REGULATORY IMPACT ANALYSIS:
PROTECTION OF STRATOSPHERIC OZONE
VOLUME II: APPENDICES TO REGULATORY
IMPACT ANALYSIS DOCUMENT
PART 1: APPENDICES A-I
PREPARED BY
STRATOSPHERIC PROTECTION PROGRAM
OFFICE OF PROGRAM DEVELOPMENT
OFFICE OF AIR AND RADIATION
U.S. ENVIRONMENTAL PROTECTION AGENCY
AUGUST 1, 1988
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ASSESSING THE RISKS OF TRACE GASES
THAT CAN MODIFY THE STRATOSPHERE
VOLUME I: EXECUTIVE SUMMARY
BY
OFFICE OF AIR AND RADIATION
U.S. ENVIRONMENTAL PROTECTION AGENCY
401 M STREET, S.W.
WASHINGTON, D.C. 20460
DECEMBER 1987
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ASSESSING THE RISKS OF TRACE GASES
THAT CAN MODIFY THE STRATOSPHERE
VOLUME I: EXECUTIVE SUMMARY
SENIOR EDITOR AND AUTHOR: JOHN S. HOFFMAN
CONTRIBUTORS: CRAIG EBERTZ, SARAH FOSTER?r
MICHAEL J. GIBBS?,
KEVIN HEARLE2, BRIAN HICKS?,
PATSY H. LiLL3f JANICE LONGSTRETH*,
NEIL PATEL1, HUGH M. PITCHER!,
ALAN F. TERAMURAS, DENNIS TIRPAK1,
JOHN B. WELLS6, G. Z. WHITTEN7,
ROBERT WORREST&
1 U.S. ENVIRONMENTAL PROTECTION AGENCY, 401 M STREET, S.W.,
WASHINGTON, DC
2 ICF INCORPORATED, 9300 LEE HIGHWAY, FAIRFAX, VA
3 UNIVERSITY OF SOUTH CAROLINA SCHOOL OF MEDICINE, COLUMBIA,
4 ICF-CLEMENT, 9300 LEE HIGHWAY, FAIRFAX, VA
5 DEPARTMENT OF BOTANY, UNIVERSITY OF MARYLAND, COLLEGE PARK,
MD
6 THE BRUCE COMPANY, SUITE 410, 3701 MASSACHUSETTS AVE., N.W.,
WASHINGTON, DC
7 SYSTEMS APPLICATIONS, INC., 101 LUCAS VALLEY ROAD, SAN
RAFAEL, CA
8 CORVALLIS ENVIRONMENTAL RESEARCH LABORATORY, 200 SOUTHWEST
35TH STREET, CORVALLIS, OR
DECEMBER 1987
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TABLE OF CONTENTS
PAGE
VOLUME I
ACKNOWLEDGMENTS i
ORGANIZATION gg^
INTRODUCTION ES.2
SUMMARY FINDINGS ES_5
CHANGES IN ATMOSPHERIC COMPOSITION ES-15
POTENTIAL CHANGES IN OZONE AND CLIMATE ES_23
HUMAN HEALTH, WELFARE, AND ENVIRONMENTAL EFFECTS ES-32
QUANTITATIVE ASSESSMENT OF RISKS WITH INTEGRATED MODEL ES-54
TABLE OF CONTENTS FOR FULL RISK ASSESSMENT ES-65
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ORGANIZATION
This document summarizes a multi-volume assessment of the risks of
stratospheric modification. Since the early 1970s, scientists have been
concerned that human activities could alter the composition of the stratosphere,
leading to reductions in the quantity of ozone protecting earth from the sun's
ultraviolet-B (UVB) radiation. If such reductions in ozone levels occurred,
public health and welfare would be harmed.
Substantial scientific progress has been made since concern about ozone
depletion was first raised. This document represents a synopsis of current
understanding of how atmospheric composition may change, the effects this change
is likely to have on ozone abundance and its vertical distribution, and the
impacts of these changes in ozone on skin cancer, cataracts, suppression of the
immune system, polymers, plants, and aquatic systems. It also examines related
changes in climate and the potential impacts of climate change on sea level
rise, agriculture, human health, water resources, and forests.
Despite significant improvement in our understanding of these issues,
substantial uncertainties remain. This risk assessment identifies and discusses
these uncertainties and, where possible, estimates quantitatively their
potential significance.
Following a brief introduction, this summary volume is organized into five
sections:
o Summary findings (page ES-5);
o Changes in atmospheric composition covers chapters 2 3 and
4 (page ES-15);
o Potential changes in ozone and climate covers chapters 5 and
6 (page ES-23);
0 Human health, welfare, and environmental effects covers
chapters 7 through 16 (page ES-32); and
o Quantitative assessment of risks with integrated model covers
chapters 17 and 18 (page ES-54).
Readers desiring greater detail are encouraged to refer to the five-volume risk
assessment and the three volumes of the technical support reports.
This summary concludes with a brief listing of major prior assessments of
this issue.
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ES-2
INTRODUCTION
Current scientific theory and evidence indicate that continued increases in
the concentrations of a variety of trace gases in the atmosphere are likely to
modify the vertical distribution and column abundance of stratospheric and
tropospheric ozone. Changes in the total abundance of column ozone would alter the
flux of ultraviolet radiation reaching the surface of the earth, and consequently
affect public health and welfare. Scientific evidence indicates that increases in
ultraviolet-B radiation (UV-B) would alter skin cancer morbidity and mortality,
increase cataracts, and probably suppress the human immune system. Evidence also
supports the conclusion that such increases could reduce crop yields and alter
terrestrial and aquatic ecosystems. Scientific theory and studies also support the
conclusion that polymers would be degraded more quickly and that urban tropospheric
oxidants would increase as a result of UV-B increases, although additional
scientific study is needed to validate the possible effects on tropospheric air
quality. The dimensions of many of these risks are at this time unquantifiable.
Exhibit ES-1 summarizes these relationships.
Changes in trace gases that can modify the stratosphere can be expected to
contribute to climate change in three ways: they are all greenhouse gases that
would increase global warming; by modifying vertical distribution of ozone, they
could change the Earth's radiative balance and climate dynamics; by adding water
vapor to the stratosphere, one of these gases (methane) directly adds to the
stratosphere's greenhouse or warming capacity. The effects of global warming
include changes in weather and climate patterns; rises in sea level; changes in
forests, hydrologic processes, and agriculture; and a variety of associated
impacts.
Current science projects that changes in ozone and climate will occur slowly
enough in the next decade that it is unclear that monitoring systems will be
capable of clearly detecting change, or of attributing changes to particular trace
gas increases. Because of the large lags expected between the emission of gases
and their ultimate effect on ozone and climate, the stabilization of atmospheric
concentrations and the prevention of further change would require large decreases
in trace gas emissions. Consequently, while monitoring can provide a valuable
system to test model projections, as well as to better understand atmospheric
systems, except in the case of a larger than expected atmospheric change,
monitoring cannot be expected to provide definitive information about the nature of
future risks. With the exception of Antarctic ozone depletion, an unexpected and,
at this time, unexplained phenomenon, past monitoring supports current models,
which project that ozone depletion and climate change are likely to occur in the
face of growth in the concentrations of trace gases.1 It is important to recognize
This Risk Assessment was written before the results of the two Antarctic
campaigns were available and has not been revised to consider them. It now appears
that the Antarctic ozone hole is at least partly caused by man-made chemicals. The
implications for ozone in the rest of the world are unclear, depending on whether
the loss mechanisms operating in Antarctica are likely to operate elsewhere and on
whether Antarctic losses themselves might have global implications. Consequently,
until those issues are resolved, we cannot conclude that the 'hole' is a portent of
things to come elsewhere on the Earth. In the rest of this summary the original
Risk Assessment findings on Antarctica and trends are kept intact.
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EXHIBIT ES-1
The Basis for Concern About CFCs and Ozone Depletion
(1) Production of CFCs
(2) Emissions then occur
(3) Concentrations build up
(4) Slow transport to stratosphere
(5) Photodissociation of CFCs
releases chlorine
(6) Chlorine catalytically
reduces ozone
(7) Ozone depletion causes
changes in UV-B
(8) CFCs and column reorganization
change the climate
Causal Chain:
(9) Increases in UV-B produce effects
For example:
On skin cancer
l""
ill. -1 I.I
•• • <• •• s
•mi IMMMOUT Mtmm n>« nu
On Larval Northern Anchovy
30
—1 1 •—1 r—T
Larval Norlharn Anchovy
10 20 JO 40 JO 10
INCREASED UV-B RADIATION (X)
70
Production —
^* Emissions — ^
- Concen- -•*- Atmospheric -
trations Responso
-+~ UV-B -^-Effects
and climate
in
u>
Source: NAS (1976), Scotto (1986). and Hunter. Kaupp and Taylor (1982).
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ES-4
that "by the time it is possible to detect decreases in ozone concentrations
with a high degree of confidence, it may be too late to institute corrective
measures that would reverse this trend" (EPA Science Advisory Board, March
1987).
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ES-5
SUMMARY FINDINGS
Fast and Possible Future Changes in Trace Gases
1. Considerable research has taken place since 1974 when the theory linking
chlorine from chlorofluorocarbons (CFCs) and depletion of ozone was first
developed. While uncertainties remain, the evidence to date continues to
support the original theory that CFCs have the potential to decrease
stratospheric ozone.
2. Atmospheric measurements show that the chemical composition of the
atmosphere -- including gases that affect ozone -- has been changing.
Recently measured annual rates of growth in global atmospheric
concentrations of trace gases that influence ozone include: CFC-11:
5 percent; CFC-12: 5 percent; CFC-113: 10 percent; carbon tetrachloride: 1
percent; methyl chloroform: 7 percent; nitrous oxide: 0.2 percent; carbon
monoxide: 1 to 2 percent; carbon dioxide: 0.5 percent; and methane: 1
percent. More limited measurements of Halon 1211 show recent annual
increases of 23 percent in atmospheric concentrations.
3. CFCs, Halons, methyl chloroform, and carbon tetrachloride release chlorine
or bromine into the stratosphere where they act as catalysts to reduce the
net amount of ozone. In contrast, carbon dioxide and methane either add to
the total column of ozone or slow the rate of depletion. The effect of
increases in nitrous oxide varies depending on the relative level of
chlorine.
4. CFCs, methyl chloroform, carbon tetrachloride, and Halons are industrially
produced. Emissions of methane, carbon dioxide, and nitrous oxide occur
from both human activity and the natural biosphere. Because all these gases
(with the exception of methane and methyl chloroform) remain in the
atmosphere for many decades to over a century, emissions today will
influence ozone levels for more than a century. Also, as a result of these
long lifetimes, concentrations of these gases will rise for more than a
century, even if emissions remain at constant levels. For example, to
stabilize concentrations of CFC-11 or -12 would require a reduction in
current global emissions of about 80 percent. (Exhibit ES-2 demonstrates
effects of various reduction levels on"CFC-12 concentrations).
5. In order to assess risks, scenarios of atmospheric change were evaluated
using models. For CFCs, methyl chloroform, carbon tetrachloride, and
Halons, demand for goods that contain or are manufactured with these
chemicals (e.g., refrigerators, computers, automobile air conditioners) and
the historic relationship between economic activity and the use of these
chemicals were analyzed. These analyses indicate that in the absence of
regulation, the use and emissions of these compounds are expected to
increase in the future. However, for purposes of analyzing risks, six
"what-if" scenarios were adopted that cover a greater range of future
production of ozone-depleting substance than is likely to occur.
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ES-6
EXHIBIT ES-2
CFG-12: Atmospheric Concentrations
from Different Emission Trajectories
•s 2
K.
0
Constant
emissions
15% Cut
50% Cul
85% Cut
1930
1905
2100
Atmospheric concentrations of CFC-12 will continue to rise unless emissions are
cut. Holding emissions constant at today's level or even 15 percent or 50
percent lower would still allow atmospheric concentrations to grow. Only a cut
of 85 percent or more could stabilize atmospheric concentrations.
Source: Hoffman, 1986.
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ES-7
Model Projections for Ozone Changes
6. Atmospheric chemistry models were used to assess the potential effects of
possible future changes in atmospheric concentrations of trace gases. These
models attempt to simulate processes that influence the creation and
destruction of ozone. While the models replicate many of the
characteristics of the atmosphere accurately, they are inconsistent with
measured values of other constituents, thus lowering our confidence in their
ability to predict future ozone changes accurately.
7. Based on the results from these models, the cause of future changes in ozone
will be highly dependent on future emissions of trace gases.
One-dimensional models project that if the use of chlorine and bromine
containing substances remains constant globally, and other trace gas
concentrations continue to grow, total column ozone levels would at first
decrease slightly, and then would subsequently increase. If the use of CFCs
continues to grow at past rates and other gases also increase at recent
rates, substantial total column ozone depletion would occur by the middle of
the next century. If the use of CFCs stays at current levels and the growth
in the concentrations of other trace gases slows over time, model results
indicate total column ozone depletion will also occur. (Exhibit
ES-3 shows various model projections for "what-if" scenarios.)
8. In all scenarios examined, substantial changes are expected in the vertical
distribution of ozone. Ozone decreases are generally expected at higher
altitudes in all scenarios in which CFC concentrations increase. Ozone
increases are expected at lower altitudes in some scenarios examined due to
increases in methane concentrations. Such changes may have important
climatic effects.
9. Two-dimensional (2-D) models provide information on possible changes in
ozone by season and by latitude. Results from 2-D models suggest that
global average depletion could be higher than estimates from a
one-dimensional (1-D) model for the same scenario. Moreover, the 2-D model
results suggest that average annual ozone depletion above the global average
would occur at higher latitudes (above 40 degrees), while depletion over
tropics is predicted to be lower than the global average; and depletion
would be greater in the spring than the annual average. Uncertainties in
the representation of the transport of chemical species used in 2-D models
introduces uncertainty in the magnitude of the latitudinal gradient of ozone
depletion, but all 2-D models project a gradient.
Measurements of Ozone
10. Measurements of ozone concentrations are another valuable tool for assessing
the risks of ozone modification. Based on analysis of data for over a
decade from a global network of ground-based monitoring stations, ozone
concentrations have decreased at mid-latitudes in the upper and lower
stratosphere and increased in the troposphere. According to studies using
ground-based instruments, there appears to have been no statistically
significant change in column ozone between 1970 and 1983. High altitude,
lower stratospheric, and total column trends are roughly consistent with
current two-dimensional model predictions.
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10.0
-50.0
ES-8
EXHIBIT ES-3
Global Average Ozone Depletion: Emission Scenarios
No Growth
Globally
No Growth
Globally -
Warming Llmlte
1985 2005 2025 2045 2065 2085
*This scenario assumes no growth in global production of ozone depleters, and
concentrations of other trace gases are prevented from rising to an amount
greater than that compatible with an increase in equilibrium global temperature
of 3.0°C ± 1.5°C by 2075.
Assumptions:
-- Current 1-D models accurately reflect global depletion; Antarctic ozone hole
has no impact on global ozone levels.
-- Greenhouse gases that counter depletion grow at historically-extrapolated
rates.
-- Growth rates for ozone depleters are for global emissions; it is assumed
that emissions do not increase after 2050.
-- Ozone depletion limited to 50 percent.
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ES-9
11. Recent evidence indicates that since the late 1970s substantial decreases in
ozone (up to 50 percent) have occurred over and near Antarctica during its
springtime. These losses have been verified by different measurement
techniques, and different theories have been suggested to explain the cause
of the seasonal loss in ozone. Insufficient data exist to state whether
chlorine and bromine are responsible for the observed depletion, or whether
some other factor is the cause (e.g., dynamics or changes in solar flux that
alters NOx). Furthermore, even if man-made chemicals are the cause of the
phenomenon, stratospheric conditions surrounding Antarctica are different
from the stratospheric conditions for the rest of the world, so that it
cannot be assumed that similar depletion would occur elsewhere. Models did
not predict the Antarctic ozone depletion, however. Consequently, the
change in Antarctica suggests that ozone abundance is sensitive to yet
unknown natural or anthropogenic factors not yet incorporated in current
models.
12. Preliminary data from Nimbus-7 suggest a decrease in global ozone
concentrations (4-6 percent) may have occurred during the past several
years. These data have not yet been published and require additional review
and verification. If verified, further analysis would be required to
determine if chlorine is responsible for the reported decrease in ozone
levels, or whether the decrease is due to other factors or reflects
short-term natural variations.
Potential Health Effects from Ozone Depletion
13. Decreases in total column ozone would increase the penetration of
ultraviolet-B (UV-B) radiation (i.e., 290-320 nanometers) reaching the
earth's surface. (Exhibit ES-4 shows relative increases in UV-B at 295,
305, and 315 nanometers.)
14. Exposure to UV-B radiation has been implicated by laboratory and
epidemiologic studies as a cause of two common types of skin cancers
(squamous cell and basal cell). It is estimated that there are more than
400,000 new cases of these skin cancers each year. While uncertainty exists
concerning the appropriate action spectrum (i.e., the relative biological
effectiveness of different wavelengths of ultraviolet radiation), a range of
relationships was developed that allows increased incidence of these skins
cancers to be estimated for future ozone depletion (these cancers are also
referred to as nonmelanoma skin cancers).
15. Studies predict that for every 1 percent increase in UV-B radiation (which
corresponds to less than a 1 percent decrease in ozone because the amount of
increase in UV-B radiation, depending on the action spectrum, is greater
than rather than proportional to ozone depletion), nonmelanoma skin cancer
cases would increase by about 1 to 3 percent. The mortality for these forms
of cancer has been estimated at approximately 1 percent of total cases based
on limited available information.
16. Malignant melanoma is a less common form of skin cancer. There are
currently approximately 25,000 cases per year and 5,000 deaths. The
relationship between cutaneous malignant melanoma and UV-B radiation is a
complex one. Laboratory experiments have not succeeded in transforming
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ES-10
EXHIBIT ES-4
Increases in Ultraviolet Radiation
Due to a 1 percent Ozone Depletion
Taldhassee. Florida
4-
2 -
1 -
295
305
Wavelength (nm)
315
Ozone depletion would lead to increases in the amount of ultraviolet radiation,
particularly at the harmful lower wavelengths, that reaches the earth's surface,
Source: Estimates based on the ozone-UV model developed by Serafino and
Frederick (1986).
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ES-11
melanocytes with UV-B radiation. However, recent epidemiological studies,
including large case control studies, suggest that UV-B radiation plays an
important role in causing melanoma. Uncertainties in action spectrum, dose
measurement, and other factors necessitates the use of a range of
dose-response estimates. Taking into account such uncertainties, recent
studies predict that for each 1 percent change in UV-B intensity, the
incidence of melanoma could increase from 0.5 to 1 percent.
17. Studies have demonstrated that UV-B radiation can suppress the immune
response system in animals and possibly humans. While UV-B-induced immune
suppression has been linked to chronic reinfection with herpes simplex virus
and leishmaniasis in animals, its possible impact on other diseases and its
impact on humans has not been studied.
18. Increases in exposure to UV-B radiation are likely to increase the incidence
of cataracts and could adversely affect the retina.
Potential Effects on Plants and Aquatic Organisms
19. While studies generally show adverse impacts on plants from increased UV-B
exposure, difficulties in experimental design, the limited number of species
and cultivars tested, and the complex interactions between plants and their
environments prevent firm conclusions from being made for the purpose of
quantifying risks. Field studies on soybeans suggest that yield reductions
could occur in some cultivars of soybeans, while evidence from laboratory
studies suggest that two out of three cultivars are sensitive to UV-B.
20. Laboratory studies with numerous other crop species also show many to be
adversely affected by UV-B. Increased UV-B has been shown to alter the
balance of competition between plants. While the magnitude of this change
cannot be presently estimated, the implications of UV-altered, competitive
balance for crops and weeds and for nonagricultural areas such as forests,
grasslands, and desert may be far reaching.
21. Aquatic organisms, particularly phytoplankton, zooplankton, and the larvae
of many fishes, appear to be susceptible to harm from increased exposure to
UV-B radiation because they spend at least part of their time at or near
surface waters. However, additional research is needed to better understand
the ability of these organisms to mitigate adverse effects and any possible
implications of changes in community composition as more susceptible
organisms decrease in numbers. The implications of possible effects on the
aquatic food chain requires additional study.
Effects of Depletion on Tropospheric Ozone and Polymers
22. Research has only recently been initiated into the effects of UV-B on the
formation of tropospheric ozone (an air pollutant with negative health and
plant effects). An initial chamber and model study shows that tropospheric
ozone levels could increase, resulting in additional urban areas being in
non-compliance with National Ambient Air Quality Standards. The increase in
UV-B would also produce ozone peaks closer to urban centers, exposing larger
populations to unhealthy concentrations of tropospheric ozone. The same
study also predicts substantial increase in hydrogen peroxide, an acid rain
precursor. However, because only one study has been done, the results must
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ES-12
be treated with caution. Additional theoretical and empirical work will be
needed to verify these projections.
23. Research indicates that increased exposure to UV-B would likely cause
accelerated weathering of polymers, necessitating polymer reformulation or
the use of stabilizers in some products, and possibly curtailing use of
certain polymers in some areas.
Climate Impacts from Trace Gas Growth
24. The National Academy of Sciences (NAS) has recommended that 1.5°C to 4.5°C
represents a reasonable range of uncertainty about the temperature
sensitivity of the Earth to a doubling of C02 or an increase in other trace
gases of the equivalent radiative forcing. While some of the trace gases
discussed above deplete ozone and others result in higher ozone levels, all,
on net, would increase the radiative forcing of the Earth and would
contribute to global warming.
25. Using the middle of the NAS range for the Earth's temperature sensitivity
and a wide range of future trace gas growth (e.g., from a phase-down of CFCs
by 80 percent from current levels by 2010 to a 5 percent annual increase
through 2050; C02 doubling by 2060; N20 increasing at 0.2 percent; CH4
increasing by 0.017 ppm/year through 2100), equilibrium temperatures can be
expected to rise from 4°C to 11.6°C by 2075. Of this amount, depending on
the scenario, CFCs and changes in ozone would be responsible for
approximately 15-25% of the projected climate change. (See Exhibit ES-5)
26. In most situations, inadequate information exists to _quancify the risks
related to climate change. Studies predict that sea level could rise by
10-20 centimeters by 2025, and by 55-190 centimeters by 2075. Such
increases could damage wetlands, erode coastlines, and increase damage from
storms. Changes in hydrology, along with warmer temperatures, could affect
forests and agriculture. However, lack of information about the regional
nature of climatic change makes quantification of risks difficult. A study
suggests that rising temperatures could adversely affect human health if
acclimatization lags.
Summary of Potential Risk
27. To perform the computations necessary to evaluate the risks associated with
stratospheric modification, an integrating model was developed to evaluate
the joint implications of scenarios or estimates for: (1) potential future
use of CFCs and change in other trace gases; (2) ozone change as a
consequence of trace gas emissions; (3) changes in UV-B radiation associated
with ozone change; and (4) changes in skin cancer cases and cataracts
associated with changes in UV-B radiation. Potential impacts of
stratospheric modification that could not be quantified were not addressed
by the integrating model. On a global basis, the risks of ozone depletion
may be greatest for plants, aquatic systems and the immune system, even
though knowledge to assess these efforts is much less certain than for skin
cancers.
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ES-13
EXHIBIT ES-5
Equilibrium Temperature Change for the Six Emission Scenarios
Assuming 3.0"C Warming for Doubled C02*
12.0
U
in
«
1)
Q
o>
0
o
n>
Q.
E
V
5.0% Growth
3.8% Growth
2.5% Growth
1.2% Growth
No Growth
80% Reduction
1985
1995
2005
2015
2025
2035
2045
2055
2065
2075
* Computed assuming that the climate sensitivity to a doubling of carbon
dioxide is 3°C. This assumption is in the middle of the NAS range of 1.5'C to
4.5°C (see Chapter 6). Note that the actual warming that may be realized will
lag by several decades or more. To compute the equilibrium warming associated
with high or low NAS estimates multiply the y axis 'temperature change' by 1.5
or 0.5.
Growth levels refer to global estimates of production of all ozone
depleters.
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ES-14
28, Uncertainty about future risks is partly driven by the rate at which CFC and
Halon use and other trace gases grow or decline. For this reason, a wide
range of "what-if" scenarios of potential CFC and Halon use and growth in
trace gas concentration was evaluated. To reflect the large uncertainties,
the scenarios range from an 80 percent global phase-down in the use of CFCs
by 2010 to an average annual growth in use of 5 percent per year from 1985
to 2050. For ozone-modifying gases other than CFCs, scenarios were based on
recently measured trends, with uncertainties being evaluated by considering
a range of future emissions and concentrations.
29. Across the wide range of "what-if" scenarios considered, ozone change by
2075 could vary from as high as over 50 percent ozone depletion to increased
abundance of ozone of approximately 3 percent. This range of ozone change
implies a change in the number of skin cancer cases among people alive today
and born through 2075 ranging from an increase of over 200 million to a
decrease on the order of 6.5 million. The overwhelming majority (over 95
percent) of the increases and decreases in skin cancer cases estimated for
this wide range of scenarios is associated with basal and squamous cell
cancers (i.e., nonmelanoma skin cancer). Mortality impacts are estimated to
be on the order of 1.5 to 2.0 percent of the changes in total cases, and a
large percentage of the estimated impacts are associated with people born in
the future. The statistical uncertainty of these estimates is on the order
of plus and minus 50 percent. Additional uncertainties exist, some of which
cannot be quantified. The greatest single uncertainty about future risks is
driven by the rate at which CFC and Halon use grows or declines. This
uncertainty is reflected in the assessment by examining a wide range of
"what if" scenarios of future use.
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ES-15
CHANGES IN ATMOSPHERIC COMPOSITION
The abundance of stratospheric ozone depends upon chemical and physical
processes that create and destroy ozone. For over a decade scientists have
hypothesized that changes in the concentrations of trace gases in the atmosphere
could possibly perturb the processes that control ozone abundance and its
distribution at different altitudes. The findings of this section summarize the
currently available evidence on how emissions and concentrations of various
gases may change over time. The findings in this section can be found in
chapters 2 through 4 of the body of the risk assessment.
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ES-16
FINDINGS
1- HUMAN ACTIVITIES ARE THE ONLY SOURCE OF EMISSIONS FOR THREE CLASSES OF
POTENTIAL OZONE-DEPLETING CHEMICALS: CHLOROFLUOROCARBQNS (CFCs):
CHLOROCARBQNS (CARBON TETRACHLORIDE AND METHYL CHLOROFORM!: AND HALQNS
(chapter 3)^.
la. Since their development in the 1930s, CFCs have become useful
chemicals in a wide range of consumer and industrial goods, including:
aerosol spray cans; air conditioning; refrigeration; foam products
(e.g., in cushions and insulating foams); solvents (e.g.,
electronics); and a variety of miscellaneous uses.
Ib. CFC-11 (CC13F) and CFG-12 (CC12F2) have dominated the use and
emissions of CFCs, accounting for over 80 percent of current CFC
production worldwide. Because of increased demand for its use as a
solvent, CFC-113 (CC12FCC1F2) has become increasingly important as a
potential ozone-depleting chemical.
2. MEASUREMENTS OF TROPOSPHERIC CONCENTRATIONS OF INDUSTRIALLY PRODUCED
POTENTIAL OZONE-DEPLETING GASES SHOW SUBSTANTIAL INCREASES (chapter 2).
2a. Measurements of current global average concentrations of CFC-11 are
200 parts per trillion volume (pptv), CFC-12 are 320 pptv, CFC-113 are
32 pptv, carbon tetrachloride (CC14) are 140 pptv, and methyl
chloroform (CH3CCL3) are 120 pptv.
2b. Based on measurements from a global monitoring network, worldwide
concentrations of chlorine-bearing perturbants (i.e., potential ozone
depleters) have been growing annually in recent years at the following
rates: CFC-11 and CFC-12 at 5 percent; CFC-22 (CHC1F2) at 11 percent;
CFC-113 at 10 percent; carbon tetrachloride (CC14) at 1 percent; and
methyl chloroform at 7 percent.
2c. Limited measurements show that global tropospheric concentrations of
Halon 1211, a bromochlorofluorocarbon containing both chlorine and
bromine (which is potentially more effective at depleting ozone), have
been growing recently at 23 percent annually. Concentrations have
been measured as one pptv.
2d. Measurements of tropospheric concentrations of Halon 1301, another
brominated compound that is a potential ozone depleter, estimate that
concentrations are approximately one pptv. No trend estimates have
been published.
2
The chapter references refer to the main body of the risk assessment.
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ES-17
3.' ALMOST ALL EMISSIONS OF CFC-11. -12. -113. HALON 1211. AND HALON 1301
PERSIST IN THE TROPOSPHERE WITHOUT CHEMICAL TRANSFORMATION OR PHYSICAL
DEPOSITION. AS A RESULT. MOST OF THESE EMISSIONS WILL EVENTUALLY RE
TRANSPORTED TO THE STRATOSPHERE (chapter 2).
3a. Gases which are photochemically inert accumulate in the lower
atmosphere. Their emissions migrate to the stratosphere slowly.
Estimates of their atmospheric lifetimes (generally calculated based
on the time when 37 percent of the compound still remains in the
atmosphere) are the following: CFC-11 is 75 years (107/58 years)-
CFC-12 is 111 years (400/55 years); CFC-113 is 90 years; CC14 is 50
years; Halon 1211 is 25 years; N20 is 150 years; and Halon 1301 is
110 years. (Where provided, the range in parentheses shows one
standard deviation).
3b. Because of their long atmospheric lifetimes, the concentrations of
these gases are currently far from steady state and will increase
over time unless there is a large reduction in future emissions.
3c. Because of their long atmospheric lifetimes, these gases would
continue to contribute to possible future ozone depletion and climate
change (CFCs and other gases affecting ozone are also greenhouse
gases) long after they are emitted. Full recovery from any depletion
or climate change would take decades to centuries.
4. WHILE CFCs USED IN AEROSOLS DECLINED FROM 1974 UNTIL 1984. NQNAERQSOL USES
OF CFCs HAVE GROWN CONTINUOUSLY AND APPEAR CLOSELY COUPLED TO ECONOMIC
GROWTH (chapter 3V' ~
4a. From 1960 to 1974, the combined production of CFC-11 and CFC-12 from
both aerosol and nonaerosol applications grew at an average annual
rate of approximately 8.7 percent. Total global CFC-11 and -12
production peaked in 1974 at over 700 million kilograms.
4b. From 1976 to 1984, sales of CFC-11 and CFC-12 for aerosol
applications declined from 432 million kilograms to 219 million
kilograms, an average annual rate of decline of over 8 percent.
During the same period, sales for nonaerosol applications grew from
318 million kilograms to 476 million kilograms, an average annual
compounded growth rate of 5 percent. By 1986, total CFC-11 and -12
global production was nearly that in 1974.
5- STUDIES OF FUTURE PRODUCTION OF CFCS-11 AND -12 PROJECT AN AVERAGE ANNUAT.
GROWTH RATE OF APPROXIMATELY 1.0 TO 4.0 PERCENT OVER THE NEXT 15 TO 65
YEARS (chapter 3).
5a. A large number of studies of future global demand for CFCs were
conducted by experts from six countries under the auspices of the
United Nations Environment Programme. These studies used a variety
of methods for estimating both near- and long-term periods. In
general, these studies assumed that: (1) demand for CFCs was driven
by economic factors; (2) no additional regulations on CFC use were
imposed; and (3) consumers or producers do not voluntarily shift away
from CFCs because of concern about ozone depletion. These studies
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provide a range of growth rates for developing alternative baseline
scenarios of future CFC use and emissions.
5b. In general, these studies projected that CFC aerosol propellant
applications would remain constant or decrease further in many
regions of the world.
5c. In the U.S. over the past four decades new uses of CFCs have
developed first in refrigeration, then in aerosols, then in foam
blowing, and then in solvents.
5d. Studies have projected that growth in developed countries for
nonaerosol applications is expected to be driven by increased use in
foam blowing (primarily for insulation) and as solvents, and by the
continued introduction of new uses. The wide range of estimates of
future growth reflects the large uncertainties related to population
and economic growth, and technological change.
5e. Studies suggest that future CFC use in developing countries will grow
faster (i.e., at a higher rate) than future CFC use in the developed
world. Nevertheless, the projected rates for the developing
countries are lower than the historical rates that have been
experienced in wealthier countries. While these studies were done
using aggregate relationships of GNP and CFC use, they made different
assumptions about how closely the pattern of CFC use in developing
nations would replicate the pattern in developed nations, generally
assuming lower use rates. However, evidence from one recently
completed study (not completed at the time of the UNEP workshop)
indicates that in developing countries the penetration of CFC-using
goods may be occurring faster than expected on the basis of the
historical relationship in developed nations. If that study is
correct, growth in developing nations would be larger than projected
in the above-mentioned studies, which generally assumed less
penetration in developing nations than had occurred in developed
nations.
5f. Three long-term studies of CFC demand report annual average rates of
growth for CFC-11 and CFC-12 over the next 65 years ranging from 0.2
percent to 4.7 percent, with a median estimate of about 2.5 percent.
The "what-if" scenarios used for quantitative risk assessment in
Chapter 18 span a wider range of growth, including one scenario with
substantial decline.
5g. Limited studies on CFC-113 and CFC-22 project that in the absence of
regulation or-voluntary shifts away from these chemicals, their
growth will increase at a faster rate than CFC-11 and -12 as new
markets develop and existing ones expand (e.g., use of CFC-113 as a
solvent in metal cleaning).
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6. • THE CHLOROCARBONS (METHYL CHLOROFORM AND CARBON TETRACHLORIDE) ARE USF.H
PRIMARILY AS SOLVENTS AND CHEMICAL INTERMEDIATES. ANALYSIS SUGGESTS
LIMITED FUTURE GROWTH FOR THESE CHEMICALS (chapter 3).
6a. Methyl chloroform is primarily used as a general purpose solvent.
Global use in 1980 was estimated at nearly 460 million kilograms.
Limited analysis of future demand indicates that it is expected to
grow at the rate of growth of economic activity (as measured by GNP).
Factors affecting future demand include possible control on it or
other solvents due to their health effects. Thus, use of methyl
chloroform could increase if other solvents are found more dangerous.
Similarly, its use could be increased if CFC-113 use is restricted.
Because methyl chloroform has a substantially shorter atmospheric
lifetime than CFC-113, it has relatively less potential for depleting
ozone.
6b. Carbon tetrachloride is primarily used to make CFCs in the U.S. In
developing countries it is also sometimes used as a general purpose
solvent. In general, future production and emission of carbon
tetrachloride is expected to follow the pattern of production of
CFCs.
7. HALONS. ON A PER POUND BASIS. POSE A GREATER THREAT (2-1/2 TO 12-1/2 TIMES^
TO OZONE DEPLETION THAN DO CFCs (chapter 3).
7a. Halons have been used in hand-held and total-flooding fire
extinguishers since the 1970s. Annual production has been limited
(approximately 20,000 kilograms) and emissions have been assumed to
be only a small fraction of production based on the assumption that
the halons remain inside the fire extinguishers. Recent research
suggests the proportion of Halons released may be substantially
higher. In the U.S., industrial response to concern about depletion
from halons is likely to lead to some voluntary steps to curtail
emissions.
7b. A single study has projected future demand for Halons.3 It indicates
that near-term demand is growing rapidly and that production may
double by the year 2000. In that study, longer-term demand is judged
uncertain and may range from an average annual decline of 1 percent
from 2000 to 2050 to an annual increase exceeding 5 percent.
7c. The expected rate of Halon emissions is very uncertain. The one
study assumed most production would remain within fire extinguisher
systems as part of a growing Halon "bank." That study has been the
basis for scenarios used in this analysis.
7d. The historic growth in Halon 1211 concentrations (recently measured
at over 20% per year) is significantly higher than the rate assumed
for future years in the one existing study.
Since the Risk Assessment was drafted, another study has been developed;
see Chapter 3 Appendix. That study was not included in this Risk Assessment.
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7e. Discussions with Halon users indicate that Halon 1301 emissions may
be underestimated in the study used for this risk assessment. A
recent survey showed that existing systems are undergoing widespread
testing and accidental discharge occurs more frequently than assumed
in prior studies.^
7f. Additional analysis of Halon emission estimates are necessary to
assess more adequately the risks associated with this trace gas.
8- FUTURE CONCENTRATIONS OF STRATOSPHERIC PERTURBANTS THAT HAVE AT LEAST SOME
BIOGENIC SOURCES. CARBON DIOXIDE. METHANE. AND NITROUS OXIDE. ARE DTFFTrmT
TO PROJECT (chapter ^).
8a. The size of existing source terms (wetland areas, for example) is not
known with certainty today for all these trace species. Greatest
uncertainty exists for methane, least for C02. To estimate future
emissions reliably requires estimating the growth of source terms
(e.g., acreage of rice paddies, wetlands area), which will be
determined by many technical, political, environmental, and social
factors.
8b. Current emission factors for each source term must be estimated; some
are not known today or have not been reliably estimated (emissions
from soils, for example).
8c. Possible changes in emission factors due to changes in the
environment must be projected. Projection of changes is difficult
because the underlying physical or biological processes that
determine emissions are not well understood and because changes in
the environment that could alter emissions are not easy to project.
8d. Biogeochemical cycles that control the fate of emissions once
released into the atmosphere must be understood to determine future
concentrations of these trace species; severe limitations to our
current understanding of these cycles limits our capacity to
determine the consequences of changing emissions in the future.
8e. Possible changes in these biogeochemical cycles due to changes in the
environment must be projected; again deficiencies in existing
knowledge makes this task difficult.
9- DESPITE THE UNCERTAINTIES ASSOCIATED WITH EACH OF THESE FACTORS.
RESEARCHERS HAVE DEVELOPED SCENARIOS FOR THREE GASES WHICH ARE COMMONLY
USED, IN THIS RISK ASSESSMENT A SCENARIO CONSISTENT WITH ONES USED IN THE
ATMOSPHERIC COMMUNITY'S WILL BE ADOPTED. AS WELL AS SEVERAL SENSITIVITY
SCENARIOS TO EXAMINE THE SENSITIVITY OF ATMOSPHERIC EVOLUTION TO THE
SCENARIOS (chapter 4).
Since this risk assessment was originally completed, Halon users in the
U.S. have taken a variety of steps to reduce emissions. This step is not
considered in this Risk Assessment.
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9a. The scenarios used in this risk assessment are consistent with that
commonly used by the atmospheric community and assume the following
changes in trace gas concentrations:
o for C02, a scenario developed by the National Academy of
Sciences (its 50th percentile, i.e., pre-industrial C02
concentrations doubling by about 2065);
o for CH4, a linear increase in concentrations of 0.017 ppm
per year;
o for N20, concentration increases of 0.2 percent per year.
9b. Additional scenarios used to analyze risks will include:
- for C02
o NAS 25th percentile (pre-industrial concentrations
doubling by 2100)
o NAS 75th percentile (pre-industrial concentrations
doubling by 2050)
- for CH4
o 0.01275 ppm per year growth in concentrations (75
percent of the historically observed 0.017 ppm per
year increase)
o 0.02125 ppm per year growth in concentrations (125
percent of the historically observed 0.017 ppm per
year increase)
o 1 percent compound growth per year in concentrations
o 1 percent compound growth per year in concentrations
from 1985 to 2010, followed by constant concentrations
at 2.23 ppm
o 1 percent compound growth per year in concentrations
from 1985 to 2020, growing to 1.5 percent compound
annual growth by 2050 and thereafter
- for N20
o 0.15 percent per year compound growth in
concentrations
o 0.25 percent per year compound growth in
concentrations
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10. DECISION MAKERS SHOULD BE MADE AWARE THAT THE MOST COMMONLY USED SCENARIOS
IN STRATOSPHERIC MODELING IMPLICITLY ASSUME THAT FUTURE DECISION MAKERS
NEVER TAKE ACTION TO LIMIT THE RISE IN CONCENTRATIONS OF CARBON DIOXIDE.
METHANE. AND NITROUS OXIDE. THREE GASES CONTRIBUTING TO THE GREENHOUSE
WARMING (chapter 4).
lOa. The standard assumption in most atmospheric modeling has been, by
default, that greenhouse gases will be allowed to increase without
limit regardless of the level of global warming that occurs or is
projected.
lOb. In order to provide decision makers with adequate information to
assess the risks of ozone modification due to rising CFCs and Halons,
alternative assumptions about the future of greenhouse gases need to
be examined. Two scenarios are examined:
-- limiting global warming to 2°C.
-- limiting global warming to 3°C.
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POTENTIAL CHANGES IN OZONE AND CLIMATE
MODELS OF THE ATMOSPHERE THAT INCORPORATE CURRENT SCIENTIFIC UNDERSTANDING
OF CHEMISTRY AND PHYSICS PROJECT CHANGES IN GLOBAL OZONE (TOTAL COLUMN AND/OR
VERTICAL DISTRIBUTION) AND INCREASES IK GLOBAL SURFACE TEMPERATURE IF TRACE GAS
CONCENTRATIONS GROW SIGNIFICANTLY. UNCERTAINTIES ABOUT MAGNITUDES REMAIN LARGE.
Models that incorporate current scientific understanding are used as the
primary tool to project the potential consequences of future changes in
abundances of trace gases. These models can be partly tested by comparing their
results with measurements of the atmospheric, historically observed changes in
ozone, and in the case of climate, with paleoclimatic and extraterrestrial
environments. While current models accurately represent some aspects of the
atmosphere, they fail to replicate other characteristics. This section
summarizes the currently available evidence on how changing atmospheric
abundance could modify total column ozone, alter column distribution, and change
global climate.
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FINDINGS
11 STRATOSPHERIC MODELING PROJECTS THAT"THE COMBINED EFFECTS OF A VARIETY OF
TRACE GASES (CHLOROFLUOROCARBONS. NITROUS OXIDE. CARBON DIOXIDE. HALQNS,
AND METHANE) ARE LIKELY TO REDUCE THE COLUMN DENSITY OF OZONE UNLESS
EMISSIONS OF OZONE DEPLETERS ARE PREVENTED FROM GROWING (chapter 5).
Ha. Photochemical theory continues to support the conclusion that
chlorine, nitrogen, and hydrogen can catalytically destroy ozone in
the stratosphere, thus depleting column levels.
lib. One-dimensional (1-D) models currently predict a 5-9 percent
depletion for the equilibrium concentrations of chlorine that would
result from constant emission of CFCs at 1977 levels. While useful
for intercomparing models, these values cannot be used to assess the
risks of depletion in an atmosphere in which other gases are also
changing.
He. One-dimensional (1-D) models predict average column ozone will
decrease if global emissions of CFCs and other ozone depleters
continue to rise from current levels, even if concentrations of
methane, carbon dioxide, and nitrous oxide continue to grow at past
rates. For a 3 percent growth of CFCs, models predict over a 25
percent depletion by 2075 if the other gases continue to grow.
lid. Two-dimensional models (2-D) used in steady state multi-perturbant
studies that include chlorine, methane, and nitrous oxide project
depletion higher than global averages at latitudes greater than 40°N,
especially in the spring.
He. Time-dependent simulations of stratospheric change in which 2-D
models are used predict that depletion over 4 percent will occur at
some latitudes for all cases of positive growth in CFC emissions.
Such models even predict ozone depletion of up to 3 percent at
inhabited latitudes for a scenario in which emissions of chlorine-
bearing substances are reduced from current to 1980 levels and in
which halon emissions are eliminated, but in which the greenhouse
gases that counter depletion are allowed to grow at historical rates.
llf. Time-dependent simulation with one 2-D model, with CFCs growing at 3
percent, methane rising at 1 percent, nitrous oxide at 0.25 percent
and carbon dioxide growing at 0.6 percent, projects annual average
depletion at 40°N of approximately 1.1 percent by 2000 and 5.2
percent by 2030. At 50°N, "depletion is projected to be 1.5 percent
by 2000 and 6.5 percent by 2030. At 60°N, depletion is projected to
be 2.1 percent by 2000 and 8.1 percent by 2030. Springtime depletion
would be higher.
llg. Time-dependent simulation with one 2-D model, with CFC-11 and -12
emissions rolled back to 1980 levels, CFC-113 capped, other
chlorinated emissions and bromine emissions eliminated, methane
rising at 1 percent, nitrous oxide at 0.25 percent, and carbon
dioxide at 0.6 percent, projects depletion by 2030 of about 0.5
percent at 40°N, 0.7 percent at 50°N, and 1.1 percent at 60°N (these
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depletion values are from 1985 levels). If carbon dioxide
concentrations are prevented from growing from current levels,
depletion would be anticipated to be higher.
llh. Time-dependent simulations with two other two-dimensional models show
roughly comparable results to those reported here, with a slightly
less latitudinal gradient. However, these models also project
latitudinal gradients from equatorial to polar and regions.
111. Because of possible increases in the emissions of bromine molecules
(see Chapter 4), Halons present a more important risk for
stratospheric depletion than has generally been appreciated.
12. CURRENT THEORY AND MODELS FAIL TO REPRESENT ALL OBSERVATIONAL MEASUREMENTS
OF THE ATMOSPHERE AND PROCESSES THAT WILL INFLUENCE STRATOSPHERIC CHANGE IN
A COMPLETE AND ACCURATE MANNER (chapter 5).
12a. While accurately reproducing many measurements in the current
atmosphere, current models fail to reproduce some measurements; the
amount of ozone at 40 kilometers is underestimated, for example.
12b. While including representations of most atmospheric processes,
current models fail to include all the processes that influence
stratospheric composition and structure in a realistic manner.
Transport processes, for example, are represented in a simplified
manner that does not encompass all the complications of movement in
the real atmosphere.
12c. The inability of models to wholly reproduce measurements of the
current atmosphere lowers our confidence in them to predict the
future; it is possible that models are over- or under-predicting
future depletion.
13. UNCERTAINTY ANALYSES THAT CONSIDER A RANGE OF POSSIBLE VALUES FOR CHEMICAL
AND PHYSICAL INPUTS CRITICAL FOR MODEL ESTIMATION OF DEPLETION INDICATE
THAT DEPLETION IS LIKELY IF CFCS CONTINUE TO GROW (chapter 5).
13a. Uncertainty analyses conducted with one-dimensional models predict
depletion for a variety of CFC levels.
13b. Uncertainty analyses using different sets of kinetics and cross
sections have not been tested in two-dimensional models. However,
different 2-D models have used different approaches for transporting
species. This provides a useful test of the sensitivity of model
predictions to the uncertainty of how transport actually works.
While differing somewhat in the latitudinal gradients of depletion,
the models with different transport both predict depletion that
increases with distance from the equator.
13c. Not all uncertainties can be tested in the modeling process. The
possibility that missing factors may lead to a greater or lesser
depletion than indicated in formal uncertainty analyses cannot be
excluded.
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OZONE MONITORING SHOWS CHANGES IN OZONE ROUGHLY CONSISTENT WITH MQnPT.
PREDICTIONS. WITH TWO EXCEPTIONS (chapter 5).
14a. Measurements by balloons and Umkehr show 3 percent depletion at
mid- latitudes in the upper atmosphere, 1.3 percent depletion in the
lower stratosphere, and 12 percent increases in the lower
troposphere. Uncertainty exists about the accuracy of all these
observations. These results, however, are roughly consistent with
the expectations generated by one -dimensional and two-dimensional
models. The ground based measurement system covers only a small part
of the Earth and is limited at high latitudes.
14b. Nimbus 7 measurements appear to show a decrease in global ozone,
especially at both poles. However, the decrease in Arctic ozone from
1978 to 1984 may have occurred only in the last several years.
Concern exists about calibration problems, which make an exact
determination of the absolute magnitude of depletion difficult.
However, the latitudinal variations in depletion seem to indicate
that a real phenomenon is being observed, not just instrumental
drift.
14c. The cause of these apparent ozone decreases measured by Nimbus 7 has
not been sufficiently analyzed to determine whether the changes (if
they are real) can be attributed to manmade chemicals. Other
possible explanations include natural variations caused by solar
cycles or other processes. The latitudinal gradients of the changes,
are, however, roughly consistent with those projected by 2-D model
results, although the magnitude is substantially larger than models
predict. Until further analysis is performed to determine whether
depletion is actually occurring and whether it can be attributed to
man-made chemicals, models to assess risks to the stratosphere should
not be revised.
14d. Measurements in the Antarctic spring show that the gradual depletion
that occurred in the mid-1970s over and near Antarctica has given way
to a steep non-linear depletion from 1979 to 1985. The ozone maximum
outside Antarctica (between 50°S and 70°S) appears to be showing a
decline. The depletion of all areas south of 80°S appears to be 16
percent.
14e. Models with conventional chemistry do not predict "the Antarctic
ozone hole." Care should be exercised in interpreting the meaning of
the phenomenon. Several hypotheses have been put forward, including
a chemical explanation that attributes the loss of ozone to manmade
sources (bromine and chlorine), a chemical explanation that
attributes the loss to natural sources (NOx, solar cycle), or an
explanation that claims the phenomenon is entirely due to the change
in climate dynamics. Until more is understood about the true causes
of the hole, it is impossible to determine whether the hole is a
precursor of atmospheric behavior that will occur in other regions of
the world. Until a better understanding of the mechanisms creating
the depletion is obtained, the existence of the Antarctic ozone hole
should not be used as a basis for making regulatory decisions.
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14f. This risk assessment will assume that Antarctic ozone and global
trends have no implications for global projections. Future reviews
should update this conclusion as necessary.
15. INCREASES IN THE ABUNDANCE OF CFCs AND OTHER TRACE GASES CAN INCREASE
GLOBAL TROPOSPHERIC SURFACE TEMPERATURES. THESE GASES CAN ALTER THE
VERTICAL DISTRIBUTION OF OZONE AND INCREASE STRATOSPHERIC WATER VAPOR.
THEREBY INFLUENCING GLOBAL WARMING (chapter 6).
15a. Trace gases that act as stratospheric perturbants also are greenhouse
gases--as their concentrations increase in the troposphere they will
retard the escape of infrared radiation from earth, causing global
wanning.
15b. Increases in methane (CH4) will also add water vapor to the
stratosphere, thereby enhancing global warming. Methane increases
will also add ozone to the troposphere, where it acts as a strong
greenhouse gas that will further increase global warming.
15c. In all model-generated scenarios of ozone depletion, ozone decreases
in the stratosphere above 28 km. This allows more ultraviolet
radiation to penetrate to lower altitudes where the "self-healing
effect" increases ozone to partially compensate for the ozone loss
above. In some scenarios sufficient depletion occurs so that ozone
eventually decreases at all altitudes.
15d. Decreases in ozone at approximately 28 km or above will have a
warming effect on the Earth. There is a small net gain in energy
because the increase in ultraviolet radiation (UV-B) allowed to reach
the earth's surface more than compensates for the infrared radiation
that is allowed to escape due to depletion of ozone above that
altitude.
15e. Below approximately 28 km, increases in ozone are more effective as
absorbers of infrared radiation. Consequently, increases in ozone
below 28 km also will produce a net warming. In this case, the
additional UV blocked by more ozone is less than the additional
infrared that is blocked from escaping the earth. Conversely, a
decrease in ozone below 28 km will tend to cool the Earth's surface.
15f. The direct effect of column depletion of ozone on global temperatures
will depend on the magnitude of the depletion. Until the depletion
is of sufficient magnitude that it occurs at the lower part of the
column, ozone depletion will be a net contributor to global warming.
If the stratosphere continues to deplete so that ozone is depleted
below 28 km, this depletion will cause a cooling. One-dimensional
models differ from two-dimensional models in the vertical
distribution of ozone change, with depletion occurring at all
altitudes in the higher latitudes in two-dimensional models, rather
than just at high altitudes. Thus, according to 2-D models, the
changes in radiative balance will be latitude dependent. At the
current time, no studies have been undertaken to determine the net
radiative forcing of changes projected by 2-D models.
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15g. Radiative forcing may vary strongly with changes in ozone at
different altitudes and latitudes. Consequently, until comparisons
are made between the models in terms of their global impact,
estimates of the effects of changes in the vertical column of ozone
on global warming made with 1-D models must be viewed cautiously. In
addition, changed vertical distribution of ozone could influence
stratospheric dynamics.
16- INCREASES IN TRACE GAS CONCENTRATIONS ASSOCIATED WITH STRATOSPHERIC
MODIFICATION ARE LIKELY TO WARM THE EARTH SIGNIFICANTLY (chapter 6).
16a. Two National Academy of Sciences panels have concluded that the
equilibrium warming for doubling atmospheric concentrations of C02,
or for an equivalent increase in the radiative forcing of other trace
gases, will most likely be between 1.5° and 4.5°C.
16b. The magnitude of warming that would be directly associated with
radiative forcing from increases in trace gases without feedback
enhancement would increase temperature by approximately 1.2°C for a
doubling of C02, and approximately an additional 0.45°C for a
simultaneous doubling of N20 and CH4. Direct radiative forcing from
a uniform 1 ppb increase in both, CFC-11 and CFC-12 would increase
temperature by about 0.15°C.
16c. The initial warming from direct radiative forcing would change some
of the geophysical factors that determine the earth's radiative
balance (i.e., feedbacks will occur) and these changes would amplify
the initial warming. Increased water vapor and altered albedo
effects (snow and ice melting, reducing the reflection of radiation
back to space) have been projected by several modeling groups to
increase the warming by as much as 2.5°C for doubled C02 or its
radiative equivalent. Large uncertainties exist about the
feedbacks between global warming and clouds, which could further
amplify, or possibly reduce, the magnitude of warming.
16d. The three major general circulation modeling groups in the U.S.
estimate an average global warming of around 4°C for doubled C02 or
its radiative equivalent. However, because of uncertainties in the
representation of the cloud contributions, greater or lesser
amplifications, including a negative feedback that would reduce the
warming to 2°C or an even lower value, cannot be ruled out.
16e. Global average temperature has been estimated as having risen about
0.6°C over the last century. This increase is consistent with
general predictions of climate models. Attempts to use these data to
derive empirically the temperature sensitivity of the earth to a
greenhouse forcing are not likely to succeed. Uncertainty about the
past concentrations of trace gases in the atmosphere, other exogenous
factors that affect the climate (such as aerosols or solar input),
and oscillation and instabilities in the internal dynamics of the
climate system (such as ocean circulation), currently prevent the
derivation of the earth's temperature sensitivity from examination of
the historic rise of temperature. This limitation is likely to
remain for more than another decade.
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16f. The global warming associated with increases in ozone-modifying gases
varies with scenarios of future growth in these gases. If the use of
CFCs grows at 2.5 percent per year through 2050, C02 concentrations
grow at the 50th percentile rate defined by the NAS (approximately
0.6 percent per year from 1985 to 2050), N20 concentrations grow at
0.20 percent per year, and CH4 concentrations grow at 0.017 ppm per
year (approximately 1.0 percent of current concentrations), then
equilibrium temperatures would rise by about 5.6°C by 2075 (relative
to observed temperature in 1985), based on a temperature sensitivity
of 3°C for doubled C02. Values would be about 50 percent higher for
a 4.5°C-based temperature sensitivity and about 50 percent lower for
1.5°C. If CFG use remains constant through 2050, the projected
warming would be about 4.3°C by 2075 (± 50%), and if use were phased
out by 2010, projected warming would be about 4.0°C (+ 50%).
16g. Efforts to gather worldwide time series data for clouds have begun.
If adequate, these data may narrow estimates of the cloud
contribution to temperature sensitivity within the next decade.
However, because of the complexity of this issue, this effort may
fail to resolve the large uncertainties affecting this aspect of
climate.
17. THE TIMING OF GLOBAL WARMING DEPENDS ON THE RATES AT WHICH GREENHOUSE CASES
INCREASE. THE RATES AT WHICH OTHER FORCINGS SUCH AS VOLCANOES AND SOLAR
RADIATION CHANGE. AND THE RATE AT WHICH OCEANS TAKE UP HEAT AND PARTIALLY
DELAY TEMPERATURE EFFECTS. A GLOBAL WARMING GREATER THAN VARIATIONS THAT
OCCURRED THIS PAST CENTURY IS EXPECTED IN THE NEXT TEN YEARS IF VOLCANTC
AND SOLAR FACTORS DO NOT SUBSTANTIALLY CHANGE (chapter 6).
17a. The delay in temperature rise introduced by absorption of heat by the
oceans can only be roughly estimated. The simple one-dimensional
models of oceans that have been used for this purpose do not
realistically portray the mechanisms for heat transport into the
oceans. Instead, these models use eddy diffusion to treat heat in a
parameterized manner so that heat absorption is consistent with data
from the paths of transient tracers. These models indicate that the
earth will experience substantial delays (on the order of several
decades) in experiencing the full wanning from greenhouse gases.
17b. The earth's current average temperature is not in equilibrium with
the radiative forcing from current concentrations of greenhouse
gases. Consequently, global average temperature would increase in
the future even if concentrations of gases did not rise any further.
For example, if 2°C is the actual sensitivity of the earth's climate
system to a C02 doubling, simple models estimate the current
"unrealized warming" to be approximately 0.34°C; for a 4°C
temperature sensitivity, the current unrealized warming would be
approximately 1.0°C.
17c. Only one three-dimensional general circulation model has been used to
simulate changes in temperature as concentrations of greenhouse gases
increase over time. This simulation shows a faster warming than
predicted by simpler one-dimensional models that use ocean box models
to simulate time-dependent warming.
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17d. Future uptake of heat by the oceans may change as global warming
alters ocean circulation, possibly altering the delaying effect of
the oceans as well as reducing their uptake of C02.
17e. Inadequate information exists to predict how volcanic or solar
forcings may change over time. Analyses done of transient warming
assume that past levels of volcanic aerosols will continue into the
future and that solar forcirg changes will average out over
relatively short periods of time.
18. WITH A FEW GENERALIZED EXCEPTIONS. THE CLIMATIC CHANGE ASSOCIATED WITH
GLOBAL WARMING CANNOT BE RELIABLY PREDICTED ON A REGIONAL BASIS
(chapter 6).
18a. In general, as the earth warms, temperature increases will be greater
with increasing distance from the equator.
18b. Global warming also can be expected to increase precipitation and
evaporation, intensifying the hydrological cycle. While models lack
sufficient reliability to make projections for any single region, all
perturbation studies with three-dimensional models (general
circulation models) show significant regional shifts in dryness and
wetness, which suggests that shifts in hydrologic conditions will
occur throughout the world.
18c. Current general circulation models represent oceanic, biospheric, and
cloud processes with insufficient realism to determine how extreme
weather events and climatic norms are likely to change on a regional
basis. For example, one analysis of general circulation model
outputs suggests that the frequency of extreme climatic conditions
will change in many regions of the world. Another model projects
increased summer drying in mid-latitudes for perturbation studies,
utilizing either of two different representations of clouds. Still
another analysis suggests changes in latitudinal gradients of sea
surface temperature will play a critical role in determining regional
climatic effects.
19. LIMITING GLOBAL WARMING BY REDUCING EMISSIONS OF STRATOSPHERIC PERTURBANTS
THAT TEND TO INCREASE OZONE WOULD INCREASE THE STRATOSPHERE'S VULNERABILITY
TO OZONE DEPLETION. UNDER SCENARIOS IN WHICH CONTINUED BUFFERING OF OZONE
DEPLETION BY OTHER TRACE GASES IS ASSUMED. SUBSTANTIAL GLOBAL WARMING
RESULTS (chapter 6).
19a. Decreases in substances- with the potential to deplete stratospheric
ozone--that is, chlorofluorocarbons and nitrous oxides—would
decrease the rate and magnitude of global warming.
19b. Decreases in methane emissions, which have the potential to increase
stratospheric and tropospheric ozone and thereby buffer ozone
depletion, would decrease warming in three ways: by reducing direct
radiative effects from its presence in the troposphere; by lowering
water vapor in the stratosphere; and by reducing ozone build-up below
28 km.
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19c. Decreases in C02 emissions would decrease global warming, but would
also have the effect of increasing the stratosphere's vulnerability
to ozone depletion.
19d. Decreases in carbon monoxide concentrations, which may occur as
energy production practices change, could result in decreases in
methane concentrations by increasing OH-radical abundance which, in
turn, would shorten the lifetime of methane and could shorten the
lifetime of methyl chloroform and CFC-22.
20. ADDITIONAL RESEARCH IS NEEDED ON CLIMATE TO REDUCE UNCERTAINTIES ABOUT
GLOBAL WARMING ASSOCIATED WITH TRACE GAS GROWTH (chapter 6).
20a. The key to improving the accuracy of estimates of global temperature
sensitivity is to acquire a better understanding of the effect of
clouds. This recommendation has been made by numerous groups over
the last decade; yet research devoted to this issue remains
relatively small.
20b. An increased understanding of ocean circulation is critical to
improving estimates of timing and regional projections.
20c. The effect of climate on biological systems and soils and their
impact on climate must be modeled if regional estimates of climate
change are to be developed.
20d. A better understanding of the radiative properties of CFC-113 and
other compounds is needed for estimating the effects of this compound
on climate.
20e. Experiments with three-dimensional models that have altered scenarios
of vertical ozone need to be undertaken to assess the possible
impacts on the magnitude of global warming and on general
circulation.
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HUMAN HEALTH, WELFARE, AND ENVIRONMENTAL EFFECTS
CHANGES IN COLUMN OZONE ABUNDANCE AND DISTRIBUTION AND A RISE IN GLOBAL
TEMPERATURE WOULD BE EXPECTED TO HARM HUMAN HEALTH. WELFARE. AND THE
ENVIRONMENT. SOME RISKS CAN BE QUANTIFIED USING RANGES. OTHER RISKS
CANNOT BE QUANTIFIED OR DATA NECESSARY FOR QUANTIFICATION ARE AVAILABLE
ONLY FOR LIMITED CASE STUDIES.
Ozone shields the earth from UV-B radiation. A decrease in total
column ozone will increase this radiation, especially at its most harmful
wavelengths. For the DNA action spectrum, a 1 percent depletion would
increase the weighted UV flux by about 2 percent. Changes in column ozone
and increases in global temperatures could alter many environmental
conditions. The findings of this section cover the effects of these
changes on human health, ecosystems, crops, materials, air pollution, sea
level and other areas that influence human welfare.
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FINDINGS
21. BASED ON SURVEYS (PARTICULARLY IN THE UNITED STATES AND IN AUSTRALIAN,
PROLONGED SUN EXPOSURE IS CONSIDERED TO BE THE DOMINANT RISK FACTOR FOR
NONMELANOMA SKIN TUMORS (chapter 7).
21a. Nonmelanoma skin tumors tend to develop in sun-exposed sites (e.g.,
the head, face, and neck).
21b. Higher incidence rates occur among groups subject to greater exposure
to the sun's rays because of occupations that necessitate their
working outdoors.
21c. A latitudinal gradient exists for UV-B radiation, and higher
incidence rates of nonmelanoma skin tumors generally occur in
geographic areas of relatively high UV radiation exposure.
21d. Skin pigmentation provides a protective barrier that reduces the risk
of developing nonmelanoma skin tumors.
21e. The risk of nonmelanoma skin tumors is highest among genetically
predisposed individuals (e.g., those with xeroderma pigmentosum).
21f. A predisposition to develop nonmelanoma skin tumors exists among
light-skinned individuals (skin phenotypes I and II) who are
susceptible to sunburn and who have red/blond hair, blue/green eyes,
and a Celtic heritage.
22. AVAILABLE EPIDEMIOLOGICAL EVIDENCE INDICATES THAT THE TWO MAJOR TYPES OF
NONMELANOMA SKIN TUMORS. SOUAMOUS CELL CARCINOMA (SCO AND BASAL CELL
CARCINOMA (ECO. RESPOND DIFFERENTLY TO SOLAR EXPOSURE. IT HAS BEEN
SUGGESTED THAT CUMULATIVE UV RADIATION HAS A GREATER EFFECT ON THE
DEVELOPMENT OF SCC THAN ON BCC (chapter 7).
22a. The BCC/SCC incidence ratio decreases with decreasing latitude and
therefore, increasing UV levels.
22b. BCC is more likely to develop on normally unexposed sites (e.g., the
trunk) compared to SCC.
22c. SCC is more likely than BCC to develop on sites receiving the highest
cumulative UV radiation doses (e.g., the nose).
22d. For a given cumulative level of sunlight exposure, the risk of
developing SCC may be greater than the risk of developing BCC.
23. THE RESULTS FROM SEVERAL EXPERIMENTAL STUDIES SUGGEST THAT UV-B MAY BE THE
MOST IMPORTANT COMPONENT OF SOLAR RADIATION THAT CAUSES VARIATIONS IN THE
INCIDENCE OF NONMELANOMA SKIN TUMORS (chapter 7).
23a. UV radiation produces nonmelanoma skin tumors in animals. UV-B
wavelengths have been shown to be most effective in producing these
tumors.
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23b. UV-B has been shown to cause a variety of DNA lesions, to induce
neoplastic transformation in cells, and to be a mutagen in both
animal and bacterial cells.
24. SEVERAL RESEARCHERS HAVE INVESTIGATED THE CHANGES IN THE INCIDENCE OF
NONMELANOMA SKIN TUMORS THAT MAY RESULT FROM INCREASES IN EXPOSURE TO SOLAR
UV RADIATION. GIVEN UNCERTAINTIES. RANGES OF ESTIMATES OF INCREASED
INCIDENCE THAT COULD OCCUR WITH DEPLETION ARE ESTIMATED (chapter 7).
24a. The action spectra for initiation and promotion of basal cell and
squamous cell skin cancer have not been precisely determined.
Photocarcinogenic studies indicate that the erythema and DNA action
spectra span a range likely to encompass that of squamous cell and
basal cell skin cancer. The Robertson-Berger (R-B) meter, while
providing useful data for describing ambient UV radiation, does not
relate as closely to those wavelengths thought to promote sunburn and
skin cancer.
24b. Several studies have provided estimates of a biological amplification
factor (BAF), which is defined as the percent change in tumor
incidence that results from a 1 percent change in UV-B radiation.
The results from six studies produced an overall BAF range that is
1.8-2.85 for all nonmelanoma skin tumors.
24c. BAF estimates are generally higher for males than for females and
generally increase with decreasing latitude. In addition, the BAF
estimates for SCC are higher than the BAF estimates for BCC. This
finding is consistent with observations that the BCC/SCC ratio
decreases with decreasing latitude and that BCC is more likely to
develop on unexposed sites.
24d. Optical amplification (the change in UV-B radiation related to ozone
depletion) increases the response of these cancers to ozone
depletion, because the relevant action spectra increase more than 1
percent for a 1 percent depletion. For example, a 1 percent
depletion has an optical amplification of over 2 for the DNA action
spectrum.
24e. Uncertainty exists in the actual doses of solar UV radiation received
by populations and in the statistical estimates of the dose-response
coefficients. Therefore, a range of estimates must be developed for
changes in incidence associated with changes in dose.
24f. Currently available nonmelanoma mortality data are of uncertain
accuracy because of the discrepancy of reporting between death
certificates and hospital diagnoses and the low proportion of deaths
reported on both hospital diagnoses and death certificates. Based on
published studies, the rates of metastasis among SCCs and BCCs have
been estimated to be 2-20% and 0.0028-0.55%, respectively. The
overall case fatality rate for nonmelanoma skin tumors is
approximately 1-2% with three-fourths to four-fifths of the deaths
attributable to SCC.
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24g. Changes in behavior have tended to increase skin cancer incidence and
mortality. While some evidence exists that this is reaching a limit,
skin cancer rates, even in the absence of ozone depletion, would be
likely to rise. Future rates of skin cancer could be reduced if
people changed their behavior. Care should be taken, however, in
interpreting such a change as a 'cost-free' response.
25• CUTANEOUS MALIGNANT MELANOMA (CMM) IS A SERIOUS LIFE-THREATENING DISEASE
THAT AFFECTS A LARGE NUMBER OF PEOPLE IN THE UNITED STATES. THERE ARE
SEVERAL HISTOLOGICAL FORMS OF MELANOMA THAT ARE LIKELY TO HAVE SOMEWHAT
DIFFERENT ETIOLOGIES AND RELATIONSHIPS TO SOLAR AND UV-B RADIATION (chapter
8) •
25a. CMM incidence and mortality is increasing among fair-skinned
populations. These increases appear not to be merely the result of
improved diagnosis and reporting.
25b. In 1987, it is estimated that there will be an estimated 25,800 cases
of CMM and 5,800 fatalities related to melanoma in the United States.
In the absence of ozone depletion, the lifetime risk of CMM in the
United States is expected to be about 1 in 150.
26. LIMITATIONS IN THE DATABASE PREVENT ABSOLUTE CERTAINTY ABOUT THE
RELATIONSHIP OF SOLAR RADIATION. UV-B. AND CUTANEOUS MALIGNANT MELANOMA
(CMM) (chapter 8^.
26a. There currently is no animal model in which exposure to UV-B
radiation experimentally induces melanomas.
26b. There is also no experimental in vitro model for malignant
transformation of melanocytes.
26c. No epidemiologic studies of CMM have been conducted in which
individual human UV-B exposures (and biologically effective doses of
solar radiation) have been adequately assessed.
27 • EVALUATION OF THE EPIDEMIOLOGICAL AND EXPERIMENTAL DATABASES FOR MELANOMA
REQUIRES CLOSE ATTENTION TO THE RELATIONSHIP OF WAVELENGTH AND DOSE AND TO
THE VARIATIONS OF SOLAR RADIATION IN THE AMBIENT ENVIRONMENT (chapter 8).
27a. Ozone differentially removes wavelengths of UV-B between 295 and 320
nm; UV-A (320-400 nm) in wavelengths above 350 nm is not removed, nor
is visible light (400-900 nm). Ozone removes all UV-C (i.e.,
wavelengths less than 295 nm).
27b. Wavelengths between 295 nm and 300 nm are generally more biologically
effective (i.e., damage target molecules in the skin, including DNA)
than other wavelengths in UV-B and even more so than UV-A radiation.
27c. Latitudinal variations exist in solar radiation; model predictions
indicate that the greatest variability is seen in cumulative UV-B
(e.g., monthly doses) followed by peak UV-B (highest one-day doses)
and then cumulative UV-A. Peak UV-A does not vary significantly
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across latitudes up to 60°N. Greater ambient variation also exists
in UV-B than in UV-A by time of day.
27d. The biologically effective dose of radiation that actually reaches
target molecules depends on the duration of exposure at particular
locations, time of day, time of year, behavior (i.e., in terms of
clothes and sunscreens), pigmentation, and other characteristics of
the skin including temporal variations (e.g., changes in pigmentation
due to tanning).
27e. Cloudiness and albedo, although causing large variations in the
amount of exposure to UV-B and UV-A, do not greatly change the ratio
of UV-B to UV-A.
27f. Ozone depletion is predicted to cause the largest increases in
radiation in the 295-299 nm UV-B range, less in the 300-320 nm UV-B
range; UV-A is virtually unaffected by ozone depletion.
27g. Cutaneous malignant melanoma has a number of different histologic
types that vary in their relationship to sunlight, site, racial
preference, and possibly in their precursor lesions. Assessment of
incidence by types is not consistent among registries, thus
complicating attempts to evaluate the relationship between CMM and
solar radiation.
27h. Melanin is the principal pigment in skin that gives it color; melanin
effectively absorbs UV radiation; the darker the skin, the more the
basal layer is protected from UV radiation.
28. A LARGE ARRAY OF EVIDENCE SUPPORTS THE CONCLUSION THAT SOLAR RADIATION IS
ONE OF THE CAUSES OF CUTANEOUS MALIGNANT MELANOMA (chapter 8).
28a. Whites, whose skin contains less protective melanin, have higher
incidence and mortality rates from CMM than do blacks.
28b. Light-skinned whites, including those who are unable to tan or who
tan poorly, have a higher incidence of CMM than do darker-skinned
whites.
28c. Sun exposure leading to sunburn apparently induces melanocytic nevi.
28d. Individuals who have more melanocytic nevi have a higher incidence of
CMM; the greatest risk is associated with a particular type of nevus
-- the dysplastic nevus.
28e. Sunlight induces freckling, and freckling is an important risk factor
for CMM.
28f. Incidence has been increasing in cohorts in a manner consistent with
changes in patterns of sun exposure, particularly with respect to
increasing intermittent exposure of certain anatomical sites.
28g. Immigrants who move to sunnier climates have higher rates of CMM than
populations who remain in their country of origin. Immigrants
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develop rates approaching those of prior (but native born) immigrants
to the adopted country; this is particularly accentuated in
individuals arriving before the age of puberty (10-14 years).
28h. It has been suggested that CMM risk may be associated with childhood
sunburn; other evidence suggests that childhood sunburn may reflect
an individual's pigmentary characteristics or may be related to nevus
development, rather than being a separate risk factor.
28i. Most studies that have used latitude as a surrogate for sunlight or
UV-B exposure have found an increase in the incidence or mortality of
CMM correlated to proximity to the equator. A recent study of
incidence using measured UV-B and CMM survey data found a strong
relationship between UV-B and incidence of CMM. Another study that
used modeled UV-B data and an expanded database on mortality found a
strong UV-B/mortality relationship.
28J. One form of CMM, Hutchinson's melanotic freckle, appears almost
invariably on the chronically sun-damaged skin of older people.
