INFLATION IMPACT STATEMENT
FOR
PORTABLE AIR COMPRESSOR REGULATION
Executive Order 11821 requires the preparation of an Inflation Impact Statement (IIS)
for all major standards and regulations or of major legislation. Attached is the IIS for
the Portable Air Compressor Regulation signed into law December 31, 1975 and published
in the Federal Register, January 14, 1976 (41FR2162).
U.S. Environmental Protection Agency
Washington, D.C. 20460
-------
INFLATION IMPACT STATEMENT FOR NOISE EMISSION REGULATION
FOR PORTABLE AIR COMPRESSOR
1. SUMMARY
The establishment of a 76 dBA at 7 meters noise standard for newly
manufactured portable air compressors to be effective 24 months after
promulgation of the regulation (36 months for units exceeding 250 cfm)
gives rise to a series of costs which would otherwise not be incurred
by the private and public sectors. To determine the magnitude and
potential impact of these costs, the Office of Noise Abatement and
1 2
Control of the U. S. EPA sponsored two contract studies. '
The studies examined the structure of the industry, the estimated
cost of quieting air compressors by type, the price elasticity of demand,
the capital and annual costs of enforcement, the impact of enforcement
on annual operating and maintenance costs and the impact of this regu-
lation on a number of economic factors.
The following conclusions were reached in these studies:
A. The aggregate list price of compressors may increase by 12. 3
percent due to the imposition of the regulation.
B. The average price elasticity of demand is estimated at -0. 35
for price increases of less than 20 percent. Based on this,
it is estimated that the first year reduction in unit sales may
be no more than 4. 3 percent. It is anticipated that cost
U. S. EPA, "A study to Determine the Economic Impact of Noise
Emission Standards in the Construction Industry: Portable Air
Compressors Report, " June 1974.
p
U. S. EPA, "Proposed New Portable Air Compressor Regulation:
Supplementary Economic Impact Analysis. "
-------
increases experienced by manufacturers will be shifted to end
users due to the industry supply curve that is highly elastic
in the region of concern.
C. Increased annual aggregate purchase costs for end user indus-
tries is estimated at $25.4 million, using list prices for the
product. * First year user annualized depreciation and capital
costs are estimated at $5.1 million.
D. The impact of the regulation on annual maintenance and operating
costs is judged to be negligible.
2. ECONOMIC IMPACT ESTIMATES
A. Incremental Costs of Compliance
The respective effective dates for this regulation (24 months
for compressors under 250 cfm and 30 months for compressors
over 250 cfm) permit compressor manufacturers to effect changes
in design without undue hardships. Changes can thus be incor-
porated into the normal design cycle without incurring undue
costs of compliance.
Included in the economic impact analysis of compressor
noise control was an assessment of the expected average
portable air compressor list price increase due to imposition
of the regulation. A list price increase of 11.2 percent is
* Normally, discounts of approximately 25% of list price occur. Assum-
ing such a discount, a purchase cost increase of the order of $19 million
is a more realistic estimate.
- 2 -
-------
estimated for compressors with air flow capacities of 250 cfm
or less. Compressors with capacities greater than 250 cfm
may experience a list price increase of 13. 0 percent. Con-
sidering the 82 percent/ 18 percent market distribution of these
two compressor groups, an average overall compressor list
price increase of 12. 3 percent may result.
The upper bound annual aggregate increase in purchase
cost, based on estimated 1977-1978 retail sales of $206 million
and an estimated list price increase of 12. 3 percent, that may
result from this regulatory action is estimated to be $25.4
million.
Annualized user costs are estimated not to exceed $5. 1
million.
The impact of the regulation on annual maintenance and
operating costs is judged to be negligible.
B. Incidence of Increased Costs
The structure of the air compressor industry is such that
production cost increases are expected to be completely passed
forward to the end consumer.
C. Effect on Prices of Goods
Imposition of the regulation may increase the retail list
price of portable air compressors as follows:
All gasoline compressors 12.1 percent
Diesel compressors 250 cfm and lower 9. 6 percent
- 3 -
-------
Diesel compressors over 250 cfm 13. 0 percent
Average increase 12. 3 percent
D. Productivity Effects
No significant unemployment is expected to occur as the result
of the portable air compressor regulation.
E. Indirect Effects - Foreign Trade
Exports are approximately 10 percent of total sales, and no
changes in export patterns are expected because of these noise
regulations. Imports make up approximately 7 percent of the
market and no change is expected due to the standards being prom-
ulgated.
F. Impact on Energy
There is conflicting information with regard to increased
fuel consumption that may be caused by this regulation. Some
members of the portable air compressor industry claim that
fuel consumption will increase by 3 to 8 percent; however, these
members were unable to support their claims with factual data.
