestern U.S. urban areas.  All of these
 data were transferred to the effects modelers for use in
 configuring the human health, welfare, and ecosystem
 physical effects models. Given the massive quantity
 and intermediate nature of the air quality  data, they
 are not exhaustively reported herein.35 To provide the
 reader with some sense of the magnitude of the differ-
 ence in modeled air quality conditions under the con-
 trol and no-control scenarios, some illustrative results
 for 1990 are presented in this chapter and in Appen-
 dix C. In addition, maps depicting absolute levels of
 control and no-control scenario acid deposition and
 visibility are presented to  avoid potential  confusion
 which might arise through examination of percent
 change maps alone.36

 Carbon Monoxide

     Figure 8 provides an illustrative comparison of
 1990 control versus no-control scenario CO concen-
 trations, expressed as a frequency distribution of the
 ratios of 1990 control to no-control scenario 95th per-
 centile 1-hour average concentrations at individual CO
 monitors. Consistent with the emission changes un-
 derlying these air quality results, CO concentrations
 under the control scenario tend to be about half those.
 projected under the no-control scenario, with most
 individual monitor ratios ranging from about 0.40 to
 0.60 percent, and a few with ratios in the 0.60 to 0.80
 range.
Figure 8. Frequency Distribution of Estimated Ratios for
1990 Control to No-control Scenario 95th Percentile 1-
Hour Average CO Concentrations, by Monitor.
  300 ,	     -	,
 1200
  100
   0 L
       0.05   0.25    0.45    0.65    0.85    1.05    1.25
        Ratio of CAA:No-CAA 95th Percentile 1-Hour Average
    33 The statistical tests used to determine goodness of fit are described in the SAI reports.

    34 PM data are reported as county-wide values for counties with PM monitors and a sufficient number of monitor observations.

    35 The actual air quality profiles, however, are available on disk from EPA. See Appendix C for further information.

    36 Large percentage changes can result from even modest absolute changes when they occur in areas with good initial (e.g.,
control scenario) air quality. Considering percentage changes alone might create false impressions regarding absolute changes in air
quality in some areas. For example, Appendix C discusses in detail two such cases: the Upper Great Lakes and Florida-Southeast
Atlantic Coast areas, which show high percentage changes in sulfur deposition and visibility.	
                                                   21

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The Benefits and Costs of the Clean Air Act, 1970 to 1990
    In considering these results, it is important to note
that CO is essentially a "hot spot" pollutant, meaning
that higher concentrations tend to be observed in lo-
calized areas of relatively high emissions. Examples
of such areas include major highways, major inter-
sections, and tunnels. Since CO monitors tend to be
located  in order to monitor the high CO concentra-
tions  observed in such locations, one might suspect
that using state-wide emissions changes to scale air
quality concentration estimates at strategically located
monitors might create  some bias in the  estimates.
However, the vast majority of ambient CO is contrib-
uted from on-highway vehicles. In addition, the vast
majority of the change in CO emissions between the
control and no-control scenario occurs due to catalyst
controls on highway vehicles. Since CO hot spots re-
sult primarily from highway vehicles emissions, con-
trolling  such vehicles would mean CO concentrations
would be commensurately lowered at CO monitors.
While variability in monitor location relative to ac-
tual hot spots and other factors raise legitimate con-
cerns about assuming ambient concentrations are cor-
related with emission changes at any given monitor,
the Project Team believes that the results observed
provide a reasonable characterization of the aggregate
change in ambient CO concentrations between the two
scenarios.

Sulfur Dioxide

    As  for CO, no-control scenario SO2 concentra-
tions were derived by scaling control scenario air qual-
ity profiles based on the difference in emissions pre-
dicted under the two scenarios. Unlike CO, SO2 is
predominantly emitted from industrial and utility
sources. This means that emissions, and the changes
in emissions predicted under the two scenarios, will
tend to be concentrated in the vicinity of major point
sources. Again, while state-wide emissions changes
are used to scale SO2 concentrations between the sce-
narios, these state-wide emission changes reflect the
controls placed on these individual point sources.
Therefore, the Project Team again considers the  dis-
tribution of control to no-control ratios to be a rea-
sonable characterization of the aggregate results de-
spite  the uncertainties associated with estimation of
changes at individual monitors.
     Figure 9 provides a histogram of the predicted
 control to no-control ratios for SO2 which is similar
 to the one presented for CO. The results indicate that,
 on an overall basis, SO2 concentrations were reduced
 by about one-third. The histogram also shows a much
 wider distribution of control to no-control ratios for
 individual monitors than was projected for CO. This
 result reflects the greater state to state variability in
 SO2 emission changes projected in this analysis. This
 greater state to state variability in turn is a function of
 the variable responses of SO2 point sources to histori-
 cal C control requirements.37 This source-specific vari-
 ability was not observed for CO because controls were
 applied relatively uniformly on highway vehicles.
Figure 9. Frequency Distribution of Estimated Ratios-for
1990 Control to No-control Scenario 95th Percentile 1-
Hour Average SO, Concentrations, by Monitor.
  300
       0.05   0.25    0.45    0.65   0.85    1.05    1.25
        Ratio of CAA:No-CAA 95th Percentile 1-Hour Average
 Nitrogen Dioxide

     Results for NO2 are presented in Figure 10. These
 results are similar to the results observed for CO, and
 for a similar reason: the vast majority of change in
 NO2 emissions between the two scenarios is related
 to control of highway vehicle emissions. While
 baseline emissions of NO2 from stationary sources may
 be significant, these sources were subject to minimal
 controls during the historical period of this analysis.
 On an aggregated basis, overall NO2 concentrations
 are estimated to be roughly one-third lower under the
 control scenario than under the no-control scenario.
    37 Figure 9 indicates that six monitors were projected to have higher SO2 concentrations for 1990 under the control scenario than
under the no-control scenario. All six of these monitors are located in Georgia, a state for which higher 1990 utility SO. emissions are
projected in the control scenario due to increased use of higher-sulfur coal. The projected increase in overall Georgia utility consump-
tion of higher sulfur coal under the control case is a result of increased competition for the low-sulfur southern Appalachian coal
projected to occur under the control scenario.
                                                  22

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                                                                                            Chapter 4: Air Quality
Figure 10. Frequency Distribution of Estimated Ratios for
1990 Control to No-control Scenario 95th Percentile 1-
Hour Average NO2 Concentrations, by Monitor.
 300
       0.05    0.25    0.45    0.65    0.85    1.05    1.25
        Ratio of CAA:No-CAA 95th Percentile 1-Hour Average
       Particulate Matter

          An indication of the difference in outcomes for
       paniculate matter between the two scenarios is pro-
       vided by Figure 11. This graph shows the distribution
       of control to no-control ratios for annual mean TSP in
       1990 for those  counties which both had particulate
       monitors and a sufficient number of observations from
       those monitors.38 While the distribution of results is
       relatively wide, reflecting significant county to county
       variability in ambient concentration, on a national
       aggregate basis  particulate matter concentrations un-
Figure 11. Frequency Distribution of Estimated Ratios for
1990 Control to No-control Annual Mean TSP Concentra-
tions, by Monitored County.
  50
     0.00     0.20     0.40     0.60     0.80     1.00
       Ratio of CAA:No-CAA Annual Mean TSP (interval midpoint)
 der the control scenario were just over half the level
 projected under the no-control scenario. The signifi-
 cant county to county variability observed in this case
 reflects point source-specific controls on particulate
 matter precursors, especially SO2, and the effects of
 long-range transport and transformation.

 Ozone

     Urban Ozone

     Figure 12 presents a summary of the results of the
 1990 OZIPM4 ozone results for all 147 of the mod-
 eled urban areas. In this case, the graph depicts the
 distribution of ratios of peak  ozone concentrations
 estimated for the control and no-control scenarios.
 While the vast majority of simulated peak ozone con-
 centration ratios fall below  1.00, eight urban areas
 show lower simulated peak ozone for the no-control
 scenario than for the control scenario. For these eight
 urban areas, emissions of precursors were higher un-
 der the no-control scenario;  however, the high pro-
 portion of ambient NOx compared to ambient non-
 methane organic compounds (NMOCs) in these areas
 results in a decrease in net ozone production in the
 vicinity of the monitor when NO emissions increase.39
Figure 12. Distribution of Estimated Ratios for 1990
Control to No-control OZIPM4 Simulated 1-Hour Peak
Ozone Concentrations, by Urban Area.
  30
                                                              20
                                                              10
                                                                 0.00    0.20    0.40    0.60    0.80    1.00
                                                                       Ratk>ofCAA:No-CAA Peak Ozone (intervalmidpoint)
                                                 1.20
          38 Given the relative importance of particulate matter changes to the bottom line estimate of CAA benefits, and the fact that a
      substantial portion of the population lives in unmonitored counties, a methodology was developed to allow estimation of particulate
      matter benefits for these unmonitored counties. This methodology was based on the use of regional air quality modeling to interpolate
      between monitored counties. It is summarized in Appendix C and described in detail in the SAIPM Interpolation Report (1996).

          39 Over an unbounded geographic area, NOx reductions generally decrease net ozone production.
                                                         23

-------
     The Benefits and Costs of the Clean Air Act, 1970 to 1990
         Rural Ozone

         Figures 13 and 14 present frequency distributions
     for control to no-control ratios of average ozone-sea-
    'son daytime ozone concentrations at rural monitors
     as simulated by SAQM and RADM, respectively.
Figure 13. Distribution of Estimated Ratios for 1990
Control to No-control SAQM Simulated Daytime Average
Ozone Concentrations, by SAQM Monitor.
  10


   8


   6
     0.00     0.20    0.40    0.60     0.80    1.00    1.20
Ratio ofCAA:No-CAA Ozone-Season Day time Average Ozone (interval midpoint)
        Both the RADM and SAQM results indicate rela-
     tively little overall change in rural ozone concentra-
     tions. This is primarily because reductions in ozone
     precursor emissions were concentrated in populated
     areas.
Figure 14. Distribution of Estimated Ratios for 1990
Control to No-control RADM Simulated Daytime Average
Ozone Concentrations, by RADM Grid Cell.
  200
   ISO
   100
   50
      0.00     0.20    0.40    0.60    0.80     1.00     1.20
 Ratio ofCAAiNo-CAA Ozone-Season Day time Average Ozone (mtervalmidpoint)
Acid Deposition

    Figure 15 is a contour map showing the estimated
percent increase in sulfur deposition under the no-con-
trol scenario relative to the control scenario for 1990.
Figure 16 provides comparable information for nitro-
gen deposition.
 Figure 15. RADM-Predicted Percent Increase in Total
 Sulfur Deposition (Wet + Dry) Under the No-control
 Scenario.
    These results show that acid deposition rates in-
crease significantly under the no-control scenario,
particularly in the Atlantic Coast area and in the vi-
cinity of states for which relatively large increases in
emissions are projected under the no-control scenario
(i.e., Kentucky, Florida, Michigan, Mississippi, Con-
necticut, and Florida).

    In the areas associated with large increases in sul-
fur dioxide emissions, rates of sulfur deposition in-
crease to greater than or equal to 40 percent. The high
proportional increase in these  areas reflects both the
significant increase in acid deposition precursor emis-
sions in upwind areas and the relatively low deposi-
tion rates observed under the control scenario.40

    Along the Atlantic Coast,  1990 nitrogen deposi-
tion rates increase by greater than or equal to 25 per-
cent under the no-control scenario. This is primarily
due to the significant increase in mobile source nitro-
gen oxide emissions along the major urban corridors
of the eastern seaboard.
        40 Even small changes in absolute deposition can yield large percentage changes when initial absolute deposition is low. See
    Appendix C for further discussion of this issue.
                                                       24

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                                                                                      Chapter 4: Air Quality
 Figure 16. RADM-Predicted Percent Increase in Total
 Nitrogen Deposition (Wet + Dry) Under the No-
 control Scenario.
   Visibility

      The difference in modeled 1990 control and
  no-control scenario visibility conditions projected by
  the RADM/EM for the eastern U.S. is depicted by the
  contour map presented in Figure 17. This figure shows
  the increase in modeled annual average visibility deg-
  radation, in DeciView41 terms,  for 1990 when mov-
Figure 17. RADM-Predicted Percent Increase in
Visibility Degradation, Expressed in DeciViews, for
Poor Visibility Conditions (90th Percentile) Under the
No-control Scenario.
 ing from the control to the no-control scenario. Since
 the DeciView metric is based on perceptible changes
 in visibility, these results indicate noticeable deterio-
 ration of visibility  in the eastern U.S. underthe no-
 control scenario.

    Visibility changes in 30 southwestern U.S. urban
 areas were also estimated using emissions scaling tech-
 niques. This analysis also found significant, percep-
 tible changes in visibility between the two scenarios.
 Details of this analysis, including the specific out-
 comes for the 30 individual urban areas, are presented
 in Appendix C.


 Uncertainty in the Air Quality
 Estimates


    Uncertainty prevades the projected changes in air
 quality presented in this study. These uncertainties
 arise  due to potential inaccuracies in the emissions
 inventories used as air quality  modeling inputs and
 due to potential errors in the structure and parameter-
 ization of the air quality models themselves. In addi-
 tion, an important limitation of the present study is
 the lack of available data and/or modeling results for
 some pollutants  in some regions of the country (e.g.,
 visibility changes in western U.S. Class I areas such
 as the Grand Canyon). The inability to provide com-
 prehensive estimates of changes in air quality due to
 the Clean Air Act creates a downward bias in the
 monetary benefit estimates.

    The most important specific sources of uncertainty
 are presented in  Table 5, and are described further in
Appendix C. While the list of  potential errors pre-
 sented in Table 5 is not exhaustive, it incorporates the
uncertainties with the greatest potential for contribut-
ing to error in the monetary benefit estimates. Over-
all, the uncertainties in the estimated change in air
quality are considered small relative to uncertainties
contributed by other components of the analysis.
      41 The DeciView Haze Index (dV) is a relatively new visibility indicator aimed at measuring visibility changes in terms of human
  perception. It is described in detail in Appendix C.

                                                   25            !     ~~~       '

-------
The Benefits and Costs of the Clean Air Act, 1970 to 1990
      Table 5. Key Uncertainties Associate^ wither.Quality* Modeling.
Potential S otirce o f Error " , ' J
V -.*v« f
- • -
Use of OZIPM4 model, wjjich does not , ;
capture long-range and night-time transport of
ozone. Use of aregipnal oxidant model, seich *
as UAM-V, would mitigate errors associated
with neglecting transport.
"" % ' "" s ^ -' < •>'
Use of early biogenic em|ssloS;estfeQtesia-«-;-!
RADM to estimate rural ozone changes, in the
eastern. 31 states. " ' < '""
Use of proxy pollutants to scale up some '
particulate species in some areas", tincertainty
is created to the extent species 'of concern are
not perfectly correlated with the proxy , ', , ,
pollutants. ,„,;-
, ,, , ,-",-
Use of state- wide average emission teduetionf*"
to configure air quality models: In'sorne*1 """^
cases, control programs may haveljeen"*"'^'^'^''
targeted to problem areas, so using sjM§3yj$$,
averages would miss relatively large '
reductions in populated areas. , '--"',
Exclusion of visibility benefits in Class I - ,
areas in the Southwestern U.S.
Potential Bias
- - ,,,,<-»,<.
^i -•/• ^^
"; Significance Rclativje to, Key
ilttc^rtaijaties ia Overall Monetary
'" "\ *' v' j^eneJIt Estimate - -. ..
'-'-#-" "'-'- '""; , 	
JSlgni^aijt^but probably not major. - , ,„
'Overall av^r|ge;,oz'one response of U% to
Mb* arid V-OC reductions of '-
approximately, 30% and 45%, -
respectively. Even if dsuke response -
doubled -to 30% , estimate of monetized
benefits of C°AA will not change very
muefc. Sigaiicant benefits X)f ozone - ,,,,
?reductioa, however, could not'b'e"
-monetized, , - ' ";,",*',""',„
,Pro-bab]y minor. Errors «eestitnaWd"fp^
-be-w&nis - 15% to *2$ % of the caon'"! ,
,-;, , -' ' '<•-'-,'->-* ' '
f< pjfeQictio'nSx'
Potentially, significant, Oiven tlie relative
' iiBp'ortalJice'of the estimated chal!'ge$''#i'' -'-
fliief pMicte'eoaceritrations to the ' "''
monetized' benefit estimate, any ' " '! ' '
unce'rtairtty associated with,Sne particles" ,'
isjp-p^entlaily significant,. Ho,we>fer,vl;he ,Si,-
jpotential error is mitigated to some extent
since proxy-pollutant measures -ar-e-app lied
Probably, -minor, , , \ ,
..VV, - -X ':' 
-------
                                                                                           Chapter 4: Air Quality
                      Uncertaigttgs
                                                              ,
                                                Potential Bias
                                                in Estimate of
                                                                      Significance Relatiye to Key
Lacjc pf niodel'coverage in western,!'
fotapiji deposition.   >:*r'v"'' 	—
                                               .IJnderestimie.
                                                                - j                  ^^
                                                                 beiiefitiof reduced acid deposition"!^ the,
                                                                 17' western statfii? ,^ftuld probably h<3t   , ,
                                                                 slgnifieaatly alter Jbjj ,esjtMate of ,' - • •
                                                                 monetized benefits.   - y<- ;         - x ,
 ,»., ,..,,,,,     ,  _^,,,
,U|<|,9JF spatially .aft'd^eo'
                                                               ---,-,  , ,     •   ,,  ,      --„
                                                               'sFote,ntiaily si'gpiffeant Any-effect.^hidi1
                                                               "might influence the direction of long-
 meteorolo'giealdata resallstte i
:|^coatst-fortesi|)era|ttre effects, oa YOCs^and,-/-
''effect otl,c^a8?ed meteorology aroiiRd major; ,
 poiat sources.   • -; --«„/, ,   '^t— -  -- ,    ---
 "        sv, J v , (, .                           ^
                                                               -benefits of the CA A,
 organic,a^p|p,|;^ij.ceatratioiis fixed ojiai|s the
>;effeet ol cfiangesjii this constituent       '*
                  "v'            '
                                                                  "s/.,,'      • •    <  •. ,-         .  ,
                                                                Probably minor, because (a) nitrates were'
                                                               ,ako^hel'
                                                                the dominant species in the' e^efn ILS'.r <•"•
                                                                t>y using emissions scaling to estimate <
                                                                cl^iiges'iai 'organic 'fe'roSdis since a      »•
                                                                signifieaht'f'raction of-'0rganie-aero|o1s are
                                                                -caused by "bipgenie ga&^phase TOfe"  ' ' ""  '
                                                                -emissions which do not change between '
                                                                •thescoiarios:  ---, .^,, , „     - „  ,  ' ""/
                                                                Probabiyjininor.  MisseVpoteatiarhamau" '
                                                                health, welfare, and ecotogical'.benerits^of
                                                                te'ducing rurlPozoae-itx agricultural aad ""
                                                                other' rural, ^^^mt,^/&tf oao«e-chauges '
                                                                are'lllcely,;to be'ifo'all gij^i IJoiited """ *^-~
                                                                precurs'of reductiofis'ltj'rftlcalare'afs, ,  ,
                                                                RADM co'iitfoltno-control ratios -are,in,f-,; ,
                                                                fact, relative^-, s,raalL      --'---  •-• --. v,-*-,
                                               ,Unkapwn,
.concentration.:? :'; ; ;"-' ->.-.-.
                                                               Probably minor^particjilarly since relative*
                                                               chang'es 'in ozone cb-hceritration between • '.-
                                                               the scoiarios'were small/  '• - , •
                                                   27

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The Benefits and Costs of the Clean Air Act, 1970 to 1990
                                                    28

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  5
  Physical Effects
 Human Health and Welfare
 Effects Modeling Approach

     This chapter identifies and, where possible, esti-
 mates the principal health and welfare benefits en-
 joyed by Americans due to improved air quality re-
 sulting from the CAA. Health benefits have resulted
 from avoidance of air pollution-related-health effects,
 such as premature mortality, respiratory illness, and
 heart disease. Welfare benefits accrued where im-
 proved air quality averted damage to measurable re-
 sources, including agricultural production and visibil-
 ity. The analysis of physical effects required a combi-
 nation of three components: air quality, population,
 and health or welfare effects. As structured in this
 study, the 3-step process involved  (1) estimating
 changes in air quality between the control and no-con-
 trol scenarios, (2) estimating the human populations
 and natural resources exposed to these changed air
 quality conditions, and (3) applying a series of con-
 centration-response  equations which translated
 changes in air quality to changes in physical health
 and welfare outcomes for the affected populations.

 Air Quality

    The Project Team first estimated changes in con-
 centrations of criteria air pollutants between the con-
 trol scenario, which at this step was based on histori-
 cal air quality, and the no-control scenario. Air qual-
 ity improvements resulting from the Act were evalu-
 ated in terms of both their temporal distribution from
 1970 to 1990 and their spatial distribution across the
 48 conterminous United States. Generally, air pollu-
 tion monitoring data provided baseline ambient air
 quality levels for the control scenario. Air quality
 modeling was used to generate estimated ambient con-
 centrations for the no-control scenario. A variety of
modeling techniques was applied, depending on the
pollutant modeled. These  modeling approaches and
results are summarized in Chapter 4 and presented in
detail in Appendix C.
 Population

     Health and some welfare benefits resulting from
 air quality improvements were distributed to individu-
 als in proportion to the reduction in exposure. Pre-
 dicting individual exposures, then, was a necessary
 step in estimating health effects. Evaluating exposure
 changes for the present analysis required not only an
 understanding of where air quality improved as a re-
 sult of the CAA, but also how many individuals were
 affected by varying levels of air quality improvements.
 Thus, a critical component of the benefits  analysis
 required that the distribution  of the U.S. population
 nationwide be established.

     Three years of U.S. Census data were used to rep-
 resent the geographical distribution of U.S. residents:
 1970, 1980, and 1990. Population data was supplied
 at the census block group level, with approximately
 290,000 block groups nationwide. Allocating air qual-
 ity improvements to the population for the other tar-
 get years of this study -1975 and 1985 - necessitated
 interpolation of the three years of population data.
 Linear interpolation was accomplished for each block
 group in order to maintain  the variability in growth
 rates throughout the country.

 Health and Welfare Effects

    Benefits attributable to the CAA were measured
 in terms of the avoided incidence of physical health
 effects and measured welfare effects. To quantify such
 benefits, it was necessary to identify concentration-
 response relationships for each effect being  consid-
 ered. As detailed in Appendix D, such relationships
 were derived from the published science literature. In
 the case of health effects, concentration-response func-
 tions combined the air quality improvement and popu-
 lation distribution data with  estimates of the number
 of fewer individuals that suffer an adverse health ef-
fect per unit change in air quality. By evaluating each
concentration-response function for every monitored
location throughout the country, and aggregating the
                                                29

-------
The Benefits and Costs of the Clean Air Act, 1970 to 1990
resulting incidence estimates, it was possible to gen-
erate national estimates of incidence under the con-
trol and no-control scenarios.

    In performing this step of the analysis, the Project
Team discovered that it was impossible to estimate
all of the health and welfare benefits which have re-
sulted from the Clean Air Act. While scientific infor-
mation was available to support estimation of some
effects, many other important health and welfare ef-
fects could not be estimated. Furthermore, even though
some physical effects could be quantified, the state of
the science did not support assessment of the economic
value of all of these effects. Table 6 shows the health
effects for which quantitative analysis was prepared,
as well as some of the health effects which could not
be quantified in the analysis. Table 7 provides similar
information for selected welfare effects.

    While the 3-step analytical process described
above was applied for most pollutants, health effects
for lead were evaluated using a different methodol-
ogy. Gasoline  as a source of lead exposure was ad-
dressed  separately from conventional point sources.
Instead  of using ambient concentrations of lead re-
sulting from use of leaded gasoline, the concentra-
tion-response functions linked changes in lead releases
directly to changes in  the population's mean blood
lead level. The amount of leaded gasoline used each
year was directly related to  mean blood lead levels
using a relationship described in the 1985 Lead Regu-
latory Impact Analysis (U.S. EPA, 1985). Health ef-
fects resulting from exposure to point sources of at-
 mospheric lead, such as industrial facilities, were con-
 sidered using the air concentration distributions mod-
 eled around these point sources. Concentration-re-
 sponse functions were then used to estimate changes
 in blood lead levels in nearby populations.

     Most welfare effects were analyzed using the same
 basic 3-step process used to analyze health effects,
 with one major difference in the concentration-re-
 sponse functions used. Instead of quantifying the re-
 lationship between a given air quality change and the
 number of cases of a physical outcome, welfare ef-
 fects were measured in terms of the avoided resource
 losses. An example is the reduction in agricultural crop
 losses resulting from lower ambient ozone concentra-
 tions under the control scenario. These agricultural
benefits were measured in terms of net economic sur-
plus.

    Another important welfare effect is the benefit
accruing from improvements in visibility under the
control scenario. Again, a slightly different method-
ological approach was used to evaluate visibility im-
provements. Visibility changes were a direct output
of the models used to estimate changes in  air qual-
ity.42  The models provided estimates of changes  in
light extinction, which were then translated mathemati-
cally  into various specific measures of perceived vis-
ibility change.43 These visibility change measures were
then combined with population data to estimate the
economic value of the visibility changes. Other wel-
fare effects quantified  in terms of avoided resource
losses include household soiling damage by  PM,0 and
decreased worker productivity due to ozone exposure.
The results of the welfare effects analysis are  found
in Chapter 6 and in Appendices D and F.

    Because  of a lack of available concentration-re-
sponse functions (or a lack of information concerning
affected populations), ecological effects  were not
quantified for this analysis. However,  Appendix E
provides discussion of many of the important ecologi-
cal benefits which may have accrued due to  historical
implementation of the CAA.


 Key Analytical Assumptions

    Several important analytical assumptions affect
 the confidence which can be placed in the  results of
 the physical effects analysis. The most important of
 these assumptions relate to (a) mapping of potentially
 exposed populations to the ambient air quality moni-
 toring network, (b) choosing among competing scien-
 tific  studies  in developing quantitative estimates of
 physical effects, (c) quantifying the  contribution to
 analytical uncertainty of within-study variances in
 effects estimates and, perhaps most important in  the
 context of the present study, (d) estimating particu-
 late  matter-related mortality based on  the currently
 available scientific literature.

     Because these resultant uncertainties were  caused
 by the inadequacy of currently available scientific in-
 formation, there is no compelling  reason  to believe
     42 These models, and the specific visibility changes estimated by these models, are described in summary fashion in the previous
 chapter and are discussed in detail in Appendix C.
     43 These visibility measures are described in Appendix C.
                                                   30

-------
                                                                                              ChapterS: Physical Effects
Tablefe-Xfamaa-'HsaltH-Effects-of''CriteriaPoHatanis:. >
                         Quantified Health Effects
                               Unquantified Healtii Effects
  Ozone s^
                                                                ,                 *
                                                               ponsiveness to stJnlpli '
                                                              Isuraunologic dianges
                                                             -, Chrtmio' respiratory disease^,,
                                                                                        '
                         Hosgii ai adjftissiotts     \
                        •, Easergencyrooni visits "*  '' ;
                        • /Asthma attacks-  , ,       "*•:
                         Changes in ptttooaaty ftmctioji
                         Oi'iibnic Sinasafe'&ilTay Beyer
                                                        Inflartimadon in the lung,
                                                               - -  ,
                                                                , I-f6»ctton,of -broncfeitfe - -   •
                                                              laSatQHKitiQn. JB the Juag
                                              .,
                         AJJ resteicteii apflyity days"
                         Days *pfvt" **
                                                                                      •$•&,'-, ff'    "" •• J1 ^v^ ^
                                                                                      'Decreased pataoaaty ftmctiba
                                                                                      -Respiratory syiitp,tams to ntoa-
                                                 and;
                                                        Bealtfe e
                                                        NmtrotfehavSo'raJ | toeiott
                                               ,,,- t,
                                                                         -swia! .......
                                                     -31

-------
The Benefits and Costs of the Clean Air Act, 1970 to 1990
                                'J         ^^Ji^"-^^•?'   iv^VP^"*  t ''"• y !* •""•Sjsis'-w >  " ''*•••* •• •• v /'*"' -v'   ••> v *jfi'*"j--t  j    ff ft*  /"],
         Table 7.  Selected Welfare Effecls;^(^ti^Jl»|aigf v^,"-^ •—.T-T'*'*"^- *^>-;f.; _^/,;,v

Pollutant
Ozone
Particulate Matter/
TSP/Sul fates
Nitrogen Oxides
Sulfur Dioxide
lj,,«V",, ^ /*? ~';;,yA,, st
,„", •" ,"f,.' --., • ," ' ' " '
Changesyn ,crj>p.yfeJds (foXXcrgiJS)
Decreased-WQMterpWdttctivity //'"^ ,
• - , ';s-';'il-;j^»~,; ', „;,:•?>
.,-• - ' ' f-Kf/X,-' ' ' '
House^gld'js oilffljg'^ ,' , , - '" ~""^! ~%
:'visibint^:r-"v5sTi'-' ^\- 1%>'*S:
;" : """,< v^f^/i- '••'«•«
Visibility ' ' '"5-'%.—-,,; ; ' ' ~
* *~ '*<>*, •• ' * * > <^ >"< '* "'
-• -'- .- , * - v'-.J5?'-";'"i, ,
•^4sv4\~,;i~- : ': ?-:>'!,:>
^ " ' b^ ^^ ,"4.^,^^ -.•• ' ^vV^^Pj
x " J ' •• '-• ''"* ' •>? '
Visibility "'"':-'':;, , ,. ''-I''1'',
-^v^/^^sSj ,^ ^ ,''"c^
-,'''' K^i 1" :,'c;>^! '' ;
,;,;,9s -*->>,,, s v'sX-sA',5-- ;
-; ' &S -f ,,-,/,„,, - , . ,; "!%;"' '--
^ f,f -. us* "^ v -. ' ^^; ' ^ 1"1"1'1' J v'yj-- 'V'^' ^ 'v/
/JUnquanWffed Welfare* 5ffi%<|S • ' ' -/
C hanges', m/^atlier »oro p; yields
; Materials, ^damage ' i/:-- -' ';
'JEffe'ets o« forests ' '^;"'.y/, ',.,..;.;,/ I
',Effedts'csi,w5MIire ' "' "1>;V:v'f" 7 ::L '-
O^KK^^6saial$ damage,-; li>,.'/, ',?*, 'S"?^
/;Effects;ci''w! Wife , • ' ,. . - ' " " r,
h^w"-- /v%j^«*^y-?'#-!;>;£v-.>y>^5 •' ,
-;Bec»i:losses dae to acid depjosjttojiv"
, ,^^^.> ^,' ' ' "• f *"*" Jf ,/ v94("s '•{,£ >
^Effe'ctsW SsiSifS-jdttito'aoiaie ^ ;;-;;'^
^pp^!?i ;- -~~ -, ' ''' ' ' "--' ::'''' - ' '; - "•'", ' -:•
"Bfficf^Qn'^rests1 -„- .- ' '-'"•>'' - '"!"
•Oi<^ losses du^to!aCici;;dep4sitfoTi ',!"; v
'^Materials daHiage1dae"to"a1da?de^ositiori" "
rij&e&on, fisheries due to' aeile^ ; !'-
-- >'' v^X*i>>V:^J ^^ /'^/^" - r .,,>'"*'
dftpositj|0i>^,;,", ,"" "•'.,-!,', •"," -; - - Y- »*
Effects' oti"forests-",> '--'' ;,•'.">"'"
•f, »v ,g ,,,f«^,-. ,^ ,/f~., -r r
that the results of the present analysis are biased in a
particular direction. Some significant uncertainties,
however, may have arisen from interpretation of model
results, underlying data, and supporting scientific stud-
ies. These assumptions and uncertainties are charac-
terized in this report to allow the reader to understand
the degree of uncertainty and the potential for mises-
timation of results. In addition, the overall results are
presented in ranges to reflect the aggregate effect of
uncertainty in key variables. A quantitative assessment
of some of the uncertainties in the present study is
presented in Chapter 7. In addition, the key uncertain-
ties in the physical effects modeling step of this analy-
sis are summarized in Table 12 at the end of this chap-
ter. The remainder of this section discusses  each of
the four critical modeling procedures and associated
assumptions.

Mapping Populations to Monitors

    The Project Team's method  of calculating ben-
efits of air pollution reductions required a correlation
of air quality data changes to exposed populations.
For pollutants with monitor-level data (i.e., SO2, O3,
NO2, CO), it was assumed that all individuals were
exposed to air quality changes estimated at the near-
est monitor. For PM]0, historical air quality data were
available at the county level. All individuals residing
in a county were assumed to be exposed to that
county's PM  air quality.44
    Many counties did not contain particulate matter
air quality monitors or did not have a sufficient num-
ber of monitor observations to provide reliable esti-
mates of air quality. For those counties, the Project
Team conducted additional analyses to estimate PM10
air quality changes during the study period. For coun-
ties in the eastern 31 states, the grid cell-specific sul-
fate particle concentrations predicted by the RADM
model were used to provide a scaled interpolation
between monitored counties.45 For counties outside
the RADM domain, an alternative method based on
state-wide average concentrations was used. With this
supplemental analysis, estimates were developed of
the health effects of the CAA on almost the entire
continental U.S. population.46 Compliance costs in-
     *• In some counties and in the early years of the study period, particulate matter was monitored as TSP rather than as PM,., In,.th<5se
 cases, PMIO was estimated by applying TSP:PM10 ratios derived from historical data. This methodology is described in Appendix C.
     45 The specific methodology is described in detail in Appendix C.
     * While this modeling approach captures the vast majority of the U.S. population, it does not model exposure for everyone. To
 improve computational efficiency, those grid cells with populations less than 500 were not modeled; thus, the analysis covered
 somewhat more than 97 percent of the population.
   —                                              32

-------
                                                                                ChapterS: Physical Effects
curred in Alaska and Hawaii were included in this
study, but the benefits of historical air pollution re-
ductions were not. In addition, the CAA yielded ben-
efits to Mexico and Canada that were not captured in
this study.

    Air quality monitors are more likely to be found
in high pollution areas rather than low-pollution ar-
eas. Consequently, mapping population to the nearest
monitor regardless of the distance to that monitor al-
most certainly results in an overstatement of health
impacts due to air quality changes for those popula-
tions. The Project Team conducted a sensitivity analy-
sis to illustrate the importance of the "mapping to near-
est monitor" assumption. For comparison to the base
case, which modeled exposure for the 48 state popu-
lation, Table 8 presents the percentage of the total 48-
state population covered in the "50  km"  sensitivity
scenario.  For most pollutants in most years, 25 per-
cent or more of the population resided more than 50
km from an air quality monitor (or in a county with-
out PM[0 monitors). Estimated health benefits are ap-
proximately linear to population covered — that is, if
the population modeled for a pollutant in a given year
in the sensitivity analysis is 25 percent smaller than
the corresponding population modeled in the base case,
then estimated health benefits are reduced by roughly
25 percent in the sensitivity case. This sensitivity
analysis demonstrates that limiting the benefits analy-
sis to reflect only those living within 50 km of a moni-
tor or within a PM-monitored county would lead to a
substantial underestimate of the historical benefits of
the CAA. Since these alternative results may have led
to severely misleading comparisons of the costs and
benefits of the Act, the Project Team decided to adopt
the full 48-state population estimate as the central case
for this analysis despite the greater uncertainties and
potential biases associated with estimating exposures
from distant monitoring sites.
 »Table 8> Percent of Population 74%
                         :62%
 73%    68%^
*73%    68%
        70S,
 Choice of Study

    The Project Team relied on the most recent avail-
 able, published scientific literature to ascertain the
 relationship between air pollution and human health
 and welfare effects. The choice of studies, and the
 uncertainties underlying those studies, also created
 uncertainties in the results. For example, to the extent
 the published literature may collectively overstate the
 effects of pollution, EPA's analysis will overstate the
 effects of the CAA. Such outcomes may occur be-
 cause scientific research which fails to find signifi-
 cant relationships is less likely to be published than
 research with positive results. On the other hand, his-
 tory has shown that it is highly likely that scientific
 understanding of the effects of air pollution will im-
 prove in the future, resulting in discovery of previ-
 ously unknown effects. Important  examples of this
 phenomenon are the substantial expected health and
 welfare benefits  of reductions in lead and ambient
 paniculate matter, both of which have been shown in
 recent studies to impose more severe effects than sci-
 entists previously believed. To the extent the present
 analysis misses effects of air pollution that have not
 yet been  subject to  adequate scientific inquiry, the
 analysis may understate the effects of the CAA.

    For some health endpoints, the peer-reviewed sci-
 entific literature provides multiple, significantly dif-
 fering alternative CR functions. In  fact, it is not un-
 usual for two equally-reputable studies to differ by a
 factor of three or four in implied health impact. The
 difference in implied health effects across studies can
 be considered an indication of the degree of scientific
 uncertainty associated with measurement of that health
 effect. Where more than one acceptable study was
 available, the Project Team used CR functions from
 all relevant studies to infer health effects. That is, the
 health effect implied by each study is reported (see
 Appendix D), and a range of reported results for a
 particular health endpoint can be interpreted as a mea-
 sure of the uncertainty of the estimate.

 Variance Within Studies

    Even where only one CR function was available
 for use, the uncertainty associated with application of
that function to estimate physical outcomes can be
evaluated quantitatively. Health effects studies  pro-
vided "best estimates" of the relationship between air
quality changes and health effects, and a measure of
the statistical uncertainty of the relationship.  In this
analysis, the Project Team used simulation modeling
                                                  33

-------
The Benefits and Costs of the Clean Air Act, 1970 to 1990
techniques to evaluate the overall uncertainty of the
results given uncertainties within individual studies,
across studies examining a given endpoint, and in the
economic valuation coefficients applied to each end-
point. The analysis estimating aggregate quantitative
uncertainty is presented in Chapter 7.

PM-Related Mortality

    The most serious human health impact of air pol-
lution is an increase in incidences of premature mor-
tality. In the present study, excess premature mortal-
ity is principally related to increased exposure to lead
(Pb)47  and to paniculate matter (PM) and associated
non-Pb criteria pollutants.48 With  respect to PM, a
substantial body of published health science literature
recognizes a correlation between elevated PM con-
centrations and increased mortality rates. However,
there is a diversity of opinion among scientific ex-
perts regarding the reasonableness of applying these
studies to derive quantitative estimates of premature
mortality associated with exposure to PM.  While 19
of 21 members of the Science Advisory Board Clean
Air Act Scientific Advisory Committee agree that
present evidence warrants concern and implementa-
tion of a fine particle (PM^) standard to supplement
the PM,0 standard, they also point out that the causal
mechanism has not been clearly established.

    For the purposes of the present study, the Project
Team has concluded that the well-established corre-
lation between exposure to elevated PM and prema-
ture mortality is sufficiently compelling to warrant an
assumption of a causal relationship and derivation of
quantitative estimates of a PM-related premature mor-
tality effect. In addition to the  assumption of causal-
ity, a number of other factors contribute to uncertainty
in the quantitative estimates of PM-related mortality.49
First, although there is uncertainty regarding the shape
of the CR functions derived from the epidemiological
studies, the present analysis assumes the relationship
to be linear throughout the relevant range of expo-
sures. Second, there is significant variability among
the underlying studies which may reflect, at least in
part, location-specific  differences  in CR functions.
Transferring CR functions derived  from one or more
specific locations to all other locations may contrib-
ute significantly to uncertainty in the effect estimate.
Third, a number of potentially significant biases and
uncertainties specifically associated with each of the
two types of PM-related mortality study further con-
tribute to uncertainty. The remainder of this section
discusses these two groups of studies and their atten-
dant uncertainties and potential biases. (See Appen-
dix D for a more complete discussion of these studies
and their associated uncertainties.)

    Short-Term Exposure Studies

    Many of the studies examining the relationship
between PM exposure and mortality evaluate changes
in mortality rates several days after a period of el-
evated PM concentrations. In general, significant cor-
relations have been found. These "short-term expo-
sure" or "episodic" studies are unable to address two
important issues: (1) the degree to which the observed
excess mortalities are "premature," and (2) the degree
to which daily mortality rates are correlated with long-
term exposure to elevated PM concentrations  (i.e..,
exposures over many years rather than a few days).

    Because the episodic mortality studies evaluate
the mortality rate impact only a few days after a high-
pollution event, it is likely that many of the "excess
mortality" cases represented individuals  who  were
already suffering impaired health, and for whom the
high-pollution  event  represented an exacerbation of
an already serious condition. Based on the episodic
studies only, however, it is unknown how many of the
victims would have otherwise lived only a few  more
days or weeks, or how many would have recovered to
enjoy many years of a healthy life in the absence of
the high-pollution event. For the purpose of cost-ben-
efit analysis, it can be important to determine whether
a pollution event reduces the average lifespan by sev-
eral days or by many years. Although the episodic
mortality studies do  not provide an estimate of the
expected life years lost (nor do they address the health
status of victims), some have evaluated the age of the
excess premature mortality cases, and have estimated
that 80 to 85 percent of the victims are age 65 or older.

     In addition to causing short-term health problems,
air pollution (measured by elevated annual PM con-
     47 Detailed information on methods, sources, and results of the Pb mortality analysis are presented in Appendix G.
     48 PM concentrations are highly correlated with concentrations of other criteria pollutants. It is difficult to determine which
 pollutant is the causative factor in elevated mortality rates. In this study, the Project Team has used PM as a surrogate for a mix of
 criteria pollutants.
     49 It should also be noted that some of the morbidity studies, most notably the PM/chronic bronchitis epidemiological studies,
 involve many of the same uncertainties.	
                                                   —

-------
                                                                               ChapterS: Physical Effects
centrations) can cause longer-term health problems
that may lead to premature mortality. Such long-term
changes in susceptibility to premature mortality in the
future will be missed by efforts to correlate prema-
ture mortalities with near-term episodes of elevated
pollution concentrations. Consequently, excess pre-
mature mortality estimates based on the results of the
"episodic" mortality studies will  underestimate the
effect of long-term elevated pollution concentrations
on mortality rates.

    Long-Term Exposure Studies

    The other type of PM-related mortality study in-
volves examination of the potential relationship be-
tween long-term exposure to PM and annual mortal-
ity rates. These studies are able to avoid some of the
weaknesses of the episodic studies. .In particular, by
investigating changes in annual (rather than daily)
mortality rates, the  long-term studies do not predict
most cases of excess premature mortality where mor-
tality is deferred for only a few days; also, the long-
term studies are able to discern changes in mortality
rates due to long-term exposure to elevated air pollu-
tion concentrations. Additionally, the long-term ex-
posure studies are not limited to measuring mortali-
ties that occur within a few days of a high-pollution
event. Consequently,  use of the results of the long-
term studies is likely to result in a more complete as-
sessment of the effect of air pollution on mortality
risk.

    The long-term exposure studies, however, have
some significant limitations and potential biases. Al-
though studies that are well-executed attempt to con-
trol for those factors that may confound the results of
the study, there is always the possibility of insuffi-
cient or inappropriate adjustment for those factors that
affect long-term mortality rates and may be con-
founded with the factor of interest (e.g., PM concen-
trations). Prospective cohort studies have an advan-
tage over ecologic, or population-based, studies in that
they gather individual-specific information on such
important risk factors as smoking. It is always pos-
sible, however, that a relevant, individual-specific risk
factor may not have been controlled for or that some
factor that is not individual-specific (e.g., climate) was
not adequately  controlled for. It is therefore possible
that differences in mortality rates that have been as-
cribed to differences in average PM levels may be due,
in part, to  some other factor or factors (e.g., differ-
ences among communities in diet, exercise, ethnicity,
climate, industrial effluents, etc.) that have not been
adequately controlled for.

    Another source of uncertainty surrounding the
prospective cohort studies concerns possible histori-
cal trends in PM concentrations and the relevant pe-
riod of exposure, which is as yet unknown. TSP con-
centrations were substantially higher in many loca-
tions for several years prior to the cohort studies and
had declined substantially by the time  these studies
were conducted. If this is also true for PM^ 5 and PM10,
it is possible that the larger PM coefficients reported
by the long-term exposure studies (as opposed to the
short-term exposure studies) reflect an  upward bias.
If the relevant exposure period extends over a decade
or more, then a coefficient based on PM concentra-
tions at the beginning of the study or in those years
immediately prior to the study could be biased up-
ward if pollution levels had been decreasing mark-
edly for a decade or longer prior to the study.

    On the other hand, if a downward trend in PM
concentrations continued throughout the period of the
study, and if a much shorter exposure period is rel-
evant (e.g., contained within the study period itself),
then characterizing PM levels throughout the study
by those levels just prior to the study would tend to
bias the PM coefficient downward. Suppose, for ex-
ample, that PM levels were converging across the dif-
ferent study locations over time, and in particular, into
the study period. (That is, suppose PM levels were
decreasing over time, but decreasing faster in the high-
PM locations than in the low-PM locations, so that at
the beginning of the  study period the interlocational
differences in PM concentrations were smaller than
they were a decade earlier.) Suppose also that the rel-
evant exposure period is about one year, rather than
many years. The Pope study  characterizes the long-
term PM concentration in each of the study locations
by the median PM concentration in the location dur-
ing the five year period  1979-1983. Study subjects
were followed, however, from 1982 through 1989. If
the difference in median PM concentrations across the
50 study locations during the period 1979-1983 was
greater than the difference during the  period 1983-
1988, and if it is PM levels during the  period 1983-
1988 that most affect premature mortality during the
study period (rather than PM levels during the period
1979-1983),  then  the  study  would have attributed
interlocational differences in mortality to larger
interlocational differences in PM concentrations than
were actually relevant. This would result in a down-
ward bias of the PM coefficient estimated hi the study.
                                                  35

-------
 The Benefits and Costs of the Clean Air Act, 1970 to 1990
    The relevant exposure period is one of a cluster
 of characteristics of the mortality-PM relationship that
 are as yet unknown and potentially important. It is
 also unknown whether there is a time lag in the PM
 effect. Finally, it is unknown  whether there may be
 cumulative effects of chronic exposure — that is,
 whether the relative risk of mortality actually increases
 as the period of exposure increases.

    Three recent studies have examined the relation-
 ship between mortality and long-term exposure to PM:
 Pope et al. (1995), Dockery  et al. (1993), and Abbey
 et al. (1991). The Pope et al.  study is considered a
 better choice of long-term exposure study than either
 of the other two studies. Pope et al. examined a much
 larger population and many more locations than ei-
 ther the Dockery study or the Abbey study. The
 Dockery study covered only six cities. The Abbey
 study covered a cohort of only 6,000 people in Cali-
 fornia. In particular, the cohort in the Abbey study
 was considered substantially too small and too young
 to enable the detection of small increases in mortality
 risk. The study was therefore omitted from consider-
 ation in this analysis. Even though Pope et al. (1995)
 reports a smaller premature mortality response to el-
 evated PM than Dockery et  al. (1993), the results of
 the Pope study are nevertheless consistent with those
 of the Dockery study.

    Pope  et al., (1995) is also unique in that it fol-
 lowed a largely white and middle class population,
 decreasing the likelihood that interlocational differ-
 ences in premature mortality were attributable to dif-
 ferences in socioeconomic status or related factors.
 Furthermore, the generally lower mortality rates and
 possibly lower exposures to pollution  among this
 group, hi comparison to poorer minority populations,
 would tend to bias the PM coefficient from this study
 downward, counteracting a possible upward bias as-
 sociated with historical air quality trends discussed
 above.

    Another source of downward bias  in the PM co-
 efficient in Pope et al., (1995) is that intercity move-
 ment of cohort members was not considered. Migra-
 tion across study cities would result in exposures of
 cohort members being more similar than would be
 indicated  by  assigning city-specific annual average
pollution levels to each member of the cohort.  The
 more intercity migration there  is, the more exposure
 will tend toward an intercity  mean. If this is ignored,
differences in exposure levels, proxied by differences
in city-specific annual average PM levels, will be ex-
aggerated, resulting in a downward bias of the PM
coefficient. This is because a given difference in mor-
tality rates is being associated with a larger difference
in PM levels than is actually the case.

    An additional source of uncertainty hi the Pope et
al., study arises from the PM indicator used in the
study. The Pope et al. study examined the health ef-
fects associated with two indices of PM exposure;
sulfate particles and fine particles (PM25). The PM25
relationship is used in this analysis because it is more
consistent with the air quality data selected for this
analysis (PM]0). Because we use a PM2 5 mortality re-
lationship, air quality profiles  were developed from
the PM,0 profiles generated for the entire 20 year pe-
riod. The same regional information about the PM]Q
components (sulfate, nitrate, organic particulate and
primary particulate) used to develop the PMIO profiles
was used to develop regional PM25/PM]0 ratios. Al-
though both urban and rural ratios are available, for
computational simplicity, only  the regional urban ra-
tios were used to estimate the PM^ 5 profiles from the
PM10 profiles used in the analysis. This reflects the
exposure of the majority of the modeled population
(i.e., the urban  population), while introducing some
error hi the exposure changes for the rural popula-
tion. In the east and west, where the rural ratio is larger
than the urban ratio, the change in PM2  exposure will
be underestimated for the rural population. In the cen-
tral region the PM25 change will be overestimated.
These ratios were used in each year during 1970-1990,
introducing another source of uncertainty in the analy-
sis.

    After considering the relative advantages and dis-
advantages of the various alternative studies available
in the peer-reviewed literature, the Project Team de-
cided that the long-term exposure studies were pref-
erable for the purposes of the present study, primarily
because the long-term exposure studies appear to pro-
vide a more comprehensive estimate of the premature
mortality incidences  attributable to PM exposure.
Among the long-term exposure studies, the Pope et
al., (1995) study appears more likely to mitigate a key
source of potential confounding. For these  reasons,
the CR function estimated in Pope et al., (1995) is
considered the most reasonable choice for this analy-
sis and is utilized in spite of the several important re-
sidual uncertainties and potential biases which are sub-
sequently reflected in the PM-related mortality effect
estimate.
                                                 36

-------
                                                                               Chapter 5: Physical Effects
Health Effects Modeling Results

    This section provides a summary of the differences
in health effects estimated under the control and no-
control scenarios. Because the differences in air qual-
ity between the two scenarios generally increased from
1970 to 1990, and the affected population grew larger
during that period, the beneficial health effects of the
CAA increased steadily during the 1970 to  1990 pe-
riod. More detailed results are presented in Appendix
D.

Avoided Premature Mortality Estimates

    The Project Team determined that, despite their
limitations, the long-term particulate matter exposure
studies provided the superior basis for estimating
mortality effects for the purpose of benefit-cost analy-
sis. Three prospective cohort studies were identified
(Pope et al. (1995), Dockery et al. (1993), and  Abbey
et al. (1991)), although the Abbey study was omitted
from consideration because the cohort in that study
was considered insufficient to allow the detection of
small increases in mortality risk. Exposure-response
relationships inferred from the Pope et al. study were
used in the health benefits model to estimate avoided
mortality impacts of the CAA. The Pope et  al. study
was selected because it is based on a much larger popu-
lation and a greater number of communities (50) than
is the six-city Dockery et al. Study. The results of the
Pope et al. are consistent with those of the other study,
and are consistent with earlier ecological population
mortality studies. See Appendix D for additional dis-
cussion of the selection of mortality effects studies.

    Table 9 presents estimated avoided excess pre-
mature mortalities for 1990 only, with the mean esti-
mate and 90 percent confidence interval. See Appen-
dix D for more detail on results implied by individual
epidemiological studies, and on the temporal pattern
of impacts.50 The model reports a range of results for
each health endpoint. Here, the fifth percentile, mean,
and ninety-fifth percentile estimates are used to char-
acterize the distribution. The total number of avoided
cases of premature mortality due to reduced exposure
to lead (Pb) and particulate matter are presented. Ad-
ditionally, avoided mortality cases  are listed by age
cohort of those who have avoided premature mortal-
ity in 1990, along with the expected remaining lifespan
(in years) for the average person in each age cohort.
The average expected remaining lifespan across  all
 age groups is also indicated. These averages might be
 higher if data were available for PM-related mortality
 in the under 30 age group and for Pb-related mortality
 in the 5-39 age group.
 >!>-•.f/V'J--/> '     , - y,     -, x,  '       > "-
Tablet, Qiteriat'ollutants-Bealth Benefits —
    ~>TS •*-,?„ - _^~  -      j ^        ^       ^L'
Distributions of 1990 Ayoide&^remature/^Qrfalities
(thousands of cases reduced) JsM-S Stafft Population.
, Rejcnaifling
^J&xptKtwaciy
PdttalMtt „,„ Age group > ^6nrs>
*?Ks ' 30**M over „,„
< /^ f?3fs?« <
i, ' ~ y'R-34 V^48
- J^44 „ ;*3¥, <
'/*t s ,45->54^ ' '-«29~
''/7^ SS^ k' "
"*1 ^ 65-74^ ' 14^»w
y; 75-S4 "^:> , ? ""^
~f— ; >84 VTs .. . . \
„ ' ^ < - > ^?%,i,!4*
l*ad ' "Ul ages . "^t-^.

y^.;; ^ijj^ ^^Vy y >trt ,* ^ * An ffify
x" 4Q-44 -..^x x/ 38 _
' y ^••<«! ^ ^S^-S^1 ^^ ^ 29
> ^ ^ S5-64 >-*^% ^2-1
* "^ ••> > /jS5*74 _, ^"^ ^ J^
. ,f^ ^ ,~Av^.f38*
^OT^L|ui ',, ~*r#v
Annual Cases Avoided
^ (thousands)
%ifc M:ejua "
, *' 112 184
""! , 2 3
" »«5 8
?4^? / !1
14 > 23
"26 'v 43
^^rSt
" " 24 4T
'*;? ,- 22
1 ° ,%-s,I'f^
0 ^'4
>>„*< Q -^
7^0 4
1<& V -205
astit
%ilc *
257
^
11
15
33'
~$
/'"?6
59
54
5X-
f^'"1
f!8
15 v
252
                            o^grematute aiorta!itjes.%y age1
 Non-Fatal Health Impacts

    The health benefits model reports non-fatal health
 effects estimates similarly to estimates of premature
 mortalities: as a range of estimates for each quanti-
 fied health endpoint, with the range dependent on the
 quantified uncertainties in the underlying concentra-
 tion-response functions. The range of results for 1990
 only is characterized in Table 10 with fifth percentile,
 mean, and ninety-fifth percentile estimates. All esti-
 mates are expressed as thousands of new cases avoided
 in 1990. "Lost IQ Points" represent the aggregate num-
 ber of points (in thousands) across the population af-
 fected by lead concentrations in 1990. All "Hospital
 Admissions" estimates are in thousands of admissions,
 regardless of the length of time spent in the hospital.
 "Shortness of breath"  is expressed as thousands of
     ' Earlier years are estimated to have had fewer excess premature mortalities.

                                                 37

-------
The Benefits and Costs of the Clean Air Act, 1970 to 1990
           Table 10.  Criteria Pollutants J^iOth Benefits --, Distributions of 1990 Non-Fatal Avoided
           Incidence (thousands of cases reduced) for 48 State Population.
Endpoint -PollutantCs)
Chronic Bronchitis PM ,
LostlQ Points Lead f ,„
IQ < 70 Lead
Hypertension , > ' Lead
Chronic Heart Disease * Lead
Atherothromboticfarain infarction 'Lead
Initial cerebrovascular accident -Lead <
Hospital Admissions '"
All Respiratory - - " 'JPM&O3
COPD + Pneumonia " \ PM & Q3
Jschernic Heart Disease PM *•
Congestive Heart Failure PM &CO -
Other Respiratory-Related Ailments <"'
Shortness of breath, days PM
Acute Bronchitis , - PM
Upper & Lower ReSp. Symptoms -"*PM
Any of 19 Acute Symptoms '*'"&& & O3
Asthma Attacks , - >- - PM~8£*33
Increase in Respiratory Dine?*' " ^P?^
Any Symptom * ' ' SQ2
* v * < w*> ,
Restricted Activity and WorfcLoss Days ; , v
MRAD PM&CeV,''
Work Loss Day s(WLP) PM
Affected *
Population
{age group)
Alt
children
children
men 2,0-74
40-74
40-74
40-47
"VJ
«u
over 65 ,
over $5
65 and over
<,
children
children,
children
18-6i
asthmatics
all
asthmatics

1S-6S
iS»$5
Annual Effects Avoidei
(thousartck)
5th Mean 95*
%ite %ile
493 674 886
7,440 10,400 13,000
3i 45 60
' 9,740 12,600- 15,600
0 22 64
0 ,,,4 15
• 0 6 19

75 89 103'
52 " 62 72
7 -19 31
28 39 -' 50
d *> =
14,800 6&^00 133,000
0 8,700 2f,600
5,400 . 9,500 13,400
1S,400* 130,000 244,000
170 850" iT&O
4,840 9,800 14,000
26 264 706
v
107!0(» -125,006 143,000
19,400 ' 22,600 25,600
Wut
cases'
points
cases
cases
cases
cases
cases

eases
eases
cases
cases

days
cases
eases
cases
cases,
, < cases
cases^

days
days
             The following additional wejfaje benefits yi'ere quantified di«i«tly in OCOBOBMP terms; .howsehold soiJlBg
             damage, visibility, deisceasfe^'vAM^et.proitoctrvity, aadagricultaralibenefits (measured it^te.ftas of rtet
             surplus).                     - '  -""'"             < >
days: that is, one "case" represents one child experi-
encing shortness of breath for one day. Likewise, "Re-
stricted Activity Days" and "Work Loss Days" are
expressed in person-days.

Other Physical Effects

    Human health impacts of criteria pollutants domi-
nate quantitative analyses of the effects of the CAA,
in part because the scientific bases for quantifying air
quality and physical effect relationships are most ad-
vanced for health effects. The CAA yielded other ben-
efits, however, which are important even though they
were sometimes difficult or impossible to quantify
fully given currently available scientific and applied
economic information.

Ecological Effects

    The CAA yielded important benefits in the form
of healthier ecological resources, including: stream,
river, lake and estuarine ecosystems; forest and wet-
land ecosystems; and agricultural ecosystems. These
benefits are important because of both the intrinsic
value of these ecological resources  and the intimate
linkage between human health and the health and vi-
tality of our sustaining ecosystems. Given the com-
plexity of natural and agricultural ecosystems and the
large spatial and temporal dimensions involved, it has
been difficult or impossible to quantify benefits fully
given currently available scientific and applied eco-
nomic information.

    Aquatic and Forest Effects

    Beyond the intrinsic value of preserving natural
aquatic (i.e., lakes, streams, rivers, and estuaries), ter-
restrial (i.e., forest and grassland), and wetland eco-
systems and the life they support, protection of eco-
systems from the adverse effects of air pollution can
yield significant benefits to human welfare. The his-
torical reductions in air pollution achieved under the
CAA probably led to significant improvements in the
                                                  38

-------
                                                                               Chapter 5: Physical Effects
health of ecosystems and the myriad ecological ser-
vices they provide. Reductions in acid deposition (SOx
and NOx) and mercury may have reduced adverse ef-
fects on aquatic ecosystems, including finfish, shell-
fish, and amphibian mortality and morbidity, reduced
acidification of poorly buffered systems, and reduced
eutrophication of estuarine systems. Ecological pro-
tection, in turn, can enhance human welfare through
improvements in commercial and recreational fishing,
wildlife viewing, maintenance of biodiversity, im-
provements in drinking water quality, and improve-
ments in visibility.

    Wetlands ecosystems are broadly characterized as
transitional areas between terrestrial and aquatic sys-
tems in which the water table is at or near the surface
or the land is periodically covered by shallow water.
Valuable products and services of wetlands include:
flood control, water quality protection and improve-
ment, fish and wildlife habitat, and landscape and bio-
logical diversity. High levels of air pollutants have
the potential to adversely impact wetlands. Reductions
of these pollutants due to compliance with the CAA
have reduced the adverse effects of acidification and
eutrophication of wetlands, which in turn has protected
habitat and drinking water quality.

    Forest ecosystems, which cover 33 percent of the
land hi the United States, provide an extensive array
of products and services to humans. Products include
lumber, plywood, paper, fuelwood, mulch, wildlife
(game), water (quality), seeds, edible products (e.g.,
nuts,  syrup), drugs, and pesticides. Forest services
include recreation, biological and landscape diversity,
amenity functions (e.g., urban forest), reduced runoff
and erosion, increased soil and nutrient conservation,
pollutant sequestration (e.g., CO2, heavy metals) and
pollutant detoxification (e.g., organochlorines).  The
greatest adverse effect on forest systems are imposed
by ozone. No studies have attempted to quantify the
economic benefits associated with all product and ser-
vice functions from any U.S. forest. Some studies have
attempted to estimate the net economic damage from
forest exposure to air pollutants by calculating hypo-
thetical or assumed reductions in growth rates of com-
mercial species. While quantification of forest dam-
ages remains incomplete, available evidence suggests
that recreational, service, and non-use benefits may
be substantial.

    For a more comprehensive discussion of the pos-
sible ecological effects of the CAA, see Appendix E.
    Quantified Agricultural Effects

    Quantification of the effects of the CAA on agri-
culture was limited to the major agronomic crop spe-
cies including barley, corn, soybeans, peanuts, cotton,
wheat, and sorghum. These species account for 70
percent of all cropland in the U.S., and 73 percent of
the nation's agricultural receipts. Ozone is the primary
pollutant affecting agricultural production. Nationwide
crop damages were estimated under the control and
no-control scenarios. Net changes in economic sur-
plus (in 1990 dollars) annually and as a cumulative
present value (discounted at 5%) over the period 1976-
1990 were estimated. Positive surpluses were exhib-
ited in almost all years and were the result of the in-
crease in yields associated with decreased ozone con-
centrations under the control scenario. The present
value (in 1990) of the estimated agricultural benefits
of the CAA ranges from $7.8 billion hi the minimum
response case to approximately $37  billion in the
maximum response case51 (note that discounting 1976-
1990 benefits to 1990 amounts to a compounding of
benefits). Exposure-response relationships and culti-
var mix reflect historical patterns and do not account
for possible substitution of more ozone-resistant cul-
tivars in the no-control scenario. Thus, the upper end
of the range of benefit calculations may overestimate
the actual agricultural benefits of the CAA with re-
spect to these crops. Because numerous crops are ex-
cluded from the analysis, including high value crops
that may be sensitive to ozone, the lower end of the
range is not  likely to fully capture the agricultural
benefits of reductions in ozone.

Effects of Air Toxics

    In addition to control of criteria pollutants, the
Clean Air Act resulted in control of some air toxics
— defined as non-criteria pollutants which can cause
adverse effects to human health and to ecological re-
sources. Control of these pollutants resulted both from
incidental control due to criteria pollutant programs
and specific controls targeted at air toxics through the
National Emission Standards for Hazardous Air Pol-
lutants (NESHAPs) under Section 112 of the Act.

    Air toxics are capable of producing a wide vari-
ety of effects. Table 11 presents the range of potential
human health and ecological effects which can occur
due to air toxics exposure. For several  years, the pri-
mary focus of risk assessments and control programs
designed to reduce air toxics has been cancer. Accord-
    51 Ranges reflect usage of alternate exposure-response functions.
                                                 39~

-------
 The Benefits and Costs of the Clean Air Act, 1970 to 1990
        Table 11. Health and Weiarrf-Bffects o
Effect Category
H H alth





Human Welfare

Ecological


Other Welfare


Quantified Effects , -
Canc'"rMtirt lit •'. <•<«-"- <>'•'
-nciotilltyst^na^'/
source.- - »- *,,,„.,
'!' ,-»,,«#
•. J, J. ., ^ <[
• -'^-:,7.
- ...x. „*.„.... •>$.*, x,,;v_
-'* •* ^^^<^'
3 % c - X ^ %v -.••<, ^; -.
" ' i '" "' ' S " -.,-. : »
•. ' - j A
'" ''---^^^•'V-
" s } s\ •,

JUnquantified Effects
' '' XiV -'"•> - , '**'*
* •atility soa'rce , ,
' 3%n#w£r' effects- *•„
- meuroldgical ,^, ;, r'/f>
'""re&KJda^? *• ' '"' '"'
•f - hematopxii ef ic •,,,,„•'
•? developinental
«, Decreased iacome and ,
-due to ifis^ gd,y|j5C;nes

,Bnfects<.'o» plaits' w^*^-
^Ecosystein eflEfects -^; 't>'i^*
^-L^ss^pf 010 loglc^[ %v--^-;
^B?'- '-;r\
^ s ^ ^ ' " ' '"' ''' J '
V$$j|>|licy - <", . ^,- , ^
Baildiag Deterfojratiba

'Otfe^r P'fflSsiWe EITects
*

''''" ^' ' ^ ' ^ i ^, "•
>•? f ,;'" , < s'<.0<
^ J^ "V -^^- ,-,rf w
' ' '' ^ *4 \''\' 'f ' '
^resulting from decreased - ^
. pjjysie^l peifortnaace

t,B3ffeets on jgiobal plimke , - -
, ---;,-/ -,{,',;,S,,,,,,
• ••:•;•„,, > , ' >
">.',<.?/•. --,, , ,, •. ' ",'--/--;-'
"t'oss of fcfetosteVrgrvtnity
'T_:, 	 \^"^ 'V
	 , 	 V-...v«*^ - -
ing to present EPA criteria, there are over 100 known
or suspected carcinogens. EPA's  1990 Cancer Risk
study indicated that as many as 1,000 to 3,000 can-
cers annually may be attributable to the air toxics for
which assessments were available (virtually all of this
estimate came from assessments of about a dozen well-
studied pollutants).52

    In addition to cancer, these pollutants can cause a
wide variety of health effects, ranging from respira-
tory problems to reproductive and developmental ef-
fects. There has been considerably less work done to
assess the magnitude of non-cancer effects from air
toxics, but one survey study has shown that some pol-
lutants are present in the atmosphere at reference lev-
els that have caused adverse effects in animals.53

    Emissions  of  air toxics can also cause adverse
health effects via non-inhalation exposure routes. Per-
sistent bioaccumulating pollutants, such as mercury
and dioxins, can be deposited into water or soil and
subsequently taken up by living organisms. The pol-
lutants can biomagnify through the food chain and
exist in high concentrations when consumed by hu-
mans hi foods such as fish or beef. The resulting ex-
posures can cause adverse effects hi humans, and can
also disrupt ecosystems by affecting top food chain
species.

    Finally, there are a host of other potential eco-
logical and welfare effects associated with air toxics,
for which very little exists in the way of quantitative
analysis. Toxic effects of these pollutants have the
potential to disrupt both terrestrial and aquatic eco-
systems and contribute to adverse welfare effects such
as fish consumption advisories in the Great Lakes.54
    52 U.S. EPA, Cancer Risk from Outdoor Exposure to Air Toxics. EPA-450/l-90-004f. Prepared by EPA/OAR/OAQPS.

    53 U.S. EPA, 'Toxic Air Pollutants and Noncancer Risks: Screening Studies," External Review Draft, September, 1990.
    54 U.S. EPA, Office of Air Quality Planning and Standards. "Deposition of Air Pollutants to the Great Waters, First Report to
Congress." May 1994. EPA-453/R-93-055.	
                                                   40

-------
                                                                               Chapter 5: Physical Effects
    Unfortunately, the effects of air toxics emissions
reductions could not be quantified for the present
study. Unlike criteria pollutants, there was relatively
little monitoring data available for air toxics, and that
which exists covered only a handful of pollutants.
Emissions inventories were very limited and incon-
sistent, and air quality modeling has only been done
for a few source categories. In addition, the scientific
literature  on the effects of air toxics  was generally
much weaker than that available  for criteria pollut-
ants.

    Limitations  in the underlying data and analyses
of air toxics led the Project Team to exclude the avail-
able quantitative results from the primary analysis of
CAA costs and benefits. The estimates of cancer inci-
dence benefits of CAA air toxics control which were
developed, but ultimately rejected,  are presented in
Appendix H. Also found in Appendix H is a list of
research needs identified by the Project Team which,
if met, would enable at least a partial assessment of
air toxics benefits in future section 812 studies.

Uncertainty In The Physical Effects
Estimates

    As discussed above, and in greater detail in Ap-
pendix D, a number of important assumptions and
uncertainties in the physical effects analysis may in-
fluence the estimate of monetary  benefits presented
in this study. Several of these key uncertainties, their
potential directional bias, and the potential signifi-
cance of this uncertainty for the overall results of the
analysis are summarized in Table 12.
                                                 41

-------
The Benefits and Costs of the Clean Air Act, 1970 to 1990
          Table 12, Uncertainties Associated wJtb Physical Effects Modeling.
Potential Source of Error
Estimation of PMu from modeled PM<«
and TSP data (to support mortality
estimation)
Extrapolation of health effects to
populations dia ant frommonitors (of
monitored counties in the ease'of PM).
Estimation of degreeof life-shortening _
associated with PMNcelated premature
mortality. \ ,
<, ^
Assumption of zero lag between* " ">
exposure and incidence of PM-related-- -
premature mortality.

Choke of CR function (i.e.* "across-
study" u ncertaint ies)
Uncettaimy associated with CR- <"
functions derived from each individual
study (i.e., "within study" uncertainty) ~
Exdusion of potential UV-B attenuation
benefits associated witbhigher
concentrationsoftropospheric ozone "
undertheno-contro5c4se. „ ov_ -
Exclusion of potential substitution of
ozone-resistant ojltivats in agriculture ~,
analysis.
Exclusion of other agricultural effects
(crops, pollutants)
Exclusion of effects on terrestrial,
wetland, and aquatic ecosystems, and
forests.
No quantification of materials damage
„ Dimtfoni of F&tentfel Btes
In Physical Effects Estimate
Unknown
; Probabteoverestimate. _
" <• " u <-~ ~"v'
Unknown.
vf.:f'Z " "
-' -' M, , *
( *°< ? ^
Ovftrestteiate." - -
< f «ft,A%. *
V- "
Sfe ' >
«*>•
_•* ><>^^-^f-i' &•
t^tikiiowa,-
^""VS * v*^St
Baknown-
* <. •?<> -
"dlerestimate. «, -,
•>••>" "• v"
Ovetestimati " '
lfnderes||jnate, -
UhderestlmatB.
^ ~ ^> s
Ua8erestraiaie ' I ,
Slgnilfcaw* RdsHve to Key Voeewsfntfes JB
Overall Monetary Benefit Estimate
Significant. Estimated PMis profiles are used
to calculate most of the preiaatate'mortaSi^, -
there is significant uncertainty about how fee
fine particle share of overall PM levels vanes
temporally and spatially throughout the 20 year
period. „ .
Probably minor. In addition, this adjustment -
avoids the underestimation which would result
by estimating effects for only those people
living nearmonitors. Potential overestimate
r»ay resttlt to the extent air quality in areas
distant from monitors is sigmf tcantiy better fi>an
in monitored areas This disparity should be
quite minor for regional pollutants, such 'as
ozone and fine parflc slates.
Unknown, possibly Significant When using a
value of hfe^years approach. Varylng:tlB<
estimate of degree of prematurity has no effect
on the aggregate benefit estimate when a value
of stat^af to«l We approach is used since all
«icid"etices of premature mortality are valued'
efttjaljy. Wader the alternative approach based
on valuing tndvidual life-years, the influence
of atenasive values for numbers of average
lite-years lost may bft significant,
Probably minor, the shdtt-temmortality "
stjadtes tndtcate tfeat a agaificantponiOKof fee
premature mortah'ty associated with exposure to
elevated PM concentrations ss very short-term
(i.e., a matter 
-------
 6
Economic  Valuation

    Estimating the reduced incidence of physical ef-
fects represents a valuable measure of health benefits
for individual endpoints; however, to compare or ag-
gregate benefits across endpoints, the benefits must
be monetized. Assigning a monetary value to avoided
incidences of each effect permits a summation, in terms
of dollars, of monetized benefits realized as a result
of the CAA, and allows that summation to be com-
pared to the cost of the CAA.

    For the present analysis of health and welfare ben-
efits, valuation estimates were obtained from the eco-
nomic literature, and are reported in dollars per case
reduced for health effects and dollars per unit of
avoided damage for welfare effects.55 Similar to esti-
mates of physical effects provided by health studies,
each of the monetary values of benefits applied in this
analysis is reported in terms of a mean value and a
probability distribution around the mean estimate. The
statistical form of the probability distribution used for
the valuation measures varies by endpoint. For ex-
ample, while the estimate of the dollar value of an
avoided premature mortality  is described by the
Weibull distribution, the estimate for the value of a
reduced case of acute bronchitis is assumed to be uni-
formly distributed between a minimum and maximum
value.

Methods for Valuation of Health
and Welfare  Effects

    In environmental benefit-cost analysis, the dollar
value of an environmental benefit (e.g., a health-re-
lated improvement in environmental quality) conferred
on a person is the dollar amount such that the person
would be indifferent between having the environmen-
tal benefit and having the money. In some cases, this
value is measured by studies which estimate the dol-
lar amount required to compensate a person for new
or additional exposure to an adverse effect. Estimates
derived in this manner are referred to as "willingness-
to-accept" (WTA) estimates. In other cases, the value
of a welfare change is measured by estimating the
amount of money a person is willing to pay to elimi-
nate or reduce a current hazard. This welfare change
concept is referred to as "willingness-to-pay" (WTP).
For small changes in risk, WTP and WTA are virtu-
ally identical, primarily because the budget constraints
normally associated with expressions of WTP are not
significant enough to drive a wedge between the esti-
mates. For larger risk changes, however, the WTP and
WTA values may diverge, with WTP normally being
less than WTA because of the budget constraint ef-
fect. While the underlying economic valuation litera-
ture is based on studies which elicited expressions of
WTP and/or WTA, the remainder of this report refers
to all valuation coefficients as WTP estimates. In some
cases (e.g., stroke-related hospital admissions), nei-
ther WTA nor WTP estimates are available and WTP
is approximated by cost of illness (COI) estimates, a
clear underestimate of the true welfare change since
important value components (e.g., pain and suffering
associated with the stroke) are not reflected in the out-
of-pocket costs for the hospital stay.

   For most goods, WTP can be observed by exam- •
ining actual market transactions. For example, if a
gallon of bottled drinking water sells for one dollar, it
can be observed that at least some persons are willing
to pay one  dollar for such water. For goods that are
not exchanged in the market, such as most environ-
mental "goods," valuation is  not so straightforward.
Nevertheless, value may be inferred from observed
behavior, such as through estimation of the WTP for
mortality risk reductions based on observed sales and
prices of safety devices such as smoke detectors. Al-
ternatively, surveys may be used in an attempt to elicit
directly WTP for an environmental improvement.

   Wherever possible, this analysis uses estimates
of the mean WTP of the U.S. population to avoid an
environmental effect as the value of avoiding that ef-
fect. In some cases, such estimates are not available,
and the cost of mitigating or avoiding the effect is
used as a rough estimate of the value of avoiding the
effect. For example, if an effect results in hospitaliza-
tion, the avoided medical costs were considered as a
possible estimate of the value of avoiding the effect.
Finally, where even the "avoided cost" estimate is not
available, the analysis relies on other available meth-
ods to provide a rough approximation of WTP. As
noted above, this analysis uses a range of values for
most environmental effects, or endpoints. Table 13
    55 The literature reviews and valuation estimate development process is described in detail in Appendix I and in the referenced
supporting reports.	™	
                                                43

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 The Benefits and Costs of the Clean Air Act, 1970 to 1990
Table 13. Kbalth and Welfare Effects Unit Valuation
(1990 dollars).
Mortality
Chronic Bronchitis
IQ Changes
Lost IQ fbints
IQ<70
Hypertension
Strokes*
Coronary Heart Disease
Hospital Admissions
Ischemic Heart Disease
Congestive Heart Failure
COPD
Pneumonia
All Respiratory
Respiratory Illness and Symptoms
Acute Bronchitis
Acute Asthma
Acute Respiratory Symptoms
Upper Respiratory Symptoms
Lower Respiratory Symptoms
Shortness of Breath
Work Loss Days
Mild Restricted Activity Days
Welfare Benefits
Visibility
Household Soiling

Decreased Worker Productivity
Agriculture (Net Surplus)
PM&Pb
PM

Pb "
Pb
Pb
Pb
Pb

PM
PM
PM&Oj
PM&03 „
pMj&bj -'

PM
PM&tt . _
PM, Qj, NOj,"S
PM
PM
PM
PM
PM&Oj

DeciView
PM „

Qt
P».

$4,800,000 ,,per case
$260,000 per case,
"" - .',. > *
M&OOO per IQ. point
$42,000 per case'* '
$680 j>erea$e
-$200,000 per case-m ales
$150,000 per«ase»
'< females ,
"' $52,-OvOO per ease
? ' > •'-
$10^300 «per case 6" £
$8,1,00* j^t-case ,(^
/ ; ^;S|J2I -/;
;'-">•" '$6,100^1^ , I
^ ' w^ ^^ ^
$45 per case
^>a ^i ^ $32 percase* , ^
o'i - ; « -$XS_ per ease *'-„•<
~ "$19 per ease v^ "^
"^jl^Zv^wcaas* ' J£
"I5L30 per day ' ""
,,^ "$83 'per (Jay
'--'' •->^' ,'
*^"2^sr*
$2.50 ApeF^juseliold
dianEge
*i **f r
Estimated CLs^^iti' ;A •
f, ,vx. ^. ,\V f:
 * Strokes are comprised of atherothrombotid bratuitoritjpiis and cefebroyasi
 accidents; both areestimated to have the same monetsrytvalue.     ^'{,^'^1 f *
 ** Decreased productivity valued as change in, daily ?ya,gesf $1 perwoiitSjy>er 10^
 decrease in O).                       ^a-—"^?-^ •>
 provides a summary of the mean unit value estimates
 used in the analysis. The full range of values can be
 found in Appendix I.

 Mortality

     Some forms of air pollution increase the probabil-
 ity that individuals will die prematurely. The concen-
 tration-response functions for mortality used hi this
 analysis express this increase in mortality risk as cases
        of "excess premature mortality" per time pe-
        riod (e.g., per year).

