REGULATORY IMPACT ANALYSIS:
PROTECTION OF STRATOSPHERIC OZONE
VOLUME I: REGULATORY IMPACT ANALYSIS DOCUMENT
STRATOSPHERIC PROTECTION PROGRAM
OFFICE OF PROGRAM DEVELOPMENT
OFFICE OF AIR AND RADIATION
U.S. ENVIRONMENTAL PROTECTION AGENCY
DECEMBER 1987
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REGULATORY IMPACT ANALYSIS:
PROTECTION OF STRATOSPHERIC OZONE
VOLUME I: REGULATORY IMPACT ANALYSIS DOCUMENT
STRATOSPHERIC PROTECTION PROGRAM
OFFICE OF PROGRAM DEVELOPMENT
OFFICE OF AIR AND RADIATION
U.S. ENVIRONMENTAL PROTECTION AGENCY
DECEMBER 1987
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LIST OF EXHIBITS
Page
2-1 The Electromagnetic Spectrum 2-2
2-2 The Ozone Layer Screens Harmful UV-R 2-3
2-3 UV-R Damage to DNA: Relative Effectiveness by Wavelength ... 2-4
2-4 Damages in U.S. At Current Levels of UV-R 2-5
2-5 Chemical Cycles that Affect the Creation and Destruction
of Ozone 2-7
2-6 History of Model Predictions of Ozone. Depletion 2-8
3-1 CFC-11 and CFC-12 Production in the United States 3-2
3-2 Cumulative Reductions in CFC-11 and CFC-12 Emissions Due
to Aerosol Reductions in the U.S. and EEC 3-5
3-3 CFC-11 and CFC-12 Production in the Developed Vorld
(CMA Reporting Companies) 3-6
3-4 Per Capita Use of CFC-11 and CFC-12 in the U.S., EEC, and
Japan 3-7
3-5 Per Capita Use of CFC-113 in the U.S., EEC, and Japan 3-8
4-1 Compound Use in 1985 by Region 4-4
4-2 U.S. 1985 End Use by Compound 4-5
4-3 Non-U.S. 1985 End Use by Compound 4-7
4-4 Cumulative Fraction Released by Year of Emission and End Use 4-8
4-5 Projected Growth Rates for Compounds by Region 4-14
4-6 Projected Use by Compound by Regions 4-15
4-7 Growth of Trace Gas Concentrations Over Time 4-20
5-1 Characteristics of Various Ozone-Depleting Compounds 5-2
5-2 Illustrative Use of CFC-11 Under Five Stringency Options 5-5
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LIST OF EXHIBITS (continued)
5-3 Nations that Have Signed the Protocol • 5-6
5-4 Illustration of Participation Rates 5'8
5-5 Control Options Analyzed 5'10
6-1 Global Ozone Depletion for the No Controls Case 6-3
6-2 Global Ozone Depletion Estimates for the No Controls Case
and CFC 50%/Halon Freeze Case 6-5
6-3 Global Ozone Depletion Estimates for Alternative Control
Options Cases 6-6
6-4 Global Ozone Depletion Estimates for the No Controls
CFC 50%/Halon Freeze, and U.S. Only Cases 6-7
6-5 Summary of Ozone Depletion Estimated for the Eight Control
Cases 6-8
6-6 Global Ozone Depletion Estimates for the CFC 50%/Halon
Freeze Case for Alternative Trace Gas Concentration
Assumptions 6-10
6-7 Estimates of Equilibrium Global Warming by 2075 6-11
7-1 Dose-Response Coefficients: Nonmelanoma Skin Cancer 7-3
7-2 Additional Cases of Nonmelanoma Skin Cancer in the U.S.
For People Born by 2075 by Type of Nonmelanoma 7-4
7-3 Additional Cases of Nonmelanoma Skin Cancer by Cohort 7-5
7-4 Additional Cases of Nonmelanoma Skin Cancer in U.S.
By 2165 by Type of Nonmelanoma 7-6
7-5 Additional Mortality From Nonmelanoma Skin Cancer in U.S.
Among People Born Before 2075 by Type of Nonmelanoma 7-7
7-6 Additional Mortality From Nonmelanoma Skin Cancer by Cohort 7-8
7-7 Additional Mortality From Nonmelanoma Skin Cancer in U.S.
by 2165 by Type of Nonmelanoma 7.9
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LIST OF EXHIBITS (continued)
Page
7-8
7-9
7-10
7-11
7-12
7-13
7-14
7-15
7-16
7-17
7-18
7-19
7-20
7-21
7-22
7-23
7-24
Dose-Response Coefficients: Melanoma Skin Cancer Incidence
Additional Cases of Melanoma Skin Cancer in U.S. for People
Born Before 2075
Additional Cases of Melanoma Skin Cancer by Cohort
Additional Cases of Melanoma Skin Cancer by 2165 in U.S
Dose-Response Coefficients: Melanoma Skin Cancer Mortality
Additional Mortality From Melanoma Skin Cancer in U.S.
Among People Born Before 2075 ;
Additional Mortality From Melanoma Skin Cancer by Cohort
Additional Mortality From Melanoma Skin Cancer in U.S.
by 2165
Estimated Relationship Between Risk of Cataract and UV-B Flux
Dose-Response Coefficients - - Cataracts
Additional Cataract Cases in U.S. Among People Born Before
2075
Additional Cataract Cases Among People Born Before 2075
by Cohort
Additional Cataract Cases in U. S . by 2165
Effect of Increased Levels of Solar UV-B Radiation on the
Predicted Loss of Larval Northern Anchovy from Annual
Populations, Considering the Dose/Dose -Rate Threshold
and Three Vertical Mixing Models
Decline in Commercial Fish Harvests Due to Increased UV
Radiation
Decline in U.S. Agricultural Crop Production Levels Due
to Ozone Depletion
Increases in Tropospheric Ozone Due to Stratospheric Ozone
Depletion
7-10
7-12
7-13
7-14
7-15
7-16
7-17
7-18
7-19
7-20
7-21
7-22
7-23
7-26
7-27
7-29
7-31
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LIST OF EXHIBITS (continued)
Page
7-25 1980 Crop Production Quantities Used in NCLAN ............... 7-32
7-26 Declines in Crop Yield Assuming a 25 Percent Increase in
Tropospheric Ozone .......................................... 7-34
7-27 Increase in Stabilizer for Ranges of Ozone Depletion ........ 7-35
7-28 Changes in Sea Level Rise Due to Stratospheric Ozone
Depletion [[[ 7'37
8-1 Value of Additional Cases Avoided of Nonmelanoma in U.S.
for People Born Before 2075 ....... ', ......................... 8-3
8-2 Value of Additional Cases Avoided from Nonmelanoma in U.S.
That Occur by 2165 .......................................... 8-4
8-3 Value of Additional Deaths Avoided from Nonmelanoma in
U.S. for People Born Before 2075 ............................ 8-5
8-4 Value of Additional Deaths Avoided from Nonmelanoma in
U.S. That Occur by 2165 ............... . ..................... 8-6
8-5 Value of Additional Cases Avoided of Melanoma in U.S.
for People Born Before 2075 ................................. 8-8
8-6 Value of Additional Cases Avoided of Melanoma in U.S.
That Occur by 2165 .......................................... 8-9
8-7 Value of Additional Deaths Avoided from Melanoma for
People Born Before 2075 ..................................... 8-10
8-8 Value of Additional Deaths Avoided from Melanoma That Occur
by 2165 [[[ 8-11
8-9 Value of Avoiding an Increase in the Incidence of Cataracts
in U. S . in People Born Before 2075 .......................... 8-12
8-10 Value of Avoiding an Increase in the Incidence of Cataracts
in U.S. Through 2165 ...... , ................................. 8-14
8-11 Valuation of Impacts on Fin Fish and Shell Fish Due to
Increased Radiation ......................................... 8-15
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LEST OF EXHIBITS (continued)
Page
8-13 Valuation of Impacts on Major Agricultural Crops Due to
Tropospheric Ozone 8-19
8-14 Valuation of Impacts on Polymers Due to UV Radiation
Increases 8-21
8-15 Valuation of Impacts of Sea Level Rise on Major Coastal Ports 8-22
9-1 Changes in Consumer and Producer Surplus Due to an Increase
in CFC Price 9-5
9-2 Assumptions Embodied in Each Stretchout Simulation 9-9
9-3 Price Increases, Social Cost, and Transfer Cost Estimates
for CFC 50%/Halon Freeze and Four Sets of Cost
Assumptions 9-12
9-4 Short Term Social Cost Estimates (1989 to 2000) by Control
Case for Four Sets of Cost Assumptions 9-13
9-5 Long Term Social Cost Estimates (1989 to 2075) by Control
Case for Four Sets of Cost Assumptions 9-14
9-6 Social Cost Estimates for the Period 1989-2165 by Control
Case for Four Sets of Cost Assumptions 9-15
9-7 Price Increases, Social Cost, and Transfer Cost Estimates
for CFC 50%/Halon Freeze and Three Sets of Cost
Assumptions 9-17
10-1 Example of Truncated Time Stream 10-2
10-2 Illustration of Truncated Population Stream and Associated
Benefit and Cost Streams 10-5
10-3 Summary of the Health Benefits for People Born Before
2075 by Scenario 10-10
10-4 Summary of the Health Benefits Through 2165 by Scenario
for People Born After 2075 10-11
10-5 Summary of the Environmental Benefits Through 2075 by
Scenario 10-13
10-6 Summary of the Costs of Control by Scenario 10-14
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LIST OF EXHIBITS (continued)
Page
10-7 Comparison of Benefits and Costs Beyond 2075 10-15
10-8 Net Present Value Comparison of Costs and Health Benefits
Through 2075 by Scenario 10-16
10-9 Comparison of Costs and Benefits Through 2075 by Scenario ... 10-17
10-10 Summary of Results of Sensitivity Analyses for Costs and
Major Health Benefits for People Born Before 2075 10-20
11-1 Short-Term Social Cost Estimates (1989-2000) for Different
Cost Assumptions: Case 6 - CFC 50%, Halon Freeze 11-15
11-2 CFC Control Options: Comparison of Administrative Burden
Estimates 11-19
11-3 Summary of Issues Related to CFC Regulatory Options 11-25
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TABLE OF CONTESTS
Page
PREFACE - i
VOLUME I: REGULATORY IMPACT ANALYSIS DOCUMENT
EXECUTIVE SUMMARY ES-1
Resulta in Brief ES-1
Purpose ES-1
Methodology ES-2
Results ES -4
Chapter 1: Introduction and Organization 1-1
1.1 Organization of Volume I 1-1
1.2 Organization of Volume II 1-3
1.3 Organization of Volume III 1-3
Chapter 2: The Scientific Basis for Concern About the Stratosphere 2-1
2.1 Ultraviolet Radiation 2-1
2.2 Concern About Stratospheric Ozone Depletion 2-1
2.3 The Stratosphere and Global Climate 2-9
2.4 Health and Environmental Effects of Stratospheric
Modification 2-9
2.5 Summary 2-13
Chapter 3: Legal Basis for Regulation and Regulatory Impact Assessment . 3-1
3.1 Domestic and International Regulatory History Prior
to the 1977 Clean Air Act Revisions 3-1
3.2 EPA Authority under the Clean Air Act 3-4
3.2.1 Domestic Regulations 3-4
3.2.2 1980 Advanced Notice of Proposed Rulemaking 3-10
3.2.3 Stratospheric Ozone Protection Plan 3-10
3.2.4 EPA's Risk Assessment 3-11
3.2.5 International Negotiations 3-11
3.3 Need for a Regulatory Impact Analysis 3-13
Chapter 4: Baseline Production and Emissions of Gases That Can
Influence the Stratosphere 4-1
4.1 Compound Use in 1985 4-2
4.1.1 CFC-11 4-3
4.1.2 CFC-12 4-6
4.1.3 CFC-113 4-9
4.1.4 CFC-114 4-9
4.1.5 CFC-115 4-10
4.1.6 Halon 1211 4-10
4.1.7 Halon 1301 4.10
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TABLE OF CONTESTS (continued)
Page
4.2 1986 Estimate and Projections of Future Use 4-11
4.2.1 Previous Projections 4-11
4."2.2 Uncertainties Inherent in Long Term Projections . 4-12
4.2.3 Baseline Compound Use Projections 4-13
4.2.4 Technological Rechaimeling 4-18
4.3 Other Trace Gases 4-19
Chapter 5: Stringency and Coverage Options 5-1
5.1 Chemical Coverage Options 5-1
5.2 Stringency Options 5-3
5.3 Participation Assumptions 5-4
5.4 Selected Policy Options for Controls on Potential
Ozone Depleters 5-7
Chapter 6: Analysis of Atmospheric Response 6-1
6.1 Baseline Case Global Ozone Depletion 6-2
6.2 Global Ozone Depletion for the Control Cases 6-4
6.3 Global Depletion with Alternate Greenhouse Gas Growth .. 6-9
6.4 Estimates of Global Warming 6-9
Chapter 7: Estimates of Physical Health and Environmental Effects 7-1
7.1 Health Impacts 7-1
7.1.1 Nonmelanoma Skin Cancer 7-1
7.1.2 Cutaneous Malignant Melanoma 7-2
7.1.3 Cataracts 7-11
7.1.4 Changes to the Immune System 7-11
7.2 Environmental Impacts 7-24
7.2.1 Risks to Marine Organisms 7-24
7.2.2 Risks to Crops 7-25
7.2.3 Impacts Due to Tropospheric Ozone 7-28
7.2.4 Degradation of Polymer* 7-33
7.2.5 Impacts Do* to Sea Level Rise 7-33
Chapter 8: Valuing the Health and Environmental Effects 8-1
8.1 Value of Preventing Health Impacts 8-1
8.1.1 Nonmelanoma Skin Cancer 8-1
8.1.2 Melanoma Skin Cancer 8-2
8.1.3 Cataracts 8-7
8.2 Value of Preventing Environmental Impacts 8-13
8.2.1 Risks to Aquatic Life 8-13
8.2.2 Risks to Crops 8-16
8.2.3 Increased Concentrations of Ground-Based Ozone .. 8-16
8.2.4 Degradation of Polymers 8-18
8.2.5 Damages Due to Sea Level Rise 8-20
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TABLE OF CONTENTS (continued)
Chapter 9: Costs of Control 9-1
9.1 Summary of Methods Used to Estimate Costs 9-1
9.1.1 Demand for CFCs 9-2
9.1.2 Supply of CFCs 9-4
9.2 Cost Results 9-8
9.3 Limitations to These Estimates 9-18
Chapter 10: Benefits and Costs of Various Options with
Sensitivity Analysis 10-1
10.1 Special Characteristics of This Benefit to Cost
Comparison 10-1
10.1.1 Truncation of Benefit and Cost Streams 10-1
10.1.2 Uncertainty 10-3
10.1.3 Nonqualified Benefits 10-3
10.2 Method for Dealing with Truncated Benefit Streams 10-4
10.3 Comparison of Benefits and Costs 10-7
10.3.1 Key Assumptions and Parameters 10-7
10.3.2 Alternatives Analyzed 10-8
10.3.3 Comparison of the Benefits and Costs 10-9
10.4 Sensitivity Analysis 10-12
Chapter 11: Description and Analysis of Regulatory Options 11-1
11.1 Description of Regulatory Options 11-2
11.1.1 Marketable Permits 11-2
11.1.2 Production Quotas 11-6
11.1.3 Regulatory Fees 11-8
11.1.4 Engineering Controls and Bans 11-10
11.1.5 Hybrid Approach -- Production Quotas Plus
Controls/Bans 11-11
11.2 Evaluation of Regulatory Options 11-12
11.2.1 Environmental Protection 11-12
11.2.2 Economic Costs and Efficiency 11-13
11.2.3 Equity 11-16
11.2.4 Incentives for Innovation 11-16
11.2.5 Administrative Burdens and Feasibility 11-17
11.2.6 Compliance and Enforcement 11-20
11.2.7 Legal Certainty 11-20
11.2.8 Impacts on Small Business 11-21
11.3 Regulatory Approach for Halons 11-21
11.4 Summary of Regulatory Options '. 11-22
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VOLDME II:
VOLUME III:
TABLE OF CONTENTS (continued)
APPENDICES TO REGULATORY IMPACT ANALYSIS DOCUMENT
Appendix A: Executive Summary of the Risk Assessment
Appendix B: Stratospheric Ozone Protection Plan
Appendix C: Analysis of How CFC Regulations can Change Future CFC
Consumption by Technological Rechanneling
Appendix D: CFC Use in Developing Countries and the UNEP Protocol
Appendix E: Human Health Effects Modeling
Appendix F: Approaches Used for Estimating the Environmental
Impacts of Stratospheric Ozone Depletion
Appendix G: The Value of a Life Saved from the Prevention of
Stratospheric Ozone Depletion
Appendix H: Selection of Discount Rate
Appendix I: Framework and Method for Estimating Costs of Reducing
the Use of Ozone-Depleting Compounds in the U.S.
Appendix J: Summary of Control Options Simulated
Appendix K: International Trade Issues and the UNEP Protocol to
Reduce Global Emissions of CFCs and Halons
Appendix L: Regulatory Flexibility Act Analysis
Appendix M: Administrative Burdens Analysis
ADDENDA TO REGULATORY IMPACT ANALYSIS DOCUMENT
Part 1: Rigid Foaa
Part 2: Flexible Foam
Part 3: Mobile Air Conditioning
Part 4: Refrigerants and Air Conditioning
Part 5: Miscellaneous
Part 6: Sterilants
Part 7: Solvents
Part 8: Halons
Part 9: Military Uses of Halons
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PREFACE
This document is contained in three volumes, as follows:
o Volume I contains the Regulatory Impact Analysis (RIA)
document itself;
o Volume II contains appendices to the RIA document; and
o Volume III, in nine parts, contains addenda to the RIA.
These are studies prepared by engineering contractors
which examine current uses of chlorofluorocarbons and
halons and possible methods and costs of reducing their
use.
Volume t contains a complete table of contents for the entire document.
Much of the analysis and modeling on which this document is based was
prepared by IGF Incorporated. The data on CFG uses and substitutes was
collected and analyzed by IGF Incorporated, Industrial Economics Corporation,
Midwest Research Institute, and Radian Corporation.
-------
EXECUTIVE SUMMARY
Results In Brief
The United States, along with 23 other nations and the European Economic
Community, recently signed an international protocol (the "Montreal Protocol")
calling for a freeze on the use of CFCs beginning in approximately 1989, a 20
percent reduction in their use beginning in 1993, and another 30 percent
reduction in their use beginning in 1998. In addition, this protocol calls for
a freeze on Halon usage at 1986 levels beginning in approximately 1992. The
protocol will only enter into force when eleven nations have ratified it and
when ratifying nations constitute two*thirds of the consumption of the
controlled substances (i.e., CFCs and Halons). The U.S. Environmental
Protection Agency is under court order to publish by December 1, 1987, proposed
regulations for protecting stratospheric ozone, or a description of why
regulations are not required.
This Regulatory Impact Analysis (RIA) examines the probable effects of
regulatory action. Its major conclusion is that the benefits of limiting future
CFC/Halon use far outweigh the increased costs these regulations would impose on
the economy, under virtually all sets of assumptions examined.
Purpose
Since 1974, there has been increasing scientific evidence that increased
emissions of CFCs and Halon compounds would deplete stratospheric ozone. These
compounds, commonly used in many applications such as refrigeration, foam
blowing, sterilization, and fire protection, have extremely long atmospheric
lives, meaning that current levels of CFC and Halon production could affect the
welfare of the human population for a number of generations.
The best available scientific evidence suggests that if CFC and Halon
emissions continue to increase, significant stratospheric ozone depletion would
result. Decreases in stratospheric ozone would result in increases in the
penetration of biologically•damaging ultraviolet-B radiation (i.e., 290 to 320
nanometers) reaching the earth's surface.
Under the auspices of the United Nations Environment Programme (UNEP), 24
nations and the European Economic Community signed an international protocol on
September 16, 1987 in Montreal, Canada which addressed the ozone depletion
problem. The protocol called for a freeze on CFC use at 1986 levels beginning
on July 1, 1989 assuming entry into force occurs by January 1, 1989; a 20
percent reduction from 1986 levels beginning on July 1, 1993; and a 50 percent
reduction from 1986 levels beginning on July 1, 1998. The protocol also calls
for a freeze on Halon use at 1986 levels beginning on January 1, 1992.
To implement the obligations of the United States under this protocol and
under its own authority as set out in Section 157(b) of the Clean Air Act of
1977, the Environmental Protection Agency is proposing draft regulations
restricting the use of CFC and Halon compounds. Executive Order 12291 requires
that the costs and benefits of "major rules" such as these'CFC and Halon
restrictions be evaluated in a Regulatory Impact Analysis (RIA). This document
presents the results of this evaluation.
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ES-2
Methodology
This RIA estimates the costs and benefits of the proposed regulations by
considering their effect in the future relative to a projected baseline of
effects which would -occur in the absence of any regulation. In this baseline
case, CFC/Halon use is projected to grow through 2050, and then level off.
These growth projections are based upon analyses of past CFC/Halon growth
patterns that appear to be closely correlated to growth rates in per capita GNP
levels. The leveling off in CFC and Halon use in 2050, however, is based on the
assumption that alternative technologies and substances will be developed that
offset the need for additional amounts of CFCs and Halons.
Associated with this increased use of CFCs and Halons are projections of
decreases in stratospheric ozone that lead to increased ultraviolet radiation
levels and global climate change. These projected levels of ozone depletion are
based upon the best available representations of the chemical processes
affecting the atmosphere, particularly the stratosphere. In the baseline case
(i.e., no regulations), levels ofcstratospheric ozone are projected to decrease
by 50 percent by the end of the 21st century.
The RIA considers seven options for regulating CFC/Halon use. They range
from a simple freeze on CFC use without any controls on Halon use, to an option
comparable to the protocol reached in Montreal,- to an option which expands the
Montreal protocol by imposing an 80 percent reduction in CFC usage. Still
another option considers the costs and benefits of CFC/Halon regulation by the
United States alone in the absence of any regulatory actions in the rest of the
world, although given the Montreal protocol, this case is presented for
comparison purposes only. Analysis of all options takes into account which
nations participate. A summary description of each scenario is provided below:
o No Controls --No controls on CFCs or halons occur. This
is the baseline scenario against which the impacts of
various control options are measured.
o CFC Freeze -- CFC use is held constant at 1986 levels
starting in 1989.
o CFC 20% --In addition to the CFC freeze in 1989, a 20%
CFC reduction worldwide occurs in 1993.
o CFC 50% --In addition to the CFC freeze in 1989 and the
20% reduction in 1993, a 50% CFC reduction occurs in
1998.
o CFC 80% --In addition to the CFC freeze in 1989, the 20%
reduction in 1993, and the 50% reduction in 1998, an 80%
CFC reduction occurs in 2003.
o CFC 50%/Halon Freeze --In addition to the freeze on CFC
use in 1989. the 20% reduction in 1993, and the 50%
reduction in 1998, Halon use is held constant at 1986
levels starting in 1992. This case is intended to
resemble the Montreal Protocol as closely as possible.
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ES-3
o CFG 50%/Halon Freeze/U.S. 80% -- Same as the CFC
50%/Halon Freeze case, except that the U.S. reduces
to 80% of 1986 CFC levels in 2003.
o U.S. Only/CFC 50%/Halon Freeze -- Same as the CFC
50%/Halon Freeze case, except the U.S. is the only
country in the world that participates.
The benefits of these regulations were estimated by assembling the best
available scientific estimates on the effects of decreases in stratospheric
ozone on human health and the environment. The major health benefits are due to
avoiding ultraviolet radiation effects, which include increased numbers of skin '
cancers and cataracts. The value of reductions in skin cancer incidence was
estimated by first estimating the additional numbers of skin cancers likely to
occur due to decreased stratospheric ozone levels. Then the proportion of skin
cancers that were fatal were estimated and multiplied by an estimated
statistical value of human life. For the remaining nonfatal skin cancers and
all cataracts, cases were valued by multiplying by an estimated social cost of
treatment. Estimates of pain and suffering were not included in the valuation
of the skin cancer cases; pain and suffering were included for the cataract
cases.
The major environmental effects were more difficult to quantify due to a
lack of scientific data on the likely magnitude of these effects. Although
limited in scope, some studies of decreased crop yields (for soybeans) and fish
harvests (for anchovies) associated with increased levels of ultraviolet
radiation are available. The effects of ultraviolet radiation on yields in
these studies were used to estimate the probable decreased productivity of
specified agricultural and marine industries due to stratospheric ozone
depletion. For the purposes of calculating benefits, values were assigned to
increased crop and fish harvests using current market prices of each commodity.
Additionally, decreased stratospheric ozone can be expected to lead to
increased tropospheric (ground-based) ozone (which can also reduce crop yields),
and to more rapid deterioration of polymers. Also, CFCs and changes in the
vertical distribution of ozone can increase global temperatures, resulting in a
rising sea level. Although the benefits of reductions in ground-based ozone
levels to humans is no doubt quite large due to avoided human health impacts,
this RIA quantitatively assesses only the impacts of these reductions on crop
production levels. The benefits accruing to avoidance of faster deterioration
of polymers were assessed by estimating the costs of adding light stabilizers to
polymers to retard the absorption of ultraviolet radiation. The impacts of a
rising sea level vere valued by estimating potential impacts on major ports.
The costs attributable to reducing CFC and Halon use through regulation were
estimated by examining the costs of alternative technologies and materials for
producing CFC-based and Halon-based products. The RIA examines a wide range of
alternative approaches, including replacing CFCs and Halons with less ozone-
depleting chemicals, recycling or recovering CFCs and Halons during production,
or eliminating the CFC-based or Halon-based product entirely.
Extensive engineering analyses were performed to estimate the costs of
producing each CFC-based or Halon-based product with the alternative
technologies. These analyses included all variable costs, such as material,
labor, energy, and operating expenses; capital costs, properly discounted for
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ES-4
%
the expected useful life of the equipment; and nonrecurring costs, such as the
costs of retooling, research and development or training. For the cost
analysis, technologies were selected that minimized the increases in production
costs required to achieve each level of reduction in CFC and Halon use.
Two types of costs result from the regulatory changes. The social costs of
regulation were estimated as the loss in consumer welfare due to the reduced
availability and higher prices of CFC-based and Halon-based products.
Regulation also transfers income from consumers of these products, who now must
pay higher prices, to other sectors of society. These transfer costs are not
losses in welfare to society and are not counted as costs of regulation.
However, they do represent substantial costs to consumers of these products.
Results
Each of the options analyzed significantly reduces the depletion of
stratospheric ozone. Exhibit ES-l(a) shows the pattern of these reductions over
time for each alternative control option (except the U.S. Only/CFG 50%/Halon
Freeze case); Exhibit ES-l(b) shows the U.S. Only/CFG 50%/Halon Freeze case
along with the No Controls and CFC 50%/Halon Freeze cases. The least stringent
control option reduces the ozone depletion percentage by the end of the 21st
century from 50 to approximately 10 percent. In contrast, by 2100 the most
stringent control option reduces the ozone depletion percentage to about 3
percent. In all cases except the U.S. only case, depletion estimates assume
substantial levels of participation by other nations.
In the baseline case depletion of stratospheric ozone led to nearly 154
million additional nonmelanoma skin cancers and over 780,000 additional melanoma
skin cancers through the year 2075 in the U.S. Both types of skin cancers
combined were estimated to result in about 3.2 million additional deaths for
people born before the year 2075 in the U.S.
Regulation of CFC and Halon use reduces the additional incidence of skin
cancers for people born before 2075 by about 88 million cases in the least
stringent regulatory option to nearly 151 million cases avoided In the most
stringent regulatory option. Deaths avoided range from 2.0 million to 4.2
million over the same range of options. The present value of benefits to United
States citizens born before 2075 from avoiding these cancers ranges from $2.8
trillion to $6.4 trillion.
A second part of the human health benefits of CFC and Halon regulation is
the reduced incidence of cataracts. Of the 18.2 million additional cases of
cataracts projected to occur among people born before 2075 in the U.S. due to
ozone depletion, from 5.1 to 17.6 million cases are estimated to be avoided
under the various CFC and Halon regulatory options. The present value of the
benefits in the U.S. of these avoided cases ranges from $0.90 to $2.59 billion.
The quantifiable environmental benefits in the U.S. due to CFC and Halon
regulation, although substantial, are small when compared to the value of the
avoided cancer benefits:
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ES-5
EXHIBIT ES-1
GLOBAL OZONE DEPLETION FOR
ALTERNATIVE CONTROL OPTIONS CASES
0.0
-1.0 •
1 -2.0
a -3.0
a
I-
o
i
-6.0
-•.0
-7.0
CFC
1886
2006
2026
204fl
2000
20t8
CFC 50%/
HALON FREEZE
CFC 80%
CFC 60%
CFC 20%
CFC FREEZE
CFC 60%/HALON FREEZE
U.8. ONLY/
CFC 60%/
HALON FREEZE
-60.0
1686
2006
2026
2046
2066
2086
-------
ES-6
o The estimated increased value of crops harvested due to
decreased levels of damaging ultraviolet radiation ranges
from $8.2 billion to $23.6 billion.
o The estimated increased value of fish harvested due to
decreased levels of damaging ultraviolet radiation ranges
from $2.4 billion to $5.5 billion.
o The estimated increased value of crops harvested due to
decreased levels of tropospheric (ground-based) ozone
ranges from $5.2 billion to $12.5 billion.
o The decreased costs in protecting polymer products from
increased ultraviolet radiation ranges from $0.7 billion
to $3.1 billion.
o The estimated benefits of avoiding oosts due to a rise in
the sea level range from $1.2 billion to $4.4 billion.
The basis for these environmental effects estimates is much less certain than
the human health impacts; the environmental impacts could be significantly
higher or lower.
The costs of regulating CFCs and Halons are more sensitive to the regulatory
option selected than are the benefits. For the leaat stringent case--a freeze
on CFCs only--the present value of the costs for the United States are estimated
to be $6.8 billion through the year 2075. However, for the most stringent
regulatory option--in which ultimately CFC usage is reduced 80 percent in the
U.S. (50 percent in the rest of the world) and Halon use is frozen at 1986
levels--the present value of costs reach $34.0 billion through the year 2075.
In most years before the year 2000, the increased prices or transfer costs
of CFCs are larger than the net social costs. For example, the average annual
social costs of regulation for the CFC 50%/Halon Freeze case through the year
2000 are $100.4 million, while the average annual transfer costs are $437.3
million. In the long run, i.e., between the year 2001 and 2075, annual social
costs usually exceed annual transfer costs.
A major uncertainty in performing the cost analysis is the speed at which
the new technologies would be adopted by manufacturers. A series of alternative
cost simulations was performed to assess the impact on costs if industries
choose to switch to the lower cost technologies at slower than optimal rates.
In the event that stretchouts (e.g., delays in making cost-effective reductions)
in adoption of these alternative technologies occur, social costs in the CFC
50%/Halon Freeze case could range from $0.7 to $1.8 billion through 2000 and
$27.0 to $36.1 billion through 2075. Between now and 2000, the estimates of
transfer costs in the CFC 50%/Halon Freeze case are even more sensitive, ranging
from $2.0 billion to $5.7 billion through 2000 and from $6.2 to $9.4 billion
through 2075.
Because the costs of regulation are incurred immediately while the benefits
of reduced ozone depletion accrue over hundreds of years, it is difficult to
determine an appropriate time period for conducting the cost-benefit
comparisons. Exhibit ES-2 compares the benefits accruing to persons born prior
-------
ES-7
to 2075 to the costs Incurred prior to 2075. If the benefits exceed the costs
of regulation for this comparison, then social welfare is increased because
additional benefits from actions taken prior to 2075 continue to accrue in years
following 2075. Also, since benefits of stratospheric ozone regulation continue
to increase while co'sts are relatively constant after 2075, then if benefits
exceed costs prior to 2075, they would continue to exceed costs after 2075 as
well. As Exhibit ES-2 shows, the present value of benefits through the year
2075 far exceeds the costs imposed by the regulatory options. Of particular
note is that not all costs and benefits have been quantified. These
unquantifiable costs and benefits are also itemized in Exhibit ES-2. In any
evaluation of the relative merits of various policy options, all costs and
benefits, whether they have been quantified or not, should be recognized.
Aa a final stage of the analysis, a series of sensitivity runs were
performed to test whether large changes in the assumptions used to estimate
either costs or benefits would alter the recommendations of the RIA. Among the
many assumptions altered during the sensitivity runs were:
o The rate of growth in baseline CFG use,
o The statistical value of lives saved,
o The discount rate, and
o The rate at which regulation affected research and
development for alternative uses of CFG and Halon
compounds.
The results were most sensitive to the choice of the social discount rate.
However, even when this value was increased from its original value of two
percent to a higher estimate of six percent, benefits still exceeded costs about
12:1.
A review of the approaches for implementing any regulatory option considered
the use of auctioned permits,.regulatory fees, allocated quotas, engineering
controls/bans, and hybrid combinations of any of these approaches. Auctioned
permits and regulatory fees both raise substantial legal issues. Regulatory
fees and engineering controls/bans do not ensure that regulatory goals will be
satisfied. Allocated quotas, therefore, appear to offer the most
straightforward approach to implementing the CFG and Halon regulations, although
they raise equity concerns because of the potentially large transfers to
producers they create. In addition, the analysis indicates that if stretchouts
are likely, command-and-control engineering requirements could significantly
reduce costs faced by business in the next 15 years.
-------
cavtmiam or oosra uo
nOUGB M73 BY 8CE3UBIO
(billion* of 1985 doLUn)
No Controls
CIC Freese
CFC 201
CFC 301
CIC MS
CIC 301/Halon Free*.*
CFC 30S/B*loa Frees*/
HMlth *nd
Environmental
Benefit*
—
S.993
«.132
*.2M
4.400
4.443
4.30*
Coat*
—
7
12
24
31
27
34
Mat Benefit*
(Nino* Costs)
—
3.988
4.120
• .273
• .349
• .434
• .472
Bet Increment*!
Benefits (Minus
Cost*) b/ Co*t* and Benefits That Have Rot Bern Quantified
—
3.988
132
133
94
•7
34
Costs
Transition coats, aucb as temporary layoffs
•hi la new capital equipment Is inatalled
Aominlatratlv* costs
Costa of unknown anvlronswntal baxards due to
us* of chaoUoala replaolnc CFC*
Htelth Benefits
Incceas* In actinia karatosls fro* UV radiation
Chang** to the bisasn liaaaie ay*t**i
Tropoapn*rle oson* U*p*ot* on tb* pulannary
0.8. MI
U.S. Ohly CFC 30t/B*lon
Fr**s*
2,832
27
2,023
2.823
ayateai
Fain and aofferinc frcai akin oanoar
Environmental Bemfita
T*a>p*ratur* rla*
B*acb atosioo
Loss of coastal wetlanda
Additional sea level rla* Uapaot* due to
Antarctic ice diachacia. Greenland io*
dlaonart*. and Antarctic aMltwater
UV radiation isqpact* on recreational fishinf.
the overall SMrina ecosystea, other cropa.
forests, and other plant species, and
•taterlala currently In us*
Tropospheric oson* laapact* on otb*r crop*,
forests, other plant species, and sun-mad*
•aterials
All dollar value* r*fl*ct tn* dlff*r*nc* b*tw**o th* No Control* scenario and the specified altemetlve *c*narlo. unless
otherwls* indicated. Valuation of th* heelth and envlronawntal benefits applies only to paopl* born before 2073; coat* are
••tLuted thrcMjh 2073. In *11 sceneries, benefit* through 2143 for people born frost 2073 to 2143 exceed the costs of control
fro*) 2073 to 2143. Estimate* aaaua* a 2 percent discount rate.
Chang* la net incremental benefit* from th* Indicated acenario to the scenario listed *bov* It, e.g.. "CFC Freese" minus "No
Control*," unUss otharwis* Indicated.
i
oo
Compared to No Controls CM*.
-------
CHAPTER 1
INTRODUCTION AND ORGANIZATION
Concern about stratospheric ozone depletion led Congress, as part of its
1977 amendments to the Clean Air Act, to include Part B on stratospheric ozone
protection. Under the Authority granted by that Act, EPA is proposing a
regulation this December, 1987. As part of the process of proposing a
regulation in December of 1987, EPA must prepare a regulatory impact analysis
that evaluates the consequences of various options for limiting ozone-depleting
chemicals. This chapter presents the basic logic and organization of this
Regulatory Impact Assessment (RIA) which examines the regulatory options that
could be used to reduce future emissions of chlorofluorocarbons (CFCs) and
Halons under Part B of the Clean Air Act.
This RIA is divided into three volumes. -Volume I is the main report; Volume
II contains the appendices supporting the analysis and findings of Volume I; and
Volume III contains further documentation,.primarily on costs of technical
options to limit ozone depleting substances. The organization of each of these
volumes is discussed in turn.
1.1 ORGANIZATION OF VOLDME I
Volume I analyzes the regulatory options to limit CFCs and other ozone-
depleting substances. It is divided into eleven chapters that analyze various
aspects of the options.
Following this introductory chapter, Chapter 2 lays the scientific basis for
concern about stratospheric ozone depletion and for preventing stratospheric
change. This chapter is not intended to provide a detailed scientific analysis
related to ozone depletion. The primary scientific basis for this RIA is
contained in the risk assessment on stratospheric protection published recently
by EPA (1987). This assessment has been reviewed by the Environmental
Protection Agency's Science Advisory Board and is available from EPA.
Similarly, assessments on atmospheric science by the World Meteorological
Organization (1986) and NASA (1986) are also used extensively in evaluating
issues related to atmospheric ozone. Readers wishing a detailed presentation of
the science should consult these source documents.
Chapter 3 lays the legal basis for regulating emissions that could affect
the stratosphere. Chapters 4 through 10 evaluates alternatives to protect the
stratosphere by analyzing factors that could result in ozone depletion and its
effects. Various control levels (i.e., chemical coverage and stringency) are
evaluated in terms of their costs and effects.
Chapter 4 lays out the baseline production for CFCs, Halons and other
relevant trace gases that could occur if there is no regulation. This chapter
considers not just ozone-depleters but concentrations of trace gases that also
influence stratospheric ozone. Some of these gases increase ozone levels, while
others could contribute to depletion. All are greenhouse gases. These
scenarios of future growth in trace gases are inputs into the atmospheric
models.
-------
1-2
Chapter 5 lays out the chemical stringency and coverage options that could
be used to reduce emissions over time, specifying four control level options
that could be undertaken. These control level options cover a range of
stringency both weaker and stronger than the protocol recently concluded in
Montreal under the auspices of the United Nations Environmental Programme
(UNEP). Also considered is the effect of unilateral U.S. action, of U.S. action
more stringent than the international protocol, and of exclusion of Halons from
control.
Chapter 6 outlines the potential atmospheric response to the baseline
scenario and to the various control level options. This response is projected
using a statistical representation of a one-dimensional atmospheric model.
Chapter 7 presents estimates of the health and environmental impacts of
projected atmospheric change, including effects on skin cancers, cataracts, sea
level, crop production, aquatics, tropospheric ozone, and polymers. This
chapter examines these impacts both for the baseline and control level options.
«
Chapter 8 presents the economic value of avoiding the damages projected in
Chapter 7, attaching dollar values to those impacts where quantitative estimates
are possible. (Note that not all effects have been quantitatively estimated and
that not all effects can be valued in dollar terms.)
Chapter 9 presents estimates of the costs that would be associated with each
control level option. In this chapter, four levels of cost are presented: a
"least cost* base estimate which assumes that information on all options to
reduce CFC use is available and that the lowest cost options are chosen; and
three levels that relax the assumption of perfect information/market
rationality, thereby slowing the timing of actions. These three levels reflect
alternative sets of assumptions regarding the manner in which control options
are "stretched out* over time, and are referred to as moderate, moderate/major,
and major stretchout cases. In addition, other scenarios examine effects of
possible "hidden costs* and delayed initiation of all actions.
Chapter 10 integrates the costs and benefits of. alternative control level
options so that the net benefit of each can be assessed. Sensitivity analyses
are included that examine the dependency of this analysis on various assumptions
about emissions, atmospheric response, physical effects, and economic valuation
assumptions.
Together Chapters 4-10 analyze the benefits and costs of different control
level options. The analysis of costs varies based on assumptions about the
penetration and availability of options to limit CFC and Halon use. The method
of implementation of these options could also affect costs. Chapter 11 has been
devoted to the regulatory alternatives that could be used to implement any of
the control level options.
Chapter 11 focuses on evaluating five regulatory options: allocated quotas:
production quotas allocated to producers and importers; auctioned permits, •
permits auctioned to any interested party; ffifil that would be used to provide
incentives to reduce demand; engineering regulations such as technology
standards for industrial processes and bans on products; and a hybrid avat;?m Of
allocated quotas with some engineering controls/bans intended to ease the
transition to a regulated system and to assure that low cost reductions are
taken early in the process. Chapter 11 examines how these options differ by
qualitatively assessing such issues as costs, admini«trAfci-!?« k,Mir^w ««„„*-
-------
1-3
legal certainty, enforcement, and impacts on small businesses. It draws on the
cost analysis presented in Volume 1 and two additional studies on administrative
burdens and regulatory flexibility, both of which are contained in Volume II.
Throughout these chapters, assumptions critical to understanding the
analysis are presented. However, in order to allow the document to be read by a
large audience of interested parties, detailed explanations of methodologies and
assumptions are relegated to Volume II and Volume III.
1.2 ORGANIZATION OF VOUDMK II
Volume II includes 13 appendices. Appendix A presents the Executive Summary
of EPA's risk assessment. Appendix B presents EPA's Stratospheric Ozone
Protection Plan, which was published in the Federal Register on January 10,
1986. Appendix C presents an analysis of how CFG regulations can lead to
technological rechanneling, thereby altering the demand for CFCs in both nations
participating and not participating in the international protocol to protect
ozone. Appendix D discusses factors affecting the use .of CFCs specific to
developing nations. Appendix E presents details of the human health effects
modeling, while Appendix F focuses on the environmental effects. Appendix G
discusses the value ascribed to preventing premature deaths now and in the
future. Appendix H discusses issues related to specifying a base discount rate
and sensitivity rates which are used to analyze the time flow of costs and
benefits. Appendix I lays out in detail the framework and method for estimating
control costs. Appendix J specifies the sequence of technical control options
that would be taken to implement the protocol control level. Appendix K
discusses issues related to international trade. Appendix L analyzes actions
under the Regulation Flexibility Act. Appendix M presents an Administrative
Burdens Analysis.
1.3 ORGANIZATION OF VOLOME III
The addenda focus on detailed uses of CFCs and the costs of undertaking
controls. The addenda are detailed into nine parts: (1) rigid foam; (2)
flexible foam; (3) automobile air conditioning; (4) refrigeration and other air
conditioning; (5) miscellaneous uses (such as aerosols and food freezing); (6)
sterilants; (7) solvents; (8) civilian uses of Halons; and (9) military uses of
Halons. In each area, the use area is reviewed, and control options are
discussed (broadly defined to include both technology controls, substitutes,
etc.). For each control option, costs and penetration rates for three time
periods are presented. This body of work forms the documentation of the
database used in the cost modeling discussed in Appendix I.
-------
1-4
REFERENCES
U.S. Environmental Protection Agency (1987), Assessing the Risks of Trace
Gases that Can Modify the Stratosphere. U.S. EPA, Washington, D.C. This is
a revised version of: EPA (1986), An Assessment of the Risks of
Stratospheric Modification. U.S. Environmental Protection Agency,
Washington, D.C.
National Aeronautics and Space Administration (NASA) (1986) , Present State of
Knowledge of the Upper Atmosphere: An Assessment Report. Processes That
Control Ozone and Other Climatically Important Trace Gases. NASA Reference
Publication 1162, NASA, Washington, D.C.
WHO (1986), Atmospheric Ozone 1985. Global Ozone Research and Monitoring
Project, Report No. 16, NASA, Washington, D.C.
-------
CHAPTER 2
THE SCIENTIFIC BASIS FOR CONCERN ABOUT THE STRATOSPHERE
2.1 ULTRAVIOLET RADIATION
The process of nuclear fusion in the sun provides energy transferred by
photons to the earth. These photons have both wavelengths and energy levels.
As shown in Exhibit 2-1, wavelengths less than 400 nanometers (nm) are
"ultraviolet radiation" (UV-R). Wavelengths below 290 nm are "UV-C" radiation,
wavelengths from 290 to 320 nm are "UV-B" radiation, and wavelengths from 320 to
400 nm are "UV-A" radiation.
Much of the ultraviolet energy that strikes the earth's atmosphere does not
reach the surface, but is absorbed by ozone (03) molecules in the
stratosphere (Exhibit 2-2). As Exhibit 2-2 demonstrates, stratospheric ozone
absorbs lower wavelengths most effectively.. In fact, no UV-C radiation reaches
the earth's surface. Stratospheric ozone partially absorbs UV-B radiation, and
does not absorb any UV-A radiation.
This selective absorption of ultraviolet radiation by the earth's ozone
layer has allowed life to develop on earth. Exposure to low UV-C and UV-B
radiation has been shown to be deadly to many organisms, and it is doubtful that
life in its current form could have evolved without the protective screening by
the ozone layer.
For many biological targets, the probability of photon absorption increases
with decreasing wavelength, especially for UV-B and UV-C. The relative
effectiveness of UV-R in producing a biological effect is therefore greater at
lower wavelengths. For example, Exhibit 2-3 shows experimental data on the
relative effectiveness of UV-R wavelengths in damaging DNA, e.g., radiation at
300 nm is about 2.5 orders of magnitude more damaging than radiation at 320 nm.
Current levels of UV-R are responsible for significant damages to human
health, welfare, and the environment. Molecular, cellular, animal, and
epidemiological evidence supports this conclusion. Examples of current UV-R
effects include skin cancer and damage to outdoor polymers. Exhibit 2-4 shows
that current U.S. incidence of nonmelanoma skin cancer cases is over 500,000 per
year, and incidence of melanoma skin cancer is 25,000 cases per year. In
addition, large sums of money are spent to prevent polymer degradation due to
ambient levels of UV-R. A $72 million per year plastic stabilizer market has
developed (Battery, McGixmiss, and Taussig, 1985).
2.2 CONCERN ABOUT STRATOSPHERIC OZONE DEPLETIOH
The creation of ozone has a simple basis: solar radiation breaks
stratospheric oxygen (02) molecules into single oxygen atoms (0). Ozone is then
naturally created by the reaction of 0 and 02. If this were the only process
occurring, it would ultimately lead to increasing concentrations of ozone. In
reality, a series of reactions also destroys ozone. In particular, ozone (03)
reacts with odd oxygen atoms (0) to form 02 molecules. This natural
-------
2-2
EXHIBIT 2-1
THE ELECTROMAGNETIC SPECTRUM
Ultraviolet radiation (UV-R) is defined as electromagnetic energy with
wavelengths less than 400 nanometers (nm). UV-R is further divided into UV-C
(less than 290 no), UV-B (290 nm to 320 no), and UV-A (320 no to 400 no).
Source: Adapted froo Scotto, J., (1986), "Nonmelanoma Skin Cancer - UV-B
Effects" in J.G. Titus (ed.), Effects of Changes in Stratospheric Ozone
and Global Climate. Volume II: Stratospheric Ozone. U.S. Environmental
Protection Agency, Washington, D.C., p. 34.
-------
2-3
EXHIBIT 2-2
THE OZONE LAYER SCREENS HARMFUL UV-R
• t
• 0*1
13*
The upper line shows that significant amounts of UV-C and UV-B reach the top of
the earth's atmosphere. The lower line, which represents the UV-R that reaches
the earth's surface, demonstrates that the ozone layer effectively screens these
harmful wavelengths.
Source: Adapted from National Academy of Sciences, (1982), Causes and Effects
of Stratospheric Ozone Reduction. National Academy Press, Washington,
D.C., p. 40.
-------
2-4
EXHIBIT 2-3
UV-R DAMAGE TO DMA:
RELATIVE EFFECTIVENESS BY WAVELENGTH
XT*
c-«
«r>
5 »-»
*
«••
-------
2-5
EXHIBIT 2-4
DAMAGES IB U.S. AT CURRENT LEVELS OF DV-R
Non-melanoma skin cancer incidence: >500,000 per year
Melanoma skin cancer incidence: 25,000 per year
UV-stabilizers for outdoor materials: $72 million per year
Sources: Non-melanoma skin cancer incidence is based on rates in Scotto, Fears,
and Fraumeni (1981). Melanoma incidence is based on rates in Scotto
and Fears (in press). Methodology used to calculate total incidence
is presented in EPA (1987). UV stabilizer estimates are reported in
Hattery, G.R., V.D. McGinniss, und P.R. Taussig (1985).
