DRAFT
REGULATORY IMPACT ANALYSIS
FOR THE PROPOSED
SOUTH COAST DISTRICT
FEDERAL IMPLEMENTATION PLAN
Office of Air Quality Planning and Standards
Office of Air and Radiation
U. S. Environmental °rotection Agency
July 27, 1990
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TABLE OF CONTENTS
L SUMMARY
H. THE NEED FOR AND CONSEQUENCES OF REGULATORY ACTION
m. ALTERNATIVES EXAMINED
IV. CONTROL STRATEGIES
V. CONTROL COSTS ANALYSIS
VI. ECONOMIC IMPACTS, REGULATORY FLEXIBILITY ANALYSIS
AND PAPERWORK REDUCTION ACT ANALYSIS
Vn. THE BENEFITS OF THE CARBON MONOXIDE AND OZONE REDUCTIONS
IN THE FEDERAL IMPLEMENTATION PLAN
VIE. NET BENEFITS
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I. SUMMARY
A. INTRODUCTION
Executive Order 12291 requires that ail Federal agencies to prepare a regulatory impact
analyses for major rules. Major rules are those that may likely result in any of the following:
(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,
(3) Significant adverse effects on competition, employment, investment, productivity,
innovation, or on the ability of the United States-based enterprises to compete
with foreign-based enterprises in domestic or export markets.
It has been determined that the Federal Implementation Plan (FIP) for the South Coast
Air Basin constitutes as a major regulation.
B. NEED FOR REGULATION
Chapter II addresses the legal and economic arguments for regulation. On January 22,
1988, EPA disapproved the 1982 SIP for ozone and carbon monoxide (CO) for the South
Coast Basin, in response to an order from the U.S. Court of Appeals for the Ninth Circuit
(Abramowitz v. EPA). The SIP was disapproved because'it failed to include a demonstration
of attainment. In February 1988, EPA was sued in the U.S. District Court by the Coalition
for Clean Air and the Sierra Club to promulgate a Federal Implementation Plan providing for
attainment of the ozone and CO standards in the South Coast. EPA did not contest this
responsibility and in September 1988 the District Court issued an order affirming this
obligation.
On February 16, 1989, EPA and the plaintiffs filed with the Court a settlement
agreement providing the EPA to propose the Federal Implementation Plan (FIP)
by April 1990 and issue the final FIP by February 1991. Following an October 1989
earthquake, the Court granted EPA a 3-month extension to the schedule.
The circumstances regarding market failure and alternative mechanisms for internalizing
the air pollution externalities are also described in Chapter II.
C. REGULATORY OPTIONS
Chapter HI discusses the alternative regulatory approaches. The EPA has reviewed
two options for developing a Federal Implementation Plan, namely a regulatory FIP versus
a committal FIP.
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The regulatory FIP includes, in legally enforceable form, substantially all measures
necessary to bring the area into attainment of the standards by the specified attainment date.
It includes a group of measures dealing with motor fuels and automotive technology (known
as the core measures) plus several categories of backstop measures. Assuming that the
creditable State rules and the core measures will meet minimum progress requirements for the
first five years, the FIP backstop rules would generally guarantee a constant rate of basin-
wide reductions from 1996 through 2010 by an incremental rollback of 6 percent per year.
EPA also proposes an economic incentive approach to stimulate the innovation that will speed
the development of pollution control and reduce its costs.
The committal FIP consists of the core rules. To achieve the remaining necessary
reductions, the Option n FIP includes specific enforceable commitments by the EPA to
develop rules in the future. The commitments consist of an identification of the relevant
measures or the source categories for the required emission reductions, quantification and
scheduling for implementation of the reductions, including scheduling the promulgation of
these measures as specific enforceable requirements. EPA will indicate that substitute
measures may be introduced if more cost-effective alternatives are identified that still provide
for the required progress in reduction of overall emissions.
D. CONTROL STRATEGIES
Chapter IV addresses the baseline emissions for volatile organic compounds (VOC) and
carbon monoxide and control measures that constitute the Federal Implementation Plan for the
South Coasr Basin; The control measures outlined in the Federal Implementation Plan (FIP)
for the South Coast. Basin, are basically designed to assure that the South Coast Air-Quality
Mangement District's (SCAQMD) Air Quality Management:Plan maintains reasonable further
progress toward attainment in a manner consistent with, the stated goals in the Plan: namely,
attainment of the .ambient standard for ozone in 2010 and carbon monoxide in 2000.
Baseline VOC emissions from the SCAQMD FIP area were estimated to be 1,494
tons per summer weekday (TPD). Mobile sources emit 46 percent of the total, point sources
(major emitting sources) contribute 25 percent, and area sources, including off-highway
vehicles, contribute 29 percent. Carbon monoxide emissions are due to combustion of fossil
fuels. During 1987, CO emissions totaled 5430 TPD. Of this, mobile sources contributed 87
percent, area sources, including off-highway vehicles, 11 percent, and point sources 2 percent.
By 2010, the total CO emissions are projected to be 4228 TPD. Mobile sources are projected
to provide much of the reduction. Based on Urban Airshed Modeling results, a target VOC
emission reduction below the baseline emission inventory is 86 percent based on the site with
the highest design value. Similarly for carbon monoxide, targeted reductions are 60 percent
reduction.
Control measures are essentially provisions that will trigger additional reduction
requirements in the event the South Coast District Air Quality Management Plan does not
achieve reasonable progress in the future years beyond 1995. Most important of these are
the control measures dealing with motor fuels and automotive technology for reducing
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emissions (core measures) and backstop measures for the industrial and commercial
solvent/consumer products category primarily small stationary and area sources.
E. CONTROL COSTS
Chapter V addresses the costs and cost-effectiveness for controlling both VOCs and
CO emissions in both FTP options. Because backstop measures allow for the use of economic
incentives, the accuracy of the cost is uncertain. However, the cost estimate should be lower
than that for traditional command and control regulations. Estimates of control requirements
for the South Coast Federal Implementation Plan for full attainment range from $ 2 to $ 6
billion for controlling volatile organic compounds (ozone precursors) and between $ 0.6 and
$1.5 billion for carbon monoxide in the Air Basin. The Agency believes that a point estimate
of the total costs for the FIP would be approximately $ 2.6 billion.
F. REGULATORY FLEXIBILITY ANALYSIS AND PAPER WORK REDUCTION
REQUIREMENTS
Chapter VI discusses the analyses and results for certification of both the Regulatory
Flexibility Act (RFA) and Paperwork Reduction Act (PRA). The RFA requires Federal
agencies to review the effects of their regulations on small entities and to involve these
entities more actively in developing and reviewing regulations. "Small entities" here includes
small businesses, small governmental jurisdictions, and small organizations.
An ozone and. CO National Ambient Air Quality Standard Implementation Plan could
affect a substantial number of small entities. However,, this number is small relative to the
total number of smaller establishments in the South Coast. With respect, to the potential for
significant impact across firm size, relative costs did not vary dramatically across firm size.
However, this may have been an artifact of the analysis. As regards impacts across industry
types, non-trivial differences in costs as a percent could arise. Chapter VI discusses measures
to avert and mitigate those impacts on small firms.
To foster cleaner air objectives and further reduce the potential for significant adverse
impacts on smaller entities, Option I invites comment on measures which provide added
flexibility for sources in the backstop measures category.
Marketable operating permits with declining VOC emission reductions will introduce
flexibility into the decision making process for individual affected facilities.
o Source categories will have a market for their excess emission reductions, and
thus, will have the incentive to reduce beyond currently prescribed requirements.
o " Phasing VOC reduction requirements (nothing for the first five years, then 6
percent per year for 15 years) provides an opportunity for the permitted source
to search for VOC reduction opportunities in a non-panic "buying" mode.
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Provision for industry government partnerships and consortia with industries should add further
flexibility. Positive impacts on small entities providing engineering services, etc. will result
from adopting Option 1. The size and extent of the positive effect have not been gauged.
In addition to the RFA, Chapter VI discusses the analyses and results for certification
of the Paperwork Reduction Act (PRA). A preliminary analysis of the record-keeping and
reporting requirements (administrative costs) for the core and backstop rules has been prepared
and is summarized as follows. Total annual costs for the core and backstop rules could be
as much as $ 5 million per year. The coverage for these costs include affected facilities and
the EPA. For the core measures, record-keeping and reporting costs are estimated as
approximately $ 710,000 per year of which $ 534,000 per year are associated with the
wintertime oxygenated fuels program. The remainder of the costs are associated with the
reformulated gasoline program ($ 153,000 per year) and- the marine vessel control program
($18,700 per year).
G. BENEFITS OF THE CARBON MONOXIDE AND OZONE REDUCTIONS IN
THE FIP
Chapter VII presents a qualitative discussion of the potential benefits associated with
health and welfare improvements in attaining the ozone and carbon monoxide NAAQS in the
South Coast District.
The South Coast District, which includes Los Angeles, Orange, Riverside, and San
Bernardino counties, comprised some 11.2 million people in 1984. By 2010, the population
is projected, to be 16.1 million. A population is at risk of adverse health effects when exposed
to levels of ozone above the NAAQS level of .12 ppm: Peak ozone concentrations have
exceeded the standard, by almost: three times continually over the recent years.. For example
in the 1986-1988 season, the "design value" exceeded 0.30 ppm. In addition, the South Coast
District has experienced multiple exceedances each year—135 exceedances occur annually at
the "design value" monitor over the nine-month season for ozone. Achieving the ozone
standard will reduce the risk to the population. For carbon monoxide, the population is at risk
of adverse effects when exposed to levels of either 9.0 ppm for the 8-hour standard, or 35
ppm for the 1-hour standard. In 1988, the South Coast had a design value of 19.6 ppm and
72 exceedances of the 8-hour CO NAAQS.
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OZONE: Health Effects
In terms of the scientific information on acute effects, there are eight major health
effects of concern for ozone:
Alterations in Pulmonary Function
Symptomatic Effects
Exercise Performance
Bronchial Reactivity
Aggravation of Existing Respiratory Disease
Morphological Effects
Altered Host Defense Systems
Extrapulmonary Effects
The category "alterations in the pulmonary function" represents the best documented
and strongest evidence of the effect of ozone on human health. Elevated levels of ozone
can modify such pulmonary measurements as forced expiratory volume, total lung capacity,
and breathing frequency.
In addition to health effects from acute (short-term) ozone .exposure, multi-hour and
chronic ozone exposure are also suspected of having adverse effects on human health. The
possible health effects from long-term ozone exposure are potentially more serious than the
acute exposure.
