EPA-230-12-90-084
December 1990
ENVIRONMENTAL INVESTMENTS:
THE COST OF A CLEAN ENVIRONMENT
A SUMMARY
Alan Carlin
with the assistance of the
Environmental Law Institute
Science, Economics and Statistics Division
Office of Regulatory Management and Evaluation
Office of Policy, Planning and Evaluation
U.S. Environmental Protection Agency
Washington, DC 20460
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Environmental Investments
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ADMINISTRATOR'S PREFACE
Over the past 20 years, the citizens of the United States have made a significant, enduring
commitment to protecting the environment. This new report, Environmental Investments: The
Cost of a Clean Environment, for the first time shows the full extent of this commit-
ment—amounting to an investment of $115 billion a year in current dollars to protect and restore
our nation's air, water, and land. This is just over two percent of our Gross National Product.
EPA's report looks in some detail at what our country has spent, what we are spending, and
what we are projected to spend on all types of pollution controls.
Of course, the country has received considerable value for these investments, and EPA has
underway additional work to compile these benefits.
In the current report, a handful of points stand out:
• First, spending on environmental problems is rising significantly with obvious
consequences for the expenditures of governments at all levels and of industry.
Moreover, if the upward trend continues into the next century, this increased spending
could affect U.S. competitiveness in world markets.
• Second, besides the level of spending, the allocation of resources is changing. The share
of costs devoted to land protection is projected to rise relative to that for air and water
protection over the next decade.
• Third, the costs of pollution control are rising at a time when unmet environmental needs
are still quite large. The American people are asking for more in the way of
environmental improvements and making clear politically they will not tolerate
backsliding. Nor do I want to see rollbacks of hard won environmental progress. But
particularly in today's economy, I am concerned about the price tag of meeting growing
environmental demands.
Thus, one of my priorities at EPA is ensuring that resources devoted to achieving the nation's
environmental goals are used as efficiently and effectively as possible. All EPA programs are
considering the most cost-effective ways to meet the Agency's mandate consistent with our
statutory responsibilities. Yet I have concluded we must redouble our efforts to find and apply
more cost-effective approaches, to engage in negotiations and voluntary agreements to cut
pollution, to foster breakthroughs in cleanup technologies, and to explore new ways to finance
environmental improvements.
One promising approach to making environmental protection more efficient is to craft
incentives that harness the marketplace on behalf of the environment. Using a combination of
incentives and vigorous enforcement of existing laws, we can engage the marketplace to deal
effectively with the subtle and complex environmental problems of the 1990s. These are often
caused by small, widely scattered sources not always amenable to federal regulation—problems
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like municipal and hazardous wastes, toxic substances in the air and water, contamination of
ground and surface waters from agricultural and urban runoff, and global atmospheric
changes—to name some current problems with which the Agency is grappling.
A good example of this approach is the system of economic incentives proposed by President
Bush to curb acid rain, which were passed by the 101st Congress in the new Clean Air Act
Amendments of 1990. Under this system, electric utilities will be given a limited number of
marketable permits designed to reduce their sulfur dioxide emissions by about half. EPA will
monitor emissions to ensure that they do not exceed the allotted levels. If a company finds that
cleanup costs are high at one plant and that purchasing additional allowances would be less
expensive, it will be able to buy allowances from other utilities. On the other hand, a company
may cut emissions so far that it will be able to sell its extra allowances or bank them to provide
for future growth. And the plant will be able to pursue the least expensive methods of pollution
control—energy conservation, different fuels, new technology—provided only that it achieves
the pollution reductions the law requires. Setting the goals nationally while providing to plant
and business managers, who know their operations best, the flexibility to choose the methods
that work for them will achieve air quality goals at the lowest possible cost, by our estimates
at perhaps one-fifth less than the cost of more traditional command and control approaches.
Like other economic incentives, this emission trading system also has the advantage of
promoting innovation in pollution prevention.
As part of my emphasis at EPA on economically smart approaches to environmental
protection, I am increasing the use of economic analysis, strategic planning, and research. They
will be used to ensure that the resources devoted to pollution control are directed towards
environmental goals where the greatest reductions in environmental risks can be achieved. In
this regard, EPA is in the process of using the data base developed in this report to see where
our spending can be better aligned with the most serious environmental risks. We believe, for
instance, that some of the environmental problems that will see the greatest expected increase
in costs during the decade, as reported here, are also areas where as yet uncontrolled
environmental risks may be less than originally thought. In many cases, there is no discretion
under the law as to what EPA must do, and we will carry out these responsibilities as fully and
vigorously as we can. In other cases, EPA proposes through its strategic planning process and
review of future regulations to direct resources, where discretion is allowed, to the highest
priority environmental risks.
In sum, our challenge over the next decade is to reconcile the expectations of the American
people for greater environmental protection with our country's aspirations for growth. We need
to deliver in the most cost-effective manner the continued public health benefits of pollution
control and assure that the natural systems that sustain all human activities, including economic
activities, continue to provide for generations to come.
William K. Reilly
Administrator
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EXECUTIVE SUMMARY
This report summarizes data presented in a much more detailed report entitled Environmental
Investments: The Cost of a Clean Environment, Report of the Administrator of the Environmental
Protection Agency to the Congress of the United States. This more detailed report is being
transmitted to Congress as a report of the Administrator in response to Section 312(a) of the
Clean Air Act and Section 516(b) of the Clean Water Act.
Unlike earlier EPA reports to Congress on the costs of environmental protection, this report
goes beyond air and water costs to present a broader picture of environmental pollution control
costs reflecting the Environmental Protection Agency's broad mandate. More specifically, this
summary report, as well as the Report to Congress, presents data on environmental pollution
control costs during the period 1972-1987, projects these costs for each subsequent year to the
year 2000 under a number of assumptions, and breaks them down in a variety of ways. These
ways include differentiating among capital, operating, and annualized costs, as well as the
medium where the pollution is controlled, the economic sector (e.g., public, private) from which
the control is funded, and whether the costs result from new or existing regulations.
The historical data are based largely on surveys of actual spending as conducted primarily
by the Department of Commerce. Projections are based on simple extrapolations of spending
trends as well as EPA estimates of the cost of newly implemented and proposed regulations.
The Administration's January 1990 Clean Air Act reauthorization proposal was the basis for
projections of future air pollution control costs.
SUMMARY OF COSTS
This report concludes that total annualized costs for all pollution control activities in the
United States at seven percent interest have increased and are projected to increase as follows
(figures for year 2000 are provided for both present and full implementation scenarios):
Total Annualized Costs
In billions of 1986 dollars
In billions of estimated 1990 dollars
As Percent of GNP
1972
26
30
0.9
1987
85
98
1.9
1990
100
115
2.1
2000
Present
148
171
2.6
Full
160
185
2.8
The present implementation option assumes that present levels of implementation of existing pro-
grams remain the same as in 1987. The full implementation option assumes that the investments
needed to bring about nationwide attainment of the national ambient air quality standard for
ozone and the fishable/swimmable goals of the Clean Water Act for municipal systems are made
by the year 2000. The comparison with Gross National Product is intended to provide a frame
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of reference to judge the relative importance of environmental costs to a well-known aggregate
measure of economic activity.
Although total annualized costs are increasing, they are increasing at a decreasing rate. The
yearly rate of increase in total annualized costs decreased from 14 percent between 1972 and
1973 to six to eight percent in the mid-1980s and is projected to fall further to about three
percent in the late 1990s (assuming full implementation).
Pollution Control capital investment is estimated to be as follows (figures for year 2000 are
provided for both present and full implementation scenarios):
Pollution Control Capital Investment
In billions of 1986 dollars
In billions of estimated 1990 dollars
As Percent of Total US Capital Investment
1972
20
23
2.5
1987
30
35
2.3
1990
41
47
2.8
2000
Present
30
35
1.7
Full
39
45
1.9
In general, pollution control capital investment as a percentage of total capital investment,
which is an important measure of the impact of pollution control costs on U.S. capital markets,
reached a high in the mid-1970s at about 3.4 percent and has been trending irregularly
downward since then. It is important to mention, however, that the year 2000 capital costs may
be underestimated because when the data were unclear, future costs for new regulations were
assigned to operating rather than capital costs.
COST COMPARISONS
Comparisons of cost data presented in the report indicate the following:
• There is expected to be a major reallocation of the percentage of pollution control
expenditures devoted to each media over the next decade from air and particularly water
pollution control to land pollution control. This is a result of the major land pollution
control legislation passed by Congress beginning in the mid-1970s and greatly expanded
in the 1980s. Specifically, the media shares were or are projected to be:
Media Shares of Pollution Control Expenditures (percent of total)
Air and Radiation Costs
Water Costs
Land Costs
Chemical Control Costs
Multi-media Costs
1987
28.9
42.9
26.0
1.2
1.1
1997
27.1
35.7
33.9
1.9
1.5
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Executive Summary
• Although increasing, national environmental pollution control expenditures remain less
than half those for clothing and shoes, one-third those for national defense, one-third
those for medical care, one-fifth those for housing, and one-sixth those for food.
• The non-EPA federal share of total annualized pollution costs is projected to increase by
more than 140 percent between 1987 and 2000, primarily as a result of the cost of
military and nuclear waste clean-up. All other shares, particularly the private sector,
are expected to fall somewhat. Even though the EPA share is projected to fall
somewhat, the net effect is that the federal share as a whole is projected to increase over
this period while the state and local government share decreases slightly.
• Although the percentage share of the burden on local government is expected to fall
slightly relative to that of other sectors, there is expected to be a significant increase in
the real costs of pollution control on this sector; the result will be an increased burden
on the taxpayers and rate payers, which may be burdensome for some smaller commun-
ities unless mitigating measures are undertaken.
• National expenditures on environmental pollution control have been somewhat higher
than in many Western European nations as a percentage of gross domestic product.
ENVIRONMENTAL RESULTS
The report also summarizes the available evidence concerning changes in ambient pollution
levels and emissions, the "result" of the pollution control expenditures detailed in other sections
of the report. An ideal comparison of the costs and benefits of pollution control would require
that these benefits be identified, quantified, and monetized. This is an extremely difficult and
data intensive task and is not attempted in this report.
Instead, the report relies on historical data on estimated air and water pollutant emissions and
ambient pollution levels, and information on the production and regulation of hazardous waste
and toxic substances to provide an indication of environmental quality levels over time. While
this provides some indication of changing environmental quality levels, it does not adequately
show the degree of environmental protection afforded by cumulative pollution control efforts.
In the absence of controls, increasing population and levels of economic activity would have
resulted in steadily decreasing environmental quality over time. In order to show environmental
quality improvements resulting from pollution controls adequately, one would need to compare
current levels of environmental quality indicators with estimated levels that would have prevailed
in the absence of cumulative pollution control efforts. Except in the case of the criteria air
pollutants emissions, such comparisons are precluded by the absence of data.
There are data, however, showing that there has been a substantial decrease in emissions of
major air pollutants since 1970 compared to what they would have been without controls:
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ACTUAL EMISSIONS AS A PERCENTAGE OF ESTIMATED EMISSIONS USING 1970
LEVELS OF CONTROL
Year
1984
1988
Paniculate
Matter
33
30
Sulfur
Dioxide
71
58
Nitrogen
Oxides
82
72
Volatile Organic
Compounds
60
58
Carbon
Monoxide
56
43
Lead
19
3
There has also been a substantial actual decrease in industrial and municipal discharges of total
suspended solids into water and some improvement in biochemical oxygen demand over the same
period.