-------
2-6
cycle of creation and destruction (which includes many other species and
interactions) leads to an "equilibrium" level of ozone, which if it were brought
to ground level pressure could be 300 mm wide. This is the origin of the 300
Dobson unit average.
Since the early'1970s, researchers have theorized that the natural
destruction of ozone can be enhanced by other anthropogenically-produced
compounds that could participate in catalytic reactions that destroy ozone. Of
particular concern are chlorine, bromine, and nitrogen, which are believed to
have the potential to reach the stratosphere in sufficient quantities to cause
significant depletion of stratospheric ozone. Exhibit 2-5 shows the basic
outline of these chlorine, bromine, and nitrogen cycles.
Natural sources of chlorine, bromine, and nitrogen contribute a small and
stable amount of these species to the stratosphere. Researchers hypothesize,
however, that man's activities may lead to rapidly increasing amounts of these
molecules in the stratosphere. The scientific focus on this issue began in the
early 1970s with analysis of nitrogen compounds from supersonic transport
aircraft, the exhaust of emissions from the proposed space shuttle, and
emissions of nitrous oxide from fertilizer applications.
In 1974, Molina and Rowland first outlined the potential effects of
chlorofluorocarbons (CFCs) on the stratospheric ozone layer. They hypothesized
that CFCs, a class of industrial chemicals valued for their stability, would
accumulate in the lower atmosphere and eventually be transported to the
stratosphere, where they would be photodissociated by the sun's high-energy UV-R
and yield chlorine atoms, which would participate in catalytic reactions that
destroy ozone.
Since 1974 there have been substantial improvements in the ability of
researchers to evaluate the effects of CFCs on stratospheric ozone. Significant
advances have enabled researchers to measure more accurately the rates of
important chemical reactions affecting ozone that occur in the atmosphere and
simulate these reactions affecting ozone in mathematical models. Comparisons of
the calculated profiles of ozone and other atmospheric constituents with field
measurements have allowed further refinements of atmospheric models.
One-dimensional atmospheric models have been developed which can simulate both
chemical reactions and vertical transport of compounds. Since 1974, the results
of these models have been relatively consistent (Exhibit 2-6). For the
"standard case* of constant emissions of CFC-11 and CFC-12 only, the Lawrence
Livemore National Laboratory one-dimensional model has projected a mean
depletion of 12.4 percent, plus or minus 3.8 percent (one standard deviation).
No excursion was more than 8 percent from the mean and none ever went
•positive."
Recent concern about potential stratospheric ozone depletion has been
intensified by several developments. First, researchers recognized that total
worldwide CFC emissions, which had remained relatively constant after the U.S.
and others abandoned their use in aerosol sprays, were beginning to rise due to
continued growth in non-aerosol uses such as air conditioning, refrigeration,
and foam blowing. In addition, growing use of other chlorine-containing
compounds, such as CFC-113 used in electronics as a solvent, was adding to the
chlorine burden in the stratosphere.
-------
2-7
EXHIBIT 2-5
CHEMICAL CYCLES THAT AFFECT THE CREATION
AND DESTRUCTION OF OZONE
1. Chlorine cyc'e:
Cl + 03 > CIO + 02
0 + CIO > Cl + 02
Net 0 + 03 > 202
2. Bromine cycle:
Br + 03 > BrO + 02
BrO + 0 —-> Br + 02
Net 0 + 03 > 202
3. Nitrogen cycle:
NO + 03 > N02 + 02
N02 + 0 > NO + 02
Net 0 + 03 > 202
Chlorine, bromine, and nitrogen act as catalysts, converting ozone molecules
into oxygen molecules, but emerging ready to eliminate another 03 molecule after
the two reactions.
-------
2-8
EXHIBIT 2-6
HISTORY OF MODEL PREDICTIONS OF OZONE DEPLETION
4 -
2 -
-2 -
-4 -
-6 -
-8 -
-10 -
-12 -
-14 -
— 18 -
-18 -
-20 -
-22 -
-24 -
-28 -
1
• •
*
• *
-.- ,
m m
• » • i
•
"
m
m
1
l i
Met
1 s
1975
1977
1979
1981
1983
1985
The one-dimensional model of the Lawrence Livermore National Laboratory has betQ
used to project ozone depletion and has shown consistent results over the last
12 years. For the standard case of constant CFC-11 and CFC-12 emissions at 197*
levels, mean projected depletion is 12.4 percent, with a standard deviation of
3.8 percent.
Source: Calculated from reported results of LLNL model. Data for 1975 to 1981
from Wuebbles (1983). Data for 1983 to 1985 taken from Figure 13-37 ot
WHO (1986).
-------
2-9
The unexpected finding of the British Antarctic Survey in 1985 that
concentrations of ozone above Antarctica were rapidly decreasing during the
Spring also intensified concern. This depletion had not been predicted by
atmospheric models, and indeed, scientists have not yet agreed on the
fundamental mechanism responsible for this "ozone hole". Nonetheless, the
losses of ozone in Antarctica raise the possibility that atmospheric models
might be underpredicting the effects of CFCs on ozone. Preliminary data from
satellites and ground-based monitoring stations also raise the possibility that
worldwide depletion of ozone has occurred in the last decade beyond what current
models have predicted. The EPA risk assessment (EPA 1987) stated that data on
the Antarctic ozone hole or the possible global depletion need additional
scientific analysis before being used for policy decisions. Additional analysis
is underway in the scientific community. If it develops that either of these
phenomena necessitates a revision of current thinking, then the models used in
this RIA will need revision. At this time, these data are not used as a basis
for decisionmaking.
2.3 THE STRATOSPHERE AND GLOBAL CLIMATE .
In addition to its role in absorbing UV-R, the stratosphere is an important
determinant of global climate. The vertical distribution of ozone, projected to
change due to CFG emissions, plays a role in establishing the earth's radiative
balance. Stratospheric water vapor also affects its radiative balance. While
the current concentration of stratospheric water vapor is low, increases in
methane, which by increasing ozone could partially offset losses in ozone from
CFCs, would also increase water vapor concentrations. The vertical distribution
of ozone in the stratosphere may also have a role in controlling climatic
circulation patterns, but the exact implications for weather and climate
circulation patterns are uncertain. Projected changes in the stratosphere will
alter vertical distribution and alter global temperatures.
2.4 HEALTH AND ENVIRONMENTAL KPPKCTS OF STRATOSPHERIC MODIFICATION
Major reviews of scientific issues related to changes in stratospheric ozone
have been conducted over the years .by the National Academy of Sciences, the
National Aeronautics and Space Administration, and the World Meteorological
Organization. In its recently completed risk assessment, the U.S. Environmental
Protection Agency also reviewed scientific work on the health and environmental
effects of atratospherlc change. Its report, Assessing the Risks of Trace Gases
That Can Modify the Stratosphere, was reviewed by the Agency's Science Advisory
Board and provides the scientific basis for developing regulations to protect
the stratosphere. The Summary Findings of the risk assessment are listed below.
Findings
Considerable research has taken place since 1974 when the theory
linking chlorine from chlorofluorocarbons (CFCs) and depletion of
ozone was first developed. While uncertainties remain, the
evidence to date continues to support the original theory that
CFCs have the potential to decrease stratospheric ozone.
Atmospheric measurements show that the chemical composition of the
atmosphere -- including gases that affect ozone •- has been
changing. Recently measured annual rates of growth in global
atmospheric concentrations of trace gases that influence ozone
include: CFC-11: 5 percent; CFC-12: 5 percent; CFC-113: 10
-------
2-10
percent; carbon tetrachlori.de: 1 percent; methyl chloroform: 7
percent; nitrous oxide: 0.2 percent; carbon monoxide: 1 to 2
percent; carbon dioxide: 0.5 percent; and methane: 1 percent.
More limited measurements of Halon 1211 show recent annual
increases of 23 percent in atmospheric concentrations.
3. CFCs, Halons, methyl chloroform, and carbon tetrachloride release
chlorine or bromine into the stratosphere where they act as
catalysts to deplete ozone. In contrast, carbon dioxide and
methane either add to the total column of ozone or slow the rate
of depletion. The effect of increases in nitrous oxide varies
depending on the relative level of chlorine.
4. Future changes in emissions of these gases will significantly
affect total column ozone. CFCs, methyl chloroform, carbon
tetrachloride and Halons are industrially produced. Emissions of
methane, carbon dioxide and nitrous oxide occur from both human
activity and the natural biosphere. Because all these gases (with
the exception of methane and methyl chloroform) have atmospheric
lifetimes of many decades to over a century, emissions today will
influence ozone levels for a very long period of time.
5. In order to assess risks, scenarios of atmospheric change were
evaluated using models. For CFCs, methyl chloroform, carbon
tetrachloride, and Halons, "what if scenarios* were developed
based on analyses of the demand for goods using these chemicals
(e.g., refrigerators, computers, automobile air conditioners) and
the historic relationship between economic activity and the use of
these chemicals. To reflect the large uncertainties inherent in
these scenarios, particularly with respect to technological
innovation and the possibility that industry and consumers will
voluntarily limit their future use of these chemicals due to
concern about ozone depletion, a wide range of scenarios was
examined. The scenarios range from a voluntary 80 percent
phase-down in the use of CFCs by 2010 to an average annual growth
in use of 5 percent per year from 1985 to 2050. For
ozone-modifying gases other than CFCs, scenarios were based on
recently measured trends, with uncertainties being evaluated by
considering a range of future emissions and concentrations.
6. One- and two-dimensional atmospheric chemistry models were used to
asses* the potential effects of possible future changes in
atmospheric concentrations of ozone-modifying gases on
stratospheric ozone. These models attempt to replicate factors
that influence the creation and destruction of ozone. While the
models replicate many of the characteristics of the atmosphere
accurately, they are inconsistent with measured values of other
constituents, thus lowering our confidence in their ability to
predict future ozone changes accurately.
-------
2-11
7. Based on the results from these models, future changes in ozone
will be highly dependent on future emissions of ozone-modifying
gases. One-dimensional models project that if the global use of
CFCs and other chlorine and bromine compounds remains constant and
other trace' gas concentrations continue to grow, total column
ozone levels would at first decrease slightly and would
subsequently increase. If the use of ozone depleting substances
continues to grow at past rates and other gases also increase at
recent rates, substantial total column ozone depletion would occur
by the middle of the next century. If the use of CFCs stays at
current levels and the growth in the concentrations of other trace
gases decreases over time, depletion will also occur.
8. In all scenarios examined, substantial changes are expected in the
vertical distribution of ozone. Ozone decreases are generally
expected at higher altitudes in all-scenarios in which CFC
concentrations increase.f Ozone increases are expected at lower
altitudes in many scenarios examined due to increased
concentrations of carbon dioxide and methane.
9. Two-dimensional (2-D) models provide information on possible
changes in ozone by season and by latitude. Results from one 2-D
model predict global average depletion could be substantially
higher than estimates from a one-dimensional (1-D) model for the
same scenario. Moreover, the 2-D model suggests that ozone
depletion substantially above the global average would occur at
higher latitudes (above 40 degrees), and depletion would be
greater in the spring than the annual average. Uncertainties in
the representation of the transport of chemical species used in
2-D models introduces uncertainty in the estimate of the magnitude
of the latitudinal gradient of ozone depletion, but all 2-D models
project a significant gradient.
10. Measurements of ozone levels are another valuable tool for
.assessing the risks of ozone modification. Based on analysis of
data from a global network of ground-based monitoring stations,
ozone levels have decreased at mid-latitudes in the upper and
lower stratosphere and increased in the troposphere. Total column
ozone has remained more or less stable. These trends are roughly
consistent with current two-dimensional model predictions.
11. Antarctic Ozone Hole: update to be supplied.
12. Trends in global ozone levels: update to be supplied.
13. Decreases in total column ozone would increase the penetration of
biologically damaging Ultraviolet-B (UV-B) radiation (i.e.,
290-320 nanometers) reaching the earth's surface.
14. Exposure to UV-B radiation has been linked by laboratory and
epidemiologic studies to squamous and basal cell skin cancers.
While uncertainty exists concerning the appropriate action
spectrum (i.e., the relative biological effectiveness of different
wavelengths of light) and measure of exposure, a range of
estimates was developed linking possible future ozone depletion
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2-12
with increased Incidence of these skin cancers (also referred to
as nonmelanoma skin cancers).
15. Studies predict that for every 1 percent increase in UV-B
radiation (which corresponds to less than a 1 percent decrease in
ozone), nonmelanoma skin cancer cases will increase on the order
of 1 to 3 percent. The mortality rate for these forms of cancer
has been estimated at 1 percent of total cases.
16. The relationship between cutaneous malignant melanoma and UV-B
radiation is a complex one. Different histological forms exist,
and laboratory experiments have not succeeded in transforming
melanocytes with UV-B radiation. However, recent studies suggest
that UV-B radiation plays an important role in causing melanoma.
Uncertainties in action spectrum, dose measurement, and other
factors necessitates the use of a range of dose-response
estimates. Considering such uncertainties, recent studies predict
that for each one percent change in UV-B, the incidence of
melanoma could increase by slightly less than 1 percent.
17- Studies have demonstrated that UV-B radiation can suppress the
immune response system in animals and possibly humans. While
UV-B-induced immune suppression has been linked to chronic
reinfection with herpes virus and leishmaniasis, its possible
impact on other diseases has not been studied.
18. Increases in exposure to UV-B radiation are likely to increase the
incidence of cataracts and could adversely affect the retina.
19. While studies generally show adverse impacts on plants from
increased UV-B exposure, difficulties in experimental design, the
limited number of species and cultivars tested, and the complex
interactions between plants and their environments prevent firm
conclusions from being made for the purpose of quantifying risks.
Field studies on soybeans suggest that yield reductions could
occur in some cultivars of soybeans, while evidence from
laboratory studies suggest that 2 out of 3 cultivars are sensitive
to UV-B.
20. Aquatic organisms, particularly phytoplankton, zooplankton, and
the larvae stage of many fish, appear to be susceptible to harm
from increased exposure to UV-B radiation because they spend at
least part of their time at or near surface waters (i.e., exposed
to sunlight). However, additional research is needed to better
understand the ability of these organisms to mitigate adverse
effects and any possible implications of changes in community
composition as more susceptible organisms decrease in numbers.
Finally, the implications of possible effects on the aquatic food
chain requires additional study.
21. Research has only recently been initiated into the effects of UV-B
on the formation of tropospheric ozone and the weathering of
polymer materials. An initial chamber and model study shows that
tropospheric ozone levels could increase, resulting in additional
urban areas being in non-compliance with National Ambient Air
Quality Standards. The increase in UV-B would also produce ozone
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2-13
peaks that would be reached earlier in the sane day. exposing
larger populations to unhealthy levels. The same study also
predicts a substantial increase in hydrogen peroxide levels, an
acid rain precursor. However, because only one study has been
done, the results must be treated with caution. Additional
theoretical and empirical work will be needed to verify these
projections. It also appears likely that the higher UV-B would
cause accelerated weathering of polymers, necessitating polymer
reformulation and the use of stabilizers in some products.
22. Changes in climate are likely to accompany trace gas growth that
alters ozone. While some of the trace gases discussed above
deplete ozone, and others result in higher ozone levels, all are
greenhouse gases that contribute to global warming. Based on a
range of potential future rates of growth of greenhouse gases,
current models estimate that by 2075 equilibrium global
temperatures may increase by 2°C to 11.5°C. The National Academy
of Sciences has recommended a range of uncertainty for these types
of equilibrium estimates of plus and minus SO percent.
23. Understanding of the possible health and environmental impacts of
climate change is very limited. Studies predict that sea level
could rise by 10-20 centimeters by 2025, and by 55 to 100
centimeters by 2075. Such increases could damage wetlands, erode
coastlines, and increase damage from storms. Changes in
hydrology, along with warmer temperatures, could affect forests
and agriculture. In most situations, inadequate information
exists to quantify the risks related to climate change.
24. To perform the computations necessary to evaluate the risks
associated with stratospheric modification, an integrating model
was developed to evaluate the joint implications of scenarios or
estimates for: (1) potential future use of CFCs; (2) ozone change
as a consequence of CFC use and emissions and concentrations of
other trace gases; (3) changes in UV-B radiation associated with
ozone change; and (4) changes in skin cancer cases and cataracts
associated with changes in UV-B radiation. The integrating model
did not incorporate other potential health and environmental
impacts of stratospheric modification that could not be
quantified.
2.5 SUMMARY
The stratosphere plays an important role in protecting human health, welfare
and the environment. The stratospheric ozone layer acts as a protective shield
against harmful ultraviolet radiation. In addition, the stratosphere influences
global climate. Increased emissions of CFCs and other trace gases are projected
to deplete stratospheric ozone and contribute to global climate change.
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2-14
P KFRR HNf; Prft
Battery, G.R. , V.D.- McGinniss, and P.R. Taussig (1985), "Final Report on Costs
Associated with Increased Ultraviolet Degradation of Polymers," Battelle
Columbus Laboratory, Columbus, OH.
Scotto, J.f T.R. Fears, and J.F. Fraumeni, Jr. (1981), Incidence of
Nonmelanoma Skin Cancer in the United States. NIH/82-2433, U.S. Department of
Health and Human Services, Bethesda, MD.
Scotto, J., and T.R. Fears (in press), "The Association of Solar Ultraviolet
Radiation and Skin Melanoma Among Caucasians in the United States," Cancer
Investigations.
U.S. Environmental Protection Agency (1987), Assessing the Risks of Trace
Gases that Can Modify the Stratosphere. U.S. EPA, Washington, D.C. This is
revised version of: U.S. Environmental Protection Agency (1986), An
Assessment of the Risks of Stratospheric Modification. U.S. EPA, Washington,
D.C.
World Meterological Organization (WMO) (1986), Atmospheric Ozone 1985.
Assessment of Our Understanding of the Processes Controlling Its Present
Distribution and Change. WMO Global Ozone Research and Monitoring Project -
Report No. 16, WMO, Geneva, Switzerland.
Wuebbles, D.J. (1983), "Chlorocarbon Emission Scenarios: Potential Impact on
Stratospheric Ozone," Journal of Geophysical Research. 88(C2), 1433-1443.
-------
CHAPTER 3
LEGAL BASIS FOR REGULATION
AND REGULATORY IMPACT ASSESSMENT
Concern about protecting stratospheric ozone began in 1974 soon after Molina
and Rowland published their paper theorizing depletion from chlorofluorocarbons
(CFCs). In the U.S., voluntary action by consumers and producers soon resulted
in significant reductions in CFC use. In 1978, the Environmental Protection
Agency (EPA) and Food and Drug Administration (FDA) banned the use of CFCs in
non-essential aerosol propeHants. Congress strengthened EPA's regulatory
authority in the 1977 amendments to the Clean Air Act. In 1980, EPA issued an
Advance Notice of Proposed Rulemaking (ANPR) that stated that it was evaluating
further restrictions on CFC use.
In 1986 EPA published its Stratospheric Ozone Protection Plan, which
superseded its 1980 ANPR and outlined a program of further research and
decisionmaking (see Appendix B). The plan called for research and analysis to
narrow scientific uncertainties, and proposed that the Agency evaluate domestic
regulations concurrently with ongoing international efforts to develop a CFC
control protocol to protect stratospheric ozone.
3.1 DOMESTIC AND INTERNATIONAL REGULATORY HISTORY PRIOR TO THE 1977 CLEAN AIR
ACT REVISIONS
In 1974, aerosol propellents accounted for approximately half of CFC use in
the United States. By 1980, this use had fallen to five percent of previous
totals in the U.S. (Exhibit 3-1). A number of events -- economic forces,
environmental concern, and regulations -- contributed to the reduction of the
use of CFCs (Kavanaugh, e_£ il., 1986).
The initial impetus away from CFC use in aerosols was the environmental
concern of consumers and producers. Consumers, alerted by news reports and
television, sought other products. Taking advantage of such environmental
concern, producers of non-CFC propelled aerosols and of alternative delivery
systems, such as pumps, advertised that their products did not contain CFCs.
The overall effect of these activities was a reduction in sales of personal care
aerosols.
Governmental restrictions on CFCs were first discussed in Congressional
hearings in December 1974. In 1976, EPA, the FDA, and the Consumer Product
Safety Commission (CPSC) began to evaluate regulations restricting CFC use in
aerosols.
The ban on CFC use in non-essential aerosol propellants was promulgated in
1978 (43 ffi 11301; March 17, 1978). The FDA acted pursuant to its authority
under the Federal Food, Drug and Cosmetic Act to ban most CFC use in food, drug,
and cosmetic aerosol devices. EPA, acting under the Toxic Substances Control
Act, banned non-essential CFC use in all aerosols. The CPSC issued regulations
requiring that exempted aerosol products bear a warning label that they
contained CFCs, which may deplete ozone.
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3-2
EXHIBIT 3-1
CFC-11 AND CFC-12 PRODUCTION IN THE UNITED STATES*
400
360
:llions of
lograms
\
Nonatrosol
Atrosol/Nooaerosol divisions are estimates
1960
1965
1970 1975
Year
1930
1985
•Production of CFC-11 and CFC-12 in the United States increased rapidly
throughout the 1960s and eariy 1970s. Production reached a maximum of 376. M
mill kg in 1974, with 56 percent used in aerosol sprays. Non-essential use of
CFCs in aerosol sprays was banned in 1978, and aerosol use today accounts for
only 5 percent of total CFC-11 and CFC-12 production.
-------
3-3
EXHIBIT 3-1 (Continued)
CFC-11 AND CFC-12 PRODUCTION IN THE UNITED STATE*
Sources:
(a) Total CFC-11 and CFC-12 production from 1960 to 1985 from United States
International Trade Commission, Synthetic Organic Chemicals. USITC,
Washington, DC, annual series.
(b) Total CFC-11 and CFC-12 production in 1985 and 1986 from United States
International Trade Commission, "Preliminary Report on U.S. Production
of Selected Synthetic Organic Chemicals (Including Synthetic Plastics
and Resin Materials). Preliminary Totals, 1986", USITC, Washington,
D.C., March 31, 1987. Datr for 1986 are preliminary and subject to
revision.
(c) Aerosol share of production is estimated for three periods: (i)
estimates for 1960-69 assume that in 1960, aerosol share for CFC-11 was
81 percent, declining smoothly to 54 percent in 1970. For CFC-12.
aerosol share assumed to be constant at 60 percent; (ii) estimates for
1970-78 from Wolf, K.A., Regulating Chlorofluorocarbori Emissions:
Effects on Chemical Production. N/1483-EPA, The RAND Corporation, Santa
Monica, CA; and (iii) estimates for 1979 to 1986 assume that aerosol
use in essential applications has remained constant at the level
reported for 1985 by Hammitt, J.K., e_£ flj.. (1986), Product Uses and
Market Trends for Potential Ozone-Depleting Substances. R-3386-EPA, The
RAND Corporation, Santa Monica, CA.
(d) Non-aerosol use equals total production minus aerosol use.
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3-4
Reductions in aerosol propellant use of CFCs by the U.S. and other nations
caused world CFC use to remain approximately constant from 1974 through the
early 1980s. Belgium, Canada, Norway and Sweden banned CFC use in aerosol
sprays. Member nations of the European Economic Community (EEC) adopted
measures to reduce CFC use in aerosols by 30 percent from 1976 levels. Exhibit
3-2 shows an estimats of the cumulative CFC-11 and CFC-12 emission reductions
achieved by the U.S. and EEC due to reductions in CFC aerosol use.
In addition to reducing aerosol use, EEC nations agreed not to increase
their CFC production capacity, and adopted engineering codes of practice to
discourage unnecessary CFC emissions from other applications. Restrictions
adopted by other nations include the Netherlands, which requires a warning label
on CFC-propelled products; Portugal, which banned CFC production and established
CFC import quotas; Brazil, which implemented a production capacity cap;
Australia, which reduced CFC use in aerosols by 66 percent; and Japan, which
also reduced CFC aerosol use and discourages-increases in production capacity of
CFC-11 and CFC-12. In the last few years, however, total world use has
increased (Exhibit 3-3). c
Because CFC emissions from all nations mix uniformly in the global
atmosphere, it is important to review international efforts to reduce CFC use.
Concerted international efforts began in 1981 under the auspices of the United
Nations Environment Programme (UNEP). At the 1981 Montevideo Senior Level
Meeting on Environmental Law, this subject was recommended as a priority for
future work within UNEP. On the basis of this recommendation, the UNEP
Governing Council established the A3 Hoc Working Group of Legal and Technical
Experts, which in 1982 began negotiating * global framework for a convention to
protect the ozone layer. While early efforts did not lead to agreements on CFC
reductions, several other nations took unilateral action to reduce CFC use and
emissions.
One measure of the relative effectiveness of CFC restrictions is the per
capita use of CFCs. Exhibit 3-4 shows that per capita use of CFC-11 and CFC-12
in the U.S. is now roughly equivalent with that in the EEC, and is still higher
than Japan. When CFC-113 is included, however, the differences between Japan
and the U.S. are dramatically reduced (Exhibit 3-5).
3.2 EPA AUTHORITY UNDER THE CLEAN AIR ACT
3.2.1 Domestic Regulations
In 1977, Congress strengthened EPA's authority to regulate and to protect
the stratosphere. Part B of the Clean Air Act (Section 157(b)) requires that:
... the Administrator (of EPA) shall propose regulations
for the control of any substance, practice, process, or
activity (or any combination thereof) which in his Judgment
may reasonably be anticipated to affect the stratosphere,
especially ozone in the stratosphere, if such effect in the
stratosphere may reasonably be anticipated to endanger public
health or welfare. Such regulations shall take into account
the feasibility and costs of achieving such control.
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3-5
EXHIBIT 3-2
CUMULATIVE REDUCTIONS IN CFC-11 AND CFC-12
EMISSIONS DUE TO AEROSOL REDUCTIONS
IN THE U.S. AND EEC
Total UM
In 1983
501 mill kg
Total U
to 1909
Y////////
U.S.
EEC
Cumulative reductions in use of CFC-11 and CFC-12 in the U.S. and EEC due to
reductions in aerosol use. For purposes of illustration, assumes that in
absence of environmental concerns, CFC use would have remained constant at peak
levels: 1974 level in U.S. and 1976 level in EEC.
Sources:
(a) U.S. historical use of CFC-11 and CFC-12 from 1974 to 1977 for aerosol
propellants based on total production and aerosol shares reported in
Wolf, K.A., (1980), Regulating Chlorofluorocarbon Emissions; Effects
on Chemical Production. N/1483-EPA. The RAND Corporation. Santa Monica,
CA. Aerosol use from 1978 to 1985 assumed to be constant at level
reported by Hammitt, J.I., et al., (1986), Product Uses and Market
Trends for Potential Ozone-Depleting Substances.R-3386-EPA, The RAND
Corporation, Santa Monica, CA. Total production of CFC-11 and CFC-12
in 1985 from USITC, "Preliminary Report on U.S. Production of Selected
Synthetic Organic Chemicals (Including Synthetic Plastics and Resin
Materials), Preliminary Totals, 1986", USITC, Washington, DC., March
31, 1987.
(b) EEC historical aerosol use from EEC (1985), "Chlorofluorocarbons in the
Environment: Updating the Situation," Communication from the
Commission to the Council. 1985 total sales of CFC-11 and CFC-12 from
EFCTC (1986), "CFC Production and Use Statistics for the EEC," paper
submitted to UNEP Chlorofluorocarbon Workshop, 1986.
-------
3-6
EXHIBIT 3-3
CFC-11 AND CFC-12 PRODUCTION IN THE DEVELOPED WORLD
(CMA REPORTING COMPANIES)
Millions of
Kilograms
* Dashed lints indicate estimate*
1960
1965
1970 1975
Year
1980
I9s5
The Chemical Manufacturers Association collects CFC-11 and CFC-12 production
data from all producers in the non-communist developed world. The data show
that CFC-11 and CFC-12 production increased rapidly throughout the 1960s and
1970s. Production reached a maximum of 812.5 mill leg in 1974, with 59 percent
used in aerosol sprays. Aerosol use fell from 1974 to 1982 following announce-
ment of the CFC-ozone hypothesis, while non-aerosol use has continued to
increase. Current production, 703.1 mill kg, is 85 percent of the 1974 level.
Source: Chemical Manufacturers Association (CMA), (1986), Production. Sales.
and Calculated Release of CFC-11 and CFC-12 Through 1985. CMA.
Washington, D.C. Estimates for the aerosol share of total production
from 1960 to 1975 are based on the 1976 share reported in the CMA
schedule.
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3-7
EXHIBIT 3-4
PER CAPITA USE OF CFC-11 AND CFC-12
IN THE U.S., EEC, AND JAPAN
(kg/capita)
0.81
0.48
U.S.
EEC
Japan
Per capita use of CFC-11 and CFC-12 Is roughly equivalent in the U.S. and EEC.
Japanese per capita use is significantly lower.
Sources: See sources for Exhibit 3-5.
-------
3-8
EXHIBIT 3-5
PER CAPITA USE OF CFC-113
IN THE U.S., EEC, AND JAPAN
(kg/capita)
0.45
0.43
0.12
U.S.
EEC
Japan
Per capita use of CFC-113 is higher in Japan than in the U.S. or EEC,
Sources: See following page.
-------
3-9
nmmr 3-5 (ConUaaad)
RB CAPUA oss or crc-113
II THE O.S.. EEC. OD JAEAI
dec/capita,)
Per Capita Use of CTCs la U.S. , EEC, and Japan
CTC- 11
CTC-11 and -12 CTC-113 Total
Population and -12 Per Cap Par Cap CFC Us*
(mill) C7C-11 CTC-12 Hat Use dm/e«p) CPC-113 (k«/ean)
U.S. 234.49 f/ 79.73 b/ 136.94 b/ 212.34 •/ 0.906 73.20 f/ 0.312 1.218
EEC 249.01 a/ 126.40 c/ 91.30 fi/ 217.70 0.809 32.30s/ °-Ul 0.930
Japan 119.23 a/ 27.80 d/ 34.70 d/ 37.30 i/ 0.482 91.93 h/ 0.432 0.914
A/ 1983 population estlaatas from The World Bank (1966), "The World Bank Atlaa, 1986."
Washincton, D.C.
h/ CTC-11 aod CTC-12 1989 production from U8ITC, "Prallirtnary Raport oa U.S. Production of
Salaetad Synthetic Organic Chaaieals (Includin* Synthatic Plaatiea and Sacla Mat«iali).
Praliainary Total*. 1986,- March 31, 1987.
c/ 1984 talaa within EEC of CTC-11, CTC-12, and CTC-113 from B*Tin«too. C.7.P. (1986).
-Projactioas of Production Capacity, Production and Us* of CTCa in tba Context of EEC Bafulation*,"
papar luhaittad for DHEP Chloroflnoroearbon Workshop, April 1986.
d/ 1989 production of CTC-11 and CTC-12 £ro» Turns ana, K., and K. ZMsaki (1986). 'Topic 2:
Projections of tha Production, Uaa and Trade of CTCa in Japan in the next Tive to Tan Tears,- Papar
submitted to UUP Chlorofluorocarbon Workshop, April 1986.
e/ Ret domestic use of CTC-11 and CTC-12. Import and export data from Wsigel, C.M., and R.M.
Uhitfield (1986). "Reply to the RAHD Corporation's Response to DRX's review of RAID's working draft,
'Projected Use, emissions and Banks of Potential Osone Depleting Substances," DRI. Total CTC
Imports in 1989 reported to be 7.08 mill kg. Exports of "fluorinatad hydrocarbons- reported to be
13.418 mill kg. CTC-11 and CTC-12 assumed to be 89 percent of this total (11.406 mill kg) mid-range
of Weigel/tfcitfield estimate.
i/ CTC-11 and CTC-12 production minus estimated exports reported in Kurosawa and TmateH (see
not* d) of 2.7 mill kg for CTC-11 and 2.3 mill kg for CTC-12.
I/ U.S. CTC-113 production in 1989 estimated by Hasmdtt. J.K., ffc ii- (1986). -Product Use and
Market Trenda for Potential Oxone Depleting Substances." R-3386-EPA, The RAID Corporation. Santa
Monica, CA. Does not exclude substantial exports.
h/ 1989 Japanese CTC-113 production reported by I. Araki of MXTI Basic Industries Bureau Chemical
Products Division sunarised in State Dept. cable ref. Tokyo 1929; State 21900. Does not include
substantial imports.
-------
3-10
It is important to consider the key provisions of this section:
1. "may reasonably be anticipated". The law does not require
a finding that harm has occurred. Rather, it requires the
Administrator to act if there is a reasonable probability
that the stratosphere will be affected, and that the
effects would endanger health or welfare.
2. "any substance, practice, process, or activity". The
scope of the Agency's authority is broad. It can
regulate, for example, chemical production, use, and
emissions in any relevant area.
3. "affect the stratosphere*. The law is concerned with all
effects in the stratosphere. While the main focus is on
stratospheric ozone, the law also grants authority for EPA
to act on other stratospheric concerns such as
stratospherically-induced climate change.
3.2.2 1980 Advanced Notice of Proposed Rii1«-»nlrlng (ANPR)
In 1980, EPA issued an Advance Notice of Proposed Rulemaking (ANPR),
•Ozone-Depleting Chlorofluorocarbons: Proposed Production/Restriction" (45 £R
66726; October 7, 1980) which called for limits on non-aerosol uses of CFCs.
The Agency announced its objective to freeze current emissions of
ozone-modifying compounds. It considered two approaches to achieve this goal:
mandated engineering controls and market-based controls.
In 1984, the Natural Resources Defense Council sued the Agency in District
Court, arguing that the ANPR constituted a finding of a reasonable threat to the
stratosphere, which required the Agency promptly either to issue regulations or
formally withdraw the ANPR. In 1985, EPA and NRDC were joined by the Alliance
for Responsible CFC Policy, Inc. in filing a Joint settlement motion calling for
a proposed regulatory decision by May 1, 1987 and a final decision by November
1, 1987. This consent decree was extended in 1987 with deadlines now scheduled
for December 1, 1987 and August 1, 1988 for proposal and final action,
respectively.
3.2.3 Stratospheric Ozone Protection Plan
The Agency announced its Stratospheric Ozone Protection Plan in 1986 (51 f£
1257; January 10, 1986), which reviewed past EPA activities, called for an
expanded program of research and analysis, and established a framework for the
development of domestic and international regulations to protect the strato-
sphere. The program plan called for further research in several areas:
The scientific community completed several major reviews of atmospheric
science issues. A major review coordinated by the World Meteorological
Organization (WHO). the National Aeronautics and Space Administration (NASA),
the United Nations Environment Programme (UNEP). and several other national
and international scientific organizations, was published in 1986. A companion
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3-11
report was published by NASA In 1986. Other scientific issues, particularly
regarding the effects of ozone depletion on human health and the environment,
were reviewed by UNEF's Coordinating Committee on the Ozone Layer, whose panel
of scientific and technical experts released its findings in 1986. Issues
related to climate change were evaluated in a report prepared by WHO in Villach,
Austria in October 1985.
KEY AREAS OF EPA ANALYST?
The program plan called for a series of domestic and international workshops
and conferences aimed at improving understanding of all aspects of stratospheric
protection. In March and May 1986, workshops were held which focused on
analysis of future supply and demand for CFCs, and possible technical controls
to reduce their use and emissions. In July and September 1986, workshops were
held which covered the analysis of potential strategies to protect stratospheric
ozone. In June 1986 an international conference discussed the health and
environmental effects of stratospheric ozone depletion and global climate change
(U.S. EPA, 1986).
3.2.4 EPA'* Risk Assessment
In December 1986, EPA submitted a draft risk assessment to the Science
Advisory Board. The document reviewed the scientific understanding of all
aspects of stratospheric protection. The Executive Summary of that risk
assessment was again reviewed in January 1987 and finalized by March 10, 1987.
Final publication of the Executive Summary, the body of the assessment, and
supporting appendices occurred in October 1987. The risk assessment, Assessing
the Risks of Trace Gases that Can Modify the Stratosphere, serves as the
scientific basis for future Agency decisionmaking, including this Regulatory
Impact Analysis.
3.2.5 International negotiations
Section 156 of the Clean Air Act calls for international cooperation to
protect the stratosphere:
The President shall undertake to enter into international
agreements to foster cooperative research which complements
studies and research authorized by this part, and to develop
standards and regulations which protect the stratosphere
consistent with the regulations applicable within the United
States.
Since 1981, international negotiations to protect the stratosphere have been
conducted under the auspices of UNEP. In 1985, the negotiations resulted in the
adoption of the Vienna Convention for Protection of the Ozone Layer. The
Convention was ratified by the U.S. Senate in July 1985 and signed by the
President in September 1985. The Convention has now been signed by 28 parties,
11 of which have completed their formal ratification or acceptance. While it
sets no specific targets for CFC restrictions, the Convention establishes a
framework for further international negotiations to develop such limits, and
requires member nations to submit CFC production and use data to UNEP.
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3-12
Prior to the resumption of negotiations on control limits in December 1986,
a series of workshops were held (early in the year) to discuss technical issues.
These workshops were companions to domestic workshops that focused on future
supply and demand for CFCs, technical control options, control strategies, and
the health and environmental effects of ozone modification.
Based on negotiating sessions in December 1986 and February 1987, initial
agreement was reached that CFC use should at least be frozen at or near current
levels of production. Disagreement continued over the necessity for further
limitations.
In April 1987, another round of negotiations was held in Geneva,
Switzerland. A working draft protocol text emerged from this session calling
for a CFC production freeze, 20% cutback in three years, followed by a possible
further 30% cutback in two years. Disagreement remained over several
significant issues relating to stringency, timing, and special provisions for
developing countries.
In September 1987 in Montreal, Canada, a final Diplomatic Conference was
held that concluded protocol negotiations. The major provisions of the protocol
include:
o Reductions in CFC Use. The use of CFC-11, 12, 113, 114
and 115 is to be frozen at 1986 levels starting in
approximately 1989, reduced to 80 percent of 1986 levels
in 1993, and reduced to SO percent of 1986 levels in
1998. The reduction from 80.percent to 50 percent will
take place unless the parties vote otherwise.
o Reduction in Halon Use. The use of Halon 1211, 1301 and
2402 is to be frozen at 1986 levels starting in
approximately 1992.
o Assessment and Review. Beginning in 1990, and at least
every four years thereafter, the Parties will assess the
control measure in light of the current data available.
Based on these assessments the Parties may adjust the
control levels and substances covered by the Protocol.
o Trade. Each Party shall ban the Import of the
controlled substances from any state not party to the
Protocol beginning one year after entry into force.
Additionally, the Parties shall develop a list of
products that contain the controlled substances which
will be subject to the same trade restrictions. The
feasibility of restricting trade in products
manufactured with the controlled substances shall also
be assessed.
o Developing Countries. Developing countries vith low
levels of use per capita are permitted to delay their
compliance with the protocol for up to 10 years. The
-------
3-13
Parties also agree to assist developing countries to
make expeditious use of environmentally-safe alternative
substances and technologies.
3.3 HEED FOR A REGULATOR? IMPACT ANALYSIS
Executive Order 12291 requires that the costs and benefits of "major rules"
be evaluated in a Regulatory Impact Analysis:
*A 'major rule' means any regulation that is likely to
result in:
(1) An annual effect on the economy of $100 million or
more;
(2) A major increase in costs or prices for consumers,
individual industries, Federal, State, or local
government agencies, or geographic regions; or
(3) Significant adverse effects on competition,
employment, investment, productivity, innovation, or
on the ability of United States-based enterprises to
compete with foreign-based enterprises in domestic or
export markets.*
Under these definitions, a rule is considered major if it meets at least one
of these three conditions. Condition (1) is probably met by the proposed rule.
Because options of the stringency under consideration are likely to result in a
total cost to the economy of $100 million or more per year, this RIA is being
prepared.
-------
3-14
REFERENCES
Kavanaugh, M., M. Barth, and T. Jaenicke (1986), "An Analysis of the Economic
Effects of Regulatory and Non-Regulatory Events Related to the Abandonment
of Chlorofluorocarbons as Aerosol Propellants in the United States from 1970
to 1980, with a Discussion of Applicability of the Analysis to Other
Nations," Aerosol Working Paper Series, Paper 1, ICF Incorporated,
Washington, D.C.
National Aeronautics and Space Administration (NASA) (1986), Present State of
Knowledge of the Upper Atmosphere: An Assessment Report. Processes That
Control Ozone and Other Climatically Important Trace Gases. NASA Reference
Publication 1162, NASA, Washington, D.C.
United Nations Environment Programme (1986), "Report of the Coordinating
Committee on the Ozone Layer: Effects.of Stratospheric Modification and
Climate Change," UNEP, Nairobi, Kenya.
U.S. Environmental Protection Agency (1987), Assessing the Risks of Trace
Gases that Can Modify the Stratosphere. U.S. EPA, Washington, D.C. This is
a revised version of: U.S. Environmental Protection Agency (1986), An
Assessment of the Risks of Stratospheric Modification. U.S. EPA, Washington,
D.C.
U.S. Environmental Protection Agency (1986), Effects of Stratospheric Ozone and
Global Climate Change. J.G. Titus, ed., Volumes I-IV, U.S. EPA, Washington,
D.C.
World Meteorological Organization (WHO) (1985), Report of the International
Conference on the Assessment of the Role of Carbon Dioxide and of Other
Greenhouse Gases in Climate Variations and Associated Impacts. WMO - No.
661, WMO, Geneva, Switzerland.
World Meteorological Organization (WMO) (1986), Atmospheric Ozone 1985.
Assessment of Our Understanding of the Processes Controlling Its Present
Distribution and Change. WMO Global Ozone Research and Monitoring Project -
Report No. 16, WMO, Geneva, Switzerland.
-------
CHAJTRP 4
BASELINE USE AND EMISSIONS OF GASES
THAT CAN UHfLUENCK TiTR STRATOSPHERE
This chapter summarizes estimates of the potential use and emissions of
ozone-modifying compounds that may be expected in the absence of regulatory
intervention. These estimates are referred to as the baseline, which is used
for estimating (in the absence of future regulation) levels of ozone depletion,
and the associated impacts on human health, welfare, and the environment. This
baseline is also used for estimating the costs of foregoing the use of
ozone-depleting compounds.
Because ozone depletion is a global phenomenon, influenced by worldwide
emissions, the analysis must assess the global use and emissions of ozone-
modifying compounds. The analysis in this ILIA divides the world into the
following six regions for purposes of specifying baseline compound use:^
o United States (U.S.);
o USSR and Eastern Bloc;
o Other Developed Countries;
o People's Republic of China (China) and India;
o Developing Countries with 1985 compound use of 0.1 to
0.2 kilograms per capita (Group I Developing
Countries)?; and
o Other Developing Countries (Group II Developing
Countries).
The potential control of seven compounds of concern is the primary focus of
this RIA. These seven compounds are CFC-11, CFC-12, CFC-113, CFC-114, CFC-11S,
Halon 1211, and Halon 1301.3 Other compounds such as CFC-22, carbon
tetrachloride, and methyl chloroform have been identified as potential ozone
depleters but are not currently under consideration for control because they
have low ozone-depletion potential, low emissions, or short atmospheric
lifetimes. The baseline assumptions for use and emissions for these three
compounds are presented in EPA (1987). The baseline values for these compounds
1 Areas included in each region are: Other Developed Countries: Canada,
Western Europe, Japan, Australia, and New Zealand; Group I Developing Countries:
Algeria, Argentina, Liberia, Malaysia, Mexico, Panama, South Korea, Taiwan,
Tunisia, and Turkey; Group II Developing Countries: countries in Central Asia,
Africa, Middle East, Latin America, South America, and South and East Asia not
included in the other five regions.
2 Dupont (1987) identified the Group I Developing countries as having 0.1
to 0.2 kg per capita CFC use (Algeria, Argentina, Liberia, Malaysia, Mexico,
Panama, South Korea, Taiwan, Tunisia, and Turkey). For purposes of this
analysis, these countries are assumed to have 0.2 kg per capita use of combined
CFC-11 and CFC-12.
e
3 The Montreal Protocol also includes Halon 2402. However, due to lack of
data this compound is not analyzed in this RIA at this time.
-------
4-2
are included In this analysis (insofar as they influence ozone depletion), but
alternatives for controlling them are not considered at this time. Therefore,
the baseline discussion in this chapter is limited to the remaining seven
chemicals of concern.
For purposes of this analysis, the baseline level is defined in terms of
compound use (as opposed to compound production). In the U.S., production is
approximately equal to use, because imports and exports of these compounds are
approximately equal (as well as relatively small). For other regions, use and
production may differ significantly. Developing countries, for example, are net
importers of CFCs, so that use exceeds production; Other Developed Countries are
net exporters of CFCs, so that production exceeds use.
Each compound is used in a variety of ways, referred to as end uses. Total
use within each region must be identified in terms of its end uses for purposes
of identifying the level of CFC or Halon releases anticipated over time. Each
end use has a rate at which its chemical cpmpounds are released to the
atmosphere, which may vary from "prompt* (e.g., CFCs in aerosols are released
immediately upon use), to being retained within products for many years (e.g.,
CFCs are contained or "banked" in rigid foam for many decades).
Of note is that three additional trace gases are important determinants of
ozone depletion: carbon dioxide (C02); methane (CH4); and nitrous oxide (N20).
These gases are considered to be key "greenhouse gases* that may warm the
Earth's climate in the coming decades. Because the rising atmospheric
concentrations of these gases are expected to counter somewhat the potential
ozone depletion caused by the compounds of concern (which are also greenhouse
gases), the baseline assumptions regarding the future concentrations of these
gases are important. In addition to countering ozone depletion, the increasing
concentrations of these three trace gases are expected to cause changes in
climate which themselves will have significant impacts. These potential climate
change impacts induced by these trace gases are not the focus of this RIA.
(Climate change impacts are discussed in EPA (1987).)
This chapter is organized as follows:
o Section 4.1 describes each compound and its use(s) in 1985
for each of the three regions examined;
o Section 4.2 presents projections of future use by region;
and
o Section 4.3 presents the projections of trace gas
concentrations.
4.1 COMPOUND USE IH 1985
Each of the seven compounds of concern is discussed in turn. The major uses
of each compound are first described briefly, then 1985 use data are presented
by region. Thereafter, data are presented on the distribution of the compound's
use across its defined end uses for the U.S. and the rest of the world.
Finally, release rates are presented for each end use.
-------
4-3
4.1.1 CFC-11
CFC-11 currently is used In the following ways throughout the world:
o aerosol 'propellant;
o blowing agent for flexible foam;
o blowing agent for rigid polyurethane foam;
o refrigeration; and
o miscellaneous uses.
As noted below, non-essential aerosol propellant uses of CFG-11 have been banned
in the United States.
Exhibit 4-1 shows data for CFC-11 use in 1985 (as well as the other six
compounds of concern) for the world and the six regions in the analysis. The
first row of the table shows data for CFC-11. The estimate for the U.S. is a
U.S. International Trade Commission (1TC) production estimate. The world total
is an estimate derived from Chemical Manufacturers Association (CMA) data and
data presented at recent international workshops.4 The U.S. is estimated to
have approximately 22 percent of global CFC-11 use. The developing nations
(including China, India, and Group I and Group II nations) are estimated to
account for roughly 25 percent of non-U.S. use, or about 20 percent of the world
total.5
Exhibit 4-2 presents the distribution of CFC-11 use in the U.S. (in percent)
for each of up to 10 different use categories (the distributions for the other
six compounds of concern are also shown in the exhibit). These end use data
were derived from the information available from Volume III.* As shown in the
Exhibit, CFC-11 is used primarily in rigid polyurethane foam. Aerosol
propellant use is small because non-essential aerosol propellant applications
4 ITC (1986); CMA (1986); and UNEP (1986).
5 This estimate for Developing Countries is consistent with the available
data that indicate that the EEC exports a significant share of its CFC-11 and
CFC-12 production to areas outside the EEC (over one-third, see EFCTC 1985).
Additionally, a significant portion of the developing nation use is probably
concentrated in Group I countries and large developing nations (see Appendix D).
Nevertheless, data on the use of CFC-11 (as well as the other compounds of
concern) in developing nations is very uncertain. Some "use" may actually occur
as products containing or made with CFCs are used in developing nations.
However, the global and U.S. values are considered reliable.