Volatile organic compounds (VOCs) are precursors to the formation of ozone and are
regulated as a means of reducing ozone levels. Ambient concentrations.of specific VOC's
pose-health risks by themselves. However, VOC emissions also lead to condensation and the
formation of secondary formed aerosols, and hence cause increased ambient air concentrations
of paniculate matter (PM). Hence reducing VOC emissions lead to further improvements in
human health by reducing the health effects associated with higher PM concentrations. PM-
related health effects include chronic and acute morbidity, and mortality.
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OZONE: Welfare Effects
In addition to the risk to human health, elevated levels of ozone also can damage
plants and damage certain materials. Such non-health damage, known collectively as welfare
effects, can occur at levels at or below the NAAQS.
The major welfare effects of concern are:
Vegetation Effects (com, soybeans, wheat, and cotton)
Forest effects (sensitive species: some conifers)
Materials damage (elastomers, dyes, paints)
In addition to the ozone-related welfare effects listed above, there are also soiling and
visibility effects derived from particulate matter produced from condensation and secondary
reactions from VOC precursors. Lastly, VOC's are known to produce odors, soiling, and other
similar welfare effects.
CARBON MONOXIDE: Health Effects
The limited information on health effects due to exposure to elevated CO concentrations
are primarily known for those effects associated with aggravation of angina. Cardiovascular
patients exercising outdoors during periods of elevated CO concentrations, may experience
decreaseditime to onset of an angina, attack. In addition; based on conn-oiled-human exposure-
chamber studies, impairment- in behavior and performance- of tasks have been observed..
Lastly, observations from animal studies suggests that exposures to elevated carbon monoxide
concentrations may produce fetal effects. Attaining and maintaining the ozone and CO
NAAQS will reduce the aforementioned adverse health and welfare risks.
H. NET BENEFITS
Chapter VIII combines the cost information of Chapter V with assumed values of
VOC emission reduction benefits to assess the economic efficiency properties of the ozone
portion of the FTP. The net benefits (i.e., benefits minus costs) are calculated for high and
low cost scenarios as well as for four assumed values of VOC emission reduction benefits.
Optimal (in an economic efficiency sense) VOC emission reduction levels and the social costs
of exceeding those levels are also estimated.
The results are sensitive to the cost scenarios and benefit per ton assumptions for
VOC emission reductions. Under some conditions less control is warranted while under other
conditions more control is warranted.
The Chapter notes the data limitations and the fact that the Clean Air Act precludes
benefit-cost considerations.
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H. THE NEED FOR AND CONSEQUENCES OF REGULATORY ACTION
A. LEGISLATIVE REQUIREMENTS AFFECTING THE REGULATION OF
AMBIENT AIR QUALITY THROUGH FEDERAL IMPLEMENTATION PLANS
The Clean Air Act as amended August 1977 (Act) establishes in Section 110 the State
Implementation Plan (SIP) as a primary mechanism for attaining and maintaining the various
National Ambient Air Quality Standards (NAAQS). Section 110(a)(l) directs each State to
submit a SIP within 9 months after an applicable NAAQS is promulgated. When Congress
amended the Act in 1977, it created a new Part D, which required a new planning process to
revise the SIPs for areas that were exceeding the NAAQS.
Congress enacted Section 110(c) in 1970 to ensure that the goal of clean air was not
frustrated in the event a State defaulted on its planning obligations. If a State fails to submit
a SIP which meets (or is determined by the Administrator to not be in accordance with) the
requirements of Section 110, then Section 110(c)(l) provides that the EPA may prepare,
propose, and promulgate regulations setting forth an implementation plan. Congress included
new sanctions when it enacted Part D in 1977, which included a ban on the construction or
modification of major stationary emission sources in nonattainment areas for which a Part D
plan has not been approved. The intent was clearly to induce State and local governments to
fulfill their obligation to develop plans assuring the attainment and maintenance of the
NAAQS, and, thus, minimize the-Federal role in the attainment planning process-
On January 22, 1988, EPA disapproved the 1982 SIP for ozone and CO for the South
Coast Basin, in response to an order from the U.S. Court of Appeals for the Ninth Circuit
(Abramowitz v. EPA). The SIP was disapproved because it failed to include a demonstration
of attainment. In February 1988, EPA was sued in the U.S. District Court by the Coalition
for Clean Air and the Sierra Club to promulgate a Federal Implementation Plan providing for
attainment of the ozone and CO standards in the South Coast. EPA did not contest this
responsibility and in September 1988 the District Court issued an order affirming this
obligation.
On February 16, 1989, EPA and the plaintiffs filed with the Court a settlement
agreement providing the EPA to propose the Federal Implementation Plan (FIP) by April 1990
and issue the final FIP by February 1991. Following an October 1989 earthquake, the Court
granted EPA a 3-month extension to the schedule.
B. THE NATURE OF THE AMBIENT AIR POLLUTION PROBLEM
Primary pollutants of concern in the South Coast Basin are ozone and carbon
monoxide. Ambient ozone pollution, is one of the Nation's most complex and widespread air
quality control problems. Ozone is rarely emitted directly into the atmosphere; it is usually
formed by a series of atmospheric reactions between precursor emissions (e.g., hydrocarbons
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and nitrogen oxides) in the presence of sunlight Ozone precursors are emitted from a wide
range of sources, including motor vehicles, petroleum refineries, oil storage tanks, household
products, petroleum marketing, chemical manufacturing, surface coating and printing industries.
In the South Coast District, an effective air pollution control program to reduce ozone must
focus on a large number of diverse source categories.
A substantial body of information on the human health and welfare effects of ozone
and carbon monoxide has been produced since the Clean Air Act was passed in 1971. The
EPA has concluded that this research provides virtually indisputable evidence that current
levels of ozone in many large urban areas are generating adverse consequences for public
health and welfare. Some of the more serious consequences of ozone exposure are:
Interference with normal functioning of the human lung at ozone concentrations
as low as 0.12 ppm.
Pain and discomfort caused by ozone at concentration levels from 0.12 ppm to
greater than 0.20 ppm.
Persistent lung function decrements in children resulting from a single ozone
episode of five days with the highest one-hour concentration of about 0.18 ppm.
Elevated levels of ozone cause reduced yields in such important crops as soybeans,
corn, wheat and cotton.
Findings from human epidemiology studies of ozone exposure at or below 0.15
ppm.
Materials known to be most susceptible- to ozone attack are elastomers, textile
fibers and dyes, and certain types of paint.
Some of the more significant consequences of excess exposure to carbon monoxide are:
Increased susceptibility on the part of exercising angina patients (reduction in time of
onset of angina attacks).
Pregnant mothers can experience damage to the fetus's nervous system and
cardiovascular system.
C. THE NEED FOR REGULATORY ACTION
In the absence of government regulation, market-oriented economic systems typically
fail to prevent elevated levels of pollution in the environment because emitters of the pollution
(or precursors to pollution) do not internalize damages caused by their emissions. For an
individual emission source, emissions are unused byproducts which can be disposed at no cost
to the emitter by release into the atmosphere. Unfortunately, once in the environment
emissions often impose damages ("costs" in economic terms) upon others in society.- —
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A divergence between the private cost of production and the social cost exists if the
owners of an emission source do not bear the full costs of their activities. Cost divergence
can lead to market failure, where the level of output is such that marginal social benefits are
not equal to marginal social cost. The result is economic inefficiency, or a mis-allocation
of society's resources; the polluting activity (e.g., the release of ozone precursors) occurs at
too high a level in comparison to the optimal efficient situation, thus reducing the potential
total welfare of society. All regulatory strategies internalize the divergence between social
and private costs. Some strategies such as well designed charges and marketable permits
provide an incentive for emitters to select efficient output levels that equate marginal social
costs and benefits.
Using regulatory strategies to internalize all negative environmental externalities may
not result in zero air pollution. Economic efficiency calls for abatement up to the point where
additional abatement costs more than the additional benefits are worth to society.
Consequently, pollution could still occur, and people other than the owners of the emitting
facility could suffer residual damages.
The purposes of the Clean Air Act include "to protect and enhance the quality of the
Nations's air resources so as to promote the public health and welfare and the productive
capacity of its population". Pursuant to that goal, Section 109 directs the Agency to establish
and review National Ambient Air Quality Standards for each criteria pollutant that protect the
public health with an adequate margin of safety. The current statute precludes consideration
of cost in establishing the level of the NAAQS. The regulations necessary to achieve the
NAAQS may result in costs higher or lower than the level that fully internalizes the
environmental externality. If these regulations are insufficiently stringent, some portion of the
air pollution externality will remain. If. the regulations are too stringent,, however, the air
pollution externality will be eliminated and replaced, with deadweight- losses from excess
pollution control.
Existing environmental regulation both nationwide and in the South Coast basin in
particular have made progress toward reduction of VOC emissions and lowering ozone levels.
For example, the design value for the 1978 to 1980 3-year period was 0.42 ppm, with more
than 150 days of exceedances per year. By 1986 to 1988 the design value was lowered to
0.34 ppm, with approximately 150 days of exceedances, in spite of population and economic
growth in the area.
But, existing regulations have not eliminated the pollution problems in the South Coast.
basin. The remaining violations of the- NAAQS violate the goals and objectives of the Clean
Air Act. For the ozone NAAQS, those violations occur on over 40 percent of the days
throughout the year. Furthermore, the design value is nearly three times the concentration
which is deemed protective with an adequate margin of safety.
One way to establish whether the status quo has a remaining air pollution externality
is to demonstrate that the net benefits of additional regulation are positive at the margin. If
a complete. assessment_of the benefits and costs of a regulatory option can be made, and the
benefits'exceed the costs, then the additional regulations increase society's well-being on
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economic efficiency grounds. The economically optimal or "best" regulation is the one that
requires control levels which maximize net benefits. As detailed in Chapters V, VII and VQI,
such an assessment of the benefits and costs can only be approximated.
Scientific evidence used in establishing the ozone and carbon dioxide NAAQS clearly
indicate that there are significant health risks associated with the present conditions in the
South Coast basin. The EPA believes that the persistent extremely high levels of ozone in
the area, measured both by peak levels and the number of days with elevated ozone, constitute
a health and welfare risk above what would remain as residual damage in an economically
efficient situation. Additional regulations are needed to eliminate the remaining externality.
Chapter V is EPA's best evidence of what additional controls would be necessary to
accomplish this.
A variety of market and extra-market mechanisms are potentially available to correct
that situation. Some of the market mechanisms are briefly described in Chapter HI of this
RIA. This section discusses extra-market mechanisms.