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TABLE OF CONTENTS
ADMINISTRATOR'S PREFACE iii
EXECUTIVE SUMMARY v
LIST OF FIGURES . xi
LIST OF TABLES xi
FOREWORD xii
1. INTRODUCTION 1-1
1.1. DEFINITION OF COSTS 1-1
1.1.1. Scope of Costs 1-1
1.1.2. Nature of Costs 1-2
1.2. COST BREAKDOWNS 1-2
1.2.1. Costs by Economic Type 1-2
1.2.2. Costs by Environmental Medium 1-3
1.2.3. Costs by Economic Sector 1-5
1.2.4. New and Existing Regulatory Costs 1-5
1.2.5. Costs by Year 1-6
1.3. DATA SOURCES 1-6
1.3.1. U.S. Department of Commerce Survey Data 1-6
1.3.2. EPA Budget Justification Data 1-7
1.3.3. Regulatory Impact Analyses Data 1-7
1.3.4. Special EPA Analyses Data 1-8
1.4. CONVENTIONS USED 1-8
1.4.1. Projection Techniques 1-8
1.4.1.1. Existing Programs 1-8
1.4.1.2. New Regulations 1-8
1.4.2. Price Deflators Used 1-9
2. AGGREGATE POLLUTION CONTROL COSTS 2-1
2.1. TOTAL COSTS .2-1
2.2. TOTAL COSTS BY FUNDING SOURCE 2-5
2.3. TOTAL CAPITAL EXPENDITURES 2-5
3. COSTS BY ENVIRONMENTAL MEDIUM AND PROGRAM 3-1
3.1. COSTS BY ENVIRONMENTAL MEDIUM 3-1
3.2. AIR AND RADIATION POLLUTION CONTROL COSTS 3-2
3.3. WATER POLLUTION CONTROL COSTS 3-3
3.4. LAND POLLUTION CONTROL COSTS 3-4
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3.5. CHEMICAL POLLUTION CONTROL COSTS 3-5
3.6. MULTI-MEDIA COSTS 3-5
4. COST COMPARISONS AND CONCLUSIONS 4-1
4.1. COST COMPARISONS 4-1
4.1.1. Environmental Media Expenditure Shares 4-1
4.1.2. GNP Expenditure Shares 4-4
4.1.3. Cost Burdens on Local Governments 4-4
4.1.4. Long Term Trends in Total Costs 4-6
4.1.5. International Pollution Control Expenditures 4-7
4.2. CONCLUSIONS 4-9
5. ENVIRONMENTAL TRENDS 5-1
5.1. AIR QUALITY
5.1.1. Criteria Pollutant Emissions 5-2
5.1.2. Effects of Pollution Controls on Air Emissions 5-2
5.1.3. Ambient Air Quality 5-3
5.2. WATER QUALITY 5-4
5.2.1. Discharges 5-4
5.2.1.1. Municipal 5-4
5.2.1.2. Industrial . .5-5
5.2.2. Non-point Source 5-5
5.3. LAND QUALITY 1 5-5
5.5.1. Hazardous Waste Management 5-5
5.5.2. Hazardous Waste Remediation 5-6
5.5.5. Underground Storage Tanks 5-6
5.4. EXPOSURE TO CHEMICALS 5-6
5.4.1. Toxic Substances 5-6
5.4.2. Pesticides 5-7
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LIST OF FIGURES
Fig. 2-1: Total Annualized Costs by Type of Regulation 2-1
Fig. 2-2: Total Annualized Costs as a Percentage of GNP 2-4
Fig. 2-3: Percent Change in Annualized Costs 2-4
Fig. 2-4: Total Annualized Costs by Funding Source 2-5
Fig. 2-5: Environmental Capital Investment as.a Percentage of Total Investment 2-6
Fig. 3-1: Total Media Costs Annualized at 7%, Assuming Full Implementation 3-1
Fig. 4-1: Percentage of Capital Plus Operating Expenditures by Medium 4-1
Fig. 4-2: Total Land Capital Plus Operating Expenditures by Type of Regulation 4-2
Fig. 4-3: Total Land Capital Plus Operating Expenditures by Program 4-2
Fig. 4-4: Solid Waste Capital Plus Operating Expenditures by Type of Reg 4-3
Fig. 4-5: UST Capital Plus Operating Expenditures by Type of Regulation 4-3
Fig. 4-6: Hazardous Waste Capital Plus Operating Expenditures by Type of Regulation . 4-3
Fig. 4-7: Superfund Capital Plus Operating Expenditures by Type of Regulation 4-4
Fig. 4-8: 1985 International Pollution Control Expenditures as % of GDP 4-8
Fig. 5-1: Actual 1988 Emissions as a Percentage of Hypothesized Emissions at the 1970
Level of Control 5-3
LIST OF TABLES
Table 2-1: Total Annualized Costs 2-2
Table 2-1: Total Annualized Costs (continued) 2-3
Table 3-2: Annualized Air & Radiation Pollution Control Costs 3-2
Table 3-3: Annualized Water Pollution Control Costs 3-3
Table 3-4: Annualized Land Pollution Control Costs 3-4
Table 3-5: Annualized Chemical Pollution Control Costs 3-5
Table 3-6: Annualized Multi-Media Pollution Control Costs . 3-6
Table 4-1: Potential Increases in Annual Charges by City Size by 2000 4-5
Table 4-2: Capital Plus Operating Expenditures for Some Countries 4-7
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FOREWORD
This summary report is based entirely on Environmental Investments: The Cost of a Clean
Environment, Report of the Administrator of the Environmental Protection Agency to the United
Congress, which is being released at the same time as this summary report. This report
summarizes the contents of the Report to Congress for those who may not be concerned with
the full derivation of the cost estimates and the more detailed results. Readers who would like
the Report to Congress can obtain it from Ms. Ernestine Thomas, U.S. EPA (PM-223X),
Washington, D.C. 20460, telephone (202) 382-5606.
This summary was edited and partly written by Alan Carlin of the Science, Economics and
Statistics Division in the Office of Policy, Planning and Evaluation with the assistance of the
Environmental Law Institute. The Environmental Law Institute provided economic and data
analysis, most of the data compilation and graphics, and assistance in desk-top publishing.
Apogee Research, Inc. provided some of the early data compilation, graphics, and desk-top
publishing assistance as a subcontractor to ELI. Anne Grambsch of SESD contributed the cover
design and some of the graphics, suggested a number of other ideas used in the layout of the
report, and handled report reproduction. The summary also benefited from the work of the
many contributors to the Report to Congress and to a number of other individuals for their
comments and assistance.
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1. INTRODUCTION
This report summarizes the results of a study by the U.S. Environmental Protection Agency
(EPA) to estimate comprehensively the direct costs of public and private pollution control
activities in the United States. This summary highlights the study findings and conclusions,
which are presented more fully in a companion report entitled Environmental Investments: The
Cost of a Clean Environment, Report of the Administrator of the Environmental Protection
Agency to the Congress of the United States (hereafter referred to as the Report to Congress).
Estimates of annual pollution control costs over the years 1972-2000 for each public sector
and the private sector are summarized here. Cost estimates are given for each of five categories
of environmental media and for all combined. The estimates are also used to provide some
comparisons of U.S. pollution control costs with those of several Western European nations and
to make a number of other costs comparisons that may prove important over the next several
years.
The nature and scope of the cost estimates, the categories of costs considered, and the data
sources are reviewed briefly in the remainder of this Chapter. Estimates of aggregate pollution
control costs are presented and discussed in Chapter 2. Chapter 3 presents cost estimates for
individual environmental media categories. Cost comparisons and conclusions are discussed in
Chapter 4. Trends in environmental quality—the "output" of environmental pollution control
expenditures—are presented in Chapter 5. A more detailed discussion of all these topics as well
as data sources and derivation are to be found in the Report to Congress.
1.1. DEFINITION OF COSTS
1.1.1. Scope of Costs
Cost estimates are provided for the total costs of EPA programs to all economic sectors
pursuant to each of the major federal environmental pollution control statutes. This provides a
picture of the total direct costs of all federal pollution control efforts and permits cost compari-
sons across environmental media and major EPA program areas. Costs of state, local, and
private pollution control programs that are closely related to areas for which EPA currently has
responsibility—pollution control and improved environmental quality—are also included and
broken out separately. The costs of federal environmental programs that are not pollution
control programs, such as wildlife conservation and land management, are not included.
By far the most significant of the included costs that are not directly mandated by federal law
are those for local government and private sector trash collection and disposal. Federal solid
waste legislation is concerned primarily with the regulation of solid waste disposal facilities.
Yet, local governments and private entities are involved with the full range of solid waste
activities, including collection, handling, storage, treatment, and final disposal. All solid waste
costs are included in this report, though only a relatively small portion of the total costs for these
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activities are incurred as a result of federal legislation. This is done on the grounds that all such
expenditures contribute to pollution control and improved environmental quality.
1.1.2. Nature of Costs
The costs presented here represent estimates of direct regulatory implementation and com-
pliance costs. They are the first-order costs to those entities that implement control measures
and undertake compliance activities. For example, the private costs associated with existing
programs represent the before-tax expenditures associated with all compliance activities, such
as the purchase, installation and operation and maintenance of existing pollution control
equipment. The private costs of new and future programs represent, for the most part, projec-
tions of before-tax capital investment and operation and maintenance costs calculated using
engineering analyses.
1.2. COST BREAKDOWNS
The cost estimates included in this report are presented in several different ways (and
discussed in the sections of the report indicated):
1.2.1. By economic type;
1.2.2. By environmental medium;
1.2.3. By the economic sector directly incurring the cost;
1.2.4. By new and existing regulations;
1.2.5. By year.
1.2.1. Costs by Economic Type
Two basic types of costs are included to represent implementation and compliance costs:
• capital costs, and
• operating costs.
From these, two aggregate cost measures are derived—annualized costs and total expenditures.
Annualized costs are the aggregate cost measure used throughout most of this report. Total
expenditures represent the sum of capital and operating costs. They are used only in Sections
4.1.1, 4.1.2, and 4.1.5 of Chapter 4. The Report attempts to minimize confusion by referring
to capital plus operating costs as expenditures rather than costs. Further discussion of total
expenditures can be found in these Sections.
The definitions of capital and operating costs used in the derivation of annual costs follow
those of the primary data sources used—The U.S. Department of Commerce Government
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Introduction
Finances reports1 and "Pollution Abatement and Control Expenditures" articles.2 Capital costs
include expenditures for plant and equipment (both replacement and expansion) and construction
in progress, as well as the costs of changes in production processes that reduce or eliminate
pollution generation. Such costs are chargeable to an establishment's accounts for plant and
equipment and subject to amortization. Operating costs include all costs and expenses for the
operation and maintenance of pollution abatement processes, including spending for materials,
equipment leasing, parts and supplies, direct labor, fuel and power, services provided by private
contractors, and research and development.