6 Volume III presents detailed data on the use of CFCs and Halons in each
of 74 applications. The 10 use categories in Exhibit 4-2 are aggregations of
the detailed use categories presented in Volume III. These estimates are
similar to previously published estimates, e.g., in Hammitt (1986). Of note is
that the distributions of use shown in the exhibit are for the known uses of the
compounds. A significant portion of CFC-11 and CFC-12 use in the U.S. cannot be
allocated to individual uses based on available data. The implications of the
inability to identify 100 percent of the use of CFC-11 and CFC-12 for the
evaluation of costs is described in Chapter 9.
-------
4-4
EXHIBIT 4-1
COMPOUND USE IN 1985 BY REGION
(millions of kilograns)
Compound
CFG -11
CFC-12
CFG -113
CFC-114
CFC-115
Halon 1211
Halon 1301
United USSR and .
States East Bloc*7
79.7 ay
136.9 ay
68.5 by
4.0 cy
4.5 £/
2.8 dy
3.5 dy
42.8
89.2
9.0
2.0
0.8
0.9
0.7
Developed*7
172.9
151.0
88.8
5.1
2.2
2.3
1.9
China and
India*7
4.4
12.2
1.1
0.2
0.1
0.1
0.1
Developing
Nations .
Group I
21.0
33.7
3.8
0.8
0.4
0.4
0.3
Developing
Nations ,
Group II*7 Tot4
47.5
32.0
5.8
1.3
0.5
0.6
0.5
368. T
L
455.0 !
177. (j
13.5-
8>
7/1
sj
7.0'
ri
A/ ITC (1987).
b/ Haomitt (1986).
£/ Industry estimates of U.S. and global CFC-114 and CFC-115 use supplied to EPA.
dy lEc (1987).
ey Share of use in the non-U.S. regions is estimated based on published estimates,
Exhibit 4-6 below.
fy Global estimates derived from CMA (1986) and UNEP (1986).
-------
EXHIBIT 4-2
U.S. 1985 END USE BY COMPOUND
(Parcant of Total Uaa)
CFC-II
CFC-12
CFC-1I3
CFC-114
CFC-11S
Ha Ion 1211
Halon 1301
Aarosol
5.7
B.2
—
—
—
—
—
Flamlbla
Foam
23. e
—
—
—
—
—
—
Rigid
Potyuratbana
Foam
02.4
6.9
~
—
—
—
—
Rigid
Nonurathana
FOBM
—
7.1
—
76.2
~
—
—
Fast
Ralaasa Jj/
Rafrlgaratlon
6.9
62.7
—
23.8
—
—
—
Mad1u«
Ralaasa ft/
Raf riga rat Ion
—
6.7
—
—
100
— i/
~ t/
Slow
Ralaasa ft/
Rafrlgaratlon
—
3.3
—
—
—
- £/
— a./
Solvant
—
—
too
—
—
—
—
Ftra
Extinguishing
—
—
—
—
—
100
100
Ml seal lanaoua
0.0
16.1
—
—
—
—
—
a./ Thaaa «ay ba minor uaaa.
g/ Includaa air conditioning eatagorla*.
U1
Sourcai Oarlvad from data peasantad In VolusM III,
-------
4-6
have been banned. (Certain uses are still allowed, however, including medical
uses and uses in which the CFC is an active ingredient -- for example, as a
foaming agent in children's party products that leave colored strings of foam
sticking to the wall.
Exhibit 4-3 shows the end use distributions for CFC-11 use outside the U.S.
For purposes of emission release rates all the regions outside the U.S. are
assumed to have the end use allocations shown in the exhibit. These end use
estimates were calculated by subtracting the U.S. estimates from end use
estimates reported in CMA (1986). As expected, the end use distribution for
CFC-11 outside the U.S. differs significantly from the distribution for the U.S.
because of the U.S. aerosol ban. Although actual end use distributions may, in
fact, vary among the non-U.S. regions, the impact of this variation is not
likely to be significant in terms of estimated atmospheric concentrations and
ozone depletion.
Finally, Exhibit 4-4 shows the manner in which releases occur from all of
the end uses that are examined (as shown above in Exhibits 4-2 and 4-3, CFC-11
is used in only a subset of all the end uses examined). The exhibit is
constructed to show cumulative releases that occur following the year of initial
compound use. For instance, for rigid polyurethane foam releases, the total
amount of chemical that is released within six years of its initial use is 31.7
percent. A final cumulative release rate of "1.000" indicates that all compound
use eventually is emitted into the atmosphere. Note that aerosol propelIant and
some foam applications have immediate releases and hence the "1.0" release rate
for year 1.
Also note that there are several release rates that describe the
refrigeration end use. Several types of refrigeration uses have been identified
with varying release characteristics. These types have been grouped into three
categories: fast, medium, and slow release. A "fast" release implies an
approximate 10 percent annual release of the compound remaining in use, with a
total venting after 4 years. A "medium" release implies an approximate 10
percent annual release with a total venting occurring on average after 17 years.
Finally, a "slow" release implies an approximate 1.5 percent annual release,
with a total venting after 17 years. Mobile Air Conditioning and Centrifugal
Chillers end uses have been identified as fast releasers. Hermetically-sealed
units (such as Home Refrigerators) are assumed to be slow releasers.7
4.1.2 CTC-12
CFC-12 has the following principal end uses:
o aerosol propellant;
o blowing agent for rigid nonurethane foam;
o blowing agent for rigid polyurethane foaa;
7 The following are the three refrigeration release types and some of the
uses that are assumed to have similar release characteristics: Fast Release --
Mobile Air Conditioning, Centrifugal Chillers; Medium Release -- Retail Food,
Cold Storage; Slow Release -- Vending Machines, Water Coolers, Ice Machines.
Freezers, Refrigerators, Dehumidifiers.
-------
EXHIBIT 4-3
NON-U.S. 1MS END USE BV COMPOUND
(Parcant of Total U««)
CFC-11
CFC-12
CFC-M3
CFC-114
CFC-115
Hal on 1211
Hal on 1301
Aerosol
38.9
46.6
~
—
—
—
—
Fla»1bla
Fomm
18.1
—
—
—
—
—
—
Rigid
Polyurothano
POM
27.3
7.6
—
—
—
—
—
Rigid
Nonurathana
Fomm
—
4.4
—
76.2
—
—
—
Fast
Ralaaaa &/
Rafrlgaratton
6.2
13.6
—
23.6
—
—
—
Madlua)
Ralaaaa fe/
Rafrlgaratlon
—
16.6
—
—
100
— £/
— I/
Slow
Ralaaaa ft/
Rafrlgaratlon
—
9.2
—
—
—
o__ t/
— */
Sol want
—
—
100
—
—
—
—
Flra
EKtlngulahlng
*
—
—
—
—
100
100
Ml aca! lanaous
7.5
0.0,
—
—
—
—
—
§./ Thaaa may ba Minor uaaa.
£/ Includaa air conditioning catagorlaa.
Sourcaai Darlvad from CMA (1966) and data praaantad In Voluwa III.
-------
EXHIBIT 4-4
CUMULATIVE FRACTION MELEASEO BV YEAH Of EMISSION AND END USE
Voor of
Intt <•)
U>o
1
2
3
4
6
«
1
• /
Aoroool
1.0
• 1
9
10
1 1
12
13
14
|K
• 3
1 A
• 9
• f
1 t
16
19
20
25
30
35
40
I/
FU«-
tblo
fo««
1.0
1 i7"!
Nlatd
Polyuroth*no
FOOM
0. 141
0.17*
0.216
0.261
0.285
0.317
0.348
0.377
0.405
0.432
0.4Sa
0.4*2
0.605
0.828
0.640
0.660
0.689
Oam
• ou t
Omm
. Ola
(nun
. UUtf
MiQid
Nonuro-
thano
Fo*«
1.0
I/
Feat
No 1 00*0
Hcfrlg-
•r*l Ion
0. 190
0.271
0.344
1.000
«/
IUdtu«
•)•!••••
M«fr<0-
•r«t Ion
0.190
0.271
0.344
0.410
0.469
0.522
0.570
0.613
0.651
0.686
0.718
0.746
0.771
0.794
0.816
0.833
I.OOO
s/
SI o«
»•!••••
«»frlg-
•r»t Ion
0.094
0.107
0.121
0.134
0. 147
0. 160
0. 172
0. 185
0. 197
0.209
0.221
0.233
0.244
0.255
0.267
0.276
1.000
• /
Sol von t
0.65
£/
U.S. Ho Ion
1211 Flro
E * 1 1 ngu 1 >h 1 ng
0.062
0.085
0. 108
0. 130
0. 151
0. 172
0. 192
0.212
0.232
0.250
0.269
0.287
0.304
0.321
0.337
0.353
0.369
0.384
0.399
0.693
0.727
0.866
£/
MOW Ho Ion
1211 Flro
C*l Ingutthlng
0.029
0.069
0. 108
0. 144
0. 180
0.214
0.246
0.277
0.307
0.335
0.362
0.388
0.413
0.437
0.460
0.482
0.503
0.523
0.542
0.945
0.938
0.979
£/
U.S. Ha Ion
1301 Flro
Ext tngutshtng
0. Ill
0. 140
0. 169
£/
HOW Ho Ion
1301 Flro
E»t Ingulshlni)
0. 167
0. 198
0.228
0.197 | 0.257
0.224
0.249
0.275
0.299
0.322
0.345
0.367
0.388
0.265
0.312
0.338
0.363
0.387
0.410
0.432
0.454
0.408 I 0.474
0.428
0.447
0.465
0.483
0.500
0.517
0.533
0.665
0.717
0.760
0.853
0.494
0.513
0.531
0.549
0.566
0.582
0.598
0.779
0.817
0.849
0.944
I/ Mo I oo»o •••uo*>tlono dorlv.d »r«o ••tlMlo* »n QU«AA (1986).
H/ No Iooto •••u«ptton» dorlvod fro« o*llmiio» In Go*Ion (1986).
t/ M.I...O o..u-P«lon. d.rlvod from o.tl-oto. fro. lEc (IM7).
Co
-------
4-9
o refrigeration; and
o miscellaneous uses.
After examining Exhibits 4-1, 4-2, 4-3 and 4-4, we note:
o Like the estimates for CFC-11, U.S. and global estimates
for CFC-12 are from ITC (1986), CMA (1986), and UNEP
(1986) data.
o U.S. use is 30 percent of world use; (see Exhibit 4-1).
o U.S. CFC-12 aerosol use is a small proportion of total
U.S. CFC-12 use because of the ban on aerosol uses in the
U.S. (Exhibit 4-2). The percent of CFC-12 use in aerosols
outside the U.S. is estimated to be about 46.6 percent
(Exhibit 4-3).
o The largest proportion, 52.8 percent, of U.S. CFC-12 use
is assigned to the fast release refrigeration group.
This allocation reflects widespread use of CFC-12 in
mobile (i.e., automobile) air conditioning. End use
allocations for "fast" release refrigeration outside the
U.S. are much smaller (13.6 percent).
4.1.3 CFC-113
CFC-113 is used almost exclusively in rapidly-growing solvent applications,
including Vaporized Degreasing, Cold Cleaning, Conveyorized Degreasing, and some
specialty Dry Cleaning applications. CFC-113 Is an attractive solvent because
it is non-flammable and has few toxic side-effects.
The data presented in Exhibits 4-1, 4-2, 4-3, and 4-4 show the following:
o U.S. and global use estimates are from Hammitt (1986).
o U.S. use accounts for nearly 39 percent of global use.
o Exhibit 4-4 shows that 85 percent of CFC-113 use in
solvents is released in one year with no additional
releases thereafter. This implies that only 85 percent of
the solvent use is ever released to the atmosphere,
reflecting the estimated 15 percent of annual production
that is buried or reacted (Quinn 1986).
Because the CMA and the ITC do not report data on CFC-113 production and
use, these CFC-113 estimates are considered to be more uncertain than the CFC-11
and CFC-12 estimates.
4.1.4 CFC-114
In the U.S. CFC-114 is used primarily as a blowing agent for nonurethane
foam. CFC-114 is also used as a refrigerant in Centrifugal Chiller
applications. Compound use figures for the U.S. and the world are estimates
from industry sources.
-------
4-10
End use shares for U.S. CFC-114 use are based on data reported in Volume III
(see Exhibit 4-2). Because detailed data on CFC-114 are not available for areas
outside the U.S., the U.S. end use share estimates are adopted for regions
outside of the U.S. (see Exhibit 4-3). CFC-114 represents only a minor source
of total CFC use. The data used to describe the production, use, and emissions
of CFC-114 contain significant uncertainty.
4.1.5 CFC-115
In the U.S. virtually all of CFC-115 is used as a refrigerant in combination
with CFC-22 in Retail Food and Cold Storage applications. Therefore, the
•medium* release refrigeration category is used to estimate CFC-115 emissions
(see Exhibit 4-4). Global and U.S. use estimates are from industry sources.
Because detailed data on CFC-115 are not available for areas outside the U.S.,
the U.S. end use share estimates are adopted for other regions (see Exhibits 4-2
and 4-3). Like CFC-114, CFC-115 constitutes* only a minor portion of total CFC
use, and the production, use, and emission? data for CFC-115 contain significant
uncertainty.
4.1.6 Halon 1211
Halon 1211 is used almost exclusively for portable fire extinguishing
applications in both the U.S. and other regions. Estimates of U.S. and world
Halon 1211 use are from lEc (1987).
Exhibit 4-4 shows the slow release characteristics of Halon 1211, reflecting
emissions from the sealed canisters that hold the compound. The last year of
the release table does not equal "1.000", indicating that some portion of Halon
1211 use is never released Into the atmosphere. This portion represents
recovery from existing systems and destruction of the chemical during fires.
Halon 1211 release rates for the U.S. differ from release rates for the non-U.S.
or "Rest of World* (ROW) regions, reflecting alternative assumptions about Halon
recovery when units are disposed and about discharge testing (see lEc 1987).
Halon 1211 has only recently been identified as an important ozone-depleting
compound. Therefore, data on its current use is somewhat sketchy. The
estimates of Halon 1211 use and emissions are very uncertain.
4.1.7 Haion 1301
Halon 1301 la used exclusively for total flooding fir* extinguishing
systems. Estimates of U.S. and world Halon 1301 use are from IEC (1987).
Because it is held in permanent fixed systems, Halon 1301 has a longer release
period than Halon 1211 (Exhibit 4-4). In addition, Halon 1301 release rates
estimated for the U.S. differ from release rates for other regions (see lEc
1987).
-------
4-11
4.2 1986 ESTIMATE AND PROJECTIONS OF FUTURE USE8
Ozone-modifying compounds are assumed to grow in the future primarily
because of their strong historical correlation with economic growth. Coiinn
(1986) found that historical growth in CFG use generally exceeded growth in per
capita national income. Gibbs (1986) found similar results. In addition,
studies on lesser developed countries discussed in Appendix D suggest that
future economic growth and compound use growth may be of comparable magnitudes.
Therefore, projections of economic growth imply growth of the compounds of
concern.
The degree to which compound use is correlated with GNP varies with the
maturity of the products and technologies that use the compounds. For instance,
a mature product market in the developed world (such as refrigeration) is
expected to grow at rates comparable to population growth rates. Developing
products and technologies (such as new solvent uses) are expected to grow more
rapidly than GNP- In addition, new products not yet introduced may create new
demand for these ozone-depleting substances.
This section discusses the baseline compound use projections and is
organized as follows:
o Section 4.2.1 reviews previous projections;
o Section 4.2.2 discusses inherent uncertainties in
projecting growth of ozone-modifying compounds;
o Section 4.2.3 provides baseline growth assumptions for
analysis in this RIA; and
o Section 4.2.4 reviews the technological rechanneling
assumptions implicit in the projections.
4.2.1 Previous Projections
Several previous studies projected U.S. and global production of CFCs,
including: Canm (1986), Hanoitt (1986), Nordhaus and Yohe (1986), and Gibbs
(1986). All these studies link compound growth to economic projections. Some
of the factors these authors have identified as critical in determining
chemical use in the future are: development of chemical markets in developing
countries; development of chemical markets in the USSR and East Bloc countries;
development of new products that use ozone-depleting compounds; development of
new products that will replace products that use ozone-depleting compounds; and
the manner in which the relationship between chemical use and income will change
as income rises.
In addition, several reports have explored production and use of CFCs for
specific countries, including: Sheffield (1986), EFCTC (1985), Bevington
8 These projections of future use are similar to the scenarios presented in
EPA (1987). Several updates have been incorporated based on data received
during the recent Montreal negotiations.
-------
4-12
(1986), Kurosawa (1986), and Hedenstrom (1986).9 These studies focus on growth
of aerosol and non-aerosol markets. Aerosol markets generally are projected to
remain constant or grow slowly. This is important because historically (in the
1970s) global reductions in aerosol markets offset rapid growth in non-aerosol
applications. This-indicates that future growth of CFCs will be driven by
non-aerosol applications.
EPA (1987) presents a synthesis of these projections, and presents a range
of scenarios for policy testing. These scenarios form the basis for the
projections used in this RIA.
4.2.2 Uncertainties Inherent in Long Ter» Projections
Use of the seven compounds is projected from 1986 to 2050. For modeling
purposes use is held constant after 2050. It is important to note that these
projections are subject to great uncertainty. Uncertainty derives from various
sources, including:
o The long period of the forecast. The lifetimes of the
most damaging ozone-modifying compounds are generally
longer than 75 years. In addition, a significant lag
period exists between tropospheric compound emissions and
stratospheric ozone damage. Therefore, once they are
emitted, damage to the ozone layer (and subsequent
effects) will occur for more than 100 years. To evaluate
potential damages properly in these future years, chemical
use and emissions must be projected for these extended
periods. Projections for such long periods are
necessarily speculative.
o The poor Quality and incomplete data that are available
(especially from developing nations). The seven compounds
are used in a wide variety of end uses. Aggregating end
use data (bottom up approach) is subject to inaccuracies
(Hammitt (1986) could not account for 31 percent of U.S.
CFC-12 use for 1985), while the production information
(top down approach) is considered reliable. Developing
country data are particularly poor because many of these
countries lack a centralized trade center that would track
the products that use the examined compounds. The
combination of these factors lead to large uncertainties
about production and use data for the recent years. Since
projections for this analysis are based on applying annual
growth rates to base year compound use, uncertainty in the
base year creates uncertainty in all succeeding years.
o Uncertainty inherent when projecting estimates that depend
on forecasted rates of economic growth. Compound
projections based on economic projections not only include
the uncertainty of the economic projection, but also the
uncertainty of how closely the intensity of use for the
9 These projections were presented in the 1986 UNEP meeting in Rome and are
summarized in UNEP (1986).
-------
4-13
products that use these compounds are linked to economic
growth.
In addition, chemical use and economic relationships are based on a limited
historical record. "In the future, GNP will exceed the historical ranges where
these relationships were developed. Therefore, even existing linkages between
compound use and economic growth are uncertain for use projections.
4.2.3 Baseline Compound Use Projections
Projections of future use for the seven compounds examined are made for the
six regions from 1986 to 2050. These projections are developed by applying
annual growth rates to the base year of use (1986). CFC and Halon use is
assumed to level off in the year 2050 for modeling purposes. Hence, projections
are presented here only through that year. End use shares and release rates for
all regions are assumed constant over time.
Projections for the seven compounds of concern are discussed in turn. The
annual growth rates used to construct the projections are displayed in Exhibit
4-5. Exhibit 4-6 presents the projections for selected years.
CFC-11 Projected Use
ITC (1986) estimates U.S. CFC-11 production in 1985 as 79.7 million
kilograms (mill kg) and 1986 (preliminary) as 91.3 million kg. This implies a
growth rate of 14.6 percent from 1985 to 1986. No estimates exist for 1986
global CFC-11 use; therefore, to maintain a constant U.S. share of global use,
global 1986 CFC-11 use is estimated by applying the U.S. growth rate (14.6
percent) to 1985 global use, 368.3 million kg. This 1986 global estimate is
421.7 million kg.
CFC-11 use in 1986 in regions outside the U.S. was obtained from published
sources with a few exceptions. Estimates for USSR and the Eastern Bloc were
obtained by EPA during recent international negotiations held in Montreal on
substances that deplete the ozone layer (September, 1987). Published estimates
were available for most countries in the Other Developed group; 1986 use for
other countries vas derived by multiplying per capita usage rates by the
countries' populations.10 The estimate for Group II developing countries
represents global CFC-11 use minus the use derived for all the other regions.
In EPA's risk assessment (EPA 1987) a series of future growth rates for
global CFC use were used for policy testing. The estimate of 2.5 percent per
year was used to represent the middle of a wide range of potential rates of
growth, recognizing that, as described above, the future rates of CFC use over
the long term are very uncertain.
10 Published estimates were available for countries in the EEC, Australia,
and Japan. Per capita use estimates for combined CFC-11 and CFC-12 use were
available from DuPont (1987) for: Bahrain; Norway; Venezuela; Austria; Canada;
Finland; Israel; Kuwait; Singapore; Switzerland; U.A.E.; and the Group I
developing countries. For purposes of this analysis it was assumed that 40
percent of the «oabined CFC-11 and CFC-12 use in these countries Is CFC-11.
-------
EXHIBIT 4-6
PROJECTED GROWTH RATES FOR COMPOUNDS BY REGION
(ANNUAL PERCENT)
crc-n. ci«c-i2.
CFC-114. AND CFC-115
GLOBAL •/
UNITED STATES
USSR & EAST BLOC
OTHER DEVELOPED
CHINA & INDIA
DEVELOPING (GROUP I)
DEVELOPING (GROUP II)
CFC-113
GLOBAL f./
UNITED STATES
USSR 1 EAST BLOC
OTHER DEVELOPED
CHINA 1 INDIA
DEVELOPING (GROUP I)
DEVELOPING (GROUP II)
HALON 1211
GLOBAL
UNITED STATES
USSR & EAST BLOC
OTHER DEVELOPED
CHINA & INDIA
DEVELOPING (GROUP I)
DEVELOPING (GROUP II)
HALON 1301
GLOBAL
UNITED STATES
USSR I EAST BLOC
OTHER DEVELOPED
CHINA I INDIA
DEVELOPING (GROUP I)
DEVELOPING (GROUP II)
1986-1990
3.62
2.50
6.00
2. SO
10.00
6.00
1.00
1966-1990
4.33
3.75
12.00
3.76
16.00
7.50
1.60
1986-1990
10.24
9.67
10.48
10.48
10.48
10.48
10.48
1986-1990
4.44
3.38
6.49
6.49
5.49
5.49
5.49
1990-2000
2.83
2.60
2.50
2.50
10.00
5.00
1.00
1990-2000
3.97
3.75
3.75
3.75
15.00
7.50
1.50
1990-2000
6.60
4.43
6.05
6.05
6.05
6.05
6.05
1990-2000
-1.47
-2.47
-0.60
-0.60
-0.60
-0.60
-0.60
2000-2050
2.50
2.50
2.50
2.50
2.50
2.50
2.50
2000-2050
2.50
2.50
2.50
2.50
2.50
o 2-50
2.50
2000-2050
2.93
2.75
2.99
2.99
2.99
2.99
2.99
2000-2060
3.16
3.27
3.07
3.07
3.07
3.07
3.07
2050-2100
0.00
0.00
0.00
0.00
0.00
0.00
0.00
2050-2100
0.00
0.00
0.00
0.00
0.00
0.00
0.00
2050-2100
0.00
0.00
0.00
0.00
0.00
0.00
0.00
2050-2100
0.00
0.00
0.00
0.00
0.00
0.00
0.00
£/ Global growth rates are derived by calculating the Implied global growth of u«e
aggregated from regional project lone.
SOURCE, HALON ESTIMATES FROM IEC (1987).
-pr
I
-------
srr 4-*
PROJECTED USE BV COMPOUND BY REGIONS
(THOUSANDS OF METRIC TONS)
CFC-11
CFC-12
CFC-M3
CFC-114
CFC-116
HALON 1211
HALON 1301
GLOBAL
UNITED STATES
USSR t EAST BLOC
OTHER DEVELOPED
CHINA 1 INDIA
DEVELOPING (GROUP I)
DEVELOPING (GROUP II)
GLOBAL
UNITED STATES
USSR I EAST BLOC
OTHER DEVELOPED
CHINA I INDIA
DEVELOPING (GROUP I)
DEVELOPING (GROUP II)
GLOBAL
UNITED STATES
USSR I EAST BLOC
OTHER DEVELOPED
CHINA & INDIA
DEVELOPING (GROUP I)
DEVELOPING (GROUP II)
GLOBAL
UNITED STATES
USSR & EAST BLOC
OTHER DEVELOPED
CHINA & INDIA
DEVELOPING (GROUP I)
DEVELOPING (GROUP II)
GLOBAL
UNITED STATES
USSR I EAST BLOC
OTHER DEVELOPED
CHINA 1 INDIA
DEVELOPING (GROUP I)
DEVELOPING (GROUP II)
GLOBAL
UNITED STATES
USSR & EAST BLOC
OTHER DEVELOPED
CHINA 1 INDIA
DEVELOPING (GROUP I)
DEVELOPING (GROUP II)
GLOBAL
UNITED STATES
USSR & EAST BLOC
OTHER DEVELOPED
CHINA I INDIA
DEVELOPING (GROUP I)
DEVELOPING (GROUP II)
1985
368.3 •
79.7 b
42.8 c
172.9 C
4.4 c
21.0 c
47.6 c
456.0 •
136.9 b
89.2 c
151.0 C
12.2 c
33.7 c
32.0 c
177.0 k
68.6 k
9.0 •
88.8 1
1.1 «
3.8 M
5.8 •
13.50 o
4.00 o
2.00 p
6.13 p
0.25 p
0.84 p
1.28 p
6.50 o
4.60 o
0.84 p
2.16 p
0.11 p
0.35 p
0.54 p
7.00 r
2.75
0.89
2.30
0.11
0.38
0.57
7.00 r
3.50 r
0.74
1.89
0.09
0.31
0.47
1986
421.7 d
91.3 •
49.0 0
198.0 f
5.1 t
24.0 h
54.4 J
485.8 d
146.2 •
95.2 g
161.2 f
13.1 1
36.0 h
34.1 j
183.6 n
71.1 n
9.4 n
92.2 n
1.2 n
3.9 n
6.0 n
13.84 q
4.10 q
2.05 q
5.26 q
0.26 q
0.86 q
1.31 q
8.71 q
4.61 q
0.86 q
2.22 q
0.11 q
0.36 q
0.55 q
9.69 r
2.87 r
1.44
3.69
0.18
0.60
0.92
8.00 r
4.03 r
0.84
2.14
0.10
0.35
0.53
1990t
479.1
too. a
66.7
218.5
7.5
29.2
56.6
667.2
161.4
129.5
177.9
19.1
43.8
35.5
217.5
82.3
14.7
106.8
2.0
5.2
6.3
16.91
4.53
2.79
5.81
0.37
I.OB
1.36
9.88
5.09
1.17
2.45
0.16
0.44
0.57
14.31
4.15
2.14
5.49
0.27
0.90
1.37
9.52
4.61
1.03
2.65
0.13
0.43
0.66
2000t
623.4
129.0
85.3
279.7
19.3
47.5
62.5
760.3
206.6
165.8
227.8
49.6
71.3
39.2
321.0
119.0
21.3
154.3
8.3
10.8
7.4
20.98
5.79
3.57
7.44
0.97
1.70
1.60
12.91
6.52
1.50
3.13
0.41
0.72
0.63
24.68
6.40
3.85
9.88
0.48
1.62
2.46
8.21
3.59
0.97
2.50
0.12
0.41
0.62
20SOt
2142.6
443.4
293.3
961.4
66.5
163.3
214.8
2613.1
710.1
569.9
782.9
170.5
245.0
134.8
1103.2
409.0
73.1
530.3
28.4
37.1
25.3
72.11
19.91
12.27
25.56
3.34
5.86
5.17
44.38
22.40
5.17
10.76
1.41
2.47
2.18
104.71
24.79
16.83
43.20
2.10
7.06
10.74
38.87
17.89
4.42
11.34
0.55
1.85
2.82
n
-------
Footnotes to Exhibit 4-6i
a Global estimate calculated from CMA (1986) and Hammltt (1986).
b U.S. International Trade Commission (1987).
C Estimate for region calculated using shares of global compound uee Identified for 1986.
d Global estimate calculated from CMA (1986). Hammltt (1986). and ITC (1987).
a U.S. International Trade Commission (1987). preliminary estimate.
f EEC estlmete celculeted from U.S. Industry estlmete provided to U.S. EPA,
Sheffield (Cenadlan) estlmete provided to U.S. EPA, Australia eetlmete from UNEP
(1986) Jepaneee estimate from Kurosawa end Imezekl (1986), other uee estimates based on Oupont (1987)
uaa par capita estlmetes provided to U.S. EPA.
g USSR and Eaat Bloc estlmete calculated from Industry estimates provided to U.S. EPA.
h Oupont (1987). Uee estimated by multiplying estimated uss per capita by population.
I Eettmeted from ZhIJIa (1986).
j Global estlmete minus documented use.
It Hammltt (1986). ^
I Arakt (MITA) In U.S. etate deportment ceble, Buxton (1987) peraonal correapondence.
• Regional estlmetes are seme proportion of remelnlng uee as average proportion
of CFC-11 and CFC-12 In 1966.
n All esttmetes 3.75ft higher than 1985 levels, see EPA (1987).
o U.S. Industry aetlmatee provided to EPA.
p Non-U.S. uae la allocated In the same regional proportions aa the averege of CFC-11 end CFC-12.
q 1986 estlmetee are 2.5ft greater than 1985 estlmetes. eee EPA (1987).
r Revised version of lEc (1987).
a Non-U.S. uaa la allocated In the same regional proportions as the average of CFC-ll and CFC-12.
t Projections for 1990-2050 are baaed on growth rates shown In Exhibit 4-5.
-------
4-17
For the baseline scenario evaluated here, the 2.5 percent annual rate of
growth is retained for the U.S. and for Other Developed Countries (see Exhibit
4-5). However, the rates of growth for, the USSR and Eastern Bloc, China and
India, and the developing countries were revised to reflect additional
information received during the Montreal negotiations. In particular, the USSR
announced its plans for 8.0 percent annual growth through 1990 (see Exhibit
4-5). The Protocol incorporates provisions allowing for this growth. Following
1990, baseline annual growth in the USSR and Eastern Bloc is assumed to return
to the 2.5 percent level.
The rate of future growth in developing countries is particularly uncertain.
The developing countries that are experiencing rapid economic growth will likely
have larger than average CFC use growth (see Appendix D). Therefore, for the
period 1986 to 2000 the annual rate of CFC growth in Group I Developing
Countries is assumed to be 5.0 percent, and the rate for India and China is
assumed to be 10.0 percent (see Exhibit 4-5). The annual rate of growth in
Group II Developing Countries is assumed to be 1.0 percent through 2000 based on
the assumption that these countries are experiencing slow economic growth.
As shown in Exhibit 4-5 all regions are assumed to grow at 2.5 percent per
year from 2000 to 2050. The levels of CFC-11 use by region are displayed in
Exhibit 4-6. The growth rates for each region are applied to the 1986 use
estimates to produce the 1990, 2000, and 2050 estimates. The implied annual
average growth rates for global CFC-11 use are 2.8 percent for 1986 to 2000 and
2.6 percent for 1986 to 2050.
CFG-12 Proleeted Use
ITC (1986) estimates U.S. CFC-12 production in 1985 as 136.9 million kg and
1986 use (preliminary) as 146.2 million kg. These estimates imply a U.S. growth
rate of 6.8 percent from 1985 to 1986. No estimates exist for global CFC-12 use
in 1986; therefore, to maintain a constant U.S. share of global use, global 1986
CFC-12 use is estimated by applying the U.S. growth rate (6.8 percent) to 1985
global use, 455.0 million kg. This 1986 global estimate is 485.8 million kg.
CFC-12 use in 1986 outside the U.S. was derived in the same manner as
described for CFC-ll.H The annual average regional growth rates for CFC-11 use
were also applied to regional CFC-12 use (see Exhibit 4-5). Exhibit 4-6
displays the resulting global and regional values for CFC-12 use. Because the
regional distribution for CFC-12 is different from the regional distribution for
CFC-11, the implied global annual growth rates also differ and are 3.3 percent
for 1986 to 2000 and 2.7 percent for 1986 to 2050.
11 Like the estimates for CFC-11, CFC-12 estimates were available for EEC,
Australia, and Japan. Per capita use estimates were available from Dupont
(1987) for: Bahrain; Norway; Venezuela; Austria; Canada; Finland; Israel;
Kuwait; Singapore; Switzerland; OAE; and the Group I developing countries. For
purposes of this analysis, It was assumed that 60 percent of the combined CFC-11
end CTC-I2 us* in these countries is CFC-12.
-------
4-18
CFC-113 Prelected Use
CFC-113 vise is expected to grow more rapidly than CFC-11 and CFC-12 use
because of its application in making electronic components (see EPA 1987). For
purposes of EPA's risk assessment, it was assumed that the annual CFC-113 growth
would be 1.5 times the CFC-11 and CFC-12 growth of 2.5 percent for the period
1986 to 2000, and would be equal to the 2.5 percent growth for the period 2000
to 2050. This assumption of 1.5 times the CFC-11/12 growth rate was retained in
the baseline scenario examined here. As shown in Exhibit 4-5, the rates of
growth for CFC-113 are 1.5 times the rates of growth for CFC-11 and CFC-12 for
the period 1986 to 2000. Following 2000, the 2.5 percent annual rate is used.
The implied global annual rates of growth are 4.1 percent for 1986 to 2000 and
2.8 percent for 1986 to 2050.
CFC-114.-115 Projected Use
Global and regional use of CFC-114 and' CFC-115 is assumed to grow at the
same rates as those used for CFC-11 and CFC-12 (see Exhibit 4-5). Because of
limited information available for these compounds, these projections are
particularly uncertain.
Halon 1211 and 1301 Prelected Use
\
lEc (1987) presents estimates of global and U.S. use of Halon 1211 and 1301.
As shown in Exhibit 4-5, the U.S. growth rates are different from the rates for
the rest of the world, and a single rate is used across all the non-U.S.
regions. The growth rates for Halon 1211 are relatively large in the short
term: approximately 10 percent through 1990, and about 5 to 6 percent from 1990
to 2000. From 2000 to 2050 the growth rates are about 3 percent.
The projected rates of growth for Halon 1301 are smaller and include a
period of decline from 1990 to 2000. This period of decline in sales of newly-
produced Halon 1301 is caused by increased recovery of the chemical from
retiring systems. The recovered Halon reduces the levels of new Halon required
to be produced. Over the long term (2000 through 2050) the increase in demand
is estimated to exceed the increased levels of recovery that are achieved, so
that production increases.
The growth rates in Exhibit 4-5 are applied to the 1986 estimates in Exhibit
4-6 to produce scenarios of future Halon use. Note that no estimates are made
at this time for Halon 2402 (also covered by the Protocol) for which information
is not currently available.
As described above, these scenarios of future use for these compounds are
subject to considerable uncertainty. As presented in EPA (1987) and Chapter 10,
alternative assumptions reflecting these uncertainties must be evaluated. In
Chapter 10, Low and High use scenarios are evaluated using 0.5 and 1.5 times the
growth rates reported above for the baseline scenario.
4.2.4 Technological Rechanneling
The projections discussed above are based on the assumption that no
regulatory intervention takes place. In such a situation, the future use and
emissions of CFCs and Ha Ions will be driven by GNP and population growth,
product maturation and saturation, and technological change. Of particular
importance is technological change, which has several fcey influences: (1)
-------
4-19
existing products that require CFCs and Halons will improve, so that CFCs and
Halons will be used less intensively; (2) existing products that require CFCs
and Halons may become .obsolete; and (3) new products that require CFCs and
Halons will be developed.
Historically, the development of new products that require CFCs has been an
important factor fueling the continued growth of CFC use. Because CFCs have
attractive properties, and because people are familiar with the characteristics
of CFCs, a steady stream of research investments has been made to develop new
products and improve old ones. It is likely that in the absence of regulatory
interventions that new products could continue to develop.
Once regulations are contemplated or required, however, the investments
required to create new uses for CFCs and improve existing products will slow and
likely stop, reducing the expected future use of the compounds. Individuals
will move away from the familiar CFC compounds and toward alternative solutions
that may be more or less costly than using .CFCs. Of note is the possibility
that alternative methods that do not require CFCs may be less costly or
preferred to using CFCs. Appendix C describes this phenomenon as "technological
channeling," where individuals continue to exploit a technology (such as CFCs)
even though alternatives may be preferred. Channeling occurs due to limited
information and other factors (see Appendix C).
The key factor to assess is that once regulations are contemplated, the A
baseline levels of use described above will not be realized because individuals
will "rechannel" their research and development investment resources away from
CFCs and into other approaches. Consequently, new products that require CFCs
will not develop, and total use will be less. The magnitude and sign of the
costs associated with this rechanneling cannot be assessed easily, nor can the
magnitude of the impact that re channel ing will have on the level of CFC use.
Appendix C describes a range of assumptions used to assess this phenomenon, and
the next chapter presents the baseline assumptions which assume that the level
of rechannel ing varies with the stringency of the proposed regulations.
4.3 OTHER TRACE GASES
Three other trace gases that have an important impact on ozone depletion
are:
o Carbon Dioxide (C02),
o Methane (CH4), and
o Nitrous Oxide (N20).
Future stratospheric ozone levels appear to be especially sensitive to future
trends in CH4 concentrations. Methane and carbon dioxide act to offset
potentially some or all of the ozone depletion from CFCs and halons. Nitrous
oxide could either increase or decrease ozone levels depending on its level
relative to CFC levels. The sources, sinks, and projections of concentrations
of these influential trace gases are discussed in EPA (1987). Here we present
the middle case from that study. Exhibit 4-7 presents projections for the
concentrations of the three trace gases from 1985 through 2165. The implied
-------
4-20
EXHIBIT 4-7
GROWTH OF TRACE GAS CONCENTRATIONS OVER TIME
Year
1985
2000
2025
2050
2075
2100
2165
C02
(PPM)
350.2
366.0
422.0
508.0
625.0
772.0
1,154.2
CH4
(PPM)
1.8
2.0
2.4
2.9
3.3
3.7
4.8
N20
(PPB)
303.1
312.3
328.3
345.1
362.8
381.4
434.3
Source: EPA (1987).
-------
4-21
annual growth rate for C02 is approximately 0.7 percent over the 180 year period
(HAS 1984). Concentrations grow at 5.9 ppm annually after 2100. Obviously,
such growth is unlikely if society becomes concerned with the greenhouse
effects. CH4 grows at 0.017 ppm for the 180 years of the analysis (EPA 1987).
N20 concentrations are assumed to grow at a 0.2 percent rate from 1985
concentration values for the entire period of analysis (EPA 1987) -
-------
4-22
REFERENCES
Bevington, C.F.P. (1986), "Projections of Production Capacity. Production and
Use of CFCs in .the Context of EEC Regulation," Metra Consulting Group,
Ltd., prepared for the European Economic Community.
Camm, F. and J.K. Hammitt (1986), "Analytic Method for Constructing Scenarios
from a Subjective Joint Probability Distribution," The RAND Corporation,
prepared for the U.S. Environmental Protection Agency, Santa Monica,
California.
CMA (1986), Chemical Manufacturers Association, "Production, Sales, and
Calculated Release of CFC-11 and CFC-12 Through 1985," Washington, D.C.
Dupont (1987), Dupont estimates of per capita consumption of CFCs, provided to
EPA.
Edmonds, J. and J. Reilly (1984), "An Analysis of Possible Future Atmospheric
Retention of Fossil Fuel C02," prepared for U.S. Department of Energy,
Washington, D.C.
EPA (1987), Assessing the Risks of Trace Gases That Can Modify The Stratosphere.
U.S. Environmental Protection Agency, Washington, D.C. This is a revision
of: U.S. Environmental Protection Agency (1986), An Assessment of the
Risks of Stratospheric Modification. U.S. Environmental Protection Agency,
Washington, D.C.
European Fluorocarbon Technical Committee (EFCTC) (1985), Halocarbon Trend
Study 1983-1995. EFCTC is a CEFIC Sector Group.
Gamlen, P.H., e_£ al. (1986), "The Production and Release to the Atmosphere of
CC13F and CC12F2 (Chlorofluorocarbons CFC-11 and CFC-12), Atmospheric
Environment. pp. 1077-1085.
Gibbs, M.J. (1986), Scenarios of CFC Use 1985-2075. prepared for U.S.
Environmental Protection Agency, ICF Incorporated, Washington, D.C.
Hammitt J.A.,'et al. (1986), "Product Uses and Market Trends for Potential
Ozone-Depleting Substances: 1985," prepared for U.S. Environmental
Protection Agency, The RAND Corporation, Santa Monica, California.
Hedenstrom, 0., S. Samuelsson, and A. Ostaan (1986), "Projections of CFC Use
in Sweden," prepared for Statens naturvardsverk.
lEc (1987), Industrial Economics, Inc. "Historical and Projected Growth of
Halons Bank and Emissions," prepared for the U.S. Environmental Protection
Agency, Cambridge, Massachusetts. The numbers presented in the baseline
are revised Halon scenarios presented in this document.
ITC (1986), U.S. International Trade Commission, "Synthetic Organic Chemicals,"
ITC, Washington D.C.
-------
4-23
Kurosowa, K. and K. Imazeki (1986), "Projections of the Production Use and
Trade of CFCs in Japan in the Next 5-10 Years," Japan Fluoride Gas
Association and the Japan Aerosol Association.
HAS (1984), National Academy of Sciences, "Causes and Effects of Changes in
Stratospheric Ozone," Washington, D.C.
Nordhaus, W.D. and G.W. Yohe (1986), "Probabilistic Projections of
Chlorofluorocarbon Consumption: Stage One," Yale University and Wesleyan
University, prepared for the U.S. Environmental Protection Agency,
Washington, D.C.
Quixm, T.H., ejt al. (1986), "Projected Use, Emissions, and Banks of Potential
Ozone-Depleting Substances," The RAND Corporation, prepared for U.S.
Environmental Protection Agency, Santa Monica, California.
Sheffield, A. (1986), "Canadian Overview of CFC Demand Projections to the Year
2005," Commercial Chemicals Branch, Environmental Protection Service,
Environment Canada.
UNEP (1986), United Nations Environmental Programme, "UNEP Workshop on
Protection of the Ozone Layer," May 1986.
Zhijia, W. (1986). "County Paper for Topic 1: UNEP Workshop on the Protection of
the Ozone Layer," National Environmental Protection Agency of the People's
Republic of China.
-------
CHAPTER 5
STRINGENCY AND COVERAGE OPTIONS
This chapter presents the stringency and coverage options (i.e., the control
levels) currently being considered for domestic action. These control level
options define the extent of reductions in chemical use that may be required.
The options do not define the regulatory means by which the reductions are
achieved (see Chapter 11). To a large extent, the stringency and coverage
alternatives can be defined and evaluated without consideration of the specifics
of the regulatory mechanisms used to implement the requirements.
The remainder of this chapter is organized as follows:
o Section 5.1 identifies the coverage options considered;
o Section 5.2 presents the stringency options;
o Section 5.3 defines tne participation assumptions; and
o Section 5.4 presents the options selected for analysis.
5.1 tiHKjfTf!AT. COVERAGE OPTIONS
As described in Chapter 4, the following eleven compounds are currently
identified as potential ozone-depleters: CFC-11; CFC-12; CFC-22; CFC-113;
CFC-114; CFC-115; carbon tetrachloride (CC14); methyl chloroform (CH3CCL3);
Halon-1211; Halon-1301; and Halon-2402. Chapter 4 presents the baseline use
assumptions for the seven compounds that are of concern in this analysis --
CFC-11, CFC-12, CFC-113, CFC-114, CFC-115, Halon-1211, and Halon-1301. Baseline
use assumptions for the remainder, except Halon-2402, are presented in EPA
(1987) . Halon-2402 is not addressed here to a lack of data on this compound at
this time.
Any chlorinated or brominated substance that survives long enough to reach
the stratosphere could contribute to ozone depletion. However, the lifetimes of
methyl chloroform and CFC-22 are shorter than those of the other ozone-depleters
because they contain hydrogen, and therefore break down by combining with the
hydroxyl (OH)'radical in the lower atmosphere. Consequently, the ozone
depletion potential per pound is much lower for methyl chloroform and CFC-22
compared to the other gases (see Exhibit 5-1).
In addition, their shorter lifetimes have another important implication for
assessing risks. In the event that ozone depletion occurs, the recovery time
and the level of control needed to arrest an increase in the chlorine
contribution to the stratosphere would be much shorter. For example, to
stabilize CFC-11 concentrations would require an 80% reduction in emissions. To
stabilize methyl chloroform concentrations would take about a 15% reduction.
Thus, if an unexpected ozone depletion problem develops, it is both easier to
arrest and rollback depletion for short-lived substances than for long-lived
ozone-depleters. As a consequence of these characteristics, and because of
their capability to displace CFC-11, -12, and -113, substances with shorter
-------
5-2
EXHIBIT 5-1
CHARACTERISTICS OF VARIOUS OZONE-DEPLETING COMPOUNDS
CFC-11
CFC-12
CFG -113
CFC-114
CFC-115
Halon 1211
Halon 1301
CFC-22
Methyl Chloroform
Ozone Depletion
Potential Weight
(Mass Basis) a/
1.0
1.0
0.8
1.0
0.6
3.0 by
10.0 by
0.05
0.1 £/
Lifetime
(years) dy
64
108
88
185
380
25
110
22
10
1985 U.S. Production
( Me trie Tons)
Unweighted
79,700
136,900
68,500
4,000
4,500
2,800
3,500
99 , 200
190,955
Weighted
79,700
136,900
54,800
4,000
2,700
8,400
35,000
4,960
19,096
ay Measured relative to CFC-11, which is set to 1.0. The values for all
compounds, except CFC-22 and Methyl Chloroform, were adopted in the Montreal
Protocol.
by Preliminary estimates with large uncertainties.
£/ Range 0.06-0.15.
dy Some uncertainty exists for these estimates.
-------
5-3
lifetimes are considered part of the solution to potential ozone depletion
problems.1
Thus, the following two chemical coverage options are being considered for
purposes of preventing potential stratospheric ozone modification:
o Fullv-haloeenated CFCs: CFC-11, CFC-12, CFG-113,
CFC-114, and CFC-115; and
o Fullv-halogenated compounds: CFC-11, CFC-12, CFC-113,
CFC-114, CFC-115, Halon-1301, Halon-1211, and Halon-
2402.
The difference between these two options is the inclusion of the Halon
compounds.
In evaluating these options it is assumed that the fully-halogenated CFCs
would be controlled as a group, and that the Halons (if covered) would be
controlled separately. As discussed in Chapter 4 above, the Halon uses
(primarily as fire extinguishants) are significantly different from the CFC
applications. In addition, the ozone depletion potentials of Halons are more
uncertain (although clearly higher than CFCs) and are dependent on the level of
chlorine in the atmosphere. Consequently, tradeoffs with CFCs could not assume
a linear or fixed ratio. (Tradeoffs between these brominated compounds,
however, may make sense.)
5.2 STRINGENCY OFTIGHS
The following stringency options are considered for control of the
fully-halogenated CFCs. Each option is evaluated in terms of total ozone
depletion potential. Individual substances are weighted, with the requirement
for control applied against all CFCs based on their ozone depletion potential
(e.g., 1.25 kilograms of CFC-113 would be equal to 1.00 kilograms of CFC-11 in
terms of meeting a control limit):
o No Controls (Baseline Case);
o Freeze use (in terms of ozone depletion potential) at
1986 levels starting in 1989;
o 20 percent: Freeze use at 1986 levels starting in 1989;
and reduce use by 20 percent starting in 1993;
o 50 percent: Freeze use at 1986 levels starting in 1989;
reduce use by 20 percent in 1993; and reduce use by 50
percent in 1998; and
1 Carbon tetrachloride is not currently considered for control because it
is used primarily as a chemical intermediate, and its emissions are small.
-------
5-4
o 80 percent: Freeze use at 1986 levels in 1989; reduce
use by 20 percent in 1993; reduce use by 50 percent in
1998; and reduce use by 80 percent in 2003.
Exhibit 5-2 shows graphically the expected use of CFC-11 for these five
stringency options if it were controlled separately (in reality, controls will
likely be applied against the pool of CFCs so CFC-11 use could be higher or
lower depending on whether it was more or less expensive to control than other
CFCs). CFC-11 use in the No Controls scenario grows at a 3.6 percent annual
rate from 1985 to 2000 and a 2.5 percent annual rate from 2000 to 2050, after
which use remains constant. Each of the four other lines in the exhibit
reflects CFC-11 use assuming 100 percent participation worldwide in a global
control protocol. As noted below, however, it may be unlikely that 100 percent
participation will be achieved.