29. SOME EVIDENCE CREATES UNCERTAINTY ABOUT THE RELATIONSHIP BETWEEN SOLAR
RADIATION AND CUTANEOUS MALIGNANT MELANOMA (chapter 8).
29a. Some ecologic epidemiology studies, primarily in Europe or close to
the equator, have failed to find a latitudinal gradient for CMM.
29b. Outdoor workers generally have lower incidence and mortality rates
for CMM than indoor workers, which appears incompatible with a
hypothesis that cumulative dose from solar exposure causes CMM.
29c. Unlike basal cell and squamous cell carcinomas, most CMM occurs on
sites that are not habitually exposed to sunlight; this contrast
suggests that cumulative exposure to solar radiation or UV-B is not
solely responsible for variations in CMM.
30. UV-B RADIATION IS A LIKELY COMPONENT OF SOLAR RADIATION THAT CAUSES
- CUTANEOUS MALIGNANT MELANOMA (CMM). EITHER THROUGH INITIATION OF TUMORS OR
THROUGH SUPPRESSION OF THE IMMUNE SYSTEM (chapter 8).
30a. Xerodenna pigmentosum patients who fail to repair UV-B-induced
pyrimidine dimers in their DNA have a 2,000-fold excess rate of CMM
by the time they are 20.
30b. UV-B is the most active part of the solar spectrum in the induction
of mutagenesis and transformation in vitro.
30c. UV-B is the most active part of the solar spectrum in the induction
of carcinogenesis in experimental animals and is considered by most
to be a causative agent of nonmelanoma skin cancer in humans.
30d. UV-B is the most active portion of the solar spectrum in inducing
immunosuppression, which may have a role in melanoma development.
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30e. The limitations in the epidemiologic and experimental database leave
some doubt as to the effectiveness of UV-B wavelengths in causing
CMM.
31. WHILE UNCERTAINTY EXISTS. INCREASES IN THE INCIDENCE AND MORTALITY OF
CUTANEOUS MALIGNANT MELANOMA ARE LIKELY AS A RESULT OF OZONE DEPLETION
WHILE MANY UNCERTAINTIES EXIST (E.G.. REGARDING ACTION SPECTRA. PEAK VERSUS
CUMULATIVE DOSE. ETC.) ABOUT THE NATURE OF THE RELATIONSHIP BETWEEN UV-B
AND MELANOMA. THE FACT THAT UV-B RADIATION VARIES ACROSS THE ENVIRONMENT TN
THE RANGE OF VARIATION EXPECTED FROM DEPLETION PROVIDES INFORMATION USUALLY
UNAVAILABLE TO RESEARCHERS MAKING QUANTITATIVE RISK ESTIMATES. THUS
ALTHOUGH IMPERFECT. EPIDEMIOLOGIC INFORMATION EXISTS TO ESTIMATE A RANGE OF
CHANGES IN INCIDENCE AND MORTALITY IF THE OZONE LAYER IS DEPLETED (chapter
8).
31a. Uncertainty exists about the appropriate action spectrum to be used
in estimating dose, the best functional form for dose-response, and
the best way to characterize dose (peak value, cumulative summer
exposure, etc.). Histologically different CMMs (or possibly CMM
located at different anatomical sites) are likely to have different
dose-response relationships. Most estimates of CMM dose-response
relationships fail to consider these histological or site
differences. Nonetheless, by encompassing a range of possibilities,
it is possible to estimate dose-response because of the systematic
variations in UV-B.
31b. A recent study by the NIH presents a well-designed ecological study
of melanoma and UV-B using survey data and measured UV-B at ground
level. While uncertainties exist, this dose-response relationship,
when used with different action spectra and assumptions about the
importance of peak versus cumulative exposure, can be utilized to
estimate a range of values for cases. The relationship estimates
that a 1 percent change in ozone is likely to increase incidence by
between slightly less than 1 to 2 percent, depending on the choice of
action spectrum. The appropriate action spectrum is likely to be
encompassed in the range of erythema and DNA.
31c. Melanoma mortality is estimated at about 25 percent of all cases.
This result is consistent with the projections of a dose-response
model of mortality developed by EPA/NCI. It is estimated that a 1
percent change in ozone would result in between a 0.3 and a 2.0
percent change in CMM mortality depending on the assumptions about
the appropriate dose and UV weighting functions used in the model.
31d. Additional uncertainties for projecting future incidence and
mortality of CMM in the U.S. include the lack of an adequate database
describing variations in skin pigmentation and human sun-exposure
behavior among different populations and estimates of how these
relationships may change in the future.
32. UV-B SUPPRESSES THE IMMUNE SYSTEM IN ANIMAL EXPERIMENTS (chapter 9).
32a. UV radiation administered at relatively low doses causes a depression
in local contact hypersensitivity (a form of cell-mediated immunity)
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resulting from an inability to respond to an antigen presented
through UV-irradiated skin.
32b. High doses of UV radiation cause a depression in systemic contact and
delayed type hypersensitivity reactions, that result in an inability
of the animal to respond to an antigen which is presented to the
animal through unirradiated skin.
32c. Both the local and systemic effects on contact hypersensitivity are
mediated by a T suppressor cell which prevents the development of
active immunity to the antigen.
32d. The immunosuppressive effects of ultraviolet radiation (UVR) have
been found to reside almost entirely in the UV-B portion of the
ground level solar radiation.
33. SUPPRESSION OF THE IMMUNE SYSTEM MAY PLAY AN IMPORTANT ROLE TN
CARCINOGENESIS (chapter 9).
33a. Animals which are UV-irradiated develop T suppressor cells which
interfere with the immune response to UV-induced tumors in such a way
that the animals are more susceptible to the growth of autochthonous
UV-induced tumors. The contribution of the suppression of the immune
system to cancer incidence that would result from ozone depletion is
reflected in the dose-response estimates of photocarcinogenesis
assuming that the action spectra for the two phenomena are the same.
If these two impacts have different action spectra, the estimates
could be either high or low.
34- LIMITED EXPERIMENTAL DATA INDICATE UV-B SUPPRESSES THE HUMAN IMMUNE SYSTEM
(chapter 9).
34a. Although there is limited information about the effects of UV
radiation on humans, several studies indicate that the immune
response of humans is depressed by UV radiation and is depressed in
UV-irradiated skin.
35. UV-B-INDUCED SUPPRESSION OF THE HUMAN IMMUNE SYSTEM COULD HAVE A
DELETERIOUS EFFECT WITH REGARD TO MANY HUMAN DISEASES (chapter 9).
35a. Preliminary studies indicate that UV radiation may prevent an
effective immune response to micro-organisms that infect via the
skin, thus predisposing to reexpression or chronic infection.
35b. Two human diseases that may be influenced by UV-B-induced immune
suppression are herpes virus infections and leishmaniasis.
35c. Almost no research has been conducted on the influence of UV-B on
other infectious diseases; additional investigation is clearly
warranted.
35d. For at least one theory of the mechanisms of UV-B-induced suppression
of the immune system (that involving urocanic acid), a possibility
exists that non-whites, as well as whites, would be vulnerable to
increased immune suppression caused by ozone depletion.
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35e. Because UV-B can produce systemic immunologic change, the possibility
exists that changes in UV-B could have resulted in effects on
diseases whose control requires systemic rather than local immunity.
35f. Immunologic studies to date have not assessed the effects of long-
term, low-dose UV-B irradiation. Consequently, the magnitude of this
risk cannot be assessed.
36. EVIDENCE EXISTS SUGGESTING THAT CATARACT INCIDENCE WILL CHANGE WITH
ALTERATIONS IN THE FLUX OF UV-B CAUSED BY OZONE DEPLETION (chapter 10).
36a. Many possible mechanisms exist for formation of cataracts. UV-B may
play an important role in some mechanisms.
36b. Although the cornea and aqueous humor of the human eye screen out
significant amounts of UV-A and UV-B radiation, nearly 50 percent of
radiation at 320 nm is transmitted to the lens. Transmittance
declines substantially below 320 nm, so that less than 1 percent is
transmitted below approximately 290 to 300 nm. However, the results
of laboratory experiments on animals indicate that short wavelength
UV-B (i.e., below 290 nm) is perhaps 250 times more effective than
long wavelength UV-B (i.e., 320 nm) in inducing cataracts.
36c. Human cataract prevalence varies with latitude and UV radiation;
brunescent nuclear cataracts show the strongest relationship.
37. INCREASES IN THE AMOUNT OF UV-B THAT CAN REACH THE RETINA APPEAR CAPABLE OF
CAUSING STABLE RETINAL DISORDERS AND RETINAL DEGENERATION. TWO CAUSES OF
BLINDNESS (chapter 10).
38. LIMITED STUDIES ANALYZING THE EFFECT OF INCREASED UV-B RADIATION ON CROPS
GENERALLY SHOW ADVERSE IMPACTS. HOWEVER. CONCLUSIONS ABOUT THE AMOUNT OF
YIELD LOSSES ATTRIBUTABLE TO UV-B CANNOT BE DRAWN (chapter 11).
38a. Difficulties in experimental design, the large number of species and
cultivars, and complex interactions between plants and their
environment have prevented quantification of total crop loss from
increases in UV-B.
38b. Action spectra for UV damage to higher plants are limited, but
indicate a strong weighting toward shorter UV-B wavelengths which are
those most affected by ozone reduction.
39. OF PLANT CULTIVARS TESTED IN THE LABORATORY. APPROXIMATELY 70 PERCENT WERE
DETERMINED TO BE SENSITIVE TO UV-B: CARE MUST BE TAKEN IN INTERPRETING THIS
FINDING (chapter 11).
39a. Different cultivars within a species have exhibited different degrees
of UV-B sensitivity. While this suggests selective breeding could
limit damage, neither the basis for selectivity nor the potential
effect on other aspects of growth has been studied.
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39b. Laboratory experiments have been shown to inadequately replicate
effects in the field, thus the implications of cultivar sensitivity-
are not certain.
39c. In some species, mitigation responses more readily apparent in the
field (e.g., increased production of UV absorbing flavonoids) have
reduced adverse impacts.
40. THE EFFECTS OF UV-B RADIATION HAVE BEEN EXAMINED FOR ONLY FOUR OF THE TF.M
MAJOR TERRESTRIAL ECOSYSTEMS AND FOR ONLY A THIRD OF THE PLANT GROWTH FORMS
(chapter 11).
40a. Little or no data exist on enhanced UV-B effects on trees, woody
shrubs, vines, or lower vascular plants.
41- LARGE UNCERTAINTIES EXIST AS A RESULT OF AN IMPERFECT EXPERIMENTAL DESTEN
OR DOSIMETRY, EXISTING EXPERIMENTAL FIELD DATA SUGGEST A POTENTIAL
REDUCTION IN CROP YIELD FOR SOME CROPS DUE TO ENHANCED UV-B RADIATION
(chapter 11).
41a. Field experiments in which UV.-B radiation has been supplemented are
limited. Several of the earlier field experiments are of limited
value since UV-B doses or other factors such as soil temperature were
not sufficiently controlled or representative of field conditions.
Dose-response studies in the field are particularly different.
Alb. The only long-term field studies of a crop involved soybeans. These
studies have found that enhanced levels of UV-B, simulating between
16 and 25 percent ozone depletion, caused crop yield reductions of up
to 25 percent in a particular cultivar. Smaller reductions in yield
were experienced in years where drought conditions existed.
41c. Soybean (CV Essex) yield could be accurately predicted when total
UV-B dose, daily maximum temperature, and number of days of
precipitation were included in a regression model.
41d. The lipid and protein content of soybean was reduced up to 10
percent; however, higher UV-B doses alone did not consistently result
in the largest reductions.
41e. While only several cultivars have been tested in the field, two out
of three soybean cultivars tested under laboratory conditions were
sensitive to UV-B. If this relationship holds true in the field, it
suggests (when considered in light of yield reduction experiments)
that UV-B increases could harm the potential of the world
agricultural system to produce soybeans.
42. THE EFFECTS OF UV-B ON FUNGAL OR VIRAL PATHOGENS VARY WITH PATHOGEN. PLANT
SPECIES. AND CULTIVAR (chapter 11).
42a. Current evidence on possible interactions with pathogens is very
limited.
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42b. Reduced vigor in UV-sensitive plants could render the plants more or
less susceptible to pest or disease damage and thus result in changes
in crop yield.
43. CHANGES IN UV-B LEVELS MAY INDUCE SHIFTS IN INTERSPECIFIC COMPETITION
(chapter 11).
43a. If enhanced UV-B favors weeds over crops, agricultural costs (e.g.,
for increased tilling and herbicide application) could increase.
However, insufficient evidence exists to form a basis for evaluating
this effect.
43b. Increases in UV-B could alter the results of the competition in
natural ecosystems and thus shift community composition. Since UV-B
changes would be both global and long term, possible UV-induced
alterations of plant species balances could result in large-scale
changes in the character and equilibrium of vegetation in
nonagricultural areas such as forests and grasslands.
44. UV-B RADIATION INHIBITS AND STIMULATES FLOWERING. DEPENDING ON THE SPECIES
AND GROWTH CONDITIONS (chapter 11).
44a. The timing of flowering may also be influenced by UV-B radiation, and
there is limited evidence that pollen may be susceptible to UV damage
upon germination.
44b. Reproductive structures enclosed within the ovary appear to be
well-protected from UV-B radiation.
45. INTERACTIONS BETWEEN UV-B RADIATION AND OTHER ENVIRONMENTAL FACTORS ARE
IMPORTANT IN DETERMINING POTENTIAL UV-B EFFECTS ON PLANTS (chapter 11).
45a. UV-B effects may be worsened under low light regimes or less apparent
under conditions of limited nutrients or water.
45b. Interactions with other environmental effects make extrapolation of
data from growth chambers or greenhouses to field conditions
difficult and often unreliable.
45c. The combined effect of higher UV-B and other environmental changes
cannot be adequately assessed by current data. Extensive, long-term
studies would be required.
46. INITIAL EXPERIMENTS SHOW THAT REDUCTIONS IN STRATOSPHERIC OZONE. WHICH
INCREASES SOLAR ULTRAVIOLET RADIATION. HAVE THE POTENTIAL TO HARM AQUATIC
LIFE. DIFFICULTIES IN EXPERIMENTAL DESIGNS AND THE LIMITED SCOPE OF THE
STUDIES PREVENT THE QUANTIFICATION OF RISKS (chapter 12).
46a. Increases in energy in the 290-320 run wavelengths that would occur if
the ozone layer were depleted could harm aquatic life.
46b. Various experiments have shown that UV-B radiation damages fish
larvae and juveniles, shrimp larvae, crab larvae, copepods, and
plants essential to the marine food web.
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46c. Up to some threshold level of exposure, most zooplankton show no
effect due to increased exposure to UV-B radiation. However,
exposure above the dose threshold elicits significant and
irreversible physiological and behavioral effects.
46d. While the exact limits of tolerance and current exposure have not
been precisely determined, estimates of these two properties for a
variety of aquatic organisms show them to be essentially equal.
46e. The equality of tolerance and exposure suggests that solar UV-B
radiation is currently an important limiting ecological factor, and
the sunlight-exposed organisms sacrifice potential resources to avoid
increased UV-B exposure. Thus, even small increases of UV-B exposure
would be likely to further injure species currently under UV-B
stress.
46f. A decrease in column ozone is reasonably likely to diminish the time
that zooplankton can survive or breed at or near the surface of
waters they inhabit. For some zooplankton, the time they spend at or
near the surface is critical for breeding, whether the population
could endure a significant shortening of surface time is unknown.
46g. Sublethal exposure of copepods produces a reduction in fecundity.
46h. Of the animals tested, no zooplankton possess a sensory mechanism for
directly detecting UV-B radiation; therefore, it would be unlikely
that they would actively avoid enhanced levels of exposure resulting
from a reduction in column ozone.
46i. Exposure of a community to UV-B stress in controlled experiments has
resulted in a decrease in species diversity, and therefore a possible
reduction in ecosystem resilience and flexibility.
46j. One experiment predicted an 8 percent annual loss of the larval
anchovy population from a 9 percent reduction in column ozone in a
marine system with a 10-meter mixed layer.
47. IN COMMON WITH ALL OTHER LIVING ORGANISMS. THE AQUATIC BIOTA COPE WITH
SOLAR UV-B RADIATION BY AVOIDANCE. SHIELDING. AND REPAIR MECHANISMS.
UNCERTAINTY EXISTS AS TO THE EXTENT TO WHICH SUCH MITIGATION MECHANISMS
WOULD OCCUR (chapter 12).
48. DETERMINATION OF UV-B EXPOSURE IN AQUATIC SYSTEMS IS COMPLEX BECAUSE OF THE
VARIABLE ATTENUATION OF UV-B RADIATION IN THE WATER COLUMN (chapter 12).
48a. Because aquatic organisms are small and do not usually have fixed
locations, it is very difficult to obtain accurate data needed to
model the systems and verify results. Current understanding of the
life cycle of organisms is very limited.
49- ABOUT ONE HALF OF THE WORLD'S PROTEIN IS DERIVED FROM MARINE SPECIES. IN
MANY THIRD WORLD COUNTRIES. THIS PERCENTAGE IS LARGER. RESEARCH IS NEEDED
TO IMPROVE OUR UNDERSTANDING OF HOW OZONE DEPLETION COULD INFLUENCE THESE
SYSTEMS (chapter 12).
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49a. A comprehensive analysis of sublethal and lethal effects of solar UV
on littoral, benthos, and planktonic ecosystems is needed.
49b. A model of energy flow analysis leading to protein production where
solar input is augmented by increased ultraviolet radiation would be
required to better evaluate potential effects. Marine organisms
responses to projected increases in UV must be considered in the
context of the oceans as a dynamic moving fluid.
49c. Better documentation of the effects of present levels of ultraviolet
light on marine organisms is needed.
49d. Intensive research is needed to identify biochemical indices that
reflect UV stress in marine organisms.
50. INCREASED UV-B RADIATION WILL ACCELERATE THE DEGRADATION OF POLYMFRS
(chapter 13).
50a. Several commercial polymers (e.g., polyethylene, polypropylene,
poly(vinylchloride)), although theoretically UV transparent, contain
chromophore impurities that absorb light in the UV-B region of the
spectrum. Other polymers (e.g., polycarbonate) have structural
features in their molecules that result in strong UV-B light
absorption.
50b. Several polymers have important outdoor applications (e.g., used in
siding and window glazing in the building industry, in film and
containers in packaging, in housewares and toys, and in paints and
protective coatings). Such polymers are likely to be exposed to
significant amounts of UV-B radiation. Other polymers are stored
outside before use and could deteriorate during these periods.
50c. Absorption of UV-B radiation in polymers causes photo-induced
reactions and alters important mechanical, physical, or optical
properties of the polymers (e.g., yellowing, brittleness) and thus
degrades (i.e., reduces the useful life of) the polymers.
51• INCREASED USE OF UV-STABILIZERS FOR PROTECTION OF POLYMERS AGAINST UV
RADIATION WOULD HAVE NEGATIVE EFFECTS (chapter 13).
51a. Increased amounts of stabilizers might adversely affect the
processing and use properties of some polymers (e.g., hardness,
thermal conductivity, flow characteristics). For example, increased
amounts of titanium dioxide in poly(vinylchloride) might affect its
processing properties, increasing its costs of production.
51b. Changes in the amount of stabilizer (and other additives) would
increase costs of products. Alternatively, manufacturers could
develop new formulations to avoid or minimize impurities in
production.
51c. The addition of stabilizers to polymers may be limited by practical
problems of material characteristics or manufacture. However, other
responses may be possible to limit damage.
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52- INCREASED UV-B RADIATION DUE TO OZONE DEPLETION COULD HAVE ADVERSE
EFFECTS (chapter 13).
52a. Changes in polymer processing properties can result in more equipment
shutdowns, higher maintenance costs, and increased utility costs.
52b. Increased operating costs and material costs (e.g., for stabilizers,
lubricants, and other additives) would have an adverse economic
impact on the polymer/plastic and related industries.
52c. In a case study using preliminary data and methods, and a given
scenario of ozone depletion (26% depletion by 2075), undiscounted
cumulative (1984-2075) economic damage for poly(vinylchloride) is
estimated at $4.7 billion (USA only). Due to the lack of data,
possible damage to other polymers has not been assessed.
53- POTENTIAL DAMAGES TO POLYMERS RELATED TO OZONE DEPLETION AND CLIMATE CHANGE
ARE DIFFICULT TO ESTIMATE (chapter 13).
53a. Due to lack of relevant experimental data, only approximate
estimation methods are available to determine the potential extent of
light-induced damage to polymers and other materials.
53b. Depending upon the chemical nature of a polymer, the components of
the compound, and the weathering factors, both temperature and
humidity tend to increase the rate of degradation.
53c. Research on dose-response relationships for polymers could increase
our ability to project the effects of ozone depletion.
53d. Actual action spectra need to be developed for different polymers.
53e. The feasibility of different mitigation measures needs to be
experimentally determined.
53f. The synergistic effects of increased humidity and temperature need to
be considered.
54. RESULTS FROM ONE MODELING STUDY AND ONE CHAMBER STUDY SUGGEST THAT
INCREASED ULTRAVIOLET RADIATION FROM OZONE DEPLETION MAY INCREASE THE RATE
OF TROPOSPHERIC OZONE FORMATION (chapter 14^."~
54a. According to these studies, increases in UV-B associated with ozone
depletion would increase the quantity of ground-based ozone
associated with various hydrocarbon and nitrogen oxides emission
levels. Results for individual cities vary, depending on the city's
location and on the exact nature of the pollution.
54b. According to these studies, global warming would enhance the effects
of increased UV-B radiation on the formation of ground-based ozone.
54c. According to these studies, ground-based ozone would form closer to
urban centers. This would cause larger populations in some cities to
be exposed to peak values.
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54d. More research is needed to verify and expand the results of these
initial studies.
55. PRELIMINARY RESULTS FROM ONE STUDY ALSO SUGGEST THAT LARGE INCREASES IN
HYDROGEN PEROXIDE WOULD RESULT FROM INCREASED UV-B RADIATION (chapter 14).
55a. If hydrogen peroxide increases as predicted in this study, the
oxidizing capability potential of the atmosphere, including the
formation of acid rain, would be influenced.
55b. More research, especially a chamber study, is needed to verify this
effect.
56. INCREASES IN GROUND-BASED OZONE WOULD ADVERSELY AFFECT PUBLIC HEALTH AND
WELFARE (chapter 14).
56a. If UV-B increases enhanced ozone production, more U.S. cities would
be unable to meet health-based ground-level ozone standards, and
background ozone would increase.
56b. Crops, ecosystems, and materials would be adversely affected by
increased ground-level ozone.
57. THE PROJECTED GLOBAL WARMING WOULD ACCELERATE THE CURRENT RATE OF SEA LEVEL
RISE BY EXPANDING THE DENSITY OF OCEAN WATER. MELTING ALPINE GLACIERS. AND
EVENTUALLY INCREASING THE RATE AT WHICH POLAR ICE SHEETS MELT OR DISCHARGE
ICE INTO THE OCEANS (chapter 15).
58. GLOBAL AVERAGE SEA LEVEL APPEARS TO HAVE RISEN 10 TO 15 CM OVER THE LAST
CENTURY (chapter 15).
58a. Studies of the possible contribution of thermal expansion and alpine
meltwater to sea level rise, based on the 0.6°C warming of the past
century, indicate that these two sources are insufficient to explain
the estimated sea level rise that has occurred during this period.
Consequently, some other source, such as melting of the polar ice
caps, must be considered a possibility.
59. ESTIMATES OF THE RISE IN SEA LEVEL THAT COULD TAKE PLACE IF MEASURES TO
LIMIT THE GLOBAL WARMING ARE NOT UNDERTAKEN RANGE FROM 10 TO 20 CM BY THE
YEAR 2025. AND 50 TO 200 CM BY 2100 (chapter 15)
59a. According to published studies, thermal expansion of the oceans alone
would increase sea level rise between about 30 cm and 100 cm by 2100,
depending on the realized temperature change. This is the most
certain contribution.
59b. Melting of alpine glaciers and possibly of ice on Greenland could
each contribute 10 to 30 cm through 2100, depending on the scenario.
This contribution also has a high degree of likelihood.
59c. The contribution of Antarctic deglaciation is more difficult to
project. It has been estimated at between 0 and 100 cm; however, the
possibilities cannot be ruled out that (1) increased snowfall could
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increase the size of the Antarctic ice sheet and thereby partially
offset part of the sea level rise from other sources; or (2)
meltwater and enhanced calving of the ice sheet could increase the
contribution of Antarctic deglaciation to as much as 2 m. The
Antarctic contribution to sea level rise may be more sensitive to
time delays after certain threshold conditions are reached than to
the magnitude of total warming.
60- OVER THE MUCH LONGER TERM (THE NEXT FEW CENTURIES) DISINTEGRATION OF THR
WEST ANTARCTIC ICE SHEET MIGHT RAISE SEA LEVEL BY 6 METERS (chapter 15).
60a. If a disintegration takes place, glaciologists generally believe that
such a complete disintegration of the west Antarctic ice sheet would
take at least 300 years, and probably at least 500 years.
60b. A global warming might result in sufficient thinning of the Ross and
Filcher-Ronne Ice Shelves in the next century to make the process of
disintegration irreversible.
61- LOCAL TRENDS IN SUBSIDENCE AND EMERGENCE MUST BE ADDED OR SUBTRACTED TO
GLOBAL RISK ESTIMATES IN ORDER TO ESTIMATE RELATIVE SEA LEVEL RISE AT
PARTICULAR LOCATIONS (chapter 15).
61a. Most of the Atlantic and Gulf Coasts of the United States — as well as
the Southern Pacific coast — are subsiding 10-20 cm per century.
61b. Louisiana is subsiding 1 m per century, while parts of Alaska are
emerging 10-150 cm per century.
61c. Due to subsidence already occurring in areas such as Bangladesh,
Bangkok, and the Nile delta, these areas are extremely vulnerable to
sea level rise.
62. A SUBSTANTIAL RISE IN SEA LEVEL WOULD PERMANENTLY INUNDATE WETLANDS AND
LOWLANDS. ACCELERATE COASTAL EROSION. EXACERBATE COASTAL FLOODING. AND
INCREASE THE SALINITY OF ESTUARIES AND AQUIFERS (chapter 15).
62a. Louisiana is the state most vulnerable to a rise in sea level.
Important impacts would also occur in Florida, Maryland, Delaware,
New Jersey, and in the coastal regions of other states.
62b. A rise in sea level of 1 to 2 m by the year 2100 could destroy 50
percent to 80 percent of U.S. coastal wetlands.
62c. Limited studies predict that increased salinity from sea level rise
would convert cypress swamps to open water and threaten drinking
water supplies in areas such as Louisiana, Philadelphia, and New
Jersey. Other areas, such as Southern Florida, may also be
vulnerable but have not been investigated.
62d. Studies of Bangladesh and the Nile River Delta indicate that these
river deltas, which are already subsiding, would be greatly affected
by rising sea level, experiencing significant economic and
environmental losses.
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63. EROSION PROJECTED IN VARIOUS STUDIES TO RESULT FROM ACCELERATED SEA LEVRT.
RISE COULD THREATEN U.S. RECREATIONAL BEACHES (chapter 15).
63a. Case studies of beaches in New Jersey, Maryland, California, South
Carolina, and Florida have concluded that a 30-cm rise in sea level
would result in beaches eroding 20-60 m or more. Major beach
preservation efforts would be required if recreational beaches are to
be maintained.
64. ACCELERATED SEA LEVEL RISE WOULD INCREASE THE DAMAGES FROM FLOODING IN
COASTAL AREAS (chapter 15).
64a. Flood damages would increase because higher water levels would
provide a higher base for storm surges.
64b. Erosion would increase the vulnerability to storm waves, and
decreased natural and artificial drainage would increase flooding
during rainstorms.
65- ESTIMATES OF DAMAGE FROM SEA LEVEL RISE MUST CONSIDER POSSIBLE MITIGATION
BY HUMAN RESPONSES (chapter 15).""
65a. The adverse impacts of sea level rise could be ameliorated through
anticipatory land use planning and structural design changes.
65b. In a case study of two cities, Charleston, South Carolina, and
Galveston, Texas, accelerated anticipatory planning was estimated to
reduce net damages by 20 to 60 percent.
66• RELATED IMPACTS OF A GLOBAL WARMING WOULD ALSO AFFECT IMPACTS OF SEA LEVET.
RISE (chapter 15).""
66a. Increased droughts might amplify the salinity impacts of sea level
rise.
66b. Increased hurricanes and increased rainfall in coastal areas could
amplify flooding from sea level rise.
66c. Warmer temperatures might impair peat formation of salt marshes and
would enable mangrove swamps to take over areas that are presently
salt marsh.
66d. Decreased northeasters might reduce damage.
67• RESEARCH OPPORTUNITIES EXIST TO IMPROVE SEA LEVEL RISE ESTIMATES AND
IMPACTS (chapter 15^~~'
67a. The most critical areas of research for reducing the variation in
estimates of future sea level rise are ice melting and runoff in
Antarctica and Greenland and ice discharge.
67b. Research in glacial discharge in Antarctica should focus not just on
West Antarctica, but on Pine Island and East Antarctica.
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67c. An improved program of tidal gauge stations, especially in the
southern hemisphere, and satellite altimetry should be used to
measure sea level rise and the mass balance of ice sheets.
68. CLIMATE CHANGE HAS HAD A SIGNIFICANT IMPACT ON FORESTS IN THE PAST IF
CURRENT PREDICTIONS PROVE ACCURATE. THERE IS A POTENTIAL FOR DRAMATIC
SHIFTS IN FORESTS AND VEGETATION OVER THE NEXT 100 YEARS (chapter 16 ).4
68a. Climate models predict that a global warming of approximately 1.5°C
to 4.5°C will be induced by a doubling of atmospheric C02 and other
trace gases during the next 50 to 100 years. The period 18,000 to 0
years B.P. is the only general analog for a global climate change of
this magnitude. The geological record from this glacial to
inter-glacial interval provides a basis for qualitatively
understanding how vegetation may change in response to large climatic
change.
68b. The paleovegetational record shows that climatic change as large as
that expected to occur in response to C02 doubling is likely to
induce significant changes in the composition and patterns of the
world's biomes. Changes of 2°C to 4°C have been significant enough
to alter the composition of biomes, and to cause new biomes to appear
and others to disappear. At 18,000 B.P., the vegetation in eastern
North America was quite distinct from that of the present day. The
cold, dry climate of that time seems to have precluded the widespread
growth of birch, hemlock, beech, alder, hornbeam, ash, elm, and
chestnut, all of which are fairly abundant in present-day deciduous
forest. Southern pines were limited to grow with oak and hickory in
Florida.
68c. Available paleoecological and paleoclimatological records do not
provide an analog for the high rate of climate change and
unprecedented global warming predicted to occur over the next
century. Previous changes in vegetation have been associated with
climates that were nearly 5°C to 7°C cooler and took thousands of
years to evolve rather than decades, the time during which such
changes are now predicted to occur. Insufficient temporal resolution
(e.g., via radiocarbon dates) limits our ability to analyze the
decadal-scale rates of change that occurred prior to the present
millennium.
68d. Limited, experiments conducted with dynamic vegetation models for
North America suggest that decreases in net biomass may occur and
that significant changes in species composition are likely.
Experiments with one model suggest that eastern North American
biomass may be reduced by 11 megagrams per hectare (10% of live
biomass) given the equivalent of a doubled C02 environment. Plant
taxa will respond individualistically rather than as whole
communities to regional changes in climate variables. At this time
such analyses must be treated as only suggestive of the kinds of
Findings 68 to 71 are summarized from Appendix B, which provides a
comprehensive review of potential impacts of global climate change.
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change that could occur. Many critical processes are simplified or
omitted and the actual situation could be worse or better.
68e. Future forest management decisions in major timber-growing regions
are likely to be affected by changes in natural growing conditions.
For example, one study suggests that loblolly pine populations are
likely to move north and northeast into Pennsylvania and New Jersey,
while its range shrinks in the west. The total geographic range of
the species may increase, but a net loss in productivity may result
because of shifts to less accessible and less productive sites.
While the extent of such changes is unclear, adjustments will be
needed in forest technology, resource allocation, planning, tree
breeding programs, and decision-making to maintain and increase
productivity.
68f. Dynamic vegetation models based on theoretical descriptions of all
factors that could influence plant growth must be improved and/or
developed for all major kinds of vegetation. In order to make more
accurate future predictions, these models must be validated using the
geological record and empirical ecological response surfaces. In
particular, the geological record can be used to test the ability of
vegetation models to simulate vegetation that grew under climate
conditions unlike any of the modern day conditions.
68g. Dynamic vegetation models should incorporate direct effects of
atmospheric C02 increases on plant growth and other air pollution
effects. Improved estimates of future regional climates are also
required in order to make accurate predictions of future vegetation
changes.
69. LIMITED ASSESSMENTS SUGGEST THAT IMPORTANT CHANGES IN AGRICULTURE AND FARM
PRODUCTIVITY ARE LIKELY THROUGHOUT THE WORLD IF CLIMATE CHANGE OCCURS AS
PREDICTED. ESTIMATES OF IMPACTS ON SPECIFIC REGIONS ARE DIFFICULT TO MAKE
BECAUSE REGIONAL PROJECTIONS OF CHANGE CANNOT BE RELIABLY MADE. CURRENT
CLIMATIC KNOWLEDGE IS ONLY SUFFICIENT TO SUPPORT VULNERABILITY STUDIES FOR
ALTERNATIVE SCENARIOS (chapter 16).
69a. Climate has had a significant impact on farm productivity and
geographical distribution of crops. Examples include the 1983
drought, which contributed to a nearly 30 percent reduction in corn
yields in the U.S.; the persistent Great Plains drought between
1932-1937, which contributed to nearly 200,000 farm bankruptcies; and
the climate shift of the Little Ice Age (1500-1800), which led to the
abandonment of agricultural settlements in Scotland and Norway.
69b. World agriculture is likely to undergo significant shifts if
trace-gas-induced climate warming in the range of 1.5°C to 4.5°C
occurs over the next 50 to 100 years. Climatic effects on
agriculture will extend from local to regional and international
levels. However, modern agriculture is very dynamic and is
constantly responding to changes in production, marketing, and
government programs.
69c. The main effects likely to occur at the field level will be physical
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impacts of changes in thermal regimes, water conditions, and pest
infestations. High temperatures have caused direct damage to crops
such as wheat and corn; moisture stress, often associated with
elevated temperatures, is harmful to corn, soybean, and wheat during
flowering and grain fill; and increased pests are associated with
higher, more favorable temperatures.
69d. Even relatively small increases in the mean temperature can increase
the probability of harmful effects in some regions. Analysis of
historical data has shown that an increase of 1.7°C (3°F) in mean
temperature changes by about a factor of three the likelihood of a
five-consecutive-day maximum temperature event of at least 35°C
(95°F) occurring in a city like Des Moines. In regions where crops
are grown close to their maximum tolerance limits, extreme
temperature events may have significant harmful effects on crop
growth and yield.
69e. Limited experiments using climate scenarios and agricultural
productivity models have demonstrated the sensitivity of agricultural
systems to climate change. Future farm yields are likely to be
affected by climate because of changes in the length of the growing
season, heating units, extreme winter temperatures, precipitation,
and evaporative demand. In addition, field evaluations show that'
total productivity is a function of the drought tolerance of the land
and the moisture reserve, the availability of land, the ability of
farmers to shift to different crops, and other factors.
69f. The transition costs associated with adjusting to global climatic
change are not easily calculated, but are likely to be very large.
Accommodating to climate change may require shifting to new lands and
crops, creating support services and industries, improving and
relocating irrigation systems, developing new soil management and
pest control programs, and breeding and introducing new heat- or
drought-tolerant species. The consequences of these decisions on the
total quantity, quality, and cost of food are difficult to predict.
69g. Current projections of the effects of climate change on agriculture
are limited because of uncertainties in predicting local temperature
and precipitation patterns using global climate models, and because
of the need for improved research studies using controlled
atmospheres, statistical regression models, dynamic crop models and
integrated modeling approaches.
70. WATER RESOURCE SYSTEMS HAVE UNDERGONE IMPORTANT CHANGES AS THE EARTH'S
CLIMATE HAS SHIFTED IN THE PAST. CURRENT ANALYSES SUGGEST AN INTENSIFIED
HYDROLOGIC CYCLE. IF CLIMATE CHANGE OCCURS AS PREDICTED (chapter 16).
70a. There is evidence that climate change since the last ice age (18,000
years B.P.) has significantly altered the location of lakes --
although the extent of present day lakes is broadly comparable with
18,000 years B.P. For example, there is evidence indicating the
existence of many tropical lakes and swamps in the Sahara, Arabian,
and Thor Deserts around 9,000 to 8,000 years B.P.
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70b. The inextricable linkages between the water cycle and climate ensure
that potential future climate change will significantly alter
hydrologic processes throughout the world. All natural hydrologic
processes — precipitation, infiltration, storage and movement of soil
moisture, surface and subsurface runoff, recharge of groundwater, and
evapotranspiration--will be affected if climate changes.
70c. As a result of changes in key hydrologic variables such as
precipitation, evaporation, soil moisture, and runoff, climate change
is expected to have significant effects on water availability. Early
hydrologic impact studies provide evidence that relatively small
changes in precipitation and evaporation patterns might result in
significant, perhaps critical, changes in water availability. For
many aspects of water resources, including human consumption,
agricultural water supply, flooding and drought management,
groundwater use and recharge, and reservoir design and operation,
these hydrologic changes will have serious implications.
70d. Despite significant differences among climate change scenarios, a
consistent finding among hydrologic impact studies is the prediction
of a reduction in summer soil moisture and changes in the timing and
magnitude of runoff. Winter runoff is expected to increase and
summer runoff to decrease. These results appear to be robust across
a range of climate change scenarios.
70e. Future directions for research and analyses suggest that improved
estimates of climate variables are needed from large-scale climate
models; innovative techniques are needed for regional assessments;
increased numbers of assessments are necessary to broaden our
knowledge of effects on different users; and increased analyses of
the impacts of changes in water resources on the economy and society
are necessary.
71. MORBIDITY AND MORTALITY RATES ARE ASSOCIATED WITH WEATHER EXTREMES IN OUR
SOCIETY (chapter 16).
71a. Weather has a profound effect on human health and well being. It has
been demonstrated that weather is associated with changes in birth
rates, outbreaks of pneumonia, influenza, and bronchitis, and related
to other morbidity effects, and is linked to pollen concentrations
and high pollution levels.
71b. Large increases in mortality have occurred during previous heat and
cold waves. It is estimated that 1,327 fatalities occurred in the
United States as a result of the 1980 heat wave, and Missouri alone
accounted for over 25 percent of that total.
71c. Hot weather extremes appear to have a more substantial impact on
mortality than cold wave episodes.
71d. Threshold temperatures, which represent maximum and minimum
temperatures associated with increases in total mortality, have been
determined for various cities. These threshold temperatures vary
regionally; for example, the threshold temperature for winter
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mortality in mild southern cities such as Atlanta is 0°C and for more
northerly cities such as Philadelphia, threshold temperature is -5°C.
71e. If future global warming induced by increased concentrations of trace
gases does occur, it has the potential to affect human mortality
significantly. In one study, total summertime mortality in New York
City was estimated to increase by over 3,200 deaths per year for a
7°F trace-gas-induced warming without acclimatization. If New
Yorkers fully acclimatize, the number of additional deaths is
estimated to be no different than today. It is hypothesized that if
climate warming occurs, some additional deaths are likely to occur
because economic conditions and the basic infrastructure of the city
will prohibit full acclimatization even if behavior changes.
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QUANTITATIVE ASSESSMENT OF RISKS WITH INTEGRATED MODEL
AN INTEGRATED ASSESSMENT OF RISKS FOR VARIOUS SCENARIOS OF OZONE-DEPLETTNf:
SUBSTANCES SHOWS THAT HARM DEPENDS ON THE LEVEL OF THE PRODUCTION QF CHLORINE
AND BROMINE BEARING SUBSTANCES.
Risks are evaluated by using the integrated model to simulate the impact of
"what-if" scenarios of production of ozone-depleting substances and scenarios of
other trace gas concentrations on the atmosphere and on human health and the
environment. Sensitivity analyses of alternative assumptions are also
conducted.
Analysis of the results of all the scenarios indicates that adverse impacts
on health and welfare are lowered with reductions in the production of ozone-
depleting substances.
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72. MODIFICATION OF THE TRACE GAS COMPOSITION OF THE ATMOSPHERE CAN BE EXPECTED
TO ALTER COLUMN OZONE ABUNDANCE (chapter 18).
72a. The range of global average total column ozone change projected for
the year 2075 based on a parameterized representation of a
one-dimensional model could vary from as high as over 50 percent
depletion, for a case where global use of chlorine and bromine
bearing substances grows at an average annual rate of 2.8 percent
from 1985 to 2100 (5.0 percent per year from 1985 to 2050, followed
by no growth through 2100), to increased abundance of ozone of
approximately 3 percent, for a case where global use of chlorine and
bromine bearing substances declines to 20 percent of its 1985 value
by 2010. Exhibit ES-6 displays the global ozone change estimates
for these two scenarios, as well as estimates for four scenarios in
between; the six "what if scenarios examined include:
o 80% Reduction: Use of chlorine and bromine bearing substances
declines to 20 percent of its 1985 value by 2010, and remains
constant thereafter, yielding approximately 3.0 percent increased
ozone abundance by 2075;
o No Growth: no growth in use of chlorine and bromine-bearing
substances from 1985 to 2100, yielding approximately 0.3 percent
increased ozone abundance by 2075;
o 1.2% Growth: 1.2 percent growth from 1985 to 2050, followed by
no growth, yielding approximately 4.5 percent depletion by 2075;
o 2.5% Growth: 2.5 percent growth from 1985 to 2050, followed by
no growth, yielding approximately 25 percent depletion by 2075;
o 3.8% Growth: 3.8 percent growth from 1985 to 2050, followed by
no growth, yielding over 50 percent depletion by 2075;
o 5.0% Growth: 5.0 percent growth from 1985 to 2050, followed by
no growth, yielding over 50 percent depletion by 2075.
The trace gas concentration assumptions used in these six cases are:
C02 -- NAS 50th percentile; CH4 -- 0.017 ppm per year (approximately
1 percent of current CH4 concentration); and N20 -- 0.20 percent per
year.
72b. Current data are not sufficient for distinguishing whether CH4
concentrations are likely to increase in a linear manner (e.g. at
0.017 ppm per year, or approximately 1 percent of current
concentrations) or in a compound manner (e.g., at 1 percent per year,
compounded annually). The sensitivity of the ozone change estimates
in 2075 was evaluated for the following six assumptions regarding
future CH4 concentrations:
o Scenario A: compound annual growth of 1 percent from 1985 to
2010, followed by constant concentrations at 2.23 ppm; and
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ES-56
EXHIBIT ES-6
ESTIMATES OF GLOBAL OZONE DEPLETION IN 2075
FOR SIX CASES OF CFG USE
10
80% No
• Reduction Growth 1.2% 2.5% 3.8% 5.0%
Global
Ozone Chang*
(X)
-10
•20
-30
-40
-50
greater than 50% depletion
Using a parameterized representation of a one-dimensional model, the
potential change in ozone was evaluated for six scenarios: 80% Reduction:
global CFC use declines to 20 percent of current levels by 2010, and remains
constant thereafter; No Growth: no growth in CFC use from current levels; 1.2%
Growth: 1.2 percent growth from 1985 to 2050, followed by no growth; 2.5%
Growth: 2.5 percent growth from 1985 to 2050, followed by no growth; 3.8%
Growth 3.8 percent growth from 1985 to 2050, followed by no growth; 5.0% Growth:
5.0 percent growth from 1985 to 2050, followed by no growth through 2100). The
trace gas concentration assumptions used in these six cases are: C02: NAS 50th
percentile; CH4: 0.017 ppm per year (approximately 1 percent of current CHA
concentration); and N20: 0.20 percent per year.
Assumptions:
Current 1-D models accurately reflect global depletion; Antarctic ozone
hole has no impact on global ozone levels.
Greenhouse gases that counter depletion grow at historically-extrapolated
rates.
Growth rates for ozone depletion are for global emissions; it is assumed
that emissions do not increase after 2050.
Ozone depletion limited to 50 percent.
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ES-57
o Scenario B: linear growth at 0.01275 ppm per year (75 percent of
the 0.017 ppm growth);
o Scenario C: linear growth of 0.017 ppm per year (approximately 1
percent of current concentrations);
o Scenario D: linear growth at 0.02125 ppm per year (125 percent
of the 0.017 ppm growth);
o Scenario E: compound annual growth of 1 percent;
o Scenario F: compound annual growth of 1 percent from 1985 to
2020, growing to 1.5 percent compound annual growth by 2050 and
thereafter.
For the 2.5% Growth scenario, the estimate of ozone depletion by 2075
ranges from about 14 percent (Scenario F) to 30 percent (Scenario A)
across these six CH4 assumptions evaluated. Exhibit ES-7 displays
the results for these six CH4 assumptions. As shown in the exhibit,
the difference between the 1 percent linear (0.017 ppm per year) and
1 percent compounded assumptions (Scenarios C and E) is approximately
6 percent depletion. This sensitivity of the ozone depletion
estimates to the assumption about linear versus compound growth of
CH4 concentrations is much larger than the sensitivity to the range
of assumptions examined regarding future C02 concentrations (from the
25th to the 75th percentile NAS estimates) and regarding future N20
concentrations (from 0.15 percent annual compound growth to 0.25
percent annual compound growth).
73• TWO-DIMENSIONAL (2-D) MODELS PREDICT GREATER AVERAGE GLOBAL DEPLETION THAN
ONE-DIMENSIONAL fl-D) MODELS. 2-D MODELS ALSO PREDICT THAT OZONE DEPLETION
WILL EXCEED THE GLOBAL AVERAGE AT HIGH LATITUDES AND BE LESS THAN THE
GLOBAL AVERAGE AT THE EQUATOR (chapter 18).
73a. For a case of 3 percent annual growth in emissions of CFCs, no
emissions of Halons, and increases in trace gases of: C02 --
approximately 0.6 percent per year; CH4 -- 1 percent per year; and
N20 -- 0.25 percent per year, a 2-D model estimates approximately 5.4
percent global average depletion by 2030. For the same scenario of
emissions and trace gas concentrations, the parameterized
representation of a 1-D model estimates only 3.0 percent depletion bv
2030. y
73b. For this same case of emissions and trace gas concentrations, the 2-D
model estimates of ozone depletion in 2030 at high latitudes are
approximately: 60°N --8.7 percent; and 50°N -- 7.0 percent.
74. ESTIMATES OF ATMOSPHERIC MODIFICATION. SKIN CANCER CASES AND DEATHS.
CATARACT CASES. MATERIALS DAMAGE. GLOBAL TEMPERATURE. AND SEA LEVEL DEPEND
ON THE RATE AT WHICH OZONE-DEPLETING GASES GROW. ATMOSPHERIC RESPONSE. DOSE
RESPONSE. AND WHETHER GREENHOUSE GASES THAT COUNTER OZONE DEPLETION GROW
INDEFINITELY. THE ASSUMPTIONS BEHIND QUANTITATIVE PROJECTIONS MUST BE
NOTED CAREFULLY (chapter 18).
-------
ES-58
EXHIBIT ES-7
ESTIMATES OF GLOBAL OZONE DEPLETION IN 2075
FOR SIX METHANE CONCENTRATION ASSUMPTIONS
10
Global
Ozone Change
•10
-20
•30
-40
Scenario A Scenarios Scenario C Scenario D Scenario E Scenario F
-29.6
Using a parameterized representation of a. one-dimensional model, the
potential change in ozone was evaluated for six assumptions about future methane
concentration: Scenario A: compound annual growth of 1 percent from 1985 to
2010, followed by constant concentrations at 2.23 ppm; Scenario B: linear growth
at 0.01275 ppm per year (75 percent of the 0.017 ppm growth); Scenario C: linear
growth of 0.017 ppm per year (approximately 1 percent of current
concentrations); Scenario D: linear growth at 0.02125 ppm per year (125 percent
of the 0.017 ppm growth); Scenario E: compound annual growth of 1 percent; and
Scenario F: compound annual growth of 1 percent from 1985 to 2020, growing to
1.5 percent compound annual growth by 2050 and thereafter.
All estimates based on the 2.5% Growth scenario 1985 to 2100 (2.5 percent
growth from 1985 to 2050, followed by no growth thereafter). The other trace
gas assumptions used in these cases are: C02: NAS 50th percentile; and N20: 0.20
percent growth per year.
Assumptions:
Current 1-D models accurately reflect global depletion; Antarctic ozone
hole has no impact on global ozone levels.
Greenhouse gases that counter depletion grow at historically-extrapolated
rates.
Growth rates for ozone depletion are for global emissions; it is assumed
that emissions do not increase after 2050.
Ozone depletion limited to 50 percent.
-------
ES-59
74a. The models used in this risk assessment assume that Antarctic ozone
depletion has no global implications and that global trends do not
invalidate estimates of current models.
74b. Except as noted, projected effects assume that: greenhouse gases grow
at historical rates indefinitely; current one-dimensional models
accurately project depletion; production of ozone depleters does not
grow after 2050; ozone depletion is limited to 50 percent; the action
spectrum causing skin cancers is DNA; and the temperature sensitivity
of the earth to doubled C02 is 3°C.
74c. In 2100, projections of ozone depletion range from over 50 percent
for the 5% Growth scenario (ozone depletion is constrained at 50
percent in this analysis) to 47 percent for the 2.5% Growth scenario
to an increase in column ozone abundance of nearly 5 percent for the
80% Reduction scenario.
74d. For cohorts born before 2075, the number of additional nonmelanoma
skin cancers projected ranges from a 261.5 million increase for the
5% Growth scenario to a 115 million increase for the 2.5% Growth
scenario to a reduction of 6.5 million skin cancers for the scenario
of 80% Reduction in all ozone depleters.
74e. For cohorts born before 2075, the increase in total melanoma cases
ranges from a 1.3 million case increase for the 5% Growth scenario to
a 609,000 increase for the 2.5% Growth scenario to 54,000 fewer cases
for the scenario of an 80% Reduction in all ozone depleters.
74f. For cohorts born before 2075, total mortality from melanoma and
nonmelanoma ranges from a 5.6 million increase for the 5% Growth
scenario to a 2.4 million increase for the 2.5% Growth scenario to
115,000 fewer cases for the scenario of 80% Reduction in all ozone
depleters.
74g. For cohorts born before 2075, the increase in total cataract cases
ranges from 26 million for the 5% Growth scenario to 15.1 million for
the 2.5% Growth scenario to 9,500 for the scenario of 80% Reduction
in ozone depleters.
74h. The rise in global temperature by 2075 ranges from 11.6°C in the 5%
Growth scenario to 5.6°C in the 2.5% Growth scenario to 4°C in the
scenario of 80% Reduction in all ozone depleters.
74i. Impacts are also projected for other areas such as sea level rise,
ground-based ozone, materials, aquatics, and soybean yield.
75. QUANTITATIVE ESTIMATES OF RISKS VARY WITH ASSUMPTIONS ABOUT FUTURE
EMISSIONS OF GREENHOUSE GASES THAT WILL CONTRIBUTE TO GLOBAL WARMING
(chapter 18).
75a. Model projections that extrapolate historical growth rates of
greenhouse gases, which tend to counter ozone depletion, into the
indefinite future assume certain policy decisions from future
decisionmakers; alternative assumptions are possible.
-------
ES-60
75b. If future decisionmakers limit the concentrations of C02, N20, and
CH4 to prevent global warming from exceeding 2°C (±50%) in 2075, they
would by necessity have to limit growth of ozone depleters to the No
Growth case; for other cases increases in ozone depleters would be
too large to achieve that objective.
75c. Ozone depletion associated with the No Growth or 1.2% Growth
scenarios increases nearly 3 to 5 percent if global warming is
limited to 3°C (±50%); skin cancer deaths would increase 43 percent
for people alive today.
75d. Estimates of methane emissions are inherently uncertain even without
consideration of future policy decisions and could affect
quantitative risk estimates.
76. QUANTITATIVE ESTIMATES OF RISK VARY WITH UNCERTAINTY ABOUT DOSE-RESPONSE
COEFFICIENTS. ACTION SPECTRUM. LIMITS OF OZONE DEPLETION. ANn
RESPONSIVENESS OF MODELS TO ATMOSPHERIC DEPLETION (chapter 18).
76a. For people alive today and born before 2075, additional skin cancer
cases would be reduced 45 percent if one assumes the lower dose-
response coefficients that are one standard error below the best
estimate and 66 percent higher if one assumes the higher coefficients
that are one standard error above the best estimate.
76b. For people alive today and born before 2075, additional skin cancer
cases would be reduced 11 percent if the Erythema action spectrum,
rather than the DNA action spectrum, were used to measure health
effects.
76c. Limiting projected depletion to 50 percent from what the
parameterized 1-D model would project reduces projected deaths for
later cohorts. For people born from 2030 to 2074, limiting depletion
to 50 percent reduces deaths by 13 percent for the 2.5% Growth
scenario and 66 percent for the 5% Growth scenario.
76d. For people alive today and born before 2075, skin cancer cases would
be reduced 62 percent in the 2.5% Growth scenario if the atmosphere
were less sensitive to potential ozone depleters (using the 10th
percentile), and increased 54 percent if the atmosphere were more
sensitive (using the 90th percentile).
77. WHILE NATIONAL QUANTITATIVE ESTIMATES OF AQUATIC. CROP. GROUND-BASED OZONE.
AND SEA LEVEL RISE DAMAGE CANNOT BE MADE AT THIS TIME. CASE STUDY RESULTS
INDICATE THAT SIGNIFICANT INCREASES IN GROUND-BASED OZONE. LOSS OF AQUATIC
LIFE. SEA LEVEL RISE DAMAGE. AND LOSS OF CROP YIELD ARE POSSIBLE (chapter
18).
-------
ES-61
MAJOR PRIOR ASSESSMENTS OF THIS ISSUE
A number of prior assessments of stratospheric modification and climate
change have been done. A partial list with descriptions is included below:
STRATOSPHERIC OZONE
1. National Academy of Sciences (NAS), 1975, 1976, 1979, 1982, 1983
Several assessments of anthropogenic influences on the stratospheric ozone
layer were coordinated by the National Academy of Sciences. The first report,
in 1975, focused on the effects of proposed fleets of supersonic transports on
the stratosphere. Subsequent reports focused on chlorofluorocarbons.
2. National Aeronautics and Space Administration (NASA), 1977, 1986
NASA has convened several technical panels to review models and chemistry.
In addition, it completed a scientific assessment in 1986.
3. World Meteorological Organization,
National Aeronautics and Space Administration,
Federal Aviation Administration,
National Oceanic and Atmospheric Administration,
United Nations Environment Programme,
Commission of the European Communities, and
Bundeministerium fur Forschung und Technologie
International assessments of the stratosphere have been conducted by the
European Community, the United Kingdom's Department of the Environment (1979),
and by the United Nations Environment Coordinating Committee on the Ozone Layer
(1981, 1984, 1986).
The most recent and most ambitious assessment of the scientific issues
regarding the stratosphere was coordinated by the World Meteorological
Organization with the assistance of several other organizations. Approximately
150 of the world's leading scientists participated in this assessment.
CLIMATE
1. Climatic Impact Assessment Program, 1974
Initial concern over anthropogenic influences on the climate and the
stratospheric ozone layer led in 1971 to the establishment of the Climatic
Impact Assessment Program (CIAP). Coordinated by the Department of
Transportation, CIAP's objective was to assess, by a report in 1974, the impacts
of climatic changes due to projected fleets of supersonic transports.
2. National Academy of Sciences: 1979, 1982, 1983
Three panels were convened by the National Academy of Sciences to assess the
scientific basis and certainty of the effects of carbon dioxide concentrations
on global climate. Reports were released in 1979, 1982, and 1983.
-------
ES-62
3. World Meter'ological Organization,
International Council of Scientific Unions, and
United Nations Environment Programme
Efforts to achieve an international scientific consensus on carbon dioxide,
trace gases, and climate were coordinated by the World Meterological
Organization (WHO), International Council of Scientific Unions (ICSU), and
United Nations Environment Programme (UNEP). Assessments were released in 1979
1981, and 1985.
-------
ES-63
REFERENCES
Commission of the European Communities, (1981), Evaluation of the Effects of
Chlorofluorocarbons on Atmospheric Ozone: Present Status of Research. EEC
Brussels, Belgium.
Department of the Environment, (1979), Chlorofluorocarbons and the Effect on
Stratospheric Ozone. Pollution Paper No. 15, Central Directorate of
Environmental Pollution, Department of the Environment, London, U.K.
EPA Science Advisory Board, (March 1987), Review of EPA's An Assessment of the
Risks of Stratospheric Modification, prepared by EPA's Science Advisory
Board, Washington, D.C., SAB-EC-87-025.
Grobecker, A.J., S.C. Coroniti, and R.H. Cannon, Jr., (1974), Report of
Findings. The Effects of Stratospheric Pollution bv Aircraft.
DOT-1ST-75-50, prepared by the Department of Transportation Climatic Impact
Assessment Program, Washington, DC.
Hoffman, J.S. (1986), "The Importance of Knowing Sooner," in J.G. Titus (ed.),
Effects of Changes in Stratospheric Ozone and Global Climate. Volume I-
Overview, U.S. Environmental Protection Agency, Washington, DC.
Hunter, J.R., S.E. Kaupp, and J.M. Taylor, (1982), "Assessment of Effects of
Radiation on Marine Fish Larvae," in J. Collins (ed.), The Role of Solar
Ultraviolet Radiation in Marine Ecosystems, pp 459-497, Plenum, New York.
National Academy of Sciences (NAS), (1979), Carbon Dioxide and Climate- A
Scientific Assessment. National Academy of Sciences, Washington, DC.
NAS (1982), Carbon Dioxide and Climate: A Second Assessment-, National Academy
of Sciences, Washington, DC.
NAS (1983), Changing Climate. Report of the Carbon Dioxide Assessment
Committee. National Academy of Sciences, Washington, DC.
NAS (1975), Environmental Impact of Stratospheric Flight. NAS, Washington, DC.
NAS (1976), Halocarbons: Effects on Stratospheric Ozone NAS, Washington, DC.
NAS (1979), Protection Against Depletion of Stratospheric Ozone bv
Chlorofluorocarbons. NAS, Washington, DC.
NAS (1979), Stratospheric Ozone Depletion bv Halocarbons: Chemistry and
Transport. NAS, Washington, DC.
NAS (1982), Causes and Effects of Stratospheric Ozone Reduction: An Update.
NAS, Washington, DC.
NAS (1984), Causes and Effects of Changes in Stratospheric Ozone: Update 1983
NAS, Washington, DC.
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ES-64
National Aeronautics and Space Administration (NASA) (1977),
Chlorofluoromethanes and the Stratosphere. NASA Reference Publication 1010
NASA, Washington, DC.
NASA (1986), Present State of Knowledge of the Upper Atmosphere: An Assessment!
ReP°rt- Processes that Control Ozone and Other Climatically Important Trar.P.
Gases, NASA Reference Publication 1162, NASA, Washington, DC.
Scotto, J. (1986), "Nonmelanoma Skin Cancer - UV-B Effects," in J.G. Titus
(ed-), Effects^of Changes in Stratospheric Ozone and Global Climate. Volume
2: Stratospheric Ozone. U.S. Environmental Protection Agency, Washington,
DC.
Serafino, G. and J. Frederick (1986), "Global Modeling of the Ultraviolet Solar
Flux Incident on the Biosphere," prepared for the U.S. Environmental
Protection Agency.
United Nations Environment Programme, UNEP (1984), Environmental Assessment of
Ozone Laver Depletion and its Impact as of October 1984. Coordinating
Committee on the Ozone Layer (CCOL), UNEP.
UNEP (1986), draft report of the CCOL meeting, 1986.
World Meteorological Organization (1979), Report of the First Session of the CAS
Working Group on Atmospheric Carbon Dioxide. WMO Project on Research and
Monitoring of Atmospheric C02, Rep. No. 2, Commission for Atmospheric
Sciences, WMO, Geneva, Switzerland.
"MO (1981), Joint WMO/ICSU/UNEP Meeting of Experts on the Assessment of the Role
of C02 on Climate Variations and their Impact:. Joint Planning Staff, WMO,
Geneva, Switzerland.
WMO (1985), Report of the International Conference on the Assessment of the Role
of Carbon Dioxide and of other Greenhouse Gases in Climate Variations and
Associated Impacts. WMO-No. 661, WMO/ICSU/UNEP, WMO, Geneva, Switzerland.
WMO (1986), Atmospheric Ozone 1985. Assessment of our Understanding of the
Processes Controlline its Present Distribution and Change. WMO Global Ozone
Research and Monitoring Project -- Report No. 16, WMO, Geneva, Switzerland.
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ES-65
TABLE OF CONTENTS
PAGE
VOLUME I
ACKNOWLEDGMENTS i
ORGANIZATION ES-1
INTRODUCTION ES.2
SUMMARY FINDINGS ES.5
CHANGES IN ATMOSPHERIC COMPOSITION ES-15
POTENTIAL CHANGES IN OZONE AND CLIMATE ES-23
HUMAN HEALTH, WELFARE, AND ENVIRONMENTAL EFFECTS ES-32
QUANTITATIVE ASSESSMENT OF RISKS WITH INTEGRATED MODEL ES-54
VOLUME II
ACKNOWLEDGEMENTS i
INTRODUCTION L
The Rise of Concern About Stratospheric Change 1
Concern About Public Health and Welfare Effects of Global
Atmospheric Change 1
Need for Assessments 2
1. GOALS AND APPROACH OF THIS RISK ASSESSMENT 1-1
Analytic Framework j_. ^
Supporting Documents and Analysis for this Review 1-2
Chapter Outlines 1_2
2. STRATOSPHERIC PERTURBANTS: PAST CHANGES IN CONCENTRATIONS
AND FACTORS THAT DETERMINE CONCENTRATIONS " 2-1
Summary 2-1
Findings 2-3
Measured Increases in Tropospheric Concentrations of
Potential Ozone Depleters 2-4
Measured Increases in Tropospheric Concentrations of
Potential Ozone Increasers 2-13
Factors that Influence Trace Gas Lifetimes 2-21
Long-Lived Trace Gases 2-22
Trace Gases with Shorter Lifetimes 2-26
Carbon Dioxide and the Carbon Cycle 2-26
Source Gases for Stratospheric Sulfate Aerosol (DCS, CS2) 2-26
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ES-66
TABLE OF CONTENTS
(Continued)
PAGE
Appendix A: CFC Emissions -Concentrations Model ................... 2-28
References [[[ 2-30
3. EMISSIONS OF INDUSTRIALLY PRODUCED POTENTIAL OZONE MODIFIERS ..... 3-1
Summary [[[ 3 _ ^
Findings [[[ 3.3
Introduction [[[ 3.5
Chlorofluorocarbons .............................................. 3.5
Chlorocarbons [[[ 3-58
Halons [[[ 3-59
References [[[ 3-66
Appendix A: Chemical Use Estimate Made Available
Since Publication of the Risk Assessment ................. A-l
Appendix A: References .......................................... A- 10
4. FUTURE EMISSIONS AND CONCENTRATIONS OF TRACE GASES WITH
PARTLY BIOGENIC SOURCES .
Summary [[[ 4.]^
Findings [[[ 4. 2
The Influence of Trace Gases on the Stratosphere and
Troposphere .................................................. 4.4
Trace Gas Scenarios .............................................. 4.4
Effects of Possible Future Limits on Global Warming .............. 4-23
Conclusion [[[ 4-23
References [[[ 4-25
5 . ASSESSMENT OF THE RISK OF OZONE MODIFICATION ..................... 5-1
Summary [[[ 5 . ^
Findings [[[ 5.3
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ES-67
TABLE OF CONTENTS
(Continued)
PAGE
VOLUME III
6. CLIMATE 6-1
Summary 6-1
Findings 6-2
The Greenhouse Theory 6-7
Radiative Forcing by Increases in Greenhouse Gases 6-8
Ultimate Temperature Sensitivity 6-15
The Timing of Global Warming 6-18
Regional Changes in Climate Due to Global Warming 6-22
Effects on the Stratosphere of Possible Control of Greenhouse
Gases 6-26
Attachment A: Description of Model to be Used in Integrating
Chapter 6-28
Attachment B: Trace Gas Scenarios 6-32
References 6-33
7. NONMELANOMA SKIN TUMORS 7-1
Summary 7-1
Findings 7-2
Background on Solar Radiation and the Concept of Dose 7-5
Introduction 7-5
Biology of Nonmelanoma Skin Tumors: Links to UV-B 7-11
Epidemiological Evidence 7-27
Dose-Response Relationships 7-40
Attachment A 7-49
References 7-58
8. CUTANEOUS MALIGNANT MELANOMA 8-1
Summary 8-1
Findings 8-3
Introduction 8-7
Epidemiologic Evidence 8-11
Experimental Evidence 8-28
Dose-Response Relationships 8-29
References 8-41
9. UVR-INDUCED IMMUNOSUPPRESSION: CHARACTERISTICS AND POTENTIAL
IMPACTS 9-1
Summary 9-1
Findings 9-3
Introduction 9-5
Basic Concepts in Immunology 9-5
Salt: Skin-Associated Lymphoid Tissues 9-7
Effects of Ultraviolet Radiation on Immunological Reactions 9-8
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ES-68
TABLE OF CONTENTS
(Continued)
PAGE
Human Studies .............................................. 9-lb
Effects of Ultraviolet Radiation on Infectious Diseases .......... 9-15
References .............................................. ' 9-18
10 . CATARACTS AND OTHER EYE DISORDERS ................................ 10.i
Summary [[[ 10-1
Findings [[[ '.'.'.'.'.'. 10-2
Cataracts [[[ * ]| ] 1Q_j
Potential Changes in Senile Cataract Prevalence for
Changes in UV-B .............................................. 10-29
Other Eye Disorders ........................................ ! ! ! ! " 10-33
References ................................................. 10-37
11. RISKS TO CROPS AND TERRESTRIAL ECOSYSTEMS FROM ENHANCED
UV-B RADIATION
Summary ................................................. 11-1
Findings [[[ ' 11-2
Introduction ................................................. " ' 11-5
Issues and Uncertainties in Assessing the Effects
of UV-B Radiation on Plants .................................. H_5
Issues Concerning UV Dose and Current Action Spectra
for UV-B Impact Assessment ................................... 11-5
Issues Concerning Natural Plant Adaptations to UV Radiation ...... 11-7
Issues Associated with the Extrapolation of Data from
Controlled Environments to the Field ......................... 11-10
Uncertainties in Our Current Knowledge of UV-B Effects on
Terrestrial Ecosystems and Plant Growth Forms ................ 11-11
Uncertainties with the Ability to Extrapolate Knowledge to Higher
Ambient C02 Environment and Other Atmospheric Pollutants ..... 11-13
Risks to Crop Yield Resulting from an Increase in
Solar UV-B Radiation ......................................... 11-15
Risks to Yield Due to a Decrease in Quality ..................... ~ 11-20
Risks to Yield Due to Possible Increases in
Disease or Pest Attack ....................................... 11-20
Risks to Yield Due to Competition with Other Plants .............. 11-22
Risks to Yield Due to Changes in Pollination and Flowering ....... 11-23
References ................................................. 11-25
12. AN ASSESSMENT OF THE EFFECTS OF ULTRAVIOLET-B
RADIATION ON AQUATIC ORGANISMS ............................... 12-1
Summary ............................................. ' 12 - 1
Findings [[[ 12-2
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ES-69
TABLE OF CONTENTS
(Continued)
PAGE
Effects on Invertebrate Zooplankton .............................. 12-11
Effects on Ichthyoplankton (Fisheries) ........................... 12-23
Conclusions [[[ 12-28
References .................................................. 12-29
13 . EFFECTS OF UV-B ON POLYMERS ...................................... 13 _ ]_
Summary [[[ 13-1
Findings [[[ 13-2
Photodegradation of Polymers ..................................... 13-4
Polymers in Outdoor Uses and the Potential for Degradation ....... 13-7
Damage Functions and Response to Damage .......................... 13-16
Effect of Temperature and Humidity on Photodegradation ........... 13-29
Future Research ................................................. 13-31
References ................................................. 13-32
14. POTENTIAL EFFECTS OF STRATOSPHERIC OZONE DEPLETION ON
TROPOSPHERIC OZONE _
Summary ................................................. 14-1
Findings [[[ " 14_2
Introduction ................. . ................................... ^.3
Potential Effects of Ultraviolet Radiation and Increased ..........
Temperatures on Ground-based Ozone ................. " .......... 14.5
Conclusions and Future Research Directions ....................... 14-9
References .................................................. 14-14
15 . CAUSES AND EFFECTS OF SEA LEVEL RISE ............................. 15 . 1
Summary [[[ 15-1
Findings [[[ 15-2
Causes of Sea Level Rise ................................... !!!!!! 15-5
Effects of Sea Level Rise ....................................... 15-15
Conclusion ........................................... 15-32
Noces .................................. '.'.'.'.'.'.'.\'.\^^'.'.'.'.'.'.'.'.'.'. 15-33
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ES-70
TABLE OF CONTENTS
(Continued)
PAGE
17. MODELS FOR INTEGRATING THE ANALYSES OF HEALTH AND
ENVIRONMENTAL RISKS ASSOCIATED WITH OZONE MODIFICATION 17-1
Summary 17-1
Introduction ' 17-2
The Model as a Framework 17-2
Analysis Procedure 17-U
Model Limitations 17-9
References 17-11
Appendix A: Model Design and Model Flow A-l
Appendix B: Scenarios of Chemical Production, Population,
and GNP B.^
Appendix C: Evaluation of Policy Alternatives '.','. c-1
Appendix D: Emissions of Potential Ozone-Depleting Compounds D-l
Appendix E: Atmospheric Science Module E-l
Appendix F: Health and Environmental Impacts of Ozone
Depletion p.^
18. HUMAN HELATH AND ENVIRONMENTAL EFFECTS 18-1
Summary 18-1
Findings 18-2
Introduction \ 18-6
Methods for Estimating Health and Environmental Risks 18-11
Description of Range of Production, Emissions, and Concentrations
Scenarios for Evaluating Risks 18-12
Sensitivity of Health and Environmental Effects to Differences
in Emissions of Ozone Depleters 18-18
Sensitivity of Results to Alternative Atmospheric Assumptions 18-23
Sensitivity of Effects to Uncertainty in Dose Response 18-54
Relative Importance of Key Uncertainties 18-61
Summary 18-62
References 18-65
VOLUME IV
Appendix A
Ultraviolet Radiation and Melanoma
VOLUME V
Appendix B
Potential Effects of Future Climate Changes on Forests and
Vegetation, Agriculture, Water Resources, and Human Health
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ES-71
TABLE OF CONTENTS
(Continued)
VOLUME VI
Technical Support Documents
Appendix C
Projecting Production of Ozone Depleting Substances
VOLUME VII
Technical Support Documents
Appendix D
Scientific Papers
VOLUME VIII
Technical Support Documents
Appendix E
Current Risks and Uncertainties of Stratospheric Ozone Depletion
Upon Plants
-------
B
-------
APPENDIX B
FFRFRAL REGISTER NOTICES
-------
STRATOSPHERIC OZONE PROTECTION PLAN
FEDERAL REGISTER NOTICE
JANUARY 10, 1986
-------
Proposed Rules
1257
Federal Regliler
Vol. 61. No. 7
Friday. January 10. 1080
This section of the FEDERAL REGISTER
contains notices to the public of the
proposed Issuance ol rules and
regulations. The purpose of those nollcus
Is to give Interested persons an
opportunity to participate In the rule
making prior to the adoption of the final
rules.
DEPARTMENT OF HEALTH AND
HUMAN SERVICES
Food and Drug Administration
21 CFR Part 163
[Docket No. 85N-0500]
Cocoa Powder*; Advance Notice of
Proposed Rulemaklng on the Possible
Amendment of UJB. Standards of
Identity
Corrections
In FR Doc. 85-20351 beginning on page
40405 in the Issue of Monday, December
2.1085. make the following corrections:
1. On page 40408. in the third column,
in the eleventh line from the bottom,
"5 103.11" should read "J 103.111";
2. On page 40407, In the second
column, in the table, under "4. Food
Additives", the second entry should
read "4.1.2 Ammonium hydrogen
carbonate";
3. On the same page. In the third
column, in the table, under "5.
Contaminants", the third entry should
read "5.3 Lead";
4. On page 40400. in the second
column:
a. In the second lino of 8.4(b), "1074"
should read "1073":
b. After entry 8.7, udd the following
entry:
8.8 Determination of sugars (to be
elaborated)1
c. The footnote indicators immediately
following the headings of entries 8.10
and 8.11 should both be changed to "2";
d. In the second line of the paragraph
following entry 8.11. "test" should read
"text"; and
5. On page 40400, In the first column.
the fourth line of { 163.114 should be
deleted.