Annualized costs, the principal aggregate cost presented in most of this report, are the sum
of the operating costs for the year in question plus amortized capital costs, which include interest
and depreciation associated with accumulated capital investment. Amortized (or annualized)
capital costs represent the real resource costs of tying-up funds in the purchase and installation
of capital equipment or other fixed assets required by environmental regulation. They are com-
puted using a seven percent rate of amortization and the following assumptions with regard to
life of capital investment for different program areas:
Mobile source air pollution control capital
Radiation control capital
Water pollution control capital (except
drinking water)
Superfund remediation capital
Underground storage tank capital
All other capital
10 years;
25 years;
30 years;
30 years;
30 years;
20 years.
The basis for selecting these capital lives and a detailed presentation of the capital and
operating cost estimates used to derive the costs presented in this report can be found in the
Report to Congress. That Report also provides estimates of annual costs computed using capital
amortization rates of three and ten percent as well as seven percent.
1.2.2. Costs by Environmental Medium
The cost estimates are categorized into three environmental media—air, water, and land—as
well as useful chemicals and multi-media. Useful chemicals (such as pesticides) differ from the
pollutants associated with air, water, and land because they have economic value and are not
simply waste products. The fifth category, labelled "multi-media," contains costs that do not fit
well in any of the other four categories. Except in the case of chemicals, costs are allocated to
the environmental medium that is most directly affected by the pollution controls associated with
expenditures. There are cases, of course, where costs are incurred to reduce the threats posed
1 U.S. Department of Commerce, Bureau of the Census, Government Finances, various years.
2 U.S. Department of Commerce, Bureau of Economic Analysis, various articles often entitled "Pollution
Abatement and Control Expenditures," published periodically in the Survey of Current Business.
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by pollution that initially is released into one medium but later impacts another. For the
purposes of this report, however, costs to reduce pollutant emissions directly into a particular
medium are allocated to that medium.
As mentioned above, the allocation of pollution control costs among different environmental
media categories is bound to cause some overlap and confusion due to the cross-media nature
of many environmental problems and the control programs used to address them. This is
particularly true for many of the program areas included under the "land" medium, which have
as one of their most important objectives the prevention and reduction of groundwater
contamination. Yet, because programs such as those relating to hazardous waste disposal are
concerned with pollution that is initially released primarily onto land, their costs are allocated
to the land medium. Despite problems of overlap, it was felt that the advantages of this
categorization scheme favored its use.
The four major environmental media categories also correspond roughly to the four major
program offices within EPA, and follow from the major pollution control laws that EPA
administers. They include:
• Air pollution and radiation control costs pursuant to:
Clean Air Act; and
Radon Gas and Indoor Air Quality Research Act of 1986, Radon Pollution Control
Act of 1988, and earlier acts.
• Water pollution control costs pursuant to:
Clean Water Act; Marine Protection, Sanctuaries and Research Act; and
the Safe Drinking Water Act.
• Land pollution control costs pursuant to:
Resource Conservation and Recovery Act; and
Comprehensive Environmental Response, Compensation, and Liability Act.
• Chemical control costs pursuant to:
Toxic Substances Control Act; and
Federal Insecticide, Fungicide, and Rodenticide Act.
The fifth category, multi-media, includes those costs pursuant to:
Energy Security Act; and
Title HI of the Superfund Amendments and Reauthorization Act.
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Introduction
Other non-media-specific EPA costs that are administered independently of the above programs
are included in the following sections:
Management and support; and
Interdisciplinary.
1.2.3. Costs by Economic Sector
The cost estimates are also broken down by the economic sector that directly incurs them.
Separate categories are included for:
EPA costs;
Non-EPA federal costs by other federal agencies;
State government costs;
Local government costs; and
Private sector costs.
This classification is useful because it permits cross-sector evaluation. EPA and state
government costs are primarily for program implementation, while non-EPA federal, local
government, and private costs are largely associated with compliance activities.
1.2.4. New and Existing Regulatory Costs
Finally, distinctions are made among the following pollution control costs:
• Costs of existing regulations—those associated with regulations and programs that were
substantially in place by 1987 and have achieved substantially full compliance with
standards or attainment of goals;
• Costs of new regulations—those estimated to result from new or recently implemented
regulations and programs (i.e., those not substantially in place by 1987) and regulations
currently under development or proposed by EPA; and
• Costs of full implementation—those that would arise from full attainment or full
compliance with those existing laws, regulations, and programs for which the attainment
deadline has passed but for which there was substantially less than full attainment by
1987. They include the costs of bringing all cities into attainment with the national
ambient air quality standard for ozone and the costs to satisfy the nation's municipal
wastewater treatment needs to bring about fishable/swimmable water quality.
The costs for existing regulations are based on survey data on historical expenditures and
extrapolations from these. New regulation costs are based on ex ante estimates of the costs
associated with new and forthcoming regulations derived in EPA regulatory impact studies. The
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year 1987 is selected as the cut-off date because that is the last year for which survey data were
available when the Report to Congress was prepared.
The estimates used to represent full implementation costs were derived from recent EPA
analyses of wastewater treatment needs and measures required to reach substantially complete
attainment of the air quality standards for ozone. Wastewater treatment costs were derived from
a report to Congress on current and future municipal needs to bring about fishable/swimmable
water quality and the estimated expenditures required to meet them. The ozone attainment costs
were derived from EPA analyses of the ozone attainment costs associated with the Administra-
tion's original proposed amendments to the Clean Air Act.
In November 1990, President Bush signed the Clean Air Act Amendments of 1990. These
contained provisions that are expected to result in higher costs than those contained in the
Administration's original proposed amendments. As a result, the costs for the Amendments are
expected to be significantly higher by the year 2000 than the estimates presented in this Report.
This is discussed further in Section 3.2.
2.2.5. Costs by Year
Finally, cost estimates are presented over the period 1972-2000. The year 1972 was selected
as the starting date because it represents the first year for which the Commerce Department
collected reasonably complete cost data. The year 2000 was selected as the ending date because
it is near enough so that reasonable cost projections can be made but far away enough to provide
a useful perspective on future cost trends.
1.3. DATA SOURCES
The cost estimates were derived from five principal data sources. These are listed below
along with the sections in which they are discussed.
1.3.1. U.S. Department of Commerce survey data on historical private and
government expenditures;
1.3.2. EPA budget justification data on historical EPA expenditures;
1.3.3. EPA regulatory impact analyses data for new and proposed regulations;
and
1.3.4. Special EPA analyses data for programs not covered by other data
sources.
1.3.1. U.S. Department of Commerce Survey Data
The basic source of pre-1988 data for private, non-EPA federal, state, and local costs is the
U.S. Department of Commerce. Data on private expenditures over the years 1972-1987 were
obtained from a series of articles entitled "Pollution Abatement and Control Expenditures"
(PACE reports), which are published periodically in the Suryey of Current Business by the
1-6
December
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Introduction
Bureau of Economic Analysis (BEA). These articles compile and organize data derived from
a number of sources, including two key agency surveys—the "Pollution Abatement Costs and
Expenditures Survey" (PACE Survey) and the "Pollution Abatement Plant and Equipment
Survey" (PAPE Survey)—which are conducted annually by the Census Bureau for BEA.
Annual cost estimates for non-EPA federal agencies are also gathered by BEA in their
surveys; however, these data are not reported in the PACE reports. For this report, pre-1988
cost estimates for non-EPA federal agencies were thus derived directly from the PACE and
PAPE survey results.
Data on state and local expenditures for the years 1972-87 are primarily from the results of
an annual survey on governmental expenditures conducted by the Census Bureau and published
in a series of annual reports entitled, Government Finances. The data, which are reported for
fiscal years, were converted into calendar years.3 Federal grants in each program area were
subtracted from total expenditures, and interest on debt, where reported, was netted from annual
expenditure data to isolate O&M costs.
Data on state and local expenditures for air pollution control were obtained from the PACE
reports published in the Survey of Current Business.
1.3.2. EPA Budget Justification Data
The main source of data for EPA expenditures is the Justification of Appropriation Estimates
for Committee on Appropriations. Outlays are shown for Fiscal Years 1972 through 1989 with
budget projections of outlays shown for Fiscal Years 1990 and 1991, as reported in an annual
attachment entitled "Summary of Budget Authority, Obligations, Outlays, and Workyears by
Media."
1.3.3. Regulatory Impact Analyses Data
The basic sources of data for new and forthcoming regulations are Regulatory Impact Anal-
yses (RIAs) and similar EPA analyses of major EPA regulations. RIAs have been prepared
prior to the issuance of each major regulation since 1981 and include data on estimated
compliance costs and benefits. Similar analyses for costs only were issued under different names
before 1981. Table 2-3 of the Report to Congress lists those regulations for which RIA cost
estimates have been used in this report; Appendix A of the Report contains summary information
for each of these rules.
To derive estimates for calendar year 1986, for example, one-half of the reported Fiscal Year 1986
estimate was added to one-half of the reported fiscal year 1987 estimate.
1990
1-7
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Environmental Investments
1.3.4. Special EPA Analyses Data
Where the above data sources did not provide adequate or reliable data, special analyses
conducted by EPA program offices or contractors were used. In general, this is the case for
those programs not involving air, water, or solid waste, since these are the media covered by
the Commerce Department data. Cost estimates for the Superfund program, for example, relied
on a special analysis. In addition, a special EPA analysis was undertaken to estimate the costs
of air mobile source control because of particular EPA expertise in this area and because the
Commerce Department data on mobile sources are not based on Commerce Department survey
data.
1.4. CONVENTIONS USED
Several conventions were followed to project future costs and to convert cost estimates into
constant dollars. These are discussed briefly below.
1.4.1. Projection Techniques
1.4.1.1. Existing Programs
Projecting future costs for existing programs is an attempt to predict what government and
private sectors will spend to maintain compliance with existing pollution control requirements
in the face of a changing economy and an expanding population.
Historical pollution control expenditures were linearly regressed against time and the
resulting parameter estimates used to predict costs for future years. Use of this method assumes
that trends in population growth, economic growth, compliance levels, and other factors that
may affect pollution control costs will continue as in the recent past and will have similar influ-
ences on expenditures. All projections were calculated at the most disaggregated level of
detail—municipal operating expenses for wastewater treatment plants, for example. Aggrega-
tions to national totals are arithmetic sums of component projections.
The estimated equations chosen for projecting costs for any regulation or program were those
that best fit the individual time series data, considering recent trends in the data, the types of
spending involved, and the maturity of the individual program. In a number of cases there were
one or more significant changes in trend during the years for which data were available. In such
cases, equations fit on the most recent clearly discernible trend were used.
1.4.1.2. New Regulations
For new and not fully implemented regulations and programs, this report used cost estimates
contained in EPA's Regulatory Impact Analyses (RIAs). Capital costs were gathered from the
RIAs associated with new regulations identified in each EPA program area. Future capital costs
are presented on both annual demand for capital and annualized (amortized) bases.
1-8
December
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Introduction
To show the timing of capital costs for new regulations, capital costs were typically spread
out in equal lumps over a relatively few years. This method of showing demands for capital
results in graphs with erratic changes in aggregate capital costs from year to year. In practice,
control capital is typically phased in more gradually over time, imposing smoother demands for
capital over a five to ten year compliance period.
Operation and maintenance (O&M) costs for new regulations were also derived from the
RIAs. For the most part, O&M costs were assumed to begin one year after a capital investment
is made and to continue through the expected useful life of the capital facility. Under these
assumptions, annual O&M costs peak in the year after the last increment of capital is put in
place and continue at this level throughout the useful life of the capital. In certain cases, only
annualized cost estimates were available for new or forthcoming regulations. In such cases,
these estimates were reported under the O&M cost category.