The stringency for Halons in the Montreal Protocol is for a freeze at
current (e.g., 1986) levels of production.. This is the only stringency option
considered for Halons at this time.
5.3 PARTICIPATION ASSUMPTIONS
It is unlikely that all nations of the world will participate in the
international protocol to protect stratospheric ozone through reductions in the
use and emissions of ozone-depleting compounds. For purposes of assessing the
impact of alternative U.S. domestic requirements, assumptions regarding
potential participation internationally are required. In particular, the
influence of alternative U.S. actions on participation abroad should be
assessed.
For purposes of this analysis, it is assumed that the U.S. will participate,
and that 100 percent compliance will be achieved in the U.S. Although this 100
percent compliance figure may seem high for most engineering-related
requirements, it is probably reasonable for a market-based regulatory approach
(such as production and import permits) where few producers and importers are
involved. Therefore, the 100 percent compliance rate for the U.S. is used.
It is expected that many of the nations of the world will participate in and
comply with the international protocol. Exhibit 5-3 lists the nations that have
signed the Montreal Protocol. As shown in the exhibit, 24 nations plus the EEC
have signed the Protocol. Virtually all industrialized nations have indicated
an intention to sign the protocol.
It is estimated that the nations who have signed the Protocol or have been
involved in the protocol development process account for a large majority of
global CFC production. However, a significant portion of this production (e.g.,
one-third of production in the EEC) is exported, some portion possibly to
nations that have not been involved to date. Also, many CFC-related products
(such as automobiles) are exported. Therefore, the effective global
participation in the protocol may be expected to be less than 100 percent, and
possibly considerably less, depending on the effectiveness of trade provisions
in the protocol.
-------
5-5
EXHIBIT 5-2
ILLUSTRATIVE USE OF CFC-11 UNDER
- FIVE STRINGENCY OPTIONS
CFC-11
Use
(millions
of kg)
No controls
Freeze
1985
2055
2065
-------
5-6
EXHIBIT 5-3
RATIONS THAT HAVE SIGNED THE PROTOCOL
Belgium
Canada
Denmark
Egypt
European Economic Community
Finland
France
Germany
Ghana
Italy
Japan
Kenya
Mexico
Netherlands
New Zealand
Norway
Panama
Portugal
Senegal
Sweden
Switzerland
Togo
United Kingdom
United States
Venezuela
Source: U.S. EPA.
-------
5-7
For purposes of analysis it is assumed that among other developed nations 94
percent participation may be expected (sensitivity analysis was performed with
75 percent and 100 percent). Among developing nations participation may be
lower, and is assumed to be 65 percent (sensitivity analysis was performed using
40 percent and 100 percent). Lower participation by developing nations may be
expected because few developing nations have been involved in the protocol
process to date. It is further assumed for purposes of analysis that those
nations who participate achieve 100 percent compliance.
For nations that do not participate in the protocol, their continued use of
CFCs is assumed to follow the modified path of demand defined in Appendix C.^
The adoption of "rechanneled" technologies in developing countries will be
strongly influenced by: (1) technology transfer from developed countries; and
(2) the ability to sell products in developed countries (see Appendix D for a
description of the factors affecting CFG use in developing nations). If new
technologies are not adopted in the non-participating developing nations, then
their CFG use may approach their baseline use in the absence of global
restrictions. However, transnational corporations (TNCs) or protocol trade
restrictions may cause non-participating nations to modify their CFG use.
Therefore, a range of values must be assessed. It is important to note that the
participation rates and the reduced growth rates assumed here for analysis
purposes are based on qualitative assessments of the relevant forces influencing
future use of CFG. Alternative hypotheses are plausible.
Exhibit 5-4 illustrates graphically how the protocol participation rates are
used in the analysis, and how the growth in CFG use is reduced for non-
participants. As shown in Exhibit 5-4(a), the total baseline use is divided
between participants and non-participants. The participants are analyzed
assuming that they achieve the reductions (e.g., 50 percent) set forth by the
protocol (see Exhibit 5-4(b)). The non-participants would experience reduced
growth (as shown in Exhibit 5-4(c)).
5.4 SELECTED POLICY OFTIOHS FOR CONTROLS OH POTENTIAL OZONE DEPLETERS
Exhibit 5-5 shows the control level options selected for analysis in future
Chapters of this RIA. These cases reflect varying coverage and stringency
assumptions. The stringency varies from no controls to an 80 percent reduction,
and two sets of compound coverage are analyzed.
Each coverage option is assumed to be applied globally, unless indicated
otherwise. Similarly, with two exceptions, each stringency option is assumed to
be applied globally. However, for cases 7 and 8 in Exhibit 5-5, it is assumed
that other parties implement less stringent requirements.
2 As described in Appendix C, the discussion and implementation of
regulations will influence people's investments in research and development,
resulting in a "rechanneling" of technology away from CFC-related products.
This rechanneling results in less CFG use than would be expected in the absence
of anv restrictions on CFCs.
-------
5-8
EXHIBIT 5-4
ILLUSTRATION OF PARTICIPATION SATES
CFC-11
Use
CFC-11
Us*
1985 1995 2005 2015 2025 2035 2045 2055 2065
Non-
Partidpaiut
Participants
Reduction
to 50%
of 1986
ust
Rtmointng
1915
1995
2005
2015
2025
2035
2045
2055
2045
(a) Total Baseline use is divided into participants and non-participants
according to the participation rate (in this case 80%).
(b) The participants reduce use according to the requirements of the
protocol (e.g., to 50% of 1986 use).
-------
5-9
EXHIBIT 5-4
HU7STBATION OF PARTICIPATION RATES
(Continued)
Non-Participants
CFC-11
UM
(0
Ktdiutd
growth
Rtmaininf
its*
1985
1995
2005
2015
2025
2035
2045
2055
(c) The non-participants experience reduced rates of growth due to the
technological changes induced by reductions undertaken by the
participants.
-------
EXHIBIT 5-5
CONTROL OPTIONS ANALYZED*
casa
i
2
3
4
5
e
7
a
b/
U.S. Raauiramanta
Fully-Hal.
CFCa Melon*
No Controls
Fraaza
20%
50%
60tt
60% Fraaza
80% Fraaza
5O% Fraaza
Non-U.S. Reductions
. Ful ly-Hal .
CFCe Ha Ions
No Controls
Fraaza
20%
60%
80%
50% Fraaza
50% Fraaza
—
Participation
Non-U . S . Dava 1 op.dc./
—
94% participation and 1/2 growth
•4% participation and 1/2 growth
04% participation and 3/8 growth
•4% participation and 3/8 growth
04% participation and 3/8 growth
94% participation and 3/8 growth
0% participation and full growth
and Rsduc.d Growth
Dava lop Ing
—
65% participation and 3/4— •--<>« th
65% participation and 5/8 growth
65% participation and 1/2 growth
65% participation and 1/2 growth
65% participation and 1/2 growth
65% participation and 1/2 growth
0% participation and full growth
a/ Tha control out Ions analyzad raflact a varlaty of covaraga and stringency casas. Tha strtngancy rangss fro* a frsaz. to an 80
parcant raductlon. Tha covaraga Includas all tha fully-haloganatad CFCs. and as sn option includss tha Halon compounds (casss
6-6).
h/ US oartlcloatlon la assuawd to always ba tOO%i raductlons In U.S. growth ara aqual to tha assumptions on raduced growth for
* Jha'ofta^ (nSn-U S.) d!"VTJad coontrlas. In C.sa 8. tha r.duct Ion. In U.S. growth ara aqu.l to th. U.S. r.ductlon. In C... 6.
e/ Prior to tha Montr.a I Protocol It «a. astlMtad that davalopad countrlas othar than th. U.S. would achi.va a participation rata
£ «f »a n^rc.nt (a.cludlno tha U.S.S.R. and othar Eastarn Bloc countrlas). With tha announcad Intantlons of tha U.S.S.R. to sign
tha PrSto"?! !t la JsH-atld ihit pirtlclpatlon among non-U.S. dav.lopad countrlas could ba about 94 p.rc.nt b.s.d on 1986 CFC
production I avals.
-------
5-11
A summary description of each scenario is provided below:
o No Controls --No controls on CFCs or halons occur. This
is the baseline scenario from which the impacts of
various control options are measured.
o CFC Freeze -- CFG use is held constant at 1986 levels
starting in 1989.
o CFC 20% --In addition to the CFC freeze in 1989, a 20%
CFC reduction worldwide occurs in 1993.
o CFC 50% --In addition to the CFC freeze in 1989 and the
20% reduction in 1993, a 50% CFC reduction occurs in
1998.
o CFC 80% --In addition to the CFC freeze in 1989, the 20%
reduction in 1993, and the 50% reduction in 1998, an 80%
CFC reduction occurs in 2003.
o CFC 50%/Halon Freeze --In addition to the freeze on CFC
use in 1989, the 20% reduction in 1993, and the 50%
reduction in 1998, Halon use is held constant at 1986
levels starting in 1992. This case is intended to
resemble as closely as possible the Montreal Protocol.3
o CFC 50%/Halon Freeze/U.S. 80% -- Same as the CFC
50%/Halon Freeze case, except that the U.S. reduces to
80% of 1986 CFC levels in 2003.
o U.S. Only/CFC 50%/Halon Freeze -- Same as the CFC
50%/Halon Freeze case, except the U.S. is the only
country in the world that participates.
Throughout this report each scenario is referenced by the underlined title
listed above.
3 The Montreal Protocol specifies that the CFC freeze would begin on July
1, 1989, the 20% CFC Reduction on July 1, 1993, and the 50% Reduction on July 1,
1998. For purposes of analysis in this study, the effective dates were analyzed
on a calendar year basis with a six month delay. This adjustment has been made
for all of the alternative control scenarios; it has less than a 0.5 percent
-------
5-12
REFERENCES
U.S. Environmental Protection Agency (1987), Assessing the Risks of Trace
Gases That Can Modify the Stratosphere. U.S. Environmental Protection
Agency. Washington, D.C. This is a revised version of: U.S. Environmental
Protection Agency (1986), An Assessment of the Risks of Stratospheric
Modification. U.S. EPA, Washington, D.C.
-------
CHAPTER 6
ANALYSIS OF ATMOSPHERIC RESPONSE
This chapter presents estimates of the atmospheric response to
perturbations due to emissions of ozone-depleting compounds. The cases being
analyzed are displayed in Exhibit 5-5 in Chapter 5. The global ozone
depletion associated with each of these cases is presented below. These ozone
depletion estimates are used in subsequent chapters to assess the potential
risks that ozone depletion may pose to human health and the environment. The
potential impacts of the emissions associated with each of the cases on global
climate is also evaluated.
There is currently some uncertainty surrounding the potential impacts of
CFC emissions on stratospheric ozone. Historically, many models have been
developed and used to assess the potential impact of various emissions and
concentrations on stratospheric ozone. Over time the results of these models
have varied, but always have projected depletion in the event of increasing
chlorine. A recent UNEP-sponsored model intercomparison workshop concluded
that the major 1-dimensioral models currently produce about the same results.
The simplified model used in this assessment was found to produce ozone
depletion estimates that are within the range of the estimates of the more
complex models, although slightly on the low side (i.e., underestimating ozone
depletion) in some cases (UNEP (1987)).
The largest uncertainties related to current atmospheric models are
driven by recent empirical findings on ozone itself. The identification of
the Antarctic ozone hole, and the inability of current theories and models to
predict or account for the hole, reduce the level of confidence that can be
placed in the current model estimates. Nevertheless, because the atmosphere
in the Antarctic is very different from the atmosphere over most of the rest
of the globe, it is premature to alter the current models until a better
understanding of the hole is achieved.
Additionally, preliminary global ozone trends based on both satellite and
ground-based estimates indicate that a reduction of global ozone may also be
occurring at rates faster than those predicted by the models. This is
possibly a second indication that the current models significantly
underestimate the response of stratospheric ozone to perturbations. However,
once again the analysis presented throughout this report, but especially in
the following chapter* on effects, presumes that these preliminary data do not
necessitate a revision to current model projections.
One mechanism that could lead to the current models being incorrect is
the existence of chemical reactions whereby gaseous species interact on
particles (such as particulates). These reactions (referred to as
•heterogeneous" chemistry because they occur at the interface between two
phases, such as gas-liquid or gas-solid) are not included in the current
atmospheric models used to assess ozone depletion. Considerable investigation
is required before the implications of this reaction mechanism for estimates
of ozone depletion can be assessed. One preliminary study shows that
heterogeneous chemistry could significantly increase the sensitivity of
stratospheric ozone to perturbations from chlorine-containing compounds such
as CFCs. Another possibility is that Antarctic depletion itself could have an
impact on global ozone.
-------
6-2
The remainder of this chapter is organized as follows:
o Section 6.1 presents estimates of global ozone depletion
for the baseline case of no controls. The uncertainty in
this estimate associated with the understanding of the
atmospheric chemistry currently included in the model is
also presented.
o Section 6.2 presents estimates of global ozone depletion
for the control cases defined in Chapter 5. These
estimates form the basis for the analyses presented in
Chapters 7-10.
o Section 6.3 presents an estimate of ozone depletion with
alternative assumptions for growth of greenhouse gases.
(Not carried forward to effects chapters.)
o Section 6.4 presents estimates of global warming
associated with the eight cases defined in Chapter 5.
6.1 BASELINE CASE GLOBAL OZOHE DEPLETIOH
This section presents estimates of global ozone depletion for the No
Controls Case using the baseline CFG, Halon and trace gas assumptions defined
above in Chapter 4. A statistical representation of a 1-dimensional model is
used to relate emissions and concentrations to ozone depletion.^
Exhibit 6-1 displays estimates of ozone depletion over time for the No
Controls Case.* As shown in the exhibit, the horizontal axis is time (1985 to
2100) and the vertical axis is the level of global ozone depletion simulated to
occur. Note that ozone depletion is identified as negative, so that increasing
levels of ozone depletion are depicted as downward-sloping curves. Note also
that in Exhibit 6-1 the ozone depletion beyond 50 percent is not shown.
Throughout this analysis (including the impacts assessments in subsequent
chapters) ozone depletion is truncated at 50 percent. Although the model used
to evaluate ozone depletion indicates levels in excess of 50 percent, the data
used to develop the parameterized model do not allow it to be carried beyond
this point. This truncation at 50 percent results in an underestimate of ozone
depletion and impacts over the long term in the No Controls Case.
The No Controls Case shows average column ozone depletion of 2% by the year
2015 from 1985 levels; depletion that may have occurred prior to 1985 is
ignored. Note that depletion continues to get worse after 2050 when CFC/Halon
* The model used to evaluate ozone depletion is described in EPA's recent
risk assessment of stratospheric modification (EPA 1987). The statistical model
is presented in Cornell (1986).
2 Recall that in this no controls case CFC/Halon use is assumed to grow
through 2050, and then remain constant. As described below, ozone depletion
continues to get worse after 2050 even though CFG use ha*
-------
6-3
\
EXHIBIT 6-1
GLOBAL OZONE DEPLETION FOR THE NO CONTROLS CASE
2005
2026
2048
2065
2086
Ozone depletion is estimated for the no controls case defined in Chapter 5.
The baseline CFG, Halon, and trace gas assumptions are defined in Chapter 4.
Mote that ozone depletion is truncated at 50 percent. This truncation results
in an underestimate of ozone depletion over the long term in this Mo Controls
Case. See text.
Source: Estimates based on the statistical method developed by Connell
(1986).
-------
6-4
use is assumed arbitrarily Co level out. The depletion continues because the
concentrations of chlorine and bromine in the stratosphere do not reach steady
state by 2050, and the concentrations continue to increase with constant
emissions. To prevent continued depletion beyond 2050 (or at any point in the
time horizon examined) CFC/Halon emissions would have to be reduced
significantly in order to prevent chlorine and bromine concentrations from
continuing to grow.
6.2 GLOBAL OZONE DEPLETION FOR THE CONTROL CASES
Exhibit 6-2 displays the estimates of global ozone depletion for the No
Controls Case, and the CFC 50%/Halon Freeze Case. As shown in the exhibit, the
more stringent policy results in less ozone depletion. With No Controls ozone
depletion reaches 50 percent by 2085, at which point it is arbitrarily
constrained in this analysis. The CFC 50%/Halon Freeze Case leads to ozone
depletion of only about 1.0 percent in the same time frame.
Ozone depletion estimates are presented ia Exhibit 6-3 for the alternative
control option cases (except the U.S. Only/CFC 50%/Halon Freeze case). These
cases include:
o CFC Freeze;
o CFC 20%;
o CFC 50%;
o CFC 80%;
o CFC 50%/Halon Freeze; and
o CFC 50%/Halon Freeze/U.S. 80%.
As expected, the more stringent policies result in less ozone depletion over
time. By 2100, the CFC Freeze leads to depletion of almost 7 percent. The CFC
80% Case reduces depletion to about 2.0 percent by 2100.
The final.two cases shown in Exhibit 6-3 show even less ozone depletion,
which is to be expected as the CFC 50%/Halon Freeze case and the CFC 50%/Halon
Freeze/U.S. 80% case incorporate a freeze on Halon production. The CFC
50%/Halon Freeze case leads to depletion of 0.4 percent in 2100, and the CFC
50%/Halon Freeze/U.S. 80% case to depletion of 0.3 percent.
Finally, Exhibit 6-4 presents the No Controls Case, CFC 50%/Halon Freeze
Case, and U.S. Only/CFC 50%/Halon Freeze Case. While the CFC 50%/Halon Freeze
case shows a marked decrease in depletion from the No Controls case, the U.S.
Only/CFC 50%/Halon Freeze case shows a large increase over the CFC 50%/Halon
Freeze case. This is a result of having only the U.S. participate in the
control policy (U.S. Only/CFC 50%/Halon Freeze case) as opposed to the policy
being globally implemented (CFC 50%/Halon Freeze case).
Exhibit 6-5 summarizes the results of the control cases in tabular form.
For each case the estimated ozone depletion for the years 2000, 2025, 2050.
2075, and 2100 are listed. As shown in the exhibit, the more stringent the
-------
6-5
EXHIBIT 6-2
GLOBAL OZONE DEPLETION ESTIMATES FOR THE NO CONTROLS CASE
AND CFG 50%/HALON FREEZE CASE
(Percent)
CFC 50%/HALON FREEZE
-00.0
1985
2005
2025
2045
2065
2085
Source: Estimates based on the statistical method developed by Cornell
(1986).
-------
6-6
EXHIBIT 6-3
GLOBAL OZONE DEPLETION ESTIMATES
FOR ALTERNATIVE CONTROL OPTIONS CASES a/
0.0
-1.0
f -2.0
a -3.0
a
§ -4.0
N
o
A
O
-5.0
-6.0 -
-7.0
CFC 50%/
HALON FREEZE/,
US. 80%
1985 2005 2025 2045 2065 2085
CFC 50%/
HALON FREEZE
CFC 80%
CFC 50%
CFC 20%
CFC FREEZE
Source: Estimates based on the statistical method developed by Connell
(1986).
All alternative cases except the U.S. Only case.
-------
6-8
EXHIBIT 6-5
SUMMARY OF OZONE DEPLETION ESTIMATED FOR THE 8 CONTROL CASES
(Ozone Depletion Reported In Percent)
1.
2.
3.
4.
5.
6.
7.
8.
Case A/
No controls
CFC Freeze
CFC 20%
CFC 50%
CFC 80%
CFC 50%/Halon Freeze
CFC 50%/Halon Freeze/
U.S. 80%
U.S. Only/CFC 50%/Halon
Freeze
2000
0.9
0.8
0.8
0.8
0.8
0.8
0.8
0.8
2025
3.9
2.3
"1.9
1.5
1.2
1.3
1.2
3.1
2050
12.4
4.3
3.4
2.3
1.6
1.6
1.4
8.5
2075
39.9
6.2
5.0
3.2
2.2
1.3
1.2
20.4
2100
50.0 by
6.8
5.2
3.1
1.9
0.4
0.3
37.2
a/ Cases are defined in Chapter 5.
by Global ozone depletion arbitrarily constrained at 50 percent in this
analysis.
-------
6-7
EXHIBIT 6-4
GLOBAL OZONE DEPLETION ESTIMATES FOR THE NO CONTROLS,
CFG 50%/HALON FREEZE. AND U.S. ONLY CASES
CFC 50%/HALON FREEZE
U.S. ONLY/
CFC 50%/
HALON FREEZE
-60.0
1986
2006
2026
2046
2066
2086
Source: Estimates based on the statistical method developed by Connell
(1986).
-------
6-9
control policy, the less ozone depletion occurs. Interesting to note is that in
the later years (2075-2100) a freeze on Halons becomes increasingly important in
keeping ozone depletion to a minimum.
6.3 GLOBAL DEFLEXION WITH ALTERNATIVE GREENHOUSE GAS GROWTH
As described in EPA (1987) there is uncertainty surrounding the potential
rates of growth of the atmospheric concentrations of C02, N20, and CH4. The
potential level of future ozone depletion is sensitive to these growth rates,
particularly the rates for CH4. Exhibit 6-6 displays estimates of ozone
depletion for the CFG 50%/Halon Freeze case with the following trace gas
concentration sensitivity assumptions:
o Low Trace Gas:
-- €02: HAS 25th percentile growth estimate;
-- N20: 0.15 percent per year; and
-- CH4: 0.01275 ppm/year (75 percent of the baseline assumption of
0.017 ppm/year).
o High Trace Gas:
-- C02: NAS 75th percentile growth estimate;
-- N20: 0.25 percent per year; and
-- CH4: 1.0 percent per year compounded annually.
As shown in the exhibit, by 2100 the ozone depletion estimates vary by several
percentage points due to these alternative trace gas assumptions.
Also shown in the exhibit is an estimate of ozone depletion for the CFC
50%/Halon Freeze case in which equilibrium global warming is limited to 2.0
degrees C by 2075. This case is undertaken to reflect the potential
implications of nations undertaking policies to prevent significant global
warming. In order to perform this simulation, the trace gas concentration
growth rates were reduced to 10 percent of their baseline assumption values
after the year 2000. When the equilibrium global warming is limited to 2.0
degrees C by 2075 in this manner, the resulting ozone depletion estimates are
much higher than the other sensitivities, indicating that reducing the growth in
concentrations for purposes of preventing global warming may have important
implications for ozone depletion.
6.4 ESTIMATES OF GLOBAL HARMIJ9G
As presented in EPA's risk assessment (EPA 1987), CFCs may also contribute
to global warming through the "Greenhouse Effect." Exhibit 6-7 summarizes
estimates of equilibrium global warming from 1985 to 2075 associated with each
of the 8 control level cases, assuming a climate sensitivity of 3 degrees C for
doubled C02.
As shown in the exhibit, global warming may reach 5.8 degrees C in the No
Controls Case for equilibrium conditions in 2075. The warming is less for the
other cases, but remains fairly substantial because the carbon dioxide (C02),
-------
6-10
EXHIBIT 6-6
GLOBAL OZONE DEPLETION ESTIMATES FOR THE
CFG 50%/HALON FREEZE CASE
FOR ALTERNATIVE TRACE GAS CONCENTRATION ASSUMPTIONS
a
a
o
N
O
o
O
6.0
4.0
3.0
2.0
1.0
0.0
-1.0 -
-2.0 -
-3.0 -
-4.0
-6.0 •
-6.0 -
-7.0 •
-8.0
HIGH TRACE GAS
BASELINE
TRACE GAS
LOW TRACE GAS
WARMING LIMITED
1986
2006
2026
2046
2066
2086
Source: Ozone depletion estimates are based on the statistical method developed
by Connell (1986). Global warming estimated based on a statistical
representation of a 1-dimensional model of the ocean and atmosphere, see
Hoffman, e_£ fll (1986) and assuming a climate sensitivity of 3 degrees C
for doubled C02.
-------
6-11
EXHIBIT 6-7
ESTIMATES OF EQUILIBRIUM GLOBAL HAHMING BY 2075
(Degrees Centigrade)
b/
Climate Sensitivity
Case a/ 3.0 Degrees C
1. No controls 5.8
2. CFC Freeze 4.7
3. CFC 20% - 4.5
4. CFC 50% 4.4
5. CFC 80% 4.2
6. CFC 50%/Halon Freeze 4.3
7. CFC 50%/Halon Freeze/U.S. 80% 4.3
8. U.S. Only/CFC 50%/Halon Freeze 5.4
a/ See Chapter 5 for the case definitions.
by A range of climate sensitivity is used from 1.5
to 4.5 degrees C based on MAS (1979). Recent climate
model developments indicate that 4.0 degrees C is the
most likely estimate. Estimates of equilibrium warming
for 1.5*C and 4.5'C can be made simply by multiplying the
values by 50 percent and by 150 percent. See EPA (1987).
Source: Estimates based on a statistical representation
of a 1-dimensional model of the ocean and
atmosphere, see Hoffman, e_£ al. (1986).
-------
6-12
methane (CH4), and nitrous oxide (N20) concentrations are assumed to increase In
all the cases (see Chapter 4 for a summary of the trace gas concentration
assumptions).
Also of note is that the global warming estimate (as well as the ozone
depletion estimates) are sensitive to the baseline growth assumptions for the
compounds of concern. Sensitivity analyses that vary the baseline growth
assumptions are presented in Chapter 10.
-------
6-13
REFERENCES
Connell, P.S. (1986). A Paraineter^ed Numerical Fit to Total Column Ozone
Changes Calculated bv the LLNL 1-D Model of the Troposphere and
Stratosphere. Lawrence Livermore National Laboratory, Livermore, CA.
Hoffman, J.S., J.B. Wells, and J.G. Titus (1986). Future Global Warming and
Sea Level Rise. U.S. Environmental Protection Agency and The Bruce Company,
Washington, D.C.
National Academy of Science, 1979, Carbon Dioxide and Climate: A Scientific
Assessment. Washington, D.C., National Academy of Sciences Press.
UNEP (1987), "Ad Hoc Scientific Meeting to Compare Model Generated Assessments
of Ozone Layer Change for Various Strategies for CFC Control," Wurzburg,
Federal Republic of Germany, 9-10 April 1987, UNEP/WG.167/INF.1.
U.S. Environmental Protection Agency (1987), Assessing the Risks of Trace Oases
That Can Modify the Stratosphere. U.S. EPA, Washington, D.C. This is a
revised version of: U.S. Environmental Protection Agency (1986), Aja
Assessment of the Risks of Stratospheric Modification. U.S. EPA, Washington,
D.C.
WMO (1986), Atmospheric Ozone 1985. Global Ozone Research and Monitoring
Project, Report No. 16, NASA, Washington, D.C.
-------
CHAPTER 7
ESTIMATES OF PHYSICAL HEALTH AND ENVIRONMENTAL EFFECTS
This chapter discusses the types of physical effects that can occur due to
stratospheric ozone depletion. These physical effects are divided into health
and environmental (non-health) impacts. The analysis of each physical effect
begins with a brief description of the physical effect, followed by a summary of
the scientific evidence indicating the potential severity of the problem.
Estimates of the physical magnitude of the effects are presented for the
baseline (i.e., no controls) case and the alternative cases. These scenarios
are described in detail in Chapter 4 (for the baseline) and Chapter 5 (for the
alternative control level scenarios).
This chapter is only intended to provide an overview of the health and
non-health impacts that could result from stratospheric ozone depletion. For
greater detail, see EPA's risk assessment (EPA 1987) and Appendix E for more
information on the health impacts and Appendix F for more detail on the
environmental impacts.
7.1 HEALTH IMPACTS
This section of the chapter discusses the potential health impacts from
stratospheric ozone depletion. These impacts include:
o Nonmelanoma skin cancer, specifically basal and squamous cell
carcinoma;
o Cutaneous malignant melanoma;
o Cataracts; and
o Changes to the immune system.
Actinic keratosis, the most common form of UV-B-induced skin damage, is not
considered in this chapter (see Appendix E for further discussion).
7.1.1 Nomelanoaa Skin Cancer
As a result of ozone depletion, the amount of potentially-damaging UV
radiation reaching the earth's surface is likely to increase. The cumulative
increase in lifetime exposure to UV radiation that individuals would experience
could increase the incidence of nonmelanoma cancers, specifically basal and
squamous cell carcinoma.
To estimate changes in the incidence of nonmelanoma skin cancer as a
function of the changes in exposure, the following equation has been used:
Fractional change in incidence - (Fractional change in exposure+1) -1.
where the fractional change in exposure is defined as the change in UV flux
reaching the earth's surface and "b" is the dose-response coefficient. This
dose-response coefficient is often referred to as the "biological amplification
factor" or BAF; it equals the percent change in incidence associated with a one
-------
7-2
percent change in exposure. The estimates of the BAF used in this analysis are
taken from EPA's risk assessment (1987), and are summarized in Exhibit 7-1 for
white males and females (non-whites are assumed not to be affected).
The number of additional nonmelanoma cases that would result from the
dose-response coefficients shown in Exhibit 7-1 is a function of the size of the
U.S. population exposed to the higher UV levels. This population is described
in terms of (1) the total population over time, specifically (a) all people born
by 2075 as defined by three cohorts -- people alive today, people born from
1986-2029, and people born from 2030-2074, and (b) all people born through 2165;
(2) the fraction of the total population that resides in each of three regions
within the U.S. (the regions vary by latitude); and (3) the fraction of the
population in each region that is white, non-white, male, female, and in each of
nine age groups. Exhibit 7-2 shows the additional number of nonmelanoma cases
that occur in people born by 2075 in the No Controls case and the alternative
scenarios by type of nonmelanoma. In Exhibit 7-3 the number of nonmelanoma
cases that occur in people born by 2075 is shown for each of the three
population cohorts; this exhibit indicates that the vast majority of cases occur
in people not yet born. Exhibit 7-4 shows the additional number of nonmelanoma
cases that occur in all people by 2165.
The increase in incidence in nonmelanoma skin cancer is expected to cause an
increase in mortality as well. Based on the information available on mortality
rates (one percent of all cases), basal cases resulting in death has been
assigned a fraction of 0.0031, and the squamous cases resulting in death
assigned a fraction of approximately 0.0375. These fractions have been
multiplied in Exhibit 7-5 by the estimated additional cases of nonmelanoma skin
cancer in Exhibit 7-2 to determine additional mortality due to nonmelanoma skin
cancer for people born before 2075. Exhibit 7-6 shows the additional mortality
among people born before 2075 by the three population cohorts; most of the
additional deaths occur in later generations. Exhibit 7-7 shows the total
increase in mortality from nonmelanoma by 2165 (including people born from
2075-2165).
7.1.2 Cutaneous Malignant Melanoaa
The increase in UV radiation from ozone depletion can also cause an increase
in the incidence and mortality of melanoma skin cancer. The dose/response
equation used 'for melanoma is similar in form to the equation used for
nonmelanoma:
Fractional change in incidence - (Fractional change in exposure + 1) -1
where the fractional change in exposure is defined as the change in UV flux
reaching the earth's surface and "b" is the dose-response coefficient. This
dose-response coefficient is often referred to as the "biological amplification
factor" or BAF; it equals the percent change in incidence associated with a one
percent change in exposure. The estimates of the BAF used in this analysis are
taken from EPA's risk assessment (1987), and are summarized in Exhibit 7-8 for
whites by location on the body (non-whites are assumed not to be affected).
-------
7-4
EXHIBIT 7-2
ADDITIONAL CASES OF NONMELANOHA SKIN CANCER
IS THE U.S. FOR PEOPLE BORN BY 2075 BY TYPE OF NONMELANOMA*'
(Unites Only)
Scenario
No Controls
Freeze
CFC 20%
CFC 50%
CFC 80%
CFC 50%/Halon
Ozone Depletion
by 2075 (%)
39.9
c
6.2
5.0
3.2
2.2
1.3
Basal
79,727,700
9,560,800
7,500,700
4,938,400
3,385,400
2,337,300
Squamous
73,959,400
5,914,100
4,577,900
2,959,200
2,001,400
1,347,600
Total
153, 687, 100^
15,474,900
12,078,600
7,897,600
5,386,800
3,684,900
Freeze
CFC 50%/Halon 1.2
Freeze/U.S. 80%
U.S. Only/CFC 50%/ 20.4
Halon Freeze
2,119,000 1,217,000 3,336,000
49,394,900 41,603,600 90,998,500
A/ Skin cancer is already a serious problem; in the absence of any
ozone depletion, 160,048,600 basal and squamous skin cancers would
occur -for people born before 2075.
by These estimates of skin cancer cases differ from estimates contained in
EPA's Draft Risk Assessment because: (1) slightly higher CFC emission
estimates are used; (2) the U.S. population is simulated to age through
2080 (rather than holding its age structure constant from the year 2000
on); and (3) estimates of trace gas concentrations are revised.
-------
7-3
EXHIBIT 7-1
DOSE-RESPONSE COEFFICIENTS: NONMELANOMA SKIN CANCER
(Whites Only)
Sauamous
Male
Female
Basal
Male
Female
DNA-D
Low ay
1.42
1.47
0.932
0.316
lee Action
Middle
2.03
2.22
1.29
0.739
Soectrrnn Ervthena Action
High by
2.64
2.98
1.65
1.16
Low ay
1.54
1.57
1.02
0.346
Middle
2.21
2.42
1.41
0.809
Spectrum
High by
2.88
3.26
1.80
1.27
ay Middle minus one standard error.
by Middle plus one standard error.
Source: EPA (1987).
-------
7-5
EXHIBIT 7-3
ADDITIONAL GASES OF NONMELANOMA SKIN CANCER BY COHORT
(Vhltes only)
People People Born People Born
Scenarios Alive Today 1986-2029 2029-2074 Total
No Controls 2,750,600 32,731,800 118,204,700 153,687,100s/
CFC Freeze 1,397,200 5,209,400 8,868,300 15,474,900
CFC 20% 1,193,400 ^,168,900 6,716,300 12,078,600
CFC 50% 958,200 2,867,200 4,072,200 7,897,600
CFC 80% 809,100 2,051,500 2,526,200 5,386,800
CFC 50%/Halon Freeze 846,300 1,788,800 1,049,800 3,684,900
CFC 50%/Halon Freeze/ 814,300 1,656,600 865,600 3,336,000
U.S. 80%
U.S. Only/CFC 50%/ 2,036,200 16,578,300 72,384,000 90,998,500
Halon Freeze
A/ These estimates of skin cancer cases differ from estimates contained in
EPA's Draft Risk Assessment because: (1) slightly higher CFC emission
estimates are used; (2) the U.S. population is simulated to age through 2080
(rather than holding its age structure constant from the year 2000 on); and
(3) estimates of trace gas concentrations are revised.
-------
7-6
EXHIBIT 7-4
ADDITIONAL CASES OF NONMELANOMA SKIN CANCER IN U.S.
BY 2165 BY TYPE OF NONMELANOMA
(Whites Only)
Scenario
Basal
Squamous
Total
No Controls
Freeze
CFC 20%
CFC 50%
CFC 80%
CFC 50%/Halon
Freeze
CFC 50%/Halon
Freeze/
U.S. 80%
U.S. Only/
CFC 50%/
Halon Freeze
117,914,800
12,459,100
9,606,700
6,062,400
3,950,100
2,211,600
1,936,300
81,901,300
107,064,100
7,405,900
5,643,500
3,515,800
2,277,600
1,287,200
1,129,200
224,978,900
19,865,000
15,250,000
9,578,200
6,227,700
3,498,800
3,065,500
68,011,700 149,913,000
-------
7-7
EXHIBIT 7-5
ADDITIONAL MORTALITY FROM NONMELANOMA SKIN CANCER IN U.S.
AMONG PEOPLE BORN BEFORE 2075 BY TYPE OF NONMELANOMA?'
(Whites Only)
Scenario
No Controls
Freeze
CFC 20%
CFC 50%
CFC 80%
CFC 50%/IUlon
Ozone Depletion
by 2075 (%)
39.9 c
6.2
5.0
3.2
2.2
1.3
Basal
247,100
29,700
23,300
15,200
10,600
7,200
Squamous
2,773,400
221,800
171,600
111,000
75,000
50,500
Total
3,020,500^
251,500
194,900
126,200
85,600
57,700
Freeze
CFC 50%/Halon 1.2
Freeze/U.S. 80%
U.S. Only/CFC 20.4
50%/Halon
Freeze
6,700
45,700
52,400
153,100 1,560,100 1,713,200
A/ Noomelanoma skin cancer deaths among people born before 2075
assuming no ozone depletion is estimated at 1,770,600.
by These estimates differ from those contained in EPA's Draft
Risk Assessment because (1) slightly higher CFC emission
estimates are used; (2) the U.S. population is simulated to age
through 2080 (rather than holding its age structure constant from the
year 2000 on); and (3) estimates of trace gas concentrations are
revised.
-------
7-8
EXHIBIT 7-6
ADDITIONAL MORTALITY FROM RONMELANOMA SKEH CANCER BY COHORT
C&hites only)
Scenarios
People People Born
Alive Today 1986-2029
People Born
2029-2074
U.S. 80%
U.S. Only/CFC 50%/
Halon Freeze
33,900
290,500
1,388,800
Total
No Controls
CFC Freeze
CFC 20%
CFC 50%
CFC 80%
CFC 50%/Halon Freeze
CFC 50%/Halon Freeze/
46,400
23,000
19,500
15,500
13,100
13,600
13,200
605,900
84,700
67.400
46,000
32,700
28,200
26 , 100
2,368,200
143,800
108,000
64,700
39,800
15,900
13,100
3,020,5004/
251,500
194,900
126,200
85,600
57,700
82,400
1,713,200
a/ These estimates differ froa those contained in EPA's Draft
Risk Assessment because (1) slightly higher CFC emission
estimates are used; (2) the U.S. population is simulated to age
through 2080 (rather than holding its age structure constant from the
year 2000 on); and (3) estimates of trace gas concentrations are
revised.
-------
7-9
EXHIBIT 7-7
ADDITIONAL MORTALITY FROM NONMELANOMA SKUT CANCER IN U.S.
BY 2165 BY TYPE OF NONMELANOMA
(Unites Only)
Scenario
No Controls
Freeze
CFC 20%
CFC 50%
CFC 80%
CFC 50%/Ualon
Basal
365,500
38,600
29,800
18,800
12,200
6,900
Squamous
4,014,900
277,700
211,600
131,800
85,400
48,300
Total
4,380,400
316,300
241,400
150,600
97,600
55,200
Freeze
CFC 50%/Halon
Freeze/
U.S. 80%
U.S. Only/
CFC 50%/
Halon Freeze
6,000
253,900
42,300
48,300
2,550,400 2,804,300
-------
7-10
EXHIBIT 7-8
DOSE-RESPONSE COEFFICIENTS:
MELANOMA SKIN CANCER INCIDENCE
(Vhltes Only)
Low A/
Middle
High b/
Face . Head
and Neck
Male
Female
Trunk and Lower Extremities
Male
Female
0.398
0,477
0.200
0.268
0.512
0.611
0.310
0.412
0.624
0.744
0.420
0.553
A/ Middle minus one standard error.
by Middle plus one standard error.
Source: Derived from: Scotto and Fears, 'The Association of
Solar Ultraviolet Radiation and Skin Melanoma Among
Caucasians in the United States,* Cancer
Investigation, in press.
-------
7-11
The number of additional cases of melanoma resulting from the dose-response
relationships in Exhibit 7-8 can be determined by applying these dose-response
coefficients to the population estimates discussed above for a specified
increase in UV radiation. The results of this procedure lead to the additional
melanoma cases listed in Exhibit 7-9 for people born before 2075 for the
baseline and alternative control level scenarios. The additional melanoma cases
for people born before 2075 are shown in Exhibit 7-10 by the three population
cohorts; the large majority of cases occur in later generations. Exhibit 7-11
summarizes the additional melanoma cases that occur by 2165 (including people
born from 2075-2165).
The increase in incidence of melanoma is also expected to lead to an
increase in mortality. The extent to which mortality will increase has been
calculated from estimates developed by Pitcher (1986). These dose-response
coefficients are summarized in Exhibit 7-12; the number of additional deaths
resulting from melanoma among people born before 2075 are summarized in Exhibit
7-13 for the baseline and alternative control level scenarios. The number of
additional deaths from melanoma are summarized in Exhibit 7-14 for the three
population cohorts; this exhibit indicates that most deaths from melanoma will
occur in people not yet born. Exhibit 7-15 summarizes the number of additional
deaths that occur by 2165 among the U.S. population (including people born from
2075-2165).
7.1.3 Cataracts
Several epidemiological studies have identified a correlation between the
prevalence of various types of cataracts in humans and the flux of sunlight or
ultraviolet radiation reaching the earth's surface. Killer, Sperduto, and
Ederer (1983) developed a multivariate logistic risk function that describes the
correlation found between the prevalence of senile cataracts and the flux of
UV-B and other risk factors. Based on the Killer study, the change in the
prevalence of cataract for each 1.0 percent change in UV-B is estimated to be
approximately 0.5 percent. This estimated relationship between UV-B and
cataract prevalence varies with age, as shown in Exhibit 7-16. This exhibit
displays the expected percent increase in cataract prevalence due to increases
in UV-B for persons of different ages.
To evaluate the impact of ozone depletion on cataract incidence, a model
developed from the Killer (1983) study was used to relate increases in
prevalence to changes in lifetime UV radiation exposure. The dose-response
coefficients resulting from this approach are provided in Exhibit 7-17. These
values were then used to estimate the increase in cataract incidence for the
baseline and alternative control level scenarios. These estimates are provided
in Exhibit 7-18 for people born before 2075. Exhibit 7-19 summarizes the
increase in cataract incidence among people born before 2075 by each of the
three population cohorts; this exhibit indicates that the majority of cases will
occur in people not yet born. Exhibit 7-20 indicates all cataract cases that
occur by 2165 (including cases that occur in people born from 2075-2165).
7.1.4 Changes to the T^mm System
The increases in solar radiation brought about by depletion of the ozone
layer could have a detrimental effect on the immune system of both humans and
animals. In particular, UV radiation reduces the ability of the immune system
-------
7-12
EXHIBIT 7-9
ADDITIONAL CASES OF MELANOMA SKIN CANCER IN U.S.
FOR PEOPLE BORN BEFORE 2075*'
(Whites Only)
Scenarios
No Controls
Freeze
CFC 20%
CFC 50%
CFC 80%
CFC-50%/Halon
Ozone Depletion
by 2075 (%)
39.9
6.2
5.0
3.2
2.2
1.3
Total
Cases
782, 100*/
125,900
100,000
67,300
47,100
34,300
Freeze
CFC 50%/Halon 1.2 31,400
Freeze/U.S. 80%
U.S. Only/CFC 50%/ 20.4 507,300
Halon Freeze
a/ Melanoma is already a serious problem in
the U.S.; in the absence of ozone
depletion 4,231,800 cases would be
expected for people born before 2075.
t/ These estimates differ from those contained
in EPA's Draft Risk Assessment because
(1) slightly higher CFC emission estimates
are used; (2) the U.S. population is simulated
to age through 2080 (rather than holding its
age structure constant from the year 2000 on);
and (3) estimates of trace gas concentrations
are revised.
-------
7-13
EXHIBIT 7-10
ADDITIONAL CASES OF MELANOMA SKIN CANCER BY COHORT
(Vhites only)
People
Scenarios Alive Today
No Controls
CFG Freeze
CFC 20%
CFC 50%
CFC 80%
CFC 50%/Halon Freeze
CFC 50%/Halon Freeze/
U.S. 80%
U.S. Only/CFC 50%/
Halon Freeze
17.500
9,700
8,400
6,900
6,000
6,300
6,100
13,400
People Born
1986-2029
177,200
41,400
33,600
23,900
17,600
16,300
15,200
104,200
People Born
2029-2074
587,400
74,800
58,000
36,500
23,500
11,700
10,100
389,700
Total
782,100s/
125,900
100,000
67,300
47 , 100
34,300
31,400
507,300
A/ These estimates differ from those contained in .EPA's Draft
Risk Assessment because (1) slightly higher CFC emission
estimates are used; (2) the U.S. population is simulated to age
through 2080 (rather than holding its age structure constant from the
year 2000 on); and (3) estimates of trace gas concentrations are
revised.
-------
EXHIBIT 7-11
ADDITIONAL CASES OF MELANOHA SKIN CANCER BY 2165 IN U.S.
(Vhltes Only)
Scenarios Total
No Controls 1,330,500
Freeze 184,800
CFC 20% 143,300
c
CFC 50% 90,800
CFC 80% 59,000
CFC 50%/Halon Freeze 31,600
CFC 50%/Halon Freeze/U.S. 80% 27,400
U.S. Only/CFC 50%/Halon Freeze 993,900
-------
7-15
EXHIBIT 7-12
DOSE-RESPONSE COEFFICIENTS:
MELANOMA SKIN CANCER MORTALITY
(Whites Only)
Action ?Ti>*t?1TTrt"B Erythema Action
Low a/ Middle High by Low A/ Middle High by
Male
Female
0.39
0.25
0.42
0.29
0.46
0.33
0.42
0.28
0.46
0.32
0.50
0.36
a. Middle estimate minus one standard error.
by Middle estimate plus one standard error.
Source: Pitcher, H.M., "Examination of the Empirical
Relationship Between Melanoma Death Rates in
the United States 1950-1979 and
Satellite-Based Estimates of Exposure to
Ultraviolet Radiation." U.S. EPA, Washington,
D.C., March 17, 1987, draft.
-------
7-16
EXHIBIT 7-13
ADDITIONAL MORTALITY FROM MELANOMA SKIN CANCER IN U.S.
AMONG PEOPLE BORN BEFORE 2075fl/
(Whites Only)
Scenarios
No Controls
Freeze
CFC 20%
CFC 50%
CFC 80%
CFC 50%/Halon Freeze
CFC 50%/Halon Freeze/U.S. 80%
U.S. Only/CFC 50%/Halon Freeze
Ozone Depletion
by 2075 (%)
39.9
6.2
5.0
3.2
2.2
1.3
1.2
20.4
Total
136, 900^
30,200
23,900
16 , 100
11,200
7,900
7,200
124.600
a/ In the absence of ozone depletion, melanoma mortality would
be expected to be 1,202,900 for people born before 2075.
by These estimates differ from those contained in EPA's Draft
Risk Assessment because (1) slightly higher CFC emission
estimates are used; (2) the U.S. population is simulated to age
through 2080 (rather than holding its age structure constant from the
year 2000 on); and (3) estimates of trace gas concentrations are
revised.
-------
7-17
EXHIBIT 7-14
ADDITIONAL MORTALITY FROM MELANOMA SKIN CANCER BY COHORT
(Whites only)
People
Scenarios Alive Today
No Controls
CFG Freeze
CFC 20%
CFC 50%
CFC 80%
CFC 50%/Halon Freeze
CFC 50%/Halon Freeze/
U.S. 80%
U.S. Only/CFC 50%/
Halon Freeze
4,800
2,600
2,200
1,800
1,600
1,600
1,600
3,700
People Born
1986-2029
46,400
10,100
8,200
5,800
4,200
3,800
3,500
27,000
People Born
2029-2074
135,700
17,500
13,500
8,500
5,400
2,500
2,100
93,900
Total
186, 900^
30,200
23 , 900
16,100
11,200
7,900
7,200
124,600
A/ These estimates' differ from those contained in EPA's Draft
Risk Assessment because (1) slightly higher CFC emission
estimates are used; (2) the U.S. population is simulated to age
through 2080 (rather than holding its age structure constant from the
year 2000 on); and (3) estimates of trace gas concentrations are
revised.
-------
7-18
EXHIBIT 7-15
ADDITIONAL MORTALITY FROM
MELANOMA. SKIN CANCER IN U.S. BY 2165
(Vhltes Only)
Scenarios Total
No Controls 285,400
Freeze 41,300
CFC 20% 32,100
CFC 50% 20,500
CFC 80% 13,400
CFC 50%/Halon Freeze 7,400
CFC 50%/Halon Freeze/U.S. 80% 6,400
U.S. Only/CFC 50%/Halon Freeze 212,300
-------
7-19
EXHIBIT 7-16
ESTIMATED RELATIONSHIP BETWEEN RISK
OF CATARACT AND UV-B FLUX
Percent
Increase
in
Cataract
Prevalence
20
18
16
14
12
10
8
6
4
2
0
ACE
AGE
SO
60
AGE • 70
10 15 20 25
Percent Increase la UV-1 Flux
30
Increased UV-B flux (measured with an RB-meter) is associated with increased
prevalence of cataract. The percent change in prevalence varies by age.