In addition to government regulation, extra-market mechanisms included negotiations
or litigation under tort and common law! In theory, the latter approaches might result in
payments to persons to compensate for the damages which they incur.
Such resolutions may not occur, however, and a need for government regulation would
continue. Two major obstacles block the correction by the private market of pollution-based
inefficiencies and inequities. The first obstacle is high transaction costs when millions of
persons are affected, by millions of pollution sources. Transaction costs of compensating those-
adversely affected, by elevated ambient ozone concentrations arise and. accumulate to a.
substantial amount because the current, and future, injury to each, individual must be appraised,
the injury must be apportioned to each precursor source, and damage- suits or negotiations
must be conducted. In an unregulated market, each source of precursor emissions and each
affected person would have to litigate or negotiate. The transaction costs would be so high
as to probably exceed the benefits of reduced air emissions. These obstacles strongly suggest
that another mechanism is desirable for solving the air pollution problem caused by
widespread emissions of ozone precursors.
The second obstacle discouraging resolution by the private sector is due to the public
good nature of pollution reduction. That is, after emissions have been reduced, the benefits
of reduction can be enjoyed by additional persons at no additional cost. This results in the
classic "free rider" problem. Thus everyone would have an incentive to be the last to
contribute resources to litigation or negotiation, thinking that he or she would freely benefit
from the efforts of others.
In view of the clear legal requirements placed on EPA by the Clean Air Act and
Amendments, and the presence and likely persistence of market failure, the Agency is
proposing additional regulations to protect human health and the environment. This regulation
is required under law as indicative- by the September 1988 Court Settlement. The Agency is
confident that regulation is less expensive than any available private sector alternatives.
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Finally, regulation will enhance protection of public health and welfare to achieve the statutory
requirements of the Clean Air Act.
Chapter V of this Regulatory Impact Analysis shows that these regulations are not
costless. Chapter VIE provides illustrative calculations of net benefits under the proposed
Federal Implementation Plan and an alternative regime that would allow for optimal control.
For some conditions, the social opportunity cost of the strategy requirements of the Clean Air
Act over and above the economic optimal control regime are also estimated. Conditions under
which more control would be warranted are also identified.
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IK. ALTERNATIVES EXAMINED
A. INTRODUCTION
This section briefly presents potential alternatives of regulating emissions that contribute
to ambient concentrations of ozone. The outline for the section is adopted from Executive
Order 12291 which requires that at a minimum the following alternatives be examined:
a) No regulation
b) Regulations beyond the scope of present legislation
c) Market oriented alternatives
d) Alternative control options
Although Executive Order 12291 requires that all alternatives be examined, only the most
promising ones need to be analyzed, in detail.
B. NO REGULATION
As discussed in Chapter II, the United States District Court ordered the EPA to develop
a FIP to attain ozone and carbon monoxide standards for the South Coast Air Basin. As a
background, the state of California has submitted to EPA a State Implementation for the South
Coast Air Quality Management District, which has been called the Air Quality Management.
Plan that has been disapproved by the EPA. However, the plan has, in many respects, set
forth goals rather than commitments, in terms of adopted regulations; The AQMP presents
a framework for phasing in controls based on the state-of-art technology for various source
categories. These phases are called Tier I, Tier JH, and Tier IE. ' For purposes of estimating
costs for the RIA, the AQMP was not considered as an effective component of the existing
set of regulations (baseline). Aside from this plan, the District does have regulations in place
on many source categories, such as Reasonable Available Control Technology and New Source
Performance Standards for stationary sources, and the California Motor Vehicle Control
Program, which is more stringent than the National Federal Motor Vehicle Control Program
for the rest of the nation. However, growth in population and vehicle-miles-traveled will
offset much of the effectiveness of the current program. As Chapter IV points out, the current
program will result in an estimated lower reduction of VOC and CO emissions, but far short
of the necessary requirements to meet the NAAQS. However, growth in both population and
vehicle-miles-traveled will offset much of the effectiveness of the current program. Given
the extent and persistence of the ozone nonattainment problem in the District, it is
problematical whether the ozone NAAQS can be achieved without the FIP containing
provisions requiring changes in present emission patterns and trends.
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C. OTHER REGULATORY APPROACHES
The Court order to develop a HP for the Basin effectively limits the opportunities for
utilizing other regulatory approaches to achieving the ozone and carbon monoxide NAAQS.
The EPA has reviewed the alternatives of a regulatory FTP versus a committal HP. Each is
described briefly below.
Option I: Regulatory FIP
This HP includes, in legally enforceable form, substantially all measures necessary to
bring the area into attainment of the standards by the specified attainment date. It includes
all the core measures plus several categories of backstop measures. (For further discussion,
refer to Appendices 3-6 of the Technical Support Document). Assuming that the creditable
State rules and the core measures will meet minimum progress requirements for the first five
years, the HP backstop rules would generally guarantee a constant rate of basin-wide emission
reductions from 1996 through 2010 by an incremental rollback of 6 percent per year from all
controllable source categories. The backstop measures serve as a strong incentive for State
efforts, since they would be rescinded before their scheduled implementation dates if basin-
wide emissions are reduced to the prescribed levels through the adoption and implementation
of future SIP rules. In addition, any of the core measures and the backstop rules (including
the Ultra Clean Motor Vehicle Program) would be rescinded upon the adoption of the
equivalent controls by the State.
Since the requirements for area-wide emission reductions are severe and potentially
disruptive, EPA has adopted a marketplace approach to stimulate the innovation that will
speed the development: of pollution control and reduce its costs. EPA has therefore designed
the backstop measures to provide maximum flexibility to the affected industries by allowing
each industry or. group of industries to determine-the best approach for meeting the required.
VOC reduction. Because the control measures specify a required reduction instead of a
command-and-control approach, affected sources can chooses a strategy that best meets their
situation. Potential VOC reduction strategies would include, but not be limited to, product
reformulation, product substitution, control equipment, purchase of emission reduction credits,
and, if necessary production curtailments.
EPA's proposed mobile source backstop measure for ultra clean vehicles has special
features designed to enable motor vehicle and fuel manufacturers to expedite progress while
allowing for economic selection of control options. Appendix 6 of the Technical Support
Document discusses these elements, which include averaging, banking, and trading. Chapter
IV of this document contains a more detailed discussion of the backstop measures.
EPA will establish a public process for projecting, in consultation with the State and
local agencies, future levels of actual emissions. This process will give several years of
advance warning on probable backstop reductions. If actual emission reduction progress
occurs, EPA would amend the backstop rules, substituting less severe and disruptive-
requirements for the original reduction schedule or rescinding completely the reduction
requirement.
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Option H: Committal FIP
This FIP consists of the core measures (described in Appendix 2 of the Technical
Support Document). To achieve the remaining necessary reductions, the Option n FTP includes
specific enforceable commitments by the EPA to develop rules in the future. The
commitments consist of an identification of the relevant measures or the source categories
for the required emission reductions, quantification and scheduling for implementation of the
reductions, including scheduling the promulgation of these measures as specific enforceable
requirements. EPA will indicate that substitute measures may be introduced if more cost-
effective alternatives are identified that still provide for the required progress in eduction of
overall emissions.
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This approach may result in a mix of core and backstop measures. The first phase
of these measures would be promulgated by 1994 to be effective in 1996. Other measures
would be promulgated as necessary in the 1996-2010 time-frame.
The rationale for the committal FIP is the recognition of the severity of the air quality
problem in the South Coast basin and the stringent requirements to attain the air quality
standards for ozone and carbon monoxide. The committal FIP would contain many of the
provisions of the regulatory FIP up to the point where there were no more strategies for which
the technology had been identified and/or for which the actual regulatory language had been
developed. However, a committal FIP is legally vulnerable because the Clean Air Act requires
that implementation plans include emission limitations, schedules, and other measures as may
be necessary to insure attainment and maintenance.. Section. 110 (a) (2) (B) requires that plans
for nonattainment areas must contain "enforceable measures to assure attainment of the
applicable standard."
D. MARKET-ORIENTED APPROACHES
There are several market-oriented approaches which can be considered as alternatives
to a command and control mechanism for attaining and maintaining the ozone NAAQS.
These include pollution charges, marketable permits, and subsidies. Elements of these
approaches could conceivably be-incorporated within the FTP (and in some cases are). Each
is briefly described below.
Charges
This approach would involve a charge set on each unit of pollutant emitted. Firms
or individual emitters would then choose the amount of abatement, in the form of reductions
of emissions of ozone precursors, considering the effect of the pollution charge. Theoretically,
emissions would be reduced until the marginal cost of abatement is equal to the charge on
emissions. The regulatory agency would, have to set the level of charge in a manner that
would result in the desired level of emissions. The biggest drawback with this approach is
the uncertainty associated with the time path for emission reductions. Some source categories
may be inclined to reduce emissions by altering schedules, adding controls and so forth;
others, may simple pay the charges and pass the costs along to consumers. In addition, the
III-3
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appropriate charge would likely differ significantly between source categories due to the
different chemistries involved in the transformation of various precursors into ozone. Given
the fact that the health and environmental impacts are multifaceted, it would be very difficult
to assess the appropriate charges.
Marketable Permits
A marketable permit or allowance system would allow a precursor emitter to purchase
a permit in order to emit a specified amount of a pollutant over a specified period of time at
a specified location. The permit would contain a provision that basically limits, or caps, the
emissions per source; and this limit would call for a fixed percent reduction in each
subsequent year over the life of the permit. A fixed number of allowances could be issued
and auctioned off to the highest bidders. Alternatively, the allowances can be distributed
among the sources, who could trade these allowances or acquire firms that have successfully
obtained allowances to emit. A variant of the allowance system is considered in addressing
the backstop control measures. The appeal of this particular allowance system is that source
categories are given more flexibility in their decisions to reduce emissions. The rationale here*
is that individual sources, or source categories (e.g., consortia) are the most knowledgeable of
their control opportunities.
Subsidies
A subsidy system pays sources for each unit of pollution that they do not emit. This
can take the form of direct payments or tax credits. Subsidies and charges are similar in that
both increase the opportunity cost of pollution, the former by causing each source of emissions
to entail forgoing the subsidy which could be received if it. were: not: emitting pollutants.
Thus, the subsidy is similar to a charge, except in two respects:.
(a) A prerequisite of FIP measures is the requirement that they are Federal
enforceable measures under the current Clean Air Act. EPA does not have
the legislative authority to offer direct payments or credits.