1.4.2. Price Deflators Used
The price deflators shown in Table 1-1 of the Report to Congress were used to convert
current dollars in to 1986 dollars, which is the year in which most dollars are denominated in
this report. These include indices developed by the Bureau of Economic Analysis of the U.S.
Department of Commerce for air, water, and solid waste costs, and the GNP implicit price
index. For other media and programs, the GNP price index was used for operating costs, and
the Construction Cost index compiled by the Engineering News Record was used for capital
costs.
1990
1-9
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Environmental Investments
1-10
December
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2. AGGREGATE POLLUTION CONTROL COSTS
General trends in total pollution control costs over time are discussed below. Total
annualized costs and total capital costs for all pollution control programs are presented in Section
2.1 and 2.2, respectively. Cost breakdowns by economic sector are discussed in Section 2.3.
2.1. TOTAL COSTS
As shown in Table 2-1, total annualized costs at a seven percent discount rate for all
pollution control efforts increased or are projected to increase as follows (figures for year 2000
are provided for both present and full implementation scenarios):
Total Annualized Costs
In billions of 1986 dollars
In billions of estimated 1990 dollars
As Percent of GNP
1972
26
30
0.9
1987
85
98
1.9
1990
100
115
2.1
2000
Present
148
171
2.6
Full
160
185
2.8
200
The difference between the full and present implementation estimates (as explained in Section
1.2.4 above) is that the latter includes the costs associated with nationwide attainment of the air
quality standards for ozone and the costs to fulfill the nation's wastewater treatment needs.
Congress passed new Clean Air Act legislation in October, 1990 that included provisions for
attainment of the ozone standard. There is no current legislation or proposed regulatory action
likely to bring about fulfillment of the wastewater treatment needs.
Yearly estimates of annualized Fig. 2-1: Total Annualized Costs by Type of Regulation
costs for the period 1972-2000
under both alternative scenarios
are shown in Figure 2-1. The full
implementation scenario is repre-
sented by the sum of the costs for
existing and new regulations plus
full implementation costs. Exist-
ing regulations are estimated to
account for about $127 billion of
total annualized costs in the year
2000, new regulations for $21
billion, and full implementation
for $13 billion.
200
150
New Regulations & Programs
Full Implemenlation
Source: Table 8-17 of Ihe Report to Congress
1990
2-1
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Environmental Investments
Table 2-1: Total Annualized Costs
(Assumes full implementation at seven percent. In millions of 1986 dollars)
Media
Total Costs
Percent of GNP
Air and Radiation, Total
Air
Radiation
Water, Total
Water Quality
Drinking Water
Land, Total
RCRA*
Superfund
Chemicals, Total
Toxic Substances
Pesticides
Multi-Media, Total
1972
26,481
0.88%
7,934
7,916
18
9,912
9,110
802
8,436
8,436
**
92
**
92
108
1973
30,261
0.96%
9,598
9,581
17
11,484
10,600
883
8,898
8,898
**
143
**
143
139
1974
33,614
1.07%
10,182
9,927
255
13,439
12,441
998
9,348
9,348
**
183
9
175
461
1975
36,842
1.19%
11,156
10,925
232
15,126
13,991
1,135
9,790
9,790
**
181
5
176
587
1976
41,572
1.28%
12,686
12,528
158
17,419
16,125
1,294
10,389
10,389
**
349
9
340
729
1977
46,509
1.37%
14,460
14,287
173
19,391
17,940
1,451
11,330
11,330
**
408
47
361
919
1978
50,482
1.41%
15,998
15,761
237
21,078
19,445
1,623
11,920
11,920
**
583
158
424
903
Media
Total Costs
Percent of GNP
1986
80,046
1.87%
Air and Radiation, Total 25,431
Air 25,077
Radiation 355
Water, Total
Water Quality
Drinking Water
Land, Total
RCRA"
Superfund
Chemicals, Total
Toxic Substances
Pesticides
Multi-Media, Total
* Includes solid waste,
mandated by RCRA
** Program was not in
35,365
32,386
2,979
17,511
17,107
404
822
402
420
918
hazardous
or not.
existence.
1987
85,290
1.92%
27,006
26,679
327
37,531
34,421
3,111
19,092
18,409
683
819
365
453
842
waste, and
1988
88,490
1.91%
27,591
27,238
353
38,491
35,241
3,250
20,318
19,388
930
910
456
454
1,180
underground
1989
94,280
1.98%
28,267
27,872
396
40,262
36,847
3,415
23,013
21,664
1,348
1,255
558
697
1,483
storage tank
1990
100,167
2.14%
28,029
27,588
441
42,410
38,823
3,587
26,547
24,842
1,704
1,579
600
979
1,603
costs in all
1991
107,867
2.26%
29,488
29,005
483
44,746
40,820
3,926
29,753
27,629
2,124
1,885
799
1,085
1,995
economic
1992
114,181
2.34%
30,217
29,692
525
46,890
42,571
4,319
32,956
30,139
2,816
2,130
960
1,170
1,989
sectors whether
2-2
December
-------
Aggregate Pollution Control Costs
Table 2-1: Total Annualized Costs (continued)
(Assumes fiill implementation at seven percent. In millions of
1979
54,824
1.49%
17,134
16,902
232
22,970
21,147
1,823
12,981
12,981
**
853
345
508
886
1980
57,969
1.58%
17,854
17,635
219
24,745
22,763
1,982
13,612
13,612
**
889
429
461
868
1981
60,539
1.62%
18,397
18,196
201
26,525
24,328
2,198
14,131
14,116
15
791
367
424
695
1982
61,237
1.68%
18,844
18,624
220
27,871
25,514
2,357
13,204
13,145
59
712
315
397
606
1983
65,477
1.74%
20,780
20,573
207
29,765
27,294
2,471
13,630
13,518
112
610
237
374
692
1984
69,925
1.74%
22,324
22,109
215
31,286
28,700
2,586
14,972
14,737
235
685
245
440
657
1985
74,021
1.78%
23,513
23,279
233
33,141
30,376
2,765
15,908
15,596
312
773
303
470
687
1986
80,046
1.87%
25,431
25,077
355
35,365
32,386
2,979
17,511
17,107
404
822
402
420
918
1986 dollars)
Media
Total Costs
Percent of GNP
Air and Radiation, Total
Air
Radiation
Water, Total
Water Quality
Drinking Water
Land, Total
RCRA
Superfund
Chemicals, Total
Toxic Substances
Pesticides
Multi-Media, Total
1993
123,735
2.49%
35,096
34,528
568
49,017
44,430
4,586
35,247
31,808
3,439
2,348
1,091
1,257
2,027
Sources:
1994
127,039
2.50%
35,518
34,905
613
51,212
46,295
4,917
35,836
31,787
4,050
2,408
1,104
1,305
2,065
Tables 8-3
1995
132,426
2.56%
37,151
36,493
659
53,543
48,194
5,350
37,158
32,468
4,690
2,472
1,119
1,353
2,102
1996
137,806
2.61%
38,917
38,212
705
55,769
50,085
5,684
38,402
33,106
5,296
2,580
1,174
1,407
2,138
and 8-6 of the Report
1997
143,447
2.67%
40,451
39,699
752
57,916
51,967
5,949
40,247
34,289
5,958
2,657
1,192
1,465
2,177
1998
150,062
2.74%
42,078
41,278
800
60,104
53,840
6,264
42,938
36,293
6,645
2,721
1,206
1,516
2,220
1999
155,004
2.78%
43,361
42,513
847
62,197
55,706
6,491
44,388
37,033
7,355
2,799
1,217
1,582
2,260
2000
160,416
2.83%
44,944
44,049
896
64,134
57,563
6,571
46,148
38,055
8,093
2,892
1,234
1,658
2,298
Media
Total Costs
Percent of GNP
Air and Radiation,
Air
Radiation
Water, Total
Water Quality
Drinking Water
Land, Total
RCRA*
Superfund
Chemicals, Total
Toxic Substances
Pesticides
Multi-Media, Total
Total
to Congress
1990
2-3
-------
Environmental Investments
In order to provide a
frame of reference to make it
easier to judge the relative
importance of environmental
costs compared to a well-
known aggregate measure of
economic activity, a compari-
son can be made with Gross
National Product (GNP).
Annualized costs as a per-
centage of GNP are shown
graphically in Figure 2-2 for
both scenarios. In order to
compute total pollution con-
trol costs as a percentage of
GNP for future years, data
on GNP over the period
1972-1989 (in constant 1986
dollars) were linearly extrap-
olated to years 1990-2000.
Although total annualized
costs are increasing, they are
increasing at a decreasing
rate. As shown in Figure 2-
3, the yearly rate of increase
in total annualized costs de-
creased from 14 percent
between 1972 and 1973 to six
to eight percent in the mid-
1980s and is projected to fall
further to about three percent
in the late 1990s (assuming
full implementation).
Fig. 2-2: Total Annualized Costs as a Percentage of GNP
3.0
2.5
1.3
«
5
I
s ?
< S J
~ii 1
S
5
^
r>
S
5
5
5
< <
II
i 1
1 1 i ill
1 if
I
1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000
^ % Change from Previous Year
2-4
December
-------
Aggregate Pollution Control Costs
2.2. TOTAL COSTS BY FUNDING SOURCE
Fig. 2-4: Total Annualized Costs
by Funding Source
0.3%
29.0%
5.8%
3.755
3.3%
22.2%
61.2%
1972 Annualized Costs
$26.5 billion
62.8%
1980 Annualized Costs
$58.0 billion
3.1%
22.5%
EPA
State
Local
Non-EPA Federal
Private
Figure 2-4 shows total
annual costs by funding
source under the present
implementation scenario.
It should be noted that the
totals are different than
those shown in Table 2-1
because the costs are for
the present rather than the
full implementation scenar-
io. The data indicate that
the share of total annual-
ized costs incurred by state
and local governments fell
during the 1970s at the
expense of the federal
government, which was
expanding its environmen-
tal involvement, while
private sector costs re-
mained relatively stable.
During the period 1980-87, there was remarkable stability in the cost shares. The future projec-
tions, however, are for a rapid growth in the federal share with a corresponding reduction in all
other shares, particularly the private sector, over the period 1987-2000. The primary reason for
this is the projected 140 percent increase in non-EPA federal costs, primarily due to proposed
Department of Defense and Department of Energy expenditures on military and nuclear waste
clean-up.
2.3. TOTAL CAPITAL EXPENDITURES
Total capital costs can be summarized as follows:
63.0%
1987 Annualized Costs
$85.3 billion
Source: Tables 8-12 and 8-12A
of the Report to Congress
60.0%
2000 Annualized Costs
$147.9 billion
Pollution Control Capital Investment
In billions of 1986 dollars
In billions of 1990 dollars
As Percent of Total Capital Investment
1972
20
23
2.5
1987
30
35
2.3
1990
41
47
2.8
2000
Present
30
35
1.7
Full
39
45
1.9
1990
2-5
-------
Environmental Investments
In more detail, total capital expenditures were relatively stable at about $25-30 billion annually
over the period 1975-1987. There is expected to be a significantly higher level of capital
expenditures during the period 1988-1992, however. Capital expenditures are estimated to reach
$43 to 46 billion in 1992 (depending on whether the present or full implementation scenarios are
used), followed by falling levels over the years 1993-2000 except for a large jump in 1998.