Source: Developed from data presented in R. Miller, R. Sperduto, and
F. Ederer, "Epideoiologic Associations with Cataract in the 1971-1972 National
Health and Nutrition Examination Survey," American Journal of Epidemiology. Vol,
118, No. 2, pp. 239-249, 1983.
-------
7-20
EXHIBIT 7-17
DOSE-RESPONSE COEFFICIENTS -- CATARACTS
Low a/ Middle High by
0.127 0.225 0.296
£/ Middle minus one standard error.
*
h/ Middle plus one standard error.
Source: Derived from data presented
in: Killer, Sperduto, and
Ederer, "Epidemiologic
Associations with Cataract in
1971-1972 National Health and
Nutrition Examination Survey,
"American Journal of
Epidemiology. Vol. 118, No. 2,
pp. 239-249, 1983.
-------
7-21
EXHIBIT 7-18
ADDITIONAL CATARACT CASES IN U.S.
AMONG PEOPLE BORH BEFORE 2075S/
Scenarios
No Controls
Freeze
CFC 20%
CFC 50%
CFC 80%
CFC 50%/Halon Freeze
CFC 50%/Halon Freeze/U.S. 80%
U.S. Only/CFC 50%/Halon Freeze
Ozone Depletion
by 2075 (%)
39.9
6.2
5.0
3.2
2.2
1.3
1.2
20.4
Total
Cases
18, 171, 000^
2,847,200
2,234,200
1,454,000
974,600
612,200
554,800
13,066,600
ay Cataracts are already a serious problem in the U.S.; in the
absence of ozone depletion 182,265,100 cases vould.be
expected for people born before 2075.
b/ These estimates differ from those contained in EPA's Draft
Risk Assessment because (1) slightly higher CFC emission
estimates are used; (2) the U.S. population is simulated to age
through 2080 (rather than holding its age structure constant from the
year 2000 on); and (3) estimates of trace gas concentrations are
revised.
-------
7-22
EXHIBIT 7-19
ADDITIONAL CATARACT CASES AMONG PEOPLE BORN BEFORE 2075
BY COHORT
People People Born People Born
Scenarios Alive Today 1986-2029 2029-2074 Total
No Controls 797,000 5,987,500 11,386,500 18,171,000^
CFC Freeze 369,100 1,032,400 1,445,700 2,847,200.
CFG 20% 311,600 824,600 1,098,000 2,234,200
CFC 50% 242,100 557,900 654,000 1,454,000
CFC 80% 197,100 389,300 388,200 974,600
CFC 50%/Halon Freeze 205,700 303,000 103,500 612,200
CFC 50%/Halon Freeze/ 196,400 277,200 81,200 554,800
U.S. 80%
U.S. Only/CFC 50%/ 575,700 3,477,900 9,013,000 13,066,600
Halon Freeze
These estimates differ from those contained In EPA's Draft
Risk Assessment because (1) slightly higher CFC emission
estimates are used; (2) the U.S. population is simulated to age
through 2080 (rather than holding its age structure constant from the
year 2000 on); and (3) estimates of trace gas concentrations are
revised.
-------
7-23
EXHIBIT 7-20
ADDITIONAL CATARACT CASES IN U.S. BY 2165
Total
Scenarios Cases
No Controls 23,374,600
Freeze 3,460,600
CFC 20% 2,678,900
CFC 50% 1,679,800
CFC 80% 1,072,400
CFC 50%/Halon Freeze 612,100
CFC 50%/Halon Freeze/U.S. 80% 554,800
U.S. Only/CFC 50%/Halon Freeze 18,001,200
-------
7-24
to respond adequately to antigens. This UV radiation-Induced immunosuppression
can reduce the host's ability to fight the development of tumors. It can also
affect the host's ability to respond to infectious diseases that enter through
the skin, possibly including such diseases as the parasite Leishmania sp. and
the Herpes simplex virus.
Although there are no experimental data that have specifically documented
the precise nature of UV radiation-induced immunosuppression, based on research
to date a number of hypotheses seem reasonable: (1) All populations, black and
white, may be at risk; (2) Individuals who are already immunosuppressed, such as
transplant patients, could be at greater risk than the rest of the population
due to additive effects; and (3) In developing countries, particularly those
exposed to higher UV-B levels near the Equator, parasitic infections of the skir
could be exacerbated.
Insufficient information exists to estimate the effects of UV radiation on
human immune systems. Although the extent of immunosuppression can not be
quantified, some evidence suggests that immunosuppression could be induced with
much lower doses of UV radiation than those required for carcinogenesis. This
may mean that exposure to low doses of UV radiation, even doses that do not
cause a sunburn, may decrease the ability of the human immune system to provide
an effective defense against neoplastic skin cells or skin infections.
7.2 ENVIRONMENTAL IMPACTS
This section of the chapter discusses the environmental (non-health) impacts
that could occur due to stratospheric ozone depletion. These impacts include:
o Risks to marine organisms;
o Risks to crops;
o Increased concentrations of tropospheric (ground-based)
ozone;
o Degradation of polymers; and
o Impacts due to «ea level rise.
7.2.1 Risks to Marine Organisms
The increased levels of ultraviolet radiation that result from stratospheric
ozone depletion pose a hazard to various marine organisms. Higher UV radiation
levels have been shown to cause decreases in fecundity, growth, survival, and
other functions of a variety of marine organisms, including fish larvae and
juveniles, shrimp larvae, crab larvae, copepods, and plants essential to the
aquatic food chain (EPA, 1987). These impacts occur mainly in organisms located
near the surface of the water since they tend to be most directly exposed to the
increased UV radiation levels. Although it has also been hypothesized that
these effects would likely cause a change in species composition as organisms
more resistant to the increase in UV radiation predominated, it is not known
what the long-term effects of these impacts on the ecosystem might be.
-------
7-25
The extent to which increased UV radiation levels may affect aquatic
organisms depends on several variables, including the degree to which UV
radiation penetrates the water, the amount of vertical mixing that occurs, and
the seasonal abundance and vertical distributions of the organisms. UV-B
penetration has been measured to depths of more than twenty feet in clear waters
and more than five feet in unclear water. However, the scientific evidence
currently available is generally insufficient to allow estimates to be made of
the amount of damage to expect in the natural environment for a given increase
in UV radiation.
In one study by Hunter, Kaupp, and Taylor (1982), analyses were conducted on
anchovy larvae to estimate the potential effects of increased UV radiation on
anchovy populations. The anchovy losses were estimated for three different
models of mixing within the surface waters of the ocean--static, mixing within
the top ten meters, and mixing within the top fifteen meters. The results of
this study are summarized in Exhibit 7-21.
To develop a rough estimate of the effects on aquatic organisms likely to
result due to increases in UV radiation, the dose-response relationship
estimated by Hunter, et. al. (1982) for anchovy larvae with vertical mixing
occurring within the top ten meters has been assumed to apply to the adult
anchovy population in the natural environment. This dose-response relationship
is used as a measure of potential impacts on all major commercial aquatic
organisms in the natural environment because it is the most reliable
quantitative information available on the magnitude of these impacts.
Increased UV radiation levels were assumed to affect harvest levels for the
major commercial fish species, including fin fish and shell fish. Average
harvest levels for the 1981-1985 period were used to represent average annual
harvest levels through 2075 for these species. Then, the physical impacts on
these commercial fishes were estimated by using the dose-response relationship
for anchovy larvae indicated in Exhibit 7-21 for mixing within the top ten
meters of the ocean to represent the decrease in harvest levels that would occur
due to increased UV radiation. (This relationship, of course, is very uncertain
and in reality, ozone depletion could result in greater or smaller losses.)
These physical effects are summarized in Exhibit 7-22 for the baseline and
alternative scenario*. For each scenario, the estimated increase in UV
radiation by 2075 is shown, along with the decline in fish populations estimated
to occur due to the indicated UV radiation increase.
7.2.2 Risks to Crops
The increases in ultraviolet radiation that would occur due to stratospheric
ozone depletion have the potential to affect agricultural crops and other
terrestrial ecosystems. For example, in a number of studies on a variety of
different crops (and different varieties of the same crop), UV-B radiation has
been shown to adversely affect crop yield and quality. In most instances, the
available information does not indicate the extent to which crops may be
affected; that is, the studies that have been conducted provide some qualitative
indication of the adverse impacts that could occur, but insufficient data are
available to develop crop-specific quantitative dose-response relationships
required to estimate the amount of damage that may occur.
-------
7-26
EXHIBIT 7-21
Effect of Increased Levels of Solar UV-B Radiation on the
Predicted Loss of Larval Northern Anchovy from Annual Populations,
Considering the Dose/Dose-Rate Threshold and Three Vertical
Mixing Models
30
Larval Northern Anchovy
10-m Mixed layer
15-m Mixed layer
10 20 30 40 50 60 70
INCREASED UV-B RADIATION (%)
Based on data of Hunter, Kaupp, and Taylor 1982.
-------
7-27
EXHIBIT 7-22
DECLINE IS COMMERCIAL FISH HARVESTS
DUE TO INCREASED UV RADIATION
UV Radiation
Scenario Increase by 2075 (%)
No Controls
Freeze
CFG 20%
CFC 50%
CFG 80%
CFC 50%/Halon Freeze
CFC 50%/Halon Freeze/U.S. 80%
U.S. Only/CFC 50%/Halon Freeze
123.0"
13.5-
10.5
6.9
7.8
2.9
2.6
55.0"
Harvest Decrease
by 2075 (%) a/
>25.0
1.7
0.2
0.0
0.0
0.0
0.0
24.0
a/ These estimates are very uncertain; actual changes could be
significantly higher or lover.
by UV radiation increases above 60 percent were assumed hot to have any
additional effects on harvest levels; this assumption was made to avoid
extrapolating beyond the range analyzed by Hunter, Kaupp, and Taylor
(1982).
Source: Based on Hunter, Kaupp, and Taylor (1982).
-------
7-28
To develop estimates of the amount of damage that may occur, studies by
Teramura on soybean cultivars, which are the most extensively studied crop, have
been used. Teramura's studies have been conducted for a period of several
years under field conditions that allow for determination of a dose-response
relationship between UV-B radiation and soybean yield. Teramura has analyzed.
the potential impacts for stratospheric ozone depletion estimates of up to 25
percent. Although there has been some variation in results, the general
relationship considering a sample of tolerant and sensitive cultivars has been a
0.3 percent decline in soybean yield for each one percent decrease in
stratospheric ozone. Since Teramura has only examined the possible relationship
for ozone depletion estimates up to 25 percent, the maximum decline in soybean
yield is limited to 7.5 percent to avoid extrapolating outside the range of the
analyses.
To determine the magnitude of UV impacts on agricultural crops, average
production levels from 1980 to 1983 for the major agricultural crops in the U.S.
were used to represent annual crop production levels through 2075. Then, using
the dose-response relationship developed from Teramura's work for soybeans as a
reasonable estimate for UV impacts on the major agricultural crops, declines in
crop production levels were estimated from the average 1980-83 production
levels. The estimates of the crop production declines are presented for the
baseline and alternative scenarios in Exhibit 7-23. The amount of the yield
decrease is shown for 2075. along with the amount of stratospheric ozone
depletion estimated by that date. Clearly, this approach to damage estimation
is highly extrapolative; actual damages could be significantly greater or lower.
7.2.3 Impacts Due To Tropospheric Ozone
Tropospheric (ground-based) ozone, commonly known as smog, is an air
pollutant formed near the earth's surface as a result of photochemical reactions
involving ultraviolet radiation, hydrocarbons, nitrogen oxides, oxygen, and
sunlight. Because ultraviolet radiation is one of the factors that can affect
the development of tropospheric ozone, depletion of stratospheric ozone, which
leads to increased UV radiation, can cause increases in the amount of
tropospheric ozone.
The extent to which increased UV radiation levels may increase the
concentration .of tropospheric ozone has been examined by Whitten (1986). In
this analysis, the potential relationship between UV radiation and smog levels
were estimated from studies conducted in three cities--Nashville, Tennessee;
Philadelphia, Pennsylvania; and Los Angeles, California. These three cities
were chosen to represent the variability in atmospheric conditions that could be
encountered in the U.S.--Nashville is nearly in compliance with the 0.12 ppm
Federal ozone standard; Philadelphia is moderately out of compliance (a 30-50
percent reduction in organic precursors would be required to come into
compliance); and Los Angeles has one of the most severe smog problems in the
U.S. The increase in tropospheric ozone for each one percent increase in UV
1 For example, see Teramura, A.H. and N.S. Murali, "Intraspecific
Differences in Growth and Yield of Soybean Exposed to Ultraviolet-B Radiation
Under Greenhouse and Field Conditions," in Env. EXP. Bot.. in press. 1986.
-------
7-29
EXHIBIT 7-23
DECLINE IN U.S. AGRICULTURAL CROP PRODUCTION
LEVELS DUE TO OZONE DEPLETION
Scenario
No Controls
Freeze
CFC 20%
CFC 50%
CFC 80%
CFC 50%/Halon
CFC 50%/Halon
U.S. Only/CFC
Ozone Depletion
by 2075 (%)
39.9
6.2
5.0
3.3
2.2
Freeze 1 . 3
Freeze/U.S. 80% 1.2
50%/Halon Freeze 20.5
Decline in Production
Levels by 2075 (%) a/
>7.50
1.9
1.5
1.0
0.7
0.4
0.4
6.1
a/ These estimates are highly uncertain; actual impacts could be
significantly higher or lower.
Source: Based on Teramura (1987).
-------
7-30
radiation is based on the average results from these three areas. Exhibit 7-24
indicates the percentage change in tropospheric ozone levels by 2075 for the
baseline and alternative scenarios, along with the estimated increase in UV
radiation.
At high concentrations, tropospheric ozone has been shown to adversely
affect human health, agricultural crops, forests, and materials:
o The human health impacts include alterations in pulmonary
function, respiratory and non-respiratory symptoms (such
as chest tightness, throat dryness, difficulty in deep
breathing, coughing, wheezing, etc.), effects on work
performance, aggravation of preexisting respiratory
diseases, morphological effects (such as lung damage),
alterations in the host defense system (e.g., increased
susceptibility to respiratory infection), and
extrapulmonary effects (such as effects on the liver,
central nervous system, blood enzymes, etc.).
o Agricultural crops and forests experience reduced growth
and declines in yield.
o Materials degrade more quickly, particularly elastomers,
textile fibers and dyes, and certain types of paints.
In this chapter, however, only the potential impacts on agricultural crops
are quantified since insufficient information exists to quantify the impacts on
human health, forests, and materials. That is, the available evidence on the
last three areas indicates that damage does occur, but the state of the research
is too limited to define specific dose-response relationships for different
levels of tropospheric ozone. Nevertheless, these impacts are not
inconsequential. In fact, the primary National Ambient Air Quality Standard
(NAAQS) for ozone is determined based on human health considerations; the
importance of these unquantifiable impacts should not be underestimated.
The impacts on agricultural production due to tropospheric ozone increases
were quantified by Rows and Adams (1987) vising the National Crop Loss Assessment
Network (NCLAN) . NCLAN was developed to assist EPA in the development of
alternative NAAQS for ozone and is designed to evaluate the impacts that occur
due to changes in tropospheric ozone.
To measure the magnitude of potential changes in agricultural output, Rowe
and Adams (1987) used average 1980-83 data on the quantity of agricultural crop
production to establish a baseline from which all changes were measured.
The type of information available from one of these years -- 1980 --is
summarized in Exhibit 7-25. Declines in agricultural output were then estimated
on an annual basis; these declines are indicated by state for the major
^ The dose-response relationship between UV radiation and tropospheric
ozone levels may be linear or non-linear depending on the interplay between
several factors, including local conditions, temperature, etc.
-------
7-31
EXHIBIT 7-24
INCREASES IN TROPOSPHERIC OZONE
DUE TO STRATOSPHERIC OZONE DEPLETION
Scenario
No Controls
Freeze
CFC 20%
CFC 50%
CFC 80%
CFC 50%/Halon Freeze
CFC 50%/Halon Freeze/U.S. 80%
U.S. Only/CFC 50%/Halon Freeze
Increase in
UV Radiation
by 2075 (%)
125.0
.- 13.5
10.5
6.9
4.8
2.9
2.6
55.1
Increase in
Tropospheric Ozone
by 2075 (%) a/
>30.9
5.2
4.1
2.7
1.9
1.1
1.0
17.7
A/ These estimates are highly uncertain; actual impacts could be
significantly higher or lover.
Source: Based on Whitten (1986).
-------
7-32
EXHIBIT 7-25
1980 CROP PRODUCTION QUANTITIES USED IN NCLAN a/
Commodity
Cotton
Corn
Soybeans
Wheat
Sorghum
Rice
Barley
Oats
Silage
Hay
Soybean Meal
Soybean Oil
1980 Prices
($/unit) by
366.72
3.25
c 7.74
3.71
3.00
12.79
2.91
1.93
19.46
70.90
0.11
0.24
1980 Quantities
(million units)
17.45
7,339.85
1,778.07
2,633.94
700.88
164.78
335.50
472.91
91.24
141.58
46,180.80
10,755.81
I/ Average values from 1980-1983 were actually
used in this analysis. Documentation for
these average values was not publicly
available in time for this study, so only
1980 data is shown here.
by Units are as follows: 500 pound bales for
cotton; bushels for corn, soybeans, wheat,
barley, oats, and surghum; hundred weight for
rice; tons for hay and silage; pounds for
soybean meal and oil.
Source: Adams (1984).
-------
7-33
agricultural crops in Exhibit 7-26 for a tropospheric ozone increase of 25
percent. The three o.ities on which these estimates are based -- Nashville,
Philadelphia, and Los Angeles --do not constitute a representative sample for
ground-based ozone levels throughout the U.S.; therefore, actual changes could
vary significantly from these estimates.
7.2.4 Degradation of Polyners
Many polymers have a tendency to absorb UV radiation due to various
impurities that are present in the polymers. The UV radiation tends to degrade
polymers by affecting their mechanical and optical properties, e.g., reductions
in tensile strength and impact strength, chalking, cracking, loss of
transparency or color, yellowing, etc. Many of these UV radiation impacts
currently affect polymeric materials, causing manufacturers to take steps, such
as the addition of light stabilizers, to reduce the amount of damage that can
occur.
The extent to which polymers would require additional protection due to
increases in UV radiation depends on the degree of outdoor exposure the polymer
receives. However, there is insufficient information on the wide variety of
applications for polymers to determine precisely which polymers would require
additional protection from UV radiation. In a study by Andrady (1986), major
applications where sunlight exposure was expected included polyvinyl chloride
(PVC), polyester, polycarbonate, and acrylics, plus several other applications
where exposure may occur on an intermittent basia.
To determine the impact of increased UV radiation on polymers, it has been
assumed that polymer manufacturers would increase the amount of light stabilizer
in the polymer to counteract the effects of the higher UV radiation levels.
This alteration in the manufacturing process is assumed to be sufficient to
prevent any additional UV-related impacts. (In this analysis, any impacts to
polymeric materials currently in use have not been considered; these impacts to
in-place products could be substantial.) The amount of increased stabilizer
that would be required is a function of the increase in UV radiation due to
stratospheric ozone depletion. The relationship between stratospheric ozone
depletion and the need for increases in light stabilizers was estimated by
Andrady (1986). This relationship is summarized in Exhibit 7-27.
7.2.5 Impacts Due To S*a Level Rise
Increased concentrations of CFCs are one of the factors expected to
contribute to global warming, of which one impact is the rise in the level of
the seas. As global warming occurs, sea level rise is likely due to three basic
mechanisms: the warming and resulting expansion of the upper layers of the
ocean, the melting of alpine glaciers, and the melting and disintegration of
polar ice sheets in Greenland and Antarctica. Increases in the level of the sea
will flood coastal wetlands and lowlands, accelerate coastal erosion, exacerbate
coastal flooding, and increase the salinity of estuaries and aquifers.
Using a model originally developed by Lacis (1981) that evaluates the
expected change in average global air temperature due to trace gas
concentrations, sensitivity to greenhouse-gas forcings, and heat diffusion into
-------
EXHIBIT 7-26
DECLINES IN CROP YIELD ASSUMING A
25 PERCENT INCREASE IN TROPOSPHERIC OZONE
STATf
vnm unra CMDI
COM SOVKM3 COTTOJ UHEAT MAT SORCMJI 8AIL£Y
.990
ARIZONA .977
CALIFORNIA 1974
COLORADO .978
CONNECTICUT .944
DELAWARE
FLORIDA
GCORCIA
IDAHO
ILLINOIS
INDIANA
IOUA
KANSAS
KENTUCKY
LOUISIANA
HAINf
HAXTLANO
.994
.994
.940
.985
!984
.992
.985
.990
.989
.994
.984
flASSACHUSETTS .988
niCHlCAN .993
MINNESOTA .994
ftlSSISSim .984
RISSOURX .984
KNTANA .984
NEWASXA .989
NEVADA .978
NEU HAWSHUf .991
•EU JEKEV .982
NEU HEXICO .983
NEM row .9n
NORTH CAtaiNA .982
*CRTN DAKOTA .994
OHIO .988
OKLAHOM .988
OREGON .994
PENNSYLVANIA .994
moot ISLAND
SOUTN CAROINA
SOUTH DAKOTA
TENNESSEE
TEXAS
UTAH
.979
.990
.991
.987
.992
.975
.958 .947 ..000 .971 .993 .009
.000 .840 .974 .957 .947 .994
.992 .933 .000 .949 .979 .000
.000 .837 .973 .959 .997 .994
.000 .000 .975 .951 .997 .994
.000 .000 .000 .000 .000 .000
.954 .000 .000 .944 .000 .999
.974 .971 .000 .000 .000 .000
.942 .952 .000 -.973 .993 .009
.000 .000 .991 . .951 .000 .997
.955 .000 .000 .973 .992 .999
.945 .000 .000 .979 .990 .000
.941 .000 .000 .975 .994 .000
.993 .000 .000 .975 .992 .999
.997 .000 .000 .974 .993 .999
.944 .939 .000 .97) .992 .099
.000 .000 .000 .000 .000 .099
.991 .000 .000 .973 .000 .999
.000 .000 .000 .000 .000 .000
.»51 .000 .000 .975 .000 .999
.943 .000 .991 .975 .000 .999
.953 .939 .000 .944 .992 .099
.945 .949 .000 .947 .992 .009
.000 .000 .992 .951 .000 .999
.954 .000 .000 .970 .992 .999
.000 .844 .975 .957 .000 .994
.000 .000 .000 .000 .000 .009
.990 .000 .000 .974 .000 .997
.000 .890 .000 .942 .990 .997
.957 .009 .000 .974 .000 .999
.950 .924 .000 .942 .990 .994
.?64 .000 .992 .973 .000 .993
.943 .000 .000 .979 .000 .994
.954 .973 .000 .999 .992 .999
.000 .000 .993 .991 .000 .999
.939 .000 .000 .944 .990 .999
.000 .000 .000 .000 .000 .000
.945 .919 .000 .954 .989 .994
.954 .000 .989 .973 .994 .999
.950 .939 .000 .944 .991 .998
.944 .979 .000 .979 .993 .999
.000 .000 .972 .940 .000 .995
VENHMT
VIWINIA
UASMINCTON
UEST VIRGINIA
UISCCNSIN
UYONINC
.988
.972
.999
.987
.984
.983
.000
.924
.000
.000
.943
.000
.000
.884
.000
.000
.000
.009
.000
.000
.994
.000
.991
.979
.000
.953
.994
.949
.970
.951
.000
.995
.000
.000
.000
.000
.000
.994
.999
.998
.999
.M7
Source: Adams (1984)
-------
7-35
EXHIBIT 7-27
INCREASE IN STABILIZER.
FOR RANGES OF OZONE DEPLETION
Ozone Depletion
(percent)
0-5
5-10
10-20
Stabilizer Increase (%)
Low
1.0
1.0
3.0
Middle
3.0
5.0
20.5
High
5.0
9.0
38.0
Source: Derived from Horst (1986), p. 6-10.
-------
7-36
the oceans, the change in global sea level was estimated. This change was
evaluated for the effects of thermal expansion, alpine meltwater, and Greenland
meltwater. The impact of these factors on sea level rise are provided in
Exhibit 7-28 for the baseline and alternative control level scenarios. Note
that the sea level rise estimates shown in Exhibit 7-28 do not evaluate the
potential changes due to Antarctic ice discharge, Antarctic meltwater, or
Greenland ice discharge. Antarctic ice discharge is not sensitive to rates of
change of temperatures in the model used, and Antarctic meltwater and Greenland
ice discharge were not considered.
-------
7-37
EXHIBIT 7-28
CHANGES IN SEA LEVEL RISE
DUE TO STRATOSPHERIC OZONE DEPLETION
Decrease In
Stratospheric Ozone Sea Level Rise
by 2075 by 2075
Scenario (%J (cm)
No Controls
Freeze
CFC 20%
CFC 50%
CFC 80%
CFC 50%/Halon Freeze
CFC 50%/Halon Freeze/U.S. 80%
U.S. Only/CFC 50%/Halon Freeze
39.9
6.2
5.0
3.2
2.2
1.3
1.2
20.4
97.8
89.4
88.4
86.8
85.7
86.7
86.5
94.7
Source: Based on Lacis (1981).
-------
7-38
REFERENCES
Andrady, Anthony, Analysis of Technical Issues Related to the Effect of UV-B
on Polymers. Res'earch Triangle Institute, Research Triangle Park, North
Carolina, March 1986.
Bureau of the Census, "Projections of the Population of the United States, by
Age, Sex, and Race: 1983 to 2080," U.S. Department of Commerce, Washington,
D.C., Series D-25, No. 952.
Connell, P.S. (1986), "A Parameterized Numerical Fit to Total Column Ozone
Changes Calculated by the LLNL I-D Model of the Troposphere and
Stratosphere," Lawrence Livermore National Laboratory, Livermore,
California.
EPA 1986. Review of the National Ambient Air Quality Standards for Ozone.
Preliminary Assessment of Scientific and Technical Information, Office of
Air Quality Planning and Standards Staff Paper. March 1986.
Killer, R., R. Sperduto and F. Ederer (1981), "Epidemiologic Association with
Cataract in the 1971-1972 National Health and Nutrition Examination Survey,"
American Journal of Epidemiology. Vol. 118, No. 2, pp. 239-298.
Hoffman, J.S., D. Keyer, and J.G. Titus (1983), Projecting Future Sea Level
Rise. Methodology. Estimates to the Year 2100. and Research Needs. U.S.
EPA, Washington, D.C.
Hoffman, J.S., J.B. Wells, and J.G. Titus (1986), "Future Global Warming and
Sea Level Rise," U.S. EPA and the Bruce Company. Washington, D.C.
Hunter, J.R., Kaupp, S.E., Taylor, J.H. (1982). "Assessment of effects of
radiation on marine fish larvae." In: Calkins, J. (e.) The Role of Solar
Ultraviolet Radiation in Marine Ecosystems, pp 459-497, Plenum, New York.
Isaksen, I.S.A. (1986), "Ozone Perturbations Studies in a Two Dimensional
Model with Temperature Feedbacks in the Stratosphere Included," presented at
UNEP Workshop on the Control of Chlorofluorocarbons, Leesburg, Virginia,
September 1986.
Kelen, T., Polvmer Degradation. Van Nostrand Reinhold Company, Inc., New York,
1983.
Lacis, A. et al. (1981), "Greenhouse Effect of Trace Gases," Geophysical
Research Letters. 8:1035-1038.
Leske, C.L. and R.D. Sperduto (1983), "The Epidemiology of Senile Cataracts:
A Review," American Journal of Epidemiology. Vol. 118, No. 2, pp. 152-165.
Mao, W. and T. Hu (1982), "An Epidemiologic Survey of Senile Cataract in
China," Chinese Medical Journal. 95(11):813-818.
-------
7-39
National Academy of Sciences (1983), Changing Climate. National Academy Press,
Washington, D.C.
Pitcher, H. (1986), "Melanoma Death Rates and Ultraviolet Radiation in the
United States 1950-1979," U.S. Environmental Protection Agency, Washington,
D.C.
Rowe, R.D. and Adams, R. M., (1987). Analysis of Economic Impacts of Lover
Crop Yields Due to Stratospheric Ozone Depletion, draft report for the U.S.
EPA, Washington, D.C., August 1987.
Scotto J., T. Fears, and Fraumeni (1981), "Incidence of Nonmelanoma Skin
Cancer in the United States," U.S. Department of Health and Human Services,
(NIH) 82-2433, Bethesda, Maryland.
Scotto, J. and T. Fears (in press), "The Association of Solar Ultraviolet
Radiation and Skin Melanoma Among Caucasians in the United States," Cancer
Investigation.
Serafino, G. and J. Frederick (1986), "Global Modeling of the Ultraviolet
Solar Flux Incident on the Biosphere," prepared for the U.S. Environmental
Protection Agency, Washington, D.C.
Setlov, R.B., "The Wavelengths in Sunlight Effective in Producing Skin Cancer:
A Theoretical Analysis," Proceedings of the National Academy of Science.
71(9):3363-3366, 1974.
Taylor, H.R. (1980), "The Environment and the Lens." Brit. J. Ophthal. 64:
303-310.
Teramura, A.H., (1983). Effects of ultraviolet-B radiation on the growth and
yield of crop plants. Plant Physiology. 58:415-427.
Teramura, A.H. and N.S. Mural! (1986). Introspective differences in growth
and yield of soybean exposed to ultraviolet-B radiation under greenhouse and
field conditions. Env. Exp. Bot. In press 1986.
Teramura, A.H., "Current Understanding of the Effects of Increased Levels of
Solar Ultra-violet radiation to Crops and Natural Plant Ecosystems,"
Testimony before U.S. Senate, May 1987.
Thomas, R.H., (1985), "Response of the Polar Ice Sheets to Climate Warning,"
Glaciers. Ice Sheets, and Sea Level: Effect of a C02-Induced Climatic
Change. Seattle, Washington, September 13-15, 1984, U.S. Department of
Energy, DOE/EV/60235-1, Washington, D.C.
U.S. Environmental Protection Agency, An Assessment of the Risks of Stra-
tospheric Modification. Submitted to Science Advisory Board, October 1986.
-------
7-40
Whitten, G.Z. and M. Gery (1986). "Effects of Increased UV Radiation on Urban
Ozone," Presented at EPA Workshop on Global Atmospheric Change and EPA
Planning. Edited by Jeffries, H. EPA Report 600/9-8 6016, July 1986.
The World Almanac and Book of Facts 1987. Hoffman, M.S. (ed.), New York, New
York, 1987.
-------
CHAPTER 8
VALUING THE ng.AT.TH AND ENVIRONMENTAL EFFECTS
Chapter 7 presented estimates on the physical magnitude of the health and
environmental effects that could result due to stratospheric ozone depletion.
In this chapter these health and environmental effects are valued to estimate
the economic impact associated with these effects. This valuation is designed
to represent the benefits to society for avoiding these effects. Estimates of
the value of each benefit are provided for the baseline scenario (as described
in Chapter 4) and alternative control level scenarios (as described in Chapter
5).
This chapter is only intended to summarize the results of the valuation of
the benefits. For greater detail on the methods used to value the health
effects see Appendix E; for the environmental effects, see Appendix F.
8.1 VALUE OF PREVENT JUG HRAT.TH IMPACTS
This section of the chapter discusses the value of avoiding the health
impacts due to stratospheric ozone depletion. These impacts include:
o Higher incidence and mortality of nonmelanoma skin cancer;
o Higher incidence and mortality of melanoma skin cancer;
and
o Higher incidence of cataracts.
There are other health impacts associated with stratospheric ozone depletion
that are not valued here because the extent of the impacts are unknown. These
impacts include possible harmful effects on the immune system, including less
resistance to infections, a higher incidence of skin damage from actinic
keratosis due to UV radiation effects, and effects due to increased levels of
tropospheric ozone (primarily impacts on the pulmonary system) .
8.1.1 HouMelanoBa Skin
Increased UV radiation from stratospheric ozone depletion can lead to a
higher incidence of nonmelanoma skin cancer, specifically basal and squamous
cell carcinoma. An increase in the number of nonmelanoma skin cancer cases is
also expected to cause an increase in the number of deaths from this type of
cancer.
Although there is a substantial amount of information evaluating the
magnitude of the physical effects from nonmelanoma, there are no publicly
available data sources to indicate the magnitude of the costs incurred by
society for nonmelanoma. To determine the magnitude of these costs, a Skin
Cancer Focus Group was organized to discuss the costs incurred by nonmelanoma
patients. The Skin Cancer Focus Group was comprised of skin cancer specialists
who were able to address the different types of treatment that various skin
cancer patients would receive, including medical costs for treatment,
recommended follow-up visits/treatments for the patient, the amount of time lost
-------
8-2
from work, and recomnu nded preventive activities for the patient outside of the
doctor's office or hospital. The objective of this procedure was to identify
the primary components incurred by the individual and/or society for the
"average" skin cancer'case. A more in-depth discussion of the Skin Cancer Focus
Group and the results obtained from it can be found in Appendix E. As discussed
in the Appendix, these estimates are preliminary and subject to revision as
further study is conducted.
The primary reasons that costs vary among different types of nonmelanoma
cases are the size of the nonmelanoma and the likelihood of a recurrence once
the nonmelanoma is treated. Based on the results from the Skin Cancer Focus
Group, the average costs across all typos of nonmelanoma are estimated to be
about $4000 for a basal cell carcinoma case and $7000 for a case of squamous
cell carcinoma (it should be emphasized that the averages include a small number
of serious cases and a number of less serious cases). Using these values to
represent the average costs to society for nonmelanoma, the costs incurred for
the additional nonmelanoma cases as a result of ozone depletion for all people
born before 2075 are summarized in Exhibit 8-1. These costs represent the
benefit to society for avoiding the increase in the number of nonmelanoma cases
in people born before 2075; these costs are shown for a discount rate of two
percent for the baseline and alternative scenarios. Exhibit 8-2 summarizes the
cost estimates for all additional nonmelanoma cases that occur by 2165
(including people born from 2075-2165).
The increase in the number of nonmelanoma cases will also lead to an
increase in the number of deaths from nonmelanoma. The value of each human life
is assumed to be three million dollars and grow in value at a rate equal to the
annual rate of growth in GNP per capita (see Appendix G for an in-depth
discussion on the value of life). The total cost to society for these
additional lives lost is determined by multiplying the value of life, i.e.,
three million dollars, by the number of lives lost. Exhibit 8-3 summarizes
these estimates for people born before 2075 for the baseline and alternative
scenarios using a discount rate of two percent. The number of additional lives
lost to nonmelanoma is also shown for people born before 2075. Exhibit 8-4
summarizes these estimates for all lives lost to nonmelanoma by 2165, including
people born from 2075-2165.
8.1.2 Melanoma Skin Cancer
Increased UV radiation from stratospheric ozone depletion can also lead to a
higher incidence of melanoma skin cancer, specifically cutaneous malignant
melanoma. Any increase in the number of melanoma skin cancer cases is also
expected to CAUSA an increase in the number of deaths from this type of cancer.
Like nonmelanoma, although there is a substantial amount of information
evaluating the magnitude of the physical effects from melanoma, there are no
publicly-available data sources to indicate the magnitude of the costs incurred
by society for melanoma. The Skin Cancer Focus Group discussed above was also
used to determine the magnitude of these costs, including medical costs for
treatment, recommended follow-up visits/treatments for the patient, the amount
of time lost from work, and recommended preventive activities for the patient
outside of the doctor's office or hospital. The objective of this procedure was
-------
8-3
EXHIBIT 8-1
VALUE OF ADDITIONAL CASES AVOIDED OF NONMELANOMA IN U.S.
FOR PEOPLE BORN BEFORE 2075 a/
(billions of 1985 dollars)
Scenario
No Controls
CFC Freeze
(Case 2)
CFC 20%
(Case 3)
CFC 50%
(Case 4)
CFC 80%
(Case 5)
CFC 50%/
Total
Additional
Cases
by 2165
153,687,100
15,474,900
12,078,600
7,897,600
5,386,800
3,684,900
Total
Cost
(10* $)
63.60
9.43
7.61
5.40
4.04
3.50
Decrease
No Controls
Additional
Cases
Avoided
-
138,212,200
141,608,500
145,789,500
148,300,300
150,002,200
From
Scenario
Value
of Avoided
Cases
(10 $)
-
54.17
55.99
58.20
59.56
60.10
Halon Freeze
(Case 6)
CFC 50%/
Halon Freeze/
U.S. 80%
(Case 7)'
U.S. Only/CFC
50%/Halon Freeze
(Case 8)
3,336,000 3.28
90,998,500 36.50
150,351,100 60.32
87,662,500 27.10
a/ Assumes a 2 percent discount rate.
Source: Value per case avoided based on results from the Skin Cancer
Focus Group, July 23, 1987 (see Appendix E).
-------
8-4
EIHIfilT 8-2
VALUE OF ADDITIONAL CASES AVOIDED FROM
NONMELANOMA IN U.S. THAI OCCUR BY 2165'
Decrease From
No Controls Scenario
Scenario
No Controls
CFC Freeze
(Case 2)
CFC 20%
(Case 3)
CFC 50%
(Case 4)
CFC 80%
(Case 5)
CFC 50%/
Total
Additional
Cases
by 2165
224,978,900
19,865,000
15,250,000
9,578,200
6,227,700
3,498,800
Total
Cost
(109 $)
77.30
10.30
8.23
•
5.73
4.21
3.47
Additional
Cases
Avoided
-
205,113,900
209,728,900
215,400,700
218,751,200
221,480,100
Value of
Avoided
Cases
(109 $)
-
67.00
69.07
71.57
73.09
73.83
Halon Freeze
(Case 6)
CFC 50%/
Halon Freeze/
U.S. 80%
(Case 7)
U.S. Only/CFC
50%/Halon Freeze
(Case 8)
3,065,500
3.24
221,913,400 74.06
149,913,000 47.60
75,065,900 29.70
a/ Assumes a 2 percent discount rate.
Source: Value per case avoided based on results from the Skin Cancer
Focus Group, July 23, 1987 (see Appendix E).
-------
8-5
EXHIBIT 8-3
VALUE OF ADDITIONAL DEATHS AVOIDED FROM NO!
IN U.S. FOR PEOPLE BORN BEFORE 2075
Scenario
No Controls
CFG Freeze
(Case 2)
CFC 20%
(Case 3)
CFC 50%
(Case 4)
CFC 80%
(Case 5)
CFC 50%/
Halon Freeze
(Case 6)
CFC 50%/
Halon Freeze/
U.S. 80%
(Case 7)
U.S. Only/CFC
Total
Additional
Deaths
by 2165
3,020,500
251,500
194,000
126,200
85,600
57,700
52,400
1,713,200
Total
Cost
(109 $)
6,110
534
416
272
187
132
120
3,440
Decrease
No Controls
Additional
Deaths
Avoided
-
2,769,000
2,825,600
2,894,300
2,934,900
2,962,800
2,968,100
1,912,000
From
Scenario
Value
of Avoided
Deaths
(109 $)
-
5,576
5,694
5,838
5,923
5,978
5,990
2,670
50%/Halon Freeze
(Case 8)
•
a/ Assumes a 2 percent discount rate and a value of life of $3 million that
increases at the rate of increase in per capita income, i.e., 1.7 percent
per year.
-------
8-6
EXHIBIT 8-4
VALUE OF ADDITIONAL DEATHS AVOIDED FROM NONMELANOMA
IN U.S. THAT OCCUR BY 2165
&/
Decrease From
Scenario
No Controls
CFC Freeze
(Case 2)
CFC 20%
(Case 3)
CFC 50%
(Case 4)
CFC 80%
(Case 5)
CFC 50%/
Halon Freeze
(Case 6)
CFC 50%/
Halon Freeze/
U.S. 80%
(Case 7)
U.S. Only/CFC
50%/Halon Freeze
(Case 8)
Total
Additional Total
Deaths Cost
by 2165 (109 $)
4, 380, 400 c 8,600
316,300 653
241,400 501
150,600 317
97,600 209
55,200 127
48,300 113
2,804,300 5,440
No Controls
Additional
Deaths
Avoided
-
4,064,100
4,139,000
4,229,800
4,282,800
4,325,200
4,332,100
1,576,100
Scenario
Value
of Avoided
Deaths
(109 $)
-
7,947
8,099
8,283
8,391
8,473
8,487
3,160
a/ Assumes a 2 percent discount rate and a value of life of $3 million
that increases at the rate of increase in per capita income, i.e.,
1.7 percent per year.
-------
8-7
to identify the primary components incurred by the individual and/or society for
the "average" skin cancer case. A more in-depth discussion of the Skin Cancer
Focus Group and the results obtained from it can be found in Appendix E.
Based on the information obtained from the Skin Cancer Focus Group, the cost
of different melanoma cases were categorized according to the most likely
location that the patient would receive treatment -- the doctor's office, on an
outpatient basis, or in the hospital. Given these different types of cases, the
average cost for a case of cutaneous malignant melanoma is assumed to be
$15,000. Using this value to represent the average cost to society for
melanoma, the costs incurred for the additional melanoma cases as a result of
ozone depletion for people born before 2075 are summarized in Exhibit 8-5.
These costs represent the benefit to society for avoiding the increase in the
number of melanoma cases in people born before 2075; these costs are shown for a
discount rate of two percent for the baseline and alternative scenarios. The
costs to society for all cases of melanoma that occur by 2165, including people
born from 2075-2165, are shown in Exhibit 8-6.
The increase in the number of melanoma cases will also lead to an increase
in the number of deaths from this illness. The value of each human life is
assumed to be three million dollars initially, and grow in value at a rate equal
to the annual rate of growth in GNF per capita (see Appendix G for an in-depth
discussion on the value of life). The total cost to society for these
additional lives lost is determined by multiplying the value of life, i.e.,
three million dollars, by the number of lives lost. Exhibit 8-7 summarizes
these estimates for people born before 2075 for the baseline and alternative
scenarios using a discount rate of two percent. The number of additional lives
lost to melanoma among people born before 2075 is also shown. The costs to
society for all lives lost to melanoma by 2165, including people born from
2075-2165, are shown in Exhibit 8-8.
8.1.3 Cataracts
Increases in UV-B radiation due to stratospheric ozone depletion may
increase the incidence of cataracts. An increase in the incidence rate would
cause some individuals to be diagnosed with cataracts who would otherwise not
have developed them and some individuals who would have incurred them later in
life to develop then earlier in life.
The value of preventing an increase in the number of cataract cases has been
developed froa an analysis by Rowe, Neithercut, and Schulze (1987). In their
study Rowe, et. al. determined the social costs associated with cataract cases.
These costs were defined as society's willingness to pay to avoid the cataracts,
and included four major cost components -- increased medical costs, increased
work loss, increased costs for chores and caregiving, and other indirect social
and economic costs. Rowe, et. al. (1987) obtained their data from a review of
the literature, contacts with various health providers, and a survey of cataract
patients. Based on their analysis, the average value assumed for a cataract
case is $15,000.
Using an estimate of $15,000 per case, the value to society for avoiding the
increase in cataracts in people born before 2075 is shown in Exhibit 8-9 for the
baseline and alternative scenarios. The value under each scenario is shown for
-------
8-8
EXHIBIT 8-5
VALUE OF ADDITIONAL CASES AVOIDED OF MELANOMA
IH U.S. FOR PEOPLE BORN BEFORE 2075 a/
Scenario
No Controls
CFC Freeze
(Case 2)
CFC 20%
(Case 3)
CFC 50%
(Case 4)
CFC 80%
(Case 5)
CFC 50%/
Halon Freeze
(Case 6)
CFC 50%/
Halon Freeze/
U.S. 80%
(Case 7)
U.S. Only/CFC
Total
Additional
Cases
by 2165
782,100
125,900
100,000
67,300
47,100
34,300
31,400
507,300
Total
Cost
(109 $)
1.22 •
0.27
0.22
0.16
0.12
0.11
0.10
0.77
Decrease
No Controls
Additional
Cases
Avoided
-
656,200
682,100
714.800
•
735,000
747,800
750,700
274,800
From
Scenario
Value
of Avoided
Cases
(109 $)
-
0.95
1.00
1.06
1.10
1.11
1.12
0.45
50%/Halon Freeze
(Case 8)
a/ Assumes a 2 percent discount rate.
Source: Value per case avoided based on results from the Skin Cancer
Focus Group, July 23, 1987 (see Appendix E).
-------
8-9
EXHIBIT 8-6
VALDE OF ADDITIONAL GASES AVOIDED OF MELANOMA
IN U.S. THAT OCCUR BY 2165 a/
Scenario
No Controls
CFC Freeze
(Case 2)
CFC 20%
(Case 3)
CFC 50%
(Case 4)
CFC 80%
(Case 5)
CFC 50%/
Halon Freeze
(Case 6)
CFC 50%/
Halon Freeze/
U.S. 80%
(Case 7).
U.S. Only/CFC
Total
Additional
Cases
by 2165
1,330,500
184,800
143,300
90,800
59,000
31,600
27.400
933,900
Total
Cost
(109 $)
1.59
0.31
0.25
0.18
0.13
0.11
0.10
1.09
Decrease
No Controls
Additional
Cases
Avoided
-
1,145,700
1,187,200
1,239.700
1,271,500
1,298,900
1,303,100
396,600
From
Scenario
Value
of Avoided
Cases
(109 $)
-
1.28
1.34
1.41
1.46
1.48
1.49
0.50
50%/Halon Freeze
(Case 8)
a/ Assumes a 2 percent discount rate.
Source: Value per case avoided based on results from the Skin Cancer
Focus Group, July 23, 1987 (see Appendix E).
-------
8-10
EXHIBIT 8-7
VALUE OF ADDITIONAL DEATHS AVOIDED FROM MELANOMA
FOR PEOPLE BORN BEFORE 2075
SJ
Scenario
No Controls
CFC Freeze
(Case 2)
CFC 20%
(Case 3)
CFC 50%
(Case 4)
CFC 80%
(Case 5)
CFC 50%/
Halon Freeze
(Case 6)
CFC 50%/
Halon Freeze/
U.S. 80%
(Case 1\
U.S. Only/CFC
50%/Halon Freeze
(Case 8)
Total
Additional
Deaths
by 2165
186,900
39,200
23,900
16,100
11,200
7,900
7,200
124,600
Total
Cost
(109 $)
389
65
52
35
25
18
17
258
Decrease
No Controls
Additional
Deaths
Avoided
-
156,700
163,000
170,800
175,700
179,000
179.700
62,300
From
Scenario
Value
of Avoided
Deaths
(109 $)
-
324
337
354
364
371
372
131
Assumes a 2 percent discount rate and a value of life of $3 million
that increases at the rate of increase in per capita income, i.e., 1.7
percent per year.
-------
8-11
EXHIBIT 8-8
VALUE OF ADDITIONAL DEATHS AVOIDED FROM MELANOMA
THAT OCCUR BY 2165s'
Scenario
No Controls
CFC Freeze
(Case 2)
CFC 20%
(Case 3)
CFC 50%
(Case 4)
CFC 80%
(Case 5)
CFC 50%/
Halon Freeze
(Case 6)
CFC 50%/
Halon Freeze/
U.S. 80%
(Case 7)
U.S. Only/CFC
Total
Additional
Deaths
by 2165
285,400
41,300
32,100
20,500
13,400
7.400
6,400
212,300
Total
Cost
(109 $)
573."
86
67
43
29
17
15
420
Decrease
No Controls
Additional
Deaths
Avoided
•
244,100
253,300
264,900
272,000
278,000
279,000
73,100
From
Scenario
Value
of Avoided
Deaths
(109 $)
-
497
506
530
544
556
558
153
50%/Halon Freeze
(Case 8)
a/ Assumes a 2 percent discount rate and a value of life of $3 million
that increases at the rate of increase in per capita income, i.e., 1.7
percent per year.