            The benefit, however, is the avoidance
        of small increases in the risk of mortality. If
        individuals' WTP to avoid small increases in
        risk is summed over enough individuals, the
        value of a statistical premature death avoided
        can be  inferred.56 For expository purposes,
        this valuation is expressed as  "dollars per
        mortality avoided," or "value of a statistical
        life" (VSL), even though the actual valuation
        is of small changes in mortality risk.

            The mortality risk valuation  estimate
        used in this study is based on an analysis of
        26  policy-relevant  value-of-life studies (see
        Table 14). Five of the 26 studies are contin-
        gent valuation (CV) studies, which directly
        solicit WTP information from subjects; the
        rest are wage-risk studies, which base WTP
        estimates on estimates of the additional com-
        pensation demanded in the labor market for
        riskier jobs. The Project Team used the best
        estimate from each of the 26 studies to con-
        struct a distribution of  mortality risk valua-
        tion estimates for the section 812 study. A
        Weibull distribution, with a mean of $4.8 mil-
        lion and standard deviation of $3.24 million,
        provided the best fit to the 26 estimates. There
        is considerable  uncertainty associated with
        this approach, however, which is discussed
        in detail later hi this chapter and in Appen-
        dix!.

            In addition, the Project Team developed
        alternative calculations based on a life-years
        lost approach. To employ the value of statis-
        tical life-year (VSLY) approach, the Project
        Team had to first estimate the age distribu-
        tion of those lives which would be saved by
        reducing air pollution. Based on life expect-
ancy tables, the life-years saved from each statistical
life saved within each age and sex cohort were calcu-
lated. To value these statistical  life-years, a concep-
tual model was hypothesized which depicted the rela-
tionship between the value of life and the value of
life-years. As noted earlier in Table 9, the average
number of life-years saved across all age groups
for which  data were available are 14  for PM-
related mortality and 38 for Pb-related mortality. The
     ** Because people are valuing small decreases in the risk of premature mortality, it is expected deaths that are inferred. For
example, suppose that a given reduction in pollution confers on each exposed individual a decrease in mortal risk of 1/100,000. Then
among 100,000 such individuals, one fewer individual can be expected to die prematurely . If each individual's WTP for that risk
reduction is $50, then the implied value of a statistical premature death avoided is $50 x 100,000 = $5 million.	
                                                    44           '

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                                                                               Chapter 6: Economic Valuation
          Surrunary 'of Mortality Valuation Estimates
                         ""
  Butter 09»3)
  Mller an)
  Qegax et af'^SS)"
  Marin and'jfcacharopoulos
  Kaeisner an
                  4.1
                  4.S
                  7.2
                 " 7.3
                  9.1s
average for PM, in particular, differs from the 35-year
expected remaining lifespan derived from existing
wage-risk studies.57

    Using the same distribution of value of life esti-
mates used above (i.e. the Weibull distribution with a
mean estimate of $4.8 million), a distribution for the
value of a life-year was then estimated and combined
with the total number of estimated life-years lost. The
details of these calculations are presented  in Appen-
dix!

Survey-Based  Values

    Willingness-to pay for environmental improve-
ment is often elicited through survey methods  (such
as the "contingent  valuation" method). Use of such
 methods in this context is controversial within the
 economics profession. In general, economists prefer
 to infer WTP from observed behavior. There are times
 when such inferences are impossible, however, and
 some type of survey technique may be the only means
 of eliciting WTP. Economists'  beliefs regarding the
 reliability of such survey-based data cover a broad
 spectrum, from unqualified acceptances of the results
 of properly-conducted surveys  to outright rejections
 of all survey-based valuations.

    In this analysis, unit valuations which rely exclu-
 sively on the contingent valuation method are chronic
 bronchitis, respiratory-related ailments, minor re-
 stricted activity days, and visibility. As indicated
 above, the value derived for excess premature mortal-
 ity stems from 26 studies, of which five use the con-
 tingent valuation method. These five studies are within
 the range of the remaining 21 labor market studies.
 All five report mortality valuations lower than the
 central estimate used in this analysis. Excluding the
 contingent valuation studies from the mortality valu-
 ation estimate would yield a central estimate approxi-
 mately ten percent higher than the 4.8 million dollar
 value reported above. The endpoints with unit valua-
 tions based exclusively on contingent valuation ac-
 count for approximately 30 percent of the present value
 of total .monetized benefits. Most of the CV-based
 benefits are attributable to avoided cases of chronic
 bronchitis.

    Chronic Bronchitis

    The best available estimate of WTP to avoid a
 case of chronic bronchitis (CB) comes from "Viscusi
 et al.(1991). The case of CB described to the respon-
 dents in the "Viscusi study, however, was described by
 the authors as  a severe case. The Project Team em-
 ployed an estimate of WTP to avoid a pollution-re-
 lated case of CB that was based on adjusting the WTP
 to avoid  a severe case, estimated by Viscusi et al.
 (1991), to account for the likelihood that an average
 case of pollution-related CB is  not as severe as the
 case described in the Viscusi study.

    The central tendency estimate of WTP to avoid a
pollution-related case of chronic bronchitis (CB) used
in this analysis is the mean of a distribution of WTP
estimates. This distribution incorporates the uncer-
tainty from three sources: (1) the WTP to avoid a case
of severe CB, as described by Viscusi et al., 1991; (2)
the severity level of an average pollution-related case
    "See, for example, Moore and Viscusi (1988) or Viscusi (1992).
                                                   45

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The Benefits and Costs of the Clean Air Act, 1970 to 1990
of CB (relative to that of the case described by Viscusi
et al.(1991); and (3) the elasticity of WTP with re-
spect to severity of the illness. Based on assumptions
about the distributions of each of these three uncer-
tain components, a  distribution of WTP to  avoid a
pollution-related case of CB was derived by Monte
Carlo methods. The mean of this" distribution, which
was about $260,000, is taken as the central tendency
estimate of WTP to  avoid a pollution-related case of
CB. The three underlying distributions, and the gen-
eration of the resulting distribution of WTP, are de-
scribed in Appendix I.

    Respiratory-Related Ailments

    In general, the valuations assigned to the respira-
tory-related ailments listed in Table 14  represent  a
combination of willingness to pay estimates for indi-
vidual symptoms which comprise each ailment. For
example, a willingness to pay estimate to avoid the
combination of specific upper respiratory symptoms
defined in the concentration-response relationship
measured by Pope et al. (1991) is not available. How-
ever, while that study defined upper respiratory symp-
toms as one suite of ailments (runny or stuffy nose;
wet cough; and burning, aching, or red eyes), the valu-
ation literature reported individual WTP estimates for
three closely matching symptoms (head/sinus conges-
tion, cough, and eye irritation). The available WTP
estimates were therefore used as a surrogate to the
values for the precise symptoms defined in the con-
centration-response study.

    To capture the uncertainty associated with the
valuation of respiratory-related ailments, this analy-
sis incorporated a range of values reflecting the fact
that an ailment, as defined in the concentration-Re-
sponse relationship, could be comprised of just one
symptom or several. At the high end of the range,khe
valuation represents an aggregate of WTP estimates
for several individual symptoms. The low end repre-
sents the value of avoiding a single mild symptom.

     Minor Restricted Activity Days

     An individual suffering from a single severe or a
 combination of pollution-related symptoms may ex-
 perience a Minor Restricted Activity Day (MRAD).
 Krupnick and Kopp (1988) argue that mild symptoms
 will not be sufficient to result in a MRAD, so that
 WTP to avoid a MRAD should exceed WTP to avoid
 any single mild symptom. On the other hand, WTP to
 avoid a MRAD should not exceed the WTP to avoid a
work loss day (which results when the individual ex-
periences more severe symptoms). No studies are re-
ported to have estimated WTP to avoid a day of mi-
nor restricted activity. Instead, this  analysis  uses an
estimate derived from WTP estimates for avoiding
combinations of symptoms which may result  in a day
of minor restricted activity ($38 per day). The uncer-
tainty range associated with this value extends from
the highest value for a single symptom to the value
for a work loss day. Furthermore, the distribution ac-
knowledges that the actual value is likely to be closer
to the central estimate than either extreme.

    Visibility

    The value of avoided visibility impairment was
derived from existing contingent valuation studies of
the household WTP to improve visibility, as reported
in the economics literature. These studies were used
to define a single, consistent basis for the valuation of
visibility benefits nationwide. The  central tendency
of the benefits estimate is based on an annual WTP of
$14 per household  per unit improvement in the
DeciView index, with upper and lower bounds of $21
and $8, respectively, on the uncertainty range of the
estimate.

Avoided Cost Estimates

     For some health effects, WTP  estimates are not
available, and the Project Team instead used "costs
avoided" as a substitute for WTP. Avoided costs were
used to value the following endpoints: hypertension,
hospital admissions,  and household soiling.

Hypertension and Hospital  Admissions

     Avoided medical costs and the avoided cost of lost
work time were used to value hypertension (high blood
pressure) and hospital admissions (this includes hos-
pital admissions  for respiratory ailments as well as
heart disease, heart attacks, and strokes).

     For those hospital admissions which were speci-
fied to be the initial hospital admission (in particular,
hospital admissions for coronary heart disease (CHD)
events and stroke), avoided cost estimates should con-
 sist of the  present discounted value of the stream of
medical expenditures related to the illness, as well as
the present discounted value of the stream of lost earn-
 ings related to the illness. While an estimate of present
 discounted value of both medical  expenditures and
 lost earnings was available for  stroke ($200,000  for
                                                 46

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                                                                             Chapter 6: Economic Valuation
 males and $150,000 for females), the best available
 estimate for CHD ($52,000) did not include lost earn-
 ings. Although no published estimates of the value of
 lost earnings due to CHD events are available, one
 unpublished study suggests that this value could be
 substantial, possibly exceeding the value of medical
 expenditures. The estimate of $52,000 for CHD may
 therefore be a substantial underestimate. The deriva-
 tions of the avoided cost estimates for CHD and stroke
 are discussed in Appendix G.

    In those cases for which it is unspecified whether
 the hospital admission is the initial one or not (that is,
 for all hospital admissions endpoints other than CHD
 and stroke), it is unclear what portion of medical ex-
 penditures and lost earnings after hospital discharge
 can reasonably be attributed to pollution exposure and
 what portion might have resulted from an individual's
 pre-existing condition even in the absence of a par-
 ticular pollution-related hospital  admission. In such
 cases, the estimates of avoided cost include only those
 costs associated with the hospital stay, including the
 hospital charge, the associated physician charge, and
 the lost  earnings while in  the hospital ($6,100 to
 $10,300, depending on  the ailment for which hospi-
 talization is required).

    The estimate of avoided cost for hypertension in-
 cluded physician charges, medication costs, and hos-
 pitalization costs, as well as the cost of lost work time,
 valued at the rate estimated for a work loss day (see
 discussion below). Based on this approach, the value
 per year of avoiding a case of hypertension is taken to
 equal the sum of medical costs per year plus  work
 loss costs per year; the resulting value is $680 per case
 per year.

    Presumably, willingness-to-pay  to avoid the  ef-
 fects (and treatment) of hypertension would reflect
 the value of avoiding any associated  pain and suffer-
 ing, and the value placed on dietary changes, etc. Like- "
 wise, the value of avoiding a health effect that would
require hospitalization or doctor's care would include
the value of avoiding the pain and suffering caused
by the health effect as well as lost leisure time, in ad-
dition  to medical costs  and lost work time. Conse-
quently, the valuations for these endpoints used in this
analysis likely represent lower-bound estimates of the
true social values for avoiding such health effects.
 Household Soiling

    This analysis values benefits for this welfare ef-
 fect by considering the avoided costs of cleaning
 houses due to particulate matter soiling. The Project
 Team's estimate reflects the average household's an-
 nual cost of cleaning per ug/m3  particulate matter
 ($2.50). Considered in this valuation are issues such
 as the nature of the particulate matter, and the propor-
 tion of households likely to do the cleaning themselves.
 Since the avoided costs of cleaning used herein do
 not reflect the loss of leisure time (and perhaps work
 time) incurred by  those who do their own cleaning,
 the valuation function likely underestimates true WTP
 to avoid additional soiling.

 Other  Valuation Estimates

 Changes in Children's IQ

    One of the major effects of lead exposure is  per-
 manently impaired cognitive development in children.
 No ready estimates of society's WTP for improved
 cognitive  ability are currently available. Two effects
 of IQ decrements can be monetized, however: reduc-
 tions in expected lifetime income, and increases in
 societal expenditures for compensatory education.
 These two effects almost certainly understate the WTP
 to avoid impaired cognitive development in children,
 and probably should be considered lower bound esti-
 mates. In  the  absence  of better estimates, however,
 the Project Team has assumed that the two monetized
 effects represent a useful approximation of WTP.

    The effect of IQ on expected lifetime income com-
 prises a direct and an indirect effect. The direct effect
 is drawn from studies that estimate, all else being
 equal, the effect of IQ on income. The indirect effect
 occurs as  a result  of the influence of IQ  on educa-
 tional attainment: higher IQ leads to more years of
 education, and more education leads in turn to higher
 expected future income. However, this indirect ben-
 efit is mitigated, but not eliminated, by the added costs
 of the additional education and by the potential earn-
 ings forgone by the student while enrolled in school.58
Combining the direct and indirect influences, the net
effect of higher IQ on expected lifetime income (dis-
    58 Theoretically, the indirect effect should be small relative to the direct effect of IQ on future earnings. The empirical research
used to derive values for this analysis, however, implies that the indirect effect is roughly equal in magnitude to the direct effect. One
can infer from this information that there is a market distortion of some sort present (such as imperfect knowledge of the returns to
education), or, perhaps, that individuals make their education "investments" for purposes other than (or in addition to) "maximizing
lifetime income." See Appendix G for further discussion of this issue.

                                                  47

-------
 The Benefits and Costs of the Clean Air Act, 1970 to 1990
 counted to the present at five percent) is estimated to
 be $3,000 per additional IQ point.

    In this analysis, it is assumed that part-time com-
 pensatory education is required for all children with
 IQ less than 70. The Project Team assumed that the
 WTP to avoid cases of children with IQ less than 70
 can be approximated by the cost ($42,000 per child)
 of part-time special education in regular classrooms
 from grades one through twelve (as opposed to inde-
 pendent special education programs), discounted  to
 the present at five percent. See Appendix G for more
 detail  on valuation methods and data sources for IQ
 effects and other lead-related health impacts.

 Work Loss Days and Worker
 Productivity

    For this analysis, it was assumed that the median
 daily 1990 wage income of 83 dollars was a reason-
 able approximation of WTP to avoid a day of lost
 work.  Although a work loss day may or may not af-
 fect the income of the worker, depending on the terms
 of employment, it does affect economic output and is
 thus a  cost to society. Conversely, avoiding the w,0rk
 loss day is a benefit.

    A  decline in worker productivity has  been mea-
 sured in outdoor workers exposed to ozon,e. Reduced
 productivity is measured in terms of the/reduction  in
 daily income of the average worker engaged in strenu-
 ous outdoor labor, estimated at $1 per 10 percent in-
 crease  in ozone concentration.

 Agricultural Benefits

    Similar to the other welfare effects, the agricul-
 tural benefits analysis estimated benefits in dollars per
 unit of avoided damage, based on estimated changes
 in crop yields  predicted by an  agricultural sector
 model. This model incorporated agricultural  price,
farm policy, and other data for each year. Based on
expected yields, the model estimated the production
levels for each crop, and the economic benefits to con-
sumers, and to producers, associated with these pro-
duction levels. To the extent that alternative exposure-
response relationships were available, a range of po-
tential  benefits was calculated (see Appendix F).
 Valuation Uncertainties

    The Project Team attempted to handle most valu-
 ation uncertainties explicitly and quantitatively by
 expressing values as distributions (see Appendix I for
 a complete description of distributions employed),
 using a Monte-Carlo simulation technique to apply
 the valuations to physical effects (see Chapter 7) with
 the mean of each valuation distribution equal to the
 "best estimate" valuation. This approach does not, of
 course, guarantee that all uncertainties have been ad-
 equately characterized, nor that the valuation estimates
 are unbiased. It is possible that the actual WTP to avoid
 an air pollution-related impact is outside of the range
 of estimates used in this analysis. Nevertheless, the
 Project Team believes that the distributions employed
 are reasonable approximations of the ranges of uncer-
 tainty, and that there is no compelling reason to be-
 lieve that the mean values employed are systemati-
 cally biased (except for the IQ-related and avoided
 cost-based values, both of which probably underesti-
mate WTP).

    One particularly important area of uncertainty is
 valuation of mortality risk reduction. As noted in Chap-
 ter  7, changes in mortality risk are a very important
 component of aggregate benefits, and  mortality  risk
 valuation is an extremely large component of the quan-
 tified uncertainty. Consequently, any uncertainty con-
 cerning mortality risk valuation beyond that addressed
 by the quantitative uncertainty assessment (i.e., that
 related to the Weibull distribution with a mean value
 of $4.8 million) deserves note. One issue merits spe-
cial attention: uncertainties and possible biases related
to the "benefits transfer" from the 26 valuation source
 studies to valuation of reductions in PM-related mor-
tality rates.

 Mortality Risk Benefits Transfer

    Although  each of the mortality risk valuation
source studies (see Table 14) estimated the average
WTP for a given reduction in mortality risk, the de-
gree of reduction in risk being valued  varied across
studies and is not necessarily the same as the degree
of mortality risk reduction estimated in this analysis.
The transferability of estimates of the value of a sta-
tistical life from the 26 studies to the section 812 ben-
efit analysis rests on the assumption that, within a rea-
sonable range, WTP for reductions in mortality risk
is linear in risk reduction. For example, suppose a study
                                                 48

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                                                                             Chapter 6: Economic Valuation
 estimates that the average WTP for a reduction in
 mortality risk of 1/100,000 is 50 dollars, but that the
 actual mortality risk reduction resulting from a given
 pollutant reduction is 1/10,000. If WTP for reductions
 in mortality risk is linear in risk reduction, then a WTP
 of 50 dollars for a reduction of 1/100,000 implies a
 WTP of 500 dollars for a risk reduction of 1/10,000
 (which is ten times the risk reduction valued in the
 study). Under the assumption of linearity, the estimate
 of the value of a statistical life does not depend on the
 particular amount of risk  reduction being valued.

     Although the particular amount of mortality risk
 reduction being valued in a study may not affect the
 transferability of the WTP estimate from the study to
 the benefit analysis, the characteristics of the study
 subjects and the nature of the mortality risk being val-
 ued in the study could be important. Certain charac-
 teristics of both the population affected and the mor-
 tality risk facing that population are believed to affect
 the average WTP to reduce risk. The appropriateness
 of the mean of the WTP estimates from the 26 studies
 for valuing the mortality-related benefits of reductions
 in pollutant concentrations therefore depends not only
 on the quality of the studies (i.e., how well they mea-
 sure what they are trying to measure), but also on (1)
 the extent to which the subjects in the studies are simi-
 lar to the population affected by changes in air pollu-
 tion and (2) the extent to which the risks being valued
 are similar.

    The substantial majority of the 26 studies relied
 upon are  wage-risk (or labor market) studies. Com-
 pared with the subjects in these wage-risk studies, the
 population most affected by air pollution-related mor-
 tality risk changes is likely to be, on average, older
 and probably more risk averse. Some evidence sug-
 gests that approximately 85 percent of those identi-
 fied in short-term ("episodic") studies who die pre-
 maturely from PM-related causes are over 65.59 The
 average age of subjects in wage-risk studies, in con-
 trast, would be well under 65.

    The direction of bias resulting from the age dif-
 ference is unclear. It could be argued that, because an
 older person has fewer expected years left to lose, his
 or her WTP  to reduce mortality risk would be less
than that of a younger person. This hypothesis is sup-
ported by one empirical study, Jones-Lee et al. (1985),
which found WTP to avoid mortality risk at age 65 to
 be about 90 percent of what it is at age 40. On the
 other hand, there is reason to believe that those over
 65 are, in general,  more risk averse than the general
 population, while  workers  in wage-risk studies are
 likely to be less risk averse than the general popula-
 tion. Although the list of 26 studies used here excludes
 studies that consider only much-higher-than-average
 occupational risks, there is nevertheless likely to be
 some selection bias in the remaining studies—that is,
 these studies are likely to  be based on samples of
 workers who are, on average, more risk-loving than
 the general population. In contrast, older people as a
 group exhibit more risk-averse behavior.

    There is substantial evidence that the income elas-
 ticity of WTP for  health risk reductions is positive
 (although there is uncertainty about the exact value of
 this elasticity). Individuals  with higher incomes (or
 greater wealth) should, then, be willing to pay more
 to reduce risk, all  else equal, than individuals with
 lower incomes or wealth. The comparison  between
 the (actual and potential) income or wealth of the
 workers in the wage-risk studies versus that of the
 population of individuals most likely to be affected
 by changes in pollution concentrations,  however, is
 unclear. One could  argue that because the elderly are
 relatively wealthy, the affected population is  also
 wealthier, on average, than are the wage-risk study
 subjects, who tend to be middle-aged (on average)
 blue-collar workers. On the other hand, the workers
 in the wage-risk studies will  have potentially more
 years remaining in which to acquire streams of in-
 come from future earnings. In addition, it is  possible
 that among the elderly  it is largely the poor elderly
 who are most vulnerable to air pollution-related mor-
 tality risk (e.g., because of generally poorer health
 care). On net, the potential income comparison is un-
 clear.

    Although there may be several ways in which job-
 related mortality risks differ from air pollution-related
 mortality risks, the most important difference may be
 that job-related risks are incurred voluntarily whereas
 air pollution-related risks are incurred involuntarily.
 There is some evidence60 that people will pay more to
 reduce involuntarily incurred risks than risks incurred
 voluntarily. If this is the case, WTP estimates based
on wage-risk studies may be downward biased esti-
mates of WTP to reduce involuntarily incurred air
pollution-related mortality risks.
    59 See Schwartz and Dockery (1992), Ostro et al. (1995), and Chestnut (1995).
    ""See, for example, Violette and Chestnut, 1983.

                                                  49

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The Benefits and Costs of the Clean Air Act, 1970 to 1990
    Finally, another important difference related to the
nature of the risk may be that some workplace mortal-
ity risks tend to involve sudden, catastrophic events,
whereas air pollution-related risks tend to involve
longer periods of disease and suffering prior to death.
Some evidence suggests that WTP to avoid a risk of a
protracted death involving prolonged suffering and
loss of dignity and personal control is greater than the
WTP to avoid a risk (of identical magnitude) of sud-
den death. To the extent that the mortality risks ad-
dressed in this assessment are associated with longer
periods of illness or greater pain and  suffering than
are the risks addressed in the valuation literature, the
WTP measurements employed in the present analysis
would reflect a downward bias.

    The potential sources of bias introduced by rely-
ing on wage-risk studies to derive an estimate of the
WTP to reduce air pollution-related mortality risk are
summarized in Table  15. Among these potential bi-
ases, it is disparities in age and income between the
subjects of the wage-risk  studies and  those affected
by air pollution which have thus far motivated spe-
cific suggestions for quantitative adjustment61; how-
ever, the appropriateness and the proper magnitude of
such potential adjustments remain unclear given pres-
ently available information. These uncertainties are
particularly  acute given the possibility that age and
income biases might offset each other in the case  of
pollution-related mortality risk aversion. Furthermore,
the other potential biases discussed above, and sum-
marized in Table 16,  add additional uncertainty re-
garding the transferability of WTP estimates from
wage-risk studies to environmental policy and pro-
gram assessments.
Table 15. Estimating Mortality Risk Based <3a Wage- /
Risk Studies: Potential Sources and Ukeiy*Direcii&n of
Bias.
Ftctor
Age
Degree of Risk Aversion
Income
Voluntary vs.
Involuntary
Catastrophic vs.
Protracted Death
Likdy Direction of Bia$ in WTS**
EsSatiee ' :
ttocertaia, perhaps upwrf
Downward _ ',
Uncertain
Downward

Uncertain, perhaps downward
    61 Chestnut, 1995; IEc, 1992.
                                                  50

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7
Results  and  Uncertainty
    This chapter presents a summary of the monetized
benefits of the CAA from  1970 to 1990,  compares
these with the corresponding costs, explores some of
the major sources of uncertainty in the benefits esti-
mates, and presents alternative results reflecting di-
verging viewpoints on two key variables: PM-related
mortality valuation and the  discount rate.

    Monetized economic benefits for the 1970 to 1990
period were derived by  applying the unit valuations
discussed in Chapter 6 to the stream of physical ef-
fects estimated by the method documented in Chapter
5. The range of estimates for monetized benefits is
based on the quantified uncertainty associated with
the health and welfare effects estimates and the quan-
tified uncertainty  associated with the unit valuations
applied to them. Quantitative estimates of uncertain-
ties in earlier steps of the analysis (i.e., estimation of
compliance costs,62 emissions changes, and air qual-
ity changes) could not be adequately developed and
are therefore not  applied in the present study. As a
result, the range of estimates for monetized benefits
presented in this chapter is narrower than would be
expected with a complete accounting of the uncertain-
ties in all analytical components. However,  the uncer-
tainties in the estimates of  physical effects and unit
values are considered to be large relative to these ear-
lier components. The characterization of the  uncer-
tainty surrounding unit valuations is discussed in de-
tail in Appendix I. The characterization of the uncer-
tainty surrounding health and welfare effects estimates,
as well as the characterization of overall uncertainty
surrounding monetized benefits, is discussed below.
Quantified Uncertainty in the
Benefits Analysis

    Alternative studies published in the scientific lit-
erature which examine the health or welfare conse-
quences of exposure to a given pollutant often obtain
different estimates of the concentration-response (CR)
relationship between the pollutant and the effect. In
some instances the differences among CR functions
estimated by, or derived from, the various studies are
substantial. In addition to sampling error, these dif-
ferences may reflect actual variability of the concen-
tration-response relationship across locations. Instead
of a single CR coefficient characterizing the relation-
ship between an endpoint and a pollutant in the CR
function, there could be a distribution of CR coeffi-
cients which reflect geographic differences.63 Because
it is not feasible to estimate the CR coefficient for a
given endpoint-pollutant combination in each county
in the nation, however, the national benefits analysis
applies the mean of the distribution of CR coefficients
to each county. This mean is estimated based on the
estimates of CR coefficients reported in the available
studies and the information about the uncertainty of
these estimates, also reported in the studies.

    Based on the assumption that for each endpoint-
pollutant combination there is a distribution of CR
coefficients, the Project team used a Monte Carlo ap-
proach to estimate the mean of each distribution and
to characterize the uncertainty surrounding each esti-
mate. For most health and welfare effects, only a single
study is considered. In this case, the best estimate of
the  mean of the distribution of CR coefficients is the
reported estimate in the study. The uncertainty sur-
rounding the estimate of the mean CR coefficient is
    62 Although compliance cost estimation is primarily of concern to the cost side of this analysis, uncertainty in the estimates for
compliance costs does influence the uncertainty in the benefit estimates because compliance cost changes were used to estimate
changes in macroeconomic conditions which, in turn, influenced the estimated changes in emissions, air quality, and physical effects.
    63 Geographic variability may result from differences in lifestyle (e.g., time spent indoors vs outdoors), deposition rates, or other
localized factors which influence exposure of the population to a given atmospheric concentration of the pollutant.

                                                 51

-------
 The Benefits and Costs of the Clean Air Act, 1970 to 1990
best characterized by the standard error of the reported
estimate. This yields a normal distribution, centered
at the reported estimate of the mean. If two or more
studies are considered for a given endpoint-pollutant
combination, a normal distribution is derived for each
study, centered at the mean estimate reported in the
study. On each iteration of a Monte Carlo procedure,
a CR coefficient is randomly selected from each of
the normal distributions,  and the selected values are
averaged. This yields an estimate of the mean CR co-
efficient for that endpoint-pollutant combination. It-
erating this procedure many times results in a distri-
bution of estimates of the mean CR coefficient.

    Each estimate randomly selected from this distri-
bution was evaluated for each county in the nation,
and the results were aggregated into an estimate of
the national incidence of the health or welfare effect.
Through repeated sampling from the distribution of
mean CR coefficients, a distribution of the estimated
change in effect outcomes due to the change in air
quality between the control and no-control scenarios
was generated.

    Once a distribution of estimated outcomes was
generated for each health and welfare effect, Monte
Carlo methods were used again to characterize the
overall uncertainty surrounding monetized benefits.
For each health and welfare effect in a set of non-
overlapping effects, an estimated incidence was ran-
domly selected from the distribution of estimated in-
cidences for that endpoint, and a unit value was ran-
domly selected from the corresponding distribution
of unit values, on each iteration of the Monte Carlo
procedure. The estimated monetized benefit for that
endpoint produced on that iteration is the product of
these two factors. Repeating the process many times
generated a distribution of estimated monetized ben-
efits by endpoint. Combining the results for the indi-
vidual endpoints using the Monte Carlo procedure
yielded a distribution of total estimated monetized
benefits for each target year (1975, 1980, 1985 and
1990). This technique enabled a representation  of
uncertainty in current scientific and economic opin-
ion in these benefits estimates.


Aggregate Monetized Benefits

    For each of the target years of the analysis, the
monetized benefits associated with the different health
and welfare effects for that year must be aggregated.
These aggregate benefits by target year must theft be
aggregated across the entire 1970 to 1990 period  of
the study to yield a present discounted value of aggre-
gate benefits  for the period. The issues involved  in
each stage of aggregation, as  well as the results  of
aggregation, are presented in  this section. (The de-
tailed results for the target years are presented in Ap-
pendix I.)
     Table 16. Present Value of 1970 to 1990-Monetized Benefits by Bfldpoiat Category for 48 State
     Population (billions of $1990, discounted to 1990; at< 5* percent).
Endpoint Pollutants)
Mortality ' • - , PM
Mortality Pb „ „
Chronic Bronchitis • , "PM
IQ (Lost IQPts. * Children w/IQ<70) Pi>
Hypertension Pi? <• -»«„
Hospital Admissions „ ' ' PM^O3rPb, &COv
Respiratory-Related Symptoms, Restricted PM , O3, N,Q'i & S02
Activity, & Decreased Productivity • "
Soiling Damage PM
Visibility * --- partJculates,
Agriculture (Net Surplus) O3
Present Valae
5th %Ue
$2,369
' $m
$409
$27,1
$77
$27
$123

$6
$38
$11
Mean
$16,632
$1,330
$3,313
,$399
$98
$57
$182

$74
"$S4
$23
95ffl %ile
$40,597
$3,910
- <$1 0,401
$551
' $120
$120
$261

$192
$71
$35
                                                52

-------
                                                                        Chapter 7: Results and Uncertainty
    Table 16 presents monetized benefits for each
quantified and monetized health and welfare endpoint
(or group of endpoints), aggregated from 1970 to 1990.
The mean estimate resulting from the Monte Carlo
simulation is presented, along with the measured cred-
ible range (upper and lower fifth percentiles of the
distribution). Aggregating the stream, of monetized
benefits across years involved compounding the stream
of monetized benefits estimated for each year to the
1990 present value (using a five percent discount rate).

    Since the present value estimates combine streams
of benefits from 1970 to 1990, the calculation required
monetized estimates for each year. However, Monte
Carlo modeling was carried out only for the four tar-
get years (1975, 1980, 1985 and 1990).  In the inter-
vening years, only a central estimate of benefits was
estimated for each health and welfare endpoint (by
multiplying the central incidence estimate for the given
year by the central estimate of the unit valuation). The
resulting annual benefit estimates provided a tempo-
ral trend of monetized benefits across the period re-
sulting from the annual changes in air quality. They
    Table 16 offers a comparison of benefits by health
or welfare endpoint. The effect categories listed in
the table are mutually exclusive, allowing the mon-
etized benefits associated with them to be added. It
should be noted, however, that the listed categories
combine estimates that are not mutually exclusive. To
avoid double counting, care was taken to treat the ben-
efits associated with overlapping effects as alterna-
tive estimates. For example, the  "Hospital Admis-
sions" category includes admissions for  specific ail-
ments (Pneumonia and COPD) as well as the broader
classification of "all respiratory" ailments. Clearly,
benefits accruing from the first two represent a subset
of the last and adding all three together would result
in an overestimate of total monetized benefits. To avoid
this, the sum of benefits from Pneumonia and COPD
was treated as an alternative to the benefits estimated
for all respiratory ailments (the sum of the first two
was averaged with the third). This issue of double-
counting also arose for two other cases of overlap-
ping health effects, both of which have been combined
into the "Respiratory-Related Symptoms, Restricted
Activity, & Decreased Productivity" category in Table
     Table 17." YotalMoHetizei Benefits for ^'StateTopulatiatf {-Present Vataejn billioris-'bf 1990$,-  -  -
    '''... -^)S'V'' ^  *  ff f/ '  	  ''f -f ' ~   ,  . ^Jf^fJ'J' ,' ' ' ' ' '           •.^              ^s If'ffj1^ J  •.              J      ••
    ''-d&coaated to 990 at 5 perc'entV> "• '
' -, "" J>> "'^ * ••/,<•• •* ' '
••" ™: ••*•>** , ,-„•-. .- - - -
y; , ' _ s\ ,v;,-
•>>*>-> ,,, , ,,,,„, *,'/?<•,>,' j ^,
;pOTALX?&Hiofe~Qfi990».xdued;eUars)
,",, ' ',~'' ' ' '"•' ' Present Value,,, ,,"'', .".-.'.
:,,;,,,,.,., , - -vv«
^;;;-'^;5tti«te,. ,>„.,.
';*;'; 7 $5^600 ":>-'~- '•'•'*
/. • 'is/lean
"'•'' $22300,.-- •
;7«;95tii «e, '"""'
$49,400,-,,,,,-,
did not, however, characterize the uncertainty associ-
ated with the yearly estimates for intervening years.
In an attempt to capture uncertainty associated with
these estimates, the Project Team relied on the ratios
of the 5th percentile to the mean and the 95th percen-
tile to the mean in the target years. In general, these
ratios were fairly constant across the target years, for
a given endpoint. The ratios were interpolated between
the target years, yielding ratios for the intervening
years. Multiplying the ratios for each intervening year
by the central estimate generated for that year pro-
vided estimates of the 5th and 95th percentiles, which
were used to characterize uncertainty about the cen-
tral estimate. Thus,  the present value of the stream of
benefits, including the credible range estimates, could
be computed.
16. First, acute bronchitis was treated as an alterna-
tive (i.e., averaged with) the combination of upper and
lower respiratory symptoms, since their definitions of
symptoms overlap. Second, various estimates of re-
stricted activity, with different degrees of severity,
were combined into a single benefit category.

    Table 17 reports the estimated total national mon-
etized benefits attributed in this analysis to the CAA
from 1970 to 1990. The benefits, valued in 1990 dol-
lars, range from $5.6 to $49.4 trillion with a central
estimate of $22.2 trillion. The Monte Carlo technique
was used to aggregate monetized benefits across end-
points. For each of several thousand iterations, a ran-
dom draw of the monetized benefits for each endpoint
was selected from the distributions summarized in
                                                  53

-------
The Benefits and Costs of the Clean Air Act, 1970 to 1990
Table 16 and the individual endpoint estimates were
then summed. This resulted in the distribution of total
national monetized benefits reported above.64

    The temporal pattern of benefits during the 1970
to 1990 period is related to the difference in emis-
sions between the control and no-control scenarios and
is magnified by population growth during that period.
As illustrated by Figure 18,  quantified annual ben-
efits increased steadily during the study period, with
the greatest increases occurring during the late 1970s.
The mean estimate of quantified annual benefits grew
from 355 billion dollars in  1975 (expressed as infla-
tion-adjusted 1990 dollars) to 930 billion  dollars hi
1980,1,155 billion dollars in 1985, and 1,248 billion
dollars in 1990.

    Figure 19 depicts the distribution of monetized
benefits for  1990 (similar distributions were gener-
ated for other years in the analysis period). The solid
vertical bars in the figure represent the relative fre-
quency of a given result in the 1990 Monte Carlo
analysis. The largest bar, located above the "<$1,000",
indicates that more Monte Carlo iterations  generated
monetized benefits of $900 billion to $1 trillion than
in any other $100 billion range bin, making this  the
modal bin. The expected value of the estimate for to-
tal monetized benefit for 1990 (i.e., the mean of the
distribution) is $1.25 trillion. The ninety percent con-
fidence interval, a summary description of the spread
of a distribution, is also noted hi the figure.
Figure 19. Distribution of 1990 Monetized Benefits of
CAA (in billions of 1990 dollars).
                                 Distribution SummarvfSBilllonjrt
                                     5th percentlle =  $329
                                     mean =      $1,250
                                     95th percentlle = $2,760
         v   v  v   R  R  R  R  5

         5th percentile       T Mean               95th peicentllef

                                 Total Monetary Benefits (S Billions)
Figure 18. Monte Carlo Simulation Model Results for
Target Years
S3.000T
"i"
5 $2,500-
§. $2,000-
a
g $1,500-
o
CD
•a $1,000-
3
tg
$500-

SO-












(in billions of 1990 dollars).










	












•1 Mean

'3;





•--:-'-•
<°*M




^ Mean

4 Elh%
<



^ %

!>°


4 85lh%




4] Mean


e| Elh%
•— i

Vti

^
_^

iC<

1
4 95th%




4 Mean



^ 51h%
4 «h% 	

1975 ' 1980 1985 1990
     On initial inspection, the estimated $1.25 trillion
 value for monetized benefits hi 1990 may seem im-
 plausibly large, even though 1990 is the year in which
 the differences between outcomes under the control
 and no-control scenarios are at their most extreme.
 The plausibility of this estimate may seem particu-
 larly  questionable  to some if one considers that the
 $1.25 trillion value for 1990 is over five percent of
 the estimated $22.8 trillion value for total 1990 assets
 of households and nonprofit organizations. Consid-
 ered from this perspective, $1.25 trillion may seem to
 represent a large share of total wealth, and some might
 question whether Americans would really be willing
 to pay this much money for the reductions in risk
 achieved by the Clean Air Act and related programs,
 even  if the risk in question involves premature death.
 However, in the end it is clear that such comparisons
 are overly simplistic and uninformative because they
 ignore the magnitude and nature of the welfare change
 being measured.

     First, with respect to the magnitude of the differ-
 ence  in estimated social welfare under the two sce-
 narios, it is important to recognize how severe air qual-
 ity conditions  and health risks would be under the
 hypothetical no-control scenario. Focusing on ambi-
 ent paniculate matter, the pollutant responsible for the
 vast majority of the estimated monetary benefits, a
 comparison of the estimated annual mean concentra-
 tions  of total suspended particulates (TSP) projected
 in the U.S.  under the no-control scenario with esti-
    64 Comparing Tables 16 and 17, it can be seen that the sum of benefits across endpoints at a given percentile level does not result
in the total monetized benefits estimate at the same percentile level in Table 17. For example, if the fifth percentile benefits of the
endpoints shown in Tkble 16 were added, the resulting total would be substantially less than $5.6 trillion, the fifth percentile value of
the distribution of aggregate monetized benefits reported in Table 17. This is because the various health and welfare effects are treated
as stochastically independent, so that the probability that the aggregate monetized benefit is less than or equal to the sum of the
separate five percentile values is substantially less than five percent.	
                                                    54

-------
                                                                        Chapter 7: Results and Uncertainty
mated annual mean TSP concentrations in other parts
of the world65 indicates that in 1990—

    •   60 metropolitan areas in the U.S. would have
       had higher TSP concentrations than Moscow,
       Russia
    •   7  metropolitan areas would be worse than
       Bangkok, Thailand
    •   6  metropolitan areas would be worse than
       Bombay, India
    •   2 metropolitan areas would be worse than Ma-
       nila, Philippines
    •   One metropolitan area would be worse than
       Delhi, India (one of the most polluted cities
       in the world)

    Under the control scenario, TSP levels in only 3
metropolitan areas were projected to exceed those in
Moscow, and none exceeded levels found in the other
foreign cities listed above. The principal reason air
quality conditions are so poor under the no-control
scenario is that air pollution control requirements re-
main fixed at their 1970 levels of scope and stringency
while total economic activity, including polluting ac-
tivity, grows by 70 percent and population grows by
22.3 percent between 1970 and 1990. Under the se-
vere air quality conditions projected throughout the
U.S. in 1990 under the no-control case, an additional
205,000 people would be projected to die prematurely
due to the effects of particulate matter, lead, and other
criteria pollutants. This represents a very large increase
in the risk of premature mortality. Since the estimate
that the average loss of life for those who actually
succumb to PM exposure related health effects is ap-
proximately 14 years, and life-shortening due to lead
exposure is even greater, it is no longer surprising that
the estimated value of avoiding these severe condi-
tions is so high.

    Second, with respect to the nature of the welfare
change reflected in the monetized benefit estimate,
the concern about the effects of limited budgets con-
straining Americans' collective ability to pay to avoid
these severe no-control scenario conditions is mis-
placed. In reality, what society actually had to pay to
avoid these conditions is measured on the cost side of
the analysis, which sums up the total expenditures
made by manufacturers and others to achieve these
air pollution reductions. The most reasonable estimate
of the value Americans place on avoiding those se-
vere no-control scenario conditions, however, is pro-
vided by measuring the amount of compensation
Americans would have demanded from polluting com-
panies and others to accept, willingly, all of that extra
pollution and its associated risks of premature death.
Under this concept of welfare change measurement,
there is no inherent limit on the amount of money citi-
zens would demand from companies to accept their
pollution and so individual personal wealth does not
constrain this value.

    The monetized benefit estimate presented in this
study, therefore, does not necessarily represent an at-
tempt to mirror what Americans would pay out of their
own pockets to reduce air pollution from levels they
never experienced; rather, it provides an estimate of
the value Americans place on the protection they re-
ceived against the dire air pollution conditions which
might have prevailed in the absence of the 1970 and
1977 Glean Air Acts and related programs, "viewed
from this perspective, the estimated monetized ben-
efits presented herein appear entirely plausible.

Comparison of Monetized
Benefits and Costs

    Table 18 presents summary quantitative results for
the retrospective assessment. Annual results are pre-
sented for four individual years, with all dollar fig-
ures expressed as inflation-adjusted 1990 dollars. The
final column sums the stream  of costs  and benefits
from 1970 to 1990, discounted (i.e., compounded) to
1990 at five percent. "Monetized benefits" indicate
both the mean of the Monte Carlo analysis and the
credible range. "Net Benefits" are mean monetized
benefits less annualized costs for each year. The table
also notes the benefit/cost ratios implied by  the ben-
efit ranges. The distribution of benefits changes little
(except  in scale) from year to  year: The mean esti-
mate is somewhat greater than twice the fifth percen-
tile estimate, and the ninety-fifth percentile estimate
is somewhat less than twice the mean estimate. The
distribution shape changes little across years because
the sources of uncertainty (i.e., CR functions and eco-
nomic valuations) and their characterizations are un-
changed from year to year. Some variability is induced
by changes in relative pollutant concentrations over
time, which then change  the relative  impact of indi-
vidual CR functions.

    Several measures of "cost" are available for use
in  this analysis (see  Chapter 2). The Project Team
    65 "Urban Air Pollution in Megacities of the World," UNEP/WHO, 1992a, Published by the World Health Organization and
United Nations Environment Program, Blackwell Publishers, Oxford, England, 1992. "City Air Quality Trends," UNEP/WHO, 1992b,
Published by the United Nations Environment Program, Nairobi, Kenya, 1992.      	
                                                 55

-------
   The Benefits and Costs of the Clean Air Act, 1970 to 1990
Table 18, Quantified Uncertainty Ranges for Monetized
Annual Benefits and Benefit/Cost Ratios; 19?Q"499G:(ui
billions of 1990-value dollars).

Monetized Benefits
5th peroentik
Mean estimate
95th percentile
Annualized Costs (5%)
Net Benefits
Mean benefits- Costs
Benefit/Cost ratio
5th percentile
Mean estimate
95th oercentile
1975

87
355
799
14

341
6/1
25/1
57/1
1980

235 '
930
2.063 •
21
« '-.v.
909-'
44/V"*
98/1 '
J985
<> j
293
1,155
2,569
25

1,130
ill'
itivT
1990

329
-1,248-
2;7fi2v"
26
.„„,.,„
"•11220-
w.
, PV "
's »•>.,.
5,600'
* 49;4Q_'_'
•3MOO-V
'' ii/i I
"""42/J;,,,
•"94/r
       PVsi990 present value reflecting compounding of 
-------
                                                                         Chapter 7: Results and Uncertainty
    In this sensitivity analysis, all the inputs to the
Monte Carlo uncertainty analysis are held constant
(at their mean values), allowing only one variable ~
for example, the economic valuation of mortality —
to vary across the range of that variable's uncertainty.
The sensitivity analysis then isolates how this single
source of uncertainty contributes to the total measured
uncertainty in estimated aggregate benefits. The first
uncertainty bar represents the credible range associ-
ated with  the total monetized benefits of the Clean
Air Act, as reported above. This captures the multiple
uncertainties in the quantified benefits estimation. The
rest of the uncertainty bars represent the quantified
uncertainty ranges generated  by single variables. As
shown in Figure 20, the most important contributors
to aggregate quantified uncertainty are mortality valu-
ation and  incidence, followed by chronic bronchitis
valuation and incidence.

Alternative Results

    The primary results of this analysis,  including
aggregate cost and benefit estimates and the uncer-
tainty  associated with them,  are  presented and dis-
cussed above. However, although the range of net
benefit estimates presented  reflects uncertainty in
many important elements of the  analysis, there are
two key variables which require further discussion and
analysis: PM-related mortality valuation and the dis-
count rate. This additional treatment is necessary be-
cause reasonable people may disagree with the Project
Team's methodological choices for these two vari-
ables, and these choices might be considered ex ante
to significantly influence the results of the study. The
purpose of this section, therefore, is to present alter-
native quantitative results which  reflect, separately,
(1) an alternative approach to valuation of premature
mortality associated with particulate matter exposure,
and (2) alternative values for the discount rate used to
adjust the monetary values of effects occurring in vari-
ous years to a particular reference year (i.e., 1990).

PM Mortality Valuation Based on Life-
Years Lost

    The primary analytical results presented earlier
in this chapter assign the same economic value to in-
cidences of premature mortality regardless of the age
and health status of those affected. Although this has
been the traditional practice for benefit-cost studies
conducted within the Agency, this may not be the most
appropriate method for valuation of premature mor-
tality .caused by PM exposure. Some short-term PM
exposure studies suggest that a significantly dispro-
portionate share of PM-related premature mortality
occurs among persons 65 years of age or older. Com-
bining standard life expectancy tables with the lim-
ited available data on age-specific incidence allows
crude approximations of the number of life-years lost
by those who die prematurely as a result of exposure
to PM or, alternatively, the changes in  age-specific
life expectancy of those who are exposed to PM.

    The ability to estimate, however crudely, changes
in age-specific life expectancy raises the issue of
whether available measures of the economic value of
mortality risk reduction can, and should, be adapted
to measure the value of specific numbers of life-years
saved.66 Although the Agency has on occasion per-
formed sensitivity calculations which adjust mortal-
ity values for those over age 65, the Agency is skepti-
cal that the current state of knowledge and available
analytical tools support using a life-years lost approach
or any other approach which assigns different risk re-
duction values to people of different ages or circum-
stances . This skepticism is mirrored hi the OMB guid-
ance on implementing Executive Order 12866 per-
taining to economic analysis methods, which states
on page 31:

    While there are theoretical advantages to
    using a value of statistical life-year-extended
    approach, current research does not provide
    a definitive way of developing estimates of
    VSLY that are sensitive to such factors as
    current age, latency of  effect, life years
    remaining,  and social valuation of different
    risk reductions. In lieu of such information,
    there are several  options for deriving the
    value of a life-year saved from an estimate of
    the value of life, but each of these methods
    has drawbacks. One approach is to use results
    from the wage compensation literature (which
    focuses on the effect of age on WTP to avoid
    risk of occupational fatality). However, these
    results may not be appropriate for other types
    of risks. Another approach is to annualize the
    VSL using an appropriate rate of discount and
    the average life  years remaining. This
    approach does not provide an independent
    estimate of VSLY; it simply rescales  the VSL
    estimate. Agencies should consider providing
    estimates of both  VSL and VSLY, while
    recognizing the developing state of knowledge
    in this area.

    While the Agency continues to prefer an approach
which makes no valuation distinctions based  on age
or other characteristics of the affected population, al-
ternative results based on a VSLY approach are pre-
    66 This issue was extensively discussed during the Science Advisory Board Council review of drafts of the present study. The
Council suggested it would be reasonable and appropriate to show PM mortality benefit estimates based on value of statistical life-
years (VSLY) saved as well as the value of statistical life (VSL) approach traditionally applied by the Agency to all incidences of
premature mortality.	
                                                __

-------
The Benefits and Costs of the Clean Air Act, 1970 to 1990
sented below. The method used to develop VSLY es-
timates is described briefly in Chapter 6 and in more
detail in Appendix I.

    Table 19 summarizes and compares the results of
the VSL and VSLY approaches. Estimated 1970 to
1990 benefits from PM-related  mortality alone and
total assessment benefits are reported, along with to-
tal compliance costs for the same period, in 1990 dol-
lars discounted to 1990 at five percent. The results
indicate that the choice of valuation methodology sig-
nificantly affects the estimated  monetized  value  of
historical reductions in air pollution-related prema-
ture mortality. However, the downward adjustment
which would result from applying a VSLY approach
in lieu of a VSL approach does not change the basic
outcome of this study, viz. the estimated monetized
benefits of the historical CAA substantially exceed
the historical costs of compliance.
                                                  1970 toward 1990 (see Table 18 above), benefit cost
                                                  ratios decline as the discount rate increases (because
                                                  earlier periods are given greater weight). Overall, the
                                                  results of the benefit-cost assessment appear to be
                                                  generally insensitive to the choice of discount rate.
                                                                                         tes on

                                                                               l9Q, dollars).
                                                   Atin»»lf zed-Costs  ""''''r
 -,$&,   - -5,%.,
  -19-.2;,-. 22.2  ' '25,8
   Q'A-"-" • -0.5   '*G3
'  '18.8    21.7,    25.1 '
 •^Table 19. Alternative Mortality Benefits
  Estimates for 1970 to 1990 (in trillionsjof) 990
  dollars, discounted at 5 percent) Compared to
  Total 1970 to 1990 Compliance Costs/	
           fffit- P.cHmatirm
Statistical life method ($4.8M/case)
Life-years lost method ($293>0/year)
Total compliance cost _
                                        Tnt

                                  16>6   18!o'
                                  9.1  "1&,1°
                                  „—!. ^ "0.5
Alternative Discount Rates

    In some instances, the choice of discount rate can
have an important effect on the results of a benefit-
cost analysis; particularly for those analyses with rela-
tively long time horizons for costs and/or benefits. In
this assessment, the discount rate affects only four
factors: IQ-related benefits estimates (especially esti-
mates of changes in discounted lifetime income), life-
time income losses due to other health effects (e.g.,
stroke), annualized costs (i.e., amortized capital ex-
penditures), and compounding of all costs and ben-
efits to 1990. Table 20 summarizes the effect of alter-
native discount rates on the "best estimate" results of
this analysis. Because monetized benefits exceed costs
for all years in the analysis period, net benefits in-
crease as the discount rate increases. Because the an-
nual benefit/cost ratio increases as one moves from
                                                  58

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                         Chapter 7: Results and Uncertainty
59

-------

-------
Appendix A:  Cost and  Macroeconomic Modeling
 Introduction

    The purpose of this appendix is to describe in de-
 tail the estimation of direct compliance costs associ-
 ated with the CAA and the effect of those expendi-
 tures on U.S. economic conditions from 1970 to 1990.
 The first section of this appendix describes the dy-
 namic, general equilibrium macroeconomic  model
 used to examine economy-wide effects. Two broad
 categories of models were considered for use in the
 assessment: Macroeconomic forecasting models (e.g.,
 the Data Resources Inc. model of the U.S. economy),
 and general equilibrium models (e.g., Hazilla and
 Kopp [1990], and Jorgenson and Wilcoxen [1990a]).
 The project team selected the Jorgenson-Wilcoxen (J/
 W) general equilibrium model of the United States
 for this analysis (Jorgenson and Wilcoxen [1990a]).
 There are two main reasons for choosing a dynamic
 general equilibrium  approach: To capture both the
 direct and indirect economic effects of environmen-
 tal regulation, and to capture the long-run dynamics
 of the adjustment of the economy. The general equi-
 librium framework enabled the project team to assess
 shifts in economic activity between industries, includ-
 ing changes in distributions of labor, capital, and other
 production factors within the economy, and changes
 in the distribution of goods and services.

    The second section describes the data sources for
 direct compliance expenditures and presents estimates
 of historical air pollution control expenditures. These
 estimates are derived primarily from EPA's 1990 re-
 port entitled "Environmental Investments: The Cost
 of a Clean Environment"l (hereafter referred to as Cost
of Clean).  Specific adjustments to the Cost of Clean
 stationary source and mobile source O&M data needed
 to adapt these data for use in the present study are
 also described. These adjusted expenditure estimates
represent the compliance cost data used as inputs to

    1 Environmental Investments: The Cost of a Clean Environment, Report of the Administrator of the Environmental Protection
Agency to the Congress of the United States, EPA-230-11-90-083, November 1990.
    2 In the present study, both benefits and costs are driven by of the same macroeconomic projections from the Jorgenson/
Wilcoxen model, to ensure that the estimates are based on a consistent set of economic assumptions.
                                              _
the JAV model to determine macroeconomic effects.

    The final section presents a summary of the di-
rect expenditure data, presents direct costs in a form
that can be compared to the benefits estimates found
elsewhere in the study, and discusses indirect effects
arising from compliance expenditures estimated by
the macroeconomic model. The indirect effects re-
ported by the model are sectoral impacts and changes
in aggregate measures  of economic activity such as
household consumption and gross national product.
These indirect effects  are second-order impacts of
compliance expenditures — a parallel modeling ex-
ercise to estimate second-order economic impacts aris-
ing from the benefits of compliance (e.g., increased
output as  a result of improved longevity or fewer
workdays  lost as a result of non-fatal heart attacks)
has not been attempted.

Macroeconomic Modeling

    EPA analyses of the costs of environmental regu-
lations typically quantify the direct costs of pollution
abatement equipment and related operating and main-
tenance expenses. However, this approach does not
fully account for all of the broader economic conse-
quences of reallocating resources to the production
and use of pollution abatement equipment. A general
equilibrium, macroeconomic model could, in theory,
capture the complex interactions between sectors in
the economy and assess the full economic cost of air
pollution control. This  would be particularly useful
for assessing regulations that may produce significant
interaction effects between markets. Another advan-
tage of a general equilibrium, macroeconomic frame-
work is that it is internally consistent. The consistency
of sectoral forecasts with realistic projections of U.S.
economic growth is ensured since they are estimated
within the  context of a single model.2  This contrasts

-------
The Benefits and Costs of the Clean Air Act, 1970 to 1990
with typical EPA analyses that compile cost estimates
from disparate sectoral and partial equilibrium mod-
els.

    The economic effects of the CAA may be over-
or underestimated, if general equilibrium effects are
ignored, to the extent that sectors not directly regu-
lated are affected. For example, it is well known that
the CAA imposed significant direct costs on the en-
ergy industry. Economic sectors not directly regulated
will nonetheless be affected by changes in energy
prices. However, an examination of the broader ef-
fects of the CAA on the entire economy might reveal
that the CAA also led to more rapid technological
development and market penetration of environmen-
tally "clean" renewable sources of energy (e.g., pho-
tovoltaics). These effects would partially offset ad-
verse effects on the energy industry, and lead to a dif-
ferent estimate of the total economic cost to society
of the CAA.

    The significance of general equilibrium effects in
the context of any particular analysis is an empirical
question. Kokoski and Smith (1987) used a comput-
able general equilibrium model to demonstrate that
partial-equilibrium welfare measures  can offer rea-
sonable approximations  of the true welfare changes
for large exogenous changes. In contrast, the results
of Jorgenson and Wilcoxen (1990a) and Hazilla and
Kopp (1990) suggest that total pollution abatement in
the U.S. has been a major claimant on productive re-
sources, and the effect on long-run economic growth
may be significant. Again, such conclusions must be
considered in light of the limitations of general equi-
librium models.

 Choice of Macroeconomic Model

    The adequacy of any model or modeling approach
must be judged in light of the policy questions being
asked. One goal of the present study is to assess the
effects of clean air regulations on macroeconomic
activity. Two broad categories of macroeconomic
models were considered for use hi the assessment:
short run, Keynesian  models and long-run, general
equilibrium models.
    Recognizing that structural differences exist be-
tween the models, one needs to focus in on the par-
ticular questions that should be answered with any
particular model. The Congressional Budget Office
(1990) noted:

    "Both the [Data Resources Incorporated] DRI
    and the IPCAEO models show relatively
    limited possibilities for increasing energy
    efficiency  and substituting other goods for
    energy in the short run... Both models focus
    primarily on short-term responses to higher
    energy  prices, and  neither is very good at
    examining how the structure of the economy
    could change in response to changing energy
    prices.  The [Jorgenson-Wilcoxen]  model
    completes  this part of the picture..."3

    One strategy  for assessing the macroeconomic
effects of the CAA would be to use a DRI-type model
in conjunction with the Jorgenson-Wilcoxen model
to assess both the long-term effects and the short-run
transitions, in much the same way that the Congres-
sional Budget Office used these models to assess the
effects of carbon taxes. However, because of signifi-
cant difficulties in trying to implement the DRI model
in a meaningful way, the project team chose to focus
on the long-run effects of the CAA. Structural changes
(e.g., changes hi employment in the coal sector due to
the CAA)  can be identified with the Jorgenson-
Wilcoxen model.

Overview of the Jorgenson-
Wilcoxen  Model

    The discussion below focuses on those character-
istics of the Jorgenson-Wilcoxen model that have
important implications  for its use in the assessment
of environmental regulations (see Table A-l). The J/
W model is a  detailed dynamic general equilibrium
model of the U.S.  economy designed for medium run
analysis of regulatory and tax policy (Jorgenson and
Wilcoxen [1990a]). It provides projections of key
macroeconomic variables, such as GNP and aggre-
gate consumption, as well as energy flows between
economic sectors. As a result, the model is particu-
larly useful for examining how the structure of the
economy could change hi response to changes in re-
    3 The Congressional Budget Office report (1990) refers to an older (1981) version of the Jorgenson model, not the current
 (1988) version. The approach to long-run dynamics differs between the two models. The newer Jorgenson-Wilcoxen model contains
 both the capital accumulation equation and the capital asset pricing equation. The 1981 version of the model contained only the
 capital accumulation equation.

-------
                                                             Appendix A: Cost and Macroeconomic Modeling
Table A-l
                                          s of*
           macroeponomic model of the U.S. economy.
                       p estfmated,«$Sn'g historic,,;,,
         A-Free'm'obiHty t£f%, siagle-ty-pejof capital-arid-
          -.lab^tf b'elween inctoslrfejs ^ : -    '  ,.,, „---
            '               '  "*' *         '
    <*',-•   'lUgohms representation of savings -aad-. -
     -,v*«<>  -invesftnertt. -  '"    -/ -,«   *   '''-7,,--;-,
    •  — ,!•, 'Bndogerjoiis model of techniea! change;- --,  „ 0
   ;-';')';  ,, ,jand^remgloy meat ,-o'r the costs *of mo vfiig
    --•>,;   ,,e^ kal from- one Industry      '
source prices. For the purpose of this study, it has five
key features: a detailed treatment of production and
consumption, parameters estimated econometrically
from historical data, an endogenous model of techni-
cal change, a rigorous representation of saving and
investment, and free mobility of labor and capital be-
tween industries.

    The first two features, industry and consumer de-
tail and econometric estimation, allow the model to
capture the effects of the CAA at each point in time
for given levels of technology and the size of the
economy's capital stock. A detailed treatment of pro-
duction and consumption is  important because the
principal effects of the Clean Air Act fell most heavily
on a handful of industries. The J/W model divides
total U.S. production into 35 industries which allows
the primary economic effects of the CAA to be cap-
tured. Econometric estimation is equally important
because it ensures that the behavior of households and
firms in  the model is consistent with the historical
record.

   The model's second two features —its represen-
tations of technical change and capital accumulation—
complement the model's intratemporal features by
providing specific information on how the Act affected
technical change  and the accumulation of capital.
Many analyses of environmental regulations overlook
or ignore intertemporal effects but these effects can
 be very important. Jorgenson and Wilcoxen (1990a)
 suggests that the largest cost of all U.S. environmen-
 tal regulations together was that,the regulations re-
 duced the rate of capital accumulation.

    The model's last feature, free mobility of a single
 type of capital and a single type of labor, is important
 because it limits the model's ability to measure the
 short run costs of changes in policy. J/W is  a full-
 employment model that describes the long-run dynam-
 ics of transitions from one equilibrium to another.
 Capital and labor are both assumed to be freely mo-
 bile between sectors (that is, they can be moved from
 one industry to another at zero cost) and to be fully
 used at all times. Over the medium to long run, this is
 a reasonable assumption, but in the short run it is too
 optimistic. In particular, the model will understate the
 short run costs of a change in policy  because  it does
 not capture unemployment, underemployment, or the
 costs of moving capital from one industry to another.
 A single rate of return on capital exists that efficiently
 allocates the capital in each period among sectors.
 Similarly,  a single  equilibrium wage rate allocates
 labor throughout the economy.

 Structure of the Jorgenson-Wilcoxen
 Model

    The J/W model assesses abroad array of economic
 effects of environmental regulations. Direct costs are
 captured as increased expenditures on factors of pro-
 duction —capital, labor, energy and materials— that
 the various industries must make to comply with the
 regulations, as well as additional out-of-pocket  ex-
 penditures  that consumers must make. Indirect costs
 are captured as general equilibrium effects that occur
 throughout the economy as the prices of factors of
 production change (e.g., energy prices). Also, the rate
 of technological change can respond to changes in the
 prices of factors of production, causing changes in
 productivity (Jorgenson and Fraumeni, 1981).

    The model is divided into four major sectors: the
business, household, government, and rest-of-the-
 world sectors. The business sector is further  subdi-
vided into 35 industries (see Table A-2).4 Each sector
produces a primary product, and some produce sec-
ondary products. These outputs serve as inputs to the
production processes of the other industries, are used
for investment, satisfy final demands by the house-
hold and government sectors, and are exported. The
model also allows for imports from  the rest  of the
world.
     The 35 industries roughly correspond to a two-digit SIC code classification scheme.
                                                 —-

-------
The Benefits and Costs of the Clean Air Act, .1970 to 1990
   Table A-2. Definitions of Industries Within
   the J/W Model.               ,     '  ,







































Industry
1

2
3
4
5
6
7
8
9
10

11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33

34
35
n ' ' " ' •
Agriculture, forestry, and -*> '
fisheries
Metal mining
Coalmining ' * f
Crudepetroleum and natural- gas
NonmetalUc mineral mining
Construction
Food and kindred products ' "
Tobacco manufacturers
Textile mill products
Ap parel and other textile "" „„ *
products
Lumber and wood products
Furniture and fixtures f - ,
Paper and allied products "" ,,
Printing and publishing
Chemicals and allied products
Petroleum refining
Rubber and plastic products
Leather and leather products
Stone, clay, and glass products
Primary metals
Fabricated metal p roduets ->?
M achinery , except electrical
Electrical machinery
Motor vehicles
Other transportation equipment
Instruments , ^f"
Miscellaneous manufacturing
Transportation and warehousing
Communication.
Electric utilities
Gas Utilities
Trade
Finance, insurance, and real
estate
Other services
Government enterprises

"t~



















»,




»



"








<
 The Business Sector

    The model of producer behavior allocates the
 value of output of each industry among the inputs of
 the 35 commodity groups, capital services, labor ser-
 vices, and noncompeting imports. Output supply and
 factor demands of each sector are modeled as the re-
 sults of choices made by wealth maximizing,  price
 taking firms which are subject to technological con-
 straints. Firms have perfect foresight of all future
 prices and interest rates. Production technologies are
 represented by econometrically estimated cost  func-
tions that fully capture factor substitution possibili-
ties and industry-level biased technological change.

    Capital and energy are specified separately in the
factor demand functions of each industry. The ability
of the model to estimate the degree of substitutability
between factor inputs facilitates the assessment of the
effect of environmental regulations. A high degree of
substitutability between inputs implies that the cost
of environmental regulation is low, while a low de-
gree of substitutability implies high costs of environ-
mental regulation. Also, different types of regulations
lead to different responses on the part of producers.
Some regulations require the use of specific types of
equipment. Others regulations restrict the use of par-
ticular factor inputs; for example, through restrictions
on the combustion of certain types of fuels. Both of
these effects can change the rate of productivity growth
in an industry through changes in factor prices.

The Household Sector

    In the  model of consumer behavior, consumer
choices between labor and leisure and between con-
sumption and saving are determined. A system of in-
dividual, demographically defined household demand
functions are also econometrically estimated.  House-
hold consumption is modeled as a three stage  optimi-
zation process. In the first stage households allocate
lifetime wealth to full consumption in current and fu-
ture time periods to maximize intertemporal utility.
Lifetime wealth includes financial wealth, discounted
labor income, and the imputed value of leisure. House-
holds have perfect foresight of future prices  and in-
terest rates. In the second stage, for each time period
full consumption is allocated between goods and ser-
vices and leisure to maximize intratemporal utility.
This yields an allocation of a household's time en-
dowment between the labor market (giving rise to la-
bor supply and labor income) and leisure time and
demands for goods and services. In the third stage,
personal consumption expenditures are allocated
among capital, labor, noncompeting imports  and the
outputs of the 35 production sectors to maximize a
subutility function for goods consumption. As with
the business sector, substitution possibilities  exist in
consumption decisions. The  model's flexibility en-
ables it to capture  the substitution of nonpolluting
products for polluting ones that may be induced by
environmental regulations. Towards this end, pur-
chases of energy and capital  services by households
are specified separately within the consumer demand
functions for individual commodities.
                                                 A-4

-------
                                                            Appendix A: Cost and Macroeconomic Modeling
    It is important to be clear regarding the notions of
labor supply and demand within the J/W model, and
what is meant by "employment" throughout this re-
port. Labor demands and supplies are represented as
quality-adjusted hours denominated in constant dol-
lars. The labor market clears in each period; the quan-
tity of labor services offered by households is absorbed
fully by the economy's producing sectors. However,
inferences regarding the number of persons employed
require information on labor quality and work-hours
per person over time and across simulations. Neither
of these are explicitly modeled.

The Government Sector

    The behavior of government is constrained by
exogenously specified budget deficits. Government
tax revenues are determined by exogenously speci-
fied tax rates applied to appropriate transactions in
the business and household sectors. Levels of eco-
nomic activity in these  sectors are endogenously de-
termined. Capital income from government enterprises
(determined endogenously), and  nontax receipts
(given exogenously), are  added to tax revenues to
obtain total government revenues. Government expen-
ditures adjust to satisfy the exogenous budget deficit
constraint.           ,

The Rest-of-the-World Sector

    The current account balance is exogenous, limit-
ing the usefulness of the model to assess trade com-
petitiveness effects. Imports are treated as imperfect
substitutes for similar domestic commodities and com-
pete on price.  Export demands are  functions of for-
eign incomes and ratios of commodity  prices in U.S.
currency to the exchange rate. Import prices, foreign
incomes, and tariff policies are exogenously speci-
fied. Foreign prices of U.S. exports are  determined
endogenously  by domestic prices and  the exchange
rate. The exchange rate adjusts to satisfy the exog-
enous constraint on net exports.

Environmental Regulation, Investment,
and Capital Formation

    Environmental regulations have several important
effects on capital formation. At the most obvious level,
regulations often require investment in specific pieces
of pollution abatement equipment. If the economy's
pool of savings were essentially fixed, the need to in-
vest in abatement equipment would reduce, or crowd
out, investment in other kinds of capital on a dollar
for dollar basis. On the other hand,  if the supply of
savings were very elastic then abatement investments
might not crowd out other investment at all. In the J/
W model, both the current account and government
budget deficits are fixed exogenously so any change
in the supply of funds for domestic investment must
come from a change in domestic savings. Because
households choose consumption, and hence savings,
to maximize a lifetime utility function, domestic sav-
ings will be somewhat elastic. Thus, abatement in-
vestment will  crowd out other investment, although
not on a dollar for dollar basis.

    The J/W assumption that the current account does
not change as a result of environmental regulation is
probably unrealistic, but it is not at all clear that this
biases  the crowding out effects in any particular di-
rection. By itself, the need to invest in abatement capi-
tal would tend to raise U.S. interest rates and draw in
foreign savings. To  the extent this occurred, crowd-
ing out would be reduced. At the same tune, how-
ever, regulation reduces the profitability of domestic
firms. This effect would tend  to lower the return  on
domestic assets, leading to a reduced supply of for-
eign savings which would exacerbate crowding out.
Which effect dominates is an empirical question be-
yond the  scope of this study.

    In additional to crowding out ordinary investment,
environmental regulation also has a more subtle ef-
fect on the rate of capital formation. Regulations raise
the prices of intermediate goods used to produce new
capital. This leads to a reduction in the number of capi-
tal goods which can be purchased with a given pool
of savings. This is not crowding out hi the usual sense
of the  term, but it is an important means by which
regulation reduces capital formation.5

The General Equilibrium

    The J/W framework contains intertemporal and
intratemppral models (Jorgenson  and Wilcoxen
[19906]). In any particular time period, all markets
clear. This market clearing process occurs in response
to any changes in the levels of variables that are speci-
    5 Wilcoxen (1988) suggests that environmental regulation may actually lead to a "crowding in" phenomenon. Wilcoxen
examined the effects of regulation at the firm level, and introduced costs into the model related to the installation of capital. He found
that when firms shut down their plants to install environmental capital, they take account of the adjustment costs and often concur-
rently replace other older capital equipment. This effect, however, is not captured in the current version of the Jorgenson-Wilcoxen
model.
                                                A-5

-------
The Benefits and Costs of the Clean Air Act, 1970 to 1990
fied exogenously to the model. The interactions among
sectors determine, for each period, aggregate domes-
tic output, capital accumulation, employment, the
composition of output, the allocation of output across
different household types, and other variables.

    The model also produces an intertemporal equi-
librium path from the initial conditions at the start of
the simulation to the stationary state. (A stationary
solution for the model is obtained by merging the
intertemporal and intratemporal models.) The dynam-
ics of the J/W model have two elements: An accumu-
lation equation for capital, and a capital asset pricing
equation. Changes in exogenous variables cause sev-
eral adjustments to occur within the model. First, the
single stock of capital is efficiently allocated among
all sectors, including the household sector. Capital is
assumed to be perfectly malleable and mpbile among
sectors, so that the price of capital services in each
sector is proportional to a single capital service price
for the economy as a whole. The value of capital ser-
vices is equal to capital income.  The supply of capital
available in each period is the result of past invest-
ment, i.e., capital at the end of each period is a func-
tion of investment during the period and capital at the
beginning of the period. This capital accumulation
equation is backward-looking and captures the effect
of investments in all past periods on the capital avail-
able in the current period..

    The capital asset pricing equation specifies the
price of capital services in terms of the price of in-
vestment goods at the beginning and end of each pe-
riod, the rate of return to capital for the economy as a
whole, the rate of depreciation, and variables describ-
ing the tax structure for income from capital. The cur-
rent price of investment goods incorporates an assump-
tion of perfect foresight or rational  expectations. Un-
der this assumption, the price of investment goods in
every period is based on expectations of future capi-
tal service prices and discount rates that are fulfilled
by the solution of the model. This equation for the
investment goods price in each time period is forward-
looking.6

    One way to characterize the J/W model —or any
other neoclassical  growth model— is that the short-
run supply of capital is perfectly inelastic, since it is
completely determined by past investment. However,
the supply of capital is perfectly elastic in the long
run. The capital stock adjusts to the tune endowment,
while the  rate of return depends  only on the
intertemporal preferences of the household sector.

    A predetermined amount of technical progress
also takes place that serves to lower the cost of sectoral
production. Finally, the quality of labor is enhanced,
giving rise to higher productivity and lower costs of
production.

    Given all of these changes, the model solves for a
new price vector and attains a new general equilib-
rium. Across all tune periods, the model solves for
the time paths of the capital stock, household con-
sumption, and prices. The outcomes represent a gen-
eral equilibrium in all time periods and in all markets
covered by the J/W  model.

Configuration of the No-control
Scenario

    One of the difficulties in describing the no-con-
trol scenario is ascertaining how much environmen-
tal regulation would have been initiated by state and
local governments in the absence of a federal program.
It may reasonably be argued that many state and local
governments would have initiated their own control
programs in the absence of a federal role. This view
is further supported by the  fact that many states and
localities have, in fact, issued rules and ordinances
which are significantly more stringent and encompass-
ing than federal minimum requirements.  However, it
may also be argued that the federal CAA has moti-
vated a substantial number of stringent state and local
control programs.

    Specifying the range and stringency of state and
local programs that would  have occurred in the ab-
sence of the federal CAA would  be almost entirely
speculative. For example, factors which would com-
plicate developing assumptions about stringency and
scope of unilateral state and local programs include:
(i) die significance of federal funding to support state
and local program development; (ii) the influence of
more severe air pollution episodes which might be
expected in the absence of federally-mandated con-
trols; (iii) the potential emergence of pollution havens,
as well as anti-pollution havens, motivated by local
    6 The price of capital assets is also equal to the cost of production, so that changes in the rate of capital accumulation result in an
increase in the cost of producing investment goods. This has to be equilibrated with the discounted value of future rentals in order to
produce an intertemporal equilibrium. The rising cost of producing investment is a cost of adjusting to a new intertemporal equilib-
rium path.

-------
                                                             Appendix A: Cost and Macroeconotnic Modeling
political and economic conditions; (iv) the influence
of federally-sponsored research on the development
of pollution effects information and control technolo-
gies; and (v) the need to make specific assumptions
about individual state and local control levels for in-
dividual pollutants to allow estimation of incremen-
tal reductions attributable to federal control programs.

    Another complication associated with the no-con-
trol scenario is the treatment of air pollution control
requirements among the major trading partners of the
U.S. Real-world manifestation of a no-control scenario
would imply that public health and environmental
goals were not deemed sufficiently compelling by U.S.
policy makers. Under these conditions, major trading
partners of the U.S. in Japan, Europe, and Canada may
well reach similar policy conclusions. Simply put, if
the U.S. saw no need for air pollution controls, there
is  little reason to assume other developed industrial
countries would have either. In this case, some of the
estimated economic benefits of reducing or eliminat-
ing air pollution controls in the U.S.  would not mate-
rialize because U.S. manufacturers would not neces-
sarily gain a production cost advantage over foreign
competitors. However, like the question of state and
local programs in the absence of a federal program,
foreign government policies under a no-control sce-
nario would be highly speculative.

    Given the  severity of these confounding factors,
the only analytically feasible assumptions with respect
to  the no-control scenario are that (a) no  new control
programs would have been initiated after 1970 by the
states or  local  governments in the absence of a fed-
eral role, and (b) environmental policies of U.S. trad-
ing partners remain constant regardless of U.S. policy.

Elimination of Compliance Costs in the
No-Control Case

    Industries that are affected by environmental regu-
lations can generally respond in three ways: (i) with
process changes (e.g., fluidized bed combustion); (ii)
through input substitution (e.g., switching from high
sulfur coal to low sulfur coal); and  (iii)  end-of-pipe
abatement (e.g., the use of electrostatic precipitation
to  reduce the emissions of particulates by combus-
tion equipment).7 Clean air regulations have typically
led to the latter two responses, especially in the short
run. End-of-pipe abatement is usually the method of
choice for existing facilities, since modifying exist-
ing production processes can be costly. This approach
is also encouraged by EPA's setting of standards based
on the notion of "best available technology" (Free-
man, 1978).

    All three possible responses may lead to: (i) un-
anticipated losses to equity owners; (ii) changes in
current output; and (iii) changes in long-run profit-
ability. If firms were initially maximizing profits, then
any of the above three responses will increase its costs.
Fixed costs of investment will be capitalized imme-
diately. This will result in a loss to owners of equity
when regulations are introduced. As far as firms are
concerned, this is just like  a lump sum tax on sunk
capital. Such effects will not affect growth or effi-
ciency. However, regulations could also change mar-
ginal costs and therefore current output. In addition,
they could change profits (i.e., the earnings of capi-
tal), and thus affect investment. Both of these effects
will reduce the measured output of the economy.

    On the consumption side, environmental regula-
tions change consumers' expectations of their lifetime
wealth. In the no-control scenario of this assessment,
lifetime wealth increases. This causes an increase in
consumption. In fact, with perfect foresight, consump-
tion rises more in earlier time periods.  This also re-
sults in a change in savings.

Capital Costs - Stationary Sources

    To appropriately model investment in pollution
control requires a recognition that the CAA had two
different effects on capital markets. First, CAA regu-
lations led to the retrofitting of existing capital stock
in order to meet environmental standards. In the no-
control scenario, these expenditures do not occur. In-
stead,  the resources that were invested in pollution
abatement equipment to retrofit existing sources are
available to go to other competing investments. Thus,
at each point in time, these resources might go to in-
vestments in capital in the regulated industry, or may
go into investments in other industries,  depending
upon relative rates of return on those investments. This
will affect the processes of capital formation and deep-
ening.

    Second,  the CAA placed restrictions on new
sources of emissions. When making investment deci-
sions, firms take into account the additional cost of
pollution abatement equipment. Effectively, the
     Regulation may also affect the rate of investment, and change the rate of capital accumulation.
                                                 A-7

-------
The Benefits and Costs of the Clean Air Act, 1970 to 1990
"price" of investment goods is higher because more
units of capital are required to produce the same
amount of output. In the no-control scenario, there
are no restrictions on new sources and hence no re-
quirements for pollution control expenditures. Effec-
tively, the "price" of investment goods is lower. Thus,
at each point in time, investors are faced with a lower
price of investment goods. This results in a different
profile for investment over time.

Operating and Maintenance Costs - Stationary
Sources

   In addition to purchasing pollution abatement
equipment, firms incurred costs to run and maintain
the pollution abatement equipment. In the no-control
scenario, resources used to pay for these operating
and maintenance (O&M) costs are freed up for other
uses. The model assumes that the resources required
to run and maintain pollution control equipment are
in the same proportions as the factor inputs used in
the underlying production technology. For example,
if 1 unit of labor and 2 units of materials are used to
produce 1 unit of output, then one-third of pollution
control O&M costs are allocated to labor and two-
thirds are allocated to materials. These adjustments
were introduced at the  sector level. O&M expendi-
tures are exclusive of depreciation charges and offset
by any recovered costs.