Capital expenditures are expected to reach $47 to 51 billion in 1998 due to over $10 billion in
capital investment for the upgrade/replacement of underground storage tanks in that year.
Capital expenditures are then expected to fall back to roughly $36 to 39 billion over years 1999-
2000.
Fig. 2-5: Environmental Capital Investment
as a Percentage of Total Investment
3 h
H 3
To put these estimates
in perspective, it is useful
to compare capital invest-
ment in pollution control
as a percentage of total
national investment in plant
and equipment over time.
Figure 2-5 shows the
highest percentages were in
the mid-1970s at a little
over three percent. These
rates were somewhat lower
over the period 1978-1982,
and even lower over the
next five years. Pollution
control capital costs were
an estimated 2.3 percent of
national capital expendi-
tures in 1987. This per-
centage is estimated to
have jumped to 2.9 percent
in 1989, but is projected to
fall steadily over the period 1990-1996—to a low of two to 2.2 percent in 1997. After a jump
to 2.7 to 2.9 percent in 1998 due to large capital outlays for the upgrade/replacement of under-
ground storage tanks, rates are expected to resume this fall, dropping to 1.7 to 1.9 percent by
the year 2000.1 It should be noted, however, that future capital costs may be understated
relative to operating costs.2
1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000
D Present Implementation ^ Full Implementation
Source: Tables 8— 1 and S—4
of Iho Report lo Congress
1 In order to compute capital investment in pollution control as a percentage of total capital investment
for future years, data on total national plant and equipment expenditures over the period 1972-1988 (in
constant 1986 dollars) were linearly extrapolated to years 1989-2000.
2 See Section 8.1.1 of the Report to Congress.
2-6
December
-------
3. COSTS BY ENVIRONMENTAL MEDIUM AND PROGRAM
This Chapter summarizes annualized costs assuming full implementation by medium and
within each medium by major EPA program and sub-program where data are available. The
same data are presented for each year between 1972 and 2000 in Table 2-1 for all media at the
primary program level. The data presented in this Chapter provides a sub-program level of
detail not found in Table 2-1, but not on a yearly basis.
3.1. COSTS BY ENVIRONMENTAL MEDIUM
Figure 3-1 shows a breakdown of total pollution control expenditures by environmental
medium in order to provide an overall perspective. This shows each of the five media which
will be discussed in the rest of this Chapter.
Fig. 3-1: Total Media Costs Annualized at 7%, Assuming Full Implementation
200
200
150
1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000
I Water H Air & Radiation E3 Land
• Multi-Media D Chemicals
Source: Tables 8—3 and 8—6
of the Report to Congress
1990
3-1
-------
Environmental Investments
3.2. AIR AND RADIATION POLLUTION CONTROL COSTS
As shown in Table 3-1, the air and radiation pollution control program has been
disaggregated first into air and radiation. Air pollution control, in turn, has been broken down
into mobile and stationary source control and a residual, undesignated category of EPA costs that
cannot be broken down between the other two. Mobile source control includes emissions control
on all motor vehicles and other transportation sources such as airplanes.
Table 3-2: Annualized Air & Radiation Pollution Control Costs
(millions of 1986 dollars)
Program
Air Pollution Total
Stationary Source
Mobile Source
Undesignated Source
Radiation
Total Air & Radiation
Year
1972
7,916
6,230
1,345
341
18
7,934
1980
17,635
13,298
4,010
327
219
17,854
1987
26,679
18,960
7,469
250
327
27,006
1995
36,493
25,118
11,097
207
659
37,151
2000
44,049
29,725
14,140
184
896
44,945
Source: Table 3-3 of the Report to Congress
Annualized air and radiation pollution control costs have increased steadily since the passage
of the Clean Air Act in 1970. As shown in Table 3-1, total costs increased from almost $8
billion in 1972 to an estimated $27 billion in 1987. Stationary source air pollution control costs
accounted for approximately 67-74 percent of total costs during this period, while radiation
control programs accounted for less than two percent. In the future, costs associated with
existing programs are expected to rise only slightly. The Clean Air Act Amendments of 1990,
however, will significantly increase the costs of new regulations in the future. This report was
prepared using the January 1990 cost estimates of the original Administration proposal. At that
time, it was estimated that the Administration's strategies for addressing ozone, acid rain, and
air toxics would add about $5.8 billion in control costs by 1995 and roughly $14.6 billion by
the year 2000. In sum, a revision of the Clean Air Act along the lines of the Administration's
proposal would have pushed total annual air and radiation pollution costs to over $34.5 billion
by 1993, to $39.6 billion by 1997, and to $45 billion by the year 2000. Stationary source costs
would account for approximately 67 percent of total future air pollution control costs.
Since the time that these cost estimates were prepared, the estimated costs for the
Administration proposal have been adjusted upward due to revisions in air toxics cost estimates.
Estimates of the costs of the Senate and House bills were higher than the original Administration
3-2
December
-------
Costs by Medium
proposal, mainly due to requirements for tighter tailpipe standards, reformulated gasoline, and
oxygenated fuels. Due to these modifications, the costs of the Clean Air Act Amendments may
be significantly higher than the estimates presented in this report.
3.3. WATER POLLUTION CONTROL COSTS
As shown in Table 3-2, water pollution control costs have been disaggregated first between
water quality and drinking water. Drinking water costs are those associated with the treatment
of drinking water supplies to improve their quality for human consumption. Water quality costs
are defined as those pursuant to the Marine Protection, Sanctuaries and Research Act of 1972
and the Clean Water Act as amended in 1987. Water quality is then broken down by "point"
and "non-point" sources. Non-point source expenditures are those incurred to control pollution
from sources other than single, specific locations. Non-point sources include land runoff,
precipitation, drainage, and seepage, including agricultural storm drainage, and irrigation return
flows.
Table 3-3: Ammalized Water Pollution Control Costs
(millions of 1986 dollars)
Program
Water Quality Total
Point Source
Non-point Source
Drinking Water
Total Water
Year
1972
9,110
8,543
567
802
9,912
1980
22,763
22,116
647
1,982
24,745
1987
34,421
33,642
779
3,111
37,532
1995
48,194
47,300
893
5,350
53,543
2000
57,563
56,604
959
6,571
64,134
Source: Table 4-3 of the Report to Congress
Total annual water pollution control costs increased steadily over time, from about $9.9
billion in 1972 to $37.5 billion in 1987. Costs associated with point source control accounted
for over 90 percent of these expenditures. Most of the historical point source control costs are
due to local expenditures for sewerage services and wastewater treatment and to private
expenditures for the control of industrial effluents and the pretreatment of wastewater discharges
to treatment facilities. Future costs are expected to increase significantly, reaching a projected
$58 billion by the year 2000. These future costs are also driven primarily by point source
control expenditures by local governments and the private sector. Moreover, if the costs
associated with fulfilling the nation's current and projected future municipal wastewater
treatment needs are included, total costs would reach $64 billion by the year 2000.
1990
3-3
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Environmental Investments
3.4. LAND POLLUTION CONTROL COSTS
Land pollution control costs are presented in Table 3-3. They are broken down into two
major components: those pursuant to or related to the Resource Conservation and Recovery Act
(RCRA) and subsequent amendments (such as the Hazardous and Solid Waste Amendments of
1984 or HSWA), and those pursuant to the Comprehensive Environmental Response, Compensa-
tion, and Liability Act of 1980 (CERCLA or Superfund) and subsequent amendments. RCRA
programs are directed towards current solid and hazardous waste management practices, while
the Superfund program involves the remediation of damages resulting from past waste disposal
at sites not currently actively managed. RCRA costs are further broken down into solid waste,
hazardous waste, and underground storage tank (UST) costs. Solid waste costs are those
pursuant to Subtitle D of RCRA, including public and private expenditures for solid waste
collection, transportation, and disposal. Hazardous waste costs are those pursuant to RCRA
Subtitle C. UST costs are those pursuant to Subtitle I, such as those resulting from the technical
standards and financial responsibility requirements for petroleum-containing underground storage
tanks.
Table 3-4: Annualized Land Pollution Control Costs
(millions of 1986 dollars)
Program
RCRA Total
Solid Waste
Hazardous Waste
Underground Storage Tanks
Superfund
Total Land
Year
1972
8,436
8,436
**
**
**
8,436
1980
13,612
13,612
**
**
**
13,162
1987
18,409
16,683
1,725
1
683
19,092
1995
32,468
20,338
9,210
2,920
4,690
37,158
2000
38,055
22,302
12,062
3,691
8,093
46,148
** Program was not in existence.
Source: Table 5-3 of the Report to Congress
Total annual costs associated with land pollution control, including costs for solid waste
collection and disposal services, increased steadily from approximately $8.4 billion in 1972 to
$19 billion in 1987. Future costs are expected to rise dramatically, due primarily to new and
forthcoming hazardous waste and UST regulations and increased levels of activity under
Superfund. Land pollution control costs are expected to be $25.6 billion in 1990, increasing to
$37 billion by 1995, and to $46 billion by the year 2000. Hazardous waste, UST and Superfund
are expected to account for 35 percent of these costs by 1990, 43 percent by 1995, and by more
than 50 percent by the year 2000.
3-4
December
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Costs by Medium
3.5. CHEMICAL POLLUTION CONTROL COSTS
Chemical pollution control costs are presented in Table 3-4. They are broken down into
toxic substance and pesticide control costs. Toxic substance costs involve costs to determine and
control the hazards posed by the manufacture, use, and transport of useful chemicals other than
pesticides. Pesticide costs relate to the costs of control of the use of insecticides, rodenticides,
herbicides, and fungicides.
Table 3-5: Annualized Chemical Pollution Control Costs
(millions of 1986 dollars)
Program
Toxic Substances
Pesticides
Total Chemicals
Year
1972
**
92
92
1980
429
461
889
1987
365
453
818
1995
1,119
1,353
2,472
2000
1,234
1,658
2,892
** Program was not in existence.
Source: Table 5-3 of the Report to Congress
Total annual costs of chemical control increased from $92 million in 1972 to $889 million
in 1979. Costs were lower in subsequent years, averaging $680 million over the period
1980-1988. Private sector pesticide control costs accounted for over 40 percent of these
expenditures. Total costs are expected to increase significantly over the next several years,
reaching $2.4 billion in 1995 and $2.9 billion by the year 2000. Private expenditures for
pesticide control are projected to increase to an estimated $1.6 billion by the year 2000. The
increase in private pesticide costs is due to an expected steady rise in costs for pesticide research
and development, cancellations and suspensions, and increased farmworker safety and applicator
training and certification costs. These cost increases reflect accelerated levels of pesticide re-
registration activity and more stringent pesticide applicator and farmworker safety requirements
mandated by the 1988 FIFRA Amendments.
3.6. MULTI-MEDIA COSTS
The multi-media control costs include all those costs that cannot easily be allocated to any
specific medium. Five categories are included in Table 3-5: EPA management and support, the
EPA energy research program, the EPA interdisciplinary research program, the Emergency
Planning and Community Right to Know Act (EPCRA), and undesignated non-EPA federal
costs. EPA Management and Support expenditures provide executive direction and policy
oversight for all EPA programs as well as administrative and support services not assigned to
specific programs. The EPA Energy Program is a multi-media research and development effort
1990
3-5
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Environmental Investments
aimed at providing scientific information for the evaluation of environmental impacts from, and
the potential controls on, the nation's energy sector. The EPA interdisciplinary Program
addresses environmental issues that affect several media and require an interdisciplinary
approach. The EPCRA Program, also known as SARA Title III, sets requirements for federal,
state, and local governments and industry regarding emergency planning and community-right-to-
know reporting on hazardous and toxic chemicals. The undesignated non-EPA federal category
are those non-EPA federal costs for environmentally-related activities that have not been broken
down by media.