BIUJHO CODE 150&-01-U
21 CFR Part 163
(Docket No. 85N-0501)
Chocolate Products; Advance Notice
of Proposed Rulemaklng on the
Possible Amendment of the U.S.
Standards of Identity
Correction
In FR Doc. 05-28350 beginning on page
40300 In the issue of Monday. December
2,1085, make the following correction:
On page 40404, In the third column, in
the second and third lines of
§ I03.145(a), "are prescribed by this
Identity" should be deleted.
SNJJNQ COM IMS-OMI
DEPARTMENT OF TRANSPORTATION
Coast Guard
33 CFR Part 166
[COO 19-097]
Port Access Routes; Approach to
Tampa Bay, PL
Correction
In FR Doc. 85-20476. beginning on
page 50808 In the Issue of Thursday,
December 12,1065, make the following
correction: On page 60800, in the second
column, in the table of geographic
positions, the fourth entry under
"Longitude" should read "83'05'06' W."
MLLMM COM IMt-OI-M
POSTAL SERVICE
39 CFR Part 111
Correct ZIP Codes for Mailing;
Withdrawal of Proposed Rule
AGENCY: Postal Service.
ACTION: Withdrawal of proposed rule.
SUMMARY: On March 10.1005 the Postal
Service published in the Federal
Register (50 FR 10001) a proposal to
require mailers of certain categories of
moil and those who desire to participate
in certain presort discount mailings to
include a correct five-digit ZIP Code, as
defined by certain Postal Service data
bases, in the address of each piece. Less
than a dozen commentere responded to
the proposal. However, the substance of
their views was that the proposal
contained certain latent ambiguities. In
view of these comments, the Postal
Service Is hereby withdrawing the
proposal for further consideration, with
the expectation that It may be initiated
at a later time
DATE: This withdrawal Is effective
January 10,1086.
POM FURTHER INFORMATION CONTACT.
William Price, (202) 206-3521.
List of Subjects In 30 CFR Part 111
Postal Service.
W. Allen Saaders.
Associate General Counsel. Office of General
Law and Administration.
|FR Doc. 86-827 Piled l-*-fl6:8:43 am]
MUMe COM rrto-iKM
ENVIRONMENTAL PROTECTION
AGENCY
40 CFR Ch. I
(OAR-FRL-2MS-3]
Stratospheric Ozone Protection Plan
AOINCY: Environmental Protection
Agency.
ACTION; Announcement of Program Plan.
SUMMARY: This notice describes recent
actlvitiea related to protection of the
stratospheric ozone layer and outlines
EPA's program plan for future
examination of the Issue. Oy enhancing
EPA's research and analysis related to
stratospheric ozone protection, this
program will provide necessary
technical Information for use in future
Agency decisions on whether or not to
regulate chlorofluorocarbons (CFCs) or
other chemicals that may affect the
ozone layer. In addition, the plan places
considerable emphasis on United States
participation in on-going international
research and discussions of global
strategies for protecting the ozone layer.
This notice provides a broad outline
and general schedule for the
stratospheric ozone protection program.
Throughout the implementation of this
program, EPA encourages public review
and participation. Where appropriate.
the Agency will announce in the Federal
Register upcoming workshops and
-------
1250
Federal Register / Vol. 51, No. 7 / Friday, January 10, I960 / Proposed Rules
conferences and Iho availability of
papers for review.
FOR FURTHER INFORMATION CONTACT
Stephen Seidel. U.S. Environmental
Protection Agency. 401 M St. S.W.,
Washington. D.C. 20400 (202) 3U2-2707.
SUPPLEMENTARY INFORMATION:
Background
lly preventing most potentially
harmful ultraviolet radiation (UV-B
radiation) from penetrating to tho earth's
surfiicc. the ozone layer acts as an
important shield protecting human
health, welfare and tho environment.
The possibility that the production, use,
and release of chlorofluorocarbons
(CFCs) could cause the depletion of
stratospheric ozone was first theorized
in 111074 article in Nature by Rowland
and Molina. If a net depletion of total-
column ozone (I.e., tho total quantity of
ozone encountered by radiation
penetrating from tho top of the
atmosphere to (he earth's surface at any
given location) occurred, more UV-D
r.idi.ition would penetrate to tho earth's
surface.
Possible health and environmental
effects of exposure to increased UV-D
radiation could include: Increases in
non-melanoma skin cancer suppression
of the human immune system; decreases
in (he productivity of commercially
important crops and aquatic organisms;
and accelerated degradation of
polymeric materials. In addition, EPA
and the National Institutes of Health
have recently initiated studios to
determine whether or nol'cxposuro to
UV-I1 rudiutiori can contribute to
melanoma skin cancer. Finally,
production and use of CFCs may
contribute to the predicted global
warming from the "greenhouse effect"
through two pathways. First, changes in
the distribution of total-column ozone
could possibly increase temperature,
and second, CFCs themselves are
infrared-absorbing gases that act
directly (in the same manner as carbon
dioxide) to raise global surface
temperature.
Although less was known about the
possible causes and effects of ozone
depletion in the mid-1970's. EPA and
other agencies responded to concerns
about this Issue by promulgating
regulations In 1078 limiting the use of
CKCs as a propellent In nonossontial
aerosol spray cans (43 FR11301; March
17.1070). CFC use as an aerosol
propcllant had grown to 56 percent of
total CFC use in this country and 25
percent of total world consumption In
1074. Dy significantly reducing CFC use
and therefore tho risks of ozone
depletion, this action has provided more
time to address the complex scientific
questions Involved In assessing those
risks.
While several other countrlos also
acted to limit CFC use In aerosol
propellents, this use continues In most
countries. In addition, CFCs are used
here and abroad for many Important
Industrial and commercial processes,
Including refrigeration, air conditioning.
and foam blowing, and as a solvent by
the electronics industry.
In 1000 EPA Issued an advance notice
of proposed rulomoklng discussing
possible further limits on domestic
production of CFCs under section 157 of
tho Clean Air Act. 42 U.S.C. 7457 (45 FR
00726; Oct 7,1080). However, somo of
the scientific Information summarized in
that notice was soon outdated by more
recent work in the field, and there have
boon substantial changes in the research
community's understanding of several
Important aspects of the Issue since
then. In general, the more recent work
has demonstrated that possible changes
in the ozone layer are affected by a
more complex array of physical and
chemical forces than previously thought,
and that substantial uncertainties
remain to be resolved before such
changes can be predicted with
confidence. In addition, EPA believes
that any decision on further regulation
of domestic CFC production or use must
be bused on further research and
analysis, and should bo evaluated in the
context of possible international
regulatory actions. Today's notice
outlines the Agency's current plan for
further cxominotion and resolution of
ihis iesue.
Two cuucnl areas of activity set the
context in which EPA is acting. Doth
scientific and diplomatic efforts are
underway, and each figures significantly
in the Agency's plan. First, the scientific
research community has expanded-lts
efforts to Improve our understanding of
the physical and chemical forces thai
affecMhe ozone layer and how-these
may change over time. For example,
researchers now recognize that
atmospheric constituents other than
CFCs have been increasing, and that
future changes in these substances must
also be considered in modelling the
future evolution of the atmosphere.
Researchers have also placed additional
emphasis on the potential climatic
impacts that might be caused by
changes In atmospheric chemical
composition.
Several major reports on related
scientific Issues ore planned for the next
year. A major review of atmospheric
science Issues related to ozone
modification is scheduled to be
published In January 1988. This report is
being sponsored by the National
Aeronautics and Space Administration
(NASA), the World Meteorological
Organization (WMO), the United
Nations Environment Programme
(UNEP), and other national and
International organizations. NASA Is
also preparing a companion report to
EPA ana Congress on this subject.
UNEFs Coordinating Committee on the
Ozone Layer will hold meetings In 1888
and will Issue a report that covers
atmospheric science and other areas of
research related to the effects of
exposure to UV-B radiation on human
health, welfare and the environment.
The Fluorocarbon Program Panel of the
Chemical Manufacturers Association
(CMAJ continues to fund research
primarily related to ozone monitoring
and atmospheric modelling. Finally, in
October 1085, the WMO convened a
conference in Villach, Austria to
examine potential changes in climate
that could, In part, result from increases
in CFCs and other ozone-modifying
substances and from changes in the
vertical distribution of ozone.
The second major focus of recent
activities has centered on international
negotiations concerning protection of
the ozone layer. Conducted under the
auspices of UNEP, these negotiations
resulted In the adoption of the Vienna
Convention for the Protection of the
Ozone Layer in March 1985. This
-------
Federal Register / Vol. 61. No. 7 / Friday. |nnunry 10. 1980 / Proposed Rules
1259
convention crcnlcs a framework for
Inlcmnllonnl cooperation on rasoorch.
monitoring nncl Information exchange. It
also provldas procedures for the future
adoption of mouBuros to control, limit.
prevent or reduce omissions of ozone-
modifying substances, should such
measures bo doomed necessary. This
treaty comas into force after formnl
acceptance by twenty nations.
While successfully adopting tho
fnunework convention, tho Diplomatic
Conference in Vienna failed to agree on
uny appropriate global control
measures. In lieu of such measures, it
passed a resolution calling for an
economic workshop to analyze relevant
aspects of control options and for
continued negotiations culminating In a
second Diplomatic Conference currently
plnnned for April 1087.
Program Plan
EPA's stratospheric ozone protection
program Integrates Iho diverse scientific
and economic research being ciirricd on
by EPA and by other organizations Into
a coherent framework for future Agency
declslonmuklng on both Iho domestic
and International aspects of this Issue.
(Sec Figure 1.) Three primary elements
of Iho Agency's program arc: (1)
conducting analyses and research
across a range of economic and
scientific subjcctc aimed at narrowing
uncertainties: (2) participating in a
scries of workshops and conferences
both In the United Slates and abroad
aimed at Improving understanding of all
aspects of this issue: and (3) deciding by
November 1087 whether additional
domestic regulation of CFCs is
warranted, based on the information
gained during the period of study.
BIUMM COM M40-W4I
-------
PROTECTION OF STRATOSPHERIC OZONE
FEDERAL REGISTER NOTICE
DECEMBER 14, 1987
-------
Monday
December 14, 1987
Part II
Environmental
Protection Agency
«CFRPart82
ftoftectlon off Stratospheric Ozone; Final
' Proposed R*4e
-------
47486 Federal Register / Vol. 52. No. 239 / Monday. December 14. 1987 / Rules and Regulations
ENVIRONMENTAL PROTECTION
AGENCY
40 CFR Part 82
[FRL-3299-9]
Protection of Stratosphere Ozone
AGENCY: Environmental Protection
Agency (EPA)
ACTION: Final rule.
SUMMARY: EPA is requiring that
individuals or legal entities involved in
the production, import or export of
specified ozor.;-depleting chemicals in
1986 provi^.; information regarding
these activnes to EPA within 30 days.
To implement the Montreal Protocol.
EPA must obtain data on United States
1986 production, imports and exports of
the chemicals covered by this
agreement. This information is critical
because the Montreal Protocol uses 1986
activity as the baseline for its
restrictions.
In addition to this request for data.
EPA is also publishing today in the
Federal Register its proposed detailed
strategy for implementing the Montreal
Protocol on Substances that Deplete the
Ozone Layer (Montreal Protocol). While
EPA is asking for public comment on
that proposed strategy, this data
collection rule is effective immediately.
CFFCCTIVI DATE December 14.1987.
FOR FURTHER INFORMATION lUHliri
Stephen Seidel: Stratospheric Protection
Program: Office of Program
Development (ANl-MSfe Office ot Afc
and Radiation: 401 M Street SW..
Washington. DC 20460. (202) 382-2878.
SUPPLEMENTARY INFORMATION:
I. Backgronnv
On September 16.1987. the United1
States and 23 other nations signed the
Montreal Protocol on Substances that
Deplete the Ozone Layer (Montreal
Protocol). This agreement sets forth a
timetable for reducing specified ozone-
depleting chemicals. It represents a
significant multilateral response to
addressing the health and
environmental risks of stratospheric
ozone depletion.
The requirements contained in the
Montreal Protocol and EPA's proposed
plan for implementing them within the
United States are discussed in detail in
a Federal Register notice also published
today.
To implement the Montreal Protocol.
EPA rnunt obtain data on United States
1986 production, imports and exports of
the chemicals covered by this
agreement. This information is critical
because the Montreal Protocol uses 1986
activity as- Mte baseline for its
rntuctiODS.
Although the timing of the effective
date of the Montreal Protocol is
uncertain (it depends on when the.
conditions for entry into force an
satisfied), it could occur as early u
January 1.1989. The effective date
(termed entry into force) would be
"January 1.1989 provided that at least
eleven instruments of ratification.
acceptance, approval of the Protaeator
accession thereto have been deposited
by States or regional economic
integration organizations representing at
least two-thirds of 1986 estimated global
consumption of the controlled
substances • • •." In addition. the
Vienna Convention for the Prottstnm of
the Ozone Layer, under which en*
Protocol was negotiated nunt ate ka*e
entered into force before Ae Protocol
can take effect. If these condition* have
not been satisfied by January 1.1989.
than the Protocol enters into fare* OB the
90th day following the date on which the
conditions have been fulfilled.
Recognizing the potentially short tee
period before entry into force, the
participants at the Diplomatic
Conference in Montreal passed •
"Resoiinaa oaBeporting of DateJ'TttB
resolution '[CfalTe upon all Signatonae.
to take, expeditiously. all steps
necessary to acquire data and report on
the production, import and export of
wQuces in a complete-ana
rJaoelv
To implement this conference
PTTAit»»^ *vlofted Nations
Bmrtfeament Program (UNEP) ha*
efauady requested production anal
•omitiBBBBB deJarfrom signatorins«ndL
baa tentatively scheduled a meeen***
iejlji uMfjaei ef mini li signatoriemtr
dtnaita and nfoiton data collefllon
efforts.
IL Statutory Authority
EPA is requiring this information?
under the authority granted it in Section
114 of the Clean Air Act This section
states that "the Administrator may
require any person who owns or
operates any emission source or
subject to any requirement of th
* * * provide such other informaJfoa aa
he may reasonably require ' * *."
EPA has elected to require this* • ---
information by rule to ensure that asT* - -t
producers, importers and exporter*
receive notice that this mformabaetir
being collected. If the Agency instead
sent letters to firms believed to bet
involved in these activities, it might** •
reach the entire universe of involved
parties.
EPA intends to send follow-up
requests for information under section
114 to producers of the specified ozone-
depletmg chemicals asking for more
detailed information related to past.
osrrent. and future production activity.
The information requested in those
letters will supplement that required by
this rule.
The rule is being published as a final
action without first seeking public
.•MitiMMt for several reasons. First, the
rale w limited in scope and simply
requires that information on past
specified activities be reported. Second.
toe information requested is
stsaightforward and clearly delineated.
Third, the resources involved in
reporting this information should be
mmimaLOnly seven firms are believed
to produce the specified ozone-depleting
chemicals m the United States, while
fewer than 20 firms or individuals are
likely to have been importers or
exporters in 1986. Fourth, this
information is not available through
ensting channels. While some of the
information is available through the U.S.
International Trade Commission and the
Caemical Manufacturers Association.
dns data is presented in an aggregate
manner and does not cover most of the
specified ozone-depleting chemicals.
Fifth, as discussed EPA will need this
inftrmation in a timely manner to
respond to UNEFs request and to
participate in the upcoming meeting on
data coliaction. For these reasons. EPA
ftns* that notice and public comment on
ttmr runs are impracticable, unnecessary
e&d contrary to the public interest
vnttun the meaning of 5 U.S.C. section
33*b)(B).
•.Requirements of the Rule
^.Affected Parties
•fee rule applies only to those parties
•fas produced, imported, or exported
••specified bulk chemicals (See
action OLE below) in 1988. Thus, firm*
vttch use chloroQuorocarbons (CFCs)
anaihalons as part of their
•enufactunng process would not be
ejected by this rule. In fact as stated
gijim. EPA believes that only seven
•nBBpratkiced the specified ozone-
denletin«chemicals in the United States
taknVxl and fewer than 20 firms were
i^anved in importing or exporting these
-•••fcemicals in their bulk form.
- k is important to note that imports or
eanwrts of products containing or
proeuced with the specified ozone-
•safcting chemicals would not be
envendW this rule. Thus, it would not
ipnfcy to «lnn importing refrigerators
OBBfenBftniCFC-12. It would, however.
•enfe to Ae import or export of any bulk
shipnents of mixtures or azeotropes
-------
Fedmal Register / VoL 52. No. 238 / Monday. December 14,1887 J Rife*.
\P Tff Clfiffi chppjrallf Tho
defiiiitioii. of COB trolled substances
(EIN) ee importer umber.
containe
states that it excludes aay of ihe
specified chemicals "whether existing
alone or in mixture that is in a
manufactured product other than a
container used lor transportation or
storage ' • V
B. Specified Ozone-Depleting Chemicals
The Montreal Protocol and therefore
this nrie appDes 1o the following
chemicats:
(1) CFC-13— Th'chlorofluoromethane
(CPC-1IJ
(2) CQ2F2— DicblorodiQnonmethane
(CFC-12)
(») CC12F-CCIF2—
IMcUorotnflooffoetbane (CFC-113)
(4) CF2C1-COP2—
DichlorotetraihuBoetfaaiie (CFC-114)
(5) CC1F2-CF3—
(Mono)chIocopeatafluQraethane
(CFC-115)
(6) CFZBrCi—
Bromochlorodifiuorome thane (Halon
12U) ;
(7) CFaHfr— Hrumulriflaonnnelhane
(Hafon 1301)
(8) C2F4Br2— Dibromotetrafluotoethaoe
(Halon 2402]
C. Data Requited
EPA is requiring thai affected parties
provide data on the quantity of each of
the specified chemicals that was
produced, imported or exported in 1966.
The year 1986 is the baseline used in the
Montreal Protocol for determining limits
on production and consumption (defined
as production plus imports minus
exports) established by that agreement
As a result 1986 is the year for which
data is sought
Information on the quantity and
location of each of the specified
chemicals produced in the United States
or its territiories is required along with
the amount of those chemicals which
may have been used and consumed as
chemical intermediaries in the
production of other chemicals. The latter
information is necessary to avoid
double-counting CFC or halon
production. Documentation supporting
the submission of 1988 production levels
could include production records or logs.
certified production statements used for
other reporting purposes or similar
information. Quantities should be
reported in kilograms for each of the
specified CFCs and halona.
The quantity of each specified
chemical imported to the United States
and its territories is required to be
reported to EPA along with Entry
Number. Customs District and Port
Code. Employer Identification Number
I m ™~~ • F ~™ ' ™" »^—^™™^^»»f «M^^^H^^M*fcW
code, the date and port of entry and the
country m wbich it was produced. B*
required information on exports
includes the quantity exported, the
producer of the chemical the date and
port of exit, the EIN, Customs District
and Port Code, the commodity code, and
the country of final destination.
Documentation supporting imparts and
exports should include copies «f official
papers (e.g.. shippers export
declarations. Form 7525 and Entry
Summaries, if available) or other
evidence confirming such activity.
Affected parties should specify what
of the submitted data is covered by 40
CFR, Part 2. Subpart B. which governs
the treatment of business information.
Congress has given EPA broad authority
to secure this information through
Section 114 of the Clean Air Act for the
purposes of developing regulations and
standards.
Under section 114. EPA is empowered
te obtain information which may be
considered confidential business
information. Producers, importers, end
exporters may request that EPA
consider some or all of the information
they supply as confidential at the time it
is submitted. Failure to assert a claim of
confidentialiry at the time of submission
may result In disclosure of the
information by the Agency without
further notice.
D. Submission of Data
The data required under this rule must
be submitted to EPA within 30 days
following the date of publication of this
notice. It should be sent to:
Stratospheric Protection Program: Office
of Program Development (ANR-445);
Office of Air and Radiation: 401M
Street SW.. Washington. DC 20460.
£ Failure to Comply
Affected parties failing to submit the
required data will be in violation of
section 113 of the Clean Air Act and will
be subject to fines of up to $25,000 per
day. In addition, since the data collected
by this rule will likely be used in
determining the allocation of rights to
produce and import bulk CFCs and
halpns. the failure to notify EPA of 1988
activities could invalidate future claims
to such allocations.
F. Future Steps
EPA intends to use the information
required by this rule to develop the U.S.
1986 production and consumption
baseline as required under the Montreal
Protocol. In addition, this data would
also be used as the basis for the
proposed "allocated quota" approach to
implementing the Protocol (see
accompanying proposed IBSU} •kLh
grants past producers and isspeztets
rights to produce and consume fea*ed«u
their 1986 activities. EPA intends Jo
publish for comment the «n~—n^t
based oa this data ia, SpaBgrf IBBaV
Final allocations providing the basis lor
issuing rights to import and produce the
regulated CFCs and Jiaionaseauki be
published as part«f the fintatle-
implementing the Montreal Protocol
That final rule is scheduled far-
promulgation by Angus! i^inm
IV. Additional Infrnsmilhin
A. Executive Order 12231 '
Executive Order {£X3.?122tt ceqocesi
the preparation of a (esBtBaBey.impact
analysis for naior rales, defined bf the
order as those likely tonssstin:
(1) An annual effect OB the ecooowjr
of $100 million or moie:
(2) A major increase m«e«ta or prices
for consumers, indmdaei industries.
Federal. State, or local gumauieut
agencies, or geographic uidastrfey. or
(3) Significant adverse effects on
competition, employment; hraestment,
proonctrvrty. irmovetion* ttr vA uie
ability of United States-based"
enterprises to compete with forefgo-
based enterprises in ihiiiursrfcor export
markets.
EPA has determined that this
regulation does not meet the definition
of a major rule under E.0.12291. and
therefore has not prepared a regulatory
impact analysis (RIA).
B. Regulatory Flexibility Act
The Regulatory Flexibility Act 5
U.S.C. sections 601-612. requires that
Federal agencies examine the impacts of
their regulations on small entities. Under
5 U.S.C. 604(a). whenever an agency is
required to publish a general notice of
proposed rulemaking. it must prepare
and make available for public gomnaanf
an initial regulatory flexibility analysis
(RFA). Such an analysis is.not required
if the head of an agency certifies that a
rule will not have a significant economic
impact on a substantial number of small
entities, pursuant to 5 U.S.C. 60S(b).
Because this rule will not have a
significant impact on small entities, no
RFA has been prepared.
C. Paperwork Reduction Act
The information collection
requirements in this rule have been
approved by the Office of Management
and Budget (OMB) under the Paperwork
Reduction Act of 1960.44 U.S.C. 3501 et
seq. and has been assigned OMB contrjl
number 2060-0158.
-------
47488 FederalJtegutet /aVoi. 52VNo.t239'••/• Monday.' December-Mr 1987^-JRules arid-RegtJationa
Date December 1.1987.
Lea M. Thomas.
Administrator. •
For the reasons set out in tfie
preamble. Part 82 of Title 40 of the Code
of Federal Regulations is added as
follows: •
PART 82—PROTECTION OF
STRATOSPHERIC OZONE
Authority: 42 U.S.C. 7457(b).
}82JO Basanne data collection.
(a) This section applfes to any'
individual or legal entity who engaged
in any of the following activities in 1986
involving any of the chemicals specified
in 5 8Z20(b) of this part
(1) Producers who manufactured the
chemicals listed in { 82.20(b) from raw
materials or feedstock chemicals;
(2) Importers who transported the
chemicals listed in { 8&20(b) from
outside the United States or its
territories to persons within the United
States or its territories; and
(3) Exporters who transported the
chemicals listed in $ 8Z20(b) from
within the United States or its territories
to outside the United States or its
territories. .
(b) The chemicals cpveredTjy this
section are lie following:
(1) CFC-43-i-Trichlorofluoromethane
(CFC-11)
(2) CC12F2—Dichlorodifluoromethane
(CFC-12)
(3] CC12F-CC1F2—
Trichlorotrifluoroethane fCFC-113)
[4] CF2CI-CC1F2—
Dichlorotetraflunmethane fCFC-1141
(5) CC1F2-CF3—
(Mono)chloropentafluoroethane
'{CFC-115J
(8) CF2BrCl—
Bromochlorodifluorometnane fHalon
1211)
[7\ CF3Br—Bromotrifluoromethane
(Halon 1301)
(8) C2F4Br2—Oibromotetrafluoroethane
(Halon 2402)
(c) Individuals and legal entities
meeting the conditions set forth in
S 8220 (a) and (b] must report the
following information along with
supporting documentation:
(1) Name, address and telephone
number of contact;
(2) The amount (kilograms) of each
the substances it produced in 1988 in
United States or its territories and the
location of its production;
(3) The amount (kilograms) of each of
the chemicals listed In 8 8&20(b) which
MBS used and entirely consumed as a
chemical intermediary in the production
of other chemicals;
e amount (kilograms) of each of
the chemicals listed in ( 82.20(b) which*
it imported into the United States or its
territories in 1988, along with the port
and date of entry and the country in
which it was produced:
(5) The amount (kilograms) of each of"
the chemicals listed in § 82.20(b) which
in 1986 it exported from the United
States or its territories, the producer of-
ine chemical, the date and port pf exit,*.
the country of final destination and'fhe
date of entry, into that country.
(d) Information required by S B2JO(c)
must be submitted to EPA within 30
days after the date of publication of this
section. Reports should be addressed to:
Stratospheric Protection Program; Office
of Program Development (ANR-445);
Office of Air and Radiation; U.S.
Environmental Protection Agency; 401M
Street SW.. Washington DC 20460.
(e) Failure to submit required
information by this date shall be a
violation of section 114 of the Clean Air
Act and may invalidate future claims for
allocation of rights to produce or import
chemicals listed in 9 82.20[b).
[FR Doc. 87-28214 Filed 12-11-87; 8*5 am]'
BOUND COW M60-M-M
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jajetal Rejwter / Vel 52. No. 239 /
December 14. laflT/
ENVIRONMENTAL PROTECTION
AGENCY
40CFflPart82
[FRL-3284-9]
Protection of Stratospheric Ozone
AGENCY: Environmental Protection
Agency (EPA).
ACTION: Proposed rule.
SUMMARY: EPA ia proposing to limit the
production And consumption of certain
chlorofluorocarbons [CFCaJand
brominated compounds Chalons) to
reduce the nsks of stratospheric ozone
depletion. Specifically, the proposed rule
wodd require a freeze at 1986
consumption and production levels of
CFC-I1. -12. -1T3. -114. and -ITS on the
bans of their relative ozone depletion
weights, followed by reductions to 80
percent and 50 percent of 1988 levels
beginning in mid-1993 and mid-1998.
respectively. It would also prohibit
production and consumption of Halon
1211.1301 and 2402 from exceeding 1986
levels on a weighted basis beginning in
approximately 1992. Under limited
circumstances, somewhat higher levels
of production (bntnotcomumpfionj
would be permitted. Coramnptian ia
defined in the proposed rale as
production plus impacts mucus exports
of the bulk chemicals described above.
These jeaiureine&ls are .being
proposed under section 157(bj of the
Clean Air Act and would constitute the
United States' implementation of the
"Montreal Protocol on Substances Thai
Deplete the Ozone layer" {Montreal
Protocol] which was sqmed by 24
countries, inrimiii^ jhe, .United Stalpg.
on September IB. 1987 la Montreal
Canada.
However, EPA isnroposing >h"* the
control requirements described, above
only take effect if Hie United States
ratffies the Protocol and following entry
into force.
EPA's proposed action is in response
to growing scientific evidence miking
increased aUuuspheiic levels of chlorine
and bromine to anticipated depletion of
the ozoue layer. If uiuiie depletion
occurs, increased levels of harmful
ultraviolet radiation wonid penetrate to
the earth's surface resulting hi
substantial damage to human health and
the environment.
To implement fhe Montreal Protocol.
EPA proposes to restrict production and
consumption of (he specified ozone-
deplermg chemicals. Quotas reflecting
the allowable level of production and
consumption will be allocated to each of
the firms who engaged in these activities
in 1986. Trading of allocated quotas
would be permttted. Exports and
imports of the restricted chemicals will
also be allowed consistent -with
restrictions contained in the Montreal
Protocol. EPA believes that this
approach will provide a low-cost means
of achieving its regulatory goal, spur
technological innovation, minimize
administrative requirements and
facilitate enforcement EPA is also
considering -whether to develop specific
regulations limiting CFC and halon use
for particular industries to supplement
allocated quotas.
As an alternative to the above
regulatory approach. EPA h requesting
comment on the use of a reguitrtory fee
in addition to allocated quotas. This
option is being considered Deconse it
addresses concerns that an allocated
quota system, by itself, is inequitable—
that CFC and halon producers and
importers might accrue excessive profits
at the expense of CFC and halon user
industries and consumers. The fee
would be set to obtain far the United
States Treasury price increases resulting
from die scarcity created by EPA
regulations. Alternatively, this same
objective could be satisfied by
auctioning (instead of allocating) rights
to produce and consume CFCs and
halons.
In a separate notice accompanying
today's proposal EPA hi requiring firms
involved in producing, "importing or
exporting any of the regulated chemicals
in 1988 toreport these activities to .EPA.
DATES: A public hearing will be held on
January 7,1988 from .9:00 aja. to 530
p.m. at the location listed below, in
order to provide an opportunity for oral
presentations of data, views, or
arguments concerning the regulations
proposed in this notice. Persons who
wash to testify at this hearing should
notify Stephen A. Seidel at the .address
listed below pnor to December 29,1987.
Written comments must be submitted
to the location listed below fay February
8.1988.
ADDRESSES: The public hearing wffl be
held at the EPA Education Center 401M
Street. SW.. Washington. DC 20460.
Written comments should be sent to
Docket No. A-87-2Q. Central Docket
Section. South Conference Room 4.
Environmental Protection Agency, 401M
Street. SW.. Washington. DC 20460. The
docket may be inspected between KOO
am. and 4:00 p.m. on weekdays. As
provided tn CFR Part 2. a reasonable fee
may be charged for photocopying. To
expedite review, it is also requested that
a duplicate copy of written comments be
sent to Stephen R. Seidel at die address
listed below.
FOR FURTHER INFORMATION CONTACT:
Stephen R. Seidel. Senior Analyst
Office of Program Development Office
of Air and Radiation (A79R-445). EPA.
401 M Street. SW.. Washington. DC
20460. Telephone (202] 382-2787.
SUPPLEMENTARY INFORMATJOM:
I. Overview of the Problem
By preventing much of the potentially
harmful ultraviolet tadiaaaa^UV-B
radiation) from penetrating to ine earth's
surface, the »traiospheric.oune layer
acts as a vital ' " "
health, welfare andlneeaMtronmenL
Concern about possible depiction of
the ozone 4ayer from dtatofl
(CFCs) was first raised in 1SP4 with
publication of research which iheorned
that chlorine released lam CFCa canki
migrate to the stratoapbeoe and reduce
the amount of ozone (Molina and
Rowland, 197*). Some of the CFCs have
an atmospheric lifetime of over 120
years (i.e.. they do not bseakdownm the
lower atmosphere). As a asast they
migrate slowly to the steateapBete
where higher energy raxtiriian strikes
them, releasing chLotrne. Once freed, (he
chlorine acts as a catalyst repeatedly
combining with and t**°*
-------
47490 Federal Register -./ VoL 52. No. 239 / Monday. December 14; 1987 7 -Proposed Rules
reviewed by its Science Advisory Board..
This study summarizes the state of'
knowledge related to both atmospheric
issues (e.g.. possible future changes in
ozone levels), and human .health and
environmental effects if the ozone layer
were depleted. These studies and more
recent research findings are summarized
below in Section IV. They also were
relied on extensively in developing the
regulatory impact analysis (RIA)
prepared in support of this rule which is
summarized below in Section VH
Unlike most issues of-concern to EPA.
stratospheric ozone protection
necessarily involves all nations of the
world. Given their long atmospheric
lifetimes. CFCs and batons become
widely dispersed. As a result the
release of these chemicals in one
country could adversely affect the
stratosphere above, and therefore the
health and welfare of. other countries.
Thus, to fully protect the ozone layer
from CFCs and halons. an international
agreement is essential
Recognizing the global nature of this
issue, the United Nations Environment
Program (UNEP) organized negotiations
in 1982 aimed at developing an
agreement to protect the ozone layer.
Following a hiatus in 1988 to develop
and assess scientific and economic
information, negotiations resumed in
December of that year. These • '
negotiations were successfully
concluded on September IB. 1987 in
Montreal when 24 nations signed a
Protocol requiring substantial reductions
in the most potent ozone-depleting
chemicals. This international agreement
represents a concerted effort by the
major CFG and halon producing-and
consuming nations to respond to the
risks from continued reliance on ozone-
depleting chemicals. It constitutes a
landmark agreement amongaationa to
take action in advance to prevent
significant environmental damage from
occurring. The text of the Protocol is
included as an annex to this preamble
and is described in greater detail below.
The regulations proposed today would
permit the United States to meet the
requirements established by the
Montreal Protocol They would also
fulfill EPA'a responsibility under section
157(b) of the Clean Air Act to protect
stratospheric ozone as needed to protect
public health and welfare..
Finally, this proposal also meets the
requirements of an agreement settling a
lawsuit brought by the Natural
Resources Defense Council in the
District Court of the District of Columbia
(NRDC v. Thomas. No. 84-0587 (D.D.C.))
seeking to compel EPA to promulgate
regulations under section 157(b). The
terms of the settlement (as amended to
extend the schedule) require EPA to
propose regulations or state its reason
for deciding not to regulate by December
1.1987. and to take final action by
August 1.1988.
IL Background
A. Past Regulatory Actions
Following the initial concerns raised
in 1974 about possible ozone depletion
from CFCs. EPA and the Food and Drug
Administration acted in 1978 to ban the
use of CFCs as aerosol propellants in all
but "essential applications" (43 FR
11301. March 17,1978; 43 FR 11318.
March 17.1978). During the early 1970s.
CFCs used as aerosol propellants
constituted over 50 percent of total CFC
consumption in the United States. This
particular use of CFCs was reduced in
this country by approximately 95
percent. Today's proposal does not
affect the existing EPA and FDA
regulations restricting the use of CFCs
as aerosol propellants.
Since 1978. CFC use has continued to
expand in other applications (e.g.. as a
foam-blowing agent, refrigerant and
solvent). Total production now has
surpassed pre-1974 levels.
Largely in response to a series of
studies by the National Academy of
Sciences published hi the late 1970s
(NAS. 1978,1979a. and 1979b) which
.warned of substantial depletion and
harm from continued use of CFCs. EPA
issued an Advance Notice of Proposed
Rulemaking (ANPR) which discussed an
immediate freeze on the production of
certain CFCs and the possibility of
employing a system of marketable.
permits to allocate CFC consumption
among industries which use CFCs (45 FR
66728: October 7.1980).
Following publication of this ANPR,
additional scientific evidence (see for
example, Causes and Effects of Changes
in Stratospheric Ozone:'Update 1983.
(NAS. 1984)) became available which
suggested that the atmospheric factors
affecting ozone levels were more
complex than previously thought. For
example, atmospheric concentrations of,
gases other than CFCs that also affect
ozone were also increasing.
Atmospheric models which are used to
analyze possible future trends in ozone
levels were now capable of
simultaneously considering-changes in
multiple trace gases including CFCs.
Because increases in some of these
gases (e.g., carbon dioxide and methane)
could potentially buffer the depleting
effects of CFCs. concern about possible
changes in total column ozone levels
(i.e» the total amount of ozone
encountered by radiation passing from
the top of the atmosphere to the earth's
surface at any given location) was.
diminished.
The apparent urgency of the ozone
depletion problem was also reduced By
the fact that CFC use worldwide in the
early 1980s was relatively constant
While some nations did not follow the
United States example by reducing their
use of CFCs as aerosol propellants.
others did. which further reduced global'
consumption of CFCs. In addition, a.
downturn* m global economic coriSIGbns
during this period had temporarily
reduced the rate of growth of CFCs in '
nonaerosol applications.
B. EPA's Stratospheric Protection Plan
Since 1983', worldwide production of
CFCs has grown at an average annual
rate of 5 percent In light of this rate of
growth and further advancements in the
scientific understanding of the link
between CFCs and ozone depletion..
EPA developed its Stratospheric
Protection Plan (51 FR 1257, January 10,
1986). This-plan descnbed the analytic
basis for supporting the on-going
international negotiations and for
reassessing the need for additional
regulations of CFCs and other potential
ozone-depleting chemicals.
It also set forth a schedule for both
domestic and international activities
related to stratospheric ozone
protection. It committed EPA to
sponsoring or participating in a series of
workshops, both here and abroad,
aimed at developing information that
would be used Tor international'''' ^
negotiations and for domestic
rulemaking. Workshops discussing
economic issues related to ozone-
protection involving interested parties
from within the United States were Held
in March and July of 1986. International
workshops covering the same topics
were sponsored by UNEP and took
place in May and July of 1986 in Rome.
Italy and Leesburg. Virginia.
respectively.
The plan also committed EPA to.
preparing the risk assessment document
mentioned above and to obtaining
review of this document by the Agency's
Science Advisory Board (SAB).
Meetings of a,aubcommittee of the SAB
organized specifically to review this-
document were held in November 1986
and January 1987. Comments from the
public were also solicited (51 FR 40510..
November 7,1986). The document has
been revised in response to comments
from the panel and the public and is
available in the docket at the address*
given above. The findings of the nsk
assessment are described in greater
detail below, in Section IV.
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Federal Register / Vol. 52. No. 239 / Monday. December 14. 1987 / Proposed Rules
47491
Finally, the plan also committed EPA
to conducting a rulemaking on possible
further regulation of CFCs and to
actively participating in the UNEP
negotiations on an international
agreement to limit ozone-depleting
chemicals.
C. International Negotiations
The initial round of international
negotiations, conducted under the
auspices of UNEP. resulted in the
Vienna Convention for the Protection of
the Ozone Layer, which was signed in
March 1985. This agreement promotes
global coordination necessary for the
protection of the ozone layer by
providing for international cooperation
in research, monitoring, and information
exchange. While the initial negotiations
failed to reach agreement on specific
obligations limiting ozone-depleting
chemicals, the Vienna Convention
provides a framework for the continued
negotiation and adoption of
international regulatory measures
necessary to protect the ozone layer.
On December 1,1988. negotiations
resumed on a possible protocol to limit
CFCs and other ozone-depleting
chemicals. Despite wide differences in
initial positions among participating
nations, these negotiations resulted ten
months later in the adoption of the
Montreal Protocol which was signed on
September 18.1987. by 24 nations.
Specific provisions of the Protocol are
discussed in detail below, and the full
text is printed as an addendum to this
notice.
ID. Statutory Authority
Section 157(b) of the Clean Air Act (42
U.S.C. 7457(b) authorizes the
Administrator to issue "regulations for
the control of any substance, practice.
process, or activity (or any combination
thereof) which in his judgment may
reasonably be anticipated to affect the
stratosphere, especially ozone in the
stratosphere, if such effect in the
stratosphere may reasonably be
anticipated to endanger public health or
welfare. Such regulations shall take into
account the feasibility and the costs of
achieving such control."
Two aspects of this regulatory
authority are notable. First, the
Administrator is not required to prove
that a "substance, practice, process or
activity" does in fact deplete
stratospheric ozone before he may
regulate it. In 1977 when the ozone
protection provisions were added to the
Clean Air Act. Congress recognized that
scientists were not certain whether
stratospheric ozone was being depleted
and what was causing any depletion
that did occur. See. e.g.. H.R. Rep. No.
294.95th Cong.. 1st Sess. 98-99 (1977).
However. Congress also recognized the
potentially senous health and
environmental consequences of ozone
depletion if it were occurring, and
authorized EPA to act in the face of
scientific uncertainty to protect against
those adverse consequences. Id. Thus.
the Administrator may regulate on the
basis of "his judgment" that the subject
of regulation "may be reasonably
anticipated" to affect the stratosphere
and that the effect "may be reasonably
anticipated to endanger public health
and welfare."
Second, the Administrator is given
broad latitude to choose what and how
to regulate. He is not limited to
controlling ozone-depleting substances
themselves: he may also regulate "any
practice, process, activity" that
threatens the ozone layer. Nor is he
limited to a particular control strategy.
Besides an implicit requirement that
regulations be efficacious, the statute
requires only that they take into account
the cost and technological feasibility of
achieving the required level of control.
In short. EPA has broad latitude to
employ the regulatory options it Finds
appropriate to control threats to
stratospheric ozone that in turn threaten
public health and welfare.
IV. Risk Assessment
A. Changes in Atmospheric Composition
Measurements of the concentrations
of specific gases over the past decade or
longer have produced conclusive
evidence that human activities are
altering the composition of the earth's
atmosphere. Table 1 summarizes the
recent rate of increase for several gases.
along with the period for which
measurements are available. Because
each of these gases affects the quantity
of ozone, past and future changes in
their atmospheric levels are a significant
element in understanding the risks of
ozone depletion.
Table 1 shows that atmospheric levels
of CFC-11 and -12 have grown at the
rate of 5 percent annually since 1978.
CFC-11 is used primarily as a foam-
blowing agent and CFC-12 is used
primarily as a refrigerant. Outside the
United States, in many countries both
are also used extensively as aerosol
propellents. Atmospheric levels of CFC-
113. which is used primarily as a solvent
by the electronics and metal cleaning
industries, have been increasing at
roughly double this rate during the same
penod. These growth rates reflect both
continued emissions of CFCs during this
penod and the long atmospheric.
lifetimes of these chemicals.
TABLE 1.—CHANGES IN ATMOSPHERIC CONCENTRATIONS OF
OZONE-MODIFYING GASES
CFC-1 1 (CCI3F)
CFC-1 2 (CO2F2)
CFC-1 13 (C2O3F3)
CFC-1 14 (C2O2F4)...
CFC-1 15 (C2C1F5)
Halon-1211 (CBrCIF2)
Haton-1301 (CF3Br)
Halon-2402 (C2F4Br2)
Nitrous oxide (N2O) .
Methane (CH4)
Carbon Dioxide (C02)
Measured rates of increase
Percent
per year
50
5.0
10.0
C)
(')
23.0
(')
(')
0.2
1.0
0.5
Penod
1978-1985
1978-1985
1975-1983
C)
C)
1979-1984
(')
(')
1978-1985
1977-1985
1958-1985
Reference
WMO. 1986.
WMO. 1986.
Rasmussen and Khalil, 1982.
C)
(')
Khalri and Rasmussen. 1985.
C)
C) • '
WMO. 1986.
NASA. 1986.
WMO. 1986.
1 No data available.
Much less information is available
about growth in Halon 1211.1301 and
2402. These compounds are becoming
more widely used primarily in certain
specialized firefighung applications. No
data is yet available on atmospheric
trends of Halon 1301 or 2402, while very
limited measurements suggest that
atmospheric levels of Halon 1211 grew
at 23 percent annually in recent years. In
comparison to the CFCs. total levels of
these halons remain very small; because
they are believed to be extremely*
efficient depleters of ozone (Prather ct
al.. 1984: WMO. 1986). they are being
proposed for inclusion in this regulation.
(See below. Section VI.)
Carbon dioxide and methane are also
increasing in the atmosphere, though at
annual rates much slower than the
CFCs. Unlike CFCs and halons. these
have the opposite effect on
-------
17492 FederalRegiateK A Vel. 52>No. 23& / Monday.. December 14. 1967 / Propoaed-Rules
.oncentrations of ozone and could •
lotentially offset depletion caused by
ncreases in these- other gases. Carbon-
iioxide emissions- result pnmaniy from
he burning of fossil fuels. In contrast
he reason that methane levels have
ncreased is not well understood
Moreover, this gas has a much shorter
stmospheric lifetime than CFCs
[approximately ten years).
Nitrous oxide-levels have also-been
increasing at approximately 0£ percent
annually. Sources of.emissions include
fossil fuel combustion and fertilizers. In
isolation, nitrous: oxides-release nitrogen
in the stratosphere which would act
similarly to chlorine and catalytically
destroy ozone. However, depending on
the relative levels of chlorine and.
nitrous oxide, the latter can have the net
effect of slowing down the rate of
depletion by binding chlonne in a
relatively inactive state.
B. Changes in Ozone Levels
TBe extensive measurements of recent
growth in atmospheric levels of ozone-
modifying gases provide only indirect
evidence that human activities may be
altering the earth's ozone layer. To more
fully analyze these risks, two
approaches have been developed^ First.
direct measurements of the quantity of
ozone have been analyzed to determine
if any trends are-apparent: and second.
atmospheric models have been-
developed that attempt to project-future
changes in ozone levels based on.
assumed changes in atmospheric levels
of ozone-modifying gam's.
1. Direct Measurements of Ozone Levels
Monitoring of ozone levels has been
conducted to various degrees using-
riiisti uiim uts iur Ddvtfrai
decades. These measurements examine
both total column ozone levels. andT
changes in the quantity of ozone at
specific altitudes. Since the late 1970s.
satellite-based instruments haw
expanded the ability to measur* ozone
levels throughout the world.
Based on the information available at
the time, the WMO assessment
concluded that total'column ozone
levels had not substantially been
altered—that no statistically significant
change had occurred. For example, it
cites a study by Reinsel (1985) which
shows that for the period 1970 to 1983.
total column ozone levels had decreased
by only 0.003 ±12 percent per decade
which does not represent a statistically
significant trend
The WMO assessment also stated
that ozone levels in the upper
atmosphere (at approximately 40
kilometers) had. in fact decreased by
approximately 0.2 percent to 0.3 percent
per year ovei the period 1970 to. 1980.
However, increases in ozone-levels ra-
the troposphere (Le.. the lower-
atmosphere) had offset the decreases
above resulting in effectively- no change
in total column ozone.1
Both these findings—essentially little
or no change in total column ozone and
decreases at 40 km—appear consistent
with current atmospheric theories and
models and are contained in EPA's risk
assessment which was. used as the basis
for this nilemaking. However.
preliminary information tharhas only
recently become available raises the
question whether total column ozone
levels have, in fact declined in recent
years.
2. Preliminary Evidence of Ozone
Depletion
a. Seasonal Ozone Losses in
Antarctica. In May 1985. an article was
published in Nature (Farmaru Gardiner
and Shanklin. 1985] which provided
evidence that ozone levels during the
months of September to November over
Antarctica had declined by
approximately 40 percent from the late
1970s. This discovery of the "Antarctic
ozone hole" by the British Antarctic
Survey team, based on data from a
ground-based instrument was
completely unexpected
Losses of the magnitude observed in
Antarctica were not predicted by
current atmospheric theories or models.
The Antarctic ozone hole thus raises
several"important questions. Are the
losses- in. ozone cauud by- CFCa-and
halons? Are these loss mechanisms
unique to-the conditions found above
Antarctica or do they have implications
for ozone levels elsewhere? Could this
seasonal ozone loss iTseff have
implications for global ozone-
concentrations? How. if at alt do our
current theories and models need to be
altered to reflect this, phenomenon?
These questions-have been the subject
of considerable research within the
scientific community since th'e initial
article in Nature appeared:
In October 1988. a team of researchers
traveled to Antarctica to begin the
process of collecting data to aid in
answering these questions. Preliminary
results from the first \dtlonal Antarctic
1 Over the? long term, IBUVIM* « oranria the
lower atmoiphere cannoi • or • nue 10 offset
decrease! In the slratoson*'* -iihout substantial
health andenvuonmenrit
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Federal Register / Vol. 52. No. 239 / Monday. December 14. 1987 / Proposed Rules 47493
b. Possible Global Losses in Ozone.
Recently published data have also
called into question the conclusion that
global total column ozone levels have
not decreased (Ken. 1987). Ground-
based measurements of total column
ozone now suggest that a 3 percent to 5
percent decrease has occurred over the
past six years. Decreases of a similar
magnitude over roughly the same period
have been reported based on a
preliminary assessment of data from the
Nimbus-7 satellite (Kerr, 1967). Because
of the complexities in interpreting
satellite data (e.g., calibration,
instrument drift and other corrections),
this data is currently undergoing further
scrutiny.
As was the case with the Antarctic
ozone hole, global ozone losses of this
magnitude appear to fall outside the
bounds of what would be expected from
current theories and models. If they are
confirmed by further review of the
evidence, several important questions
would be raised. Are these losses in
excess of historic variation or are they
due to natural causes (e.g. the solar
cycle, volcanic activity, etc.)? Are they
related to increases in atmospheric
levels of CFCs and halons? What if
anything, must be changed in current
models to account for such losses?
A thorough review of this data to
resolve these important uncertainties
has recently been initiated by scientists
at NASA and NOAA. Pending the
outcome of this assessment. EPA does
not believe that this preliminary
evidence has yet been adequately
reviewed and analyzed by the scientific
community to allow for it to be used in
its risk assessment or regulatory
decisions. Once the on-going review is
completed, if new information becomes
available and previously unresolved
issues are successfully addressed, then
EPA will modify its risk assessment to
reflect this improved understanding of
recent trends in ozone. This information
will also be examined in the context of
the upcoming international scientific
and policy review* under the terms of
the Protocol. EPA specifically requests
comments on the appropriate means of
factoring new scientific evidence into its
risk assessment and future policy
decisions.
3. Role of Atmospheric Models in
Predicting Future Ozone Levels
While direct measurements provide
useful information concerning past
changes in ozone levels, atmospheric
models are the only available tool for
predicting possible future trends in
ozone. These models, in more or less
detail, attempt to replicate the forces
which determine ozone concentrations.
For example, current models include
approximately 50 chemical species
found in the atmosphere and simulate
over 140 different reactions among these
chemicals which directly or indirectly
affect ozone abundance.
From EPA's perspective in evaluating
nsks. a key question is to what degree
these models can accurately predict
future ozone changes. As stated above.
current models do not predict the
Antarctic ozone hole and suggest that
global ozone levels should not have yet
declined by even one percent based on
the nistonc use of CFCs and halons. and
changes in other trace gases.
Furthermore, current models fail to
accurately project the abundance of all
chemical species at all altitudes, thereby
lowering our confidence in their
predictive powers.
Despite these shortcomings, both the
EPA and WMO risk assessments
concluded that atmospheric models
represent the best available tools for
evaluating future trends in ozone levels.
These studies show that when tested
against the current make-up of the
atmosphere, the existing atmospheric
models do a reasonably good job of
replicating most key atmospheric
constituents. Thus, the models
accurately predict many, though •
certainly not all, of the key chemical
constituents which affect the creation
and destruction of ozone. While model
accuracy will inevitably improve over
time, EPA has relied on current versions
in assessing the risks of future ozone
depletion. ' ' •'
4. Future Trends in Ozone Levels:
Assuming No Further Regulation of
CFCs or Halons
In utilizing models to predict future
ozone trends, the rate of growth of
ozone-modifying gases is a key variable.
As part of the Regulatory Impact
Analysis (RIA) prepared in support of
this proposal. EPA examined the risks of
ozone depletion from continued use of
CFCs. halons and other relevant trace
gases. The assumptions underlying this
analysis are detailed in Chapter 4 of the
RIA and are summarized here.
EPA conducted extensive studies
analyzing possible future rates of growth
for CFCs and halons in the absence of
additional regulations. (See for example:
Hammitt et aJ. (Rand). 1986: Nordhaus
and Yohe. 1986; and Gibbs et al. (ICF).
1988.) This issue was also the subject of
both EPA and UNEP sponsored
workshops in 1986. Based on this
review. EPA believes that strong market
demand exists for CFC products in
many sectors of the economy, both in
the United States and abroad, and that
in the absence of regulation, use of
CFC-11. -12. and -113 would increase.
In the RIA. a middle estimate of growth
in trace gas emissions was developed.
For CFC-11 and CFC-12. the middle
estimate implies an average annual
growth rate of approximately 2.7
percent, which reflects a 2.5 percent
annual growth rate for the developed
world, and slightly higher projected
growth in the developing world and in
the Soviet Union. The middle scenario
includes an average annual growth rate
of 2.9 percent for CFC-113.2.6 percent
for CFC-114. and 2.6 percent for CFC-
115.
Recent studies by Industrial
Economics. Inc. (1987), with the
cooperation of an ad hoc technical
committee representing halon producers
and users, provided the basis for
estimates of future growth in production
of Halon 1211 and 1301, which are
assumed to grow at average annual
rates of 4.3 and 2.7 percent. Because
Halon 2402 is only used in minor
applications in the United States, this
chemical was omitted from the analysis.
Table 2 shows the range of growth
rates assumed for these chemicals. This
range of estimates reflect the many
factors (e.g., economic and population
growth, technological innovation, etc.)
which influence projections over this
period of time. It also shows the growth
rates assumed for carbon dioxide..,
methane and nitrous oxide which were
based on past measurements showing
increases for each of these gases. Based
on a simplified one-dimensional model
of the combined effects of these gases.
Table 2 indicates the projected ozone
depletion for each of these scenarios.
Thus, in the case which represents the
mid-range estimate of future trends in
emissions of trace gases, projected total
column ozone would decline by 3.9
percent by 2025 and by 39.9 percent by
2075. In the case when CFC use only
grows by approximately 1.2 percent
annually, projected ozone depletion by
2075 would reach 7.0 percent In the case
where CFC use grows at approximately
3.8 percent per year, projected ozone
depletion by 2075 would exceed 50
percent.
TABU 2
YMT
LenCPC
C=C
I ki B» AbMnc* o«
10M
iaon
3030
mw
000
0.27
076
2S6
000
0.27
OS6
1 71
300
4J6
oo
OS
10
2.3
4 7
91
-------
47494
Federal Ragfcftr/ Vd. 52. No.-238f / Monday. Daamber 14. 1987'/ Proposed Roles
TABL&2—Continued
(Pwetfff tow earn, aocttWn)
Yaat
3040
2050
2060
2070 .
2075
LOWCFC
QTOWOl
333
4.32
140
M7
7-oa
Medkn
CFC
ywttL
706
1232
20.27
3146
»90
M0CFC
QTOWth
IB 86
>SO
>fiO
>so
>so
Emmnn irom suancal modal davttxmf Or Comtfl (1066)
1" EPA ft»*Aaaeaa»eni (1887).
CFCandHWor
of poMD (pveMT
LovScanano
CFC-11. 12. 114.
115
CFC-113
Haton-1211
Halon.1301
Madum Scenano
CFC-11. iz. 114.
11S_
CFC-113
Haion-1211 .
Halon-1301
HignScanaiw
CFC-11. 12. 114.
11*.
CFC-113
Haion-1211
Haton-1301
1985-2000
2.1
n
I*
-w
IB
40
as
1 1
5-»
(.1
12.0
a»
2000-2050
1J
rx
u.
18-
zs
2-S
29
U
3*.
U'
44
4P
POMPOM
CanMM
Contain
COMM
; COMM
Canm*
Camam
Canmni
CBMM
Conatam
Carman
Concur)
Conuan
OttMr Tnea> Oaa Seanarioa,
Carton Daada
sonpanan
wane fcom dw Nanonat Addam? of
Soanaa • uaaa (mphad annual growm n-Mmoapnanc
a» 0-7-pareaiil turn 1985 lo fnSL
Anrualgr^a(aoi7 para per nttaninoaphaw
NittouaOnda
Anual fv*et of 0.2 paicM
The ozone depletion estimates in
Table 2 are based on. a parameterization
(i.e. a statistical simplification^of Kone>
dimensional model developed by
Lawrence Livermore National
Laboratory. A recent comparison of the
results of this model with one-
dimensional models conducted under
the auspices of UNEP showed that this
parameterization produced depletion
estimates that were somewhat lower
than those projected by other-models foe
the same trace gas scenarios. (ONER.
1987).
While this parameterization provides.
a reasonable representation of a one-
dimensional model (Connell. 1986). by
design it provides only a globally
averaged estimate of depletion. More
sophisticated two-dimensional models-
have recently been developed which
provide estimates of ozone depletion by
latitude. Since health and environmental
effects will vary by latitude, these more
detailed models would be mere-
appropriate for calculating the impacts
of depletion. However, because these
models are expensive and time-
consuming, to use. they are of limited
utility for examining a wide raag»ei
scenarios, aa required in EPA'*risk
assessment. In addition, diffecenft two-
dimensional models differ substantally
in the-degree to which depletion vanes
with latitude. As a result of these-
lunitationfe EPA's estimates of risks rely
only on the previously mentioned one-
dimensional parameterization^
A companson of these different
models was conducted by. EPA as part
of its nsk assessment (SeeChapterS). It
showed that two-dimensuuiai-modeia
predict greater average depletion than
one-dimensional models-foe the same-
trace gas scenarios. For example; one
two-dimensional model (developed by
Sze] projects an 18 percent depieten;
compared to a 15 percent depletion for
exactly the same scenario fot a one-
dimensional model. Two-dimensional
models also generally project depletion
higher than global averages at latitudes
greater than 40 degree North: or Sotctht
especially in the spring.
5. Effects- of Ozone Depletion on Human:
Health and the Environment
Any decrease in total column ozone
would lead to increased penetration of
damaging ultraviolet radiatieato the
earth's surface. Under current
atmospheric conditions., the ozone layer-
blocks most of the UN-B part of the.
ultraviolet spectrum with- the:amount
screened out increasing with latitude.
This current gradient in exposure
provides a useful natural experiment
demonstrating the effects of different,
exposure to UN-B radiation.
The health and environmental effects
of ozone depletion are briefly described-
below; for a fuller explanation, see
Chapter 7 of the RIA and Chapters 7 to
16 of the EPA's riak.as8essment.EPA
has attempted to. quantify- each, effect.
but insufficient data haa made-
quantifying, some effects-impossible..
Estimate* are also uncertain because of
possible changes in future technologies.
Additional research, to better
understand UV-B effects is warranted.
However. EPA has taken account of all
possible ozone depletion effects in
assessing the need for controls.
a. Increased. Incidence of
Nonmelaaoma SJua Cancers.
Laboratory studiea and epidemiological
evidence show a strong Imk.between.
exposure to UV-B radiation and
increased incidence of basal and.
squamoumonjneJanoma skist cancers.
(See Chapter 7 of EPA's risk
assessment.) Several lines, of evidence
support this relationship: Ufc
Noomelaaoaiarskin- cancers tend to
develop in sun-exposed sites: (2)
outdoor workers have higher incidence
rates: 01 Incidence rales are higher:
closer to the equator fcorrecting-foc
differences hrskin pigmentation);.and
individuals genetically snspecabie hr
sunburn have a higher incidence of akon
cancers.
Several researchers have correlated.
UV-B measurement*-with nonmelanoma
skin cancan incidence data. Results, from
six stadia show that a I percent
depletion of total column ozone would
teadrto an increase hi nonmelanoma.
skin cancer incidence of 4.8- percent to.
7.6 percent
Based on the expected growth hi trace
gas emfsBioiwfbr the middle scenario
presented in Table 2. the resulting ozone
depletion would lead to an increase1 in
incidence of approximately. 153 millfen
nonmelanoma skin cancer cases among1
the United States population alive today
and" bom by the year 2075. Based on
current fatality rates- from basal and
squamoBs-skin cancers, this increase in
incidence could be expected to lead to
an increase of 3.0 million deaths of
people born during this same time-
period. Grven the uncertainties
associated with the appropriate dose-
response relationship, this projection-
could fall within-the range of 1.5 mHIran
to 4.5 million deaths.
b. Increased Incidence of Melanoma
Skin Cancer. While the current
incidence of melanoma skin cancer
cases is small compared to
nonmelanoma cases, the fatality rate Is
much higher. While no animal model
and in vitro experimental evidence
exists explaining the exact relationship
between melanoma and UV-B radiation.
based"on the preponderance of
evidence, EPA's risk assessment
concluded that increased UV-B
exposure would increase the incidence
of melanoma-Evidence ur support of this
conclusion includes: [1] Lighter skinned
individuals, whose skin has less
protective melanin, have higher
melanoma incidence rates than darker
skinned individuals; (2i early, childhood
exposure to sunlight appears to be
linked to higher incidence rates; and (3)
individuals genetically incapable of
repairingjunlight-induced damage to
celfs have a higher rate of incidence.
Based on a range of estimates for
uncertain factors. EPA's nsk assessment
developed » dose-response relationship
which suggests that for every 1 percent
increase KLozone depletion, the
incidence- ef melanoma would increase
by slightly lesa than 1 percent to 2
percent aad the number of fatalities
from melanoma would increase by 0.8
percent to 1.5 percent.
Based on the trace gas scenario which
assumed a 2J percent average annual
-------
Federal Register / Vol. 52. No. 239 / Monday. December 14. 19B7 / Proposed Rulea 47495
growth in CPCs. and the resulting ozone
depletion shown in Table 2. the number
of melanoma cases in the United States
would increase by 782.100 and the
number of fatalities would increase by
187.000 for the population alive today
and born by the year 2075. Given the
uncertainties associated with the dose-
response relationship, the number of
deaths could fall within a range of 93,500
to 280.000.
c. Increased Incidence of Cataracts.
UV-B radiation has been found to play a
significant role in the formation of
cataracts. Supporting evidence include
animal laboratory studies and
epidemiologies! studies. Based on the
available research, a dose-response
relationship was developed in EPA's
risk assessment (See Chapter 10).
Assuming trace gas trends and the
resulting ozone depletion for the middle
scenario described in Table 2, the
number of cases of cataracts would
increase by 18.2 million for the
population in the United States alive
today or bom through 2075.
d. Suppression of the Immune System,
Experimental studies show a
suppression of the immune response
system associated with exposure to UV-
B radiation. Current research does not
explain the exact mechanism by which
the immune system is altered or the
potential implications for a wide range
of diseases. Limited studies do suggest.
however, that UV-B induced
suppression nay increase the frequency
of outbreak of herpes simplex virus and
leishmaniasis (v£» a skin disorder
common in the tropics). No quantitative
estimates of the potential barm Delated
to immune suppression on these or other
possible diseases are at this fine
possible.
e. Damages to Plants, Limited thidfo*
have shown that plants ?»pp">d to
increased levels of UV-B radiation can
be harmed. Initial studies showed a
substantial vuInerabiEry to UV-B
exposure across a wide range of plants.
However, these studies were conducted
in laboratories or greenhouses and their
results have not been replicated under
field conditions where phoCanpafr
mechanisms may offset damage*
The only long-term controlled Retd
study involves soy beans. This study
found that enhanced levels of UV-B'
radiation simulating a 16 and 25 percent
ozone depletion caused reductions In
crop yield of up to 25 percent in. the*
tested cdtivar. Substantially-smaOer
changes occurred in years when drongJrT
conditions' also greatly reduced dup*
yields of the plants grown under' , (
natureHy occurring conditions (EeVnW
control pfantaj. Becanse-a vrfde'ipngrbf'
crops fiave-tested sensitive toHEncnntstsB •
• _ ... ^-v*mr.
exposure to UV-B radiation, but have
not yet been tested under field
conditions, the dose response
relationship developed from the field
tests of soy beans was used as the basis
for estimating impacts on major grain
crops in the RIA.
f. Damage to Aquatic Organisms.
While studies to date have been limited
in scope, it appears that increased
exposure to UV-B radiation could
adversely affect aquatic organisms and
potentially disrupt the aquatic food
chain. For example, studies suggest that
phytoplankton remain close to the
water's surface to facilitate
photosynthesis. As a result, they would
be susceptible to damage from increased
UV-B radiation. Similarly, the larvae
stage of many fish live at or near the
water's surface and would also be
susceptible to damage if ozone depletion
occurs. A case study showed that a 10
percent ozone depletion would lead to a
6 percent loss in the larval anchovy
population. Because a wide range of
aquatic organisms have shown a
sensitivity to increased exposure to UV-
B radiation, but insufficient data exists
for developing specific dose-response
relationships, the case study examining
the effects on anchovy larvae was used
as the basis for estimating impacts on a
limited group of shellfish »"d fin fish in
the RIA.
g. Accelerated Weathering of Outdoor
Plastics. Plastics exposed to the outdoor
environment under current ultraviolet
conditions ™"*pfh ngfci stabilizers or
other additives fti reduce damage from.
chalking, yellowing or britueness. If UV—
B radiation Increases, damages would
increase or greater expense would be
incurred In protecting against the
damages from such exposure. A
relationship was developed between
UV-B exposure and damage to outdoor
products made of polyvinyl chloride and
incorporatedia the analysis presented'
in the RIA,.-..,..
h. Increased FonnaU'oa of
Groundlevel Ozone. Preliminary studies*
have assessed the impact of
increasedUV-B penetration on the
photochemicaTreactions responsible for
the creation ofgroundkvel ozone. These -
case studies suggest that groundlevel.
ozone would form earlier in the day and
nearer to population centers, thus
exposing more people to its harmful
effects! Total amounts of groundlevel
ozone would also Increase.While \.!
substantial h ins to Vftrina health nt"t
welfare could result, from Increased.'.
groundlevel ozbo*. because of limited
data, only fhe Impacts od crop*loss were
included In the RIA.
i.-CDmateM Keloledbripacft Duets',
Increases iff thane-Modifying Cases,
CFCs and other gases that modify
stratospheric ozone are also greenhouse
gases and therefore contribute to
concern about future global warming.
Based on the rate of growth in trace
gases assumed in the middle scenario
presented in Table 2. by 2075 a global
equilibrium temperature (Le., the earth's
temperature at the time when incoming
energy is balanced against outgoing
energy) increase of 5.8 degrees
centigrade (10.4 degrees Fahrenheit)
could be anticipated. Based on earlier
reports by the National Academy of
Sciences (1983). these estimates could
be 50 percent higher or lower to reflect
current uncertainties in climate model
predictions. This temperature increase
could be expected to affect water
resources, agricultural productivity,
forests, and endangered species.
However, because of the difficulty in
quantifying these effects, the RIA does
not assess the extent of potential harm
related directly to climate change.
One possible indirect effect of climate
change is increased sea level rise. Based
on current models and the trace gas
scenario described above, the projected
global warmkg could increase global
sea level by 87.8 centimeters by 2O7S.
However, because of the difficulty in
quantifying impacts related to sea level
rise, the analysis in the RIA is hmhtd to
extrapolation of several case studies
quantifying damage from sea level rise
to major port area* in the United States.
Based on the WMO i
EPA's recently completed risk
assessment the Agency befieves thai"
the current rate of growth SB "-
atmospheric levels of ozone-depleting
gases is likely to result In substantial
depletion of ozone which woakl lead to
significant harm to human health and
the environment. While many •. < t
uncertainties exist and only limited*
studies are available hi s«v«rsl of the
areas of potential harm, the current
evidence presents e strong case for •
acflbn to substantially reduce current
levels of use of die most potent ozone-
depleting rJ"Mn>M>'1" A comparison ol
the potential costs of Bruiting CFCs end
batons to the potential heahK and., ,
environmental-benefits is presented..
below In Section Vfl. , """"
V.TneMootreelProtooot
;.The MontrealjProfocoi U,
Comprehensive a^
with the. threat of etraii
depletion by m»n^naJa
has three key Components. ffcsC ft .
requlres'partieilo sighiftcaaUyredue*
their production and consumption of
-------
Kfrm. 52*N^:^9^Moriday>Betember'
;cactaln ozone-depleting substances over.
•th'e next-decade. Second, Tf provides for1,'
•revision of the reduction.requirements' *
based on scheduled, periodic !_.-TX
assessments of available Scientific".
environmental technical'and economic
information. Third, ft imposes
.restrictions on trade in ozone-depleting
products with nonparties to minimize
nonparties'polential to deplete
stratospheric ozone and to encourage
nations to become parties. Each of these
components is described in greater
detail below.
The Montreal Protocol will take'effect
("enter into force"] on January 1,1989,
provided that at least 11 instruments
ratifying the Protocol ha-'e been
deposited by States or regional
economic integration organizations
representing at least two-thirds of 1986
estimated global consumption of the
covered substances, and that the Vienna
Convention for the Protection of the
Ozone-Layer has entered into force. If
these conditions have not been fulfilled
by January 1,1989. the Protocol will
enter into force on the 90th day
following the date on which the
conditions have been fulfilled
The Vienna Convention has so far
been ratified by 14 nations, including the.
United States, as noted above. Twenty
instruments of ratifications are required
for its entry into force. The Department
of State and the White I louse are
currently in the process of requesting
from the Senate its advice and consent
to ratification of the Protocol so that the.
President may ratify it on behalf of the
United States.
A. Control Provisions
1. The Chemicals Covered
The Protocol identifies in Annex A
two groups of ozone-depleting
substances for control "controlled
substances"). Croup I includes CFC-11.
-12. -113. -114. and -115. These
chemical compounds are fully
halogens ted and therefore are strong
potential ozone-depleters that are either
widely used or potential substitutes for
those chemicals which are now widely
used.
Group II includes Halon 1211.1301
and 2402. Because they contain bromine,
these chemicals are even stronger
potential ozone-depleters than the
chemicals in Croup I. However, they are
currently emitted in small quantities
relative to CFCs. substantial
uncertainties exist as to their exact
ozone depletion weights, and recent
evidence suggests that their ozone-
depleting potential may substantially
depend on atmospheric chlorine
concentrations.
jVThe Protocol's coveraoe^xtends'only
to the'spe'dfied chemicals in bulk form.
Ita definition of controlled substances.
excludes chemicals which are in.'
manufactured products other than a
container used for the transportation or
storage of the chemicals. EPA Is seeking
comment on the implications of using
this definition of controlled substances.
2. "Calculated Levels"
.The Montreal Protocol does not place
limits on each of the controlled
substances. Instead, it places separate
limits on the total ozone depletion
potential of Group I and Group II
controlled substances that a party
produces and consumes. A party may
consequently produce and consume any
mix of the controlled substances within
each of the Groups, so long as the total
ozone depletion potential of the mix
does not exceed the specified limits.
For purposes of calculating total
ozone depletion potentials, the Protocol
lists in Annex A the "ozone depleting
potential" of all but one of the controlled
substances. In the case of Halon 2402, it
provides that the ozone depleting
potential is "to be determined." More
generally, it notes that the ozone
depleting potentials "are estimates
based on existing knowledge and will be
reviewed and revised periodically." as
provided under Article II. paragraph 9.
The Protocol uses the phrase
"calculated levels" to refer to this
weighting of controlled substances
based on their relative ozone-depleting
potentials. It provides under Article 3
that calculated levels be determined for
each Group of controlled substances by
multiplying the amount of emissions (in
kilograms) of each controlled substance
within that Group by the ozone
depleting potential specified for it in
Annex A. and adding together the
resulting products.
3. Production and Consumption Limits
Just as the Protocol does not place
limits on each controlled substance, it
does not place limits on particular uses
(e.g. aerosols, refrigeration) of the
controlled substances. Instead, the
Protocol limits each party's total
production and consumption of Group I
(CFCs) and Group II (halons) controlled
substances for specified 12-month
periods. It leaves up to each party how
to stay within those limits.
Article 1 of the protocol defines
production as "the amount of controlled
substances produced minus the amount
destroyed by technologies to be
approved by the Parties." It defines
consumption as "production plus
imports minus exports of controlled
substances." However. Article 3
provides that after January 1,1993,'any
export of controlled substances to non-
parties'may not be subtracted in
calculating the consumption level of the
exporting party.
4. Tuning and Magnitude of Limits
The limits imposed by the Protocol are
generally defined in terms of 12-month
periods and keyed to calculated levels
of 1986 production and consumption.
The year 1986 was chosen as the
baseline for controls so that nations did
not have an incentive to increase their
production and consumption during-
1987, when the protocol was being
negotiated, in order to establish higher
baselines.
a. Group I controlled substances. For
Croup I controlled substances. Article 2
of the Protocol requires each party to
reduce in three steps the calculated
level of its production and consumption
of those substances.
For the first step, paragraph 1 of
Article requires that if the Protocol
enters into force on January 1,1989,
each party must limit its calculated
levels of consumption and production to
1986 levels in the 12-month period
commencing July 1.1989. and in each 12-
month period thereafter. If the Protocol
enters into force on a later date, each
party must meet that limit in the 12
month period commencing on the first
day of the seventh month following the
date of entry into force of the Protocol,
and in each 12-month period thereafter.
However, the Protocol permits each
party to increase its production in each
of the relevant control periods by up to
10 percent of its calculated level of 1986
production, provided that the increased
production is used for one or both of two
purposes. One purpose is to satisfy the
"basic domestic needs" of developing
countries operating under Article 5 of
the Protocol. That Article allows
developing countries who are parties to
the Protocol and whose annual
calculated level of consumption of both
Group I and Group II controlled
substances is less than 0.3 kilograms per
capita on the date it becomes a party to
the Protocol, to delay its compliance
with the Protocol's control provisions by
ten years after that specified in those
provisions, so long as its per capita
consumption does not exceed 0.3
kilograms.
With Article 5. the drafters of Protocol
sought to fairly accommodate the
"special situation" of developing
countnes whose 1986 consumption of
the controlled substances was low
relative to that of developed countries.
By allowing developing countries to
increase their consumption somewhat
-------
Hadooal Begirter / YoL S2. NaraarJ Memtar. December M. 1987 /
and by allowing parties to increase rtheir
production to supper tbe developing
countries, the drafters hoped to
encourage developing countries to join
the Protocol and make it -unnecessary
for (hem to build or expand any capacity
for producing controlled .substances in
order to supply for a limMfd period of
time their growing domestic needs.