Capital Costs - Mobile Sources

   Capital costs associated with pollution control
equipment were represented by changing costs for
motor vehicles (sector  24) and other transportation
equipment (sector 26). Prices (unit costs) were reduced
in proportion to the value of the pollution control de-
vices contained in cars, trucks, motorcycles, and air-
craft.

Operating and Maintenance - Mobile Sources

   Prices for refined petroleum products (sector 16)
were changed to reflect the resource costs associated
with producing unleaded and reduced lead gasoline
(fuel price penalty), the change in fuel economy for
vehicles equipped with pollution control devices (fuel
economy penalty), and the change in fuel economy
due to the increased fuel density of lower leaded and
no lead gasoline (fuel economy credit). Third, inspec-
tion and maintenance costs and a maintenance credit
associated with the use of unleaded and lower leaded
(i.e., unleaded and lower leaded gasoline is less cor-
rosive, and therefore results in fewer muffler replace-
ments, less spark plug corrosion, and less degrada-
tion of engine oil) were represented as changes in
prices for other services (sector 34).


Direct Compliance  Expenditures
Data

Sources of Cost Data

    Cost data for this study are derived primarily from
the 1990 Cost of Clean report. EPA publishes cost
data in response to requirements of the Clean Air and
Clean Water Acts. The following subsections describe
Cost of Clean data in detail,  as well as adjustments
made to the data and data from other sources.

Cost of Clean Data

    EPA is required to compile and publish public
and private costs resulting from enactment of the Clean
Air Act and the Clean Water Act. The  1990 Cost of
Clean report presents estimates of historical pollution
control expenditures for the years 1972 through 1988
and projected future costs for the years 1989 through
2000. This includes federal, state, and local govern-
ments as well as the private sector. Estimates of capi-
tal costs, operation and maintenance (O&M) costs,
and total annualized costs for five categories of envi-
ronmental media, including air, water,  land, chemi-
cal, and multi-media, are presented. It should be noted
that these estimates represent direct regulatory imple-
mentation and compliance costs rather than social
costs. The Cost of Clean relied on data from two gov-
ernmental sources, the EPA and the U.S. Department
of Commerce (Commerce).

EPA Data

    EPA expenditures were estimated from EPA bud-
get justification documents.8 Estimates of capital and
operating costs resulting from new and forthcoming
regulations were derived from EPA's Regulatory Im-
pact Analyses (RIAs). RIAs have been prepared prior
to the issuance of all major regulations since 1981.
Finally, special analyses conducted by EPA program
offices or contractors were  used when other data
sources did not provide adequate or reliable data.
    8 The main source of data for EPA expenditures is the Justification of Appropriation Estimates for Committee on Appropriations.
                                                A-8

-------
                                                            Appendix A: Cost and Macroeconomic Modeling
Commerce Data

    Data collected by Commerce were used exten-
sively in the Cost of Clean for estimates of historical
pollution control expenditures made by government
agencies other than EPA and by the private sector.
Two Commerce agencies, the Bureau of Economic
Analysis (BEA) and the Bureau of the Census (Cen-
sus), have collected capital and operating costs for
compliance with environmental regulations since the
early 1970's. Commerce is, in fact, the primary source
of original survey data for environmental regulation
compliance costs. Commerce publishes a number of
documents that report responses to surveys and com-
prise most of the current domain of known pollution
abatement and control costs in the United States, in-
cluding:

    •    A series of articles entitled "Pollution Abate-
        ment and Control Expenditures" published
        annually in the Survey of Current Business
        by BEA (BEA articles);

    •    A series of documents entitled "Pollution
        Abatement Costs and Expenditures" pub-
        lished annually in the Current Industrial Re-
        ports by Census (PACE reports); and

    •    A series of documents entitled Government
        Finances published annually by Census (Gov-
        ernment Finances).

    BEA articles contain data derived from a number
of sources, including two key agency surveys —the
"Pollution Abatement  Costs and Expenditures Sur-
vey" (PACE Survey) and the "Pollution Abatement
Plant and Equipment Survey"  (PAPE Survey)—
which are conducted annually by Census for BEA.
Data have been reported for 1972 through 1987.9

    PACE reports have been published annually since
1973  with the exception of  1987. Figures for 1987
were estimated on the basis of historical shares within
total manufacturing.  These reports contain expendi-
ture estimates derived from surveys of about 20,000
manufacturing establishments. Pollution abatement
expenditures for air, water and solid waste are reported
by state and Standard Industrial Code (SIC) at the four-
digit level. According to Census, surveys conducted
since 1976 have not included establishments with
fewer than 20 employees because early surveys
showed that they contributed only about 2 percent to
the pollution estimates while constituting more than
10 percent of the sample size.

    Each year Census conducts a survey of state, lo-
cal, and county governments; and survey results are
published in Government Finances. Census asks gov-
ernment units to report revenue and expenditures, in-
cluding expenditures for pollution control and abate-
ment.

    Non-EPA  Federal expenditures were estimated
from surveys completed by federal agencies detailing
their pollution control expenditures, which are sub-
mitted to  BEA. Private  sector air pollution control
expenditures, as well  as state and local government
air pollution expenditures, were taken from BEA ar-
ticles.

Stationary Source Cost Data

Capital Expenditures Data

    Capital expenditures for stationary air pollution
control are made by factories and electric utilities for
plant and equipment that abate pollutants through end-
of-line (EOL) techniques or that reduce or eliminate
the generation of pollutants through changes in pro-
duction processes  (CIPP). For the purposes of this
report EOL and CIPP expenditures are aggregated.10
Table A-3 summarizes capital expenditures for sta-
tionary air pollution control, categorized as "nonfarm
business" or "government enterprise" expenditures.

    Nonfarm business capital expenditures consist of
plant and equipment expenditures made by 1) manu-
facturing  companies, 2) privately and cooperatively
owned electric utilities, and 3) other nonmanufacturing
companies. "Government enterprise" is, according to
BEA, an agency of the government whose operating
costs, to a substantial extent, are covered by the sale
of goods  and services. Here, government enterprise
means specifically government enterprise electric
    9 The most recent BEA article used as a source for air pollution control costs in the Cost of Clean was "Pollution Abatement and
 Control Expenditures, 1984-87" in Survey of Current Business, June 1989.
    10 Survey respondents to the Census annual Pollution Abatement Surveys report the difference between expenditures for CIPP
 and what they would have spent for comparable plant and equipment without pollution abatement features. Disaggregated capital
 expenditures by private manufacturing establishments can be found in annual issues of Census reports.
                                                 _

-------
 The Benefits and Costs of the Clean Air Act, 1970 to 1990
    Table A-3. Estimated Capital and G&M
    Expenditures for Stationary .Source Air
      *•                     * -4        ••  V
    Pollution Control (millions
Nonfarm
Business
^eaz
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
Tap.'
2,172
2,968
3,328
3,914
3,798
3,811
3,977
'4,613
5,051
5,135
5,086
4,155
4,282
4,141
4,090
4,179
4,267
4,760
4,169
OfrM*

1,407--
1,839
2,195
2,607
3463
3,652 '
4,499
5,420
5,988
5,674.
6,149 -'
6,690
6,997
7,116
7,469"
7,313
7,743
8,688
Government
Enterprise
£a|Lf' £
63 :
82 -.-,
104
102' ~"
156 -
197
205
285 ,
<»-398v, ,N
45TV>V;
508%o,
*• "412 ^
41^ *"
' "328 ' '
312
277
'',243*^
-g.^,?XV
226 \ '

?/=** ~*
, -^2^
^ -56-,
"v>45'-
^ 58
' 60
72
,-1%
,-v,H4,8j-
^- ,135--
•'••- I4,i:-
%v-143 -
'147,
- ^C
-•-i4dC
"U30*
T61-'
*'lfo
" 154
     Sources:
     a. Non-fena capital expenditures for 197&S7 ateftocn Cost
     ofClean,Table B-l, line 2.         >•   -  ,-  —  , ,-,
     b. Non-famj O&M expenditures for J973-85 as to* Co**
     ^fCfea/i.Tdile B-l, Une 8,  .     •, (, ^^^'^^
     c. GovemmeTit enterpnse capital expenditures fpr i STJ-ST'^;*
     are from Cort of Clean, Table B-9, line 1.    ,    .*,---,
     d. Government enterpnse O&M expenditures for 1973-85  '
     are from Cost of Clean, Table B-?, fine 5,        '   ' !'
     All other reported expenditures ate EPA estimates.
utilities. Government enterprise capital expenditures
are pollution abatement expenditures made by pub-
licly owned electric utilities.11

Operation and Maintenance Expenditures Data

    Stationary source O&M expenditures are made
by manufacturing establishments, private and public
electric utilities, and other nonmanufacturing busi-
nesses to operate air pollution abatement equipment.
O&M expenditures for electric utilities are made up
of two parts: 1) expenditures for operating air pollu-
tion equipment and 2) the additional expenditures as-
sociated with switching to alternative fuels that have
lower sulfur content (fuel differential). Expenditures
to operate air pollution abatement equipment are for
the collection and disposal of flyash, bottom ash, sul-
fur and sulfur products, and other products from flue
gases.12 O&M expenditures are net of depreciation
and payments to governmental units, and are summa-
rized in Table A-3. O&M data were disaggregated to
the two digit SIC level for use in the macroeconomic
model.

    For both capital and O&M expenditures, histori-
cal survey  data  were  not available for each year
through 1990 prior to publication of Cost of Clean.
For the purpose of the section 812 analysis, EPA pro-
jected 1988-1990 capital expenditures and 1986-1990
O&M expenditures. Those projections were used in
the macroeconomic simulation, and have been retained
as cost estimates to ensure consistency between the
macroeconomic results  and the direct cost estimates.
Since completion of the macroeconomic  modeling,
however, BEA has published expenditure estimates
through 1990. A comparison of more recent BEA es-
timates with the EPA projections used in the section
812 analysis can be found in the "Uncertainties in the
Cost Analysis" section, below.

Recovered  Costs

    "Recovered costs" are costs recovered (i.e., rev-
enues realized) by private manufacturing establish-
ments through abatement activities. According to in-
structions provided to survey participants by Census,
recovered costs consist of 1) the value of materials or
energy  reclaimed through abatement activities that
were  reused in production and 2) revenue that was
obtained from the sale of materials or energy reclaimed
through abatement activities. Estimates of recovered
costs  were obtained from the PACE reports and  are
summarized in Table  A-4. In this analysis, recovered
costs  were removed from total stationary source air
pollution control O&M costs — that is, net O&M cost
in any year  would be O&M expenditures (see Table
A-3) less recovered costs. Recovered cost data were
disaggregated to the two digit SIC level for use in the
macroeconomic model.
    11 BEA calculates these expenditures using numbers obtained from Energy Information Agency (EIA) Form 767 on steam-
electric plant air quality control.

    12 Farber, Kit D. and Gary L. Rutledge, "Pollution Abatement and Control Expenditures: Methods and Sources for Current-
Dollar Estimates," Unpublished paper, Bureau of Economic Analysis, U.S. Department of Commerce, October 1989.
                                                  A-10

-------
                                                               Appendix A: Cost and Macroeconomic Modeling
           s'-f*"' -
    fable A-avBMJ
    (f^lksis-of current dollars)^'",_
                      "•?- ' '^ ^ x;"'=?.g>

                     PAfTE*   '''Estimated
                        ";,       ,,  ,  '•'?'>«!>' >•:
                               ,, 'it'     -. ''

      ',;-,>1973..'   ,-4-   '""-    ,>-:*-/  ' IsV'


                      -  "     - -»,-*•<•,-496^'
        ,1977  " '    -K   >v-;"    <«*•< 5S'?-VV
        ,,1^,78  - -''   ,Xv   t>;'-"-  ,,,N,;617 '";
        ?S^9 "^,,,   ^'7S€k"    ""'"'" 	
       ,,;l9|o „'-,/--•    ^.


       ',-1983 *''l'f   r-"-
                         '&&£'  'J' '"    ->->?«O"J^
                     s,'-.*•*  'v-oOO      ' _, J-J  vo/w
                     ^,   767--•->-"  ,,, ,,-,^7,68
                     \,,   860- -' "   ,,,,,8.67



                             i,V Xv

                              *~s"
   "\;biSusfrial-Report|;fey Census*- '
Mobile Source Cost Data

    Costs of controlling pollution emissions from
motor vehicles were estimated by calculating the pur-
chase price and O&M cost premiums associated with
vehicles equipped with pollution abatement controls
over the costs for vehicles not equipped with such
controls. These costs were derived using EPA analy-
ses, including EPA RIAs, the Cost of Clean, and other
EPA reports.13 This Appendix summarizes the sec-
tion 812 mobile source compliance cost estimates and
provides references to published data sources where
possible. Further information on  specific methods,
analytical steps, and assumptions can be found in
McConnell etal. (1995),14 which provides a detailed
description of the section 812 mobile source cost es-
timation exercise and compares the method and re-

    13 A complete listing of sources used in calculating mobile source capital and operating expenditures can be found in Environ-
mental Investments: The Cost of a Clean Environment, Report of the Administrator of the Environmental Protection Agency to the
Congress of the United State, EPA-230-11-90-083, November 1990.
    14 Evaluating the Cost of Compliance with Mobile Source Emission Control Requirements: Retrospective Analysis, Resources
for the Future Discussion Paper, 1995. Note that McConnell etal. refer to the section 812 estimates as: Cost of Clean (1993, unpub-
lished).
suits to other similar analyses (including Cost of Clean
(1990)).

Capital Expenditures Data

    Capital expenditures for mobile source emission
control are associated primarily with pollution abate-
ment equipment on passenger cars, which comprise
the bulk of all mobile sources of pollution. These capi-
tal costs reflect increasingly stringent regulatory re-
quirements and improvements in pollution  control
technologies overtime. Each of the following devices
have been used at one time or another dating back to
the Clean Air Act Amendments of 1965: air pumps,
exhaust-gas recirculation valves, high altitude con-
trols, evaporative emissions controls, and catalysts.
The cost estimates for each component were computed
on a per-vehicle basis by engineering cost analyses
commissioned by EPA. The resulting per-vehicle capi-
tal costs were multiplied by vehicle production esti-
mates to determine annual capital  costs. Table A-5
summarizes mobile source capital costs.

Operation and Maintenance Expenditures Data

    Costs for operation and maintenance of emission
abatement devices  include the costs  of maintaining
pollution control  equipment plus the  cost of vehicle
inspection/maintenance programs. Operating costs per
vehicle were multiplied by total vehicles  in use to
determine annual cost. Mobile source  O&M costs are
made up of three factors: 1) fuel price  penalty, 2) fuel
economy penalty, and 3) inspection and maintenance
program costs  as described below. These costs are
mitigated by cost savings in the form of maintenance
economy and fuel density economy. Table A-6 sum-
marizes mobile source O&M expenditures and cost
savings by categories, with net O&M costs summa-
rized above in Table A-5. The following sections de-
scribe the components of the mobile source O&M cost
estimates.

   Fuel Price Penalty

   Historically, the price of unleaded fuel has been
several cents per gallon higher than the price of leaded
fuel. CAA costs were calculated as the difference be-
                                                 A-ll

-------
The Benefits and Costs of the Clean Air Act, 1970 to 1990
     Table A-5, Estimated Capital and
     Operation and Maintenance Expenditures
     for Mobile Source Air Pollution Control
     (millions of current dollars).
Year
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
Capital" ,
276
242
1,570
1,961
2,248
2,513
2,941
2,949
3,534
3,551
4,331
5,679
6,387
6,886
6,851
7,206
7,053
7,299
O&M* „
<• 1,765 "
'2,35 f~~'
° f 2^282 j
2^?6lf®'
S'lf?$5:* *;
~<" / f 9Q% '
- - " " ' 1,229
1,790
1,389
555
-155.
-326
337"
, -1,394
-l',302\
-1,575 <
" v -1,63,6, •
*" ~~ :U&1A
      a. CBpital'oqp,: Cost of Clean, Tables C-2 to O9, tine 3
      on each; Tables C-2 A to C-9A, fine 10 on each; «sa V«rted
      from SJ986to cuirent dollars.
      b, O&M ex p.:  EPA analyses based on sources and
      methods in:  Costs and Benefits of Reducing Lead~in
      Gasoline: Final Regulatory Imp act Analysis, TJ.S.'
      Environmental Protection Agency, Office of Bjlicy
      Analysis, EPA-230-05-SS-O06,                  "
      of Clean.
is likely to understate costs because regulatory require-
ments and market developments cannot be perfectly
anticipated over time. This procedure resulted in esti-
mates that are about ten percent less than estimates in
other EPA reports.15 However, new process technolo-
gies that were developed in the mid-1980s were not
reflected in either the base case or regulatory case runs.
It is reasonable to expect that regulatory requirements
would have encouraged development of technologies
at a faster rate than would have occurred otherwise.

    Fuel Economy Penalty

    The fuel economy penalty benefit is the cost as-
sociated with the increased/decreased amount of fuel
used by automobiles with air pollution control devices
(all else being equal). An assumption that can be made
is that the addition of devices,  such as catalytic con-
                                                           1 -TableA-^'0^M'C9'$ts-'«t)4'O-edits (millions!''
                                                                     Fuell»iic«""vl*)Ec1)aV';"^"' Net     Totfil
     '1974
                          *2'35'l'
    , IOT
-------
                                                              Appendix A: Cost and Macroeconomic Modeling
verters, decrease automobile fuel efficiency.16 If this
assumption is true, air pollution control devices in-
crease the total fuel cost to consumers. An alternative
assumption is that the use of catalytic converters has
increased fuel economy. This increase has been at-
tributed in large measure to the feedback mechanism
built into three-way catalytic converters.17 Under this
assumption, the decrease in total fuel cost to consum-
ers is considered a benefit of the program.

    For the purposes of this study, sensitivity analy-
ses were performed using data presented in the Cost
of Clean report. These analyses were conducted to
evaluate the  significance of assumptions about  the
relationship between mile  per gallon (MPG)  values
for controlled automobiles and MPG values for un-
controlled cars.  Based on results of these and other
analyses, fuel economy was assumed to be equal for
controlled and uncontrolled vehicles from 1976 on-
ward. This may bias the cost estimates although hi an
unknown direction.

    Inspection and Maintenance Programs

    Inspection and maintenance programs are admin-
istered by a number of states. Although these programs
are required by the Clean Air Act, the details of ad-
ministration were left to the discretion of state or lo-
cal officials. The primary purpose of inspection and
maintenance programs is to identify cars that require
maintenance —including cars that 1) have had poor
maintenance, 2) have been deliberately tampered with
or had pollution control devices removed, or 3) have
used leaded gasoline when unleaded is required— and
force the owners of those cars to make necessary re-
pairs or adjustments.18 Expenditures for inspection and
maintenance were taken from  the Cost of Clean.

    Beneficial effects  of the mobile  source  control
program associated with maintenance and fuel den-
sity were also identified. These cost savings were in-
cluded in this study as credits to be attributed to the
mobile source control program. Credits were estimated
based on an EPA study,19 where more detailed expla-
nations may be found.

    16 Memo from Joel Schwartz (EPA/OPPE) to Joe Somers and Jim DeMocker dated December 12,1991, and entitled "Fuel
Economy Benefits." Schwartz states  that since this analysis is relative to a no Clean Air Act baseline, not a 1973 baseline, fuel
economy benefits are not relevant. In the absence of regulation, tuning of engines for maximum economy would presumably be
optimal in the base case as well.
    17 Memo from Joseph H. Somers, EPA Office of Mobile Sources, to Anne Grambsch (EPA/OPPE) and Joel Schwartz (EPA/
OPPE) entitled "Fuel Economy Penalties for section 812 Report," December 23,1991.
    18 Walsh, Michael P., "Motor Vehicles and Fuels: The Problem," EPA Journal, Vol. 17, No. 1, January/February 1991, p. 12.
    19 Schwartz, J., et al. Costs  and Benefits of Reducing Lead in Gasoline: Final Regulatory Impact Analysis, U. S. Environmental
Protection Agency, Economic Analysis Division, Office of Policy Analysis, February 1985.	
                                                 A-13
    Maintenance Credits

    Catalytic converters require the use of unleaded
fuel, which is less corrosive than leaded gasoline. On
the basis of fleet trials, the use of unleaded or lower
leaded gasoline results in fewer muffler replacements,
less spark plug corrosion, and less degradation of en-
gine oil, thus reducing maintenance  costs. Mainte-
nance credits account for the  majority of the direct
(non-health) economic benefits of reducing the lead
concentration in gasoline.

    Fuel Density Credits

    The process of refining unleaded gasoline in-
creases  its density.  The result is a gasoline that has
higher energy content. Furthermore, unleaded gaso-
line generates more deposits  in engine combustion
chambers, resulting in slightly increased compression
and engine efficiency. Higher energy content of un-
leaded gasoline and increased engine efficiency from
the used  of unleaded gasoline yield greater fuel
economy and therefore savings in refining, distribu-
tion, and retailing costs.

Other Direct Cost Data

    The Cost of Clean report  includes several other
categories of cost that are not  easily classified as ei-
ther stationary source or mobile source expenditures.
Federal and  state governments incur air  pollution
abatement costs; additionally,  federal and state gov-
ernments  incur costs to develop and enforce CAA
regulations. Research and development expenditures
by  the federal government, state and local govern-
ments, and (especially) the private sector can be at-
tributed to the CAA. These data are summarized by
year in Table A-7.

    Unlike the other private sector expenditure data
used for this analysis, the survey data used as a source
for private sector R&D expenditures cannot be disag-
gregated into industry-specific expenditure totals.
Consequently, private sector R&D expenditures are

-------
    The Benefits and Costs of the Clean Air Act, 1970 to 1990
Table A-7. Other Air Pollution Control ExpetfditaresTpnipons of
current dollars).                           ' ' " „ y;,v v,, ,»:,;>,-:
year,
Abatement
State &
Fed." Local*

1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990

47
56
88
105
106
90
103
95
85
87
136
115
98
67
80
65
70
71

0
0
1
1
1
0
0
0
0
0
4
14
12
14
15
10
12
13
Regulations
; Research
State &
Fed." Local* Private^' |

50
52
66
69
80
93
100
122
108
93
88
101
103
106'
110
120
130
133

115
131
139
135
161
183-
200
207
226
230
239
250
250
307
300
320*
360
343

492 '
. -520--
487
562
675
805
933-
851
79,8, ,
761
691 "•-
665; '
•77r::
'" "83'f"*
887,;;'
' 934 "-'
984
749'
jakCi

~iW '
100" '
los ;;
13 r:
144
146
105,
'130
131
126;;
133"
'16'5
;;%? ,.
:;2t7 ,v
;i^!;;
- 220 --"
"230*-
231- '
f >••
-< V- , -
V, " s " "
6
'* '7 •'
;^;8
'6
' "?"
,, ,8,
-, ;-^-'»
' 5
;c.
" <- 2, <
6;
4*
- 3'
- ~4"
! 2
1
v-V-2
U"2
Tntel
,' '', *A

'836'
-'866-
'897;
t'.tKf^
1,174-
- vl,32f.
,11,448-,
1,410'
'%'34$
^229
:4',297
"" 1*314'
""J$3j$
^5%'
*'??!
,/lv6TO-
1,788
i;54a<
_ Federal government abatement expenditures: 1973-82, "Pollution Abatement-anACoittroi;;^
Expenditures", .s|'"vy pf .Qirrent- Business (BEA) July 188S Table 9 line 13^1^3-87, BEA '  t
June 1989 Table 71ine 13; 1988-90, BEA May 1995 Table 7 lipes,lS.s    ";,'.,,   ' "  '"
b. St«e and local abatement expenditures; 1973-87, Cost of dean, Ta&te B»9lin^5f 1985^0,
BEA May 1995 Table? line 14.             ^ c ,t,  , , > *•- *•-....
«. Privae sector R&D expenditures: 1973-86, BEA May 1994 Table'-*! v—^^
expenditures in $1987 are converted to current dollars, vsipg to QiDP price df fia
elsewhetein tbisAppendix —netting out public sector I^&l? leaves priv*»
1987-90, BEA May 1995 Table 7 line 20.           ' - ,,*,-, -
f. Federal govcrnmentR&D expenditures: 1973-82, BEA My 198fjTafeJe91j)j»*||.;4^
BEAJune I989Toble61ine21; 1988-90, BEAMiy 1995,Tafale-7 fine21.    ' *^r>V
g. State and local government R&D expenditures: 1973^87, SgQtgggfe/ut, Table B'9' fit<
1988-90,BEA May 1995Table? Iine22.      "  ^r"" " ,VlSS', -'--    --«-,—
          from more recent issues of the Survey of
          Current Business (BEA). Federal govern-
          ment expenditures are from BEA (various
          issues). Private R&D expenditures were
          reported in Cost of Clean. Since publica-
          tion of Cost of Clean, however, BEA has
          revised its private sector R&D expenditure
          series (BEA, 1994 and 1995). Since private
          R&D expenditures were not included in the
          macroeconomic modeling exercise, the re-
          vised series can be (and has  been)  used
          without causing inconsistency with other
          portions of the section 812 analysis.

          Assessment Results

          Compliance Expenditures and
          Costs

              Compliance with the CAA imposed
          direct costs on businesses, consumers, and
          governmental units, and triggered other
          expenditures such as governmental regula-
          tion and monitoring costs and expenditures
          for research and development by both gov-
          ernment and industry. As shown in Table
          A-8, annual CAA compliance expenditures
          - including R&D, etc.- over the period
          from 1973 to  1990 were remarkably
          stable20, ranging from about $20 billion to
          $25 billion hi  inflation-adjusted 1990 dol-
          lars (expenditures are adjusted to 1990 dol-
          lars through application of the GDP Implicit
          Price Deflator). This is equal  to approxi-
          mately  one third of one percent of total
          domestic output during that period, with the
          percentage falling from one half of one per-
          cent of total output hi 1973 to  one quarter
          of one percent in 1990.
    omitted from the macroeconomic modeling exercise
    (the macro model is industry-specific). The R&D ex-
    penditures are, however, included in aggregate cost
    totals used in the benefit-cost analysis.

        The Cost of Clean and the series of articles "Pol-
    lution Abatement and Control Expenditures" hi the
    Survey of Current Business (various issues) are the
    data sources for "Other Air Pollution Control Expen-
    ditures." State and local expenditures through 1987
    are found in Cost of Clean; 1988-90 expenditures are
    Although useful for many purposes, a summary
of direct annual expenditures is not the best cost mea-
sure to use when comparing costs to benefits. Capital
expenditures are investments, generating a stream of
benefits (and opportunity cost) over the life of the in-
vestment. The appropriate accounting technique to use
for capital expenditures in a cost/benefit analysis is to
annualize the expenditure — i.e., to spread the capi-
tal cost over the useful life of the investment, apply-
ing a discount rate to account for the time value of
money.
        20 While total expenditures remained relatively constant over the period, the sector-specific data presented in Tables A-3 and A-5
    above indicate that capital expenditures for stationary sources fell significantly throughout the period but that this decline was offset
    by significant increases in mobile source capital expenditures.
                                                       __

-------
             Appendix A: Cost andMacroeconomic Modeling
A-15

-------
The Benefits and Costs of the Clean Air Act, 1970 to 1990
Annualization Method

    For this cost/benefit analysis, all capital expendi-
tures have been annualized at 3 percent, 5 percent,
and 7 percent (real) rates of interest. Therefore, "an-
nualized" costs reported for any given year are equal
to O&M expenditures (plus R&D, etc., expenditures,
minus recovered costs) plus amortized capital costs
(i.e., depreciation plus interest costs associated with
the pre-existing capital stock) for that year. Station-
ary source air pollution control capital costs are am-
ortized over twenty years; mobile source air pollution
control costs are  amortized over ten years. Capital
expenditures are amortized using the formula for an
annuity [that is, r/(l-(l+r)'1) , where r is the rate of
interest and t is the amortization period].21 Multiply-
ing the expenditure by the appropriate annuity factor
gives a constant annual cost to be incurred for t years,
the present value of which is equal to the expenditure.

    Due to data limitations, the cost analysis for this
CAA retrospective starts in 1973, missing costs in-
curred in 1970-72. Cost of Clean, however, includes
stationary source capital expenditures for 1972. In this
analysis, amortized costs arising from 1972
capital investments are included in the 1973-
1990 annualized  costs,  even though  1972
costs are not otherwise included in the analy-
sis. Conversely, only a portion of the (e.g.)
1989 capital expenditures are reflected in the
1990 annualized costs — the remainder of
the costs are spread  through the following
two decades, which fall outside of the scope
of this study (similarly, benefits arising from
emission reductions in, e.g., 1995 caused by
1990 capital investments are not captured
by the benefits analysis). Table A-9 presents
CAA compliance costs from 1973 to 1990,
in 1990 dollars, with capital expenditures
amortized at a five percent real interest rate.
"Total" costs are the sum  of stationary
source, mobile source, and  "other" costs,
minus recovered costs.
             The Stationary Source table reports a capital ex-
         penditure of $6,521  million for 1972 (in 1990 dol-
         lars).  The cost is spread over the following twenty
         years (which is the assumed useful life of the invest-
         ment) using a discount rate of five percent; thus, the
         amortization factor to be used is f(20)=0.0802. Mul-
         tiplying $6,521 million by 0.0802 gives an annuity of
         $523  million.  That annuity is noted on the first data
         row of the table, signifying that the 1972 expenditure
         of $6,521 million implies an annual cost of $523 mil-
         lion for the entire twenty-year period of 1973 to 1992
         (the years following 1990 are not included on the
         tables, since costs incurred in those years are not in-
         cluded in this retrospective assessment). The first sum-
         mary row near the bottom of the table (labeled "SUM")
         reports aggregate annualized  capital  costs: for 1973
         (the first data column), capital costs are $523 million.

             Capital expenditures in 1973 amounted to $8,360
         million.  Using the amortization technique explained
         above, one can compute an annualized cost of $671
         million,  incurred for the twenty-year period of 1974
         to 1993. Aggregate annualized capital costs for 1974
         include cost flows arising from 1972 and 1973 invest-
TabieA-
                          ", 1973-1990
1973
"1974
  1977,
  -1978
  1986
     Tables A-10 and A-11 provide details
 of the amortization calculation (using a five
 percent interest rate) for stationary sources
 and mobile sources,  respectively. Similar
 calculations were performed  to derive the
 annualized cost results using discount rates
 of three percent and seven percent.
 1999
' 199*6
 Stalioria'iy
*k
 "523,,  ''C'936
 1*194'   ^4,778
        2,630
       - 3,31-7
        3,968"
         ,5,277
         '6!,6iO'
        5,768
        6,527
        6,991
       " 7,959
       ",S,7&t
        S',785
       ' 7,855
        8,168
        8',593
        9,005'-'
       '- 9,410
        8,477
       !;,
-------
                                                     Appendix A: Cost and Macroeconomic Modeling
     ''5*^11 J™£&fg 5-^-*" § * *^Sic§ "^ S § ' ''''''frl^s,; '  "'»'%•;§»'j^'i:§''S ''•'•,%%#$?* S'^S^isi"°""'

t^^£  ,£&.  ^%IV^%:^
'"*'^i<  ^^  ~^^:^m^^-'£^i^!''-,   	-•ksiJ^.v ''<-'^rh:,' j&,'B**s<r-  	>^>i ^ -'^T--"^^'-   <•>*:•>"&>"•-/'<  -  ,'^^>,-;/A g:s:s-srls^
ftg^; vl?|;g|:^|^,,|;|||«|,,-| "'X?L-£:;>V':'--  -'/''"" '^^^"^ 1'^'^  '^"1 ^*1)-J
 1&iv  il^l.s§:i2i--^;V:B'?--  :  -  — -l^|tl~l:l^ -:%
  S""" ^"i""1   1V'  '•  '   '"^*«™ '"„','""''-, r,v"-"~'-s^V- V1 ^:i^«^f<5ri"cf Clfv,',\'"W;;;/^_ ~, ^  ••;Ir^"C-  - -liv*-
 ••>§ ••,    cS^tS^ ••••<*•  "VN. A   '  "" ^^•—v-X' '   s    "•'•-Wlc/ ^ ^ ••*'' "'/'"••''" \"";'tS^>^  v y'*§\;
              ^8-'
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    ''"     "'          '             'y   *
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* * stf   ^ 5-fct-'-
=!  us te :-iV,  ^ 'S-,ff .a.
V».'"  --"T"-'"-<^t:*.  -    ^;'~",-f^i'   •     /"--„«„  , •&-;*&<;5, -  1' '§i;C"^-, E -
K KJt>^.^<5Jl'^ri.v*%.^'^*t. ^, ^^cjS5?''****-^'C>x:'''' JJ^ir\.--"""O
                                        A-17

-------
The Benefits and Costs of the Clean Air Act, 1970 to 1990
           g
           c\
           »—*


           •8
           V3


           §
           g
           g
           CO


           I
            §
           -
           O
            s
            N





           j
           •

           I
                                                       ,,>x .-   -      ' "-«, <=, <*. « ^ r;
              <-;\-"**"      «- •>  -   • ,"'? *"• '        •* •* •-,   -,**?•-•     •-"  .  ,. „, *   ^ ^.» a
m £ S in ffi. J?
          to
                                                                                       -      *Sf  S t3 iT*
                                                                                jj, "./--/-,     « -g d »
                                                                '"'"'  r^g-o 8 B  '
                                                                 .-..   ^"^;,^;^,^
                                                         A-18

-------
                                                                Appendix A: Cost and Macroeconomic Modeling
 raents: that is, $523  million plus  $671 million, or
 $1,194 million (see the "SUM" row). Similar calcu-
 lations are conducted  for every year through 1990, to
 derive aggregate annualized capital costs that increase
 monotonically from 1973 to 1990, even though capi-
 tal expenditures decline after 1975.22

     An alternative calculation technique is available
 that is procedurally simpler but analytically identical
 to that outlined above. Instead of calculating an annu-
 ity for each capital expenditure (by multiplying the
 expenditure by the annuity factor f), then summing
 the annuities associated with all expenditures in pre-
 vious years, one can  sum all previous expenditures
 and multiply the sum (i..e., the capital stock at the
 start of the year) by /. The third summary row (la-
 beled "K stock") near the bottom of the amortization
 summary tables give the pollution control capital stock
 at the start of each year. For example, the stationary
 sources capital stock in place at the  start of 1975 was
 $23,533 million (this  is the sum of 1972, 1973, and
 1974 capital expenditures). Multiplying the capital
 stock by the annuity factor 0.0802 gives $1,888  mil-
 lion, which is the aggregate annualized stationary
 source capital cost for 1975.

    One can perform  further calculations to decom-
 pose the annualized capital costs into "interest" and
 "financial depreciation" components.23 For example,
 at the start of 1973, the stationary source capital stock
 was $6,521 million. A five percent interest rate im-
 plies an "interest expense" for 1973 of $326 million.
 Given a 1973 annualized cost of $523 million, this
 implies a "depreciation expense" for  that year of ($523
 million minus $326 million =) $197 million. For 1974,
 the existing capital stock net of "financial deprecia-
 tion" was $14,684 million (that is, the $6,521 million
 in place at the start of 1973, plus the investment of
 $8,360 million during 1973, minus the depreciation
 of $197 million during 1973); five percent of $14,684
 million is the interest expense of $734 million. Since
 the annualized capital cost for 1974 is $1,194 mil-
 lion, depreciation expense is $460  million (i.e., the
 difference between annualized cost and the interest
 component of annualized cost). This procedure is re-
 peated to determine interest and depreciation for each
 year through 1990 (see the last three  rows of Table A-
 11).
     The three tables above all present costs (and in-
 termediate calculations) assuming a five percent in-
 terest rate. As noted above, the Project Team also
 employed rates of three percent and seven percent to
 calculate costs. Those calculations and intermediate
 results are not replicated here. The method employed,
 however, is identical to that employed to derive the
 five percent results (with the only difference being
 the interest rate employed in the annuity factor calcu-
 lation). Table A-12 presents a summary of expendi-
 tures and annualized costs at the three interest rates.
      Table A-T2. -Gompllanee Expenditures
      Annualize4 Costs, 19,73-1990- ($1990
     , million$).   ' '• 's   1""!" '
         ^'
        ,1973
                         Alft«»a:
 19,635    10,957',; -H-,042
-21,405""-'-"
        1977
        1979
        '1980
        1982
 24,062 '7 '*! 5,253
^22;593'''"'i4\963-
"24;S37 ,  ,17,309-
 25,74*1--»--l-9,666-
 -24367  ' i9-,590
'21,555,' , I8.-643'
        - 19,095"
                               13,638  13;988;
                                     13,13.9
 - 15,7,?6;
,-,,,18,232,  19,
                              -20;905"22;321
                             -;- ao^s,^^.
                             -- 21,909;:
        1986
        1988:
        1989
        -21--, 109'
-20,615 ---<22$7!2V
      L  22,012
 53,161- ;25,364
 24,237, •?&'$&'
,24^81 24719^-'
       -;-.2349B
                                      ,
                             "26,066 28^17-
                jj-^v,X-v,'S'-',,'
Discounting Costs and Expenditures

    The stream of costs from 1973 to 1990 can be
expressed as a single cost number by discounting all
costs to a common year. In this analysis, all costs and
benefits are discounted to 1990 (in addition, all costs
and benefits are converted to 1990 dollars, removing
the effects of price inflation).24 There is a broad range
    22 Similar calculations were performed for mobile source control capital costs, where the assumed amortization period is ten years.

    23 One might, for example, wish to examine the relative importance of the "time value" component of the computed capital costs.

    24 Unlike most cost-benefit analyses, where future expected costs and benefits are discounted back to the present, this exercise
brings past costs closer to the present. That is, the discounting procedure used here is actually compounding past costs and benefits.

-------
The Benefits and Costs of the Clean Air Act, 1970 to 1990
of opinion in the economics profession regarding the
appropriate discount rate to use in analyses such as
this. Some economists believe that the appropriate rate
is one that approximates the social rate of time pref-
erence — three percent, for example (all rates  used
here are "real", i.e., net of price inflation impacts).
Others believe that a rate that approximates the op-
portunity cost of capital (e.g., seven percent or greater)
should be used. A third school of thought holds that
some combination of the social rate of time prefer-
ence and the opportunity cost of capital is appropri-
ate, with the combination effected either by use of an
intermediate rate or by use of a multiple-step proce-
dure which uses the social rate of time preference as
the "discount rate,"  but still accounts for the cost of
capital. The section  812 Project Team chose to use a
range of discount rates (three, five, and seven per-
cent) for the analysis.

    Expenditures and annualized costs discounted to
1990 are found on Table A-13. Expenditures are dis-
counted at all  three rates; annualized costs are dis-
counted at the rate corresponding to that used in the
annualization procedure (i.e., the "annualized at 3%"
cost stream is  discounted to 1990 at three percent).
The final row presents the result of an explicit combi-
nation  of two  rates: Capital costs are annualized at
seven percent, then the entire cost stream is discounted
to 1990 at three percent.
   Table A-13.  Costs Discounted to 1990 ($1990
   millions).
Expenditures
Annualized Costs
Annualized.at 7%
a.^S:
520^75
416,804
476329
5SL
627,621
522^06
7^.
760,751
657,00,3
^ "•
Indirect Economic Effects of the CAA

    In addition to imposing direct compliance costs
on the economy, the CAA induced indirect economic
effects, primarily by changing the size and composi-
tion of consumption and investment flows. Although
this analysis does not add these indirect effects to the
direct costs and include them  in the comparison to
benefits, they are important to note. This section sum-
marizes the most important indirect economic effects
of the CAA, as estimated by the J/W macroeconomic
simulation.

GNP and Personal Consumption

    Under the no-control scenario, the level of GNP
increases by one percent in 1990 relative to the con-
trol case (see Table A-14). During the period 1973-
1990, the percent change in real GNP rises monotoni-
cally from 0.26 percent to 1 .0 percent. The increase
     '.Table A'»l¥.   flefe^Besfm Otass* -
     ^National Produet'J|e%een the fcojatrol and
      •No- control Scenarios * r
                               Real % ,
          Year

          1973
  -0.09
  -048
  -0x10
  -0,00
  -0-10
ff  0.26
^'0.27
                            ', -it**"** *. 'M A
                             "**j$?$4'
           1980 v'
           1981 > >'
           1982"   ,
           1983  /-
           1984  " -
 ^-044
,  -044
           1987
                  'y '%M
  JsO.,73
  "0<74

   0.84'
   0,95
                                1,00
                                                                                    1.
in the level of GNP is attributable to a rapid accumu-
lation of capital, which is driven by changes in the
price of investment goods. The capital accumulation
effect is augmented by a decline hi energy prices rela-
tive to the base case. Lower energy prices that corre-
spond to a world with no CAA regulations decreases
costs and increases real household income, thus in-
creasing consumption.

    Removing the pollution control component of new
capital is equivalent to lowering the marginal price of
investment goods. Combining this with the windfall
gain of not having to bring existing capital into com-
pliance leads to an initial surge in the economy's rate
of return, raising the level of real investment. The in-
                                                A-20

-------
                                                               Appendix A: Cost and Macroeconomic Modeling
 vestment effects are summarized in Figure A-l. More
 rapid (ordinary) capital accumulation leads to a de-
 cline in the rental price of capital services which, in
 turn, stimulates the demand for capital services by pro-
 ducers and consumers. The capital rental price reduc-
 tions also serve to lower the prices of goods and ser-
 vices and, so, the overall price level. Obviously, the
 more capital intensive sectors exhibit larger price re-
 ductions.25 The price effects from investment changes
 are compounded by the cost reductions associated with
 releasing resources from the operation and mainte-
 nance of pollution control equipment and by the eh'mi-
 nation of higher prices due to regulations on mobile
 sources.

     To households, no-control scenario conditions are
 manifest as an increase in permanent future real earn-
 ings which supports an increase in real consumption
 in all periods and, generally, an increase in the de-
 mand for leisure (see Table A-15). Households mar-
 ginally reduce their offer of labor services as the in-
                                  come effects of
f^^^Hffffffff^^^fuff^^^ffff^t  higher real earn-
                                  ings dominate the
                                  substitution ef-
                                  fects of lower
                                  goods   prices.
Table A-l|;;6ffference in Personal
             Between" the Control-,
' *"* N
?^v

f 'St
/ '










'



v •.>'

>, "V »*,

" '••• , "V
-^at"
-- - ,,-,.
..-1973,,
' '1?74 J
1976?'
1977
" 19¥8;A
- 1979'. .:-
1 19'80 "
1981
1982-'-'
rt^'A-.",*
ISfJJJ
1984
1985

1987
' 1988
" 19&9
" 1990

«»^»»

Norainai ^,
; Change'

«0:6i
, -our -
•8.1ft, „
•8.10
-0,09. x
' -0.11 ,,
" '-0.12 -
'-0.13 -.
" ' ' -0.12
w" * A 1 -3
",V/ ""'^ s ,s
•".•"*< -*0 15
,,Z..0.19"%
* >C^ ^ ,, _,
, ,, f) 1 Q '
!.7'T-0.19 -N
,^/-0.-17
-> --0.17
^-?>0ii8
,',;,; s^<',, > ,
. * * jVS *

Real %'
^haiige

, - Oi33v,,
" J*3k"
0;39': -.
' - o:54/-.
,,„ 0.63'"=
„, ,,0.68'"
- - -0-7i'>>;'
- < -0.74:T'
.*>, t^r
'f\ '
0 'So-1^ *
0,8&'-V
:,,„,; 0.94 •'•-
,,,;t_0;98;:
":'v>|ri,03
^^1104-r
",,VOi,,,,
^
., <^.,


inc iiiuicasc in
consumption is
dampened by an
increase in the
rate of return that
produces greater
investment (and
personal sav-
'. , ings).

Finally, tech-
nical change is a
\7^t"17 1Yf\f\f\ftC\ttt
very imporicini.
aspect of the sup-

, , ply-side adjust-
"" ",;, ments under the
n*x- no-control sce-
#?. , „ nario. Lower fac-
'-, * tor prices in-
- - "** crease the endog-
-; *;- enous rates of
' J; S;

technical change in those industries that are factor-
using. Lower rental prices for capital benefit the capi-
tal-using sectors, lower materials prices benefit the
materials-using sectors, and lower energy prices ben-
efit the energy-using sectors. On balance,  a signifi-
cant portion  of the increase  in economic growth is
attributable to accelerated productivity growth. Un-
der the no-control scenario, economic growth aver-
ages 0.05 percentage points higher over the interval
1973-1990. The increased availability of capital ac-
counts for 60 percent of this increase while faster pro-
ductivity growth accounts for the remaining 40 per-
cent. Thus, the principal effect arising from the costs
associated with CAA initiatives is  to  slow the
economy's rates of capital accumulation and produc-
tivity growth. This finding is consistent with  recent
analyses suggesting a potential association between
higher reported air, water, and solid waste pollution
abatement costs and lower plant-level productivity in
some manufacturing industries (Gray and Shadbegian,
1993 and 1995).

    As with the  cost and expenditure data presented
above, it is possible to present the stream of GNP and
consumption changes as single values by discounting
the streams to a single year. Table  A-16 summarizes
the results of the discounting procedure, and also in-
cludes discounted expenditure and annualized cost
data for reference. Accumulated (and discounted to
1990) losses to GNP over the 1973-1990 period were
half again  as large as expenditures during the same
period, and approximately twice as large as annual-
ized costs. Losses in household consumption were
approximately as great as annualized costs.
                                                             ^A-ii6,,,GNPaftd
                                                          ra&countedto 1990 fS1§9"()"bi
                                                           GNP     ,  ,„_,„„   '
                                                           Household C,6ft'su!rfj>ti(Mi

                                                           HH ai
                                                                                                   657-
                                                                                            loos  •  iVsi"'
                                                                                             569" '/$&••
                                                             iBacroecoaoMc
                                                                                Jorgeason'etat(1993),
                                                                                                '
     25 Not surprisingly, at the industry level, the principal beneficiaries in the long run of eliminating the costs associated with air
 pollution abatement are the most heavily regulated industries. The largest changes in industry prices and outputs occur in the motor
 vehicles industry. Other industries that benefit significantly from the elimination of environmental controls are refined petroleum
 products, electric utilities, and other transportation equipment. Turning to manufacturing industries, metal mining and the primary
 metals have the largest gains in output from elimination of air pollution controls.
                                                  A-21

-------
The Benefits and Costs of the Clean Air Act, 1970 to 1990
     Figure A-l. Percent Difference in Real Investment Between Control and No-control Scenarios.
              i
              a
                    1873 1874  1875 1878  1877  187a  1878  1880  1881  1882  1883  1984  1985  1988  1887  1988  1989  1980
                                                      Year
     Figure A-2. Percent Difference in Price of Output by Sector Between Control and No-control
     Scenario for 1990.
                     1  23  4  56 78 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35
                                                     Sector
                                                    A-22

-------
                                                             Appendix A: Cost and Macroeconomic Modeling
    Although they have value as descriptors of the
magnitude of changes in economic activity, neither
GNP nor consumption changes are perfect measures
of changes in social welfare. A better measure is
Equivalent Variations (EVs), which measure  the
change in income that is equivalent to the change in
(lifetime) welfare due to removal of the CAA. As part
of its macroeconomic exercise, EPA measured the EVs
associated with removal of the CAA. Elimination of
CAA compliance costs (disregarding benefits) repre-
sents a welfare gain  of $493 billion to $621 billion,
depending on assumptions used in the analysis.26 This
result does not differ greatly from the range of results
represented by expenditures, anualized costs, and con-
sumption changes.

Prices

    One principal consequence of the  Clean Air Act
is that  it changes prices. The largest price reductions
accrue to the most heavily regulated industries which
are the large energy producers and consumers (see
Table A-17). But these are also the most capital in-
tensive sectors and it is the investment effects that are
the dominant influences in altering the course of the
economy.  Focusing on  energy prices, under  the
no-control scenario the price of coal in 1990 declines
by  1.3 percent, refined petroleum declines by 3.03
                         oontrol Scenarios	,
    'Year
         -0.44
                    P<*,trr»jftnm
                     -5:99
                              ;EIecitri
-------
The Benefits and Costs of the Clean Air Act, 1970 to 1990
     Figure A-3. Percent Difference in Quantity of Output by Sector Between Control and No-
     control Scenario for 1990.
                      1234567
                                    9 10 11 12 13 14 15 16 17 16 19 20 21 22 23 24 25 26 27 26 29 30 31 32 33 34 35
                                                  Sector
     Figure A-4. Percent Difference in Employment by Sector Between Control and No-control
     Scenario for 1990.
                       ™l
                                                 : 16 17 16 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35
                                                    Sector
                                                 A-24

-------
                                                             Appendix A: Cost and Macroeconomic Modeling
that the largest increase hi prices also occurred hi the
motor vehicles  sector. The 3.8  percent reduction hi
prices produces an increase in output of 5.3 percent
relative to the base case.

    Significant  output effects are also seen hi the pe-
troleum refining sector (sector 16) with a 3.2 percent
increase, hi electricity (sector 30) with a 3.0 percent
increase, and in other transportation equipment (sec-
tor 25) with a 1.6 percent increase. The large gains in
output for these industries are mostly due to the de-
cline in their prices. In manufacturing, the sectors
exhibiting the most significant output effects are metal
mining (sector 2) with a 2.0 percent increase, and pri-
mary metals  (sector 20) with a  1.8 percent increase.
Twenty of the remaining industries exhibit increase
in output of less than 0.9 percent after pollution con-
trols are removed.

    While most sectors increase output under the
no-control scenario, a few  sectors decline in size in
the absence of air pollution controls.  The most no-
table of these are food and kindred products (sector
7) which decline by 0.5 percent,  furniture and fixtures
(sector 12) which decline by 0.6 percent, and rubber
and plastic products (sector 17)  which decline by 0.3
percent. These sectors are among the least capital in-
tensive, so the  fall in the rental price  of capital ser-
vices has little effect on the prices of outputs. Buyers
of the commodities produced by these industries face
higher relative  prices and substitute other commodi-
ties in both intermediate and final demand. The rest
of the sectors are largely unaffected by environmen-
tal regulations.

Changes in  Employment Across
Industries

    The effect of the CAA on employment presents a
much more complicated picture. Although Jorgenson-
Wilcoxen is a full-employment model and cannot be
used to simulate  unemployment effects,  it is useful
for gaining insights about changes in the patterns of
employment across industries. Percentage changes in
employment by sector for 1990 are presented hi Fig-
ure A-4.

    For 1990, the most significant changes in the level
of employment relative to the control scenario occur
in motor vehicles (sector 24) which increases 1.2 per-
cent, other transportation equipment (sector 25) which
increases 0.8 percent,  electric utilities (sector 30)
which increases 0.7 percent, and primary metals (sec-
tor 20) which increases 0.6 percent. The level of em-
ployment is higher relative to the control case  in 10
other industries.

    For a few sectors, the no-control scenario results
in changes hi real wages which cause reductions in
employment. The most notable reductions in employ-
ment under the no-control scenario occur in tobacco
manufacturing (sector 8) which declines 1.2 percent,
furniture and fixtures (sector 12) which declines 0.8
percent, rubber and plastic products (sector 17) which
declines 0.8 percent, food and kindred products (sec-
tor 7) which declines 0.7 percent, stone, clay and glass
products (sector 19) which declines 0.6 percent, and
instruments (sector 26) which declines 0.6 percent.
These  sectors are generally those in which the level
of output was lower hi 1990 relative to the control
scenario, since they are among the least capital inten-
sive and the fall in the rental price of capital services
has little effect on the prices of outputs. Buyers of the
commodities produced by these industries face higher
relative prices and  substitute other commodities hi
both intermediate and final demand. It is interesting
to note that several  of the least capital intensive sec-
tors experience insignificant employment effects in
the short run (1975) under the no-control scenario,
but increasingly adverse effects over the 20-year pe-
riod of analysis. These include food and kindred prod-
ucts, furniture and fixtures, rubber and plastic  prod-
ucts, stone, clay and glass products, and instruments.

    Examination of the transition of employment in
the economy from the initial equilibrium to 1990 re-
veals that the employment effects of the C AA on motor
vehicles, transportation equipment, electric utilities,
and primary metals persist over the entire period of
analysis. Employment varies from:  an increase of 1.7
percent in  1975 to  1.2 percent in 1990 in motor ve-
hicles; an increase  of 0.7 hi 1975  to 0.8 percent hi
1990 hi transportation equipment; an increase of 1.2
percent hi 1975 to 0.7 percent hi 1990 hi electric utili-
ties; and an increase of 0.8 percent in 1975 to 0.6 per-
cent in 1990.
                                                 A-25

-------
The Benefits and Costs of the Clean Air Act, 1970 to 1990
 Uncertainties in the Cost
 Analysis

 Potential Sources of Error in the Cost
 Data

    Because of the importance of the Cost of Clean
 data for this assessment, the project team investigated
 potential sources of error due to the use of industry's
 self-reported costs of compliance with air pollution
 abatement requirements. Concerns about the accuracy
 of responses include (1) misreporting by firms in re-
 sponse to federal agency surveys, and (2) omission of
 important categories of compliance cost from the data
 collected or reported by these federal agencies.27 Table
 A-18 contains a summary of the results of the analy-
                                                 sis. This analysis is consistent with the findings of
                                                 two recent studies comparing combined air, water, and
                                                 solid waste pollution abatement costs, as reported in
                                                 federal abatement cost surveys, to their observed ef-
                                                 fects on productivity levels. These studies suggest that,
                                                 since observed productivity decreases exceed those
                                                 expected to result from the reported abatement costs,
                                                 there may be additional pollution abatement costs not
                                                 captured or reported in the survey data, and that total
                                                 abatement costs  for the three  manufacturing indus-
                                                 tries studied may be under-reported by as much as a
                                                 factor of two  in the most extreme case (Gray and
                                                 Shadbegian, 1993 and 1995; Gray,  1996).

                                                     The major finding from this analysis indicates that
                                                 total O&M costs are likely to be under-reported due
                                                 to  exclusion of private research and development
      Table A-l8. Potential Sources of E^or'aitf} Their,Effec,fc.Gtt Total''CoMs^'f Compliance,
                    Source of Error •
          Lack. of Data at Firm Level
                                            ' • '-^'Percent -Unknown  ,^;
          Misallocation of Costs;
          Inclusion of OSBA and Other "' - *"•*
          Regulatory Costs         ,„ c
                                              .      ,  ',<
                                             Over-reported
                                            V^    . ft' '& f-W-S ,„,
                                         - - Percent Unknown
          Exclusion of Solid Waste Disposal 'Cqsls
          Related to Air Pollution Abatement
    Exclusion of Costs:        '   "*' - \

    Exclusion of Private R&0 Expenses •'


    Exclusion of Energy Ose by;Potfu1tib1a'x
    Abatement Devices'*'   "'. '-'•*'-.^^

    Exclusion of Depreciation Expenses^1-


    Exclusion of Recovered Costs
                                                                             aries by year) '
                                                                                     '  ^
          Omissio n of Smal 1 Pi rms'
                     NET EFFECT  '  '
'•> Energy outlays are part of the data, on ;O^M
considered along with other opealing expea'
accumulattoo process, as the undepreciated ca
ptoduceis and consumeis.     ° " " ,v"
                                                                         , in fhejgvy, njotfel,
                                                                  D^«ec'ilfe)n'Js>»|)r
-------
                                                               Appendix A: Cost andMacroeconomic Modeling
(R&D) expenditures. Note, however, that although
these costs were excluded from those used for the
macroeconomic modeling, they were included in the
overall direct cost estimate of the CAA; see "Other
Direct Costs," above. These costs are excluded from
the macromodeling because they cannot be disaggre-
gated by industry and, more importantly, because there
is no information on what was purchased or obtained
as a result of these expenditures.

    Based on the need indicated by the lEc review,
modifications to the BEA data were made to remedy
some of the biases noted above. In particular, recov-
ered costs for stationary source air pollution, e.g. sul-
fur removed using scrubbers that is then sold  in the
chemical market, have been accounted for in the data
set used in the model runs.
             s as a Perceata'gesef-Capital 'Stock "
              I990'a&?lars)--- ••  --
    1973
   '-1976
        ,
   • 1979
    1962
 1964
. 1965s
   -19B8
         "14J880   14,684,. ,,4-,77'a
       32,77:3,
       -41,331'-'
       ,49,448"
       '57,299..
          3W2 '6,768
         .- SS^SW"' 6,S27
          46,612^,6,991
                  -'58,232', 3.8,791
       74,366 *
       02,381?'
                  -"-74,173, ;?
 95,879 V^7eB06  8,605

-107,'082 ', '-,-79,713, '8;<

         -80,300-  8:,'l
                 8,5
                -8SS42
      117,263  ,
      i'22,182 -
      127,'394
                             v% 'O',60  •?..v'&'6Q''
                            "" 0.32 -' o'JsT
                                     -0,2C:'
                                 -vO;1,4-v , 0,15
                                    .09/HrP'tl- r
                                 '  0.07
   K stock",l
         ',-fromTable-'-A-lO.,  -.^-^^,.-	•-- •  -- -";;--'>-
      K" is tiie.siatioiia^ryYbuirCe control ,capi!&i stock.Jess, ,"••
                ied bVimortfeation ,at, sfefrom Table- - -
                    * »,"•'-<      ~ -        --       .
 '.I'fi&feal twp.cohjrnns ar^iatips: <
  'stpcJc^andO&lVlimd'edby^etcapital.   >v^"'-'','-".,.
    An additional set of concerns relates directly to
reporting of costs by firms. Some have noted an un-
expected temporal pattern of stationary source con-
trol expenditures in the BEA data that might lead one
to question the accuracy of the Census survey re-
sponses. One would expect that stationary  source
O&M expenditures over time would be roughly pro-
portional to the accumulated stationary source con-
trol capital  stock. Yet, as illustrated in Table A-19,
O&M expenditures as a fraction of accumulated capi-
tal stock decline over time (even if one discounts the
first few years because  of  the dramatic percentage
increases in capital stock during those years). It is true
that the ratio of O&M expenditures to the depreci-
ated capital stock (in the far right column, labeled "net
K") is reasonably stable after 1981. The depreciation
shown here, however, is ^financial depreciation only,
depicting the declining value of a piece of equipment
over time, rather than a measure of physical asset
shrinkage. Assuming a twenty-year useful lifetime,
all of the stationary source control capital stock put in
place since 1972 could conceivably still be in place in
1990. If anything, one would expect the O&M/K ra-
tio to increase as the capital depreciates (i.e., ages),
until the equipment is scrapped, because aging equip-
ment requires increasing maintenance. Consequently,
one might infer from this information that firms have
systematically under-reported O&M expenditures, or
have over-reported capital expenditures.

    The apparent anomaly might be explained by an
examination of the types of O&M expenditures re-
ported. If more than a token percentage of O&M ex-
penditures are unrelated to  "operation and mainte-
nance" of pollution control devices, then the observed
O&M/K ratio would not appear unusual.

    The Census PACE survey28 required respondents
to report air pollution abatement O&M expenses in
the following categories: salaries and wages; fuel and
electricity; contract work; and materials, leasing, and
"miscellaneous."29  In later versions of the survey,
additional information relating to the types of expenses
to report was provided as a guide to respondents. The
types of expenses listed that are relevant to air pollu-
tion abatement include:
    28 Pollution Abatement Costs and Expenditures, various years.

    29 Census also requested a reporting of "depreciation" expenses as a component of O&M. BEA, however, removed depreciation
expense from the reported O&M costs because retaining depreciation would have amounted to double-counting, since BEA also
reported capital expenditures.
                                                  A-27

-------
The Benefits and Costs of the Clean Air Act, 1970 to 1990
   (1)  operating and maintaining pollution abate-
        ment equipment;
   (2)  fuel and power costs for operating pollution
        abatement equipment;
   (3)  parts for pollution abatement equipment re-
        placement and repair;
   (4)  testing and monitoring of emissions;
   (5)  incremental costs for consumption of envi-
        ronmentally preferable materials and fuels;
   (6)  conducting environmental studies for devel-
        opment or expansion;
   (7)  leasing of pollution abatement equipment;
   (8)  compliance and environmental auditing;
   (9)  salaries and wages for time spent completing
        environmental reporting requirements; and
  (10)  developing pollution abatement operating
        procedures.30

    The magnitude of the expenditures associated with
the first three items should be correlated with the size
of the existing stock of air pollution abatement capi-
tal. Expenditures associated with items four through
ten, however, should be independent of the size of the
existing capital stock  (expenditures associated with
item seven, leasing of pollution abatement equipment,
could be negatively correlated  with the size of the
capital stock). If items four through ten account for a
non-negligible proportion of total O&M expenditures,
and i/respondents included these cost categories even
though they were not explicitly listed in the survey
instructions before 1991, then one would  expect  to
see the O&M/K ratio declining during the  study pe-
riod. Thus, even though it is possible that O&M ex-
penditures are underreported (or that capital expendi-
tures are overreported), one cannot be certain.

Mobile Source Costs

    For the section 812 analysis, EPA used the best
available information on the estimated cost of mobile
source air pollution control. Several other sources of
cost estimates exist, however, including a cost series
produced by the Department of Commerce Bureau of
Economic Analysis (BEA). The BEA cost series  is
summarized in Table A-20. The BEA estimates dif-
fer significantly from EPA estimates, particularly with
respect to estimates of capital costs and the "fuel price
penalty" associated with the use of unleaded gaso-
line.

    EPA's  capital cost estimates are based on esti-
mates of the cost of equipment required by mobile
1987,  .„ 4,475 <
l-9?8 ,,,,v«,4,267,/- 7,313
•1989-  --«4;760- * 7,743"
1990" ""'"4^69 7, -S.688
       BEA Estimates
1986   '4;09ff:'-" ,7,072
19^7  '- '3^82 ' ;5,$,43
1988    3,-120-   6,230'
  •r  ,',„,,«• ,-5,*',,,"',,
  312- '; "<•»
  277'"'  "'
                                  130
                                         -12,914"
                                          13O37.
                          312
        , - ,I'82
        ..Ml'1''
  1990.-, .4402-  6.799
  121 v,;,v  161"""  ,, 9,632
  229   - -  J53U''£   '£,9$St
' "2'0tf """"  :154 ••-  "'11.255
             1995, t
                                       ,,,
                           btltttiaa Aba»eta art. '«ad Coaaol ,
                           '                 j for •„
source regulations. BEA's estimates are based on sur-
vey data from the Bureau of Labor Statistics (BLS)
that measures the increase in the per-automobile cost
(relative to the previous model year) due to pollution
control and fuel economy changes for that model year.
The difference in approach is  significant: BEA's an-
nual capital cost estimates exceed EPA's by a factor
of (roughly) two. EPA may underestimate costs to the
extent that engineering cost estimates of components
exclude design and development costs for those com-
ponents. The BLS estimates add the incremental an-
nual costs to all past costs to derive total current-year
costs.  Such an approach overestimates costs to the
extent that it fails' to account for cost  savings due to
changes in component mixes over time.

    Some mobile source pollution control devices re-
quired the use of unleaded fuel. Unleaded gasoline is
more  costly  to produce than is leaded gasoline, and
generally has a greater retail price, thus imposing a
cost on consumers. EPA estimated the "fuel price pen-
alty" by using a petroleum refinery cost model to deter-
mine  the expected difference  in production cost be-
tween leaded and unleaded gasoline. BEA's "fuel price
penalty" was the difference between the retail price
of unleaded gasoline and that of leaded gasoline.

    A detailed description of the data sources, ana-
lytic methods, and assumptions that underlie the EPA
and BEA mobile source cost estimates can be found
in McConnell et al. (1995).
    30 Pollution Abatement Costs and Expenditures, 1992, pg. A-9.

-------
                                                             Appendix A: Cost andMacroeconomic Modeling
Stationary Source Cost Estimate
Revisions
                          Endogenous Productivity Growth in the
                          Macro Model
    As noted above, the costs used for stationary
sources in the macro-modeling (and retained in this
cost analysis) were projected for several years in the
late 1980s. Since that time, BEA has released histori-
cal expenditure estimates for those years based on
survey data. A comparison of the expenditure series
can be found in Table A-21. Apparently, EPA's pro-
jections overestimated stationary source compliance
expenditures by approximately $2 billion per year for
the period 1987-1990. Since expenditures from all
sources are estimated to be $18 billion -$19 billion
(current dollars) per year during 1987-1990, this im-
plies that EPA has overestimated compliance expen-
ditures by more than ten percent during this period.
Although a substantial overstatement for those years,
the $2 billion per year overestimate would have little
impact (probably less than two percent) on the  dis-
counted present value, in 1990 dollars, of the  1973-
1990 expenditure stream.
    " r^/Capitar  '  Ne£!j,,,
        ,,, JExjk" '*
,,1974'
 1975-
'---;' 1,118
                   1,380
     	2,802
                 '""' 1,180
                 ' '"""1344
                 "?Z?"~ry/"/ /<;<
 \m
 1978
 1979
 '1980
 1981
 1982
 1983
 ',' 3,93,5,
 \ 4,6,34 '
  ' 5^63
   1985
  ,1986
   1987
   1989
   1990
   7,663
   9326''
   11,900^
//j-iwio*
- -  K36V
   13?725
,   16,157
 > 15340
 --  14,521
! 1^420-
 1,28,9,,
 1,1-36
 552 -

 274,
 118"
 165~
-.(331)
'(453)
 (631)"
 (271)''
 (719)
                           •>.•.••
                           309
                           1,209
,,2,99,6 ,
 3^18
 4,235,,-
 4,427 ^
 4,995 '•'
 4,522
 3,672
                                      1,792
                                     ,2320 ,
                                     -2,252
                                      1-.876
1,972,'
'U70 -
                                     658
                                     420,
                                     183
                                    "(55)
   Inspection and maintenance costs less fuel density savings and
                    °"          ''
                             For each industry in the simulation, the JW model
                          separates price-induced changes in factor use from
                          changes resulting strictly from technical change. Thus,
                          simulated productivity growth for each industry has
                          two components: (a) an exogenous component that
                          varies over time, and (b) an endogenous component
                          that varies with policy changes. Some reviewers have
                          noted that, although not incorrect, use of endogenous
                          productivity growth is uncommon in the economic
                          growth literature. EPA conducted a sensitivity run of
                          the J/W model, setting endogenous growth parameters
                          to zero (i.e.,  removing endogenous productivity
                          growth from the model).31

                             Endogenous productivity growth is an important
                          factor in the J/W model. For example, for the period
                          1973-1990, removal of the endogenous productivity
                          growth assumptions reduces household income by 2.9
                          to 3.0 percent (depending on whether one uses a world
                          with  CAA or  one without CAA as the baseline). In
                          comparison, removal of CAA compliance costs re-
                          sults  in a 0.6 to 0.7 percent change in household in-
                          come (depending on whether one uses, as a baseline,
                          a world with or one without endgenous productivity
                          growth). That is, use of the endogenous productivity
                          growth assumption has four to five times the impact
                          of that of CAA compliance costs.

                             Although very important to the simulated growth
                          of the economy within any policy setting, the endog-
                          enous productivity growth assumption is less impor-
                          tant across policy settings. Under the base (i.e., "with
                          endogenous productivity growth") scenario,  the ag-
                          gregate welfare effect (measured as EVs, see above)
                          of CAA compliance costs and indirect effects is esti-
                          mated to be 493 billion to 621 billion in 1990 dollars.
                          If one removes the endogenous productivity  growth
                          assumption, the aggregate welfare effect declines to
                          the range 391  billion to 494 billion in 1990 dollars
                          (Jorgenson et al., 1993, pg. 6-15), areduction of about
                          twenty percent.
    31 For greater detail, see Jorgenson et al., 1993.
                                                A-29

-------
The Benefits and Costs of the Clean Air Act, 1970 to 1990
Amortization Period for Stationary
Source Plant and Equipment

    In developing annualized costs, stationary source
capital expenditues were amortized over a twenty-year
period. That is, it was assumed that plant and equip-
ment would depreciate over twenty years. It is pos-
sible that stationary source plant and equipment has,
on average, a useful lifetime significantly greater than
twenty years. The Project Team tested the sensitivity
of the cost analysis results to changes in stationary
source capital amortization periods.

    Table A-22 presents total annualized compliance
costs assuming a 40-year amortization period for sta-
tionary source capital expenditures (all other cost com-
ponents are unchanged from the base analysis). All
costs are in 1990-value dollars, ad" three alternative
discount rates are used in  the annualization period.
Table A-23 presents the results discounted to 1990,
and compared to the base  case results (i.e., using a
twenty-year amortization period). Doubling the am-
ortization period to 40 years decreases the 1990 present
value of the 1973-1990 cost stream by approximately
40 billion dollars. This represents a change of six per-
cent to nine percent, depending on the discount rate
employed.
   tpital Amortiiatidn FeriodV'WS-/;'.
-a-9.90.(millk
     1973
     1974
     1975
     1976
     1977
     1978
     1979
     1980
     1981
     .!$§?,„
    Am.
     1.984.--
     -1'9S5
     1986
     '1987
     .19>S
     1990
       .fttfj.%.
 10,8,0'l 'l4899 11,008-
 1-2,875
 tjjtJ^O1, , »-*^»w>r *s,v »•
 rf'^ S f ft" '/y v" /S-/«S'"yr'ai»(jr
-------
                                                         Appendix A: Cost and Macroeconomic Modeling
 Cost and Macroeconomic
 Modeling References

 Chase Econometrics Associates, Inc. 1976. "The
       Macroeconomic Impacts of Federal Pollution
       Control Programs: 1976 Assessment." Report
       prepared for the Council on .Environmental
       Quality  and the Environmental Protection
       Agency.

 Congressional Budget Office. 1990. Carbon Charges
       as a Response to Global  Warming: The Ef-
       fects of Taxing Fossil Fuels. Washington, DC,
       U.S. Government Printing Office.

 Data Resources, Inc. 1979. "The Macroeconomic
       Impacts of Federal Pollution Control Pro-
       grams: 1978 Assessment," Report prepared
       for the Environmental Protection Agency and
       the Council on Environmental Quality.

 Data Resources, Inc. 1981. "The Macroeconomic
       Impact of Federal  Pollution Control Pro-
       grams: 1981 Assessment," Report prepared
       for the Environmental Protection Agency.
       July  17.

Economic Report of the President. 1995. U.S. Gov-
       ernment Printing Office,  Washington, DC.
       February.

Farber, Kit D. and G. Rutledge. 1989. "Pollution
       Abatement and Control Expenditures: Meth-
       ods and Sources for Current-Dollar Esti-
       mates." Unpublished Paper for U.S.  Depart-
       ment of Commerce, Bureau  of Economic
       Analysis. October.

Freeman, A.M. 1978. "Air and Water  Pollution
       Policy," in P.R. Portney (ed.), Current Issues
       in U.S. Environmental Policy. Johns Hopkins
       University Press, Baltimore.

Gray, Wayne B. 1996. Personal communication with
       Michael Hester of Industrial Economics, Inc.
       December 4.

Gray,  Wayne B. and Ronald J. Shadbegian. 1993.
       "Environmental Regulation and Manufactur-
       ing Productivity at the Plant Level," Center
       for Economic Studies Discussion Paper, CES
       93-6. March.
Gray, Wayne B. and Ronald J. Shadbegian.  1995.
       "Pollution Abatement Costs, Regulation, and
       Plant-Level Productivity," National Bureau of
       Economic Research, Inc., Working Paper
       Series, Working Paper No. 4994. January.

Hazilla, M. and R.J. Kopp. 1990. "Social Cost of En-
       vironmental Quality Regulations:  A General
       Equilibrium Analysis," Journal of Political
       Economy, Vol. 98, No. 4. August.

Industrial Economics, Incorporated. 1991. "Sources
       of Error in Reported Costs of Compliance
       with Air Pollution Abatement Requirements,"
       memorandum to Jim DeMocker, EPA/OAR.
       October 16.

Jorgenson, Dale W. and Barbara M. Fraumeni. 1989.
       "The Accumulation of Human and Nonhu-
       man Capital, 1948-1984," in R.E. Lipsey and
       H.S. Tice, eds., The Measurement of Saving,
       Investment, and Wealth. University of Chi-
       cago Press, Chicago, II.

Jorgenson, Dale W. and Barbara M. Fraumeni. 1981.
       "Relative Prices and Technical Change," in
       E. Berndt and B. Field, eds., Modeling and
       Measuring Natural Resource Substitution.
       MIT Press, Cambridge, MA.

Jorgenson, Dale W., Richard J.  Goettle, Daniel
       Gaynor, Peter J. Wilcoxen, and  Daniel T.
       Slesnick. 1993. "The Clean Air Act and the
       U.S. Economy," Final report of Results and
       Findings to the U.S. EPA. August.

Jorgenson, Dale W. and Peter J. Wilcoxen. 1990a.
       "Environmental Regulation and U.S. Eco-
       nomic Growth," inRAND Journal of Econom-
       ics, Vol. 21, No. 2, pp. 314-340.

Jorgenson, Dale W. and Peter J. Wilcoxen. 1990c.
       "Intertemporal General Equilibrium Model-
       ing of U.S. Environmental Regulation," in
       Journal of Policy Modeling, Vol. 12, No. 4,
       pp. 715-744.

Jorgenson, Dale W. and Peter J. Wilcoxen. 1993. "En-
       ergy,  the Environment  and Economic
       Growth," in Handbook of Natural Resource
       and Energy Economics, Allen V. Kneese and
       James L. Sweeney, eds., Volume 3, Chapter
    •   27. North-Holland, Amsterdam, forthcoming.
                                             A-31

-------
The Benefits and Costs of the Clean Air Act, 1970 to 1990
Kokoski, Mary F. and V. Kerry Smith. 1987. "A Gen-
       eral Equilibrium Analysis of Partial-Equilib-
       rium Welfare Measures: The Case of Climate
       Change," American Economic Review, Vol.
       77, No. 3, pp. 331-341.

McConnell, Virginia, Margaret A. Walls, and Win-
       ston Harrington. 1995. "Evaluating the Costs
       of Compliance with Mobile Source Emission
       Control Requirements: Retrospective Analy-
       sis," Resources for the Future Discussion Pa-
       per.

Schwartz, Joel. 1991. "Fuel Economy Benefits."
       Memorandum to Joe Somers and Jim
       DeMocker. December 12.

Somers, J.H. 1991. "Fuel Economy Penalties for Sec-
       tion 812 Report." Memorandum to Anne
       Grambsch and Joel Schwartz. December 23.

U.S. Department  of Commerce. Government Fi-
       nances, various issues. Bureau of the Census.

U.S. Department of Commerce. "Pollution Abatement
       and Control Expenditures," Survey of Current
       Business, various issues. Bureau of Economic
       Analysis.

U.S. Department of Commerce. "Pollution Abatement
       Costs and Expenditures," Current Industrial
       Reports, various issues. Bureau of the Cen-
       sus.

U.S. Environmental Protection Agency (EPA). 1985.
        Costs and Benefits of Reducing Lead in
        Gasolines: Final Regulatory Impact Analy-
       sis. Office of Policy Analysis, EPA-230-05-
       85-006. February.

U.S. Environmental Protection Agency (EPA). 1990.
       Environmental Investments: The Cost of a
        Clean Environment, Report to the Congress.
        Office of Policy,  Planning and Evaluation.
       EPA-230-12-90-084. December.

Verleger, Philip K., Jr. 1992. "Clean Air Regulation
        and the L.A. Riots," The Wall Street Journal,
       Tuesday, May  19. p. A14.
Walsh, M.P. 1991. "Motor Vehicles and Fuels: The
       Problem." in EPA Journal, Vol. 17, No. 1, p.
       12,

Wilcoxen, Peter J. 1988. The Effects of Environmen-
       tal Regulation and Energy Prices on U.S.
       Economic Performance, Doctoral thesis pre-
       sented to the  Department of Economics at
       Harvard University, Cambridge, MA. Decem-
       ber.
                                              A-32

-------
Appendix B: Emissions  Modeling
Introduction


    This appendix provides additional details of the
methodologies used to estimate control and no-control
scenario emissions and the results obtained by these
methods. Methodological information and results are
provided for each of the six principal emission sec-
tors: industrial combustion, industrial processes, elec-
tric utilities, on-highway vehicles, off-highway ve-
hicles, and commercial/residential sources.

    The initial section of this appendix assesses the
emissions projections presented in this analysis by (1)
comparing the 1970 to 1990 control scenario projec-
tions with recent EPA Trends report estimates for the
same years and (2) comparing the 1970 to 1990 trend
in no-control scenario projections with 1950 to 1970
emissions as reported in Trends. The first compari-
son indicates that control scenario emissions projec-
tions approximate, but do not precisely match, the EPA
Trends data. The reason for this mismatch is discussed
below. The second comparison is useful for demon-
strating that pre-1970 emissions trends would not pro-
vide a satisfactory basis for extrapolating emissions
trends into the 1970 to 1990 period. The inability to
simply extrapolate pre-1970 trends provides further
justification for applying the present modeling meth-
odologies to generate no-control scenario emissions
projections.

    The remainder of the appendix provides further
details of the emissions modeling conducted in sup-
port of the  present analysis, and is largely adapted
from the draft report "The Impact of the Clean Air
Act on 1970 to 1990 Emissions; section 812 retro-
spective analysis," March 1,1995 by Pechan Associ-
ates. The draft Pechan report surveys the methodolo-
gies and results associated with the sector-specific
emission modeling efforts by Argonne National Labo-
ratory (ANL), ICF Resources Incorporated (ICF), Abt
Associates (Abt), and the Environmental Law Insti-
tute (ELI).
  Comparison of Emissions
  Projections with Other EPA Data

  Control Scenario Projections Versus
  EPA Trends Projections

      The control scenario emission results are similar,
  but not identical, to official EPA historical emission
  estimates provided by the EPA National Air Pollut-
  ant Emission Trends Reports.1 Comparisons between
  the current estimates and the Trends data for SO2, NOx,
  VOC, CO, and TSP are presented in Figures B-l, B-
  2, B-3, B-4, and B-5 respectively. More detailed tables
  providing emission estimates by sector and by target
  year for TSP, SO2, NOx, VOC, CO, and Lead are pre-
  sented in Tables B-16, B-17, B-18, B-19, B-20, and
  B-21, respectively, at the end of this appendix.