(b) The long-run effects of subsidies may be quite different than for permits or
charges, since the former increase profit levels for emitting industries and the
latter decrease them.
REFERENCES
1. South Coast Air Quality Management District. Final Air Quality Management Plan,
1989 Revision. Summary and Appendices (viz. Appendix IV). . March 1989.
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IV. CONTROL STRATEGIES
A. INTRODUCTION
This chapter addresses the baseline emissions for three pollutants—nitrogen oxides,
volatile organic compounds, and carbon monoxide—and control measures that constitute the
Federal Implementation Plan for the South Coast Basin. The measures for mobile sources do
have some additional benefit in reducing nitrogen oxides. The control measures outlined in
the Federal Implementation Plan (FTP) for the South Coast Basin are basically designed to
assure that the SCAQMD's Air Quality Management Plan maintains reasonable further progress
toward attainment in a manner consistent with the stated goals in the Plan; namely, attainment
of the ambient standard for ozone in 2010.
B. BASELINE EMISSIONS AND FUTURE EMISSIONS
The FTP relies on the most recent State/local inventory of emission in the South Coast
Basin. This baseline emission inventory serves four purposes: (1) as an input for ozone
modeling; (2) to quantify the emission reductions needed to attain the ozone NAAQS; (3) to
quantify emission reductions for control strategies developed for the FIP; and (4) for tracking
purposes to measure progress towards attainment. An EPA document entitled Emissions
Inventory Documentation for the South Coast AOMD Federal Implementation Plan summarizes
emissions of Volatile' Organic- Compounds (VOCs), Nitrogen Oxides (NOJ and Carbon
Monoxide (CO) for the base year (1988), and future years through 2010.
VOC Emissions
Baseline VOC emissions from the SCAQMD FIP area were estimated to be 1,494 tons
per summer weekday (TPD). Mobile sources emit 46 percent of the total, point sources
(major emitting sources with emissions contribute 25 percent, and area sources, including off-
highway vehicles, contribute 29 percent.
By the year 2010, VOC emissions are expected to decline to 1130 TPD as a result of
the current baseline program which consist of New Source Performance Standards and
Reasonable Available Control Technology for stationary sources and EPA's California
programs for motor vehicles emission and motor fuels standards. The principal source for the
projected decrease in VOC emissions is decreased mobile source emissions. On a per-vehicle
basis, mobile source emissions will be cut in half, accounting for almost all of the total VOC
decrease. Mobile source emissions are reduced due to the EPA's California and Federal Motor
Vehicle Control Program (FMVCP); replacement of older automobiles with newer, less
polluting models (fleet turnover); enhancements to the State's inspection and maintenance (I/M)
program: and institution of Phase I of the Federal Reid Vapor Pressure (RVP) regulations.
However, with a projected increase of 37 percent in population to 2010 relative to 1985,
vehicles-mile-travelled (VMT) will increase. Consequently, this increase in VMT will offset
.IV-1
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declines in per vehicle mobile emissions. In addition, stationary and area source emissions
will increase.
The total baseline emissions for the typical 1987 summer day are estimated to be 1494
tons per day VOC. Emissions for the categories regulated under the FIP are as follows:
Source Category Emissions (TPD)
Total Mobile 751
Highway Mobile Sources 667
Marine Vessels 4
Other Mobile Sources 80
Total Under Stationary Backstop ' 743
Industrial and Commercial Solvents 392
VOC-Using Manufacturing Processes 16
Disposal of Materials Containing VOC 6
Food Industry & Agricultural Processes 8
Petroleum Production & Marketing 84
Consumer Solvent Use H3
Pesticides 10
Livestock Operations 37
Miscellaneous Sources Covered 44
Stationary Not" Covered By Backstop Rules 42'
Stationary Combustion . 40
Other Stationary 2
CO Emissions
Carbon monoxide emissions are due to combustion of fossil fuels. During 1987, CO
emissions totaled 5430 TPD. Of this, mobile sources contributed 87 percent, area sources,
including off-highway vehicles, 11 percent, and point sources 2 percent. By 2010; the total
CO emissions are projected to be 4228 TPD. Mobile sources are projected to provide much
of the reduction.
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C. EMISSION REDUCTIONS NEEDED
A photochemical modeling analysis was performed in order to estimate the ozone
precursor emission reductions needed to reduce the peak ozone concentrations to the ambient
standards. The simulation model of atmospheric chemistry and meteorology was the Urban
Airshed Model (UAM). The LJAM modeling was conducted in accordance with EPA's User's
Guide For the Urban Airshed Model:Volume I: User's Manual for UAM (CB-IV) (EPA-45Q/4-
90-007A\
Based on the modeling results, a target VOC emission reduction was determined for
each monitor site as the amount of VOC reduction needed to bring the site into compliance
with the ozone NAAQS. The highest VOC reduction target for any site was selected as the
overall reduction target. The target reduction for base year VOC emissions (the District uses
the term Reactive Organic Gases, or ROG) for the South Coast District is 86 percent based
on the site with the highest design value. The target reduction translates into a target emission
rate of 200 TPD. Accounting for the current baseline program, the required FIP reduction of
VOC is 930 TPD in 2010.
The 86 percent target was calculated taking into account the fact that NOX and CO
emissions remained constant. However, reductions in emissions of NO, and CO due to
FMVCP, fleet turnover and Federal RVP regulations alter the VOC reductions needed to attain
the NAAQS. These reductions in NOX and CO are assumed to affect the photochemistry for
ozone formation and do affect the reduction requirements for attainment, but for the FIP they
are assumed not to have any effect. Further details on the air quality modeling' are in an
Appendix of the- Technical Support Document.
In terms of carbon monoxide, targeted reductions are 60 percent reduction. The target
reduction translates into a target emission rate of 2172 TPD. Accounting for the current
baseline program, the required FIP reduction of VOC is 2056 TPD. Attainment date for CO
is the year 2004.
The 1989 State Implementation Plan (SIP), or the South Coast Air Quality Management
Plan does not contain adopted regulations, nor demonstration of feasibility of control measures
identified as Tier I, Tier n, and Tier HI measures. Therefore, these measures were condiered
in the emissions reductions analyses and control requirements for the RJA.
C. CONTROL STRATEGIES
The control measures proposed in the Regulatory FIP for the South Coast are
summarized in Table IV-1. They consist of core measures and backstop measures, which
basically reflect provisions that will trigger additional reduction requirements in the event the
South Coast District Air Quality Management Plan does not achieve reasonable progress in
the future years beyond 1995.
According to the General Accounting Office (GAO), ' "a market approach to air
pollution control could reduce compliance costs without jeopardizing clean air goals." GAO
IV-3
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notes that savings in abatement costs depend on the pollutant, but ranges from 40 percent to
90 percent. 2 The percentages could be higher for they do not reflect the invention,
innovation, and technology diffusion gains resulting from stimulated research and development
2 More recent studies by T.H. Tietenberg, 3 EPA's Regulatory Reform Staff, 4ICF Resources
Inc. 5, and R.N. Stavins 6 demonstrate conceptually and/or empirically the value of economic
incentives.
The South Coast FIP is a hybrid. The positive features of traditional command and
control regulations are maintained for certain lower cost (core) measures. However, under
option I, economic incentives may be used to address the emission reduction requirement of
higher cost (backstop) measures. [See page VI-4].
CORE MEASURES
Under both FIP options, EPA is proposing core measures that will contribute emission
reductions to expedite attainment. As a general principle, core measures take into account
reductions for both VOC and CO emissions. These measures are area specific controls or
national regulations in scope. The core measures are primarily directed toward regulating
reduction of evaporative and refueling emission (VOC) or improving combustion (CO). The
following discussion presents details on these core measures.
Wintertime Oxygenated Fuels Program
In vehicles equipped with evaporative controls, high RVP fuel can also result in higher
CO tailpipe emissions due to canister purging. Significant CO benefits may be attained by
limiting RVP levels during the wintertime CO season. The voluntary ASTM RVP
specifications for wintertime fuel in the South Coast is up to 13.5 psi for the months of
November through February. The FIP will propose to limit the RVP of gasoline sold during
these months to 10.0 psi beginning in November 1992, again taking into account safety,
driveability, and cost factors.
Gasoline Volatility Restrictions
In June 1990, EPA promulgated the second phase of a two-phase program for a
national volatility control. Under this final rule-making, maximum volatility of gasoline is
limited to 9.0 psi Reid Vapor Pressure in the state of California for the month of May, as also
requied by California, and 7.8 psi for month of June though September 15, beginning in 1992.
In March 1990, the California Air Resources Board proposed to reduce" the maximum
allowable limit to 8.0 psi from April through October. Because of the length of the ozone
season in the Basin, EPA is proposing to extend the federal 7.8 psi RVP limit to the months
of April through October during 1992 and 1993. Beginning in 1994, the 7.8 psi limit would
apply to April, May, and October, and a lower volatility limit of 7.0 psi RVP for June through
September in the Basin.
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Cold CO Emissions Standard for Light-Duty Cars and Trucks
The proposed cold CO standard will help to reduce those CO emissions at or below
50 degrees Fahrenheit. (The current Federal motor vehicle program requires compliance with
CO emission standards at temperatures between 68 and 86 degrees Fahrenheit.)
EPA has found that violations of the CO standard typically occur at lower temperatures and
that the emissions control performance of vehicles is degraded at lower ambient temperatures,
causing CO emissions to increase significandy. The standards should be fully effective
sometime during the mid-1990s. The proposal may also contain features such as the
availability of an emissions averaging program.
EPA intends to propose in the near "future new Federal emission control requirements
to reduce CO at lower ambient temperatures. This rule-making (and the proposed national
control on evaporative emissions discussed below) does not automatically apply to California
vehicles, and the State of California has no equivalent provisions. [Therefore, the national
rules to apply to California vehicles.]
Emission Controls for Gasoline-Fueled Motor Vehicles
In January 1990, EPA proposed new national regulations to prevent excess evaporative
emissions from gasoline-fuel motor vehicles. The new regulations changes the test procedure
for these vehicles to include two diurnal heat builds at the end of the current Federal Test
Procedure, a representative temperature range of 72-96 degrees for each diurnal cycle,
removing.the. fuel tank cap near, the beginning of the hot soak portion of the test, and an
engineering review of control system designs to ensure that any vapors generated are routed
to the evaporative control system. No specific implementation date has been proposed, but.
it is anticipated the new test procedure-would become effective sometime after the 1991 model
year.