The second justification for the parties
to increase their prodocBon by up to 10
percent -of 1988 faces » 'lor the
purposes of industrial rationalization
between Parties." Article 1 of the
Protocol defines industrial
rationalization as "(he transfer of all or
a portion of (he calculated level of
production of one Party to another, lot
the purpose of achieving economic
effkiencesorttspaiufiag (a anticipated
shortfalls in supply as a resell of plant
closures."
For the second reduction step,
paragraph 3 requires each party to limit
the calculated level of its production
and consumption in the period from July
1.1993. to June 30.1394. and in each 12-
month period thereafter, to £0 percent of
the calculated level of its 1S8B
production and consumption. Notably.
the second reduction step taxes effect
beginning July 1,1993, regardless of
when the Protocol enters into force, so
long as the Protocol "has entered into
force by that date. As in the case of fhe
nrst step, each pai ty may -exceed its.
production limit in each control period
by up to 10 percent :dFta 1986
production leueL asaysaed tbe
production over tbe tent is used for one
or both oftfaesan
described above.
Finally, for thetsusrscdaction step,.
paragraph 4 require* each parry 4o hmit
the calculated keuei of its production
and consumption in the period from July
1.1998. to June 30.1998. and in each 12-
month penod thpmaftai-, to SO pxrrnnt jtf
its ca Iculated level nf loflft production
and consumption. Each party is allowed
to exceed its production TuniLiy up to 15
percent of its calculated level m* 1386
production, provided Ifie production in
excess of the limit is used for one or
both of the purposes described.above.
The third reduction step wfll
automatically take effect beginning July
1.1998. so long as-the Protocol enters
into force anytime before Jnry 1.1998.
and unless decided otherwise by a 4we~
thirds majority «f the parties present
and voting. reyrenRfQinj at least two-
thirds of parties' total «Mi««"* iba control
measures specified JnJirbcIe.2, based'
on Article 6as«esflinents.Iaragraphfl
provides that the portion Tjiyt attempt to
attempt to reach consenaiudsi Aenead
for any adjnatmpnt; nfl^'p
to make any adjn«tm«»nt
adopted by a rWO-fhlEd8 majnrity yptp xjf
the parties present and votuuj
representing at least EBy percent of the
total consumption of die n»p*mTipij
substances of the pggHea.
C. Teade Provision*
Article 4 of fhe Protocol requites
parties tO impose «p»fiTlpd ypfftrlrJinng
on trade of ozone-depleting products
with nonparties. The .purpose of the
trade restrictions is to Dadacelhe
potential of nonpaztiea ibaiGbrenely
affect the ozone layer aiuT4« induce ,
nonparties to join, ozatleaatfomph/
with, the Protocol.
Pursuant to p"T«jf«fi» l pf A1*"*1*^
each party must baa theiayvrt of
controlled substances from nonpartiet
within one year of the >Ve*»ceTs entry
into force. Under r""qygffr S, within
three years of the Protocol's entry into
force, the parties ante develop a list of
products cuutaiiiiiui controlled
substances fe.g.. refrigerators.^
condrttoners); and vriftm ooe'yeaz of Jhe
list having become effective. TJarties not
objecting to the list are t» ban Imports of
uie ii^^eo proHu^RS ^co^n
-------
47498 Federal Register / Vol 52. No. 239 / Monday. December 14. 1987 / Proposed Rules
Article 4 also provides for-several
exemptions from the trade restrictions-
Paragraph 7 provides that paragraphs 5
and 6 will not apply to products,
equipment plants or technology that
contribute to the reduction of emission
of controlled substances: and paragraph
8 exempts from the restrictions of,
paragraphs 1.3 and 4 those nations that
do not join, but are found to be in
compliance with, the Protocol
D. Other provisions
As for its implementation, the Protocol
establishes requirements for parties to
report relevant data (Article 7); an
accompanying conference resolution
calls for UNEP to convene a meeting of
government experts to recommend to
the parties measure for harmonizing and
coordinating data on production,
imports and exports of controlled
substances. The Protocol also requires
the parties at their first meeting to
develop enforcement mechanisms and
penalties for non-compliance (Article B).
To ease compliance, the Protocol calls
for the parties to cooperate in the
research, development and exchange of
information on emissions reduction
technologies, substitutes for ozone-
depleting products, and control
strategies (Article 9). It also urges
parties to lend one another, and
particularly developing countries,
technical assistance to facilitate
participation in and implementation of
the Protocol (Article 10).
VI. Proposed Action
A, Scope and Stringency
EPA proposes to implement the
Montreal Protocol, provided that it
enters into force and the United States
ratifies it Based on its assessment of the
available evidence, EPA believes that
the Protocol's requirements are an
appropriate response to the potential
ozone depletion problem at this time.
Moreover, given that potential ozone
depletion is a global problem requiring a
global response, EPA believes that the
Protocol is the most effective means of
addressing the problem. For these
reasons. EPA believes that
implementation of the Protocol would
best protect public health and welfare
from the adverse effects of any ozone
depletion.
The Protocol may be amended in ways
that could significantly affect the
stringency of the control regime it
prescribes. For example, the Protocol
provides explicitly that the fifty percent
reductions in consumption and
production required by Article 2.
Paragraph 4. will not come into effect if
the Parties by a *wo-thirds majority vote
otherwise. In the event that any such
amendment is adopted by the parties.
EPA intends to conduct rulemaking to
consider the effect the changes should
have on the control regime prescribed
by these regulations.
1. Basis for control requirements
EPA's assessment of the risks of
ozone depletion indicates that the
Protocol's control requirements are an
appropriate response, particularly
considering that the Protocol permits
revisions of the requirements as new
information warrants.
The chemicals covered by the
Protocol are those which currently pose
the greatest threat to stratospheric
ozone. Moreover, the Protocol's different
treatment of CFCs and halona
reasonably reflects differences in what
is known about the ozone depletion
potential of the two classes of chemicals
and the volume of their respective
emissions.
The extent to which a chemical will
contribute to ozone depletion depends
on its chlorine and bromine content and
its atmospheric lifetime. Table 3 lists
these characteristics for those
compounds considered for coverage. It
illustrates that the chemicals in Group II
(halons) have greater ozone depletion
potentials than the chemicals in Group I
(CFCs), and that Group I chemicals have
greater ozone depletion potentials than
CFC-22 and methyl chloroform. It also
shows that carbon tetrachloride (CC14)
is a stronger potential ozone-depleter
than several of the chemicals included
in Group I.
TABLE 3.—RELATIVE OZONE-DEPLET-
ING POTENTIAL OF CHEMICAL COM-
POUNDS
Compound
CFC-11 ._ . ,
CFC-12
CR>113 „.„
GPG-m . ......... .u..,.....,.
CFC-115
Halon-1211
Haton-1301
Halon-2402
HCFC-22
Methyl Chloroform
CO 4
Ufe-
•time
:. (years)
75
111
• 90
185
180
25
110
(f)
20
6.5
50
Ozone-
deplet-
ing
poten-
tial1
(mass
. basis)
1.0
1.0
0.8 .
1.0
0,6.
3.0
10.0
6.0
0.05
0.1
1.06
* Not reported.
Sources: Lifetime estimates are based
on WMO (1986), and are summarized in.
EPA Risk Assessment, 1987. and EPA
Regulatory Impact Analysis. 1987. Ozone
depletion potentials for CFC-11, -12,.-
113, -114. -115. Halon-1211 and 1301.
methyl chloroform, and CCI4 approxi-
mate those estimated by the Lawrence
Uvermore National Laboratory one-di-
mensional atmosphenc model (Connell.
personal communication). Ozone-deple-
tion potential for Haton-2402 reported at
negotiators for Montreal Protocol on
Substances that Affect the Ozone- Layer
(Bakken, personal communication).
Values for CFC-11, -12. -113. -114. -
115. and Halon 1211 and 1301 are listed
in Annex A of the Montreal Protocol.
These values are preliminary estimates
based on currently available research
and are likely to change over time as new
information becomes available.
HCFC-22 and methyl chloroform are
appropriately excluded from coverage
for several reasons. First, as Table 3
shows, they are substantially less
harmful to the atmosphere than the
other chemicals considered for
coverage. Second, they have short
atmospheric lifetimes, so their future
atmospheric concentrations can be more
quickly reduced by emission limits if
such reductions are determined to be
necessary in the future. Third, both
chemicals are potential substitutes for
some of the more potent ozone-depleting
chemicals covered by the Protocol
In contrast, carbon tetrachlonde i* a
relatively strong potential ozone-
depleter. but its small volume of
emissions makes it reasonable to
exclude. Most carbon tetrachloride is
consumed as a feedstock to producing
CFCs and relatively little is emitted into
the atmosphere.
CFC-114 and CFC-115 are reasonably
included despite currently minor
production levels because they are fully
halogenated CFCs and therefore have
long atmospheric lifetimes and are
relatively strong potential ozone-"
depleters. Furthermore, if they were not
covered, they could be substituted in .
some uses for the covered CFCs. If .such
substitutions were to occur,
ozone depletion would not be
substantially reduced. *
1 Measured relative to CFC-11 which is
set to 1.0. Values reported on a mass
basis (i.e. per kilogram).
«It ihould be noted Out CFC-115 can be wed In
• blend with HCFC-22 in leveraJ commensal
refrigeration application*. While any iuch UM of
CFC-llS would be covered by (he Protoeofi control
requirement*, ihifttng boo CFC-12 to this blend
would lutMiantiauyredoce the overall etone- ..
depleting potential of the chemical* u*ed. Stnot-lhl*
reduction in oxone depletion would occur without
•ubataniiaUy altering product price*, industry may
continue thl* trend a* one mean* of reducing riitk*
from ozone depletion.
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Federal Register / Vol. 52. No. 239 / Monday. December 14. 1987 / Proposed Rules 47499
Table 3 also highlights the substantial
concern with Halon 1211.1301 and 2402
as potential ozone-depleters. Because
bromine remains in a chemically
reactive state in the stratosphere, it is an
extremely effective catalyst contributing
to ozone depletion. However, while
general agreement exists that the halons
are. kilogram for kilogram, more potent
ozone-depleters than CFCs. substantial
uncertainties exist regarding their
ozone-depletion potential. As a result.
the ozone depletion weights provided in
Table 3 and Annex A of the Protocol.
particularly in the case of the halons.
should be viewed as preliminary, and
are likely to change as more information
becomes available.
EPA examined the effect on future
ozone depletion based on projections
from a simplified one-dimensional
atmospheric model. For a baseline case
where CFCs are reduced by 50 percent
over ten years, if the halons were
allowed to continue to grow at expected
rates, depletion of 3.2 percent would
occur by 2075. By freezing halon
production at current levels, the level of
predicted ozone depletion would be
reduced to 1.3 percent by 2075.
EPA's risk assessment also indicates
that the Protocol's reduction
requirements would substantially
reduce potential depletion and thus the
adverse health and welfare effects of
depletion. As shown earlier in Table 2.
based on model projections, continued
trends in worldwide use of CFCs in the
absence of regulation could result in
substantial ozone depletion sometime
during the early part of the next century.
The extent to which limits on CFC and
halon production and consumption
could reduce estimated ozone depletion
is dependent, in part, on future trends in
other trace gases, the extent to which
other nations also reduce their
consumption and production of ozone-
depleting chemicals, and the ability of
current models to predict future changes
in ozone levels. The assumptions
underlying this analysis are explained in
detail in the RIA accompanying this
rulemaking.
Several different levels of emission
reductions and their effects on ozone
depletion are presented in Table 4.
These estimates are compared to the
base case (no regulation) shown earlier
in Table 2. They indicate that
international action to freeze CFCs at
1986 levels alone would substantially
reduce depletion compared to the base
case, but would still result in
approximately 6 percent depletion by
2075. In contrast, model projections
indicate that the reductions required by
the Montreal Protocol and the
anticipated participation by most
developed and developing nations.
would result in less than 2 percent
depletion by 2075. If the United States
were to take additional steps beyond
the 50 percent reduction required by the
Protocol and reduce its CFC
consumption by BO percent, depletion
would only be reduced by an additional
0.1 percent.
TABLE 4 —OZONE DEPLETION LEVELS FOR
ALTERNATIVE REDUCTION OPTIONS
(Pcront dopMon o» lotil column ozm]
ClM
1 No controls •— - — — • • .
2 CFC Iram
4 CFC 50% . _. . .. .
6 CFC 50%/Htion tTMM
7 CFC 50%/Halon fram/U S
80%
"US o""y'C*C 50*-
2000
09
08
08
08
08
08
08
08
2025
39
2.3
19
15
1.2
U
12
31
2050
124
43
34
23
IB
IB
1 4
as
2075
399
6.2
50
32
i2
IJ
12
204
Source: Cases 1-6 assume specified
reductions are taken on the timetable
specified in the Montreal Protocol and
that 94 percent of the non-U.S.
developed world and 65 percent of the
developing world participate in making
these reductions. Case 7 assumes that
the U.S. takes unilateral action. A more
detailed discussion of assumptions is
included in Chapter 5 of the RIA.
Given the many variables and
uncertainties involved in predicting
ozone depletion far into the future, the
Protocol's control requirements achieve
a reasonable degree of risk reduction.
Moreover, the Protocol includes review
and revision mechanisms for obtaining
more or less risk reduction as advances
in modelling capability, new data, or
other relevant developments warrant.
The Protocol's trade provisions are
also a reasonable means of reducing the
nsk of stratospheric ozone depletion. As
model projections indicate, broad
observance of the Protocol is needed to
effectively protect stratospheric ozone,
and nations that neither joined nor
complied with the Protocol would
endanger the ozone layer.
Implementation of the Protocol's trade
restrictions would reduce the potential
for those nations to adversely affect the
ozone layer and would induce them to
join the Protocol.
2. International Considerations
Taken as a whole. EPA believes that
the Protocol effectively addresses the
global problem of potential ozone
depletion. The Agency thus considers it
unwise to risk undermining the
agreement by deviating from its
requirements.
As explained earlier, EPA believes
that the available evidence fully
supports the need for the Protocol's
control requirements. Moreover, failure
by the United States to meet all the
requirements would set a damaging
precedent. For the Protocol to be
effective, nations cannot pick and
choose which of its provisions to
implement.
Requiring the United States to do
more than the Protocol requires could
also be counterproductive. Were EPA to
implement the reductions required by
the Protocol regardless of whether the
Protocol enters into force, or require
greater reductions than the Protocol
requires, other nations might have less
incentive to join the Protocol. The
failure of many nations tr join the
United States in banning CFCs in
aerosols demonstrates that unilateral
United States action does not
necessarily lead other nations to reduce
their emissions, and raises the concern
that other nations might "free-nde" on
United States reductions to avoid
making costly reductions themselves. In
any event, as noted earlier, even if EPA
were to require that the United States
take an additional step beyond the
Protocol and reduce its consumption by
80 percent, potential ozone depletion
would only be reduced by an additional
0.1 percent.
B. Control Strategy
As noted earlier, the Montreal
Protocol leaves up to each party how to
achieve the required reductions in
production and consumption. EPA's goal
in implementing the Protocol is to
provide the market place with as much
flexibility as the Protocol permits to
achieve the required reductions in the
most economically eiGcient manner
possible.
1. Economic Incentives Venus
Engineering Controls/Bans
Two general approaches for achieving
the Protocol's required reductions of
controlled substances were evaluated
by the Agency. One approach relies on
market incentives to achieve low cost
reductions in the use of CFCs and
halons. Under this approach EPA could
either directly restrict the supply of
CFCs and halons or assess a regulatory
fee on their use. Either case would
increase costs of using CFCs which
would give those firms with relatively
low-cost reduction options an economic
incentive to reduce their use of these
chemicals. Those firms where no such
reduction opportunities exist would
continue to use CFCs. although they
would have to pay a higher pnce.
According to economic theory.
providing firms with an incentive to
make cost-effective reductions should
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47500 Federal Ragrtea A Vol. 52. No. 239 / Monday. December 14. 1967 / Proposed Rules
minimize the costs lo-aoutery of meeting
the regulatory goal Three alternative
economic incentive approaches were
evaluated: marketable nghta baaed on
auctions ("auctioned nghts"),
marketable rights allocated by quota to
past producers and importers
("allocated quotas"), and regulatory
fees.
The second general approach is the
use of traditional engineering controls
and product ot chemicals bans
("engineering controls or bans"]. It
involves EPA decidlngwhichspecific
industries or uses of CFCs and batons
should'be regulated. EPA would make
this decision based on the availability of
low cost reductions, the quantity of
reductions achieved, the administrative
burdens of monitoring compliance, the
enforceability of the regulation, and the
impacts on small businesses. This
approach is EPA's usual method of
regulating pollution. It was considered
alone, and a supplement to allocated
quotas based on the extent to which
CFC users may be postponing the
adoption of low cost reductions "hybrid
option").
EPA evaluated each of these options
in light of the following criteria:
Certainty of achieving the desired-
environmental goal: economic costs and
efficiency in meeting that goal: equity
considerations; administrative costs and
enforceabifityr legal certainty: and
impacts on small bnsiness.
Each of the options has specific
advantages, but also raise* possible-
problems-. The regulatory fees-option
should provide for least cost reductions.
while providing clear price incentives
for users to reduce their reliance on
CFCs and halons and for producers to
introduce chemical substitutes.
However, regulatory fees alone would
not ensure that the freeze or reductions
of controlled substances would be
achieved during the time period required
by the Protocol. For example, more firms
than anticipated could decide to pay the
fee and continue using CFCs or halons.
Engineering controls or bans would pose
the same problem, since uses of CFCs or
halons that were not regulated could
continue to grow, possibly offsetting
reductions from the regulated uses.
Engineering controls or bans would
also be administratively burdensome.
considering the many thousands of
small firms that use CFCs or halons. In
the case of regulatory fees, another
concern is whether EPA has the legal
authority to impose a fee which would
result in revenues in excess of the costs
of operating the program: regulatory fees
might be invalidated as beyond the-
Agency's authority under the Clean Air
Act. (The Legal issues concerning fees
are discussed in a separate-analysis
prepared by EPA which is contained in.
the docket)
The auctioned rights option would
entail auctioning nghts allowing a
specified amount of production or
consumption of CFCs or halons. The
auctions would be open to any
interested party. The total amount of
production and consumption nghts
auctioned would reflect EPA's
regulatory goal Revenues front the
auction would go to the United Slates
Treasury. Firms seeking to use CFCs or
halons would have to obtain rights-at
auction or by purchasing them from.
other firms on a secondary market.
Alternatively, to the extent CFC or
halon producers or suppliers had not
purchased rights at auction, final users
of these chemicals could simply buy
them directly through their existing
channels of supply. EPA would monitor
compliance by checking whether
producers and importers held rights
authorizing their production and
consumption.
Like all the economic incentive
approaches, auctioned rights should
provide for economically efficient
reductions. In addition, any revenues
from the auction would go to the general
treasury.9 Concerns have been raised.
however, that auctions, at least initially.
would create large uncertainties for
firms about price and availability, and
could lead to speculation and short-term
hoarding of permits (beyond a firm's
actual needs) during the auction
process.4 Also, legal questions have
been raised concerning EPA's authority
under the rMcai> Air Act to implement an
auction to allocate rights. (These issues
are also discussed in the EPA analysis
contained in the docket)
EPA favors simply allocating rights
equal to the quantity of allowable
production and consumption to
producers and importers of controlled
substances in 1986. Since producers and
importers are small in number (probably
no more than 15 to 20). it would be far
less burdensome to allocate nghts to
them instead of users. Similar to
auctioned rights, firms allocated rights
could buy and sell them to respond to
* The argument advanced by econonialt is thai
equity would be served were revenues from the
auction or regulatory fees to go to ike Trasury
because the revenues would represent payment*
from those who damage the environment to those
who are damaged. i.e. citron*
« Speculation can be aitard to market fmcthmng.
Of course, if speculators enter die. marital and bid
up the price to levels higher tha> metket vaJueulhoy
will lose money in their subsequent efforts to sell in
the after-market However, to the extent prices are
bid op by speculators end remain nig her for some
time, imall Onni aaiog CFCs ot oaJoaa. mat be
adversely affected.
changes in market conditions. Price
increases as a result of decreased
supplies should provide firms using
CFCs or halons with the economic
incentive to make the lowest cost
reductions of controlled substances.
Unlike auctioned rights or regulatory
fees, this option avoids raising any legal
issues concerning EPA's regulatory
authority.
The major concern about the allocated
quotas option is one of equity—should
current CFC and halon producers and
importers reap a possible windfall profit
from the scarcity created by EPA's
regulation? The extent to which CFC
and halon prices increase over time
determine the magnitude of this
potential gain.
A second concern (one that applies to
all of the economic incentive
approaches) is that certain industries
where low-cost reductions are possible
may decide not to make these
reductions, at least for a time, and may
elect instead to continue their use of
CFCs or halons. For example. CFCs are
a very small part of the costs of a
computer. As a result, firms in this
industry may be better able to pass on
price increases to their customers. If
available inexpensive reductions are not
realized by these or other industry
groups, then CFC and halon pnces could
increase more than they otherwise
would, resulting in additional economic
burden on all firms using these
chemicals. The impact of this burden
could be particularly large in the near
term* before new chemical substitutes
become available.
These two concerns are discussed in
greater detail in a later section which
describes potential remedies to these
problems and presents the alternative
regulatory approaches still under
consideration by the Agency.
2. Design of Allocated Quota System
EPA proposes to implement the
Montreal Protocol using a system of
allocated, marketable "rights." * The
Protocol's limits on production and
consumption would be translated into
allocated quotas of production nghts
and consumption rights. The Protocol's.
separate treatment of Group I and
Group II controlled substances would be
reflected in separate nghts for each
group of controlled substances.
Similarly, the Protocol's definition of
• The word "righta" Is used as a metier of
convenience. The "nghW mat would be created by
the regulation* an really privilege*, since, il futum
stances or shifts in the regulatory approach.
warrant chamjei In allocations of controlled'
substances. EPA may by rafemeking modify the
amount of Bgte*-allocBlsd.
-------
Federal Register / Vol. 52. No. 239 / Monday. December 14. 1987 / Proposed Rules 47501
limits in terms of "calculated levels" of
Croup I or Group II substances would be
earned over into the definition of rights.
(As explained earlier, calculated level is
determined by multiplying the emissions
of each controlled substance by its
ozone depletion weight and adding
together the resulting products for all the
controlled substances within each
Group ) Thus, rights would be specified
in terms of calculated level of Group I or
Group II controlled substances, so that
holders of rights could se'ect any mix of
controlled substances within each
Group, provided that the total calculated
level of the mix did not exceed the
calculated level of the rights held.
a. Chemical Coverage and Ozone
Depletion Weights. The regulations
would include the same chemicals in
Group I and Group II of controlled
substances as the Protocol does. They
would likewise adopt the Protocol's
ozone depletion weights for each of the
controlled substances. However, the
regulations would also provide an ozone
depletion weight for Halon 2402.
whereas the Protocol leaves the weight
for that halon for later determination.
EPA is proposing a 6.0 weight for Halon
2402 based on its assessment of the
chemical's ozone depletion potential.
The Agency will also propose this
weight for adoption by the Protocol
parties: but should the parties establish
a different weight and scientific
evidence support their choice. EPA
would revise its regulation to conform to
the Protocol. In the meantime, EPA
believes it appropriate to propose its
assessment of the ozone depletion
weight of Halon 2404 to give industry a
basis for judging their compliance with
the halon limit.
b. Production Rights and Consumption
Rights. Production rights held by firms
would authonze them to produce a
calculated level of controlled substances
equal to the calculated level of rights
they hold.6 Rights would be apportioned
among producers of controlled
substances according to the calculated
level of controlled substances each
produced m 1986. the baseline year
established by the Protocol. The total of
• Production right! would be required for virgin
production but not for recycling, of controlled
•ubstances Production used and consumed as a
chemical intermediary is also exempt Further, the
Protocol defines production of controlled
substances as ihe amount produced minus the
amount destroyed "by technologies to be approved
by the parlies ' Because no such technologies have
yet been approved, this proposal does not include
any provision for credits for destruction. However.
EPA intends to work with industry in the future to
review existing and new destruction technologies
and. if appropriate submit these technologies to the
Parties for their approval.
these "baseline production rights"
would thus equal United States
production in 1986.
Consumption rights would authorize
holders to produce or import a
calculated level of controlled substances
equal to the calculated level of the rights
held. As descnbed earlier, the Protocol
defines consumption as production plus
imports minus exports, and keys its
consumption limits to 1986 levels of
these three components of the
consumption equation. Since exports of
controlled substances are subtracted
from, and therefore aid compliance with
the consumption limit, no rights would
be required to export (although
exporters would be required to report
their exports to EPA). Nor would users
of CFCs or halons ever become involved
with either production or consumption
rights—only producers, importers, and
exporters would be directly involved in
this proposed regulatory system.
Baseline consumption rights would be
apportioned to producers and importers.
but in a manner that takes account of
1986 exports. Importers would be
allotted baseline consumption rights
equal to the calculated level of their
1986 imports of controlled substances.
Producers would be apportioned
baseline consumption rights equal to the
calculated level of their 1986 production.
less a proportionate share of the
calculated level of the United States'
total 1986 exports. The apportionment
formula for determining each producer's
consumption rights would be the
producer's 1986 production multiplied by
a correction factor equivalent to:
[(U.S. 1986 production)—{U.S. 1986 exports)]
(US. 1986 production)
EPA believes producers' baseline
consumption nghts should be reduced to
reflect exports because producers
generally have been the major exporters
of controlled substances.
In a separate rule also appearing in
today's Federal Register, EPA is
requiring producers, importers and
exporters of controlled substances in
1986 to provide the Agency with the
information needed to determine the
United States' 1988 production and
consumption levels, individual
producer's baseline production and
consumption nghts. and individual
importer's baseline consumption rights.
Based on the information received, the
Agency plans to publish proposed
baseline apportionments in time for final
apportionments to be included in this
rule when it is promulgated on August 1.
1988.
As their definitions suggest.
production and consumption rights
overlap, but not entirely. To produce
controlled substances, a firm must-have
both production and consumption nghts;
to import controlled substances, it need
have only consumption nghts. The
overlap simply mirrors the overlap of
the Protocol's limits on production and
consumption (i.e.. production plus
imports minus exports). Several
examples illustrate how the two limits
may interact and how the proposed
regulatory system would accommodate
these interactions.
Assume the United States in 1986
produced 100 units, imported 10 units,
and exported 5 units of Group I
controlled substances. United States
1986 production would be 100 units and
its 1986 consumption 105 units. After the
Protocol's freeze on Group 1 controlled
substances took effect the United States
. could not produce up to 105 units of
controlled substances for domestic
consumption even though it would stay
within its consumption limit, because it
would exceed by 5 units its production
limit. Unless the United Slates gained
the nght to increase its production in the
manner permitted by the Protocol
(described below), it could only obtain
the remaining 5 units of controlled
substances permitted by the
consumption limit by importing them. To
restate this scenano in terms of rights.
United States producers would be
granted production rights for 100 units of
controlled substances. Producers and
importers would be granted
consumption nghts for 105 units. Thus.
producers could produce up to 100 units
of controlled substances using aU of
their 100 production rights and 100 of the
105 available consumpuoarights; the
remaining consumption rights could be
used to import controlled substances.
c. Allowance for Additional
Consumption Rights. A slightly different
example illustrates another aspect of the
proposed regulatory system.' Assume the
United States in 1986 produced 100
units, imported 5 units, and exported 10
units of controlled substances, for a 1986
production level of 100 and a 1988
consumption level of 95. In this case.
baseline consumption nghts would not
be plentiful enough to permit producers
to produce all 100 units for which they
held baseline production nghts. The
Protocol would permit production of all
100 units, provided that at least 5 are
-------
47502
Federal. Register / Vol. 52. No. 239 / Monday. December 14. 19B7 / Proposed. Rales
exported so that the consamplion tunit
is not exceeded. The proposed
regulations would permit the same by
granting additional consumption rights
upon proof of exports of controlled
substances to any nation until fanuary 1.
1993. and to any party of the Protocol
beginning January 1.1993.7 If a producer
held production rights for 12 units and
consumption rights for 10 units, he could
produce the 10 units for which, he held
production rights, export 2trf the units.
and receive from EPA additional
consumption rights for 2 units. With
those additional consumption rights, he
could produce oil 12 units for which he
held production rights.
The regulations would require
controlled substances to be exported
before additional consumption rights
would be granted, to ensure that the
United States stayed within its
consumption limits. If EPA were to grant
additional consumption rights based
merely on a producer's plan or
agreement to export controlled
substances, the United States could
exceed its consumption limits if the
producer did not ultimately export the
substances but nonetheless increased
his production as allowed by the
additional consumption rights he
received. The regulations would
moreover require that exports reach
their destination—not just leave the
United Slates—before additional
consumption rights would be granted.
This requirement h necessary to track
controlled substances for purposes of
determining parties' compliance with the
consumption Kmits. Otherwise, on the
last day of any control period, parties
could export controlled substances as
needed to stay within consumption
limits, but since the exported controlled
substances would likely nor arrive at
their destinations until the following
control period, no party would have to
include the controlled substances in the
tally of its consumption. . '
Anyone who exports controlled
substances could obtain consumption
rights equal to the calculated level of
controlled substances exported. If the
exporter were not also a producer, he
could sell the consumption rights to a
producer. As further explained below.
all rights created by the regulations
would be transferable subject to EPA
verification that the transferor in fact
possesses the rights being transferred.
' A* noted earlier, the Pmocol requnCT that
beginning (aouary L 1391. only export* to parties
will be subtracted in determining consumption. EPA
will in future relemakingi promulgate a liifof
parties baaed on the hit kapt by the Secretariat of
the Protocol.
To illustrate anotherpossible
scenario, assume total Onited States
exports increased over 1966 levels, so
that the United States was below its
consumption limit. While the Uni-ed
States could not increase its prou action
[except under the circumstances
described below), it could increase its
imports up to the level permitted by the
consumption cap. To restate this in
terms of rights, if a producer with
production rights for 10 units and
consumption rights for 12 units exported
8'Bnits. he could acquire additional
consumption rights for ft units and
import a total of 8 units.
As the above examples demonstrate.
the Protocol's production and
consumption limits can interact in many
ways. EPA has tried to create a
regulatory system flexible enough to
accommodate the possible interactions.
Comments are requested on whether the
proposed system does provide adequate
flexibility and how it might be improved
d. Scheduled Reduction of Production
and Consumption Rights. The regulatory
system must also provide for the
Protocol's scheduled reductions. The
proposed regulations would do so by
reducing the number of rights granted
over time. For Group I controlled
substances, it would grant producers
and importers 100 percent of their
apportioned baseline production and
consumption rights for the first
reduction step: 80 percent of the same
for the second reduction step: and 50
percent of the same for the third. For
Group II controlled substances, the
regulations would grant 100 percent of
the apportioned 1986 baseline
production and consumption rights for
all the applicable control periods.
The proposed regulations do not yet
specify the control periods to which the
grants of rights would apply, since the
Protocol makes the timing of the freezes
of Group I and Group II substances
dependent on when the Protocol enters
into force. EPA solicits comments on the
appropriate time period for which these
rights would apply. EPA would
promulgate the dates of the control
periods in a future ruiemakmg after the
Protocol has entered into force and
before the Protocol's requirement have
taken effect.
Even after the date «f f\ try into force-
is known, however, a T:«-stion will
remain as to the proper dates Tor the
freeze of Group I controlled substances
at 1986 levels. The issue arises from the
potential discontinuity in the timing of
the first and second steps of the
reduction schedule for Group I
controlled substances. The Protocol
specifies 12-month control periods for all
three steps of the Group I reduction
schedule. But while the Protocol
provides that the second step will take
effect beginning July 1.1993. it makes
the start of the first step dependent on
when the Protocol enters into force. If
the Protocol enters into force on January
1.1989, the freeze will take effect
beginning July 1.1989. In that case, the
end of last freeze control penod will
coincide with the start of the first
control period for the second step. On
the other hand, if the Protocol enters
into force on any date other than
January 1st. there would be overlapping'
control periods, unless EPA defined the
last control period as lasting less than 12
months.
To avoid this problem. EPA intends to
promulgate dates for the last control
period of the freeze that do not overlap
with the first control penod of the 80
percent step. Unless the Protocol enters
into force on fanuary 1. the last control
penod of the freeze would be less than
12 months long, and the rights granted
for that period would be reduced
accordingly. EPA solicits comments on
this approach.
e. Allowance for Additional
Production Rights. As explained earlier.
the Protocol allows parties to exceed
their production limits by certain
amounts under certain circumstances.
For the first and second steps of the
reduction schedule for Group I
controlled substances and for the freeze
of Group II controlled substances, the
Protocol permits parties to exceed the
applicable production limits by 10
percent of the calculated level of their
1986 production in order to supply the
"basic domestic needs" of parties that
are developing countries and "for the
purposes of industrial rationalization."
For the third step of the Group I
reduction schedule, the Protocol allows
production to exceed the 50 percent
production limit by 15 percent of 1988
production levels for the same two
purposes. These allowances are termed
"potential production rights".
EPA believes that the driving force
behind the developing countries and
industrial rationalization provisions was
to minimize the construction of new
manufacturing capacity, particularly
during the initial penod when states are
deciding whether to adhere to the
Protocol. So viewed, the provisions for
ID and 15 percent increases in
production are intended to allow nations
that already have substantial installed
manufacturing capacity to make
available limited amounts of supplies to
satisfy demand from developing nations.
and to offset for losses in production
that might be sustained by shutting
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Federal Register / VoL 52, No. 239 / Monday. December 14.1987 / Proposed Rules
47503
down inefficient or obsolete facilities.
The cushion provided by the allowable
"potential production rights" will
provide sufficient flexibility in the
market to accommodate these needs
without undue price increases that might
encourage construction of new
manufacturing capacity.
Accordingly, EPA proposes to
implement the provisions for 10 and IS
percent production increases by
allocating "potential production rights"
that could be converted to production
rights upon proof of exports of
controlled substances to parties. Every
producer granted baseline production
rights would also be granted potential
production rights equal to 10 or 15
percent of his baseline production rights.
depending on the control period and
group of controlled substances involved.
A producer could then obtain
authorization from EPA to convert his
potential production rights to production
rights to the extent he exported
controlled substances to parties.
Because the industrial rationalization
provision refers to transfers between
parties, and the developing country
provision similarly limits production
increases to those necessary to supply
parties that are developing countries.
EPA would authorize conversion of
potential production rights only to the
extent controlled substances have been
exported to parries. In future
rulemakings. EPA wonld promulgate.
and from time to time revise, as
Appendix B to these regulations, a list of
nations that are parties' to the Protocol.
That list would be based on.the list of
parties kept by the Secretariat of the
Protocol.
EPA would otherwise issue notices
authorizing conversion of potential
production rights on the same basis as
the Agency would grant additional
consumption rights upon proof of
exports. In both cases. EPA would
require that the exported controlled
substances arrive in the country
importing them before EPA would issue
the authorizing notice or grant
consumption rights. EPA would also
limit the authorization or the
consumption rights to the control period
in which the exports arrived in the
importing country.
For a producer to make use of
production rights converted from
potential production rights^ he would
also have to obtain consumption rights
in the same amount Since any
controlled substances he expected to a
party would provide the baste for
obtaining additional consumption rights,
EPA would treat requests for
authorization to convert potential
production rights as requests for
additional consumption rights, as well
Therefore, upon proof of exports to
parties. EPA would (1) issue a notice
authorizing the conversion of potential
production rights equal to the calculated
level of the exports, for the control
period in which the exports arrived in
the importing nation, and (2) grant
consumption rights in the same amount
for the same control penod.
Anyone (not just producers) exporting
controlled substances to parties could
obtain authorization to convert potential
production rights, whether or not he held
potential production rights. If he did not
hold potential production rights, he
could either purchase such rights from.
or sell his authorization to. someone
who does. If enough controlled
substances were exported to parties, it
would be possible for EPA to issue
authorizations to convert more potential
production rights than there were
potential production rights to convert^ In
that case, authorizations beyond those
needed to convert all available potential
production rights could not be used
without violating the terms of the
Protocol and would therefore be useless.
f. Transfers Involving 25 Kilotonne
Parties. The Protocol also allows a party
to increase its production beyond the 10
or 15 percent allowances, if it receives a
transfer, "for the purposes of industrial
rationalization." of a calculated level of
production from another party whose
1980 calculated level of production was
less than 25 kilotonnes. However, unlike
the other provisions related to industrial
rationalization, this section of the
Protocol provides that "the total
combined calculated levels of
production of the Parries concerned
(may) not exceed the (Protocol's)
production limits."
EPA proposes to implement this
provision by permitting anyone ("the
recipient") to obtain production rights in
excess of baseline production rights to
the extent a "25-kilotonne party" agrees
to transfer to him some amount of the-
calculated level of production that the
party is permitted under the Protocol
and to decrease its production by that
amount. In a future rulemaking. EPA
would promulgate a list of 25-kilotonne
parties as Appendix D to these
regulations. EPA would adopt a list of
25-kilotonne parties compiled by the
Protocol parties, but absent such a list.
the Agency would compile its own
based on information available from the
Secretariat of the Protocol and the
parties themselves.
EPA believes that any transfer
meeting these requirements would serve
the purposes of industrial
rationalization, which are to "achiev(e)
economic efficiencies" or "respond!) to
anticipated shortfalls in supply at a
result of plant closures." EPA could
reasonably assume that any such
transfer would "achiev[e] economic
efficiencies" since the United States
recipient of a 25-kilotonne party's
production presumably would not seek
that production unless it were
economically efficient for bun to
produce it.
The regulations would require that the
recipient of a 25-kilotonne party's.
production obtain from the principal
diplomatic representative in that party's
embassy in. the United States a
document dearly stating that the 25-
kilotonne party will decrease its-
production by the amount it is.
transferring to the recipient. Tfie 25-
kilotonne party's agreement to decrease
its production by the amount being
transferred would ensure that the total
combined calculated levels of
production of the United States and the
25-kilotonne party would not exceed the
limits applicable to the two parties
under the Protocol. Upon obtaining a
copy of this document and other
requisite information. EPA would notify
the Secretariat of the Protocol of the
transfer, as required by the Protocol
and issue a notice granting the recipient
production rights equivalent to the
calculated level of production
transferred.
g. Transfer of Rights. As pointed out
earlier, all of the rights and
authorizations obtained pursuant to the
regulations wonld be transferable.
However, fora transfer to be effective.
the transferor would first be required to
submit a transfer request to EPA. The
Agency would maintain records-of who
holds what rights or has been-issued
authorizations to convert potential.
production rights. If EPA's reoosdc
indicated that the transferor possessed
sufficient rights 01 authorization to
cover the transfer request EPA would
issue a notice of transfer to th*
transferor and transferee. The transfer
would take effect as of the dale EPA
issued the notice, and EPA would revise
its records to reflect the transfer.
EPA is proposing these transfer
requirements because of the need to
assure compliance with the Protocol. A
fraudulent transfer of rights or
authorization would not only-result in
higher emissions of ozone-depleting
substances, but nsk the United States
exceeding the Protocol's limits. Thus.
EPA has provided for the procedural
safeguards described above to minimize
the possibility of fraudulent or mistaken
transfers.
h. Prohibitions on Production, or
Import in Excess of Rights. The
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Federal Register / Vol. 52. No. 239 / Monday. December 14. 1987'/ Proposed Rule3
capstone of the proposed system of
production and consumption nghts
would be the prohibitions on production
and import of controlled substances.
The regulations would prohibit anyone
from producing a calculated level of
controlled substances in excess of the
amount of "unexpended" production
rights held by that person. Similarly.
they would prohibit anyone from
producing or importing a calculated
level of controlled substances in excess
of the amount of"unexpended"
consumption rights held by that person.
A person's "unexpended" production or
consumption nghts would be the total of
the calculated level of production or
consumption rights he holda. minus the
calculated level of controlled substances
the person has produced and/or
imported, depending on the type of
rights involved. In short, the prohibitions
prevent anyone at any time from
producing or importing controlled
substances in amounts greater than the
unused production and consumption
rights that he holds at the time.
i. Import Bans. In addition to
implementing the Protocol's production
and consumption limits, the regulations
would also enact the Protocol's ban on
imports of controlled substances from
any nonpartv. except nonparties found
to be in compliance with the Protocol's
requirements. The Protocol requires that
parties impose, and the regulations
would accordingly implement that ban
beginning one year after the Protocol
enters into force. In future rulemakings.
EPA would promulgate, and from time to
time revise, as Appendix C to these
regulations, a list of nonparties found to
be in compliance with the Protocol.
The Protocol also provides for parties
to impose import bans on products
containing and products made with, but
not containing, controlled substances.
However, those provisions^are not self-
executing, as they require further action
of the parties to implement. Thus. EPA is
not proposing to impose further import
bans, but will promulgate such bans in
future rulemakings when the parties
have taken the necessary action. EPA is
nonetheless seeking comments on
products that should be covered by the
future bans. The Agency is also seeking
comment on whether any additional
steps (e.g.. labelling of products
containing or produced with controlled
substances from nonparties) might be
warranted either pnor to or in
conjunction with the trade restrictions
contained in the Protocol.
j. Reporting and Recordkeeping. EPA
is considering a vanety of alternative
recordi--'eping and reporting
requirements. One option is to require
firms involved in the production of the
regulated chemicals to maintain the
following information: Weekly records
of the quantity of regulated chemicals
produced at each facility including
controlled substances produced and
consumed for feedstock purposes; and
weekly records of the quantity and
purchaser of controlled substances
produced at each plant. These records
would be retained for a penod of four
years.
In addition. EPA would require
monthly reports from producers of the
controlled substances for each plant and
for all plants owned by the same
company within 15 days after the end of
each month. The reports would include
the following: summaries of monthly
production of the controlled substances:
monthly summaries of the quantity of
sales for each of the controlled
substances; the quantity and source of
material containing recr arable
controlled substances a.. J the quantity
of controlled substances recovered:
summaries of total monthly and control-
period-to-date production of the
calculated levels of Group 1 and Group 2
controlled substances; and total rights
the producer holds at the end of each
month.
Another approach and the way EPA is
presently leaning is to require the
following information: daily records of
the quantity of the CFCs and halons
produced at each facility including
controlled substances produced and
consumed for feedstock purposes: daily
records of the quantities of HCFC-22
and CFG-118 that may also be produced
at the same facilities: continuous
records of reactive temperature and
pressure within the primary reactor and
initial distillation column at each facility
during the production operations; daily
records of purchases and use of the
following materials consumed in
producing the regulated chemicals at
each plant: carbon tetrachloride.
perchloroethylene. chloroform.
hydrofluoric acid, hydrochloric acid.
bromine. HCFG-22 and CFG-23; and
daily records of the quantity and
purchaser of controlled substances
produced at each plant. These records
would be retained for a period of four
years.
Under this approach, monthly reports
required within 15 days of the end of
each month would include the following:
summaries of monthly production of the
controlled substances, specifying the
quantity used and consumed as
feedstocks, and production quantities of
HCFC-22 and CFC-118. if they are
produced at the same facility; monthly
summaries of the quantity of sales for
each of the controlled substances;
description of any material alterations
in the annual production plan required
for each facility by EPA (as described
below); description of any shifts in
operating characteristics: the quantity
and source of material containing
recoverable controlled substances and
the quantity of controlled substances
recovered; summaries of total monthly
and control-penod-to-date calculated
production levels of Group I and Group
II controlled substances; and the
producer's total consumption nghts.
production rights and authonzation to
convert potential production nghts to
production nghts.
EPA is leaning toward requesting
daily instead of weekly records of
production since daily records will
provide more precise information on
production. The more precise
information will aid in evaluating trades
(determining expended versus
unexpended production rights).
pinpointing violations, and will ease
checks on production records when
using process parameters (quantities of
raw matenals. temperature, pressure) to
calculate production. It is not expected
that daily records will impose a
significant burden on the industry since
information currently available to EPA
indicates that manufacturers already
keep production data on a once per shift
basis. Records of raw matenals. process
parameters, and other CFC compounds
(HCFC-22 and CFC-116) produced at
the regulated facilities are requested to
provide a check on production records.
Records of sales of controlled
substances would provide not only a
check on production records, but would
provide EPA information on whether
exporters have actually purchased the
reported quantity of controlled
substances exported. Records of imports
and exports are requested on a daily
basis since EPA will need to check the
date of import/export against records
held by U.S. Customs and the U.S.
Census to venfy compliance.
This information would provide EPA
with a double-check on whether
producers and importers are staying
within their production and
consumption nghts. EPA solicits
comment on both of these approaches to
reporting and recordkeepmg
requirements. EPA is specifically
interested in the level of reporting
necessary to ensure compliance with
permit restrictions.
Whatever approach is chosen, failure
to maintain the required records or file
these reports in a timely manner may
result in EPA assuming production for
the unknown period at maximum
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Federal Register / Vol. 52. No. 239 / Monday. December 14. 1987 / Proposed Rules
47505
capacity for the purposes of evaluating
compliance.
Records and reports could be required
for each facility at each plant owned by
a company or they could be required on
an aggregate, company-wide basis. EPA
is presently inclined to require that all
production and sales records be
maintained for individual production
facilities, but that monthly reports to
EPA be submitted containing
information for both individual plants
and aggregated for all the plants owned
by a firm.
With thus approach. EPA would not
grant rights for each CFC or halon
production facility or plant, but will
instead grant rights that are company-
wide. However, to facilitate
enforcement with respect to these rights.
EPA will require that firms inform EPA
on an annual basis of their intended
production plans for each facility and
plant and notify the Agency of any
significant shifts in the location or
quantity of production described in
these plans as part of their monthly
reports. While compliance with these
annual production plans will not be
binding, they provide useful information
to EPA for purposes of compliance
monitoring. EPA solicits comments on
the sufficiency of these requirements.
For firms engaged in the import of
controlled substances. EPA is also
considering a variety of alternative
reporting and recordkeeping
requirements. EPA is presently inclined
to require the maintenance of daily
records of the quantity of controlled
substances, either alone or in mixtures.
that are imported: the dates and ports of
call of imports: the date and port of
entry into the United States or its
territories: the dates on which and the
country in which the imported
controlled substances were produced:
and a name and address from which
additional information can be obtained.
Monthly reports by importers to EPA
must include summaries of the above
information along with totals for
control-penod-to-date and the
importer's total consumption rights at
the end of the month. EPA will further
verify reported import activities with
information obtained by U.S. Customs
and with information reported through
data presented by other nations to the
Secretariat to the Protocol.
Exporters must report all exports not
previously reported in the context of
obtaining consumption or production
rights. Reports would be required on a
monthly basis and include: name and
address of exporter and recipient of the
exports: the exporter's Employer
Identification Number (EIN]; the type
and quantity of controlled substances
exported the date and port from which
the exports were shipped: the date and
country in which, the exports amved:
and the source from which the exported
controlled substances were purchased.
To facilitate the collection of the
relevant information. EPA is requesting
the U.S. Department of Commerce for
permission to obtain copies of Shipper's
Export Declarations (Form 7525-V) filed
by exporters of controlled substances.
EPA is also requesting the Customs
Service for permission to obtain copies
of "Entry Summaries" (Form 7501) filed
by importers of controlled substances.
EPA solicits comments on these
reporting and recordkeeping
requirements.
k. Compliance and Penalties. Based
on its review of reports and records and
possible site inspections. EPA would
determine whether firms are in
compliance with the regulations. The
regulations would define a violation as
the production or import of every
kilogram of controlled substances in
excess of unexpended production or
consumption rights, or in contravention
of the ban on imports from nonparties.
Under section 113(b) of the Clean Air
Act. penalties of up to $25.000 per day
per violation can be assessed. Thus, a
firm that produced two kilograms of
controlled substances beyond its rights
would be potentially subject to a
maximum fine of $50.000. In addition to
the various remedies under the Clean
Air Act EPA has the authority to seek
inhictive relief to limit further
production or sales, and to seek to have
any activity in excess of unexpended
rights subtracted from future year's
rights. Also, the Agency may bring
criminal penalties against knowing
violators, as set forth under section
113(c) of the Act.
Given that compliance with the terms
of the Montreal Protocol is determined
on a twelve month basis, the control
period would be for one block year
(unless otherwise specified), and EPA
would track compliance over that same
period. However, tracking compliance
on an annual basis presents some
practical limitations—in extreme
circumstances a firm could go out of
compliance only at the end of the
penod. With a shorter averaging time or
a rolling a\ i" UP compliance could be
judged earl it-r nr more frequently. As an
alternative to the block annual control
period. EPA r^uid specify a rolling
twelve-month < nntrol penod where
compliance cou:d be measured at the
end of each tr.ontn based on the
previous tv%>- •. e months of production.
This altemat •• e would provide greater
assurance thai the United States
satisfies its obligations under the
Montreal Protocol, but could somewhat
limit the flexibility of firms in meeting
shifting market conditions during the
course of a year. EPA proposes to
initially specify compliance on a block
one year control period, but will
consider shifting to a twelve-month
rolling control penod if difficulties in
ensuring compliance develop. EPA may
impose the twelve-month rolling quota
on firms that have violated production
or consumption rights or in cases where
compliance monitoring is hindered.
1. Effective Date. The proposed
regulations would not take effect until
the Montreal Protocol enters into force.
After the Protocol has entered into force.
EPA would revise the effective date
section of regulations to include the date
of entry into force.
The United States is now in the
process of ratifying the Protocol. That
process includes completion of an
environmental impact statement
concerning the Protocol, and submittal
of the Protocol by the President to the
Senate for its advice and consent If the
Senate gives its advice and consent the
ratification document then goes to the
President for his signature and. once
signed, is deposited at the United
Nations headquarters. Unless
unanticipated delays are encountered.
EPA expects this process to be
completed well before the January 1.
1989 target date for entry into force.
m. Payment of Fees.' (a) Background.
In recognition of the fact that producers
and importers of controlled substances
would receive production and
consumption rights which would allow
them to engage in their activities. EPA
has examined the feasibility and
desirability of making the
administration of this regulatory system
as self-supporting as possible by having
the producers and importers beat some
of its costs through payment of ..
administrative fees. EPA is proposing to
include Sec. 82.14 in the proposed rule.
which would provide for EPA to collect
fees in advance for granting production
and consumption rights. The authority
for this provision is the Independent
Offices Appropriation Act ("1OAA"]. 31
U.S.C. 9701 (formerly 31 U.S.C. 483(a)).
which permits and encourages Federal
agencies to recover, to the fullest extent
possible, costs attributable to special
benefits provided to identifiable
recipients.
1 Payment of administrative feet to eo»w the
costs of operating th« program is being proposwd
regardless of the regulatory approach |e g. allocated
quotas, auctions, or regulatory fees) unployed.
Because the fee simply covers the costs of operating
the program, the legal lines concerning a fee used
as a regulatory tool arc not applicable.
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47506 Federal Register / Vol. 52. No. 239 / Monday. December 14. 1987 / Proposed Rules
The following describes the broad
outlines of the fee program.
(b) Activities, the Cost of Which are
Proposed for Recovery The Supreme
Court has stated that agency activities
for which costs are properly chargeable
to the recipient are those which
"bestow[ j a benefit on the applicant.
not shared by other members of
society." In National Cable Television
Ass'n v. U.S.. 415 U.S. 336. 34O-41 (1974).
The Court of Appeals for the D.C.
Circuit has further specified that the full
costs of providing a service may be
recovered when:
• The Agency has identified specific
activities for which the fee is being
assessed:
• The service produces a private
benefit:
• The value of the benefit is
reasonably related to the fee:
• The benefit accrues at least in part
to an identifiable pnvate beneficiary
and not merely to an entire industry;
and
• The service produces no
independent public benefit. Central &
Southern Motor Freight Tariff Ass'n v.
U.S.. 777 F.2d 722.730 (D.C. Cir. 1985).
Based on these criteria. EPA proposes
to recover the full costs of the following
activities, ail of which relate to
apportioning and administering
production and consumption nghts:
(1) Determining the amount of
baseline production and baseline
consumption rights apportioned to
specific producers and importers.
(2) Processing applications, under
Sees. 82.9 and 82.11 for additional
production rights, and taking associated
actions (e.g. notifying the Secretariat of
the Protocol of 25-kilotonne party
transfers).
(3) Processing applications under Sec.
62.10 for additional consumption nghts.
(4) Processing applications under Sec.
82.12 for transfers of nghts.
(5) Processing and maintaining the
reports required to be submitted to EPA
under Sec. 82.13.
EPA requests comments on whether to
charge for additional activities, such as
audit and enforcement activities.
(c) Determination of Costs of
Activities. EPA proposes to recover the
following costs of the activities
descnbed above:
(1) Direct labor costs, which will be
based on the grade level of staff working
directly on the activities;
(2) Indirect labor costs, which will
include managenal and supervisory
support, and secretarial/clerical
support; and;
(3) Overhead costs, including office
space costs, utilities, equipment, and
materials.
By the first day of any control period.
every person owning production or
consumption nghts applicable to that
control penod would have to pay EPA
the full amount of the fee owed. Failure
to pay the fee on a timely basis would
result in the person being treated as
owning no production or consumption
nghts during the control penod. until
payment is made. Late payment would
be subject to interest computed at the
Federal short-term rate.
Under EPA's proposed system.
owners of production or consumption
rights would make one fee payment as
of the beginning of the control penod.
No additional fees would arise from
applications to EPA under Sees. 82.9-
82.12 for additional production or
consumption nghts or transfers of rights.
EPA solicits comments on the merits of
charging separately for EPA's costs in
processing such applications and
reducing the up-front fees accordingly.
In addition, EPA solicits comments on
procedures for imposing fees with
respect to audit or enforcement
activities, if EPA determines to impose
such fees.
(a) Fee Waivers or Adjustments.
There may be circumstances under
which waivers from, or adjustments of.
fees would be appropriate. While the
IOAA is silent concerning such matters.
it does provide that the President shall
set policies concerning the
implementation of the IOAA. Office of
Management and Budget (OMB) Circular
A-25, Sec. 9(b) contains guidelines for
Federal user charge systems and
provides for exceptions to a general user
fee policy under several circumstances.
Under these guidelines, waivers may be
appropriate under the following
circumstances:
(1) Public Interest. If the person uses
the controlled substances as part of
activities designed to promote the public
interest, the fee may be waived. EPA
solicits comments on the circumstances
under which this exemption may be
applicable.
(2) Economic Hardship. A fee may be
waived or adjusted if its imposition
would result in an economic hardship on
the person. Considerations for an
economic hardship waiver include size
of the firm and amount of sales or use of
controlled substances.
(3) Small Business. EPA solicits
comment on whether waivers of
adjustments would be appropnate for
small businesses, based on number of
employees and annual gross revenue
from sale or use of the controlled
substance.
EPA further solicits comments on
whether a fee should be charged for
processing an application for a waiver
or adjustment (which would be refunded
if the waiver or adjustment is granted).
3. Other Regulatory Options Considered
As a regulatory scheme, allocated
quotas of production and consumption
rights appear to offer the advantages of
the other options while avoiding many
of their potential problems. However, as
discussed above, it is not free from
concerns.
By restricting the supply of CFCs and
halons through regulation. EPA would
effectively create a scarcity that would
result in higher prices for the controlled
substances as demand for CFCs and
halons exceeded supply over time.
Under the allocated quota approach.
any additional revenue that would result
from the scarcity created by this
regulation accrue to the firms allocated
nghts.
The magnitude of these transfer
revenues would depend on how much
the prices for the regulated chemicals
increased over time. Based on the
analysis presented in the RIA. Table 5
presents EPA's estimates of possible
transfer revenues that would accrue
primarily to the chemical manufacturers.
assuming that they allowed market
forces to determine what pnce and
which firms purchase CFCs and halons.
(If market forces do not operate, the
producers and importers will determine
allocation to users based on criteria
other than pnces.) Table 5 shows that.
even for scenanos where price increases
are small in the initial years and
gradually increase to the price where
expected chemical substitutes come into
play, the total amount of transfers could
range from S2.0 billion to S5.7 billion
from 1989 through 2000. For the scenario
where CFC price increases in the early
years are more substantial (e.g., the
"stretchout cases" where
implementation of low cost reductions is
delayed), the amount of the transfers
increases accordingly. Overall, for the
decade leading up to the turn of the
century, transfer revenues were
calculated to be approximately three
times greater than the social costs (i.e.,
the real resource costs to reduce use)
involved in meeting the control
requirement.
TABLE 5 — PRELIMINARY ESTIMATE OF POTEN-
TIAL SOCIAL COSTS AND TRANSFERS TO
PRODUCERS
CFC pnc* mcnun
(IMS S/kg)
1989 .....
Least
con
00
Stretchout!
MCXMT-
•M
00
MOOT.
IN/
maiof
00
M4KX
1 00
-------
Federal Register / Vol. 52. No. 239 / Monday. December 14. 1987 / Proposed Rules 47507
TABLE 5 —PRELIMINARY ESTIMATE OF POTEN-
TIAL SOCIAL COSTS AND TRANSFERS TO
PRODUCERS—Continued
SMtcnoua
1994
1999 —
2005
2075
Sooai costs (present
value m mlbons o»
1985 dollars!
iggft-HXW . . .,
1989-2075
Trannar revenue!
(present value «
mttonsof 1985
dollars)
1989-2000 _ .-
1989-2075 .. -
Least
COSI
221
377
377
5*8
689
27.040
1,975
6.163
Moder-
ate
350
548
548
548
1.148
29.220
2S16
7.096
Moder-
ate/
maior
370
548
548
548
1.628
37.910
2.757
6,378
Mawr
548
548
548
548
1850
38.140
5.703
9400
Assumes CFCs regulated with an
initial freeze in 1989 at 1988 levels. 20
percent reduction in 1993 and 50 percent
reduction in 1998. and halons frozen at
1986 levels in 1992.
Social costs are discounted at a 2
percent rate, and transfer costs are
discounted at a rate of 6 percent.
reflecting the opportunity cost of funds
in the private sector.
Source: Estimates taken from RIA.
An argument can be made that the
above analysis overstates the quantity
of transfers. According to this line of
reasoning, chemical manufacturers may
not behave competitively and would not
allow market prices to determine who
gets these chemicals, but would instead
directly allocate them to their customers
based on past sales. CFC and halon
prices would increase only gradually
reflecting the higher costs of producing
less of these chemicals and the need to
generate capital for research and
production of chemical substitutes. The
resulting lower price increases could act
as a disincentive to the introduction of
more expensive, substitute chemicals.
While no estimate of the price
increases under this scenario has been
calculated, given the slow rate of pnce
increase in the EPA scenarios, the
overall difference in the quantity of
transfers is not likely to differ
substantially. Thus, even in the scenario
where CFC and halon producers
allocate their allowable production and
limit pnce increases, transfers on the
order of a nearly a billion dollars or
more are likely over the next ten years.
This raises questions as to whether
possible profits from continued
production of the restricted chemicals
might have the undesired effect of
delaying the introduction of less
profitable chemical substitutes.
EPA has explored a number of
possible approaches to improving the
equity of its proposed regulation by
reducing or eliminating the potential
transfers to the CFC and halon
producers and importers. One approach.
the use of auctions to allocate
marketable rights, was mentioned in an
earlier section. Under this option. EPA
would auction rights to all interested
parties and the resulting transfers would
accrue to the U.S. Treasury.
An advantage of the auction approach
is that it takes CFC allocation out of the
hands of producing firms and allows the
market to function. While detailed
design of an auction is not presented, as
an aid to commenters. the major
characteristics of auction forms most
likely to be applicable to the case of
CFCs can be briefly presented. An
advantage in the design of an auction of
CFC permits is the availability of
existing models provided by the
auctions regularly conducted by the
Federal Government in the areas of
government procurement leasing of
mineral nghts (including onshore and
outer continental oil and gas
development coal leases, geothermal
development, etc.). and Treasury bills.
The government auctions are typically
structured as "first-price sealed-bid"
auctions.' in which potential bidders
submit sealed bids and the highest
bidder is awarded the item for the price
he bid. An alternative is the "second-
price sealed-bid" auction, in which the
highest bidder wins the item but pays a
price equal not to his own bid but to the
second-highest bid. Variations on these
forms can be used: for example, the
government may impose a reserve price,
discarding all bids if they are.too-low;
and bidders may be charged an entry
fee for the right to participate.
When a fixed quantity of a good is put
up for sale (such as with the weekly
Treasury bill auction), two kinds of
sealed bid auctions are used to sell
multiple units, as explained below. In
the discriminatory sealed bid auction.
each of the bidders pays the amount he
bid. In the uniform-price sealed bid-
auction, each successful bidder pays a
price equal to the highest unsuccessful
bid. Procedurally, bidders submit bids
that consist of both a price and a
desired number of units of the
commodity. Enough units are available
that a number of the highest bidders can
be awarded the units for which they bid.
The government then ranks all buyers'
bids by pnce from highest to lowest, and
cumulates the quantities bid.10 The
result is a market demand curve.
To aid in reducing uncertainty, the
introduction of an auction aaan
allocation mechanism could be phased
in according to a preannounced
schedule (such as every three months):
each auction would offer only a fraction
of total rights for sale. The phase-in
approach would allow time for
procedural and substantive familiarity
to be gained by all parties: if necessary,
limitations could be placed on the
amount of nghts any one firm could
acquire. With a very short timeframe
between auctions, a firm concerned
about the bidding up of prices could
hold back, bid only its true value for
nghts in a subsequent auction, and have
less concern over rights acquisition. To
the extent it is desirable to protect small
firms or particularly vulnerable
industries, set asides could be
designated for these groups.
In EPA's consideration of the use of
an auction to allocate rights, several
concerns have ansen. EPA is concerned
about the potential large uncertainties
regarding the pnce and availability of
the controlled substances which an
auction might create, particularly in its
initial years. Related concerns are that
big companies could easily outbid small
companies, that speculators would drive
up the pnce of rights, and that
companies would hoard supplies.11 As
suggested above, a number of steps in
designing an auction could be taken to
address these concerns.
The final concern involves the
question of EPA's legal authority under
the Clean Air Act to operate ail auction.
Such an auction would constitute
regulatory action by an administrative
agency, pursuant to an asserted grant of
authority from Congress, requiring the
payment of money by the pnvate sector
to the U.S. Treasury. The principal legal
issues EPA is considering concern (1)
whether such an asserted grant of
congressional authority constitutes a
delegation by Congress of its
constitutional power to impose taxes or.
alternatively, its constitutional power to
regulate commerce: and whether
Congress in fact granted such authority
for an auction under the statutes EPA
administers.
One potential alternative—a "zero
revenue auction"—might avoid some of
the legal and practical problems. This
alternative would not yield revenue to
the government.
Under this approach, each producer
(or user) would receive a provisional
• Sealed-bidi are preferred due to n«k aversion
on (he pan of bidden
10 The cumulation process may require several
steps (nol detai'ed here)
1' To tome extent uncertainty stem* from the
shortages themselves and sufficient information
regarding the auction form would alleviate concerns
over the method of allocation.
-------
<75M
Federal Reajttar J "Vol. 52. No. 239 / Monday, December 14, 19fl7 7.
allocation of agktaequal to OslHfi
production {or nse). Each producer or
user would then be xeonnxd to submit a
sealed bid pt*«*iii«ug the number of
nghts it would purchase at a range of
alternative paces (Le. its demand
schedule). These bids would be
aggregated io oonsaruct the market
demand for these nghts. The resorting
market pnce-weald then be set at the
pnce that equates market demand with
the 1986 oahag on total prodacuon.
Each firm's final abacaboa will be its
reported deaaaod at the market pnce.
Each firm wooU then pay an amount
equal to the pnce of ifhese rights times
its final aUocaoon and receive back an
amount equal to the pnce tines its
provisional .aHocainon. Met payments to
the government wondd be zero for all
firms taken together. Each firm would
receive exactly the number of rights it
initially stated it would be welling and
able to purchase at the equilibrium
pnce.
The zero revenue auction has several
features that make it an attractive
interim option. First, it virtually
eliminates uncertaiaty by gusxanteeiDg
each firm the number of rights it oioally
reported ia ita ceiled bids a teach
alternative price." Second. A
automatically produces the first round af
trades in ihe system of f&acketabJe
permits, thus fadaoing any one .firms
ability to hoand. speculate.«ria oatttd
others. Third, it produces a public pace
signal providing inf
i £nf*
ure
_
(non-zero jevennej auctions and other
allocation systems that *^*^ jtrucrnram t
may want to i«nr^ciggn* as well AS for
potential "ntrantf into the industry.
Finally, if fap auction is oonductfld for
users (as opposed Io producers), it
would
ih<»
some
users may he forced out of business.
Each user «mid guarantee that it stays
in business or be compensated lor oaing
out of business at a price Io which ii
agreed.
If it is determined Jbat EPA Jacks the
authority to conduct an auction.
legislative authorization would be
necessary. These legal issues an
addressed in greater detail in aa
analysis prepared by EPA which is
included in the docket
EPA is specifically interested In
receiving comments on the desirability
of using auctions as the method of
allocating rights, the possible steps EPA
could take to minimize disruption in the
11 In fact any firm could go io far ai Io guarantee
Its provisional allocation as its final one-fey
reporting that si «oufai iniii Inai sis pcmsBnl
allocation tegantitas oi the fact, tf «U fna did
this, the ptovusaaaiaisBcsaicsi •odd a» to finai
one and change hands.
early years of an auction. *nd fte legal
issues concerning 'the possible need for
additional legislative authority.
If the legal obstacles to auctioning
marketable permits cannot be resolved.
a potentially attractive alternative
would involve EPA allocating CPC or
halon rights to firms now using (as
opposed to producing, importing, or
exporting) these chemicals. This option
is very similar to the scenario described
above whereby the chemical producers
would reallocate their aitowaUe quotas
to their customers based on historic
sales. The major difference is that in the
option where EPA allocates rights
directly to nsecs. the possnVQtty of
transfers from .users to producers M
substantially seduced. However, under
this option EPA would be required to
allocate nghts to approximately 10.000
firms who now buy directly from CFC
and halon producers. EPA is interested
in receiving comments on the
desirability of this approach and
possible ways to minimize the
administrative burden of the intitial
allocation.
Another attmi-li vf qptHM which
provides a strong alternative to tbe
auction option would he to combine
allocated quotas -with a regulatory fee.
While ia lee .alone wodi aot ensure
compliance wan, the reductions zequired
by the Montreal Pjotncal. when teamed
with Allocated quotas. Ian flaw woaki
be remedied, The quota would paovade a
relatively sktatghtfdrwanianeana of
ensuring that -the adnctions requited by
the Montreal ftctocot axe achieved. A
fee »*«'»«x»«»H jgaJMt pyrAi^onf pnri
importers would provide an economic
incentive for *h«» •inrnnrfiirftirm 0{
chemical substitutes and far firms to
employ other Low coat methods of
reducing emissions. It would also
provide clear signals a bant feature price
increases and avaid many of Ihe
potential uncertainties .associated with
auctions. The fee would ako capture
most of the transfers far -eq«i«dentof
ozone-depleting substance produced.
An important Htmipri rnnnirlcrntuin ^g
the extent to which penodic fee
ad)ustments would occur on an
automatic basis or would reqmre
regulatory intervention. With the quota
system in place, automatic fee changes
specifically intended to bnng actual
CFC production into alignment with
production goals would not be
necessary. However, any adjustments
neeriprl as a result of significant changes
in economic activity, new scientific
evidence, and/or discovery that the cost
of switching to certain substitutes was
different than previously thought wrvuid
likely be difficult to accomplish on aa
automatic baata.iOn the other hand, tbe
more automatic the adjustment, me
more certainty for investment and
production decisions the system is ^My
to provide.
Another important design
consideration is the extent to which The
fee should be phased in: should it be set
from the start at levels calculated Io
extract the full amount of transfer
payments or should it be set low {merely
as a price signal) and subsequently
adjusted upward in (either small or
large) increments?
Collection of See payments would be
directly from the .firms allocated the
CFC and halon quotas, on a periodic
(e.g. monthly or annual) basis.
EPA seeks oonanents on the fees-
witb-qnotas option, in comparison v*Kb
both ueaoctionjiptionandlhe
allocated quota option without fees.
ERA is interested m receiving comments
on the deskafantthyand imptementatien
Isaacs Belated to Ibis option, metadutg
the legal OSQCB nssed earlier.
Under a finsd approach to reducrpg
the potential neqoitieB of the aHecated
quota system, some portion of the
transfers cowd oe iwcspluieu threttgh
voluntary donation by the pitiduceis to
an industry-wide research organisation.
This approach «voo4d not be mandated
by EPA. but wooM be punned by «^
voluntary efgaiHLafiun created by CFC
and halon producer and user utdnsliies.
Essentially, seme trr aB of me punluter
finm would Bgree to set aside some '
portion of
-------
Federal Register / VoL 52. No. 239 / Monday.- December 14.-1987 / Proposed Rules 47509'
proposed projects would be submitted,
on a voluntary basis and reviewed by a
committee representing the members of
the institute.
Joint research groups have been
established by other industries (e.g.. the
Electric Power Research Institute) and
are generally highly regarded by their
members. Several CFC user groups have
already initiated and funded joint efforts
to resolve obstacles to testing and using
CFC substitutes. The major halon
producers and users have agreed in
principal to pursue this option with the
chemical producers assessing a few cent
per kilogram tariff on all halon sales to
fund joint projects to reduce emissions.
to develop new fire protection chemicals
and practices. EPA is interested in
comments on the possible structure and
scope of this type of organization, how it
might aid in facilitating technology
transfer and the extent to which it might
add to research and development efforts
undertaken anyway by individual firms.
The second major concern with
allocated quotas relates to the
possibility that some industries—
particularly those where CFCs or halons
are only a small fraction of total product
cost—may be slow to respond to
economic incentives to reduce their use
of the controlled substances and may
elect to simply pay higher prices for
CFCs/halons instead. The rate at which
firms will move to make cost effective
reductions rests on a behavioral
assumption about the extent to which
firms will minimize production costs. To ,
gain some insights into the effect of
alternative assumptions on cost-
minimizing behavior. EPA included in
the RLA several scenarios where the
analysis assumed that firms elected to
delay or failed entirely to pursue certain
cost-effective, low-cost reduction
options.
Table 5 shows the differences in CFC
pnces for various assumptions about the
rate at which firms employ low-cost use
reductions. Compared to the "least cost"
case where reductions are taken as they
become cost competitive and >. >
technologically available, the three
"stretchout" cases demonstrate that
should firms not seek to minimize costs.
CFC pnces. social costs and transfers
could all increase. Given the assumption
on the availability of substitutes in the
future, these increases occur primarily in
the early years when the burden on user
industries will be most difficult and
before chemical substitutes for many
applications will be commercially
available.
This analysis shows the close
interrelationships among CFC- and
halon-using industries under the
proposed regulatory approach. To the
extent those industries where
inexpensive reductions are available
postpone making such reductions, prices
of CFCs and halons would likely
increase to all industries. For those user
groups where CFCs are a large
percentage of final product price (e.g.,
the foamblowing applications), such
increases could be burdensome
particularly in the initial years before
chemical substitutes come to market
and place a ceiling on such cost
increases. Table 6 shows EPA estimates
of the total amount of CFCs and halons
consumed by the major user industries.
TABLE 6.— 1985 UJS. CONSUMPTION
OF CFCs AND HALONs BY MAJOR
USER INDUSTRIES
Industry
Flexible Foam —
Rigid polyurethane
foam.
Rigid non-urethane
foam.
Refrigeration and air
conditioning.
Aerosol _..
Sol"?"*
Fire extinguisher
Miscellaneous
Total
weight-
ed use
(mill
kg)
1B.6
61.3
12.8
96.0
11.6
54.8
43.4 >
22.0
Chemicals
used
CFC-11
CFC-11.12
CFC-12.
114
CFC.11. 12.
114.115
CFC-11. 12
CFC-113
HaJon-1211,
• 1301.
• 2402 .
CFCrl2-
1 Estimates do not include Haton 2402.
Source? Estimates prepared for EPA Regu-
latory Impact Analysis.
Of course, direct limits on specific
CFC or halon uses—either bans or
engineering controls—also have serious
drawbacks. They would reduce or
effectively eliminate the markets' ability
to allocate CFCs and halons to their
highest valued uses and result in a
waste of resources. This happens
because they reduce individual's and
firm's rewards from finding those uses
as well as their incentives to find
substitutes that do not deplete ozone.
Requirements of this type are also
generally inflexible and unresponsive to
changes in the relative values of CFCs
and halons in other uses. An approach
relying on bans and engineering controls
places in the hands of the Federal.
government basic decisions on the use
of these chemicals. There is no
guarantee that the mandated restrictions
will result in better or more valuable
uses of these chemicals.
Since the initial limits are at 1936
levels, any shortfall in supply (and
associated increases in pnces) are not
likely to be large in the early years.
Further, it could take several yean to
promulgate regulations restricting
specified uses. Thus, such regulations
may not be helpful m easing the
transition.
However, because of the potential
concerns that some users may not
minimize their costs. EPA is seeking
comment on the desirability of
supplementing the allocated quota
system with direct limits on specific
CFC or halon user industries where
inexpensive reductions appear feasible.
These limits could be established by
EPA on a voluntary (e.g.. the publication
of technical guidance) or mandatory
basis, or they could start as voluntary
and become mandatory, through a
rulemaking procedure, only if necessary.