      Though the EPA  Trends and the present  study
  emission profiles are similar to each other, they should
  not be expected to match precisely. This is because
  the emission estimates developed for the present study
  are based on modeled macroeconomic and emission
  sector conditions. Even though the macroeconomic
  and sector models themselves are constructed and
  calibrated using historical data, modeled replications
-—ef historical trends would not be expected to precisely
 -capture actual historical events and conditions which
  affect emissions. Relying on modeled historical sce-
  narios is considered reasonable for the present analy-
  sis since its purpose is to estimate the differences be-
  tween conditions with and without the CAA. Com-
  paring actual historical emissions with modeled no-
  control emissions would lead to an inconsistent basis
  for comparisons between scenarios. Using models for
  both scenarios allows potential model biases to es-
  sentially cancel out.

      In general, however, these comparisons  show
  close correspondence between control scenario and
  Trends estimates with the largest differences occur-
    1EPA/OAQPS, "National Air'Pollutant Emission Trends 1900 -1994," EPA-454/R-95-011, October 1995.
                                              _

-------
     The Benefits and Costs of the Clean Air Act, 1970 to 1990
Figure B-l.  Comparison of Control, No-control, and
Trends SO2 Emission Estimates.
    40
    30
    20
1   10
w
                                    t
                                           Control
                                          .No-Control
                                          .TRENDS
        1950    1960
                     1970
                    Year
                            1980     1990
                                                         Figure B-2.  Comparison of Control, No-control, and
                                                         Trends NOX Emission Estimates.
                                                              40
                                                              30
                                                            •220
                                                              10
1950    1960    1970    1980    1990
             Year
Figure B-3.  Comparison of Control, No-control, and
Trends VOC Emission Estimates.
    40
     30
     20
     10
            I    I   I
                             I   I    I
        1950    1960    1970
                     Year
                            1980    1990
                                                         Figure B-4. Comparison of Control, No-control, and
                                                         Trends CO Emission Estimates.
                                                             200
                                                          I  150
                                                            hoo
                                                              so
                                                                 1950    1960    1970    1980    1990
                                                                              Year
                            Figure B-5. Comparison of Control, No-control, and
                            Trends TSP Emission Estimates.
                                 40
                                 30
                             & 1 20
                                 10
                                    1950    1960    1970    1980    1990
                                                 Year
                                                     B-2

-------
                                                                            Appendix B: Emissions Modeling
   ring for VOC and CO emissions. The Trends report
   VOC estimates are generally higher than the control
   scenario estimates due to the inclusion of Waste Dis-
   posal and Recycling as a VOC source in the Trends
   report. This inconsistency is of no consequence since
   Waste Disposal and Recycling sources were essen-
   tially uncontrolled by the historical CAA and there-
   fore do not appear as a difference between the control
   and no-control scenarios. The higher CO emission
   estimates in the Trends Report are primarily associ-
   ated with higher off-highway vehicle emissions esti-
   mates. Again, since off-highway emissions do not
   change between the control and no-control scenario
   in the present analysis, this inconsistency is of no con-
   sequence.

   No-Control Scenario Projections  Versus
   Historical EPA Trends Data

       Comparisons between the control scenario emis-
   sions estimates generated for the present study and
   1970 to 1990 emissions estimates obtained from the
   Trends Report are useful for assessing the reasonable-
   ness of the control scenario estimates. As indicated
   above, there is close correspondence between the con-
   trol scenario and the Trends Report.  It may also be
   useful to compare the pre-1970 historical emissions
   data from the Trends Report2 with the no-control sce-
   nario estimates presented herein to assess whether
   these pre-1970 trends can be reasonably extrapolated
   to the 1970 to 1990 period. In addition, examination
   of any significant changes in emissions trends between
   the  pre-1970  Trends data and post-1970 ncbeontrol
   projections might indicate flaws in^the emissions
   modeling conducted for the present study.
       ForJSOjrthe 1950 to 1970 Trends data in Figure
—EPl demonstrate the effects of the huge increase in
   fossil fuel combustion between 1960 and 1970. This
   net increase occurred, despite the obsolescence of coal-
   fired locomotives and reductions in coal refuse burn-
   ing, largely because utility emissions nearly doubled
   between  1950 and 1960, and nearly doubled again
   between  1960 and 1970.3  Although no-control sce-
   nario projections for the post-1970 period show sig-
nificant additional increases in SO2 emissions, the rate
of growth is markedly slower than during the 1950 to
1970 period.

    The Trends data for 1950 to 1970 NO  shown in
                                      X
Figure B-2 indicate the steady increase in emissions
resulting from increased combustion of natural gas
and gasoline.4  The post-1970 emissions estimates
derived for the present study reflect a continuation of
this trend.

    Emissions of VOCs increased  steadily  over the
1950 to 1970 period, as shown in Figure B-3, prima-
rily due to increases in industrial production and ve-
hicular travel.5 The no-control scenario emission es-
timates continue this trend throughout the 1970 to 1990
period, with some acceleration of the rate of change
due to the rapid increase in VMT projected under this
scenario.

    The Trends data shown in Figure B-4 for CO in-
dicate an overall increase between 1950 and 1970. This
increase occurred despite significant  reductions in
emissions from stationary source fuel combustion and
industrial processes because mobile source emissions
nearly doubled during this period.6 Under the no-con-
trol scenario  of the present study, additional reduc-
tions from stationary sources are not available to off-
set the  transportation-related increases; therefore, the
rate of increase in CO emissions after 1970 under the
no-control scenario reflects the rapid increase in mo-
bile source emissions caused by increases in vehicle
miles traveled.

    Finally, Figure B-5 demonstrates a directional
shift in emissions of primary particulates between the
1950 to 1970 Trends data and the post-1970 no-con-
trol scenario. The declining trend from 1950 to 1970
indicated by the Trends data, however, is largely due
to reductions in use of coal-fired locomotives, reduc-
tions hi residential coal-burning, coarse (i.e., visible)
particle emissions controls installed on fossil fuel com-
bustors and industrial processes, and  reductions in
forest fires and other open burning.7 Since the reduc-
tions achievable from these sources  were largely
       2 While 1970 to 1990 Trends data were obtained from more recent Trends reports, the 1950 to 1970 data were obtained from the
   November 1991 report since this was the last year the Trends report series included data for this period.

       3 U.S. EPA, "National Air Pollutant Emission Estimates, 1940 -1990", EPA-450/4-91-026, November 1991, Table 4, p. 16.

       4 U.S. EPA, "National Air Pollutant Emission Estimates, 1940 -1990", EPA-450/4-91-026, November 1991, p. 42.

       5 U.S. EPA, "National Air Pollutant Emission Estimates, 1940 -1990", EPA-450/4-91-026, November 1991, p. 42.

       6 U.S. EPA, "National Air Pollutant Emission Estimates, 1940 - 1990", EPA-450/4-91-026, November 1991, Table 7, p. 19.

       7 U.S. EPA, "National Air Pollutant Emission Estimates, 1940 - 1990", EPA-450/4-91-026, November 1991, Table 3, p. 15.
                                                   B-3

-------
The Benefits and Costs of the Clean Air Act, 1970 to 1990
achieved by 1970, they are no longer available to off-
set the increases observed from other source catego-
ries (e.g., highway vehicles). The no-control scenario
therefore shows a steady increase in overall emissions
of primary particulates after 1975.

    The following sections of this appendix summa-
rize the methodologies used to model control and no-
control scenario emissions for each of the six major
emission sectors. Additional details can be found in
the supporting documents listed in the References sec-
tion of this appendix.


Industrial  Boilers and Processes

    For the purposes of the retrospective analysis, the
industrial  sector was divided into two components:
(1) boilers; and (2) industrial processes and process
heaters. The factors affecting emissions from these
two source types are different, and, as a result, sepa-
rate methods were used to  calculate control  and
no-control scenario emissions in each of the target
years. To  analyze the change in emissions from in-
dustrial  boilers, ANL used the ICE model (Hogan,
1988). This model was developed under the auspices
of NAPAP to forecast State-level fuel choice  and
emissions  from conventional, steam raising, industrial
boilers.  For the retrospective analysis of industrial
processes  and fuel use emissions from process heat-
ers, ELI used the EPA Trends methods and the ANL
MSCET data base (EPA, 1991; Kohout et al., 1990).
The Trends report contains estimates of national emis-
sions for a variety of industrial sources for the time
period of  interest. The MSCET data base provided
the spatial distribution used to calculate State-level
emissions.

    The distinction between industrial boilers and non-
boiler industrial processes was necessitated by the
structure of the CAA regulations and by the factors
affecting emission levels from these two source types.
Boilers are regulated differently from processes and
process heaters. Emissions from industrial processes
are primarily  a function of levels of industrial activ-
ity. The emissions from fuel combustion, however,
are a function of energy use and fuel choice as well as
industrial activity. Fossil fuel emissions in the absence
of the CAA are not proportional to industrial output,
since the level of energy use is a decision variable for
the firm in its production process. Therefore, in the
ICE model simulations used to estimate no-control
scenario boiler emissions, the level (and type) of en-
ergy use were determined first, and then the effects of
emission regulation were taken into account.

Overview of Approach

Industrial Boilers

    ICE model inputs include fuel prices, total boiler
fossil fuel demand by industry type, and environmen-
tal control costs. The outputs of the ICE model were
SO2, NOx, and TSP emissions by State, industry, and
boiler size class. The model runs in 5-year increments
and has a current base year of 1985.

    The model required boiler demand input data at
the State level. Seven industry types were included in
the ICE model: Standard Industrial Classification (SIC
) codes 20,22,26,28,29, 33, and "other manufactur-
ing." ANL's approach assumed that industrial boiler
fuel use occurs only in the manufacturing sector. The
model also required fuel price data in each of the tar-
get years at the Federal Region level. Prices by grade
of coal and petroleum product, such as sulfur content
and heating value, were used by the model to deter-
mine the cost of compliance, and to determine emis-
sions when the regulations are not binding.

    Control costs were computed by engineering sub-
routines in the model. These costs were used by the
ICE model's fuel choice component to determine the
effect of CAA-related costs on the market share of a
particular fuel. This fuel choice decision only applies
to new industrial  boilers, since the cost of existing
emission controls  are not in the ICE  data base and
fuel choice is not re-evaluated for existing boilers.

Industrial   Processes  and  In-Process  Fuel
Combustion

    The calculation of historical emissions from in-
dustrial processes  uses EPA Trends methods to esti-
mate national emissions for the analysis years, then
allocates these emissions to States using  the State
shares from the MSCET data base.

    MSCET uses a variety of methods to estimate his-
torical emissions for the various industrial sectors. For
industrial process emissions, MSCET is based on his-
torical data on industrial activity to allocate emissions
based on the State level distribution of the polluting
activities. The State level distribution and benchmark
                                                B-4

-------
                                                                         Appendix B: Emissions Modeling
is based on the 1985 NAPAP Inventory (EPA, 1989).
This approach implies that the MSCET data corre-
sponds directly to the 1985 NAPAP Inventory, and
that, for any State, the sum of the emissions  from
Source Classification Codes (SCCs ) that comprise
the MSCET industry sector are equal to the MSCET
data for that State and sector. Data from Trends are
used by MSCET to provide information on changes
in the aggregate level of control for years other than
the 1985 benchmark. Since no direct correspondence
existed between the Trends data and MSCET, a rela-
tionship was developed to link MSCET sectors to
Trends industry categories and to industry categories
in the J/W model, which was used to change activity
levels for the no-control scenario.

    Table B-l shows the relationship between the sec-
tor definition used by MSCET, Trends, and the J/W
model. The mapping from MSCET to J/W and Trends
is used to provide the changes in aggregate activity
and emission control for the calculation of no-control
scenario emissions.

Establishment of Control Scenario Emissions

    Energy use  and corresponding  emissions  were
broken down between boilers and non-boiler indus-
trial processes. The latter category includes furnaces,
kilns, internal combustion engines (e.g., compressors),
and other non-steam types  of process heat. The focus
of this analysis is on boiler emissions, which  were
subject to increasingly stringent regulations over the
1970 to 1990 period. (Emissions from some types of
industrial processes were also regulated, but  regula-
tion of non-boiler sources  was targeted on  the emis-
sions from the industrial process itself, not on its fuel
combustion) For this study, ANL assumed that only
boiler fuel use is affected by emission regulations. The
non-steam boiler portion of industrial fuel use is not
directly affected by the CAA. This portion of the
emissions may be affected indirectly by changes in
industry activity level and fuel consumption. The
emissions from non-boiler industrial processes  were
calculated separately by ELI.

Control Scenario Boiler Emissions

    Control scenario boiler SO2, NOx, and TSP emis-
sions were calculated by the ICE model. The MSCET
data base provided an estimate of historical emissions
for total fossil fuel combustion by industry. Since
MSCET does not identify the two required compo-
nents of boiler and non-boiler emissions, ANL de-
fined the residual of the ICE model control scenario
and MSCET as the non-boiler or in-process fuel use
emissions. For the relevant study period, MSCET pro-
vided a control scenario estimate of total boiler and
non-boiler emissions, which was used to calculate the
control scenario State-level boiler emissions based on
a special run of the ICE model.8

    In order to use ICE to model the historical emis-
sions path, it was necessary to construct a new ICE
model base year file and new user input file so that
the model could begin its calculations from 1975 con-
ditions. Construction of the base year file was com-
pleted in two stages, using two different data sources,
as discussed below. The user input file has  several
elements, including energy prices and historical boiler
fuel use; its construction is discussed in the next sec-
tion. The model base year file provided the  energy
use in boilers and corresponding emission control
regulations (State Implementation Plans -SIPs- for
example) by several categories. These categories in-
clude:

    •   State;
    •   Industry group (one of seven);
    •   Fuel type (natural gas, distillate or residual
        fuel oil, and coal);
    •   Boiler size class  (MMBTU/hr, one of eight
        categories);
    •   Utilization rate (one of five categories); and
    •   Air quality control region (AQCR ).

    For the purposes of ANL's analysis, only the first
three categories were assumed to vary. In other words,
for each State, industry, and fuel type combination,
the distribution of boiler size, utilization rate,  and
AQCR was assumed to be constant. Over time, how-
ever, changes in the aggregate composition of State,
industry, and fuel type would cause corresponding
changes in the aggregate composition of the other three
characteristics. As mentioned previously, the current
base year file was 1985. The retrospective analysis
required a  1975 base year. Because of data  limita-
tions, the approach to construct a new base year was
achieved hi the following two steps: the construction
of a 1980 interim base  year file from the 1985 file,
and then the construction of the 1975  file from the
interim 1980 file.
    8 MSCET does not provide State-level estimates of TSP, while ICE does. To estimate total regional TSP from fuel combustion,
the Trends model was employed. These national emissions estimates were allocated to the States based on the State-level shares of
TSP from the NAPAP inventory.
                                                —

-------
 The Benefits and Costs of the Clean Air Act, 1970 to 1990
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                                      B-6

-------
                                                                       Appendix B: Emissions Modeling
    Estimates of boiler fossil fuel consumption in
1980 for each State and major fuel type were pro-
vided by Hogan (Hogan, 1988). These estimates are
based on the assumption that the industry mix, size,
utilization, and AQCR distribution within a State are
constant. Through assuming this relationship, the 1985
ICE base year was scaled to match the data for 1980,
thus forming the 1980 interim base year data.

    To construct the 1975 base year file, the assump-
tion of a constant industry mix for a State and fuel
type was no longer necessary, since detailed data on
each industry for 1980 and 1975 were available from
PURchased Heat And Power (PURHAPS ) model data
files (Werbos, 1983). These PURHAPS data files were
derived from the Annual Survey of Manufactures:
Fuels and Electric Energy Purchased for Heat and
Power (DOC, 1991). The available data in these files
were for total fuel use not boiler fuel use. To make
use of these data, it was necessary to assume that the
fraction of fuel  used in boilers, for any  given State
and industry, remained constant from 1975 to 1980.
To the extent that the fraction of boilers' heat versus
process heat applications is a function of the specific
industrial production process, this assumption is rea-
sonable.

    Based on the assumption of constant boiler fuel
fraction of total fuel use, the ratio of 1975 to  1980
energy use for each State, industry, and fuel type was
applied to the corresponding record of the 1980 in-
terim base year  file to produce 1975 base year files.

Control Scenario Industrial Process Emissions

    To  estimate boiler emissions of sulfur oxides
(SO ), NOx, and VOC from industrial processes, data
from Trends were used. The percentage change in
national emissions by Trends category was applied to
the appropriate  sector from MSCET to obtain State-
level emissions. In some cases there are several cat-
egories  in Trends that match directly with MSCET
categories (see Table B-l). In these cases, the Trends
sectors  were aggregated and the percentage change
was computed.  It was assumed that the level of con-
trol in each industry sector  implied by  Trends was
uniform across  States. The changes in emissions in
each State are not equal to those at the national level,
since the industry composition in each State varies.
Development of Economic Driver
Data lor the Control Scenario -
Industrial Boilers and Processes

    The results of the J/W model were the primary
source of activity in the ICE model driver data. These
results were also used by ELI to produce the national
results for industrial processes fromTrends. Both ICE
and Trends use the forecasted change  in industrial
activity that results under the no-control scenario.
These data were in the form of industry specific
changes in energy consumption and industrial output,
for boilers and industrial processes.

Economic Driver Data for Industrial
Boiler Approach

    Using the 1975 base year file as a starting point,
the ICE model estimated fuel choice and emissions
based on a user input file containing total boiler en-
ergy demand and regional energy prices. The  1975,
interim 1980, and original 1985 base year files con-
tained the required information on energy demand for
each industry group and State, so the data in these
three files were aggregated across fuel type, and other
boiler characteristics (for example, size). These ag-
gregated data provided the energy demand for three
of the target years. Since 1990  State-level  data on
energy use by industry group were not available at
the time of the study, the NAPAP base case forecast
for the ICE model for  1990  was  used to provide the
demand data for this year.

    The user input file for ICE also requires a price
input for each target year. These prices were input by
Federal Region for distillate oil, 4 grades of residual
oil (by sulfur content), natural gas, and 11 grades of
coal (by sulfur content and coal rank, i.e., bituminous
and sub-bituminous). Prices  for 1985 and 1990 were
obtained from the NAPAP base case user input file.
The prices for 1975 and 1980 are from U.S. Depart-
ment of Energy (DOE) data  on State-level industrial
energy prices (DOE, 1990).  Regional prices  of natu-
ral gas, distillate oil, steam coal, and residual oil were
constructed by aggregating expenditures across States
within each region and dividing by total British ther-
mal unit (BTU) consumption for the years 1975,1980,
and 1985. Since prices by sulfur content grade are not
reported by this DOE source, ANL assumed that the
sulfur premium implied by the 1985 ICE model input
file was proportional to the  average price. Based on
this assumption, the ratio of  the regional coal and re-
                                               B-7

-------
 The Benefits and Costs of the Clean Air Act, 1970 to 1990
 sidual oil price in 1975 and 1980 to the 1985 price
 was applied to the 1985 price in the ICE model base
 case file for each grade of fuel. To provide additional
 consistency between the NAPAP analysis and ANL's
 study, the distillate oil and natural gas prices were
 benchmarked to the 1985 ICE model prices as well.

     One possible inconsistency arises using this pro-
 cedure. The residual oil and natural gas markets are
 closely linked, particularly for industrial customers.
 These markets, specifically the gas market, underwent
 tremendous changes over the study period. To model
 the effect of these structural changes on the sulfur pre-
 miums in residual oil would require a detailed oil and
 gas  supply model that was beyond the scope of this
 project. Moreover, the CAA regulations themselves
 create the potential for sulfur premiums. This poten-
 tial effect of the CAA was not captured, though,  be-
 cause of the assumption of proportional fuel sulfur
 premiums on residual fuel oil. The relationship  be-
 tween market driven sulfur premiums in the coal mar-
 ket and the CAA was given additional consideration
 in this analysis through the use of an explicit coal sup-
 ply model.

    The J/W data for industrial energy consumptions
 was supplied in the form of percentage change in cost
 shares. In  order to compute the percentage change in
 the quantity of energy used, ANL used the following
 identity:
            = In (P) + In (£) - In (P  x £)
 In
    The percentage change in E is the percentage
change in cost share, minus the change in price, plus
the change in value of shipments. These calculations
were performed for each energy type and industry
sector in the J/W model. The ICE model requires to-
tal fuel use, so the fuel specific percentages were
weighted by historical fuel consumption to produce
an aggregate change in fuel consumption to apply to
the ICE model input data files.9

    ICE also uses energy prices to simulate boiler fuel
choices. The control scenario forecasts of energy
prices in ICE were adjusted based on the percentage
changes in energy prices, by coal, oil and natural gas.
This implicitly assumes that the oil and coal fuel sul-
fur premiums, by region, are proportional to the aver-
age national price. To test this assumption for the coal
market, additional modeling of the coal prices  was
performed using the coal market component of the
ARGUS model.

    It is possible that in some regions low sulfur coal
prices to the industrial sector may be lower than the
national average. This was not found to be the case.
For example, in 1990, delivered  regional  industrial
coal prices change by less than two-thirds of one per-
cent. In most cases, the percentage change was near
zero. This  result appears to occur because of the highly
regional nature of the coal market. While  the artifi-
cial demand for low sulfur coal may fall, power plants
near low sulfur coal reserves now find it advantageous
to buy this local coal, which raises the price back to
an equilibrium level near to that of the control  sce-
nario. This is even more likely to be true of industrial
delivered prices, since industrial prices are more af-
fected by transportation costs than are the utility prices.
No additional ICE modeling was performed.

Economic  Driver Data for the Industrial
Process Approach

    The J/W model was also used to account for ac-
tivity level changes in the calculation of  industrial
process emissions under the no-control scenario.  The
correspondence between Trends, MSCET,  and the J/
W model was used to apply changes in industrial ac-
tivity in each target year to each industrial process.

No-control Scenario Emissions

Industrial Boiler Emissions of SO2, NOx, and TSP

   The CAA imposed different regulations, SIPs, and
New Source Performance Standards (NSPS) that ap-
ply to industrial boilers of varying size. The primary
effect of CAA regulations  on industrial boilers was
simulated by defining the Air Quality Control Region
(AQCR), the resulting SIPs, and subsequent NSPS for
boilers. The industrial boiler SIP regulations were in-
cluded in the ICE base year file discussed in the pre-
vious section. Since the ICE model estimates new
boiler emissions for each target year, the boiler NSPS
are input through the ICE user files. Industrial NSPS
were implemented in two phases. The 1971 regula-
tions are imposed for the study years 1975 and 1980.
    9 ICE uses six of the manufacturing industries from the J/W model directly. The remaining industries' percentage changes were
weighted to produce the "other" category.

-------
                                                                        Appendix B: Emissions Modeling
The 1984 NSPS revisions are imposed in the study
years 1985 and 1990. For the no-control scenario, ANL
set the SIPs and NSPS to a flag that indicated "no
regulation."

Industrial Boiler Emissions of CO and VOC

   Two of the  criteria pollutants emitted by indus-
trial fuel combustors, CO and VOC, were not included
as outputs of the ICE model. Therefore, CO and VOC
emissions were analyzed separately using Trends
methods. Control scenario CO and VOC emissions
were taken  directly from Trends.

   To estimate CO and VOC emissions from indus-
trial combustion for the no-control scenario, fuel use
for industrial manufacturing was adjusted, reflecting
fuel consumption changes estimated by the J/W model.
These changes in the level of fuel consumption by
industrial combustion were also used in ANL's ICE
boiler model. Changes in industrial combustion fuel
use by  manufacturing between the control and
no-control scenarios are reported in Table B-2.  These
estimates represent an average of several sectors,
which were developed by ANL as part of the model-
ing process for ICE.

   No-control  scenario emissions were computed
using 1970 emission factors. Since there were no add-
    'Table B-2. ?Fuel Use .Changes Between    ,. *;
    f <'-^','/ ,;'      —  ''; ' •> •• •>   ,;•> 7>_>VgX't VA   '
    '"Control andfNo-control Scenarios.,  ]-n  ': •'""'-
' YfcaiSv,*
1975 '
V S :;§f ° ' v
•>v> ^ '
-1980 \
"'- ' ,^
198s ;:'•;
i- **^
•*,-'•!
'•^^::
"Vv- „ 	 -s.
•* ,'?,"•>
FuelType
- Coal ";f '^7,
v&SfsJ
' oii^j.^v/"^-
•>
,Gas _ ^"'
W-SV-'V' s s s s •. s s •- v
,£gal ;,--**
~Q{I if:
*Gas „-•» -
%'> •, -y"
*C0-aL,,w,-<
foil- ;"•;
- ,?/- ?•••
-'Gas vf^f , -
' Coal ;;„;„ -
-C6il -,„.,,.,-
jGas '"";>T-i"
Fuel Use Cftaages -
-H"^-^tOs04^- ,-,%„;. ,
/x""" -fMil;>^: ""
;/T^'
-.006*,-; -
V ^f&to " * '~<\\ ' '
':' ,,;,^.oo6i
;- .'-f.0107 	 '-
"• XV
*^^Q&5:\^
^V±rf-.oo6i ,J,^
•• »»*;0089 ,-::-;>
--^097 - .,,^»
... :X<::0079;>-|^
V S*NX*' ""''
'" ' 4-.Q091-.v-v,.
^-.^-£^^K
on controls for industrial combustion VOC and CO
emissions, it was not necessary to adjust the no-con-
trol scenario for changes in control efficiency.

    Emission estimates were regionalized using State-
level emissions data from industrial boilers recorded
hi MSCET. For the control scenario estimates, VOCs
were regionalized using the MSCET State-level shares
for industrial fuel combustion. In the no-control sce-
nario, the State-level shares were held constant. The
control scenario emissions  of CO were regionalized
using the control scenario NOx emissions from the ICE
model. This approach assumes that CO emissions are
consistent with NO  emissions. The no-control sce-
                 X
nario CO emission estimates from industrial combus-
tion sources were regionalized using no-control NO
emission  estimates from industrial combustion
sources.

Industrial Process Emissions

    A wide range of controls were imposed on indus-
trial processes. These emission limits are embodied
in the assumptions of control efficiencies in the Trends
model. Data on national no-control scenario emissions
from industrial processes  were provided by EPA.
These data were combined with MSCET to produce
regional-level results.

Lead Emissions

    Estimates of lead emissions from industrial boil-
ers and industrial processes were completed by Abt
Associates. The methods used for calculating lead
emissions from industrial  processes and industrial
boilers were similar. The starting point was the TRI,
which provides air toxics emissions  data for manu-
facturing facilities with more than  10 employees. To
estimate lead emissions from industrial boilers and
processes, 1990 facility-level lead emissions data were
extracted from the TRI. These data were then adjusted
to create estimates of lead emissions from industrial
sources under the control and no-control scenarios for
each of the target years. For the control scenario, lead
emissions  for 1975,1980, and 1985 were obtained by
extracting an emission factor and a control efficiency
for each lead-emitting industrial process in the Trends
data base. These emission factors and control efficien-
cies were  multiplied by the economic activity data
for each year for each process as reported in Trends
to yield estimated control scenario emissions by in-
dustrial process. Each industrial process was assigned
                                                B-9

-------
The Benefits and Costs of the Clean Air Act, 1970 to 1990
a code to correspond with energy consumption data
by industrial process compiled in the National Energy
Accounts (NEA) by the Bureau of Economic Analy-
sis, and emissions were summed over all processes to
obtain a total for each target year.

   For consistency with the other emission estimates
in this analysis, industrial process no-control scenario
lead  emissions were adjusted for changes in indus-
trial output, and for changes in emissions per unit of
output due to control technology applications. Changes
in industrial output were accounted for using results
from  the J/W model. Lead-emitting industrial pro-
cesses in the Trends data base were assigned to a J/W
sector. For each sector, the percentage change in eco-
nomic output was used to adjust the economic activ-
ity data for that process from the Trends data base.
These adjusted economic output figures were used
with the 1970 emission factors and control efficien-
cies to derive the estimated no-control scenario lead
emissions for each industrial process in each target
year.  The process-level emissions  were  then aggre-
gated to the NEA-code level as in the control sce-
nario.

   The lead emission estimates from industrial pro-
cesses, by NEA code, were used to derive percentage
changes in emissions under the control and no-control
scenarios by NEA code for application to the TRI
emissions data. Since TRI data are reported by SIC
code, NEA codes were "mapped" to the appropriate
SIC codes,  and then the percentage change for each
NEA code was used to represent the percentage change
for all SIC codes covered by that NEA code.

   To calculate lead emissions from industrial boil-
ers, Abt Associates developed estimates of lead emis-
sions from industrial combustion under the CAA for
each of the target years. The Trends data base con-
tains national aggregate industrial fuel consumption
data  by fuel type. For each fuel type, the fuel con-
sumption estimate was disaggregated by  the share of
that fuel used by each NEA industrial category. The
Trends data base also contains emission factors for
industrial fuel  use, by fuel type, as well as control
efficiencies. The lead emissions from industrial com-
bustion for each NEA category were derived by mul-
tiplying the fuel-specific combustion estimate for each
NEA category by the emission factor and control ef-
ficiency for that fuel type. The result was emissions
of lead by NEA code and by fuel type. Emissions from
all fuel types were then summed by NEA code. The
NEA data were used to disaggregate the industrial fuel
consumption figures, based on the assumption that the
ICE are the same among all industries covered by a
given NEA code.

    To estimate no-control scenario lead emissions,
the macroeconomic effect of the CAA and the change
in emissions per unit of output that resulted from spe-
cific pollution control mandates of the CAA were both
taken into account. As hi the control scenario, the na-
tional aggregate industrial fuel consumption estimate
by fuel type was disaggregated by the share of that
fuel used by  each NEA industrial category. The fuel
use was then adjusted in two ways: some NEA codes
were specifically modeled by the ICE model, and for
the remaining NEA  codes, J/W percentage changes
in fuel use were applied. These fuel use estimates were
then combined with the 1970 emission factors and
control efficiencies for industrial combustion by fuel
type from the Trends data base to obtain no-control
scenario combustion-related lead emissions from in-
dustrial boilers by NEA code. These estimates of to-
tal lead emissions by NEA codes were matched to
SIC codes, and then  to the data in the TRI data base.
This approach assumed that an average emission value
was assigned to all reporting TRI facilities in a given
SIC code.


Off-Highway  Vehicles

    The off-highway vehicle sector includes all trans-
portation sources that are not counted as highway ve-
hicles. Therefore, this sector includes marine vessels,
railroads, aircraft, and off-road internal combustion
engines and  vehicles. As a whole, off-highway ve-
hicle emissions are a relatively small fraction of total
national anthropogenic emissions.

Overview of Approach

    The process used by ELI to determine the national
level of emissions from the off- highway transporta-
tion sector is similar to the procedure outlined  above
for industrial processes. To estimate  the emissions of
criteria air pollutants from these sources under the
no-control scenario, the historical activity levels were
held constant, rather than attempting to calculate a
new no-control scenario level of off-highway vehicle
activity. This assumption was necessary since the off-
highway activity indicators (amount of fuel consumed,
and landing  and take-off cycles for aircraft) do not
                                               B-10

-------
                                                                         Appendix. B: Emissions Modeling
have direct correspondence with a given J/W category.
The national no-control scenario emissions of criteria
air pollutants from these sources were simply derived
by recalculating emissions using 1970 emission fac-
tors.

Development of Control Scenario

    To estimate control scenario emissions, the analy-
sis relied on Trends methods, using historical activity
indicators, emission factors, and control efficiencies.
Essentially, the estimates of off-highway emissions
under the control scenario represent the historical es-
timates from the Trends data base.

No-control Scenario Emissions Estimates

    The calculation of off-highway emissions for the
no-control scenario  required the Trends data to  be
adjusted to reflect changes in controls and economic
activity in each of the target years. Linking source
activity changes with economic activity for this sec-
tion is not straightforward. The economic activity data
for off-highway engines and vehicles are expressed
either in terms of amount of fuel consumed, or in terms
of landing and take-off cycles for aircraft. Neither of
these off-highway activity indicators has a direct cor-
respondence with a given J/W sector, making the sort
of direct linkage between Trends categories and J/W
sectoral outputs that was used for industrial processes
inappropriate.

    In  the absence of a link between the economic
factors that are  determinants of emissions from this
sector and the available economic activity forecasts,
the no-control scenario emissions of criteria air pol-
lutants from off-highway mobile sources were esti-
mated based on the same historical activity levels used
for the control scenario. Although there were changes
in sectoral output and personal income that might have
had an effect on off-highway vehicle usage,  these
changes were deemed to be  small and not likely to
have a major effect on the emissions from this sector.

    Emission factors  for each  of the off-highway
sources were also held constant at 1970 levels to cal-
culate no-control scenario emissions for each target
year. The national emissions of criteria air pollutants
from these sources were then recalculated using 1970
emission factors.
National and State-Level Off-Highway
Emission Estimates

    Table B-3 summarizes national-level emission
estimates for off-highway sources. The emission es-
timates derived from using the methodology discussed
above yielded results that seem counter-intuitive. The
emissions from off-highway sources, in particular the
emissions from aircraft, are lower in the no-control
scenario than those projected for the control scenario
for most pollutants. This is a result of calculating
emissions using 1970 emission factors, since the 1970
emission factors for aircraft are lower than the air-
craft emission factors in later years.

    ELI identified several potential sources of uncer-
tainty in the emission estimates for this sector. First,
the assumption that the total level of off-highway ve-
hicle  fuel consumption is constant between the two
scenarios may be flawed. Second, the use of  1970
emission factors in the no-control scenario may fail
to capture significant changes in technology. These
technological changes are implicitly captured in the
control scenario and it is possible that these techno-
logical changes may also have occurred under a
no-control scenario.

    One possible response to the biases created by the
use of  1970 emission factors  for all years in the
no-control scenario is to  test how results might differ
if the emission factors used for the control scenario,
which would include technological change, were also
used for the no-control scenario. However, using this
treatment of emission factors, the emissions projec-
tions from the adopted methodology from non-high-
way sources in the no-control scenario would be iden-
tical to the emissions projections  under the control
scenario. The reason for this is that the economic ac-
tivity levels were not adjusted for the calculation of
emissions under the no-control scenario.

    In order to disaggregate the national data to a State
level, the methodology used the MSCET  data base,
which is described earlier. Emissions of VOC, SOx,
and NOx were regionalized using the State-level shares
from the MSCET methodology. The emissions of TSP
were regionalized by using the State-level shares for
SOx reported by MSCET, and the emissions of CO
were regionalized using the State-level shares for NOx,
also reported by MSCET. The potential bias that this
introduces is likely to be small, due to the relative
homogeneity of off-highway vehicle emission sources.
                                                B-ll

-------
The Benefits and Costs of the Clean Air Act, 1970 to 1990
           Table B-3, Difference in Control-atid-Kc^cop^ol Scenario Off-KgKway-'Moljile-Souiice
              ,    •'       .              _,,,<-,-.-  «'<*•"_   fl _ '*"   ,          ;,•>•*/•»•-   ,}^> ,""• —-''-
           Emissions.                    • '-  '  ,..,,.  >'*;'J'-- .'  /->.« -'-  "     -"--   ,   '"''.,,.*»,


TSP


NO.



SOj


CO


VOCs

-8,,^;A
S=-lo* •"*
CpfltrpJ Scenario;
_ ^ NV.V'
No-Conircd SeeaaritiT*
N ^t
Percentage Increase:
Control Scenarios '", , „.*»,•,
No-Control Scenario: , '-.*.-,-
" "' . ,„,- *-
Percentage Iacrea&:-
Control Scenario:
No-Control Scenario: ,, •#,*?
Percentage Increases:" ' ,
Control Scenario: , •; -:;^
,^t. jJV* '
No-Control SceltafJo:
Percentage InaeisSf' ^ '^^,e
, ; "*;"•*
Control Scenario:"'
No-Control Seertarto:
Percentage- Increase!:,, ',>i •"•"'•
' '"' ISTSiv,'^1
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, - .?*/»'» ;•
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S''l,S7ft«
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" ' 268,7' "•'"
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^^»
40S4**'"'
-. --/ -403.0 - -
' ' 's*,' ' '"•• "* S S' ' '
,,,, 4'&~"
"!----'-7;88l.? '"'
',"7?880.2
'*** *'*'
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1,388,6- - '"
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- ,,<• ,,,'^' '
	 1990,,,,. -
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,, ,„/,' "'f- 	
, 266.9
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V«,x2,085.9
,'s 2,058.'9'": '

,«.,-, - - 4%
- .;„*<,-$.: <"'-.'>"'
392,5, - -
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*1»V
"""' '8,tX?9,0 ;-?#•
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4,405.0" ''•**
-«,v- ---t"--!
7 , ,i,485,,8,,.
^^tiF1®-'
             Note;               _                ^
             scenarios divided by the ControlScenario projeetionT
                          ,       , -          ,,,, \f,,//><>**'**'/f<
          ; increa'se'is thedifferen'tial'between
               , ;»^;   - -    ;-,
                'XV , ( '^ '^^i-/'-', ^ ' , ,
As with regionalization of industrial process emis-
sions, the State-level shares are held constant between
the two scenarios. To the extent that the distribution
of economic activity between States was not constant
over  the period of the analysis, holding State-level
emission shares constant may bias the results, although
the direction and magnitude of the potential bias is
unknown.

On-Highway

    This section addresses the highway vehicle por-
tion of the transportation sector. Highway vehicle
emissions depend on fuel type, vehicle type, technol-
ogy,  and extent of travel. Emissions from these ve-
hicles have been regulated through Federal emission
standards and enforced through in-use compliance
programs, such as State-run emission inspection pro-
grams. Vehicle activity levels are related to changes
in economic conditions, fuel prices, cost of  regula-
tions, and population characteristics. Emissions are a
function of vehicle activity levels and emission rates
per unit activity.

   TEEMS was employed by ANL to analyze the
transportation sector. The modeling system links sev-
eral models, disaggregate and aggregate, to produce
State-level estimates of criteria pollutants. The sys-
tem is subdivided into two modules: an activity/en-
ergy module and an emissions module. Each module
contains multiple models. TEEMS has been docu-
mented in several reports and papers (Mintz and Vyas,
1991; Vyas and Saricks, 1986; Saricks, 1985). It has
been used for several policy analyses and assessment
studies for DOE and NAPAP. This section presents
an overview of the approach used to conduct the analy-
sis of the transportation sector. Also included in this
section is a summary of the methodology used by Abt
Associates to estimate changes in lead emissions from
highway vehicles in each target year.
                                                 B-12

-------
                                                                         Appendix B: Emissions Modeling
 Overview of Approach

    TEEMS has two modules: an activity/energy
 module and an emissions module. The activity/energy
 module calculates emissions based on: (1) personal
 travel; (2) goods movement; and (3) other transporta-
 tion activity inputs.

 Personal Travel

    Personal travel  activity and resulting fuel con-
 sumption were calculated for each target year using
 procedures that  disaggregate households by demo-
 graphic and economic attributes. Economic driver
 data, developed from U.S. Government data and mac-
 roeconomic model(s) of the  domestic "economy,
 formed the basis for household disaggregation. Mod-
 eling procedures were employed by ANL to project
 movement of households between various attribute
 classes, and vehicle holdings were projected in terms
 of the number and type of vehicles held by each house-
 hold type. National totals were then developed by
 aggregating the  vehicle holding estimates for each
 household type, accounting for the number of house-
 holds of that type. Travel estimates, in terms of VMT,
 were calculated using the same approach, and based
 on the VMT of each household type. The basis for
 household transportation activity projection has been
 empirically established through analysis of the 1983-
 84 Nationwide  Personal Transportation Survey
 (NPTS) (FHWA, 1986; Mintz and Vyas, 1991). VMT
 are projected using this empirical relationship, and es-
 timates of the elasticity of VMT to vehicle operating
 cost are then made. Energy consumption was esti-
 mated in each target year using VMT, shares of VMT
by vehicle type, and exogenously developed vehicle
characteristics.

    The following three models and an accounting
procedure were employed to develop target year per-
sonal travel activity projections:

    1.  The first model projected the target year dis-
       tribution of households by then: attributes.
       This model employed an iterative proportional
       fitting (IFF) technique and projected the num-
       ber of households in each cell of the house-
       hold matrix - each of which is defined by vari-
       ous categories within six household attributes.

   2.  The second model  projected changes in ve-
       hicle ownership resulting from changes in
       income and  cost of vehicle operation. The
        model applied estimated ownership changes
        to each target year household matrix such that
        the control values within each of the house-
        hold attributes, excepting vehicle ownership,
        remained unchanged.

    3.  The third  model estimated the composition
        of household vehicle fleet by type (cars and
        trucks), size, technology, and fuel.

    4.  An accounting procedure applied VMT per
        vehicle to  vehicle ownership in each combi-
        nation of household attributes. VMT and en-
        ergy consumption were accumulated by ve-
        hicle type, size, and fuel.

    Each of these  models is described separately in
 the following subsections.

    Iterative Proportional Fitting (BPF)

    This IFF model modified a control scenario ma-
 trix of household  counts. A household matrix was
 developed from the 1983 NPTS data and upgraded to
 the year 1985 using published aggregate data. The
 procedure used in  constructing the 1985 household
 matrix has been documented elsewhere (Appendix B
 of Mintz and Vyas, 1991). The matrix is defined by
 six attributes:  (1) residential location (central city,
 suburb, rural); (2) household income; (3) age of house-
 holder; (4) household size; (5) number of drivers; and
 (6) number of vehicles. The household matrix has
 3,072 cells, some of which are illogical (such as 1
 person, 2 drivers).  Illogical cells  were replaced with
 zeros.

    Household shares within each attribute in each
 target year were developed exogenously using data
 from the Bureau of the Census and selected macro-
 economic model runs. The projected total of house-
 holds and shares of households in each category of an
 attribute were supplied to the IFF model. The model
 modified  the control scenario household matrix to
 match the specified shares and total number of house-
 holds.

    The IPF model treated household distribution
 within each attribute as a set of vectors. These vectors
 were scaled to  match the specified shares and house-
hold total. Following the initial scaling, a gradual scal-
ing technique was used to move in the direction of the
target shares. The scaling process was repeated until
closure was achieved for all attribute classes. Since
                                               B-13

-------
The Benefits and Costs of the Clean Air Act, 1970 to 1990
vehicle ownership levels were estimated by the ve-
hicle ownership model (described in the next section),
shares within the sixth household attribute (number
of vehicles held) were not specified, leaving it uncon-
trolled. This flexibility of an uncontrolled attribute
helped to facilitate the model operation. The number
of households in each class of vehicle ownership
within the output matrix represents distribution of
households using the control scenario (1985) relation-
ship of vehicle ownership to other household at-
tributes.

    Vehicle Ownership Projection (VOP)

    The VOP model projected the changes in vehicle
ownership resulting from changes in the number of
licensed drivers, disposable personal income, and an-
nual fuel cost of vehicle operation. The model is based
on historical household ownership rates. A target per-
driver ownership rate was computed using disposable
income and fuel cost. This target rate represented de-
sired ownership if income and fuel cost were the only
determinants. A parameter representing ownership
responsibilities such as acquisition effort,  disposal
effort, parking requirements, and other indirect aspects
was applied to adjust this target. The new ownership
rate was used to  estimate the number of household
vehicles.

    The household matrix created by the IFF model
was revised to match the projected household vehicle
ownership. Household shares within the first five at-
tributes remain constant while those within the sixth
attribute (i.e., number of vehicles) were variable. A
deviation measure was defined and its value for each
class within the first five attributes was minimized. A
set of simultaneous equations was  solved using
Lagrangian multipliers.

    Projection of Vehicle Fleet Composition

    The composition of household vehicles was pro-
jected for each household matrix cell using a vehicle
choice model called the Disaggregate Vehicle Stock
Allocation Model (DVSAM ). Vehicles are defined
by type (auto, light track), size (small, mid-size, full-
size auto; small pickup, small utility/minivan, stan-
dard pickup, large utility/standard van; or any other
size classification), fuel (gasoline, diesel, methanol,
ethanol, or compressed natural gas), and technology
(stratified charge, direct injection, electric, fuel cell,
or Brayton).
    The model computed vehicle composition based
on an individual vehicle's utility to households and
household, needs. A menu of vehicles classified by
the previously mentioned vehicle attributes was sup-
plied to the model. The menu specified characteris-
tics of each vehicle available to households. Vehicles
were characterized by price, operating cost, seating
capacity, curb weight, and horsepower. These vari-
ables formed the basis for computing "utility" (analo-
gous to consumer satisfaction).  The household ma-
trix provided demographic  and  economic attributes
which, when combined with vehicle usage in miles,
define household needs. Vehicle usage (VMT) was
computed as a function of income, number of drivers,
and number of vehicles. A logit model was applied to
compute vehicle ownership shares. Several model.en-
hancements facilitated modeling of limited range ve-
hicles, and representation of supply constraints and/
or regulated market penetration.

    Activity/Energy Computation

    An accounting procedure was applied to compute
personal travel activity in terms of VMT by vehicle
type. Control scenario VMT per  vehicle estimates for
each cell in the household matrix were developed from
the 1983 NPTS. These rates were adjusted within the
procedure on the basis of changes in average vehicle
operating cost per mile for each cell. The vehicle com-
position projection model computes ownership shares
and share-weighted change hi vehicle operating cost.
Elasticity  values were applied to this change.

    ANL  assumed that  VMT per vehicle  remained
nearly unchanged for a household matrix cell over time
(with the exception of the effect of changes in vehicle
operating cost). In other words, variation of VMT
across household types is far greater than within house-
hold types. VMT per household vehicle  remained
stable during the period from 1977 to 1984 (Klinger
and Kuzmyak,  1986). Some increases were observed
in recent years, which were attributed to lower  fuel
prices and increased household income (DOC, 1991;
FHWA, 1992). (A portion of the increase could be
attributed to the method of computing average VMT
per vehicle.) The assumption that VMT per vehicle
for each cell remained nearly constant and was elas-
tic relative to vehicle operating cost is reasonable. As
households move from one cell of the matrix to an-
other, they "acquire" the VMT per vehicle rate of that
cell. Thus, this approach accounted for changes in
VMT per vehicle due to increased household afflu-
ence, increased rate  of driver licensing, changes in
fuel price, and changes in vehicle technology.
                                                B-14

-------
                                                                        Appendix B: Emissions Modeling
Goods Movement

    Energy and activity demand resulting from move-
ment of 24 aggregate categories of commodities is
estimated by this subcomponent of the TEEMS activ-
ity module. Changes in commodity demand/produc-
tion were provided by growth indexes by two-digit
SIC generated by a macro model. A model that
projects shifts in mode shares among truck, rail, ma-
rine, air, and pipeline modes was used, followed by a
procedure to compute ton miles of travel for each
mode, VMT by fuel type for trucks, and energy con-
sumption by operation type for non-highway modes.
The model used 1985 control scenario data, which
were compiled from railroad waybill sample and pub-
lications, waterborne commerce publications, trans-
portation statistics, and other sources. The procedure
used in developing the 1985 control scenario freight
data  has  been  documented in an ANL report
(Appendix A of Mintz and Vyas, 1991).

    This goods movement model was not used for this
retrospective analysis  because of funding and time
constraints. A procedure to estimate  truck VMT by
fuel type was employed in its place. Published his-
torical VMT values (FHWA, 1988; 1992) were used
along with VMT shares by fuel and truck type from
Truck Inventory and Use Surveys (TIUS) (DOC, 1981;
1984; 1990).

Other Transportation Activities

    The activity/energy module also has other mod-
els for developing activity and energy use projections
for air, fleet automobiles, and bus modes. Fleet auto-
mobile activity estimates from an earlier study (Mintz
and Vyas, 1991) were used while other modes were
not analyzed.

Lead Emissions

    Estimates of lead emissions in the transportation
sector were developed by Abt Associates  based on
changes in reductions of lead in gasoline. This esti-
mation required the estimates of lead in gasoline con-
sumed over the period from 1970 to 1990 and the
amount of lead content hi gasoline that would have
been consumed in the absence of the CAA. These
values were calculated using the quantity of both
leaded and unleaded gasoline sold each year and the
lead concentration in leaded gasoline in each target
year. Data on annual gasoline sales were taken from a
report by ANL that presented gasoline sales for each
State in each target year. For the control scenario, data
on the fraction of gasoline sales represented by leaded
gasoline were used. For the no-control scenario, all of
the gasoline sold was assumed to be leaded. Data on
the lead content of gasoline was obtained from ANL
for 1975 through  1990. For 1970 through 1975, the
analysis assumed that the 1974 lead content was used.

Estimation of No-control Scenario
Emissions

    TEEMS emissions projections were carried out
by ANL in the following three steps:

    1.  Development of emission factors;
    2.  Allocation of highway activity to States; and
    3.  Development of highway pollutant estimates.

    The following subsections describe the procedures
used for computing highway vehicle emissions.

Development of Emission Factors

    EPA's MOBILESa Mobile Source Emission Fac-
tor model was used to provide all of the highway ve-
hicle emission factors used to estimate 1975 to 1990
emission rates (EPA, 1994b). Documentation of the
MOBILESa model is found in the User's Guide for
the MOBILES model.10

    Although the actual emission factors used by ANL
are not documented in either the original ANL TEEMS
model report or in the Pechan summary report, the
Project Team provided direction that defined the emis-
sion factors to be used. For the control scenario, ANL
was directed to use the official EPA emission  factors
prevailing at the time for each target year. For ex-
ample, the official EPA emission factor being used in
1980 for on-high way vehicle NOx was to be used to
estimate 1980 control scenario on-highway vehicle
NOx emissions. For the no-control scenario, the offi-
cial EPA emission factors used to estimate emissions
in 1970 were to be used throughout the 1970 to 1990
period.

    It is important to note that using the 1970 on-high-
way vehicle emission factors to estimate no-control
scenario emissions for the entire 1970 to 1990 period
may bias scenario emission differentials upward. This
is because it is possible that technological changes to
on-highway vehicles unrelated to CAA compliance
    10 EPA/OAR/OMS, "User's Guide to MOBILES," EPA-AA-AQAB-94-01, May 1994; see also 58 FR 29409, May 20, 1993.

-------
The Benefits and Costs of the Clean Air Act, 1970 to 1990
strategies may have yielded incidental reductions in
emissions. However, EPA Office of Mobile Sources
(EPA/OMS) experts indicate that the two major tech-
nological changes in vehicles occurring during the
period of the analysis -electronic ignition and elec-
tronic fuel injection- would have yielded negligible
emission reductions in the absence of catalytic con-
verters."

    Another potential bias is introduced by assuming
the CAA had no substantial effect on vehicle turn-
over. However, two factors render this potential bias
negligible. First and foremost, under the no-control
scenario retired vehicles would be replaced by new
but equally uncontrolled vehicles. Second, no-control
scenario vehicle use is greater in terms of VMT per
year. This means no-control scenario vehicles would
reach the end of their service lives earlier, offsetting
to some extent the alleged incentive to retire vehicles
later due to  costs imposed by CAA control require-
ments.

Allocation of Highway Activity to States

    TEEMS' activity module generated national ac-
tivity and energy estimates. These activity totals were
allocated to States through a regionalization algorithm
that used time series data on historical highway activ-
ity shares by State. A trend extrapolation methodol-
ogy was used that stabilizes shifts after 5 years in the
future. For the retrospective analysis, historical high-
way activity shares for each target year were devel-
oped using data published by the Federal Highway
Administration (FHWA) (FHWA, 1988; 1992).

Development of Highway Pollutant Estimates

     Highway emission estimates  were calculated in
both scenarios for each target year using VMT esti-
mates generated by TEEMS and emission factors from
MOBILE5a. Control scenario activity levels were
adjusted for the no-control scenario using economic
forecasts and historical data.

     Control Scenario Emissions Calculation

     Control scenario data for the transportation sec-
tor were compiled from several sources. Household
counts and shares of households by six attributes were
obtained from various editions of the Statistical Ab-
stracts of the United States. Household income infor-
mation was obtained from the control scenario run of
the J/W model. Fuel prices were obtained from the
Annual Energy Review (DOE, 1992) while vehicle fuel
economy and aggregate VMT per vehicle were ob-
teinedfromHighway Statistics (FKW A, 1988; 1992).
B-4 lists data sources for the control scenario run.

    Table B-5 shows household  shares prepared for
the IFF model. The total number of households in-
creased from 63.4 million in 1970 to 93.3 million in
1990. A gradual shift from rural to urban was observed
with movement to suburbs within urban areas. The
effect of economic downturns in  1975 and 1980 was
an increase in share for the lowest income category;
more households moved to the highest income group
from 1970 to 1990, while the  lower middle income
group share expanded and the upper middle income
share declined.  The rate of household formation was
high during the 1970's, which resulted in increases in
smaller and younger households. The trend in younger
households reversed after 1980 as household forma-
tion slowed. Average household size dropped from
3.2 in 1970 to 2.67 in 1990. The number of licensed
drivers  increased throughout the analysis  period as
more and more young people were licensed to drive.

    Data for the VOP model included disposable in-
come per capita, fuel price, overall personal vehicle
fuel economy,  and annual  usage in terms of VMT.
Table B-6 shows these data for each year in the analy-
sis period.

    Data  preparation for the  model that projected
household vehicle composition was limited to char-
acterization of existing technology vehicles. Seven
vehicle size and type combinations were character-
ized for 1975 and 1980 while one vehicle, minivan/
small utility, was added for 1985 and 1990. Control
scenario vehicle characteristics are tabulated in Table
B-7.  TEEMS' activity and energy computation pro-
cedure was executed to produce personal vehicle travel
and energy consumption estimates.

    Commercial  track travel was not modeled but,
historical data published by the FHWA (FHWA, 1987;
 1991) were used. FHWA publishes track travel by
three categories: 1) 2-axle, 4-tire tracks; 2) single unit
    " Telephone conversation between Jim DeMocker, EPA/OAR and EPA/OMS/Ann Arbor Laboratory staff (date unknown).
Nevertheless, the Project Team did consider reviewing emission factors for European automobiles to attempt to estimate no-control
scenario emission factors for 1975 through 1990 reflecting the use of electronic fuel injection and electronic ignition but no catalytic
converter. However, the Project Team concluded that differences in fuel/air mix ratios used in Europe would probably obscure any
differences in emission rates attributable to the use of electronic fuel injection and electronic ignition.

-------
                                                                                  Appendix B: Emissions Modeling
trucks; and 3) combination trucks. All 2-axle, 4-tire
trucks were treated as light-duty trucks. VMT by per-
sonal light trucks were subtracted from the published
totals to arrive at commercial light truck VMT. Die-
sel truck VMT shares of total VMT were obtained
fromTIUS (DOC, 1981; 1984; 1990). TIUS data were
also used to split VMT by single unit and combina-
tion trucks. All combination trucks were assumed to
be the heaviest, class 7 and class 8, while single unit
trucks could be of any size class 3 through 8. Gaso-
line and diesel VMT totals were developed for these
heavy-duty trucks and were kept constant for the con-
trol and no-control scenarios.
                                                                   >1 Scenario Aj'tifyity^rqjec'tion.'   s-*nv,
                            (Ujcaiioa, t
Statistic a! Abstfacirofttlte Oittittd States, editions 96th,
        ," 104th, IQSfo, and ,lf3fh^-    '""-w*
        '  '   - ---1 *" ^            s
                                                                                           -
                                                             4 v Statistical-Abstracts aad EHWAHIgl^ay, Statistics- ,.,,-,v
                                                             >/,'4 -'•
                     ;»j»«..»,. <.
                                                             ,
                                                             "VNews Miricerb'ata'Book
                       *->•>
-------
The Benefits and Costs of the Clean Air Act, 1970 to 1990
     TableB-5» Distributionof-Hoaseholdsby'DemograpMcMribur^toV.ControlScedatfo.,""*,,, ,„  ,',,„;<;:
Household (Million)
Population (Million)
Attribute
Location
Central City
Suburbs
Rural
Income (1990$)*
<$ 13,000
$13,000 -$33,000
$33 ,000 -$52,500
>$52,500
Age of Householder (YF
<35
35-44
45-64
> = 65
Household Size
1
2
3-4
Licensed Drivers
0
2
> = 3
: 63-4 " 714 -- ; "' ',80,8",,, - 864. 	 ---,933- >,
,.iu,, '•"''' '' ' ,;-,,;Household',Percentage,_,by Year ^_4;;,,;,; •/ '
1970' °'*'t./';' "i975 ~'",;j$M ' 1985,', >"*;';.19^°; ,",'-,
-/-'-*' '_„„,,, : 	 *•' - -^*- „',,.,. " ,:'*"*.' ,-**•';
33.2,,- ' 321)"^' „", :,;-31.9 _, , ' /31.6 -""""' "3L4,vv -
33'.2 • ^i-2^0, -, -' 314 '_,/ '303 --y'^|Q.,3 /'
-25,9 ,,\,, ', "^5,'U'. "'"'' 26.6 ' " t^f25> - ; ','25,5, '
\.v - ,-;^3410:i^"' ' ^,,o,v-;37,2 - -;<-r-!;";-'37,4 '37.7 , ,;' 38.0^,,--,
" ^'5, '**';S^-^ ^ 13'-6' V"T-^ '*"""' '3;,;
- : ' /l8^;'-;; /16.7 ,, --'--'173 , v-,,-,,;204-'"!' '"'" " -22.1
,,,',36.3 :*"' -!"'34.0,, ,' ' ^I3.f ^^W£^-^^'^$&^
- •- -; j'7,'.2;l-«A v\ 19.5 '"'"'T,^'.? """''' " 23.7'v'" '"'""246,, "
„ -•,-, 's/--s J' ^(K _ „ ; >•(*<. *t* 'J/J'Jr>n 17 s , qt Q-N "21 >i ll'> ^ ,/ '/•"•
, , t „,- •3yAJ , ,t'(v ^Jv.f ' , 5I;Jf , ^^"- ;^s^ +'**v| ^ %*•'*«'
/^^3ft*8^"^/V," s ^6*8 *'" %*'^V^12i8 11,2" "v ^ 10-4 /^^
•^5j , -^ ;'5='"'"< ' ' , " ^-v-^---'J">^J'?s""r X,,A ,^ S&fV*^y!' * , ' 'f' '**** *S**'f»/« ' , ,V-* N " ' ",'' ' ^/J'A" ^ ""' "
*\rt •<>•>= ^^'^^ J *m * *\n rt '•- n^ !•> "'>A''f> *'
/ - * £rl *Q ^ (, sAtfaij * 4rf.\) j£\J*Ar^^ ^ £»\1AJ , , r f
^t , -_^ ,48.i,. /-"' ' - 49-2'^';;^ >tj&ti.. ' -^fZ~- '-'— 5^?; '*
        Notei   *Approximated to 1990 dollars.
                                                  B-18

-------
                                                     Appendix B: Emissions Modeling
            posable Income     Fiiel Price
S^?f"^r- '- ^   ' :&2?&;-% "V-;,,^  1,06 '.;•'"";,';; Jl3,f;'";^-;i.7'?^.
  '{-'|'l: '  -.,v,^ '	   ,^A-,\ ,„,;--,'- '•' ;   - -,-'A*-'	-;';:^:,< ,,^,>4.
 t'Tc"'-''^     """"^ '"^  "-"'''-o-'-'Vjtrv .-• ••••"•'•'. - •.--,'  "",''i'ferv»,-* "•  "       i ^* *••••• ••     '"" ^ V,-\------ *\ iift^.# ""
<-1979  ', '<5-feV, -:«tte?
%ifc;C.;^'":: :X°ft|^:  ,  ' r:$f r'*'"  '•,   • ^^• "*^'',, 2^212^"
A9wl^'—^3^,p^;-;%fe%ii iL55 r*:4'^^f. "ta?fe;;^^S
                                                  „ ^->^<,^  --'.-,^S£S
                                                  •••^SS^offlS
                                                  V, ,„ ^', ^V^Il^"-T
                                                  „ " ' -, '/ "•". ™, -^ ^>ig, , ^; „
                              B-19

-------
The Benefits and Costs of the Clean Air Act, 1970 to 1990
               Table B-7.  Control Scenario Per&rfalCharacteristies.*
-----?; ,- • --0^-
VafcaleT!i?i» , , G%«b; ,« ,&ttg»ft6,, fuel'*'"''
nUtOCDODU.6' , ^ •,v,v..j45 - 9.9 " '' "
Utility (1145) , - .;r^>-;"^»r-- ' '
MtnivarfSmall ' „ '" '"*w *VV -*•->*- -•- ,
Utility (7-8) ' >--- , -","s>.«*;^>*-X--
„ *»-;, '.v v *°*;' " '• "t"
' - "X
,,„ C^J*
,<, ^
-2;535-
- 3,736'''

'
4,455
, 3,580 '
-, ,4;975,
't'/'^ y ?'*
' :', /?"-,l?»
1980
Engine Fuel
Bower Economy
"-S3 19^
, ,,- 105 W.9
116"-""^'^15'.-1. ,

^^ ^
143 - -12.4 ,
' , 99 'I,'l5.9
144 ""••'•li'A


*"•*»•'•»•<• --><*'•• ^g
VehidcType * Curb . Ejngi»
^eats) '0^^^, |hp)
Automobile' " ' * '- -^^r^^fc-
Small (2-4) - -,2,^25 , ;,75
Compact (4) 2,775 90
Mid-size (5) - 3,I?0 ,10,8*
I^rge{6) ' * '' 3,973 f "'l'35;
Light truck ^ , ,,,^,, ,-,»^ ^fv.,
Std. truck 4i Jtfiff, ^§2
•• ^ 1"fl v) _
Compact 3,495 90
Std.Van/Std. 4,920 ,142
Otaity(ll-15) - "•"<-, •-'.->->
*WW .,_.,..' ,4;12l;"m'
5^^g;^ " '"* ' J^'jf~*^'' - - 299Q
^%ia 	 '"Ccarb^k^ ' Hug-*
^J^conpnly <«w/*,v^w Witiiut InnriftT Economy
"• SS-??""'^^"" , , , 2,133 ^ 75 '-24*9-;? ;-
' *«. ,< ^^-^ ^ " ,',
•\f\ s± , ,,.. 'A> sO' xo<^ (in s' '*y/i Y^ •?':''
t , i"'3 - A J"--> -A/ xU'tv
' lj *if\ s ' ^ fwn ' ins ' v 10 *t '
*^/^ ^*, ^•ft f V«-o ' *"> svJjlAJU lUq v ly-^>
•.••vOs v V> v^ •. ' "" '''5<'^* O-.) ' '' s* ' ' ' '* ' ' S '
*-&§*y^\A A ' ' a 7/\c lart 17 1
i*+>V_. j^ /v«i> v f^l-pfj fiff f ^1 f >J.,
, ' 13vl ^v^iV^;, --s* x' ' 4,OQQ 128 * vi4.sl^ ,
''"'Afcfc*;^ ^ v '3;§fiS' 9,., ^b/?*? 138 12:9
7;' *r^7/- -^7*'' 18>2-
;-/:--


^

- „,-,
•v, -:,
                   NntP.r,    *A verpges for all vdi icle$ of earfi type 'a'nd sizet'
                                                     B-20

-------
                                                                        Appendix B: Emissions Modeling
                                U Blsttibution of JpfQtfsetohfe by fiicome Class'
                                           v ^Honsefaold Shares (%)» by Year,.,
:'---'^;/-^-rr--.1975. ^ ; ^ j_ggft  ---'-j^
                                                                     1990,
                                  vs^-.r-    -26.3
                         4(3.000-33;o'00-"-,~  .  37,3
                                            --13.-6
                   -26.2
                   ' 37.6   , ,38:4,
                    22.6'  ;;;:?f.Q
                    13.6   ---14.3
24.7
38.4 "'
  .-y:
22.v
i4:3x^:
    No-control Scenario Emissions

    The control scenario data were modified to re-
flect no-control scenario emissions using economic
changes predicted by the J/W model, EPA, and ANL.
The J/W model predicted a slight loss of employment
and drop in GNP  in terms of nominal dollars. How-
ever, the lower rate of inflation coincided with a real
GNP rise. ANL's information from the model did not
include any indexes for converting nominal income
to real income. ANL assumed real income changes to
be similar to those of real GNP and modified house-
hold shares by income classes accordingly. The model
also predicted a slight drop in refined petroleum price
beginning in  1973. The predicted drop was the larg-
est  (5.35 percent) in 1973, reached the lowest level
(2.16 percent) in 1984, then increased to a second peak
(3.44 percent) in 1988, and dropped again from 1989
to 1990. Since these changes were inconsistent with
historical patterns of leaded and unleaded gasoline
price change, ANL developed an estimate of changes
in fuel price resulting from the cost of removal of lead
from gasoline and other infrastructure costs involved
with distributing a new grade of fuel. Subsequently,
EPA provided a set of fuel costs for use in the analy-
sis. Both ANL and EPA fuel prices followed a similar
pattern, although their magnitudes  differed. The
no-control scenario was analyzed with  EPA fuel
prices. ANL also established a relationship with cost
of regulation/emission  control technology, and  the
                   effect of costs on vehicle price and fuel economy di-
                   rectly from the EPA publication Cost of A. Clean En-
                   vironment (EPA, 1990). These changes were used in
                   the analysis.

                      The IPF model was executed for target years 1975,
                   1980, 1985, and  1990 using a set of revised house-
                   hold shares by income class. Table B-8 shows the re-
                   vised shares. Comparing Table B-8 no-control sce-
                   nario shares with those in Table B-5 for the control
                   scenario, there seems to be a slight shift away from
                   travel by the lowest, income  group  and toward the
                   middle  income groups.

                      The vehicle ownership projection model was ex-
                   ecuted for the above four target years using the data
                   listed in Table B-9. Changes in fleet characteristics
                   are summarized in Table B-10.
                                               B-21

-------
The Benefits and Costs of the Clean Air Act, 1970 to 1990
                   Table B-9.  Economic aiid Vehicle Usage'Data- for -Vehicle Ownership",
                   Projection ~ No-control Scenario..  ,";,;,    ,"'",'
Year
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
Disposable
Income per"
Capita (84 $)
7;5lt
-' -7,769' '
7,990
.8,463 '
8,297 -
8,406
- 8,600
8,795
9,126 -
9,114 ',
9,158
9,116'-:
9,312 *
9,775
9,97& <,
10,244
' 10,282 "
10,676
10,827
11,019
*-" Fuel 'Price
- - ,, 0,91-''*
' ' l,/,;0.8;8 "' '
•- -ores'
-'""" 0.84""
1 /\,, 1-06
... ;u;oi.
: ::Si,,
v T'VO.9'6
rr,, 141' '
'- >' -- 1 51°"- -
\'f'f '' * if+fri' ^j-WO
;^,/'i.53ft":.
^ t.t 3^0
*s * '* '
„ ' '\f^,,;;-
,«-, ' Lfl6^,,,
0.-84 •
:';-;v-;o;86 "
- - '---ass
„ 7-0.88 '
,-'T|?7- -
-Miles'/ -
! , ' " ,"' '/' "
"„„;,,- '13.5 ' -

,, i'3:§
" ^;';i3.4,
, ' ,1-3*5-:--; '
_ \:'i3ju--,<-
1 ' Uft
"",14-4^'r, x,,
,,- "-,-15.5 	
kX'.~..Xo
-;;r;;,,,, f6,.s
^•--17:2
17.9' , ,,
- - ••- 18.3 -- ,-
-- -18.4 -----
,-,;,•- :19A ,*-^
,,;-. '/V20.i^ ;„'
,s"/2Q.s'->
: * Ij-^^;-
- ; ,. ,,,-*'
/-;-'"'
10,143 ';i
^ -10,247 '; ~°-
^5^
l°,',lM, -''••'••
' ,9',56'9,
9,736"''^"
' 9,85'4 ' "
9,,?63, <"•?
,;4 16,17,4 ,-,--
' r:;S-:
'9,234 , • --
9,447 - -
- '' 9,45-0"!
', 9,582, •
- 9^07"-:,-^-
' - 9,738- - - ,'-'
''';'l6,201
-io^i4-v!
v:9;,902 .,„„
-,,';'^>, ,  ,   ,,
                       . Thseffiictof rftduttiotlsin veHdejjriceaiid-vfthicle'operatuig cost, andinoreases,-- -,>-•------             ' .'' .
                                                         B-22

-------
                                                              Appendix B: Emissions Modeling
^fablfB'la.^elc^nt ehlfl|e$ it* K$ Vehicle Characteristics
 thedoMtol'aa4H<   ~—rvw:"-"s"     •  -"""""
                             1975
                                    	,.  '   ,1980'  -;', ,-
                     ,,,-.„, >v,'-"'-      '   -'" *       • * "
                     Ptlfce-'-" aapg   HP'.      Ftife^  ntpgi:,"*gfr..
                      -2.35   0.01   '0,59
                      -2^35    0,01  ,,0,59'
                      - C>*s'v^ N''   "  Is?"*'' "'
                                  „, "J  "jJkT^  3 0+ 22
    Std
         ,  ;^  -i,>5u   -u;ur
         ^^     "• ;"s
       r^..  .Lsa-VO.Or   0:59
                                                -, ••       N •?<&'      M-."*-'*1
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                                   B-23

-------
The Benefits and Costs of the Clean Air Act, 1970 to 1990
Utilities

    The electric utility industry retrospective analy-
sis was prepared using two different utility simula-
tion models. ICF utilized its CEUM to estimate con-
trol and no-control scenario emissions for SO2, TSP,
and NOx in each of the target years. ANL's ARGUS
model  was used to estimate electric utility CO and
VOC emissions for the same period. This mix of mod-
eling approaches was used because, while CEUM was
determined to be a better tool for examining fuel shifts
that were affected by the CAA than ARGUS, the
CEUM model was not initially set-up to evaluate CO
or VOC emissions. Although CEUM can be (and even-
tually was) configured to provide emission estimates
for pollutants other than SO2, NOx, and PM, ARGUS
was already configured to provide VOC and CO emis-
sions. However, it should also be noted that VOC and
CO emissions from utilities are quite low, as efficient
fuel combustion reduces both pollutants. Thus, for this
sector, the presence or absence of the CAA would not
produce any different VOC or CO control techniques.
VOC and CO emission rates for this sector differ pri-
marily based on the fuel and boiler type. Therefore, a
simpler modeling approach was judged to be accept-
able and appropriate for these two pollutants. This
chapter presents the methodology used to estimate
utility emissions under the control and no-control sce-
nario using the CEUM  and ARGUS  models.  The
method used by Abt Associates to estimate lead emis-
sions from utilities is also presented.

Overview of Approach

    The CEUM model uses industry capacity data and
specific unit-by-unit characteristics, operating costs
data, electricity demand estimates under the control
and no-control scenario, and historical fuel prices to
estimate SO2, TSP, and NOX emissions for 1980,1985,
and 1990. Changes in electric utility emissions, costs,
and regional coal production were  developed using
ICF's CEUM with a calibration to historical electric-
ity generation, fuel use, and emissions. The ARGUS
model, which was used by ANL to estimate utility
VOC and CO emissions, is driven by operating costs,
industry capacity and generation data, demand for
coal, and unit-level operating characteristics. The J/
W model is used to incorporate predicted changes in
electricity demand under the no-control scenario. Fi-
nally, Abt Associates relied upon energy use data, the
Trends data base, and the Interim 1990 Inventory to
calculate utility lead emissions based on coal con-
sumption. The approaches used by each of these three
contractors are discussed individually in the follow-
ing sections.

Establishment of Control Scenario Emissions

   A common feature of the approaches taken by ICF
and ANL was to identify conditions that are inputs to
the CEUM and ARGUS models, respectively, in the
control scenario. Later in the analysis, these variables
were revised to reflect no-control scenario conditions.
The next section discusses the specific assumptions
used in the CEUM analysis.

   Key Assumptions  in the Development of the
   ICF Analysis

   At EPA's direction, ICF made  several assump-
tions in conducting this  analysis for purposes of con-
sistency with other ongoing EPA efforts assessing the
effects of the CAA. These include the macroeconomic
assumptions regarding the effects of the CAA on eco-
nomic growth, or more specifically, electricity de-
mand, developed from other EPA commissioned ef-
forts. Each is  described  briefly below.

   Pollution Control Equipment Costs

   Only limited actual data  were available for this
analysis on the historical capital and operating costs
of pollution control equipment. Accordingly, for this
analysis, the  actual capital and operating costs of
scrubbers were estimated using EPA scrubber cost
assumptions adjusted to reflect actual data from a sur-
vey of scrubbed power plants with scrubbers installed
during the 1970s and early 1980s. For those power
plants with actual survey data, actual capital costs were
used. For other pre-1985 scrubbers, ICF relied on the
average costs from the survey data. For particulate
control equipment (primarily electrostatic precipita-
tors, or ESPs), costs were estimated  based on limited
actual data, and a 1980 Electric Power Research In-
stitute (EPRI) study of ESP and baghouse costs. Based
on this information, ESPs were estimated to cost an
average of $50 per kilowatt (in 1991  dollars). The
development  of more detailed data  on  actual power
plant pollution control costs was beyond the scope of
ICF's analysis. ICF concluded that such an effort
would not significantly change the national or regional
cost estimates developed by its approach.
                                               B-24

-------
                                                                        Appendix B: Emissions Modeling
    Electricity Demand and Fuel Prices

    Consistent with other EPA ongoing analyses, ICF
assumed that the CAA resulted in a reduction in elec-
tricity demand of 3.27 percent in 1980, 2.77 percent
in 1985, and  2.97 percent in 1990. Also consistent
with these studies, ICF assumed that natural gas prices
and oil prices would not be affected by the CAA. Coal
prices were estimated to change in line with increases
and decreases in demand for specific coal supplies
(and consistent with ICF's detailed modeling of coal
supply and demand). The average prices of all residual
oils consumed were also estimated to change due to a
greater use of more expensive lower sulfur residual
oils under the CAA.

    Coal, Nuclear, Hydro, and Oil/Gas Capacity

    At EPA's direction, ICF's approach was based
on the assumption that no changes in the amount of
nuclear, coal, hydro, or oil/gas stream or combined
cycle capacity would be built or in place in 1980,1985,
or 1990. Given that the driving factors associated with
the actual decisions to build new baseload capacity
were not based  solely on economics but entailed fi-
nancial, regulatory, and political factors as well, the
actual effect of  the CAA on these  build decisions is
very uncertain.  To the extent that more coal-fired
power plants  would be built and fewer oil/gas-fired
power plants constructed, the actual emissions reduc-
tions associated with the CAA would be greater than
those estimated  by ICF, while the estimated costs of
the CAA would be greater (because fewer, lower-cost,
coal-fired power plants would be  on line under the
CAA). However, the CAA had virtually no effect on
the costs of constructing new coal-fired power plants
that came on line prior to about 1975 and a relatively
moderate cost effect on coal-fired  power plants that
came  on line through the early 1980s (since these
power plants were not required to install scrubbers).
Since a  large majority of coal-fired power plant ca-
pacity came on line prior to 1975, ICF concluded that
the effect of the CAA on the amount of total coal-
fired capacity was not expected to be very large.

    Natural Gas Consumption

    The analysis assumed that the amount of natural
gas consumed under the no-control scenario could not
exceed the  actual amount of consumption  in 1980,
1985,  and 1990. In part, because of natural gas price
regulation and the oil price shocks of the 1970s, natu-
ral gas was often unavailable to electric utilities in the
early 1980s. Since the CAA is relatively unrelated to
the questions of supply availability and price regula-
tion of natural gas, ICF assumed that no additional
gas supplies would be available if the CAA had never
been adopted. It is possible, however, that in the ab-
sence of the CAA, industrial and commercial users of
natural gas would have used more oil or coal. To the
extent that this would have occurred, there would have
been more natural gas supplies available to  the elec-
tric utility sector. This increase in supply would have
resulted in an increase in the estimated costs of the
CAA, and a corresponding decrease in the estimated
emission reductions. ICF concluded, however, that this
effect would not be very significant.

   State and Local Environmental Regulations

   At EPA's direction, ICF assumed that there would
be no State and local emission limits or other emis-
sion control requirements under the no-control sce-
nario. Accordingly, ICF assumed that there would be
no SO2, NOx, or TSP emission limits under the
no-control scenario and that all scrubbers, NOx con-
trols, andESPs/baghouses (at coal-fired power plants)
were installed as a result of the CAA. (The more lim-
ited amount of particulate control equipment installed
at oil-fired plants was assumed to have been installed
prior to the passage of the CAA.) In the case of par-
ticulate control equipment, some ESPs and other
equipment were installed at coal plants prior to the
1970 CAA. To the extent that this is the case, the es-
timates of the costs of meeting the CAA have been
overstated. ICF concluded, however, that the amount
of such capacity was not substantial.

   Retirement Age

   The analysis assumed that unit retirement age was
constant between the control and no-controls sce-
narios. Adoption of this assumption might bias the
emission reduction estimates upward to the extent
turnover rates of older (and presumably higher-emit-
ting) units may be slower under the control scenarios,
because more significant CAA control requirements
focused on new units. However the vast majority of
existing coal and oil capacity was built after 1950 and
it is generally  acknowledged that a relatively short
technical plant lifetime would be about 40 years. As
such, even if the no-control scenarios resulted in no
life-extension activity, there would be  virtually no
effect over the 1970 to 1990 timeframe of the analy-
sis.
                                               B-25

-------
The Benefits and Costs of the Clean Air Act, 1970 to 1990
   ICF1975 Control Scenario Emissions

   The 1975 emissions under both scenarios were
calculated differently than emissions in 1980, 1985,
and 1990. In calculating or estimating 1975 SO2 emis-
sions for the control scenario (i.e., "actual" 1975), the
weighted average emission rates at the State level, in
the year 1975 were  estimated, based on  plant level
average sulfur content of fuel deliveries from Federal
Energy Regulatory Commission (FERC ) Form 423
and assumed AP-42 sulfur  retention in ash.  These
weighted average emission rates were then applied to
actual State-level electric utility fuel consumption in
the year 1975 (DOE, 1991). In the case of NOx emis-
sions, first, an estimate of Statewide NOx emissions
in the year 1975 was derived based on the use of the
same NOx emission rates, by fuel type, as developed
for the 1980 no-control scenario modeling runs. These
emission rates were specific to the fuel type (coal, oil,
or natural  gas). These Statewide NOx emission rates
or factors were then  applied to actual fuel consumed
by electric utilities in the year 1975, in order to obtain
estimated "actual" 1975 emissions. As before, the fuel
consumption at a State level was derived from iheState
Energy Data Report (DOE, 1991). ICF calculated the
weighted average heat content (BTU/lb) by State from
the 1975 FERC Form 423 data and used these figures
with the TSP emission factors (Ibs/ton) to derive emis-
sion  rates by State  (Ibs/MMBTU). These emission
rates were then applied to 1975 fuel consumption es-
timates obtained from the State Energy Data Report.
For the control scenario 1975 estimates, ICF used the
1975 factors.