Table 3-6: Annualized Multi-Media Pollution Control Costs
(millions of 1986 dollars)
Program
Management & Support
Energy
Interdisciplinary
EPCRA
Undesignated
Total Multi-Media
Year
1972
96
**
11
**
**
108
1980
214
183
37
**
434
868
1987
276
54
59
**
453
842
1995
399
6
138
916
642
2,102
2000
460
0
184
916
738
2,298
** Program was not in existence.
Source: Table 7-3 of the Report to Congress
Total annual costs for multi-media environmental programs increased from $108 million in
1972 to $869 million in 1980. Over 50 percent of these expenditures are non-EPA federal costs,
and approximately 25 percent are EPA costs for its management and support programs. During
the period 1981-1987, annual costs for multi-media programs averaged $728 million. Future
annual costs are expected to rise significantly, largely due to the costs associated with the
recently implemented EPCRA provisions. Annual costs are expected to increase from an
estimated $842 million in 1987 to $2.3 billion by the year 2000. The EPCRA provisions are
expected to account for approximately 45 percent of these costs; undesignated non-EPA federal
programs, 32 percent; and EPA management and support programs, 15 percent.
3-6
December
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4. COST COMPARISONS AND CONCLUSIONS
The cost estimates presented in this report, together with data from other recent EPA studies,
permit some interesting comparisons of pollution control costs. This Chapter discusses five such
cost comparisons, and some general conclusions that follow from these and others made in
Chapter 2.
4.1. COST COMPARISONS
Below, comparisons of costs over time are discussed for the following categories of pollution
control costs and expenditures:
4.1.1. Environmental media expenditure shares;
4.1.2. Comparisons with other U.S. expenditures from Gross National Product;
4.1.3. Cost burdens on local governments;
4.1.4. Long term trends in total costs; and
4.1.5. International pollution control expenditures.
4.1.1. Environmental Media Expenditure Shares
Fig. 4-1: Percentage of Capital Plus Operating
Expenditures by Medium
Assuming full Implementation and 1986 dollars
^^j-j-OTjsoj^Air & Radiation 28.9%
Water +2.9% Multi-Media 1.1%
Chemicals 1.2% Land 26'0%
1987 Total Cost
($77 billion)
Water 35.7%
The first comparison involves
the shares of total U.S. expendi-
tures accounted for by different
environmental media over time.
The sum of capital and operating
expenditures is used for these
comparisons since this measure of
costs does not include interest and
depreciation costs on past capital
investments and thus illustrates
near-term future trends more
clearly than annualized costs. The
total expenditures measure differs
from the total annualized costs
measure discussed in previous
chapters. Annualized costs reflect
the sum of operating and amor-
tized capital costs. Amortized
capital costs represent depreciation and interest charges on the stock of capital in use as of that
year. The total expenditures measure, on the other hand, represents total operating costs plus
the total value of capital equipment purchased in that year alone. It thus includes total monetary
outlays in a particular year and excludes depreciation and interest charges on past capital invest-
ments. As discussed in Section 1.2.1, this measure is referred to as "total expenditures" to
distinguish it from "annualized costs."
Chemicals 1.9%
Air & Radiation 27.1%
Multi-Media 1.5%
Land 33.9%
Source: Table 8- IS of the Report to Congress
1997 Total Cost
($119 billion)
1990
4-1
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Environmental Investments
The most significant increase in total expenditures is expected in the land medium. As
shown in Figure 4-1 in percentage terms, land expenditures are estimated to increase from 26
percent of total expenditures in 1987 to 34 percent by the year 1997. On the other hand, the
share of water expenditures over these years is projected to fall from 43 percent of total
expenditures in 1987 to 36 percent in 1997, while the share of air expenditures is expected to
fall only slightly from 29 to 27 percent. Since there estimates assume full implementation, the
fall in the share of water expenditures would be even greater if the full implementation
assumptions with regard to water are not fulfilled.
Fig. 4-2: Total Land Capital Plus Operating
Expenditures by Type of Regulation
60
Figure 4-2 shows that total ex-
penditures for existing land pro-
grams are projected to increase
steadily over the period 1987-
2000. The increase in land expen-
ditures associated with new regula-
tions follows a less regular trend.
Expenditures for new regulations
are expected to increase rapidly
over the period 1987-1992. By
1992, new regulations will account
for an estimated 33 percent of
total land expenditures. Expendi-
tures for new regulations are
expected to fall off considerably
over the next few years to roughly
one-half the 1992 level. However, expenditures for new land regulations are expected to jump
again in 1998 and then fall back to the mid-1990 trend over years 1999-2000.
1986 1987 1988 1989 1990 1991 1992 1993 1991 1995 1996 1997 1998 1999 2000
B Existing Regulation* £|§ New Regulations
Source: Table 8- ISA of th« Report to Congress
Figure 4-3 shows that the two
jumps in new regulation expendi-
tures are due largely to expendi-
tures associated with new rules for
underground storage tanks (UST).
The first jump is due in part to
large UST corrective action expen-
ditures; the second jump is due
primarily to large capital expendi-
tures for the upgrade/replacement
of tanks in 1998, the regulatory
deadline for such action. The
UST expenditures are broken out
in Figure 4-4.
Fig. 4-3: Total Land Capital Plus Operating
Expenditures by Program
-, 60
10
1972 1974 1976 1973 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000
0 Total Solid Wail. [§j Tolol Sup.r(und | Tolal Hazardous Wail, gl Total UST
Source: Tabl. 8- ISA of 1h. R.port 1o Congress
4-2
December
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Cost Comparisons and Conclusions
Figure 4-3 shows that solid waste is expected to account for the largest share of land
expenditures over the period 1987-2000, followed by hazardous waste, Superfund, and UST.
The large majority of solid waste expenditures are for local government and private sector trash
collection and disposal activities, however, most of which do not result from federal laws and
regulations. As shown in Figure 4-5, new federal solid waste regulations are expected to
account for only 15 percent of total solid waste expenditures in 1992, decreasing to about ten
percent in subsequent years.
Fig. 4-4: Solid Waste Capital Plus
Operating Expenditures by Type of Reg.
Fig. 4-5: UST Capital Plus Operating
Expenditures by Type of Regulation
1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1396 1997 1998 1999 200O
Score*! Tab1> 8-1BA of )h« R«poH lo Congr.*.
Figure 4-6 breaks out hazard-
ous waste expenditures by existing
and new regulations and also
shows that portion of existing
regulation expenditures expected
to be incurred by the U.S. Depart-
ment of Energy (DOE) and the
U.S. Department of Defense
(DOD). This figure shows that
existing regulations will account
for roughly 64 percent of total
hazardous waste expenditures over
the period 1992-2000. An average
of about 52 percent of these ex-
penditures for existing regulations
over the period will be incurred
by DOE and DOD.
86 1987 1988 1989 199O 1991 1992 1993 199* 1995 1996 1997 1998 1999 2OOO
| Exiting Regulation, ^ Nmw Regulation.
Tab!* 8-I8A of th« Report to Congr»««
Fig. 4-6: Hazardous Waste Capital Plus Operating
Expenditures by Type of Regulation
1985 1987 1989 1991 1993 1995 1997 1999
1986 1988 1990 1992 1994 1996 1998 2000
RS53 Existing Regulations: ^H Existing Regulations:
KS8 All expenditures except OOD/DOE !• DOD/DOE expenditures
Source: Table 8- 18A of the Report to Congress
New Regulations
1990
4-3
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Environmental Investments
Fig. 4-7: Superfund Capital Plus Operating
Expenditures by Type of Regulation
Finally, Figure 4-7 shows total Super-
fund expenditures and that portion of the
total expected to be incurred by DOE and
DOD. Superfund expenditures are esti-
mated to increase rapidly over the period
1987-2000, and DOE and DOD together
are expected to account for an average of
approximately 35 percent of the total over
the period.
4.1.2. GNP Expenditure Shares
Another comparison which can be
made using the total expenditures data is
how environmental pollution control
expenditures compare with other national
expenditures familiar to the individual
citizen. These comparisons can be made
in terms of percentages of Gross National Product (GNP) as follows:
0
1980 1982 1984- 1986
1981 1983 1985 19S7
0
1990 .1992 1994 1996 1998 2000
1989 1991 1993 1995 1997 1999
• Existing Regulations:
All expenditures except DOD/DOE
Soiree: Toble 8- 18A of the Report to .Congress
Existing Regulations:
DOD/DOE expenditures
COMPARATIVE U.S. EXPENDITURES AS PERCENT OF GNP
Environmental Pollution Control1
Clothing and Shoes2
National Defense2
Medical Care2
Housing2
Food2
1980
1.8
3.6
5.4
6.3
9.8
12.4
1987
1.7
4.2
6.9
7.0
9.3
11.7
1 From Table 8-19 of the Report to Congress. Assumes full implementation.
2 From Economic Report of the President, January 1989, Tables B-2 and B-ll.
As can be seen, environmental pollution control represents a small fraction of the expenditures
on many of the major components of GNP.
4.1.3. Cost Burdens on Local Governments
A third interesting comparison involves local government pollution control costs over time.
The estimates presented in Chapter 2 suggest that although the percentage share of costs funded
by local government is not projected to change much, total annualized dollar costs to local
governments will increase substantially over the period 1987-2000. Annual local government
costs under the full implementation scenario are expected to increase from $19 billion in 1987
to over $32 billion by the year 2000, a 69 percent increase. Increases in local costs are driven
4-4
December
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Cost Comparisons and Conclusions
primarily by costs for wastewater treatment and by revisions to several environmental laws in
recent years that establish broader and more stringent standards for drinking water treatment,
sewage sludge disposal, and solid waste disposal.
A more detailed examination of the economic impacts of environmental pollution control
regulations at the local level can be found in the Municipal Sector Study1 released by EPA in
1988. This report was part of a larger study that summarized the economic impacts of
expanding pollution control requirements on municipalities, small business, and agriculture.2
Table 4-1: Potential Increases in Annual Charges by City Size by 2000
Types of Regulations (1986$s
Municipal
Population
0 - 2,500
2,500 - 10,000
10,000 - 50,000
50,000 - 250,000
Over 250,000
Number
of Cities
26,315
6,279
2,694
463
659
Waste
Water
45
20
20
20
60
Drinking
Water
40
15
5
10
15
Solid
Waste
26
23
32
28
51
per household)
Other
59
32
23
12
34
Total
170
90
80
70
160
Note: User charge increases have been calculated using weighted average costs of
new regulations. The costs that a municipality may incur will depend on the
regulations it has to comply with.
Source: U.S. Environmental Protection Agency, The Municipal Sector Study:
Impacts of Environmental Regulations on Municipalities, Office of Policy, Planning
and Evaluation, Report EPA-230-09/88-038, September, 1988, p. v.