They could be developed through the
traditional agency process or through a
different process (e.g., a negotiated
process) with greater involvement of
industry and other interested groups.
In developing the RIA cost analysis,
EPA obtained substantial information
from a variety of sources on low-cost
measures to reduce CFC and use. Based
on its preliminary cost analysis, the.
following steps to reduce CFC and halon
use appear possible during the period
covered by this regulation:
a. Commercial Air Conditioning.,
Firms in this industry have taken steps
in recent years to shift a way. from'CFC-.
12 in air conditioning. For example^ „' „',
window and central units are no longer
of concern from the perspective ol.thls
proposal because they now use HCFC-
22. Commercial chillers have already . "
begun to shift, but could makagreatec.
use of HCFC-22. CFC-502, CFJWOO and
other chemicals and mixes wiu bsone _
depletion weights that are significantly'
lower than CFC-11 and CFC-12."'
Although CFC-502 is a blend of 484
percent HCFC-22 and 51.2 percent CFC-
115. it has a combined ozone depletion
weight of approximately 0.3, and'
therefore represents a potentially,.
attractive option for many firms. By
altering their market mix and shifting
more toward CFC-22. CFC-602. etc..
substantial'reductions in CFC-11 and
CFC-12 use are currently possible.
Nonetheless, there appeartojtt
substantial emissions resulting bom
current practices of venting CFCs during
routine maintenance. Relatively minor
design changes (e.g., different valves) by
equipment manufacturers could
facilitate improved servicing practices
and reduced emissions.
Over the longer-term, chemical
substitutes may make it possible to
eliminate use of CFC-11 and CFC-12 in
new equipment. The most promising
chemical substitute now appears to be
-------
47510 Federal Begater / Vol. 52. No. 239 / Monday, December.!^ 1967 J. Proposed Sulea
HFC-lMa. This chemical dees not
contain any chlorine and therefore
would not deplete ozone. It fan passed
preliminary short-term toxitity tests, but
has not yet undergone longer-term
testing and is not yet available in
commercial quantities. Recent industry
estimates suggest (his f^omy-o^ rf^iM be
available in 5 yean to 6 years if no
major problems are encountered, h has
many of the sane chemical and physical
properties of CFC-12 and Jmtaai tests
suggest that it ought requite nrny
changes to be used in new«q.iapment it
is . '• "ly. however, lo cast severaltimes
the -iirrent pace of CFC-12.
^ioambile Air Conditioning.
Approximately 25 percent of all CFCs
are used in automobile air conditioners
making it by far the single largest user
industry. In the near term, the auto
manufacturers could improve
component quality and several could
redesign their air conditioning units to
require a lower initial CFC charge per
unit. While ?vhy*«»"»"*l progress has
been made in reducing emissions in
manufacturing over the past years.
EPA's analysis suggests that a wide
variance exists among automobile
manufacturers and that additional steps
could be taken in (his area. Other CFC
reductions which appear possible in the
near term at die point of manufacture
include completing the awilchover lo
helium gas for testing systems and
eliminating unnecessary losses during
charging.
Over the longer term, automobile
manufacturers appear to have several
promising options for eliminating this
"
chemical substitutes [e^j., HCFC-22,
CFC-142b/22 blend, and HFC-IMaJ. Jo
addition, alternate air conditioning
systems incradmg a modified sterling
cycle may be feasible. Because of the
difficulty in knowing which of these or
other options wfH piuvu to be most
attractive, research into several of these
options simultaneously may be
desirable.
Even if atrtomobile ui
-------
Federal Register / Vol. 52. No. 239 / Monday. December 14. 1987 / Proposed Rules
47511
In addition to slabstock foam, flexible
nolded foam blown with CFC-11 is
used primarily in seat and back
cushions by auto manufacturers and
ilso in some furniture uses. Several
:ompames have stated that they
currently do not use CFC-11 as an
auxiliary blowing agent: they have
hifted to water blown foam. Other
:ompanies have noted that within three
.nonths they will also shift out of CFC
use and into water blown foams.
e. Commercial and Residential
Refrigeration. As was the case with air
:onditioning. over the last few years,
commercial refrigeration has moved in
he direction of shifting some uses from
:FC-12 to HCFC-22. CFC-502. CFC-502
ind other refrigerants. This trend is
likely to continue in the area of
commercial refrigeration. Manufacturers
can also further reduce emissions from
leak testing and rework. Increased
recovery at reworking, venting and
disposal will also reduce the use of
3FCs. Over the longer term. HFC-134a
appears promising as a means of
eliminating this use of CFC-12.
For home refrigerators, the same
substitute may prove feasible. In
addition, home appliances might be
produced using a modified sterling cycle
or other technology that does not use
CFC as its refrigerant. CFC-500, which
has a» ozone-depleting potential of 0.7.
can be used in some appliances such as
dehumidifiers.
f. Rigid Insulating Foam. CFC-11 is
widely used as a foam blowing agent to
make various forms of insulating foam
(e.g.. polyurethane. isocyanorate,
phenolic, etc.). Its molecolacmight and.
low thermal conductivity make CFC-11
an excellent chemical in. the
manufacture of highly efficient
insulating materials used for roofs.
walls, and foundations.
In the near-term, this use of CFCs may
not be significantly reduced because of
its utility in saving energy (and meeting
code requirements) and because no
substitute blowing agents an available.
However, some product substitutes may
make inroads into its current market
Over the longer-term. HCFC-123 may
become an attractive means of reducing
this use of CFC-11.
g. Rigid Packaging Foam. CFC-12 is
used as a blowing agent in the
manufacture of polystyrene, foam which.
is widely used m the food packaging
industry. CFC-12. currently competes
with pentane as a blowing agent for
producing this foam with each capturing
about 50 percent of the market.
Because of pentane's potential
problems with flammability and air
pollution, many Grms now using CFC-12
will not want to incur the substantial
coats of shifting to this chemicaL.
Instead, recent process development
efforts have demonstrated that HCFC-
22 can effectively be used as an
alternate blowing agent. Industry
estimates suggest that only minimal
costs would be incurred in converting a
plant from CFC-12 to HCFC-22 [on the
order of $50.000 to $100.000) and that
operating costs and efficiencies will not
be significantly affected. An application
was recently approved by the Food and
Drug Administration granting non-
objection (e g.. a ruling that the proposed
product for a particular use does not
differ materially from an already
approved product) to the use of HCFC-
22 blown foam m fast food packaging.
h. Total Flooding Fire Extinguishant
Systems. Halon 1301 is used almost
exclusively as the agent in total flooding
systems used to protect computer
centers, document rooms, libranes.
military installations, etc. Because it is
nontoxic (which allows it to be
discharged without evacuating the
facility) and because it does not leave a
residue, its provider an extremely useful
function in protecting high valne
property.
In response to recent concerns about
the rote of haloiw ar a potential ozone-
depleting substance, the industry has
initiated a series of steps to better
understand and reduce any unnecessary
emissions of this gas. For example, the
industry decided not to require
mandatory discharge testing of new
systems as part of a review of its fire
protection code. It is exploring the
development of alternative test gases
and'ways to limit discharges from fake
alarms. It also-conducted an industry-
wide survey to determine current uses
and sources of emissions and It
exploring ways to track halons from the
time of production to their release as
basis for possibly shifting to an
emissions (instead of production) based
regulatory regime.
In the near term; the voluntary
emission reduction steps described
above might provide ample room for
continued growth in the number of
systems assuming substantial reductions
from unncessary testing and false
alarms can be realized. Over the longer
term, alternate chemicals may be
developed, more efficient use of these
chemicals may be possible (e.g-, shifting
from 1301 total flooding systems to more
directed, less depleting 1211 systems), or
the industry may be capable of
demonstrating that an emissions based
regulatory system is a viable means of
protecting the environment while
continuing the use of these chemicals.
i. Halon Fire Extinguishers. Halon
1211 is used extensively in wheeled and
handheld portable fire extinguishers.
These extinguishers are used in
situations where human exposure to the
agent is possible (e.g.. airplanes) or
where concerns exist about harm from
residues from other agents (e g..
computers). At the same time, these
extinguishers have recently penetrated -
the broader consumer market and some
percentage are now being purchased
and used for applications where other
agents would be adequate.
In addition, the major user of Halon
1211 is the military as part of its training
exercises. The U.S. military has already
initiated a review of possible steps to
reduce unneccesary steps from training
and is also working on developing
alternative fire-fighting agents.
j. Sterilization. CFC-12 in
combination with ethylene oxide (EO)
(in a 12/88 blend) is widely used by
hospitals, medical equipment
manufacturers and contractors for
sterilizing equipment. While 30 percent
of the commercial market and majority
of hospitals now use this CFC/EO blend.
other options are currently feasible.
Hospitals could shift to a blend of
carbon dioxide and ethylene oxide and
totally eliminate their use of CFC-12^
While this shift requires that a chamber
be able to withstand higher pressure
and may involve a longer processing
time, neither of these concerns are
expected to create problems for most
hospitals.
Because of their higher volume use,
commercial sterilizers could
economically increase their recapture
andxecovery of CFC-12 through the
addition of carbon adsorption or
refrigerated condensers.. In turn.
hospitals could elect to increase their
reliance on contract sterilizers as an
alternative to shifting to carbon dioxide/
ethylene oxide mix.
Sterilization using cobalt radiation
has recently achieved a growing share
of the market and offers another
attractive alternative to current use o£
CFC-12 in this application. Other
methods of sterilization such as electron
beam and alternative chemicals are also
possible over a longer time period.
Finally. EPA is also seeking comment
on the desirability of requiring that
products produced with the controlled
substances be labelled. This
requirement would provide useful
information for consumers. By making it
possible for consumers to distinguish
between those spraycans that contained
CFCs and those that did not. it was an
effective part of the regulatory program
limiting this use of CFCs in 1978.
Labelling requirements could ba used as
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47512 Federal Register / Vol. 52. No. 239 / Monday. December 14. 1987 / Proposed Rules
an adjunct to any of the other regulatory
options descnbed above.
VII. Impact of Proposed Action
A. Reductions in Ozone Depletion
The proposed regulation would
substantially reduce the threat of
stratospheric ozone depletion and the
accompanying nsks to human health
and the environment. As shown earlier
in Table 4. in the absence of any
regulation, a continuation of current
trends in the use of ozone-depleting
chemicals could result in a global
average of 12 percent depletion by 2050
and as much as 40 percent depletion by
2075.
By reducing consumption of the most
potent ozone-depleting CFCs in
approximately a decade by 50 percent
from 1986 levels and by freezing
consumption of halons 1211.1301. and
2402. the projected depletion of ozone
would be substantially eliminated.
Based on current models, these
limitations (assuming r significant
portion of other nations take similar
steps) would result in depletion
estimates of 1.6 percent by 2050 and
under 1.4 percent by 2075.
Given the large uncertainties
concerning current atmospheric models,
the rate: of growth of other trace gases.
and reduction steps by other nations.
EPA's proposed actioi represents a
reasonable near-term strategy for
safeguarding the ozone layer. However,
as we develop a better understanding of
these factors, EPA intends to
periodically reassess its actions. The
Agency also intends to participate in
similar reassessments conducted under
the auspices of the Montreal Protocol.
B. Economic Impact
In its regulatory impact analysis. EPA
has examined the potential costs (in
terms of U.S. industry) ind health and
environmental benefits also limited to
the U.S. which are likely to result from
the proposed action. The analysis
assumes that a large portion of other
developed and developing nations join
with the United States in reducing their
consumption and production of the
controlled substances.
Given the nature of this issue, the RIA
necessarily covers a broad range of
areas. On the costs side, this analysis
covers eight major industrial groupings:
refrigeration; air conditioning; flexible
foam: ngid foam: solvent cleaning:
sterilization: miscellaneous: and fire
extmguishant The RIA contains
information on over 650 different control
options for limiting use of CFCs and
halons within these industrial groupings.
The potential benefits from limiting
the amount of future depletion also
cover a broad range of health and
environmental concerns. An increase in
the quantity of damaging ultraviolet
radiation flux would represent a major
change in one of the basic
environmental parameters potentially
affecting to varying degrees most forms
of biological life. While research to date
on the effects of increased exposure to
UV-B radiation has been limited, the
RIA explores several specific potential
areas of damage, only some of which
can be quantified with currently
available information.
1. Economic Costs of Reductions
EPA used a bottom-up approach in
analyzing the costs of meeting the
proposed regulation. As descnbed
above, studies were initiated in eight
major CFC and halon use categones.
These groupings were then further
divided into 82 specific applications. For
example, refrigeration was divided into
18 categories including retail food, home
refrigerators, refrigerated transport, etc.
Finally costs and emission reduction
estimates were developed for over 650
distinct control options covering the full
range of use applications. These options
included engineering controls, chemical
substitutes, product substitutes,
recovery and recycling, and work
practices. Cost estimates included
capital and operating expenses
(including, where applicable, any energy
penalty). Technologies were assessed in
terms of the date at which they would
be available (0-3 years. 4-7 yean, or
longer), and the rate and limits for
achieving market penetration.
The cost estimates for these
reductions were used as the input for the
Integrated Assessment Model (LAM)
which provided estimates of the total
cost of meeting a regulatory goal. The
model operates by prioritizing the
potential reductions on the basis of least
cost and the judgment of EPA's
contractors based on discussion with
industry representatives concerning the
likely response to regulations on the
part of specific industry sectors.
The output frnm the model provides
an estimate of 'he total social costs for
meeting a roc . -cd level of reductions,
the CFC or hd.un pnce increases which
would hkeU * > ompany such costs, and
the amount n: v.msfers which would be
involved. To1; •• 5 contains these
estimates for p-.-posed regulation under
four different assumptions concerning
the rate at which firms respond to
changes in market conditions resulting
from restncticrs on the regulated
chemicals.
The "least cost" scenario assumes
that all reductions are taken as soon as
they are technologically available and
as soon as the cost of CFCs or halons
exceed the cost of making the reduction.
In this scenario. CFC price increases are
minimal in the early years, rise to S3.77/
kg around the turn of the century and
plateau around S5.48/kg well before
2075 when chemical substitutes have
penetrated major markets.
The low initial cost increases reflect
the large quantity of CFC and halon
reductions that are available with
current technologies and which either
will save firms money (e.g.. through
additional CFC or halon recovery) or
which are competitive. In the latter
years of the analysis, the $5.48 pnce
ceiling reflects the anticipated costs of
alternative chemicals (e.g., primarily
HFC-134a replacing CFC-12 and HCFC-
123 replacing CFC-11 in foam
applications) which could replace large
quantites of current CFC use. In the
least cost scenario, total social costs
were calculated to be S689 million
through 2000 and S27 billion through
2075 (all social costs assume a 2 percent
discount rate).
In contrast to the "least cost" case.
the other scenarios assume varying
degrees of delay in implementation of
steps to reduce CFC and halon use.
Firms might delay their response for any
of several reasons: They lack
information about the availability or
applicability of a technology; they are
less concerned about minimizing costs
in the short-run because they can pass
on price increases to consumers; they
may lack access to capital to make a
shift to a lower cost technology; or they
may assume a high "hurdle rate" (i.e.,
the desired return on capital for any
new investments) for capital committed
to pollution control.
The costs of meeting the proposed
regulation under these alternative
scenarios is also shown in Table 5. The
social costs calculated from the LAM
through 2000 ranged from $1.1 billion to
$1.8 billion depending on the rate at
which firms implemented low cost
reductions. The CFC pnce increase
which would accompany these costs in
all scenanos reached $5.48/kg just
before the turn of the century. However,
the range of transfer costs during this
time period (1989-2000) was much
wider, reflecting different price increase
in the initial years. In the "moderate
stretchout" case transfers through 2075
totaled $7.15 billion, while in the "major
stretchout" case transfers totaled $9.4
billion.
Thus, the rate at which firms
implement low cost reductions is an
-------
Federal Register / Vol. 52. No. 239 / Monday. December 14. 1987 / Proposed Rules
47513
important determinant particularly in
the near-term, of the costs and transfer
payments involved in meeting the
proposed regulations.
As part of analyzing the economic
costs of reducing CFC and halon use. the
RIA also takes into consideration
possible impacts of the proposed
regulation on energy use. CFCs are used
in a wide range of energy-related areas
including insulation for buildings and
appliances. Its thermal efficiency also
affects energy consumption of
refrigerators and other appliances.
Based on the analysis in the RIA. no
significant increases in energy-
consumption or costs are likely to occur.
In the near-term. CFCs are still likely to
be used in major appliances. In the case
of insulation, building and energy codes
generally require a set level of energy
efficiency which will either continue to
be satisfied by CFC-blown foam or by
other insulating materials (e.g.
fiberglass). In the longer-term, substitute
blowing agents are likely to be
developed and formulations modified to
maintain current insulating values.
2. Health and Environmental Benefits
The RIA also contains a description of
the potential benefits that would result
from actions to limit the risks from
ozone depletion. In some of the health
and environmental areas, sufficient
research has been completed to provide
a basis for a dose response relationship
which can be used for calculating
potential benefits. Examples of these
areas include nonmelanoma and
melanoma skin cancer, and cataracts. In
other areas, research on UV-B radiation
effects primarily has taken the form of
case studies. For example, research on
plant effects has progressed the furthest
on soy beans, while research on aquatic
effects has examined potential impacts
on anchovies. In these and similar areas
(e.g.. increased groundlevel ozone
formation and sea level rise impacts),
the RIA quantifies benefits based on an
extrapolation from existing case studies.
Finally, in several areas, initial studies
have clearly shown that increased UV-B
radiation will cause damage, bat not
enough information exists to quantify
those impacts. Examples include
suppression of the immune system and
climate related impacts on water
resources, agriculture, forests, etc. A
detailed decnption of the derivation of
the benefits estimates are included in
volumes 1 and 2 of the RIA.
Table 7 summanzes estimates of the
economic benefits which would result
from the proposed actions to prevent
future depletion of the ozone layer.
These benefits reflect the difference
between the base case (no regulation)
described in Section IV and the "CFC
50%. Halon Freeze" case which forms
the basis for this proposed regulation.
It should be stated that projecting
benefits out to the year 2075 is a very
speculative exercise at best (but is
required because of the long
atmospheric lifetime of these chemicals).
The estimates are subject to substantial
uncertainties both in the calculation of
the dose-response effects, and in the
economic values placed on such effects.
Due to this enormous uncertainty, the
benefits have been estimated in ranges.
TABLE 7.—SUMMARY OF BENEFITS FROM
PROPOSED REGULATION*
Effoca.
Slun cancer cawt ...
Cataract cam . .
154 43 mlkon casern.
3.14 mnon caaea.
178miiioncasm
Mutton.
Value of skn cancer caaa
(lot and nqn eenemmrt
Value ol ikn career
death*.
How and Ngn tenMNrttf
Valua at cataract cam
(Jowand hqn Mniitviiy)
Damage v crepe .... _.
(low and hgn eentavty).
Damaga 1C ton.
(vow and high lonsnntty) ..
Damage to crope from
ground level anna.
OM and highaenMMM
Damage 10 fatfm^rm
(km and hgh eoraeMy)
See lev* me damage to
major pona.
.
TOM nonoten/ _—
(low and ngn •oneovoy)
S613MlK>n
(StJDdl-UOSM)
SUSMton.
(S174tM-»42M|
($72 m* -17 SHU
SZ34MKM.
(S23 MI-MS bU).
SSJbttan,
(S3M-S114H).
SU.4Mton.
($11 M-t24BMI).
SailZMbon.
(S22IIM.-ML3 MJ.
S43bdkon.
SSI Men,
oy«ci
le«et ozone
• Shorn* value « avoided damage rate** to -no reguto-
«on FarpopuManaanv today and bom baton 2076.
per year The to.eeenano aaaumo. a 6 f^fSSSl
"•and a (2 melon vaua ol Me »tien tirniiii brOSS
byTTirSnt'Sy^."*1" «••••»••-•» ««~"
Healtti enact* (Den oenoer Mdoneo and morlaHi. and
craraa ncoenoe mnniiia beeed on doea reet
meteepresemed n EPA (1087). Crap eatmeiea
tar gnn crape baaed one; on doae
•ay baana. Damage to Han eetmetei
of ta and one* hen baaed on doae mponae
ancnowea. Polymer cameae beeea on doae r
iHPdeti developed Mr PVC and airlanded to ocmde
•no^poiyeelera, Oamage to oope. fram grauod '
toea model Sea leoel nae eewn.
anon to Mnaan oamagae. bet any n»uy«
to major pona baaed on kmned caaa (tuaee.
The total benefits through 2075 were
estimated to be between $29 billion and
$340 trillion (benefit estimates were
discounted over a range of 1 percent to &
percent annually). The majority of these
benefits resulted from decreases in the
number of deaths from skin cancer
which is an area where effects research
has progressed ure furthest The skin
cancer benefit estimates, however,
assume no improvement in our ability to
treat skin cancer, if a cure for cancer
were discovered, these benefits would
decrease enormously. Because more
limited research has been undertaken in
the area of potential damage to crops
and aquatic organisms, the estimates of
potential benefits for these anas are
also uncertain. In its report to EPA. the
Science Advisory Board stated that it
believed that damage related to these
areas could prove to be of greater global
magnitude than harm from skin cancers.
3. Comparison of Costs and Benefits
Based on the analysis presented
above and detailed in the RIA, the
estimated benefits from the proposed
regulation would far exceed the
estimated costs. Table 8 summaiues
these benefits and costs. It shows that
for those areas where quantification
was possible, benefits would total from
$29 billion to $340 trillion for the period
1989-2075. In comparison, costs of
reducing CFCs and halons called for by
the proposed regulation for the same
penod would total approximately $27
billion. Table 9 illustrates the extreme
sensitivity of this analysis to specific
individual assumptions about discount
rates and the valuation of life:
Additional sensitivities are included in
the RIA.
TABLE 8.—COMPARISON OF COSTS
AND BENEFITS THROUGH 2075 by
Scenario
[Billions of 1985 dollars!
No Controls:
CFC Reeze
(low)
(high)
CFC 20%
(low)
(high)
CFC 50%
(low)
(high)
CFC 80%
(tow)
(high)
CFC 50%/
Halon freeze ...
(low)
(high)
CFC 50%/
Halon
freeze/U.S.
80%
(low)
(high)
U.S. only CFC
50%
(low)
(high)
Health
and
environ-
mental
benefits
5.995
16
324.000
6.132
17
330.000
6.299
18
339.000
6,400
19
341.000
6.463
19
345.000
6306
19
346.000
2.852
a
135.000
Costs
7
0.7
12
12
2
21
24
5
41
31
7
51
27
5
46
34
7
56
27
y
46
Nat
Ttmai ntilm
UWKIIIIS
5J8B
15
323.988
6.120
15
229.979
6.275
13
338459
6.369
12
340.949
6.436
14
344,954
6.472
12
343,944
Z825
»
134X964
All dollar values reflect the difference
between the No Controls Scenariaand
-------
47514 Federal Register / Vol. 52. No. 239 / Monday. December 14. 1987 / Proposed Rules
the specified alternative scenario.
Valuation of the health and
environmental benefits applies only to
people bom before 2075: costs are
estimated through 2075.
Ranges for damage valuation reflect
the following scenanos: the high
scenario assumes a 1 percent discount
rate and a $4 million value of life which
increases by 3.4 percent per year. The
low scenano assumes a 6 percent
discount rate and a $2 million value of
life which increases by 0.85 percent per
year. The medium scenano assumes a 2
percent discount rate and a S3 million
value of life which increases by 1.7
percent per year.
Source: EPA Regulatory Impact
Analysis. 1987.
TABLE 9.—SUMMARY OF RESULTS OF SENSI-
TIVITY ANALYSES FOR COSTS AND MAJOR
HEALTH BENEFITS FOR PEOPLE BORN BE-
FORE 2075
Serartwity
• two percent
dnoount rate)
No controls.
2 Discount ratas
A.1I
Protocol..
Wterence.
Ozona
nan
20^5
|pe>.
399
13
386
399
13
386
399
13
386
39*
386
399
13
386
Value
ofkvea
Ml
(10-)
6.499
ISO
6.349
24650
388
24.262
71
9
62
4J33
100
4.233
8667
225
8.442
Con-
trol
COM
(10')
Net
present
value
ol
(10-1
6.322
24218
57
4.206
8.415
Sewn EPA Regulatory Imped Anriym 1967
VTil. Additional Information
A. Executive Order 12291
Executive Order (E.O.) 12291 requires
the preparation of a regulatory impact
analysis for major rules, defined by the
order as those likely to result in:
(1) An annual effect on the economy
of $100 million or more:
(2) A major increase in costs or prices
for consumers, individual industries.
Federal. State, or local government
agencies, or geographic industries: or
(3) Significant adverse effects on
competition, employment, investment.
productivity, innovation, or on the
ability of United States-based
enterprises to compete with foreign-
based enterprises in domestic or export
markets.
EPA has determined that this
proposed regulation meets the definition
of a major rule under E.0.12291. and
has prepared a regulatory impact
analysis (R1A). That document, along
with this notice of proposed rulemaking.
has been submitted to the Office of
Management and Budget (OMB] for
review under Executive Order 12291.
Any comments from OMB and any EPA
responses to such comments are
available for public inspection at the
Central Docket Section, South
Conference Room 4, Docket No. A-87-
20. U.S. Environmental Protection
Agency. 401 M Street SW., Washington.
DC 20460. A copy of the RIA has also
been placed in the rulemaking docket.
B. Regulatory Flexibility Act
The Regulatory Flexibility Act. 5
U.S.C. 601-612. requires that Federal
agencies examine the impacts of their
regulations on small entities. Under 5
U.S.C. 604(a), whenever an agency is
required to publish a general notice of
proposed rulemaking. it must prepare
and make available for public comment
an initial regulatory flexibility analysis
(RFA). Such an analysis is not required
if the head of an agency certifies that a
rule will not have a significant economic
impact on a substantial number of small
entities, pursuant to 5 U.S.C. 605(b). EPA
has prepared an initial regulatory
flexibility analysis for the regulations
proposed in this notice, and this initial
RFA has been placed in the rulemaking
docket.
The initial RFA concluded that of the
many industries potentially affected by
the proposed regulation, the foam
blowers were the only group that could
be substantially affected based on the
criteria contained in EPA guidelines on
preparation of an RFA. For their
industries, because CFCs are such a
minor portion of total product costs.
price increases of the magnitude
anticipated by this regulation would not
result in significant economic impacts.
The preliminary RFA suggests that
different segments of the foamblowing
industry are likaly to be affected to
different extents depending on the
availability of chemical substitutes
versus alternative products. For
example, the polystyrene foam blowers
may be able to shift from CFC-12 to
HCFC-22 without incurring large capital
costs and therefore would remain
competitive with paper and other forms
of packaging. In the case of ngid foam.
pnce increases may cause some loss of
market share to non-CFC blown foam cr
to other materials. Due to data
limitations and the inability to
accurately model behavioral changes.
the number of firms that might go out of
business versus the number that would
shift to providing other insulating
material could not be determined.
In designing and evaluating its
regulatory options. EPA sought to
minimize the burdens placed on small
firms. In addition, the proposed hybnd
approach (allocated quotas plus
targetted regulations) would further
reduce potential increases in CFC prices
and thereby reduce the impact on the
foamblowing industry. Because foam
blowing is one of the major uses of
CFCs, providing foam blowers with set
asides and outright exemptions would
have substantial impacts on efforts to
protect the ozone layer or substantially
increase costs to other industries.
C. Paperwork Reduction Act
The information collection
requirements in this proposed rule will
be submitted for approval to the Office
of Management and Budget (OMB)
under the Paperwork Reduction Act of
1980.44 U.S.C. 3501 et seq. Comments on
these requirements should be submitted
to the Office of Information and
Regulatory Affairs. OMB. 726 Jackson
Place. Washington. DC 20530 marked
"Attention: Desk Officer for EPA." The
final rule will respond to any OMB or
public comments on the information
collection requirements.
IX. References
Connell. P.S.. (1986). "A parameterized
numerical fit to total column ozone changes
calculated by the LLNL1-D model of the
troposphere and stratosphere". Lawrence
Livermore National Laboratory. Uvermore.
CA.
Farman. J.C.. B.C. Gardiner, and J.D.
Shanklin. (1985). "Large losses of total ozone
in Antarctica reveal seasonal ClOx/NOx
interaction". Nature. 315.207-210.
Kerr. R.A.. (1987). "Has Stratospheric
Ozone Started to Disappear?". Science. 237.
131-132.
Khaki. M.A.K.. and R.A. Rasmussen. (1985).
"Tnchlorofluoroethane (F-113) trends at Pt.
Barrow. Alaska", in Geophysical Monitoring
for Climate Change. No. 13. Summary Report
1984. U.S. Department of Commerce. Boulder.
CO.
Molina. M.J., and F.S. Rowland. (1974).
"Stratospheric sink for chlorofluoromelhanes:
chlorine atom-catalysed destruction of
ozone". Nature. 249.810-812.
National Academy of Sciences. (NAS).
(1978). Halocarbons: Effects on Stratospheric.
Ozone. National Academy Press.
Washington. DC
National Academy of Sciences. (NAS).
(I979a). Protection Against Depletion of -
Stratospheric Ozone by Chlorofluorocarbons.
National Academy Press. Washington. DC.
National Academy of Sciences. (NAS).
(I979b), Stratospheric Ozone Depletion by
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Federal Register / 'Vol. 52. No. 239 / Monday. December 14. 1987 / -Proposed Rules
Halocarbons: Chemistry and Transport.
National Academy Press. Washington. DC.
National Academy of Sciences. (NAS).
(1983). Changing Climate. National Academy
Press. Washington. DC.
National Academy of Sciences. (NAS).
(1984). Causes and Effects of Changes in
Stratospheric Ozone: Update 1983. National
Academy Press. Washington. DC.
National Aeronautics and Space
Administration. (NASA). (1986). Present State
of Knowledge of the Upper Atmosphere: An
Assessment Report. Processes that Control
Ozone and Other Climatically Important
Trace Cases. NASA Reference Publication
1162. NASA. Washington. DC
Prather. M.f.. M.B. McElroy. and S.C.
Wofsy. (1984). "Reductions in ozone at high
concentrations of stratospheric halogens"-
Nature. 312.227-231.
Pyle. |.A.. and J.C. Farman. (1987). "Ozone
Depletion. Antarctic Chemistry to Blame"
Nature. 329.103-104.
Rasmussen. R A., and M.A.K. Khalil. (1982).
"Atmospheric fluorocarbons and methyl
chloroform at the South Pole". Antarctic
Journal of the United States: 1982 Review.
203-205.
United Nations Environment Programme.
(1987). "Ad Hoc Scientific Meeting to
Compare Model Generated Assessments of
Ozone Layer Change for Various Strategies
for CFC Control". Wurzburg. Federal
Republic of Germany. 9-10 April 1987. UNEP/
WG.1B7/INF.1
United States Environmental Protection
Agency (EPA). 11987). An Analysis of the
Risks from Trace Cases That Can Modify the
Stratosphere. U.S. EPA. Washington. DC.
World Meteorological Organization
(WMO). (1986). Atmospheric Ozone 1985.
Assessment of Our Understanding of the
Processes Controlling its Present Distribution
and Change. WMO Global Ozone Research
and Monitoring Protect—Report No. 16.
WMO. Geneva. Switzerland.
Date: December 1.1987.
Lee M. Thomas.
Administrator.
United Nations Environment Programme
MONTREAL PROTOCOL ON
SUBSTANCES THAT DEPLETE THE
OZONE LAYER
Final Act. 1987
Montreal Protocol on Substances That
Deplete the Ozone Layer
The Parties to this Protocol.
Being Parties to the Vienna
Convention for the Protection of the
Ozone Layer.
Mindful of their obligation under that
Convention to take appropriate
measures to protect human health and
the environment against adverse effects
resulting or likely to result from human
activities which modify or are likely to
modify the ozone 1 year.
Recognizing that world-wide
emissions of certain substances can
significantly deplete and.otherwise
modify the ozone layer in a manner that
is likely to result in adverse effects on
human health and the environment
Conscious of the potential climatic
effects of emissions of these substances.
Aware that measures taken to protect
the ozone layer from depletion should
be based on relevant scientific
knowledge, taking into account technical
and economic considerations.
Determined to protect the ozone layer
by taking precautionary measures to
control equitably total global emissions
of substances that deplete it with the
ultimate objective of their elimination on
the basis of developments in scientific
knowledge, taking into account
technical and economic considerations.
Acknowledging that special provision
is required to meet the needs of
developing countries for these
substances.
Noting the precautionary measures for
controlling emissions of certain
chlorofluorocarbons that have already
been taken at national and regional
levels.
Considering the importance of
promoting international co-operation in
the research and development of science
and technology relating to the control
and reduction of emissions of
substances that deplete the ozone layer.
bearing in mind in particular the needs
of developing countries.
Have agreed as follows:
Artcle I: Definitions
For the purposes of this Protocol:
1. "Convention means the Vienna
Convention for the Protection of the
Ozone Layer, adopted on 22 March 1985.
2. "Parties" means, unless the text
otherwise indicates. Parties to this
Protocol.
3. "Secretariat" means the secretariat
of the Convention.
4. "Controlled substance" means a
substance listed in Annex A to this
Protocol, whether existing alone or in a
mixture. It excludes, however, any such
substance or mixture which is in a
manufactured product other than a
container used for the transportation or
storage of the substance listed.
5. "Production" means the amount of
controlled substances produced minus
the amount destroyed by technologies to
be approved bv the Parties.
6. "Consumption" means production
plus imports minus exports of controlled
substances
7. "Calculated levels" of production.
imports, expor-s and consumption
means levels determined in accordance
with Article 3
8. "Industrial rationalization" means
the transfer of all or a portion of the
calculated level of production of one
Party to another, for the purpose of
achieving economic efficiencies or
responding to anticipated shortfalls In
supply as a result of plant closures.
Article 2: Control Measures
1. Each Party shall ensure that for the
twelve-month period commencing on the
first day of the seventh month following
the date of the entry into force of this
Protocol, and in each twelve-month-
penod thereafter, its calculated level of
consumption of the controlled
substances in Group I of Annex A doe*
not exceed its calculated level of
consumption in 1988. By the end of the
same penod. each Party producing one
or more of these substances shall ensure
that its calculated level of production of
the substances does not exceed its
calculated level of production in 1988.
except that such level may have
increased by no more than ten per cent
based on the 1986 level. Such increase
shall be permitted only so as to satisfy
the basic domestic needs of the Parties
operating under Article 5 and for the
purposes of industrial rationalization
between Parties.
2. Each Party shall ensure that for the
twelve-month penod commencing on the
first day of the thirty-seventh month
following the date of the entry into force
of this Protocol, and in each twelve-
month period thereafter, its calculated
level of consumption of the controlled
substances listed in Group D of Annex
A does not exceed its calculated level of
consumption in 1988. Each Party
producing one or more of these
substances shall ensure that its
calculated level of production of the
substances does not exceed its
calculated level of production in 1986,
except that such level may have
increased by no more than ten per cent
based on the 1988 level. Such increase
shall be permitted only so as to satisfy
the basic domestic needs of the Parties
operating under Article 5 and for the
purposes of industrial rationalization
between Parties. The mechanisms for
implementing these measures shall be
decided by the Parties at their first -
meeting following the first scientific
review.
3. Each Party shall ensure that for the
penod 1 July 1993 to 30 June 1994 and in
each twelve-month period thereafter, its
calculated level of consumption of the
controlled substances in Group I of
Annex A does not exceed, annually.
eighty per cent of its calculated level of
consumption in 1988. Each Party
producing one or more of these
substances shall, for the same periods.
ensure that its calculated level of.
production of the substances does-not
-------
exceed, annually, eighty per cent of its
calculated level of production in 1968.
However, m order to satisfy the basic
domestic needs of the Parties operating
under Article 5 and for the purposes of
industrial rationalization between
Parties, its calculated level of production
may exceed that limit fay up to ten per
cent of its calculated level of production
in 1986.
4. Each Party shall ensure that for the
period 1 July 1998 to 30 June 1999. and in
each twelve-month penod thereafter, its
calculated level of consumption of the
; ontrolled substances in Group I of
Annex A does not exceed, annually,
fifty per cent of its calculated level of
consumption in 1988. Each Party
producing one or more of these
substances shall, for the same penods.
ensure that its calculated level of
production of the substances does not
exceed, annually, fifty per cent of its
calculated level of production in 1988.
However, in order to satisfy the basic
domestic needs of the Parties operating
under Article S and for the purposes of
industrial rationalization between
Parties, its calculated level of production
may exceed that limit by up to fifteen
per cent of its calculated level of
production in 1986. This paragraph will
apply unless the Parties decide
otherwise at a meeting by a two-thirds
majority of Parties present and voting.
representing at least two-thirds of the
total calculated level of consnmptioB of
these substances of the Parties. This
decision shall be considered and made
in the light of the assessments referred
to in Article 8.
5. Any Party whose calculated level of
production in 1988 of the controlled
substances in Group I of Annex A was
less than twenty-five kilotonnes may,
for the purposes of industrial
rationalization, transfer to or receive
from any other Party, production in
excess of the limits set out in paragraphs
1.3 and 4 provided that the total
combined calculated levels of
production of the Parties concerned
does not exceed the production limits
set out in this Article. Any transfer of
such production shall be notified to the
secretariat, no later than the time of the
transfer.
6. Any Party not operating under
Article 5. that has facilities for the
production of controlled substances
under construction, or contracted for.
pnor to 16 September 1987. and
provided for in national legislation pnor
to 1 January 1987, may add the
production from such facilities to its
1986 production of such substances for
the purposes of determining its
calculated level of production for 1988,
provided that such fatalities are
completed by 31 December 1990 and
that such production does not raise that
Party's annual calculated level of
consumption of the controlled
substances above 0.5 kilograms per
capita.
7. Any transfer of production pursuant
to paragraph 5 or any addition of
production pursuant to paragraph 8 shall
be notified to the secretariat, no later
than the time of the transfer or addition.
8. (a) Any Parties which ere Member
States of a regional economic
integration organization as defined in
Article 1(8) of the Convention may agree
that they shall jointly fulfill their
obligations respecting consumption
under this Article provided that their
total combined calculated level of
consumption does not exceed the levels
required by this Article.
(b) The Parties to any such agreement
shall inform the secretariat of the terms
of the agreement before the date of the
reduction in consumption with which
the agreement is concerned.
, (c) Such agreement will become
operative only if all Member States of
the regional economic integration
organization and the organization
concerned are Parties to the Protocol
and have notifiBd the secretariat of their
manner of implementation.
9. (a) Based on the assessments made
pursuant to Article 8. the Parties may
decide whether
(i) adjustments to the ozone depleting
potentials specified in Annex A should
be made and. if so. what the
adjustments should be: and
(if) further adjustments and reductions
of production or consumption of the
controlled substances from 1986 levels
should be undertaken and. if so. what
the scope, amount and timing of any
such adjustments and reductions should
be.
(b) Proposals for such adjustments
shall be communicated to the Parties by
the secretariat at least six months
before the meeting of the Parties at
which they are proposed for •adoption.
(c) In taking such decisions, .the
Parties shall make every effort to reach
agreement by consensus. If all efforts at
consensus have been exhausted, and no
agreement reached, such decisions shall,
as a last resort be adopted by a two-
thirds majority vote of the Parties
present and voting representing at least
fifty per cent of the total consumption of
the controlled substances of the Parties.
(d) The decisions, which shall be
binding on all Parties, shall forthwith be
communicated to the Parties fay the
Depositary. Unless otherwise provided
in the decisions, they shall enter into
force on the expiry of six months from
the date of the circulation of the
communication by the Depositary.
10. (a) Based on the assessments
made pursuant to Article 6 of this
Protocol and in accordance with the
procedure set out in Article 9 of the
Convention, the Parties may decide
(i) Whether any substances, and if so
which, should be added to or removed
from any annex to this Protocol: and
(ii) The mechanism, scope and timing
of the control measures that should
apply to those substances;
(b) Any such decision shall become
effective, provided that it has been
accepted by a two-thuds majority vote
of the Parties present and voting.
11. Notwithstanding the provisions
contained in this Article. Parties may
take more stringent measures than those
required by this Article.
Article 3: Calculation of Control Levek
For the purposes of Articles 2 and 5.
each Party shall, for each Group of
substances in Annex A. determine its
calculated levels of:
(a) Production by:
(i) Multiplying its annual production
of each controlled substance by the
ozone depleting potential specified in
respect of it in Annex A: and
.(ii) Adding together, for *•«•-!« *ur^
Group, the resulting figures;
(b) Imports and exports, respectively.
by following, mutatis mutandis, the
procedure set out in subparagraph {a);
and
(c) Consumption by adding together
its calculated levels of production and
imports and subtracting its calculated
level of exports as determined in
accordance with subparagraphs (a) and
(b). However, beginning on 1 January
1993. any export of controlled
substances to non-Parties shall not be
subtracted in calculating the
consumption level of the exporting
Party.
Article 4: Control of Trade With Non-
Parties
1. Within one year of the entry into
force of this Protocol, each Party shall
ban the import of controlled substances
from any State not party to thn Protocol
2. Beginning on 1 January 1993, no
Party operating under paragraph 1 of
Article 5 may export any controlled
substance to any State not party to this
Protocol.
3. Within three years of the date of the
entry into force of this Protocol, the
Parties shall, following the procedures in
Article 10 of the Convention.
in an annex a list of products contammg
controlled substances. Parties that haw
-------
Federal Register / VoL 52, No. 239'/ Monday. December 1*. 1987 / Proposed Rule* 47517
not objected to the annex in accordance
with those procedures shall ban. within
one year of the annex having become •
effective, the import of those products
from any State not party to this Protocol.
4. Within five years of the entry into
force of this Protocol, the Parties shall
determine the feasibility of banning or
restricting, from States not party to this
Protocol, the import of products
produced with, but not containing.
controlled substances, if determined
feasible, the Parties shall following the
procedures in Article 10 of the
Convention, elaborate in an annex a list
of such products. Parties that have not
objected to it in accordance with those
procedures shall ban or restrict within,
one year of the annex having become
effective, the import of those products
from any State not party to tms Protocol
5. Each Party shall discourage the
export, to any State not party to this
Protocol, of technology for producing
and for utilizing controlled substances.
6. Each Party shall refrain from
providing new subsidies, aid. credits.
guarantees or insurance programmes for
the export to States not party to this
Protocol of products, equipment, plants
or technology that would facilitate the
production of controlled substances.
7. Paragraphs 5 and 6 shall not apply
to products, equipment plants or
technology that improve the
containment recovery, recycling or
destruction of controlled substances.
promote the development of alternative
substances, or otherwise contribute to
the reduction of emissions of controlled
substances.
& Notwithstanding the provisions of
this Article, imports referred to in
paragraphs 1.3 and 4 may be permitted
from any State not party to this Protocol
if that State is determined, by a meeting
of the Parties, to be in full compliance
with Article 2 and this Article, and has
submitted data to that effect as specified
in Article 7.
Article 5: Special Situation of
Developing Countries
1. Any Party that is a developing
country and whose annual calculated
level of consumption of the controlled
substances is less than 0.3 kilograms per
capita on the date of the entry into force
of the Protocol for it or any time
thereafter within ten years of the date of
entry into force of the Protocol shall, in
order to meet its basic domestic needs.
be entitled to delay its compliance with
the control measures set out in
paragraphs I to 4 of Article 2 by ten
years after that specified in those
paragraphs. However, such Party shall
not exceed an annual calculated level of
consumption of 0.3 kilograms per capita.
Any ouch Party shall be entitled to use
either the average of its annual
calculstedlevel of consumption for the
period 1995 to 1997 inclusive or a
calculated level of consumption of 0.3
kilograms per capita, whichever is the
lower, as the basis fonts compliance
with the control measures.
2. The Parties undertake-to facilitate
access to environmentally safe
alternative substances and technology
for Parties- that are developing countries
and assist them to make expeditious use
of such alternatives.
3. The Parties undertake to facilitate
bilaterally or multilaterally the provision
of subsidies, aid. credits, guarantees or
insurance programmes to Parties that
are developing countries for the use of
alternative technology and for substitute
products.
Article 6V Assessment and Review of
Control Measures
Beginning in 1990. and at least every
four years thereafter, the Parties shall
assess the control measures provided
for in Article 2 on the basis of available
scientific, environmental technical and
economic information. At least one year
before each assessment the Parties
shall convene appropriate panels of
experts qualified in the fields mentioned
and determine the composition and
terms of reference of any such panels.
Within one year of being convened, the
panels will report their conclusions.
through the secretariat to the Parties.
Article 7: Reporting of Data
1. Each Parry'shall provide to the
secretariat within three months of
becoming a Party, statistical data on its
production, imports and exports of each
of the controlled substances for the year
1988. or the best possible estimates of
such data where actual data are not
available.
-2. Each Party shall provide statistical
data to the secretariat on its annual
production (with separate data on
amounts destroyed by technologies to
be approved by the Parties), imports.
and exports to Parties and non-Parties.
respectively, of such substances for the
year during which it becomes a Party
and for each year thereafter. It shall
forward the data no later than nine
months after the end of the year to
which the data relate.
Article 8: Non-Compliance
The Parties, at their first meeting.
shall consider and approve procedures
and institutional mechanisms for
determining non-compliance with the
provisions of this Protocol and for
treatment of Parties found to be in non-
compliance.
Article Srftesearch. Development.
Public A wanness and Exchange nf
Information
1. The Parties shall co-operate.
consistent with their national laws.
regulations and practices and taking
into account in particular the needs of
developing countries, in promoting.
directly or through competent
international bodies, research.
development and exchange of
information on:
(a) Best technologies for improving the
containment recovery, recycling or
destruction of controlled substances or
otherwise reducing their emissions:
(b) Possible alternatives to controlled
substances, to products containing such
substances, and to products
manufactured with them: and
(c) Costs and benefits of relevant
control strategies.
2. The Parties, individually, jointly or
through competent international bodies.
shall co-operate in promoting public
awareness of the environmental effects
of the emissions of controlled
substances and other substances that
deplete the ozone layer.
3. Within two years of the entry into
force of this Protocol and every two
years thereafter, each Party shall submit
to the secretariat a summary of the
activities it has-conducted pursuant to
this Article.
Article 10: Technical Assistance
1. The Parties shall, in the context of
the provisions of Article 4 of the
Convention, and taking into account in -
particular the needs of developing
countries, co-operate in promoting
technical assistance to facilitate
participation in and implementation of
this Protocol.
2. Any Party or Signatory to this
Protocol may submit a request to the
secretariat for technical assistance for
the purposes of implementing or
participating in the Protocol.
3. The Parties, at their first meeting.
shall begin deliberations on the means
of fulfilling the obligations set out in
Article 9. and paragraphs 1 and 2 of this
Article, including the preparation of
workplans. Such workplans shall pay
special attention to the needs and
circumstances of the developing
countries. States and regional economic
integration organizations not party to
the Protocol should be encouraged to
participate in activities specified in such
workplans.
Article 11: Meetings of the Parties
1. The Parties shall hold meetings at
regular intervals. The secretariat shall
convene the first meeting of the Parties
-------
47518 Federal Boater / Vol. si. Na 23ft / Monday. December 14. Ifl87 / Propp«d-.Ruiet
not later than one yaar aftecJhe dale of
the entry into force of this Psotoool and
in conjunction with a meeting «f die
Conference of the Parties to the
Convention, if a meeting of the latter is
scheduled within that period.
2. Subsequent ordinary meetings of
the Parties shall be held. unest-me
Parties otherwise decide, in cunjumAion
with meetings of the Conference-of the
Parties to the Convention. Extraordinary
meetings of the Parties shafl tie held at
such other tunes as may be-deemed
necessary by a meeting oHhe Parties, or
at the written request of any Party,
provided that within six monms of
such a request being communicated to
them by the secretarial it is supported
by at least one third of the Parties.
3. The Parties, at their first meeting.
shall:
(a) Adopt by consensus rules of
procedure for their meetings:
(b) Adopt by consensus the financial
rules referred to in paragraph Z of
Article 13:
(cj Establish the panels and determine
the terms of reference referred to in
Article 6:
(d) Consider ana approve me
procedures aad institutional
mechanisms specified in Article 8: and
(e) Begin preparation of workpians
pursuant to paragraph 3 of Article 10.
4. The functions of the joeetings of the
Parties shall be to:
(a) Review the implementation of this
Protocol:
(b) Decide on any adjustments or
reductions referred to in paragraph 9 of
Articles
(c) Deads an any addtaaato.
insertion ia or removal from any annex
of substances and on relatadoaotroi
measures ia accordance wdtrsMtsajranh
10 of Article 2:
(d) Establish, where necessary.
guidelines or procedures for reporting of
information aa providedsBr ta Article 7
and paragraph 3 of Article*
(e) Review requests tor technical
assistance submitted pnrsaaatto
paragraph 2 of Article 1ft
(f) Review reports prepared by the
secretariat pursuant to svnparagraph (c)
of Article 12:
(g) Assess, in accordance wua Amae
6. the control measures provided for in
Article 2;
(h) Consider and adopt, aa required,
proposals for amgnrfnimnt of *h»«
Protocol or any annex and for any new
annex;
(i) Consider ana adopt the budget for
implementing this Protocol: and
(j) Consider and undertake any
additional action that may be required
for the achievement of the purposes of
this Protocol.
agencies and the uteroBtioaar Atbmie
Enetn Agency.att«dU»aaySiaienct
party to this Protocol. Bay be j-
represented at meetings of .the Parties as
observers. Any body or agency, -whether
national orinteniaaonalgovexnnealal
or non-govemmearaLqaafeased infields •
relating to the protection of tha none
layer which has informed the secretariat
of its wish to be tepresentadat •
meeting of the Panties aaaa observer
may be admitted smless atleast one
third of the Parties present object The
ad^msaon and participation of
observers shaft be •object to the rules of
procedure adopted by the Parties.
Article 12: Secretariat
For the purposes of this Protocol the
secretariat shall: &
(a) Arrange for and service meetings
of the Parties as provided for in Article
11:
(b) Receive and maJre available, upon
request by a Party, data provided
pursuant to Article 7;
(c) Prepare and distribute regularly to -
the Parties reports based on information
received pursuant to Articles 7 and 9;
(d) Notify the Parties of anyreqaest
for technical assistance received
pursuant to Article 10 so a* to facilitate
the provision of such assistance;
(e) Encourage noa-PartiM to attend
the meetings of the Partie»aa observers
and to act in accordance with the
provisions of this Protocol:
(f) Provide, as appropriate, tne
information and requests referred to in
subparagnrphs (c) andtcTJ toeuch non-
party observers; end "'
Igl Ivnonn fonJi otoer functions for
the echieTement-ef the puposes of thh
Protocol as may be assigned to It by the
Parties.
Article 13: Financial Provisions
1-ae fanda reqniradlbrdhe op
tion
of this Protocol, including those for the
functioning of the ocretariat related to
this Protocol shatt be charged
exclusively against cenuibalKms from
the Parties.
t The Parties, at their fitst meeting.
shall adopt by consensus financial rules
for the operation of tins Protocol.
Article 14: Relationship a f This Protocol
to the Convention
Except as otherwise provided in this
Protocol, the provisions of the
Convention relating to Its protocols shall
apply to this Protocol
Article 1& Signature
This Protocol shall be open lor
signature by States and byregumai
economic integration organization in
NaonmealflB 18 SeptembertSaTJam ' •
Ottawa from 17 September lOTto 16
January MBVaad at UnHetf NUflms
Headquarters m New York$oml7
January 1988 to 15 Septenber-ma.
Article IBifntiy Into face • •
1 C. kJ» f u ... . U 1.1
1. This Protocol shall enter nto force
on 1 January 1989. provided Oiat'htleast
eleven instrument* of ratirica1»H.
acceptance; appro rat of fee'Erofecol -or
accession thereto nave been deposited
by States or regional economic " *'
integration organteaHons rtpieseuflngat
least two-thirds of 1966 estimated' global
consumption ofthe ceiitiulIeuV »
substances, and the pnmshim of
paragraph 1 of Article 17 of the
Convention have Been fnlfnled. Inlhe
event that these conditions nave not
been fulfilled by mat date, the Protocol
shall enter info force on the ninetieth
day following the date on -which the
conditions have been foffilledJ.''
2. For the purposes of paragraph 1,
any such instrument depositedby a
regional economic integration
organization shall not be couniedas
additional to those deposite'dlg;
member States of such organization.
3. After thf entry 'n>n
Protocol any State or rrynnal
integration organizanon soaJl baooj
Party to it on tha mo
-
the date of deposit of Aa uutwaoeat ol*
ratification, acceptance, appaowaier
accession.
Article IK Parties /oTninjr'AfterEntrir
Into rofce
Subject to Article S. any State or
regional economic jatagnttoB
organisation w aicb becomes a£atty to
this Protocol after thedatecf Jto entry
of the oblgations onder Actkat &m*
well aa under Article 4. IhaUqipcyAt
that date to the States andflgiOBBti
economic integration organization that
became Parties on the date thtJPtotocol
entered into force.
Article IB: Reservations
No reservations may be made *6 this
Protocol
Article 1& Withdrawal
For the porposes of ih» Pwdacol me
provisions of Article 19 of 4* '"' •
Convention Teiaong to withdrawal shall
apply, except with respect to Parties
referred to in paragraph 1 of Article 5.
Any such Parry may withdraw frost this
Protocol by giving written noflfibaBon to
the Depositary «t way time after few
yean of aasurampj the obHgatioaw
specified in paragraphs I to 4 of Article
2.Any such withdrawal shall take effect
-------
Federal Register / VoL 52. No. 239 / Monday. December 14, 1987 / Proposed Rules
47519
upon expiry of one year after the date of
its receipt by the Depositary, or on such
later date as may be specified in the
notification of the wrthdnrwHl.
Article 20: Authentic Texts
The original of this Protocol, of which
the Arabic. Chinese. English. French.
Russian and Spanish lexis are equally
authentic, shall be deposited with the
Secretary-General of the United
Nations.
In witness whereof the undersigned.
being duly authorized to that effect,
have signed thia protocol.
Done at Montreal thia sixteenth day of
September. One Thousand Nine
Hundred and Eighty Seven.
ANNEX A.—CONTROLLED
SUBSTANCES
Group
Group L
Group II:
Substance
CFCU(CTC-U) -
CF,CW(CFC-12)_-
dF.Cti (CFC-TT3J
GF.O, (CKMT4J...
CFiBrCI (haJon-
1211).
CF,Br(halon-1301).
CiF.Bft (halon-
2402).
Ozone
depteftng
potential1
1.0
10
OB
T.O
0.6
3.0
10.0
1 These ozone depleting potentials are esti-
mates based on existing knowledge and will
be reviewed and revised periodically.
X Tdk kd« j
* i o oe
For the reasons set out in the
preamble. Part 82 of Tide 4O of the Code
of Federal Regulations i» proposed as
follows:
1. The authority citation for Part 82
continues to read an follows:
Authority: 42 U.S.C 7457ff>t *
2. Part BZ is amended by adding the
following 55 S2J. through 82.14 and
appendices A through D to read as
follows:
PART 82-PTOTECTlOW OF
STRATOSPHERIC OZONE
Sec.
82 1 Purpose and acope.
82.2 Effective date.
82.3 Definitions.
82.4 Prohibitions;
82.5 Apportionment of baseline production
rights.
82.6 Apportionment o* baseline
consumption nghts.
82.7 Grant and phased reduction of baseline
production and caaiumpuon rights, foe
group I controlled substances.
SM.
82.8 &aat and freeae of, baaelaie production
and consumption nghts for group 11
controlled substances.
82.9 Allowance for production nghts in
addition to baseline pradncnon nghts.
82.10 Allowance for consumption nghts in
•addition to Dateline concunptkm right*.
82.11 Exports to parties.
82.12 Transfers of production aad
consumption rights.
82.13 Recordkeeping and reporting
requirements.
82.14 Payment of feer
Appendix A to Part 82—Controlled
substances and oxnne depienoa weights.
Appendix B to Part 82—PsrUe* la the
Montreal Protocol.
Appendix C to Part BZ—Nations complying
with, but not parry to. the protocol.
Appendix D to Part 82—Twenty-five-
kilotonne parties.
Authority. 42 U.S C. T457(bJ.
§ 82.1 Purpose and scop*.
(a) The purpose of these regulations is
to implement the Moatteat Protocol on
Substances that Deplete the Ozooe
Layer under auihonty provided by
section 157 of the Clean Air Act. The
Montreal Protocol requires each nation
that becomes a Party to the Protocol to
limit its total production and its
consumption, (defined as production pl"i>
imports minus exports} of certain ozone-
depleting ttuhatntipofr ftCCOf*K"ff tO flV
specified schedule. The Protocol also
requires Parties to impose certain
restrictions on trade in ozone-depleting
substances with nonpartfes.
(b) This rule applies to any individual.
corporate, or governmental entity that
produces, imports, or exports' controlled
substances.
§824 Effective date;
The regulations, ander this Part will
take effect when the Montreal Protocol
enters into force. The Montreal Protocol
will enter mto force on ]aj»ry X.1888»
provided that at least 11 Instruments of
ratification, acceptance, approval of the
Protocol or accession thereto have been
deposited by States or regional
economic integration organizations
representing at least two-thirds of 138ft
estimated global consumption of the
controlled substances; and provided that
the Vienna Convention for the
Protection of the Ozone Layer has
entered into force. If these conditions
have not been fulfilled by January 1.
1989. the Protocol will enter mto force
on the ninetieth day following the date
on which the conditions have been
fulfilled.
§82.3 Definitions.
As used in this Part, the term:
(a) "Administrator" means the
Administrator of the Environmental
Protection Agency or his authorised
representative.
(b) "Baseline consumption nghts"
means the consumption rights
apportioned under Sec. 82.9.
(c) "Baseline production nghts" means
the production rights apportioned under
Sec. 82.5.
(d) "Calculated level" means the level
of production, exports or imports of
controlled substances determined for
each Croup of controlled substances bj:
(1) Multiplying the amount (in
kilograms) of production, exports or
imports of each controlled substance by
that substance's ozone depletion weight
listed in Appendix A to this Part; and
[2] Adding together the resulting,
products for the controlled substances
within each Group.
(e) "Consumption nghts" meaoa the
privileges granted by this Partto
produce and import calculated levels of
controlled substances;howevec.
consumption nghts may be used to
produce controlled substances only in
conjunction with production nghts. A
person's consumption rights are the total
of the nghts he obtains under Sees. &2J
(baseline nghts for Group I controlled
substances). 82.B (baseline nghts for
Group II controlled substances),, and
82.10 (additional consumpuoa, eights
upon proof of exports of controlled
substances), as may be modified under
Sec. 82.12 (transfer of rights).
(f) "Control peoodft" means tbaee
penods during which the prohibitions
under Sec. 82.4 apply. Those- periods are:
(1) For Group I controlled substances;
[reserved]
(2) For Group II controlled sobstsnces:
[reserved!
(g) "Controlled subelanca" •eans-any
substance listed in Appendix A. to this
Part, whether existing alone or tar •
mixture, but excluding any such
substance or mixture that is in. a-
manufactured product other than a
container used for the transportation or
storage of the substance listed.
(h) "Export" means the transport of
controlled substances from withm the
United States or its temtones to persons
or countries- outside the United States or
its temtones.
(i] "Fatality" means any process
equipment (e&. reactor. disoBation
column) to convert raw materials or
feedstock chemicals into controlled
substances.
(j) "Import" means the transport of
controlled substances from outside the
United States or its temtones to persons
within the Umted States or its
territories.
(k) "Montreal Protocor* means the
Montreal Protocol on Substances that
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47520
Federal Register / Vol. 52. No.- 239 / Monday. December 14. 1987 / Proposed Rules
Deplete the Ozone Layer which was
idopted on September 16.1987, in
Montreal. Canada.
(!) "Nations complying with, but not
joining, the Protocol" means any nation
listed in Appendix C to this Part.
(m) "Party" means any nation that is a
party to the Montreal Protocol and listed
in Appendix B to this Part.
(n) "Person" means any individual or
legal entity, including an individual.
corporation, partnership, association.
state, municipality, political subdivision
of a state. Indian tribe, and any agency,
department or instrumentality of the
United States and any officer, agent, or
employee thereof.
[o\ "Plant" means one or more
facilities at the same location owned by
or under common control of the same
person.
(p) "Potential production rights"
means the production nghts obtained
under Sec. 82.9 (a) and (b).
(q) "Production" means the
manufacture of a controlled substance
from any raw material or feedstock
chemical: however, production does not
include the manufacture of controlled
substances that are used and entirely
consumed in the production of other
chemicals.
(r) "Production rights" means the
privileges granted by this Part fo
produce calculated levels of controlled
substances: however, production rights
may be used to produce controlled
substances only in conjunction with
consumption nghts. A person's
production rights are the totbl of the
rights he obtains under Sees. 82.7
(baseline rights for Croup I controlled
substances). 82.8 (baseline rights for
Group II controlled substances), and
82.9 (c) and (d) (additional production
rights), as may be modified under Sec.
82.12 (transfer of rights).
(s) "Twenty-five-kilotonne Party"
means any nation listed in Appendix D
to this Part
(t) "Unexpended consumption rights"
means consumption nghts that have not
been used. At any time in any control
period, a person's unexpended
consumption rights are the total of the
calculated level of consumption rights
he holds at that time for that control
period, minus the calculated level of
controlled substances that the person
has produced and imported in that
control penod until that time.
(u) "Unexpended production rights"
means production rights that have not
been used. At any time in any control
penod. a person's unexpended
production nghts are the total of the
calculated level of production nghts he
holds at that time for that control penod.
minus the calculated level of controlled
substances that the person has produced
in that control penod until that time.
§82.4 Prohibitions,
(a) No person may produce at any
time in any control period, a calculated
level of controlled substances in excess
of the amount of unexpended production
rights held by that person at that time
for that control period. Every kilogram
of such excess constitutes a separate
violation of this regulation.
(b) No person may produce or import
at any time in any control penod. a
calculated level of controlled substances
in excess of the amount of unexpended
consumption rights held by that person
at that time for that control period.
Every kilogram of such excess
constitutes a separate violation of this
regulation.
(c) A person may not use his
production rights to produce a quantity
of controlled substances unless he owns
at the same time consumption rights
sufficient to cover that quantity of
controlled substances, nor may he use
his consumption rights to produce a
quantity of controlled substances unless
he owns at the same time production
rights sufficient to cover that quantity of
controlled substances. However.
consumption rights alone are required to
import controlled substances.
(d) Beginning one year after the
effective date of this Part, no person
may import any quantity of controlled
substances from any nation not listed in
Appendix B to this Part (Parties to the
Montreal Protocol), unless that nation is
listed in Appendix C to this Part
(Nations Complying with. But Not Party
to. the Protocol). Every kilogram of
controlled substances imported in
contravention of this regulation
constitutes a separate violation of this
regulation.
982.5 Apportionment of baMlini
production rights.
Persons who produced one or more
controlled substances in 1988 are
apportioned calculated levels of
baseline production rights as set forth in
paragraphs (a) and (b) of this section.
Each person's apportionment is
equivalent to the calculated levels of
that person's production of Group I and
Group II controlled substances in 1986.
(a) For Group I controlled substances:
I Cafcuinad IMI
! [ReMivwri
(Reserved)
[Reserved]
§ 82.6 Apportionment of baseline
consumption right*.
Persons who produced, imported, or
produced and imported one or more
controlled substances in 1988 are
apportioned calculated levels of
baseline consumption nghts as set forth
in paragraphs (a) and (b) of this section.
The apportionment for each person who
imported controlled substances is
equivalent to the calculated levels of
Group I and Group II controlled
substances that the person imported in
1988. The apportionment for each person
who produced controlled substances is
equivalent to the calculated levels of
Group I and Group II controlled
substances that the person produced in
1988. multiplied by a correction factor.
The general equation for the correction
factor is (the calculated level of 1988
United States production minus the
calculated level of 1988 United States
exports) divided by (the calculated level
of 1988 United States production);
correction factors are separately
calculated for Group I and Group n
controlled substances.
(a) For Group I controlled substances:
Pmon
[RnMPiirtl
CticutaUd I**
(ReteivMl
(b) For Group n controlled substances:
Ctfcuuted
I) _.
(b) For Group II controlled substances:
§82.7 Grant and phased of baseUrw
production and consumption rights for
group I controlled substances.
(a) For each of the control periods that
ends before July 1.1993. every person-is
granted 100 percent of the baseline
production and consumption rights
apportioned to him under Sees. 82.5(a)
and 82.8{a).
(b) For each of the control periods that
occurs between July 1.1993. and June 30,
1998. inclusive, every person is granted
80 percent of the baseline production
and consumption rights apportioned to
him under 55 82.5(a) and B2.6(a).
(c) For each of the control periods that
begins after June 30.1998. every person
is granted 50 percent of the base-line
production and consumption rights
apportioned to him under 55 82.5(a] and
82.6(a).
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Federal Register / VoL 52. No. 239 / Monday. December 14. 1387 / Proposed Rules 47521
§ 82.8 Grant and freeze of baseline.
production and consumption rights for
group II controlled substances.
For each of the control periods
specified in § 82.3(0(2). every person is
granted 100 percent of the baseline
production and consumption rights
apportioned to him under 5 82.5(b) and
82.6(b).
§ 82.9 Allowance for production rights In
addition to basetow production rights.
(a) Every person apportioned baseline
production rights for Group I controlled
substances under 8 BZ5(a) is also
granted a calculated level of potential
production rights equivalent tnc
(1) 10 percent of his apportionment
under § 82J{a). for each control penod
ending before July 1.1998; and
(2) 15 percent of his apportionment
under § BZ5(a), for each control penod
beginning after June 30.1998.
(b) Every person apportioned baseline
production nghta for Group II controlled
substances under & flZ5(bl is also
granted a calculated level of potential
production rights equivalent to 10
percent of his apportionment under
§ 82.5(b). for each, control year specified
in § 82.3(0(2).
(c) A person may convert potential
production rights, either granted to him
under paragraphs [a] and (b) of this
section or obtained by him under S 82J2.
(transfer of rights), to production rights
only to the extent authorized by the
Administrator under § 8Z.11 (Exports to
Parties). A person may
obtainauthorization to convert potential
production rights to production rigftta
either by requesting issuance of a notice
under f 8Z.lIor by completing a transfer
of authorization under & 82.12,
(d) Any person ("The recipient") may
obtain productionrights in accordance
with the provisions of this paragraph.
(1) A nation listed in Appendix D to
this Part (Twenty-five-kirotonne Parties]
must agree to transfer to the recipient at
a specified time some pmount of the
calculated level of production that the
nation is permitted under the Montreal
Protocol. The recipient must obtain from
the principal diplomatic representative
in that nation's embassy in the United
States a document dearly stating that
that nation agrees to reduce its
allowable calculated level of production
by the amount being transferred to the
recipient and for the control period(s) to
which the transfer apphes~
(2) The recipient must submit to the
Administrator a transfer request that
includes a true copy of the document
required by paragraph (d)(l) of this
section and that sets forth the following:
(i) The identity and address of the
recipient;
(it) The identity of the Twenty-frve-
kilotonne Party;
(ni) The names and telephone
numbers of contact persona for the
recipient and for the Twenty-five-
kilotonne Party;
(iv) The amount of allowable
calculated level of production being
transferred; and
(v) The control penod(s) to which the
transfer applies.
(31 After receiving a transfer request
that meets the requirements, of
paragraph (d)(2) of this section, the
Administrator wdL
(i) Notify the Secretariat of the
Montreal Protocol of the transfer and
(ii) Issue the recipient a notice
granting the recipient production rights.
equivalent to the calculated level of
production transferred, and specifying
the control periods to which the grant of.
production rights applies. The grant of
production nghta will be effective on the
date that the notice is
§ 82.10 Allowance for censunipBun right*
In addition to beseNn* consumption rights,
(a) Except as limited by paragraph (b}
of this section, any person may obtain,
in accordance with the provisions of this
paragraph, consumption rights'
equivalent to the calculated level of
controlled substances that the person
has exported from the United States or
its territories. The consumption rights
granted under this section will be valid
only during the control period hi which.
the exports arrived in the country to
which they were transported1.
(1) The person who exported (the
"exporter") the controlled substances
must submit to the Administrator a
request for consumption rights setting
forth, with supporting documentation.
the following:
(i) The identities and addresses of the
exporter and the recipient of the exports-
(the "Importer");
(ii) The exporter's EIN (Employer
Identification Number);
(iii) The names and telephone number
of contact persons for the exporter and
for the importer
(iv) The quantity and type of
controlled substances exported:
(v) The date on which and the port
from which the controlled substances
were exported from the United States or
its territories;
(vi) The country to which the
controlled substances were exported
and the date on which they arrived hi
that country:
(viL)The source from which and the
date on which the exporter purchased
the controlled substances:
(2) The Administrator will review the
information •"«* documentatioo
submitted under paragraph (a XI) of this
section, and issue the exporter a notice
granting the exporter consumption rights
equivalent to the calculated level of
controlled substances that the
documentation verifies were exported.
The grant of the consumption rights will
be effective on the date the notice is
issued.
(b) No consumption rights will be
granted after January 1.1993, for exports
of controlled substances to any nation
not listed in Appendix B to this Part
(Parties to the Montreal Protocol].
582.11 Exports to parties.
In accordance with the provisions of
this section, any person may obtain
authorization to convert potential
production rights to production rights by
exporting controlled substances- to
nations listed in Appendix B to this Part
(Parties to the Protocol). Authorization
obtained under this section wiU be valid
only during the control penod in which
the controlled substances armed m the
party to which they were exported. A
request for authorization under this
section will be considered a request for
consumption nghta under { 8Z10. as
well.
(a) The exporter most submit to die
Administrator a request fat authority to
convert potential production rights to
production nghtfl. That request sausl set
forth, with supporting documentation,
the following:
(1) The identities and addresses of the
exporter and the importer.
(2) The exporter's EIN number;
(3) The names end telephone numbers
of contact persons for the exporter and
for the importer.
(4) The quantity and type of controlled
substances exported;
(5) The date on which and the port
from which the controlled substances
were exported from the United States or
its territories;
(6) The country to which the
controlled substances were exported
and the date on which they armed m
that country; and
(7) The source from which and the
date on which the exporter purchased
the controlled substances exported.
(b) The Administrator will review the
information and documentation
submitted under paragraph (a) of this
section, and assess the quantity of
controlled substances that the
documentation verifies were exported to
a party Based on that assessment, the
Administrator will issue the exporter a
notice authorizing the conversion of a
specified quantity of potential
production rights to production rights1 in
a specified control year, and granting
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7522
Federal Register / Vol. 52. No. 239 / Monday. December 14. 1987 / Proposed Rules
onsumption rights in the same amount
jr the same control year. The
uthorization may be used to convert
•otential production rights to production
ights as soon as the date on which the
lotice is issued.
82.12 Transfers of Production and
Consumption Rights.
Any person ("transferor") may
ransfer to any other person
"transferee") any amount of the
transferor's consumption rights.
production rights, potential production
rights, or authorization to convert
potential production rights to production
rights, as follows:
(a) The transferor must submit to the
Administrator a transfer request setting
forth the following:
(1) The identities and addresses of the
transferor and the transferee:
(2) The names and telephone numbers
of contact persons for the transferor and
for the transferee:
(3) The type of rights (i.e..
consumption nghts. production rights, or
potential production nghts) or
authorization being transfered:
(4) The Group of controlled
substances to which the nghts or
authorization being transferred pertains:
(5) The amount of rights or
authorization being transferred:
(8) The control period(s) for which the
nghts or authorization are being
transferred: and
(7) The amount of unexpended rights
of the type and for the control period
being transferred that the transferor
holds as of the date of the request
(b) If the records maintained by the
Administrator, taking into account any
previous trades and any production or
imports reported by the transferor.
indicate that the transferor possessed.
as of the date the transfer request was
processed, unexpended nghts or
authorization sufficient to cover the
transfer request, the Administrator will
issue a notice of transfer to the
transferee and the transferor. The notice
will specify the transferor and
transferee, and the amount, type and
control year of the nghts or
authorization transferred. The transfer
will be effective on the date the notice
of transfer is issued.
§ 82.13 Recordkeeping and reporting
requirements.
(a) Unless otherwise specified, the
recordkeepmg and reporting
requirements set forth in this section
take effect as follows:
(1) For Group I controlled substances,
beginning with the first day of the first
control period specified in § 82.3(f)(l).
(2) For Group II controlled substances.
beginning with the first day of the first
control penod specified in { 82.3(0(2)-
(b) Unless otherwise specified, reports
required by this section must be mailed
within 15 days of the end of the
applicable reporting penod to the
Administrator.
(c) Records and copies of reports
required by this section must be
retained for four years.
(d) In reports required by this section.
quantities of controlled substances must
be stated in terms of kilograms.