   For the remaining target years,  ICF used the re-
sults of CEUM runs that provided fuel consumption
figures in  1980,1985, and 1990, respectively. Emis-
sions were then calculated using the appropriate emis-
sion  factors for each year.

   ARGUS Modeling Assumptions

   The portion of the electric utility sector analysis
conducted by ANL  with  the ARGUS model is de-
scribed in this subsection. ARGUS contains four ma-
jor components: BUILD, DISPATCH, the Emissions
and Cost Model, and the Coal Supply and Transpor-
tation Model (CSTM). An overview of ARGUS can
be found in Veselkaef al (1990). Only the DISPATCH
and CSTM modules were used for the present analy-
sis. A brief description of the ARGUS components
used in this analysis  is found in the following subsec-
tions.
   DISPATCH Module

   The DISPATCH module contains a probabilistic
production-cost model called the Investigation of
Costs and Reliability in Utility Systems (ICARUS ).
This module calculates reliability and cost informa-
tion for a utility system. ICARUS represents detailed,
unit-by-unit operating characteristics such as fuel cost,
forced outage rate, scheduled maintenance, heat rate,
and fixed and variable operating and maintenance
(O&M ) costs. These components are used to effi-
ciently compute system reliability (such as loss-of-
load probability  and unserved energy) and production
costs.

   The input data required by .ICARUS include
monthly load duration curves, annual peak demands,
and, for both new and existing units, unit sizes, capi-
tal costs, fixed and variable O&M costs, fuel types
and costs, heat rates,  scheduled maintenance,  and
equivalent forced outage rates. The output from
ICARUS includes annual summaries of capacity, gen-
eration, cost,  and reliability for the entire generating
system.

    CSTM Module

   The CSTM module determines the least-cost com-
bination, on a per BTU basis, of coal supply sources
and transportation routes for each demand source.
First, it estimates coal market prices based on regional
demands for coal from all economic sectors. To gen-
erate market  prices, CSTM estimates regional coal
production patterns and coal transportation routes.  The
CSTM input  data are grouped into three major  cat-
egories: demand, supply,  and transportation. CSTM
uses supply curves from the Resource Allocation and
Mine Costing (RAMC ) Model (DOE, 1982). Every
region has a separate curve for one or more of the 60
different coal types that may be produced in that re-
gion. CSTM modifies the original RAMC supply
curve by dividing the single RAMC curve into  two
curves, one representing deep mines and the other  rep-
resenting surface mines, but still uses the same ranges
for heating values and mine prices that define the sup-
ply curves in RAMC. Prices fluctuate as a result of
different mining methods, size of mining operations,
reserve characteristics, and depletion effects.

    The transportation data defines the network  that
connects 32 coal supply origins with 48 demand cen-
ters. Transportation cost is affected by distance, ter-
rain, congestion, variable fuel costs, cost escalators
                                               B-26

-------
                                                                        Appendix B: Emissions Modeling
for fuels and facility upgrades, and competition.
CSTM first computes the production cost for each coal
supply region and coal type. It then matches supply
sources with transportation routes to find the lowest
delivered costs.

    Coal demand for a particular region is based on
the amount, geographic region, economic sector, and
range of coal types. There are 44 domestic demand
regions. CSTM allows demand to be met by one, or a
combination of, different supply regions.

    The ARGUS input data for existing units are based
on the Argonne Power Plant Inventory (APPI). APPI
is a data base of operating and planned generating units
in the United States that was current through 1988 at
the time of ANL's analysis. This data base is updated
annually based on information in the regional North
American Electric Reliability Council  (NERC ) re-
ports, reports from the Energy Information Adminis-
tration (EIA), and other sources. Unit operating char-
acteristics (fixed O&M, variable  O&M, heat rate,
forced outage rate, and scheduled maintenance) are
based on regional data as defined in the EPRI report
on regional systems and other historic data (EPRI,
1981).

    ANL used the 1988 inventory to generate a 1990
inventory. The 1990 inventory was then used to gen-
erate  a separate unit inventory for the target years
1975,1980 and 1985. The target year inventories were
generated by removing units whose on-line year was
greater than the target year, from their respective in-
ventory. The regional capacity totals in these prelimi-
nary inventories were tabulated by major fuel category
(nuclear, coal, oil and gas steam) and compared to the
regional historic NERC totals. This review identified
capacity differences, especially in 1975 and 1980 in-
ventories. The original plan was to add phantom units
to match the regional historic totals. However, based
on the need for State-level emissions, it was decided
that a more thorough review of the unit inventories
was required.

    ANL's detailed review included an examination
of the nuclear and coal units greater than 100 mega-
watt equivalent (MWe) in each target year. Missing
units, with the appropriate unit size and State code,
were added so that the regional totals  were compa-
rable. The availability of coal units was based on the
on-line year of the unit as reported in the EIA report
Inventory of Power Plants in the United States (DOE,
1986). The coal units were also checked against the
EIA Cost and Quality Report (EIA, 1985) to verify
the existence of flue gas desulfurization (FGD ) sys-
tems in each of the target years. The nuclear unit in-
ventories were verified with the EIA report An Analy-
sis of Nuclear Power Plant Operating Costs (DOE,
1988).  The review also included oil and gas steam
units greater than 100 MWe. The total capacity of the
oil and gas steam units were compared because many
units switched primary fuel from oil to gas during the
relevant time period. The oil and gas units were com-
pared to historic inventories based on information pro-
vided by Applied Economic Research. In addition to
thermal generation, the hydro and exchange energy
was reviewed. For each target year, the hydro genera-
tion and firm purchase and sale capacity data was ad-
justed to reflect the historic levels. These two compo-
nents,  hydro and firm purchase and sales, are ac-
counted for first in the loading order. If these vari-
ables are overestimated, there will be less generation
from coal units. Likewise, if they are underestimated,
there will be too much coal generation. The hydro and
firm purchases and sales can vary significantly from
year to year because of weather conditions and other
variables. Therefore, it was important that  they be
accurately represented.

No-control Scenario Emissions

    In  order to calculate utility emissions under the
no-control scenario, inputs to  both the CEUM and
ARGUS  models were adjusted to reflect no-control
scenario conditions.  The changes made to each
model's base year input files are discussed separately
in the following sections.

    ICF Estimates of SO2, TSP, and NOx Emissions
    in the No-control Scenario

    As described earlier, ICF utilized a different meth-
odology to calculate 1975 emission estimates. Rather
than relying on the use of detailed modeling runs, ICF
based the 1975 emission estimation on historic fuel
consumption and sulfur content data in  1975. This
subsection first outlines the process used to calculate
no-control scenario emissions in 1975 and then pre-
sents the methods used for the remaining target years.

    1975 Utility SOf NO^ and TSP Emissions

    To develop State-level no-control scenario utility
SO2 emissions, ICF developed no-control scenario SO2
emission rates. A reasonable surrogate for these emis-
sion rates is SO2 rates just prior to the implementa-
                                               B-27

-------
 The Benefits and Costs of the Clean Air Act, 1970 to 1990
tion of the SEPs under the CAA. ICF developed 1972
rates (based on the earliest year available for FERC
Form 423) and compared these with 1975 rates. In
each State, the greater of 1972 or 1975 rates was used
in the calculation of SO2 emissions in the absence of
the CAA. To develop State-level no-control scenario
SO2 emissions, no-control scenario fuel consumption
data were needed. ICF assumed that the demand for
electricity in 1975 would be 2.73 percent higher than
the actual energy sales in 1975. This assumption is
identical to the no-control scenario electricity demand
projections derived from the J/W projections. For the
purpose of this analysis, it was further assumed that
this increment in demand would have been met in 1975
from the oil and coal-fired plants  in each State. The
increase  in consumption of these fuels was assumed
to be in the same proportion as their share in the 1975
total energy mix for electricity generation in that State.
It was assumed that the generation of nuclear, gas-
fired, and other electricity generation would not
change. A sensitivity case without an assumed elec-
tricity demand change was also calculated.  (The sen-
sitivity analysis results are presented later in this ap-
pendix.)

    For NO emissions under the no-control scenario,
it was also  assumed that the 1975 electricity sales
would have been 2.73 percent higher than was the case
in 1975. No-control scenario TSP emissions in 1975
were based on national emission rate numbers from
EPA that were converted to pounds per million BTU
using the average energy content of fuels hi each State.
No-control scenario TSP emissions were calculated
based on 1970 emission factors (Braine, Kohli, and
Kim, 1993).

    1980,1985, and 1990 Utility Emissions

    For  1980, 1985,  and 1990, ICF calculated
no-control scenario emissions based on fuel consump-
tion figures from the CEUM runs, and 1970 emission
factors from EPA.

    Electric utility SO2 emission  estimates are ap-
proximately  10 million tons (or about 38 percent)
lower by 1990 under the control scenario than under
the no-control scenario. Most of this estimated differ-
ence results from the imposition of emission limits at
existing power plants through the SEPs under the 1970
CAA. Most of these SIPs were effective by 1980 (with
some not fully effective until 1985). Most of the ad-
ditional reductions that occurred during the 1980s were
the result of the electric utility NSPS, which required
the installation of 70 to 90 percent SO2 removal con-
trol equipment.

    By contrast, electric utility NO  emission esti-
mates under the control scenario are only about 1.2
.million tons,  or 14 percent, lower than under the
no-control scenario by  1990. This occurs because,
under the implementation of the 1970 CAA, only a
few existing power plants were subject to NOx emis-
sion limits. Virtually all of the estimated reductions
are the result of NOx NSPS, which generally required
moderate reductions at power plants relative to un-
controlled levels. In addition, electricity demand is
estimated to be about 3 percent lower under the con-
trol scenario. This decrease reduces the utilization of
existing power plants and also contributes to  lower
NO emissions (and other pollutants as well).

    Electric utility annualized costs (levelized capi-
tal, fuel, and O&M) are estimated to be $0.2 billion
lower in 1980, $1.5 billion higher in 1985, and $1.9
billion higher in 1990 under the control scenario. Note,
however, that  this  reflects the effects of two offset-
ting factors: (1) the higher utility compliance costs
associated with using lower sulfur fuels, and the in-
creased O&M and capital costs associated with scrub-
bers and particulate control equipment; and (2) lower
utility generating costs (fuel, operating  and capital
costs) associated with lower electricity demand re-
quirements. In 1980, the increase in fuel costs due to
higher generation requirements (under the no-control
scenario), was larger than the decrease in capital and
O&M costs and thus yielded a cost increase over the
control case.

    However, lower electricity demand for the utility
sector would translate into higher costs in other sec-
tors (as electricity substitutes are used).  This  effect
was captured to some extent by the original J/W mac-
roeconomic modeling conducted for the present analy-
sis.

    Average levelized U.S. electricity rate estimates
are approximately 3 percent higher under the control
scenario during the  1980s. Note that year by year, elec-
tric utility revenue requirements and capital expendi-
tures (not estimated by ICF) would be estimated to
have increased by a greater percentage particularly in
the 1970s and early 1980s as incremental capital ex-
penditures for scrubbers and ESPs were brought into
the rate base.
                                                B-28

-------
                                                                          Appendix B: Emissions Modeling
    Significant shifts in regional coal production are
estimated to have occurred between the control and
no-control scenarios. High sulfur coal producing re-
gions such as Northern Appalachia and the Midwest/
Central West are estimated to have lower production
under the control scenario, while lower  sulfur coal
producing regions such as Central and Southern Ap-
palachia are estimated to have higher coal produc-
tion.12

ARGUS No-control Scenario

    Regional fuel prices, for the thermal units, were
based on historic information from the EIA Form 423
data for the year 1977,1980 and 1985. The 1977 data
was used for 1975. Fixed and variable O&M costs
were adjusted from the 1988 level, and all  cost data
were converted to 1985 dollars.

    The load data were  based on regional historic
NERC data for each of the target years. The shapes of
the monthly load duration curves are the  result of
modifications based on the data in the EPRI report on
regional systems (EPRI, 1981). The shapes were modi-
fied to match the projected 1988 monthly load factors
for the NERC regions. These load shapes were held
constant for all years.

    The actual peak-loads were selected from historic
information and used with the existing load duration
curves. The system was dispatched so that the calcu-
lated generation could be compared with historic data.
Discrepancies were resolved by adjusting  the peak
load so that the annual generation was on target. This
procedure was repeated for each of the target years.

    The electric utilities were expected to have an in-
crease in  generation as identified by the J/W data.
Table  B-ll identifies the increase in national level
generation by year. The national level increase in gen-
eration was applied to each power pool.

    In addition to load changes, coal units with FGD
equipment were modified. These units had their FGD
equipment removed along with a 3 percent decrease
in heat rate, a 2  percentage point decrease in forced
outage rate, and a 50 percent decrease in  their fixed
and variable O&M costs. These changes were incor-
                                     ,  ,
        Table B-l 1.  J/^;JMmatesr of->;	-v'
        Percentage
                          Percentage
             -1915
              1985
             1$9CT,,,
porated into the ARGUS model for each of the target
years. Model runs were then conducted to arrive at
estimates of VOC and CO emissions in the no-control
scenario.

Estimation of Lead Emissions from
Utilities

    In order to estimate lead emissions from electric
utilities in each of the target years, data from three
different sources were used. Energy use data for the
control and no-control scenarios were obtained from
the national coal use estimates prepared for the sec-
tion 812 analysis by ICF (Braine and Kim, 1993). The
Trends data base provided emission factors  and con-
trol efficiencies, and the Interim 1990 Inventory iden-
tified utility characteristics. The ICF data bases pro-
vided the amount of coal consumed for both the con-
trol and no-control scenarios in each of the target years.
A correspondence between the Interim Inventory and
the ICF data base was achieved through the plant name
variable. Using emission factors for lead and control
efficiencies for electric utilities, estimates of lead
emissions per plant per year, were calculated. These
factors were obtained from the Trends data base. It
was assumed that pollution control on coal-burning
power plants under the no-control scenario would be
the same as the pollution control level in 1970. There-
fore, the control efficiency from  1970 is used as the
basis for the no-control case.
    12 At EPA's direction, ICF's analysis did not estimate the effect of shifts in non-utility coal consumption on regional coal
production, nor did it consider the possibility that fewer new coal powerplants might have been built due to the CAA as discussed
earlier. Both of these factors could result in a greater estimated change in total U.S. coal production than estimated herein although the
difference is not likely to be very significant.

-------
The Benefits and Costs of the Clean Air Act, 1970 to 1990
CEUM Sensitivity Case

    In addition to comparing actual (control scenario)
historical costs and emissions with the higher elec-
tricity demand under the no-control scenario, ICF also
evaluated emissions in a sensitivity case without the
CAA (i.e.,  under the no-control scenario) with the
same electricity demand (versus the no-control sce-
nario with higher demand). The purpose of this sensi-
tivity analysis was to isolate the incremental electric
utility compliance costs and reductions in emissions
associated with the CAA from the lower resulting
generation costs and emissions due to lower estimated
electricity demand under the CAA. The incremental
effects of the CAA when compared with this case in-
dicate:

    •  Estimated reductions in emissions due to the
       CAA are somewhat lower if measured against
       the sensitivity case without the CAA with the
       same electricity demand than the emissions
       without the CAA with lower demand. This
       occurs because lower electricity demand un-
       der the no-control scenario sensitivity results
       in lower utilization of existing coal and oil
       plants which, in turn, results in lower emis-
       sions. As noted above, in some sense, the
       changes in emissions represent the effects of
       electric utility compliance actions under the
       CAA, absent the effect of lower resultant de-
       mand for electricity.

    •  When measured against the sensitivity case
       without the CAA (with the  same electricity
       demand), electric utility annualized costs are
       estimated to have increased by about $5 to $6
       billion during the 1980 to 1990 period. This
       reflects the following cost factors: (1) higher
       annualized capital costs associated primarily
       with scrubbers and ESPs installed by electric
       utilities to comply with the CAA; (2) higher
       O&M costs associated with the additional air
       pollution control equipment; and (3) higher
       fuel costs associated with using lower sulfur
       coal and oil in order to meet the emission limit
       requirements of the CAA.


Commercial/Residential

    The Commercial and Residential Simulation Sys-
tem (CRESS) model was developed by ANL as part
of the Emissions and Control Costs Integrated Model
Set and used in the NAPAP assessment (Methods for
Modeling Future Emissions and Control Costs, State
of Science and Technology, Report 26) (McDonald
and South, 1984). CRESS is designed to project emis-
sions for five pollutants: SOx, NOx, VOC, TSP, and
CO. The CRESS output is aggregated into residential
and commercial subsectors related to both economic
activity and fuel use. The introductory material pro-
vided in this appendix about CRESS describes the base
year as being 1985. It appears in this way because
CRESS was originally developed to operate using the
1985 NAPAP Emission Inventory as its base year data
set. For the five pollutants reported by CRESS, emis-
sion estimates are provided for the following sectors:

    *   Commercial/institutional

        • coal, including point and area categories of
         anthracite and bituminous boilers;
        • liquid fuel, including boiler and space heat-
         ing uses of residual, distillate,  LPG, and
         other fuels;
        • natural gas boilers,  space heaters, and in-
         ternal combustion engines;
        • wood used in boilers and space heaters; and
        • other mixed or unclassified fuel use.

    4   Residential

        • coal, including area sources of anthracite
         and bituminous;
        • liquid  fuel, composed of distillate and re-
         sidual oil;
        • natural gas; and
        • wood.

    4   Miscellaneous

        • waste disposal, incineration, and open burn-
         ing; and
        • other,  including forest fires, managed and
         agricultural burning, structural  fires, cut-
         back asphalt paving, and internal combus-
         tion engine testing.

    In addition, VOC emissions are projected for these
source categories:

    4   Service stations and gasoline marketing;

    4   Dry-cleaning point and area sources; and
                                                B-30

-------
                                                                         Appendix B: Emissions Modeling
    4  Other solvents, including architectural surface
       coating, auto-body refinishing, and consumer/
       commercial solvent use.

    This section describes the use of CRESS to esti-
mate control and no-control scenario emissions from
the commercial/residential sector.

Control Scenario Emissions

    For the NAPAP assessment, 1985 CRESS output
corresponded to the 1985 NAPAP Inventory (EPA,
1989), which served as the benchmark for any pro-
jections. The design of CRESS is such that emissions
by NAPAP SCC are input for each State, then pro-
jected to future years  by scaling them to economic
data such as energy demand. In estimating emissions,
differences in emission controls associated with new,
replacement,  and existing equipment are taken into
account where such differences are considered sig-
nificant. The basic modeling approach is shown in
the following equation:
              -. • f'• --
             ,
                   ^"^  ' *
    where:
      Q = emissions in year t or the base year, year 0

      E = emission factor for the source category b
          in the base year, or for a subcategory j sub-
          ject to controls in year t (this takes into
          account changes in emission rates that may
          occur as a result of emission regulations or
          technology changes)

      D = driver data indicating activity levels in the
          base and future years

      f =  fraction of total activity in year t differen-
          tially affected by emission controls

The calculations are carried out in two subroutines,
one for SO2, NOx, TSP and CO, and one for VOC.

    Typically SO2, NOx, TSP, and CO emissions are
projected by multiplying the 1985 NAPAP SCC data
or base year data by the ratio of the driver data (activ-
ity  level) value in the projection  year to its value in
the base year. Because there are few controls on SO
or NO emissions from the sources covered by CRESS,
projected emissions for most sectors are proportional
to the expected activity levels. Thus,
                        :*> 'rVCfew&^SJ^'* vv  ••" * v""?^
                         JJ1,-? >-- ',     ,7
               *i -:*^:&n%Z,r'''"""" ^	
              ''  '':^; ' ^¥--''-"-m^W^'
    There are a few source types, such as commer-
cial/institutional boilers, for which emission controls
are mandated. These are modeled by multiplying the
1985 emission data by the ratio of the controlled emis-
sion factor to the base-year emission factor. Emission
factors for each source type are weighted by the pro-
portion of base year activity in each subsector to which
controls are expected to apply.
                    &_;,
    where:

      g=  the fraction of base-year activity accounted
          for by existing  source b,  replacement
          source r, or new source n in year t

    The effective emission factor (Et,n) for the sector
is calculated by'weighing  the portions  of sectoral
emissions subject to NSPS controls and those likely
to continue at existing levels. Ah appropriate Internal
Revenue Service-based rate at which new equipment
replaces existing sources is  applied to each sector in
the model. This  is done to  estimate how emissions
might change as older sources are retired and replaced
by new sources that emit at lower rates.

    The SO /NO /TSP/CO subroutine varies in new
           X     X
and replacement emission-source fractions subject to
NSPS  controls.  These  fractions are applied to the
emission-source replacement rates. In addition, ratios
for new source emission factors are varied by State.
However, emission ratios for any pollutant/source type
combination do not vary over the projection period.

    The VOC estimation methodology is  similar, but
allows variation in emission factors over time. Emis-
sion ratios are calculated from files of replacement
and existing source emission factors weighted by the
replacement rate for each sector and new source fac-
tors by State. These are input for each 5-year projec-
tion interval. For most source categories, VOC  con-
                                                B-31

-------
The Benefits and Costs of the Clean Air Act, 1970 to 1990
trols are not envisioned, and the 1985 NAPAP emis-
sions for the category are simply scaled proportion-
ally to changes in the driver (activity level) data.

    For sources to which controls apply, a variation
on the following equation is employed:
                                          (6)
    In equation 6, the emission factors for new and
existing sources are effectively weighted by the pro-
portion of total activity in year t to which controls
apply.

    In using CRESS for the CAA retrospective analy-
sis, the base year was 1975. CRESS requires emis-
sions information by State and NAPAP source cat-
egory as input. Since detailed information on emis-
sion levels for 1975 by NAPAP source category were
not available, the data were developed from a combi-
nation of sources. The procedure for calculating 1975
emissions based  on  the 1985 NAPAP inventory is
described below. The emissions module uses  these
initial values in conjunction with activity estimates to
project control and no-control scenario emissions.

Emissions Data

    Since the starting point for the analysis was 1975,
emissions data by State and SCC for SO2, NOx, VOC,
TSP, and CO were required. Available emissions in-
formation for this year was not at the level of detail
needed  by CRESS. The  1985 NAPAP Inventory,
which contains the necessary level of detail, in con-
junction with information from EPA's National Air
Pollutant Emission Estimates, 1940-1990 (Trends') and
ANL's MSCET,  was used to  construct an emissions
inventory for 1975. The model then uses these emis-
sions as a benchmark for the analysis.

    The method for constructing the 1975 emissions
data base was consistent for all pollutants; however,
two different sources of emissions data were neces-
sary in order to obtain time series information on all
pollutants. MSCET contains monthly State-level emis-
sion estimates from 1975 to 1985 by emission source
group for SO2, NOx, and VOC. Therefore, MSCET
information was used for SO2, NOx, and VOC, while
Trends data were used  for TSP and CO. Emission
source groups from MSCET were matched with 1985
NAPAP Inventory SCCs. The MSCET methodology
is benchmarked to the 1985 NAPAP Inventory and
uses tune series information from Trends in conjunc-
tion with activity information to estimate State-level
emissions for SO2, NOx, and VOC. Although the level
of detail contained in the NAPAP Inventory could not
be preserved because of the aggregation needed to
match with MSCET emissions sources, MSCET pro-
vided the State-level spatial detail required by CRESS.

    Once the 1985 emissions by SCC and State from
the 1985 NAPAP Inventory were matched with emis-
sion source groups and States from the MSCET data
base, an estimate of 1975 emissions was computed
by multiplying the 1985 NAPAP Inventory emissions
value by the ratio of 1975 MSCET emissions to 1985
MSCET emissions. Ratios were computed and applied
for each combination of State, pollutant, and MSCET
emission source group.

    This method of constructing an emissions inven-
tory for 1975 utilizes the State estimates from MSCET,
thus capturing the spatial shifts that occurred over the
analysis period. It is assumed that NAPAP provides
the most reliable point and area source information in
terms of the level of  1985 emissions (which is also
the assumption of the MSCET methodology). Note
that if there were a 1-to-l correspondence between
MSCET and NAPAP, this method would be equiva-
lent to using the MSCET methodology directly for
constructing 1975 emission levels.

    A similar method was used for TSP and CO, but
since these pollutants are not included in MSCET, the
Trends ratio of 1975 to 1985 emissions for these two
pollutants was used. Thus, for TSP and CO, all States
were assumed to have experienced the same change
in emissions as indicated by the national figures.

    It should be noted that in addition to the loss in
spatial detail, the Trends source groups  generally
spanned several NAPAP source.categories. The
strength in the Trends information is the consistency
of emissions estimates over time. It is considered to
be the most reliable data for tracking changes in emis-
sions over the time period of the analysis, and was
therefore chosen for developing 1975 estimates for
TSP and CO.

    The 15 source categories reported in Trends were
matched with those in the 1985 NAPAP Inventory.
The ratios of 1975 emissions to 1985 emissions by
source category that were applied to the 1985 NAPAP
emissions data are shown in B-12. The 1975  emis-
                                              B-32

-------
                                                                          Appendix B: Emissions Modeling
-Table Krl^frends Source Categ >%V< *WS* ', ,' ,', :
   , Commerci al/Jnsfitiiiacfjriail Fuel t,, v „,,    '[^ ] ^
   Coisbustioa;     - —-x*  /,   ^ ^^,    '•  ,/,,','
     FuetOil
                                 •<::;  1*43
                                W'-'.  '0.67
  Coal ->•->> -: —
                                    """ ' 1.47
                                      >v, -s
                                         I -00
           ; Frest Fires- -^^>.>,

^Soliff Waste Disposal: " *     ; ,r-
                                         '0,62
     Incineration-'
  ,Op?ai Baroing    ;',;,""v
         *•<•••,•,      ;  ,    s > i •• -
  tf^»llaaeou^Ofcer Borning  -  "'-""1.00

.Industrial Processes;" Caving; •
S /^     '        Cs"^',
?Asplialt Pavrajgs-and, Roofing""
                                         036 >•
   ^    f 2.11 is coMj)'(ifed'asaielat!0 of the 197,5TSP-«sttss»as
   of 40^1 agiam s J»r,)®ar to tfeft coiys{jfi&aiilg' 19 SS'onissitSis'of
   1? gigagrarns perj
-------
The Benefits and Costs of the Clean Air Act, 1970 to 1990
population. Forest wildfires and managed open burn-
ing activity are related to 1977 State-level forest acre-
age. The demographic information is assumed to be
invariant to CAA regulations and thus is the same in
the control and no-control scenarios.

   Car stock (or vehicle population), the driver vari-
able for the auto body refinishing, is approximated by
State motor vehicle registrations. Highway Statistics,
an annual publication by the FHWA, was the source
for data on State motor vehicle registrations. The three
source categories connected with gasoline marketing
are driven by State-level gasoline sales in gallons. State
gasoline consumption was obtained from the SEDS
data base.  Housing starts and 10 percent of the exist-
ing housing stock were combined to form the activity
indicator for architectural surface coating emissions.
Housing data compiled by the U.S. Bureau of the
Census were available in the Statistical Abstract of
the United States (DOC, 1975;  1977; 1982; 1983;
1987; 1993). Regional-level data for 1975 was allo-
cated to the States based on the 1980 State distribu-
tion.
No-control Scenario Emissions

    Adjustments to control scenario emissions in each
of the target years to reflect conditions un-
der the no-control  scenario were achieved   ^^H
through emission factors, energy input data,
and economic/demographic data. The adjust-
ments made to each of these variables to gen-
erate no-control scenario emissions are dis-
cussed individually in the following subsec-
tions.
        Energy Data

            State-level energy demand for the residential and
        commercial sectors for the no-control scenario was
        estimated from the J/W model forecast. Final energy
        demand estimates for the household sector were cal-
        culated by an EPA contractor for the purposes of the
        no-control  scenario analysis.  State  allocation of the
        national-level estimates was based  on historic State
        shares, i.e., this assumes that there is no change in the
        distribution of energy demand across States as a re-
        sult of removing regulations. In addition, the J/W
        model estimates an aggregate refined petroleum cat-
        egory and does not distinguish among liquid petro-
        leum gas, distillate oil, and residual oil. The relative
        shares among these three categories of petroleum prod-
        ucts remained constant between  the control and
        no-control scenarios. The information on percentage
        change in energy demand by fuel type as provided by
        the J/W model is listed in Table B-13.

            The differential for commercial sector final en-
        ergy demand was calculated from the combination of
        four intermediate product flow categories from the J/
        W forecast. The National Income  and Product Ac-
        counts (NIPA) for the commercial sector correspond
        to J/W SIC categories 32 through 35:
Table B-B, Percentage Change to Real Energy Demandt>y
Households' from Control to No-control Scenario.
Emissions Data

    CAA regulation of the commercial/resi-
dential sector was minimal. For regulated   ^ *  "
source categories, emission factors were re-   •"•mm••
vised to reflect pre-regulation emission rates.
Six commercial/residential source categories were
regulated for VOC emissions: Service Stations Stage
I Emissions, Service Stations Stage II Emissions, Dry
Cleaning (perchloroethylene), Gasoline Marketed, Dry
Cleaning (solvent), and Cutback Asphalt Paving.
Commercial-Institutional boilers were regulated for
SO2 and  TSP and internal  combustion sources were
regulated for NOX emissions. All NSPS were removed
for these sources to estimate no-control scenario emis-
sions levels.
Year „
1975
1980
1985
1990
C°al
1.48
1.50 .
1.98
2,23
Refined Petroleum
' 1 4.76
" , 3,S4 '
3,90
' 4,33
Ueetrte
3.62
4,26
, , 3,88
4,1$
jSattwa
-"2.42
2.12" ^
2-41 ..
2.77 " ;
            (32)  Wholesale and Retail Trade;
            (33)  Finance, Insurance, and Real Estate;
            (34)  Other Services; and
            (35)  Government Services.

            Percentage change information from the J/W fore-
         cast for energy cost shares, value of output, and en-
         ergy prices was used to calculate the differential in
         commercial sector energy demand for the no-control
         scenario. The energy cost share is defined as the cost
                                                B-34

-------
                                                                         Appendix B: Emissions Modeling
of energy input divided by the value of the output. In
order to calculate the percentage change in commer-
cial sector energy demand, the change in energy price
was subtracted from the percentage change in energy
cost, and added to the change in the value of output.
Each of these variables was available from the J/W
model results. This calculation was performed for each
of the four energy types,  and each of the four NEPA
categories. The change in commercial sector energy
demand was obtained by taking the weighted average
of the four NIPA categories. Since data on relative
energy demand for NIPA categories were not readily
available, square footage was used as a proxy for cal-
culating the weights. These data were taken from the
Nonresidential Buildings Energy Consumption Sur-
vey, Commercial Buildings Consumption and Expen-
diture 1986 (EIA, 1989). The resulting estimate for
commercial sector changes in energy demand is pro-
vided in Table B-14.
                                      State-level gasoline sales is one of the activities
                                   forecasted by the transportation sector model. The
                                   percentage change in gasoline sales calculated by the
                                   TEEMS model was used in the no-control scenario as
                                   a CRESS model input.
                                       Table B.-15;
                                       Economic,Variables Us,ed,m CRESS.
^e'ar
%75
•• -^
:19SQ
1985
4990-
, •_ •**y' ^xx, , ' y Motor
, ,\ , , ^Construction.- ' W Vekijctes
,V., --o;70^ ^ „-, -, -, ^_Q4 ,
, f Vi3' •*' i '-.'''
"'" ' 0-1> -:- ;; ^,^t7^ 	
, -^LTl - >- - - ^''°7 "" "
'''"•-* "Q.-29 ,w^,-6.a5,,,,V
-fableB^li
                                      ''           "
                         Refined  s
                        Petroleum
                               Natural:-'
                                                   .0.80
     19SO  >^--'
     ,1985
     1990'»'-
;,^-  ,   , ,3-36,;'^ -   , 1,40>>V


'*?''  ,,,-  ,,IM'12,     -s;1^-:,   '"''-O'.'4p"
    The national-level change in commercial sector
energy demand was allocated to the States using his-
toric shares. Implicit is the assumption that removal
of CAA regulations does not alter the State distribu-
tion of energy use.

Economic/Demographic Data

    State population was assumed not to vary as a re-
sult of CAA regulations, thus only the economic vari-
ables  were revised for the no-control scenario.
No-control scenario housing starts and car stock were
derived from J/W forecast information on construc-
tion and motor vehicles. The differential for catego-
ries 6 (construction) and 24 (motor vehicles and equip-
ment)  was applied to control scenario values to ob-
tain no-control scenario levels. The percentage change
from the J/W forecast is given in Table B-15.
                                                B-35

-------
The Benefits and Costs of the Clean Air Act, 1970 to 1990
       Table B-16.  ISP Emissions Under the Control ati4,1Horl'Scenarios by Target Year (in

       thousands of short tons),                   , ,,'X,  '"  "'-•*
Sector
Transportation:
Highway Vehicles
Off-Highway Vehicles
Stationary Sources:
Electric Utilities
Industrial Processes

Industrial Boilers
Commercial/Residential
TOTAL*
,*;-,>>,*,
W5

700
270'

1,72£
5,620,

740
2,020"
11,070
w =.,s"*v '-.'j -^ ^,\^
--- 1S8O-- •

' ' 760 - -
•" - "280>v-^
^ , » V •f
*,*,., ^°
JjyssyL,.,'

,-.¥ ,,,430^
-"-•"2,510.-^-»
-¥-8,550- ,,,,
&A.
1585
< - „
-770-
--£70

450"
3,040'

250'
5,680
7,460
'-'" •:'/%:»•.
1990
':"'" "
**° 820 ,
, ,,280 '
-4" ;,;';?,;
"«?.'. 4fc
' ^''"3,680

/ 240
- , -2,550 '
7,390,<-
' 19WS

;':""770-
"**"•" ""260'

3,460
1,1,120

„ „ ,7|p
* ' -2;020
• 18,410
Without the CAA
'"later
*;- ,
w-., --910
270
- -,
' 4M80'
'''12,000

550
2,520
' 20,730
1985
" "--'-'
- 1,030
260

'-'- 5,180
11,7-10

360
' 2,700
21,250
'v^ "S?
* V*,199Q Emfesions
V,' ' ' '-" "'-
1,180 - ,(30%) '
' 270 ' 5% ,- '
^ , ; ; " ' - ,
5,S60 -(93%),
12,960 ' "'(76%) J

,' 400 (41%)
"••- -2/560 -(1%)
23t23'0' v (68%)>,
               models designed to stmulate'condj.aotis in, {heabsence of ti» CAA, Tlesa niimbets should,not^b& taferpffiM as actual hfetotlcaJ •

               emission estimates.        ^ -       < -r-.>-^4x>*.*..*.          --• - ,                     	'	'^
                                   J    '  '"''   v "*  -      -.  -.^          -,-.^.^,      v^^^h        ,              ,'V •,  s
               *Totals may differ sSghtly from sums tJae to rounding.
      Table B-17. SOi Emissions Under the

      of shorttons).           . _,,
                -,'-,„,,,''',   '- ,'>!,<;,

"' ^'"'"?'os by Target-Year (in thousands
-v^>A1Kkr^ <:*,,,* , ,'-/,,-,
v''x:;-:-1990

. i 570' "
- ^-
** t
16,510 -
- 2,460,;-
:--^2,820
'?, ^9°
nn^'44-°*
' 19?S '
'SttfA'"/, -
* - '380
360
5'
,-, 20,6:%'"
- 4560
3,910
#i,oob
,'N,3l^'6'0'
'"-'198®

-,---450
530
,/,
"25,'^b'
.5,940
,,4,UO,,
?'' 810'
'37,460
1985

500
400

"•25,140
5,630
, 4020*'
610
''V&lftO''
^riif : tS?
jg^O Effliaioas

560 ' 1%' ' -
"-, --39,0 " l%-";
,'/,•>,,
-26,730 (38%).-;
'6,130 (60%),
'""4-H,610-- ~ (39%)
710''" ~,(3%>
"- 39,140, ^^C^bk)4'

               models designed to simulate ootudifions «i the'a'bsen'c'f of ,tji» CA.A, itiese p wn^er| should not be in'ierpisteilfactual b|sf orioal

               emission estimates.      '  %  "   '':"   ""/»«•>. -   \- -        ,'-'" '         '   '-'V;,-,,-,"      '•* """«---,-,^,,
                                                   , tT^S-v, ;„„--».-         ''*Mfc ,w--v ,,v,           ,,'<,"-„ -,^4,,y;,,,,,,


               "Totals may differ slightly froin sums.duejKi foun|lagl
                                                          B-36

-------
                                                                                      Appendix B: Emissions Modeling

                                0fidertb&-€bj$roland^control'Sceaarios-bv Ta^t^fear (aft  , ^ ^ „
                                "t X          „  * JH* ^^=   ~     -      ~ v (          ~       >. ^%v v^     > <   ^. ^ v^ £   >
                             1975
                                                          1990      1975     19»0
                                                                                               :  199®   Emissions
  Higbway Vdiides^'  "       ?,640    > 'A340"' x  '8,61O
  Off-Mighway VeMdiess>      ' I^S&Ct,,   ,2,180^/2,080
Stationary'Soutces:  -  v "     •*  * xv ^tj"" '
                       ""'   5,54V- >>-*'(S,450\v,^46(SO     7,050
                        ^  t  750    "',760' " " ^690      710
,  Industrial"Pailers*           4,09p     ^Qffff^,-^Q/     3^710

TOTAL*      -'-"'^       '22,06V    23,370    22.460- •* &%&>'
                                                                   9,020 „, 15,060  -^13,160    15,39'0
                                                                   1,980  " „  2,150              " '"""
            rocesses
 5,740     7,150    >-7,780     8,300-
  760""  -,  830     \790     1,090"
 4,120* "\ 3,6*3    "3,~68Ow&ife<}eveloped Sf»ecifica31y Mihis section'812'asalysl^usiag ,
       ^-models"designed to simidate conditions sin the absence of tfie <3A A. 'These numbers shonittnot be mtarpusled as aotoal^istorical
                '
        ^otals^roay ^ffep'sSgtitly ftwa saias'durto ri»ri
-------
The Benefits and Costs of the Clean Air Act, 1970 to 1990
      Table B-20. CO Emissions Und^eFttiCC^ntrol and"Mo-cotJttor§eeaarios by Tamet;Ye'af;£iti tnoasands
      ofshorttons),              "  —^-'^ •  s '".'1T7. ', '*" **• v-          "''	'„.:;':   ""-";


Sector
Transportation:
Highway Vehicles
Off-Highway Vehicles


Electric Utilities
Industrial Processes
Industrial Boilers

Commercial/Residential
TOTAL*

Wkhthc
1975 19SO

83,580 79,9,70, j,
- 8,510 ' 8.100 '
- ? *"'>'• *&#<.<"•
' ;£*** *"• v
.,^/fc.A - •..{. •/ V"^ "***
240 ' ^ j, 28$^
7,580^^6^^
>*/Jrt , „„,. , ?vx 't'f rttX^
/Z-w3 v* ., 'j /lv

10,230 !l333tf\
110,880 109, HO
, ,,«^,!
.CAA - »-.
- ^1985-,- -
'*'>*&&>$'' S"*
•^2jt§ft
7*880
s-WV/1 ,-•

wp-
f ,,- 290
^-,,4,840
*>J 670,

; 14,140- -
100,300- „

x--%
4 •&&'"
' , '/*
65,430
- 8,080""
* *->,- >t =,-•?,
,^,,,J,^vv^,
370 s
^ifcf.
,« 7>tO

43,150
x92,9,00
-< ?•">'.-.,--
»"• % „,-
"'"''iW*'

•" 90,460'
"VSjSMJ-
'^ > J

'250"
9,240"
720 '

, 10^2^0,,
119,430s*

' WHhott
' 1980

105,530,
8,070


*" ' '290
9,120 ,
710-,,

,,,-13,170-
' '136,880'

the CAA
1985 <
f f vtffl
131,^20^
, ,,7,880,

'/
,,300
,' '8,860"
/,-,-,, -,620

-- 14,200
163,280,,;,
'* ' " DiBSaceate
, , „ , , ' *1a K8W ',
' " ' 199(11 Emissions
,77" ----- 'T
,449,280 '(56%) ,„
4,,,??,?F;,,;, „ ,°*'";
-
•*', * J»y >S ,,#'ifx'"y '& *<•, ~~,
380 - (3%) '
' 10,!80 	 '(4'9%y"-
?4o "6si"""

13,210 , ,, W""
v;18t,,S6Q,.;, m°!$ '
          -   Theestiraates of emission levels w'z*1 aa*l''li''tftoittJtieCAA vsreje^^*s-^v?;V 1 1
1 , >- -;,;;;",:)1|>?^)-1-, 0 '"'o'
190 s- - s --90' -' " --- -> 23 '", ' '"*'"*3 ''

- ,„„,,. ,^,v.,^, ,
, Without the CAA' •-
- -1975,,,-, 1980 '^lilS "' '
7' "203 -.-'-207-,-- -- -214
•i-".,-,«v-/,r ' «
J '-> ' ' *7
217 „,,„-,, ,,221,,,,,,, ,-228
,,,-, »,,,,J-i»,,,,,^ „ ,,,,
Difftieace
,, ~ ,-, ; -,-;<„ ,^J9»,
15*Vw ' J jBJwHUwflwwas
223 (99%)""
237 ' ' *-(9-9%5
••/ ,,„,„,,,, ,
                                                           ',,  -  ',                       , ,
      Notre;   The estimates of emission levels wftft andvtifluna the 'QiA'^ejfe!^ev«loped specifically for'thts section 812 analysis using     '-,
              models designed to simulate conditions in ths-absence.qfsliie C^A-  These numbers should-not be inter|)reted as actual- historical
              emission estimates.              - - -     <    '--xxv-j;,,         " -«--•-•--•-
              *T«als may differ slightly from sums due-to r^umftng,.; /v,
                                                          B-38

-------
                                                                     Appendix E: Emissions Modeling
Emissions Modeling References

Abt Associates Inc. (Abt). 1995. The Impact of the
       Clean Air Act on Lead Pollution: Emissions
       Reductions, Health Effects, and Economic
       Benefits from 1970 to 1990, Final Report,
       Bethesda, MD, October.

Argonne National Laboratory (ANL). 1990. Current
       Emission Trends for Nitrogen Oxides, Sulfur
       Dioxide, and Volatile Organic Chemicals by
       Month and State: Methodology and Results,
       Argonne, IL, August.

Argonne National  Laboratory (ANL). 1992. Retro-
       spective Clean Air Act Analysis: Sectoral
       Impact on Emissions from 1975 to 1990,
       (Draft), Argonne, IL, July.

Braine, Bruce and P. Kim. 1993. Fuel Consumption
       and Emission Estimates by State, ICF Re-
       sources, Inc., Fairfax, VA, memorandum to
       Jim DeMocker, EPA. April 21.

Braine, Bruce, S. Kohli, and P. Kim. 1993.7975 Emis-
       sion Estimates with and without the Clean Air
       Act, ICF Resources, Inc., Fairfax, VA, memo-
       randum to Jim DeMocker, EPA, April 15.

DeMocker, J. Personal Communication with Office
       of Mobile Sources Staff, Ann Arbor, Michi-
       gan. Date unknown.

Energy Information Administration (EIA). 1982. Es-
       timates of U.S. Wood Energy Consumption
       from  1949 to 1981. DOE/EIA-0341, U.S.
       Department of Energy. August.

Energy Information Administration (EIA). 1985. Cost
       and Quality of Fuels for Electric Utility
       Plants. DOE/EIA-0091(85), U.S. Department
       of Energy.

Energy Information Administration (EIA). 1989.Non-
       residential Buildings Energy Consumption
       Survey: Commercial Buildings Consumption
       and Expenditures 1986. DOE/EIA-0318(86),
       U.S. Department of Energy. May.

Energy Information Administration (EIA). 1990. Es-
       timates of U.S. Biofuels Consumption 1990.
       DOE/EIA-0548(90), U.S. Department of En-
       ergy. October.

Electric Power Research Institute (EPRI). 1981. The
       EPRI Regional Systems, EPRI-P-1950-SR,
       Palo Alto, CA.

Federal Highway Administration (FHWA). 1986.
       1983-1984 Nationwide Personal Transporta-
       tion Survey, U.S. Department of Transporta-
       tion, Washington, DC.

Federal Highway Administration (FHWA). 1988.
       Highway Statistics 1987, PB89-127369, U.S.
       Department of Transportation, Washington,
       DC.

Federal Highway Administration (FHWA). 1992.
       Highway Statistics 1991, FHWA-PL-92-025,
       U.S. Department of Transportation, Washing-
       ton, DC.

Gschwandtner, Gerhard. 1989. Procedures Document
       for the Development of National Air Pollut-
       ant Emissions Trends Report, E.H. Pechan &
       Associates, Inc., Durham, NC. December.

Hogan, Tim. 1988. Industrial Combustion Emissions
       Model (Version 6.0) Users Manual, U.S. En-
       vironmental Protection Agency, EPA-600/8-
       88-007a.

ICF Resources, Inc.  1992. Results of Retrospective
       Electric Utility Clean Air Act Analysis -1980,
       1985 and 1990, September 30.

Jorgenson, D.W. and P. Wilcoxen. 1989. Environmen-
       tal Regulation and  U.S. Economic  Growth,
       Harvard University Press, Cambridge, MA.

Klinger, D. and J.R. Kuzmyak. 1986. Personal Travel
       in the United States,  Vol. 1:1983-84 Nation-
       wide  Personal Transportation Study, U.S.
       Department of Transportation, Federal High-
       way Administration, Washington, DC. Au-
       gust.

Kohout, Ed. 1990. Current Emission Trends for Ni-
       trogen Oxides, Sulfur Dioxide, and Volatile
       Organic Compounds by Month  and State:
       Methodology and Results," Argonne National
       Laboratory, ANL/EAIS/TM-25, Argonne, IL.
                                              B-39

-------
 The Benefits and Costs of the Clean Air Act, 1970 to 1990
 Lockhart, Jim. 1992.  Projecting with and without
        Clean Air Act Emissions for the Section 812
        Retrospective Analysis: A Methodology Based
        Upon the Projection System used in the Of-
        fice of Air Quality Planning and Standards
        National Air Pollutant Emission Estimate
        Reports" (Draft Report), Environmental Law
        Institute, November 16.

 McDonald, J.F. and D.W. South. 1984. The Commer-
        cial and Residential Energy Use and Emis-
        sions Simulation System (CRESS): Selection
        Process, Structure, and Capabilities, Argonne
        National Laboratory, ANL/EAIS/TM-12,
        Argonne, IL. October.

 Mintz, M.M. and A.D. Vyas. 1991. Forecast of Trans-
        portation Energy Demand through the Year
        2010, Argonne National Laboratory, ANL/
        ESD-9, Argonne, IL. April.

 Pechan Associates. 1995.The Impact of the Clean Air
        Act on 1970 to 1990 Emissions; Section 812
        Retrospective Analysis. Draft Report. March.

 Saricks, C.L. 1985. The Transportation Energy and
        Emissions Modeling System (TEEMS): Selec-
        tion Process, Structure, and  Capabilities,
        Argonne National  Laboratory, ANL/EES-
        TM-295, Argonne, IL. November.

 Veselka, T.D., et al. 1990. Introduction to the Argonne
        Utility Simulation (ARGUS) Model," Argonne
        National Laboratory, ANL/EAIS/TM-10,
        Argonne, EL. March.

 Vyas, A.D. and C.L. Saricks.  1986. Implementation
       of the Transportation Energy and Emissions
       Modeling System (TEEMS) in Forecasting
       Transportation Source Emissions for the 1986
       Assessment, Argonne National Laboratory,
       ANL/EES-TM-321, Argonne, IL. October.

U.S. Department of Commerce (DOC). 1975. Statis-
       tical Abstract of the United States: 1975 (96th
       Edition), Bureau of the Census, Washington,
       DC, September.

U.S. Department of Commerce (DOC). 1977. Statis-
       tical Abstract of the United States: 1977 (98th
       Edition), Bureau of the Census, Washington,
       DC, September.
 U.S. Department of Commerce (DOC). 1981. 7977
        Truck Inventory and Use Survey, Bureau of
        the Census, TC-77-T-52, Washington, DC,
        August.

 U.S. Department of Commerce (DOC). 1982. Statis-
        tical Abstract of the United State's: 1982-1983
        (103rd Edition), Bureau of the Census, Wash-
        ington, DC, December.

 U.S. Department of Commerce (DOC). 1983. Statis-
        tical Abstract of the United States: 1984
        (104th Edition), Bureau of the Census, Wash-
        ington, DC, December.

 U.S. Department of Commerce (DOC). 1984. 1982
        Truck Inventory and Use Survey, Bureau of
        the Census, TC-82-T-52, Washington, DC,
        August.

 U.S. Department of Commerce (DOC). 1987. Statis-
        tical  Abstract of the United States: 1988
        (108th Edition), Burea of the Census, Wash-
        ington, DC, December.

 U.S. Department of Commerce (DOC). 1990. 1987
        Truck Inventory and Use Survey," Bureau of
        the Census, TC87-T-52, Washington, DC,
        August.

 U.S. Department of Commerce (DOC). 1991.Annwa/
        Survey of Manufactures: Purchased Fuels and
        Electric Energy Used for Heat and Power by
        Industry Group,  Bureau of the Census,
        M87(AS)-1, Washington, DC.

 U.S. Department of Commerce (DOC).  1993. Statis-
        tical Abstract of the United States: 1993
        (113th Edition)," Bureau of the Census,
        Washington, DC.

 U.S. Department of Energy (DOE). 1982. Documen-
        tation of the Resource Allocation and Mine
        Costing (RAMC) Model. DOE/NBB-0200.
       Energy Information Administration.

U.S. Department of Energy (DOE). 1986. Inventory
       of Power Plants in the United States 1985.
       DOE/EIA-0095(85), Energy Information
       Administration, Washington, DC, August.
                                             B-40

-------
                                                                     Appendix B: Emissions Modeling
U.S. Department of Energy (DOE). 1988. An Analy-
       sis of Nuclear Power Plant Operating Costs.
       DOE/EIA-0511(88),  Energy Information
       Administration.

U.S. Department of Energy (DOE). 1990. State En-
       ergy Price and Expenditure Report 1988.
       DOE/EIA-0376(88),  Energy Information
       Administration, Washington, DC, September.

U.S. Department of Energy (DOE). 1991. State En-
       ergy Data Report: Consumption Estimates -
       1960-1989. DOE/EIA-0214(89), Energy In-
       formation Administration, Washington, DC,
       May.

U.S. Department of  Energy (DOE).  1992.  Annual
       Energy Review 1991. DOE/EIA-0384(91),
       Energy Information Administration, Wash-
       ington, DC.

U.S. Environmental Protection Agency (EPA). 1985.
       Compilation  of Air Pollutant Emission Fac-
       tors, Volume I: Stationary Point and Area
       Sources, AP-42,  Fourth Edition,  GPO No.
       055-000-00251-7, Research Triangle Park,
       NC. September.

U.S. Environmental Protection Agency (EPA). 1989.
       The 1985 NAPAP Emissions Inventory, EPA-
       600/7-89-012a, Research Triangle Park, NC.
       November.

U.S. Environmental Protection Agency (EPA). 1990.
       The Cost of a Clean Environment, EPA-230-
       11-90-083. November.

U.S. Environmental Protection Agency (EPA). 1991.
       Office of Air Quality Planning and Standards,
       National Air Pollutant Emissions Estimates,
       1940-1990,  EPA-450/4-91-026,  Research
       Triangle Park, NC. November.

U.S. Environmental Protection Agency (EPA). 1992.
       7990 Toxics Release Inventory, EPA-700-S-
       92-002, Washington, DC.

U.S. Environmental Protection Agency (EPA). 1994a.
       National Air Pollutant Emission  Trends,
       1900-1993, EPA-454/R-94-027, Office of Air
       Quality Planning and Standards, Research
       Triangle Park, NC. October.
U.S. Environmental Protection Agency (EPA). 1994b.
       Office of Mobile Sources, User's Guide to
       MOBILES (Mobile Source Emission Factor
       Model), EPA-AA-AQAB-94-01, Ann Arbor,
       MI. May.

U.S. Environmental Protection Agency (EPA). 1995.
       National Air Pollutant Emission Trends 1900-
       1994, EPA-454/R-95-011. Office of Air Qual-
       ity Planning and Standards, Research Triangle
       Park, NC. October.

Werbos, Paul J. 1983. A Statistical Analysis of What
       Drives Energy Demand:  Volume HI of the
       PURHAPS Model Documentation, U.S. De-
       partment of Energy, Energy Information Ad-
       ministration, DOE/EIA-0420/3, Washington,
       DC.
                                             B-41

-------

-------
Appendix C:  Air Quality Modeling
Introduction

   This appendix describes in greater detail the vari-
ous methodologies used to translate differences in
control and no-control scenario emission estimates
into changes in air quality conditions. Summary char-
acterizations of the results of the air quality modeling
efforts for 1990 are provided here and in the main
text. Further details and discussion of key analytical
and modeling issues can be found in a number of sup-
porting documents. These documents, which provide
the analytical basis for the results presented herein,
are:

    *   ICF Kaiser/Systems Applications Interna-
       tional, "Retrospective Analysis of Ozone Air
       Quality in the United States", Final Report,
       May 1995. (Hereafter  referred to as "SAI
       Ozone Report (1995).")

    *   ICF Kaiser/Systems Applications Interna-
       tional, "Retrospective Analysis of Paniculate
       Matter Air Quality in the United States", Draft
       Report, September 1992. (Hereafter referred
       to as "SAI PM Report (1992).")

    *   ICF Kaiser/Systems Applications Interna-
       tional, "Retrospective Analysis of Paniculate
       Matter Air Quality in the United States", Fi-
       nal Report, April 1995. (Hereafter referred to
       as "SAI PM Report (1995).")

    *   ICF Kaiser/Systems Applications Interna-
       tional, "PM Interpolation Methodology for
       the section-812  retrospective analysis",
       Memorandum from  J. Langstaff to J.
       DeMocker, March 1996. (Hereafter referred
       to as "SAI PM Interpolation Memo (1996).")

    *   ICF Kaiser/Systems Applications Interna-
       tional, "Retrospective Analysis of SOy NOX
       and CO Air Quality in the United  States",
       Final Report, November 1994. (Hereafter re-
       ferred to as
       (1994).")
'SAI SO , NO  and CO Report
    *  ICF Kaiser/Systems Applications Interna-
       tional, "Retrospective Analysis of the Impact
       of the Clean Air Act on Urban Visibility in
       the Southwestern United States", Final Re-
       port, October 1994. (Hereafter referred to as
       "SAI SW Visibility Report (1994).")

    «  Dennis, Robin L., US EPA,  ORD/NERL,
       "Estimation of Regional Air Quality and
       Deposition Changes  Under Alternative 812
       Emissions Scenarios Predicted by the Re-
       gional Acid Deposition Model, RADM", Draft
       Report, October 1995. (Hereafter referred to
       as "RADM Report (1995).")

    The remainder of this appendix describes, for each
pollutant or air quality effect of concern, (a) the basis
for  development of the control scenario air quality
profiles; (b) the air quality mbdeling approach used
to estimate differences in air quality outcomes for the
control and no-control scenario and the application of
those results to the derivation of the no-control sce-
nario air quality profiles; (c) the key  assumptions,
caveats, analytical issues, and limitations associated
with the modeling approach used; and (d) a summary
characterization of the differences in  estimated air
quality outcomes for the control and no-control sce-
narios.


Carbon  Monoxide


Control scenario carbon monoxide
profiles

    As described in the preceding general methodol-
ogy section, the starting point for development of con-
trol scenario air quality profiles was EPA's AIRS da-
                                              C-l

-------
   The Benefits and Costs of the Clean Air Act, 1970 to 2990
Table C-1. Summary of CO Monitoring Oata,
Year
1970
1975
1980
1985
1990
Number of
Monitors
82
503
522
472
5Q6
Number of
Counties
54
246 <
250
232
244
.Percent^
Population
*£%?$}'.£&$i * -V* /
Covered"
\<-?"
n/a .,2
C *s"M%\
n/a ,,J^
.,* 5Q%"^r
.tftyv ^ s'
n/a-;>
55,%
** -* / x,.
Number of
ti">-" 1
Samples
/• ^
*%40$,524 "
'' /
' 2,667,525
, :M>Sl399
>3iS$$,286 -
Jst^SS^S. r
Meaii
Number of
Samples per
' Monitor
4982 ,
' '"$,303
**-, 5,846'

-------
                                                                               Appendix C: Air Quality Modeling
                           tfraat of Air Quality Profile; Databases.,,,
                         -. ££•'. -  . .\	, /-rtfi-i ^X , '    '  ' >'s *.,<#*>»*>, A* ^ -f ; ,,-.    '^-ix
                 CoIUHHlS
                                     Description '' '  ''',
                                                Year (10,75, SO^S^O).
                              Integra '
                    Avwalrag flifi,6tlv-3; 5, "T, 8; 12, 24-faours)" '
                                                State n?iS,cpde
                    ,11-13
- Integar  '-' -"''
. Cooity FlPlcode -
                  *   21-30
 Real
                                                -Latitude
                   , -.0 \»t..>#
                   "32 -'41
                    43-44™
                                                Hourly int&inittency parameter^*:;/'
                                                                     , ,, •  s
                                               o. Hourly -logaoajial paraitietw it,
                                                Hourlylogaorraal parame,t£sc cr"
                  >  76 -
                   Hourly gamma parameter
                                                V,   ,         '---V •-, „
                                               v Hourly gamma parameter ,p
                                                E»aUy,Baa^tognonnaJ parameter ,n*/,i
                                                PMJym«xlog»oiti>al' parameter 
-------
The Benefits and Costs of the Clean Air Act, 1970 to 1990
    The adjustment for background concentration is
made to hold ambient background concentrations of
the pollutant  constant between the control and
no-control scenarios. To the extent background con-
centrations are affected by transport of anthropogenic
pollutants from upwind sites, and to the extent up-
wind emissions may have been controlled under the
control scenario, assuming a fixed background con-
centration represents a conservative assumption in this
analysis. As discussed in the SAISO2, NOx, and CO
Report (1994), the CO background concentration used
for this analysis was 0.2 ppm, which equals the low-
est typical concentration observed in the lower 48
states.

    In the SAI SO2, NOx, and CO Report (1994) docu-
menting the CO air quality modeling effort, reference
is made to using county-level emission estimates as
the basis for deriving the no-control profiles. Deriva-
tion of these county-level results is described hi more
detail in  the appendix on emissions estimation. It is
important to emphasize here, however, that the county-
level CO emissions data were derived for both the
control and  no-control  scenarios by simple popula-
tion-weighted  disaggregation of state-level emission
totals. Although CO emission estimates were needed
at the county level to support the ozone ah" quality
modeling effort, differences in state-level emissions
estimates are what drive the difference in the control
and no-control air quality profiles for CO. In other
words, the ENCAA to £GW ratios used to derive  the
no-control profiles according to Equation (1) above
are essentially based on state-level emissions estimates
for CO.

    As for the control  scenario air quality profiles,
the no-control scenario air quality profiles are avail-
able on diskette. The filename for the CO No-control
Scenario profile database is CONCAA.DAT. The
same data format described hi Table C-2 is adopted.

Summary differences in carbon
monoxide air quality

    While the control and no-control scenario air qual-
ity profiles are too extensive to present hi their en-
tirety in this report, a summary indication of the dif-
ference in control  and no-control scenario CO con-
centrations is useful. Figure C-l provides this sum-
mary characterization. Specifically, the air quality
indicator provided is the 95th percentile observation
of 1990  CO concentrations averaged over a  1-hour
period. The graph shows the number of monitors for
Figure C-l. Frequency Distribution of Estimated Ratios
for 1990 Control to No-control Scenario 95th Percentile
1-Hour Average CO Concentrations, by Monitor.
  300
       0.05   0.25    0.45   0.65
                         0.85    1.05    1.25
Ratio of CAA:No-CAA 95th Percentile 1-Hour Average
 which the ratio of 1990 control to no-control scenario
 95th percentile 1-hour average concentrations falls
 within a particular range. The x-axis values in the
 graph represent the midpoint of each bin. The results
 indicate that, by 1990, CO concentrations under a no-
 control scenario would have been dramatically higher
 than control scenario concentrations.

 Key caveats and uncertainties for
 carbon monoxide

     A number of important uncertainties should be
 noted regarding the CO air quality estimates used in
 this analysis. First and foremost, CO is a highly local-
 ized, "hot spot" pollutant. As such, CO monitors are
 often located near heavily-used highways and inter-
 sections to capture the peak concentrations associated
 with mobile sources. Since this analysis relies on state-
 level aggregate changes in CO emissions  from all
 sources, the representativeness and accuracy of the
 predicted CO air quality changes are uncertain. There
 is no basis, however, for assuming any systematic bias
 which would lead to over- or under-estimation of air
 quality conditions due to reliance on state-wide emis-
 sion estimates.

     A second source of uncertainty is  the extent to
 which the three-parameter distributions adequately
 characterize air quality indicators of concern. Appen-
 dix C of the  SAI SO2, NOx, and CO Report (1994)
 presents a number of graphs comparing the fitted ver-
 sus empirical data for one-hour and 12-hour averag-
 ing periods. In the case of CO, the  gamma distribu-
 tion appears to provide a very reasonable fit, though
 clearly some uncertainty remains.
                                                C-4

-------
                                                                       Appendix C; Air Quality Modeling
    Finally, a central
premise of this analy-
sis is that changes in
CO emissions should
be  well-correlated
with changes  in CO
air quality. Strong
correlation between
the state-level emis-
sions estimates used
in this  analysis and
empirical air quality
measurements would
not be expected due to
inconsistencies be-
tween the state-level
scale   of modeled
emissions versus the
                                                                                           s , frf v
                                                                                          * "V >. V"- '
                           ,,•.
                         .1970
,'jf NiHttberol
 -'  Monitors.
                                                Counties
                                                .  340
                                                            , ' Fercea't „,',
                                                            iPoptitetion
                                                                         ' 6,6015' ";
                                                          ^
                                                    -X' 'Meaa-Nunvber, ^
                                                    ' ''
monitor-level scale of the air quality data, and between
the modeled control scenario emissions inventories
and actual historical air quality measurements. Under
these circumstances, it is particularly important to
focus on the primary objective of the current analy-
sis, which is to estimate the difference in air quality
outcomes between scenarios which assume the ab-
sence or presence of historical air pollution controls.
In the process  of taking differences, some of the un-
certainties are  expected to cancel out. No attempt is
made in the overall analysis to predict historical air
quality, or hypothetical air quality in the absence of
the Clean Air Act, in absolute terms.


Sulfur Dioxide

    Sulfur dioxide (SO2) emissions lead to several air
quality effects, including secondary formation of fine
particle sulfates, long range transport and deposition
of sulfuric acid, and localized concentrations of gas-
eous sulfur dioxide. The first two effects are addressed
later in this appendix, under the particulate matter and
acid deposition sections. The focus of this section is
estimation of changes in local concentrations of sul-
fur dioxide.

    The methodology applied to estimation of local
sulfur dioxide  air quality is essentially identical to the
one applied for carbon monoxide. As such, this sec-
tion does not repeat the "roll-up" modeling method-
ological description presented in the CO section, but
instead simply highlights those elements of the sulfur
dioxide modeling which differ from carbon monox-
ide.
                    Control scenario sulfur dioxide profiles

                       Unlike the CO monitoring network, the number
                    of monitors as well as the population coverage of the
                    SO2 monitoring  network shrank during the 1980's.
                    Table C-3 summarizes the SO2 monitoring data used
                    as the basis for development of the control scenario
                    air quality profiles.

                       As for CO, air quality profiles reflecting average
                    values and daily maxima for 1, 3, 5, 7, 8,  12, and 24
                    hour averages were compiled from AIRS for moni-
                    tors in the lower 48 states which had at least 10 per-
                    cent of their potential samples available. Applying a
                    cutoff of 0.1 ppb to isolate the zero and near-zero ob-
                    servations, three-parameter lognormal and gamma
                    distributions  were fitted to these empirical profiles.
                    In the case of SO2, the three-parameter lognormal dis-
                    tribution was found to provide the best fit.

                       The control scenario SO2 air quality profiles are
                    available on diskette,  contained in a file named
                    SO2CAA.DAT. The same data format described in
                    Table C-2 is  adopted.

                    No-control scenario sulfur dioxide
                    profiles

                        The no-control air  quality profiles for SO2 are
                    derived using Equation 1, the same equation used for
                    CO. For SO2, the background concentration was as-
                    sumed to be zero. Although anthropogenic emissions
                    contribute only  small amounts to total global atmo-
                    spheric sulfur, measured background concentrations
                                                C-5

-------
   The Benefits and Costs of the Clean Air Act, 1970 to 1990
   for the continental U.S. range from only 0.1 to 1.3
   ppb. Background SO2 is discussed in more detail in
   the supporting document SAISO2, NOx, and CO Re-
   port (1994).1

       The no-control scenario SO2 air quality profiles
   are available on diskette, contained in a file named
   SO2NCAA.DAT.  The data format is described in
   Table C-2.

   Summary differences in sulfur dioxide
   air quality

       As for CO, reporting differences in control and
   no-control scenario air quality projections for each
   monitor covered in the analysis is impractical due to
   the large amount of data involved. However, Figure
   C-2 provides an illustration of scenario differences
   similar to the one provided for CO. Specifically, the
   graph shows the distribution of 1990 control to no-
   control scenario 95th percentile 1-hour average con-
   centrations ratios at SO2 monitors. By 1990, SO2 con-
   centrations under the no-control scenario were sub-
   stantially higher than those associated with the con-
   trol scenario.
Figure C-2.  Frequency Distribution of Estimated Ratios
for 1990 Control to No-control Scenario 95th Percentile
1-Hour Average SO2 Concentrations, by Monitor.
   300
•5'200
I
   100
        0.05    0.25    0.45   0.65    0.85  .  1.05    1.25
         Ratio of CAA:No-CAA 95th Percentile 1-Hour Average
    Key caveats and uncertainties for sulfur
    dioxide

       The'height of stacks used to vent flue gases from
    utility and industrial fossil fuel-fired boilers has a sig-
    nificant effect on the dispersion of sulfur dioxide and
    on the formation and long-range transport of second-
    ary products such as particulate sulfates. Under a no-
control scenario, it is conceivable that some sources
might have built taller stacks to allow higher emis-
sion rates without creating extremely high ground-
level concentrations of flue gases. On the other hand,
it is also conceivable that, in the absence of post-1970
air pollution control programs, sources might have
built shorter stacks to avoid incurring the higher costs
associated with building and maintaining taller stacks.
To the extent facilities would have adopted different
stack height configurations under a no-control sce-
nario, both local  exposures to sulfur dioxides (and
other emissions from fossil fuel combustion) and long-
range transport, deposition, and exposure associated
with secondary formation products may have been
different. However, this analysis assumes that both
the location of individual facilities and the height and
configuration of emission stacks are constant between
the two scenarios. If, in fact, stack heights were raised
under the historical case due to CAA-related concerns,
increases in local SO2 concentrations under the
no-control scenario may be overestimated. However,
this same assumption may at the same time lead to
underestimation under the no-control scenario of long-
range transport and formation  of secondary particu-
lates associated with taller stacks. For stacks built
 lower under a no-control scenario, local SO2 expo-
 sures would have been higher and long-range effects
 lower. Finally, the comments on uncertainties for car-
 bon monoxide apply as well to SO2.


 Nitrogen Oxides

     Similarly to  sulfur dioxide, emissions of nitro-
 gen oxides (NOx) -including nitrogen dioxide (NO2)
 and nitrous oxide (NO)- lead to several air quality
 effects. These effects include secondary formation of
 fine particle nitrates, formation of ground-level ozone,
 long range transport and deposition of nitric acid, and
 localized concentrations of both NO2 and NO. The
 first three effects are addressed later in this appen-
 dix, under the particulate matter, ozone, and acid
 deposition sections. The focus of this section is esti-
 mation of changes in local concentrations of NO2 and
 NO.

    The methodology applied to estimation of local
 nitrogen oxides air quality is essentially identical to
 the one applied for carbon monoxide and sulfur diox-
 ide. As such, this section does not repeat the "roll-up"
 modeling methodological description presented in the
 CO section, but instead simply highlights those ele-
       1 SAI SO2, NOx, and CO Report (1994), page 4-9.

-------
                                                          Appendix C: Air Quality Modeling
ments of the nitrogen oxides modeling which differ
from carbon monoxide.

Control scenario nitrogen oxides
profiles

    After peaking around 1980, the number of NO2
and NO  monitors, their county coverage, and their
population coverage shrank between 1980 and 1990.
Tables C-4 and C-5 summarize, respectively, the NO2
and NO monitoring data used as the basis for devel-
opment of the control scenario air quality profiles.

    As for CO and SO2, air quality profiles reflecting
average values and maxima for 1, 3, 5, 7, 8, 12, and
                                       24 hour NO2 and NO averages were compiled from
                                       AIRS for monitors in the lower 48 states which had at
                                       least 10 percent of their potential samples available.
                                       Applying a cutoff of 0.5 ppb to both NO2 and NO to
                                       isolate the zero and near-zero observations, three-pa-
                                       rameter lognormal and gamma distributions were fit-
                                       ted to these empirical profiles. For NO2 and NO, the
                                       three-parameter gamma distribution was found to pro-
                                       vide the best fit.

                                           The control scenario NO2 and NO air quality pro-
                                       files are available on diskette, contained in files named
                                       NO2CAA.DAT andNOCAA.DAT, respectively. The
                                       same data format described in Table C-2 is adopted.
                             <"'->-':'~ ttt'ftttff/'t'&Z'rrs-Js'
                                                 PerceiJI^.
                                                Population
                                                 Cowifed
                                                          ,
                                                ), Number of
                                                                Monitor
:•»
                                                             ; 1,9^128  ',
                                     s
                                                 , 'Samples
                                                                            Moiritor
                                               ;i!, 4,101,051
  W85
                                                            , -' 956,425™",  ;
                                    C-7

-------
   The Benefits and Costs of the Clean Air Act, 1970 to 1990
    No-control scenario nitrogen oxides
    profiles

       The no-control air quality profiles for NO2 and
    NO are derived using Equation 1, the same equation
    used for CO and SO2. As discussed in detail in the
    SAISO2, NOX, and CO Report (1994),2 nitrogen ox-
    ides are emitted almost entirely from anthropogenic
    sources and they do not have long atmospheric resi-
    dence times. Therefore, global background concen-
    trations are very low, on the order of 0.1  or 0.2 ppb.
    For the present analysis, background concentrations
    of NO2 and NO were assumed to be zero.

       The no-control scenario NO2 and NO air quality
    profiles are available on diskette, contained hi files
    named NO2NCAA.DAT andNONCAA.DAT, respec-
    tively. The data format is described in Table C-2.

    Summary differences in nitrogen oxides
    air quality

       Figure C-3 provides a summary indication of the
    differences in control and no-control scenario air qual-
    ity for NO2. As for CO and SO2, the graph shows the
    distribution of 1990 control to no-control scenario 95th
    percentile 1-hour average concentration ratios at NO2
    monitors. These ratios indicate that, by 1990, no-con-
    trol scenario NO2 concentrations were significantly
    higher than they were under the control scenario. The
    changes for NO are similar to those for NO2.
Figure C-3. Frequency Distribution of Estimated Ratios
for 1990 Control to No-control Scenario 95th Percentile
1-Hour Average NO2 Concentrations, by Monitor.

  300
    oL
       0.05    0.25   0.45    0.65    0.85    1.05    1.25
        Ratio of CAA:No-CAA 95th Percentile 1-Hour Average
 Key caveats and uncertainties for
 nitrogen oxides

    A number of caveats and uncertainties specific to
 modeling NOx should be noted. First, stack height and
 stack height control strategies likely to have influenced
•local concentrations of SO2 may also have influenced
 local concentrations of NO2 and NO. (For a fuller dis-
 cussion of the stack heights issue, refer to the section
 "Key caveats and uncertainties for SO2") In addition,
 the earlier discussion of uncertainties resulting from
 the use of state-level emissions and the cancellation
 of uncertainties resulting from analyzing only differ-
 ences or relative changes also applies to NOx.

 Acid Deposition

    The focus of air quality modeling efforts described
 above for carbon monoxide, sulfur dioxide, and ni-
 trogen oxides was to estimate the change in ambient
 concentrations of those pollutants  as a result of
 changes in emissions. Particularly since the emissions
 modeling was driven by modeled macroeconomic
 conditions, rather than actual historical economic ac-
 tivity patterns, neither the emissions inventories nor
 the resultant air quality conditions developed for this
 analysis would be expected to match historical out-
 comes. The need to focus on relative changes, rather
 than absolute predictions, becomes even more acute
 for estimating air quality outcomes for pollutants sub-
 ject to long-range transport, chemical transformation,
 and atmospheric deposition. The complexity of the
 relationships between emissions, air  concentrations,
 and deposition is well-described hi the following para-
 graph from the RADM report document developed
 by Robin Dennis of US EPA's National Exposure
 Research Laboratory in support of the present analy-
                                                       sis:
     "Sulfur, nitrogen, and oxidant species in the
     atmosphere can be transported hundreds to
     thousands of kilometers by meteorological
     forces. During transport  the primary
     emissions, SOf NO^, and volatile organic
     emissions (VOC) are oxidized in the air or in
     cloud-water  to form  new,  secondary
     compounds,  which are acidic, particularly
     sulfate and nitric acid, or which add to or
     subtract from the ambient levels ofoxidants,
     such as ozone. The oxidizers, such as the
     hydroxyl radical, hydrogen peroxide and
        1 SAI SO2> NOX, and CO Report (1994), page 4-9.

-------
                                                                       Appendix C: Air Quality Modeling
    ozone are produced by reactions ofVOC and
    NOx. The sulfur and nitrogen pollutants are
    deposited to the earth through either wet or
    dry deposition creating a load of pollutants
    to the earth's surface...  However, the
    atmosphere is partly cleansed of oxidants
    through a  number of physical processes
    including deposition (e.g., ozone is removed
    by wet and dry deposition). Dry deposition
    occurs when particles settle out of the air onto
    the earth or when gaseous or fine particle
    species directly impact land, plants, or water
    or when plant stomata take up gaseous
    species, such as SO2. In wet deposition,
    pollutants are removed from the atmosphere
    by either rain or snow. In addition, fine
    particles or secondary aerosols formed by the
    gas- and aqueous-phase transformation
    processes scatter or absorb visible light and
    thus contribute to impairment of visibility. "3
                Control scenario acid deposition
                profiles

                   The derivation of control scenario emission in-
                ventory inputs to the RADM model is succinctly de-
                scribed in this excerpt from the RADM Report (1995):

                   The RADM model requires a  very detailed
                   emissions inventory in both time and space.
                   The emissions fields are also day-specific to
                   account for the temperature effects on the
                   volatile  organics  and  the wind and
                   temperature effects on the plume rise of the
                   major point sources. At the time of the 812
                   retrospective study RADM runs,  these
                   inventories had been developed for 1985,
                   using the 1985 NAPAP  (National Acid
                   Precipitation  Assessment  Program)
                   inventory, and adjusted for point source
    The complexity and nonlinearity
of the relationships between localized
emissions of precursors, such as SO2
and VOC, and subsequent regional
scale air quality and deposition effects
are so substantial that the simple "roll-
up" modeling methodology used for
estimating local ambient concentra-
tions of SO2, NOx, and CO is inad-
equate, even for a broad-scale, aggre-
gate assessment such as the present
study. For sulfur deposition, and for
a number of other effects addressed
in subsequent sections of this appen-
dix, a regional air quality model was
required. After careful review of the
capabilities, geographic  coverage,
computing intensity, and resource re-
quirements associated with available
regional air quality models, EPA de-
cided to use various forms of the Re-
gional  Acid  Deposition Model
(RADM) to estimate  these effects.4
Figure C-4 shows the geographic do-
main of the RADM.
Figure C-4. Location of the High Resolution RADM 20-km Grid Nested
Inside the 80-km RADM Domain.
    3 Dennis, R. RADM Report (1995), p. 1.