-------
8-12
EXHIBIT 8-9
• «-^^^«*Arf ^*i AAV
Scenario
No Controls
CFC Freeze
(Case 2)
CFC 20%
(Case 3)
CFC 50%
(Case 4)
CFC 80%
(Case 5)
CFC 50%/
Halon Freeze
(Case 6)
CFC 50%/
Halon Freeze/
U.S. 80%
(Case 7)
U.S. Oniy/CFC
i r • ^ • iT~r r ~T~ AA*
IN U.S. IN
Total
Additional
Cases
by 2165
18,171,000
2,847,200
2,234,200
1,454,000
974,600
612,200
554,800
13,066,600
PEOPLE BORN
Total
Cost
(109 $)
2.78
0.58:
0.47
0.33
0.24
0.21
0.19
1.88
BEFORE 2075
Decrease
No Controls
Additional
Cases
Avoided
-
15,323,800
15,936,800
16,717,000
17,196,400
17,558,800
17,616,200
5,104,400
From
Scenario
Value
of Avoided
Cases
(109 $)
-
2.20
2.31
2.45
2.54
2.57
2.59
0.90
50%/Halon Freeze
(Case 8)
Source: Value per case avoided based on Rove, Neithercut, and Schulze
(1987).
-------
8-13
a discount rate of two percent; the number of additional cataract cases that
occur in people born before 2075 is also shown. The costs to society for all
additional cataracts that occur by 2165, including cataracts that occur in
people born from 2075-2165, are shown in Exhibit 8-10.
8.2 VALUE OF PREVENTING ENVIRONMENTAL IMPACTS
This section of the chapter discusses the value of avoiding the
environmental impacts due to stratospheric ozone depletion. These impacts
include:
o Risks to aquatic life;
o Risks to crops;
o Increased concentrations of tropospheric (ground-based)
ozone;
o Degradation of polymers; and
o Impacts due to sea level rise.
In this section the valuation procedures are discussed only briefly. For
further detail, see Appendix F.
8.2.1 Risks to Aquatic Life
The potential risks to aquatic life were expressed in Chapter 7 as a decline
in the commercial fish harvests. The commercial fish species evaluated were:
o Fin fish, including menhaden, Pacific trawlfish,
anchovies, halibut, sea herring, Jack mackerel, Atlantic
mackerel, sablefish, and tuna.
o Shell fish, including clams, crabs, American lobster,
spiny lobster, oysters, shrimp, scallops, and squid.
To determine the value associated with avoiding these declines, average
commercial harvest levels and market values for these fish species from
1981-1985 were estimated from data available from the U.S. Department of
Commerce. These average values were 5.9 million tons harvested with an average
annual value of $3.65 billion, and were used to represent annual harvest levels
and market values over the 1985-2075 period. For each scenario, the percentage
decline in the amount harvested each year was estimated from these averages and
valued based on the average market value, i.e., $3.65 billion, or about $620 per
ton. The net present values of these annual impacts were calculated using a
discount rate of two percent.
Sensitivity analyses were also conducted to capture some of the uncertainty
by assuming that the impacts would range from one-half to twice the level
estimated using the average annual values. The benefit estimates that result
from this procedure are summarized in Exhibit 8-11. Clearly, these estimates
are quite speculative and could be higher or lower by significant margins.
-------
8-14
EXHIBIT 8-10
VALUE OF AVOIDING AN INCREASE IN THE INCIDENCE OF
CATARACTS IN U.S. THROUGH 2165
Scenario
No Controls
CFG Freeze
(Case 2)
CFC 20%
(Case 3)
CFC 50%
(Case 4)
CFC 80%
(Case 5)
CFC 50%/
Halon Freeze
(Case 6)
CFC 50%/
Halon Freeze/
U.S. 80%
(Case 7)
U.S. Only/CFC
50%/Halon Freeze
(Case 8)
Total
Additional
Cases
by 2165
23,374,600
3,460,600
2,678,900
1,679,800
1,072,400
612 , 100
554,800
18,001,200
Total
Cost
(109 S)
3.05.
0.61
0.49
0.34
0.25
0.20
0.19
2.14
Decrease
No Controls
Additional
Cases
Avoided
-
19,914,000
20,695,700
21,694,800
*
22,302,200
22,762,500
22,819,800
5,373,400
From
Scenario
Value
of Avoided
Cases
(109 $)
-
2.44
2.56
2.71
2.80
2.85
2.86
0.91
Source: Value per case avoided based on Rowe, Neithercut, and Schulze
(1987).
-------
8-15
EXHIBIT 8-11
VALUATION OF IMPACTS ON FIN FISH
AND SHELL FISH DUE TO INCREASED RADIATION
(billions of 1985 dollars)
Harvest Decliiu
by 2075
Scenario (Percent)
No Controls
CFC Freeze
(Case 2)
CFC 20%
(Case 3)
CFC 50%
(Case 4)
CFC 80%
(Case 5)
CFC 50%/
>25.0
1.7
0.2
0.0
0.0
0.0
Decrease from No Controls --
Total Cost Value of Avoided Impacts
* (10 *$) (109 *)
0.5
2.75
0.067
<0.01
0.00
0.00
0.00
1.0 2.0 0.5
5.5 . 11.00
0.134 0.268 2.68
<0.01 <0.01 2.75
0.00 0.00 2.75
0.00 0.00 2.75
0.00 0.00 2.75
1.0 2.0
-
5.37 10.73
5.50 11.00
5.5 11.00
5.50 11.00
5.50 11.00
Halon Freeze
(Case 6)
CFC 50%/ 0.0 0.00 0.00 0.00 2.75 5.50 11.00
Halon Freeze/
U.S. 80%
(Case 7)
U.S. Only/CFC 24.0 1.56 3.11 6.22 1.20 2.39 4.78
50%/Halon Freeze
(Case 8)
Source: Based on Hunter, Kaupp, and Taylor (1982)
-------
8-16
8.2.2 Risks to Crops
The impacts on agricultural crops were valued by estimating the net present
value of the forecasted yield declines due to increased UV radiation levels.
Yield declines were 'estimated for the major grain crops: wheat, rye, rice,
corn, oats, barley, sorghum, and soybeans. Potential impacts on other crops,
including fruits and vegetables, forests, and other non-commercial species have
not been evaluated.
The impacts on the major grain crops were valued by first estimating the
value of the impacts on soybeans only. These impacts were analyzed by Rowe and
Adams (1987) using the National Crop Loss Assessment Network (NCLAN), from which
they developed the following relationship between soybean yield and economic
damage:
D2 - 0.1068 * SOY - 0700029 * SOY2
where
D2 — annual change in economic surplus, in billions of 1982 dollars,
resulting from changes in soybean yield due to UV-B.
SOY - percent change in soybean yield due to UV-B, which was defined as
0.30 times the percentage decrease in stratospheric ozone.
The value of potential impacts on the major grain crops was then calculated
by increasing the estimated impacts on soybeans by a factor of 3.85 to reflect
the larger size of the market for all major grain crops compared to the size of
the market for soybeans only. The factor of 3.85 was determined by using
average annual crop production levels from 1981-1985 to represent average annual
production levels for each crop, and the market value was estimated using the
average market price for these crops during 1981-1985. This information was
obtained from the U.S. Department of Agriculture; the average annual value of
all soybean production was about $13 billion and the average annual value of all
major grain crops was $50 billion (1985 dollars).
The net present value of these annual production declines was calculated for
each scenario using a discount rate of two percent. Sensitivity analyses were
also conducted by assuming that the impacts would range from one-half to twice
the level estimated by the approach described above. The benefit estimates from
this approach are summarized in Exhibit 8-12. Clearly, these estimates are
quite speculative and could be significantly higher or lower.
8.2.3 Increased Concentrations of Ground-baaed Ozone
The economic impact of tropospheric (ground-based) ozone on agricultural
crops was determined from the National Crop Loss Assessment Network (NCLAN).
which was developed to assist EPA in the evaluation of National Ambient Air
Quality Standards (NAAQS) for ground-based ozone. In an analysis by Rowe and
Adams (1987), the value of potential crop losses for soybeans, corn, wheat,
-------
8-20
The benefit estimates that result from this approach (i.e., the amount of
damage that could be avoided if the amount of ozone depletion is reduced) are
summarized in Exhibit 8-14 for the baseline scenario and alternative scenarios.
These damage estimates are shown for a discount rate of two percent. The amount
of ozone depletion estimated to occur by 2075, from which the level of UV damage
is determined, is also shown for each scenario.
8.2.5 Damages Due To Sea Level Rise
Sea level rise can cause loss of wetlands, higher storm surges, flooding,
and beach erosion, among other factors. In this section only the impacts on the
major coastal ports have been valued. These impacts were valued using an
analysis by Gibbs (1984) that evaluated the effects of a 0.75 to 2.2 meter rise
in sea level by 2075 on two coastal communities -- Charleston, South Carolina
and Galveston, Texas. Gibbs analyzed impacts for two types of community
responses -- damages if actions anticipating the rise in sea level were
undertaken and damages if no anticipatory actions were undertaken.
The damage estimates developed by Gibbs for Charleston and Galveston were
used to estimate a range of potential damages for all major coastal ports.
Using the amount of tonnage shipped through each port each year as an
approximate measure of the size of the port, the damage estimates developed by
Gibbs were divided by the amount of tonnage shipped to represent the potential
range of impacts due to sea level rise. For sea level rise of 98 cm, these cost
estimates were $8 to $66 per ton shipped if anticipatory actions were taken and
$16 to $181 per ton shipped if they were not. All costs are in 1985 dollars
assuming a three percent discount rate. The primary reason for the variation in
damages is the amount of protection a port has from severe storms -- costs are
lower if the port is protected (like Galveston) or higher if the port is
relatively unprotected (like Charleston).
These cost ranges were then used to determine potential impacts at all major
coastal ports. These damage estimates are summarized in Exhibit 8-15 for the
baseline scenario and alternative scenarios. The amount of sea level rise by
2075 is indicated for each scenario. Damage estimates are provided for
anticipated and unanticipated responses. Low, medium, and high estimates are
also provided -- the low estimates assume most ports will be relatively
protected; the high estimates assume they will be relatively unprotected; and
the medium estimates reflect a port-by-port assessment on whether the port
appeared to be unprotected (hence higher damage estimates were assumed) or
protected (hence lover damage estimates were assumed). Clearly, this is a crude
estimating technique and real damages could be much higher or lower than
indicated by these estimates. However, many sea level damage issues, such as
flooding of coastal wetlands, beach erosion, increases in salinity in aquifers,
among other factors, are not included here.
-------
8-19
EXHIBIT 8-13
VALUATION OF IMPACTS ON MAJOR AGRICULTURAL CROPS
DUE TO TROPOSFHERIC OZONE
(billions of 1985 dollars)
Tropospheric
Ozone Increase
by 2075
Scenario (Percent)
No Controls
CFC Freeze
(Case 2)
CFC 20%
(Case 3)
CFC 50%
(Case 4)
CFC 80%
(Case 5)
CFC 50%/
>30.9
5.2
4.1
2.7
1.9
1.1
Total-Cost
(10* $)
0.5 1.0
7.45 14.90.-
2.6 5.2
2.25 4.5
1.65 3.3
1.3 2.6
1.25 2.5
2.0
29.80
10.4
9.0
6.6
5.2
5.0
Decrease from No Controls-
Value of Avoided Impacts
(10* $)
0.5 1.0 2.0
.
4.85 9.70 19.40
5.20 10.40 20.80
5.80 11.60 23.20
6.15 12.30 24.60
6.20 12.40 24.80
Halon Freeze
(Case 6)
CFC 50%/ 1.0 1.2 2.4 4.8 6.25 12.50 25.00
Halon Freeze/
U.S. 80%
(Case 7)
U.S. Only/CFG 17.7 4.15 9.7 19.40 2.6 5.2 10.40
50%/Halon Freeze
(Case 8)
Source: Based on Rove and Adams (1987).
-------
8-18
cotton, rice, barley, sorghum, and forage was estimated vising the following
relationship between tropospheric ozone changes and economic damage:
Dl - -0.0678 * T - 0.000195 * T2
where:
Dl - annual change in economic surplus, in billions of 1982 dollars, due
to tropospheric ozone.
T - percent change in tropospheric ozone.
This approach was used to generate a stream of annual impacts through 2075.
The present value of these annual impacts was then calculated using a discount
rate of two percent. Sensitivity analyses were also conducted by assuming that
the impacts would range from one-half to twice the level estimated by the
approach described above. A summary of the decrease; in economic value for each
scenario is provided in Exhibit 8-13. The estimated increase in tropospheric
ozone by 2075 is also indicated. Clearly, these estimates are quite speculative
and could be significantly higher or lower.
8.2.4 Degradation of Polyswrs
The economic impact of UV radiation on polymers has been determined from
work done by Horst (1986). Horst assumed that polymer manufacturers would
increase the amount of light stabilizer in their products as a result of higher
UV radiation levels. The amount of stabilizer was assumed to increase about one
percent for each one percent decrease in stratospheric ozone, although this
varied depending on amount of depletion and intensity of the UV radiation, among
other factors. Also, the maximum change allowed due to manufacturing
limitations was a 25 percent increase in stabilizer, which was estimated to lead
to a 1.86 percent increase in the price of the polymer. Although the analysis
by Horst was conducted on rigid FVC products only, these dose-response and
price-response relationships were assumed to apply to acrylic and polyester
applications as well (these products are also frequently exposed to UV
radiation). The market size for all of these UV-sensitive materials was
estimated to be 3.75 tines larger than the market for rigid FVC products only.
For these polymer products, cost impacts through 2075 were calculated for
each year using three basic steps:
o The size of the market for each polymer product was
estimated.
o The amount of damage to polymer products (i.e., the amount
of additional stabilizer required) due to increased UV
radiation levels was assessed.
o The damage costs were determined based on the
price-response relationship presented above.
-------
8-17
EXHIBIT 8-12
VALUATION OF IMPACTS ON MAJOR GRAIN CROPS
DUE TO INCREASED RADIATION
(billions of 1985 dollars)
H
Scenario
No Controls .
CFC Freeze
(Case 2)
CFC 20%
(Case 3)
CFC 50%
(Case 4)
CFC 80%
(Case 5)
CFC 50%/
arvest Decli
Kv 9O75
Oy t.\J 1 J
(Percent)
>7.50
1.9
1.5
1.0
•
0.7
0.4
Decrease from No Controls -
TotalQCost Value of Avoided Impacts
ne (10y $) (10* $)
0.5 1.0 2.0 0.5 1.0 2.0
14.C45 28.92: 57.80
5.66 11.32 22.64 8.79 17.58 35.16
4.72 9.45 18.90 9.72 19.45 38.90
3.55 7.10 14.20 10.90 21.80 43.60
2.80 5.61 11.20 11.64 23.29 46.58
2.76 5.53 11.06 11.68 23.37 46.74
Halon Freeze
(Case 6)
CFC 50%/ 0.4 2.63 5.26 10.52 11.82 23.63 47.28
Halon Freeze/
U.S. 80%
(Case 7)
U.S. Only/CFC 6.1 10.37 20.74 41.48 4.08 8.16 16.32
50%/Halon Freeze
(Case 8)
Source: Based on Rove and Adams (1987).
-------
8-21
EXHIBIT 8-14
VALUATION OF IMPACTS ON POLYMERS
DUE TO UV RADIATION INCREASES
(billions of 1985 dollars)
Stratospheric
Ozone Decrease
by 2075
Scenario (Percent)
No Controls
CFC Freeze
(Case 2)
CFC 20%
(Case 3)
CFC 50%
(Case 4)
CFC 80%
(Case 5)
CFC 50%/
39.9
6.2
5.0
3.2
2.2
1.3
Decrease from No Controls --
Total Cost Value of Avoided Impacts
(10* $) (10* $)
0.5
2.54
1.16
0.95
0.85
0.79
0.79
1.0
4.69
2.32
1.90
1.71
1.57
1.57
2.0 0.5 1.0
9.38
4.64 1.18 2.37
3.80 1.39 2.79
3.41 1.49 2.98
3.14 1.55 3.12
3.14 1.55 3.12
2.0
-
4.74
5.58
5.96
6.24
6.24
Halon Freeze
(Case 6)
CFC 50%/ 1.2 0.79 1.57 3.14 1.55 3.12 6.24
Halon Freeze/
U.S. 80%
(Case 7)
U.S. Only/CFC 20.4 1.99 3.98 7.95 0.35 3.98 7.96
50%/Halon Freeze
(Case 8)
Source: Based on Horst (1986).
-------
8-22
EXHIBIT 8-15
VALUATION OF IMPACTS OF SEA LEVEL
RISE ON MAJOR COASTAL PORTS27
(billions of 1985 dollars)
Sea Level Rise
Scenario
No Controls
CFC Freeze
(Case 2)
CFC 20%
(Case 3)
CFC 50%
(Case 4)
CFC 80%
(Case 5)
CFC 50%/
Anticioated
by 2075 (cm) Low
97.8
89.4
88.4
86.8
85.7
86.7
12
12
12
12
12
12
.9
.4
.4
.3
.2
.3
Medium
54.4
51.1
50.7
50.1
49.7
50.1
High
104
98
97
96
95
' 95
.8
.1
.3
.0
.1
.9
UnanticiDated
Low Medium
25
23
23
23
23
23
.7
.9
.7
.4
.1
.3
144
136
135
133
132
133
.0
.1
.1
.6
.6
.5
High
287.4
272.2
270.4
267.5
265.5
267.3
Halon Freeze
(Case 6)
CFC 50%/ 86.5
Halon Freeze/
U.S. 80%
(Case 7)
U.S. Only/CFC 94.7
50%/Halon Freeze
(Case 8)
12.3 50.0 95.7 23.3 133.4 266.9
12.7 53.2 102.3 25.1 141.1 281.8
a/ All damage estimates were calculated assuming a three percent
discount rate.
Source: Based on Gibbs (1984).
-------
8-23
REFERENCES
Gibbs, M. "Economic Analysis of Sea Level Rise: Methods and Results." In:
Earth, M.C. and-J.G. Titus (eds.). Greenhouse Effect and Sea Level Rise: A
Challenge for this Generation. New York, Van Nostrand Reinhold, 1984.
Horst, R., K. Brown, R. Black, and M. Kianka, The Economic Impact of Increased
UV-B Radiation on Polymer Materials: A Case Study of Rigid PVC. Mathtech,
Inc., Princeton, New Jersey, June 1986.
Hunter, J.R., Kaupp, S.E., Taylor, J.H. (1982). "Assessment of Effects of
Radiation on Marine Fish Larvae." In: Calkins, J. (e.) The Role of Solar
Ultraviolet Radiation in Marine Ecosystems. pp. 459-497, Plenum, New York.
Jewell, L. Duane (1986). Agricultural Statistics 1986. U.S. Department of
Agriculture, Washington, D.C.
Rowe, R.D. and Adams, R.M., (1987). Analysis of Economic Impacts of Lower Crop
Yields Due to Stratospheric Ozone Depletion, draft report for the U.S. EPA,
Washington, D.C., August 1987.
Rowe, R.D., T.N. Neithercut, and W.D. Schulze (1987), Economic Assessment of
the Impacts of Cataracts. Draft Report, prepared for U.S. Environmental
Protection Agency, January 30, 1987.
Thomas, B.C., (1986). Fisheries of the United States. 1985. U.S. Department of
Commerce, National Oceanic and Atmospheric Administration, Washington, D.C.,
April 1986.
U.S. Environmental Protection Agency, An Assessment of the Risks of
Stratospheric Modification. Submitted to Science Advisory Board, October
1986.
-------
CHAPTER 9
COSTS OF CONTROL
This chapter presents estimates of the costs of foregoing the use of CFCs as
would be required under the various stringency and coverage options defined in
Chapter 5. In addition to the results themselves, the chapter presents a brief
summary of the method used to construct these estimates. (Readers interested in
additional description should consult Appendix I contained in Volume II of this
RIA.) The costs presented in this chapter, when combined with the benefit
estimates presented in Chapter 8, provide the basis for the cost-benefit
comparisons described in Chapter 10.
This analysis assumes that CFCs are allocated through some type of pricing
mechanism. The market-based regulatory schemes currently being considered,
e.g., auctioned permits, allocated quotas, and regulatory fees, among others,
can be shown to result in the same level of costs, differing only by which
segment of society ultimately bears the cost of regulation. Furthermore, the
market system described below is highly idealized -- e.g., all firms are assumed
to face identical costs and react in identical fashion to the regulations. To
the extent the real market differs from the idealized case, costs could differ.
This chapter is organized as follows:
o Section 9.1 describes briefly the method used to estimate
the costs of CFG regulation.
o Section 9.2 presents estimates of costs for each of the
cases analyzed.
o Section 9.3 discusses the principal limitations of the
cost analysis.
9.1 SUMMARY OF METHODS USED TO ESTIMATE COSTS
The basic method for estimating costs is to measure the decreases in
society's welfare attributable to reduced availability of CFC-using products.
The technique adopted for this purpose is the measurement of decreases in
producer and consumer surplus in the relevant markets that result from
regulatory restriction* on CFG use. Consumer surplus represents the loss in
satisfaction to consumers of CFC-using products. Producer surplus represents
the loss in income to the owners of factors of production used in manufacturing
CFC-using products. The relevant markets are:1
o the markets for the various CFG compounds, i.e. the
markets in which CFCs are sold by producers of these
compounds to the various CFC-using industries (e.g., the
market for CFC-11); and
1 This analysis assumes that the markets for complements and substitutes
for the output of CFC-using industries do not experience price changes.
Consequently, there is no welfare change in these markets.
-------
9-2
o the markets for the outputs of the CFC-using industries,
i.e., the markets in which the products of the CFC-using
industries are sold to consumers (e.g., the market for
foam-based packaging materials.)
The initial impact of any system of CFC regulation is to reduce the supply
of CFCs and therefore to increase CFC prices. Demands for CFCs are "derived
demands" since they are derived from manufacturers' desires to meet the demands
of consumers for final products. Since CFCs are used as inputs to many
products, e.g., insulating foams, air conditioners, etc., the increases in CFC
prices will cause accompanying increases in the costs of supplying all these
products. Ultimately, the costs born by society due to CFC regulation will be
reduced consumption and increased prices of all products that currently use or
would potentially use CFCs as an input. The reduced satisfaction which society
will receive from these products is the real economic cost of CFC regulation.
Estimating the full cost burden to society requires careful attention to the
modeling of all likely changes in both relevant markets -- outputs of CFC-using
industries and CFC markets themselves. These changes can either occur in the
behavior of firms and the way CFCs are both supplied and demanded or in the
behavior of consumers and the way CFC-using goods are demanded. The discussion
below will first examine the nature of CFC demands which are, of course, closely
related to the supply decisions of CFC-using industries. Next, it will consider
the nature of CFC supply. Finally, it will describe how the information about
the demand and supply of CFCs can be used to estimate the costs of CFC
regulation.
9.1.1 Deaand for CFCa
The demands for CFCs are largely determined by the choices made by both
buyers and sellers of CFC-using products. Three possible adjustments could
occur in CFC-using markets as a result of regulation-induced CFC price
increases:
o switches from CFC-using products to other products;
o switches to production processes that utilize fewer CFCs
per unit of output; and
o switches from CFC-using production processes to ones using
other chemicals.
Each of these adjustments would change the quantity of CFCs demanded by
industry.
An example of the first type of adjustment is the replacement of CFC-based
foam egg cartons with paper-based egg cartons. The result of this type of
adjustment is a reduction in CFC demand that is directly proportional to the
extent to which the substitute product, in this case, paper egg cartons,
penetrates the former CFC-using product's market. In the extreme case in which
the CFC price rise is large and CFCs comprise a large share of the product
costs, the penetration could be complete and the derived demand for CFCs from
this type of product could fall to zero.
-------
9-3
An example of the''second type of adjustment is the use of carbon adsorption
equipment to collect ithd recycle CFC emissions during the production of flexible
foams. Because collection and recycling result in significantly less CFC usage
in the foam manufacturing process, the installation of this equipment would
partially reduce the demand for CFCs from this type of product.
An example of the third type of adjustment is the use of an ethylene
oxide/carbon dioxide mixture instead of an ethylene oxide/CFC mixture in the
sterilization of hospital equipment. Here again CFC demand will be reduced to
the extent the new mixture captures a share of the sterilization market. The
derived CFC demand is reduced to the extent the new chemical captures a share of
the CFC input market.
To model all possible adjustments in production processes and consumer
behavior, this analysis utilizes extensive engineering analyses on manufacturing
processes of CFC-using products. (Volume III of this report presents the
results of these engineering analyses.) Unlike traditional economic theory,
these engineering analyses characterize substitution possibilities as limited
for any given production technology. In other words, it is not usually possible
to reduce the use of CFCs in a continuous manner by increasing the use of some
other factor. Rather these analyses assume that a fixed amount of each input,
including CFCs, are necessary to produce any unit of the final product. (These
types of production technologies are often called "fixed proportion" processes.)
Although substitution of inputs may not be possible within a given production
technology, input substitution implicitly occurs when manufacturers choose to
alter production technologies.
The methodology assumes that firms choose the production technology that
minimizes production costs given prevailing input prices. In developing an
estimate of production costs, the analysis has included all variable costs, such
as material, labor and energy expenses; capital costs, properly discounted for
the expected useful life of the equipment; and nonrecurring costs, such as the
costs of retooling, research and development expenditures, and training costs.
All decisions by producers and consumers to switch from one production
technology or product to another are based upon estimates of private costs as
seen by the producers and consumers themselves. Private costs differ from
social costs because:
o taxes cause gross returns from any investment to differ
from net returns; and
o the discount rate used by firm owners is higher than the
rate of social discount appropriate for government
decisionmaking.
Social costs usually exceed private costs because private costs are
measured net of taxes.
Because each given production technology uses a fixed amount of CFCs over a
range of CFC prices, the derived demand from any particular CFC-using product
will be constant over the same range of CFC prices. Therefore, the derived
demand curve for CFCs appears as a step function in which each vertical segment
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9-4
indicates the range of CFC prices over which the technology is preferred to all
others, and each horizontal section represents the reduction in CFC demand that
occurs as manufacturers choose to switch to a new production technology.
The results of the engineering analyses provide the basis for the
characterization of -CFC demand curves for each specific industry. As an example
of how an individual demand curve might be characterized in the analysis,
consider the demand for CFCs from polystyrene foam manufacturers. If CFC price
increases were small -• say $0.10 per kilogram, the least expensive response
from foam manufacturers might be a switch to carbon adsorption to reduce loss of
CFCs during the production process. This technology might be estimated to save
about five percent of total CFC usage in this industry. If CFC price increases
were higher -- say $0.25 per kilogram, the increased CFC price might induce some
foam manufacturers to switch to the use of pentane as a blowing agent. This
switch might reduce industry demand for CFCs by 30 percent. At substantial
increases in CFC price -- say $0.50 per kilogram, polystyrene foam manufacturers
might be unable to compete with other forms of containers and might lose their
markets with a consequent loss in all remaining demand for CFCs from these
manufacturers.
The aggregate derived demand schedule for CFCs is obtained by summing the
individual derived demand schedules of all CFC-using industries. Thus, the
aggregate demand curve represents an ordering of all options that could be taken
to decrease the use of CFCs. These steps are ordered from least costly to most
costly as seen by the participants in the CFC markets.
9.1.2 Supply of CFCs
The supply of CFCs is more difficult to characterize. If the industry were
competitive, this supply would merely reflect the marginal cost of CFC
production at any particular output level. Unfortunately, there are almost no
data concerning the marginal costs of production of CFCs. Moreover, data
suitable for econometric estimation of CFC supply schedules are unavailable.
The nature of modern chemical manufacture makes it reasonable to assume that
marginal costs of production of CFCs are constant over current levels of
production. However, even if such an assumption is reasonable at moderate
levels of CFC reduction, this assumption is certainly unreasonable over the
entire range of CFC production. Unfortunately, this analysis is constrained by
the lack of quantitative knowledge about the nature of CFC production and
assumes that the supply curve is horizontal ("perfectly elastic") over all
relevant CFC production levels.
The analysis recognizes that the domestic CFC industry is highly
concentrated and that it is possible that CFC prices do exceed their marginal
costs. The Implications of this possibility for the estimation of the costs of
CFC regulation are explained in the next section.
9.1.3 Estimating Costs
The costs of CFC regulation are determined by examining the changes -- both
in price and in quantity -- occurring due to regulation in the CFC market.
Exhibit 9-1 illustrates the method. The result of CFC regulation would be a
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9-5
EXHIBIT 9-1
CHANGES IN CONSUMER AND PRODUCER SURPLUS
DUE TO AN INCREASE IN CFC PRICE
Price of
CFC in
Year t
P(0)
s(0)
d(0)
q(D
q(0)
Quantity of
CFC in Year t
-------
9-6
decrease In CFG supply and an increase in CFG price. It is immaterial to the
cost estimates whether this is accomplished through a fee system that drives up
CFG prices from p(0) to p(l) and then induces quantity reductions by CFC users
or through a quota that reduces CFC production from q(0) to q(l) and induces
higher prices for CFCs.
The total consumer surplus created from the consumption of CFCs is the area
below the demand curve for CFCs and above the market price of CFCs. Thus, the
decrease in consumer surplus caused by regulation is measured as the sum of
areas T and D in Exhibit 9-1. The relevant economic cost of CFC regulation is
area D. This area represents the loss in economic welfare to society through
reduced consumption of CFCs.
The other part of the reduction in consumer surplus, area T, represents a
transfer in income from consumers of CFC-using products to other segments of
society. Although this area does represent a decrease in the utility that
society derives from the consumption of CFCs.and CFC-using products, it is
offset by an increase in utility that society may derive from the consumption of
substitute chemicals and other products.
As mentioned above, the analysis assumes the supply of CFCs to be horizontal
("perfectly elastic") over the entire range of production. This assumption is
equivalent to assuming that no producer surplus exists in CFC manufacture and
therefore underestimates decreases in producer surplus earned by the CFC
industry as CFC production levels decrease. This implies that the cost
estimates presented in the next section are also underestimated.
As a final step in constructing the cost estimates, this methodology is
repeated annually throughout the analysis period, 1989 (when costs are first
incurred due to a freeze on CFC usage at 1986 levels) through 2165.
Consideration of the impact of time is essential because manufacturers will
possess considerably more opportunities to substitute new production
technologies for old ones as time progresses. Similarly, the passage of time
will allow substitute products to penetrate markets now dominated by CFC-based
products.
To reflect the expected availability of new methods of reducing CFC use, the
engineering analyses identified potential technologies that may be available
over the next ten years. One example of this type of emerging technology is the
development of new chemicals, such as FC-134a or CFC-123. As a result of the
creation of additional substitution possibilities, the demand curve for CFCs
becomes less steeply sloped ("more elastic") and the cost of achieving any
specified level of CFC reduction should decrease over time. It is likely,
moreover, that as CFC prices rise due to regulation, unforeseen opportunities
will develop, particularly over the very long time horizon of this analysis.
Consequently, long-term costs are likely to be overestimated.
A major difficulty encountered in performing the cost analysis was the
construction of a set of assumptions that were not only technically feasible,
but also likely to actually occur. The extensive engineering analyses described
in Volume III of this RIA provided substantial information about the
technologies that would be available for reducing the use of CFCs over the
foreseeable future. Each technology was characterized according to:
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9-7
f
o the date it was initially expected to become available;
o the percentage in CFC use reduction that it might be able
to achieve;
o the length of time it would take to penetrate the market;
and
o its cost.
A major task of the economic analysis is to convert these characterizations of
the technological base into cost curves usable for economic analysis.
However, construction of cost curves in this manner implicitly accepts a
number of assumptions about human behavior that are probably inaccurate, at
least in the short run. In particular, the assumption that each technology is
directly converted into practical use at the first time it is available requires
that producers of CFC-using products:
o possess perfect information about all available
technologies;
o always act to minimize the costs of production;
o face no costs of switching technologies beyond those
measurable in dollars due to the purchase of additional
equipment and training; and
o have unobstructed access to capital markets.
Reality, as we know, is considerably different from this "idealized" view of
the world. In practice, producers of CFC-using products:
o may not learn about a technology for quite some time after
its availability;
o may not have to minimize production costs because costs
can be passed on to consumers of their products;
o face a number of "hidden costs," such as difficulties in
changing prevailing work practices, acquiring knowledge of
how to implement the new technology, or reluctance to
alter established manufacturing practices; and
o may not be able to finance a switch to a new technology
even if such an investment is profitable.
In an attempt to capture some of the likely "stickiness" in conversion from
one set of manufacturing technologies to another, a number of simulations were
performed. In the first simulation, labelled "least cost" through the remainder
of this section, it is assumed that the availability and penetration rates of
all new technologies are as described in the engineering analyses presented in
Volume III of this RIA. Three alternative simulations, labelled "moderate
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9-8
stretchout," "moderate to major stretchout," and "major stretchout,"
respectively, reduce the pace at which switches to these new technologies occur.
Exhibit 9-2 lists all assumptions used in each stretchout simulation.
The least cost simulation assumes that all technological shifts and product
switches identified -by the engineering contractors occur in the minimal amount
of time. Thus, the penetration of a new technology or product into the market
of the former CFC-based product is limited only by the availability of needed
capital equipment and an optimistic assessment of the pace at which knowledge of
the new technology or product could be dispersed through society. The
simulation is labelled "least cost" because these technological assumptions do
not include any assessment of the impacts of human resistance to changes toward
the new lower cost methods. Any resistance to adoption of these cost saving
alternatives would increase the cost of CFG-regulations.
Because the least cost simulation assumes no resistance to technological
change and all stretchout simulations assume substantial resistance, the three
stretchout simulations should be seen as relatively closely related and
collectively as quite distinct from the least cost simulation. The moderate
stretchout simulation contains a number of assumptions that slow the rate or
extent to which available technologies would be adopted. The assumptions
primarily involve slower penetration rates for new products and production
processes into the marketplace. In other cases, manufacturers of products for
which CFCs comprise only a minor share of total product price are assumed not to
adapt to increases in CFC prices. Finally, switches to alternative chemicals in
place of CFCs are assumed to be much slower than projected in the least cost
simulation.
In contrast to numerous changes in the technological assumptions made in the
moderate stretchout simulation, only six changes are made in the other two
stretchout simulations. Each of these six assumptions, however, represents a
relatively large change in the demand for CFCs. The moderate to major
stretchout simulation retains all assumptions used in the moderate stretchout
simulation. In addition, it is assumed that air blast technology is delayed
five years, product substitutes for refrigeration applications are delayed five
years, and servicers of air conditioning and refrigeration equipment do not
attempt to recover CFCs. The major stretchout simulation retains all
assumptions used in the moderate to major stretchout simulation. In addition,
it is assumed that aquaeous cleaning technologies are delayed five years,
product substitutes for foam packaging are delayed five years, and changes to
insulation in refrigeration applications are delayed fifteen years.
9.2 COST RESULTS
This section describes the principal results of the cost analysis, including
estimates of CFC and Halon prices, social costs, and transfer costs of the
various regulatory alternatives. The Integrated Assessment Model (LAM)
described in EPA (1987) and modified to include the information about the CFC
cost methodology described in the last section (and Appendix I) was used to
develop these estimates. Appendix J presents a more comprehensive listing of
IAM results.
-------
9-9
EXHIBIT 9-2
ASSUMPTIONS EMBODIED IN EACH STRETCHOUT SIMULATION
Moderate Stretchout Simulation
o Use of carbon dioxide as a blowing agent does not start until 1992.
o CFG-22 penetrates only 25 percent of aerosol propellant market.
o Use of FC-134A is delayed until 1997 in all refrigeration applications
except mobile air conditioning.
o Aqueous cleaning processes take 10 years to fully penetrate their
markets.
o Use of carbon adsorption processes. does not start until 1992.
o Solvent applications do not reclaim waste solvents.
o Hydrocarbon substitute blowing agents take ten years to penetrate their
markets.
o Solvent applications do not switch to use of CFC-132B.
o Solvent applications cannot start using CFC-123 until 1997.
o Cold storage applications do not switch to the use of ammonia.
o Use of CFC-22 by cold storage applications does not start until 1992.
o Use of gamma radiation for sterilization does not start until 1997.
o Dry cleaning establishments do not switch their CFG usage patterns
(except for introduction of refrigerated condensers.)
o Flexible foam producers do not switch to use of methylene chloride.
o Hospitals and medical equipment suppliers take ten years to fully switch
to the use of disposable equipment.
o Hospitals and medical equipment suppliers take five years to switch to
the use of EO/C02 for sterilization.
o Minor sterilization facilities (e.g., pharmaceutical applications,
animal labs, and libraries) do not alter the CFG usage patterns.
o Use of airblast processes by liquid food freezing establishments takes
five years to fully penetrate its markets.
o Recovery of CFCs during the servicing of mobile air conditioners does
not start to penetrate the market until 1992.
o Other insulating materials of equivalent energy-saving potential take
ten years to fully penetrate their markets.
o Alternative packaging materials take five years to fully penetrate their
potential markets.
o Rigid foam manufacturers do not switch to use of water as a blowing
agent.
o Refrigerator and water cooler reconditioners do not recover CFCs during
reworking.
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9-10
EXHIBIT 9-2 (continued)
ASSUMPTIONS EMBODIED IN EACH STRETCHOUT SIMULATION
Moderate to Major Stretchout Simulation
o All assumptions from Moderate Stretchout.
o Air conditioning and refrigeration applications do not recover during
servicing.
o Product substitutes for refrigeration applications are delayed 5 years.
o Air blast technology is delayed 5 years.
Major Stretchout Simulation
o All assumptions from Moderate to Major Stretchout.
o Aqueous cleaning technologies are delayed 5 years.
o Product substitutes for foam packaging are delayed 5 years.
o Changes to insulation in refrigeration applications are delayed 15
years.
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9-11
Exhibits 9-3 and 9-4 summarize the results of the four simulations for the
CFG 50%/Halon Freeze case (Case 6 described in Chapter 5). As Exhibit 9-3
shows, all simulations project increases in the price of CFC compounds. (All
prices and cost figures cited in this section are in 1985 dollars.) No price
increase for CFCs is projected for 1989 in most simulations because a number of
options that save money or can be executed at zero cost are presumed to exist
presently. Price increases are greater over the longer term as those options
that reduce CFC use at relatively little expense are exhausted and the continual
growth in CFC demand over time forces the introduction of more costly
technologies. The pace of price increase is greater if more stickiness is
assumed in the adoption of the available technologies. In the moderate
simulation, the price of CFCs decreases early in the 21st century as the pace of
adoption of lower cost control technologies temporarily exceeds the growth in
CFC demand due to economic expansion.
Exhibit 9-3 also shows the pattern of Halon price increases. The increase
in the price of Halon 1211 occurs shortly after the imposition of the freeze and
continues throughout the analysis period. In the medium term, Halon price
increases temporarily decline because the recovery of Halon from the retirement
of existing systems increases supply at a rate that exceeds the growth in
demand. Over the longer term, the price is projected to increase by $2.75 per
kilogram (weighted for ozone-depleting potential).
Exhibit 9-4 shows the estimated costs for each of the four simulations. The
results for social costs are divided into those costs experienced in the short
term (through the year 2000) and those experienced in the long term (through the
year 2075). All social cost estimates are presented in present value terms
using an assumed social discount rate of 2 percent. Over the short term, social
costs are projected to be sensitive to the pace at which technologies might be
adopted by CFC users. In the optimistic "least cost* scenario, these social
costs are only $689 million (in 1985 dollar*). They rise to as much as $1.9
billion in the "major stretchout" simulation.
In the longer term, costs are much less sensitive to assumptions about
technology diffusion. Instead of varying by a factor of three, they vary from
about $27 billion in the "least cost" simulation to about $38 billion in both
the "moderate to major stretchout" and "major stretchout* cases.
Of particular interest is- the sensitivity of transfer costs to assumptions
about the pace at which technology is adopted. As discussed above, transfer
costs, although not a cost to society, do represent higher CFC input prices that
must be paid by CFC-us ing industries. As such, they are a significant share of
the compliance burden that will fall on these industries. All transfer cost
estimates are presented in present value terms using an assumed private discount
rate of 6 percent. By 2000, the present value of these transfer costs can be
significant -- almost $6 billion --if the pace of diffusion of available
technologies is slow. Over the longer term, transfer costs range from a low of
$6.2 billion in the most optimistic least cost simulation to a high of $9.4
billion for the most pessimistic major stretchout simulation.
Exhibits 9-5 and 9-6 show the social costs of each of the control cases
defined in Chapter 5 for the short term (1989-2000) and the long term
(1989-2075), respectively. Even though most of these cases assume worldwide
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9-12
EXHIBIT 9-3
PROJECTED PRICE INCREASES
FOR THE CFC 50%/HALON FREEZE CASE .
AHD FOUR SETS OF COST ASSUMPTIONS37
(in 1985 dollars)
CFC Price Increases:
1989
1994
1999
2005
2075
Halon Price Increases:
1989
1994
1999
2005
2075
Least
Cost
0.0
2.21
3.77
3.77
5.48
0.0
0.49
0.11
0.49
2.75
Moderate
0.0
3.50
5.48
4.97
5.48
0.0
0.49
0.11
0.49
2.75
Stretchouts
Moderate/
Major
0.0
3.70
5.48
5.48
5.48
0.0
0.49
0.11
0.49
2.75
Major
0.0
5.48
5.48
5.48
5.48
0.0
0.49
0.11
0.49
2.75
The CFC 50%/Halon Freeze case assumes CFCs are regulated with an initial
freeze in 1989 at 1986 levels, 20 percent reduction in 1993 and 50 percent
reduction in 1998, and Halons frozen at 1986 levels in 1992. Prices are
cited on a standardized "ozone-depleting equivalent" basis per kilogram.
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9-13
EXHIBIT 9-4
SOCIAL AND TRANSFER COST ESTIMATES
FOR THE CFG 50%/HAUON FREEZE CASE.
AND FOUR SETS OF COST ASSUMPTIONS4'
(Present values In Billions of 1985 dollars)
Social Costs b/
1989-2000
1989-2075
Transfer Costs*'
1989-2000
1989-2075
Stretchouts
Least Moderate/
Cost Moderate Maj or
689 1.U6 1,628
27,040 29,220 37,910
1,975 2,516 2,757
6,163 7,096 6,376
Major
1,850
38,140
5,703
9,400
a/ The CFC 50%/Halon Freeze case assumes CFCs regulated with an initial
freeze in 1989 at 1986 levels, 20 percent reduction in 1993, and 50
percent reduction in 1998, and Halons frozen at 1986 levels in 1992.
by Social costs are discounted at a 2 percent rate of social discount.
£/ Transfer costs are discounted at a rate of 6 percent, reflecting
the opportunity cost of funds in the private sector.
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9-14
EXHIBIT 9-5
SHORT-TERM SOCIAL COST ESTIMATES (1989 TO 2000) BY CONTROL CASE
FOR FOUR SETS OF COST ASSUMPTIONS a/
(millions of 1985 dollars)
2.
3.
4.
5.
6.
7.
8.
Case
CFG Freeze
CFC 20%
CFC 50%^
CFC 80%^
CFC 50%/Halon Freeze^
CFC 50%/Halon Freeze/
U.S. 80%^
U.S. Only/CFC.50%/
Halon Freeze*7
Least
Cost
0
248
669
669
689
689
689
Moderate
0
316
1,126
1,126
1,146
1,146
1,146
Stretchouts
Moderate/
Major
24
890
1,608
1,608
1,628
1,628
1,628
Major
70
1,146
1,830
1,830
1,850
1,850
1,850
a/ Cases defined in Chapter 5. Social costs discounted at a rate of 2 percent.
*" The costs are equal through 2000 for cases 4 and 5 because the 80% reduction
does not occur until after 2000.
™ The costs are equal through 2000 for cases 6, 7, and 8 because the 80%
reduction does not occur until after 2000.
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9-15
EXHIBIT 9-6
LONG-TERM SOCIAL COST ESTIMATES (1989 TO 2075) BY CONTROL CASE
FOR FOUR SETS OF COST ASSUMPTIONS a/
(millions of 1985 dollars)
2.
3.
4.
5.
6.
7.
8.
Case
CFC Freeze
CFC 20%
CFC 50%
CFC 80%
CFC 50%/Halon Freeze
CFC 50%/Halon Freeze/
U.S. 80%
U.S. Only/CFG 50%/
Halon Freeze
Least
Cost
6,778
12,070
24,440
31,350
27,040
33,950
27,040
Moderate
7,050
16,590
26,630
41,820
29,220
44,410
29,220
Stretchouts
Moderate/
Major
17,220
27,230
35,310
54,750
37,910
57,350
37,910
Major
17,240
27.460
35,550
55,370
38,140
57,960
38,140
Cases defined in Chapter 5. Social costs discounted at a rate of 2 percent.
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9-16
actions, the costs shown in these exhibits are for the U.S. only. Thus, the
costs presented for the last alternative (U.S. Only/CFC 50%/Halon Freeze case),
in which only the U.S. imposes CFG and Halon controls, are identical to the CFC
50%/Halon Freeze case. This occurs because the only difference between the two
alternatives is the choice by other nations whether to regulate CFCs and Halons.
Through the year 2000, the various control cases do not pose great costs on
the U.S. Even with the most pessimistic of assumptions about the pace at which
technology is adopted, the costs of the most stringent regulatory alternatives,
including a Halon Freeze, is less than $2 billion. Costs are low through the
year 2000 because some low cost options are available to reduce CFC and Halon
use and because the more stringent reductions in use are not mandated until
1998.
In the short term the costs of alternative regulatory options vary greatly
according to assumptions about the pace at which technologies are adopted. For
example as seen in Exhibit 9-4, the costs of- a phased reduction in CFC use to 50
percent combined with a freeze on halons is estimated to vary from $689 million
(in 1985 dollars) under the most'optimistic least cost assumptions to nearly $2
billion if major stretchouts in technology adoption occur. Similar variations
are observed for all other regulatory alternatives.
Although these cost estimates may seem low, especially when, compared to the
benefit estimates of Chapter 8, they do not imply that significant expenditures
are not required. Not only may transfer payments be substantial, but
significant capital outlays are required, for which payback will take five to
twenty years. In the first year of the freeze, on the order of $100 million in
capital investment is simulated to be required, the majority being associated
with solvent applications. Social costs are reported as email, however, because
reduced operating expenses are expected to offset these capital outlays.
In the long term, costs are slightly less sensitive to the pace at which
technology is adopted. Coats in the major stretchout simulation, the most
pessimistic case, are two and one-half times greater than the costs in the least
cost case for Case 2, the CFC Freeze. However, the percentage difference in
costs is only about 40 percent for the cases in which CFCs are reduced to 50
percent of the 1986 usage levels. Costs are higher in the more pessimistic
cases because, by assumption, fewer control options are available and those that
are available .take longer to penetrate the market.
Exhibit 9-6 also shows, however, that over the longer term the social costs
vary greatly according to the stringency at which CFCs and Halons are
controlled. For example, using the major stretchout simulation, costs vary from
only $17 billion if CFC use is frozen at 1986 levels and Halons are not
controlled to nearly $58 billion if CFC use is reduced 80 percent and Halon
usage is frozen. As examination of cases 5 and 7 show, the combination of
lengthy stretchouts of available technologies with large restrictions in CFC use
is particularly expensive -- resulting in costs in excess of $50 billion.
Exhibit 9-7 shows results similar to Exhibits 9-5 and 9-6 for the period
1989 through 2165. This extended period plays a role in the cost-benefit
analysis presented in Chapter 10. The pattern of social costs over this longer
period is the same as that seen over the period 1989 through 2075, differing
only in the magnitude of the cost estimates.
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9-17
EXHIBIT 9-7
SOCIAL COST ESTIMATES FOR THE PERIOD 1989-2165 BY CONTROL CASE
FOR FOUR SETS OF COST ASSUMPTIONS a/
(Billions of 1985 dollars)
2.
3.
4.
5.
6.
7.
8.
Case
CFC Freeze
CFC 20%
CFC 50%
CFC 80%
CFC 50%/Halon Freeze
CFC 50%/Halon Freeze/
U.S. 80%
U.S-. Only/CFC 50%/
Halon Freeze
Least
Cost
10,970
17,760
33,480
41,690
37,560
45,770
37,560
Moderate
11,340
26,550
35,130
57,790
39,200
61,860
39,200
Stretchouts
Moderate/
Major
29,090
39,110
45,450
74,890
49,520
78,970
49,520
Major
29,110
39,330
45,680
75,510
49,760
79,580
49,760
Cases defined in Chapter 5. Social costs discounted at a rate of 2 percent
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9-18
Exhibits 9-8 and 9-9 show the results of some sensitivity analyses examining
the implications of alternative assumptions about how CFC users might react to
increases in CFC prices. In a first simulation (the "One Year Delay" case), it
is assumed that adoption of all technologies for reducing the use of CFCs occurs
at the same rate as specified in the moderate stretchout case, but that all
changes are delayed -by one year. Results of this simulation are very close to
those of the moderate stretchout simulation.