(e) Every person ("producer") who
will produce controlled substances
dunng a control penod must comply
with the following recordkeepmg and
reporting requirements:
(1) By the first day of each control
period, every producer must submit to
the Administrator a plan estimating for
each of his facilities the type and
amount of controlled substances he will
produce and the time penods during
which the controlled substances will be
produced. The plan must also include
estimates of the quantities of
chlorodifluoromethane (HCFC-22) and
hexafluoroethane (CFC-116) each of
these facilities will produce in that
control period. Any change in the plan
during the control period must be
communicated to the Administrator no
later than the month following the
change, as part of the monthly report
required under paragraph (e)(3) of this
section.
(2) Every producer must maintain the
following:
(i) Daily records of the quantity of
each of the controlled substances
produced at each facility, including
controlled substances produced for
feedstock purposes:
(ii) Daily records of the quantity of
HCFC-22 and CFC-118 produced at
each facility also producing controlled
substances;
(iii) Continuous records of the reactive
temperature and operating pressures
within the primary reactor and initial
distillation column during the
production operations at each facility:
and
(iv) Daily records of the quantity of
the following raw rr-crerials and
feedstock chemica s ;••.-chased for and
used at each plan: f'on tetrachlonde,
perchloroethylene - "oform.
hydrofluonc acid -. -ochlonc acid.
bromine. CFC-113 ! TKC-22. and CFC-
23.
(v) Daily records. ; :u.e quantity and
purchaser of contro 'i'ii substances
produced at each plani
(3) For each month every producer
must provide the Administrator with a
report containing the following
information:
(i) The production and sales in that
month of each controlled substance,
specifying the quantity of any controlled
substance used for feedstock purposes
for each plant and totaled for all plants
owned by the same person:
(ii) The quantities of HCFC-22 and
CFC-116 produced that month at the
same facilities producing any of the
controlled substances for each plant
(iii) A descnption of any shifts that
have occurred that month in the planned
utilization of facilities as descnbed in
the plan provided to the Administrator
under paragraph (e)(l) of this section:
(iv) The .total for that month and for
the conlrol-penod-to-date of calculated
levels of production for Group I and
Group II controlled substances for each
plant:
(v) The producer's total consumption
rights, potential production rights.
production nghts and authonzation to
convert potential production nghts to
production rights, as of the end of that
month: and
(vi) The quantity and names and
addresses of the source of recyclable or
recoverable materials containing the
controlled substance which is recovered
at each plant. For any person who fails
to maintain the records and reports
required by this paragraph, the
Administrator may assume that the
person has produced at full capacity
during the penod for which records or
reports were not kept, for purposes of
determining whether the person has
violated the prohibitions at Sec. 82.4.
(f) For Group I controlled substances.
beginning with the first control penod
specified under Sec. 82.3(0(1). and for
Group II controlled substances.
beginning one year after the Montreal
Protocol enters into force, any person
("importer") who imports controlled
substances during a control penod must
comply with the following
recordkeeping and reporting
requirements:
(1) Any importer must maintain the
following daily records:
(i) The quantity of each controlled
substance imported, either alone or in
mixtures;
(ii) The date on which the controlled
substances were imported:
(iii) The port of exit and port of entry
through which the controlled substances
passed: and
(iv) The dates on which and the
country in which the imported
controlled substances were produced.
(2) For each month, every importer
must submit to the Administrator a
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Federal Register / Vol. 52. No. 239 / Monday. December 14. 1987 / Proposed Ruies 47523
report containing the following
information:
(i) The daily records required in
paragraph (g)(l) of this section for the
previous month:
(ii) The total for that month and for
the control-penod-to-date of calculated
levels of imports for Croup I and Group
II controlled substances: and
(iii) The importer's total consumption
rights at the end of that month.
(g) For any exports of controlled
substances not reported under Sees.
82.10 (additional consumption rights) or
82.11 (Exports to Parties), the person
("exporter") who exported the
controlled substances must submit to
the Administrator the following
information within one month of the
otherwise unreported exports leaving
the United States:
(1) The names and addresses of the
exporter and the recipient of the
exports:
(2) The exporter's EIN number
(3) The type and quantity of controlled
substances exported:
(4) The date on which and the port
from which the controlled substances
were exported from the United States or
its temtories:
(5) The country to which the
controlled substances were exported
and the date on which they arrived in
that country: and
(6) The source from which and that
date on which the exporter purchased
the controlled substances exported.
§ 82.14 Payment of fees.
[Reserved]
Appendix A to Part 82—Controlled
Substances and Ozone Depletion
Weights
Contracted subsuncn
Controlled tutnunca*
A Group I
CFCO—TncMorotkionnMtian* (CFC-11)
CCI2F2—Oicnierodtflugonnitiim (CFC-12)
CCBF-CCIFZ-TncNorotnfluoramafW (CFC-
113) . . .
CF2CI-COF2—OcNOKjlau Hkionjemin*
(CFC-114) .. .
Ozon*
depletion
10
10
08
10
Ozone
I
COF2-CF3—(MonotcNorooenutkjoroelMn*
(CFC-115)
B Giouoll
CF2BO—efomocruoroorftuoromemin* (Htton
1211) . -_. I
CF3Br-8romomfluorome9ian( iH«lon 1301)
C2F48rt—Oftromotmfluoroemww (Htlon |
2402)-- . . .. I
06
30
100
SO
Appendix B to Part 82—Parties to the
Montreal Protocol
[Reserved]
Appendix C to Part 82—Nations
Complying With. But Not Parties to, the
Protocol
[Reserved]
Appendix 0 to Part 82—Twenty-Five-
Kilotonne Parties
[Reserved]
[FR Doc. B7-28215 Filed 12-11-87: 8*45 am)
BILLING COOC UM-50-M
-------
r.
-------
FINAL RULE
PROTECTION OF STRATOSPHERIC OZONE
TO BE SUPPLIED WHEN FEDERAL REGISTER
COPIES ARE AVAILABLE
-------
APPENDIX C
ANALYSIS OF HOW CFC REGULATIONS CAN CHANGE
FUTURE CFC CONSUMPTION BY TECHNICAL RECHANNELING
1. INTRODUCTION
The probable association between ozone depletion and chlorofluorocarbon
(CFC) emissions motivated negotiations under the auspices of the United Nations
Environment Programme to reach an agreement to limit production and consumption.
In September 1987 this led to an establishment of an international protocol to
control CFC emissions that will reduce emissions by 50 percent in joining
nations by 2000. To estimate the effectiveness of this protocol in reducing
ozone depletion requires evaluating which nations will participate in the
protocol and what will be the impact of the protocol on future CFC demand in
both non-complying and complying nations.
A large number of projections of future demand of CFCs have been made.
However, almost all of these were made on the assumption of no protocol and
assume technological developments that are unlikely to be fully realized under
the protocol in place. Consequently, to evaluate the protocol's effectiveness
requires consideration of how CFC demand/use could be indirectly altered as a
result of changes in technology caused by the protocol. This paper examines
this issue. It examines the reasons the "technology frontier" is likely to
diminish as well as the magnitude of that likely diminution of demand. It also
discusses the difficulty of analyzing even the sign of the costs of this change
in demand, and suggests some future analyses needed to address these issues more
comprehensively.
2. THE TECHNOLOGY FRONTIER AND ITS EFFECTS ON CFC DEMAND AND USE
Nordhaus and Yohe used the concept of a technology frontier in their work on
projecting CFCs (Nordhaus and Yohe, 1986). Conceptually, a technology frontier
defines a potential or saturation use of CFCs that depends on technology,
income, tastes, and population. The actual growth of demand/use in a nation
depends on two things: the future of the frontier and the rate at which nations
approach it. Exhibit 1, taken from Nordhaus and Yohe, schematically illustrates
how the path of actual consumption will, over time, tend towards the technology
frontier.
2.1 The Historical Growth of the Frontier
Nordhaus and Yohe point out the future of the technology frontier is not
certain, but has been positive in the past. Quinn et al. analyze this
historical growth pattern in more detail (Quinn et al., 1986). Quinn defines
the first period of CFC uses as the mid 1930s through the 1940s -- with the
development of refrigerator applications. A major new product emerged in the
1950s -- air conditioning. A second major use developed in the late 1940s and
early 1950s, aerosols. New applications developed for twenty years, so that by
1974, the aerosol use area was reaching maturity, just as the ozone controversy
started. Quinn discusses foam as a third major use, with the 1960s being a
period of initial growth, and with many new applications still being developed
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C-2
EXHIBIT 1
CFC
Use/GNP
1950
1980
Time
The top line defines the potential technology frontier for use of CFCs. It
slopes upward over time, reflecting technological advances and development of
new markets. The bottom line illustrates the path of actual consumption, which
over time approaches the technology frontier.
Source: Nordhaus and Yohe, 1987.
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C-3
today. A fourth major use area (for CFC-113) was solvents, vith major use
starting the late 1970s and with new applications continuing to be developed
today. (Other use areas exist sterilization, food freezing, etc.). The pattern
Quinn notes is a major new use each decade followed by at least two decades (for
that use) of major new products.
Besides his qualitative analysis, Quinn also estimates elasticities for
non-aerosol CFC use for CFC-11 and -12, demonstrating that throughout the 50
year time span there has been a strong relationship between CFC use and income.
Exhibit 2 schematically illustrates the strong growth of new uses and products
from the 1930s to the early 1980s.
DISAGGREGATING THE COMPONENTS OF DEMAND/USE
In order to understand how demand develops, it is useful to analyze its
components and their relationship to the technology frontier. This will provide
a better organizing structure for analyzing future demand and the potential
effects of the international protocol on it. CFC demand use can be divided into
four components: new uses (e.g., aerosols were a new use); new products (for
example, the mousse in Europe was a new aerosol product); market expansion of
existing products (for example, mousses are still expanding in Europe (Knollys,
1986)); and the replacement and servicing of existing products (for example,
deodorants are primarily a replacement product in Europe, without much market
expansion). Expansion of the technology frontier affects each, with the
greatest influence on new uses and products and with some influence on the
improvement of existing products.
In the past fifty years there have been a variety of forces that have driven
each of these components of growth. New uses resulted as a function both of
research and the inherent physical possibilities of CFC molecules. New products
have depended on both R&D and on information diffusion --it has taken time for
people to develop products. Products in the market expansion stage have
required time to penetrate potential markets, with marketing and the development
of a service capability driving the rate of expansion and with technological
improvements in products occurring as producers/users "move up" the learning
curve. Finally, mature products have expanded as a result of income and
population growth, with technological improvement tending to decrease the
intensity of use needed to produce the product (for example, air conditioning
charges have fallen).
FUTURE RATES OF GROWTH
Even in the absence of an international protocol, the future growth rates of
new uses and additional applications could vary from past rates, since the
possibility exists that uses and applications have been exhausted. Quinn,
however, shows that consistency of growth has been maintained for 50 years.
Hedenstrom, Samuelsson, and Ostman (1986) have listed an impressive set of new
products. Personal communications to EPA from industrial companies on new
products indicates that new products have been under development. On the other
hand, indefinite extrapolation of past rates of technology growth and demand
seems unlikely (Nordhaus and Yohe, 1986, Gibbs, 1986). Consequently, most
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C-4
EXHIBIT 2
COMPONENTS OF THE CFC BASELINE
CFC
Use
Per Capita
New Uses(?)
New Products
Expanded Markets
for Existing Products
1930s
1987
„ Replacement and
Servicing
Time
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C-5
analysts who have projected CFC growth have assumed that, over time, the
technology frontier will decline (U.S. EPA 1987a). This, however, does not
fully define the issue since an international protocol is quite likely to
influence R&D at every level of production and use of CFCs and their
substitutes. The issue, then, is "how would we expect the international
protocol to effect this change?"
In fact, the indirect effect of the international protocol is that it is
likely that the CFC frontier will contract more, with a consequent effect on
CFCs. As this happens, CFC demand/use will likely diminish (from where it would
have been) even in countries that do not join the proposed international
protocol, with all countries having lower saturation levels of demand given the
smaller range of new CFC-using products.
3. THE IMPACT OF THE INTERNATIONAL PROTOCOL ON THE TECHNOLOGY FRONTIER AND CFC
DEMAND
The introduction of the international and national regulations to limit CFC
use is likely to profoundly influence the research and development aimed at
finding new uses and new products to use CFCs. For example: corporations such
as McDonald's have announced that they will be abandoning use of CFC blown food
packaging; the foam industry has talked of launching a "Manhattan Project" to
find non-CFC technologies to blow foam (diverting research from new products to
use CFCs); a major computer corporation has told EPA that a wholly new product
has been aborted due to its use of CFCs. These changes represent the beginning
of altered R&D patterns. CFCs have received enormous press publicity and
congressional attention, and have been identified as molecules that will be
under continued regulatory pressure for a long time to come, not just for ozone,
but also because of their greenhouse effect (Mintzer, 1987). Bills to regulate
them continue to emerge (e.g., Stark, 1987). Thus, even investments intended to
improve existing products are themselves likely to decrease.
Simultaneously, this pressure will create an unusual market for substitutes,
creating an unusually large demand all at once. This is likely to make
substitute development less expensive.
The importance of a sudden "jump" cannot be overestimated. Technology
development, once started, tends to gain its own momentum, channeling efforts
for innovation and use in certain existing directions. A set of technical
experts develop who actively promote a fundamental approach to using a
technology and who investigate new uses, ways of improving old uses, finding new
products, etc. Simultaneously, subsidiary related industries and technologies
are created that tend to support the technology. Over time, a technology
becomes the "only" solution sought as industries "satisfice" using acceptable
solutions that exist, with improvements at the margin, rather than seeking out
new technologies. This process has certainly existed for CFCs, and by itself
constituted a powerful obstacle to alternative technologies. The international
protocol is likely to start a different channel moving. For example, in
electronics, aqueous solutions have had a hard time developing because soldering
fluxes were not designed for them (U.S. EPA 1987b). Firms that have decided to
shift to aqueous solutions have had to "fight the system," experiencing
difficulties because few other firms have simultaneously done so. Another
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C-6
obstacle has been military specifications, which have specified CFCs. The
international protocol will change this situation in which the incremental
obstacles of using aqueous solutions are so high, creating a macroinstability.
Many firms will favor a change simultaneously, so that venders of solder will
have a greater incentive to develop aqueous compatible fluxes. Similarly, with
many electronic firms expressing concern, the military is much more likely to
respecify its parts based on performance creating a climate favorable to
innovation, perhaps leading to greater efficiencies than now exist. Such
macroinstability has produced efficient innovation in the past (Klein, 1977).
3.1 Factors Influencing the Strength of Technological Rechanneling
Several factors will influence the relative strength of technological
rechanneling on different countries:
(1) Growth in developing nations will be less affected than
in developed nations.
Growth in poorer countries is more likely to depend on
income growth that increases consumption of maturer
products; growth in richer countries who are closer to
their technology frontier is more likely to depend on
changes in technology (Nordhaus and Yohe, 1986). Thus,
a protocol that is less stringent, such as a freeze,
would tend to have the same effect as a more stringent
protocol in developed countries, but have a differential
effect in developing countries.
(2) The impact of technological rechanneling is likely to be
delayed several years.
R&D takes time to be successful; much of the effect will
occur in the future.
(3) The stringency of the international protocol will have
an impact.
The more stringent the protocol, the clearer the signal,
the lower the transition costs and the less desirable
CFC based technologies are likely to be in the future.
3.2 A Method for Estimating Impact
It would be desirable to use an empirically-derived estimate of the
sensitivity of the technology frontier to stringency. Unfortunately this is
impossible for several reasons: for one thing, no one knows what new CFC-based
uses and new products would have been developed in the absence of the protocol;
for another, there is no historical experience on which to base an empirical
estimate. While a strong empirical basis for estimating the relative influence
of stringency on changed demand is lacking, the important ramifications of the
international protocol can be evaluated on the growth of non-participants,
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C-7
non-compliers, and developing nations by using parametric sensitivity analysis
that spans a range of effects.
The magnitude of rechanneling will be tested for four cases (Exhibit 3), a
moderate, low, and high case, and no rechanneling (a limit that gives the worst
case in terms of ozone depletion, but highest: costs). The rechanneling
multiplier is the percent of demand in a scenario that will occur if a protocol
is implemented. For example, if a CFC 50 Percent/Halon Freeze protocol that
enters into force in 1990 is implemented, developing nations will grow at 50
percent of the rate otherwise assumed in Case 1 (moderate rechanneling), 62.50
percent in low rechanneling, and 20 percent in high rechanneling, implying a
range of more than 300 percent in the low to high estimate of rechanneling. A
ten year lag in this effect is assumed. Clearly, other parameters could be
used, but these constitute a reasonable set.
4. ANALYSIS OF THE OPPORTUNITY COST OF THE CHANGING TECHNOLOGY FRONTIER
Technological rechanneling changes the technology frontier so that demand/
use is not developed, thereby reducing emissions. The legal instruments nations
use to further reduce demand will then further reduce use. Exhibit 4 shows how
two kinds of "costs" could be associated with the change in demand; that is,
costs of technological rechanneling and costs of regulation. It is for these
latter reductions that conventional economic techniques can estimate costs.
However, it cannot be assumed that there are no costs to technological
rechanneling. In a theoretically optimal world, there clearly would be a loss,
although estimation of its value would be more problematical. There exists a
large body of literature, however, that disputes the assumptions of neoclassical
microeconomics, especially as regards'innovation (Klein, 1977; Simon 1982).
History is replete with cases of technological channeling which have led to
systems that appear sub-optimal: the keyboard and its type organization, for
example, were developed because 19th century typewriter technology required
an arrangement of keys that they slowed typing (they got stuck and were diffi-
cult to unstick). After the technology of keyboards improved, so that the bars
would return fast enough to allow touch typing, the keyboard was never
rearranged, too many people were committed to the old technology, so that even
today, typewriting is harder to learn and less productive than theoretically
optimal.
The English measurement system is another example of technological
channeling that plagues U.S. machine tool manufacturers. The lines of U.S.
televisions are fewer than Europeans, giving worse pictures, constituting
another example of technological channeling. Worse yet, the size of word
processing screens have been established based on a standard for computer design
that assumed televisions would be used as video display terminals. This
standard prevents use of full page screens (which would be more efficient for
editing). Thus quite recently a course of technological channelling (software
and hardware) has resulted in a sub-optimal economic efficiency.
Simon and others have pointed out that firms satisfice, choosing what they
know will work, rather than optimizing. Klein (1977) has argued that
macro-instability (such as caused by the protocol) can lead to a search for new
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C-8
EXHIBIT 3
RECHANNELING MULTIPLIERS
No Freeze Freeze Freeze
Protocol Freeze +20 +50 +80
Developed
Developing
Developed
Developing
Developed
Developing
1
1
1
1
1
1
0.5 0.5 0.375 0.375
.75 .625 0.5 0.5
.75 .750 0.5 0.375
.875 .75 0.625 0.5
.375 .375 .250 .250
.5 .375 .200 .10
Case 1 Moderate technological rechanneling
Case 2 Low technological rechanneling
Case 3 High technological rechanneling
Case 4 No technological rechanneling
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C-9
EXHIBIT 4
USE OF CFCs UNDER ALTERNATIVE
BASELINE AND REGULATORY SITUATIONS
CFC
Consumption
Per Capita
1
Baseline CFC Use
Opportunity Cost
or Changing Investment
(Disappearing Demand)
Demand Due to
Technological
Rechanneiing
Opportunity Cost
or the Regulations
CFC Use
With Regulation
Protocol
Time
The protocol will technologically rechannel demand by focusing R&D away
from new uses, new products, and improved products towards totally different
areas. It is uncertain what will be the opportunity cost (or benefit) of this change.
-------
C-10
technologies that improves efficiencies, while Olson (1982) has even claimed
that historical improvement in efficiency of nations is driven by disruption.
Thus, even the sign of the opportunity cost (benefit) of the technological
rechanneling cannot be estimated, since it is not clear that superior
technologies were not being ignored due to prior technological channelling.
This argument is not merely academic. In the case of the use of CFCs in
aerosols, for example, the claim has been made that moving U.S. industry to
hydrocarbons lead to rapid improvement of hydrocarbon propelling technology,
pumps sprays, and other delivery systems that were more effective and efficient
than CFC propelled aerosols. (Dispute exists on this from some segments of
industry and the European aerosol industry which was not regulated.) One group
of authors has estimated that over $170 million savings per year due to this
macrostability-induced rechanneling (Kavanaugh, Earth, and Jaenicke, 1986).
5. FUTURE RESEARCH NEEDS
Strong evidence indicates that implementation of an international protocol
will cause resources to be diverted away from the development of new CFC-uses
and products. This diversion will lower the potential (maximum or saturation)
level of CFC use (i.e., lower the theoretical CFC frontier) which, in turn, will
reduce actual CFC use. The extent of the change is uncertain; a range must be
tested. The costs are undeterminable. Additional work in this area is
necessary before definite conclusions can be drawn. One possible avenue is to
examine the other components of CFC demand, the existing stock of product, the
manufacturing of additional CFC-related products for replacement, and the
manufacturing of additional products to add to the existing stock. This
"bottom-up" approach would provide greater insight into the factors that will
influence future demand for CFCs. Development of alternative parameters (to
reflect the disaggregate approach) could significantly narrow uncertainty.
Given the complexity and importance of the issue, continued efforts to model the
future use of CFCs are clearly warranted.
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C-ll
REFERENCES
Gibbs, M. (1986), "Summary Paper for Topic #2. Projections of Demand for CFCs,"
presented at the UNEP Economic Workshop on the Ozone Layer, Rome, Italy, May
1986.
Hedenstrom, 0., S. Samuelsson, and A. Ostman (1986), "Projections of CFG Use in
Sweden," presented at the UNEP Economic Workshop on the Ozone Layer, Rome,
Italy, May 1986.
Kavanaugh, M., M. Earth, and T. Jaenicke (1986), "An Analysis of the Economic
Effects of Regulatory and Non-Regulatory Events Related to the Abandonment
of Chlorofluorocarbons as Aerosol Propellants in the United States from 1970
to 1980, with a Discussion of Applicability of the Analysis to Other
Nations," presented at the UNEP Economic Workshop on the Ozone Layer, Rome,
Italy, May 1986.
Klein, B.H. (1977), Dynamic Economics. Harvard University Press, Cambridge, MA.
Knollys, R.C. (1986), "Fluorocarbon Use in Aerosols. A Trend Study 1984-1995 in
Member Countries of the European Economic Community," presented at the UNEP
Economic Workshop on the Ozone Layer, Rome, Italy, May 1986.
Mintzer, I.M. (1987), A Matter of Degrees: The Potential for Controlling the
Greenhouse Effect. Research Report #5, The World Resources Institute,
Washington, D.C.
Nordhaus, W.D., and G.W. Yohe (1986), "Probabilistic Projections of
Chlorofluorocarbon Consumption. Stage One," presented at the UNEP Economic
Workshop on the Ozone Layer, Rome, Italy, May 1986.
Olson, M. (1982), The Rise and Decline of Nations: Economic Growth.
Stagflation, and Social Rigidities. Yale University Press, New Haven, CT.
Quinn, T.H., K.A. Wolf, W.E. Mooz, J.K. Hammitt, T.W. Chesnutt, and S. Sarma
(1986), Projected Use. Emissions, and Banks of Potential Ozone-Depleting
Substances. N-2282-EPA, The RAND Corporation, Santa Monica, CA.
Simon, H.A. (1982), Models of Bounded Rationality: Volume I. Economic Analysis
and Public Safety. MIT Press, Cambridge, MA.
Stark, F.H. (1987), "Ozone Protection and CFC Reduction Act," Congressional
Record. June 30, 1987, 1987, p. E2681, U.S. Congress, Washington, D.C.
U.S. EPA (1987a), Assessing the Risks of Trace Gases That Can Modify the
Stratosphere. U.S. EPA, Washington, D.C.
U.S. EPA (1987b), Memorandum from Stephen Andersen, Office of Air and Radiation,
to CFC-113 Use and Alternative Expert Panel, "Draft Consensus Conclusions,"
August 8, 1987.
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APPENDIX D
CFG USE IN DEVELOPING COUNTRIES
AND THE UNEP PROTOCOL
1. INTRODUCTION
International negotiations to freeze and reduce the emissions of
chlorofluorocarbons (CFCs) and halons^ have been concluded under the auspices of
the United Nations Environment Programme. The result of these negotiations is
the Montreal Protocol on Substances that Reduce the Ozone Layer. Despite
concerns over ozone depletion and actions taken against aerosol propellant
applications in several industrial countries, global use of CFCs in non-aerosol
applications has continued to grow. The use of CFCs in less developed countries
(LDCs)* has contributed to the overall growth of global CFC use and continued
growth is expected.-*
This paper examines future CFC use in less developed countries (LDCs) and a
range of factors by which it may be affected. The approach of this paper is to
combine quantitative estimates of future CFC use in developing countries with an
examination of qualitative factors such as development issues and indicators,
and international economic, financial, business and trade issues. Together,
these factors may provide a base on which to assess potential future use of CFCs
in developing countries. These issues are of concern in evaluating the
potential future environmental impact of LDC use of CFCs, the potential impact
of U.S. domestic regulations, and the potential impact of the Montreal Protocol
in helping reduce the use of CFCs in developing countries. The following
questions are addressed below:
• What factors may affect the potential future growth of
CFC use in developing countries?
• Based on limited available data, how much may CFC use in
LDCs be expected to grow?
•*• Although the Montreal protocol regulates both CFCs and halons, this
paper is limited to use of CFCs in developing countries.
r\
*• The terms less developed countries, LDCs, underdeveloped countries, and
developing countries are used interchangeably. "Newly industrialized countries"
(NICs) refers to the small group of developing countries that have experienced
greater economic growth and industrial development than most other LDCs. This
group of NICs includes: Brazil, Mexico, Singapore, Taiwan, South Korea, Hong
Kong, and Argentina, among others.
o
J The use of CFCs in developing countries is directly addressed in the
Montreal Protocol in several articles, including: Article 5 - Special Situation
of Developing Countries; Article 9 - Research, Development, Public Awareness and
Exchange of Information; and Article 10 - Technical Assistance, Montreal
Protocol on Substances that Deplete the Ozone Layer. United Nations Environment
Programme, 1987.
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D-2
• How and why will CFC use differ among LDCs?
• How might CFC use in LDCs be affected by the
implementation of international protocol provisions in
the industrial countries?
• How attractive is joining the protocol versus not
joining for the LDCs?
Section 2 provides the focus of this report. The issue of CFC use in three
groups of developing countries is examined: newly industrialized countries
(NICs), least developed countries and large developing countries. Particular
consideration is given to: the relationship between economic development and
CFC use; the position of LDCs in the international structure of production of
CFC end-user industries; and LDC development and industrialization strategies.
Section 3 presents a range of estimates of potential future growth of CFC
use in LDCs. Several scenarios of future LDC CFC use are discussed and
compared. The implied relationships between CFC use and GNP in the scenarios
are examined.
Section 4 examines the potential effect on LDC use of CFCs if industrial
countries implement the regulations of the UNEP protocol and LDCs refrain from
joining. The impact of protocol-induced changing technology on future LDC CFC
use is also discussed.
Section 5 examines the relative attractiveness of joining the UNEP protocol
for the three groups noted above. Factors affecting the decisions of LDCs to
join or not join the protocol are discussed.
2. CFC USE IN DEVELOPING COUNTRIES
2.1 Differences in CFC Use in LDCs and Industrial Countries
The use of CFCs in LDCs has similarities and differences from that in
industrial countries. On the one hand, CFC use has greatly increased in those
LDCs that, like the developed countries, have entered the industrialization path
and require CFCs to serve manufacturing production in their most dynamic
industries, such as automobiles and electronics. On the other hand, the growth
of CFC use has been very uneven among LDCs, and there exists a significant
difference in the amount of CFCs produced and consumed by industrial countries
and LDCs, with consumption in the industrial countries far exceeding that in the
developing countries. This difference is graphically displayed in Exhibits D-l,
D-2, and D-3, which illustrate estimated current CFC production/use and per
capita CFC production/use in various developing and industrial countries.
2.2 Three Groups of LDCs
Differences among developing countries exist which affect their current and
potential use of CFCs. Most significant are differences in economic structure
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D-3
EXHIBIT D-l
CFG-11 AND CFG-12 PRODUCTION/USE FOR VARIOUS COUNTRIES
(kg/millions)
240
210 -
180 -
ISO -
Millions
of 120
Kilograms
90 -
60 -
30 -
Egypt
India
Korea
Mexico
Thailand
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D-4
EXHIBIT D-2
CFC-11 AND CPC-12 PRODUCTION/USE PER CAPITA
FOR VARIOUS COUNTRIES
(kg/capita)
Kilograms
per
Capita
Australia
Austria EEC
Brazil Egypt
Indonesia
Hong Kong Japan
Kuwait
Malaysia
India
Korea
I
Norway
Sweden
I
U.S.
Mexico
Thailand
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D-5
EXHIBIT D-3
Australia
Austria
Brazil
China
EEC
Egypt
Honduras
Hong Kong
India
Indonesia
Japan
Korea
Kuwait
Malaysia
Mexico
Norway
Sweden
Thailand
U.S.
Population
(Thousands)
15,369
7,549
132,600
1,019,102
269,017
45,169
4,093
5,400
749,200
158,900
119,259
40,100
1,720
14,863
75,011
4,133
8,331
49,169
234,496
a/ GNP a/
(Millions)
169,557
67,045
228,072
294,572
2,396,766
30,144
2,656
34,182
194,729
85,806
1,159,124
84,611
26,064
26,679
157,372
55,650
99,750
38,864
3,176,670
CFC-11 +
CFC-12
Use/
Production
(Mill kg)
12.0
5.2
a/
8.9
e/
18.0
£/
228.5
2.9
&/
0.2
n/
1.7
o/
0.4
B/
5.4
57.5
a/
3.1
i/
1.0
i/
1.4
k/
5.2
i/
0.7
I/
3.6
2.0
by
197.4
CFC-11 +
CFC-12
Use Per
Capita
(kg)
0.78
0.69
0.07
0.02
0.85
0.06
0.04
0.32
0.001
0.03
0.48
0.08
0.60
0.09
0.07
0.18
0.43
0.04
0.84
CFC-11 +
CFC-12
Use (kg)
Per $
Bill GNP
.07
.08
.04
.06
.10
.10
.08
.05
.002
.06
.05
.04
.04
.05
.03
.01
.04
.05
.06
Year
of Use/
Production
Data
1984
1985
1985
NA
1985
1985
1984
1985
1982
1984
1985
1985
NA
NA
1983
1984
1984
1984
1985
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D-6
a/ The World Bank, (1986), "The World Bank Atlas, 1986," Washington, D.C.
Numbers reflect 1983 estimates for GNP and Population. GNP is in real U.S.
1982 dollars.
b/ United States International Trade Commission, (1986), "Preliminary Report on
U.S. Production of Selected Synthetic Organic Chemicals (Including Synthetic
Plastics and Resin Materials) July through September, October through
December, and Cumulative Totals 1986," USITC, Washington, D.C., February 20,
1986. Imports and exports were not considered. 1985 production estimates.
c/ Department of Arts, Heritage and Environment, Australia, (1986), Australian
Submission to UNEP Workshop on Chlorofluorocarbons. submitted for Topic 1 of
the UNEP Chlorofluorocarbon Workshop, Rome, Italy, May 1986.
d/ Austria, (1986), Current Use of CFCs in Austria, prepared by the Austrian
Delegation for Topic 1 of the UNEP Chlorofluorocarbon Workshop, Rome, Italy,
May 1986. Estimate net use of all CFCs.
e/ Zhijia, W., (1986), Country Paper for Topic 1. prepared by the National
Environmental Protection Agency of the People's Republic of China for Topic
1 of the UNEP Chlorofluorocarbon Workshop, Rome, Italy, May 1986. Net use
of all CFCs.
f/ EFCTC, UNEP Chlorofluorocarbon Workshop 1986, Phase I "CFG Production and
Use Statistics for the EEC 1976 to 1985" Rome, May 1986. Total Sales.
g/ United Nations Environment Programme, (1986), Background Factual Papers on
Current Production Capacity. Use. Emissions. Trade and Current Regulation
of CFCs Separately by Country and/or Region. Topic 1 -- Overview, prepared
for UNEP Workshop on Chlorofluorocarbons, Rome, Italy, May 1986. Estimates
net use of all CFCs.
h/ Kurosawa, K., and K. Imazeki, (1986), Paper for CFCs Workshop, submitted by
Japan for Topic 2 of the UNEP Chlorofluorocarbon Workshop, Rome, Italy, May
1986.
i/ United Nations Environment Programme, (1986), Draft Report of the Second
Part of the Workshop on the Control of Chlorofluorocarbons. UNEP/WG.148/3/
L.l/Corr. 1, 11 September 1986. Estimate net use of all CFCs.
i/ Department of Environment, Malaysia, (1986), Country Report. Chlorofluoro-
carbon Chemicals in Malaysia, submitted for Topic 1 of the UNEP
Chlorofluorocarbon Workshop, Rome, Italy, May 1986. Estimate use of CFC-11,
CFC-12 and CFC-22.
k/ Ostman, A., P. Bohm, and I. Kokeritz, (1986), Current Use of CFCs in
Sweden and Norway, prepared for the Swedish Environment Protection Board and
submitted for Topic 1 of the UNEP Chlorofluorocarbon Workshop, Rome, Italy,
May 1986. Estimates for 1984 use.
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D-7
I/ Perez, A.R.A., (1986), National Panorama of Chlorofluorocarbons. prepared by
Secretaria de Desarrollo Urbano y Ecologia for the UNEP Chlorofluorocarbon
Workshop Rome, Italy, May 1986. Estimates of total CFC consumption.
No production or export data reported. Country contains two producing
plants.
m/ Banco Do Brasil S.A. (1985), Carteira Do Comercio Exterior. Brasil, and
United Nations Environment Programme, (1986) Tonic 1 - Overview prepared for
UNEP Workshop on Chlorofluorocarbons, Rome, Italy, May 1986. Use/production
calculated as Imports - Exports + Production.
n/ Census and Statistics Department (1985), Hong Kong Trade Statistics. Hong
Kong. Product coverage includes Dichlorofluormethane,
Trichlorofluoromethane and Dichlorodifluoromethane mix Trichloro-
fluoromethane. Production/use calculated as Imports-Exports + Production.
o/ Directorate General of Commercial Intelligence and Statistics, (1982),
Monthly Statistics of the Foreign Trade of India. Calcutta, India. Product
coverage includes "other halogenated derivatives of hydrocarbons."
Use/Production calculated as Imports - Exports + Production.
p/ Biro Pusat Statistik (1984), Indonesia Foreign Trade Statistics. Jakarta
Indonesia. Product coverage includes "other halogenated derivatives of
hydrocarbons." Use/Production calculated as Imports - Exports + Production.
a/ Office of Customs Administration (1985), Statistical Yearbook of Foreign
Trade. Seoul, Republic of Korea. Product Coverage includes
Chlorofluoromethanes. Use/Production calculated as Imports - Exports +
Production, production assumed to be zero.
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D-8
and levels of development and industrialization. There are also significant
differences in the size of individual LDCs, which may also affect CFC use.
For purposes of this report, we distinguish among three groups of LDCs:
newly industrialized countries (NICs), least developed countries, and large
developing countries. We also examine the additional importance of development
strategy as a factor influencing CFC use. Individual LDCs for which we have CFC
production and/or use data, and projected future CFC use are identified
according to the group they most approximate in economic structure or size.^
• NICs. These are the newly industrialized countries.
They are distinguished from most LDCs due to both the
significant and growing role in their economies of the
manufacturing sector and their ability to produce
internationally competitive products in global industries
such as automobiles and electronics. As such, the NICs
have higher CFC consumption levels than other LDCs. With
higher relative per capita incomes, the NICs also consume
greater numbers of CFC end-user products. Brazil,
Republic of Korea and Hong Kong are NICs.
• Least Developed Countries. Most developing countries are
in the least developed country category. The economies
of these countries are largely based on agriculture and
primary commodities, such as cocoa, copper, coffee, and
bauxite. Industrial development is at a very low level
and mainly serves agricultural production and resource
extraction activities. Of the 36 countries identified as
least developed countries by the IMF, the overwhelming
majority are African countries. Use of CFCs in these
countries is mainly limited to the importation of
products containing or manufactured with CFCs. As such,
CFC use is small and should continue to remain so. For
this report, we include in the least developed group,
Egypt, Honduras and Thailand.
• Large Developing Countries. The large developing
countries are distinguished by the size of their
populations and domestic markets. Although the
overwhelming majority of their populations are extremely
poor, the size of these countries has allowed them to
develop significant manufacturing sectors for both
domestic and export markets. Although their population
size ensures continued small levels of per capita CFC
^ It should be noted that the diversity of LDCs requires even greater
differentiation than just three categories. For example, Thailand and Egypt are
included here among the least developed countries. Although they are poorer and
less developed than the NICs, Thailand and Egypt have manufacturing industries
that would distinguish them from most of the least developed countries
categorized as such by the World Bank and IMF.
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D-9
use, these countries exhibit higher total levels of CFC
use than other LDCs, and even some industrial countries.
(See Exhibits D-l and D-2). The Peoples Republic of
China, India and Indonesia are included here as large
developing countries.
• Development Strategy. Developing countries are also
distinguished by their development strategies. These
strategies tend to be either inward or outward-looking
in orientation, with some countries combining
industry-specific import substitution with
industry-specific export promotion. Those developing
countries that have implemented the most successful
outward-looking development strategies have both
strengthened their ties to the international economy and
industrial countries' markets, and increased their
production and export of CFC end-user products such as
automobiles (Brazil, South Korea), electronics (Hong
Kong, South Korea, India, Thailand), and refrigeration
and air conditioning (Brazil, Hong Kong, India, South
Korea, Thailand). As such, CFC consumption and demand
in these coun.tries has risen, in part, due to
development strategy.
It is important to recognize that just as LDC development strategies have
tended to encourage greater CFC use, development strategies can also play a role
in reducing CFC use in developing countries. LDCs have choices in determining
which industries they target for development. They also can influence the types
of technologies used in their manufacturing sectors. As substitute chemicals,
products and production processes are developed which do not use and/or use less
CFCs, LDC governments can play an active role to encourage the introduction of
these new technologies.
It is important to distinguish between the current importance of CFCs in the
LDC production of certain goods, and the relative importance of CFCs to
long-term economic development in the LDCs. The current industrialization plans
of many LDCs, particularly the NICs, are based on the development of CFC
end-user industries. Given the current use of CFCs in industries such as
automobiles, electronics and refrigeration equipment, developing countries that
base their economic growth on these industry sectors could be positively or
negatively influenced by the availability of CFCs. However, conscious action by
LDC governments to incorporate technologies that use less CFCs as they become
commercially viable, could reduce overall CFC use in these countries, especially
with regard to production for export markets. As such, there is little reason
to assume that unlimited access to CFCs is a precondition for long-term economic
growth in the developing countries. At the same time, near-term adjustment
costs of adopting alternative CFC-free technologies must be acknowledged. The
need to reduce such adjustment costs is addressed by the Montreal Protocol in
Articles 5 and 10 which encourage both financial and technical assistance for
LDCs to adopt non-CFC based technologies.
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D-10
2.3 Development and CFG Use
Economic growth and GNP per capita are often used as proxies for
development. GNP per capita may indeed provide the best single development
indicator, which is one reason it was used in recent analyses of CFC use
projections.5 While the use of GNP per capita as an explanatory variable of LDC
use of CFCs may be reasonable for making projections, alone it cannot explain
the complexity of domestic and international factors that influence economic
development and CFC use in these countries.
Economic growth refers to an increase in per capita real income. Economic
development, on the other hand, refers to the variety of structural changes in
an economy and society that permit the conditions required for economic growth
to become self-sustaining. This distinction is particularly relevant here
because industrialization is one important aspect of economic development, and
CFCs are used in many industrial processes. However, growth of per capita real
income need not directly parallel industrialization; it may lag behind or exceed
industrialization in different countries and, possibly, even in a single country
at different times. As such, CFC use may increase, concurrently, with stagnant
or declining per capita income as occurred in several countries in recent years.
Reflecting the changing economic base of many LDCs, manufacturing and industry
have experienced strong growth in the past two decades in many LDCs, while
agriculture has declined as a portion of GDP. In addition, several LDCs have
increased domestic import substitution and production capacity. This is
especially true for CFC-related industries. (Some major development indicators,
including those of most direct relevance to future LDC use of CFCs, are noted in
Exhibit D-4.)6
The relationship between CFC use and development is heavily influenced by
the characteristics of the CFC end-user industries, such as: automobiles,
electronics, air conditioning, refrigeration, and foam products. These
industries have played an important role in the industrial development of the
LDCs examined here, especially automobiles and electronics. These products have
been produced for both domestic and export markets and have required increasing
amounts of CFCs to keep pace with growing production output.
Because insufficient alternative chemicals, product substitutes, production
processes and recovery technologies are commercially available to displace all
CFC use, CFCs may be essential in the near-term to the growth of specific
industries. Where CFC use is constrained under the UNEP protocol, CFC
conservation in other industries may not be sufficient to "free-up" levels of
CFCs sufficient to sustain all growth. Therefore, CFCs are currently an
important input to the economic development and industrialization path chosen by
these countries.
•* See section 3 below for a summary of projections.
° See Attachment D-l for historical economic development data for selected
developing countries, including: Brazil, China, Egypt, Honduras, Hong Kong,
India, Indonesia, South Korea and Thailand.
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D-ll
EXHIBIT D-4
DEVELOPMENT FACTORS AFFECTING THE USE AND PRODUCTION OF CFCs
1. Population Size and Growth Rate
2. Gross National Product Per Capita and Growth Rate
3. Distribution of Gross Domestic Product by Sector
4. Growth Rate of Specific Sectors
5. Distribution of Manufacturing Value Added
6. Energy Consumption Per Capita
7. Growth in Production of Commercial Energy
8. Merchandise Exports
9. Merchandise Imports
10. Origin and Destination of Exports
11. Net Inflow of External Capital
12. Long-Term Debt Service as Percentage of GNP and Exports
13. Income Distribution
14. Urban Population as Percentage of Total Population
15. Growth of Urban Population
16. Climate
17. Commercial and Domestic Levels of Food Refrigeration
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D-12
The level of CFC use is also influenced by other key development factors.
Consumption of CFC end-user products in developing countries is greatly driven
by per capita income and related factors. Also important are the physical and
human infrastructure -- availability of electricity, roads, and adequate skilled
labor -- necessary for the production and/or operation of these products;
urbanization; and availability of the requisite financing for developing
physical and human infrastructure. Each of these factors is discussed in turn.
GNP Per Capita. As GNP per capita grows in developing countries, the
tendency is for consumption of certain consumer items to rise. Because CFCs are
used as inputs in the production of durable goods such as automobiles,
refrigerators, and air-conditioning units, and demand for these goods is
positively related to changes in income, as income increases the use of CFCs may
also increase. Although unavailable to large parts of LDC populations, these
products provide important benefits and meet basic types of family needs. As
such, the CFC end-user products are among the first that families in developing
countries may purchase as income increases.
Families without refrigerators need to shop daily for perishables to avoid
food spoilage. Automobiles and/or trucks provide great time savings in
countries with very poor transportation systems, as well as a potential source
of new employment where these vehicles are used for commercial purposes. Basic
consumer electronics such as televisions, radios, and stereos are often the
first items purchased as incomes rise due to their low relative cost vis-a-vis
other "luxuries," especially in urban areas. In rural areas where incomes are
generally lower than in cities, a television or radio may be purchased to
provide group entertainment for an entire village.
Growth of GNP per capita will vary among developing countries. Whereas
growth in the NICs may be expected to continue to be strong over the foreseeable
future, recent overall growth trends have been negative for successive years in
numerous developing countries. Also, as noted in the social indicators in
Exhibit 2 of Attachment D-l, income distribution is weighted towards the highest
quantile of households in many LDCs, which will also affect future demand for
CFC end-user products.
Infrastructure. The increased use of CFC end-user products is greatly
dependent on the development and availability of an adequate physical
infrastructure. The products' requirements are very basic. Automobiles need
roads. Refrigerators, air conditioners, and consumer electronics require
adequate electricity generation in order to operate. In this regard, the growth
of per capita energy consumption should reflect increased use of these CFC
end-user products. As noted in Exhibit 4 of Appendix D-l, average annual growth
rates of energy production and per capita energy consumption have greatly
increased since 1970.
Infrastructural development also affects industrial CFC use in developing
countries in that it makes possible the production of these items. The
production of automobiles, electronics, refrigerators, and air conditioners
requires adequate generation of electricity, transportation systems,
communications systems, etc. Whether this production is mainly for the domestic
market or for export will further influence LDC use of CFCs.
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D-13
Urbanization. Increased urbanization in developing countries will tend to
put upward pressure on the demand for and consumption of CFC end-user products.
People in urban areas generally have higher incomes than in rural areas, even
among the poorer sections of the urban population. (Clearly, quality of life
must be distinguished from income.) Urban areas have more developed
infrastructures, higher per capita electricity consumption, and greater
concentrations of paved roads and cars. Populations in most LDCs have
increasingly shifted from rural to urban areas in the last twenty years and this
pattern is expected to continue. This trend is reflected in the fact
that the number of cities with over 500,000 people has more than doubled in many
LDCs over the last 15-20 years.
Urbanization itself, however, will proceed differently among LDCs,
reflecting differing paces and types of economic development. Urbanization will
be influenced by the character and pattern of agricultural development and
industrialization, and the resultant availability of employment opportunities in
rural or urban areas. For example, internal migration to urban areas will be
encouraged by development strategies that commercialize agriculture, increase
rural inequalities, and provide little or no technical assistance, credit, or
fertilizer to small farmers. Conversely, policies that increase cultivable
land, permit more equitable distribution of rural incomes and/or land, and
reduce rural population fertility may reduce internal migration to urban areas.^
These patterns will have different implications for future use of CFCs in
developing countries.
Development Financing. The availability and directed use of development
financing in LDCs will greatly affect the development indicators noted above
and, accordingly, their respective influence on the use of CFCs in developing
countries. Uncertainties exist about future financing of development in many
LDCs. The protocol directly addresses the need of developing countries for
external assistance to facilitate their adoption of environmentally safe
substances and technology. This may help relieve some of the pressure in the
LDCs to direct limited funds to environmental protection by providing bilateral
and multilateral subsidies, aid, credits, loan guarantees and technology
transfer assistance specifically directed at use of alternative technologies to
reduce CFC use and emissions.
Economic growth in developing countries strongly parallels public sector
spending and investment, due to the central economic role of the state in most
LDCs. In recent years, as a result of many factors, both government capital
investment and GNP per capita growth have been negative. Economic recession has
reduced tax revenues, increased budget deficits, forced government officials to
focus on short-term needs and generally constrained available development
' See, Robert A. Pastor, ed., Migration and Development in the
Caribbean: The Unexplored Connection. Westview, 1985.
° See, "Article 5: Special Situation of Developing Countries;" Montreal
Protocol on Substances That Deplete the Ozone Layer. United Nations Environment
Programme, 1987.
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D-14
financing. This has been further exacerbated by the debt crisis in several
countries. Consumer demand for CFC end-user products and infrastructural
investments have suffered as a result. Although this trend will reverse itself,
the vulnerability of the developing.countries to both domestic and international
economic shocks ensures continued uncertainty regarding the future availability
of development financing and sustainability of related economic growth. In
assessing potential future use of CFCs in LDCs, it is important, however, to
distinguish between short-term and long-term patterns of growth.
2.4 Global Factors
The future use of CFCs in developing countries will be greatly affected by a
variety of global conditions. Some of these factors are beyond the control of
the LDCs and others will be influenced by LDC policies and bargaining with a
host of international economic, political, and financial players. The
interaction of these various international factors will directly affect LDC
production, use, import, and export of CFC chemicals and CFC end-user products.
This is due to two factors:
• the general position of the developing countries in the international
economic and financial system; and
• the particular position of individual LDCs in the international
structure of production of the CFC chemical and end-use industries.
The first factor relates to the macroeconomic condition of a developing
country. Shifts in the pace of economic growth and inflation in the industrial
economies can directly affect a developing country's performance through
international economic and financial market linkages. Other factors of equal
importance include shifts in interest rates and exchange rates, as well as
international trade restrictions.9
The second factor -- the particular position of LDCs in the international
structure of production -- relates to the industrial use of and demand for CFCs
in developing countries. Major CFC end-user industries -- automobiles,
electronics, refrigerators, and air conditioners -- are international
industries. Industry output in the developing countries for each product group
is largely determined by the business decisions of transnational corporations
(TNCs) centered in the industrial countries.^ Generally, the relative autonomy
of the subsidiary in a LDC to make investment and production decisions is
strengthened when subsidiary output is targeted at the local market and weaker
9 Goldsbrough, D. and Iqbal H. Zaidi, "How Performance in Industrial
Economies Affects Developing Economies," Finance and Development. Vol.23,
No. 4, December, 1986.
10 There are exceptions to this, such as the Korean automobile industry
which is largely an indigenous industry. However, here too, foreign capital
through TNC investments from the U.S. and Japan are playing a growing role as
the Koreans turn their attention to exports requiring greater technological
sophistication and quality.
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D-15
when targeted at the global market. In recent years, production in developing
countries of automobiles, electronics, refrigerators, and air conditioners has
been increasingly targeted for export markets, particularly in the industrial
countries. For large LDCs, domestic markets may be large enough to support
domestically-oriented industries (computers and autos in Brazil, for example).
But here too, TNCs often exert significant influence on the development of these
industries and markets.
The large degree of control that TNCs have over production, technological
and product development decisions, and quality control standards has potentially
important implications for the future use of CFCs in developing countries. Most
significant is the potential for TNCs to either play a positive role in the
transfer of alternative. CFC-free technologies and production processes to the
developing countries as they become commercially viable, or to play a negative
role by exporting CFG using technologies to potential pollution havens. In this
regard, the Montreal Protocol encourages the former and discourages the latter.
As noted above, efforts to facilitate financial and technical assistance for
developing countries to adopt alternative technologies is an obligation of
protocol membership, as stipulated in Article 5. In addition, the Protocol's
trade control provisions require that each signatory discourage the export of, and
export finance for technology, plants and equipment to non-parties that use or
produce CFCs and halons. ^
3. POTENTIAL FUTURE RATES OF GROWTH OF CFG USE IN LDCs
The future use of CFCs in LDCs will be driven by the various development
factors described above, including the rates of growth of the LDC economies.
Although LDCs are currently believed to account for a relatively small portion of
global CFG use, the use and emissions of CFCs by the LDCs could have an important
impact on stratospheric ozone if their use grows. In particular, if developed
countries agree to restrict CFC use, and if CFC use grows in the LDCs, then the
LDC contribution to global CFC emissions could become significant. This section
presents a range of estimates of potential future growth in LDC CFC use.
Section 3.1 presents the results of a study of global CFC use by T.H. Quinn,
et al. of The RAND Corporation.12 Section 3.2 presents results of a study by M.J.
Gibbs of ICF Incorporated, which was also about global CFC use.^-3 Section 3.3
reviews the results from a preliminary analysis of future use of CFC-related
11 See, "Article 4: Control of Trade with Non-Parties," Montreal Protocol on
Substances that Deplete the Ozone Layer. United Nations Environment Programme,
1987.
12 Quinn, T.H., et al. (1986), "Projected Use, Emissions, and Banks of
Potential Ozone-Depleting Substances," N-2282-EPA, The RAND Corporation, prepared
for the U.S. Environmental Protection Agency, Washington, D.C.
13 Gibbs, M.J. (1986), "Scenarios of CFC Use: 1985-2075," ICF Incorporated,
prepared for the U.S. Environmental Protection Agency, Washington, D.C.
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D-16
products by Daniel Kohler of The RAND Corporation that was specifically geared
toward
Section 3.4 identifies the range of potential future CFC growth that is
implied by a range of assumptions about two key determinants of future CFC use:
economic growth (measured as GNP) and the income elasticity of demand for CFCs.l->
Finally, section 3.5 summarizes the estimates presented in the preceding
sections.
3.1 Quinn Scenarios of CFC Use in Developing Countries
Quinn (1986) presents a range of scenarios of potential future global CFC- 11
and CFC -12 use for the period 1980 to 2075. The scenarios are based on
assumptions regarding how the future use of CFCs in various parts of the world
may unfold, using the historical development pattern of CFC markets in developed
countries as a guide for bounding the scenario assumptions. Quinn divided the
world into the following regions: U.S.; EEC; Pacific developed nations; other
developed nations; Eastern Bloc nations; Latin America; Africa; and Asia and
other developing nations. This section summarizes Quinn' s scenarios for the
three regions that can be considered to be representative of developing nations:
Latin America, Africa, and Asia/other.
Future use of CFCs was projected for three time periods: 1980 to 2000,
2000-2040, and 2040-2075. The uncertainties of. the estimates are assumed to
increase into the future. During the first period (1980-2000) CFC markets in
developing countries are assumed to be at very early stages of the development
process. Consequently, all the scenarios presented by Quinn for these
developing nations in this period are based on the assumption that CFC use will
grow at a rate equal to the growth rate of GNP per capita. Because the
populations of developing nations are expected to continue to increase during
this period (implying that the rate of growth of GNP will exceed the rate of
growth of GNP per capita) , this assumption implies an income elasticity of less
than one. Exhibit D-5 summarizes the Quinn estimates for CFC-11 and CFC-12 for
the LDC regions for this period.
As shown in the exhibit, Quinn' s assumptions result in LDC CFC growth in the
range of 2.3 to 2.8 percent per year for the period 1980 to 2000. These rates
14 Kohler, D.F., et al. (1987), "Projections of Consumption of Products
Using Chlorofluorocarbons in Developing Countries," N-2458-EPA, The RAND Corp.,
prepared for the U.S. Environmental Protection Agency, Washington, D.C.
15 The income elasticity of demand for a commodity is a key parameter in the
analysis that follows. It is defined as the percentage change in demand (or use)
of a commodity associated with a one percent change in income. (Income, for a
nation, is often measured by GNP, or GNP per capita). When the demand for a
commodity increases (in percentage terms) by an amount greater than the increase
in income (also in percentage terms), then the income elasticity exceeds 1.0. If
the commodity demand and income change by the same amount, the income elasticity
is equal to 1.0. Finally, if the increase in commodity demand is smaller than the
increase in income, the income elasticity is less than 1.0.
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D-17
EXHIBIT D-S
SUMMARY OF QUINN CFG SCENARIOS FOR DEVELOPING NATIONS:
1980 to 2000
GNP/Capita Population GNP
Growth Growth Growth £/
Latin America 2.8% 2.2% 5.1%
Africa 2.3% 2.3% 4.6%
Asia, Other 2.7% 1.8% 4.5%
Implied
CFC Income
Growth k/ Elasticity £/
2.8% 0.55%
2.3% 0.50%
2.7% 0.60%
a/ GNP growth is the GNP per capita growth compounded with the population
growth.
b/ CFC use is assumed by Quinn to grow at the same rate as GNP per capita
during this period.
c/ Income elasticity is computed as the ratio of the CFC growth rate to the GNP
growth rate.
Source: Quinn, T.H., et al. (1986), "Projected Use, Emissions, and Banks of
Potential Ozone-Depleting Substances," N-2282-EPA, The RAND
Corporation, prepared for the U.S. Environmental Protection Agency,
Washington, D.C.
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D-18
are dependent on the projected rates of GNP per capita growth, which are
uncertain. Of note is that given the rates of population growth (and hence GNP
growth) also reported by Quinn, the implied income elasticities for the three
LDC regions are in the range of 0.5 to 0.6.
Quinn's LDC regional economic growth rate assumptions for the period 2000 to
2040 range from continued growth at the rate of growth of GNP per capita, to
growth on the order of about 3.5 times this rate. The large growth rate is
based on the assumption that the LDCs would experience CFC market development in
the same manner as the U.S. experienced in the post-World War II period. During
this period Quinn estimates that the relative rate of CFC use growth to GNP per
capita growth was in this range. Quinn's assumptions for the period 2000 to
2040 imply that CFC use growth in the LDC regions may range from about 2.0
percent per year (the assumed GNP per capita growth rate) to roughly 7.0 percent
per year (3.5 times this lower rate).
Quinn reports that projections in the final period are very uncertain, and
assumes that the growth in CFC use in the LDC regions may be on the order of GNP
per capita growth in those regions, and Quinn reports a value of about 1.5
percent per year. Overall, the Quinn scenarios portray potential LDC CFC growth
as follows:
• relatively slow growth through the year 2000, with
rates equal to the rate of growth in GNP per capita
(which implies a rate less than the rate of GNP
growth);
• possibly higher rates of growth between 2000 and
2040, ranging from 1.0 to about 3.5 times the rate
of growth of GNP per capita; and
• very uncertain growth beyond 2040, possibly driven
by the rate of growth of GNP per capita.
3.2 Gibbs Scenarios of CFC Use in Developing Countries
Gibbs (1986) presented five scenarios of CFC-11 and CFC-12 use through the
year 2075 for three regions: the U.S.; non-U.S. OECD countries; and non-OECD
countries. Although the non-OECD region includes all the East Bloc nations
(which are not considered LDCs), this region is the most analogous to LDCs in
the Gibbs study.
Gibbs' scenarios for the U.S. and the non-U.S. OECD regions were based on a
range of GNP and population scenarios and relationships between population, GNP
and CFC use developed from historical U.S. data. Gibbs assumed, however, that
the relationships based on historical U.S. data would not likely be applicable
to the non-OECD countries. Therefore, Gibbs' scenarios of CFC use in this
region were based on a range of "logistic" or S-shaped curves. The shape of
this curve implies that the growth of CFC use over time will not be constant;
the rate is initially high, with declining rates as market saturation is
achieved.
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D-19
The range of S-shaped curves used by Gibbs to project scenarios of potential
CFG use in the non-OECD region is driven by alternative assumptions about the
level at which market saturation is achieved. The saturation level was defined
as the level of use per capita simulated to be achieved by 2075. The level was
chosen as a fraction of the use per capita observed today in the non-U.S. OECD
region; with the fraction defined as the ratio of the projected 2075 GNP per
capita value in the non-OECD region to the current GNP per capita value for the
non-U.S. OECD region.
Exhibit D-6 displays a summary of Gibbs' scenarios for the non-OECD region
for the period 1985 to 2000. Five alternative GNP projections were used,
producing estimates of CFC growth ranging from 3.7 percent per year to nearly 10
percent per year. Gibbs suggests that the lowest and highest scenarios may be
bounding cases. The implied income elasticities are also reported. The
elasticity estimates are initially higher than the rates implied by Quinn's
scenarios for this same period.
Gibbs' scenarios for the period 2000 to 2075 show declining rates of growth
and declining income elasticities over time. The range of his estimates is very
large by 2075 (about a factor of 10), reflecting uncertainties in population and
GNP per capita projections, as well as uncertainties in the potential level of
market saturation in this region. The range of growth rates for the 2000 to
2075 perio.d is about 2.8 percent to 3.7 percent for this non-OECD region.
3.3 Kohler Estimates of Demand for CFC Related Products in Developing Countries
Kohler examined potential future demand in developing countries for
individual CFC end-user products, including: automobiles; refrigerators; and
air conditioners. Future LDC consumption of these products for the period 1980
to 2000 was estimated using "a series of models employing baseline data on
relationships between consumption of CFC-intensive products and average GNP,
along with reasonable population forecasts and alternative assumptions about GNP
growth."16 The projections include CFC end-user products both domestically
produced and/or imported from industrial or other developing countries. This
top-down approach for individual products is combined with a bottom-up
examination of CFC end-user product ownership at the household level. It
illustrates a key underlying source of industrial demand for CFCs.
The results of the Kohler study indicate that in the developing countries
examined, consumption of CFC end-user products may increase at a rate comparable
to the rate of GNP growth between the years 1980 and 2000. Growth rate
projections for consumption of CFC end-user products in selected LDCs are
presented for three GNP scenarios in Exhibits D-7, D-8, and D-9. The three GNP
growth rate scenarios are, respectively, Scenario A: extrapolated to the future
based on 1960-1980 growth rates; Scenario B: IMF baseline projections for
1987-1990; and Scenario C: GNP per capita growth of one percent per year.
(This scenario is presented primarily to test the implications of a global
recession over the next thirteen years).
16 Kohler et al., op. cit., p. 65.
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D-20
EXHIBIT D-6
SUMMARY OF GIBBS SCENARIOS
OF FUTURE CFG USE IN NON-OECD COUNTRIES:
1985 to 2000
Scenario
Limits to Growth
Low Growth
Medium Growth
High Growth
No Limits to Growth
GNP
Growth
2.5%
3.3%
3.5%
4.0%
4.6%
CFC
Growth
3.7%
5.0%
6.7%
9.6%
9.8%
Implied
Income
Elasticity 3/
1.5
1.5
1.9
2.4
2.1
a/ The implied elasticity is computed as the ratio of the CFC use growth
to the GNP growth.
Source: Gibbs, M.J. (1986), "Scenarios of CFC Use: 1985-2075," ICF
Incorporated, prepared for the U.S. Environmental Protection
Agency, Washington, D.C.
-------
EXHIBIT D-7
Scenario A: RAND GNP and Product-Consumption Annual
Growth Rates in Selected LOCs: 1980-2000*
Cross-Section
GroMth Iota
Cross-Section
Nodal
Croat-Sect ion
Country
•raiil
India
Indonesia
South Korea
Algeria
Argentina
China
Iran
NCR Ice
Nigeria
Saudi Arable
South Africa
turkey
Veneiuala
Source: D.F. Kohl
D
Populetlon
2. IX
2.0X
1.8X
1.SX
S.7X
1.SX
I.OX
S.OX
2.2X
S.SX
s.ax
S.OX
1.9X
2.8X
er. -1- •••n«
D Model
GNP Autoenbllea
7.SX
S.4X
S.9X
8.6X
7.0X
S.SX
4.8X
8.4X
4.9X
7.7X
12.2X
S.SX
S.SX
S.SX
mmt f r»^ *D
7.9X
S.7X
7.0X
9.9X
7.9X
4. OX
S.SX
9.0X
S.SX
8.4X
9.8X
S.SX
6.0X
S.8X
PA 1 *M» g) 1 *•••*• jkf •>•<
Model (Point Estleate) (Nigh P«
ftutoMoblles •efrlgeretors
4.2X
6.8X
6.8X
4.7X
6.6X
S.OX
S.7X
S.SX
4.2X
7.2X
•10.4X
4.4X
4.7X
2.2X
.61
.21
.*4X
.71
.51
.61
.61
.91
.61
.IX
.31
.71
.71
tint EstiMte) Air
•efrigeretors Conditioning
S.2X
7.3X
10.41
5.9X
6.7X
S.4X
9.81
4.9X
4.8X
9.2X
4. IX
S.2X
5.81
4.2X
„
9.3X
4. OX
7.5X
11.31
8.2X
4.4X
6.7X
10.5X
S.9X
9.4X
15. SX
6. IX
60V
• W>
6.5X
- • —' • "™^S»™si ^^-™ • f ^^^^^f w w vf v»« • w*w »»• w m ^wv^ecv^ w "^f *mmmun «re ««•«»* w^eH ««waev |
lha lANO Corporation, prepered for U.S. Envlronnental Protection Agency. January 1986.
•otea: a IAND, estiaetes baaed en projected GNP growth retea estlaeted fro* GNP per capita during the period 1960-1980
; 20;j.lh*1rat- of "»»"l«tl«i trouth uaa calculeted for eech country aatuaina eiiponential
). CMP value* uere calculated by projecting GNP per capita to the yeer 2000. dividing
CMP per capita by population, and calculating the laplled exponential growth rate.
c fetlwtea fro* Kohler (19861. pg. 26. Growth retee Mere calculated asaualng an e«ponmllal growth of autonbile stock.
d EetlMtes froa Kohler (1986). pg. 32. Growth ratea were calculated asaualng an exponential growth of autoaobile stock.
a Estimates free) Kohler C19B6). pg. 41. Growth retea wtre colculated asaualng an exponential growth of doaestlc refrigerators stock.
f Est laates fro* Kohler (1986). pg. 46. Growth relea were calculated assualng an exponential growth of daws tic refrigerators slock.
g Estimates free) Kehler (1986). pg. 54. Growth retea wtre celculaled assualng an exponent Iel growth of doBcsttc air conditioning slock.
-------
EXHIBIT D-8
Scenario B: RAND GNP and Product-Consumption Annual
Growth Rates in Selected LDCs: 1980-2000
Country
•railI
India
Indonesia
South Korea
Algeria
Argentina
China
Iran
Neiico
Nigeria
Saudi Arabia
South Africa
lurkay
Venezuela
»f
Ih.
Population
.IX
.OX
.BX
.SX
.7X
.IX
.ox
.ox
.2X
.SX
.BX
.OX
.9X
ex
Cross-Sect ion
b Model
CMP Autoavbilet
,TX
,01
n
n
.n
n
.ox
.61
.n
.71
.n
.n
.91
.9X
s.ox
.91
.«x
.ox
.3X
.sx
.9X
.9X
.OX
.9X
.8X
.SX
.ox
.zx
Croat-Section
Model
(Point fatiMte)
•ofrlgeratori
.SX
.9X
.6X
.SX
.9X
.)X
.n
.n
.9X
.ox
.4X
.aX
.6X
Air
Conditioning
.6*
.6X
.n
.n
.IX
.8X
.9X
.JX
.AX
.n
.n
.n
.n
.en
to
to
Ca—.-Proiectlona of Produeti U.ln» ChiorolluBrocarbona In Developing
f.7 U.S. Invlroment.l fro, eel. on A9-ncy. Janu^r ««*.
,ro-,h o,
th. l^i«i .N»n«n,l.l .ro-,h ra..
c l.,i«.« lr- *M~ «19«*,. p.- 26. Cro-th r.,« -era calculate ..«-,ns «
a .Ml—. .- .-.r C19.6,. P.- *«. Cro-th rate. «r. calculate- ...-.n, « a^onenti.l .ro-,H ., d«,.,c ..... ^r.,or.
. i.,i_... lr- «-hler «I966». P9- »4. Cr«««. rate, -ere calculate- a.*-ln. « .V-nen«..« Qr-«H ol
,tock.
>tic air condltionina (lock.
-------
Country
Bran I
India
Indonesia
South Korea
Algeria
Argentina
China
Iran
Hem co
Nigeria
Saudi Arabia
South Africa
turkey
Venezuela
EXHIBIT D-9
Scenario C: RAND GNP and Product-Consumption Annual
Growth Rates in Selected LOCs: 1980-2000*
Population
2. IX
2. OX
1.8X
I.5X
3.7X
1.3X
1.0X
3. OX
2.2X
3.5X
3. 8X
3. OX
1.9X
2.8X
3. IX
3. OX
2.9X
2.5X
4.7X
2.3X
2. OX
4. OX
3.3X
4.5X
4. ax
4. OX
2.9X
3. BX
Cross-Sect ion
b Model
GNP Automobiles
3.2X
3.2X
3.5X
2.flX
.3X
,7X
,zx
,3X
,3X
n
BX
ox
ox
4.U
Cross-Sec 11 on
Model
(Point Estimate)
Refrigerators
2. BX
3.6X
3.3X
2.3X
4.4X
2. OX
2.6X
3.5X
2.9X
4.7X
4.OX
3.6X
2.8X
3.2X
Air
Conditioning
3.5X
3.4X
3.2X
2.9X
5.IX
2./X
2 4X
4.4X
3.7X
S.OX
5.2X
A.IX
3.IX
4.2X
ro
to
Source: D.f. Kohler. J. Haaga. and f. Cam. "Projections of Products Using Chlorofluorocarbons in Developing Countries-.
Ihc RAND Corporation, prepared for U.S. Environmental Protection Agency. January 1986.
Mules: a RAND estimates bused on piojcctcd CNP/capita growth rates of IX for the years 1980 2000.
b Estimates from Kohlcr <1986). pg. 20. Ihe rale of population growth was calculated for each country assuming exponential
growth «Pop2000/Pop1980)/<1/20)>. CNP values were calculated by projecting GNP per capita to the year 2000. dividing
CNP per capita by population, and calculating Ihe loplied exponential growth rale.
c Estimates Iron Kohler (19B6). pg. 26. Growth rates were calculated assuming an exponential growth of automobile slock.
d Estimates Iron Kohler (1986). pg. 41. Growth rales were calculated assuming an exponential growth of domestic refrigerators stock.
e Estimates tram Kohler (1986). pg. S4. Growth rales were calculated assiaing an exponential growth of domestic air conditioning slock
-------
D-24
Under Scenario A two sets of estimates are presented. The cross-sectional
model projections are based on analyses of recent data (about 1980) across all
the countries examined. The growth-rate model projections are based on time
series analysis. Under Scenario A (Exhibit D-7) 13 out of 14 cross-section
model projections for automobiles show product consumption growth rates greater
than GNP growth rates. The exception was for Saudi Arabia.*7 The growth-rate
model projections for automobiles, however, show only 3 out of 14 product
consumption growth rates greater than GNP growth rates. For refrigerators the
two models respectively show 3 and 5 (out of 14) product consumption growth
rates greater than GNP growth rates. All 14 projections of air conditioning use
growth rates were greater than GNP growth rates.
Under Scenario B (Exhibit D-8), only the cross-section model results were
reported by Kohler. For automobiles, 12 out of 14 consumption growth rates are
greater than the GNP growth rates. Estimates for refrigerators show only 4 out
of 14 consumption growth rates greater than GNP growth rates. All projections
of air conditioning use growth rates were greater than GNP growth rates.
In Scenario C (Exhibit D-9), 12 of the automobile, 4 of the refrigerator,
and all of the air conditioning estimates exceed the GNP growth rates.
In sum, the Kohler estimates indicate the following for the products
examined:
• Automobiles: The cross-section model shows the
automobile stock growing more rapidly than GNP in
nearly all the countries examined, and in all three
GNP scenarios. The growth rate model (presented
for Scenario A only) indicates that GNP growth may
exceed automobile stock growth in most of the
countries examined.
• Refrigerators: Both the cross-section and the
growth rate models indicate that GNP is likely to
grow more rapidly than the stock of refrigerators in
most of the countries examined in all three
scenarios.
• Conditioning Equipment: The results indicated that
the growth in air conditioning equipment may exceed
the rate of growth of GNP in all the scenarios
examined. Compared to the automobile and
refrigerator estimates, however, the air
conditioning estimates are based on less complete
data, and are considered (by Kohler) to be less
reliable.
1' Of note is that Saudi Arabia has an unrealistically high GNP growth rate
projection of 12.2 percent in this scenario.
-------
D-25
Overall, these results imply that the rates of growth of the CFC-related
products may be comparable to the rates of growth of GNP during the period 1980
to 2000.
3.4 Estimates of LDC CFC Growth Under Alternative Parameter Assumptions
This section presents a range of CFC use growth rates for the period 1985 to
2000 that are implied by a range of assumptions about future GNP growth and
income elasticities of demand. The potential rate of GNP growth in LDCs through
2000 is uncertain, and will be influenced by various factors described in the
previous section. A GNP growth range of 1.5 percent to 4.5 percent is used to
explore the potential CFC growth rates during this period. The low rate would
be consistent with very slow global economic growth, including significant
recession. If the GNP growth rate is as low as 1.5 percent per year from 1985
to 2000, the implied GNP per capita level declines during this period because
population is expected to grow more rapidly than 1.5 percent per year. A GNP
growth rate of 4.5 percent is consistent with continued strong economic
expansion in the LDCs.
Because the LDCs are diverse, some countries may be more likely to
experience strong growth during the next 13 years (e.g., the newly
industrialized countries), while others (e.g., those with large debt burdens)
may be more likely to experience lower growth. A middle value of 3.0 percent
per year is also presented.
A range of income elasticities of 0.5 (based on the Quinn scenario results)
to 2.0 (based on the Gibbs scenario results) is used. A middle value of 1.0
(consistent with the indications from the Kohler analysis) is also presented.
Exhibit D-10 displays the implied CFC use growth rates for these ranges of
assumptions. Not surprisingly the range of possible values is quite large,
ranging from 0.75 percent to 9.0 percent. As mentioned above, it is unlikely
that all of the LDCs will be in either extreme situation.
Of note is that the NICs and the large developing nations account for the
largest portion of CFC use by the LDCs. The NICs will likely experience GNP
growth on the high side of the range examined here, so that their CFC use growth
rates will likely also be on the high side. Because the NICs have adopted
CFC-intensive development strategies, their income elasticities may also be
moderately high, meaning that the NICs may experience CFC use growth on the
order of 3.0 to 9.0 percent.
The potential future GNP growth rates for the large developing nations (e.g.
China and India) are less certain.18 Also, although these nations have
18 The World Bank categorizes both China and India as "low-income
countries." Although forecasts of GNP growth are not presented in the World
Bank's 1987 World Development Report, "high" and "low" forecasts are presented
for GDP and GDP/capita between 1986 and 1995 for the "low income countries."
These range from a low GDP growth rate of 4.6 percent, to a high GDP growth rate
of 6.7 percent; an average of 5.65 percent. Low and high forecasts of
-------
D-26
EXHIBIT D-10
CFG USE GROWTH RATES FOR RANGES OF VALUES FOR
INCOME ELASTICITIES AND GNP GROWTH, 1985-2000
Income
Elasticity
0.5
Income
Elasticity
1.0
Income
Elasticity
2.0
GNP GROWTH RATE
1.5 Percent
3.0 Percent
4.5 Percent
Values computed assuming a constant income elasticity; values equal the GNP
growth rate times the income elasticity.