Another manufacturer indicated that fuel consumption may actually
decrease as a result of the use of more efficient fans to achieve
fan noise reduction. The agency attempted to determine experi-
mentally whether fuel consumption was actually affected by the
application of quieting technology compressors. However, fuel
- 4 -
-------
consumption differences (between a standard compressor and a
quieted version of the same compressor) attributable to the
quieting technology could not be separated from those attributable
to manufacturing tolerance variances. In view of the foregoing,
EPA is of the opinion that quiet portable air compressors use no
more fuel than unquieted units.
3. IMPACT ON INFLATION
The annual aggregate increase in purchase cost, based on estimated
1977-1978 retail sales of $206 million and an estimated list price increase
of 12. 3 percent that may result from this regulatory action, is estimated
to be $25. 4 million.
First year user annualized costs are estimated at $5. 1 million.
The macroeconomic effect of these price increases is judged to be
negligible when compared with the current or projected GNP levels.
The impact of the regulation on annual maintenance and operating
costs is judged to be negligible.
Possible unit sales reduction resulting from increased prices are
estimated to be no greater than the following:
Gasoline compressors 4. 2 percent
Diesel compressors under 250 cfm 3. 4 percent
Diesel compressors over 250 cfm 4. 3 percent
Average reduction 4. 3 percent
4. ENVIRONMENTAL IMPROVEMENTS
It is estimated that over 27. 4 million people are exposed to con-
struction site noise levels in excess of Ldn 55, the level identified as
- 5 -
-------
protective of public health and welfare with an adequate margin of
safety. Compliance with the regulation being promulgated is projected
to reduce the severity and extensiveness of impact from construction
site noise by approximately 14. 7 percent from current levels; con-
comitant regulation of truck noise to either 83 or 75 dBA at 50 feet,
for example, could provide total relief on the order of 37 to 46 percent,
respectively. In terms of the acoustic energy contribution to construc-
tion site noise, compliance with the regulation will reduce the acoustic
energy contribution of portable air compressors to approximately 1
percent of the total site noise. This will move the portable air com-
pressor from the second most predominant construction site noise
source to the 16th noisiest piece of construction equipment on a list
of 20 pieces of equipment typically used at construction sites. In terms
of the actual benefits from the regulation being promulgated, the regu-
lation will reduce the extensiveness and severity of impact on the
entire 27. 4 million people exposed to noise levies above 55 Ldn at
construction sites by 14. 7 percent.
5. ALTERNATIVES CONSIDERED
Regulatory Alternatives
The results of studies performed to assess the health and welfare
and economic impacts associated with the various standard and effective
date options showed the following potential impacts:
1. list price increase ranging from 10 percent to 12.3 percent;
2. annual aggregate increase in purchase costs ranging from $25. 4
million for 76 dBA level to $20. 3 million for a 78 dBA level;
- 6 -
-------
3. health and welfare benefits ranging from 14 percent to 14. 7
percent reduction in noise impact on 27.4 million people exposed
to construction site noise.
A 76 dBA standard effective in 24 months for compressors with air
flow capacities less than or equal to 250 cfm, and in 30 months for
compressors with capacities greater than 250 cfm, combines the best
health and welfare benefit of 14. 7 percent noise impact reduction with
a potential maximum average list price increase of 12. 3 percent and
an annual aggregate increase in purchase cost of up to $25.4 million.
More importantly, however, the 24 and 30 month effective dates for
the 76 dBA standard allow adequate lead time to insure that no manu-
facturer will suffer undue hardship from loss of sales that might accrue
from an inability to produce compressors complying with the standard
if too short a lead time were established.
Accordingly, the following standard has been established for newly
manufactured portable air compressors:
Standard
76 dBA
Effective Date
75 to 250 cfm >250 cfm
24 months 30 months
Non-Regulatory Alternatives
Comprehensive studies were performed to evaluate portable air com-
pressor noise emission levels requisite to protect the public health and
welfare, taking into account the magnitude and conditions of use, the
degree of noise reduction achievable through application of best avail-
able technology and the cost of compliance. The results of these studies
- 7 -
-------
indicate that the regulation of portable air compressor noise is feasible.
Accordingly, no non-regulatory alternative was considered.
6. IMPACT ON MATERIALS
The impact of this regulation on the demand and supply of material is
expected to be considerably below the 3 percent annual consumption thres-
hold and is not expected to have significant impact on any scarce mater-
ials.
It is hereby certified that the economic and inflationary impacts of
this proposed regulation have been carefully evaluated in accordance
with Executive Order 11821.
December 31, 1975 **
Acting Administrator
GPO 899-345
------- |