    4 For a detailed description of the various forms of the RADM and its evaluation history, see the Dennis, R. RADM Report (1995).
                                               C-9

-------
The Benefits and Costs of the Clean Air Act, 1970 to 1990
    emissions to 1988 for the Eulerian Model
    Evaluation Field Study funded by NAPAP.
    These RADM emissions inventories had
    county-level and detailed SCC and species-
    level information incorporated into them to
    provide the 80-  and 20-km detail. The 812
    Study emissions are principally computed at
    the state level.  While the 1985  812 Study
    emissions are close to the NAPAP inventory,
    they do not exactly match, nor do they have
    the spatial, nor economic sector, nor species
    detail within a state needed to run RADM. To
    connect the 812 Study emissions to the RADM
    emissions,  the  following approach was
    followed:  An industry/commercial-level
    disaggregation (including mobile sources)
    was developedfor the 812 emissions to allow
    different sectors in a state to change their
    emissions across time without being in lock
    step and the detailed NAPAP emissions for
    every 80- and 20-km RADM grid-cell were
    grouped by state to the same level of industry/
    commercial aggregation for an  exact
    correspondence. Then it was assumed that the
    812 Study  1985 control emissions were
    effectively the same as the 1985 NAPAP
    emissions. Relative changes in emissions
    between the 812 1985 control and any other
    scenario (e.g.,  1985 no-control, or 1990
    control, or 1980 no-control, etc.) were then
    applied to the  1985 NAPAP state-level
    industry/commercial  groups  in  the
    appropriate 80-  and 20-km grid cells. Thus,
    state-level emissions for each group would
    retain the same state-level geographic pattern
    in the different scenarios years, but the mix
    across groups could change with time. In this
    \vay, the more detailed emissions required by
    RADM were modeled for each scenario year
    using the 812 Study emissions data sets.5

    Although the focus of the present analysis is to
estimate the differences between the control and no-
control scenarios, it  is useful to illustrate  the abso-
lute levels of acid deposition associated with the two
scenarios. It is particularly important to demonstrate
the initial deposition conditions to preclude possible
misinterpretations of the maps showing percent
change in deposition. A relatively high percentage
change in a particular region, for example, may oc-
cur when initial deposition is low, even when the
change in deposition is also modest. The RADM-
Figure C-5. RADM-Predicted 1990 Total Sulfur Deposition
(Wet + Dry; in kg/ha) Under the Control Scenario.
Figure C-6.  RADM-Predicted 1990 Total Nitrogen Deposi-
tion (Wet + Dry; in kg/ha) Under the Control Scenario.
      Dennis, R. RADM Report (1995).
                                               C-10

-------
                                                                           Appendix C: Air Quality Modeling
Figure C-7. RADM-Predicted 1990 Total Sulfur Deposition
(Wet + Dry; in kg/ha) Under the No-control Scenario.
Figure C-8.  RADM-Predicted 1990 Total Nitrogen Deposi-
tion (Wet + Dry; in kg/ha) Under the No-control Scenario.
modeled 1990 control scenario wet and dry sulfur
deposition pattern is shown in Figure C-5. A com-
parable map for nitrogen deposition is presented in
Figure C-6. Maps of the RADM-predicted 1990 no-
control scenario sulfur and nitrogen deposition are
presented in Figures C-7 and C-8, respectively.

No-control scenario acid deposition
profiles

    Configuration of the RADM model for the
present analysis —including allocation of emission
inventories to model grid cells, design of meteoro-
logical cases, treatment of biogenic versus anthro-
pogenic emissions, and  temporal, spatial, and spe-
cies allocation of emissions— are described in de-
tail in the RADM Report (1995). The remainder of
this section provides a summary description of the
acid deposition modeling  effort.
    For sulfur deposition, the RADM Engineering
Model (RADM/EM), which focuses on sulfur com-
pounds, was used to derive annual average total (wet
plus dry) deposition of sulfur in kilograms sulfur
per hectare (kg-S/ha) under both the control  and
no-control scenarios. The relative  changes  in an-
nual average total sulfur deposition for each of the
80-km RADM/EM grid cells for 1975,1980,1985,
and 1990 were then compiled.

    Nitrogen deposition was calculated in a differ-
ent manner. Since nitrogen effects are not included
in the computationally  fast  RADM/EM, nitrogen
deposition had to be derived from the full-scale,
15-layer RADM runs. Because of the cost and com-
putational intensity of the 15-layer RADM, nitro-
gen deposition estimates were only developed for
1980 and 1990. As for sulfur deposition, the rela-
tive changes in annual average total (wet plus dry)
nitrogen deposition, expressed as kg-N/ha, were cal-
culated for each 80-km grid cell and for each of the
two scenarios. It is important to note that ammonia
depositin contributes significantly to total nitrogen
deposition. However, the activities of sources as-
sociated with formation and deposition of ammo-
nia, such as livestock farming and wildlife, were
essentially unaffected by Clean Air Act-related con-
trol programs during the  1970 to  1990 period of
this analysis. Therefore,  ammonia deposition is held
constant between the two scenarios.
                                                   C-ll

-------
    The Benefits and Costs of the Clean Air Act, 1970 to 1990
Figure C-9. RADM-Predicted Percent Increase in Total
Sulfur Deposition (Wet + Dry; in kg/ha) Under the No-
control Scenario.
Figure C-10.  RADM-Predicted Percent Increase in Total
Nitrogen Deposition (Wet + Dry; in kg/ha) Under the No-
control Scenario.
Summary differences in acid
deposition

    Figure C-9 is a contour map showing the esti-
mated percent increase in sulfur deposition under
the no-control scenario relative to the control sce-
nario for 1990. Figure C-10 provides comparable
information for nitrogen deposition. These maps
indicate that by 1990 acid deposition would have
been significantly higher across the RADM domain
under the no-control scenario.

    Examination of the percent change sulfur depo-
sition map indicates relatively large percentage
changes in the upper Great Lakes  and the Florida-
Southeast Atlantic Coast areas. This result may ap-
pear somewhat surprising to readers familiar with
the historical patterns of acid deposition. However,
a review of the emission data and the control sce-
nario sulfur deposition map reveal the reasons for
this result.

    First, Figure C-5 shows that  control scenario
deposition rates are relatively low. As described
above, even a small absolute increase hi deposition
leads to a large percentage increase hi areas with
low initial rates of deposition. Second, the scenario
differences in SOx emission rates for these areas
were substantial. For example, 1990 no-control sce-
nario total SOx emissions for Michigan were ap-
proximately  1.8 million tons but  control scenario
emissions for the same year were less than 600,000
tons; a reduction of over two-thirds. Similarly, 1990
no-control scenario emissions for Florida were over
2.3 million tons,  compared to  approximately
800,000 tons under the control scenario; also a re-
duction of about two-thirds. Almost 1 million tons
of the Michigan reduction and approximately 1.3
million tons of the Florida reduction were associ-
ated with utilities. Emission reductions of these
magnitudes would be expected to  yield significant
reductions in rates of acid deposition.

Key caveats and uncertainties for acid
deposition

    Regional-scale oxidant and deposition  model-
ing involves substantial  uncertainty. This uncer-
tainty arises from uncertainties in  modeling atmo-
spheric chemistry, incomplete meteorological data,
normal seasonal and temporal fluctuations in atmo-
spheric conditions, temporal and spatial variability
                                                    C-12

-------
                                                                        Appendix C: Air Quality MoiMing
in emissions, and many other factors. Uncertainties
specific to the RADM model, and this particular ex-
ercise, are discussed in detail in the RADM Report
(1995). It is important, however, to highlight some of
the potential sources of modeling uncertainty unique
to this analysis.

    The first source of uncertainty specific to this
analysis is associated with the spatial and geographic
disaggregation of emissions data. As discussed in the
RADM Report, the RADM model requires emission
inventory inputs which are highly disaggregated over
both time and space. The ideal emissions inventory
fed into the RADM model includes day-specific emis-
sions to account for temperature effects on VOCs and
the significance of localized meteorological conditions
around major point sources. Given the broad-scale,
comprehensive nature of the present study, such de-
tailed emissions inventories were not available. How-
ever, the industry/commercial-level disaggregation ap-
proach developed for the present analysis would not
be expected to introduce any systematic bias, and the
contribution of this disaggregation of emissions would
not be expected to contribute significantly to the over-
all uncertainty of the larger analysis.

    The acid deposition estimates included in the
present analysis are limited in that only the eastern 31
of the 48 coterminous states are covered. Although
acid deposition is a problem primarily for the eastern
U.S., acid deposition does occur in states west of the
RADM domain. The magnitude of the benefits  of re-
ducing acid deposition in these western states is likely
to be small, however, relative to the overall benefits
of the historical Clean Air Act.

Particulate Matter

    Developing air quality profiles for particulate
matter is significantly complicated by the fact that
"particulate matter" is actually an aggregation of dif-
ferent pollutants with varying chemical and aerody-
namic properties. Particulate species include chemi-
cally inert substances, such as  wind-blown sand, as
well as toxic substances such as acid aerosols; and
include coarse particles implicated in household soil-
ing as well as fine particles which contribute to hu-
man respiratory effects. In addition, emissions of both
primary particulate matter and precursors of second-
arily-formed particulates are generated by a wide va-
riety of mobile and stationary sources, further com-
plicating specification of particulate air quality mod-
els. Finally, particulate air quality models must take
account of potentially significant background concen-
trations of atmospheric particles.

    Modeling multiple species and emission sources,
however, is not the only major challenge related to
particulate matter which is faced in the present study.
Over the 1970 to 1990 period being analyzed, under-
standing of the relative significance of fine versus
coarse particles evolved significantly. Up until the
mid-1980s, particulate air quality data were collected
as Total Suspended Particulates (TSP). However, dur-
ing the 1980s, health scientists concluded that small,
respirable particles, particularly those with an aero-
dynamic diameter of less than or equal to 10 microns
(PM10), were the component of particulate matter pri-
marily responsible for adverse human health effects.
As of 1987, federal health-based ambient air quality
standards for particulate matter were revised to be ex-
pressed in terms of PM10 rather than TSP. Starting in
the mid-1980s, therefore, the U.S. began shifting away
from TSP monitors toward PM10  monitors. As a re-
sult, neither TSP nor PM10 are fully  represented by
historical air quality data over the 1970 to 1990 pe-
riod of this analysis. Furthermore, a large number of
U.S. counties have no historical PM monitoring data
at all, making it difficult to estimate changes in ambi-
ent concentrations of this significant pollutant for ar-
eas containing roughly 30 percent of the U.S. popula-
tion.

    Given the relative significance of particulate mat-
ter to the bottom-line estimate of net benefits of the
historical Clean Air Act, it was important to develop
methodologies to meet each of these challenges. The
methodologies developed and data used are described
primarily in the two supporting documents SAI PM
Report (1992) and SAI PM Report (1995).6 To sum-
marize the overall approach, historical TSP data were
broken down into principal component species, in-
cluding primary particulates, sulfates, nitrates, organic
particulates,  and background particulates.  Historical
data were used for the control scenario. To derive the
no-control profiles, the four non-background compo-
nents were scaled  up based on corresponding
no-control to control scenario ratios of emissions and/
or modeled atmospheric concentrations. Specifically,
the primary particulate component was scaled up by
the ratio of no-control to control emissions of PM.
    6 In addition, SAI memoranda and reports which supplement the results and methodologies used in this analysis are included in
 the references.	
                                                 C-13

-------
The Benefits and Costs of the Clean Air Act, 1970 to 1990
Organic constituents were scaled up by the ratio of
no-control to control VOC emissions. In the eastern
31 states where RADM sulfate and nitrate data were
available, values for SO4 and NO3 from an appropri-
ate RADM grid cell were assigned to the  relevant
county and used to scale these components of PM.
For the western states not covered by RADM, sul-
fates were scaled up by the change  in SO2 emissions
and nitrates were scaled up the change in NOx emis-
sions. No-control scenario profiles were then con-
structed by adding these scaled components  to back-
ground concentrations.

    To resolve the problem of variable records of TSP
and PM10 data, both TSP and PM10 profiles were gen-
erated for the entire 20 year period. Missing early year
data for PM,0 were derived by applying region-spe-
cific, land use category-specific PM10 to TSP ratios to
the historical TSP data. Missing recent year TSP data
were derived for those  areas where PM10 monitors
replaced TSP monitors by applying the reciprocal of
the relevant PM]0 to TSP ratio. The methodology is
described in detail in the SAI PM Report (1995).

    In  addition, to increase the geographic coverage
of estimates of air quality, an interpolation methodol-
ogy7 was developed to predict air quality for the con-
trol scenario in counties without measured data. PM
concentrations were estimated by first estimating the
components of PM  (i.e., sulfate, nitrate, and organic
particulate, and primary particulate). The methodol-
ogy for developing the concentrations of components
within  a county differed depending  upon whether the
county was within or outside the RADM domain.
    For those counties within the
RADM domain, the RADM modeled
concentrations for 1980 and 1990 were
used to predict sulfate air quality. Re-
lationships based on linear regressions
that related 1980 and 1990 RADM sul-
fate concentrations to estimated sulfate
particulate concentrations were calcu-
lated for counties with AIRS data. Sul-
fate particulate concentrations were
then calculated for all counties in the
domain by applying the regression re-
sults to the RADM grid cell concen-
tration located over the county center.
Statewide average nitrate, VOC, and
primary particulate concentrations
were calculated from measured ambi-
               ent TSP and PM]Q to describe these constituents in
               counties without data. Control scenario PM profiles
               were developed by adding the RADM-estimated sul-
               fate particulate levels to the statewide average nitrate,
               VOC, and primary particulate levels, and background.

                  For counties outside the RADM domain, an al-
               ternate procedure was used. Using the primary and
               secondary particulate estimates for counties with data,
               statewide average sulfate, nitrate, VOC, and primary
               particulate concentrations were determined. Control
               scenario PM10 was predicted by adding the statewide
               averages of all primary and secondary particulate, and
               background. Using this method, all counties that did
               not have  monitors and are in the same state are as-
               signed the same PM concentration profiles. These in-
               terpolated results are clearly less certain than results
               based on actual historical  monitoring data and  are
               therefore presented separately.

               Control scenario particulate matter
               profiles

                  The number of TSP monitors peaked in 1977 and
               declined throughout the 1980s. Table C-6 summarizes
               the daily (i.e., 24-hour average) TSP monitoring data
               used as the basis for development of the control sce-
               nario air quality profiles. Most of the TSP and PM10
               monitors  collected samples every six days (i.e., 61
               samples per year).

                  Daily PM10 data were also collected for each year
               between 1983  and 1990. Table C-7 summarizes the
               daily PM10 monitoring data used for the control sce-
               nario air quality profiles.
Year,'/

1970
, 1975 ,,
1980
1985

im
; Ntunlier'pf '
Monitors
'/** t* *
751; -
V 3,467--
" 349?*,""
v '*$&.
„ , -
923;;; -
' ' * " / **
* " ' ^ * ^
Number of ' '
Counties ' '"

245 - ,
1,146
1,478'
- 'i:M^- \

410 '
>v* Number of
« ''""Sample!

, 56,804, w ,»
- -221,873-
'' "'234,$SU'T
!""X18W'*'

, ,,„ $4§L~v.
<> i!§$t / r
„ JMfeanjNuiriljer
of Samples per
Monitor

7C.
<.•%.#•,
6cv: •
'*':' 65- ------
r *>.-J
,,,„, ,
.„„/, , "^ '*:
                   vff.  ' ' ""' f V''''*V */ £, '?s* * VV''* J''; ^ v' ^'/ ^ 'J'^*'''* &%/ '''"'

-Data Souircet-J/I PM'Repott (5995),- •'•
    7 The interpolation methodology is described in detail in SAI, 1996. Memo from J. Langstaff to J. DeMocker. PM Interpolation
Methodology for the section 812 retrospective analysis. March 1996.
                                                CM4

-------
                                                                          Appendix C: Air Quality Modeling
Table C-7* J
              allow differentiation between urban and
              rural locations for coarser particles.

%-,'.- ''\ x
¥ear '*
198S" '
1990
- -""-~»"
^ s / ,*^- " "*
^ Dumber of ,,,-
v; 'Monitors"
-' ' • -v " '
303"
s>;i;249 •*
- - . --<-
'V-J"'~ " "X^*
"* ' \ XV s ^ s/ s
/Niri»fc>rof
•-(Oolintfes '-
,,u.- j-^ , „/
556° "v:
- .- - , -- ,,,
' " * * \$v/f *' '
, Bomber of
"Samples
" 22,031---'""'
- 98,9C&T°
* /, f
* IMteaB Number-*.'
• of Samples per
Monitor
73
s ., < j V v*'
• " < ' --79- -
-Date Source: -5AIPM Repott (1995),, ,„
      Further speciation of TSP and PM10 air quality
  data serves two purposes in the present analysis. First,
  speciation of TSP into PM10 and other fractions al-
  lows derivation of PM10:TSP  ratios. Such ratios can
  then be used to estimate historical PM10 for those years
  and monitors which had TSP data but no PM10 data.
  The reciprocal ratio is also applied in this analysis to
  expand 1985 and 1990 TSP data to cover those areas
  which monitored PM]0 but not TSP. The second pur-
  pose served by speciation of particulate data is, as
  described earlier, to provide  a basis for scaling up
  concentrations of each species to derive no-control
  scenario TSP and PM10 profiles.

      To break the TSP and PM10 data down into com-
  ponent species, speciation factors were applied to the
  PM fractions with aerodynamic diameters below 2.5
  microns (PM25) and from 2.5 to 10 microns (PM10).
  The PM2 5 speciation factors were drawn from a Na-
  tional Acid  Precipitation Assessment Program
  (NAPAP) report on visibility which reviewed  and
  consolidated speciation data from a number of stud-
  ies.8 These factors are presented in Table C-8. In the
  table, fine particle concentrations are based on par-
  ticle mass measured after  equilibrating to a relative
  humidity of 40 to 50 percent; and organics include
  fine organic carbon.

      To develop speciation factors for coarser particles
  (i.e., in the PM2S to PM10 range), SAI performed a
  review of the available literature, including Conner et
  al.  (1991), Wolff and Korsog (1989), Lewis  and
  Macias (1980), Wolff et al. (1983), Wolff et al. (1991),
  and Chow et al. (1994).9 These speciation factors are
  summarized in Table C-9. Data were too limited to
                 The TSP and PM10 control scenario
              profiles developed based on this meth-
              odology are available on diskette, un-
              der the filenames listed in Table C-10.

              No-control scenario
              particulate matter profiles

     ^ -'^J      To derive the no-control TSP and
mmimiiitiiiiiA   PMIO air quality profiles,  individual
              component species were adjusted  to
 reflect the relative change in emissions or, in the case
 of sulfates and nitrates in the eastern U.S., the rela-
 tive change in modeled ambient concentration. The
 following excerpt from the SAI PM Report (1995)
 describes the specific algorithm used:10

     "For the retrospective analysis, the no-CAA
     scenario TSP and PMW  air  quality was
     estimated  by means of the following
     algorithm:

     •   Apportion CAA scenario TSP and PM10
        to size categories and species;

     •   Adjust for background concentrations;

     •   Use a linear scaling to adjust the non-
        background portions   of  primary
        particulates,sulfate, nitrate, and organic
        components based on emissions ratios of
        PM, SOy NOx and VOC, and Regional
        Acid Deposition Model (RADM) annual
        aggregation results for SO4 and NO3;

     •   Add up the scaled components to estimate
        the no-CAA scenario TSP and PM
        concentrations."
10
     The specific procedures and values used for the
 linear rollback, speciation, fine to coarse particle ra-
 tio, scaling, and background adjustment steps are de-
 scribed in detail in the SAI PM report (1995).1' Table'
 C-ll lists the names of the electronic data files con-
 taining the TSP and PM10 profiles for the no-control
 scenario.
      8 J. Trijonis, "Visibility: Existing and Historical Conditions-Causes and Effects," NAPAP Report 24,1990.

      9 This literature review, and complete citations of the underlying studies, are presented in the SAI PM Report (1995), pp. 4-2 to
  4-6 and pp. R-l to R-2, respectively.

      10 SAI PM Report (1995), p. 5-1.

      11 SAI PM Report (1995), pp. 5-2 to 5-15.
                                                  __

-------
 The Benefits and Costs of the Clean Air Act, 1970 to 1990
        Table C-8.  Fine Particle (PM^>Cherrrical Composition by t££ 1
Component
RURAk BAST '" '"' «^^5.
Fine particle concentration
Ammonium sulfate ' " ; '*
Ammonium nitrate
Organics
URBANBAST - ^.^^^
Fine particle concentration -"'
Ammonium sulfate
Ammonium nitrate
Organics
^ ^^uhwi' -"-7
='- .Number dftV
Data Sets, „
Mean ,
.-> Range of;,,,,
l^^?^~x s% * , ><*&5?&>&&KW^, , V'**
v ,.'.,1*'"1'
' r^' *
*&$$',, ' " " ""V-tf
' ' -i'i*' .-
- 36 /-*>-/ ,
"55::-"'
1 "-'-,--,;.
- - - ,24,"""
^- '^S?*^''",', r'*~
' — =v25v,'
25 ,x, ,„
: ";-i7:"":
25"'--, -,
^'"-«-- -
, '^"-',
:;"'-/-35,
' . ,,4/ /"-
V" ' 27, -'
r^^'^Sr**'
• 35< --*„,„
-*- '--|fe,
.,:,:,,is;/r"
42, ;' ''
-,:•/•;, ',6-46- '-,:
''••j ^ 4 1 ** 66is1^^
'-,-„:,„;'?' -^
^,^,34-,-,
— ;;^^,,
29-43
53 ,-,57'
""' 1
.. .,*&.&"'
^^^r
' ""*«&*! J
""" ' fst7'
' 14-41 v'

',;;'",' 13-74,"'"" '"
-Was .'
""" 2-37-, ,»,-,,
-"' 25-79'
        Data Sources: SAIPM Report (1995); and I. Ifi-josis, nVisMlity
           to,"NAPAP Report 24,1990.                "--^"
Summary differences in paniculate
matter air quality

    Figure C-ll provides one indication of the esti-
mated change in participate matter air quality between
the control and no-control scenarios. Specifically, the
graph provides data on the estimated ratios of 1990
control to no-control scenario annual mean TSP con-
centrations in monitored counties. The X-axis values
represent the mid-point of the ratio interval bin, and
the Y-axis provides the number of counties falling into
each bin. Figure C-ll indicates that annual average
TSP concentrations would have been substantially
higher in monitored counties under the no-control sce-
nario.

Key caveats and uncertainties for
paniculate matter

    There are several important caveats and uncer-
tainties associated with the TSP and PMJO air quality
profiles developed for this study. Although further
                                               C-16

-------
                                                                           Appendix C: Air Quality Modeling
       (3^'C4~^eP^
-ComponeatV
                                                                                           es
                                                                                           '
                                                              :---
                   5<"     %?«>
     Coarse parflcle^oncetttrfitioa'
                                                           IS
                                                           IS
    ,   .,,,
• Data S0!if,ce: SAI |SSlle£>ott-<1995).   ' -,',
%    '         *
                   o^O. 3pM>Q>attt>i Sceriario^t; Quality PBitife Hie
                                    , \- -Aahual"Meaji
                                   '   2ncffl!kl'est Dally- '
                                              '  *' PMlOOtt^UAT
                                               - -                   *•-,  ^ -' -     ^ \
                  r "(3Q" ie£ei.st0 peiKen'dies fom 5 to 95, inaio^d.ng'19 perceatiie'daUi"files .avafiffljfe,

                                     '
                                               C-17

-------
      The Benefits and Costs of the Clean Air Act, 1970 to 1990
Table C-ll. PM No-Control Scenario Air 'Quality-Profile 71''",',-'•
Filenames.                        *^*T **'
Component
ISP
ISP
TSP
PMie

PM«
PM««
Indicator
Annual Mean
2nd Highest Daily
(X)tfi Pewentite
Annual Mean

2nd Highest Daily
(X)th Percentile'
Filename '"''#<
T&O'JMEA J>AT< :-4?-
' ' '" TSPNCHLDAH-,-.^ ,
* ' '' ' -•*«•{• £-W-v
TSPNC(X).DAT,,>~,,
•pMlONCME-DA^s.

PMiONtM38&V
PMIONC   ./.-
!                                           ,«-.v,,
Iffw "(X)" refers to peicentiles ftoitt 5 to 95, ittdjcaftag 19)
available for TSP and 19 similar files available fop PM«j for exam^
;50thpetcentileTSP air quality data profile foe theuo-coattd;sce»adtfis,iiamed
ITSPNCSO.DAT.                        '.,.'*   -s
      reductions in these uncertainties were not possible for
      this study given time and resource limitations, the rela-
      tive importance of particulate matter reduction con-
      tributions towards total benefits of the Clean Air Act
      highlights the importance of these uncertainties.

         A number of uncertainties were introduced in the
      process of speciating and rolling up individual com-
      ponents of particulate matter. First, temporal and spa-
      tial variability in the size and chemical properties of
      particulate emissions are substantial. These charac-
      teristics change from day to day at any given loca-
      tion. Second, using changes in proxy pollutant emis-
 Figure C-ll.  Distribution of Estimated Ratios for 1990
 Control to No-control Annual Mean TSP Concentra-
 tions, by Monitored County.
   50
   40

 I 30

 jjj 20
 B
 2
   10
      0.00     0.20     0.40     0.60     0.80     1.00
        Ratio of CAA:No-CAA Annual Mean TSP (interval midpoint)
      sions, such as using SO2 as a surrogate for SO4
      in the western states, to roll up individual PM
      components may introduce significant uncer-
      tainty. Third, even assuming a satisfactorily
      high degree of correlation between target and
      surrogate pollutants, relying on predicted
      changes in emissions at the state level further
      compounds the uncertainty. Finally, and per-
      haps most important, using PM10 to TSP ratios
      derived from late 1980s monitoring data may
      lead to significant underestimation of reduc-
      tions in fine particulates achieved hi earlier
      years. This is because historical Clean Air Act
      programs focused extensively on controlling
      combustion sources of fine particulates. As a
      result,  the share of TSP represented by PM10
      observed in the late 1980s would be lower due
      to implementation of controls on combustion
      sources. This would lead, in turn, to underesti-
      mation of baseline PM10 concentrations, as a
share of TSP, in the 1970s and early 1980s. If baseline
PM10 concentrations in these early years are underes-
timated, the reductions in PM10 estimated by linear
scaling  would also be underestimated.12


Ozone

    Nonlinear formation processes, long-range atmo-
spheric  transport, multiple precursors, complex atmo-
spheric  chemistry, and acute sensitivity to meteoro-
logical conditions combine to pose substantial diffi-
culties in estimating air  quality profiles for ozone.
Even in the context of an aggregated, national study
such as  this, the location-specific factors controlling
ozone formation preclude the use of roll-up modeling
based on proxy pollutants or application of state-wide
or nation-wide average conditions. Such simplifica-
tions would yield virtually  meaningless results for
ozone.

    Ideally, large-scale photochemical grid models —
such as  the Urban Akshed Model (UAM)— would
be used to develop control and  no-control scenario
estimates for  ozone concentrations in rural and urban
areas. Such models provide better representations of
the effects of several important factors influencing air
quality  projections such  as long-range atmospheric
transport of ozone. However, the substantial comput-
ing time and data input requirements for such models
precluded their use for this study.13 Instead, three sepa-
         12 See SAI PM Report (1995), p. 5-9.

         13 For a description of the extensive data inputs required to operate UAM, see SAI Ozone Report (1995), p. 1-1.
                                                      C-18

-------
                                                                                 Appendix, C: Air Quality Modeling

        Table C-12«-¥rbii''reas Modeled" with GMk   ,
          Albuquerque, NM  "»>™ • ' "
          Anderson, ,13^,, ..',,,, ,,,>v s s- :-'-' >
          AppMon, Wl  --svwo -—
          'Atjahtic City, &J
          Augusta;'GA'-SG^-' •'' *'j?"f*
          Austin, IX ,   •    _>,„<  ,
          Bdfirnore, MD      '- --- ,,  ^
          Baton Rouge,' LA -•c"r ',,  '"''"'
          Beffingftafli.WA ''' *
                             '
                              _
          BJrHjinghara,,AL -    , , „ „
          Boston, MA,,,.,, ,,,     -,;-.,
                    "'       "
          Canton, OH    ' '   ,  -  -"'
          Cedar Rap'i&s;*! A-   ,,,-•--
          Chaaipaign.IL \\; *r   ' '/,
                       ''''
CharlQtte, NC,  ,, ,  ^,  ,-,:
yChattenpogi'TN^GAj,': -  ' ^
          jColorada, Springs,, 00-
fialitovTX-"  vX;'  --'-,vs
Davenport, JA-B^    *" ''**'
Decatur^IL""!'-"    '""''"'"
'Denver, CO""   s>""1<'
Detroit, Ml'   ---"->  ~ '   ,.*
          Brt^'PA
             ri.C Ml -;«'''' -'-.,<,,;""
          >For£C *  "
                                              o,'WJ ,
                                           , TN-VA- -;
                              ' i. Toitnsto wn, PA  .-• *'*''''
                                                 -
                              ,,- Lafayette, IN     ",
                             >,^- tafay'ette, LA """""
                                               '
                                          Lancaster,' PA-   A
                                       1 '' ' Lansing, MI     '
                                       '- ,LasCruce,s,KM
                                          La's-Vegas^NV
                                               ton,  K.Y   '
                                      , AL .
                               ' Ifew Orleans, LA
                               "New^ork^lSfY
                                                        ,,,
                                        ' '''Oklahoma City, 'OK
                                 Qriatiiio, FL -
     '  ,. Owerisboro, KY \ ,,,
   '„,, „  paikersburg, WV-,^
         Pascagojik, MS'{-
   " "-",' Pensac'6la,'FL* '   -  \ -, -
                                                       '•'\"" ' *;",,',,Phikdelphia,>A'"'"
                                                                             "':,- =,v^-'^ --' "
                                                                Portsaioath,M,H,; ,
                                                        ';" '"'  Raleigh;'NC    - "/" " "'
                                                                Reading,?^""  .  •
                                                              v'~' 6, NV" -'^"',,     ;;,"
      ,,„   RoanoteVA , -  '  •
  -  \/f"lloGh'ester»NY,  _
         "Salt Lake Ci$Tte
                     '
          San "Diego, CA
      , , ,  San. Fr'a'n'ci,scq, CA ' " T^}^ *
      "
                                                                SatttaBarSara,CA'
    '•-•^'-'Seatfle/WA   ,,  -'"-"
          Sheboygatf, Wl
          Shreveportj'Ij-A'^,-,, _
         - Springfield, IL ',,,,,,,
         ' Springfield, MO  ->;
                                                                     ,  ,, , St,Louis,MO-;'- -        , ,-.  „
                                                                    ''" "'"'" 'Steabenvi!ie,'QH-WVs  ""  ,„„,,.„,
                                                                   ,., ^ '•< ' \   • , ,3' xrt/'. '.   -^-^^^"
                                                                          Syracuse, NY       '     ,
          Tallahassee, FL

    , _ '_,,__ ,T«rre Haute, 1$,

  '  °:  , , T.oeson, AZ
          Ventura'C";' " s"Vi'ctof)a>-TX"
                                                               , Wheeling/WV'-QH  ,-\-
                                                              '"
rate modeling efforts were conducted to provide ur-
ban and rural ozone profiles for those areas of the lower
48  states in which historical ozone changes attribut-
able to the Clean Air Act may be most significant.

    First, for urban areas the Ozone Isopleth Plotting
with Optional Mechanisms-IV (OZDPM4) model was
    14 See SAI Ozone Report (1995), p. 1-1.
                                                  run for 147 urban areas. Table C-12 lists the urban
                                                  areas modeled with OZIPM4. Although it requires
                                                  substantially less input data than UAM, the OZIPM4
                                                  model provides reasonable evaluations of the relative
                                                  reactivity of ozone precursors and ozone formation
                                                  mechanisms associated with urban air masses.14 Three
                                                  to five meteorological episodes were modeled for each
                                                      C-19

-------
The Benefits and Costs of the Clean Air Act, 1970 to 1990
of the 147 urban areas; and for each of these, four
model runs were performed to simulate the 1980 and
1990 control and no-control scenarios. The outputs of
these model runs were peak ozone concentrations for
each of the target year-scenario combinations. The
differentials between the control and no-control sce-
nario outputs were averaged over meteorological epi-
sodes and then applied to scale up historical air qual-
ity at individual monitors to obtain no-control case
profiles. As for the other pollutants, the  control sce-
nario profiles were derived by fitting statistical distri-
butions to actual historical data for individual moni-
tors.

    Second, the 15-layer RADM runs for  1980  and
1990 were used to estimate the relative change in ru-
ral ozone distributions for the eastern 31 states. In ad-
dition, a limited number of 20-km grid cell high-reso-
lution RADM runs were conducted to benchmark the
15-layer, 80-km RADM median ozone response and
to estimate high ozone response. The relative changes
in modeled median and 90th percentile rural ozone
were then assumed to be proportional to the changes
in, respectively, the median and 90th percentile ozone
concentrations. The domain of the high-resolution
RADM is shown in Figure C-4 and the general RADM
domain is shown in Figure C-12.

    Finally,  the SARMAP  Air Quality Model
(SAQM) was run for EPA by the California Air Re-
sources Board (CARD) to gauge the  differences in
peak ozone concentrations in key California agricul-
tural areas for 1980 and 1990. No-control profiles were
developed for ozone monitors in these areas by as-
suming the relative change in peak'ozone concentra-
tion also applies to the median of the ozone distribu-
tion. The domain of the SAQM is shown in Figure C-
12.
 Figure C-12. RADM and SAQM Modeling Domains, with Rural Ozone Monitor Locations.
                                               C-20

-------
                                                                         Appendix C: Air Quality Modeling
Control scenario ozone profiles

    For ozone, air quality profiles were  developed
from historical AIRS data and calculated for individual
monitors based on 1, 2, 6, 12, and 24 hour averaging
times. Profiles based on the daily maximum concen-
trations for these averaging times were also calculated.
Given the significance of seasonal and diurnal ozone
formation, twelve separate profiles of hourly ozone
distributions were also developed for six 2-month
periods and for daytime and nighttime hours. The
2-month periods are January-February, March-April,
and so forth. The diurnal/nocturnal profiles are divided
at 7 A.M. and 7  P.M. Local  Standard Time. All of
these profiles are based on constructing 1, 2, 6, 12,
and 24-hour moving average profiles from the hourly
ozone  data  from each monitor.15 A two-parameter
gamma distribution is then fitted to characterize each
of these air quality profiles.16  The functional form of
the gamma distribution, the  basis for deriving the
monitor-specific values for mean and variance, and
an analysis of the goodness of fit to  the data are pre-
sented in the SAI Ozone Report (1995).

    Table C-13 summarizes the ozone monitoring data
used as the basis for the control scenario profiles. The
distribution of these monitors among urban, subur-
           -13;,'
   /Data. „  ;']';
          -"'•
       ,-Year
        199$
                   .'791
               •'-"'-   $34 ;''
                               Number of
                                Counties
415-
ban, and rural locations is presented in Table C-2 of
the SAI Ozone Report (1995).

    Given the substantial number of alternative air
quality profiles for ozone, approximately 20 high-den-
sity disks are required to hold the profiles, even in
compressed data format.  Resource limitations there-
fore preclude general distribution of the actual pro-
files. As discussed in the caveats and uncertainties
subsection below, however, the substantial uncertain-
ties associated with model results for any given area
preclude application of these profiles in contexts other
than broad-scale, aggregated assessments such as the
present study. The historical ozone monitoring data
used as the basis for this study are, nevertheless, avail-
able through EPA's Aerometric Information Retrieval
System (AIRS).

No-control scenario ozone profiles

    The specific modeling methodologies for the
OZIPM4 runs —including emissions processing, de-
velopment of initial and boundary conditions, meteo-
rological conditions, simulation start and end times,
organic reactivity, and carbon fractions— are de-
scribed in detail  in the SAI Ozone Report (1995).
Assumptions and modeling procedures not otherwise
described in the SAI report were conducted in accor-
dance with standard EPA guidance.17

    Similarly,  the RADM modeling methodology
used to estimate changes in day-time rural ozone dis-
tributions in the eastern 31 states are described in de-
tail in the RADM Report (1995). The referenced re-
port also provides complete citations of the literature
associated with development, standard application
procedures, and evaluation of RADM by the National
Acid Precipitation Assessment Program (NAPAP).

    To derive the no-control scenario results for key
California agricultural areas, the  California Air Re-
sources Board and US EPA's Region 9 office agreed
to conduct three runs of the SAQM. For the 1990 con-
trol scenario, the 1990 SARMAP base case scenario
adopted for  California State Implementation Plan
modeling was  adopted.18  Derivation  of 1990
    IS For the nighttime profiles, only 1, 2, 6, and 12-hour averaged concentrations are derived.
    16 Normal and lognormal distributions were also developed and tested for goodness of fit; however, the gamma distribution provided
a better representation of the concentration distribution. See SAI Ozone Report (1995), page 4-2.

    17 US EPA, Office of Air Quality Planning and Standards, "Procedures for Applying City-Specific EKMA," EPA-450/4-89-012, 1989.
    18 Documentation of the SARMAP Air Quality Model and the SARMAP 1990 base case can be found in the SAQM references listed
at the end of this appendix.
                                                 C-21

-------
The Benefits and Costs of the Clean Air Act, 1970 to 1990
no-control and 1980 control and no-control scenarios
was based on adjusting the aggregate mobile, point,
and area source VOC and NOx emissions associated
with each of these cases. For example, the 1980
no-control results were derived by, first, multiplying
the 1990 SARMAP base case mobile  source VOC
emissions by the ratio of 1980 no-control scenario to
1990 control scenario mobile source VOC emissions
derived for the present study. Similar adjustments were
made for point and area sources, and for NOx.  The
SAQM was then re-run holding fixed all other condi-
tions associated with the 1990 SARMAP base case,
including meteorology, activity patterns, and other
conditions. The specific emission ratios used to modify
the 1990 SARMAP base case are presented in Table
C-14. The ratios themselves were derived by adding
on-highway and off-highway emissions to represent
the mobile source category; adding utility, industrial
process, and industrial combustion emissions to  rep-
resent point sources; and using commercial/residen-
results. This is because OZDPM4 provides only the
maximum hourly ozone concentration. However, to
estimate  all the various physical consequences of
changes in ambient ozone concentrations, the current
study requires estimation of the shift in the entire dis-
tribution of ozone concentrations. Since it is daytime
ozone season concentrations which are most sensi-
tive to changes in VOC and NOx emissions, the pre-
dicted shifts in the most important component of the
ozone concentration distribution are reasonably well-
founded. The method adopted for this  analysis in-
volved applying the no-control to control peak con-
centration ratio to all concentrations in the distribu-
tion down to a level of 0.04 ppm. The 0.04 ppm level
is considered at the high end of hypothetical ambient
ozone concentrations in the absence of all anthropo-
genic ozone precursor emissions. A ratio of 1.0 is used
for ozone concentrations at or near zero. The method-
ology is described  in more detail in the SAI Ozone
Report (1995) on page 4-6.
        Table C-14. Apportionment of Bnissidns; Inventories for-SAQM Runs.



VOC


NO,


Category .
Mobile
Area
Point
Mobile
Area
Point
' ' 1980 Control - "•" • •
.to.l^OConfcol Ratio"
'.Co,, , - 1344 ' - - -'-
,-,«<"•>*• '
: ",„ 0.820 -, ,\, 'w
* - ' L284 ""^ ,','*
< 11042"
''' $»
	 0.731
1 \^j&$^: - '
WSONo-CoatroI Hf"4'-
1990 Control Ratio '„',
•'- 'J-055* .;•„';".
". - "";oM":;
	 1:439" "°
,'>„:*- U4jrf;;'
0.738' ""*! '
''•"' ' , <'/'/#•' s' ; '
'* " 1.339 ?—*"'<"-•
'' 'Xv^v sss, ,
199&No-Co»ttiolto>
"'. ;1990,e ^ffrf
„, f -,,; ,%:/, JiSvi??;/, . .
- i.f (&"';' : --
1.232 ""
,' ,,, ', 1,677", *"*';':
1.058-- ,-:-
• • • t fiQ
*.*V? . ,,,;,, ,,..
tial emissions to represent area sources. The no-control
scenarios were then derived by adjusting the peak and
median of the control scenario ozone distribution
based on the ratio of S ARMAP-predicted peak ozone
concentrations under the control and no-control sce-
narios.

    The relative results of the control and no-control
scenario runs of the OZEPM4, RADM, and SAQM
models were then used to derive the no-control case
air quality profiles. For the urban monitors relying on
OZIPM4 results, only ozone-season daytime concen-
trations could be calculated directly from OZIPM4
    Estimating changes in rural ozone concentrations
is required primarily for estimating effects on agri-
cultural crops, trees, and other vegetation. For this
reason, only the differences in daytime, growing sea-
son ozone concentrations are derived for the present
study. As described in detail in the SAI Ozone Report
(1995) on page 4-7, the no-control rural ozone pro-
files are calculated by, first, taking the ratio  of the
average daytime growing season ozone concentrations
simulated by RADM or SAQM (whichever is relevant
for that monitor). The ratio of no-control to control
scenario average ozone concentration is then applied
to all the hourly concentrations from that monitor.
                                               C-22

-------
                                                                        Appendix C: Air Quality Modeling
Profiles based on 1, 2, 6, 12, and 24-hour averages
are then calculated for the control case; and averages
for daytime hours are calculated for the no-control
case.19 Even though the control and no-control sce-
nario off-season profiles are held constant, profiles
for the no-control scenario are developed for  all
months of the year since the ozone season varies
throughout the country.

Summary differences in ozone air
quality

    Figure C-13 presents a summary of the results of
the 1990 OZIPM4 results for all 147 of the modeled
urban areas.  Specifically, the graph depicts a fre-
quency distribution of the ratio of control to no-control
scenario peak ozone. While the vast majority of simu-
lated peak ozone concentration ratios fall below 1.00,
eight urban areas show lower simulated peak ozone
for the no-control scenario than for the control sce-
nario. For these eight urban areas, emissions of pre-
cursors were higher under the no-control scenario;
however, the high proportion of ambient NOx  com-
pared to ambient non-methane organic compounds
(NMOCs) in these areas results in a decrease in  net
ozone production when NOx emissions increase. Fig-
ures C-14 and C-15  present frequency distributions
for control to no-control ratios of average ozone-sea-
son daytime ozone concentrations at rural monitors
as simulated by RADM and SAQM, respectively.

    These figures indicate that, by 1990,  no-control
scenario ozone concentrations in the modeled  areas
would have been generally higher in both urban and
rural areas. Rural area concentrations differences  are
not as great as urban area differences due to (a)  the
differentially greater effect of CAA emission controls
in high population density areas, and (b) potential dif-
ferences in the models used for urban and rural areas.

    Ozone reductions in both rural and urban areas
projected in this analysis are not as proportionally large
as the estimated reductions in emissions of ozone pre-
cursors for at least four reasons. First, current knowl-
edge of atmospheric photochemistry suggests that
ozone reductions resulting from emissions changes
will be proportionally smaller than the emissions re-
ductions. Second, biogenic emissions of VOCs, an
important ozone precursor, are significant and are held
constant for the control and no-control scenarios of
this analysis.  Biogenic emissions are important  be-
cause they contribute roughly half of the total
Figure C-13. Distribution of Estimated Ratios for 1990
Control to No-control OZIPM4-Simulated 1-Hour Peak
Ozone Concentrations, by Urban Area.
  30
  20
I
   10
                                               MI a
     0.00     0.20     0.40    0.60    0.80     1.00
           RatioofCAANo-CAA Peak Ozone (interval midpoint)
                                                 1.20
Figure C-14. Distribution of Estimated Ratios for 1990
Control to No-control RADM-Simulated Daytime Aver-
age Rural Ozone Concentrations, by RADM Grid Cell.
   200
   150
 S 50
       0.00     0.20     0.40     0.60     0.80     1.00     1.20
 Ratio of CAA *Jo-CA A Ozone-Season Daytime Average Ozone (interval midpoint)
Figure C-15. Distribution of Estimated Ratios for 1990
Control to No-control SAQM-Simluated Daytime Aver-
age Ozone Concentrations, by SAQM Monitor.
  10
1  8

1:
CM  4
O
I
     0.00     0.20     0.40    0.60    0.80    1.00    1.20
 RatioofCAA'No-CAA Ozone-Season Daytime Average Ozone (interval midpoint)
    19 The no-control scenario nighttime profiles are assumed to be the same as the control scenario profiles.
                                                 ___

-------
The Benefits and Costs of the Clean Air Act, 1970 to 1990
(manmade plus natural) VOC emissions nationwide.
Due to this abundance of VOC loading and the inher-
ent nonlinearity of the ozone-precursor response sys-
tem,20 historical reductions in anthropogenic VOC
emissions can yield minimal reductions in ozone, es-
pecially in rural environments. Third, this rural effect
also influences urban areas receiving substantial ozone
transported in from surrounding areas. Consequently,
the effect of emission controls placed in urban areas
often is reduced since much of the urban area ozone
is imported. Thus, the problem is truly regionalized
given the importance of transport, biogenic emissions
and associated urban-rural interactions, all contribut-
ing toward a relatively non-responsive atmospheric
system.21 Finally, physical process characterizations
within OZIPM4 are severely limited and incapable of
handling transport, complex flow phenomena, and
multi-day pollution events in a physically realistic
manner. Consequently, it is possible that the OZDPM4
method used herein produces negative bias tenden-
cies in control estimations. Additional discussion of
uncertainties in the ozone air quality modeling is pre-
sented in the following section.

Key caveats and uncertainties for ozone

    There are a number of uncertainties hi the overall
analytical results of the present study contributed by
the ozone air quality modeling in addition to the po-
tential systematic downward bias discussed above.
First, there are substantial uncertainties inherent in any
effort to model ozone formation and dispersion. These
uncertainties are compounded in the present study by
the need to perform city-specific air quality modeling
using OZIPM4, which is less  sophisticated than an
Eulerian model such as the Urban Airshed Model.
However, while the absolute ozone predictions for any
given urban area provided by OZIPM4 may be quite
uncertain, the process of aggregating results for a num-
ber of cities and meteorological episodes should sig-
nificantly reduce this uncertainty.22 Urban areas for
which ozone changes may be overpredicted are offset
to some degree by urban areas for which the change
in ozone concentrations may be underpredicted. In
weighing the significance of this source of uncertainty,
it is important to consider the central purpose of the
present study, which is to develop a reasonable esti-
mate of the overall costs and benefits of all historical
Clean Air Act programs.  All analyses are based on
relative modeled results, and ratios of the model pre-
dictions for the control and no-control scenarios, rather
than the absolute predictions. As a result of this, the
effect of any bias in the model predictions is greatly
reduced due to partial cancellation.

    Additional uncertainty is contributed by other
limitations of the models, the supporting data, and the
scope of the present analysis. Relying on linear inter-
polation between 1970 and modeled 1980 results to
derive results for 1975, and between modeled results
for 1980 and 1990 to derive results for 1985, clearly
adds to the uncertainty associated with the RADM-
based rural ozone estimates. Assuming that changes
hi peak concentration predicted by  OZIPM4 and
SAQM can be applied to scale hourly ozone values
throughout the concentration distribution also contrib-
utes to uncertainty. Resource and model limitations
also required that night-time ozone concentrations be
held constant between the scenarios. This leads to an
underestimation of the night-time component of ozone
transport. Finally, changes in rural ozone in areas not
covered by RADM or SAQM could not be estimated.
As a result, potentially significant changes in ambi-
ent ozone in other major agricultural areas, such as in
the mid-west, could not be developed for this analy-
sis. The Project Team considered using an emissions
scaling (i.e., a roll-back) modeling strategy to develop
crude estimates of the potential change in rural ozone
concentrations in monitored areas outside the RADM
and SAQM domains. However, the Project Team con-
cluded that such estimates would be unreliable due to
the nonlinear effect on ozone of precursor emission
changes. Furthermore,  the team concluded that
baseline levels of  ozone and changes in precursor
emissions in these areas are relatively low. The deci-
sion not to spend scarce project resources on estimat-
ing ozone changes hi these rural areas is  further sup-
ported by the relatively modest change in rural ozone
concentrations  estimated within the RADM  and
SAQM domains.
    20 Nonlinear systems are those where a reduction in precursors can result hi a wide range of responses in secondary pollutants
 such as ozone. Ozone response often is "flat" or nonresponsive to reductions of VOCs in many rural areas with significant natural
 VOC emissions. Also, ozone can increase in response to increases in NOx emissions in certain localized urban areas.
    21 Both the 1990 CAA and EPA's and the National Academy of Science's Section 185B Report to Congress recognized the
 consequences of biogenics, transport and the need to conduct regionalized assessments, as reflected in organizational structures such
 as the Ozone Transport Commission and the North American Research Strategy for Tropospheric Ozone (NARSTO).
    22 Note that aggregating individual urban area.results may reduce the effect of uncertainty in individual city projections (i.e.,
 overestimated cities would offset underestimated cities). However, aggregation of individual urban area results would not reduce
 potential errors caused by systematic biases which arise due to, for example, misestimated emissions inventories.

-------
                                                                             Appendix C: Air Quality Modeling
  Visibility

     Two separate modeling approaches were used to
 estimate changes in visibility degradation in the east-
 ern and southwestern U.S. These are the two regions
 of the coterminous  U.S. for which Clean Air Act pro-
 grams were expected to have yielded the most sig-
 nificant reductions in visibility degradation. Visibil-
 ity changes in the  eastern 31 states were estimated
 based on the RADM/EM results for sulfates; and
 changes in visibility in 30 southwestern U.S. urban
 areas were calculated using a linear emissions scaling
 approach. Despite the potential significance of Clean
 Air Act-related visibility changes in southwestern U.S.
 Class I areas, such as National Parks, resource limita-
 tions precluded implementation of the  analysis
 planned for these areas.

     The RADM/EM system includes a post-proces-
 sor which computes various  measures of visibility
 degradation associated with changes in sulfate aero-
 sols.23 The basic approach is to allocate the light ex-
 tinction budget for the eastern U.S. among various
 aerosols, including  paniculate sulfates, nitrates, and
 organics. The change in light extinction from sulfates
 is provided directly by RADM, thereby reflecting the
 complex formation and transport mechanisms asso-
 ciated with this most significant contributor to light
 extinction in the eastern U.S. Nitrates are not estimated
 directly by RADM. Instead, RADM-estimated con-
 centrations of nitric acid are used as a surrogate  to
 provide the basis for estimating changes in the par-
 ticulate nitrate contribution to light extinction. The
 organic fractions were held constant between the two
 scenarios. Standard  outputs include daylight distribu-
 tion of light extinction, visual range, and DeciViews24
 for each of RADM's 80-km grid cells. For the present
 study, the RADM visibility post-processor was con-
 figured to provide the 90th percentile for light extinc-
 tion and the 10th percentile for visual range to repre-
 sent worst cases; and the 50th percentile for both of
 these to represent average cases. More detailed docu-
 mentation of the RADM/EM system and the assump-
 tions used to configure the visibility calculations are
 presented in the RADM Report (1995).

     To estimate differences in control and no-control
 scenario visibility in southwestern U.S. urban areas,
 a modified linear rollback approach was developed
 and applied to 30 major urban areas with population
 greater than 100.000.25 For each of the 30 urban cen-
 ters, seasonal average 1990 air quality data was com-
 piled for key pollutants, including NO2 and PM]0, con-
 tributing to visibility degradation in southwestern U.S.
 coastal and inland cities. PM,0 was then speciated into
 its key components using city-specific annual aver-
 age PM1Q profile data. After adjusting for regional —
 and for some species, city-specific—background lev-
 els, concentrations of individual light-attenuating spe-
 cies were scaled linearly based on changes in emis-
 sions of that pollutant or a proxy pollutant.26 Using
 the same approach used for the 1993 EPA  Report to
 Congress on effects of the 1990 Clean Air Act Amend-
 ments on visibility in Class I areas, light extinction
 coefficients for each of these species were then mul-
 tiplied by their respective concentrations to derive a
 city-specific light extinction budget.27 This process
 was repeated for pre-1990 control and all no-control
 scenarios by scaling 1990 results by the relative change
 in annual county-level emissions of SOx, NO , and
 PM. Based on the city-specific light extinction bud-
 get calculations, measures for total extinction, visual
 range, and DeciView were calculated for each sce-
 nario and target year.

 Control scenario visibility

    Unlike the other air quality conditions addressed
 in the present study, modeled visibility conditions are
used as the basis for the control scenario rather than
actual historical conditions. However, like  the other
air quality benefits of the historical Clean Air Act, it
is the differences between modeled visibility outcomes
for the control and no-control scenarios which are used
    23 A complete discussion, including appropriate references to other documents, of the RADM and RADM/EM modeling
conducted for the present study is presented in the subsection on acid deposition earlier in this appendix.

    24 The DeciView Haze Index (dV) is a relatively new visibility indicator aimed at measuring visibility changes in terms of human
perception. It is described in detail in the SAI SW Visibility Report (1994), pp. 4-2 to 4-3. See also Pitchford and Malm (1994) for
the complete derivation of the DeciView index.

    25 Complete documentation of the linear scaling modeling, speciation methodologies, spatial allocation of emissions and other
data and assumptions are provided by the SAI SW Visibility Report (1994).

    26 For example, sulfate (SO4) concentrations were scaled based on changes in sulfur oxide (SO ) emissions.

    27 The term "light extinction budget" refers to the apportionment of total light attenuation in an area to the relevant pollutant
species.
                                                  C-25

-------
The Benefits and Costs of the Clean Air Act, 1970 to 1990
to estimate visibility benefits. Nevertheless, 1990 ab-
solute levels of eastern U.S. visibility predicted by
RADM under the control scenario are presented in
Figure C-16 to provide a sense of initial visibility con-
ditions.

    For the southwestern urban areas, 1990 control
scenario annual average light extinction budget, vi-
sual range, and DeciView conditions are listed in Table
C-15. These 1990 results are presented to  give the
reader a sense of the initial visibility conditions in
absolute, albeit approximate, terms.

No-control scenario visibility

    The no-control scenario visibility results for the
eastern U.S. area covered by RADM are presented in
Figure C-17. No-control scenario 1990 outcomes for
the 30 southwestern U.S. urban areas are presented in
Table C-16.

Summary differences in visibility

DeciView Haze Index

    The DeciView Haze Index (dV) has recently been
proposed as an indicator of the clarity of the atmo-
sphere that is more closely related to human percep-
tion than visual range (VR) or total extinction (bext)
(Pitchford and Malm, 1994). It is defined by the equa-
tion:
    where:

      bcxt= total extinction in inverse megameters
           (Mm'1)

    This index has the value of approximately 0 when
the extinction coefficient is equal to the scattering
coefficient for particle-free air (Rayleigh scattering)
and increases in value by approximately one unit for
each  10 percent increase in bext. Since the  apparent
change in visibility is related to the percent change in
b^j (Pitchford et al.,  1990), equal changes in dV cor-
respond to approximately equally perceptible changes
in visibility. Recent research indicates that, for most
observers, a "justnoticeable change" invisibility cor-
responds to an increase or decrease of about one to
two dV units.
Figure C-16.  RADM-Predicted Visibility Degradation,
Expressed in Annual Average DeciView, for Poor Visibility
Conditions (90th Percentile Under the Control Scenario.
Figure C-17. RADM-Predicted Visibility Degradation,
Expressed in Annual Average DeciView, for Poor Visibility
Conditions (90th Percentile Under the No-control Scenario.
                                                C-26

-------
                         Appendix C: Air Quality Modeling

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C-27

-------
      The Benefits and Costs of the Clean Air Act, 1970 to 1990
         Both VR and dV are measures of the value of bext
     at one location in the atmosphere. Both are unaffected
     by the actual variability of the compositions and illu-
     mination of the atmosphere, so neither is closely linked
     to the human perception  of a particular scene. The
     isolation of these parameters from site-specific varia-
     tions and temporal fluctuations of the atmospheric il-
     lumination increases their usefulness for comparing
     the effects of air quality on visibility across a range of
     geographic locations for a range of time periods. Each
     parameter attempts to scale the b  data so that changes
     in air quality can be used to provide an indication of
     changes in the human perception of a scene.

     Modeling Results

         The differences in modeled 1990 control and
     no-control scenario visibility conditions projected by
     the RADM/EM for the eastern U.S.  are presented in
     Figure C-18. The map shows the percent increase in
     modeled annual average visibility degradation under
     poor conditions for 1990 when moving from the con-
     trol to the no-control scenario. The results indicate
     perceptible differences in visibility between the con-
     trol and no-control scenario throughout the RADM
     domain. The relatively large increase in visibility im-
     pairment in the Gulf Coast area is a reflection of the
Figure C-18. RADM-Predicted Increase in Visibility
Degradation, Expressed in Annual Average DeciView,
for Poor Visibility Conditions (90th Percentile) Under the
No-control Scenario.
significant increases in 1990 sulfate concentrations
associated with the no-control scenario. (See the ear-
lier discussion of effects in this region in the sections
dealing with acid deposition.)

    The differences in modeled 1990 control and
no-control scenario visibility conditions  in the 30
southwestern U.S. urban areas projected by linear roll-
back modeling are  presented in Table C-17. When
reviewing these visibility degradation differentials for
the 30 southwestern U.S. urban areas, it is important
to consider that while estimated differences in visual
range were in many cases very large, changes in the
DeciView Haze Index (dV) may be relatively small.
This is because the perception of visibility degrada-
tion measured by dV may be small when baseline vis-
ibility  is high.28 Even so, the results indicate that, by
1990,  visibility in  southwestern U.S. urban areas
would be noticeably worse under the no-control sce-
nario.

Key caveats and uncertainties for
visibility

    There are  several sources of uncertainty in the
RADM and southwestern U.S. linear scaling model
analyses. For RADM, the use of nitric acid as a surro-
  gate for estimating changes in light-attenuating ni-
  trate particles ignores the interaction effects of ni-
  trates, sulfates, and ammonia. As a result, increases
  in nitrates may be overestimated by the model when
  both sulfates and nitric acid increase. However, the
  significance of this potential overestimation is miti-
  gated to some extent by the relative insignificance
  of nitrate-related  visibility degradation relative to
  sulfates which prevails in the eastern U.S.

      Several  important uncertainties in the south-
  western U.S. urban area visibility analysis are de-
  scribed in detail in the SAI SW Visibility Report
  (1994). First, the need to use seasonal average con-
  ditions leads to underestimation of extreme visibil-
  ity impairment episodes associated with high hu-
  midity, since particle growth due to water absorp-
  tion  is highly nonlinear. Second, although the use
  of city-specific light extinction and PM speciation
  data is significantly better than reliance on regional
  averages, uncertainties  in city-specific  data may
  contribute to overall uncertainty in the estimates.
  However, overall uncertainty associated with these
  factors will be reduced to some extent since over-
  estimation of visibility degradation in some cities
         28 See SAI SW Visibility Report (1994), page 5-3.

-------
                                                                          Appendix C: Air Quality Modeling
will be offset by underestimations in other cities. Fi-
nally, the linear scaling used to estimate the pre-1990
control  scenarios and the no-control scenarios was
based on changes in county-wide or air basin emis-
sions. Uncertainties associated with apportionment of
state-wide emission changes to individual counties or
air basins may contribute significantly to overall un-
certainty in the visibility change estimates. Such ap-
portionment is particularly difficult for SOx emission
changes, since emission reductions achieved by the
Clean Air Act tended to be at relatively remote utility
and smelter plants. However, sulfates are a relatively
minor source of light attenuation in western urban
areas.

    An  important overall limitation  of the visibility
analysis conducted for the present study is that only
southwestern urban areas and  the eastern 31 states
were included. The Clean Air Act may have contrib-
uted toward significant reductions in visibility degra-
dation in other areas. For example, Clean Air Act pro-
grams to reduce ambient particulate matter may have
motivated reductions in silvicultural burning in some
northwestern states. Perhaps the greatest deficiency
in geographic coverage by the present study is the
omission of visibility changes hi Class I areas in the
west.
'•- f V •> '•>*';":' •O'** '\
,,,,table CflX', J-Stftti
                                           fo'f"
                    ;Cities."
",/-ci«r-r*-' -
,,,*,,,',,
Lois /i}gele$,,CA , ,-,,,-,-<
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"Riverside;- GA •'"''"'' " -,-,'='>
;~A>aieim:CA ' ' - ^t-"'"
Ventura, CA , , , ,;,/
San Diegb, CA
- Santa" Barbara, CA , l-tr**'"*
-Bate«iteld;CA:;-'^r* "

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Mode^C, CA
StocKtoArCA-'"'"'",' - -

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•-oamSn« CA" ' "'.LL^^
^ San- Jose, CA ,'/>#v>,- s.-x A-
''M- "•'
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« ;-, , -.' v ->
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.Prove, UT ,,,,/

PortCQiiins,CO--';-

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^ ^ >-v ' . "*A; s>'
Denver, CO
' Colorado Sjoings, CCJ' ' ;,
-/"- * " " " V-/
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--^ - - ^^ /^ -^
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                                                      t£k&JSflOiU^ SAI SW yisibjlit^R&port (1),
                                                                   "• ^"~-  %' "      ~"
                                                  C-29

-------
The Benefits and Costs of the Clean Air Act, 1970 to 1990
Air Quality Modeling References

Chang. 1995. SARMAP Air Quality Model (SAQM).
       Final report to San Joaquin Valley wide Air
       Pollution Study Agency.

DaMassa, Tanrikulu, and Ranzier. 1996. Photochemi-
       cal Modeling of August 3-6,  1990,  Ozone
       Episode in Central California Using the
       SARMAP Air Quality Model. Part II: Sensi-
       tivity and Diagnostic Testing. Preprints, Ninth
       Joint Conference on the Applications of Air
       Pollution Meteorology with Air Waste Man-
       agement Association. January 28 - February
       2,1996, Atlanta, Georgia.

Dennis, R. 1995. Estimation of Regional Air Quality
       and Deposition Changes Under Alternative
       812 Emissions Scenarios Predicted by the
       Regional Acid Deposition Model, RADM.
       Draft Report for U.S. Environmental Protec-
       tion Agency, ORD/NERL. October 1995.

ICF Kaiser/Science Applications International. 1996.
       PM Interpolation Methodology for the  Sec-
       tion 812 Retrospective Analysis. Memoran-
       dum from J. Langstaff to Jim DeMocker.

ICF Kaiser/Systems Applications International. 1994.
       Retrospective Analysis of the Impact of the
       Clean Air Act on Urban Visibility in the South-
       western United States.  Final Report.

ICF Kaiser/Systems Applications International. 1995.
       Retrospective Analysis of Ozone Air Quality
       in the United States. Final Report.

ICF Kaiser/Systems Applications International. 1992.
       Retrospective Analysis of Paniculate Matter
       Air Quality in the United States. Draft Re-
       port.

ICF Kaiser/Systems Applications International. 1995.
       Retrospective Analysis of Paniculate Matter
       Air Quality in the United States. Final Report.

ICF Kaiser/Systems Applications International. 1994.
       Retrospective Analysis of SO, NO and CO
       Air Quality in the United States. Final Report.
ICF Resources Incorporated. 1992. Results of Retro-
       spective Electric Utility Clean Air Act Analy-
       sis -1980, 1985, and 1990. September 30.

Pitchford, Marc L. and William C. Malm. 1994. "De-
       velopment and Applications of a Standard
       Visual Index." Atmospheric Environment, vol.
       28, no. 5. pp.  1049-1054.

Seaman and Stauffer.  1995.Development and Design
       Testing of the SARMAP Meteorological
       Model. Final  report to San Joaquin Valley
       wide Air Pollution Study Agency.

Seaman, Stauffer,  and Lario-Gibbs. 1995. "A Multi-
       Scale Four Dimensional Data Assimilation
       System Applied in the San  Joaquin Valley
       During SARMAP. Part I: Modeling Design
       and Basic Performance Characteristics."Jour-
       nal of Applied Meteorology. Volume 34. In
       press.

Tanrikulu, DaMassa, andRanzieri. 1996. Photochemi-
       cal Modeling of August 3-6,1990 Ozone Epi-
       sode  in  Central  California Using the
       SARMAP Air Quality Model. Part I: Model
       Formulation,  Description and Basic Perfor-
       mance. Preprints. Ninth Joint Conference on
       the Application of Air Pollution Meteorology
     ,  with Air Waste Management Association.
       January 28 - February 2,1996. Atlanta, Geor-
       gia.

Trijonis.  1990. Visibility: Existing  and Historical
       Conditions—Causes and Effects. NAPAP Re-
       port 24. 1990.

U.S. Environmental Protection Agency (EPA). 1989.
       Procedures for Applying City-Specific EKMA.
       EPA-450/4-89-012. Office  of Air Quality
       Planning and  Standards.
                                              C-30

-------
Appendix D:  Human  Health  and  Welfare  Effects
of Criteria Pollutants
Introduction

   In responding to the mandate of section 812, EPA
conducted a comprehensive benefits analysis to iden-
tify and estimate the quantifiable health and welfare
benefits enjoyed by Americans due to improved air
quality resulting from the CAA. Health benefits re-
sulted from avoidance of air pollution-related health
effects, such as mortality, respiratory illness, and heart
disease. Welfare benefits accrued where improved air
quality averted damage to ecological health and mea-
surable resources, such as  agricultural production,
building materials, and visibility.

   This appendix presents an overview of EPA's
approach for modeling human health and welfare ef-
fects. It provides an outline of the principles used to
guide the benefits analysis, details methods used to
quantify criteria air pollutant exposure nationwide
across the study period (1970 to 1990), and discusses
several critical conceptual and implementation issues
for using health and welfare effect information. Mod-
eling results, estimates of avoided incidences of ad-
verse health and welfare effects, are then presented.
Ecological and agricultural benefits are examined in
more detail in Appendices E and F, respectively. Ap-
pendix I details the approach used to translate health
and welfare effects into monetary benefits.

Principles for the Section 812
Benefits Analysis

   Estimating the effects of even modest shifts in
environmental releases involves complex chemical,
environmental, biological,  psychological and eco-
nomic processes. The task of estimating the  broad
changes associated with adoption and implementation
of the Clean Air Act challenges the limits of scien-
tific  knowledge and modeling capability to synthe-
size available information and techniques into a prac-
tical  framework. A pragmatic plan for a comprehen-
sive  assessment must fairly reflect the complexities
and uncertainties, but still produce a policy-relevant
analysis in a timely fashion. In order to achieve this
ambitious goal, the following principles have been
used to guide the section 812 benefits assessment.

    Comprehensiveness: The assessment should in-
clude as many benefit categories as are reasonably
believed to be affected by implementation of the Clean
Air Act. Comprehensiveness requires assessing effects
with which greater levels of scientific confidence are
associated, as well as less well-understood effects. The
degree  of relative certainty among effects must be
carefully described hi order to fairly present a broad
portrayal of the physical and social benefits accruing
to the nation from implementing the Act. In addition,
section 812 of the 1990 CAA Amendments explicitly
directs  a comprehensive benefits coverage that pro-
hibits a default assumption of zero value for identi-
fied benefits unless a zero value is supported by spe-
cific data.

    Quantification Where Feasible: The central goal
of the present study is to evaluate and compare the
benefits and costs of historical CAA-related programs.
Effective comparison of the variety of human health,
welfare, and ecological benefits with the associated
compliance costs requires that these consequences be
measured in terms of a common metric. Expressing
the value of these various effects in economic terms
is the most efficient way to  accomplish this objec-
tive, and is consistent with standard practices associ-
ated with economic benefit-cost analysis. Expressing
these effects in economic terms requires quantifying
and presenting estimated effects in both physical and
monetized economic terms. Pursuant to this paradigm,
the emphasis in the present study  is largely on cat-
egories having direct and perceptible effects on hu-
man health. That is, the emphasis of the analysis is on
categories such as symptoms and diseases rather than
on physical changes (such as cell level changes) that
do not directly result in a decreased health status no-
ticeable to the individual.
                                              D-l

-------
The Benefits and Costs of the Clean Air Act, 1970 to 1990
    Efficient Use of Previous Research Results: Sig-
nificant research effort has been spent to understand
and quantify the complex relationships between air
pollution and human health. The present study has
relied as much as possible on available research re-
sults, making adjustments as necessary to apply the
existing results to the current analysis.

    Incorporate Uncertainty: To properly convey the
results of any benefits assessment, it is  important to
include an evaluation and characterization of how
much confidence the analysts have in the estimates.
Ideally this would include a formal quantitative as-
sessment of the potential for error, and the sources,
directions, and potential significance of any resultant
biases. A method for considering and reporting un-
certainty must be built into the fundamental design of
the assessment. Such a framework was developed and
applied in the present study, and was supplemented
where necessary by expert judgment regarding the
sources and potential significance of errors in each
analytical step.

General Modeling Approach

    Consistent with these principles, the EPA devel-
oped an approach  for quantifying the effects  of re-
duced pollutant exposure, with particular focus on
those effect categories for which monetary benefits
could be estimated. As described previously, the study
design adopted for the section 812 assessment links a
sequence of analytical models. The macroeconomic
modeling (Appendix A) estimated economy-wide ef-
fects of CAA expenditures. These effects provided a
basis for the modeling of criteria pollutant emissions
under the two scenarios considered (the factual con-
trol scenario and the hypothetical no-control scenario),
as documented hi  Appendix B. The emissions esti-
mates were used as input to the air quality models
(Appendix C). Ambient pollutant concentrations es-
timated by the air quality models.were used as inputs
to the health and welfare benefits model, the focus of
this appendix.

    The approach developed to model health and wel-
fare benefits is known as a "reduced form" or "em-
bedded model" approach. The concept of a reduced
form model is to use simplified versions of previously
constructed complex models to characterize the im-
pact of a series of linked physical and socioeconomic
processes. The health and welfare benefits model is
characterized as a reduced form model because it re-
lies on summaries of the data output from the air qual-
ity models, which rely  on emissions summaries and
summaries of macroeconomic conditions, succes-
sively. Although results of the independent models
are used in series, the  models themselves have not
been integrated into the health and welfare benefits
model.

    In general, the reduced form health and welfare
benefits model relies  on two fundamental inputs: (1)
nationwide changes in pollutant exposures across the
study period, and (2) the association between changes
in exposure and expected changes in specific health
and welfare effects. These  inputs  are discussed be-
low.


Quantifying Changes in Pollutant
Exposures

    Estimating changes hi pollutant exposures re-
quires characterization  of nationwide air quality im-
provements across the  study period, as well as the
populations exposed to the different levels of improve-
ment.

Air Quality

    As discussed in  Appendix C, the  section 812
analysis estimated ambient concentrations for both the
control  and no-control scenarios for the  following
pollutants and air quality parameters:

    •    Particulate matter,  less than 10 microns in
        diameter (PM10)
    •    Ozone (O3)
    •    Nitrogen dioxide (NO2)
    •    Sulfur dioxide (SO2)
    •    Carbon monoxide (CO)
    •    Visibility measures (light extinction and
        DeciView)1
    •    Lead (Pb)

    Generally, this analysis adopted actual historical
air pollution monitoring data to represent control sce-
nario  air quality.  No-control scenario profiles were
    1 While the visibility measures listed are not criteria air pollutants, they provide important measures of a significant welfare
effect resulting from air pollution, visibility degradation. Light extinction (which is related to DeciView, a haziness index) results
from light scattered by fine particles in the atmosphere, especially sulfates and ammonium nitrates. As atmospheric concentrations of
such particles increase, light is attenuated and visibility diminishes.
                                                __

-------
                                              Appendix D: Human Health and Welfare Effects of Criteria Pollutants
derived by running the control and no-control scenario
emissions inventories through a suite of air quality
models and then using the differences in these mod-
eled outcomes to adjust the historical profiles. Since
lead was treated differently than the other pollutants,
the analysis of the CAA impacts on atmospheric lead
concentrations is documented in Appendix G.

    With respect to the distribution of air quality data
across the two decades considered, it should be noted
that both the number and location of monitors track-
ing air quality changed over tune. Table D-l depicts
the number of monitors for each pollutant across the
period of this analysis. The number of monitors gen-
erally increased throughout the 1970s and leveled off
or declined at varying points during the 1980s, de-
pending on the pollutant.
    Tabje D-l.  Criteria Air Pollutant Monitors
ir toe u.


Yea? -
1970
- 1975
- 1980
1985
1~990
a., iy-/u - 1.
-_ __
„ " V--**"
; ,; EM,V v
1,1 2ft
1,131
970
; , ,"/ 7»>, x -
'""*" . ,t,- •/->-_ ~
-- ,,/, ,
Pollutant
-'£b-'-'M,v '^
i ",',',fl.J- »«,
5« ', V-J375 - 1,088
527 ,^'*305,v „ 916-
- «z7"-',^«" *',,?53->



01'
1 '82-
'511
' 458-
, 493
    For the section 812 modeling, the non-lead pol-
lutants have been characterized as either county-level
or monitor-level pollutants. The distinction was im-
portant for quantifying the population exposed to dif-
ferent levels of air quality improvements, as discussed
below. PM10 is  considered a county-level pollutant,
since historical concentrations in monitored counties
have been synthesized into a single concentration for
each, county.2 In contrast, O3, NO2, NO, SO2, and CO
were reported at specific monitor locations, given by
latitude/longitude coordinates. Finally, visibility was
treated as a county-level pollutant in the western U.S.
and a monitor-level pollutant in the eastern U.S.3 Air
quality data for PM10 and ozone were reported for each
year of the study period; data for the remaining pol-
lutants were reported only for 1975, 1980, 1985, and
1990.

    In order to reduce the volume of air quality data
necessary to describe pollutant concentrations for two
scenarios nationwide over twenty years, annual con-
centration profiles were reduced to frequency distri-
butions. That is, annual pollutant concentrations for a
variety of averaging times (e.g., 1-hour, 6-hour, daily)
were summarized as  a distribution of values across
the year. This approach reduced data management
requirements significantly, while adequately captur-
ing air quality improvements between the control and
no-control scenarios.

Population Distribution

   . Health and some  welfare benefits resulting from
air quality improvements  are distributed to popula-
tions in proportion to the reduction in exposure each
enjoys. Predicting population  exposures, then, is a
necessary step in estimating health effects. Doing so
for the section 812 analysis required not only an un-
derstanding of where air quality improved as a result
of the CAA, but also how many individuals were af-
fected by varying levels of air quality improvements.
Thus,  a critical component of the benefits  analysis
required that the distribution of the U.S. population
nationwide be described in a manner compatible with
the air quality data. Described below is the method
used to allocate U.S. Census data to  a symmetrical
grid  overlying the country.

Census Data

   Three years of U.S. Census data were used to rep-
resent the geographical distribution of U.S. residents:
1970,1980, and 1990. Population data were supplied
at the census block group level,  with approximately
    2 Two different measures of ambient concentrations of particulate matter were used in the United States during the period 1970
to 1990. Prior to 1987, the indicator for the National Ambient Air Quality Standard for PM was total suspended particulates (TSP). In
1987, the indicator was changed to PM(() (particles less than 10 uM in diameter). Widespread PM10 monitoring did not begin until
1985; prior to that only TSP data is available. Because the recent scientific literature reports primarily the relationship between PM10
and adverse health and welfare effects, PM10 data is preferred, if available. Where only TSP is available, PMIO concentrations were
estimated using PM]0:TSP ratios that vary by area of the country and the urban/rural characterization of the area.

    3 In the western U.S., visibility was modeled using a linear-rollback model and extinction budget approach for 30 major urban
centers (SAI, 1994). The modeling results, reported in DeciView, were applied to the counties in the vicinity of the urban centers and
considered to share a common air basin. In the eastern U.S., Regional Acid Deposition Model (RADM) runs provided visibility
estimates in terms of light extinction coefficients. These were modeled across a 60 km. X 60 km. grid, approximately covering the
eastern half of the country. Since the extinction Coefficients were reported at the grid cell centroids, for which the coordinates were
known, visibility in the east was treated as a monitor-level pollutant.	
                                                   _

-------
The Benefits and Costs of the Clean Air Act, 1970 to 1990
290,000 block groups nationwide. Allocating air qual-
ity improvements to the population during intermedi-
ate years necessitated interpolation of the three years
of population data. Linear interpolation was performed
at the block group level in order to preserve the vari-
ability in growth rates throughout the country.

Gridding U.S. Population

    To ease computational burden, block group popu-
lation estimates were aggregated to a rectangular grid
structure. The grid, comprised of ten kilometer by ten
kilometer gridcells, spanned the entire area of the con-
tentional United States.  This grid size generated
46,885 populated gridcells throughout the U.S.

    The entire population of each block group was
assumed to reside at the geographical centroid of the
block group area, the coordinates of which were avail-
able from the U.S. Bureau of the Census. Block group
populations were aggregated to gridcells according
to the block group centroids encompassed by each cell.
In addition to the population of each gridcell, the state
and county names for each gridcell were retained,
permitting aggregation of data at the state and county
level, as well as nationwide.

Allocating Exposure Estimates to the Population

    Two alternative modeling strategies we're used to
allocate air quality improvements to the U.S. popula-
tion. They differed in terms of both the certainty of
the estimates and the geographic coverage:
   Table D-2. Population Coverage in the 4..B%
,,7l.S%
„ ?$?$
„ 73.0&
„„ 100% -
109(1-
70.4%
72,2%
61,5%
74,4%
67.$%
70,6%
* 100%
    Method One

    Air quality improvements (difference between
control and no-control scenarios) were applied to in-
dividuals living in the vicinity of air quality monitors.
For pollutants with monitor-level data, it was assumed
that the individuals in a gridcell were exposed to air
quality changes estimated at the nearest monitor, as
long as the monitor was within 50 kilometers. Like-
wise, for PM10 (for which data was available at the
county level) the population of each monitored county
was assumed to be exposed to the air quality changes
reported for that county.4 The remainder of the popu-
lation was excluded from the analysis.

    Unfortunately, by limiting the quantitative analy-
sis to populations within 50 km of a monitor (or within
a monitored county, for PM), a significant portion of
the U.S. population was left out of the analysis (see
Table D-2). For most pollutants in most years (ex-
cepting lead), less than three-quarters of the popula-
tion lived within 50 km of a monitor (or within a PM-
monitored county). Clearly, an analysis that excluded
25 percent of the population from the benefits calcu-
lations (thus implicitly assuming that  the CAA had
no impact on that population) would understate the
physical effects of the CAA. Conversely, ascribing
air pollution reduction benefits to persons living great
distances from air quality monitors is a speculative
exercise, and could overstate benefits.

    Method Two

    As an alternative  modeling strategy,  air quality
improvements were applied to almost all individuals
nationwide. Where monitor data were not available
within 50 kilometers,  data from the closest monitor,
regardless of distance, were used. Similarly,  PM10
concentrations were extrapolated using regional air
quality models to all counties (even those for which
monitoring data was unavailable) and applied to the
populations of those counties.

    Although subject to less certain air quality data,
the second alternative extrapolates pollutant exposure
estimates to almost the entire population using the
, closest monitoring data available (see Table D-3).5
This  second alternative was  chosen as the preferred
approach hi the benefits analysis. The sensitivity of
    4 Since the lead (Pb) analysis, which was handled separately from that of the other criteria pollutants, did not require air quality
modeling data, the issue of proximity to monitors is irrelevant. The Pb analysis extended to 100 percent of the population.