0.75
1.50
2.25
1.5
3.0
4.5
3.0
6.0
9.0
GDP/capita for the period 1986-1995 are 2.8 percent and 4.8 percent
respectively; an average of 3.8 percent.
-------
D-27
generally not adopted export-led development strategies, the development of
their internal markets may require increasing levels of CFCs (e.g., China has
announced its desire to introduce refrigeration in significant amounts by
2000).19 Therefore, these LDCs are unlikely to be in the lowest portion of the
growth range presented in Exhibit D-10.
Overall, because the majority of current LDC CFC use is in countries that
are not expected to be in the low portion of the range presented in Exhibit
D-10, it indicates that CFC use growth across the LDCs may be on the order of
the middle of the range in the exhibit (e.g., 3.0 percent) or higher.
3.5 Summary of CFC Growth Estimates
Each of the studies surveyed in this paper present estimates of the annual
growth rate of CFC use to the year 2000. However, the studies are based on
different methodologies, regional definitions, and scenarios of future economic
growth. Comparisons of the estimates of future CFC use under these
circumstances should be regarded with considerable caution. With these caveats
in mind, some qualified comparisons are presented in this section.
In the Quinn study it was assumed that in the near term (through 2000) CFC
use would grow at the same rate as GNP per capita. This assumption implies an
income elasticity of less than 1.0. Using the Quinn population (and hence GNP)
growth scenario, the implied income elasticity is on the order of 0.5.
The Gibbs study results are driven by the assumed level of market saturation
achieved, and is strongly influenced by the large range of GNP and population
projections examined. The Gibbs results imply larger income elasticities in the
near term, ranging from 1.5 to 2.4. Of particular note is that the Gibbs values
are for all non-OECD nations, including the East Bloc countries. The inclusion
of these nations may be one reason why Gibbs' elasticity estimates exceed
Quinn's estimates. In fact, if Quinn's estimates for East Bloc countries are
combined with the results for the three Quinn regions identified above, an
income elasticity of about 1.0 is implied for the period 1980 to 2000 for
several of his scenarios, making his implied income elasticity closer to, but
still lower than Gibbs.
19 It has been reported that China currently (1985) has about 4 million
refrigerators, about one per sixty of its 240 million households. It has also
been reported that by the year 2000, 50 percent of the households in China will
have installed refrigerators. Assuming about 240 million households, this 50
percent saturation implies a 30-fold increase in refrigerators (from 4 million
to 120 million) by the year 2000. The average annual growth rate in the stock
of refrigerators is estimated at over 25 percent per year. See Gandhi, Sunita,
Andrea Ketoff and Jayant Sathaye (July 1987), "Trends in Saturation of
Refrigerators and Air Conditioners in Developing Countries: Potential for
Chlorofluorocarbon Emissions," International Energy Studies, Energy Analysis
Program, Lawrence Berkeley Laboratory, Berkeley, California, prepared for the
U.S. Department of Energy.
-------
D-28
The Kohler results indicate that the rates of growth may be expected to vary
across the nations examined. Overall, however, the rate of growth in
CFC-related products may be expected to be comparable to the rate of growth of
GNP.
The parametric analysis displays the implications of the ranges of results
reported in the three studies. Because most of the LDC CFC use is in NICs and
large LDCs, it may be anticipated that near term CFC growth in LDCs will be in
the middle to high end of the range of possible outcomes from the parametric
analysis.
4. IMPACT OF CFC REGULATION IN INDUSTRIAL COUNTRIES ON FUTURE LDC USE OF CFCs
This section examines some of the potential implications of CFC regulation
in industrial countries on future CFC use in developing countries. The
disproportionate participation between industrial and developing countries in
the Montreal Protocol negotiations to reduce CFC emissions, raises the
possibility that while most (or all) industrial countries may join the protocol,
many LDCs may not.
4.1 Potential Impacts on LDCs
Under each of the LDC groupings -- NICs, least developed countries, and
large developing countries --we discuss the potential impacts of the protocol's
trade control provisions on LDC exports of CFCs, products containing
CFCs, and products manufactured with but not containing CFCs. General
conclusions are summarized in Exhibit D-ll. We also examine current and
potential future import costs of CFC-11 and CFC-12 for selected LDCs.
As noted in the exhibit, an import ban by parties to the protocol on exports
of CFC bulk chemicals should have a very small negative impact on the non-party
NICs; no effect on non-party least developed countries; and no-to-very small
effect on non-party large developing countries. An import ban on products
containing £FCs could have a large negative impact on the non-party NICs; a
small negative effect on non-party least developed countries; and a medium-large
effect on non-party large developing countries. An import ban on products
manufactured with, but not containing CFCs could have a large-very large
negative effect on non-party NICs; a small-medium effect on non-party least
developed countries; and a medium-large negative effect on non-party large
developing countries.
The Montreal Protocol contains trade control provisions that could involve
the following:
a) signatory countries will ban imports of CFC and halon bulk chemicals
from and exports of CFC and halon bulk chemicals to any state not party
to the protocol;
b) imports of products containing CFCs and halons from non-signatory
countries will also be restricted or banned;
-------
D-29
EXHIBIT D-ll
POTENTIAL NEGATIVE EFFECTS OF PROTOCOL TRADE CONTROLS
ON CFC-RELATED EXPORTS OF SELECTED NON-PARTY LDCs a/
NICs
Least Developed
Countries
Large Developing
Countries
Import Ban of
CFG Chemicals
Very small
None
Import Ban
by Parties
of Products
Containing CFCs
Large
Small
None-very small Medium-large
Import Ban
of Products
Manufactured
with CFCs
Large-very large
Small-medium
Medium-large
a/ This analysis assumes that many LDCs do not join the protocol and continue
to implement current economic and industrial development policies. These
potential effects are for illustrative purposes only and will differ among
individual countries within each group.
-------
D-30
c) the feasibility of banning or restricting imports of products
manufactured with but not containing CFCs or halons from non-signatory
countries will be determined;
d) exports to non-signatory countries of technologies which produce or use
CFCs and halons will be discouraged; and
e) signatories will not provide new financial support for the export of
technologies which facilitate production of CFCs or halons to non-
signatory countries.
4.1.1 NICs
The newly industrialized countries (NICs) are the largest producers and
users of CFCs and CFC-related products among the developing countries. NICs
that currently produce CFCs include: Brazil, Mexico, Venezuela, Argentina,
Korea and Taiwan, among others. Although CFC export data are unavailable, it
appears that production of CFCs in these countries is mainly for domestic
consumption rather than export. As such, the impact of an import ban by
industrial countries party to the protocol of CFCs produced in non-signatory
NICs, would have a limited negative impact on these industries or on the export
earnings of these countries.
The NICs have become significant producers and exporters of manufactured
goods containing CFCs, including: motor vehicles, air conditioners, and
refrigerators. Although production of these goods serve, in part, domestic
markets, recent industry production trends have been increasingly for export to
industrialized country markets. As such, any restrictions on the export of
these products by the NICs will have a strong negative impact on these
industries, as well as the countries' export earnings. From the viewpoint of
the NICs, restrictions on auto exports would pose the most serious detrimental
effects. For example, in the event they do not join the protocol, Brazil and
Korea would be most immediately affected.
The NICs are also the largest producers among developing countries of
products manufactured with but not containing CFCs, notably electronics. Should
the protocol's most severe trade control provisions be extended to such
products, their domestic electronics industries and export earnings of the NICs
would be greatly affected. In the event they do not join the protocol, NICs
that could receive the most detrimental affects may include: Korea, Taiwan,
Singapore, Malaysia and Mexico.
Another concern of the NICs is the potential increase in the cost of
importing CFCs for industrial purposes, due to the protocol's restrictions on
global production/use of CFCs. Current import costs of CFC-11 and CFC-12 for
those NICs with available data are relatively small but cover a broad range.
Import costs for Brazil, Hong Kong and Korea are, respectively, $18,000,2° $2.5
million and $5.2 million (See Exhibit D-12). Given that these countries
2" Brazil's low import cost is due to self-sufficiency in CFC chemical
production.
-------
D-31
Country
Brazil
EXHIBIT D-12
ESTIMATED IMPORT COSTS OF CFC-11 AND CFC-12
FOR SELECTED LDCs
(thousands of dollars)
CFC Imports
Amount
.012 mill kg
Current Import
Cost (g)
$ 18
Possible Future
Range of Cost (h)
$ 36 - 1,800
Hong Kong
India
Indonesia
1.7 mill kg
c/
.448 mill kg
d/
5.4 mill kg
2,500
672
8,100
5,000 - 30,500
1,344 - 6,720
16,200 - 81,000
Korea
3.5 mill kg
5,200
10,400 - 52,000
Thailand
1.2 mill kg
1,800
3,600 - 18,000
Notes:
a/ "Carteira Do Comercio Exterior," Banco Do Brazil S.A., 1985.
b/ "Hong Kong Trade Statistics," Census & Statistics Department, Hong Kong,
1985.
c/ "Monthly Statistics of the Foreign Trade of India," Directorate General of
Commercial Intelligence and Statistics, India, 1982.
d/ "Indonesia Foreign Trade Statistics," Biro Pusat Statistic, Jakarta,
Indonesia, 1984.
e/ "Statistics Yearbook of Foreign Trade," Office of Customs Administration,
Republic of Korea, 1985.
f/ "Foreign Trade Statistics of Thailand," Department of Customs, Bangkok,
Thailand, 1985.
E/ This assumes an average cost of $1.50/kg for CFC-11 and CFC-12.
h/ This assumes a range of between two and ten times current import costs.
-------
D-32
respectively import products and production inputs worth billions of dollars,
current import costs represent a very small share of total import costs.
In the event that CFC prices increase between two and ten times their
current cost, the import cost of CFCs should continue to represent a small share
of total import costs, albeit larger than at present. For those countries with
existing CFC production capacity, higher import costs may stimulate further
import substitution of CFC chemicals. This would likely be the case for Brazil
and some other Latin American NICs. For those NICs not currently producing
CFCs, a ten-fold increase in CFC import costs would surely raise the possibility
of initiating domestic CFC production. It is not currently known how much of a
CFC import price increase would make CFC import substitution cost-effective.
In summary, the UNEP protocol's trade provisions could impair manufactured
exports by non-party NICs which they have successfully increased in recent
years. The costs to these countries of potentially lost export earnings could
be high. Of all the developing countries, the NICs have the greatest interest
in retaining access to the markets of the industrialized countries. As a
result, it is likely that they will give due consideration to the potential
costs and benefits of joining the protocol versus not joining. Protocol
provisions to facilitate transfers of alternative technologies are an important
incentive to join the protocol for the NICs.
4.1.2 LEAST DEVELOPED COUNTRIES
The least developed countries are the smallest users of CFCs among the
developing countries. In general, the least developed countries do not have
domestic production capacity for CFC chemicals. Domestic production of
CFC-related products is largely non-existent, with the exception of a few
countries that assemble air conditioners, refrigerators and electronics
products. For example, Thailand is a net exporter of air conditioners, and
several least developed countries, such as those in the Caribbean Basin, are
attempting to establish electronics assembly industries for export. However,
most of the least developed countries have no domestic production capacity for
CFCs or CFC-related products. For these countries, CFC use is limited to
imports of CFCs contained in or used to manufacture CFC end-user products.
The potential effects of the UNEP protocol's trade control provisions should
be limited for the least developed countries as a group (see Exhibit D-ll).
Without exports of CFC-related products, the protocol's import restrictions are
of little concern to these countries. They also should experience very limited
balance of payments effects due to potential CFC price increases that might
occur due to global reductions in CFC production. Because these countries have
little need for industrial applications of CFCs, price increases should be
limited to those incorporated in imported CFC end-user products. However, the
value of CFCs represents such a small share of the total value of CFC end-user
products (e.g., automobiles), that any increase in the final import cost of
these products should be limited.
The trade control provisions of the UNEP protocol may have some negative
effect on those few non-signatory least developed countries either currently
attempting to, or considering, the development of domestic CFC end-user
-------
D-33
industries, such as assembly of electronics or air conditioners. Because these
industries would have the purpose of raising foreign exchange through exports to
the industrial countries, restricting such exports may have detrimental effects.
Since these countries would be able to export CFC end-user products to signatory
industrial countries and obtain needed CFCs under the protocol, those
considering CFC-related exports would be likely to join. Again, this would
apply to very few countries in this least developed group.
A.1.3 LARGE DEVELOPING COUNTRIES
The large developing countries are significant users of CFCs. Indonesia and
the Peoples Republic of China, for example, use larger amounts of CFC-11 and
CFC-12 than some industrial countries (see Exhibit D-l). China and India are
producers of CFCs. Although total use of CFCs in these countries is quite
large, per capita use is much smaller than the industrial countries and slightly
smaller than the NICs.
CFC use in the large developing countries has similar industrial
applications as in the NICs. This is particularly true for India which has an
impressive domestic electronics industry. China is also attempting to expand
its electronics industry. Both countries also produce other CFC end-user
products, such as automobiles, refrigerators and air conditioners. Production
by these countries of most industrial goods, including CFC end-user products, is
for the domestic market. However, in recent years, the large developing
countries have attempted to increase their respective manufactured exports, spur
the technological growth and sophistication of these industries, achieve greater
economies of scale and production efficiencies, and, lastly, earn needed foreign
exchange.
While the currently-earned foreign exchange that could be lost is relatively
low, trade control provisions of the UNEP protocol could impair the continued
near-term growth and, perhaps more importantly, the technical development of CFC
end-user industries in the large developing countries that do not join the
protocol. At the same time, however, the domestic markets of these countries
probably can provide a major market for growth of CFC containing products.
The large developing countries would also feel the impact of any price
increases for CFC chemical imports. For example, Indonesia currently imports
about 5.4 million kilograms of CFC-11 and CFC-12, at a cost of roughly $8
million. A price increase from two to ten times could raise Indonesia's CFC
import cost to between $16 million and $81 million (see Exhibit D-12). This
could provide the incentive for Indonesia to initiate domestic production of
CFCs. Once large capital investments are made in CFC producing facilities it
will be harder to alter the growth of CFC dependent industries.
In summary, the trade control provisions of the protocol could, to a greater
or lesser degree, impair future growth of CFC end-user industries in the large
developing countries. Potential CFC price increases could significantly affect
import costs in these countries and provide the economic incentive for them to
substitute domestic production of CFCs for imports.
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D-34
4.2 Potential LDC Responses and Alternatives
What alternatives will developing countries have regarding trade of CFC
end-user products if they do not sign the protocol and are therefore frozen out
of industrial country markets? Two options are apparent.
• Option 1: Increase south-south trade. One alternative to
exporting to industrial country markets is increasing access
to LDC markets. Although trade among developing countries
increased at a faster pace than their trade with the rest of
the world through the 1970s and early 1980s, much of this
was trade in primary products. As noted in Exhibit 5 of
Attachment D-l, manufactured exports between LDCs have
declined as a percentage of total goods exported to
developing countries. In addition, demand in LDCs for CFC
end-user products such as automobiles, refrigerators and air
conditioners is limited. This is due to both the luxury
character of these products as well as the continued need of
many LDCs to conserve foreign exchange and limit imports to
necessary production inputs, capital goods and.food.
South-south trade may be a complement to north-south trade,
but not a viable substitute, except in the case where the
products are designed for the LDC market (e.g., inexpensive
refrigerators without freezers). Although new south-south
trade could reasonably exhibit a high rate of growth, it
could not compensate for the loss of access to industrial
country markets. Sales volumes would clearly decline as
would LDC export earnings.
• Option 2: Alternative technologies. Because the protocol
is only concerned with CFCs and products containing or made
with CFCs, companies in non-signatory LDCs could continue
producing and exporting to signatory industrial countries if
CFC use was eliminated from the production of products
currently using CFCs. Even if LDCs do not sign the
protocol, companies will still have an incentive to
assimilate CFC-free alternative technologies as they become
available. Transnational corporations (TNCs), in turn, may
be encouraged by non-party LDCs to use CFC-free technologies
as they are developed in order for the LDCs to retain
international market access for their products.
However, it may be possible for LDCs to target CFC use to
markets where there are no prohibitions, using alternative
technologies only for exports to protocol members that
enforce trade control provisions. The practicality of this
depends on industry-specific factors and the economy of
scale involved in this process.
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D-35
In summary, the economic development of some LDCs (NICs) could be greatly
impaired in the near-term if the full regulatory potential of current protocol
trade control proposals - - banning imports of all products containing or
manufactured with CFCs -- was implemented in the early 1990s and most LDCs
decide not to join and continue to implement current industrialization policies.
However, the development and adoption of alternative, non CFC-based technologies
should limit the potential negative impacts on the long-term economic
development and industrialization of these countries. If a protocol is
structured so that LDCs can grow until alternatives are available, but lose
export markets if they do not join, many LDCs will find it attractive to join.
Those LCD's that are either dependent on exports for growth, or intend to
greatly expand their exports of CFC-related products would have incentive to
adopt such alternative technologies whether they join the protocol or not
(assuming a strong trade control provision). This is particularly true for the
NICs.
4.3 Impact of Changing CFC Technology on Future LDC Use of CFCs
The protocol provides developing countries with a Grace Period from
regulations to freeze and reduce CFC and halon use for ten years if their per
capita consumption of the controlled substances is below 0.3 kilograms.^1 The
rationale for this exemption is that the economic and industrial development of
these countries would be unfairly hampered if access to CFCs was immediately
limited. Of note is that use of CFCs by developing countries may be affected by
regulations imposed in industrial countries, whether they join the protocol with
a regulatory Grace Period, or if they remain outside the protocol. In the long
term (following the Grace Period), CFC and halon limits would apply to LDCs. By
then, however, new technologies might be emerging which would allow LDCs to
develop without CFCs. The question arises, however, whether the higher costs of
these technologies will be a disincentive to their use, particularly in domestic
markets. Protocol provisions to encourage transfers of alternative
technologies, however, may limit these adjustment costs.
Once the regulations are imposed in the industrial countries, use of CFCs
and CFC related products will be reduced. Technological development will begin
to focus on other methods of providing the goods and services once made with
CFCs. Instead of automatically searching to solve problems with CFCs, engineers
will seek other alternatives. The potential future level of CFC use in
developing nations will likely be influenced by the technological changes
brought on by reductions in industrial nations; however, the extent of the
influence in developing nations is uncertain.
5. RELATIVE ATTRACTIVENESS OF THE UNEP PROTOCOL FOR LDCs
In order to assess the likelihood of LDC participation in the UNEP protocol
it is essential to identify the relative attractiveness for these countries of
joining versus not joining, whereas the preceding sections illustrated some
See Article 5: Special Situation of Developing Countries, Montreal
Protocol on Substances That Deplete the Ozone Layer. United Nations Environment
Programme, 1987.
-------
D-36
types of costs LDCs may experience, this section examines these costs relative
to the advantages of joining the protocol and suggests the'likelihood that
selected LDCs may join the protocol.
We discuss, in turn, the relative attractiveness of the protocol for newly
industrialized countries, least developed countries, and large developing
countries.
5.1 NICs
As noted above, the newly industrialized countries (NICs) are designated as
such due to the significant and growing role of manufactured goods production,
especially industrial products, in their respective economies. These industries
include major CFC end-user products such as automobiles, electronics,
refrigeration, and air conditioning equipment. The NICs are both largely
self-sufficient in meeting domestic demand for these products as well as
substantial exporters of these products. Markets in the industrial countries
represent the major destinations for these exports. As such, the NICs have an
interest in retaining access to these markets for their CFC end-user products.
NICs that participated in the Montreal Protocol negotiations included:
Argentina, Brazil, Colombia, Korea, Malaysia, Mexico, Nigeria and Venezuela.22
Mexico and Venezuela signed the protocol. Membership in the protocol would
allow signatory NICs continued access to industrial country markets for their
CFC end-user products. This is the main attraction that protocol membership
would represent for these countries. Depending on protocol provisions,
membership in the protocol would also allow the NICs to continue to expand their
respective uses of CFCs for some specific period of time. Lastly, technology
transfer provisions should provide additional incentive to join.
It should be noted that protectionist sentiment and actions pose a more
serious threat to the NICs' access to industrial markets for their CFC end-user
products than do protocol regulations to limit CFC use. Even without the
provision of a time-based exemption, signatory LDCs would be able to maintain
current (1986) levels of CFC use through 1992 or such, when use would be reduced
20 percent. However, there is no such guarantee that exports of automobiles,
electronics, refrigerators, and air conditioners by the NICs to industrial
countries will retain or exceed their current levels through 1992, absent any
international CFC regulations.
Provision of a LDC Grace Period from the protocol's control measures to
freeze and reduce CFC use for those LDCs that join would increase the relative
attractiveness of joining for the NICs by reducing the near-term adjustment
costs. Most significantly, such a Grace Period may allow continued CFC use for
ten years. In and of itself, however, providing a Grace Period would not allow
the LDCs to do anything that they do not and cannot already do, and could still
result in lower LDC per capita CFC use than in OECD countries.
22 Colombia, Malaysia and Nigeria are included here as NICs, although they
are relatively less developed than other countries in this group.
-------
D-37
The incentive to join the protocol, besides a desire to protect the
environment, is therefore provided by the protocol's trade control provisions
which would ban or restrict exports of CFCs and some CFC end-user products by
those countries that do not join.
The trade control provisions wpuld restrict, to a greater or lesser degree,
the ability of countries outside the protocol to export their CFCs and CFC
end-user products to the markets of protocol signatories. It is this threat of
losing market access to major export markets for major export products of the
NICs that provides the greatest incentive for them to join the protocol.
The combination of the protocol's trade control provisions, LDC Grace Period
and technology transfer assistance may be particularly attractive to the NICs.
Together, these provisions would make joining the protocol significantly less
costly than not joining. As such, it is more likely than not that the NICs will
join the protocol rather than be subject to its trade control provisions. Some,
however, may choose to simply comply with the protocol's central measures rather
than officially join.
5.2 Least Developed Countries
There is little immediate economic incentive for most of the least developed
countries to join the .protocol. Their use of CFCs is low and should continue to
be. Despite this, several least developed countries participated in the
Montreal Protocol negotiations, including: Algeria, Burkina Faso, Chile, Congo,
Costa Rica, Democratic Yemen, Egypt, Ghana, Kenya, Mauritius, Morocco, Panama,
Peru, Philippines, Senegal, Thailand, Togo, Tunisia, and Uganda. Of these,
Egypt, Ghana, Panama, Senegal, and Togo joined the protocol. The Dominican
Republic, Ecuador and Kuwait were observers. These countries do not produce
CFCs or CFC end-user products that would be subject to the protocol's trade
control provisions, for either their respective domestic markets or export. A
few of the least developed countries, such as Egypt, do have relatively high per
capita CFC consumption levels." for these countries, membership in the
protocol may represent less cost than not becoming party to the agreement.
For most of the least developed countries, the economies of which are
agricultural and primary resource-based, the incentive and attraction of joining
the UNEP protocol may be largely indirect and political. That is, to the degree
their participation in the protocol may contribute to these countries being
favorably viewed by others, their participation may have intangible benefits.
For some, public government support for an agreement of importance to industrial
countries may result in strengthened relations between individual developing and
industrial countries. Otherwise, the direct benefits of protocol membership are
limited for most of the least developed countries. The costs of both protocol
membership and abstention appear to be minimal.
23 See Exhibits D-l, D-2 and D-3.
-------
D-38
5.3 Large Developing Countries
The attractiveness of joining the protocol for the large developing
countries, such as the Peoples Republic of China, India and Indonesia,^ is
greatly dependent on whether these countries continue to implement development
strategies with increasing emphasis on export of manufactured goods. China and
Indonesia participated in the Montreal Protocol negotiations, while India was an
official observer. None has yet joined the protocol.
China and India are both attempting to develop domestic production
capabilities in CFC end-user industries such as motor vehicles and electronics.
Expansion of these industries along current lines would require continued access
to the markets of industrial countries. In this case, participation in the
Montreal Protocol may be a key to continued export growth of such targeted
industries. The ten-year Grace Period allowing continued growth of controlled
substances use up to 0.3 kilograms per capita would further benefit the current
development strategies of these countries, thus increasing their incentive to
join. However, as with the NICs, the principal incentive to join the protocol
is the threat of losing access to export markets in the industrial countries.
The size of domestic markets in the large developing countries gives them
the option of basing their economic growth and development on increased domestic
consumer demand. ^ With regard to CFC-related products, production for domestic
consumption could continue to use CFCs, whereas, production for export could
employ alternative technologies.
The ability of domestic markets to absorb current and foreseeable output of
CFC-related products, however, has structural limitations. The character of
these products and the vast poverty of the people in the large developing
countries may constrain the ability of domestic markets to absorb these goods
and fully substitute for exports. This will surely be a consideration in the
decision of the large developing countries to join the protocol or not. For
these countries, the choice of development strategy -- outward or inward looking
-- will be an important factor. A decision to maintain or increase
the outward orientation of their domestic economies should increase the
probability that large developing countries will join the protocol.
2^ Brazil could also be included in this group of developing countries
given its large population and domestic market.
nc
" Recent experience in Brazil showed the potential for this type of market
shift. Although the causal factor was different, built-up consumer demand
effectively siphoned off motor vehicles and other products made for export.
Similarly, India's electronics may serve a domestic market.
-------
D-39
ATTACHMENT D-l
The following is a series of development factors and indicators that will
have affected the recent use and production of CFCs and CFC end-user products in
nine developing countries-*- under three categories: newly industrialized
countries -- Brazil, Hong Kong, and South Korea; least developed countries --
Egypt, Honduras, and Thailand; and large developing countries -- China, India,
and Indonesia.
Exhibit 1 provides basic indicators which illustrate recent economic growth,
population and projected population growth rates through the year 2000. There
has been steady growth of GDP over the past decade ranging from a 4.1 percent
increase in India to a 9.1 percent increase in Hong Kong. Population growth
through the year 2000 is expected to range from a low of 1.2 percent in both
China and Hong Kong, to a high of 3.0 percent in Honduras.
Social indicators are shown in Exhibit 2. Income distribution is weighted
heavily towards the highest quantile of households. Urban population as a
percentage of total population increased in eight out of the nine countries
identified, the exception being Egypt. The number of cities with over 500,000
persons has, in most countries, more than doubled.
Exhibit 3 examines economic activity by sector. It indicates that
agriculture represents a smaller portion of GDP than in the past.
Manufacturing, services and, in most countries, industry have experienced strong
growth in the past two decades, but a slowdown appeared in the 1973-1984 period
from the preceding nine years. The sector breakdown illustrates that the
economic growth indicated in Exhibit A-l is unevenly based among economic
sectors. CFC-related products are among the manufacturing and industry sectors
that have had some of the strongest growth.
Production indicators in Exhibit 4 show a large increase in manufacturing
since 1970. Of that increase, machinery and transport equipment grew at a
faster pace than other sectors of manufacturing. For a majority of the
countries, average annual energy production growth rates and per capita energy
consumption increased tremendously due to improved infrastructure. This in turn
is a precondition for increased CFC use in developing countries.
Exhibit 5 on structure of exports once again illustrates the growth of
machinery and transport equipment as a share of merchandise 'exports. The
destination of manufactured exports indicates a general decrease in the
percentage of total goods exported to developing countries. The current trend
is not toward increased trade of manufactured products between developing
nations. This is significant as the trend indicates the problem some LDCs will
have if they are banned from trading CFC end-user products with industrialized
nations.
1 These countries were chosen because of the availability of data on CFC
production/use (shown in Exhibits D-l, D-2, and D-3), the growth of which is
influenced by the development indicators included in this Appendix.
-------
D-40
Exhibit 6 on the structure of imports and capital flows demonstrates that
with the exception of fuels, developing countries have, in most cases been
importing much less than they did twenty years ago. This reflects in part,
increasing domestic import substitution and production capacity. At the same
time, all of the developing countries here have increased their external debt
obligations, which in turn will restrict their available finances for productive
investment and import purposes.
-------
D-41
ATTACHMENT D-l
EXHIBIT 1
BASIC INDICATORS
Population Population GDP Growth
(millions) Growth Rate (billions $) in GDP (%)
1984 1980-2000 1965 1984 1973-1984
Newlv Industrialized Countries
Brazil
Hong Kong
Korea
Least Developed Countries
Egypt
Honduras
Thailand
132.6
5.4
40.1
45.9
4.2
50.1
2.0
1.2
1.4
2.2
3.0
1.7
19.3
2.2
3.0
4.6
.5
4.1
187.1
30.6
93.2
30.1
2.8
43.0
4.4
9.1
7.2
8.5
3.8
6.8
GNP Per
Capita ($)
1984
1,720
6,330
2,110
720
700
860
Large Developing Countries
China 1 ,
India
Indonesia
029.2
749.2
158.9
1.2
1.9
1.9
65.6
46.3
3.6
281.3
162.3
80.6
6.6
4.1
6.8
310
260
540
a/ The World Bank, (1986).
180-184 and 228-229.
World Development Report. Washington, D.C., pp.
-------
ATTACHMENT D~l
EXHIBIT 2
SOCIAL INDICATORS (1)
Urban Population Cities
Income Distribution^) As Z of total Average annual Over 500,000
(Z share of household income by urouos of households) Population growth rate (Z) Persons
Lowest 20Z 2nd Ouantile 3rd Ouantile
4th Ouantile Highest 20Z 1965 1984 1965-73 1973-84 1960 1980
Newly Industrialized Countries
Brazil
Hong Kong
Korea
Least Developed
Egypt
Honduras
Thailand
2.0 5.0 9.4
5.4 10.8 15.2
5.7 11.2 15.4
Countries
5.8 10.7 14.7
NA NA NA
5.6 9.6 13.9
17.0 66.6 51 72 4.5 4.0 6 14
21.6 47.0 89 93 2.1 2.6 1 1
22.4 45.3 32 64 6.5 4.6 3 7
20.8 48.0 40 23 3.0 3.0 53 53
NA NA 26 39 5.4 5.7 0 0
21.1 49.8 13 18 4.8 3.1 1 1
Large Developing Countries
China
India
Indonesia
NA NA NA
7.0 9.2 13.9
6.6 7.8 12.6
NA NA 18 22 3.0 2.9 42 45
20.5 49.4 19 25 4.0 4.2 11 36
23.6 49.4 16 25 4.1 4.5 3 9
o
I
ro
(1)
The World Bank. (1986). Vterld Development Report 1986. Washington, D.C., pp. 226-227 and 240-241.
(2)
The income distribution data are current to 1976 for India, Indonesia, South Korea, and Thailand. The income distribution data
for Brazil, Hong Kong, and Egypt are current to 1972, 1980, and 1974, respectively.
-------
ATTAC&fQlT D-l
EXHIBIT 3
ECONOMIC ACTIVITY BY SECTOR (1)
Distribution of gross domestic product (percent)
Agriculture Industry Manufacturing^) Services
1965 1984 1965 1984 1965 1984 1965 1984
Average annual growth rate (percent)
Agriculture
1965-73 1973-84
Industry
1965-73 1973-84
Manufacturing Services
1965-73 1973-84 1965-73 1973-84
Newly Industrialized Countries
Brazil
Bong Kong
S. Korea
19
2
38
13
1
14
33
40
25
35
22
40
26
24
18
27
NA
28
48
58
37
52
78
47
3.8
-0.6
2.9
4.0
0.8
1.7
11.0
8.4
18.4
4.2
8.0
10.9
11.2
NA
21.1
4.9
NA
11.5
10.5
8.1
11.3
4.6
9.6
6.8
>ast Developed Countries
0
•P-
Egypt
Honduras
Thailand
29
40
35
20
27
20
27
19
23
33
26
28
NA
12
14
NA
15
NA
45
41
42
48
47
52
2.6
2.2
5.2
2 5
3.6
3.7
3.8
5.7
9.0
10.3
4.4
8.7
NA
6.5
11 4
NA
4.2
10.0
4.7
5.8
9.1
10.6
3.8
7.5
Large Developing Countries
China
India
Indonesia
39
47
59
36
35
26
38
22
12
44
27
40
NA
15
8
NA
IS
NA
23
31
29
20
38
34
2.8
3.7
4.8
4.9
2.3
3.7
12.1
3.7
13.4
8.7
4.4
8.3
NA
4.0
9.0
NA
5.9
14.9
11.7
4.2
9.6
5.0
6.1
8.6
(1)
The World Bank, (1986). World Development Report 1986. Washington, D.C., pp. 182-185.
(2)
The distribution of manufacturing activity is shown separately in Exhibit A-4.
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ATTACaEHT D-l
tOKHIHTT 4
EBCDUCTIOH IHDICATCBS (1)
Value added
in manufacturing
(billions of Food and
1980 dollars) agriculture
1970 1983 1970 19B3
Distribution of manufacturing value added
1970
(percentage: 1980 prices)
Textiles Machinery and
and transport
clothing equipment Chemicals
1983 1970 1983 1970 1983
Other
1970
1983
Average annual energy
production growth rate
(percent)
1965-73
1973-84
Per capita energy
consumption
(kilograms of
oil equivalent)
1965 1984
Newly Industrialized Countries
Brazil 27.0 56.9
Bong Kong 3.1 6.9
S. Korea 4.0 21.8
Least Developed Countries
21
4
13
21
NA
10
15
50
16
11
NA
19
16
16
9
17
NA
24
4
1
16
11
NA
12
44
28
46
40
NA
36
8.7
NA
2.9
9.4
HA
5.0
286
424
237
753
1,162
1,171
O
•P-
Egypt
Honduras
Thailand
3.3
0.5
2.5
4.8
0.7
7.8
22
43
32
20
50
23
35
13
21
26
11
NA
5
NA
6
13
1
12
32
41
36
32
33
56
10.0
15.6
11.0
15.6
9.9
17.4
313
111
80
562
205
205
Large Developing Countries
China
India
Indonesia
69.1 134.9
16.3 27.1
2.4 9.6
NA
11
18
NA
13
21
NA
37
7
NA
27
7
NA
14
5
NA
18
7
NA
8
7
NA
11
6
NA
30
62
NA
32
60
11.8
3.7
12.7
5.6
7.9
3.3
178
100
91
485
187
205
(1)
The World Bank, (1986) World Development Report 1986. Washington, D.C., pp. 192-195.
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ATIMXMEBT D-l
FHHimT 5
STRUCTURE OF EXHBTS (1)
Percentage share of merchandise exports
Fuels,
minerals,
and metals
Other
primary
commodities
1965 1963
Textiles
and clothing
Machinery
and transport
equipment
1965 19B3 1965
"83
Other
Manufacturers
1965 19B3 1965
Destination ot manufactured exports (» of total)
Manufactured
Industrial East European exports
market nonmarket High-income Developing (billions
i economies oil exporters economies ot dollars)
1963 1965 1983 1965 19B3 1965 198* 1965 1983
Newly Industrialized Countries
Brazil 9 15 63 44
Bong Kong 2 2 11 6
S. Korea 15 3 25 6
1 3 2
43 33 6
27 25 3
14
22
32
6
37
29
23
36
34
40
71
66
52
64
66
3 59
4 28
10 32
43
32
24
.13 91
1 01 20 1
10 22 2
Least Developed Countries
Egypt
Honduras
Thailand
6
11
70
7
6
71
90
64
22
84
62
15
1
0
4
1
11
HA
HA
0
NA
NA
6
5 20
7 2
15 39
38
28
60
46
0
0
40
0
0
30
98
61
14
72
31
.13
.01
03
26
06
2 06
Large Developing Countries
China NA
India 10
Indonesia 43
22
18
80
NA
41
53
21
29
12
HA
36
0
19
14
1
NA
1
3
HA
12
1
32
31
6
HA
55
25
HA
51
42
HA
12
1
NA
0
0
NA
2
0
HA
7
7
NA
31
74
NA
19
52
NA 12 56
83 5 08
.03 1.62
(1)
The World Bank, (1986). World Development Report 1966. Washington, D.C., pp. 198-199 and 204-205.
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ATTACHMENT D-l
EXHIBIT 6
STRUCTURE OF IMPOSTS AND CAPITAL FLOHS(l)
Net capital inflow
Percentage share of merchandise immrts Cmiin,™,, ~r j_i i « n.-..-, , ...
Other Machinery Public and as DercentaBa of
primary and transport Other publicly Private Exports of goods
Food Fuels commodities eouioment Manufacturers ituaranteed nonguarantBBd RHP ^A .
1965 1983 1965
Newly Industrialized Countries
Brazil
Hong Kong
S. Korea
Least Develor
Egypt
Honduras
Thailand
20
25
15
8 21
12 3
8 7
1983 1965 1983 1965 1983 1965 1983 1970 1984 1970 1984 1970 1984 1970 1984
56 9 4 22 16 28 16 629 8,102 700 -416 1.6 5.5 21 7 35 8
7 13 6 13 21 46 54 -1 69 NA NA NA NA NA NA O
27 26 " I3 29 38 22 242 2,999 25 807 3.2 6.6 20 3 15 8 *•
(Ti
>6cl Countries
26
11
6
Larne Developing
China
India
Indonesia
NA
22
6
30 7
10 6
4 9
Countries
15 NA
7 5
8 3
3 « 6 23 29 31 30 97 995 NA -50 NA 7.9 NA 34 1
22 l 2 26 18 56 47 26 245 7 -33 1.5 6.0 52 20 4
2* 6 8 31 29 49 35 27 804 62 713 2.5 5.4 14.0 21.5
1 m 1° NA 19 NA 47 NA NA NA NA NA NA NA NA
37 M 6 37 " 22 32. 583 2,048 0 530 1.0 1.1 234 138
25 2 5 39 35 50 28 382 2,219 134 400 1.8 5.5 13.8 19.0
(1)
The World Bank, (1986). World Development Report 1986. Washington, D.C.. pp. 200-201, 210-211 and 212-213.
-------
If.
-------
APPENDIX E
HUMAN HEALTH EFFECTS MODELING
This appendix presents the assumptions and calculations that underlie the
estimates of cancer incidence and mortality and cataract incidence.
Each of the following topics is discussed in turn:
1. Baseline U.S. Population;
2. Ozone Depletion;
3. Changes in UV Radiation Flux;
4. Basal and Squamous Cell Skin Cancers:
• Age- and sex-specific incidence rates assuming zero
ozone depletion,
• Dose-response relationship and assumptions, and
• Mortality assumptions.
5. Melanoma Skin Cancers:
• Age- and sex-specific incidence and mortality rates
assuming zero ozone depletion,
• Dose-response relationship and assumptions.
6. Cataract Prevalence and Incidence:
• Age-specific prevalence rates assuming
zero ozone depletion
• Dose-response relationship and assumptions;
• Method for computing incidence from prevalence.
7. Valuation of Human Health Effects
This appendix begins with a brief summary covering these areas.
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E-2
SUMMARY
The key assumptions used to evaluate cancer risks include:
1. U.S. Population. The U.S. population is estimated to grow
to 311 million by the year 2080 and to remain constant
thereafter. The population is categorized by sex, race
(white, non-white), age, and region (north, middle,
south). The sex, race, and age pattern is assumed to
change from 1985 to 2080, and to remain fixed thereafter.
The current regional distribution of the U.S. population
is assumed throughout.
2. Ozone Depletion. Global ozone depletion was evaluated
using a parameterized representation of a 1-dimensional
model of the atmosphere. Various scenarios of future
production and emissions of ozone depleting compounds
have been analyzed, ranging from a phaseout of CFCs to 5.0
percent growth per year from 1985 to 2050. In all
scenarios, production after 2050 was assumed to be
constant, and global ozone depletion was constrained not
to exceed 50 percent.
3. UV Radiation Flux. The DNA-damage action spectrum and the
erythema action spectrum are used to evaluate potential
changes in UV radiation flux. Based on estimates from a
UV model, for each 1.0 percent of ozone depletion,
DNA-damage-weighted UV radiation flux is projected to
increase from 2.1 to 3.2 percent, and erythema-weighted UV
is projected to increase from 1.75 to 2.6 percent.
4. Basal and Squamous Cell Skin Cancers. Incidence rates
(cases per 100,000 population per year) for white males
and females for each U.S. region (north, middle, and
south) were developed from incidence rates published in
1981. In the absence of ozone depletion, these rates are
assumed to remain constant throughout the analysis, and
rates for non-whites are assumed to be zero. A "power
function" dose-response model is used which implies about
a 1.0 percent increase in basal cell cancer (BCC)
incidence and a 2.0 percent increase in squamous cell
cancer (SCC) incidence for a 1.0 percent increase in
DNA-damage-weighted UV radiation exposure. Changes in
cumulative lifetime exposure are used in the dose-response
equation. Mortality, which occurs in one percent of all
current cases of nonmelanoma, is estimated to be 0.3
percent of additional basal cases and 3.75 percent of
additional squamous cases.
5. Melanoma Skin Cancer. Incidence and mortality rates are
developed for white males and females for each U.S. region
-------
E-3
(north, middle, and south) based on incidence and
mortality rates published in 1984. In the absence of
ozone depletion, these rates are assumed to remain
constant throughout the analysis, and rates for non-whites
are assumed to be zero. A "power function" dose-response
model is used which implies less than a 1.0 percent
increase in both incidence and mortality for a 1.0 percent
increase in DNA-damage-weighted UV radiation exposure
(incidence and mortality are modeled separately). Changes
in cumulative lifetime exposure are used in the
dose-response equation.
6. Cataracts. Cataract prevalence for males and females are
taken from rates published in 1983. In the absence of
ozone depletion, these rates are assumed to remain
constant throughout the analysis. A "power function"
dose-response model is used which implies about a 0.2
percent increase in prevalence for a 1.0 percent increase
in UV radiation exposure. Changes in cumulative lifetime
exposure are used in the dose-response equation.
Incidence is estimated as the rate of change of
prevalence, assuming that mortality is not related to
cataract prevalence.
7. Value of the Health Effects. To determine the amount of
damages caused by the impacts on human health (and
therefore, the size of the benefits to society for
avoiding the damages), estimates of the costs to society
for skin cancer and cataracts have been determined. Each
additional case of nonmelanoma is assumed to cost society
$5,000, melanoma -- $15,000, and cataracts -- $15,000.
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E-4
1. BASELINE U.S. POPULATION
The U.S. population is described in terms of:
• total population over time;
• fraction of the total population that resides in each of
three regions within the U.S.; and
• fraction of the population in each region that is white,
non-white, male, female, and in each of nine age groups.
Exhibit E-l shows the data used to describe the U.S. population. The top row
shows the total U.S. population, which grows through the year 2080. After 2080,
the total population remains constant.
Exhibit E-l also displays the fraction of the U.S. population that resides
in each of three regions: north, middle, and south. The three regions were
chosen to divide the country into three sets of baseline nonmelanoma and
melanoma incidence categories. The states included in each region are listed in
Exhibit E-2. As shown in the exhibit, the regional population of the U.S. is
assumed to remain constant after 1985, and therefore does not reflect regional
migration and differences in birth and death rates among the regions after this
time.
Exhibit E-l also displays the fractions of the population projected to be
white male and female and non-white male and female. These fractions shift
slightly by 2000, and significantly by 2080.
Exhibit E-3 displays the fractions of the population projected to be in each
of nine age groups. The age distributions are computed from projections for
whites only, and the age group definitions were selected to correspond to the
age groups for which nonmelanoma and melanoma skin cancer incidence rates are
available. The age distributions show the general trend of the population
getting older on average through the year 2080. Because skin cancer incidence
rates increase with age, the shift in the age structure of the U.S. population
toward older age groups has a large influence on estimates of skin cancer
incidence and mortality; the older the population, the higher the population
incidence and mortality.
To compute the number of people in each region by race, age, and sex over
time, the total U.S. population is multiplied by the appropriate fractions
displayed in Exhibits E-l and E-3.
2. OZONE DEPLETION
Global ozone depletion can be evaluated for a wide range of future
production and emissions of ozone depleting compounds and several sets of
assumptions regarding future trace gas concentrations. The range of annual
average growth rates for production through 2050 for the six scenarios presented
in EPA's risk assessment are: (1) phasedown to 20 percent of the 1985 global
emission levels by 2010, then constant thereafter; (2) lowest: 0.0 percent
-------
E-5
EXHIBIT E-l
U.S. POPULATION ESTIMATES
Year
1985 2000 2025 2050 2080
Total U.S.
Population (millions) 239 266 301 310 311
Regional U.S. Population (Fraction of Total)
North 0.2486 0.2486 0.2486 0.2486 0.2486
Middle 0.4607 0.4607 0.4607 0.4607 0.4607
South 0.2907 0.2907 0.2907 0.2907 0.2907
Population by Race and Sex
White Male 0.4157 0.4063 0.3902 0.3732 0.3611
White Female 0.4355 0.4246 0.4087 0.3968 0.3843
Non-White Male 0.0710 0.0807 0.0961 0.1096 0.1213
Non-White Female 0.0778 0.0884 0.1050 0.1204 0.1333
Source: Computed from data presented in: Bureau of the Census, "Projections of
the Population of the United States, by Age, Sex and Race: 1983 to
2080," U.S. Department of Commerce, Washington, D.C., Series P-25, No.
952.
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E-6
EXHIBIT E-2
STATES INCLUDED IN THE THREE REGIONS OF THE U.S.
REGION 1: NORTH
REGION 2: MIDDLE
REGION 3: SOUTH
Alaska
Connecticut
Idaho
Maine
Massachusetts
Michigan
Minnesota
Montana
New Hampshire
New York
North Dakota
Oregon
Rhode Island
South Dakota
Vermont
Washington
Wisconsin
California (N) *
Colorado
Delaware
District of Columbia
Illinois
Indiana
Iowa
Kansas
Kentucky
Maryland
Missouri
Nebraska
Nevada
New Jersey
North Carolina
Ohio
Oklahoma
Pennsylvania
Tennessee
Utah
Virginia
West Virginia
Wyoming
Alabama
Arizona
Arkansas
California (S) *
Florida
Georgia
Hawaii
Louisiana
Mississippi
New Mexico
South Carolina
Texas
California is divided in half, one half being included in the
Middle Region, and one half included in the South Region.
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E-7
EXHIBIT E-3
AGE DISTRIBUTION OF THE U.S. POPULATION OVER TIME
Aee Group
Year
1985
1990
1995
2000
2005
2010
2015
2020
2025
2050
2075
2080
0-14
0.2074
0.2086
0.2083
0.1990
0.1869
0.1794
0.1778
0.1776
0.1752
0.1693
0.1669
0.1664
15-24
0.1619
0.1381
0.1275
0.1303
0.1360
0.1334
0.1246
0.1177
0.1168
0.1151
0.1147
0.1146
25-34
0.1739
0.1722
0.1532
0.1329
0.1243
0.1274
0.1332
0.1314
0.1240
0.1214
0.1198
0.1186
35-44
0.
0.
0.
0.
0.
0.
0.
0.
0.
0.
0.
0.
1360
1532
1627
1633
1472
1286
1207
1243
1310
1236
1212
1219
45-54
0.0962
0.1043
0.1245
0.1422
0.1528
0.1542
0.1394
0.1226
0.1162
0.1190
0.1204
0.1196
55-64
0.0973
0.0879
0.0838
0.0925
0.1120
0.1286
0.1387
0.1406
0.1282
0.1229
0.1189
0.1174
65-74
0
0
0
0
0
0
0
0
0
0
0
0
.0748
.0770
.0760
.0700
.0681
.0762
.0927
.1070
.1166
.1005
.1011
.1040
75-84
0.0403
0.0444
0.0470
0.0498
0.0502
0.0469
0.0463
0.0527
0.0651
0.0723
0.0778
0.0757
85+
0.0122
0.0143
0.0170
0.0200
0.0226
0.0254
0.0265
0.0261
0.0269
0.0561
0.0594
0.0617
Source: Computed from data on the white population presented in: Bureau of
the Census, "Projections of the Population of the United States, by
Age, Sex, and Race: 1983 to 2080," U.S. Department of Commerce,
Washington, D.C., Series P-25, No. 952.
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E-8
globally (e.g., a true global freeze); (3) low: 1.2 percent globally; (4)
central: 2.5 percent globally; (5) high: 3.8 percent globally; and (6) highest:
5.0 percent. Production is held constant after 2050. The annual average growth
rates from 1985 to 2100 are therefore much lower than the rates listed above,
which are for 1985 to 2050.1
Emissions lag production because a portion of the production of some
chemicals (e.g., CFCs) is stored in products (e.g., refrigerators) before it is
eventually released. The lag between production and emission is estimated based
on the current mix of applications of ozone-depleting compounds, and is held
fixed in the future. Exhibit E-4 displays the global ozone depletion2 estimates
in the "No Controls" scenario, reflecting no regulatory control of
ozone-depleting substances.3 These estimates in Exhibit E-4 are also based on
trace gas concentrations that grow through 2100 as follows: C02 --
approximately 0.6 percent per year; methane -- 0.017 ppm per year; and N20 --
0.20 percent per year.
For several of the CFC scenarios, the ozone depletion estimates can exceed
the valid range of the model. In these cases, the estimates of global ozone
depletion are capped at 50 percent. The choice of the 50 percent cap has a
large influence on the estimates of incidence and mortality. If a higher cap
were chosen (e.g., 70 percent), estimates of effects would be much higher.
3. CHANGES IN DV RADIATION FLDX
Estimates of the ozone-depletion-induced changes in UV radiation reaching
the earth's surface were based on the results of a UV model that relates UV flux
to ozone concentrations.^
1 The annual growth rates from 1985 to 2100 for scenarios 3 to 6 are: (3)
low: 0.7 percent; (4) central: 1.4 percent; (5) high: 2.1 percent; and (6)
highest: 2.8 percent.
2 In reality the extent of ozone depletion is expected to vary by latitude.
However, different models (Sze and Isaksen, for instance) produce different
gradients. Because it has not been resolved which model is most appropriate,
unlike the draft risk assessment, the global depletion estimate is used here to
project effects.
•3
In EPA's risk assessment, the middle case assumed an average annual rate
of growth in global CFC production of 2.5 percent per year from 1985 to 2050.
The assumed rate of growth in global CFC production for the No Controls scenario
analyzed here is higher than 2.5 percent per year over the 1985-2000 period
based on better information for the estimated CFC needs for several countries
(e.g., the U.S.S.R. and other Eastern bloc countries are expected to increase
CFC production 8 percent per year from 1986-1990) (see chapter 4). These
changes result in an annual average rate of growth of 3.6 percent from 1986-
2000; after 2000, the rate of growth is 2.5 percent per year.
4 The UV model is described in G. Serafino and J. Frederick (1986).
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E-9
EXHIBIT E-4
ANNUAL AVERAGE OZONE DEPLETION ESTIMATES
NO CONTROLS SCENARIO*
Global Ozone
Depletion (%)
Year Estimate
1985
2000
2025
2050
2075
2100
2150
2165
0.00
1.00
4.64
15.68
50.00
50.00
50.00
50.00
* Production of ozone-depleting compounds
grows at 3.6 percent per year from 1985 to
2000, at 2.5 percent per year from 2000 to
2050, and remains constant thereafter.
Trace gas concentrations grow as follows:
C02 -- approximately 0.6 percent per year;
methane -- 0.017 ppm per year; and N20 --
0.20 percent per year.
Source: Using a parameterized numerical fit
to a 1-dimensional model of the
atmosphere. The model is described
in: Connell, Peter S. , "A
Parameterized Numerical Fit to
Total Column Ozone Change
Calculated by the LLNL 1-D Model of
the Troposphere and Stratosphere,"
Lawrence Livermore National
Laboratory, Livermore, California,
November 1986. Of note is that a
UNEP-sponsored model
intercomparison found that compared
with other models, this
parameterization tends to
under-estimate ozone depletion due
to CFG-related perturbations.
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E-10
The UV radiation values predicted by the model were weighted to derive
biologically effective UV radiation fluxes using a weighting function based on
the DNA-damage action spectrum developed by Setlow.^ Exhibit E-5 shows the
percent change in DNA-damage-weighted UV radiation flux for a wide range of
changes in ozone levels. As shown in the exhibit, these values were estimated
separately for each of the three U.S. regions. For example, a 10 percent ozone
depletion over the north region results in a 22.9 percent increase in DNA-
weighted UV radiation flux, and a 10 percent ozone depletion over the south
region results in a 22.2 percent increase in UV radiation flux. Linear
interpolation between values in the exhibit was used to estimate changes in UV
radiation flux for changes in ozone ranging from increased levels of ozone of 10
percent to depletion of 30 percent.
The values shown in Exhibit E-5 for the DNA-damage action spectrum and the
erythema action spectrum were used to estimate additional incidence and
mortality risks. These values were estimated by: (1) simulating the UV
radiation flux in 5 nm band widths with the UV Model; and (2) summing the energy
across the 5 nm band widths using the appropriate action spectrum. The total UV
radiation estimates for each level of depletion were used to compute the percent
change in weighted UV radiation for the given percent changes in ozone.
Eight cities in each of the three U.S. regions were analyzed using this
method (Exhibit E-6 lists the cities). Within each region, the results for the
eight cities were weighted by their populations to produce average values used
for each region. The relationship between ozone levels and weighted UV
radiation flux shows only slight variation across the three U.S. regions.
4. BASAL AND SQUAMODS CELL SKIN CANCER
4.1 Zero Ozone Depletion Incidence
Zero ozone depletion incidence of basal and squamous cell skin cancers is
simply defined as the annual number of cases of these cancers expected over time
in the absence of ozone depletion. This incidence was estimated by multiplying
the region-, age-, and sex-specific incidence rates for whites shown in Exhibit
E-7 by the number of whites (by age, sex, and region) in the U.S. over time.
These rates in the exhibit are estimates of the expected number of cases per
100,000 people per year. The rates were estimated as the population-weighted
averages of the incidence rates reported for 10 locations in the U.S.6
5 Setlow, R.B., "The Wavelengths in Sunlight Effective in Producing Skin
Cancer: A Theoretical Analysis," Proceedings of the National Academy of
Sciences. 71(9):3363-3366, 1974.
Incidence rates for nonmelanoma skin cancer at 10 locations came from:
Scotto, Fears, and Fraumeni (1981), "Incidence of Nonmelanoma Skin Cancer in the
United States," U.S. Department of Health and Human Services, (NIH) 82-2433,
Bethesda, Maryland, and were used to develop the population-weighted average
incidence rates by region which were incorporated into the model as described
above.
-------
E-ll
EXHIBIT K-5
PERCENT CHANGE IN WEIGHTED UV ENERGY AS A FUNCTION OF
CHANGE IN OZONE ABUNDANCE FOR THREE U.S. REGIONS
DNA- Damage Action Spectrum
Chanee in UV (%)
Change in Ozone
10% Increase
5% Increase
2% Increase
0 (No Change)
2% Depletion
5% Depletion
10% Depletion
20% Depletion
30% Depletion*
North
-17.3
-9.3
-3.8
0.0
4.2
10.8
22.9
53.8
96.0
Middle
-17.2
-9.1
-3.8
0.0
4.3
10.6
22.8
53.2
94.8
South
-16.7
-8.9
-3.8
0.0
4.2
10.5
22.2
51.0
90.4
Erythema Action Spectrum
Chanee in UV m
North
-14.5
-7.7
-3.2
0.0
3.5
8.9
18.8
43.4
76.5
Middle
-14.4
-7.6
-3.2
0.0
3.5
8.9
18.7.
43.1
75.9
South
-14.2
-7.5
-3.1
0.0
3.5
8.8
18.5
42.1
73.1
For depletion in excess of 30 percent, the following values are multiplied
by the estimated depletion in order to compute changes in weighted UV radiation
flux: DNA-damage: North -- 96.0/30 =3.2; Middle -- 94.8/30 =3.16; and South
-- 90.4/30 = 3.013; Erythema: North -- 76.5/30 = 2.55; Middle -- 75.9/30 =
2.53; South -- 73.1/30 = 2.437. Given the fact that UV appears to increase
non-linearly with ozone depletion, this extrapolation is an underestimate.
Source: Based on analyses using the UV Model developed by Serafino and
Frederick (1986).
-------
E-12
EXHIBIT E-6
CITIES USED TO EVALUATE CHANGES IN WEIGHTED UV
FLUX FOR THE THREE REGIONS OF THE U.S.
REGION 1: NORTH REGION 2: MIDDLE REGION 3: SOUTH
New York Chicago Los Angeles
Detroit Philadelphia San Diego
Milwaukee Baltimore Houston
Boston San Francisco Dallas/Fort Worth
Seattle Washington Phoenix
Minneapolis Denver New Orleans
Portland Salt Lake City Miami
Buffalo Kansas City Atlanta
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E-13
EXHIBIT E-7
RATES FOR 1KXMELAKM& SKUI CANCERS: WHITE FOHILATIOR GHLT
(Cases per 100.000 per year)
<15
North Region
Basal Cell Skin Cancer
Male 0.1
Female 0 . 5
Squamous Cell Skin Cancer
Male 0.2
Female 0.0
Middle Region
Basal Cell Skin Cancer
Male 0.8
Female 0 . 3
Squamous Cell Skin Cancer
Male 0.1
Female 0.1
South Region
Basal Cell Skin Cancer
Male 0.3
Female 0.5
Squamous Cell Skin Cancer
Male 0.0
Female 0.0
Age Group
15-24 25-34 35-44 45-54 55-64 65-74 75-84 85+
2.9 22.1 91.1 259.2 465.8 761.0 1.162.8 1,311.3
5.6 22.2 91.0 201.8 287.4 465.9 638.2 754.1
0.3 1.6 7.4 32.6 87.4 147.4 349.7 431.8
0.1 1.4 4.1 10.5 27.5 54.8 112.5 167.7
2.6 29.4 120.0 297.4 556.7 871.9 1,149.0 1,139.0
5.0' 33.8 95.8 197.7 309.5 453 8 629.8 608.4
0.8 3.3 22.2 67.7 170.4 295.1 489.9 624.2
0.1 2.4 7.1 19.5 48.0 91.6 172.6 284.1
3.8 49.4 236.1 595.9 1,075.0 1,786.0 2,331.0 2,295.0
5.8 49.8 175.0 365.1 561.4 815.3 1,133.0 1,188.0
0.3 11.2 43.0 168.6 377.3 640.0 965.7 696.0
0.4 4.3 15.3 55.7 120.5 254.1 383.2 536.8
Source: Derived from data presented in: Scotto, Fears, and Fraumeni, 1981, "Incidence of Nonmelanoma Skin
Cancer in the United States," U.S. Department of Health and Human Services, (NIH) 82-2433, Bethesda,
Maryland.
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E-14
The locations in each region for which incidence rates are available are:
North
Middle
South
Seattle; Minneapolis-St. Paul; Detroit;
Utah; San Francisco; Iowa; and
Atlanta; New Orleans; New Mexico; Dallas-Fort Worth.
In the absence of ozone depletion, the incidence rates (based on values
published in 1981) are assumed to remain constant throughout the time horizon of
the analysis.
Exhibit E-8 displays the estimated incidence of basal and squamous cell skin
cancer from zero ozone depletion. Increases from zero ozone depletion incidence
are due both to the increased size of the population and the changing population
patterns with regard to race, age, and sex; the incidence rates (i.e., the
values presented in Exhibit E-7) remain unchanged in the absence of ozone
depletion. This incidence after 2080 remains constant because the population
size is constant, and age, race, and sex patterns are assumed to remain
constant.
The estimated incidence from zero ozone depletion can also be expressed in
terms of the expected risk of developing nonmelanoma skin cancer. Three cohorts
were analyzed: (1) people alive today; (2) people born between 1986 and 2029
(roughly, the children of the people alive today); and (3) people born between
2030 and 2074 (roughly, the grandchildren of the people alive today).
Exhibit E-9 displays the number of whites estimated to be in each cohort,
and the number of cases expected for each. The risk is calculated by dividing
the number of cases by the number of people in the cohort, and is expressed in
the exhibit as a percent.
For the approximately 203 million white people alive today in the U.S., 61
million cases are anticipated during the remainder of their lives (in the
absence of ozone depletion). On average, the risk is about 30 percent, although
it should be noted that some people may get more than one case of
nonmelonoma skin cancer during their lives. For the individuals born after
1985, the risk is estimated over their entire lives, and is estimated to be
approximately 40 percent for people born from 1986-2029 and about 41 percent for
people born from 2030-2074 (again, in the absence of ozone depletion).
4.2 Dose-Response Relationship and Assumptions
The additional incidence of nonmelanoma skin cancer associated with
increased UV radiation flux due to ozone depletion was estimated by: (1)
computing the expected percent increase in incidence; and (2) multiplying the
percent increase by the incidence estimates assuming zero ozone depletion. The
expected percentage increase in incidence is driven by: the estimated percent
increase in exposure to UV radiation; the form of the dose-response equation;
and the dose-response coefficient used in the equation. Each factor is
discussed in turn.
The change in UV flux reaching the earth's surface is used as a proxy for
the change in cumulative lifetime exposure for purposes of evaluating expected
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E-15
EXHIBIT E-8
INCIDENCE OF NONHELANOMA SKIN CANCER
IN THE ABSENCE OF OZONE DEPLETION
White
U.S. Population U.S. Population Incidence (thousands)
Year (millions) (millions) BCC ^/SCC £/Total
1985
2000
2050
2075
2100
2150
2165
239
268
310
311
311
311
311
203
221
237
232
232
232
232
462
573
839
838
839
839
839
125
156
250
252
252
252
252
587
729
1089
1090
1091
1091
1091
a/ BCC = Basal Cell Cancer.
b/ SCC = Squamous Cell Cancer.
Source: Population estimates derived from: Bureau of the Census,
"Projections of the Population of the United States, by Age, Sex,
and Race: 1983 to 2080," U.S. Department of Commerce, Washington,
D.C., Series P-25, No. 952. Incidence estimates computed by
multiplying zero ozone depletion incidence rates (see Exhibit E-7)
by the population data. Incidence increases because the
population structure shifts towards more elderly people.
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E-16
EXHIBIT K-9
RISK OF NONMELANONA SKIN CANCER
IN THE ABSENCE OF OZONE DEPLETION
Cohort
U.S.
Population
(millions)
U.S.
Population:
Whites Only
(millions)
Zero
Ozone
Depletion
Cases: Risk:
Whites Only Whites Only
(millions) (percent)
People Alive Today 239
People Born 1986-2029 154
People Born 2030-2074 156
203
125
119
61.1 30.1
49.9 39.9 £/
49.1 41.3 fi/
a/ Population estimates are approximate.
b/ Reflects the risk during the remaining lifetimes of the people alive
today.
c/ Reflects the risk during the entire lifetimes of the people in the
cohort. Differences between the latter two age cohorts are due to a small
change in assumed age distribution which stabilizes in 2080.
Source: IGF Incorporated estimates.
-------
E-17
changes in nonmelanoma incidence. For example, the percent change in a
40-year-old individual's lifetime exposure in year T (over a level of zero
change) is estimated as the average percent change in DNA-damage-weighted UV
radiation flux (due to ozone depletion) over the years T-39 to T. Changes in UV
radiation prior to 1985 are assumed to be zero, meaning that people alive today
are simulated to experience increased UV radiation exposure from ozone depletion
only in the future. Note that estimated percent changes in UV radiation flux
are assumed to translate directly into percent changes in exposure, so that no
variations in exposure due to behavior are assumed (e.g., people are assumed not
to change their exposure-related habits in response to the increased flux of UV
radiation or to expected increases in their income).
The dose-response equation used was:
Incidence = a x (Exposure)
To estimate changes in incidence as a function of changes in exposure, this
equation was rearranged as follows:
Fractional change in incidence - (Fractional change in exposure +1) - 1.
The dose-response coefficient, b, for this equation is often referred to as a
"biological amplification factor" or BAF; it equals the percent change in
incidence associated with a one percent change in exposure.
As reported in EPA's risk assessment, various authors have estimated the BAF
for basal and squamous cell skin cancer. Exhibit E-10 displays the coefficients
used to evaluate increased risks due to ozone depletion. The coefficients were
estimated using published estimates of basal and squamous cell skin cancer
incidence rates and weighted annual UV radiation flux from the UV Model for 10
locations in the U.S. As shown in the exhibit, separate coefficients are used
for basal and squamous cell skin cancers, and for males and females. Also shown
in the exhibit are the coefficients used for the sensitivity analysis. These are
the same seven locations analyzed in Scotto and Fears (in press). Then, the
estimates of the incidence rates for each region were divided between: (1)
Face, Head, Neck and Upper Extremities; and (2) Trunk and Lower. Exhibit E-ll
displays the increased number of cases annually of basal and squamous cell skin
cancers estimated based on the dose-response equation and the No Controls
Scenario of production described above. As shown in the exhibit, the additional
incidence is fairly small in the early years, reflecting the low level of
increased exposure simulated to be experienced by most individuals alive in the
near future. The risks of stratospheric modification can also be expressed on a
percentage basis for the three cohorts analyzed. Exhibit E-12 displays
estimated changes in risk for the three cohorts for the No Controls Scenario.
4.3 Mortality Assumptions
A dose-response relationship between UV exposure and mortality due to basal
and squamous cell skin cancer has not been developed due to the poor quality of
-------
E-18
EXHIBIT E-10
DOSE-RESPONSE COEFFICIENTS: NONHELANOMA SKIN CANCER
(Whites only)
DNA- Damage Action Spectrum
Squamous
Male
Female
Basal
Male
Female
Low £/
1.42
1.47
0.932
0.316
Middle
2.03
2.22
1.29
0.739
High ^/
2.64
2.98
1.65
1.16
Erythema Action Soectrum
Low S/
1.54
1.57
1.02
0.346
Middle
2.21
2.42
1.41
0.809
High k/
2.88
3.26
1.80
1.27
a/ Middle minus one standard error.
b/ Middle plus one standard error.
Source: EPA (1987).
-------
E-19
EXHIBIT E-ll
ANHUAL
OF IOHELAKH& SOB CANCER:
HO CONTROLS SCENARIO
(Whites only. — DNA-Danage Action Spectnin>a/
Basal
Ozone Zero Ozone
Depletion Depletion Additional Additional
Year (t) (1,000s) (1,000s) Percentage
1985 0.00 462.0 0.0 0.0
2000 1.00 572.5 1.5 0.3
2050 15.68 838.6 . 93.8 11.2
2075 50.00^ 838.0 470.1 56.1
2100 50.00 838.6 1,080.4 128.8
2150 50.00 838.6 1,756.4 209.4
2165 50.00 838.6 1,765.0 210.5
Souamous
Zero Ozone
Depletion Additional Additional
(1,000s) (1,000s) Percentage
125.0 0.0 0.0
156.1 0.8 0.5
249.7 52.8 21.1
251.5 313.9 124.8
252.0 887.6 352.2
252.0 1,813.8 719.8
252.0 1,830.4 726.3
a/ The Ho Controls Scenario is one of several scenarios examined.
b/ Global ozone depletion constrained not to exceed 50 percent.
Source: ICF Incorporated estimates.
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E-20
EXHIBIT E-12
CDMDIATIVE INCIDENCE AND RISK OF NONMELANOMA SKIN CANCER BY
COHORT: NO CONTROLS SCENARIO S/
(Whites only -- DNA-Damage Action Spectrum)
Incidence
Risk
Zero Ozone Additional Zero Ozone Additional
Depletion Additional Percentage Depletion Additional Percentage
Cohort (millions) (millions) Increase (%) (%) Increase
People Alive
Today ^/
People Born
1986-2029 fi/
61.09
49.87
3.51
42.46
5.7
85.1
30.1
39.9
1.7
34.0
5.7
85.1
People Born
2030-2074 £/ 49.09
132.02 268.9
41.3
111.1
268.9
a/ The No Controls Scenario is one of several scenarios examined.
b/ Reflects the risk during the remaining lifetimes of people alive today.
c/ Reflects the risk during the entire lifetimes of the people in the cohort.
d/ The total additional cases are so high that the incidence exceeds the size of the
populations; this can happen because the percentage of deaths are low and a
person can get two or more skin cancers.
Source: IGF Incorporated estimates.
-------
E-21
the data on mortality due to these cancers. It is expected, however, that a
fraction of basal and squamous cases will result in death, and it was assumed in
this analysis that this fraction remains constant over time. It has been reported
that:
(1) about one percent of all nonmelanoma skin cancer cases
result in death;
(2) about 80 percent of all cases are basal, and 20 percent
are squamous; and
(3) about 75 percent of the deaths from nonmelanoma skin
cancers are attributable to squamous, and 25 percent to
basal.7
Based on these approximate figures, the fraction of basal cases resulting in
death is approximately 0.0031, and the fraction of squamous cases resulting in
death is approximately 0.0375. In the risk assessment, these fractions were
multiplied by the estimated additional cases of nonmelanoma skin cancer to
compute additional mortality due to nonmelanoma skin cancer.
5. MELANOMA SKIN CANCER
5.1 Zero Ozone Depletion Incidence and Mortality
Zero ozone depletion incidence of melanoma skin cancer is simply defined as
the number of cases expected over time in the absence of ozone depletion. This
incidence was estimated using the age- and sex-specific incidence rates for
whites shown in Exhibit E-13. These rates were derived from National Cancer
Institute (NCI) incidence data for whites and data presented in Scotto and Fears
(in press).8 First, the NCI incidence data were population-weighted for each of
the three U.S. regions using the following seven locations:
North : Seattle and Detroit;
Middle: Utah, San Francisco, and Iowa; and
South : Atlanta and New Mexico.
These incidence data were then divided into the two body locations (Face,
Head, Neck and Upper Extremities; and Trunk and Lower Extremities) using data
from Scotto (in press). Note that the data that describe the relative frequency
of melanoma incidence between the two locations in Scotto and Fears (in press)
do not vary by age group, and it was assumed that the relative frequency of
incidence between the two locations is equal across ages. It was also assumed
that the incidence among non-whites was zero. In the absence of ozone
Scotto, Fears, and Fraumeni, 1981, "Incidence of Nonmelanoma
Skin Cancer in the United States," U.S. Department of Health and Human
Services, (NIH) 82-2433, Bethesda, Maryland, pp. 2, 7, and 13.
Q
0 National Cancer Institute SEER Report, 1984, and Scotto and Fears (in
press), "The Association of Solar Ultraviolet Radiation and Skin Melanoma Among
Caucasians in the United States," Cancer Investigations.
-------
E-22
EXHIBIT E-13
INCIDENCE FOR MELANOMA SKIN CANCER IN THE ABSENCE OF
OZONE DEPLETION
WHITE POPULATION ONLY
(Cases per 100,000 population per year)
Age Group
10-14 15-24 25-34 35-44 45-54
NORTH REGION
Face. Head. Neck and Upper Extremities
Males 0.0 0.8 2.4 5.3
Females 0.1 0.9 3.2 4.2
Trunk and Lower Extremities
Males 0.0 1.2 3.4 7.5
Females 0.1 1.4 5.3 6.9
MIDDLE REGION
Face. Head. Neck and Upper Extremities
Males 0.0 1.0 3.4 5.5
Females 0.0 1.7 4.3 5.7
Trunk and Lower Extremities
Males 0.0 1.1 3.8 6.1
Females 0.1 2.2 5.8 7.6
SOUTH REGION
Face. Head. Neck and Upper Extremities
Males 0.1 1.2 4.3 6.7
Females 0.0 1.6 6.0 7.2
Trunk and Lower Extremities
Males 0.1 1.4 5.1 7.8
Females 0.0 1.7 6.6 8.0
5.5
5.3
7.9
8.6
7.3
6.5
8.2
8.6
9.5
8.8
11.1
9.6
55-64
8.4
5.4
12.0
8.9
10.6
5.8
11.9
7.7
11.4
8.8
13.3
9.6
Sources: Derived from Scotto and Fears, "The Association
Radiation and Skin Melanoma Among Caucasians in
Cancer Investigation, in press, and the National
65-74
10.4
4.5
14.9
7.4
11.7
6.6
12.9
8.8
11.4
8.1
13.5
8.8
75-84
9.2
4.6
13.2
7.4
13.7
7.1
14.9
9.4
15.9
10.3
18.9
11.1
85+
9.1
4.9
13.0
8.0
16.2
11.9
17.9
15.7
23.8
15.0
27.3
16.4
of Solar Ultraviolet
the United States,"
Cancer Institute SEER
Report, 1984.
-------
E-23
depletion, the incidence rates reported in Exhibit E-13 are assumed to remain
constant throughout the time horizon of the analysis.
The incidence of melanoma skin cancer assuming zero ozone depletion among
whites in the United States was computed by multiplying the age- and
sex-specific rates reported in Exhibit E-13 by the number of individuals in the
appropriate segments of the U.S. population. Exhibit E-14 displays the annual
incidence of melanoma skin cancer over time assuming zero ozone depletion.
Increases in incidence from 1985 to 2080 are due both to the increased size of
the population and the changing population patterns (race, age, and sex).
Incidence after 2080 assuming zero ozone depletion remains constant because the
population size is constant.