Controls on Marine Vessel Tanks
The proposed control measure would apply available technology to reducing the
emissions from unloading, loading, lightering, ballasting, and housekeeping. The FIP
regulation is similar, in many respects, to the benzene regulation promulgated on March 7,
1990, under the National Emission Standards for Hazardous Air Pollutants program (section
112 of the Act).
Reformulated Gasoline
The proposed regulation sets a performance standard for a required vehicle emission
reduction (relative to either 7.0 or 7.8 psi gasoline without other changes, depending on
month), but leaves the formula choice to the gasoline refiner or importer. While the reduction
of RVP from 9 psi to 7.0 psi is the most readily feasible change that can be made to reduce
vehicle VOC emissions, adding oxygenates and shifting the chemical composition towards less
reactive compounds are _also_possible. The effective date is April 1994.
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This measure will provide important reductions in 1995 to about 2010. This period is after
the core measure's benefit has been obtained and used to meet the 6 percent progress
requirement but before the ultra clean vehicle program becomes fully effective.
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TABLE IV-1
SUMMARY OF CORE AND BACKSTOP MEASURES FOR WHICH
REGULATIONS ARE BEING DEVELOPED
CORE MEASURES
Wintertime Oxygenated Fuels Program
Gasoline Volatility Restrictions during the Ozone Season
Wintertime Gasoline Volatility Restrictions for Carbon Monoxide (CO)
Cold CO Emission Standard for Light-duty Cars and Trucks
Enhanced Evaporative Emission Controls for Gasoline-fueled Motor Vehicles (proposed
nationally in January 1990)
Controls on Marine Vessel Tanks
Reformulated Gasoline
BACKSTOP MEASURES
Group A: Stationary and Area Source Categories
Consumer Products
Industrial and Commercial Solvent. Use
Disposal of Materials Containing VOC's
Pesticides Products
Manufacture of Products Containing VOC's
Petroleum and Natural Gas Extraction, Processing and Storage
Commercial Food Preparation
Livestock Waste Operations
Architectural Coatings
Miscellaneous Small Sources
Group B: Rail, Aircraft and Ship Operations
Rail Locomotives
Commercial and General Aircraft
Large Ocean Going Ships
IV-7
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TABLE IV-1 (CONTINUED)
SUMMARY OF CORE AND BACKSTOP MEASURES FOR WHICH
REGULATIONS ARE BEING DEVELOPED
BACKSTOP MEASURES
Group C: Other Off-Highway Equipment and Vehicles
Smaller Marine Vessels
Pleasure Boats
Construction Equipment
Utility Equipment
Off-Road Motorcycles, Buggies, and Four-Wheel Drive Vehicles
Commercial and Residential Lawn and Garden Equipment
Group D: Ultra Clean Motor Vehicle Program
All Categories of On-Road. Motor Vehicles
Alternative CO Backstop Measure
IV-8
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BACKSTOP MEASURES
The backstop measures serve to guarantee the necessary emission reductions required
for Reasonable Further Progress (RFP) and attainment, after taking credit for enforceable
regulations in the State Implementation Plan and core measures in the FIP. WPA hopes
that the backstop measures will never be implemented, because the State and local effort will
continue to achieve RFP. In order to achieve the required emissions reductions equitably,
the backstop rules are intended to cover every controllable VOC source category. The control
level required for backstop categories is generally 90 percent. The high reduction level results
from air quality modeling requirements stemming from a very high design value for both
ozone and carbon monoxide.
• .
As shown in Table IV-1, source categories for backstop rules are grouped in four
classifications (Groups A, B, C, and D). In terms of scheduling, Groups A and B backstop
rules are designed to go into effect in 1996 and to achieve uniform reduction from each
category of 6 percent per year until the year 2010. Group C backstop rules would initially
apply to new units sold in 1997. As discussed below, the Group D backstop measure affects
new car sales, as early as 1997, with the measure being fully effective in 2010.
Group A Categories
The first type of backstop rule requires sources to achieve reductions of facility
emissions by 6 percent annually. Reductions could be achieved by control equipment, process
modification, changes in operations or throughput, or purchased emission reduction credits.
Source categories subject to this rule-are: industrial and commercial solvents; manufacture of
products containing VOC's; commercial food preparation; petroleum and natural gas extraction,
processing and. storage; and livestock operations.
The second type of backstop rule for this group is for facilities that manufacture
products sold in the South Coast District. It require a reduction in VOC mass associated with
the use of the products. Compliance plans can rely on reduction in VOC content, product
substitution, or the purchase of reduction credits. Affected source categories are the
manufacturers of consumer products, pesticide products, and architectural coatings.
Group B Categories
The backstop measure for the Group B program take the form of annually renewable,
marketable EPA permits to operate in the Basin. Permits will be denominated in VOC tons,
and will be reduced adjusted by a fraction to achieve the necessary reduction. It is anticipated
that all current users will receive entitlements; new entrants will have ample time to plan
either to purchase permits from existing permit holders, or buy lower emitting internal
combustion engines (aircraft, rail, shipping).
Group C Categories
Emission limits will be proposed for new units that will require controls as effective
as those on motor vehicles. Technology may be less sophisticated and costly than for
IV-9
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on-highway motor vehicles; however, it is anticipated that some form of catalyst technology
will be required on many gasoline engines. For applications involving very small engines,
electrification may be the most feasible technology for users with access to electric power.
Group D Category
The Group D backstop measure represents an ultra clean motor vehicle program. This
measure would backstop the three-phased program clean-fuel and ultra-low emission vehicle,
recently proposed by the California Air Resources Board, as a result of the 1990 California
Clean Air ACL This backstop measure would rely heavily on future use of ultra clean
vehicle and fuel technology. The core principle of this backstop measure would be control
for total coverage of all emissions-exhaust, evaporative, running losses, and refueling--
associated with vehicles, from certification to in-use. Termed as an in-use emission standard,
this measure would subject cars and regulated trucks in the fleet at some future year in the
South Coast basin to recall testing, regardless of maintenance and use. (Manufacturers would
choose whether to include tampered vehicles.)
The composite, in-use emission standard would be 0.20 gram per mile for VOC, and
an in-use standard of 3.4 gram per mile for CO, for light-duty vehicles (passenger cars and
trucks). Proportional reductions would be required for heavier trucks up to 14,000 pound
GVWR. As a bench-mark for comparison, cars alternatively would have to comply with a
0.66 gram per mile standard for total emissions—exhaust, evaporative, running losses, and
refueling— under Phase n of the clean vehicle program for severe and extreme nonattainment
(ozone) areas in the Senate Bill for amending the Clean Air Act.
. The compliance date for the VOC measure is 2010, and 2004 for CO, for all on-road
vehicles in the basin. Average vehicle emissions will be essentially the-same as new vehicles
sold in 2010. EPA is considering a range of dates from 1997 to 2002 as the time after which
all new vehicles must meet the in-use standards. The Preamble for the Notice of Proposed
Rule-making is requesting comments for phasing in earlier new car sales, in various
proportions by year, to take into account technology development.
In terms of flexibility for auto manufacturers, first, the composite approach would allow
auto manufacturers to choose the fuel and vehicle design at least cost. Secondly, the universal
recall requirements would provide incentive to auto manufacturers to achieve compliance
toward developing more durable and tamper-free emission control designs of components. As
an option, EPA would allow the manufacture to request excluding obviously tampered cars
from a recall investigation with some appropriate adjustment to the applicable performance
criterion. Thirdly, the proposed program would vehicle manufacturers the flexibility of
averaging, banking, and trading. Manufacturers could earn credits by producing vehicles that
are cleaner than the performance standards. The credits may be used by the generating
manufacturers, sold or traded to other manufacturers for use in complying with the emission
performance standards.
One foreseeable problem with the composite standard is that older vehicles operating
in the basin in 2010 will have dated designs for emission control technology and will
adversely influence the average per-vehicle emission standard of all vehicles on highways in
IV-10
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the basin. EPA is soliciting public comments on how best to deal with this problem. EPA
has recommended options (Preamble for Notice of Proposed Rule-making) that range from
owners of higher emitting vehicles to obtain emission credits from owners of lower emitting
vehicles to dis-incentives of higher registration fees for older vehicles, banning unregistered
noncomplying vehicles from the South Coast area, new residents moving into the basin, and
visitors.
The alternative CO backstop measure will supplement the core measures for CO
because the modeling analysis estimates a shortfall of emission reductions during the period
of November 1, 2000 to March 1, 2001 and each period of November 1 through March 1
thereafter through March 1, 2004. In summary, this measure would prohibit 20 percent of the
motor vehicles registered in the 4-county District from on-highway operation during any given
weekday (Monday through Friday). The prohibition would be equitably proportioned on the
principle of either the last letter or last number of license plate.
IV-11
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REFERENCES
1. Report by the U.S. General Accounting Office, "A Market Approach to Air Pollution
Control Could Reduce Compliance Costs Without Jeopardizing Clean Air Goals",
March 23, 1982.
2. See Reference 1.
3. T.H. Tietenberg, Emissions Trading—An Exercise in Reformong Pollution Policy.
Resources for the Future, Inc. Washington, D.C. 1985
4. EPA's Regulatory Reform Staff, Emission Trading Status Report. January 1, 1986.
5. ICF, Resources Incorporated, "Economic, Environmental, and Coal Market Impacts of S02
Emissions Trading Under Alternative Acid Rain Control Proposals", March 1989.
6. Stavins, R. N., "Project 88 Harnessing Market Forces to Protect Our Environment:
Initiatives for the New President A Public Policy Study'".YSponsored by Senators
Timothy E. Wirth and John Heinz, Washington, D.C., December 1988.
IV-12
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V. CONTROL COSTS ANALYSIS
A. INTRODUCTION
This chapter addresses the costs for controlling both volatile organic compounds (VOC)
and carbon monoxide (CO) emissions in both FIP options. As discussed in Chapter IV, these
measures consist of core measures, consisting of area specific and national control measures
primarily directed at regulating fuels for mobile sources, and backstop measures aimed at
reduction of stationary sources, chiefly industrial and consumer solvents and consumer
products. Because backstop measures allow for the use of economic incentives, the accuracy
of the cost is uncertain. However, the cost estimate should be lower than that for traditional
command and control regulations.
B. COST ANALYSIS
As result of the limited information on cost for the control measures outlined in the
FIP, particularly for the backstop rules, the costs are presented on a per ton basis for the
particular control measure as available.