    5 While this alternative captures the vast majority of the U.S. population, it does not model exposure for everyone. To improve
computational efficiency, those gridcells with populations less than 1,000 were not modeled; these cells account for less than five
percent of the U.S. population.	
                                                  D-4

-------
                                            Appendix D: Human Health and Welfare Effects of Criteria Pollutants
the benefits estimate to the extrapolation of air qual-
ity data beyond monitored areas is explored in Ap-
pendix I.
  '•Table D-^.,ii
 ,"-f$Extr^ps6l|ted to Aii;tfc|lf Model Ru'ns,(ggrc'
  s
    CO,
                                        747%
    SO*   ' '^   91.4$>
                               -v> v,—  ""-
                        .100%	;	'joQ%.'L::"'
Estimating Human Health Effects
of Exposure

    It is impossible to estimate all of the physical ef-
fects that would have occurred without the Clean Air
Act. While scientific information is  available that
makes it possible to estimate certain effects, many
other, potentially very important, health and welfare
effects cannot be estimated at this time. Other physi-
cal effects can  be quantified, but it is impossible to
assess the economic value of those endpoints based
on the current economics literature. Table D-4 shows
the health and welfare effects for which quantitative
analysis has been prepared, as  well as some of the
health effects that have  not been quantified in the
analysis.

    In order to translate  the reductions in pollutant
exposure estimated to result from the CAA into health
benefits, it is necessary to quantify the relationship
between such exposures  and adverse health effects.
As indicated below, this analysis relies on concentra-
tion-response relationships published in the scientific
literature which provide  estimates of the number  of
fewer individuals that incur an adverse health effect
per unit change hi air quality. Such relationships are
combined with the air quality improvement and popu-
lation distribution data to estimate changes in the in-
cidence of each health endpoint. By evaluating each
concentration-response function for every gridcell
throughout the country, and aggregating the resulting
incidence estimates, it was possible to generate na-
tional estimates of avoided incidence.

    It should be noted that a slightly different approach
was used to compute health effects associated with
exposure to gasoline lead. Instead of relating health
outcomes to ambient pollutant concentrations, the
concentration-response functions for lead-induced
effects link changes in health effects directly  to
changes in the population's mean blood lead level.
This value is directly related to the concentration of
lead hi gasoline in a particular year. Appendix G docu-
ments both the methods used to  characterize mean
blood lead levels and the approach for estimating hu-
man health effects from lead exposure.

    The discussion below outlines the types of health
studies considered for this analysis, and issues criti-
cal to selecting specific studies appropriate for use in
the section 812 context. Next, details regarding use of
the results of the studies are explored. Finally, the
concentration-response functions used to model health
benefits from reductions in non-lead criteria  pollut-
ants are outlined.

Types of Health Studies

    Scientific research about air pollution's adverse
health impacts uses a broad array of methods and pro-
cedures. The research methods used to investigate the
health effects of air pollution have become consider-
ably more sophisticated over time, and will continue
to evolve in the future. This progress is the result of
better available research techniques and data, and the
ability to focus further research more sharply on key
remaining issues based on the contributions of earlier
work.

    The available health effects  studies that could
potentially be used as the basis of the section 812 as-
sessment are categorized into epidemiology studies
and human clinical studies. Epidemiological research
in air pollution investigates the association between
exposure to air pollution and observed health effects
in the study population. Human clinical studies in-
volve examination of human responses to controlled
conditions in a laboratory setting.  Research has been
conducted on health effects from  exposure to pollu-
tion using each approach, and studies using these tech-
niques have been considered in  various formal regu-
latory proceedings. Each type of study (as it is used
                                                 D-5

-------
 The Benefits and Costs of the Clean Air Act, 1970 to 1990
       Table D-4. Human Health Bffects-of Crtteria-l'qlluta^ts,
Pollutant


Participate Matter/
ISP/ Sulfatcs



Carbon Monoxide
Nitrogen Oxides
Sulfur Dioxide



Lead


' AV,»^f- - ,' ,
Quantified Health Effects , •
, ^ * , „ vw^ie' *<*>•>
Mortality* * * > ^ "s S*V
Respiratory symptoms
Minor restricted activity.days
Respiratory restricted activity,,^,.,,
days
Hospital admission^" >;'"" ''' ' '
Asthma attacks - '
Changes in pu toonary fonetiQn
Chronic S inusitis & Hay. Sever
','-•<•
Mortality*
Bronchitis - Chronic and Acate -
Hospital admissions ' "• •"'•>
Lower respiratory illness • , • v
Upper respiratory Bkess^ ^ , s ,
Chest illness^ ,jiv j,,°,,,^
Respiratory symptoms' • • "
Minor restricted- activity days
All restricted activity (fays \ '* 'J,
Moderate or worse asttenastajg.^ s.
(&sthiti.&tiC*s) * * N
Hospital Aamissions^**1^ "*'
congestive hSte'faiiiite5'''''"'
Decreased tiroe-ttfoHsetWIogm*
Respiratory illness N
.-, -•> i
,/ '&&. >^M ^ f
fix exercising asthmatics: ,„ >„,
Changes in pnlmonaiy function
Respiratory symptoms' v>'f"
Combined respQnWdf5$V
respiratory' symptotas and "\~
poteonary fiujctioa change's^

Mortality "' ' "'''"' v'
HyperteasiDn"?; *^ "^ '," '^ '\ *
Non-fttsl coronary heartdisease
Kon-feal stroke^ 5 \*?£^ ^
IQ loss effect OB li^ime earnings
lOlosseffectsonspecial
eduction **^jjsVhV's -
•.w^ "• >V-> \ ••
S -,'"'
^nq»a»tttieaHe«MJi Effects' '"

' fo'stiiattli>"
, Centibacinarfibrosis- .'/T'H - ' ^
vlnflaromatiolx'in the lung
' - !„' ', ' """ "•
•f , , >' -
"^ ^ ± ' i'/"1 \
^ '','#,,, <
''^'v"V^?x ' '''*'*'!'',,
-I /.;*• '
-A--, , '-•"• '-',
"Changes irfpulmoiiajy &nction
x" ^ "w:*,, -
' :-"<•>„'
^ ?><'' "
f ' "/„ * /
v j ?/*/' ,
.. ^ '^' i^j^A'^ '* 0",
*#%*''•:'> „ •*• ,,.,,,, „„,„
/" ^'*'^V^" ^.>vSs^v^V^ %' *
, •'• ,v<-*;^:-%,y ,;,,,/->->;;,, -
Be,ha5*oj;aJ,«fR}cts ,
^the^jiospit^l admissions ' -
, ^ ^ '^--^//^vv^ ,
, Increased airvirw responsiveness ~.,;
v w^*--r, •- J r
s\o^ ^ ^ ' * ^^'''" ''^4^ ^ ^ y't/iy;
^ ' ki-f, '-„*,„ - -
"*" -?»?« „ ' , °"
i?IVh*-\
. . f, ., ,? - -.\ f ;
''Heaifli etfects forindHdiiais in ,
'ajgerfinges Otherthan those
studied ,^,,.^ -„-;,-----
Neurobehavioral function
Other^canliovascular-diseages ' '''"-
< IReproductiye effects '" '' *
^Fefel.effects frprnmatesrnal' •"•*- '
;,' ^xpostue , ,w,.,.,,,,,,,,,
^fijeliiSijuefttaad anti-sO?iaj, v
°^*'*' tieHavioriincbildirej}^,,,
Otner,PessiWeH!ects

Chronic,respiratory,dise,3;|e|,v^
,^x^rapidinonary effects (ag,,'
',""" ' changes in sfrttetwe, ' 'si*?
ftinc^otysfothe^Wgans) ' "
• • A ^'^/;'y--iJ^ ',Vf?*,,,,, ,,,
; ^,«/;,^4<_;,;,;/?>,!;,,, ^, ,„ ,
' \<^ '<<(*> .jv, ^ >f ,
' CKronic respiratory, diseases
- ,other,th,a(5. c|f o,mc ^roophitis
'Inflammation in the^liSiB' /r /
' '^ ,'.' , * ^ * , , S"'**'^ <;/f,<
"'- '/'^B *^-,,.;-\ ;i>,, - - , --
*'<* <••'*''> ,w *,>!,
-<\ *!f •./
"''""'"'' '-, -t,--; /,-, ,-,< , ,,


•. , i' >'t'-,/ , , s~"? t, _,
Otfeer'cajSiovascular'el&ctS' , ',',,,
"Deyelopiaental e&ctsx'-»
'?*?»* '<; V* " v^-S , , ,, ,, , , ,
.;Decreased,pu.lmoaary fiincti'olf '
Jnflamination to the tang , '" '', /v
>-ImcStinord*gfcal-'cbanges _ _ ,
X-:: -:;;:-? -v-;\ .--,,
Respiratory symptoms t» oon*
asthmatics ''' ' &$#;
• Hospital admissions/ - ,., v , „
'f'f
',"',''
f
'* ""/"M,
'' ', , ' , f/ffs- I, X''" " ' ""
-'-"' /' "-'A;« re •„«;••-•
/*;*»'•
• '• '" ,'•„ ,'" /,'„ -, - ,
"•»,.* .*-,?-,-•--«;-, , , ' "s""- ,
" V, <,',/.,, - ,rvv, !*''SsJ1,
       * This analysis estimates excess mortality a'sii&'PM i05as,an indicator,of tlie pollataftt mix to wliicfi-
                 ^         „,„* .!!,.<„ }Sfs-mf<-,~-V;lfZsV:n%frt!/^3 o?    "<  XT- . . ' -V,/, „>-,,      «T               -*-,<.
       individuals were exposed.,               '
for air pollution research) is described below, and the
relative strengths and weaknesses for the purposes of
the section 812 assessment are examined.

Epidemiological Studies

    Epidemiological studies evaluate the relationship
between exposures to ambient air pollution and health
effects in the human population, typically in a "natu-
ral" setting. Statistical techniques (typically variants
of multivariate regression analysis) are  used to esti-
mate  quantitative concentration-response (or expo-
sure-response) relationships between pollution levels
and health effects.
    Epidemiology studies can examine many of the
types of health effects that are difficult to study using
a clinical approach. Epidemiological results are well-
suited for quantitative benefit analyses because they
provide a means to estimate the incidence  of health
effects related to varying levels of ambient air pollu-
tion without extensive further modeling effort. These
estimated relationships implicitly take into account
at least some of the complex real-world human activ-
ity patterns, spatial and temporal distributions  of air
pollution, synergistic effects of multiple pollutants and
other risk factors, and compensating or mitigating
behavior by the subject population. Suspected rela-
tionships between air pollution and the effects of both
                                                   D-6

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                                             Appendix D: Human Health and Welfare Effects of Criteria Pollutants
 long-term and short-term exposure can be investigated
 using an epidemiological approach. In addition, ob-
 servable health endpoints are measured, unlike clini-
 cal studies which often monitor endpoints that do not
 result in observable health effects (e.g. forced expira-
 tory volume). Thus, from the point of view of con-
 ducting a benefits analysis, the results of epidemio-
 logical studies, combined with measures of ambient
 pollution levels and the size of the relevant popula-
 tion, provide all the essential components for associ-
 ating measures of ambient air pollution and health sta-
 tus for a population in the airshed being monitored.

    Two types of epidemiological studies are consid-
 ered  for dose-response modeling: individual level
 cohort studies and population level ecological stud-
 ies. Cohort-based studies track individuals that are
 initially disease-free over a certain period of time, with
 periodic evaluation of the individuals' health status.
 Studies about relatively rare events such as cancer
 incidence or mortality can require tracking the indi-
 viduals over a long period of time, while more com-
 mon events (e.g., respiratory symptoms) occur with
 sufficient frequency to evaluate the relationship over
 a much shorter time period. An important feature of
 cohort studies is that information is known about each
 individual, including other potential variables corre-
 lated to disease state. These variables, called con-
 founders, are important to identify because if they are
 not accounted for in the study they may produce a
 spurious association between air pollution and health
 effect.

    A second  type of study used in this analysis is a
 population-level ecological  study. The relationship
 between population-wide health information (such as
 counts for daily mortality, hospital admissions,  or
 emergency room visits) and ambient levels of air pol-
 lution  are evaluated. One particular type  of ecologi-
 cal study, time-series, has been used frequently in air-
 pollution research. An advantage of the time-series
 design is that it allows "the population to serve as its
 own control"  with regard to certain factors such  as
 race and gender. Other factors that change over time
 (tobacco, alcohol and illicit drug use, access to health
 care, employment, and nutrition) can also affect health.
 However, since such potential confounding factors are
 unlikely to vary over time in the same manner as air
pollution levels, or to vary over periods of months  to
 several years in a given community, these factors are
unlikely to affect the magnitude  of the association
between air pollution and variations in short-term
human health responses.
     Drawbacks to epidemiological methods include
 difficulties associated with adequately characterizing
 exposure, measurement errors in the explanatory vari-
 ables, the influence of unmeasured variables, and cor-
 relations between the pollution variables of concern
 and both the included and omitted variables.  These
 can potentially lead to spurious conclusions. However,
 epidemiological studies involve a large number of
 people and do not suffer extrapolation problems com-
 mon to clinical studies of limited numbers of people
 from selected population subgroups.

 Human Clinical Studies

    Clinical studies of air pollution involve exposing
 human subjects to various levels of air pollution in a
 carefully controlled and monitored laboratory  situa-
 tion. The physical condition of the subjects is mea-
 sured before, during and after the pollution exposure.
 Physical condition measurements can include general
 biomedical information (e.g., pulse rate and  blood
 pressure), physiological effects specifically affected
 by the pollutant (e.g., lung function), the onset of
 symptoms (e.g., wheezing or chest pain), or the abil-
 ity of the individual to  perform specific physical or
 cognitive tasks (e.g., maximum sustainable speed on
 a treadmill). These studies often involve exposing the
 individuals to pollutants while exercising, increasing
 the amount of pollutants that are actually introduced
 into the lungs.

    Clinical studies can isolate cause-effect relation-
 ships between pollutants and certain human health
 effects. Repeated experiments altering the pollutant
 level, exercise regime duration and types of partici-
 pants can potentially identify effect thresholds,  the
 impact of recovery (rest) periods, and the differences
 in response among population groups. While cost con-
 siderations tend to limit the number of participants
 and experimental variants examined in a single study,
 clinical studies can follow rigorous laboratory scien-
 tific protocols, such as the use of placebos (clean air)
 to establish a baseline level of effects and precise
 measurement of certain health effects of concern.

    There are drawbacks to using clinical studies as
 the basis for a comprehensive benefits analysis. Clini-
 cal studies are appropriate for examining acute symp-
 toms  caused by short-term exposure to a pollutant.
While this permits examination  of some important
health  effects  from,   air  pollution,  such  as
bronchoconstriction in asthmatic individuals caused
by sulfur dioxide, it excludes studying niore severe
                                                 D-7

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The Benefits and Costs of the Clean Air Act, 1970 to 1990
effects or effects caused by long term exposure. An-
other drawback is that health effects measured in some
well-designed clinical studies are selected on the ba-
sis of the ability to measure precisely the effect, for
example forced expiratory volume, rather than a larger
symptom. The impact of some clinically measurable
but reversible health effects such as lung function on
future medical condition or lifestyle changes are not
well understood.

    Ethical limits on experiments involving humans
also impose important limits to the potential scope of
clinical research. Chronic effects cannot be investi-
gated because people cannot be kept in controlled
conditions for an extended period of time, and be-
cause these effects are generally irreversible. Partici-
pation is generally restricted to healthy subjects, or at
least to exclude people with substantial health condi-
tions that compromise their safe inclusion in the study.
This can cause clinical studies to avoid providing di-
rect evidence about populations of most concern, such
as people who already have serious respiratory dis-
eases. Ethical considerations also limit the exposures
to relatively modest exposure levels, and to examin-
ing only mild health effects that do no permanent dam-
age. Obviously for ethical reasons human clinical evi-
dence cannot be obtained on the possible relationship
between pollution and mortality, heart attack or stroke,
or cancer.

    One potential obstacle to using dose-response in-
formation from clinical research methods  hi a ben-
efits assessment is the need for an exposure model.
The dose-response functions developed from clinical
research are  specific to the population participating
in the study and the exposure conditions used in the
laboratory setting. It is therefore difficult to extrapo-
late  results from clinical settings to daily exposures
faced by the whole  population. For example, many
clinical studies evaluate effects on exercising individu-
als. Only a small portion of the population engages in
strenuous activity (manual labor or exercise) at any
time. Reflecting these fundamental differences be-
tween the laboratory setting and the "real world" im-
poses a formidable burden on researchers to provide
information about human activity patterns, exercise
levels, and pollution levels. This requirement adds an
additional step in the analytical process, introducing
another source of uncertainty and possible error.

    To apply the clinical results to model the general
population, two decisions must be made. First, how
far can the conditions hi the clinical  setting be ex-
panded? For example, if the subjects in the clinical
study were healthy male college students, should the
results be applied to the entire population, including
children?  Second, how many  people in the general
population are exposed to conditions similar to those
used in the clinical setting? Frequently, clinical stud-
ies are conducted at relatively high exercise levels (in-
creasing the dose, or the quantity of pollutants actu-
ally delivered to the lungs). In the general population
few people experience these conditions very  often,
and people do not reach these exercise levels with
equal frequencies during the day and night.

    In addition, the analyst must determine the num-
ber of people that are exposed to the levels of ambient
conditions seen hi the laboratory. Air quality varies
throughout a city and is typically reported by data from
monitors located at various places throughout the city.
However, people are not exposed to the conditions at
any one monitor all day. As people move around in
the city, they are exposed to ambient air quality con-
ditions represented by different monitors at different
times during the day. To further compound the prob-
lem, air quality also varies between indoors and out-
doors, within a car or garage, and by such factors as
proximity to a roadway or major pollution source (or
sink). The exposure model must account for the am-
bient conditions in the "microenvironments'' that the
population actually experiences.

    The issues of study subjects, exercise and mi-
croenvironments can influence the choice of clinical
studies selected for the section 812 assessment. Clini-
cal studies that use exposure regimes and exercise lev-
els more similar to what larger groups of the popula-
tion see are easier to apply in a benefits  model than
are more narrow studies. Similarly, studies that use a
diverse group of subjects are easier to apply  to the
general population than are more narrow studies.

    Given the  major advantages of epidemiological
studies—exposures do not need to be modeled and
health effects are observed in a large, more heteroge-
neous population—epidemiological studies are used
as the basis for determining the majority of health ef-
fects and dose-response  curves. The diverse activity
patterns, microenvironments, and pollution levels are
already considered in the aggregate through the con-
centration-response functions derived from epidemio-
logical studies. Clinical  studies are used if there are
health effects observed hi clinical studies not observed
in epidemiological studies.
                                                  D-8

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                                             Appendix D: Human. Health and Welfare Effects of Criteria Pollutants
  Issues in Selecting Studies To Estimate
  Health Effects

      A number of issues arise when selecting and link-
  ing the  individual components of a comprehensive
  benefits analysis. The appropriate procedure for han-
  dling each issue must be decided within the context
  of the current analytical needs, considering the broader
  analytical framework. While more sophisticated or
  robust studies may be available in some circumstances,
  the potential impact on the overall analysis may make
  using a simpler, more tractable approach the pragmatic
  choice. In considering the overall impact of selecting
  a study for use in the section 812 assessment, impor-
  tant factors  to consider include the likely magnitude
  the decision will have on the overall analysis, the bal-
  ance between the overall level of analytical rigor and
  comprehensiveness in separate pieces of the analysis,
  and the effect on  the scientific defensibility of the
  overall project.

     This section discusses ten critical issues in select-
  ing health information for use in the section 812 as-
  sessment: use of peer-reviewed research, confound-
 ing factors, uncertainty, the magnitude of exposure,
 duration  of exposure, threshold concentrations, the
 target population, statistical significance of relation-
 ships, relative  risks, and the need for baseline  inci-
 dence data. The previous discussion about the types
 of research methods available for the health informa-
 tion alluded to some of these issues, as they are po-
 tentially important  factors in selecting between stud-
 ies using different methods. Other issues address how
 scientific research  is used in the overall analytical
 framework.

 Peer-Review of Research

    Whenever possible, peer reviewed research rather
 than unpublished information has been relied upon.
 Research  that has been reviewed by the EPA's  own
 peer review processes, such as review by the Clean
 Air Science Advisory Committee (CASAC) of the
 Science Advisory Board (SAB), has been used when-
 ever possible. Research reviewed by other public sci-
 entific peer review processes  such as the National
 Academy of Science, the National Acidic Precipita-
 tion Assessment Program, and the Health Effects In-
 stitute is also included in this category.

    Research published in peer reviewed journals but
not reviewed by CASAC has also been considered for
  use in the section 812 assessment, and has been used
  if it is determined to be the most appropriate avail-
  able study. Research accepted for publication by peer
  reviewed journals ("in press") has been considered to
  have been published. Indications that EPA intends to
  submit research to the CASAC (such as inclusion in a
  draft Criteria Document or Staff Paper) provide fur-
  ther evidence that the journal-published research
  should be used.

      Air pollution health research is a very active field
  of scientific inquiry, and new results  are being pro-
  duced constantly. Many research findings are first
  released in University Working Papers, dissertations,
  government reports, non-reviewed journals and con-
  ference proceedings. Some research is published in
  abstract form in journals, which does not require peer
  review. In order to use the most recent research find-
  ings and be as comprehensive as possible, unpublished
  research was examined for possible use in the section
  812 assessment. Any unpublished research used is
  carefully identified in the report, and treated as hav-
  ing a higher degree of uncertainty than published re-
  sults. The peer review of the section 812 assessment
 by the Advisory Council on Clean Air Compliance
 Analysis provides one review process for all compo-
 nents of the assessment, as well as for the way in which
 the components have been used.

 Confounding Factors

    Confounding can occur when the  real cause of
 disease is associated with a number of .factors. If only
 one contributing factor is evaluated in  an epidemio-
 logical study, a false association may occur. For ex-
 ample, in epidemiology studies of air pollution, it is
 important to take into account weather conditions,
 because weather is associated with both air pollution
 and health outcomes. If  only air pollution is evalu-
 ated, a false association between air pollution and
 health could result; one may incorrectly assume that
 a reduction in air pollution is exclusively responsible
 for a reduction in a health outcome. Potential con-
 founders include weather-related variables, age and
 gender mix of the subject population, and pollution
 emissions other than those being studied. Studies that
 control for a broad range of likely confounders can
 offer  a more  robust conclusion about an individual
pollutant, even if the statistical confidence interval is
larger due to the inclusion  of more variables in the
analysis.
                                                D-9

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 The Benefits and Costs of the Clean Air Act, 1970 to 1990
    In many cases, several pollutants in a "pollutant
 mix" are correlated with each other—that is, they tend
 to occur simultaneously. Therefore,  although there
 may be an association between a health effect and each
 of several pollutants in the mix, it may not be clear
 which pollutant is causally related to the health effect
 (or whether more than one pollutant is causally re-
 lated). This analysis includes epidemiological mod-
 eling of the health effects that have been associated
 with exposure to a number of pollutants. In most cases
 where the health effect is being modeled for the sev-
 eral correlated pollutants of interest, regression coef-
 ficients based on PM as a surrogate for the mixture
 were chosen hi preference to multiple pollutant mod-
 els and single pollutant models. The most important
 example of this occurs in estimating mortality effects.
 There is substantial evidence that exposure to criteria
 pollutants, either individually or collectively,  is sig-
 nificantly associated with excess mortality. Generally,
 this association is related to particulate matter. There-
 fore, even though particulate matter cannot be shown
 to be the sole pollutant causing pollution-related ex-
 cess mortality, it can be used as an indicator of the
 pollutant mixture which appears to result in excess
 mortality. This analysis estimates excess mortality (for
 all criteria pollutants other than lead) using PM as an
 indicator of the pollutant mix to which individuals
 were exposed. This issue is discussed further below,
 where details on estimating mortality effects are ex-
 plored.

    The one exception to the use of single pollutant
 regression models is estimating hospital admissions.
 Both PM and ozone are generally found to have a sta-
 tistically significant and separate association with
 hospital admissions. Using separate regressions (from
 single pollutant models) for each pollutant may over-
 state the number of effects caused by each pollutant
 alone. On the other hand, using PM as a single indica-
 tor of the pollutant mix could underestimate the total
 hospital admissions caused by different mechanisms.
 Separate PM and ozone coefficients for hospital ad-
 missions are selected from regression models that
 consider the effects of both pollutants simultaneously.

 Uncertainty

    The stated goal of the section 812 assessment is
 to provide a comprehensive estimate of benefits of
 the Clean Air Act. To achieve this goal, information
with very different levels of confidence must be used.
Benefit categories are not to be omitted simply be-
cause they are highly uncertain or controversial, but
those benefit categories that are reasonably well un-
derstood must be distinguished from those which are
more tentative.

    The ideal approach to characterizing uncertainty
is to conduct a formal quantitative uncertainty analy-
sis. A common approach develops an estimated prob-
ability distribution for each component of the analy-
sis. A Monte Carlo procedure draws randomly from
each of these distributions to generate an estimate of
the result. Evaluating the result for many such ran-
dom combinations, creates a distribution of results that
reflects the joint uncertainties in the analysis.

    The most serious obstacle to preparing a formal
quantitative uncertainty analysis is identifying all the
necessary distributions for each  component of the
analysis. The Monte Carlo procedure requires that all
components of the model be rerun many times. How-
ever, the section 812 project links the outputs from
independent modeling activities. It would be imprac-
tical to simultaneously rerun the macroeconomic,
emissions, air quality, and exposure models because
of the diverse origins of the models. Therefore, in-
stead of a complete formal uncertainty analysis, the
section 812 assessment includes a less rigorous analy-
sis of the inherent uncertainties hi the modeling ef-
fort. The uncertainty analysis combines quantitative
and qualitative elements designed to sufficiently de-
scribe the implications of the uncertainties. A primary
goal of the sensitivity/uncertainty analysis  is to iden-
tify the health effects that make a sizable contribution
to the overall assessment of the monetary benefits.
There may be situations where there are significant
differences hi the available information used to pre-
dict  the incidence of a particular health effect (i.e.,
the uncertainty bounds are large). It is important to
alert the reader to situations where using  the lower
incidence estimates may portray the health effect as
only modestly contributing to the overall  total ben-
efits, but using reasonable alternative higher estimated
incidence figures (or higher monetized values) would
substantially impact not only the monetized value of
the individual health effect, but actually make a no-
ticeable difference in the total benefits assessment.

    Consideration of the overall uncertainties inher-
ent in the section 812 assessment has several impor-
tant implications for health study selection.  It was im-
portant to carefully examine the balance between the
level of uncertainties in the analysis and the need for
                                                 D-10

-------
                                             Appendix D: Human Health and Welfare Effects of Criteria Pollutants
 comprehensive coverage of all benefit categories.
 There were frequently situations in which a direct
 tradeoff existed between more comprehensive cover-
 age and the restriction of the analysis to more certain
 information. Also, the relationship between the un-
 certainty in other parts of the analysis and the uncer-
 tainty for each particular health effect was carefully
 considered.

 Magnitude of Exposure

    One component of the section 812 analysis esti-
 mates the air pollution levels that would have occurred
 hi the absence of the Clean Air Act. These estimates
 are larger than currently observed levels of U.S. air
 pollution, and perhaps even levels currently observed
 elsewhere in the world. This aspect of the analysis
 poses difficulties for the application of concentration-
 response functions that have been based on exposures
 at much lower pollution levels. The shape of the con-
 centration-response function much  above observed
 exposures levels is unknown. It is possible that bio-
 logical mechanisms affecting response that are unim-
 portant at low levels of exposure may dominate the
 form of response at higher levels, introducing
 nonlinearity to the mathematical relationship. In gen-
 eral, studies that include exposure levels spanning the
 range of interest in the section 812 assessment are
 preferable to studies at levels outside of the range, or
 that only include a narrow part of the range. A pos-
 sible drawback to this approach is that studies which
 fit this criterion have  often been conducted outside
 the U.S. The  application .of foreign studies to U.S.
 populations introduces additional uncertainties regard-
 ing the representativeness of the exposed population
 and the relative composition of the air pollution mix
 for which the  single pollutant is an indicator. These
 difficult issues were considered in selecting studies
 for the benefits analysis.

 Duration of Exposure

    Selection of health studies for the section 812 as-
 sessment must consider the need to match the health
 information to the air quality modeling conducted for
 the assessment. For example, information on the health
 effects from short term (five minute) exposure to sul-
fur dioxide cannot be  readily combined with infor-
mation on average daily sulfur dioxide levels. In se-
lecting studies for the benefits analysis, preference was
shown for studies whose duration of exposure matched
one of the averaging times of the air quality data.
 Thresholds

    Exposure-response relationships are conceptual-
 ized as either exhibiting a threshold of exposure be-
 low which adverse effects are not expected to occur,
 or as having no response threshold, where any expo-
 sure level theoretically poses a non-zero risk of re-
 sponse to at least one segment of the population. The
 methods employed by health researchers to charac-
 terize exposure-response relationships may or may not
 explicitly analyze the data for the existence of a thresh-
 old. Studies may analyze relationships between health
 and air pollution without considering a threshold. If a
 threshold for population risk exists but is not identi-
 fied by researchers, then Clean Air Act benefits could
 be overestimated if CAA levels are below the thresh-
 old, because the  risk reduction from the no-control
 scenario could be overstated. On the other hand, if a
 threshold is artificially imposed where one does not
 exist, the relative benefits of the Clean Air Act may
 be underestimated. In general, those studies that ex-
 plicitly consider the question of a threshold (whether
 a threshold is identified or not) provide stronger evi-
 dence; consideration of this question is  a positive fea-
 ture when selecting studies for this analysis.

 Target Population

    Many of the  studies relevant to quantifying the
 benefits of air pollution reductions have focused on
 specific sensitive subpopulations suspected to be most
 susceptible  to the effects of the pollutant.  Some of
 these effects may be relevant only for the studied sub-
 population; effects on other individuals are either un-
 known, or not expected to occur. For such studies, the
 challenge of the analysis is to identify the size  and
 characteristics of the subpopulation and match its oc-
 currence to  exposure. Other studies have examined
 specific cohorts who may be less susceptible than the
 general population to health effects from air pollu-
 tion (e.g., healthy workers), or who differ in age, gen-
 der, race, ethnicity or other relevant characteristics
 from the target population of the benefits  analysis.
 Extrapolating results from studies on nonrepresenta-
 tive subpopulations to the general population intro-
duces uncertainties to the analysis, but the magnitude
 of the uncertainty and its direction are often unknown.
Because of these uncertainties, benefit analyses often
limit the application of the dose-response functions
only to those subpopulations with the characteristics
of the study population. While this approach has merit
in minimizing uncertainty in the analysis, it can also
                                                 D-ll

-------
The Benefits and Costs of the Clean Air Act, 1970 to 1990
severely underestimate benefits if, in fact, similar ef-
fects are likely to occur in other populations. For these
reasons, studies that examine broad, representative
populations are preferable to studies with narrower
scope because they allow application of the functions
to larger numbers of persons without introducing ad-
ditional uncertainty.

    Many studies included in the section 812 analy-
sis focus on a particular age cohort of the population
for the identification of health effects. The choice of
age group is often a matter of convenience (e.g., ex-
tensive Medicare data may be available for the eld-
erly population) and not because the effects are, in
reality, restricted to  the specific age group  (even
though their incidence may vary considerably over
the life span). However, since no information is avail-
able about effects beyond the studied population, this
analysis applies the given concentration-response re-
lationships only to those age groups corresponding to
the cohorts studied. Likewise, some studies were per-
formed on individuals with specific occupations, ac-
tivity patterns, or medical conditions because these
traits relate to the likelihood of effect. In these cases,
application  of dose-response functions has been re-
stricted to populations of individuals with these same
characteristics.

Statistical Significance of Exposure-Response
Relationships

    The analysis includes as many studies related to a
given health effect as possible, except for studies in-
applicable to the current analysis. For some endpoints,
the group of adequate studies yielded mixed results,
with some showing statistically significant responses
to pollutant concentrations and others with insignifi-
cant associations. Unless study methods have been
judged inadequate, dose-response functions with both
statistically significant and insignificant coefficients
have been included to characterize the possible range
of risk estimates. Excluding studies exclusively on the
basis of significance  could create an upward bias in
the estimates by not reflecting research that indicates
there is a small, or even zero, relationship  between
pollution and specific health effects. It should be noted,
however, that some studies that found insignificant
effects for a pollutant could not be used because they
did not report the insignificant coefficient values.

    In some cases, a single study reported results for
multiple analyses, yielding both significant and non-
significant results, depending on the nature of the in-
put parameters (e.g., for different lag periods or con-
current exposures). In these cases, only significant
results were included.

Relative Risks

    Many studies reported only a relative risk value
(defined as the ratio of the incidence of disease in two
groups exposed to two different exposure levels). The
analysis required conversion of these values to their
corresponding regression coefficients when the coef-
ficients were not reported. When converting the rela-
tive risk to a coefficient value, the analysis used the
functional form of the regression equation reported
by the authors of the study.

    The coefficients from a number of studies mea-
sured the change in the number of health effects for
the study population  rather than a  change per indi-
vidual. These coefficients were divided by the size of
the study population to obtain an estimate of change
per individual. The coefficient could then be  multi-
plied by the size of the population modeled in the cur-
rent analysis  to determine total  incidence of  health
effects.

Baseline Incidence Data

    Certain dose-response functions (those expressed
as a change  relative to baseline conditions) require
baseline incidence data associated with  ambient lev-
els of pollutants. Incidence data necessary for the cal-
culation of risk and benefits were obtained from na-
tional  sources whenever possible, because these data
are most applicable to a national assessment of ben-
efits. The National Center for Health Statistics pro-
vided  much of the information on national incidence
rates.  However, for some studies, the only available
incidence information come from the studies them-
selves; in these cases, incidence in the study popula-
tion is assumed to represent typical  incidence nation-
ally.

    Studies were excluded if health endpoints could
not be defined in the U.S. population. For example, in
Pope  and Dockery (1992)  the authors  developed a
unique definition of  symptomatic  children in Utah
which has no correlation in the incidence data bases
which were available; consequently, the results could
not be applied to the general population.
                                                  D-12

-------
                                            Appendix D: Human Health and Welfare Effects of Criteria Pollutants
 Estimating Mortality Effects

 Using PM as an Indicator

    There is substantial evidence that exposure to cri-
 teria pollutants, either individually or collectively, is
 significantly associated with excess mortality. This
 association is most closely and consistently related to
 the ambient air concentrations of PM.

    Several studies have found small but statistically
 significant relationships between ozone and mortal-
 ity, while other studies have not found a significant
 relationship. There is inconclusive evidence whether
 ozone has an effect independent of the effect of other
 pollutants (e.g., PM  or CO), has a synergistic effect
 in combination with  other effects, or is a confounder
 in the relationship between  mortality and other pol-
 lutants. For example, in a recent study HEI  (1996)
 found a significant and relatively stable ozone coeffi-
 cient for most of the model  specifications presented
 in the study. However, the measured ozone effect was
 largest and most significant in the winter and autumn,
 when ozone levels are low.

    This analysis estimates excess mortality (for all
 criteria pollutants other than lead) using PM as an in-
 dicator of the  pollutant mix to which individuals
 were  exposed.  Even if paniculate matter exposure
 cannot be shown to be an independent causal factor
 of excess mortality, it is, at a minimum, a good indi-
 cator measure of the exposure to the pollutant mix-
 ture that has been shown to be related to excess mor-
 tality. Because  PM is used as an indicator, the con-
 centration-response functions from single pollutant
 models (i.e., statistical models including PM as the
 only pollutant) are preferred. To the extent that ozone
 is correlated with PM, the effect of ozone, either as an
 independent association or acting hi combination with
 other pollutants, will be captured by this approach.

 Estimating the Relationship Between PM and
 Premature Mortality

    Long-term exposure versus short-term exposure
 studies and the degree of prematurity of mortality.
 Both long-term exposure (cohort) studies and short-
term exposure (longitudinal or time-series)  studies
have estimated the relationship between exposure to
PM and premature mortality. While there are advan-
tages and disadvantages to each type of study (as dis-
cussed above), the long-term studies may capture more
 of the PM-related premature mortality, as well as pre-
 mature mortality that is more premature, than the
 short-term studies.

    The degree of prematurity of pollution-related
 death may be an important uncertainty in the effort to
 estimate the benefits of reducing pollution concentra-
 tions, as discussed in Appendix I. The willingness to
 pay to save a few days of life may be significantly
 less than the willingness to pay to save a few, or many,
 years of life. Evidence concerning the degree of pre-
 maturity of pollution-related death would, in this case,
 be crucial. Such evidence  is, however, still scarce.
 There is some limited evidence that the relative risk
 of mortality from exposure to PM is higher for older
 individuals than for younger individuals. This, com-
 bined with the fact that the baseline incidence of mor-
 tality consists disproportionately of people 65 and
 over, suggests that PM-related mortality is dispropor-
 tionately among older individuals. The extent to which
 prematurity of death among  older individuals is on
 the order of days or weeks  versus years, however, is
 more uncertain. The short-term exposure studies can
 provide little information on this. It is possible that
 premature deaths on high pollution days would have
 occurred only days later, if the individuals were sick
 and therefore particularly susceptible. The fact that
 the long-term exposure mortality studies found sub-
 stantially larger relative risks, however, suggests that
 not all of the premature mortality is on the order of
 days or even weeks. Shortening of life of such a small
 duration would not be detectable in a long-term epi-
 demiology study, ensuring that the effects detected in
 such studies must represent longer periods of life short-
 ening. This suggests that at least some of the prema-
 ture mortality associated with exposure to PM may
 reduce lifespans by substantially longer amounts of
 time.

    Even if an individual's PM-related premature
 mortality is of very short duration, on the order of
 days,  however, it may be misleading to characterize
 such a PM-related loss as only those few days if the
 individual's underlying susceptibility was itself ex-
 acerbated by chronic exposure to elevated levels of
pollution. Suppose, for example, that long-term ex-
posure to elevated PM levels compromises the car-
diopulmonary system,  making the individual more
 susceptible to mortality on peak PM days than he oth-
erwise would have been. If this is the case, then the
underlying susceptibility would itself be either caused
by chronic exposure to elevated PM levels or exacer-
                                                D-13

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The Benefits and Costs of the Clean Air Act, 1970 to 1990
bated by it. Characterizing the individual's loss as a
few days could, in this case, be a substantial underes-
timate.

    In addition, the long-term studies estimate sig-
nificantly more PM-related mortality than the annual
sum of the daily estimates from the short-term stud-
ies, suggesting that the short-term studies may be
missing a component of PM-related mortality that is
being observed in the long-term studies. For example,
if chronic exposure to elevated PM levels causes pre-
mature mortality that is not necessarily correlated with
daily PM peak levels, this type of mortality would be
detected in the long-term studies but not necessarily
in the short-term studies. Two of the long-term expo-
sure studies suggest, moreover, that the association
between ambient air pollution and mortality cannot
be explained by the confounding influences of smok-
ing and other personal risk factors.

    Uncertainties surround analyses based on epide-
miological studies of PM and mortality. In addition
to the uncertainty about the degree of prematurity of
mortality, there are other uncertainties surrounding
estimates based on epidemiological studies of PM and
mortality. Although epidemiological studies are gen-
erally preferred to human clinical studies, there is
nevertheless uncertainty associated with estimates of
the risk of premature mortality (and morbidity) based
on studies in the epidemiological literature. Consid-
ering all the epidemiological studies of PM and mor-
tality, both short-term and long-term, there is signifi-
cant interstudy variability as well as intrastudy un-
certainty. Some of the difference among estimates
reported by different studies may reflect only sam-
pling error; some of the difference, however, may re-
flect actual differences in the concentration-response
relationship from one location to another. The trans-
ferability of a concentration-response function esti-
mated in one location to other locations is a notable
source of uncertainty.

     Although there may be more uncertainty about
the  degree of prematurity of mortality captured  by
short-term exposure studies than by long-term expo-
sure studies, certain sources of uncertainty associated
with long-term exposure studies require mention. Al-
though studies that are well-executed attempt to con-
trol for those factors that may confound the results of
the  study,  there is always the possibility of insuffi-
cient or inappropriate adjustment for those factors that
affect long-term  mortality rates  and may be con-
founded with the factor of interest (e.g., PM concen-
trations). Prospective cohort studies have an advan-
tage over ecologic, or population-based, studies in that
they gather individual-specific information on such
important risk factors as smoking. It is always pos-
sible, however, that a relevant, individual-specific risk
factor may not have been controlled for or that some
factor that is not individual-specific (e.g., climate) was
not adequately controlled for. It is therefore possible
that differences in mortality rates that have been as-
cribed to  differences in average PM levels may be
due, in part, to some other factor or factors (e.g., dif-
ferences  among communities in  diet, exercise,
ethnicity,  climate, industrial effluents, etc.) that have
not been adequately controlled for.

    Another source of uncertainty surrounding the
prospective cohort studies concerns possible histori-
cal trends in PM concentrations and the relevant pe-
riod of exposure, which is as yet unknown. TSP con-
centrations were substantially  higher in many loca-
tions for several years prior to the cohort studies and
had declined substantially by the time these studies
were conducted. If this is also true for PM10 and or
PM^, it is possible that the larger PM10 and or PM25
coefficients reported by the long-term exposure stud-
ies (as opposed to the short-term exposure studies)
reflect an upward bias. If the relevant exposure pe-
riod extends over a decade or more, then a coefficient
based on  PM concentrations at the beginning of the
study or in those years immediately prior to the study
could be biased upward if pollution levels had been
decreasing markedly for a decade or longer prior to
the study.

     On the other hand, if a downward trend in PM
concentrations continued throughout the period of the
study, and if a much shorter exposure period is rel-
evant (e.g., contained within the study period itself),
then characterizing PM levels throughout the study
by those  levels just prior to the study would tend to
bias the PM coefficient downward.

     The relevant exposure period is  one of a cluster
 of characteristics of the mortality-PM relationship that
 are as yet unknown and potentially important. It is
 also unknown whether there is a time lag  in the PM
 effect. Finally, it is unknown  whether there may be
 cumulative effects of chronic exposure — that is,
 whether the relative risk of mortality actually increases
 as the period of exposure increases.

     Estimating the relationship between PM and pre-
 mature mortality. The incidence of PM-related mor-
 tality used for estimating the benefits of the CAA is
                                                 D-14

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                                             Appendix D: Human Health and Welfare Effects of Criteria Pollutants
 based on the concentration-response relationship re-
 ported by one of the two recent long-term exposure
 (prospective cohort) studies (Pope et al., 1995, and
 Dockery et al., 1993). Because it is based on a much
 larger population and many  more locations than
 Dockery et al. (1993), the concentration-response
 function from Pope et al. (1995) was used in this analy-
 sis. The results of Pope et al. are consistent with those
 of Dockery et al., which reported an even larger re-
 sponse, but in only six cities. Moreover, Pope et al. is
 also supported by several ecological cross-sectional
 studies of annual mortality based on 1960 and 1970
 census data (using either TSP or sulfate as indicators
 of PM), including the work of Lave and Seskin (1977)
 and Lipfert (1984).

    Numerous short-term exposure (time series) stud-
 ies have also reported a positive and statistically sig-
 nificant relationship between PM and mortality. Of
 the fourteen studies  that estimated the relationship
 between daily PM10 concentrations and daily mortal-
 ity listed in Table 12-2 of the PM Criteria Document,
 twelve reported positive and statistically significant
 findings (Pope et al., 1992; Pope and Kalkstein, 1996;
 Dockery et al., 1992; Schwartz, 1993a; Ozkaynak et
 al., 1994; Kinney et al., 1995: Ito et al., 1995; Ostro et
 al., 1996; Saldiva et al., 1995; Styer et al., 1995; Ito
 and Thurston,  1996; Schwartz et al., 1996). While
 these studies lend substantial support to the hypoth-
 esis that there is a relationship between PM10  and
 mortality, they may be capturing only the portion of
 that relationship involving short-term effects. For this
 reason, they are considered in  this analysis only as
 supporting evidence to the results of the study by Pope
 etal.

    The Pope et al. study has several further advan-
 tages.  The population followed in this study was
 largely white and middle class, decreasing the likeli-
 hood that interlocational differences in premature mor-
 tality were due in part to differences in socioeconomic
 status or related  factors. In addition, the generally
 lower mortality rates and possibly lower exposures to
 pollution among this group, in comparison to poorer
 minority populations, would tend to bias the PM co-
 efficient from this study downward, counteracting a
 possible upward  bias associated with historical air
 quality trends discussed above.

    Another source of downward bias in the PM co-
efficient in Pope et al. is that intercity movement of
cohort members was not considered in this study.
Migration across  study cities would result in expo-
 sures of cohort members being more similar than
 would be indicated by assigning city-specific annual
 average pollution levels to each  member of the co-
 hort. The more intercity migration there is, the more
 exposure will tend toward an intercity mean. If this is
 ignored,  differences in exposure levels, proxied by
 differences in city-specific annual median PM levels,
 will be exaggerated, resulting in a downward bias of
 the PM coefficient (because a given difference in mor-
 tality rates is being associated with a larger differ-
 ence in PM levels than is actually the case).

    In summary, because long-term exposure studies
 appear to have captured more of the PM-related pre-
 mature mortality, as well as premature mortality that
 is more premature, they are preferable to the  short-
 term exposure studies. Among the long-term  expo-
 sure studies, the Pope et al. study has several advan-
 tages, as discussed above, which are likely to reduce
 the possibility of a key  source of confounding and
 increase the reliability of the concentration-response
 function from that study. For these reasons, the con-
 centration-response function estimated in this  study
 is considered the most reasonable choice for this analy-
 sis.

    Matching PM Indices in the Air Quality Profiles
 and Concentration-Response Function. The Pope et
 al.  study examined the health effects associated with
 two indices of PM exposure: sulfate particles and fine
 particles (PM2 5). The reported mortality risk ratios are
 slightly larger for PM25 than for sulfates (1.17 versus
 1.15 for a comparison between the most polluted and
 least polluted cities). The PM2 5 relationship is used in
 this analysis because it is more consistent with the
 PM10  air quality data selected for the  analysis. Esti-
 mated changes in PM25 air quality must be matched
 with the PM^ mortality relationship. However, only
 PM10 profiles were used for the entire 20 year period.
 Therefore, the same regional information about the
 PMIO components (sulfate, nitrate, organic particulate
 and primary particulate) used to develop the PM10 pro-
 files were used to develop regional PM2 /PM10 ratios.
 Although  both  urban and rural ratios are available,
 for computational simplicity, only the regional urban
 ratios were used to estimate the PM25 profiles  from
 the PM10 profiles used in the analysis. This reflects
 the exposure of the majority of the modeled popula-
tion (i.e.,  the urban population), while introducing
 some error in the exposure changes for the rural popu-
lation. In the east and west, where the rural ratio  is
larger than the urban ratio, the change in PM25 expo-
sure will be underestimated for the rural population.
                                                D-15

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The Benefits and Costs of the Clean Air Act, 1970 to 1990
In the central region the PM2J change will be overes-
timated. These ratios were used in each year during
1970-1990, introducing another source of uncertainty
in the analysis. Table D-5 summarizes the PM2 /PMu> Ratios'Used td Estimate*
   PMz.5 Data Used With Pope et & (1995)
   Mortality Relationship.
East Central West National
Urban
Rural
0.59
0 68
0,58
0.53
0.48
0.49'"
»-9'55
0.57
Prematurity of Mortality: Life-Years Lost as a Unit
of Measure

    Perhaps the most important health effect that is
examined in this analysis is mortality. Although this
analysis does not take into account the degree of pre-
maturity of death (that is, the ages of those individu-
als who die prematurely from exposure to PM are not
considered), considerable attention has been paid to
this issue and, in particular, to life-years  lost  as an
alternative to lives lost as a measure of the mortality-
related effects of pollution.

    Because life-years lost is of potential interest and
because there is a substantial potential for confusion
in understanding apparently disparate estimates of life-
years lost from pollution exposure, this section at-
tempts to present a clear discussion of the various
possible measures of life-years lost, what they depend
 on, and how they are related to each other.

     Because the actual number of years any particu-
 lar individual is going to live cannot be known, "life-
 years lost" by an individual actually refers to an ex-
pected loss of years of life by that individual. The
 expected loss of years of life by an individual depends
 crucially on whether the expectation is contingent on
 the individual only having been exposed to PM or on
 the individual actually having died from that expo-
 sure.
    An ex ante estimate of life-years lost per indi-
vidual is contingent not on the individual having died
prematurely but only on the individual having been
exposed. Suppose, for example, that a 25 year old has
a life expectancy of 50 more years in the absence of
exposure and only 49 more years in the presence of
exposure. Given (chronic) exposure from the age of
25 on, the 25 year old exposed to (some elevated level
of) PM might expect a shortening of life expectancy
of one year, for example. That is one expected life-
year lost due to chronic exposure. This is the life-years
lost that can be expected by every exposed individual.

    An ex post estimate of life-years lost per individual
is contingent on the individual actually having died
from exposure to PM.  When an individual dies of
exposure to PM, he is said to have lost the number of
years he would have been expected to live, calculated,
for example, from age- and gender-specific life ex-
pectancy tables. Suppose that the life expectancy of
25 year olds is 75 — that is, a 25 year old can expect
to live 50 more years. A 25 year old  who dies from
exposure to PM has therefore lost 50  expected years
of life. This is the life-years lost that can be expected
by every 25 year old affected individual (i.e., every
25 year old who actually dies from exposure to PM).

     Estimates of the total life-years lost by a popula-
tion exposed to PM depend on several factors, includ-
ing the age distribution and the size  of the exposed
population, the magnitude of the change (or changes)
in PM being considered, the relative risk assumed to
be associated with each change in PM, and the length
of time exposure (i.e., the change in PM) is presumed
to occur. A population chronically exposed to a given
increase in PM will lose more life-years than a popu-
lation exposed to the same increase in PM for only a
year or two.6 A population that is generally older will
lose fewer life-years, all else equal, than one that is
generally  younger, because older individuals have
fewer (expected) years of life left to lose. And a popu-
 lation exposed to a greater increase in PM will lose
 more life-years than if it were exposed to a smaller
 increase in PM. Finally, the life-years lost by the popu-
 lation will increase as the relative risk associated with
 the increase in PM increases.