In a second simulation (the "Hidden Cost" case), it was assumed that all CFC
users face some "hidden costs" to adopting a CFC-reducing technology. These
hidden costs could be the need to amortize the cost of capital equipment Just
recently purchased or a simple reluctance to adopt new methods. In this
simulation, all CFC-reduction options were assumed to cost at least $0.10 per
kilogram. Again, the results of this simulation are similar to the moderate
stretchout case.
9.3 l.TTCTTATTOWS TO THESE ESTIMATES
Any comprehensive attempt to measure the costs of a regulatory action is
forced to utilize a number of simplifying assumptions. This analysis is no
exception. This section describes those assumptions that we believe most
seriously affect the quality of these estimates. An understanding of the
significance of these assumptions is essential to any correct application of the
results of this analysis.
First, these estimates are contingent on the technologies available to
reduce CFC use over time. Any attempt by manufacturers, scientists, or
engineers to predict available production technologies over such a long time
frame is obviously speculative. Thus, although we believe this analysis
captures the probable near-term responses of manufacturers to increased CFC
prices, uncertainty over the accuracy of these cost estimates certainly grows as
the projection period increases. These cost estimates probably overestimate
eventual social costs over the long run because it is likely that scientific and
technological breakthroughs unforeseeable at the present time will create more
opportunities to reduce CFC use than captured in this analysis.
A second type of uncertainty involves the exact time at which chemical
substitutes for CFCs, such as FC-13.4a or CFC-123, will become available. The
least cost set of assumptions projects availability for these substitutes in
1993. All stretchout cases assume availability in 1998 (except FC-134a in
mobile air conditioner•). Given the difficulties of managing any research and
development process, this availability date could slip. Because the ability of
manufacturers to meet tighter CFC restrictions often hinges on the availability
of these chemicals, a slippage in the dates of availability could increase the
costs of achieving these tighter restrictions. In parallel fashion, these
chemicals (or other options) could also become available earlier and
substantially ease the costs of CFC regulation.
Third, we were unable to identify usage patterns for a significant portion
of CFC use --as much as 20 percent for some compounds. To the extent that this
unallocated portion of CFC use would be controllable using the same technology
switches available to the CFC uses that were analyzed, the cost estimates would
be unaffected. However, if this unallocated portion of CFC use would be more
-------
9-19
EXHIBIT 9-8
PROJECTED FRIGE INCREASES FOR THE CFG 50%/HALON FREEZE CASEa/
AND THPBg SETS OF COST ASSUMPTIONS
(in 1985 dollars per kilogram)
Moderate One Year Hidden
Stretchout Delay Cost
CFC Price Increases:
1989 0.0 0.0 0.0
1994 3.50 3.52 3.50
1999 5.48 5.48 5.48
2005 4.97 4.97 4.97
2075 5.48 5.48 5.48
Halon Price Increases:
1989 0.0 0.0 0.0
1994 0.49 0.49 0.49
1999 0.11 0.11 0.11
2005 0.49 0.49 0.49
2075 2.75 2.75 2.75
The CFC 50%/Halon Freeze case assumes CFCs are regulated with an initial
freeze in 1989 at 1986 levels, 20 percent reduction in 1993 and 50 percent
reduction in 1998, and Halons frozen at 1986 levels in 1992. Prices are
cited on a standardized "ozone-depleting equivalent" basis per kilogram.
-------
9-20
EXHIBIT 9-9
SOCIAL AND TRANSFER COST ESTIMATES FOR THE
CFG 50%/HALON FREEZE CASE /
AND THPCT. SETS OF COST ASSUMPTIONS*7
(Present values in millions of 1985 dollars)
Moderate
Stretchout
One Year
Delay
Hidden
Cost
Social Costs by
1989-2000
1989-2075
1,146
29,220.
1,193
29,270
1,248
29,970
Transfer
1989-2000
1989-2075
2,516
7,096
2,587
7,168
2,594
7,175
* The CFC 50%/Halon Freeze case assumes CFCs regulated with an
initial freeze in 1989 at 1986 levels, 20 percent reduction in
1993, and 50 percent reduction in 1998, and Halons frozen at
1986 levels in 1992.
by Social costs are discounted at a 2 percent rate of social discount.
™ Transfer costs are discounted at a rate of 6 percent, reflecting
the opportunity cost of funds in the private sector.
-------
9-21
(less) costly to reduce than the average CFC uses analyzed here, these cost
estimates are biased downward (upward).
A fourth uncertainty is outside the individual CFC markets themselves. We
cannot be sure what the proper rate of social discount should be over any period
as long as the one used in this analysis. Even measurement of this rate for the
present period is a frequent topic of debate among economists. Over the
long run, this rate depends on such factors as a society's preference for future
consumption and the investment opportunities available to it. Although these
factors change only slowly, they could be significantly different by 2075 than
they are today (see Appendix H for further discussion).
Fifth, the cost estimates presented here do not include some costs that
could be of interest. Some transition costs involved in switching from one type
of technology to another are not included. An example of the type of transition
cost that was not included is the unemployment experienced by workers who are
temporarily out of work while new capital equipment is being installed. Also,
administrative costs, discussed in Chapter .11, are not included.
Finally, these costs ignore currently undefined risks and associated costs
that could occur with the use of substitute chemicals.
-------
9-22
REFERENCES
U.S. Environmental Prbtection Agency (1987), Assessing the Risks of Trace
Gases that Can Modify the Stratosphere. U.S. EPA, Washington, D.C. This is
a revised version of: U.S. Environmental Protection Agency (1986), An
Assessment of the Risks of Stratospheric Modification. U.S. EPA, Washington,
D.C.
-------
CHAPTER 10
frENEFTTS AND COSTS OF VARIOUS OPTIONS
WITH SENSITIVITY ANALYSIS
The previous several chapters of this Regulatory Impact Analysis have
defined, measured, and, where possible, quantified benefits and costs associated
with stratospheric ozone protection. This chapter develops and implements a
method to compare benefits with costs. Several characteristics of the benefit
and cost streams that make this problem particularly complex are examined in
Section 10.1. Section 10.2 presents the methodology for the analysis. Section
10.3 presents the several benefit-cost comparisons and Section 10.4 subjects
these results to a sensitivity analysis.
10.1 SPECIAL CHARACTERISTICS OF THIS BENEFIT TO COST COMPARISON
The analysis of stratospheric ozone protection is unavoidably carried out
over a period measured in decades to centuries. Two problems follow from this
factor -- truncation of benefit and cost streams and great uncertainty. The
long time period of the analysis and the nature of the benefits makes uniform
quantification difficult. The implications of these factors are discussed in
turn.
10.1.1 Truncation of Benefit and Cost Streams
As a result of some action, (e.g., a regulation), benefits (or costs) could
accrue during each of a series of years. The set of such benefits (or costs) is
referred to as a time stream. If the measurement of a time stream is cut off at
a point in time after which it would logically continue, the time stream is. said
to have been truncated. This is illustrated in Exhibit 10-1, in which a time
stream of benefits is represented as beginning at time tl and continuing to
grow. If this hypothetical benefit stream is truncated at time t2, benefits
occurring after time t2 (i.e., to the right of the line t2-a) would not be
included in the analysis. In effect, such benefits would be valued at zero. If
such benefits were the consequence of actions whose costs were estimated to be
incurred prior to time t2, truncation of the benefits stream would result in an
inappropriate benefit-cost comparison. In this example, because costs occur
prior to t2, estimates of net benefits (or estimates of a benefit-cost ratio)
would be biased downward.
In the case of stratospheric ozone protection, benefits accrue
contemporaneously with costs as well as long afterward for two reasons:
(1) Ozone-depleting compounds have very long atmospheric
lifetimes. Therefore, foregoing the use (and emission) of
a compound in any given year (presumably at some cost)
helps to reduce ozone depletion immediately, as well as
for many decades and centuries to come.1
1 For example, the e-folding atmospheric lifetime of CFC-12 is estimated at
nearly 140 years. This means that 38 percent of the CFC-12 molecules remain in
the atmosphere 140 years after their release. The benefit of foregoing the use
(and emission) of CFC-12 has benefits that extend through this time period and
beyond.
-------
10-2
EXHIBIT 10-1
EXAMPLE OF TRUNCATED TIME STREAM
Benefits
Time
-------
10-3
(2) Skin cancer risks in humans, a major consequence of ozone
depletion, is believed to be associated with cumulative
lifetime exposure to UV radiation. Therefore, reduced
exposure during the early part of a person's life (realized
as a consequence of protecting stratospheric ozone) has
benefits for that person later in life (i.e., reduced risk
of skin cancer). The benefit of reduced skin cancer
incidence is realized after the reduction in exposure
occurs.
Because of these two factors, a comparison of benefits and costs measured over
the same finite time horizon produces an underestimate of net benefits. Because
benefits accrue for long periods after costs are incurred, the underestimate may
be significant.
Of note is that extending the time horizon does not necessarily resolve this
issue. An arbitrarily long, but finite, time horizon will still generally
result in a biased benefit-cost comparison.. Although a preferred analytic
solution may be to perform the analysis over an infinite period, this is
generally not feasible because: (1) the models are generally not valid over so
long a period; and (2) the system does not reach steady state (allowing
extrapolation) within the acceptable time limits of the models.
Therefore, although it would be best to avoid truncation, it is not possible
to do so in this case. Particular care must be taken in structuring a
benefit-cost comparison, and a method for doing so is presented below.
10.1.2 Uncertainty
Evaluating the effects of regulations to protect the stratospheric ozone
layer involves measuring complex phenomena over very long periods of time.
Factors such as invention, research and development, technological change, and
industry and consumer response to price change and altered product and input
availability, must be forecasted. While such analyses are difficult, they are
often performed in regulatory analysis. In this case the challenge is the very
large number of years -- nearly two centuries -- over which such phenomena must
be considered.
There is no definitive way to deal with this uncertainty. One must make the
most informed projections one can, be clear about their source and their
implications, and then subject them to a sensitivity analysis. Such an analysis
seeks to vary uncertain assumptions or projections in order to indicate how
sensitive the results of the analysis -- and the policy implications that follow
.. are to alternative values. Section 10.4 presents a sensitivity analysis of
the benefit-cost analysis for this study.
10.1.3 Honquantified Benefits
A traditional benefit-cost analysis compares only what can be quantified and
transformed into dollar units or monetized.. If all of the relevant benefits and
costs are quantifiable, no problem exists. If, however, some costs cannot be
quantified, a benefit-cost contrast that did not take this into account would
-------
10-4
overestimate net benefits and be biased in favor of adopting the policy being
analyzed. If, on the other hand, some benefits could not be quantified, while
all costs could be, the benefit-cost analysis would be biased against adopting
the policy.
Reduced skin cancer incidence and mortality provide the major quantifiable
benefits. Yet other major factors, such as impacts on aquatic and terrestrial
ecosystems, global warming, and the incidence of infectious diseases in humans,
are not satisfactorily captured in the quantified benefits examined below. Such
benefits, and others discussed in Chapter 8, are difficult or impossible to
quantify because doing so involves the resolution of conceptual problems and
assembly of data that have not been completed. In many instances some of these
issues may never be completely resolved.
The fact that some benefits are quantified and thus conveniently comparable
to costs should not blind the policymaker to the existence of non-quantified
benefits. Rather, policymakers must array all- factors -- cost an
-------
10-5
EXHIBIT 10-2
ILLUSTRATION OF TRUNCATED POPULATION STREAM AND
ASSOCIATED BENEFIT AND COST STREAMS
Population
1985
2075
2165 Time
-------
10-6
benefit stream. Recall that the major monetized benefit is the value due to
reduced skin cancer incidence and mortality. The aggregate value of this
benefit, in turn, depends on the size of the population (as well as incidence of
UV radiation and its effects).
To illustrate the methodology, we relate costs and benefits to time and the
population relevant to that time. First, we define two benefit concepts:
o Benefit 1 -- the benefit associated with the population of
persons alive today and born prior to 2075. This benefit is
functionally related to the area under the line ABC in
Exhibit 10-2; therefore, we place a Bl in this area.2
o Benefit 2 -- the benefit associated with the population of
persons born after 2075. Note that someone born in the year
2100 could, by assumption, live to the year 2190. By our
truncation at year 2165, any benefits associated with such a
person would go uncounted for the period 2165 to 2190. For
someone born in 2165, the uncounted benefit period would be
2166 to 2255. Thus, the benefits excluded as a result of
the inevitable truncation could be quite large. We place a
B2 in the area BDC, recognizing that B2 is an underestimate
of benefits beyond 2075 since it excludes any benefits
beyond 2165.
Next, we also define two cost concepts:
o Cost 1 -- costs incurred from the present to 2075. These
are associated with some of Benefit 1, but also with some of
Benefit 2 (as well as benefits that occur beyond 2165, if
they were evaluated). This is because some costs incurred
in, say, 2050, will result in a life saved of someone born
after 2075. However, that benefit is counted as part of
Benefit 2. We place a Cl at the top of Exhibit 10-2 to
indicate the period of time for which Cost 1 is relevant.
o Cost 2 -- costs incurred from 2075 to 2165. Note that Cost
2 could be associated with Benefit 1 and Benefit 2. That
is, someone born in 2025, who would be 65 in 2090, might
have his or her life prolonged by a cost incurred in 2076.
A C2 is placed in the exhibit to indicate the time period
during which Cost 2 is incurred.
Now, we examine a reasonable set of hypotheses about how Benefit 1 and
Benefit 2 relate to Cost 1 and Cost 2. If these hypotheses are borne out by the
2 In order to simplify this presentation of the methodology, in this
section we do not discuss the benefit stream in terms of present values of
dollar amounts. In practice, of course, this is how benefits are measured;
i.e., below they are presented in present value terms. Note also that in
Exhibit 10-2 "Bl" represents benefits that are a function of the area (under
line ABC) in which it is placed; this area is not a benefit measure.
-------
10-7
data, they yield an unambiguous conclusion to the benefit-cost analysis, even in
the presence of the truncation.
• i
Consider first the following propositions. We know Benefit 2 is likely to
be an underestimate of benefits associated with Cost 2. If Cost 2 is less than
Benefit 2, even in the presence of the truncation, then it is straightforward to
justify Cost 2 based only on the truncated measure of Benefit 2. Now, compare
Benefit 1 and Cost 1. If Benefit 1 exceeds Cost 1, the overall net benefits
must be positive. It might seem problematic that part of Benefit 1 is
associated with Cost 2. But, by the prior conclusion (Benefit 2 exceeds Cost
2). Cost 2 has already been paid for. Thus, Benefit 1 and Cost 1 can be
directly compared without concern for the contribution of Cost 2 to Benefit 1.
The method for contrasting benefits and costs requires that, for each
regulatory alternative, the Bl to Cl and B2 to C2 comparisons be made. We now
examine how to do so for a set of regulatory alternatives when the ranking of
the alternatives is of interest. Recall that this analysis examines eight
regulatory alternatives: (1) No Controls;- (2) CFC Freeze; (3) CFC 20%; (4) CFC
50%; (5) CFC 80%; (6) CFC 50%/Halon Freeze; (7) U.S. 80%/Halon Freeze; and (8)
U.S. Only CFC 50%/Halon Freeze. It may be that in contrast to the No Controls
Case (i.e., the baseline of no regulation), all alternatives are desirable. The
goal is to know which is most desirable.
The following procedure is suggested. First, determine if the B2 to C2
test is passed (i.e., whether B2 exceeds C2 or not; B and C are measured in
present value terms). The amount of the B2 - C2 difference is not factored into
the analysis because of the speculative nature of estimates so far into the
future. Next, measure the Bl - Cl difference for all regulatory alternatives
that pass the first test. Each alternative is evaluated relative to the No
Controls Case. The Bl - Cl differences are enumerated only for the alternatives
that passed the first test (B2 > C2), and the B1-C1 differences are used for
ranking.3
10.3 COMPARISON OF BENEFITS AND COSTS
This section presents the comparison of benefits and costs for the various
alternatives that have been analyzed. The first part of this section discusses
the key assumptions and parameters used to measure the costs and the benefits.
The second section reviews the specific alternatives analyzed throughout the
last several chapters. The last section presents the comparison of the costs
and benefits.
10.3.1 Kay Assumptions and Parameters
To conduct the benefit-cost comparison, the following key assumptions and
parameters have been defined:
o Two time periods are used in the benefit-cost
comparison--(1) 1985 to 2075 and (2) 2075 to 2165. As
3 In fact, even if B2 < C2, the policy could still have positive net
benefits. The truncated benefit stream, Benefit 2, is biased downward, and
Benefit 1 may exceed Cost 1 by a sufficient amount to result in positive net
benefi-s. Since the data presented below shows .that B2 > C2 in all cases
examined, we do not deal with this complication.
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10-8
discussed previously in this chapter, all benefits enjoyed
by people born before 2075 are compared to costs incurred by
2075, while costs incurred between 2076 and 2165 are
compared to benefits received by 2165 by people born from
2075 to 2165 (even though, as discussed earlier, benefits
may accrue after 2165 from costs incurred prior to 2165).
The choice of these time periods allows for a reasonable
comparison of future costs and benefits from stratospheric
ozone protection to be made.
o All costs and benefits, that could be quantified are
expressed on a present value basis in 1985 dollars. The
present values have been determined by applying a two
percent real discount rate to the future streams of costs
and benefits. (Alternative discount rates are presented in
the sensitivity analysis.)
o For purposes of the benefit-cost comparison, the benefits
evaluated in Chapters 7 and* 8 are compared to the costs
presented in Chapter 9 for the "Least Cost" set of cost
assumptions. If other cost estimates were used, the
benefit-cost comparison would be slightly different because
(1) costs for the other cases analyzed would be higher than
the estimates in the "Least Cost" case and (2) the benefit
estimates associated with other cost scenarios (i.e., other
than the "Least Cost" scenario) would be slightly different
than the benefits identified for the "Least Cost" scenario
due to changes in CFC control options from one cost scenario
to the next (e.g., the choice of control options can affect
whether the CFC emissions occur promptly or are delayed,
which could change the type and magnitude of the benefits).
Despite this focus on the "Least Cost" scenario, the results
of the benefit-cost comparison would not change
significantly if other cost scenarios were evaluated.
10.3.2 Alternatives Analyzed
For the benefit-cost comparison, eight regulatory alternatives are analyzed
(a more complete discussion of these alternatives can be found in Chapter 5):
o No Controls--No controls on CFCs or halons occur. This is
the baseline scenario from which the impacts of various
control options are measured.
o CFC Freeze--CFC use is held constant at 1986 levels starting
in 1989.
o CFC 20%--In addition to the freeze in 1989, a 20% reduction
worldwide occurs in 1993.
o CFC 50%--In addition to the freeze in 1989 and the 20%
reduction in 1993, a 50% reduction occurs in 1998.
-------
10-9
o CFG 80%--In addition to the freeze in 1989, the 20%
reduction in 1993, and the 50% reduction in 1998, an 80%
reduction occurs in 2003.
o CFG 50%/Halon Freeze--In addition to the freeze on CFC use
in 1989,- the 20% reduction in 1993, and the 50% reduction in
1998, Halon use is held constant to 1986 levels starting in
1992.4
o CFC 50%/Halon Freeze/U.S. 80%--Same as the CFC 50%/Halon
Freeze case, except that the U.S. reduces to 80% of 1986
levels of CFC use in 2003.
o U.S. Only/CFC 50%/Halon Freeze--Same as the CFC 50%/Halon
Freeze case, except the U.S. is the only country in the
world that participates.
As discussed above, the cost and benefit estimates evaluated for each of
these regulatory alternatives are determined from the "Least Cost" scenario
discussed in Chapter 9. This scenario assumes that CFC and Halon control
options will be adopted in an economically-efficient, timely fashion.
10.3.3 Comparison of the Benefits and Costs
As discussed above, two time periods are used in the benefit-cost
comparison: (1) 1985 Co 2075 and (2) 2075 to 2165. All benefits enjoyed by
people born before 2075 (i.e., Benefit 1) are compared to costs incurred by 2075
(i.e., Cost 1), while all costs incurred between 2076 and 2165 (Cost 2) are
compared to benefits received by 2165 by people born after 2075 (Benefit 2).
The benefits evaluated are divided into two categories--health impacts
(which are typically less difficult to quantify) and environmental impacts
(which are usually more difficult to quantify). The specific health benefits
valued in this analysis include changes in the number of cases and deaths from
nonmelanoma and melanoma and changes in the number of cases of cataracts.
Exhibit 10-3 summarizes the magnitude of these benefits for the No Controls and
alternative scenarios for people born before 2075; Exhibit 10-4 summarizes these
benefits for people born after 2075 (see Chapter 8 for valuation of these
benefits).
The specific environmental (non-health) impacts valued in this analysis
include UV radiation impacts on agricultural crops, UV radiation impacts on the
major commercial fish species, increased tropospheric ozone levels on
4 As discussed in Chapter Five, the Montreal Protocol specifies that the
CFC freeze would begin on July 1, 1989 assuming entry into force occurs prior to
January 1, 1989, the 20 percent CFC reduction on July 1, 1993, and the 50
percent CFC reduction on July 1, 1998. For purposes of analysis in this study,
the effective dates were analyzed on a calendar year basis with a six month
delay. This adjustment has been made for all of the alternative control
scenarios; it has less than a 0.5 percent impact on the estimated costs and
benefits presented throughout this Regulatory Impact Analysis.
-------
10-10
EXHIBIT 10-3
SUMMARY OF THE HEALTH BENEFITS FOR
PEOPLE BORN BEFORE 2075 BY SCENARIO fl/
(billions of 1985 dollars)
Value of
Avoided Cases
Scenario Skin Cancer Cataracts
No Controls
CFC Freeze 55 2 '
CFG 20% 57 ° 2
CFC 50% 59 2
CFC 80% 61 3
CFC 50%/Halon Freeze 62 3
CFC 50%/Halon Freeze/ 62 3
U.S. 80%
U.S. Only/CFC 50%/ 29 1
Halon Freeze
Value of
Avoided Skin
Cancer Deaths
•
5,900
6,031
6,192
6,287
6,349
6,392
2,801
Total Value
(Benefit 1)
-
5,957
6,090
6,253
6,351
6,414
6,457
2,831
a/ All dollar values reflect the difference between the No Controls
scenario and the specified alternative scenario. Estimates assume a 2
percent discount rate.
-------
10-11
EXHIBIT 10-4
Scenario
No Controls
CFG Freeze
CFC 20%
CFC 50%
CFC 80%
CFC 50%/Halon
CFC 50%/Halon
U.S. 80%
U.S. Only/CFC
Freeze
+ - Less than
FOR PEOPLE BORN AFTER 2075^
(billions of 1985 dollars)
Value of Value of
AyQided Cases Avoided Skin Total Value
Skin Cancer Cataracts Cancer Deaths (Benefit 2)
.
13 c + 2,544 2,557
13 + 2,574 2,588
14 + 2,621 2,635
14 + 2,648 2,662
Freeze 14 + 2,680 2,694
Freeze/ 14 + 2,683 2,697
50%/Halon 3 + 512 515
$500 million.
All dollar values reflect the difference between the Mo Controls
scenario and the specified alternative scenario. Estimates assume a 2
percent discount rate.
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10-12
agricultural production, UV radiation damage to polymers, and impacts on harbors
(primarily from storm damages) due to increases in the level of the seas.
Exhibit 10-5 summarizes the magnitude of these benefits for the No Controls and
alternative scenarios (see Chapter 8 for valuation of these benefits); the value
of these benefits has been estimated through the year 2075.
The costs to achieve the goals of each regulatory alternative are based on
the "Least Cost" case discussed in Chapter 9. A summary of these costs is
provided in Exhibit 10-6; costs incurred by 2075 (Cost 1) and between 2076 and
2165 (Cost 2) are shown.
Following the methodology set forth above, we first compare B2 and C2. This
comparison is shown in Exhibit 10-7. The analysis shows that for all cases B2
exceeds C2. Therefore, we proceed to compare fil to Cl.
Exhibit 10-8 compares the costs of control through 2075 with only the health
benefits incurred by people born before 2075 for each scenario. Exhibit 10-9
provides a similar comparison of costs and -benefits that includes the health and
environmental (non-health) impacts; it also lists major costs and benefits that
were not quantified and therefore are not captured by a comparison of monetized
values.
As shown in Exhibit 10-9, benefits to all people born by 2075 (Benefit 1)
exceed the costs of control through 2075 (Cost 1) for every case. Moreover,, it
was shown earlier that the benefits after 2075 (Benefit 2) exceed the costs of
control incurred after 2075 (Cost 2). From these results, it appears that the
benefits of the alternative's analyzed exceed the costs of control for CFCs and
Halons. However, the quantitative benefit-cost comparison in Exhibit 10-9 is an
incomplete summary of all factors that should be considered by policymakers when
making policy choices since that comparison includes only those factors that
could be quantified and monetized. However, as discussed earlier, several
potential benefits of stratospheric ozone protection and costs of control could
not readily be quantified and monetized. The major unquantified benefits and
costs are enumerated in the last column of Exhibit 10-9. These factors should
also be considered when evaluating various policy choices.
10.4 SENSITIVITY ANALYSIS
The analysis in the preceding section indicates that the benefits of
stratospheric ozone protection exceed the costs of control of ozone-depleting
substances by a substantial margin. This result is sensitive to several key
assumptions. The following sensitivities are analyzed to determine how
sensitive the results are to each factor:
o Social discount rates of one and six percent.
o Statistical value of life estimates of two and four million
dollars.
o Rate of growth in CFC use is altered; the results above
assume growth of 3.6 percent per year from 1985 to 2000 and
2.5 percent per year from 2000 to 2050. Low (2.1 percent
per year from 1985 to 2000 and 1.3 percent per year from
2000 to 2050) and high (5.2 percent per year from 1985 to
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10-13
EXHIBIT 10-5
SUMMARY OF THE ENVIRONMENTAL BENEFITS THROUGH 2075 BY SCENARIO a/
(billions of 1985 dollars)
TJV UV
Damage Damage Damage UV Sea Total
to to from Damage to Level Benefits
Scenario Crops by Fish by Ozone by Polymers by Rise £/ (Benefit 1)
No Controls
CFC Freeze
CFC 20%
CFC 50%
CFC 80%
CFC 50%/Halon
Freeze
CFC 50%/Halon
Freeze/U.S. 80%
U.S. Only/CFC 50%/
Halon Freeze
-
17.6
19.4
21.8
23.3
23.4
23.6
8.2
-
5.4
.5.5
5.5
5.5
5.5
5.5
2.4
-
9.7
10.4
11.6
12.3
12.4
12.5
5.2
-
2.4
2.8
3.0
3.1
3.1
3.1
4.0
-
3.3
3.7
4.3
4.7
4.3
4.4
1.2
-
38.4
41.8
46.2
48.9
48.7
49.1
21.0
a/ All dollar values reflect the difference between the No Controls
scenario and the specified alternative scenario. Estimates assume a 2
percent discount rate.
by Middle values were used.
£/ Medium values assuming impacts are anticipated were used.
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10-14
EXHIBIT 10-6
SUMMARY OF THE COSTS OF CONTROL BT SCENARIO a/
(billions of 1985 dollars)
Scenario
No Controls
CFC Freeze
CFC 20%
CFC 50%
CFC 80%
CFC 50%/Halon Freeze
CFC 50%/Halon Freeze/
U.S. 80%
U.S. Only/CFC 50%/Halon
Freeze
Total Costs By 2075
(Cost 1)
..
6.8
12.1
24.4
31.4
27.0
34.0
27.0
Costs Between 2076 and 2165
(Cost 2)
--
4.2
5.7
9.1
10.3
10.5
11.8
10.5
a/ All dollar values reflect the difference between the No Controls
scenario and the specified alternative scenario. Estimates assume a 2
percent discount rate.
-------
10-15
EXHIBIT 10-7
COMPARISON OF BENEFITS AND COSTS BEYOND 2075
(billions of 1985 dollars^
Benefits Through
2165 for People
Born After 2074 Costs from 2075-2165
Scenario (Benefit 2) (Cost 2)
Is B2 Greater
Than C2?
No Controls - -
CFC
CFC
CFC
CFC
CFC
CFC
U
Freeze
20%
50%
80%
50%/Halon Freeze
50%/Halon Freeze/
.S. 80%
U.S. Only/CFC 50%/Halon
Freeze
2,557
2,588
2,635
2,662
2,694
2,697
515
4.2
5.7
9.1
10.3
10.5
11.8
10.5
Yes
Yes
Yes
Yes
Yes
Yes
Yes
All dollar values reflect the difference between the No Controls scenario
and the specified alternative scenario. Estimates assume a 2 percent
discount rate.
-------
10-16
EXHIBIT 10-8
NET PRESENT VALUE COMPARISON OF COSTS AND
HEALTH BENEFITS THROUGH 2075 BY SCENARIO a/
(billions of 1985 dollars)
Health Benefits
(Benefit 1)
No Controls
CFC Freeze
CFC 20%
CFC 50%
CFC 80%
CFC 50%/Halon Freeze
CFC 50%/Halon Freeze/
--
5,957
6,090
6,253
6,351
6,414
6,457
Costs
(Cost 1) Benefits -Costs
--
7
12
24
31
27
34
--
5,950
6,078
6,229
6,320
6,387
6,423
Incremental
Benefits -
Costs by
--
5,750
128
151
91
67
36
U.S. 80%
U.S. Only/CFC 50%/Halon
Freeze
2,831
27
2,804
2,804
a/ All dollar values reflect the difference between the No Controls
scenario and the specified alternative scenario unless noted otherwise.
Valuation of the health benefits applies only to people born before
2075; costs are estimated through 2075. In all scenarios, benefits
through 2165 for people born from 2075 to 2165 exceed the costs of
control from 2075 to 2165. Estimates assume a 2 percent discount rate.
by Change in (benefits-costs) from the indicated scenario to the scenario
listed above it, e.g., "CFC Freeze" minus "No Controls," unless noted
otherwise.
£/ Compared to No Controls Case.
-------
cr cosm AID
2*73 IT BTFNA1TO •/
(millions oC IMS dollars)
Ho Controls
CFC Freese
CFC 201
CFC 301
CFC 801
CFC 30X/Halon Frees*
CFC 301 /Helen Freese/
Health and
Environmental
Benefits
--
3.993
4.132
'
4,299
• .400
4.443
4.304
Costs
~
7
12
24
31
27
34
Het Benefits
(Minus Costa)
~
3,988
• .120
• ,273
4,349
4,434
• ,472
Net Incremental
Benefits (Minus
Costs) b/
—
3.988
132
133
94
•7
34
Costs and Benefits That Have Hot Been Quantified
Costs
Transition costs, such ss temporary layoffs
while new capital equipment is installed
Administrative costs
Costs of unknown environmental basards due 'to
use of chemicals replacing CFCs
Health Benefits
Increase in actinic keratosis from UV radiation
Changes to the human immune system
Tropospherio ozone impacts on the pulmonary
0.8. 80S
0.8. Only CFC SOS/Balon
Fraasa
2.M2
27
2.823
2.823 p/
•ystaai
Pain and suffering from skin oancar
Envlronaantsl Bmsfits
TaafMratura risa
Baacb arosion
Loss of coastal mtlanda
Additional saa l«val rlsa iipacti dua to
Antarctic lea dischsrga. Oraanland lea
diacharga, and Antarctic ataltwatar
UV radiation lopacts on racraational fishing,
tha overall swrlns acosysta*. other crops,
forests, and other plant species, and
Materials currently in use
Tropospheric otone lapacts on other crops,
forests, other plant species, and •en-made
swterlels
s/ All dollar values reflect the difference between the No Controls scenario and the specified alternative scenerlo. unleci
otherwise Indicated. Valuation of the beelth and environmental benefits applies only to people born before 2073; costs are
estimated through 2073. In ell scenarios, benefits through 2143 for people born from 2073 to 2143 exceed the coats of control
from 2073 to 2163. Estimates assume a 2 percent discount rate.
fe/ Change in net Incremental benefits from the indicated scenario to the scenario listed above it, e.g.. "CFC Freeze" minus "Mo
Controls," unless otherwise indicated.
£/ Compared to No Controls Case.
-------
10-18
2000 and 3.8 percent per year from 2000 to 2050) cases are
analyzed.
Previous results used the DNA action spectrum; the erythema
spectrum is substituted.
To capture uncertainties in the dose-response coefficients,
low and high values are evaluated based on the statistical
variation about each coefficient (± one standard error about
each coefficient).
The statistical value of life has been adjusted over time at
the rate of growth in per capita income (i.e., 1.7 percent
real growth per year); this assumption is evaluated at
one-half and double this rate of growth.
Protocol participation rates for other parts of the world
are altered to provide lower and higher estimates than
assumed in the analysis above. These participation rates
are indicated below (the middle assumptions were used for
the base case estimates):
High
Middle
Low
100%
100%
100%
Other Developed Countries
100%
94%
75%
Developing Countries
100%
65%
40%
The technological rechanneling estimates used above are
evaluated at a higher level, lower level, and at a zero
impact level. These rates are presented below as a percent
of the assumed growth rate in CFC use (the middle
assumptions were used for the base case estimates, see
Appendix C):
High .
Middle
Low
Amount of
Reduction
CFC Freeze
CFC 20%
CFC 50%
CFC 80%
CFC Freeze
CFC 20%
CFC 50%
CFC 80%
CFC Freeze
CFC 20%
CFC 50%
CFC 80%
U.S. and Other
Developed Countries
0.375
0.375
0.250
0.250
0.
0.
,5
.5
0.375
0.375
0.75
0.75
0.50'
0.50
Developing Countries
0.5
0.375
0.250
0.250
0.75
0.625
0.5
0.5
0.875
0.75
0.625
0.625
None
All cases
1.00
1.00
-------
10-19
o The rates-of growth in trace gas concentrations,
specifically methane, C02, and N20, are altered to provide
lover and'higher growth rates than used in the results
presented'above. These lower and higher growth rates are
presented below, along with the middle assumptions used for
the base case estimates:
Methane C02 N20
High 1% annual compounded growth NAS 75th percentile 0.25%/year
Middle 0.017 ppm/year NAS 50th percentile 0.2%/year
Low 0.01275 ppm/year NAS 25th percentile 0.15%/year
For all of the above sensitivity analyses, comparisons are made between two
scenarios only -- the No Controls scenario and the CFC 50%/Halon Freeze
scenario. These two cases are shown to indicate the magnitude of the changes in
costs and benefits due to each sensitivity analysis. Also, for all
sensitivities only the health benefits due to avoided deaths are shown; these
benefits provide the vast majority of all health and environmental benefits from
stratospheric ozone protection. Exhibit 10-10 summarizes the results from the
sensitivity analyses.
Also shown in Exhibit 10-10 are the following two cases:
o Low discount rate and high value of life, shows the combined effects of
assuming a 1 percent discount rate and a $4 million value of life
growing at 3.4 percent per year.
o High discount rate and low value of life, shows the combined effects of
assuming a 6 percent discount rate and a $2 million value of life
growing at 0.85 percent per year.
The results for these two cases are shown for each of the control cases
discussed above.
-------
10-10
S«Mitivity
1. Bai« Cata
Bo Controls
CTC SOX/Balon Pr««s«
(Protocol)
Diffarmc*
2. Discount Ratas
A. 1 F«rc«nt Discount Rat«
Ho Controls
CFC 30Z/Halon Fr*«*«
Ditfamc*
B. 6 P«rc«it Discount Ret*
Ho Controls
CFC 301/Halon Ft
DiCfarsnc*
3. Valua of Lifa
A. TOL at 82 aill ion
Ho Controls
CFC 301/Halon fr««««
TOL «t 84 Billion
Bo Controls
CFC SOX/Halon 7r*«*
4. CFC/Haloa Osa Growth
A. Low Os« Growth
Bo Controls
CFC 30X/Bml£D
Diffazanoa
B. li«b Os« Growth
Bo Controls
CTC 30I/H*lon Fr*«M
gratlaat^s
Osona
Delation
in
2073 fl)
39.9
1.3
38.6
i
39.9 C
1.3
38.6
i
39.9
1.3
38.6
39.9
1.3
38.6
39.9
1.3
38.6
7.0
-0.3*/
7.3
>30.0
3.8
>44.2
i assess* alp
Additional
Daaths by
2163 (IP6)
3.21
0.07
3.14
3.21
0.07
3.14
3.21
0.07
3.14
3.21
0.07
3.14
3.21
0.07
3.14
0.34
0.0
0.34
4.98
0.24
4.74
azent iH «-"*••'
Vain*
of Lives
Lost CIO9)
6,499
130
6,349
24.630
388
24.262
71
9
62
4.333
100
4.233
8.667
223
8.442
709
9
700
10,321
319
9,802
POR COSTS AW
FOBE 2073
t rat«)
Hat Present Value
Control of Benefits - Costs
Coats (10*) (109)
27
27 6,322
46
46 24,216
m
3
3 37
27
27 4.206
-------
10-21
10-10
SQHNfiHT OP WMnrTg
MftJOR HEALTH BI
Oson*
Depletion I
in I
SenaitivltT 2073 (Z) 2
Ho Control*
CFC 50Z/H*lon Freese
Difference
6. De«e Response Coefficient*
39.9
1.3
38.6
au&Fiis FCR v,
•••• • 2 pea
ulditional
leath* by
!163 (10*)
2.81
0.06
2.75
OT Kf/ftrifiFS FOB. GOSX3 ABD
mix* BLUB BlUnJIZ 2073
react diectnat rate)
Value Het Present Value
of Live* Control of Benefit* - Colt*
Lost (10*) Cost* (10*) UO9)
3.700
134
3.366
27
27 3.339
A. Low Do** Re*pon** Coefficient*
Ho Control*
CFC 30Z/H*lon Freese
Difference
39.9
1.3
38.6
1.60
0.05
1.55
3.260
103
3.154
-
27
27 3,127
B. High Do** R**pon*e Coefficient*
Ho Control*
CFC 30Z/l*lon Fr**s*
7. Value of Life (VOL) Growth D
39.9
1.3
itttt
3.68
0.09
3.59
11,400
195
11.205
-
27
27 11.178
A. VOL Grow* at 0.83 fere ant Annually
Bo Control*
CFC 30Z/I*lon Freese
DafarenC.
39.9
1.3
38.6
3.21
0.07
3.14
2.180
72
2,108
-
27
27 2,081
B. VOL Ore** at 3.4 Fercant Annually
He Control*
CFC 50Z/H*loa Frees*
Difference
39.9
1.3
34.6
3.21
0.07
3.14
63.200
780
62,420
-
27
27 62,394
-------
10-22
SXMA
HI
Sansitivltr
8. Global Participation Ratal
A. Hi«h Participation
Be Control*
CTC 301/Halon Fraasa
Diffaranca
B. Low Participation
Be Controls
CTC 301/Halon Fraaxa
Diffaranca
a Tachnolocical R^chvnnf 1 Inc
A it< aft Taclnolofical Bad
Be Controls
CTC 301/Halon Fraasa
Diffaranca
B. Lew Tacbno logical IMOJ
Be Controls
CTC 30X/HsloB TXMM
Mffarsnea
C. Bo Tachaolotical lachai
Be Controls
CTC 30X/H*10a Fra«*a
Diffaranca
jcm. BEALZB 1
Oa^-t«
OMM
Daplation
in
2073 CX)
39.9
0.3
39.4
39.9
2.4
37.3
39.9
1.1
38.8
39.9
1.3
38.4
mA1L ***•
39.9
2.3
37.4
IULHIBIT
(oontiJ
cs OP mjmi J
BfiUI!il3 FOR
auo» -2i
Daaths by
2143 CIO*)
•
3.21
0.03
3.18
3.21
0.12
3.09
3.21
0.04
3.13
3.21
0.07
3.14
3.21
0.10
3.11
10-10
mad)
LV1XX ftlf "•*"** I
EBDRU BCB9 WP
MrcBtt Ataronnt
Valaa
of Liras
Loat CIO*)
4.499
82
4.417
4,499
243
4.234
4.499
133
4,344
4,499
144
4.333
4,499
229
4,470
tB COSTS ABO
THE 2073
, rat«)
Control
Coats CIO*)
-
27
27
-
27
27
21
21
34
34
37
37
Hat Praaant Valua
4,390
6.207
4.343
4,301
4,413
-------
10-23
SDMsK
HAJ
r OF REsa
CB BE1UB
(ZstlsMtc*
Ozone
Depletion
in
Sensitivitr 2073 (I)
10. Other Trace Oaa Growth
A. Lew Trace Gas Growth
Bo Controls
ere SOZ/Balon Freesa
Difference
B. Hish Trace Gas Growth
Bo Controls
Cre SOZ/Balon Frees*
Difference
11. Low Discount Rate and Hish
Value of Life
Bo Controls
Cre Freese
Difference
Bo Controls
CFC 20Z
Difference
Bo Controls
ere soz
Oi/foxono*
Bo Controls
ere soz
Difference
Bo Controls
Cre SOZ/Balea Freese
Difference
Bo Controls
Cre 30Z/Bal0B Frees*/
43.1
2.9
2.2
29.9
-1.3*
31.2
39.9
6.2
0.7
39.9
3.0
34.9
39.9
3.2
36.7
39.9
2.2
37.7
39.9
1.3
38.6
39.9
1.2
Qij^^BIT 10™ 10
its or sEBSznvrrr aHATTsn
i asxtsae a 2 percent dlamrai
Additional
Deaths by
2163 (106)
3.44
0.13
3.31 •
2.47
-o.oosf
2.46
3.21
0.29
2.92
3.21
0.22
2.99
3.21
0.14
2.07
3.21
0.10
3.11
3.21
0.07
3.14
3.21
0.06
Value
of Lives
Loat (109)
6,980
293
6,683
3.000
-94*
3.094
291.333
23,467
267,866
291.333
17,747
273.386
291,333
10,749
280,384
. 291.333
6,731
284,602
291.333
3.120
288,213
291.333
2,629
F^Bsl OQSX3 assBD
EFCBE 2073
A x*ta>)
Control
Coat* (109)
-
27
27
.
27
27
-
12
12
21
21
41
41
31
31
46
46
36
Ret Preaent Value
of Benefit* - Costa
CIO9)
6,638
3,067
267.834
273,363
280,343
284,331
288,167
0.8. 80Z
Difference 38.7
3.13
288,704
36
288.648
a/ Increased ocoaa abundance.
b/ Lives caved due to increased ocone abuadaace.
/ Valua of lives saved.
-------
10-10
HaJK TJUTB BZHEFUS PGR
(ZstlsBtas asswe e 2 p
Osene
Depletion Additional
in
Sensitivity 2.073 (X)
Be Controls
0.3. Only/CrC 30Z
Difference
Haloa rreese
12 Hifth Di*coa*Txt Rate and
Low Value ef Life
He Controls
CTC rreece
Difference
He Controls
crc 201
Difference
Be Controls
CTC 301
Difference
Bo Controls
crc BOX
Difference
Be Controls
ac 30X/Halon Pree*e
Difference
Bo. Controls
CTC 301/Halan rree«e
U.S. 80S
Difference
Bo Controls
0.8. Ctaly/CrC 30V
39.9
20.4
19.3
39.9
6.2
0.7
39.9
3.0
34.9
39.9
3.2
36.7
39.9
2.2
37.7
39.9
1.3
38.6
39.9
1.2
38.7
39.9
20.4
Deaths by
2163 (106)
3.21
1.84
1.37
3.21
0.29
2.92
3.21
0.22
2.99
3.21
0.14
2.07
3.21
0.10
3.11
3.21
0.07
3.14
3.21
0.06
3.13
3.21
1.84
EDQEUE Tf^f BJ9CBK 2073
Value
of Lives Control
Lost go9) Co«t« (109)
291,333
210,613 46
80,720 46
21
7 0.7
14 0.7
21
6 2
13 2
n
3 3
16 3
21
4 7
17 7
21
4 3
17 3
21
4 7
17 7
21
13 3
K«t Pr»««nt Value
of B«n«fit» - Cost*
(109)
80,674
13
13
11
10
12
10
Bslon rr«
Differ OBC*
19.3
1.37
-------
CHAPTER 11
DESCRIPTION AMD ANALYSIS OF REGULATORY OPTIONS
\
This chapter presents and evaluates the range of regulatory options
considered for limiting the production and consumption of chlorofluorocarbons
(CFCs) and Halons. It explores two generic types of regulatory approaches --
the use of economic incentives and the use of more traditional engineering
controls or product bans. Within each of these general approaches, several
options are discussed and evaluated. Specifically, the chapter focuses on the
following five regulatory options:
o auctioned permits;
o allocated quotas;
o regulatory fees;
o process and engineering controls and product bans; and
o hybrid combination of allocated quotas plus controls/bans.
Economic incentive approaches (auctioned permits, quotas, and fees)
generally provide incentives through higher CFC/Halon prices for firms to reduce
their use of these chemicals. Those firms who can make relatively low-cost
reductions will do so, while those firms who do not have such options will
continue to use CFCs or Halons, albeit at a higher price.
The first section of the chapter discusses the design of each of these
options. In developing these designs, a wide range of possibilities was
evaluated. For example, in the case of auctioned permits, auctions could be
held at specific times and places with only attendees bidding, or they could be
conducted through the mail. Bidding could be limited to certain people or open
to anyone. The process used in. selecting among the many possible design options
for each of the five approaches was to create the most straightforward option
possible so as to facilitate its potential to be successfully implemented and to
choose design characteristics in light of the following evaluation criteria:
o Environmental protection;
o Economic costs and efficiency;
o Incentives for innovation;
o Equity;
o Administrative burden and feasibility;
o Compliance and enforcement;
o Legal certainty; and
o Impacts on small business.
The analysis of the five options against these criteria draws from several
sources. Cost estimates, including transfer payments, were developed from the
Integrated Assessment Model described in earlier chapters and in Appendix I.
Estimates of administrative burdens were drawn from a separate study of this
-------
11-2
aspect of costs presented in Appendix M. Impacts on small businesses were
assessed as part of t:e Regulatory Flexibility Analysis presented as Appendix L.
Other information and' discussion draws from numerous meetings of the
Stratospheric Ozone Protection Workgroup which contains representation of
interested offices within EPA and from a series of meetings with CFC and Halon
user and producer industries.
The remaining sections of this chapter analyze and evaluate the five
options. Given the complexities of the options, a simple quantitative
evaluation was not possible. However, considerable information was developed to
provided a basis for comparing, both quantitatively and qualitatively, the
options under consideration.
11.1 DESCRIPTIOH OF REGULATOR? OFTIOHS
For each of the five options listed above, this sections presents a brief
summary of how that option would be structured and then a discussion of key
design features. For simplicity, the discussion focuses on CFCs. Section 11.3
below discusses the same options in the context of Halons and explains why the
two families of chemicals are being treated separately.
11.1.1 Auctioned Permits
SUMMARY OF SYSTEM DESIGN
CFC permits would be auctioned to any interested party. Firms using or
producing CFCs could elect to participate in the auction. The number of permits
auctioned would be determined by the desired regulatory goal (e.g., production
freeze, 20% or 50% reduction) and could be reduced over time to reflect a CFC
phasedown. Revenues from the auction would go to the U.S. Treasury.
The permit would allow a firm to produce a specified amount of CFCs (the
amount would be specified as so many kilograms of CFC-11 or CFC-12, 1.25 times
that amount of CFC-113, etc.). CFC production in any given year would equal the
quantity of permits auctioned. Multi-year permits and banking are inconsistent
with meeting the annual obligations for production limits required in the
international protocol and therefore would not be allowed. (Firms could,
however, use the permits to buy CFCs and then stockpile the chemicals
themselves.) .
Firms nov producing CFCs are likely to participate and obtain permits
directly through the auction. They would then have the option of selling CFCs
that have already been permitted to their customers (presumably for a higher
price reflecting their auction bid). Alternatively, they could also sell CFCs
to user firms that had directly obtained permits at auction or in secondary
markets. Similarly, user firms could elect to buy CFCs from any producer that
had already obtained permits at auctions (or from wholesalers or processors that
had permits), or they could elect to buy permits separately at auction or on a
secondary market and then assign them to their suppliers at the time of CFC
purchase. Host CFC users would probably not become directly involved with
permits, but would instead rely on their existing distribution chain to obtain
the required permits and CFCs.
-------
11-3
EPA racordkeeping would begin with an account being established for each
winning bidder at the time of auction. Future transactions would be credited
and debited against that account, similar to a checking account at a bank.
Because all permits eventually reach the hands of the CFG producers (or
importers) , monitoring compliance involves ensuring that the five CFC producers
and ten or so importers have total permits equal to or greater than their actual
production/ import levels .