The incremental costs of the core measures are summarized as follows:
o Wintertime oxygenated, fuels program for CO will cost about $485 per ton CO1
o Reduction of summer time volatility in the Basin to 7.8 psi will cost $-1300 per
ton of VOC. Further reduction to 7.0 psi will cost approximately $ 1900 per
ton VOC.2 These values include fuel economy and fuel recovery credits based
on high ozone day conditions. The use of average summer day conditions
would result in somewhat higher cost and cost-effectiveness values.
o Wintertime volatility to 10 psi will cost about $ 65 per ton of CO3
o Marine vessel tank controls will cost about $ 2500 per ton VOC4
o Cost-effectiveness of the reformulated gasoline proposal is believed to range
from $ 2000 to $ 10,000 per ton of VOC equivalent emissions. A more precise
estimate for the FIP's ozone program is difficult, because the current information
for reformulated gasolines include the cost of fuel changes for reducing ozone
in addition to toxic effects. Presently, EPA's best etimate for reformulating
gasoline to achieve the ozone reductions proposed in the FIP is $ 8,000 per ton.
Figure V-l presents a cost-effectiveness profile of the measures for VOC in the FIP.
The Figure identifies the upper bound and lower bound estimate, as well as a middle estimate,
for the reformulated gasoline jmo_backstop measures. Intuitively, these measures will vary in
cost, but generally" lbw-~c"ost measures will be adopted first; higher cost measures will be
V-l
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Figure V-1. COST-EFFECTIVENESS OF VOC MEASURES
i Core and Backstop Measures
i South Coast FIP
12,000
10,0001 -
c
o
o) 8,000 -
LLJ
z
LLJ
o
LLJ
LL
LL
UJ
i
cn
O
o
6,000 -
4,000 -
2,000
0
HIGHER COST ESTIMATE
BACKST
0
EASURES
LOWER COST ESTIMATE
200
400 600
VOC REDUCTIONS (Tons/Day)
800
1,000
A Conceptual Framework of Relative Comparison
Core Measures versus Backstop
Year of Attamment--2010
-------
adopted later. Thus, the marginal cost curve will rise and is illustrated as an upward" sloping
diagonal.
Given the uncertainty of the costs associated with the success of the SIP and the
actions undertaken by sources with regard to backstop measures, only ranges of cost estimates
for the Regulatory FIP can be developed for purposes of this RIA.
The Agency believes that a point estimate of the total annual costs for the FIP program
would be approximately $ 2.6 billion. This estimate is made on the basis of the emission
reductions for VOC and CO discussed in Chapter IV. The cost estimates in this total are
derived by using a $ 5000 per ton VOC for the VOC backstop measures, a $ 16,000 per ton
CO, or $ 0.15 per mile, for the.alternative CO backstop and the fuel quality measures are
based on estimates from the Office of Mobile Sources.6 Table V-l presents a summary of
these costs for the FIP requirements to attain the Ozone and CO National Ambient Air Quality
Standards in the South Coast Air Basin. VOC fuel quality rules include both lowering
volatility and reformulation of gasoline (for summertime conditions from April through
October). Similarly, CO fuel quality rules include lowering volatility and oxygenated gasoline
(for wintertime conditions). Attainment for ozone is projected for the year of 2010. The CO
fuel quality rules will begin to have an effect in 1992; the CO alternative backstop rule be
effective from 2000 through 2004. A range of costs for the FIP is presented as $ 2 to $ 6
billion, for VOC controls (ozone) arid from $ 0.6 to $1.5 billion for carbon monoxide in the
Air Basin. The majority of these costs are for the backstop measures and do represent a high
degree of uncertainty. This uncertainty taken into account by costing out backstop measures
using a. range of $ 2,000 tb-$ 10,000 per ton VOC,-and a range of $ 0.3 to $ 1.2 billion for
the alternate-backstop-measure for CO.. These estimates are somewhat comparable to estimates
generated by the South Coast Air Quality Management District. The District has produced
cost estimates for all quantifiable phases of their Air Quality Management Plan for all
pollutants for controls to implement Tier I measures that total $ 2.6 billion per year. In
addition, an independent estimate based on extrapolation from the national analysis conducted
for the legislative initiatives for amending the Clean Air Act 5(i.e., the Title I and n
nonattainment provisions) provides a range of $ 2 billion to $ 6 billion range for VOC alone.
There is reasonable optimism that the costs for the FIP will be toward the lower end
of the $ 2 to $ 6 billion per year range. The rationale for this optimism is that once
enforceable rules are adopted for the measures in the SCAQMD Air Quality Management Plan,
most of the back stop measures will be rescinded. Most of the core measures are relatively
low cost, or economically feasible, and are similar to those utilized in the national analysis.
V-3
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TABLE V-l. SUMMARY OF CONTROL MEASURES AND ANNUALIZED COSTS FOR
FEDERAL IMPLEMENTATION PLAN
CONTROL MEASURE ANNUAL COSTS
($ MILLIONS/ YR)
YOC-RELATED FUEL QUALITY RULES ' 305
CO-RELATED FUEL QUALITY RULES 146
CO ALTERNATIVE BACKSTOP RULE (NO-DRIVE DAY) 789
MARINE VESSEL CONTROLS 4
VOC BACKSTOP MEASURES 1335
TOTALS FOR THE FIP 2579
V-4
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REFERENCES
1. Preliminary estimate, Office of Mobile Sources, U. S. Environmental Protection Agency,
Ann Arbor, Michigan, July 25, 1990.
2. See reference 1.
3. See Reference 1.
4. "Ozone Nonattainment Analysis, A Comparison Of Bills," E. H. Pechan & Associates,
Springfield, Virginia. Prepared under Contract 68-02-4400 for the U. S. Environmental
Protection Agency, January 1990.
5. Correspondence from James Wilson, E. H. Pechan & Associates, Springfield, Virginia,
to Frank Bunyard, Office of Air Quality Planning and Standards, U. S. Environmental
Protection Agency, June 15, 1990.
6. See- reference 1.
V-5
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VL ECONOMIC IMPACTS, REGULATORY FLEXIBILITY ANALYSIS
AND PAPERWORK REDUCTION ACT ANALYSIS
A. INTRODUCTION
The Regulatory Flexibility Act requires Federal agencies to review the effects of their
regulations on small entities^ and to involve these entities more actively in developing and
reviewing regulations.1 "Small entities" here includes small businesses, small governmental
jurisdictions, and small organizations.
Through the U.S. EPA's proposal, public review, comment period and promulgation
process, provision is made for involvement of all affected parties. Moreover, such involvement
has been reflected in past efforts of the local and state air quality management activities.
The criteria for "smallness" applies to the firm, not to each of the facilities, plants, or
establishments owned by the firm. The Small Business Administration (SBA) defines "small
businesses" by Standard Industrial Classification (SIC) code in terms of annual sales or
employment. Agencies are required to screen for potential adverse effects and to prepare a
Regulatory Flexibility Analysis if certain criteria are triggered.2
The next issue is whether the regulation would have "a significant economic impact on
a-substantial number of small entities." A "substantial number" is generally thought to imply
greater than 20 percent of the small entities, although this is not a fixed rule. A "significant
economic impact" is said to occur whenever any of the following criteria are satisfied: -
o Annual compliance costs (including annualized capital, operating, and reporting
costs) increase as a percent of total costs of production for small entities for the
relevant process or product by more than 5 percent.
o Compliance costs as a percent of sales for small entities are at least 10 percent
higher than compliance costs as a percent of sales for large entities.
o Capital costs of compliance represent a significant portion of capital available
to small entities, considering internal cash flow plus external financing
capabilities.
o The requirements of the regulation are likely to result in closures of small
entities.
VI-1
-------
B. METHODOLOGY
The approach taken to determine if there is potential for a substantial number of small
entities to be affected was to compare the Small Business Administration criteria for small
entities (see Table VI-1) with surrogates for these criteria in the South Coast Air Quality
Management District.
TABLE VI-1. SELECTED SMALL BUSINESS ADMINISTRATION CRITERIA
FOR SMALL ENTITIES
Dry cleaning $7 Million Annual Sales
Aerospace 1000 employees
Passenger Car Assembly 1000 employees
Auto refinishing $3.5 Million Annual Sales
Can Coating 1000 Employees
Fabric Coating 1000 Employees
Large Appliance 1000 Employees
Marine Vessel 1000 Employees
Sanitary Food Containers 750 Employees
(Paper Coating)
Rubberized Materials Resins 750 Employees
(Fabric Coating)
All Other Categories 500 Employees
The approach taken to see if there is a potential for significant impact was to compare
estimated control costs as a percent of sales across firm size and industry type for two
categories of sources.
Given that there is much uncertainty in the costs associated with backstop measures,
it was decided to perform an illustrative exercise based on a $2000 per ton control cost
estimate. In order to do this, the analysis requires a comparison of costs as a percent of sales
by model plant—a conceptual model plant representing each employee category for which
statistics on employment, payroll, and establishments are available.
VI-2
-------
The procedure for this analysis is as follows:
(1) Determine the number of employees for each model plant by dividing total
employment for an entire industry by the mid-range estimate (e.g., 2.5 would
represent this estimate for the 1 to 4 employment category {see Randy Strait
memo}) for each employment category (establishments and employee data by
employment category, employees per firm, are available from County Business
Patterns41).
(2) Compute annual emissions and emission reduction requirements by multiplying
annual per-employee-emissions {see Randy Strait memo} by employees for each
model plant.
(3) Compute annual control costs by multiplying costs-per-ton by tons reduction for
each model plant.
(4) Compute individual model firm annual sales by multiplying average annual
payroll by number of employees and by sales-to-payroll ratios. (Sales and
payroll data are available from Enterprise Statistics 5; average annual payroll
per employee is derived by dividing payroll for category by derived employees
in Step 1).
(5) Compute control costs per model firm as a percent of model firm sales as the
measure of differential impact..
C. RESULTS
Even after adjustment to reflect that the number of establishments may not be an
appropriate surrogate for the number of firms, a CO and ozone National Ambient Air Quality
Standard Implementation Plan could affect a substantial number of small entities. See Table
VI-2. However, this number (8712) is small relative to the total number of smaller
establishments in the South Coast. See Table VI-3.
With respect to the potential for significant impact across firm size, relative costs did
not vary dramatically across firm size. See Table VI-4. However, this may have been an
artifact of the analysis.
As regards impacts across industry types non-trivial differences in costs as a percent
could arise. See Table VI-4.
VI-3
-------
D. MEASURES TO AVERT IMPACTS ON SMALL FIRMS
Exemption of facilities emitting less than 20 pounds of VOC per day have been
incorporated in Option I. This will eliminate the impact of a CO and ozone National Ambient
Air Quality implementation plan on a substantial number of small firms. For < 100 employee
establishments in the Miscellaneous Metal Parts and Coating and Wood Furniture
Manufacturing Facilities, this could eliminate about 90 percent of establishment from impact
by the regulations.