     Life-years lost are usually reported as  averages
 over a population of individuals. The population be-
 ing averaged over, however, can make a crucial dif-
     6 Even in the absence of cumulative effects of exposure, exposure of a population for many years will result in a greater total
 number of pollution-related deaths than exposure for only a year or two, because the same relative risk is applied repeatedly, year
 after year, to the population, rather than for only a year or two.
 ~~~                     "                      D-16                                ~

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                                             Appendix D: Human Health and Welfare Effects of Criteria Pollutants
 ference in the reported average life-years lost, as noted
 above. The average life-years lost per exposed indi-
 vidual (the ex ante estimate) is just the total life-years
 lost by the population of exposed individuals divided
 by the number of exposed individuals. This average
 will depend on all the factors that the total life-years
 lost depends on except the size of the exposed popu-
 lation. The average life-years lost by an exposed indi-
 vidual is a statistical expectation. It is the average of
 the numbers of life-years actually lost by each mem-
 ber of the exposed population. Alternatively, it can be
 thought of as a weighted average of possible numbers
 of years lost, where the weights are the proportions of
 the population that lose each number of expected years
 of life. Although those individuals who do die prema-
 turely from exposure to PM may lose several expected
 years  of life, most exposed individuals do not actu-
 ally die from exposure to PM and therefore lose zero
 life-years. The average life-years lost per exposed in-
 dividual in a population,  alternatively referred to as
 the average decrease in life expectancy of the exposed
 population, is therefore heavily weighted towards zero.
 The average number of life-years lost per individual
 who dies of exposure to PM (the ex post measure of
 life-years lost) is an average of the numbers of ex-
 pected years of life lost by individuals who actually
 died prematurely because of PM. Because everyone
 who dies prematurely from exposure to PM loses some
 positive number of expected years of life, this aver-
 age, by definition, does not include zero.

    An example of an ex ante measure of life-years
 lost is given by a study in  the Netherlands (WHO,
 1996), which considered a cohort of Dutch males, aged
 25-30, and compared the  life expectancy of this co-
 hort to what it would be hi a hypothetical alternative
 scenario in which these individuals are continuously
 exposed to concentrations of PM2S that are 10 ug/m3
 lower than in the actual scenario, the life expectancy
 of this cohort of 25-30 year old Dutch males was cal-
 culated to be 50.21 years in the actual scenario, based
 on a 1992 life table from the Netherlands. Assuming
 that the relative risk of mortality associated with an
 increase of 10 ug/m3 PM25 is 1.1 (the average of the
 relative risks of 1.14 from Dockery et al.,  1993, and
 1.07 from Pope et al., 1995), the study authors calcu-
 lated death rates in the hypothetical "cleaner" scenario
 by dividing the age-specific death rates in the actual
 scenario by 1.1. Using these slightly lower death rates,
and assuming that the effect of PM does  not begin
until 15 years of exposure, the authors constructed a
life table for the cohort in  the hypothetical "cleaner"
scenario. Based on this new life table in a cleaner
 world, the life expectancy of the cohort of 25-30 year
 old Dutch males was calculated to be 51.32 years in
 the hypothetical cleaner scenario. (In calculating life
 expectancies in both the "dirty" scenario and the
 "clean" scenario, it is assumed that any individual who
 does not survive to the next 5-year age group lives
 zero more years. For example, a 30 year old individual
 either survives to age 35 or dies at age 30.) The change
 in life expectancy for this cohort of 25-30 year old
 Dutch males, due to a change in PM exposure of 10
 ug/m3 for the rest of their lives (until the age of 90),
 was therefore 51.32 years - 50.21 years =1.11 years.
 That is, the average life-years lost by an exposed in-
 dividual hi this population, under these assumptions,
 is 1.11 years.

     The estimate of 1.11 years of expected life lost
 depends on several things, as mentioned above. If the
 study authors had used the relative risk from Pope et
 al., 1995, alone, (1.07  instead of 1.1), for example,
 the change in life expectancy (the ex ante measure of
 life-years lost) for this cohort of 25-30 year old Dutch
 males would have been 0.80 years. Similarly, chang-
 ing the assumption about the duration of exposure also
 changes the estimate of ex ante life-years lost. Using
 a relative risk of 1.1, but assuming that exposure lasts
 only during the first 5 years (i.e., that the death rate in
 the first five years, from age 25 through age 30, is
 lower but that after that it is the same as in the "dirty"
 scenario), the average life-years lost by an exposed
 individual in this population is reduced from 1.11 years
 to 0.02 years.

    By their construction and definitions, the average
 life-years lost per exposed individual and the average
 life-years lost per affected individual (i.e., per indi-
 vidual who dies prematurely from PM) take the same
 total number of life-years lost by the exposed popula-
 tion and divide them by different denominators. The
 average life-years lost per exposed individual divides
 the total life-years lost by the total population exposed;
 the average life-years lost per affected individual di-
 vides the same total life-years lost by only a small
 subset of the total population exposed, namely, those
 who died from PM. The average per exposed indi-
 vidual is therefore much smaller than the average per
 affected individual. Because both types of average may
be reported, and both are valid measurements, it is
important to understand that, although the numbers
 will be very dissimilar, they are consistent with each
other and are simply different measures of the esti-
mated mortality impact  of PM.
                                                D-17

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The Benefits and Costs of the Clean Air Act, 1970 to 1990
    To calculate the total (estimated) life-years lost
by a population, it is necessary to follow each age
cohort in the population through their lives in both
scenarios, the "dirty" scenario and the "clean"  sce-
nario, and compute the difference in total years lived
between the two scenarios, as WHO (1996) did for
the cohort of Dutch males 25-30 years old. This
method will be referred to as Method 1. In practice,
however, it is not always possible to do this. (Other
changes to the population, such as those from recruit-
ment and immigration, for example, would make such
an exercise difficult.) An alternative method, which
approximates this, is to predict the numbers of indi-
viduals in each age category who will die prematurely
from exposure to PM (i.e., who will die prematurely
in the  "dirty" scenario),  and multiply each of these
numbers by the corresponding expected number of
years remaining to individuals in that age category,
determined from life expectancy tables. This method
will be referred to as Method 2. Suppose, for example,
that individuals age 25 are expected to live to age 75,
or alternatively, have an expected 50 years of life re-
maining. Suppose that ten 25 year olds are estimated
to die prematurely because of exposure to PM. Their
expected loss of life-years is therefore 50 years each,
or a total of 500 life-years. If the same calculation is
carried out for the individuals dying prematurely in
each age category, the sum is an estimate of the total
life-years lost by the population.

    Using Method 1 (and retaining the assumptions
made by WHO, 1996), the average life-years lost per
PM-related death among the cohort of Dutch males is
calculated to be 14.28 years. Using Method 2 it is es-
timated to be 14.43 years.

   Although this ex post measure of life-years lost is
much larger than the ex ante measure (1.11 life-years
lost per exposed individual), it only applies to those
individuals who actually die from exposure to PM.
The number of individuals in the age 25-30 Dutch
cohort example who eventually die from exposure to
PM (7,646) is much smaller than the number of indi-
viduals in the age 25-30 Dutch cohort who are ex-
posed to PM (98,177). The total life-years lost can be
calculated either as the number of exposed individu-
als times the expected life-years lost per exposed in-
dividual (98,177*1.11 = 109,192.1) or as the number
of affected individuals times the expected life-years
lost per affected individual (7,646*14.28 = 109,192.1).

   To further illustrate the different measures of life-
years lost and the effects of various input  assump-
tions on these measures, death rates from the 1992
U.S. Statistical Abstract were used to follow a cohort
of 100,000 U.S. males from birth to age 90 in a "dirty"
scenario and a "clean" scenario, under various assump-
tions. Death rates were available  for age less than 1,
ages 1-4, and for ten-year age groups thereafter. The
ten-year age groups were divided into five-year age
groups, applying the death rate for the ten-year group
to each of the corresponding five-year age groups. Ex
ante and ex post measures of life-years lost among
those  individuals who survive to the 25-29 year old
category were first calculated under the assumptions
in the WHO (1996) study. These assumptions were
that the relative risk  of mortality in the "dirty" sce-
nario versus the "clean" scenario is 1.1; that exposure
does not begin until age 25; that the effect of expo-
sure takes fifteen years; that individuals at the begin-
ning of each age grouping either survive to the next
age grouping or live zero more years; and that all in-
dividuals age 85 live exactly five more years. Under
these  assumptions, the expected life-years lost per
exposed individual in the 25-29 year old cohort is 1.32
years. There are 96,947 exposed individuals in  this
age cohort. The expected life-years lost per affected
individual (i.e., per PM-related death) is 16.44 years
(Method 1). There are 7,804 affected individuals. The
total life-years lost by individuals in this  cohort is
128,329.3 (1.32*96,947 = 16.44*  7,804= 128,329.3).

    If the relative risk is changed to 1.07, the expected
life-years lost per exposed individual in the cohort of
25-29 year old U.S.  males is reduced from 1.32 to
0.95 years. The expected life-years lost per affected
individual (i.e., per PM-related death) is 16.44 years
(Method 1). Using a relative risk of 1.1 but assuming
no lag (i.e., assuming that exposure starts either at
birth or at age 25 and has an immediate effect), the
expected life-years lost per exposed individual in the
25-29 year old cohort changes from 1.32 to  1.12. The
expected life-years lost per affected individual (i.e.,
per PM-related death) becomes 19.7 years (Method
1).
                                                D-18

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                                             Appendix D: Human Health and Welfare Effects of Criteria Pollutants
  Estimating Morbidity Effects

     In addition to mortality effects, this analysis quan-
  tifies effects for a number of non-fatal health end-
  points. Several issues arise in implementing the stud-
  ies selected for this analysis.

  Overlapping Health Effects

     Several endpoints reported in the health effects
  literature overlap with each other. For example,  the
  literature reports relationships for hospital admissions
  for single respiratory ailments (e.g. pneumonia or
  chronic obstructive pulmonary disease) as well as for
  all respiratory ailments combined. Similarly, several
  studies quantify the occurrence of respiratory symp-
  toms where the definitions of symptoms are not unique
  (e.g., shortness of breath, upper respiratory symptoms,
  and any of 19 symptoms). Measures of restricted  ac-
  tivity provide a final example of overlapping health
 endpoints. Estimates  are available for pollution-in-
 duced restricted activity days, mild restricted activity
 days,  activity restriction resulting in work loss. This
 analysis models incidence for all endpoints. Double-
 counting of benefits is avoided in aggregating eco-
 nomic benefits across overlapping endpoints (see
 Appendix I).

 Studies Requiring Adjustments

    Applying concentration-response relationships
 reported in the epidemiological literature to the na-
 tional scale benefits analysis required by section 812
 required a variety of adjustments.

    Normalization of coefficients by population. To
 be applied nationwide, concentration-response coef-
 ficients must reflect the change in risk per person per
 unit change in air quality. However, some studies re-
 port the concentration-response coefficient, , as the
 change in risk for the entire studied population. For
 example, Thurston et al. (1994) reported the total num-
 ber of respiratory-related hospital admissions/day  in
 the Toronto,  Canada area.  To normalize the coeffi-
 cient so that it might be applied universally across the
 country, it was divided by the population in the geo-
 graphical area of study (yielding an estimate of the
 change in admissions/person/day due to a change  in
pollutant levels).

    Within-study meta-analysis. In some cases, stud-
ies reported several estimates  of the concentration-
 response coefficient, each corresponding to a particu-
 lar year or particular study area. For example, Ostro
 and Rothschild (1989) report six separate regression
 coefficients that correspond to regression models run
 for six separate years. This analysis combined the in-
 dividual estimates using a fixed coefficient meta-
 analysis on the six years of data.

     Conversion of coefficients dependent on symptom
 status during the previous day. Krupnick et al. (1990)
 employed a Markov process to determine the prob-
 ability of symptoms that were dependent on  symp-
 tom status of the previous day. The current analysis
 adjusts the regression coefficients produced by the
 model in order to eliminate this dependence on previ-
 ous day's  symptom status.

 Concentration-Response Functions:
 Health Effects

    After selecting studies appropriate for the section
 812 analysis,  taking into  account the considerations
 discussed above, the published information was used
 to derive a concentration-response function for esti-
 mating nationwide benefits for each health effect con-
 sidered. In general, these functions combine air qual-
 ity changes, the affected population and information
 regarding the expected per person change in incidence
 per unit change in pollutant level. The following tables
 present the functions used in this analysis, incorpo-
 rating information needed to apply these functions and
 references  for information.

 Particulate Matter

    The concentration-response functions used to
 quantify expected changes in  health effects associ-
 ated with reduced exposure to particulate matter are
 summarized in Table D-6. The data profiles selected
 for use  in this analysis are PM10. In those cases in
 which PM10 was not the measure used in a study, this
 analysis either converted PM10 air quality data to the
 appropriate air quality data (e.g., PM25 or TSP) or,
equivalently, converted the pollutant coefficient from
the study to the corresponding PM10 coefficient, based
on location-specific information whenever possible.
                                                D-19

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      Benefits and Costs of the Clean Air Act, 1970 to 1990
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-------
                                                  Appendix D: Human Health and Welfare Effects of Criteria Pollutants
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The Benefits and Costs of the Clean Air Act, 1970 to 1990
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-------
                                                  Appendix D: Human Health and Welfare Effects of Criteria Pollutants
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The Benefits and Costs of the Clean Air Act, 1970 to 1990
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                                   Appendix D: Human Health and Welfare Effects of Criteria Pollutants
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The Benefits and Costs of the Clean Air Act, 1970 to 1990
           •^ a o ca
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                                                     Ozone

                                                         The health effects literature includes studies of
                                                     the relationships between ozone and a variety of
                                                     non-fatal health effects. Many of these relationships
                                                     are provided by the same studies that reported the
                                                     particulate matter relationships shown above. For
                                                     some health endpoints, most notably hospital ad-
                                                     missions, multiple studies report alternative esti-
                                                     mates of the concentration-response relationship.
                                                     The variability between these reported estimates is
                                                     incorporated into the Monte Carlo approach used to
                                                     combine estimates of avoided health effects with
                                                     economic  valuations (discussed in Appendix I).
                                                     Table D-7 documents the concentration-response
                                                     functions used in this analysis.
                                                D-26

-------
                                   Appendix D: Human Health and Welfare Effects of Criteria Pollutants
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                                       D-28

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                                            Appendix D: Human Health and Welfare Effects of Criteria Pollutants
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The Benefits and Costs of the Clean Air Act, 1970 to 1990
form*
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                                          Appendix D: Human Health and Welfare Effects of Criteria Pollutants
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                                   D-32

-------
Appendix D: Human Health and Welfare Effects of Criteria Pollutants
;dures, National Hospital Discharge Survey, 1990. Number of 1990 discharges divided by
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-------
The Benefits and Costs of the Clean Air Act, 1970 to 1990
Nitrogen Oxides

    Nitrogen dioxide (NO2) is the primary focus of health studies on the nitrogen oxides and serves as the basis
for this analysis. The primary pathophysiology of NO2 in humans involves the respiratory system and the con-
centration-response function identified for NO2 describes the relationships between measures of NO2 and respi-
ratory illness.

    A number of epidemiological studies of NO2 are available; however, most have either confounded expo-
sures (with other pollutants) or insufficient exposure quantification (e.g., exposure assessment indicates only
absence or presence of a gas stove). Most studies consider NO2 generated by gas stoves or other combustion
sources in homes and are therefore not directly usable in concentration-response functions. However, studies by
Melia et al,  1980 and Hasselblad et al, 1992 provide a reasonable basis for development of a concentration
response function. Table D-8 presents the function obtained from their work. The function relates NO2 to respi-
ratory illness in children.
                                                D-34

-------
                                   Appendix D: Human Health and Welfare Effects of Criteria Pollutants
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                                       D-35

-------
The Benefits and Costs of the Clean Air Act, 1970 to 1990
Carbon Monoxide

    Three concentration-response relationships are available for estimating the health effects of carbon monox-
ide. The first relates ambient CO levels to hospital admissions for congestive heart failure (Morris et al., 1995).
The second equation (Allred et al., 1989a,b, 1991) relates the CO level in the bloodstream to the relative change
in time of onset of angina pain upon exertion. The third relates the CO level in the bloodstream to the relative
change in time of onset of silent ischemia. Due to the lack of quantitative information relating silent ischemia to
a meaningful physical health effect, this analysis uses only the first two dose-response functions shown in Table
D-9.
                                                 D-36

-------
Appendix D: Human Health and Welfare Effects of Criteria Pollutants
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-------
The Benefits and Costs of the Clean Air Act, 1970 to 1990
Sulfur Dioxide

    This analysis estimated one concentration-response function for SO2 using clinical data from two sources
on the responses of exercising asthmatics to SO2, as measured by the occurrence of respiratory symptoms in
mild and moderate asthmatics (see Table D-10).
                                               D-38

-------
           Appendix D: Human Health and Welfare Effects of Criteria Pollutants
Sources
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              D-39

-------
The Benefits
d Costs of the Clean Air Act, 1970 to 1990
Estimating Welfare Effects of
Exposure

    In addition to avoided incidences of adverse hu-
man health effects, the air quality improvements esti-
mated to result from the CAA yield additional ben-
efits, namely welfare benefits. Table D-10 indicates a
variety of benefits expected to have accrued through
the avoidance of air pollution damage to resources.
As indicated, data supporting quantified estimates of
welfare benefits are more limited than those quanti-
fying the relationship between air pollution exposure
and human health. While evidence exists that a vari-
ety of welfare benefits result from air quality improve-
ments, currently available data supports quantifying
only a limited number of potential effects at this time.
The Table lists the effects quantified in the section
812 analysis; each is discussed below.
                                       mate such benefits using reported relationships be-
                                       tween ozone exposure and yields of a variety of com-
                                       modity crops.

                                           It should be noted that the method used to allo-
                                       cate monitor-level ozone concentrations to estimate
                                       crop exposure differed from that used to estimate
                                       ozone health effects. Instead of assigning concentra-
                                       tions from the nearest monitor, the agricultural ben-
                                       efits analysis estimated ozone concentrations for each
                                       county nationwide. This was necessary because of two
                                       factors specific to the agricultural analysis. First, crop
                                       production is reported at the county level, so changes
                                        in crop yields associated with changes in ozone levels
                                        must be estimated for each county. Second, much of
                                        the nation's agricultural production of "commodity
                                        crops" (corn, wheat, soybeans, etc.) occurs at signifi-
                                        cant distances from the location of the population-
                                        oriented ozone monitors. Thus, an algorithm was used
          Table D-l 1. Selected Welfare Effecte^of Orilrai^ Pollutants,,     '  '" : --;r  ' *f --; ,,,    ^ ,'!;'
Pollutant
Ozone
Parficulate Matter^
TSP/Sulfates
Nitrogen Oxides"
SulBir Dioxide
Quantified Welfare Effects, "* v"/
Agriculture - C^angesluf crop y Was '
{for 7 crop's^' ^ „>- ,/-x',^;,
Decreased wofker g*pdtictivief :\/t,,.
Materials Damaga - Household ,
'•* :'«&&*: -^r- • r' .
Visibility •-""w->'-" -*-. "" '
' *" ' '/x? '
Visibility'', , " ,v; -"*'„, - /
'' ,^?>»v- ' ^ j "• , ,'?* '-" '-"
trnquatttieied Welfare Ettects
, Changes In other crop,,yield's „„,, „,
^Matefjals data age ;j,
Ecological- effects on fereste' - <-* •
-Bcological---e'ffects-on wapfe ,
..Othei1 materials, daaiage,, ^ • ,„,
' 'Q:op losses, due to aejd;dep0siti0n
depositioif"" v,""
"Effectsoti fisheries dtjeto,,»id^ ;,
-deposition; v ,„, -,- , '.
-/Bffeetson forest"'"' ^,,^""' 	 "•
"-"Crop.tossesdue'fo'^ijid.depbsition "
deposition ' , ,, ' , "*"'
' Effecfson. 'fisheries dw^'to acid-/- - ,t
,,depositiott"" „, .-. ••• ,,,-'• iV,'
Bffe^ts,pn forest, , 1 '"''
  Agricultural Effects

     This analysis was able to quantify the benefits to
  economic welfare attributable to the increased crop
  yields expected from CAA-related air quality improve-
  ments. Appendix F describes the method used to esti-
                                         to assign ozone concentrations for the agricultural
                                         analysis for the control and no-control scenarios to
                                         county centroids based on a planar interpolation of
                                         concentrations at the nearest three monitors. Appen-
                                         dix F documents the details of the triangulation of
                                         ozone air quality data.
                                                  D-40

-------
                                             Appendix D: Human Health and Welfare Effects of Criteria Pollutants
  Materials Damage

      Welfare benefits also accrue from avoided air
  pollution damage, both aesthetic and structural, to ar-
  chitectural materials and to culturally important ar-
  ticles. At this time, data limitations preclude the abil-
  ity to quantify benefits for all materials whose dete-
  rioration may have been promoted and accelerated by
  air pollution exposure. However, this  analysis  does
  address one small effect in this category, the soiling
  of households by paniculate matter. Table D-l 1 docu-
  ments the function used to associate nationwide PM-
  10 levels with household willingness to pay to avoid
  the cleaning costs incurred for each additional ug/m3
  ofPM-10.     ;

  Visibility

     In addition to the health and welfare benefits esti-
  mated directly from  reduced ambient concentrations
  of individual criteria air pollutants, this analysis also
  estimates the general visibility improvements attrib-
  uted to improved air quality. Visibility effects  are
  measured in terms of changes in  DeciView, a mea-
  sure useful for comparing the effects of air quality on
  visibility across a range of geographic locations for a
  range of time periods. It is directly related to two other
  common visibility measures, visual range (measured
  in km) and light extinction (measured in km'1); how-
 ever, it characterizes  visibility in terms of perceptible
 changes in haziness  independent of baseline condi-
 tions.

    Visibility conditions  under the control and  no-
 control scenarios were modeled separately for the east-
 ern and western U.S. In the east, the Regional Acid
 Deposition Model (RADM) generated extinction co-
 efficient estimates for each of 1,330 grid cells in the
 RADM domain (essentially the eastern half of the
 country). The extinction coefficients were translated
 to DeciView using  the  relationship  reported in
 Pitchford and Malm  (1994). In the Western U.S., a
 conventional extinction budget approach provided
 DeciView estimates for 30 metropolitan areas (SAI,
 1994). A linear  rollback model provided the corre-
 sponding no-control estimates. Visibility estimates for
 both portions of the country were  generated for the
 target years 1975, 1980, 1985,  and  1990.

    Table D-l2 summarizes the methodology used to
predict visibility benefits  attributable to the CAA.
Physical benefits for a given year are reported in terms
 of the average DeciView change per person in the
 modeled population.

 Worker Productivity

     Available  data permits  quantification of a final
 human welfare endpoint, worker productivity. Crocker
 and Horst (1981) and U.S. EPA (1994c) present evi-
 dence  regarding the inverse relationship between
 ozone  exposure and productivity in exposed citrus
 workers. This analysis applies the worker productiv-
 ity relationship (reported as income elasticity with
 respect to ozone) to outdoor workers in the U.S. (ap-
 proximately one percent of the population). Table D-
 12 details the form of the concentration response func-
 tion.

 Ecological Effects

    It is likely that the  air pollution reductions
 achieved under the CAA resulted in improvements in
 the health of aquatic and  terrestrial ecosystems. To
 the extent that these ecosystems provide a variety of
 services (e.g., fishing, timber production, and recre-
 ational  opportunities),  human welfare benefits also
 accrued. However, due to a lack  of quantified con-
 centration-response relationships (or a lack of infor-
 mation  concerning affected  population),  ecological
 effects were not quantified in this analysis. Appendix
E provides discussion of many of the important eco-
logical benefits which may have accrued due to his-
torical implementation of the CAA.
                                                D-41

-------
The Benefits and Costs of the Clean Air Act, 1970 to 1990
               S-a
               213
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               lllil
                 2 r".  W

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                                       D-42

-------
                                           Appendix D: Human Health and Welfare Effects of Criteria Pollutants
  §


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                                               D-43

-------
The Benefits and Costs of the Clean Air Act, 1970 to 1990
Modeling Results

    This section summarizes results of the health and
welfare effects modeling. As indicated previously, the
Project Team adopted a Monte Carlo approach in an
effort to capture uncertainty in the benefits analysis.
With respect to estimating avoided incidence of ad-
verse health and welfare effects, two sources of vari-
ability are considered. The first is the statistical un-
certainty associated with each concentration-response
relationship reported in the literature. In addition to
an estimate of a concentration-response function co-
efficient, studies typically report a standard error of
the reported estimate. The second source of uncer-
tainty lies in the choice of studies, where multiple stud-
ies offer estimates for the same endpoint. Different
published results reported in the scientific literature
typically do not report identical findings; in some in-
stances the differences are substantial. This between-
study variability is captured by considering the range
of estimates for a given endpoint.

    Table D-13 summarizes health and welfare effects
for each study included in the analysis. The values
presented are mean estimates of the number of cases
of each endpoint avoided due to implementation of
the CAA.  A distribution is associated with each mean
estimate, capturing the uncertainty inherent in the es-
timate of the concentration-response coefficient. The
distribution of estimated effects corresponding to a
given study was generated by randomly sampling from
the distribution of coefficients (given by the estimated
coefficient and its standard error reported in the study)
and evaluating the concentration-response  function,
yielding an estimate of avoided incidence for the given
effect. This procedure was repeated many times. While
only the central estimates of the resulting distribu-
tions are presented here, the distributions were retained
for use in  monetizing and aggregating economic ben-
efits (see Appendix I).7

     As shown, for some health endpoints more than
one concentration-response function was used, each
representing a different study. The alternative con-
centration-response functions provide differing mea-
sures of the effect. These can be used to derive a range
of possible results. In the case of lead (Pb), alterna-
tive functions were not used;  rather, two analytical
procedures were implemented (labeled the "backward-
looking" and "forward looking" analyses), giving a
range of results for most Pb endpoints (see Appendix
G for discussion of Pb health effects).

    The table presents the results of modeling "all U.S.
population" (although, with the exception of Pb, not
all of the 48 state population is modeled, with up to
five percent being excluded in a given year). The re-
sults depict the pattern of health effects incidence
across years. The accuracy of the scale of incidence
is less certain (due to the extrapolation of air quality
data). These results are  almost certainly more accu-
rate than the corresponding "50 km" results, but rely
on the assumption that (for a portion of the popula-
tion)  distant air quality monitors provide a reason-
able estimate of local air quality conditions. Thus, the
results presented here are somewhat speculative. It is
likely that the estimated health effects are overstated
for that population group (20  to 30 percent of total
population in the case of PM) for which distant moni-
tors are used. (Note, however, that the scaling of
unmonitored county PM concentrations based on re-
gional-scale grid model projections significantly miti-
gates this potential overestimation in the case of PM;
see Appendix C for details). Conversely, there is an
implied zero health impact for that portion of the popu-
lation (three to four percent in the case of PM)  ex-
cluded from the analysis altogether, an understatement
of health impacts for that group.

    The results indicate the growth of benefits over
the study period, consistent with increasing improve-
ments in air quality between the control and no-con-
trol scenarios from 1970 to 1990.

    The mortality  effects documented above can be
disaggregated by age. Table D-14 indicates the esti-
mated proportions of premature mortalities for vari-
ous age groups (Pb-induced mortality estimates for
children, men,  and women are grouped). Also pre-
sented is the average life expectancy for each group,
indicating the degree of prematurity  of PM and  Pb-
related mortality.

    Table D-15 presents estimated incidence reduc-
tions  for several health effects which could be quanti-
fied but not monetized for this analysis.
    7 With the exception of visibility, welfare endpoints estimated economic benefits directly and are therefore included in the
monetary benefits results presented in Appendix I.
                                                 __

-------
         Appendix D: Human Health and Welfare Effects of Criteria Pollutants
mean- estimates). -  *,
     '   '   '*       '  *''
  ffects ^BxteapSl                                                   . ,

'--,,-   '„',,,,-,  ,   ;  -;             *   ",-•>'».,•>-''- -        *' -%---, -,s*,~
                               *      "                                '
Endpolnt Study
MORTALITY
Mortality (long-term exposure) Pope et al., 1 995
Mortality (Pb exposure) -Male Average of Backward & Forward
Mortality (Pb exposure) -Female Average of Backward & Forward
Mortality (Pb exposure) -Infant Average of Backward & Forward
CHRONIC BRONCHITIS
Chronic Bronchitis Schwartz, 1993b
Abbey etal., 1993
OTHER Pb-INDUCED AILMENTS
Lost IQ Points Average of Backward & Forward
IQ < 70 Average of Backward & Forward
Hypertension-Men Average of Backward & Forward
Cor. Heart Disease Average of Backward & Forward
Atherothrombotic brain infarction - Men Average of Backward & Forward
Atherothrombotic brain Infarction - Women Average of Backward & Forward
Initial cerebrovascular accident - Men Average of Backward & Forward
Initial cerebrovascular accident - Women Average of Backward & Forward
HOSPITAL ADMISSIONS
All Respiratory Schwartz, 1 995, Tacoma
Schwartz, 1996, Spokane
Pope, 1991, Salt Lake Valley
Schwartz, 1 995, New Haven
Thurston et al., 1 994, Toronto
COPD + Pneumonia Schwartz, 1 994c
Schwartz, 1996, Spokane
Schwartz, 1994a
Schwartz, 1994b
Ischemic Heart Disease Schwartz and Morris, 1 995
Congestive Heart Failure Schwartz and Morris, 1995
Morris etal., 1995
OTHER RESPIRATORY-RELATED AILMENTS
-Adults
Any of 1 9 Acute Symptoms Krupnick et al., 1 990
-Children
Shortness of breath, days Ostro etal., 1995
Acute Bronchitis Dockery et al., 1 989
Lower Respiratory Symptoms Schwartz et al., 1 994d
Upper Respiratory Symptoms Pope et ai., 1991
•All Ages
Asthma Attacks Ostro et al., 1 991
Whittemore and Kom, 1980;
EPA ,1983
Increase in Respiratory Illness Hasselbladi 1992
Any Symptom Linn et al. (1 987, 1 988, 1 990)
RESTRICTED ACTIVITY AND WORK LOSS DAYS
RAD Ostro, 1987
MRAD Ostro and Rothschild, 1 989
RRAD Ostro and Rothschild, 1 989
Work Loss Days Ostro, 1 987
HUMAN WELFARE
Household Soiling Damage ESEERCO, 1 994
Visibility - East (DeciView chg. per person) Pitchford and Malm, 1 994
Visibility - West (DeciView chg. per person) Pitchford and Malm, 1 994
Pollutant's)

PM,o
Pb
Pb
Pb

PM,o
PMio.

Pb
Pb
Pb
Pb
Pb
Pb
Pb
Pb

PM,0&03
PM,0&O3
™10
PM10&O3
PM10&O3
PM10&03
PM10&O3
PM,0&03
PM,0 & O3
P^o
PM,0
CO


PM10 & O3

PM,0
PM,o
PM10
PM10

PM10
O3

NO2
S02

PM10
PM10&O3
PM,0&O3
PMW

1975 1980

58,764 145,884
822 5,281
231 1,474
456 2,342

198,973 554,632
173,571 454,309

1,028,492 5,031,157
3,780 20,074
830,299 5,276,999
1,313 . 8,444
181 1,128
84 529
260 1 ,635
120 758

32,004 77,827
29,393 69,449
30,982 73,093
23,137 55,096
13,746 32,383
21,898 53,928
19,769 47,294
'16,942 40,882
13,006 30,679
6,348 14,709
5,733 13,365
3,022 8,543


41,631,456 98,876,110

20,752,402 50,758,872
1,936,260 6,255,801
2,994,048 6,100,276
500,395 1,292,922

264,430 548,306
193 . 482

729,306 2,686,813
104,896 319,192

19,170,337 47,445,314
60,871,610 155,799,151
47,669,732 237,799,482
6,966,775 17,213,581

1985

169,642
10,340
2,866
3,933

720,166
564,753

8,559,426
36,520
10,087,115
16,671
2,165
1,020
3,154
1,466

95,435
93,137
86,407
66,385
39,691
64,217
63,116
49,290
37,434
17,289
15,742
17,028


117,275,400

58,575,484
7,644,924
6,977,680
1,557,177

686,953
816

6,113,639
282,846

56,939,271
190,333,140
176,850,171
20,648,906

1990

183,539
12,819
3,537
4,944

741,775
602,990

10,378,268
45,393
12,646,876
21 ,069
2,690
1,255-
3,926
1,804

106,777
119,290
95,486
73,842
46,013
70,528
80,113
55,227
43,410
19,098
17,362
21,835


129,529,717

68,375,216
8,541,833
7,804,860
1,683,854

841,916
1,080

9,776,267
265,650

62,187,720
209,924,785
174,329,691
22,562,752

PM]0 direct economic valuation
DeciView
DeciView
0.4 1.4
2.4 4.9
1.9
5.0
2.0
6.0
Decreased Worker Productivity Crocker & Horst, 1 981 and EPA, 1 994cO3 direct economic valuation
Agriculture (Net Surplus) Minimum Estimate
Maximum Estimate
O3 direct economic valuation
O3 direct economic valuation
             D-45

-------
The Benefits and Costs of the Clean Air Act, 1970 to 1990
                              •, '        -if ^sstf* "     **."*,.)     ' '•''V^**'**^'"  J      "*  v * v* "          ;'/  '     ""

                         Table D-14; lyIbrtaIify^isttibutiod^by-Age:'Rcop|>«ioaof PM- a
                                                        ,  °"".'-L>-  12% (15%)
                          Notes;

                          • Distributiott of premature mortalities acrossa||s;is fairly edrisistenfacross years',


                          11 PM-xetated roortality jmdem&esgroated only foiyndi-SiduilsSC
                                     v* v/'-';-      >>->'%&%\^\ * ' -^       *  *rttt^>^^'^'
                          consisteftt'witb tha population siudleo by Jpp{» «t ai., iyy5.'

                          4 Pb-related'ni6rteliQ''ittcideic& was^stlrnated fo|,|iifenfs," women, aged 45-74, and


                          'tbiee'age groups (40-54, 55-64',' 65'-74^ eacfe wl^a^stlnct co»ce.nttalfon4espo,nsg,. ------
                                  _ .   ,   --   "'    ,„•*£%&/'   •  •'-'.--"'-      .,„---'-        '-.'"'*,,'      ,v,
                          relationship.  l\^.»-,-**r"  ',,^«-;'•"•**'':
                                  - -^^   H  "    . ^^^-o-sr^^-^                ^ ^^,.^^ ^          % * "*"*           M
                                                              D-46

-------
                                                                 Appendix D: Human Health and Welfare Effects of Criteria Pollutants
                                                 'StiMly
                    Pnlin<«ary
                    fever
                                                                  OS'
    53   •  i2i   "i$r
'•>_,'       '  A>J <•'*•• \s


 ""'%'-:-  ,87 "  441
                                                                                iecreasedjPEV (per year]

                                                                                mittion

                                                                                decreas
                                                                                                    million ewes/year "

                                                                                                             "    1
lirij'eto Oaset 0JfsAfl^aa  Allred,
PaSn  '   '"'"'"'     '' ;
                                                                                -0.^%   0.7% '0.8%'
                                                                                   '"  '*"
                             "f'f o •.'  ,          s ,

                            fractional -mcf&nse'm •

                            time tf m $# j^emginff
_
                                                                      D-47

-------
The Benefits and Costs of the Clean Air Act, 1970 to 1990
Human Health and Welfare
Effects References

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 Melia, R.J.W., C du V Florey,  R.W. Morris, B.D.
        Goldstein, H.H. John, D. Clark, I.E.
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Melia, R.J.W., C du V. Florey, and Y. Sittampalarm.
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        269.             -

Morris, R.D., E.N. Naumova, and R.L. Munasinghe.
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       ization for Congestive Heart Failure Among
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       American Journal of Public Health 85(10):
        1361-1365.
                                               D-49

-------
The Benefits and Costs of the Clean Air Act, 1970 to 1990
Ostro, B.D. 1987. "Air Pollution and Morbidity Re-
       visited: a Specification Test." /. Environ.
       Econ. Manage. 14: 87-98.

Ostro, B.D. and S. Rothschild. 1989. "Air Pollution
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Ostro, B.D., MJ. Lipsett, M.B. Wiener, and J.C.
       Seiner. 1991. "Asthmatic Responses to Air-
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       Public Health 81: 694-702.

Ostro, B.D.,  J.M. Sanchez, C. Aranda, and G.S.
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Ostro, B.D.,  J.M. Sanchez, C. Aranda, and G.S.
       Eskeland. 1996. Air Pollution and Mortality:
       Results from a Study of Santiago, Chile. In:
       Lippmann, M. ed. Papers from the ISEA-ISEE
       Annual Meeting; September 1994; Research
       Triangle Park, NC./. Exposure Anal. Environ.
       Epidemiol.: in press.

Ozkaynak, H., J. Xue, P. Severance, R. Burnett, and
       M. Raizenne. 1994. Associations Between
       Daily Mortality, Ozone, and Particulate Air
       Pollution in Toronto, Canada. Presented  at:
       Colloquium on Particulate Air Pollution and
       Human Mortality and Morbidity:  Program
       and Abstracts; January; Irvine, CA. Irvine,
       CA: University of California Irvine, Air Pol-
       lution Health Effects Laboratory; p. PI.13;
       report no. 94-02.

Pitchford, M.L. and W.C. Malm. 1994. "Development
       and Applications of a Standard Visual Index."
       Atmospheric Environment 28(5): 1049-1054.

Pope, C.A., HI. 1991. "Respiratory Hospital Admis-
       sions Associated with PM Pollution in Utah,
       Salt Lake, and Cache Valleys." Arch. Environ.
       Health 46 (2): 90-97.

Pope, C.A., HI, and D.W. Dockery.  1992. "Acute
       Health Effects of PM  Pollution on Symp-
       tomatic and Asymptomatic Children." Am.
       Rev. Respir. Dis.  145: 1123-1128.
Pope, C.A., IE, D.W. Dockery, J.D. Spengler, and
       M.E. Raizenne. 1991. "Respiratory Health
       and PM  Pollution: a Daily Time Series
       Analysis!* Am. Rev. Respir. Dis. 144: 668-
       674.

Pope, C.A., HI, and L.S. Kalkstein. 1996. Synoptic
       Weather Modeling and Estimates of the Ex-
       posure-Response Relationship Between Daily
       Mortality and Particulate Air Pollution.
       Environ. Health Perspect. 104: in press.

Pope, C.A., HI, J. Schwartz, and M.R. Ransom. 1992.
       Daily Mortality and PM   Pollution in Utah
       Valley. Arch. Environ. Health 47: 211-217.

Pope, C.A., IH, MJ. Thun, M.M. Namboodiri, D.W.
       Dockery, J.S. Evans, F.E. Speizer, and C.W.
       Heath, Jr. 1995. Particulate Air Pollution as a
       Predictor of Mortality in a Prospective Study
       of U.S. Adults.Am. J. Respir. Crit. CareMed.
       151:669-674.   .

Portney, P.R. and J. Mullahy. 1990. "Urban Air Qual-
       ity and Chronic Respiratory Disease." Re-
       gional Science and Urban Economics 20:407-
       418.

Roger, L.J., H.R. Kehrl, M. Hazucha, and D.H.
       Horstman. 1985. "Bronchoconstriction in
       Asthmatics Exposed to Sulfur Dioxide Dur-
       ing Repeated Exercise." J. Appl. Physiol.
       59(3): 784-791.

Saldiva, P.H.N., Pope, C.A., III, J. Schwartz, D.W.
       Dockery, A.J. Lichtenfels,  J.M. Salge, I.
       Barone, andG.M. Bohm. 1995. Air Pollution
       and Mortality in Elderly People: A Time-Se-
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       Health 50: 159-163.

Samet, J.M., Lambert, W.E., Skipper, B.J., Gushing,
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       L.C., Schwab, M., and J.D. Spengler. 1993.
       "Nitrogen Dioxide and Respiratory Illnesses
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        1265.

Schwartz, J. 1993a. Air Pollution and Daily Mortal-
       ity in Birmingham, Alabama. Am.  J.
       Epidemiol. 137: 1136-1147.
                                               D-50

-------
                                           Appendix D: Human Health and Welfare Effects of Criteria Pollutants
 Schwartz, J. 1993b. "Particulate Air Pollution and
        Chronic Respiratory Disease." Environmen-
        tal Research 62:1-13.

 Schwartz, J. 1994a. "Air Pollution and Hospital Ad-
        missions in Elderly Patients in Birmingham,
        Alabama." American Journal of Epidemiol-
        ogy 139:589-98.

 Schwartz, J. 1994b. "Ah- Pollution and Hospital Ad-
        missions for the Elderly in Detroit, Michigan."
        American Journal of Respiratory Care Med
        150:648-55.

 Schwartz, J. 1994c. "PM , Ozone and Hospital Ad-
        missions for the Elderly in Minneapolis-St.
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 Schwartz, J. 1994d. "Acute Effects of Summer Air
        Pollution on Respiratory Symptom Report-
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        150: 1234-1242.

 Schwartz, J. 1995. "Short Term Fluctuations hi Air
        Pollution and Hospital Admissions of the Eld-
        erly for Respiratory Disease." Thorax 50:531-
        538.

 Schwartz, J. 1996.  "Air Pollution and Hospital Ad-
        missions for Respiratory Disease." Epidemi-
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        Fine Particles? /. Air Waste Manage. Assoc.:
        accepted.

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 Seal, E., W.F. McDonnell, D.E. House, S.A. Salaam,
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        810.

Styer, P., N. McMillan, F. Gao, J. Davis, and J. Sacks.
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 Systems Application International (SAI). 1994. Ret-
        rospective Analysis of the Impact of the Clean
        Air Acton Urban Visibility in the Southwest-
        ern United States. Prepared for the U.S. En-
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        and Radiation. October 31.

 Thurston, G., K. Ito, C. Hayes, D. Bates, and M.
        Lippmann. 1994. "Respiratory Hospital Ad-
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 U.S. Environmental Protection Agency (U.S. EPA).
        1985. Costs and Benefits of Reducing Lead
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 U.S. Environmental Protection Agency (U.S. EPA).
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 U.S. Environmental Protection Agency (U.S. EPA).
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       July.
                                              D-51

-------
The Benefits and Costs of the Clean Air Act, 1970 to 1990
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       1993b. External Draft, Air Quality Criteria for
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       Volume n. Office of Health and Environmen-
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U.S. Environmental Protection Agency (U.S. EPA).
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       Quality Standards for Sulfur Oxides: Assess-
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U.S. Environmental Protection Agency (U.S. EPA).
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U.S. Environmental Protection Agency (U.S. EPA).
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       Mathtech, Inc., under EPA Contract No.
       68D30030, WA 1-29. August.

Ware J.H., D.W. Dockery, A. Sprio m, F.E. Speizer,
       and E.G. Ferris, Jr. 1984. "Passive Smoking,
       Gas Cooking, and Respiratory Health of Chil-
       dren Living in Six Cities." American Review
       of Respiratory Disease 129:366-374.

Watson,  W. and  J. Jaksch. 1982. "Air Pollution:
       Household Soiling and Consumer Welfare
       Losses." Journal of Environmental Econom-
       ics and Management.  9: 248-262.

Whittemore, A. S., and E. L. Korn.  1980. "Asthma
       and Air Pollution in the Los Angeles Area."
       American Journal of Public Health 70:687-
       696.
World Health Organization (WHO). l996.Final Con-
       sultation on Updating and Revision of the Air
       Quality Guidelines for Europe. Bilthoven,
       The Netherlands 28-31 October, 1996 ICP
       EHH018VD962.il.
                                              D-52

-------
 Appendix E:  Ecological Effects of Criteria
 Pollutants
 Introduction

    Benefits to human welfare from air pollution re-
 ductions achieved under the CAA can be expected to
 arise from likely improvements in the health of aquatic
 and terrestrial ecosystems and the myriad of ecologi-
 cal services they provide. For example, improvements
 in water quality  stemming from a reduction in acid
 deposition-related air pollutants (e.g., SOx and NOx)
 could benefit human welfare through enhancements
 in certain consumptive services such as commercial
 and recreational fishing, as well as non-consumptive
 services such as wildlife viewing, maintenance of
 biodiversity, and nutrient cycling. Increased growth
 and productivity  of U.S. forests could result from re-
 duced emissions of ozone-forming precursors, particu-
 larly VOCs and NOx, and thus may yield benefits from
 increased timber production; greater opportunities for
 recreational  services such as hunting, camping, wild-
 life observation; and nonuse benefits such as nutrient
 cycling, temporary CO2 sequestration, and existence
 value.

    In this Appendix, the potential ecological benefits
 from CAA pollutant controls are discussed in the con-
 text of three types of ecosystems: aquatic, wetland,
 and forest. In describing the potential ecological ben-
 efits of the CAA, it is clearly recognized that this dis-
 cussion is far from being comprehensive in terms of
 the types and magnitude of ecological benefits that
 may actually have occurred from the implementation
 of the CAA. Rather, this discussion reflects current
 limitations in understanding and quantifying the link-
 ages which exist  between air quality and ecological
 services, in addition to limitations hi the subsequent
 valuation of  these services in monetary terms.  This
 discussion also does not cover potential benefits from
 improvements in other ecological services, namely ag-
 riculture and visibility, which are discussed and quan-
 tified in other sections of this report. This appendix
is dedicated to a qualitative evaluation of ecological
benefits. However, where possible, the existing body
of scientific literature is drawn upon in an attempt to
 provide insights to the possible magnitude of benefits
 that may have resulted from CAA-related improve-
 ments of selected ecological services. It is important
 to note that the inability to fully value ecological ser-
 vices results in a significant undervaluation of the
 ecological benefits of air pollution reductions.  This
 undervaluation should not be interpreted as a devalu-
 ation.


 Benefits From Avoidance of
 Damages to Aquatic Ecosystems

    Aquatic ecosystems (lakes, streams, rivers, estu-
 aries, coastal areas) provide a diverse range of ser-
 vices that benefit the welfare of the human popula-
 tion.  Commercially, aquatic ecosystems provide a
 valuable food source to humans (e.g., commercial fish
 and shellfish harvesting), are used for the transporta-
 tion of goods and services, serve as important drink-
 ing water sources, and are used extensively for irriga-
 tion and industrial processes (e.g., cooling water, elec-
 trical generation). Recreationally, water bodies pro-
 vide important services that include recreational fish-
 ing, boating, swimming, and wildlife viewing.  They
 also provide numerous indirect services such as nu-
 trient cycling, and the maintenance of biological di-
 versity.

    Clearly,  these and other services of aquatic eco-
 systems would not be expected to be equally respon-
 sive to changes in air pollution resulting from the
 implementation of the CAA.  The available scientific
 information suggests that the CAA-regulated pollut-
 ants that can be  most clearly linked to effects on
 aquatic resources include SOx and NOx (through acid
 deposition  and increases  in  trace  element
bioavailability), NOx (through eutrophication of ni-
trogen-limited water bodies), and mercury  (through
changes in atmospheric deposition). Potential ben-
efits from each of these processes (acid deposition,
eutrophication, mercury accumulation in fish) are
described separately in the following sections.
                                              E-l

-------
The Benefits and Costs of the Clean Air Act, 1970 to 1990
Acid Deposition

Background

    Acid deposition refers to the depositing of strong
acids (e.g., H2SO4, HNO3) and weak acids «NH4)2SO4,
NH^NOj) from the atmosphere to the earth's surface.
Acid deposition can occur in the wet or dry form and
can adversely affect aquatic resources through the
acidification of water bodies and watersheds. Acidi-
fication of aquatic ecosystems is of primary concern
because of the adverse effects of low pH and associ-
ated high aluminum concentrations on fish and other
aquatic organisms. Low pH can produce direct ef-
fects on organisms, through physiological stress and
toxicity processes, and indirect effects, mediated by
population and community changes within  aquatic
ecosystems. Acidification can affect many different
aquatic organisms and communities. As pH decreases
to 5.5, species richness in the phytoplankton, zoop-
lankton,  and benthic invertebrate communities de-
creases.1  Additional decreases  in pH affect species
richness  more significantly, and may sometimes af-
fect overall biomass.2 Table E-l presents descrip-
tions of the biological effects of acidification at dif-
ferent pH levels.  In evaluating the severity of bio-
logical changes due to acidification, the reversibility
of any changes is an important consideration; biologi-
cal populations and communities may not readily re-
cover from improved water quality under certain cir-
cumstances.  Researchers have addressed acidifica-
tion effects through many different experimental pro-
tocols, including laboratory bioassays, particularly
concerning pH,  aluminum, and calcium; manipula-
tive whole-system acidification studies in the field;
and comparative, nonmanipulative field studies.

    Although acidification affects  phytoplankton,
zooplankton, benthic invertebrates, fish, amphibians,
and waterfowl, most acidification research has con-
centrated on fish populations.3 Aluminum, which can
be toxic to organisms, is soluble at low pH and is
leached from watershed soils by acidic deposition.4
Acidification may affect fish in several ways.  The
direct physiological effects of low pH and high alu-
minum include increased  fish mortality,  decreased
growth, and decreased reproductive potential.  The
mechanism of toxicity involves impaired ion regula-
tion at the gill.5 Population losses occur frequently
because of recruitment failure,6  specifically due to
increased mortality of early life stages.7 Changes at
other trophic levels may affect fish populations by
altering food availability.8  Fish in poorly buffered,
low pH water bodies may accumulate higher levels of
mercury, a toxic metal, than in less acidic water bod-
ies, due to increased mercury bioavailability.  The
primary consequence  of mercury accumulation ap-
pears to be hazardous levels to humans and wildlife
who consume fish, rather than direct harm to aquatic
organisms (discussed further below).

    The CAA-regulated pollutants that are likely to
have the greatest effect on aquatic ecosystems through
acid deposition and acidification are SO2 and NOx. In
the atmosphere, SO2 and NOx react to form sulfate
and nitrate particulates, which may be dry-deposited;
also the pollutants may react with water and be wet-
deposited  as dilute sulfuric and nitric acids. SO2 is
considered the primary cause of acidic deposition,
contributing 75 to 95 percent of the acidity in rainfall
in the eastern United States.9

Current Impacts of Acid Deposition

    Effects on Water Chemistry

    The effects of acid deposition and resulting acidi-
fication of water bodies was intensively studied as part
of a 10-year, congressionally-mandated study of acid
rain problems in the United States.10  Based on the
NAPAP study, it is estimated that 4 percent of the
lakes and 8 percent of the streams in acid-sensitive
    1 J. Baker et al., NAPAP SOS/T 13,1990; Locke, 1993.

    2 J. Baker et al., NAPAP SOS/T 13,1990.

    3  NAPAP, 1991.

    4  J. Baker et al., NAPAP SOS/T 13,1990.
    5 J. Baker et al., NAPAP SOS/T 13,1990.

    6 Rosseland, 1986.

    7 J. Baker et al., NAPAP SOS/T 13,1990.

    8 Mills et al., 1987.

    9 NAPAP, 1991.
    10 NAPAP. 1991.	
                                                 E-2

-------
                                                                     Appendix E: Ecological Effects of Criteria Pollutant;
                                        lea! Conges 'w1th,-S,urface-feter AcMificatiqii,,    —'   '\,
            Decrease
           5.5to5.0
                             ^e^easft in speties ridaiess ofpjhytbjilaitooti, 20pgl«akt«i, and berithic
                                                       sitiv/spectes, bu{'no mrasurable chan
                                                       •.,  ',„     -s,  ,';>vv/ "
                                                        V', -•  **'"<*',      '**>-.,
                                                       active succes^'may occur for aciS4eiave-fishaiieci«s!
                          rttttno^,,stape         ''^J'' j * •>     '       s      'v-xv''  s s'     '"o 4,  '        'ff    \

'• f^1* 4veise eff^Cdfc^easdd'^lfe'dBcttVB succes^inay oWiir for aciS^eralSve-fish'ap'ecies feg-StWad."
 Loss of se»sitiw' sp^i^offita'l&kand <3ace; socfeas blacknose^coand.
 ceo^eased reproductive success (rflafce taut'ai^ walleye    ..... "  "'";-     ""
 -    -''      "™  ""*-•"  ""*      ..... y";      lm"~-
                                                                                           )owt ia'some waters "
                                                                                               '  '"
 Loss Qf^B^Bj« of ooiBmtMi,,ifiy4«ebW-^eoies
                                                                               'aBlj fe'nthSe in
                                                                                                        of
                                                                                                ''•>        ' '
                                                                 !aketrosat,
                                                                        '
                                                        .-
                             fitosn,^iid beaAic iayeiteBf^otantunitlBs^cereases in-the total abundance tad biotnass of bentte' V
                                                        jS some Wafers,
                                                          ,, "^ •>        •.  ,,
                                            \   <  '\"*'-.  "     	^ .... - -jp -^^--^pn—T -r 	T--va4.— ,™.fl.w^.ni^^Jr^x,w,^t.jA
                                            teuehtenbergianamtAsptqpcfia prio^otita;,^ snaas,- raSst^ectes of clams,-31$ many
                                               ''                              "'<>'4"-        -'""'•*°             '"-
                              m,ost ish
                                                ?-;-     ---  f ,-      -  •->-(      * * ,,x
                                          rt-ftshspe4es-swb ai^wolf toftt-aad,Atlabtic salmon,
                        Substa'ntiaXdecrease'in-tbe.nurafeer of species, of zoopiakkton aa8"benftio
                        clferis ^ndtrtany insects and cru&icean.$;; measurable-^crease in tjje totaV
                        a»dbeMMc!,i|yertebi'8resi»^ostwat«rsr'>'''-\ •     ,-, '       ^•"•'~->~v
                                                                    Mbiaas sucfe Ss spotted sfi&'a
                                                                    '      ''"'    "-,	
regions of the U.S. are chronically acidic due to natu-
ral and anthropogenic causes. NAPAP defines acidic
conditions as occurring when  the acid neutralizing
capacity11 (ANC) is below 0 ueq/L. Furthermore, ap-
proximately 20 percent of  the  streams and lakes in
these regions are considered to  be extremely suscep-
tible to acidity  (defined as ANC <50  ^eq/L) and
                                     slightly more than half show  some susceptibility to
                                     acidification (defined as ANC <200 ueq/L).

                                         In terms of the role of acid deposition as a causal
                                     mechanism for the acidification of water bodies, it is
                                     estimated that 75 percent of the 1,181 acidic lakes
                                     and 47 percent of the 4,668 streams studied under


-------
The Benefits and Costs of the Clean Air Act, 1970 to 1990
NAPAP receive their dominant source of acid anions
from atmospheric deposition (see Table E-2). On a
regional basis, the importance of acid deposition var-
ies considerably, which is believed to result from re-
gional differences in SOx and NOx emissions and dif-
ferences in the biogeochemistry of individual water-
sheds. For acidic lakes (ANC <0), the regions  that
appear most likely to be influenced by acid deposi-
tion include the Adirondacks and Mid-Atlantic High-
land region, with acid deposition cited as the domi-
Florida, where the vast majority (79 percent) are acidic
primarily due to organic acids, rather than acid depo-
sition.

    Effects on Fish Habitat Quality

    By combining information on relevant water
chemistry parameters (pH, aluminum, calcium), fish
toxicity models, and historical and current distribu-
tions of fish populations in the lakes and streams in-
        Table E-2. Comparison of Population of Acidif %ioiial'- Surface Water Jurvey (NSWS) by'
        Chemical Category'1           «,--   '    -        -•                 -         '•••<••• •
Region
V
^
New England
Adirondacks
Mid- Atlantic Highlands , ,„
Southeastern Highlands
Horida
Upper Midwest -
West
AH Lakes

Mid-AtlanticHigblands
Mid-Atlantic Coastal Plain
Southeastern Highlands
Florida
All Streanis
, Number ,ojf,,,, JSeposifiori* ,„„ Organic , •/ Acid Mrnev,,, ,- ' Wa&rsted
"Acidic '. \i ."-Efoaiirated ' , Etojainated " ' ' Drainage, - 'Sauate^
Waters ' MJ^'" ' v / ' "" t,/,/-.;'-""* Dominated , Dominated
' """"' r'ViAKBs, ' ,7--:-,: ; t;'v,;!,^-- - - ' ^ "'"" '
* *•* *i *n rr& "• %'f^''J 0 i J _, ^ J"'t V J -VH- %
" s 1 fJ , ,; vv'11" yy / -.- - ^ __ A* ^ -,v i •pim ^ ^ , - ,77, '
*, ' ^ v . ._; ^ "/ & ' , A^Sf "• " ,/•»'*"'
s ^vvv*, '*"^J , ^^f^^J* *^* J „ , ft A\/,i '',, __ A ' *
- 477 ,, W" - ' ",?^,//, ' ",~ ,- -~ ' 4, , -


* 'IV -- "-' *^ ;„;,--' ' r->-. * *•""**.. A •' '->'<"'/'
1334" " _ 44 '•""'''*," -s-54, ' • ~"^','<1^W, '%',',
-"/«,/--* <".*""" - ; "" <,?;,-;---,-' ' '"
"243-,'--*': 50 ---J--- 50 ' — ,;>'//
;-' 677 , / W2i ' " ;%, '^,'";,7:M",,:":L«~:'- '-,---~'
4^a;" : -• - --47 ' „ ,„ 7€ *w ' • 26 , --^ :rt?
-------
                                                            Appendix E: Ecological Effects of Criteria Polh
   the survival of acid-sensitive species such as minnows.
   About two percent and six percent of the lakes in the
   New England region are estimated to be unsuitable
   for acid-tolerant and acid-sensitive fish species, re-
   spectively. A greater proportion of streams in the Mid-
   Atlantic Highland region are estimated to be unsuit-
   able for acid-tolerant and acid-resistant fish species
   (18 percent and 30 percent, respectively); however,
   about 44 percent of streams surveyed  in this region
   are thought to be heavily influenced by acid mine
  drainage (Table E-2).

      Economic Damages to Recreational Fishing

      In an effort to assess some of the impacts from
  existing levels of acid deposition to public welfare,
  NAPAP investigated the current economic damages'
  associated with acid deposition to trout anglers of New
  York, Maine, Vermont, and New Hampshire. The
  general approach used consisted of linking the catch
  per unit effort (CPUE) for four species of trout at in-
  dividual lakes (estimated using participation survey
  data) to the relevant water quality conditions at these
  lakes (namely, the acid stress index or ASI).  Using
  historical water quality data, critical water  quality
  conditions  (i.e., the ASI values) were estimated for
  lakes in the absence of acid deposition and compared
  to current conditions reflecting  the presence of acid
 deposition. Using two types of travel cost models, the
 Random Utility Model (RUM)  and Hedonic travel-
 cost model (HTCM), estimates of the willingness to
 pay (WTP) per trip of sampled trout anglers were ob-
 tained. Aggregate estimates of the WTP were obtained
 across the populations of trout anglers using statisti-
 cal weighting factors.  Finally, the difference in total
 WTP between the current (acid deposition) scenario
 and the historical (acid deposition-free) scenarios was
 determined.

    The resulting estimates of economic damages to
 trout  anglers in the four state region are relatively
 small. Specifically, damage estimates range from $0.3
 million to $1.8 million (in 1989  doliars) for the he-
donic travel-cost and random utility models, respec-
tively. By many accounts, these estimates can be con-
sidered to underestimate actual damages to anglers in
these states. First, data limitations precluded the de-
velopment of meaningful WTP estimates for brook
   trout anglers, which may be a significant component
   of trout fishing in these areas. Second, resource con-
   straints necessitated exclusion of a large population
   of trout anglers (i.e., those residing in New York City).
   Third, the economic damage estimates were limited
   to trout anglers, thus excluding potentially similar if
   not greater economic damages to anglers fishing for
   other coldwater or warmwater fish  species.  In addi-
   tion, the NAPAP analysis was performed in the con-
   text of recreational fishing in lakes, thereby exclud-
  ing potentially important welfare impacts from recre-
  ational fishing in streams. Finally, these estimates do
  not address non-use values of lakes in this region.

  Benefits From Acid Deposition Avoidance Under
  the CAA

     It is currently estimated that in the absence of
  pollution reductions achieved under the Clean Air Act,
  total sulfur emissions to the atmosphere would have
  increased by nearly sixteen million tons by 1990, a 40
  percent increase above 1990 levels estimated with
  CAA controls remaining in place.13  Based on atmo-
  spheric transport and deposition modeling,  this  in-
  crease in sulfur emissions corresponds to an approxi-
  mate 25 to 35 percent increase in total sulfur deposi-
  tion (wet & dry) in large portions of the northeastern
  portion of the United States.14  Given sulfur emission
  and deposition changes of this magnitude, and the
  importance of sulfur emissions in contributing to acid
 deposition, one would expect some benefits to human
 welfare to be achieved as a result of improved quality
 of aquatic ecosystems.  To date, however, no formal
 benefits assessment of CAA-avoided acid deposition
 impacts has been conducted for aquatic ecosystems.
 Nevertheless, past benefit assessments involving acid
 deposition impacts on aquatic ecosystems provide
 some opportunity to gain insights into  the relative
 magnitude of certain aquatic-based benefits that may
 be achieved through pollution reductions under the
 CAA.15

    Recreational Fishing

    NAPAP evaluated the impact of changes in acid
deposition on use values of aquatic ecosystems (i.e.,
recreational fishing).16 In their integrated assessment,'
NAPAP valued the impacts of three different sulfur-
    13  U.S. EPA, 1995; Table B-2.

    14  U.S. EPA 1995, p. 3-10.

    15  See, for example, NAPAP, 1991.
    16  NAPAP, 1991.

-------
The Benefits and Costs of the Clean Air Act, 1970 to 1990
induced acid deposition scenarios to trout anglers from
NY, VT, NH and ME.17  The three scenarios evalu-
ated were:

    1.   No change in acid deposition.
    2.   A 50 percent reduction in acid deposition.
    3.   A 30 percent increase in acid deposition.

    As described above, equations were developed by
NAPAP to estimate the catch per hour for species at
each lake as a function of the ASI value for each lake
and of the technique of the fishers. Baseline and pre-
dicted changes in CPUE were evaluated for all lakes
modeled in the region. Willingness-to-pay estimates
for CPUE per trip were derived for the baseline and
sulfur emission scenarios using two travel-cost mod-
els, a random utility model and a hedonic travel cost
model. These willingness-to-pay estimates were then
combined with the results of a participation model
that predicted the total number of trips taken by trout
anglers. Total welfare changes were determined over
a 50 year period (from 1990 to 2040).

    At current levels of acid deposition, NAPAP esti-
mates that trout anglers in these four states will expe-
rience annual losses by the year 2030 of $5.3 or $27.5
million (in 1989 dollars) for the random utility model
and hedonic travel cost model, respectively (see Table
E-3). If acid deposition increases by 30 percent, which
                                         roughly corresponds to the 25 to 35 percent increase
                                         predicted for the northeast U.S. in the absence of CAA
                                         sulfur controls,18 the resulting economic losses to trout
                                         anglers in 2030 would range from $ 10 million to nearly
                                         $100 million annually (in 1989 dollars) for the RUM
                                         and HTCM, respectively. If deposition decreases by
                                         50 percent, annual benefits to recreational anglers are
                                         estimated to be $14.7 million (RUM) or $4.2 million
                                         (HTCM).

                                             While an estimation of CAA-related benefits to
                                         trout anglers based on the 30 percent increase in acid
                                         deposition scenario has some appeal, a strict transfer
                                         of these benefits to the section 812 retrospective analy-
                                         sis is hindered by several factors.  First, the NAPAP
                                         benefits estimates are projected for future conditions
                                         (the year 2030). Therefore, the extent to which the
                                         NAPAP benefits reflect conditions and benefits in
                                         1990 (the focus of the section 812 retrospective as-
                                         sessment) is unclear. Second, the NAPAP and CAA
                                         section 812 analyses operate from different baselines
                                         (1990 for the NAPAP study versus 1970-1990 for the
                                         section 812 study). However, the NAPAP estimates
                                         of annual benefits  of $10 to $100 million provide a
                                         rough benchmark for assessing the likely magnitude
                                         of the avoided damages to an important and sensitive
                                         recreational fishery in a four-state area most impacted
                                         by surface water acidification from atmospheric depo-
                                         sition.
  Table E-3. Results from
  Ecosystem Use Values from1 Acid Bepo,sMon;Avc-idaSSb%.
  —   J                       ' <•<><• •"••*    .,	.,.,.,.. ..^wfl^v^ -?<-/•
   Study
   NAPAP
   (1991)
Use      Scenario Modete4f:,,;>. > Mefltod  Annual Beneftts
Vafue           -""• x *V," '" "       '""".'7'-'!«,-  -   ' '.'
Trout     No changp iii alai  °
Fishing    deposition- Vs? ~

(NY,     50% decrease- in acid''
ME, VT,   deposition
NH)                _<•_;_ ^

         30% increase jtf acid1'
         deposition
mm-
HTCM

RUM
                                                    4lG'<3lniili
-------
                                                         Appendix E: Ecological Effects of Criteria Pollutants
 composition.19 Nuisance algal blooms can have nu-
 merous economic and biological costs, including wa-
 ter quality deterioration affecting biological resources,
 toxicity to vertebrates and higher invertebrates, and
 decreased recreational and aesthetic value of waters.20
 Although severe eutrophication is likely to adversely
 affect organisms, especially fish, a moderate increase
 in nutrient levels may also increase fish stocks, by
 increasing productivity in the food chain.21

 Atmospheric Deposition and Eutrophication

    The deposition of NOx in aquatic systems and then-
 watersheds is one source of nitrogen that may con-
 tribute to eutrophication. The relative importance of
 NOx deposition as a contributor to aquatic eutrophi-
 cation depends on the extent to which the productiv-
 ity of an aquatic ecosystem is limited by nitrogen avail-
 ability and the relative importance of nitrogen depo-
 sition compared to other internal and external sources
 of nitrogen to the aquatic ecosystem. Furthermore,
 the vulnerability of aquatic ecosystems  to eutrophi-
 cation is known to vary seasonally and spatially, al-
 though these systems are affected by nutrient deposi-
 tion throughout the year. In general, freshwater eco-
 systems appear to be more often limited by phospho-
 rus, rather than nitrogen, and are not as likely to be
 heavily impacted by nitrogen deposition compared to
 some estuarine and coastal ecosystems.22  In contrast
 to acidification of streams and lakes, eutrophication
 from atmospheric deposition of nitrogen is more com-
 monly found  hi  coastal  and  estuarine ecosystems,
 which are more frequently nitrogen-limited.23

    Unfortunately, there is limited information with
 regard to the relative importance of atmospheric depo-
 sition as a nitrogen source hi many estuarine and ma-
rine ecosystems. Estimates of the importance of at-
mospheric nitrogen deposition are difficult to make
because of uncertainties in estimating deposition, es-
pecially dry deposition, as well as watershed nitrogen
retention.24  Paerl (1993) reviews the importance of
 atmospheric nitrogen deposition as a contributor to
 eutrophication of coastal ecosystems; he concludes
 that 10 to 50 percent of the total nitrogen loading to
 coastal waters is from direct and indirect atmospheric
 deposition.  Estimates for the economically impor-
 tant Chesapeake Bay indicate that about 25 to 40 per-
 cent of the nitrogen loadings to the bay occur via at-
 mospheric deposition.25 Hinga et al. (1991) estimate
 that anthropogenic deposition provides 11 percent of
 total anthropogenic inputs of nitrogen in Narragansett
 Bay, 33 percent for the New York Bight, and 10 per-
 cent for  New York Bay.  Fisher and Oppenheimer
 (1991) estimate  that atmospheric nitrogen provides
 23 percent of total nitrogen loading to Long Island
 Sound and 23 percent to the lower Neuse River in
 North Carolina.  Information on the importance of
 atmospheric nitrogen deposition for most other U.S.
 coastal ecosystems is not available hi the literature.
 Episodic atmospheric inputs of nitrogen may be an
 important source of nitrogen to nutrient-poor marine
 ecosystems, such as the North Atlantic near Bermuda
 and the North Sea.26

 Valuing Potential Benefits from Eutrophication
 Avoidance Under the CAA

    It is  currently  estimated that in the absence of
 pollution reductions achieved under the Clean Air Act,
 total nitrogen emissions to the atmosphere would have
 increased by nearly 90 million tons by 1990, a two-
 fold increase above 1990 levels estimated with CAA
 controls remaining hi place.27  However, the ability
 to determine the potential economic benefit from such
 a reduction in nitrogen emissions is heavily  con-
 strained by gaps in our current biological and eco-
nomic knowledge base of aquatic ecosystems.

    One water body that has received much study in
the area of nitrogen-induced eutrophication is Chesa-
peake Bay.  As previously discussed, it is estimated
that atmospheric deposition of nitrogen contributes
approximately 25 percent to the total nitrogen load-
    19 Paerl, 1993.

    20 Paerl, 1988.

    21 Hansson and Rudstam, 1990; Rosenberg et al., 1990; Paerl, 1993.

    22 Hecky and Kilham, 1988; Vitousek and Howarth, 1991.

    23 U.S. EPA, 1993; Paerl, 1993.

    24 U.S. EPA, 1993.

    25 U.S. EPA, 1994.

    26 Owens et al., 1992.

    27 U.S. EPA, 1995; Table B-3.	
                                                E-7

-------
The Benefits and Costs of the Clean Air Act, 1970 to 1990
ings to the bay.28  In deposition terms, an estimated
15 to more than 25 percent increase in total nitrogen
deposition has been forecast in the Chesapeake Bay
watershed by 1990 in the absence of CAA pollution
controls.29 These results are based on an estimated
40,000 tons of atmospherically deposited nitrogen (as
nitrate and ammonia) to Chesapeake Bay in 1985,30
which means a 20 percent increase in atmospheric
deposition would amount to approximately 8,000 ad-
ditional tons.

    One indirect method available to gauge the po-
tential economic relevance of avoidance of such at-
mospheric nitrogen loadings to Chesapeake Bay is
through the avoidance cost of nitrogen controls. How-
ever, such an assessment is difficult due to the site,
facility, and treatment-specific variation in treatment
costs. For example, Camacho (1993) reviewed nitro-
gen treatment costs for chemical treatment of water
from important point sources (mostly  public owned
treatment  works) and found that costs ranged from
$9,600 to $20,600 per ton (annual costs, 1990 dol-
lars), depending on the facility evaluated.  Biological
treatment of nitrogen from point sources was far more
expensive, varying from $4,000 to $36,000 per ton.
For control of non-point source loading, values of ni-
trogen removal practices ranged from  $1,000 to
$285,000 per ton.31 Taking chemical addition as one
possible example, the avoided costs of treatment of
8,000 tons of nitrogen would range from about $75
million to about $170 million annually (in 1990 dol-
lars).

Mercury

    Mercury, in the form of methyl mercury, is a neu-
rotoxin of concern and can accumulate in tissue of
fish to levels that are hazardous to humans and aquatic-
feeding wildlife in the U.S. In relation to the section
812 CAA  retrospective analysis, mercury  is of inter-
est for two reasons. First, potential benefits to human
welfare may have occurred as a result of mercury
emission controls implemented under EPA's National
Emission Standards for Hazardous Air Pollutants
(NESHAP). Second, experimental and observational
evidence suggests that acidification of water bodies
enhances mercury accumulation in fish tissues.32
Therefore, CAA-mandated reductions in sulfur and
nitrogen oxide emissions and subsequent acid depo-
sition may have resulted in indirect benefits from a
reduction in mercury accumulation in fish and subse-
quent improvements  to human health and welfare.

    The accumulation of mercury to hazardous levels
in fish has become a pervasive problem in the U.S.
and Canada. A rapid increase in advisories occurred
during the 1980s, including a blanket advisory affect-
ing 11,000 lakes in Michigan.33  The Ontario Minis-
tries of Environment and Natural Resources (1990)
recommend fish consumption restrictions for 90 per-
cent of the walleye populations, 80 percent of small-
mouth bass populations, and 60 percent of lake trout
populations in 1,218 Ontario lakes because of mer-
cury accumulation.  In many instances, mercury has
accumulated to hazardous levels in fish in highly re-
mote water bodies that are free from direct aqueous
discharges of mercury.34 Mass balance studies have
shown that atmospheric deposition of mercury can
account for the accumulation of mercury in fish to
high levels in lakes of these remote regions.35 The
potential impacts of mercury on the health of humans
and fish-eating (piscivorous) wildlife has lead EPA
to recently establish  water quality criteria to protect
piscivorous species in the Great Lakes.36

    Although mercury accumulation in fish via atmo-
spheric deposition is  now widely recognized as a po-
tential hazard to human health and certain  wildlife
species, studies establishing quantitative linkages be-
tween  sources of mercury emissions, atmospheric
deposition of mercury, and subsequent accumulation
in fish are lacking. Thus at the present time, we are
unable to quantify potential benefits from CAA-
avoided mercury accumulation in fish of U.S. water
    28 U.S. EPA, 1993.
    29 U.S. EPA 1995, Figure C-6.
    30 NERA, 1994.
    31 Shuyler, 1992.
    32 Bloom et al., 1991; Watras and Bloom, 1992; Miskimmin et al., 1992; Spry and Wiener, 1991; Wiener et al., 1990.
    33 Watras et al., 1994.
    34 Glass et al., 1990; Sorenson et al., 1990; Grieb et al. 1990; Schofield et al. 1994.
    35 Fitzgerald et al. ,1991.
    36 U.S. EPA, 1995.	 ,  ' ,
                                                 E-8

-------
                                                          Appendix E: Ecological Effects of Criteria Pollutants
  bodies. Given the pervasiveness of the mercury prob-
  lem with CAA-pollution controls, potential benefits
  to human health and welfare from avoidance of fur-
  ther mercury related damages to aquatic ecosystems
  could be substantial.

     It should also be noted that atmospheric deposi-
  tion is a major contributor to surface water loads of
  other toxic pollutants as well. For example, scientists
  believe that about 35 to 50 percent of the annual load-
  ings of a variety of toxic chemicals to the Great Lakes
  may be from the air; for lead, atmospheric deposition
  currently accounts for an estimated 95 percent of the
  total load in the Great Lakes.37  CAA-related reduc-
  tions in air emissions of toxic pollutants (such as lead)
  undoubtedly reduced the loading of these chemicals
 to the Great Lakes and other water bodies; the magni-
 tude of the benefits of reducing these exposures  to
 humans and wildlife is not known.


 Benefits  from Avoided Damages
 to  Wetland Ecosystems

 Introduction

    This review addresses the effects of air pollutants
 on wetland ecosystems; the focus is on acidification
 and nutrient loading.  Valuable service flows of wet-
 land ecosystems include flood control, water quality
 protection and improvement, wildlife  and fish habi-
 tat, and biodiversity. The limited scientific evidence
 suggests that air pollutants  may  most affect
 biodiversity, in particular because of nutrient loading
 through nitrogen deposition.

   Wetlands are broadly characterized as transitional
 areas between terrestrial and aquatic systems in which
 the water table is at or near the surface or the land is
periodically covered by shallow water.38 Types of
wetlands include swamps (forested wetlands), marshes
(herbaceous vegetation),  and peatlands, which are
wetlands that accumulate partially decayed vegeta-
tive matter due to limited decomposition.39  Peatlands
    "U.S. EPA, 1994.

    38 Cowardin et al., 1979.

    39 Mitsch and Gosselink, 1986.

    40 Mitsch and'Gosselink, 1986.

    41 U.S. EPA, 1993.

    42 Gorham et al., 1984.

    43 Turner et al., NAPAP SOS/T 10, 1990.
  include bogs and fens. Bogs receive water solely from
  precipitation, are generally dominated by Sphagnum
  moss, and are low in nutrients.  Fens receive water
  from groundwater and precipitation, contain more
  marsh-like vegetation, and have higher pH and nutri-
  ent levels than bogs.40  Most of the limited work on
  the effects of atmospheric deposition on wetlands has
  been done in peatlands, specifically in Europe, where
  levels of atmospheric deposition are generally much
  higher than in the U.S.

     The air pollutants of greatest concern with respect
  to effects on wetland ecosystems are oxides of nitro-
  gen (NOx) and oxides of sulfur (SOx), primarily sul-
 fur dioxide (SO2). Air pollutants may affect wetland
 ecosystems by acidification of vulnerable wetlands
 and by increasing nutrient levels.  Acidification in
 vulnerable wetlands may affect vegetation adversely,
 as appears to have occurred in Europe.  In wetlands
 where nitrogen levels are low, increased nitrogen
 deposition may alter the dynamics of competition
 between plant species. Species adapted to low-nitro-
 gen levels, including many endangered species, may
 decrease in abundance.41

 Effects of Acidification

    Limited evidence suggests that acidic deposition
 and  decreased pH may harm certain wetland plants,
 alter competitive relations between wetland plants and
 cause changes in  wetland drainage and water reten-
 tion.

    Work concerning the possible acidification  of
 peatlands is inconclusive. Acidic deposition is un-
 likely to result in displacement of base cations from
 cation exchange sites in bogs, and therefore it will not
 cause a drop in pH.42  Peatland sediments are low in
 A13+, so mobilization of toxic aluminum is not a con-
 cern as it is in forest soils and aquatic ecosystems.43
 Acidification might affect certain fen ecosystems.
 Gorham et al. (1984) have hypothesized that acidic
deposition could leach base cations from mineral-poor
fens  and decrease pH levels.  This could result in a
                                                E-9

-------
The Benefits and Costs of the Clean Air Act, 1970 to 1990
transition to bog vegetation such as Sphagnum and
away from sedge meadow vegetation. At this time,
this remains a hypothesis; however, pH did not de-
crease  in a mineral-poor Ontario fen during a four-
year period in which researchers experimentally in-
creased acidic deposition.44

    In  European wetlands affected by high levels of
deposition for many years, acidic deposition has seri-
ously affected wetland vegetation.  Roelofs (1986)
reports that acidification of heath pools in the Nether-
lands has caused a change in species composition with
Sphagnum and rushes replacing the original vegeta-
tion. Likewise, significant declines in Sphagnum in
British bogs have occurred in areas affected by 200
years of atmospheric pollution, including  nitrogen
deposition.45  It is unclear how such changes have af-
fected  wetland service flows apart from the effects on
biodiversity; however, water retention has decreased
and significant erosion has occurred hi seriously per-
turbed British bogs near Manchester and Liverpool.46

Effects of Nutrient Loading

    Atmospheric deposition may affect wetlands by
increasing the level of nutrients, particularly nitrogen,
in wetlands.  Sulfur is not a  limiting nutrient in
peatlands,47 but nitrogen commonly limits plant
growth.48  The effects of increased nitrogen levels in
wetlands include an increased  threat to endangered
plant species and possible large-scale changes in plant
populations and community structure.   Endangered
and threatened plant species are common in wetlands,
with wetland species representing 17 percent of the
endangered plant species in the U.S. (U.S. EPA, 1993).
These  plants are often specifically adapted to low ni-
trogen levels; examples include isoetids49 and insec-
tivorous plants.50 In eastern Canadian wetlands, na-
tionally rare species are most  common in infertile
sites.51 When nitrogen levels increase, other species
adapted to higher levels of nitrogen may competitively
displace these species. Thus, NOx emissions that in-
crease nitrogen levels in nitrogen-poor wetlands may
increase the danger of extinction for threatened and
endangered species.

    By changing competitive relations between plant
species, increased nitrogen deposition may broadly
affect community structure in certain wetlands. Com-
mon species that thrive in nitrogen-poor wetlands may
become less abundant. Many nitrogen-poor bogs in
the northern U.S.  are dominated by Sphagnum spe-
cies. These species capture low levels of nitrogen from
precipitation. Increased nitrogen levels may directly
harm Sphagnum and cause increased nitrogen to be
available to vascular plants that may out compete Sph-
agnum.52  Studies in Great Britain have documented
large declines in Sphagnum moss because of atmo-
spheric pollution;53 nitrogen loading may play an im-
portant role in these declines.  However, Rochefort et
al.  (1990) document limited effects of fertilization
from experimentally-increased NO3~ and SO42' depo-
sition on an Ontario mineral-poor fen over a four-year
period, apart from initially increased  Sphagnum
growth.  Thus, increased nitrogen loading might ad-
versely or beneficially affect wetland plants depend-
ing on baseline nitrogen concentrations in the wet-
land, atmospheric nitrogen loading, and species  re-
quirements for and sensitivity to nitrogen.

    Increases in nitrogen levels due to NOx emissions
will have the greatest effect on wetlands that are ex-
tremely  nitrogen-limited and that receive small
amounts of nitrogen naturally. Since bogs, including
Sphagnum bogs, receive little surface water runoff,
they get most of their nutrient and water loadings
through precipitation. These bogs may receive a total
of approximately  10 kg nitrogen per hectare per year
(kg N/ha/yr), which is one to two orders of magnitude
less nitrogen than other freshwater wetlands and
    44 Rochefort et al., 1990.

    45 Lee et al., 1986.
    44 Lee et al., 1986.
    47 Turner et al., NAPAP SOS/T 10,1990.
    48 U.S. EPA, 1993.
    49 Boston, 1986.

    30 Moore et al., 1989.
    51 Moore et al., 1989; Wisheu and Keddy, 1989.

    52 Lee & Woodin 1988, Aerts et al., 1992.
    53 Ferguson et al., 1984; Lee et al., 1986.

                                                 E-10

-------
                                                          Appendix E: Ecological Effects of Criteria Pollutants
  saltmarshes receive.54  As atmospheric deposition of
  nitrogen has been estimated to be at least 5.5 to 11.7
  kg N/ha/yr,55 changes in NOx emissions would most
  likely affect these bogs.  The results of a model by
  Logofet and Alexandrov (1984) suggest that a tree-
  less, nutrient-poor bog may undergo succession to a
  forested bog because of the input of greater than 7 kg
  N/ha/yr.

     As in freshwater wetlands, significantly increased
  nitrogen deposition to coastal wetlands will increase
  productivity and alter the competitive relationships
  between species.56 However, studies showing this
  increased productivity have used 100 to 3000 kg  N/
 ha/yr.57  Therefore, limited changes in NO emissions
 may not affect coastal wetland productivity.

  Summary of Wetland Ecosystem Effects

    The effects of air pollutants on wetlands have re-
 ceived little attention, in contrast to the large body of
 work on the effects of acid rain on aquatic and forest
 ecosystems.  Little evidence exists  suggesting that
 acidification due to atmospheric deposition is a ma-
 jor threat to wetlands.  In particular, peatlands are
 naturally acidic, although mineral-poor fens may be
 at risk from acidification. Nitrogen loading may alter
 community composition in wetlands naturally low in
 nutrients, such as bogs. Nitrogen loading may threaten
 rare species adapted to low nitrogen levels. In Britain
 and The Netherlands, heavy atmospheric deposition
 over a long period appears to have caused serious de-
 clines in Sphagnum in peatlands.

    Air pollutants appear to most seriously threaten
 rare and  endangered species, biodiversity, and com-
 munity composition in wetlands, particularly bogs.
 These changes are difficult to associate with changes
 in economic value; even the qualitative nature of the
 effects is uncertain. Air pollutants may not signifi-
cantly affect such important wetland service flows as
flood control, water quality protection, and wildlife

    M U.S. EPA, 1993.
    55 U.S. EPA, 1993.
    56  U.S. EPA,  1993.
    57 U.S. EPA, 1993.
    58 Powell etal. 1993.
    59 U.S. DOI, 1993.
   60 Shriner et al., NAPAP SOS/T 18,1990.
   61 NAPAP, 1991.
   62 Shriner et al., NAPAP SOS/T 18,1990.
  habitat in most wetlands, so the impacts on the more
  readily monetized aspects of the economic value of
  wetlands may be limited.


  Benefits from Avoided Damages
  to Forests

  Introduction

     Forests occupy 33 percent of the land mass in the
 U.S. (some 738 million acres) and provide a wealth
 of services to the U.S. population.58 Notable services
 provided by forests include timber production, recre-
 ational opportunities such as hunting, camping, hik-
 ing, and wildlife observation, water quality protec-
 tion, nutrient removal and cycling, flood control, ero-
 sion control, temporary carbon sequestration, preser-
 vation of diversity,  and existence values. In 1991,
 hunting participation alone accounted for 236 million
 recreation days that included 214 million person trips
 with estimated expenditures valued at $12.3 billion.59

    The Clean Air Act-regulated pollutants of great-
 est concern with respect to effects on forest ecosys-
 tems are oxides of sulfur (SOx), primarily sulfur di-
 oxide (SO2), oxides  of nitrogen (NOx),  and  volatile
 organic compounds (VOCs). While extremely high
 ambient concentrations of SO2 and NOx may directly
 affect vegetation, such effects are uncommon in the
 U.S.;60 the indirect effects of these pollutants are of
 greater concern. Specifically, emissions of SO2 and
 NOx are known to contribute to acid deposition in
 portions of the United States, with SO2 contributing
 75 to 95 percent of the acidity in rainfall in the east-
 ern U.S.61  Acid deposition  is of concern  to forests
 primarily from the acidification of soils (i.e., by re-
 ducing seed germination, altering nutrient and heavy
 metal availability).  Direct foliar damage can occur
from precipitation with extremely low pH levels (i.e.,
3.0-3.6 and below), although these levels are lower
than ambient levels in the U.S.62 VOCs and NO  are
                                               E-ll

-------
The Benefits and Costs of the Clean Air Act, 1970 to 1990
important precursors to ozone formation, which can
affect leaf photosynthesis and senescence and decrease
cold hardiness, thereby causing deleterious impacts
on tree growth, survival and reproduction.  Deposi-
tion of NO may also alter the nutrient balance of for-
est  soils, which in turn might alter the competitive
relationships between tree species and affect species
composition and diversity.63

Current Air Pollutant Effects on Forests

Acid Deposition Impacts

    In 1985, NAPAP organized the Forest Response
Program (FRP) to evaluate the significance of forest
damage caused by acidic deposition, the causal rela-
tionships between air pollutants and forest damage,
and the dynamics of these relationships regionally.
Research was  focussed on four forest regions: East-
ern Spruce-Fir, Southern Commercial Forests, East-
ern Hardwoods, and Western Conifers. With the ex-
ception of high-elevation spruce-fir forests, the avail-
able evidence suggests that acidic deposition does not
currently affect these forests and that observed de-
clines in sugar maple and southern pines are not due
to acidic deposition.64

    Circumstantial evidence suggests that acidic depo-
sition may affect high-elevation spruce-fir forests in
the northeastern U.S.  These forests have extensive
contact with acidic cloud water.65  Experimental evi-
dence suggests that acidic deposition may affect cold
hardiness in red spruce, an important component of
the spruce-fir forest. Significant declines in red spruce
growth and in its importance hi the forest have oc-
curred in New York and northern New England.  The
proximate cause of death of red spruce in the region
is pathogens and insects; acidic deposition may inter-
act with these biological stresses  and with weather-
induced stress to produce adverse effects hi red spruce.
Ozone may also play a role hi red spruce decline in
this region.66  Available evidence suggests that soil
aluminum and soil  pH levels have not affected red
spruce adversely.67
Ozone Impacts

    Experimental Evidence *

    For practical reasons, the majority of experimen-
tal evidence linking ozone exposure to damage to tree
species has been derived from studies of individual
plants, especially seedling and branch studies.68  Re-
sults from these studies suggest that ozone exposure
can reduce photosynthesis and increase senescence in
leaves.  Subsequently, such effects from ozone may
alter the carbohydrate allocation to plant tissues such
as roots, which may affect plant growth and cold har-
diness.  Decreases in cold tolerance may be particu-
larly important for trees in northern latitudes and high
elevations. Recent work on quantifying the relation-
ship between ozone exposure and plant responses sug-
gest that seedlings of aspen, ponderosa pine, black
cherry, tulip poplar, sugar maple, and eastern white
pine seedlings may experience biomass reductions of
approximately 10 percent at or near ambient ozone
exposures.69  Because trees are perennials, the effect
of even a 1-2 percent per year loss in seedling biom-
ass (versus 10 to 20 percent yield loss in crops), if
compounded over multiple years under natural field
conditions of competition for resources, could be se-
vere.

    Although indicative of short-term relative re-
sponse to ozone exposure, results  from these experi-
ments are unable to provide reliable information on
the long-term effects of ozone on  forests. This limi-
tation arises because the  effects of ozone on forests
will depend on both the response of individual plants
to ozone exposure and the response of populations of
plants, which interact with their environment.  Popu-
lation response will be altered by the varying intraspe-
cific genetic susceptibility to ozone. Individual plant
response will also be affected by many environmen-
tal factors, including insect pests, pathogens, plant
symbionts, competing plants,  moisture, temperature,
light, and other pollutants. Consistent evidence on
the interaction of ozone with other  environmental fac-
tors is lacking. Furthermore, most experimental stud-
    <° U.S. EPA, 1993.
    M Barnard et al., NAPAP SOS/T 16,1990; NAPAP, 1991.
    65 Barnard et al., NAPAP SOS/T 16,1990.

    M Shriner et al., NAPAP SOS/T 18,1990.
    OT Barnard et al., NAPAP SOS/T 16,1990.
    « U.S. EPA, 1996a.
    69 Hogsettetal. ,1995.	
                                                 E-12

-------
                                                           Appendix E: Ecological Effects of Criteria Pollutants
 ies have only studied exposure for one growing sea-
 son; effects on forest species may occur over de-
 cades.70 Therefore, considerable uncertainties occur
 in scaling across individuals of different ages, from
 individuals to populations and communities, and
 across time.

     Observational Evidence

     Studies of the forests of the San Bernardino Moun-
 tains provide the strongest case for linking ozone ex-
 posure to damages to an entire forest ecosystem. These
 forests have been exposed to extremely high ambient
 ozone levels over the past 50 years due to then: prox-
 imity to the Los Angeles area. The area has been ex-
 tensively studied regarding the effects of ozone, as
 described in U.S. EPA (1996a). The ecosystem has
 been seriously affected by ozone pollution, with the
 climax-dominant, but ozone-sensitive ponderosa pine
 and Jeffrey pine declining in abundance, replaced by
 more ozone-tolerant species. These sensitive species
 have experienced decreased growth, survival, and re-
 production, and susceptibility to insects.  The effects
 of ozone on these species have resulted in other eco-
 system effects, including the buildup of a large litter
 layer, due to increased needle senescence.  The de-
 cline of the fire-tolerant ponderosa and Jeffrey pines
 may seriously affect the fire ecology of the ecosys-
 tem, with fire-sensitive species becoming more com-
 mon. Ozone concentrations have been declining in
 recent decades, and crown injury of ponderosa and
 Jeffrey pine has decreased. However, the two species
 have continued to decline in abundance, as measured
 by total basal area, compared with other species over
 the period 1974 to 1988.71 The nature of community
 dynamics, particularly in mixed species, uneven aged
 stands, indicates that subtle long-term forest responses
 (e.g., shifts in species composition) to elevated levels
of a chronic stress like exposure to ozone are more
likely than wide-spread community degradation.72
     Limited field studies have been completed in other
 forest ecosystems. Foliar injury has been observed in
 the Jefferson and George Washington National For-
 ests and throughout the Blue Ridge Mountains,  in-
 cluding areas of the Shenandoah National Park.73 In
 the Great Smoky Mountains National Park, surveys
 made in the summers from 1987 through 1990 found
 95 plant species exhibited foliar injury symptoms con-
 sistent with those thought to be caused by ozone.74
 Foliar ozone injury has also been documented in Na-
 tional Parks and Forests in the Sierra Nevada moun-
 tains.75

     Growth and productivity of seedlings have been
 reported to be affected by ozone for numerous spe-
 cies in the Blue Ridge Mountains of Virginia.  In the
 Shenandoah National Park, Duchelle et al. (1982,
 1983) found that tulip poplar, green ash, sweet gum,
 black locust, as well as several evergreen species (e.g.,
 Eastern hemlock,  Table Mountain pine,  pitch pine,
 and Virginia pine), common milkweed, and common
 blackberry all demonstrated growth suppression  of
 seedlings. Except for the last two species mentioned,
 almost no visible injury symptoms accompanied the
 growth reductions.  Studies of mature trees in the
 Appalachian Mountains also indicate that injury as-
 sociated with  exposure to ozone and other oxidants
 has been occurring for many years.76 Researchers have
 also found that major decreases in growth occurred
 for both symptomatic and asymptomatic trees during
 the 1950s and 1960s in the Western U.S.77  The ad-
 verse response of a number of fruit and nut trees  to
 ozone exposure has been reported.78

    Monitoring by the USDA Forest Service shows
that growth rates of yellow pine in the Southeast have
been decreasing over the past two decades in natural
stands but not in pine plantations.79 Solid evidence
linking this growth reduction to air pollutants is lack-
    70 U.S. EPA, 1996a.   •

    71 Miller et al., 1989 and Miller et al., 1991.

    72 Shaver et al., 1994

    73 Hayes and Skelly, 1977; Skelly et al., 1984

    74 Neufeld, et al., 1992

    75 Peterson and Arbaugh, 1992

    76 Benoit et al., 1982

    77 Peterson et al., 1987; Peterson and Arbaugh, 1988, 1992; Peterson et al., 1991

    78 McCool and Musselman, 1990; Retzlaff et al., 1991, 1992a, b
    79 NAPAP, 1991.

-------
The Benefits and Costs of the Clean Air Act, 1970 to 1990
ing, although ozone, in particular, may be a factor.80
Ambient ozone levels in the region are high enough
to damage sensitive tree species, including pine seed-
lings during experimental exposure.81  Due to the com-
mercial importance of yellow pine, the economic im-
pacts of ozone on forest ecosystems in this area could
be significant if ozone is affecting growth.

    Although the ecosystem effects occurring in the
San Bernardino forest ecosystem have occurred at very
high ozone exposures, lower ozone exposure else-
where in the U.S. may still affect forests.  The EPA
Ozone Staff Paper82 assessed the risk to vegetation,
including forests, under current ambient air quality.
Using a GIS approach, it was found that under the
base year (1990) air quality, a large portion of Cali-
fornia and a few localized areas in North Carolina and
Georgia have seasonal ozone levels above those which
have been reported to produce greater than 17 percent
biomass  loss in 50 percent of studied tree seedling
species.  A broader multistate region in the east is
estimated to have  air quality sufficient to cause  17
percent biomass loss in seedlings, while at least a third
of the country, again mostly in the eastern U.S., most
likely has  seasonal exposure levels which could al-
low up to 10 percent yield loss in 50 percent of stud-
ied seedlings.  The Staff Paper did not present mon-
etized benefits because of lack of exposure-response
functions.83

    Even small changes in the health of ozone-sensi-
tive species may affect competition between sensi-
tive and tolerant species, changing forest stand dy-
namics.84 Depending on the sensitivities of individual
competing species, this could affect timber produc-
tion either positively or negatively, and affect com-
munity composition  and, possibly, ecosystem pro-
cesses.

Endangered species

    Ozone effects may also reduce the ability of af-
fected areas to provide habitats to endangered spe-
cies. For example, two listed endangered plant spe-
cies, the spreading aven and Roan Mountain bluet,
    80 NAPAP, 1991.
    81 NAPAP, 1991.
    M U.S. EPA, 1996b

    83 U.S. EPA, 1996b.
    84 U.S. EPA, 1996a.

    85 U.S. EPA, 1996b
    86 NAPAP. 1991.
are currently found at a small number of sites in east-
em Tennessee and western North Carolina—forested
areas where ozone-related injury is of concern.85  In
addition, ozone-related effects on individual  ozone-
sensitive species that provide unique support to other
species can have broader impacts. For example, one
such species is the common milkweed, long known
for its sensitivity to ozone and usefulness as an indi-
cator species of elevated ozone levels, as well as be-
ing the  sole food of the monarch butterfly  larvae.
Thus, a major risk associated with of the loss of milk-
weed foliage for a season is that it might have  signifi-
cant indirect effects on the monarch butterfly popula-
tion.  A large number of studies have shown that
ozone-sensitive vegetation exists over much of the
U.S., with many native species located in forests and
Class I  areas, which are federally mandated to pre-
serve certain air quality related values.

Valuation of Benefits From CAA-
Avoided Damages to Forests

Background

    To quantitatively assess the economic benefits of
avoided damages of relevant CAA pollutants to for-
ests, it is necessary to link estimated changes in air
pollution to measures of forest health and conditions
that can be readily quantified in economic terms. For
commercial timber production, this would  require
quantifying the relationship between atmospheric
deposition and measures of forest productivity such
as timber yield. For assessing recreational benefits,
linkages would have to be drawn between air pollu-
tion and vulnerable factors that influence forest-based
recreation (e.g., site-characteristics such as  canopy
density, type of tree  species, degree of visible tree
damage, etc.).  While important strides have been
made in establishing these  linkages (e.g., NAPAP
modeling of air pollution effects on forest soil chem-
istry and tree branch physiology), critical gaps in our
ability to predict whole tree and forest responses to
air pollution changes have precluded the establish-
ment of such quantitative linkages.86  Critical knowl-
                                                 E-14

-------
                                                         Appendix E: Ecological Effects of Criteria Pollutants
 edge gaps exist in our ability to extrapolate experi-
 mental results from seedling and branch studies to
 whole tree and forest responses, to account for key
 growth processes of mature trees, to integrate various
 mechanisms by which air pollution can affect trees
 (e.g., soil acidification, nitrification, and direct foliar
 damage, winter stress, etc.), and to account for the
 interaction of other stressors on forest health and dy-
 namics (susceptibility to insect damage, drought, dis-
 ease, fire, nutrient and light competition, etc.).

    Despite these constraints to quantifying economic
 benefits from air pollution reductions on forest eco-
 systems, relevant studies that have attempted to value
 air pollution damages on forests are reviewed and
 summarized below.  In some cases, the relationship
 between air pollution and forest response is estimated
 using expert judgement (e.g., for NAPAP assessment
 from various growth scenarios). In other cases, dam-
 age estimates reflect current impacts of air pollution
 on forests, and the dose-response relationship is ab-
 sent.  In the aggregate, this summary provides some
 insight into  possible CAA-related  benefits from
 avoided damages to a select and narrowly focussed
 group of forest services, but, because of severe data
 constraints, does not provide an estimate of the over-
 all range of forest-based benefits possible under the
 CAA.

 Commercial Timber Harvesting

    The economic impact of hypothetical growth re-
 ductions in northeastern and  southeastern trees (both
 hardwood and softwood species) was intensively stud-
 ied under NAPAP.87 Growth reductions ranging from
 5 to 10 percent over a 5 to 10 year period, depending
 on the species and location, were assumed to occur as
 a result of all forms of air pollution based on expert
 opinion derived from a survey by deSteigner and Pye
 (1988).  Timber market responses to these hypoth-
 esized growth declines were modeled until the year
 2040 using a revised version of the Timber Assess-
 ment Market Model (TAMM90) and the Aggregate
 Timberland Assessment System (ATLAS), which was
 used to  simulate timber inventories on  private tim-
berland  in the United States.  Economic  welfare out-
puts included changes in consumer and producer sur-
plus and changes in revenue to southeast stumpage
owners. Results indicate that annualized reductions
 in consumer and producer surplus would total $0.5
 billion by the year 2000 and $3 billion by the year
 2040 (in 1967 dollars). Simulated effects on stump-
 age owners' revenues were minimal ($10 to $20 mil-
 lion).

     In an attempt to estimate the net economic dam-
 ages from ozone  effects on selected U.S. forests,
 NAPAP studied the effect of various assumed reduc-
 tions in growth rates of commercial southeastern pine
 forests (both natural and planted).88 For both planted
 and natural plus planted pines, the following changes
 in growth rates were assumed to occur: a two percent
 increase, no change, a two percent  decrease, a five
 percent decrease, and a ten percent decrease.  The two
 to five percent growth reductions were considered as
 possible outcomes from current ozone induced dam-
 age to southeastern forests, although no  quantitative
 linkage between ozone exposure and damages was
 established. The ten percent growth reduction sce-
 nario was primarily included for evaluating model
 sensitivity to severe changes in growth and was con-
 sidered out of the range of likely ozone damage esti-
 mates.  The TAMM and ATLAS models were again
 used to simulate  timber market responses under
 baseline and hypothesized growth change scenarios
 from 1985 to 2040.  Results indicate that annual
 changes in total economic surplus (i.e.,  the sum of
 consumer and producer surplus and timber owner rev-
 enues in 1989 dollars) would range from an increase
 of $40 million (for the two percent increase in growth
 scenario) to a decrease of $110 million  (for the ten
 percent decrease in growth scenario) for planted and
 natural pine model simulations.

    In the context of estimated benefits from avoid-
 ance of other damages in the absence of the Clean Air
 Act from 1970 to 1990,89 the magnitude of economic
 damages estimated to the commercial timber indus-
 try are comparatively small.  For example, economic
 damage estimates range up to $3 billion annually for
five to ten percent growth rate reductions in northeast
and southeast forests, and just $110 million for south-
eastern pines. However, in the context of damages to
forest-based services as a whole, the NAPAP-derived
commercial timber damage estimates  should be
viewed as representing a lower bound estimate for a
variety of reasons.  First, these damage estimates
exclude other categories of possible forest-based ben-
    87 Haynes and Kaiser, NAPAP SOS/T 27 Section B, 1990.
    88 NAPAP, 1991.

    89 Most notably avoided human health effects, which are estimated on the order of $300 to $800 billion annually.
                                               E-15

-------
 The Benefits and Costs of the Clean Air Act, 1970 to 1990
efits, including recreational and non-use values. Sec-
ond, even within the context of timber-related dam-
ages, the NAPAP forest-damage studies focused on a
portion of U.S. forests (northeastern and southeastern
U.S.); a much greater geographic range of forests could
become susceptible to timber-related damages in the
absence of CAA controls. Finally, the NAPAP dam-
age estimates consider only two types of tree species:
planted and naturally grown pines, although these spe-
cies are economically important.  Damages to other
commercially harvested tree species, such as mixed
pine and hardwood forests, are therefore excluded.

Non-marketed Forest Services

    In an effort to address the potential benefits re-
sulting from avoidance of acid deposition-induced
damages to non-marketed forest-based services (e.g.,
recreation use, existence value), an extensive review
of the economic literature was conducted under  the
auspices of NAPAP.90  From their review, NAPAP
could not identify any single study or model that could
be reliably used to quantify economic benefits from
avoided acid deposition-caused damages to non-mar-
keted forest services (such as recreational use) on a
regional or national basis. The primary limitation in
many of the studies reviewed was the absence of a
quantitative linkage between the value of a recreational
user day and important site characteristics which could
be tied to air pollution effects. In addition, most stud-
ies were narrowly focused geographically to specific
sites and did not attempt to value system-wide (larger
scale) damages that could result from acid deposition
over an entire region. Since the availability of nearby
substitution sites will affect the recreational value for
a given site, the benefits from such site-specific stud-
ies may not reflect actual economic damages incurred
from wide-scale air pollution impacts on forests. The
inability of studies to consider additional crowding at
unaffected sites in addition to changes in recreational
participation rates as a function of air pollution dam-
ages was also recognized as an important limitation.

    Despite not being able to quantitatively assess  the
benefits from avoided acid deposition-induced dam-
ages to nonmarket forest services, several important
concepts emerge from NAPAP's review of recre-
ational benefits, that bear relevance to the section 812
retrospective analysis. First, several studies were iden-
tified that established a relationship between key for-
est site characteristics and the value of recreational
participation. For example, Brown et al. (1989) used

    90 Rosenthal, NAPAP SOS/T 27 Section B, 1990.
contingent valuation to evaluate the relationship be-
tween scenic beauty ratings  and willingness of
recreationalists to pay at pictured sites. Based on their
interviews with over 1400 recreationalists at ten dif-
ferent sites in Arizona, positive correlations were es-
tablished between scenic beauty rankings determined
from one group of recreationalists and willingness to
pay to recreate determined by  a separate group of
recreationalists (r2 ranged from 0.27 to 0.98 depend-
ing on ranking). In another study, Walsh et al. (1989)
developed a functional relationship between reduc-
tion of recreational benefits and tree density changes
that reflected varying levels of bisect damage at six
campgrounds  in the Front Range of the Colorado
Rockies. By using both contingent valuation and travel
cost models, Walsh et al. (1989) were able to show
that 10 percent, 20 percent, and 30 percent decreases
in tree densities reduces the total recreational benefits
at their sites by 7 percent, 15 percent and 24 percent,
respectively. Although results from these studies are
limited to the sites from which they were derived, they
do support the intuition that the degree of visible dam-
age  to forests  is to some extent correlated  with the
magnitude of damages to forest-based recreation ex-
pected. This finding supports the notion that the avoid-
ance of damages to forest ecosystems from CAA-in-
duced pollution controls (albeit currently unqualified)
have likely benefited forest-based recreation in the
U.S.

    In addition to establishing relationships between
recreational value and visible damage to forest sites,
there is evidence linking air pollution (ozone) effects
on forests to economic damages to non-use values of
forests.  For example, D.C. Peterson et al. (1987) val-
ued ozone-induced damages to forests surrounding the
Los Angeles area. Using contingent valuation meth-
ods,  D.C.  Peterson et  al.  (1987)  surveyed
recreationalists (a random survey of households in the
San Bernardino, Los Angles and Orange counties) and
residents (a sample of property owners within the San
Bernardino and Angeles national forests) for their
willingness to pay to prevent forest scenes from de-
grading one step on a "forest quality ladder" depict-
ing various levels of ozone-induced damages.  The
mean willingness to pay to protect further degrada-
tion was  $37.61 and $119.48 per household for
recreationalists and residents, respectively.  Annual
damages to Los Angeles area residences from.a one-
step drop on the forest quality ladder were estimated
between $27 million and $147 million.
                                                E-16

-------
                                                          Appendix E: Ecological Effects of Criteria Pollutants
    These estimates cannot be directly translated into
a rough estimate of the potential non-use values of
avoided forest damages. Considering the limited size
of the population generating the estimated benefits of
forest degradation, however, they do provide evidence
that the recreational and non-use benefits may sub-
stantially exceed the commercial timber values.
                                              E-17

-------
The Benefits and Costs of the Clean Air Act, 1970 to 1990
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