DISCUSSION OF DETAIT^^p DESIGN FEATURES
o Number of perming . International negotiations and discussions of
domestic rules have focused on setting regulatory goals, at least in part,
directly linked to CFG production. This simplifying assumption is appropriate
because it reflects the very long atmospheric lifetimes of CFCs which minimizes
any need to be concerned about prompt versus delayed emissions. To the extent
the regulatory requirement involves a gradual or stepwise phasedown of
production, the number of permits issued would likewise be diminished over time.
;
The number of permits would be determined bv the regulatory
goal (e.g.. a freeze. 20%. 50%. reduction) and be modified to
reflect anv changes in that goal over time.
o Definition of permits. Permits could be defined for each type of CFC
(CFC-11, -12, -113, etc.) or a standard CFC depletion unit could be developed
and used for any of the regulated CFCs based on its relative depletion potential
(e.g., a pound of CFC-11 and -12 would be 1 unit, a pound of 113 would be 0.8
units, etc.). The latter system results in a larger market, provides additional
flexibility to firms, and does so without sacrificing the goals of environmental
protection. The UNEP protocol recognizes the desirability of permitting trading
among CFCs based on their relative ozone-depleting potential.
A standard CFC depletion unit would be defined and trading
•among regulated CFCs would be permitted based on their
relative ozone -depleting potential.
o Length of permit;. Permits could be for an amount of CFCs consumed
during a single specified year (e.g., 100 kilograms in 1987), an amount which
could be consumed annually for several years (e.g., 100 metric tons for each
year from 1990 to 1994) or they could specify a total amount over a given a
period of years («.g., 500 kilograms from 1990-1994). Permits of several years
duration could reduce the frequency of required allocations as well as ease the
transition to tighter standards. However, the terms of an international
agreement appear to limit EPA's flexibility in developing multi-year design
features. Also, enforcement and compliance monitoring would be hindered by
permits of long duration, since in many cases EPA would not be able to evaluate
compliance until the end of the multi-year period.
will acaeifv a quantity of CFCa for each year or for
of several years.
o Banking of unused permits. A related issue is whether permits that are
issued for a specified time period should be able to be "banked" and used
sometime after that date. While the use of either banked or multi-year permits
provides increased flexibility and certainty for industrial planning, neither
use adversely affects the environment -- while more production or use might
occur in a particular year, that would only result if less than permitted
-------
11-4
production occurred in a prior year. Once permits are sold, it is assumed that
the emissions have occurred and may not care what year they are actually used.
However, banking does not appear consistent with the formula for determining
compliance in the international agreement, and it would also complicate domestic
compliance monitoring. Firms seeking additional flexibility would have to
stockpile CFG supplies instead of permits.
Banking of unused permits would not be permitted. It is
inconsistent with the international agreement.
o Allocation of permits. Permits could be initially allocated either by
distributing them to past GFC user.industries (or producers, see quota option,
below) or by auctioning them. In general, the first option -- grandfathering
past users or producers -- involves granting them a potentially valuable
property interest (CFC permits) and may be criticized primarily on equity
grounds (e.g., why benefit current users and producers and discriminate against
future users and consumers). Because of the large number of CFC users, giving
permits directly to them would be administratively quite complicated. The
second option -- auctions -- would be more equitable. Furthermore, under an
auction instead of the revenues raised in accomplishing this regulatory
objective initially going to past producers or users, it would go to the federal
government in the fora of the auction price. However, legal concerns have been
raised about EPA's authority to hold an auction that would result in revenues
greater than the costs of administering the program.
Initial allocation would be based on auctions.
o Participation in the auction. Auctions could be open to any interested
party or they could be restricted to bona fide producers or users. A "producers
only" auction would be limited to five firms (possibly plus importers) and might
not create enough of a market to avoid market domination or possible collusion
among one or more firms. An auction limited to users could involve 40,000 firms
or more, but only a small portion are likely to participate with the remainder
probably relying on their CFC distribution chain to provide them with CFCs that
have already been permitted at the time of production. If the auctions were
open to both producers and users, maximum flexibility might be achieved. Large
or small users across all industries, along with chemical producers (and
wholesalers and reprocessors) could participate. Barring non-users or
non-producers.might seem attractive, but would involve the administratively
complicated task of qualifying who was or was not a real user. Nonparticipants
or firms not winning adequate permits at auction could satisfy their
requirements through their CFC distribution chain or through secondary market
transactions and would not likely become involved with permits at all.
Auctions would be open to anyone.
o Structure of auctions. Many different types of auctions are possible,
including those with open versus sealed bids and those where winning bids pay
the same or different prices. The structure of the auction may influence its
competitiveness, efficiency, and its final price. Sealed bids have the
advantage of being able to be done through ^he mails and therefore would not
require representation at one central location. They also may more directly
reflect the value of the permit for an individual firm rather than what the
party thinks an oral auction will produce. However, sealed bids limit the
firm's flexibility to respond to information made available during the oral bid.
Once all the bids have been assembled, the winning ones could be awarded from
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the highest bid on down until all the permits are assigned. Alternatively, the
same price (as established above) could be charged to all firms submitting bids
above the lowest accepted one (a uniform price auction) . This latter approach
would reduce the overall costs to firms (the transfer costs) without
substantially reducing incentives for reducing emissions but might encourage
firms to bid higher 'than they expect to pay. While set asides (e.g., a portion
of total permits) could be earmarked for certain users or for small firms, this
option may not be necessary if an active secondary market develops.
The structure of the auction would involve sealed bids . The
permits would be awarded based on the highest bid to the
lowest successful bid until the supply is exhausted. A
uniform auction price could be set or another mechanism could
for determining price.
o Trading of permits. Once the initial allocation has been completed
through auctions, parties may transact the purchase or sale of permits. These
secondary market transactions would provide greater flexibility for firms
electing not to participate in the auction or whose bids were not accepted. It
also provides greater flexibility for firms to meet short- tern changes in their
business activity (e.g., they may have bought either too few or too many
permits). An active secondary market will also correct any inefficiencies at
the time of the initial auction moving the system in the direction of lower
total costs. The advantages of trading must be evaluated in the context of
possible increases in administrative burden. To create an active market,
requires an effective and timely recordkeeping system be established to allow
producers and possible permit buyers to validate transactions before they are
completed.
Unrestricted trading of CFG permits would be encouraged.
o Recordkeeping requirements . To ensure the integrity of any trading
system and to determine compliance, some form of recordkeeping will be
necessary. At the time of the initial auction, winning bidders could be awarded
permits and at the same time have an EPA account established with the amount of
their permits. EPA (or its designee responsible for operating the system) would
have to be notified of any future transactions involving those permits and
appropriate accounts would be debited or credited accordingly, along the lines
of a checking, account. Eventually permits would move along the chain of
chemical distribution (from users to processors to CFG producers) where they
would be held. CFG producers would have to have adequate permits (either bought
at the auction or obtained from customers) to match their production. EPA would
monitor compliance by periodically comparing the number of permits surrendered
by a CFG producer (or importer) with its actual production data. In order to
check production records , EPA would also need to review records on production
process parameters (reactive pressure, temperature, raw material consumption,
etc.) Buyers and sellers of permits would have to register each transaction
with EPA (or its designee) and chemical producers could only sell CFCs
equivalent to their permit total bought at the auction or obtained in exchange
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from sales to users. Administrative burdens would depend on how effectively the
permit tracking system operated.
A recordkeeping system to track all permit transfers would be
established by EPA as a compliance and enforcement mechanism.
Records would also be required of all producers/importers.
o Recycling of CFCa. The regulatory and permitting system described above
is based on limiting new production of CFCs over time and does not restrict the
continued recycling and reuse of past CFG production. Indeed, because permits
are required for only newly produced or "virgin* CFCs, this system provides an
incentive for recycling. Recycled CFCs may, however, create some difficulties
from an enforcement perspective. Recycled CFCs could be permitted through a
crediting system which would be consistent with permits required for virgin CFC
production. While recycling activities are now used by a limited number of
firms, this practice is likely to become more widespread over time and may
involve thousands of firms. Alternatively, EPA could allow recycling without
permits or could simply require that all recycled CFCs be labelled.
Recycled CFCs would be kept apart from the permitting system:
no labelling of recycled CFCs would be required.
o Detection and definition of violations. The ability to enforce against
users and producers of CFCs will necessarily differ under a permit system than
under more traditional EPA regulations which include specific emission limits
over specified and relatively short periods of tin*. Firms may be out of
compliance because they have purchased and used CFCs without permits, they may
have produced and/or sold CFCs without adequate permits or to parties lacking
permits, or they may have fraudulently sold permits. Moreover, EPA may have to
determine the liable party in fraudulent activities which could be complicated
due to the large number of participants in the system, and could hinder
enforcement. EPA will have to develop an enforcement policy to accompany this
regulatory package which defines the nature of a violation, rules governing
liability, and the basis for calculating penalties. The Clean Air Act specifies
maximum penalties of $25,000 per day of violation. EPA would define a violation
as the production or importation of any kilogram not covered by a permit at the
time of production. The number of excess kilograms rather than the length of
violation would be the controlling factor, with each excess kilogram defined as
a separate violation.
Violations and accompanying penalties will be defined as part
of a penalty policy developed in conjunction with this
regulation.
11.1.2 Allocated Quota*
SUMMARY OF SYSTEM DESIGN
Based on the regulatory goal (e.g., production freeze, or 20% or 50%
reduction) production quotas would be allocated to the five CFC producers and
ten or so importers based on their historic 1986 market share. As demand for
products made with CFCs continues to increase over time, these limits on supply
will result in a shortfall of supply relative to demand and could result in
increases in the CFC market price. Individual CFC users are then faced with the
decision of whether to take steps to reduce consumption or to pay the higher
costs of CFCs. Producers could be allowed to trade their quotas to provide
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added flexibility (e.g., shifts in business plans or the desire to close
specific facilities).
EPA would issue permits only to the five producers and ten or so importers.
Periodic reports would be submitted to EPA by these firms to verify compliance
with production levels contained in permits. Occasional site visits could
further verify compliance. No permits or enforcement would involve CFC users.
DISCUSSION OF DETAILED DESIGN FEATURES
o Production limits. The total production limit would be determined by
the regulatory goal. Since international and domestic regulatory discussions
have focused on limiting production as the key parameter, this approach should
be straightforward. Production limits would be set on an annual basis (e.g.,
annual production equal to 1986 levels) to reflect current discussions of
control measures. If the regulatory requirement is reduced over time, the
overall production limit and recent allocations to producers/importers would
also be reduced. Trade-offs among the regulated chemicals would be permitted
based on their relative ozone-depletion potential.
Total production limits would be determined by regulatory
goals. Trade-offs ^Tnong regulated chemicals would be
permitted based on their relative ozone-depleting potential.
o Allocation of production limits. Total production limits could be
allocated among existing producers and importers based on historic levels.
Allocation could be based on an average of the past three years' production
pro-rated to the regulatory goal (e.g., 1986-production levels). Auctions
involving the five producers and importers represent an alternative allocation
system. However, with the small number of firms involved, market dominance and
possible collusion could be a problem. An auction among producers would,
however, address concerns about equity, but might raise additional legal issues.
Under an auction, the revenue created by the regulatory scarcity would go to the
U.S. Treasury instead of the chemical companies. These reveues could then be
appropriated by Congress and directed toward projects to improve the social
welfare.
and importers based on historic market share.
o Banking of unused quotas. Producers may decide not to produce their
full quota in any given year and "bank" the unused portion for future years.
Banking provides added flexibility for producers and users and will allow them
to better accommodate to year-to-year fluctuations in demand for CFCs due to the
business cycle. However, banking complicates compliance monitoring. While
producers may stockpile production in any given year consistent with their
quota, banking of permits is not consistent with the terms of the international
protocol.
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Banking of unused production rights Is not consistent with the
international agreement and therefore would not be allowed.
o Trading of allocated quotas . Once initial allocations are determined,
firms could be given the option of using their quotas themselves or trading them
to other producers. (Because of the capital expense of a CFG production
facility and the likely scheduled phase down of allowable production, it is
unlikely that new producers would want to enter the market.) If trading among
producers were permitted, this would allow greater flexibility for existing
chemical producers to gradually reduce, consolidate or eliminate their
production facilities. However, fewer producers might result in greater market
dominance. All trades would have to be recorded with EPA.
Trading flTBong producers and flffl"Tflt importers of their quotas
should be permitted.
o Recordkeeoing requirements and compliance monitoring. Producing and
importing firms would be required to maintain records of quantities of the
regulated chemicals produced and to submit reports periodically to EPA.
Producers would also be required to keep records which serve as checks on their
production figures, such as records on sales or opeating parameters (raw
materials, consumed, reactive pressure, temperature, etc.). EPA would conduct
periodic site visits to verify information. All producers and importers would
be required by regulation to report their activities related to the controlled
chemicals .
Recordkeeping. reporting and monitoring would focus only on
producers and importers.
o Recycling of CFCs. Because the above system focuses on production
limits, any recycled CFCs would not be counted against the yearly quota. In
fact, recycling could be encouraged by the higher market price of virgin CFG
production. Moreover, since only records of new production would be required,
no permitting or reporting would be required. If, for enforcement or monitoring
purposes, it were important to distinguish recycled CFCs from virgin production,
labelling could be required.
No restrictions would be applied to recycled CFCs.
o Definition of violations. Producers or importers may be out of
compliance by producing quantities in excess of their quota. Monthly reporting
of daily production would be required to aid EPA in making this assessment.
Each kilogram in excess could be defined as a violation as part of a penalty
policy developed by EPA to accompany the regulation.
Penalties will be defined consistent with current statutory
language as part of a policy developed in conjunction with the
regulation.
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11.1.3 Regulatory Fees
SUMMARY OF SYSTETf DESIGN
Under this regulatory option the price of CFCs is Increased directly by EPA
in order to provide 'an incentive for firms to reduce their use of CFCs. The
regulatory fee would be set (based on EPA analysis) at a level thought adequate
to achieve the desired regulatory goal. Future modifications to the initial fee
level could compensate for missing the mark, though not without some time lag.
In addition, the fee could be increased over time to reflect the phase- in of
more stringent reduction targets. The fee would be collected directly from CFC
producers/importers with revenues going to the U.S. treasury.
DISCUSSION OF DETAILED DESIGN FEATURES
o Scope of fee. The fee would be assessed against the regulated chemicals
based on their relative ozone -depleting potential. For example, the fee on
CFC -11 would be higher than that on CFC -113. Since CFC production costs will
not have changed, the fee would be in excess of the current market price of CFCs
(e.g., a fee of $.50/pound would approximately double the current price of
CFC-12).
Fees would cover all regulated chemicals and be based on their
relative ozone-depletin potential.
o Payment of fees by producers ffnd liffP?rt*ra • Fees would be collected
from chemical producers and importers. While these firms are likely to pass on
the costs of the fee to their customers, it will be administratively easier to
collect the fee directly from the five producing companies and from importers.
The total amount paid would be based on the quantity of the fee as determined by
EPA regulation and the quantity of regulated chemicals produced or imported.
The latter information should be readily available as part of periodic reporting
requirements to EPA.
Fees would be collected from chemical roducers and importers .
o Initial setting of fee flioymt Th* goal of the regulatory fee is to
provide an adequate economic incentive for enough firms to reduce their
consumption of the regulated chemicals to meet a regulatory goal (e.g., a
freeze, 20% or 50% reduction). Thus, in determining the initial fee schedule,
EPA must evaluate the likely decisions by firms --to either pay the fee and
continue to use CFCs or to take alternative steps to reduce consumption. Given
the diversity of firms, this analysis is not a simple one. If the fee is set
too low, the regulatory goal will not be satisfied and the U.S. would be out of
compliance with its international obligations. If it is set too high, firms may
make unnecessary expenditures to reduce CFC consumption.
on an analysts of likelv firm behavior, with some margin
arror to anaura compliance. EPA will determine the initial
of a fee.
o Shifts In fee over time. The fee may have to shift over time to
compensate for missing the target regulatory goal or to achieve changes in the
goal (e.g., a scheduled production phasedown) . Such shifts could be determined
by administrative action or they could be predetermined with automatic increases
in the fee if not enough reductions occur, or automatic decreases in the fee if
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reductions in excess of the regulatory goal occur. However, in changing the fee
EPA oust consider that industry's response may lag by one or more years, and
that considerable annual variability in CFC demand due to the business cycle may
mask changes in use due to the amount of the fee alone.
A self-adjusting fee formula should be included in the
regulation with periodic assessments of the formula based on
administrative discretion.
o Monitoring and enforcement. Periodic reports of production would be
required of producers and importers. Checks on production (operating
parameters, and sales records) would also be required. These reports, along
with the amount of the fee set by regulation and adjusted accordingly, would be
used as the basis for determining the amount of fee owed by a firm. EPA would
conduct periodic audits to determine accuracy of reports.
Reporting of production would be required bv producers and
importers. This would provide a record for assessing fees and
a basis for enforcement.
o Definition of violation. A violation would occur for every day that a
company owed but did not pay a fee. This would apply if a firm were found to be
underreporting its production. At a minimum, the fine could be based on the
amount of the fee not paid. Periodic site visits would aid EPA in verifying
production quantities reported to EPA.
A penalty policy would be defined in conjunction with the
development of the regulation consistent with current
statutory requirements.
o Recycling of CFCs. Since only new production would be assessed a fee,
recycled CFCs would not be subject to this charge. No permitting or
recordkeeping would be necessary. If labelling of recycled CFCs would assist in
enforcement, it could be required.
No requirements would be placed on recycled CFCa.
11.1.4 Engineering Controls mad Bans
SUMMARY OF SYSTEH DESIGN
In line with the usual EPA approach to limiting emissions of a pollutant,
the Agency could develop a series of specific control measures requiring
targeted CFC user industries to reduce their consumption of these chemicals.
For example, EPA could ban the use of CFC-blown packaging, require additional
recovery and recycling from solvent users of CFCs, and require recycling of CFCs
used in sterilization. The list of controls would be developed based on
considerations of costs, effectiveness, administrability, and other concerns and
would be administered through the EPA headquarters and regional offices, along
with state and local pollution control agencies.
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DISCUSSION OF DETAILED DESTCtt FEATURES
t,
o Selection of regulations. EPA contractors and staff have developed
engineering cost data on controls for each of the major uses of CFCs. Based on
this analysis, EPA would select control options based on the following criteria:
currently available "technologies ; relatively low cost of reductions ;
administrative burden and enforceability; quantity of reductions achieved; and
effects on small businesses. Specific regulations could include engineering or
process controls, product substitutes or bans.
EPA would select specific regulations aimed at achieving
low-cost reductions based on currently available technologies.
and other traditional Agency concerns.
o Quantity of reductions required. The number of specific regulations
will be determined by the amount of reduction achieved by each, the likely
growth in non-regulated uses of CFCs, and the regulatory target (e.g., freeze,
20% or 50% reduction) . A priority listing -of regulations could be developed as
part of the proposal with the top several taking effect in the near- term, with
others down the list taking effect only as required to meet the regulatory goal.
Like an emissions fee, EPA would have to carefully analyze current CFC markets
and uses to determine the likely quantity of reductions required in order to
avoid over- or under -regulation. However, future modifications to the list of
requirements would involve time lags, and EPA could not ensure that it satisfied
its obligation under the international agreement.
EPA would publish a priority list of specific controls and
items on the list would take effect, as necessary, over time
to meet regulatory requirements.
o Compliance and enforcement. CFC regulations would be enforced in the
same manner as other EPA regulations. Recordkeeping and reporting requirements
would be established which would allow EPA to determine compliance with the
regulations. Site visits would allow for inspection of records, operation of
control equipment and work practices. Where appropriate, permits would be
issued, reports required, and site visits undertaken. Where control equipment
is required, allowable levels of. emissions, test methods and performance test
requirements would be established. Where bans are instituted, compliance
monitoring might primarily involve reporting. Given the large number of firms
which might be affected, substantial resources may be required and regional
offices along with State and local agencies would have to be involved.
Compliance and enforcement activities would follow traditional
EPA practices .
11.1.5 Hybrid Approach -- Allocated Quotas plus Controls/Bans
F SVSTEM DESIGN
This hybrid approach would set a production ceiling based on the regulatory
goal and allocate quotas to current producers/importers. In addition, EPA could
specify one or more regulations requiring specific industry sectors to reduce
emissions. The specific regulations would be based on potential costs,
reductions and administrative feasibility. Those industries where low- cost
reductions are possible, but might not be taken, would be likely candidates for
regulation. The specific regulations could take effect at the start of the
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regulatory program or they could be prospective, taking effect in order to meet
more stringent deadlines. They could act as guidelines (e.g., be voluntary) or
they could be mandatory.
DISCUSSION OF DETAILED DESIGN FEATURES
o Selection of regulations. EPA would select regulations based on the
same criteria established in option 4, above (e.g., low costs, available
technology, quantity reductions). In addition, those industries which might not
implement low-cost reductions (where CFC costs are a small part of total costs)
in response to price incentives might particularly be targeted for regulation.
EPA would select regulations based on traditional criteria of
costs and effectiveness and would especially consider those
industries where low-cost options exist, but might otherwise
not be pursued.
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11.2 EVALUATION OF REGULATOR; OPTIOHS
This section presents the criteria used to evaluate each of the five options
and analyzes each option based on those criteria. The criteria are:
o Environmental protection;
o Economic costs and efficiency;
o Incentives for innovation;
o Equity;
o Administrative burdens and feasibility;
o Compliance and enforcement;
o Legal certainty; and
o Impacts on small businesses.
The goal of environmental protection involves evaluating the control option
to determine whether it ensures that a specific regulatory goal (e.g. production
freeze, 20 or 50 percent reduction) will be achieved. This criteria is
particularly important in this program area, because failure to obtain that goal
in any given year would result in the United States' failing to meet its
obligation under the international protocol.
Economic costs and efficiency are important considerations because of the
widespread use of CFCs throughout many industrial categories and the desire by
EPA to minimize the economic burden of its actions. Cost estimates are based on
analysis using the Integrated Assessment Model detailed in Appendix I. Output
from this model also provides a basis for examining the magnitude of transfer
payments which will be discussed in the section below dealing with equity.
Providing strong across-the-board incentives for innovation is critical
because of the ten-year period and increasing stringency of the proposed
reductions. Long-term coats of compliance could be substantially reduced if
timely research and development into low-cost alternatives and controls occurs
before such measures are required.
Administrative burdens differ substantially among these options and are
presented in detail in Appendix M and are summarized below in this section.
Legal certainty relates to EPA's statutory authority under the Clean Air Act
for implementing the approaches under consideration.
Finally, a Regulatory Flexibility Analysis was conducted and is summarized
below and presented in Appendix L. This study focussed on potential impact on
small businesses and the possibility of plant closures, particularly in the foam
blowing industry.
11.2.1 Environmental Protection
The five regulatory approaches considered in this analysis differ
substantially in terms of their ability to ensure that a specified goal of
environmental protection (e.g., freeze, 20 or 50 percent reduction) will be
satisfied.
Three approaches -- allocated quotas, auctioned permits and the hybrid --
provide straightforward mechanisms for achieving a set level of CFC reduction.
Under auctioned permits, the quantity of permits available at auction would be
linked directly to the specified environmental goal. Because this goal is
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specified in terms of a baseline level of production, the number of available
permits at auction can easily be calculated. Under the allocated quota and
hybrid options, the amount allocated to producers and importers would also
directly reflect the desired environmental goal.
Regulatory fees 'present a more difficult situation. EPA would establish the
fee based on its assessment of the required price incentive to achieve the
desired reduction in CFC production. Given the many factors affecting a firm's
decision to reduce its consumption of CFCs or to continue their use at a higher
price, the fee may not result in the required level of reductions. This
situation is likely given the past volatility in CFC demand driven by general
economic conditions. Thus, in years where the U.S. economy is expanding, demand
for products produced with CFCs will also be expanding and CFC production levels
would likely exceed the specified limits. While increases to the fee in higher
years could compensate for missing the mark, this would put the United States in
the position of being out of compliance with its obligations under the
international protocol. To compensate for these potential problems, EPA would
have to set the regulatory fee at a higher level to provide for an adequate
margin of safety.
A similar problem could develop in the case of the engineering controls/ban
option. While EPA would promulgate regulations sufficient to reduce CFC use in
line with the regulatory goal, it is possible that growth in unregulated uses
would offset these reductions, thus jeopardizing U.S. compliance with its
international protocol obligations. Moreover, EPA could not assume 100 percent
compliance for those firms subject to regulation. As a result, a margin of
safety would have to be maintained to safeguard against violating environmental
protection goals.
11.2.2 Economic Costs and Efficiency
Estimates of economic costs for various control stringencies and coverage
were presented in Chapter 9. These costs were developed using the Integrated
Assessment Model (LAM) which is discussed in greater detail in Appendix I.
These cost estimates provide only a limited basis for comparing the costs
under the five different regulatory options. In fact, economic theory would
suggest that the three economic-based approaches should result in the same costs
of meeting a specified reduction goal. As a result, these three options cannot
be distinguished using the LAM. However, by modifying assumptions to the model
to reflect possible behavioral responses to economic incentives, it might be
possible to gain some insights to the costs of economic-based approaches in
general.
Exhibit 11*1 summarizes the economic cost estimates under four scenarios
defining a range of responses by CFC users and producers. It shows that
aggregate costs through the end of the century would differ substantially
depending on the rate at which firms instituted available lower cost reduction
measures. Thus, for the scenarios discussed in Chapter 9, the costs ranged from
$883 million for the Least Cost Case to $2.0 billion for the Major Stretchout
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EXHIBIT 11-1
SHORT-TERM SOCIAL COST ESTIMATES (1989-2000)
FOR DIFFERENT COST ASSUMPTIONS:
CASE 6 - CFG 50%, Halon FREEZE
A/
Cost
(millions of
1985 dollars)
Transfers
(millions of
1985 dollars)
Least Cost
Moderate Stretchout
Moderate/Major Stretchout
Major Stretchout
883
1,340
1,822
2,045
2,014
2,555
2,796
5,742
a/ Assumes 2% real discount rate.
*" Assumes 6% real discount rate.
Source: See Exhibit 9-4.
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Case. Under the Moderate Stretchout Case (e.g., with firms somewhat delaying
over time their response to CFC price increases), the costs were estimated to be
$1.3 billion through the year 2000. While the costs through 2075 also vary, the
percentage differences among cases is substantially less over this longer time
period.
Thus, an important factor in evaluating the costs and economic efficiency
among the regulatory options is the extent to which each provides incentives for
lower cost reductions to be realized in the short term. While no quantitative
information is available to distinguish among the economic-based approaches
based on differing behavioral responses, the general point can be made that
economic costs will be reduced and efficiency improved substantially if low cost
reductions are taken in the initial years following implementation of any
regulation.
Given the large number and diverse nature of industrial users of CFCs,
developing specific engineering controls and product bans to meet the regulatory
goal would not likely result in capturing the lowest-cost available reductions.
EPA regulations would necessarily be developed based on "model" firms and
therefore might result in too great or too little reductions and associated
costs for individual firms. Moreover, certain industries where low cost
reductions might be available would be difficult to regulate because of the
large number of affected firms or because the controls would be achieved through
changes in work practices which cannot easily be monitored. For example,
possible low-cost reductions in the areas of refrigeration and air conditioning
servicing might respond to price incentives but would be difficult to regulate
and enforce through a direct regulation.
While no cases were examined based on specific options available for direct
regulation, a qualitative assessment based on the considerations raised above
would suggest that economic costs would probably be greater than under the
economic incentive approaches, but the extent of the higher costs would depend
on the degree to which firms responded to price increases by reducing their use
of CFCs and Halons. In fact, under extreme circumstances, it is conceivable
that a set of engineering controls and bans could actually result in lower costs
than any of the economic incentive approaches if a substantial number of firms
delayed making reductions in response to CFC price incentives.
The hybrid approach attempts to respond to the concern that firms in certain
industries may not be sensitive to CFC price increases and would instead elect
to continue their use of CFCs. By requiring that certain low-cost reductions be
taken, this option reduces demand for CFCs. To the extent these reductions
would have been taken anyway under the economic incentives options, economic
costs would not differ between these approaches. To the extent however, that
some regulated firms may face higher compliance costs, overall costs are
increased and economic efficiency is reduced.
11.2.3 Equity
There are two important issues concerning equity that arise in evaluating
these regulatory options. How do the options vary in terms of the quantity and
beneficiary of any transfer payments? Which industries would likely bear the
costs of reducing use under the engineering controls/ban options?
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Under the three economic Incentive systems and the hybrid option,
potentially substantial amounts of transfers (e.g., the amount of the auction
price, fee or quota) would be created. Because only those firms who are
targeted for reductions would incur costs, the engineering controls/ban option
would not result in the creation of any transfer payments.
Under the cases examined above in Exhibit 11-1, the amount of the transfers
varied from $3.6 billion through 2000 in the Least Cost Case to $9.0 billion
over the same period for the Major Stretchout Case. This range suggests that
options which provide the strongest inducement for low-cost reductions to be
realized early would substantially reduce the quantity of transfer payment. In
fact, it is clear that from the perspectives of fairness and efficiency, the
greatest loss could occur if firms with low cost reductions fail to make them,
resulting in harm to firms that cannot reduce emissions in the short term or
survive price hikes.
In the case of auctioned permits and the regulatory fee, the transfers would
go from CFC user industries and consumers jto the U.S. Treasury. The quantity of
transfers would be the revenue raised by the fee or the auction. In the case of
allocated quotas, transfers would accrue to the CFC producers and importers. In
theory, equity is better served when monies are returned to the Treasury to be
distributed in turn to citizens through programs deemed by Congress to be most
socially beneficial. The quantity of transfers would be determined by the CFC
price increases charged by the producers/importers. In theory, the revenues in
each of these options should be equal. However, CFC producers might elect to
limit price increases over time to minimize near term impacts on their customers
in order to ensure future markets for chemical substitutes. To the extent
producers limit price increases (and allocate their quotas to users instead).
transfers would be reduced under this option.
Engineering controls and bans and the hybrid approach (to a lesser extent)
present possible inequities of a different nature. Under these options,
specific industries would be targeted for reductions and therefore would bear
the entire costs of protecting the environment. However, if regulations were
aimed only at lowest cost reductions and excluded firms that were outliers
(i.e., had high costs), this would not be an issue.
•
11.2.4 Incentives for Innovation
Incentives for innovation are important given the phase-down of allowable
reductions over an approximately ten year period. To the extent timely
investments are made in developing future low-cost reductions, the overall costs
and efficiency of achieving that goal will be substantially improved.
•
The three economic-based approaches and the hybrid option all provide
across-the-board incentives for innovation. Since all firms face higher costs
of using CFCs, all have the incentive to search for alternatives to their
current reliance on these chemicals.
In contrast, the engineering controls/ban approach would not provide an
across-the-board incentive for innovation. By only targeting certain CFC user
industries, no incentive would exist for other industries -to innovate away from
using CFCs. In fact, because demand for CFCs would be reduced reflecting those
regulated firms, CFC prices would not likely change substantially and
unregulated users might actually increase their use over time. Moreover, firms
mifhf hold off making reductions in order to avoid possible problems (e.g.
-------
11-18
tighter baseline, conflicting technology requirements) if EPA promulgated
regulations for their industry in future years.
11.2.5 Administrative Burdens and Feasibility
This section evaluates the administrative costs associated with each of the
five options. It examines both burdens placed on EPA and industry, and divides
those costs into a start-up costs (e.g., one-time costs to develop compliance,
reporting and recordkeeping systems) and annual operating costs (e.g., annual
costs to comply with reporting and recordkeeping activities). Appendix H,
"Analysis of Administrative Burdens" provides a detailed study of these costs
and assumptions which are summarized in this section.
The five regulatory options differ substantially in the administrative costs
to both EPA and industry. In general, the three economic-based approaches
result in relatively low administrative costs, while the two approaches
involving engineering controls/bans necessitate more substantial resource
burdens. Exhibit 11-2 provides a summary of these administrative costs.
a. Auctioned Permits. EPA's start-up costs involved in this option
primarily involve developing and testing various aspects of the auction system
and establishing a computer tracking system for recordkeeping purposes.
Industry start-up costs are primarily concerned with establishing procedures for
assessing the CFG market and determining whether and how much to bid at auction.
The operations phase of this option involves EPA holding an annual auction,
and recording and tracking all permit transactions. The costs of tracking
transactions will depend on the total number of such actions and on how
efficiently the recordkeeping system works (e.g., the number of problem
transactions). Initial estimates suggest that EPA operating costs will not be
substantial, however, they will be higher than for either of the other two
economic incentive approaches. This system would also be complex from an
administrative standpoint due to the annual auctions, and the need to monitor
the potentially large number of trading transactions each year.
Total industry operating costs will depend on the number of firms who elect
to participate in the auction and the number of transactions which occur
afterwards. Initial estimates are that annual administrative costs to industry
could be on the order of $24 million. The majority of these burdens are
associated with the buying and selling of permits. Unlike the other two
economic incentive approaches where almost no administrative costs would be
incurred by CFG user industries, to the extent some percentage of CFG user firms
wanted to obtain their own permits, under this option they would incur some
relatively small administrative costs.
b. Allocated Quotas. Because this option only involves allocating quotas
to the five CFG producers and less than 15 importers, the total costs of
starting and operating this system is relatively low. Moreover, because fewer
trades are likely to occur than under auctioned permits, industry's costs of
participating and EPA's costs of tracking are substantially reduced. Compliance
-------
EXHIBIT 11-2
COMPARISON OP ADMINISTRATIVE MMOEN ESTIMATES
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-------
11-20
only involves the few producers and Importers. In terms of feasibility, this
approach is most easily implemented.
c. Regulatory Fees. The administrative costs associated with this option
are similar in magnitude to those resulting from allocated quotas. Since fees
would be assessed at the point of production or importation, only those few
firms involved in these activities would be involved. CFC user industries would
simply pay a higher price for CFCs at the time of purchase to their suppliers
reflecting the regulatory fee. EPA compliance monitoring and enforcement would
be limited to the few CFC producers and importers.
d. Engineering Controls/Bans. Because of the large number of firms that
use CFCs, the administrative costs of this approach were estimated to be
substantially greater than the previous options. For example, for the purposes
of illustrating this option, three specific regulations were imposed: a ban on
the use of CFC-12 in blown packaging; a reduction or ban in the use of CFC-113
in metal and electronics cleaning; and a reduction in the use of CFC-12 in
medical sterilization. The number of facilities assumed to be affected by these
regulations were 100 f r foam packaging, 15,000 for*electronics and metal
cleaning, and 150 for medical sterilization.
The start-up phase would require each affected facility to prepare a
compliance plan stating how it intended to meet the EPA ban or work practice, or
demonstrating the facility's ability to meet required performance standards.
For example, in the case of a ban on foam packaging, facilities could substitute
one of several possible alternative blowing agents. In the case of metal or
electronics cleaning, firms could increase the recovery of CFC-113 through
improved engineering or work practices, or they could shift to a different
solvent or cleaning process. The purpose of the compliance plan is for the
facility to notify EPA of its intentions. Where facilities must put on control
equipment to recover a specified percentage of CFCs or to meet * specified
emission limit for example, the facility would be required to submit an initial
performance test report which demonstrates the facility's ability to meet the
required level of recovery or emission limit and which establishes the operating
parameters at which compliance is achieved. Because of the large number of
firms required to file such plans or initial reports, the total industry
start-up costs were estimated to be $171 million.
Industry operating costs would also be substantial, reflecting the reporting
requirements and the coats associated with occasional site visits to review
compliance. Annual operating costs associated with administrative requirements
were estimated to be approximately $92 million. Because more regulations than
the three examined might be necessary, depending on the level of reduction
required, this figure may underestimate actual costs.
EPA start-up and operating costs would also be substantially greater than
under the previous regulatory options. Agency staff would be required to review
the compliance plans to make certain that proposed actions would result in the
required level of reductions. They would also have to modify the compliance
plans, where necessary, to provide a basis for compliance monitoring and
enforcement. On a monthly basis, EPA would review compliance reports to
determine if the facilities are meeting the required work practice or emission
-------
11-21
reduction required. Finally, site visits would be conducted to review
compliance.
In addition to EPA Headquarters staff, enforcement against a large number of
firms would necessarily involve EPA Regional offices and state and local air
pollution control agencies. The costs of coordinating and involving several
additional layers of agencies has not been estimated in this analysis, but could
be substantial.
•• Hybrid -- Allocated Quotas Plus Controls/Bans. This option combines the
administrative requirements of the production quotas with a subset of those
requirements associated with the previous option. Depending on the number of
firms affected by the engineering controls/ban regulations adopted under this
approach, the administrative costs to industry and EPA could be substantial.
In Appendix M, the analysis assumes that two regulations are promulgated.
The use of CFG-12 is banned in foam packaging and the use of CFG-113 is either
reduced or banned in metal and electronics cleaning. Because of the large
number of affected facilities (particularly in the case of metal and electronics
cleaning), the initial estimate of administrative costs are substantial.
Industry first year start-up and operating costs were estimated to total
over $260 million. Of this amount, about $94 million were annual operating
costs associated with quarterly reporting and occasional site visits. EPA
costs, particularly during the operational stage, would also be substantial.
11.2.6 Compliance and Enforcement
The five regulatory options were designed in a manner to facilitate
compliance and enforcement. In the case of the three economic-based approaches,
all compliance and enforcement actions focus on the few CFG producers and
importing firms. These firms would be required to keep track of and report
their CFC-related activities and would be monitored periodically to determine if
they were in compliance. Given the high capital costs associated with
developing new production facilities, "black market" CFCs are unlikely to become
a problem. Importation limits may be monitored by U.S. Customs.
In the case of the engineering controls/bans option, substantial efforts and
resources would be required to monitor compliance. Depending on the number of
firms affected by direct regulations, EPA's ability to ensure compliance, and,
where necessary, to take enforcement action might be limited by resource
constraints. Morsover, the implementation of this option would necessarily
involve EPA Regions and State/local agencies. Given the large number and
diverse nature of CFC-using industries, it is likely that if this option were
selected, that compliance and enforcement could be substantially more difficult.
Under the hybrid approach, compliance and enforcement would combine the
activities of both allocated quotas and engineering controls/bans. Thus, the
approach has the advantages and disadvantages of each of these options.
However, to the extent fewer mandatory regulations are utilized, the
difficulties associated with compliance and enforcement under the controls/ban
option would be reduced.
-------
11-22
11.2.7 Legal Certainty
Section 157(b) of the Clean Air Act provides EPA with the authority to
regulate "any substance practice, process, activity" (or any combination
thereof). This clearly provides EPA with broad authority in terms of its
traditional approach to engineering controls or bans. However, the
economic-based approaches represent a departure from past regulations and raise
legal issues concerning Congressional intent and EPA authority.
Specifically, under the auctioned permit and regulatory fee options,
substantial revenues would be raised for the U.S. Treasury. The legal issue is
whether EPA has the authority under the Clean Air Act to raise revenues in
excess of the cost of operating a program.
No legal issues have been raised in the context of the other options.
11.2.8 Impacts on Small Business
To determine the impact on small businesses, a Regulatory Flexibility
Analysis (RFA) was performed. This analysis is summarized here and included in
Appendix L.
The purpose of a Regulatory Flexibility Analysis (RFA) is to evaluate
impacts of regulatory options on small businesses and to evaluate alternatives
to minimize those impacts consistent with achieving the desired regulatory goal.
The RFA first examined the range of industries using CFCs or Halons to
identify those where these chemicals are a significant percent (greater than
five percent) of final product or service. Thus, the analysis assumed that
where CFCs or Halons are only a small part of total costs, any expenses incurred
in complying with the regulation would not substantially impact the affected
firms.
Based primarily on this initial screen, the analysis focused on the foam
blowing industry as the only industry group with the potential to be affected
substantially by regulations on CFCs. The detailed analyses of this Industry
was limited due to the availability of information on individual firms.
However, based on data that was publicly accessible, the RFA focused on the
extent to which compliance costs would exceed five percent of total product
costs and the extent to which firms using CFCs could be replaced by expanded
markets for product substitutes (e.g., fiberglass for CFC-blown insulating
foam).
The results of this analysis suggest that substantial market share will be
lost particularly in the CFC-blown foam packaging and polyethylene industries
and to a lesser extent in CFC-blown insulation. While initial cost estimates
suggest that alternative packaging and insulating materials could result in a
substantial number of small firms closing, this fails to account for the
availability of relatively low-cost alternative blowing agents (e.g., pentane
and CFC-22) that are now available for certain uses of packaging foams.
Moreover, over a longer period of time, other alternative blowing agents (e.g.,
CFC-123) might become available and allow these firms to be competitive with
product substitute.
-------
11-23
11.3 REGULATOR? APPROACH FOR HALONS
Because they contain bromine, which is considered to be a substantially more
effective ozone-depleting chemical than chlorine, Halon 1301, 2402, and 1211 are
also included in the international protocol and in the proposed domestic rule.
Chapter 6 examines in detail the effects on ozone depletion of varying levels of
control of Halons including the possibility of excluding these chemicals from
regulation.
Because Halons have substantially different emission characteristics and
because greater uncertainties exist concerning their relative ozone-depleting
potential, they are treated separately from the CFCs in the protocol and the
proposal. In addition, primarily because of limited information about current
worldwide production, use and emissions, the international agreement took the
interim step of freezing production at 1986 production levels beginning in 1990
but did not call for reductions.
The five options discussed above are also possible for regulating Halons.
In general, the same issues and concerns about these options raised in the
context of CFCs are also applicable to these chemicals. Thus, regulatory fees
and engineering controls/bans would not ensure that the regulatory goal was
satisfied. The same legal issues and concerns about transfer payments would
develop. Administrative burdens would be greatest in the options involving
engineering controls/bans and in the hybrid.
Halons are substantially more expensive than CFCs. Furthermore, unlike CFCs
which are critical elements of products, the only time Halon emissions are
essential is in putting out a fire. As a result of the unique characteristics,
it may be possible to significantly reduce the current level of Halon emissions.
The Halon producer and user industries have recently initiated a program aimed
at cutting back emissions from testing, servicing and accidental discharge of
total flooding systems and from training using handheld systems. These steps
could substantially reduce current Halon emissions. As a result, most of the
ongoing Halon production would be contained in cylinders unless used to
extinguish a fir*.
Moreover, the industry is exploring the possibility of developing a
comprehensive system to track each kilogram of Halons produced. If such a
system becomes viable, it may be possible to move in the direction of an
emission-based approach to regulation --a shift which would not be possible
given the different and more diverse characteristics of CFC use.
Thus, in evaluating regulatory options related to Halons, an additional
factor to be considered is the desirability for additional flexibility to
potentially move in the direction of an emission-based system.
11.4 SUMMARY OF REGOLATCEY OPTIOHS
This chapter has defined and evaluated five different approaches for
regulating CFCs and Halons. It examined the results of several different
studies in comparing these options. Criteria used in this evaluation include
economic costs, equity considerations, administrative burdens, legal issues and
impacts on small businesses. While many of these comparisons could be made only
-------
11-24
in a qualitative manner, nonetheless, several important distinctions were
highlighted between tl.ese options.
Exhibit 11-3 summarizes the results of this review. It shows that for
several options, significant issues were raised which could undermine their
viability. Auctioned permits and regulatory fees both raised substantial legal
issues. Regulatory fees and engineering controls/bans do not ensure that the
regulatory goal will be satisfied. Administrative costs under the engineering
controls/ban and hybrid approaches could be substantial.
Because of these above concerns, it appears that allocated quotas offers the
most attractive approach to limiting the use of CFCs and Halons. This approach
was very similar to auctioned permits in that it should provide for economically
efficient reductions. Moreover, it involves a minimum of administrative costs,
is the most easily enforced option, and does not raise any potential legal
issues. The major concerns about allocated quotas involve equity -- should the
CFG and Halon producers receive the potential windfall profits from government
restrictions on supply. Possible mechanisms might be developed to return, on a
voluntary basis, some or all of this revenue to CFG and Halon users and'
consumers or a fee might be used in addition to the allocated quota system.
Alternatively, mechanisms other than allocating production quotas to the few
current producers may need to be developed if equity concerns are to be
addressed.
-------
EMHIBIT ll->
SUMettftV OF ISSUCS RELATED TO CTC REGULATORY OPTIONS
Eveluetlon Criteria
Environmental Protection
Auctioned Peratte
Parent number
directly linked
to regulation s^al
Al loceted Quote*
Quote* directly
linked to regu lo-
tion goel
Oatton*
Reguletory Feoe
No certalntyi
.ould hove to
•odtfy fee over
tlae
Control a /Ban
No certelntyi aiey
hove to odd con-
trol* to offaot
lncree*e> In
unreguletod uae*
Hybrid —
Quo! ••/Control*
Quota* directly
linked to regyla-
tlon goal
Economic Efficiency
Cqulty
Efficiency
achieved If lo.
coot reduction*
echloved J./
Largo tran*fer*
fro* u**r* t*
treaeury I/
Attain I at relive Feaotbtltty Eaay to adeilnleter
through producer*/
tapertor*
LogoI Certainty
Con*ld*reble legal
uncertainty
Incentive* for Innovation Strong acro»*-the-
board Incentive*
Ce«pl lance and Enforcement Involve* only pro-
ducer*/Importer*
efficiency
achieved. If lo.
coat reductlene
roeIliad J./
Large trenifer*
to producer* \l
e**y t* adalnleter
through producer*/
Inportar*
No problao*
Idontlfled
Strong ecro**-the-
boerd Incentive*
Involve* only pro-
ducer*/ laportor*
Efficiency
echlevod. If Ion
coat* reduction*
reel lied I/
Lerge tren*f*r*
tram uaer* to
treetury £/
Caay to edialnlater
through producer*/
••porter*
Conaldarable legel
uncertelnty
Strong acro**-the-
boerd Incentive*
Involve* only pro-
ducer*/ tapertor*
of regulation*
Not all lo« co*t
reduction* ••••••-
eble to direct
regulation
Tho** InduvtMa*
urteffocted avoid
burdena
Potentially large
nueber of ueer*
Involved
No problaaw
Idantlflad
Only Incentive*
for targeted
Induatrlaa
Could Involve «eny
f tr«*
SOM \om co*t
reduction* guaran-
toadi »om» effi-
ciency *ecrlflc«d
Trencfora reduced;
co»t to regulation
fire*
Depend* on nuabar
fir** effected by
tndu*try-*p*clfIc
regulation*
No problem
Identified
Acrote-the-board
Incentive*
Depend* on quad-
tlty end coveraa*
ti Concern aatete that *oa* Industrie* -- particularly the** Ilk* eer elr conditioner* end coaputor* .hero CFC price* ere e tiny
1 f?2c?l2n of tMrpro^uct eeete - .ould not toko full edventego of lo. ce.t of reduction opportunltto. end In.t.ed .ould .b.orb
th! COM* of feeV p^r-lteT end quetae. Ry doing *o. the coete of the*, eppreechee .ould Incree.* to other Indu.trl*. *nd .conoalc
efficiency .euld bo eecrlflced.
21 Tranef.r coot, are th.ee e.pen... Incurred In paying f.r pr.lt.. fe... er quote. In e.c... of the co.t. dlr.ctly Incurred/putt In.
on control*. ..Itching t* oubetttuteo) by reducing CFC uee.
-------
SPECIAL ISOTOPE SEPARATION PROJECT
Lawrence Livermore
National Laboratory
Westinghouse Idaho
Nuclear Company, Inc.
From
Phone
Date .
Subject:
Pan-34-89
J. D. Panasiti
6-0996/MS 3202
March 3, 1989
Deployment CCB II Meeting
To
F. A. Comprelli
R. M. Feinberg
A. M. Umek
M. D. Jackson
R. G. O'Neil
cc: J. M. Yatabe
R. G. Peterson
A Deployment Class II Change Control Board (CCB) meeting is scheduled
for 10:30 a.m. on Wednesday, March 8th, at LLNL in Building 482, Room
2151.
The agenda is to consider the following items:
o Change Request 88-039; Increase Substation Capacity
o Change Request 88-051; Unclassified Raceway
o Change Request 89-058; Site Safety Issues Report
o Discussion of FY-89, 90, and 91 Budget proposals which may
require emergency CCB II action at this meeting. (Materials
will be supplied as soon as possible.)
The first two were sent to you about January 24, 1989, (CIN #9441);
the third was sent about February 22, 1989, (CIN #9591). If you need
copies of these three, please obtain them from the nearest SIS
Document Control Center using the above referenced CIN numbers.
D. Panasiti, Secretary
Deployment Change Control Board II
Manager, SIS Project Support & Control
bjh
-------
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