E. MEASURES TO MITIGATE IMPACTS ON SMALL FIRMS
To foster cleaner air objectives and further reduce the potential for significant adverse
impacts on smaller entities, Option I invites comment on measures which provide added
flexibility for sources in the backstop measures category.
Marketable operating permits with declining VOC emission reductions will introduce
flexibility into the decision making process for individual affected facilities.
o Source categories will have a market for their excess emission reductions, and
thus, will have the incentive to reduce beyond currently prescribed requirements.
o Phasing VOC reduction requirements (nothing for the first five years, then 6
percent, per year for 15 years) provides an opportunity for the permitted source
to search for VOC reduction opportunities in a, non-panic "buying." mode.
Provision for industry government partnerships and.consortia.with industries should add further
flexibility.
F. CONCLUSIONS
There is a potential to adversely impact on a substantial number of small entities.
Option 1 includes steps to dramatically reduce this potential. The 20 pound/day size cutoff
removes a large percentage of small entities from any adverse impact. And the added
flexibility in control decisions by sources in the backstop category acts to reduce the potential
cost burden.
Positive impacts on small entities providing engineering services, etc. will result from
adopting Option 1. The size and extent of the positive effect have not been gauged.
VI-4
-------
TABLE VI-2. DISTRIBUTION OF SMALL BUSINESSES AFFECTED BY BACKSTOP RULES
Industrial and Commercial Solvent Category
Source Category
Aerospace Component Coating
Automobile and Light-Duty
Truck Assembly Line Coating
Automobile & LD Truck
Non-Assembly Line Coating
Can Coating
Flatwood Products Coating
Graphic Arts
Large Appliance
Magnet Wire Coating
Plastic Parts Coating
Dry Cleaning
Fabric Coating
Paper Coating
Miscellaneous Parts and
Product Coating
Metal Furniture Coating
Wood Furniture
Totals For Coating Categories
Number of
Businesses
14
86
1298
27
4
3580
3
1
4
2276
52
90
165
101
911
8712
Number of
Small
Businesses
0
76
1296
13
4
3549
1
0
0
2240
47
70
163
94
817
8339
VI-5
-------
TABLE VI-3. DISTRIBUTION OF ESTABLISHMENTS BY EMPLOYEES
South Coast AQMD
««««««««««««EMPLOYEE CATEGORY»»»»»»»»»»
County
Los Angeles
Orange
Riverside .
S. Bernardino
Totals
Establish-
ments
208637
63902
17375
21404
311318
1
to
4
117712
35174
9955
12037
174878
5
to
9
36179
11851
3433
4152
55615
10
to
19
24647
7784
1902
2582
36915
20
to
49
17947
5553
1321
1712
26533
50
to
99
7009
2012
465
567
10053
100
to
249
3604
1097
230
258
5189
250
to
499
980
287
47
64
1378
500
to
999
358
82
16
22
478
>
1000
201
62
6
10
279
SOURCE: 1986 County Business Patterns for Los Angeles, Orange, San Bernardino, and Riverside Counties (California). US.
Department of Commerce.
VI-6
-------
TABLE VI-4. ILLUSTRATIVE DIFFERENTIAL CONTROL COST IMPACTS BY FIRM SIZE
««««««««««««EMPLOYEE CATEGORY»»»»»»»»»»
Miscellaneous Metal Parts
and Coating Industry
j
|i
Establishments/Category
Employees/Category
Payroll/Employee ($/Yr)
Sales/Payroll Ratio
Annual Sales/Estab
Annual Tons VOC/Estab
Annual Costs/Estab
Costs, % Sales
Wood Furniture Industry
Establishments/Category
Employees/Category
Payroll/Employee ($/Yr)
Sales/Payroll Ratio
Annual Sales/Estab
Annual Tons VOC/Estab
Annual Costs/Estab
Costs, % Sales
1
to
4
35
30
7506
8.5
54668
1.9
3800
6.95
1
to
4
254
59
7506
8.5
14820
0.04
80
0.54
5
to
9
30
83
8434
7.3
1703299
6.25
12500
7.34
5
to
9
135
165
8434
7.3
75246
0.21
420
0.56
10
to
19
32
172
9307
6.7
335161
12
24000
7.16
10
to
19
142
343
9307
6.7
150619
0.41
820
0.54
20
to
49
55
409
9900
6.6
485895
17
34000
7.00
20
to
49
191
815
9900
6.6
278808
0.73
1460
0.52
50
to
99
11
883
10325
6.4
5304580
182
364000
6.86
50
to
99
95
1760
10325
6.4
1224255
3.18
6360
0.52
100
to
249
2
2067
10388
6.2
66566067
2339
4678000
7.03
100
to
249
74
4122
10388
6.2
3587721
9.56
19120
0.53
250
to
499
250
to
499
15
8846
10401
6
36803248
101.26
202520
0.55
500
to
999
500
to
999
2
17704
10776
6.3
6 x 10"
1519
3038000
0.51
VI-7
-------
PAPER WORK REDUCTION ACT ANALYSIS.
A preliminary analysis of the recorcikeeping and reporting requirements (administrative
costs) for the -core and backstop rules has been prepared and is summarized as follows. Total
annual costs for the core and backstop rules could be as much as $ 5 million per year. The
coverage for these costs include affected facilities and the EPA For the core measures,
recordkeeping and reporting costs are estimated as approximately $ 710,000 per year of which
$ 534, 000 per year are associated with the wintertime oxygenated fuels program. The
remainder of the costs are associated with the reformulated gasoline program ($ 153,000 per
year) and the marine vessel control program ($18,700 per year).
For the backstop measures, roughly $ 4 million per year are incurred with the
compliance for Group A Category (Stationary Sources) rules. This is the estimate for format
3 for the Industrial Solvent and Industrial/Commercial Coating category. This format is
somewhat more expensive than implementation under a format 1 /format 2 option. A possible
explanation for this may be the additional requirement for paperwork requirements incurred
by users of architectural coatings, pesticide products, and consumer products. The format 1 /
format 2 option would require only manufactruers, packagers and distributors to incur these
administrative costs.
REFERENCES
I. This chapter is based on § 8.3.6, "Small Business Effects," in Hazardous Waste TSDF-
-Background Information for Proposed RCRA Air Emission Standards.
2. Memorandum from Smith, Ronald C, Office of Standards and Regulations, Office of
Policy and Resource Management, U.S. Environmental Protection Agency, to Steering
Committee Representatives. April 1983. Compliance with Regulatory Flexibility Act
Attachment: Implementation of the Regulatory Rexibility Act, p. 6-7.
3. Letter from Randy Strait to Bruce Livingston et al, U.S. Environmental Protection
Agency Region IX. April 26, 1990. Exemption Level Analysis for INdustrial and
Commercial Solvent Use Facilities.
4. U. S. Department of Commerce. County Business Patterns. 1986 County Business
Patterns for California.
5. U. S. Department of Commerce. 1977 Enterprise Statistics, General Report on
Industrial Organization
VI-8
-------
VH. THE BENEFITS OF THE CARBON MONOXIDE AND OZONE REDUCTIONS
IN THE FEDERAL IMPLEMENTATION PLAN
A. INTRODUCTION
This chapter addresses the potential benefits associated with achieving the ozone and
carbon monoxide NAAQS in the South Coast District. A formal benefits analysis requires
many pieces of information. The full pollutant path must be analyzed, tracing emission
reduction through atmospheric dispersion through population exposure through effective dose
through health endpoint manifestation through mitigating or averting behavior and finally
through valuation. Such a detailed analysis is not available for the South Coast District FTP.
Ambient air modeling performed in conjunction with the FTP analysis uses Urban
Airshed Model (UAM) to determine the VOC emission reductions necessary to attain the
ozone and CO reductions for the carbon monoxide standard. UAM predicts hour-by-hour
concentrations for a limited number of episode-days. Such data are needed to estimate
changes in population exposures and consequently, reductions in ozone-related health effects.
Other models that predict hourly ozone concentrations do exist. The EPA has
developed the Regional Oxidant Model (ROM) for two geographic areas of the nation: the
north-east and the south-east. Such models have been operational in the Agency and have
been successful in. producing some limited simulation over the course of an ozone season.
Resource requirements to conduct such modeling is quite extensive.
Quantitative estimates of the improvements in human health and welfare from the FIP
regulations are not available. To do an adequate assessment of benefits requires the following:
(1) adequate modeling of the emission-to-air quality relationshipsfor VOC, ozone,
CO, and paniculate matter (PM10) both temporally and spatially.
(2) concentration-response functions, for salient health and welfare endpoints
(3) population exposure assessments (or crop assessment for vegetative effects) to
determine the dose concentration-risk profile for each effect category on the
populations living in the polluted areas such as the South Coast air basin, and
«
(4) valuation, or willingness-to-pay, for those health and welfare improvements
associated with the effects of the categories such as those listed in this chapter.
The remainder of this chapter briefly describes the known health and welfare effects
of elevated ambient ozone levels. Attaining the ozone NAAQS would reduce or eliminate
the detrimental effects of ozone currently experienced in the District. Such a qualitative
description of the benefits is all that is possible at this time.
VE-1
-------
OZONE: Health Effects
In order to establish the ozone NAAQS the EPA reviewed a large amount of research
on the effects of elevated ozone concentrations on the human body. The results of the EPA's
most recent review are contained in three documents: Air Quality Criteria for Ozone and
Other Photochemical Oxidants (1986), Environmental Criteria and Assessment Office,..
EPA/600/8/84-020aF-eF, Air Quality Criteria for Ozone and Other Photochemical Oxidants:
Supplement (Draft, 1988) and Review of the National Ambient Air Quality Standards for
Ozone: Assessment of Scientific and Technical Information (Draft, 1988), Office of Air
Quality Planning and Standards. The following discussion draws heavily on these documents.
• The South Coast District, which includes Los Angeles, Orange, Riverside, and San
Bernardino counties, comprise some 11.2 million people in 1984. By 2010, the population
is projected to be 16.1 million. A population is at risk of adverse health effects when exposed
to levels of ozone above the NAAQS level of .12 ppm. Peak ozone concentrations have
exceeded the standard by almost three times continually over the recent years. For example
in the 1986-1988 season, the "design value" exceeded 0.30 ppm. In addition, the South Coast
District has experienced multiple exceedances each year—approximately 150 exceedances occur
annually at the "design value" monitor over the nine-month season for ozone. Achieving the
ozone standard will reduce the risk to the population. For carbon monoxide, the population
is at risk of adverse effects when exposed to levels of either 9.0 ppm for the 8-hour standard,
or 35 ppm for the 1-hour standard. In 1988, the South Coast had a design value of 19.6 ppm
and 72 exceedances of the 8-hour CO NAAQS.