The Municipal Sector Study found that new and forthcoming pollution controls on local
governments will require significant additional capital investments and increases in rates charged
to customers for expanded environmental services. It is estimated that in the coming years the
average household will be charged an additional $100 annually for locally-provided environmen-
tal services. Those municipalities with populations under 2,500 and over 250,000 will
experience the greatest increases in total user costs on a per household basis, with average
additions to annual user charges and fees of $170 and $160, respectively (see Table 4-1). When
1 U.S. EPA, The Municipal Sector Study: Impacts of Environmental Regulation on Municipalities, Report
No. 230-09-88-038, September 1988.
2
U.S. EPA, Municipalities, Small Business, and Agriculture: The Challenge of Meeting Environmental
Responsibilities, Report No. 230-88-037, September 1988.
1990
4-5
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Environmental Investments
these costs are added to projected increases in costs necessary to maintain current services,
average household costs in the year 2000 are estimated to be 60 to 120 percent higher than 1986
costs. Municipalities with populations under 2500 are expected to experience costs in the upper
end of this range. Because smaller municipalities tend to have lower average household incomes
and higher unit costs for improved environmental services, households in smaller communities
will be required to pay a greater proportion of their incomes on average than households in
larger cities for comparable environmental services. Households in communities with
populations under 2,500 will pay an average 0.7 percent of their incomes for environmental
services while those in larger cities will pay, on average, 0.5 percent.
Most municipalities are expected to be able to meet the estimated increases in environmental
expenses and still remain financially sound. The municipalities most likely to experience
difficulties will be those with populations of 2,500 or less. Between 21 percent and 30 percent
of these communities may experience difficulties because of the high costs of certain individual
regulations, the cumulative costs of recent legislative requirements, and the limited margin for
expanding financial obligations in small communities. Such difficulties are not limited to small
cities, but it is estimated that a much smaller proportion (between three and seven percent) of
cities with populations over 2,500 persons will face financial problems as a result of EPA
requirements.
The individual environmental regulations that account for the largest potential cost increases
to small municipalities are sewage treatment and new drinking water treatment requirements.
Several of the more costly drinking water regulations will apply to a greater proportion of
smaller municipalities than larger municipalities since they deal with environmental risks that
are more often found in smaller community water systems. Many larger water supply systems
already have introduced treatment systems to control such risks. The costs of solid waste dis-
posal, asbestos removal in schools, and underground storage tank regulations also account for
a significant portion of the additional costs expected to be borne by smaller communities.
4.1.4. Long Term Trends in Total Costs
As discussed in Section 2.1, a comparison of total annualized costs over the period 1972-
2000 shows that pollution control costs in constant dollars and as a percentage of GNP have
increased over time, but at a decreasing rate of increase, and are expected to do so through the
year 2000. In the year 2000, costs are expected to be more than 70 percent higher than year
1987 levels under the present implementation scenario, which includes costs for all current and
planned pollution control programs. Year 2000 costs are estimated to be over 85 percent higher
than 1987 levels under the full implementation scenario, which includes the costs of achieving
the ozone National Ambient Air Quality Standard nationwide and the expenditures needed to
fulfill the nation's wastewater treatments needs, in addition to costs for all current and planned
programs. Since the ozone standard is more likely to be implemented, given the enactment of
the Clean Air Amendments of 1990, than the wastewater treatment needs are to be met, the most
likely projected costs would seem to be between the present and full implementation projections.
On the other hand, as discussed in Section 3.2, the cost estimates for the Clean Air Act
4-6
December
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Cost Comparisons and Conclusions
Amendments appear likely to be higher than those used in this report. A case can therefore be
made that the costs may lie nearer the full than the present cost projections.
Beyond the year 2000, the difficulty of projecting costs becomes even greater. The Clean
Air Act Amendments envision increasing costs beyond the year 2000. The annual costs for the
Administration's Clean Air Bill included in this report are estimated to be $4 to $7 billion higher
by the year 2005 than in 2000. The trend also points upward, but at a decelerating rate of
increase. All of this suggests continued cost increases beyond the year 2000, at least until 2005.
4.1.5. International Pollution Control Expenditures
Comprehensive estimates of pollution control costs in other developed countries are available
for certain Western European nations only. However, these estimates are expressed in terms
of total pollution control expenditures—capital outlays plus operating costs—instead of in
annualized terms.3 As discussed in Section 4.1.1, the total expenditures measure differs from
the total annualized costs measure discussed throughout the previous chapters. In addition, the
pollution control expenditure estimates reported by most of the European nations include non-
household expenditures only. To permit comparisons of U.S. costs with those in the other
countries, the U.S. estimates are adjusted to reflect non-household expenditures for pollution
control as well as total expenditures.
Table 4-2: Capital Plus Operating Expenditures for Some OECD Countries
Country
United States
Non-household
Incl households
Austria
Finland
France
Non-household
Incl households
West Germany
Netherlands
Norway
United Kingdom
1975 1976
1977
1978
1979
1980
1981 1982
(Figures represent percentage of Gross
1.60 1.59
1.87 1.85
1.09
1.37 1.36
1.66
1.59
1.86
1.16
1.29
1.51
1.77
1.10
1.33
1.57
1.81
1.13
1.37
1.60
1.83
1.31
1.45
1.11
1.53
1.74
1.19
0.87
1.45
1.57
1983
1984
1985
1986
Domestic Product)
1.50
1.70
1.24
0.86
1.45
1.18
1.45
1.67
1.12
0.85
1.41
1.42
1.66
1.10
0.84
1.37
1.44
1.67
1.32
,0.85
1.10
1.52
1.26
0.82
1.25
1.50
1.74
1.16
0.89
1.15
Source: Table 9-2 of the Report to Congress
These cost estimates are reported in: Organization for Economic Cooperation and Development,
Pollution Control and Abatement Expenditure in OECD Countries: A Statistical Compendium, OECD
Environment Monographs No. 38, November 1990, p. 40.
1990
4-7
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Environmental Investments
Table 4-2 compares the sum of capital and operating expenditures as a percentage of Gross
Domestic Product (GDP) for the United States and Western European countries over the years
1975-1985. The data for 1985, the most recent year for which there are data for all the
countries listed in Table 4-2, are shown graphically in Figure 4-8.
The estimates indicate that in most years for which there are comparable data, non-household
U.S. pollution control expenditures as a percentage of GDP were higher in the U.S. than in most
of the Western European countries represented by the data. In 1985, the most recent year for
which data are available for most of the countries listed in Table 4-2, the percentage of non-
household pollution control expenditures in the U.S. were nine to 76 percent higher than in
Finland, the Netherlands, the United Kingdom, France, and Norway, and five percent less than
in West Germany. It should be noted that the differences in the estimates for the United States
and West Germany are small enough that they could be the result of inaccuracies in the data or
the methods used to put them in comparable terms.
Kg. 4-8: 1985 International Pollution Control Expenditures as % of GDP
United States
0.0
0.5 1.0 1.5
(percent of GDP)
2.0
HI Nan—Household
Source: Table 9—2 of the Report to Congress
* Includes household expenditures
Household
4-8
December
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Cost Comparisons and Conclusions
4.2. CONCLUSIONS
The comparisons of pollution control costs discussed in this Chapter and Chapter 2 lead to
six conclusions. First, over the next decade there is expected to be a shift in the relative shares
of total environmental control costs accounted for by different environmental media. Most sig-
nificantly, there is expected to be a substantial increase in the share of total costs directed
towards land pollution control (which includes a significant groundwater protection component)
and a corresponding decrease in the share of total costs directed towards the control of surface
water quality. This is due largely to legislation enacted in the 1980s relating to past and current
practices involving the generation, handling, storage, treatment, and disposal of hazardous
wastes. Costs associated with the Superfund clean-up of abandoned hazardous waste sites and
various RCRA programs involving current hazardous waste operations, including the corrective
action and underground storage tank programs, are expected to impose significantly increasing
costs over the next decade.
Second, although increasing, national environmental pollution control expenditures remain
less than half those for clothing and shoes, one-third those for national defense, one-third those
for medical care, one-fifth those for housing, and one-sixth those for food.
Third, the non-EPA federal share of total annualized pollution costs is projected to increase
by more than 140 percent between 1987 and 2000, primarily as a result of the cost of military
and nuclear waste clean-up. All other shares, particularly the private sector, are expected to
fall somewhat. Even though the EPA share is expected to fall, the net effect is that the federal
share is projected to increase over this period.
Fourth, although the percentage share is expected to fall slightly, it is projected that over the
next several years real pollution control burdens on municipalities will increase dramatically and
result in large increases in the fees charged to consumers for locally-provided environmental
services. Moreover, many smaller municipalities may face severe difficulties in securing the
capital resources necessary to comply with pollution control requirements. The EPA is currently
extending technical and financial assistance to alleviate these constraints. .The EPA,
municipalities, and private entities are also exploring more innovative ways to mitigate pollution
control burdens on localities. These include public partnerships and regionalization projects,
whereby two or more communities may share expertise, jointly purchase environmental services
in volume at discount prices, and enter into joint ventures for financing pollution control
infrastructure.
Fifth, the estimates presented in this report show that total annualized costs for pollution
control programs have been increasing fairly rapidly in recent years, and the trend is projected
to continue through the year 2000. Currently, the nation spends about two percent of GNP on
pollution control; this is expected to increase to between 2.6 and 2.8 percent of GNP by the year
2000 assuming a seven percent discount rate.
1990
4-9
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Environmental Investments
There is reason to believe that pollution control costs will be rising significantly at least
through the year 2005. Even if no new environmental legislation is passed beyond the Clean
Air Act Amendments of 1990, pollution control costs appear likely to continue to increase
beyond the costs projected in this report for the year 2000. Moreover, if new environmental
legislation should be enacted in the future, costs would be higher than those projected in this
report.
Finally, national expenditures on pollution control as a percentage of GDP have been
somewhat higher in the U.S. than in many Western European nations for which comparable data
are available. While these results are not conclusive evidence, they do suggest that the United
States' commitment to national pollution control is at least as great as that of many of its
Western European economic counterparts.
4-10
December
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5. ENVIRONMENTAL TRENDS
This chapter summarizes data and information on historical trends in various measures that
are suggestive of the level of environmental quality over time. The objective is to provide some
indication of the "output" of the pollution control costs presented in this summary report. As
indicators of environmental quality only, these data are not readily comparable to the monetary
cost estimates. Pollution controls have resulted in substantial and valuable national benefits in
the form of improved human health, recreational opportunities, visibility, and general
environmental integrity. An ideal comparison of the costs and benefits of pollution control
would require that these benefits be identified, quantified, and monetized. This is an extremely
difficult and data intensive task and far beyond the scope of this report.
Instead, this chapter relies on historical data on estimated air and water pollutant emissions
and ambient pollution levels, and information on the production and regulation of hazardous
waste and toxic substances to provide an indication of environmental quality levels over time.
While this provides some indication of changing environmental quality levels, it does not
adequately show the degree of environmental protection afforded by cumulative pollution control
efforts. In the absence of controls, increasing population and levels of economic activity would
have resulted in steadily decreasing environmental quality over time. In order to show
environmental quality improvements resulting from pollution controls adequately, we would need
to compare current levels of environmental quality indicators with estimated levels that would
have prevailed in the absence of cumulative pollution control efforts. Except in the case of the
criteria air pollutants emissions, such comparisons are precluded by the absence of data. As a
result, none of the other environmental indicators discussed in this chapter will provide such
comparisons.