Ozone affects certain people- more than others. The population most at risk from
ozone' are people with pre-existing respiratory disease: This includes people with chronic
bronchitis (3.5% of- the U.S. population), asthma (3.0%), allergies (7.2%) and emphvsema
(1.0%).
There are eight major health effects of concern:
Alterations in Pulmonary Function
This is the best documented and strongest evidence of the effect of ozone on human
health. Elevated levels of ozone can modify such pulmonary measurements as forced
expiratory volume, total lung capacity, and breathing frequency.
Symptomatic Effects
In controlled exposure experiments heavily exercising adults have experienced coughing,
shortness of breath, and pain on'deep inspiration.
Exercise Performance
A decrement in exercise performance has been associated with elevated ozone
exposures.
Bronchial Reactivity
Increased bronchial reactivity has been observed in both healthy and asthmatic subjects
exposed to high levels (.32 ppm to 1.0 ppm) of ozone.
vn-2
-------
Aggravation of Existing Respiratory Disease
Some epidemiological data suggest that elevated ozone levels may aggravate existing
asthma, chronic bronchitis or emphysema.
Morphological Effects
Animal studies suggest that a characteristic lesion occurs at the junction of the
conducting airways and the gaseous exchange tissues in the lung.
Altered Host Defense Systems
Animal studies indicate that ozone exposure may influence or alter the host defense
systems of individuals, permitting development of respiratory infections.
Extrapulmonary Effects
Humans or animal tests have found alterations in red blood cell morphology and
enzyme activity, cytogenetic effects, and subjective limitations in vigilance tasks.
Further, animal tests have provided limited evidence for cardiovascular, reproductive,
teratological, endocrine system and liver metabolism effects.
In addition to health effects from acute (short-term) ozone exposure, multi-hour and
chronic ozone exposure are also suspected of having adverse effects on human health. The
possible health effects from long-term ozone exposure are potentially more serious than the
acute exposure. Clinical research on multi-hour exposures indicate that lung function
decrements, symptoms, and even inflammation can occur. Epidemiological studies show some
correlation between ozone levels and respiratory hospital admissions. The most pertinent new
research on chronic ozone exposure'is in the area, of animal toxicology. Structural changes
in lung collagen have been confirmed in- several studies at high ozone concentrations.
Volatile organic compounds (VOCs) are precursors to the formation of ozone. VOC
emissions also lead to condensation and the formation of secondary formed aerosols, and
hence cause increased ambient air concentrations of paniculate matter (PM). Hence reducing
VOC emissions lead to further improvements in human health by reducing the health effects
associated with higher PM concentrations. PM-related health effects include chronic and acute
morbidity, and mortality.
vn-s
-------
OZONE: Welfare Effects
In addition to the risk to human health, elevated levels of ozone also can damage
plants and cause materials damage. Such non-health damage, known collectively as welfare
effects, can occur at levels at or below the NAAQS.
The major welfare effects of concern are:
Vegetation' Effects
Plant response to ozone exposure is quite varied and may be expressed as biochemical,
physiological, visible injury, growth, yield, reproductive and ecosystem effects. The
bulk of scientific research has investigated whether long-term (days, months) exposure
can cause reductions in growth and yield, while shorter exposure studies have
concentrated on foliar injury and physiological changes. Economically important crops
shown to be sensitive to ozone include soybeans, corn, wheat and cotton.
Forest Effects
Stress from elevated ozone levels may result in reductions in tree growth and decline
of forest stands in more susceptible forest types. Certain forest types and tree species
appear to be more susceptible than others. For instance, the mixed conifer forests of
San Gabriel and San Bernardino mountain ranges east of Los Angeles have experienced
slow decline and death due to ozone since the early 1950's. Individual tree species
known to be susceptible to ozone include Ponderosa Pine, Jeffrey Pine and Eastern
White Pine..
Materials Damage
The materials known to be most susceptible to ozone attack are elastomers (rubber),
textile fibers and dyes, and certain types of paint.
In addition to the ozone-related welfare effects listed above, there are also soiling and
visibility effects derived from paniculate matter produced from condensation and secondary
reactions from VOC precursors. Lastly, VOC's are known to produce odors, soiling, and
other similar welfare effects.
vn-4
-------
CARBON MONOXIDE: Health Effects
The limited information on health effects due to exposure to elevated carbon monoxide
concentrations are primarily known for those effects associated with aggravation of angina.
A summary of the limited information on known effects is as follows:
Aggravation of angina
Patients suffering from cardiovascular disease, particularly angina, will likely to
experience, during the course of exercise, a decrease in time of onset
Impairment of behavior and performance
Limited experiments on controlled chamber studies have produced some results
indicating impairment of visual perception, manual dexterity, learning ability, and
performance of complex tasks.
Fetal effects
Based on limited data in animal studies, there is potential for elevated CO exposures
to produce deleterious effects in the fetus.
VII-5
-------
VIBL NET BENEFITS
As noted in Chapter VII, data, resources and time constraints precluded a careful
quantification and monetization of benefits. Furthermore, uncertainties regarding the actual
control technologies that would be employed in certain VOC-emitting categories and the
effect of economic incentives make it difficult to estimate control costs as accurately as
EPA would like. Consequently, comparisons of benefits and costs to assess the economic
efficiency properties of the proposed HP are uncertain and subject to change.
Nevertheless, Figure VIE-l illustrates ranges of net benefits. The ranges result from
combining assumed gross values of VOC emission reductions with high and low cost
estimates. As the assumed value of VOC emission reduction increases so do net benefits.
But, the net benefits are negative over some of the range if the values of VOC emission
reductions are either $2000 or $5000 per ton. At values of $10,000 or $15,000 per ton the
net benefits are positive throughout the range.
However, as shown in Figure VIII-2, a positive net benefit does not necessarily
mean that net benefits are maximized. Only optimal (in an economic efficiency sense)
regulations maximize net benefits. To determine the optimal regulation, the decision rule is
to equate marginal benefits and marginal costs provided net benefits are positive and that
marginal costs are rising at a rate greater than marginal benefits.
Table VHI-l illustrates the VOC emission reduction levels which would be optimal
given assumed benefit values and the estimated costs displayed on Figure V-l. At the
$2000 per ton and $5000 per ton benefit values the optimal levels are quite sensitive to the
cost estimates. For example, if the benefits of VOC emission reductions were $2000 per
ton and-the higher or middle cost estimates were used, only 13 percent of the required
VOC emission reduction could be considered optimal. With the same benefit per ton value
and the lower cost estimate, nearly all of the required reduction could be considered
optimal.
The Clean Air Act requires EPA to establish ambient air quality standards at levels
that protect public health and the environment irrespective of the costs of achieving these
standards. EPA estimates that VOC emissions must be reduced to 200 tons per day, a
reduction of 930 tons from the baseline. With benefit values of $2000 or $5000 per ton
going beyond the optimal VOC emission reduction levels displayed in Table VIII-1 could
impose new social costs. These social costs partially offset the social benefit from
internalizing the air pollution externality. These costs are imbedded in the net benefit
calculations shown in Figure VIII-1, but are displayed separately in Table VIII-2.
Under certain conditions emission reductions beyond the level called for in the
proposed FEP would be warranted on economic efficiency grounds. These are also noted in
Table VHI-2.
EPA cautions that the precise location of these economically efficient VOC emission
reduction levels is not well-defined.
VIII-1
-------
Figure VIII-1. ILLUSTRATION OF NET BENEFITS
South Coast Federal Implementation Plan
VOC only
o
O 2000
Q
LJJ
DC
O 5000
>
z
O
£ 10000
Q_
h-
LL 15000
iu
z
LJJ
DQ
Backstop Measures
$ 2000 per Ton VOC
Backstop Measures
2,227,400
(6,477,595)
! $10,000 per Ton VOC
(3,564,595)
10,395,600
(10,000,000) (5,000,000)
0 5,000,000
NET BENEFITS ($ PER DAY)
10,000,000 15,000,000
Basis: 930 Tons of Daily Reduction for FIP
Cost Estimates-Chapter V of 7/26/90 Draft RlA
-------
Figure VIII-2. Optimal Regulation
and Net Benefit Levels
Positive Net
Benefits
Total Cost
Negative Net
Benefits
Optimal Regulation Level
VOC Emission Reductions
Marginal Costs/
Marginal Benefits
Optimal Regulation Level
VOC Emission Reductions
-------
TABLE VIII-1. ILLUSTRATION OF ECONOMICALLY EFFICIENT
VOC EMISSION REDUCTION LEVELS
Assumed Benefit Per
Ton of VOC Emission
Reduction
Optimal VOC Emission
Reduction Level with
Higher Cost Estimates*
Optimal VOC Emission
Reduction Level with
Middle Cost Estimates
Optimal VOC Emission
Reduction Level with
Lower Cost Estimates**
$2,000
$5,000
$10,000
$15,000
Up to 120 tons/day
Up to 120 tons/day
Up to 930 tons/day
Up to 120 tons/day
420 tons/day
930 tons/day
Up to 930 tons/day
More than 930 tons/day
More than 930 tons/day
More than 930 tons/day More than 930 tons/day More than 930 tons/day
Key: * Reformulated gasoline plus backstop measures costed at $10,000 per ton
** Reformulated gasoline plus backstop measures costed at $2,000 per ton
V11I-4
-------
TABLE VIII-2. ILLUSTRATION OF THE SOCIAL COST FROM
EXCEEDING ECONOMICALLY EFFICIENT VOC EMISSION REDUCTION LEVELS
Assumed Benefit Per
Ton of VOC Emission
Reduction
$2, 000
$5, 000
$10, 000
$15,000
Social Cost
Using the Higher VOC
Control Cost Estimates
(000' s of $'s per day)
6,500
4,100
0
*
Social Cost
Using the Middle VOC
Control Cost Estimates
(000' s of $'s per day)
3200
1300
0
*
Social Cost
Using the Lower VOC
Control Cost Estimates
(000' s of $'s per day)
2
*
*
*
Key: * = Under these conditions efficiency gains could be made by going beyond 930 tons of VOC
emission reductions per day. There would be a social cost from stopping short of the
optimal VOC emission reduction level.
VIII-5
------- |