The data presented for different environmental media and regulatory program areas are of
widely varying quantity and quality. As might be expected, nationwide data on the more mature
pollution control programs, such as those directed to air and water quality, are more extensive
and better than those for the newer regulatory programs. Data and information on various
environmental quality indicators are summarized in the following sections corresponding to the
media used in Chapter 3 of this report:
5.1. Air Quality;
5.2. Water Quality;
5.3. Land Quality; and
5.4. Exposure to Chemicals.
The actual data that provide the basis for the following discussion can be found in the Report
to Congress.
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5.1. AIR QUALITY
5.1.1. Criteria Pollutant Emissions
EPA estimates of historical air emissions of the six criteria air pollutants or their
precursors—paniculate matter (PM), sulfur oxides (SO*), nitrogen oxides (NOJ, volatile organic
compounds (VOCs), carbon monoxide (CO), and lead (Pb)—indicate that, since 1970, there has
been a substantial decrease in emissions of each of these pollutants except nitrogen oxides.
Because one of the criteria air pollutants, ozone, is a secondary pollutant formed by the reaction
of reactive volatile organic compounds and nitrogen oxides, emissions of reactive volatile
organic compounds and nitrogen oxides (a criteria pollutant in its own right) are measured rather
than ozone.
5.1.2. Effects of Pollution Controls on Air Emissions
In addition to data on actual emissions for the criteria air pollutants, EPA has developed
estimates of emissions that would have occurred over the period 1970-1988 if pollution controls
pursuant to the Clean Air Act had not been introduced. The data indicate that by 1984 air
pollution controls had resulted in substantial reductions in air emissions for all of the criteria air
pollutants from levels that would have been observed in the absence of controls:
ACTUAL EMISSIONS AS A PERCENTAGE OF ESTIMATED EMISSIONS
USING 1970 LEVELS OF CONTROL
Year
1984
1988
Particulate
Matter
33
30
Sulfur
Dioxide
71
58
Nitrogen
Oxides
82
72
Volatile Organic
Compounds
60
58
Carbon
Monoxide
56
43
Lead
19
3
Source: Table 10-2 of the Report to Congress.
For example, particulate matter emissions were about 33 percent of what they would otherwise
have been without the introduction of additional controls since 1970. In other words, pollution
controls adopted since 1970 eliminated an estimated 67 percent of the particulates that would
otherwise have been emitted into the atmosphere in 1984. By this measure, there has been
continued improvement in air emissions since 1984, as shown in Figure 5-1, which illustrates
actual emissions in 1988 as a percentage of estimated 1988 emissions at the 1970 level of
control.
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Fig. 5-1: Actual 1988 Emissions as a Percentage of
Hypothesized Emissions at the 1970 Level of Control
100 —
- 100
PM
1988 ACTUAL
REDUCTIONS FROM ESTIMATED 1988
EMISSIONS USING 1970 CONTROLS
Source: Table 10—2 of the Report to Congress
5.1.3. Ambient Air Quality
Data are also available on ambient air concentrations of each of the six criteria air
pollutants—particulates, sulfur dioxide, nitrogen dioxide, ozone, carbon monoxide and lead
between the years 1979 and 1988. In terms of ambient air quality since 1978, clear
improvements have been observed with respect to each of these pollutants except ozone. The
experience with ozone has been mixed. Despite these improvements, many regions of the
country are still not in compliance with the National Ambient Air Quality Standards (NAAQS)
associated with one or more of the criteria pollutants. Air quality data before the mid-1970s are
of questionable quality and thus are not included in the estimated trends. Below, the data are
used to examine trends in average ambient pollutant concentrations over time and to compare
estimated concentrations with the NAAQS for each pollutant.
Taken as a whole, the data show a downward national trend in average ambient; concentra-
tions for the criteria air pollutants over the ten year period. Annual average concentration of
particulates fell by over 20 percent over the period; sulfur oxide concentrations, by over 35
percent; carbon monoxide concentrations, by about 32 percent; and lead concentrations, by 88
percent. Moreover, except in the case of ozone, between 75 and 90 percent of all sites sampled
showed average pollutant concentrations less than or equal to the NAAQS for each pollutant.
There are many regions of the country that are not in compliance with one or more NAAQS,
however. In 1987, an estimated 21.5 million people lived in counties where average paniculate
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levels were above the NAAQS for participate matter; 1.6 million people lived in areas that
exceeded the sulfur dioxide standards; 29.4 million people lived in areas that exceeded the
carbon monoxide standards; 7.5 million people lived in areas that exceeded the standard for
nitrogen dioxide level; 2.8 million people lived in areas that exceeded the lead standard; and
88.6 million people lived in areas where ozone levels were above the NAAQS level.
5.2. WATER QUALITY
Since the early 1970s, pollutant loadings for both industrial and municipal point source water
pollution have decreased. Municipal point source improvements are primarily the result of better
control technology. Industrial point source improvements are also the result of increased and
improved control technology, as well as process changes and increased discharges to public
treatment facilities. However, the available evidence suggests that non-point source pollution
loadings have increased significantly over time. Taken as a whole, the data indicate that
discharges of conventional water pollutants have been increasing over time. Moreover, while
point-source discharges appear to be decreasing, non-point source loadings are increasing and
more than offsetting point source gains. Finally, the data suggest that non-point sources account
for the vast majority of all discharges of conventional water pollutants. Water pollution
discharges are discussed in more detail below.
5.2.1. Discharges
5.2.1.1. Municipal
Data are available on municipal treatment plant discharges of total suspended solids (TSS)
and biological oxygen demand (BOD), two traditional water pollution indicators, in years over
the period 1960-1988. The data show that discharges of both TSS and BOD increased
significantly over the period 1960-1973. By 1980, the level of both had fallen considerably, but
this was followed by a gradual rise in pollutant loadings over the 1980s. By 1988, municipal
discharges of both TSS and BOD were comparable to those experienced in the 1960s, but were
still well below the year 1973 levels. The increase in pollution loadings from municipal
treatment plants in recent years is probably due to a large increase in the volume handled by
such facilities. This, in turn, is the result of an increase in the number of people served by
municipal systems, as well as a significant increase in the amount of industrial and commercial
wastes, both pretreated and untreated, being processed by municipal treatment plants. The
increase in the volume of wastes handled by municipal systems would probably have resulted
in much greater discharges of pollutants had it not been for expanded pollution controls.
Improved water pollution controls have resulted in "cleaner" discharges from these facilities in
terms of lower concentrations of pollutants per volume of wastewater released into waterways.
5.2.1.2. Industrial
Data are also available on the direct discharges of TSS and BOD in 1973 and the period
1982-1987 for major industrial categories. The data show that for these industries total
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industrial discharges of BOD declined by 93 percent over the two time periods, and discharges
of suspended solids declined by 96 percent. One important reason for these declines is that more
industrial wastes are being discharged to municipal treatment plants instead of being discharged
directly to water bodies. Currently, only about 27 percent of total BOD discharges and 39
percent of suspended solids discharges from these industries are made directly to water bodies.
Better and more widely applied control technology and treatment techniques as well as industrial
process changes are also responsible for the dramatic reduction in direct discharges from
industrial sources.
5.2.2. Non-point Source
Data on non-point source discharges of four conventional water pollutants—biological oxygen
demand, suspended solids, nitrogen, and phosphorus—are available for years 1973 and 1980.
These non-point sources include agriculture, silviculture, and urban runoff. The data indicate
that non-point source discharges of each pollutant increased significantly between 1973 and 1980.
The increase in non-point source discharges was driven primarily by agricultural discharges,
which historically have accounted for the bulk of all non-point loadings.
5.3. LAND QUALITY
5.3.1. Hazardous Waste Management
Data are available on hazardous waste generation and management in years 1981 and 1985.
These data were developed by two national surveys conducted in the early and mid-1980s,
respectively. Direct comparison of the two data sets is limited somewhat by changes in the
definition of hazardous waste and waste generators for the 1981 and 1985 data. Some general
comparisons can be made, however, and these are useful because they span years before and
after much of the first phase of RCRA regulations were put in place. Most of the current RCRA
regulatory program was implemented after 1985, however, and thus is not reflected in the data.
The data show that only slightly more waste was generated in 1985 than in 1981. The
slightly higher waste generation reported in 1985 was most likely due to the wider definition of
hazardous waste used in the later survey and its inclusion of more than three times the number
of small-quantity generators than were included in the 1981 survey. The relative shares of total
wastes accounted for by different classes of generators changed somewhat between the two
years, however. While the share of total waste generation accounted for by chemical and
petroleum industries was slightly more than 70 percent in each of the two years, the share
accounted for by metals-related industries dropped significantly from 1981 to 1985. The data
also show that there were more commercial treatment, storage, and disposal facilities in 1981
than in 1985. Some facilities probably closed after 1981 due to lack of certification or
profitability, or concern about more stringent prospective regulation.
Data are also available on the use of the various waste treatment and disposal options for the
period 1983-1987, which were collected in a national survey of selected commercial hazardous
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waste management firms. The data show an increase in the use of incineration and landfill
disposal options over the period and a decrease in the use of deep-well injection. Recently
promulgated rules restricting the land disposal of hazardous waste will most likely increase the
use of waste recovery, treatment, and incineration in future years. Much waste will continue
to be landfilled, however, until alternative disposal options become more widely available.
5.3.2. Hazardous Waste Remediation
Data on EPA activities under the Superfund Program, which is directed to cleaning-up
abandoned hazardous waste sites, show that first-starts for hazardous waste removals, site
investigation studies, remedial design studies, and remedial actions (i.e., site clean-ups)
increased steadily throughout the 1980s except for a drop in 1986, the year that the controlling
legislation was reauthorized. Moreover, EPA activity under the program has increased more
rapidly in recent years. Private actions have also increased significantly in recent years but
currently represent only about one-third of all Superfund activity.
5.3.3. Underground Storage Tanks
Data on underground storage tanks and estimated rates of future growth in the use of
different types of tanks indicate that bare steel tanks, currently the most widely used type, are
expected to be phased out rapidly over the next several years and replaced with more leak
resistant tank varieties required by the recently promulgated technical standards rule. The
production of protected tanks increased from roughly 15 percent of total tank production in 1980
to over 60 percent in 1987.
5.4. EXPOSURE TO CHEMICALS
5.4.1. Toxic Substances
More than 65,000 chemical substances are licensed for manufacture or processing for
commercial use in the United States. Notifications of intent to bring new chemicals into
domestic production and/or use have been received by EPA for over 1000 new chemicals each
year since 1982. This level of new chemical introduction is up sharply from levels experienced
in the 1970s and early 1980s and is expected to continue into the future. By the end of fiscal
year 1985, EPA had received a total of 6,200 pre-manufacturing notices for new chemical
introductions; this had jumped to 9,132 by the end of fiscal year 1987, however. As of 1987,
EPA had prohibited or restricted the manufacture, use, or distribution of a total of 553 new
chemicals.
5.4.2. Pesticides
Data on the agricultural use of herbicides, insecticides, and all other pesticides for years
1964-1986 show that the use of pesticides peaked in 1981 and has since stabilized at somewhat
lower levels. The decrease in pesticide use is probably due to a combination of factors,
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including greater use of integrated pest management practices, an increased awareness of the
potential danger in handling and using insecticides, and greater use of targeted insecticides that,
while more potent, require smaller quantities.
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