The estimated incidence from zero ozone depletion can also be expressed in
terms of the expected risk of developing melanoma skin cancer. For the three
cohorts analyzed in the risk assessment, Exhibit E-15 displays the number of
whites in each cohort, and the number of cases expected for each. The risk is
calculated by dividing the number of cases by the number of people in each
cohort. For the approximately 203 million whites alive today in the U.S., 1.53
million cases are expected during the remainder of their lives (in the absence
of ozone depletion). On average, risk is about 0.8 percent. For individuals
born after 1985, the risk is estimated over their entire lives, and is estimated
to be about 1.1 percent (again, in the absence of ozone depletion).
Exhibit E-16 displays the mortality rates for melanoma skin cancer assuming
zero ozone depletion, also derived from seven locations reported in the NCI
data. These data do not identify the anatomical sites of the melanomas (Face,
Head and Neck versus Trunk and Lower Extremities); consequently, the mortality
figures are not divided by body site.
Similar to the incidence rates, these mortality rates are assumed to remain
constant over time in the absence of ozone depletion. Exhibit E-17 displays the
mortality over time assuming zero ozone depletion, and Exhibit E-18 displays the
estimated risk for the three cohorts analyzed.
5.2 Dose-Response Relationship and Assumptions
The additional incidence and mortality of melanoma skin cancer associated
with increased UV radiation flux due to ozone depletion was estimated by: (1)
computing the expected percent increase in incidence; and (2) multiplying the
percent increase by the zero ozone depletion incidence estimates. The expected
percentage increase in incidence is driven by: the estimated percent increase
in exposure to UV radiation; the form of the dose-response equation; and the
dose-response coefficient used in the equation. Each factor is discussed in
turn.
The change in UV flux reaching the earth's surface is used as a proxy for
the change in cumulative lifetime exposure for purposes of evaluating expected
changes in melanoma incidence and mortality (the change in incidence may
actually be the result of a change in peak exposure, which is highly correlated
to the change in cumulative exposure, and therefore, for purposes of this
analysis, would not change the outcome by a large amount). For example, the
-------
E-24
EXHIBIT E-14
ANNUAL INCIDENCE OF MELANOMA SKIN CANCER
IN THE ABSENCE OF OZONE DEPLETION
White
U.S. Population U.S. Population Incidence
Year (millions) (millions) (thousands)
1985 239 203 20.2
2000 268 221 24.2
2050 310 237 30.0
2075 311 232 29.6
2100 311 232 29.6
2150 311 232 29.6
2165 311 232 29.6
Source: Population estimates derived from: Bureau of the Census,
"Projections of the Population of the United States, by Age,
Sex, and Race: 1983 to 2080," U.S. Department of Commerce,
Washington, D.C., Series P-25, No. 952. Incidence estimates
computed by multiplying zero ozone depletion incidence rates
(see Exhibit E-13) by the population data.
-------
E-25
EXHIBIT E-15
RISK OF MELANOMA. SKIN CANCER
IN THE ABSENCE OF OZONE DEPLETION
Cohort
People Alive Today
People Born 1986-2029
People Born 2030-2074
U.S.
Population &
(millions)
239
154
156
U.S.
Population
f Whites Only &
(millions)
203
125
119
Zero Ozone
Depletion
Cases :
f Whites Only
(millions)
1.53
1.37
1.33
Risk:
Whites Only
(percent)
0.8 V
1.1 £/
1.1 fi/
a/ Population estimates are approximate.
b/ Reflects the risk during the remaining lifetimes of the people alive
today.
c/ Reflects the risk during the entire lifetimes of the people in the
cohort.
Source: ICF Incorporated estimates.
-------
E-26
EXHIBIT E-16
MORTALITY RATES FOR MELANOMA SKIN CANCER
IN THE ABSENCE OF OZONE DEPLETION
WHITE POPULATION ONLY
(Rate per 100,000 population per year)
10-14
NORTH REGION
Male 0 . 0
Female 0.0
MIDDLE REGION
Male 0.0
Female 0.0
SOUTH REGION
Male 0 . 0
Female 0.0
15-24
0.5
0.0
0.4
0.4
0.2
0.0
25-34
1.0
0.8
1.5
0.7
1.3
1.2
35-44
2.9
1.6
3.4
2.1
3.5
0.8
Age Group
45-54
4.6
2.8
4.2
2.1
6.1
3.9
55-64
5.6
2.9
5.9
3.5
7.7
3.7
65-74
8.0
3.3
10.3
5.1
12.8
5.4
75-84
7.9
5.3
13.3
5.6
10.2
10.2
85+
10.3
5.5
9.7
10.2
11.1
15.8
Source: Derived from National Cancer Institute SEER Report, 1984.
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E-27
EXHIBIT E-17
MORTALITY FROM MELANOMA SKIN CANCER
IN THE ABSENCE OF OZONE DEPLETION
White
U.S. Population U.S. Population Mortality
Year (millions) (millions) (thousands)
1985 239 203 4.97
2000 268 221 6.11
2050 310 237 8.32
2075 311 232 8.27
2100 311 232 8.28
2150 311 232 8.28
2165 311 232 8.28
Source: Population estimates derived from: Bureau of the Census,
"Projections of the Population of the United States, by Age, Sex,
and Race: 1983 to 2080;" U.S. Department of Commerce, Washington,
D.C., Series P-25, No. 952. Incidence estimates computed by
multiplying zero ozone depletion incidence rates (see Exhibit E-
16) by the population data.
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E-28
EXHIBIT E-18
RISK OF MORTALITY FROM MELANOMA SKIN CANCER
IN THE ABSENCE OF OZONE DEPLETION
U.S.
Population
(millions)
U.S.
Population:
Whites Only
(millions)
Zero Ozone
Depletion
Cases: Risk:
Whites Only Whites Only
(millions) (percent)
People Alive Today 239
People Born 1986-2029 154
People Born 2030-2074 156
203
125
119
0.45 0.2 b-/
0.38 0.3 £/
0.37 0.3 £/
a/ Population estimates are approximate.
b/ Reflects the risk during the remaining lifetimes of the people alive
today.
c/ Reflects the risk during the entire lifetimes of the people in the
cohort.
Source: ICF Incorporated estimates.
-------
E-29
percent change in a 40-year-old individual's lifetime exposure in year T (over a
level of zero change) is estimated as the average annual percent change in
DNA-damage-weighted UV radiation flux (due to ozone depletion) over the years
T - 39 to T. Changes in UV radiation prior to 1985 are assumed to be zero,
meaning that people alive today are simulated to experience increased UV radi-
ation exposure only in the future. Note that estimated percent changes in UV
radiation flux are assumed to translate directly into percent changes in expo-
sure, so that no variations in exposure due to behavior are assumed (e.g.,
people are assumed not to change their exposure-related habits in response to
the increased flux of UV radiation or as a result of expected increases in
income).
The form of the dose-response equation used for both incidence and mortality
was:
Incidence = a x (Exposure)
To estimate changes in incidence as a function of changes in exposure, this
equation was rearranged as follows:
b
Fractional change in incidence = (Fractional change in exposure +1) - 1.
The dose-response coefficient, b, for this equation is often referred to as a
"biological amplification factor" or BAF; it equals the percent change in
incidence associated with a one percent change in exposure.
Exhibit E-19 displays the coefficients used to assess the risks of ozone
depletion in conjunction with the DNA-damage action spectrum and the erythema
action spectrum. As shown in the exhibit, separate coefficients are used for
Face, Head and Neck Melanomas, Trunk and Lower Extremities Melanomas, and for
males and females. Also shown in the exhibit are the coefficients used for the
sensitivity analysis presented in the risk assessment. Of note is that these
coefficients were developed using Robertson-Berger (R-B) meter measures of
annual UV radiation flux as the surrogate measure of exposure, and that the
coefficients were then used with the DNA-damage action spectrum and erythema
action spectrum estimates of changes in UV flux due to ozone depletion. Use of
R-B meter-derived coefficients for the dose-response relationship coupled with
estimates of changes in DNA-damage-weighted and erythema-weighted UV radiation
flux in response to ozone depletion may result in overestimating the increase in
melanoma incidence in response to ozone depletion.'
Exhibit E-20 displays the increased number of cases per year of malignant
melanoma estimated using the dose-response equation and the No Controls Scenario
of production described above. As shown in the exhibit, the additional
incidence is fairly small in the early years, reflecting the low level of
This potential upward bias is not present in the analysis of nonmela-
noma skin cancers because the dose-response coefficients for nonmelanoma were
computed using estimates of DNA-damage-weighted UV radiation flux.
-------
E-30
EXHIBIT E-19
DOSE-RESPONSE COEFFICIENTS:
MELANOMA SKIN CANCER INCIDENCE
(Whites Only)
Low fl/ Middle
High
Face. Head and Neck
Male
Female
0.398
0.477
0.512
0.611
0.624
0.744
Trunk and Lower Extremities
Male
Female
0.200
0.268
0.310
0.412
0.420
0.553
a/ Middle minus one standard error.
b/ Middle plus one standard error.
Source: Derived from: Scotto and Fears, "The Association of Solar
Ultraviolet Radiation and Skin Melanoma Among Caucasians in
the United States," Cancer Investigation, in press.
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E-31
EXHIBIT E-20
ANNUAL INCIDENCE OF MELANOMA SKIN CANCER:
NO CONTROLS SCENARIO*
(Whites only -- DNA-Damage Action Spectrum)
Zero Ozone
Ozone Depletion Depletion
Year
1985
2000
2050
2075
2100
2150
2165
(percent)
0.00
1.00
15.68
50.00
50.00
50.00
50.00
(thousands)
20.2
24.2
30.0
29.6
29.6
29.6
29.6
Additional
(thousands)
0.00
0.03
1.60
6.97
13.18
17.26
17.30
Additional
Percentage
Increase
0.0
0.1
5.3
23.5
44.5
58.3
58.4
* The No Controls Scenario is one of several scenarios
examined.
Source: IGF Incorporated estimates.
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E-32
increased exposure simulated to be experienced by most individuals alive in the
near future.
The risks of stratospheric modification can also be expressed on a
percentage basis for the three cohorts analyzed. Exhibit E-21 displays
estimated changes in risks for the No Controls Scenario. Exhibit E-22 displays
the coefficients used to evaluate the increased mortality due to melanoma skin
cancer. Exhibit E-23 displays the increases in melanoma mortality computed with
changes in UV flux from the No Controls Scenario and the dose-response
coefficients presented in Exhibit E-22. Exhibit E-24 displays the increase in
risks.
6. CATARACT PREVALENCE AND INCIDENCE
Epidemiological studies have identified a correlation between the prevalence
of various types of cataracts in humans and the flux of sunlight or ultraviolet
radiation reaching the earth's surface (Hiller, Giacometti and Yuen 1977;
Zigman, Datiler, and Torczynski 1979; Taylor 1980; Hollows and Moran 1981).
Hiller, Sperduto and Ederer developed a multivariate logistic risk function that
describes the correlation found between the prevalence of senile cataracts and
the flux of UV-B and other risk factors. " The results of this study were used
to indicate the magnitude of change in the prevalence of senile cataracts that
could be associated with changes in UV-B flux due to ozone depletion.
The study by Hiller, Sperduto, and Ederer included HANES data on a total of
2', 225 persons between the ages of 45 and 74 years who had resided in the
state where the HANES examination took place for at least one-half of their
lives. Of these 2,225 people, 413 (18.6 percent) were placed in the cataract or
aphakia outcome category.
UV-B flux data were developed by NOAA for the 35 HANES locations used in the
study based on a statistical analysis of UV-B data collected at 10 locations
using Robertson-Berger meters. The statistical analysis incorporates season,
latitude, elevation, weather (clouds), and haze. Subsequent validation of the
estimates at six locations indicated that the differences between the estimated
and observed mean daily flux average about seven percent.
These data on UV-B and outcome (i.e., cataract) were used by Hiller,
Sperduto, and Ederer in conjunction with demographic and medical history data to
estimate the following multivariate logistic risk function:
P - 1
exp(-a-biXi-
•^ Hiller, Sperduto, and Ederer, "Epidemiologic Associations with Cataract
in the 1971-1972 National Health and Nutrition Examination Survey," American
Journal of Epidemiology, Vol. 118, No. 2, pp. 239-249, 1983.
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E-33
EXHIBIT E-21
CUMULATIVE INCIDENCE AND RISK OF MELANOMA SKIN CANCER
BY COHORT: NO CONTROLS SCENARIO £/
(Whites only -- DMA-Damage Action Spectrum)
Incidence Risk
Zero Ozone Additional Zero Ozone Additional
Depletion Additional Percentage Depletion Additional Percentage
Cohort (millions) (millions) Increase (%) (%) Increase
People Alive
Today k/ 1.53
People Born
1986-2029 £/ 1.37
People Born
2030-2074 £/ 1.33
0.02
0.22
0.65
1.3 0.8 0.01 1.3
16.1 1.1 ' 0.18 16.1
48.9 1.1 0.54 48.9
a/ The No Controls Scenario is one of several scenarios examined.
b/ Reflects the risk during the remaining lifetimes of people alive today.
c/ Reflects the risk during the entire lifetimes of the people in the cohort.
Source: ICF Incorporated estimates.
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E-34
EXHIBIT E-22
DOSE-RESPONSE COEFFICIENTS: MELANOMA SKIN CANCER MORTALITY
(Whites Only)
DNA-Damage Action Spectrum Erythema Action Spectrum
Low 3/Middle High £/ Low 3/Middle High £
Male
Female
0.39
0.25
0.42
0.29
0.46
0.33
0.42
0.28
0.46
0.32
0.50
0.36
a/ Middle estimate minus one standard error.
b/ Middle estimate plus one standard error.
Source: Pitcher, H.M., "Examination of the Empirical Relationship
Between Melanoma Death Rates in the United States 1950-1979
and Satellite-Based Estimates of Exposure to Ultraviolet
Radiation." U.S. EPA, Washington, D.C., March 17, 1987,
draft.
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E-35
EXHIBIT E-23
MELANOMA SKIN CANCER MORTALITY: NO CONTROLS SCENARIO*
(Whites-only -- DNA-Damage Action Spectrum)
Zero Ozone
Ozone Depletion Depletion
Year
1985
2000
2050
2075
2100
2150
2165
(percent)
0.00
1.00
15.68
50.00
50.00
50.00
50.00
(thousands)
4.97
6.11
8.32
8.27
8.28
8.28
8.28
Additional
(thousands)
0.0
0.01
0.33
1.43
2.77
3.80
3.81
Additional
Percentage
Increase
0.0
0.2
4.0
17.3
33.5
45.9
46.0
* The No Controls Scenario is one of several scenarios
examined.
Source: ICF Incorporated estimates.
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E-36
EXHIBIT E-24
RISK OF MORTALITY FROM MELANOMA SKIN CANCER BY COHORT:
NO CONTROLS SCENARIO £/
(Whites only -- DMA-Damage Action Spectrum)
Mortality Lifetime Risk
Zero Ozone Additional Zero Ozone Additions
Depletion Additional Percent Depletion Additional Percent
Cohort (thousands) (thousands) Increase (percent) (percent) Increase
People Alive
Today k/
People Born
1986-2029 £/
449.3
380.9
6.0
57.6
1.3
15.1
0.22
0.30
0.003
0.045
1.3
15.1
People Born
2030-2074 £/ 372.7 147.7 39.6 0.31 0.123 39.6
a/ The No Controls Scenario is one of several scenarios examined.
b/ Reflects the risk during the remaining lifetimes of people alive today.
c/ Reflects the risk during the entire lifetimes of the people in the cohort.
Source: ICF Incorporated estimates.
-------
E-37
where P is the probability (or risk) of having a cataract, and X. are risk
factors. In addition to UV-B, the following risk factors were analyzed: age;
race; sex; education; diabetes; systolic blood pressure; and residence (urban,
rural).
Exhibit E-25 displays the standardized regression coefficients estimated for
each of the risk factors. Positive coefficients indicate factors that are
correlated with increased risk; negative coefficients indicate factors that are
correlated with decreased risk. The coefficients presented in the exhibit are
"standardized," meaning that they represent the expected change in the logit of
P (equal to In (P/l-P)) for a one standard deviation change in the risk factor.
Standardization of the coefficients allows the relative importance of the risk
factors to be identified by the relative size of the standardized coefficients.
As shown in Exhibit E-25, three risk functions were estimated: (1)
univariate (outcomes as a function of the risk factor); (2) bivariate (outcome
as a function of the risk factor and age); and (3) outcome as a function of all
the risk factors simultaneously. For all three formulations, UV-B is
statistically significant, and positively correlated with the increased risk of
being in the cataract outcome category.
Using the multivariate risk function coefficients, and the mean values for
all the risk factors other than UV-B, the change in the prevalence of cataract
for each 1.0 percent change in UV-B is estimated to be approximately 0.5
percent. This relationship holds for changes in UV-B as large as minus 20
percent to plus 30 percent. Outside of this range, reductions in UV-B are
associated with less of a reduction in cataract prevalence, and increases in
UV-B are associated with larger increases.
Of note is that this estimated relationship between UV-B and cataract
prevalence varies with age; UV-B has a larger effect on prevalence (on a
percentage basis) among younger individuals. Exhibit E-26 displays the percent
increase in cataract prevalence due to increases in UV-B for persons of
different ages. As shown in the exhibit, the percentage increase in prevalence
due to changes in UV-B are estimated to be larger for 50 year olds than for 70
year olds.
Although the effect of UV-B on prevalence is estimated to be larger at
younger ages (on a percentage basis) using the multivariate risk function, the
prevalence of senile cataracts is known to increase substantially with age.
Leske and Sperduto report the prevalence of senile cataracts in both sexes found
in the Framingham Eye Study to be as follows: 52 to 64 years old -- 4.5
percent; 65 to 74 years old -- 18.0 percent; 75 to 85 years old -- 45.9
percent. ^ These prevalence estimates use the same definition of cataracts as
used by Killer, Sperduto, and Ederer. Because cataracts are more prevalent in
older individuals, increases in the actual number of cases of cataracts would
likely be larger for older individuals, even though the percentage increase in
risk has been estimated to be larger for younger individuals.
11 Leske and Sperduto, "The Epidemiology of Senile Cataracts: A Review,"
American Journal of Epidemiology. Vol. 118, No. 2, pp. 152-165, 1983.
-------
E-38
EXHIBIT E-25
STANDARDIZED REGRESSION COEFFICIENTS FOR CATARACT
Risk Factor &
Age
Race
Sex
Education
Diabetes
Systolic Blood
UV-B
Residence
Mean ^
61.97
1.22
1.52
2.87
0.08
Pressure 146.3
3.59
1.37
Univariate £/
1.22 £/
0.18 £/
0.07
-0.43 £/
0.25 £/
0.33 £/
0.19 £/
0.18 £/
Bivariate ^
-
0.20
0.08
-0.25 £/
0.23 £/
0.15 £/
0.20 £/
0.21 £/
f Multivariate ^
1.20 f/
0.13 £/
0.08
-0.14 £/
0.21 £/
0.08
0.13 £/
0.19 £/
a/ Values for categorical risk factors: race: 1 = white, 2 = black; sex:
1 - male, 2 = female; education 1 = <5 grades, 2=5-8 grades, 3 = 9-11
grades, 4 = 12 grades, 5 = college; diabetes: 0 = absent, 1 = present;
residence: 1 = urban, 2 = rural.
b/ Mean value for the risk factor in the 2,225 persons in the study.
c/ Each risk factor analyzed separately.
d/ Each risk factor analyzed with age only.
e/ All risk factors analyzed simultaneously.
f/ p(two sided) <0.005.
g/ p(two sided) <0.05.
Source: Hiller, R. , R. Sperduto, and F. Ederer, "Epidemiologic Associations with
Cataract in the 1971-1972 National Health and Nutrition Examination
Survey," American Journal of Epidemiology. Vol. 118, No. 2, pp. 239-249,
1983.
-------
Percent
Increase
in
Cataract
Prevalence
20
18-
16-
14
12
10
8
6
4
2-
0
E-39
EXHIBIT E-26
ESTIMATED RELATIONSHIP BETWEEN RISK OF CATARACT
AND DV-B FLUX
AGE
AGE
50
60
AGE « 70
10
15
20
25
30
Percent Increase in UV-B Flux
Increased UV-B flux, (measured with an RB-meter) is associated with increased
prevalence of cataract. The percent change in prevalence varies by age.
Source: Developed from data presented in R. Killer, R. Sperduto, and F. Ederer,
"Epidemiologic Associations with Cataract in the 1971-1972 National
Health and Nutrition Examination Survey," American Journal of
Epidemiology. Vol. 118, No. 2, pp. 239-249, 1983.
-------
E-40
To assess the potential implications of ozone depletion for cataract
incidence, the prevalence reported by Sperduto and Ederer was used as the
prevalence in the absence of ozone depletion. These prevalence values were used
to compute incidence estimates (again, in the absence of ozone depletion) under
the assumption that mortality and cataract prevalence are not related, and that
the people in each age group-(e.g., 55 to 64 year olds) are distributed
uniformly across the ages. Based on these assumptions, the incidence rates
assuming zero ozone depletion are as follows: 55 to 64 years old -- 450 per
100,000; 65 to 74 years old •• 1,350 per 100,000; 75 to 85 years old -- 2,750
per 100,000. Because (in the absence of ozone depletion) prevalence of
cataracts in those 85+ years old is assumed to be equal to the prevalence in
those 75 to 85 years old, there is no incidence among those over 85. The
incidence over time assuming zero ozone depletion and for the three cohorts is
presented in Exhibits E-27 (number of cases per year) and E-28 (cumulative
number of cases), respectively.
To evaluate the impact of ozone depletion on cataract incidence, a "power
model" was used to relate increases in prevalence to changes in lifetime UV
radiation exposure. The use of the power model is justified because the percent
change in prevalence divided by the percent change in UV radiation is fairly
constant over a wide range of changes in UV. Exhibit E-29 displays the
age-weighted coefficients used in the analysis. The age-weighting was performed
because the dose-response coefficient varies by age.
Of note is that these coefficients were developed using Robertson-Berger
(R-B) meter measures of annual UV radiation flux as the surrogate measure of
exposure, and that the coefficients were then used with the DNA-damage action
spectrum and erythema action spectrum estimates of changes in UV flux due to
ozone depletion. Use of R-B meter-derived coefficients for the dose-response
relationship coupled with estimates of changes in DNA-damage-weighted and
erythema-weighted UV radiation flux in response to ozone depletion may result in
overestimating the increase in cataract incidence in response to ozone
depletion.
Using the coefficients in Exhibit E-29, estimates of increased prevalence
due to ozone depletion were computed. These prevalence values were then
translated into increased incidence estimates, as above. Exhibits E-30 and E-31
display the increased incidence over time and by cohort for the No Controls
Scenario.
There are various important limitations in the use of these estimates and
data. The correlation between UV-B and cataracts reported by Miller,
Sperduto, and Ederer does not prove a causal connection -- other (unknown)
factors could be playing a role. These (unknown) factors would have to be
correlated with UV-B flux. Also, the study does not have estimates of
individual lifetime UV-B exposure, thereby limiting the strength of the evidence
for the association between UV-B exposure and cataracts. Additionally, the
sample population analyzed may not be representative of the entire U.S.
population. Finally, the outcome category used in the study does not
differentiate between different types of cataracts, some of which may be more
strongly related than others to UV-B exposure.
-------
E-41
EXHIBIT E-27
ANNUAL INCIDENCE OF CATARACTS
IN THE ABSENCE OF OZONE DEPLETION
Year
1985
2000
2050
2075
2100
2150
2165
U.S. Population
(millions)
239
268
310
311
311
311
311
Incidence
(millions)
0.603
0.724
1.194
1.242
1.234
1.234
1.234
Source: Population estimates derived from:
Bureau of the Census, "Projections of
the Population of the United States, by
Age, Sex, and Race: 1983 to 2080," U.S.
Department of Commerce, Washington, D.C.,
Series P-25, No. 952. Incidence estimates
computed by multiplying incidence rates
assuming zero ozone depletion by the
population data.
-------
E-42
EXHIBIT E-28
RISK OF CATARACTS
IN THE ABSENCE OF OZONE DEPLETION
Cohort
People alive today
People born 1986-2029
People born 2030-2074
U.S. Population ^
(millions)
239
154
156
Zero Ozone
Depletion Cases
(millions)
70.7
56.0
55.5
Risk
(percent)
29.6 b-/
36.4 £/
35.6 £/
a/ Population estimates are approximate.
b/ Reflects the risk during the remaining lifetimes of the people alive
today.
c/ Reflects the risk during the entire lifetimes of the people in the
cohort.
Source: IGF Incorporated estimates.
-------
E-43
EXHIBIT E-29
DOSE-RESPONSE COEFFICIENTS -- CATARACTS
Low & Middle High k/
0.127 0.225 0.296
a/ Middle minus one standard error.
b/ Middle plus one standard error.
Source: Derived from data presented
in: Heller, Sperduto, and
Ederer, "Epidemiologic
Associations with Cataract in
1971-1972 National Health and
Nutrition Examination Survey,"
American Journal of
Epidemiology. Vol. 118, No. 2,
pp. 239-249, 1983.
-------
E-44
EXHIBIT E-30
ANNUAL INCIDENCE OF CATARACTS: NO CONTROLS SCENARIO*
(DNA-Damage Action Spectrum)
Year
1985
2000
2050
2075
2100
2150
2165
Ozone Depletion
(Percent)
0.00
1.00
15.68
50.00
50.00
50.00
50.00
Zero Ozone
Depletion
(millions)
0.603
0.724
1.194
1.242
1.234
1.234
1.234
Additional •
(millions)
0.000
0.001
0.027
0.134
0.224
0.274
0.273
Percent
Increase
0.00
0.14
2.26
10.79
18.15
22.20
22.12
*The No Controls Scenario is one of several scenarios examined.
Source: IGF Incorporated estimates.
-------
E-45
EXHIBIT E-31
RISK OF CATARACTS BY COHORT:
NO CONTROLS SCENARIO £/
(DNA-Damage Action Spectrum)
Cohort
Incidence
Risk
Zero Ozone Additional Zero Ozone Additional
Depletion Additional Percentage Depletion Additional Percentage
(millions) (millions) Increase (%) (%) Increase
People Alive
Today ^/ 70.7
People Born
1986-2029 £/ 56.0
People Born
2030-2074 £/ 55.5
1.02
7.08
11.85
1.4
12.6
21.6
29.6
36.3
35.6
0.41
6.57
7.62
1.4
12.6
21.4
a/ The No Controls Scenario is one of several scenarios examined.
b/ Reflects the risk during the remaining lifetimes of people alive today.
c/ Reflects the risk during the entire lifetimes of the people in the cohort.
Source: ICF Incorporated estimates.
-------
E-46
Confidence in the estimates developed here are strengthened by several
considerations. The correlation between UV-B flux and sunlight flux is high,
and a correlation between sunlight and cataracts has also been found in
Australia (Taylor 1980) and in China (Mao and Hu 1982). An association between
UV-B exposure and cataracts has also been demonstrated in laboratory animals.
Therefore, although considerable investigation remains to be performed,
indications are that the association between UV-B and cataracts is a reasonable
basis for evaluating potential impacts due to increased UV-B flux associated
with ozone depletion.
7. VALUATION OF HUMAN HEALTH EFFECTS
The previous sections have discussed the physical impacts on human health
that can result from stratospheric ozone depletion. In this section the costs
associated with these human health effects are discussed. The first part of
this section discussed the costs associated with skin cancer; the second part
discusses the costs due to cataracts.
7.1 Costs of Skin Cancer
As discussed previously in this appendix, there is a substantial amount of
information on the specific types of cancer that can occur and the rates at
which the incidence of skin cancers may change. However, there is little
available information on the costs to society associated with a potential
increase in the number of skin cancer cases.
To overcome this problem, EPA sponsored a Skin Cancer Focus Group, which was
comprised of medical specialists in the skin cancer field. The purpose of this
Skin Cancer Focus Group was to identify the major cost components incurred by
society for different types and severity of skin cancer. These cost components
include the medical costs associated with treatment, the amount of work lost due
to treatment, costs due to preventive measures recommended for those people that
have skin cancer, costs of caregiving and chores performed by others, pain and
suffering incurred by skin cancer patients, etc.
The major costs identified by the Skin Cancer Focus Group are presented in
Attachment A to this appendix, along with a summary of the key elements
addressed by the Skin Cancer Focus Group. Based on the results from this
process, the costs assumed for skin cancer are $5000 for a "typical" case of
nonmelanoma and $15,000 for a "typical" case of melanoma. (In this context
"typical" is used to imply a weighted average of the costs incurred for the
different types of cases that are treated. Because many cases are less serious
and some are more serious, the "typical" case does not represent the modal case,
but the weighted average based on the frequency of each type of case.)
For the increase in mortality expected from an increase in skin cancer, the
value of each life lost is assumed to be three million dollars; this value is
assumed to increase at the rate of 1.7 percent annually (i.e., the value of a
human life increases at the same rate of growth in per capita income). For a
more complete discussion of these issues, see Appendix G.
-------
E-47
It should be noted that the results obtained to date from the Skin Cancer
Focus Group process are preliminary. The information is undergoing continuing
peer review to ensure that all issues have been properly addressed and all costs
adequately represented. As this review process continues, the results may
change as well. However, it should be emphasized that the cost estimates
presented above are conservative estimates of the actual costs incurred by
society for skin cancer. This is because the costs currently include only those
items directly attributable to the medical treatment required for skin cancer
patients, i.e., the cost of medical treatment, follow-up visits, preventive
measures, etc. Other costs, such as pain and suffering and costs of caregiving
and chores performed by others, have not been included because cost estimates
have not been readily available. Inclusion of these costs would more closely
reflect society's willingness to pay to avoid all of the costs associated with
additional skin cancer cases.
These costs also do not include the costs associated with potential
increases of actinic keratosis, i.e., pre-cancerous lesions that occur as a
result of excessive exposure to the sun. As discussed further in Attachment A
to this Appendix, the increase in incidence of actinic keratosis may be quite
substantial, perhaps even greater than the increase in incidence of nonmelanoma.
The costs to treat actinic keratosis may be several thousand dollars per case.
Due to a lack of information on the potential increase in incidence of actinic
keratosis from higher levels of UV radiation, this illness has not been included
in this analysis. It should be noted, however, that the costs to society for
actinic keratosis may be large.
In one respect the cost estimates developed from the Skin Cancer Focus Group
discussion in Attachment A may overestimate costs for individuals that develop
more than one case of skin cancer in their lifetime. The cost estimates include
certain activities, such as follow-up visits and application of sunscreen, that
skin cancer patients are recommended to do for the rest of their lives.
However, in some instances a single individual may develop two or more cases of
skin cancer. For these people with recurring skin cancer, additional medical
treatment will be required, but their costs do not increase for follow-up visits
to the doctor or for sunscreen applications. To the extent that some
individuals do develop more than one case of skin cancer, total costs will be
overestimated. As an example, if a second case of nonmelanoma affects the same
individual five years after treatment for the first nonmelanoma, about $1500 of
the costs incurred would already be accounted for by the costs associated with
the first case. No correction has been made for this potential double-counting.
Since many other potential costs are not included in the cost estimates, however
(as discussed above), the cost estimates of $5000 for nonmelanoma and $15,000
for melanoma likely do not overestimate society's willingness to pay to avoid
the skin cancer in the first place.
7.2 Costs of Cataracts
The costs of cataracts have been determined from Rowe, Neithercut, and
Schulze (1987). In this study, Rowe et. al. evaluated society's willingness to
pay to avoid the damages incurred from cataracts. These impacts on the
well-being of the affected individual and others in society included:
-------
E-48
1. Increased Medical Costs,
2. Increased Work Loss,
3. Increased Cost for Paid Chores, Caregiving, etc.,
4. Increased Disutility Related to Reduced Leisure Activities,
5. Increased Disutility Related to Discomfort,
6. Increased Unpaid Caregiving and Chores, and
7. Other Effects, such as risk premiums.
To estimate these costs, Rowe et. al. (1987) used three basic methods --a
review of the literature to determine the amount and type of information
available on the costs, contacts with health providers to obtain their estimates
of the costs of treating cataract patients, and a survey of actual cataract
patients to determine the types of costs they incur as a result of the medical
illness.
Rowe et. al. (1987) investigated several different measures for evaluating
the costs of cataracts. These measures included costs incurred by the affected
individual only versus those costs incurred by society in general; they also
included the costs of the illness only (i.e., the actual medical costs) versus
estimates of the willingness to pay to avoid the damages. For purposes of this
analysis, the most appropriate cost measure is assumed to be the social
willingness to pay. Based on the costs reported by Rowe et. al. (1987), each
cataract case that results from increased UV-B radiation is assumed to cost
$15,000.
-------
E-49
REFERENCES
Bureau of the Census, "Projections of the Population of the United States, by
Age, Sex, and Race: 1983 to 2080," U.S. Department of Commerce, Washington,
D.C., Series D-25, No. 952.
Connell, P.S. (1986), "A Parameterized Numerical Fit to Total Column Ozone
Changes Calculated by the LLNL I-D Model of the Troposphere and
Stratosphere," Lawrence Livermore National Laboratory, Livermore,
California.
Killer, R., R. Sperduto and F. Ederer (1981), "Epidemiologic Association with
Cataract in the 1971-1972 National Health and Nutrition Examination Survey,"
American Journal of Epidemiology. Vol. 118, No. 2, pp. 239-298.
Isaksen, I.S.A. (1986), "Ozone Perturbations Studies in a Two Dimensional
Model with Temperature Feedbacks in the Stratosphere Included," presented at
UNEP Workshop on the Control of Chlorofluorocarbons, Leesburg, Virginia,
September 1986.
Leske, C.L. and R.D. Sperduto (1983), "The Epidemiology of Senile Cataracts:
A Review," American Journal of Epidemiology. Vol. 118, No. 2, pp. 152-165.
Pitcher, H. (1986), "Melanoma Death Rates and Ultraviolet Radiation in the
United States 1950-1979," U.S. Environmental Protection Agency, Washington,
D.C.
Mao, W. and T. Hu (1982), "An Epidemiologic Survey of Senile Cataract in
• China," Chinese Medical Journal. 95(11):813-818.
Rowe, R.D., T.N. Neithercut, and W.D. Schulze (1987), Economic Assessment
of the Impacts of Cataracts. Draft Report, prepared for U.S. Environmental
Protection Agency, January 30, 1987.
Scotto J., T. Fears, and Fraumeni (1981), "Incidence of Nonmelanoma Skin
Cancer in the United States," U.S. Department of Health and Human Services,
(NIH) 82-2433, Bethesda, Maryland.
Scotto, J. and T. Fears (in press), "The Association of Solar Ultraviolet
Radiation and Skin Melanoma Among Caucasians in the United States," Cancer
Investigation.
Serafino, G. and J. Frederick (1986), "Global Modeling of the Ultraviolet
Solar Flux Incident on the Biosphere," prepared for the U.S. Environmental
Protection Agency, Washington, D.C.
Setlow, R.B., "The Wavelengths in Sunlight Effective in Producing Skin Cancer:
A Theoretical Analysis," Proceedings of the National Academy of Science.
71(9):3363-3366, 1974.
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E-50
Taylor, H.R. (1980), "The Environment and the Lens." Brit. J. Qphthal. 64:
303-310.
U.S. EPA (1986). Review of the National Ambient Air Quality Standards for
Ozone. Preliminary Assessment of Scientific and Technical Information.
Office of Air Quality Planning and Standards Staff Paper. March 1986.
U.S. EPA (1987), Assessing the Risks of Trace Gases that can Modify the
Stratosphere. U.S. Environmental Protection Agency, Washington, D.C.
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E-51
ATTACHMENT A
SUMMARY OF MEETING WITH THE SKIN CANCER FOCUS GROUP
(Held on July 23, 1987, in New York City. New York)
In attendance were Drs. Darrell Rigel and Robert Friedman, skin cancer
specialists practicing in New York City, and Craig D. Ebert, M.P.P., and Dr.
Janice Longstreth of ICF Incorporated of Washington, D.C.
Craig Ebert of ICF began the meeting with an overview of the current efforts
to achieve an international protocol for the control of ozone- depleting
substances. Mr. Ebert explained that the U.S. Environmental Protection Agency
was currently working on a Regulatory Impact Analysis to evaluate the benefits
and costs associated with various control programs to avoid the potential health
and non-health impacts that could result from stratospheric ozone depletion.
The purpose of this meeting was to evaluate the costs due to increased
incidences of skin cancer that could occur as a result of increased ultraviolet
radiation from ozone depletion. The objective was to identify all of the social
costs incurred from skin cancer (not just the costs to the individual),
including not only the medical costs, but the costs due to loss of work,
caregiving and chores performed by others for the patient,and unpaid costs
incurred by the patient and others (such as family members) during and after
treatment.
Dr. Rigel indicated that although basal and squamous cell carcinoma and
cutaneous malignant melanoma are the different types of skin cancer on which to
focus, there would be large costs due to significant increases in the incidence
of actinic keratosis, pre-cancerous lesions that occur as a result of excessive
exposure to the sun. For purposes of discussion, these cases were divided into
"less serious" cases, where only a few lesions at most are present, to "more
serious" cases, where hundreds of lesions may be present. About 90 percent of
all cases are in the first category, with ten percent considered "more serious."
It was estimated that the prevalence rate in the U.S. for actinic keratosis is
about 1 in 50 to 1 in 100. About three percent of all keratoses were estimated
to become squamous cell carcinoma.
In the "less serious" cases, the lesions would be treated by either scraping
or freezing them off. The initial visit would cost about $125, followed by
another visit in six months, with annual follow-up visits thereafter as a
precaution. Follow-up visits average about $50 per visit.
In the "more serious" cases, the typical treatment would be application of a
topical cream over the exposed areas of the body suffering from the sun
exposure, i.e., the face, neck, hands, and perhaps, the arms and shoulders. The
purpose of the cream is to remove the sun-damaged cells by burning them off.
The patient typically undergoes treatment for 10-14 days, with the cream applied
twice a day. If the patient's hands are being treated, it is often necessary to
apply the cream for 6 weeks due to the toughness of the skin on the back of the
hands. During this treatment, the patient will look very much like a burn
patient. Once the 10-14 days have elapsed, the patient -is often given steroids
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E-52
to ease tne psiti and help in the recovery. While this treatment is going on,
tne patient will have burning and itching around the olock. For 2-3 weeks after
tSs cream has b^en applied, the pafient will have scabs and. oozing as the skii:
heals that many h&ve compered to a very bad ca.se of poison ivy. This is
followed, by about 2-3 veeks of redness. !•: i.s quite conunon fcr these p.itier.ts
to stMr home during this period of tine, particularly during the first 2-3 vest
period after j.l.e cream i.'.s bten initially applied.
The cost for the craan. alone with thic treatment is about $75-$100. The
patient is seen by the doctor 7., 4, and 6 veeks from the time r;he tveatinenc is
first begun. The effectiveness cf the tre.itment lascs only two years so ir
some ca&es it may be necessary to gc through the treatment again after this
period of t-iue. For all forms of ksratosis, regardless of severity, it was.
estimated that the average cost of treatment, was §300 per year per case.
Basal Gall Carcinoma
For purposes of discussion, basal cell carcinoma was divided into three
s:
1. Small--aoout 80% of all cases.
2. Large--about 15% of all cases.
3. Recur ring--about 5% »± al_ cas.es.
Small BCC are typically treated in the doctor's office by (1) burning and
scraping or (2) freezing. In these, ca^es the cost of the biopsy plus the
pcthology fee would he about $200. This woold be followeu by the treatment
itself at a cost of about $250, plus che costs of follow-up. These patients
would be seen every six monclis for t-.v;o years, then once a year thereafter for
the rest of cheir lives. (Estunatstl average age at first discovery is 56;
«s*imateJ years of follow-up is 15.) These follow-up visits would coct about
?50 per visit and take from no more than ons-half hour to maybe an hour. In
these types of cases there is about a 50* chance of a second recurrence; if a
second BCC is found, the-e is about a 7'3%- chance that a third BCC rfil] he found.
Large BCC may be treated either i:i the doctor's office or the. hospital,
depending on the location of the BCC. The cost to treat each ca.se (one case is
«me treatzirert, r.ot necessarily one patient; one patient may undergo multiple
treatments) ranges from $500 to S1500, witn an average of $1000 per case.
Eatieoits are liVely to be out of work for au least a week. Large BCC are
similar to recurring JiCC, except that they do not recur.
R&curring BCC are typically treated with microscopic surgery at a cost of
about $1200 per treatrjent. These patients will be out: of work for at least a
week. About 80-90% of all cases are single lesion: 10-20% are multiple lesions.
The costs of treatment do not go vp linearly for Multiple lesion patients --a
patient, with three tumors would 5.ncur ccsts about twice as great is a single
lesion patient, not thiee times as great.
lies. Friedman and Ligel indicated that carrent estimates of 500,000 cases of
sJcfm cancer per year was a significant unaerestimate of the number of
nonmalanoma skin cancers, nie reported statistics are based on information
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E-53
obtained from hospitals, but many of these cases are treated in the doctor's
office. This approach probably understates cases by at least sixfold, e.g.,
thoy estimated 3 million cases was probably more reasonable.
Many cancer patients are elderly who may no longer be employed and, as a
result, do not miss work when treatment ij> required. Hov'ever, in nany of these
esses, friends or relatives take tiaie off from their jobs to bring the patient
in and to assist the patient during the treatment process. For these patients
insurance costs often go up, including medical snd life insurance. A common
reaction for patients once they discovar they have cancer is fear and depression
•- doctors spend some of their time consoling and educating the patient to allay
these fears. Very few patients a::e thought to seek psychotherapy, so few that
no estimate on the number of patients was provided.
Squaftous Cell Carcinorea
The procedures and co:;ts to treat squamous cell carcinoma (SCC) are the same
as those incurred for basal cell carcinoma unless the SCC is on the lip or it
These cases often require a lip resection at a cost of $2-3,000.
About 4-5% of all SCC cietftstasize. If a SCC wetastasizes, the patient can
expect multiple hospital stays, chemotherapy , surgery, and being out of
for an indefinite pericr? of time. In cases where the patient dies, the
cost for these: cases -mngzs from $25,000 to $50,000 per case over the
of che treatment (th&f.e costs are medical costs only). In cases where tha
does not die, the average cost per case is $5,000 to $10,000 per case.
patients thac have tkin cancer, doctors typically recommend a number of
that can affect the patient's lifestyle. These recoirirendations usually do
ri.l- to mid-October); in Florida sunscreen
us.e is recommended year-round.
F.or a patient exposed to the sun on a casual basis during the day,
applications are recommended twice a day. For more serious exposure, such as
the amount of sun oae may receive at the beach, more frequent applications may
b.e necessary. Sunscreens with a sun protection factor (SPF) of 15 or higher are
strongly recommended. It is estimated that it takes one full ounce to cover the
entire human oody correctly. At a cost of about $10 per bottle, annual
sunscreen costs were put at a minioum of $100, probably higher, especially in
the South. In 1936 about $100 million was spent in the U.S. on sunscreens with
a SPF of 15 or higher.
In addition to sunscreen, patients a^e told to wear hats and sunglasses, to
avoid the sun between 10 A.M. and 2 P.K. , to use umbrellas, and to stay out of
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E-54
the direct sun whenever possible. For people involved in careers that require a
substantial amount of time outdoors, doctors rarely recommend a change of
careers, but they do strongly urge that these types of precautions be taken to
minimize the degree of risk.
Cutaneous Malignant. Melanoma
Cutaneous malignant melanoma (CMM) was divided into four different
classifications, depending mainly on where the CMM is treated, for purposes of
discussion:
1. Office -- about one-third of all cases
2. Outpatient -- about one-third of all cases
3. Hospital
A. Low risk -- two-thirds to three-fourths of all
hospital cases
B. High risk (lymph nodes are affected) -- about
one-third to one-fourth of all hospital cases.
The location for where the CMM is treated has been changing rapidly in
recent years. The general shift has been to more outpatient care due to better
medical procedures and the tendency to catch the skin cancer at an earlier stage
than in previous years. In some cases, however, insurance considerations may
result in in-hospital treatment.
For all types of CMM, a biopsy and pathology fee will be incurred at a cost
of about $200-$250 per case. Total medical costs for an office visit are likely
to run about $500 to remove the CMM.
For an outpatient case, total medical costs are likely to average about
$1500 per case.
For hospital cases, costs will vary depending on whether it is a low risk or
high risk case, with the degree of risk depending on whether the lymph nodes are
affected. About 30% of all cases metastasize. For low risk patients, a
hospital stay of 5 to 7 days is required, averaging about $400-$700 per day.
Surgery costs will run about $2500-$3000. Anesthesiology costs would run about
$1500, and medicine costs would be about $300-$500. In the first year, these
patients would see the doctor eight times, four times the second and third year,
twice a year for about six years, and once a year thereafter at a cost of about
$50 per visit if no recurrence is diagnosed.
For high risk patients where the lymph nodes are affected, another $2000 to
$3000 would be spent to have the lymph nodes removed. For these patients,
follow-up visits would be required monthly for 6 months, every three months for
year 2, every four months for years 3 and 4, every six months through year 7,
followed by once a year visits thereafter. These patients would typically incur
about $300-$400 in laboratory costs per year.
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E-55
Despite the different types of cancer, if the cancer metastasizes, the
treatment (and hence, the incurred costs) is likely to be quite similar. As
indicated above, for patients who will eventually die from the cancer these
medical costs run about $25,000 to $50,000 per case; costs are $5,000 to $10,000
per case for patients that survive.
Skin cancer patients are taught to examine themselves once a month to make
sure no visible changes have occurred. Once they have been taught how to do it,
this procedure takes no more than a few minutes each month.
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E-56
SUMMARY ESTIMATES OF COSTS FOR SKIN CANCER
ACTINIC KERATOSIS
1. Less Serious--90% of cases
• Initial visit--$125
• Six-month follow-up--$50
• Annual follow-up--$50 per visit; assume 15 years--$750
• Sunscreen costs (see below)--$l,550-$3,050
Total: $2,475-$3,975
2. More Serious--10% of cases
• Initial visit--$125
• Topical Cream--$75-$100
• Follow-up visits at 2, 4, and 6 weeks from initial visit--$150
• Work loss (4 weeks at $30,000/year)--$2300
• Annual follow-up--$50 per visit; assume 15 years--$750
• Sunscreen costs (see below)--$l,550-$3,050
Total: $4,950-$6,475
BASAL CELL CARCINOMA
1. Small--80% of cases
• Biopsy plus pathology fee--$200
• Treatment cost--$250
• Follow-up visits--once every six months for two years, then
annually at $50 per visit--$850 assuming 15 years of visits.
• Sunscreen costs (see below)--$l,550-$3,050
Total: $2,850-$4,350
2. Large--20% of cases (recurring cases were considered "large" cases)
• Biopsy plus pathology fee--$200
• Treatment cost--about $1000 (±$500)
• Follow-up visits--once every six months for two years, then
annually at $50 per visit--$850 assuming 15 years of visits.
• Loss of work—one week at $30,000/year--$575
• Sunscreen costs (see below)--$l,550-$3,050
Total: $4,175-$5,675
SQUAMOUS CELL CARCINOMA
1. Small--80% of cases
• Biopsy plus pathology fee--$200
• Treatment cost--$250
• Follow-up visits--once every six months for two years, then
annually at $50 per visit--$850 assuming 15 years of visits.
• Sunscreen costs (see below)--$1,550-$3,050
Total: $2,850-$4,350
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E-57
2. Large--15% of cases
• Biopsy plus pathology fee--$200
• Treatment cost--about $1000 (±$500)
• Follow-up visits--once every six months for two years, then
annually at $50 per visit--$850 assuming 15 years of visits.
• Loss of work--one week at $30,000/year--$575
• Sunscreen costs (see below)--$1,550-$3,050
Total: $4.175-$5,675
3. Metastasize cases--4-5% of all SCC cases
A. Death does not result--$5/10,000 in medical costs per case
• Work loss--assume two years at $30,000 per year-- $60,000
Total: $65,000-$70,000
B. Death--$25-50,000 per case, medical costs only
• Work loss--assume two years at $30,000 per year-- $60,000
Total: $85,000-$110.000
CUTANEOUS MALIGNANT MELANOMA
1. Office--one-third of all cases
• Total medical costs--$500 per case
• Follow-up visits--four times first year, three times second year,
twice thereafter (assume 13 more years)--$1650
• Work loss--assume 2 hours per visit, or about 1-1/2 weeks at
$30,000 per year--$850
• Transportation to and from doctor's office--assume $10 per
visit--$330
• Sunscreen costs (see below)--$l,550-$3,050
Total:$4,880-$6,380
2. Outpatient--one-third of all cases
• Total medical costs--$1500 per case
• Follow-up visits--four times first year, three times second year,
twice thereafter (assume 13 more years)--$1650
• Work loss--assume 2 hours per visit, or about 1-1/2 weeks at
$30,000 per year--$850
• Transportation to and from doctor's office--assume $10 per
visit--$330
• Sunscreen costs (see below)--$l,550-$3,050
Total: $5.880-$7,380
3. Hospital--one-third of all cases
A. Low risk--2/3 to 3/4 of all hospital cases
• Hospital stay--$2000-$3500
• Surgery--$2500-$3000
• Anesthesiology--$1500
• Medic ine- -$ 300-$400
• Follow-up visits--eight times first year, four times second and
third year, twice a year for six years, and once thereafter (assume
6 more years)--$1700
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E-58
3. Hospital--one-third of all cases (continued)
• Work loss due to surgery--assume three weeks at $30,000 per
year--$1,730
• Work loss due to office visits--assume 2 hours per visit, or about
1-1/2 weeks at $30,000 per year--$850
• Transportation to and from doctor's office--assume $10 per
visit--$340
• Sunscreen costs (see below)--$l,550-$3,050
Total: $12,470-$16,070
B. High risk--1/3 to 1/4 of all hospital cases
• Hospital stay--$2000-$3500
• Surgery--$2500-$3000
• Lymph node removal--$2,000-$3,000
• Other laboratory costs--$300-$400 per year
• Anesthesiology--$1500
• Medicine--$300-$400
• Follow-up visits--monthly for 6 months, every three months through
year 2, every 4 months for years 3 and 4, twice a year/through year
7, and annually thereafter (assume 8 years)-/$1600
• Work loss due to surgery--assume three weeks at $30,000 per
year--$1,730
• Work loss due to office visits--assume 2 hours per visit, or about
1-1/2 weeks at $30,000 per year--$850
• Transportation to and from doctor's office--assume $10 per
visit--$320
• Sunscreen costs (see below)--$l,550-$3,050
Total: $14,670-$19,370
4. Metastasize cases
A. Death does not result--$5-10,000 per case
B. Death results--$25,000-$50,000
SUNSCREEN REQUIREMENTS--APPLIES TO ALL SKIN CANCER PATIENTS
• Annual sunscreen costs in New York--$100/year; assuming 15
years--$1500
-- In the South, about $200 per year--$3000
• Wear hats and sunglasses--$50
Total Suncreen Costs: $1,500-$3,050
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F
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APPENDIX F
APPROACHES USED FOR ESTIMATING THE ENVIRONMENTAL IMPACTS
OF STRATOSPHERIC OZONE DEPLETION
This appendix presents the approaches used to estimate the environmental
(non-health) impacts that could result from stratospheric ozone depletion. The
dose-response relationships used to assess the likely physical impacts
associated with increases in ultraviolet (UV) radiation due to ozone depletion
and the methods used to quantify and value the potential damages are described.
Throughout this appendix reference is often made to EPA's Risk Assessment:
Assessing the Risks of Trace Gases that Can Modify the Stratosphere, final
report by the Office of Air and Radiation, EPA, December 1987 (EPA 1987). The
Risk Assessment reviews in detail the current state of knowledge on the
potential risks posed by stratospheric ozone depletion.
This appendix presents overviews of the environmental risks associated with
ozone depletion, including:
• risks to marine organisms;
• risks to crops;
• increased concentrations of ground-based ozone (smog); and
• degradation of polymers.
It is important to emphasize that this analysis focuses exclusively on the above
environmental effects, all of which have anticipated, direct economic
consequences. Damage to other aspects of the natural environment and to
ecosystems are not estimated herein, although their long-term economic
consequences could be highly significant, perhaps catastrophic. Therefore,
these potential additional environmental consequences should be considered in
interpreting the results of this analysis.
This appendix also presents estimates of the potential impacts of sea level
rise associated with the global warming impacts of CFCs. The health impacts of
ozone depletion (including skin cancers and cataracts) are described in Appendix
E.
1. RISKS TO AQUATIC ORGANISMS
1.1 Physical Effects
Increased flux of UV radiation due to ozone depletion is anticipated to
adversely affect aquatic organisms. According to the Risk Assessment (EPA
1987):
Various experiments have demonstrated that UV-B radiation
causes damage to fish larvae and juveniles, shrimp larvae, crab
larvae, copepods, and plants essential to the aquatic food web.
These damaging effects include decreased fecundity, growth,
survival, and other reduced functions in these organisms. In
natural marine plant communities a change in species composition
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F-2
rather than a decrease in net production is the probable result
of enhanced UV-B exposure. The change in community composition
may introduce instabilities to ecosystems and would likely have
an influence on higher trophic levels. A decrease in column
ozone could diminish the near-surface season of invertebrate
zooplankton populations. Whether the population could endure a
significant shortening of the surface season is unknown.
The direct effect of UV-B radiation on food-fish larvae
closely parallels the effect on invertebrate zooplankton.
Information is required on seasonal abundances and vertical
distributions of fish larvae, vertical mixing, and penetration
of UV-B radiation into appropriate water columns before effects
of incident or increased levels of exposure to UV-B radiation
can be predicted. However, in one study involving anchovy
larvae, a 20% increase in incident UV-B radiation (which would
accompany about a 9% decrease in the atmospheric ozone column)
would result in the death of all of the larvae within a 10-meter
mixed layer in April and August after 15 days. It was
calculated that about 8% of the annual larval population
throughout the entire water column would be directly killed by a
9% decrease in column ozone.
Effects induced by solar UV-B radiation have been measured
to depths of more than 20 m in clear waters and more than 5 m in
unclear water. The euphotic zone (i.e., those depths with
levels of light sufficient for positive net photosynthesis) is
frequently taken as the water column that reaches down to the
depth at which photosynthetically active radiation is reduced
99%. In marine ecosystems, UV-B radiation penetrates
approximately the upper 10% of the marine euphotic zone before
it is reduced to 1% of its surface irradiance. Penetration of
UV-B radiation into natural waters is a key variable in
assessing the potential impact of this radiation on any aquatic
ecosystem.
Although the scientific literature generally supports the hypothesis that UV
radiation can inflict potentially adverse impacts on marine organisms, there is
a limited amount of information from laboratory studies to indicate the
appropriate dose-response relationships between UV radiation increases and
impacts on aquatic organisms in the natural environment. In a study by Hunter,
Kaupp, and Taylor (1982), analyses were conducted on anchovy larvae to estimate
the potential effects of increased UV-B radiation on anchovy populations. They
found that several factors influence the potential for UV-B radiation to affect
anchovy larvae, including seasonal abundance and vertical distribution of the
larvae, degree of vertical mixing, and the amount -of UV-B penetration into the
anchovy-populated seawater. The results of their study are summarized in
Exhibit F-l.
As indicated in Exhibit F-l, anchovy larvae losses were estimated for three
different models of mixing within the top layer of the oceans -- static, mixing
within the top ten meters, and mixing within the top 15 meters. For purposes
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F-3
EXHIBIT F-l
EFFECT OF INCREASED LEVELS OF SOLAR UV-B RADIATION
ON THE PREDICTED LOSS OF LARVAL NORTHERN ANCHOVY
FROM ANNUAL POPULATIONS, CONSIDERING THE DOSE/DOSE-RATE
THRESHOLD AND THREE VERTICAL MIXING MODEL
30
Larval Northern Anchovy
10-m Mixed layer
15-m Mixed layer
10 20 30 40 50 60 70
INCREASED UV-B RADIATION (%)
Based on data of Hunter, Kaupp, and Taylor 1982.
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F-4
of this analysis, the dose-response relationship demonstrated by the ten-meter
mixed layer model was assumed to be the most representative of likely impacts
due to increased UV-B radiation. These impacts on anchovy larvae were assumed
to apply to the adult anchovy population, i.e., a 10 percent decline in anchovy
larvae would translate into a 10 percent decline in the adult populations. Our
understanding of the relationship between larvae populations and adult
populations is not good; it is possible that the impacts on the adult population
might not occur or might be larger. Obviously, actual impacts would also vary
depending on the ocean mixing depth assumed. Additionally, these impacts were
limited to a maximum of 25 percent of the population levels to avoid
extrapolating outside the bounds of the available (limited) information.
1.2 Valuation of Physical Impacts
To estimate the potential impact of increased UV-B radiation on the natural
environment, the dose-response relationships indicated by the ten-meter mixing
depth for anchovy larvae in Exhibit F-l were assumed to be representative of the
effects on the natural anchovy population. These effects were assumed to be
reflected in commercial harvest levels, which would decline by the amount
indicated by the dose-response relationships, e.g., if an increase in UV-B
resulted in a 25 percent decline in anchovy larvae survival, then commercial
harvest levels would also decline by 25 percent.
The value of a decline in the commercial anchovy harvest was determined by
using the average 1981-1985 anchovy harvest levels (9,111 tons) and market value
($4.9 million) as reported by the U.S. Department of Commerce.* These 1981-1985
market levels were assumed to represent the average amount and value of each
annual anchovy harvest through 2075 from which UV-B impacts are measured. For
example, if a 25 percent decline in the anchovy harvest were estimated to occur,
the value of this impact would be 25 percent of the average 1981-1985 harvest
level multiplied by the average value of anchovies from 1981-1985 (as determined
by its market price). Future harvest amounts and market value could differ from
average 1981-1985 levels; to the extent that they do so, the values estimated
herein will be incorrect. However, because future market value and production
levels cannot be easily estimated, the average 1981-1985 levels were used as a
reasonable approximation.
Exhibit F-2 summarizes the estimated value of avoiding declines in anchovy
harvests for the baseline (i.e., no controls) scenario.^ The dollar values in
Exhibit F-2 are net present values based on cumulative impacts on anchovy
harvests for all years 1985-2075 (all values are in 1985 dollars). The
estimated percentage decline in the amount of anchovies harvested by 2075 is
Fisheries of the United States. 1985. United States Department of
Commerce, National Oceanic and Atmospheric Administration, Washington, D.C.,
April 1986.
n
The baseline scenario used throughout this appendix assumes about 3.6
percent annual CFC growth from 1985 to 2000 and 2.5 percent annual CFC growth
from 2000 to 2050, with constant production thereafter. See Chapter 4 for a
discussion of the baseline.
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F-5
EXHIBIT F-2
POTENTIAL IMPACTS ON ANCHOVY HARVESTS
DUE TO INCREASED UV RADIATION
(billions of 1985 dollars)
Scenario
No Controls
Harvest Decline
bv 2075
>25.0%
2% Discount Rate
0.5 1.0 2.0
0.004 0.009 0.018
Source: ICF estimates based on Hunter, Kaupp, and Taylor (1982)
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F-6
shown. The value of the change in anchovy harvest levels has been calculated
for a discount rate of two percent. Also, to reflect the uncertainty associated
with the crude manner used to value these benefits, values have been quantified
for three different levels of impacts -- one level assuming that the impact on
harvests is equal to the dose-response relationships shown in Exhibit F-l,
another level assuming impacts are one-half that amount, and a third level
assuming that impacts are doubled. These sensitivity analyses help to capture
the potential range of impacts that could result depending on the ability of
thenatural environment to compensate for potentially adverse impacts or the
possibility that impacts could be more severe than currently thought due to
currently unforeseen ripple effects (e.g., other aquatic species that rely on
anchovies for survival also experience harmful impacts).
In addition to the potential impacts on anchovy harvests, increases in UV-B
radiation would likely have deleterious effects on a wide variety of marine
organisms. Much of the evidence for these effects has been reviewed by Worrest
(1983). Unfortunately, the reactions of other marine organisms to increases in
UV-B radiation have not been adequately quantified. To estimate the potential
range of impacts of UV-B radiation on other marine organisms, the dose-response
relationships used for anchovies were applied to all other major commercial fish
species. That is, if UV-B increases were estimated to cause a 25 percent
decline in anchovy harvests, the same percentage decline would occur for all
other commercial fish species. Future scientific research would be needed to
validate the reasonableness of this assumption.
Exhibit F-3 summarizes the estimated value of avoiding declines in
commercial fish harvests for the baseline scenario. These values have been
estimated using the same methodology used for valuing the impacts on anchovies.
Impacts were determined from average commercial harvest levels (5.9 million tons
for all species considered) and average market values from 1981-1985 ($3.65
billion) and are based on the net present value of impacts over the 1985-2075
period. A discount rate of two percent was used, and sensitivity analyses are
shown assuming that impacts range from one-half to twice the level estimated by
the dose-response relationships. Also, the potential benefits have been
separated according to the type of commercial fish evaluated:
• Fin fish include menhaden, Pacific trawlfish, anchovies,
halibut, sea herring, jack mackerel, Atlantic mackerel,
sablefish, and tuna.
• Shell fish include clams, crabs, American lobster, spiny
lobster, oysters, shrimp, scallops, and squid.
While clearly speculative, these estimates dimension the problem. Real damages
could be significantly larger or smaller.
2. RISKS TO CROPS
2.1 Physical Effects
UV radiation may potentially affect crops and other managed or naturally-
occurring plants. According to the Risk Assessment (EPA 1987):
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F-7
EXHIBIT F-3
POTENTIAL IMPACTS ON FIN FISH AND SHELL FISH HARVESTS
DUE TO INCREASED UV RADIATION
(billions of 1985 dollars)
Harvest Decline 2% Discount Rate
Scenario bv 2075 (%) 0.5 1.0 2.0
No Controls >25.0%
-- Fin Fish
-- Shell Fish
Total
1.1
2,3
3.4
2.2
4.5
6.7
4.4
_i^
13.4
Source: ICF estimates based on Hunter, Kaupp, and Taylor (1982)
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F-8
In making an assessment of the risk to crops and ecosystems
of increased ultraviolet-B (UV-B) radiation, it must be
recognized that existing knowledge is in many ways deficient.
The effects of enhanced levels of UV-B radiation have been
studied in only four of the ten major terrestrial plant
ecosystems. Most of our knowledge is derived from studies
focused upon agricultural crops and conducted at mid-latitudes,
not in the tropics or at more poleward latitudes. Trees have
not been subject to experimentation. Experimental protocols
often have had flaws; too often, single-year studies have been
done, rather than long-term ones, and too much of the existing
data comes from growth chambers, in which plants grow under
unrealistic conditions, rather than from field studies.
Therefore, the full extent of the potential impacts of enhanced
levels of UV-B radiation on a global basis cannot be adequately
assessed.
Despite these limitations, a broad range of experimental
results demonstrated that, in nearly half of the plant species
examined, UV-B radiation deleteriously affected crop yield and
quality. Data exist that indicate that it may be reasonably
anticipated that if UV-B radiation increases, crop yield and
quality will decline for at least some cultivars. Existing data
also suggest that increased UV-B radiation will alter the
distribution and abundance of plants and potentially disrupt
ecosystems. Unfortunately, a qualitative prediction of how
these ecosystems would be altered cannot be determined from the
current knowledge base.
Despite the potential for UV-B radiation to adversely affect crop yield and
quality, there is a very limited amount of information to indicate the extent to
which damage may occur. Although scientific studies have been carried out on a
number of different types of crops, reliable dose-response relationships are
difficult to obtain. Some of the most detailed work has been conducted by A.H.
Teramura on soybean cultivars.3 His greenhouse and field studies have helped to
determine the dose-response relationship between UV-B radiation and soybean
yield. There has been some variation in results from one study to the next. As
a general approximation of the overall dose response relationship, for this
analysis each one percent decrease in ozone is assumed to cause a 0.3 percent
decline in soybean yield.^ This relationship is assumed to hold for ozone
o
J For example, see Teramura, A.H. and N.S. Murali, "Intraspecific
Differences in Growth and Yield of Soybean Exposed to Ultraviolet-B Radiation
Under Greenhouse and Field Conditions." Env. EXD. Bot. In press, 1986, and
Teramura, A.H., "Effects of Ultraviolet-B Radiation On The Growth and Yield of
Crop Plants." Plant Physiology. 58:415-427, 1983.
This value was based on the average of all statistically significant data
points in Teramura's work (non-drought years). This result was reported in
Analysis of Economic Impacts of Lower Crop Yields Due to Stratospheric Ozone
Depletion. Robert Rowe and Richard Adams, draft report to EPA, August 18, 1987.
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F-9
depletion estimates up to 25 percent. At this point, declines in soybean yield
would be 7.5 percent. For ozone depletion estimates exceeding 25 percent,
declines in soybean yield were limited to 7.5 percent. This limit was applied
because the scientific research conducted to date has not analyzed effects on
soybean yield for ozone depletion estimates exceeding 25 percent. The 7.5
percent limit avoids extrapolating dose-response relationships outside the range
of the available scientific analyses. However, this assumption may be a very
limiting assumption; in reality, very high UV-B increases might have more than a
proportional effect.
2.2 Valuation of Physical Impacts
The dose-response relationship discussed above, i.e., a 0.3 percent decline
in soybean yield for each one percent decrease in ozone, is assumed to apply to
all future years of agricultural production. This assumption does not take into
account possible measures to plant more UV-B resistant soybean varieties, the
substitution of other crops that are more resistant to UV-B for soybeans, or
other possible mitigating factors. Sensitivity analyses to consider these types
of impacts are discussed below.
To determine the value of future declines in soybean yield, a study by Rowe
and Adams (1987) that analyzed the economic impacts of stratospheric ozone
depletion on crop yields was used. In their analysis, Rowe and Adams used the
National Crop Loss Assessment Network (NCLAN) to evaluate the economic impacts.
NCLAN was originally developed to assist EPA in the evaluation of various
National Ambient Air Quality Standards (NAAQS) for tropospheric ozone. For
their analysis Rowe and Adams used information supplied by EPA from Teramura
(1987) to estimate the percentage decline in soybean yield due to increased UV
radiation. NCLAN was then used to determine the annual changes in economic
surplus that would occur for the estimated changes in soybean yield. They
developed the following relationship between soybean yield and economic damage:
D2 = 0.1068 * SOY - 0.00029 * SOY2
where
D2 = annual change in economic surplus, in billions of 1982 dollars,
resulting from changes in soybean yield due to UV-B.
SOY = percent change in soybean yield due to UV-B, which was defined as
0.30 times the percentage decrease in stratospheric ozone.
Using this equation, annual decreases in economic surplus can be calculated
for assumed levels of stratospheric ozone depletion. To estimate the impact of
potential changes in soybean yield over time, the following additional steps are
taken:
This may be a conservative (low) estimate of actual impacts since Teramura's
work intentionally examined one cultivar sensitive to UV (Essex) and one
cultivar that was not sensitive (Williams); earlier work by Teramura indicated
that about two-thirds of all soybean cultivars are sensitive to UV.
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F-10
• All values are expressed in 1985 dollars.
• Impacts are cumulative from 1985-2075, i.e., the annual
soybean impacts have been expressed on a net present
value basis.
• A discount rate of two percent was used.
• Dollar values have been calculated for three different
levels of impacts: (1) the level indicated by the
dose-response relationship discussed above; (2) one-half
the rate of impact implied by the dose-response
relationship; and (3) double the rate of impact. These
three levels are shown as sensitivity analyses to
reflect potential improvements in crop breeding and
management practices or future differences in production
levels or market value.
The results of this valuation procedure are summarized in Exhibit F-4, along
with the estimated decline in soybean yield by 2075 in the baseline scenario.
Although the dose-response information for the effects of UV-B radiation on
plant species is most reliable for soybeans, UV-B radiation has been shown to
affect other plants as well. However, detailed dose-response information is not
available for the other plants. Because reliable dose-response data do not
exist for other plant species, the dose-response relationship for soybeans is
assumed to apply to other plant types. That is, for each one percent decrease
in stratospheric ozone, plant yield is assumed to decline by 0.3 percent. In
this analysis only the major grain crops are assumed to be affected: wheat,
rye, rice, corn, oats, barley, sorghum, and soybeans.5 Potential impacts on
other crops, including fruits and vegetables, trees, and non-commercial plant
species have not been evaluated.
To estimate the value of potential impacts on the major grain crops, the
estimated impacts on soybeans only were increased by a factor that reflected how
much larger the size of the market for these crops was compared to the size of
the market for soybeans. This comparison was done by using average annual
production levels and market values from 1981-1985 to represent average future
levels of annual production and market value. During this period the average
annual amount of soybeans produced in the U.S. was valued at about $13 billion,
while all major grains crops had an average annual value of $50 billion.6 This
comparison indicates that the market for all major grain crops is about 3.85
times greater than the market for soybeans only. This factor was used to
increase the estimated impacts on soybean yield only to a level commensurate
Other minor grain crops, particularly feedstuffs such as cottonseed and
linseed meal, are not included here.
° Jewell, C. Duane (1986). Agricultural Statistics 1986. U.S. Department
of Agriculture, Washington, D.C., 1986.
-------
F-ll
EXHIBIT F-4
POTENTIAL IMPACTS ON SOYBEAN YIELD DUE TO UV RADIATION
(billions of 1985 dollars)
Harvest Decline 2% Discount Rate
Scenario bv 2075 f%) 0.5 1.0 2.0
No Controls >7.5% 4.4 8.7 17.4
Source: IGF estimates based on Teramura (1987).
-------
F-12
with potential impacts on all major grain crops. Also, there are a variety of
factors beyond the scope of this analysis that could cause the dose-response
relationships for grain crops to be different. To take the potential impact of
these factors into account, sensitivity analyses similar to those discussed
above for soybeans were conducted. Exhibit F-5 summarizes the results of the
valuation for the baseline scenario. While speculative in nature, these
estimates again provide some dimensioning of the potential problem.
3. TROPOSPHERIC OZONE
3.1 Physical Effects
Due to increases in the flux of UV radiation that may occur due to
stratospheric ozone depletion, levels of tropospheric ozone (ground-based ozone,
or smog) may increase. According to the Risk Assessment (EPA 1987):
Tropospheric or ground-based ozone, 03(T), is an air
pollutant formed near the earth's surface as a result of
photochemical reactions involving ultraviolet radiation,
hydrocarbons, nitrogen oxides, oxygen, and sunlight. At high
concentrations, often found during warmer months, tropospheric
ozone can adversely affect human health, agricultural crops,
forests, and materials. To protect public health, the U.S.
Environmental Protection Agency (EPA) has established a primary
standard of 0.12 ppm (one-hour average), which is not to be
exceeded more than one day per year. In 1979, EPA also
determined that a secondary welfare standard, more stringent
than the primary standard, was unnecessary for the protection of
vegetation. Currently, EPA is reviewing available scientific
and technical information to determine whether these standards
are adequate to protect health and welfare.
This chapter reviews preliminary scientific information that
suggests that increases in UV-B radiation may affect the rate of
tropospheric ozone formation in urban areas. The results from
these analyses suggest that increased ultraviolet radiation
increases the rate of ground-based ozone production and acid
rain precursors. Moreover, global warming, associated with
ozone-depleting substances, may enhance these reactions.
Further analyses of additional cities are being conducted. If
these analyses confirm these results, it would appear likely
that in the future more cities and regions would violate the
ambient air standards and that more restrictive measures to
control hydrocarbons and nitrogen oxides may be required in
order to comply with current standards.
Very little analysis has been conducted to date on the relationship between
UV radiation increases and potential increases in the level of tropospheric
(ground-based) ozone. Whitten (1986) has conducted a preliminary investigation
into the potential relationships between UV radiation and ground-based ozone in
urban areas. This analysis focused on the potential impacts in three cities:
-------
F-13
EXHIBIT F-5
IMPACTS ON YIELD OF MAJOR GRAIN CROPS
DUE TO UV RADIATION
(billions of 1985 dollars)
Scenario
No Controls
Harvest Decline
bv 2075
>7.5%
2% Discount Rate
0.5 1.0 2.0
16.9 33.7 67.4
Source: 1CF estimates based on Rowe et al. (1987).
-------
F-14
Los Angeles, Philadelphia, and Nashville. These three cities were selected to
represent the likely range of atmospheric conditions that could be encountered
in the U.S. -- Nashville is nearly in compliance with the 0.12 parts per million
Federal ozone standard; Philadelphia is moderately out of compliance (a 30-50
percent reduction in organic precursors would be required); and Los Angeles has
one of the most severe ozone problems in the U.S. The average increase in
tropospheric ozone is based on the results from these three areas.7 The maximum
increase in tropospheric ozone has been limited to 30.9 percent, the average of
the maximum values reported for Nashville, Philadelphia, and Los Angeles, to
avoid extrapolating beyond the range of impacts reported in Whitten (1986).
Increases in tropospheric ozone could cause a number of adverse impacts on
human health. In a recent study by EPA/OAQPS (1986),8 a review of the available
evidence indicated that tropospheric ozone could have the following health
effects:
• During periods of heavy exercise, alterations in pulmonary
function^ have been demonstrated among healthy individuals.
Controlled exposure studies have reported decreases in
pulmonary function among intermittently, heavily exercising,
healthy children exposed for two hours to 0.12 ppm 03 and
among continuously heavily exercising, healthy adults
exposed for one hour to 0.16 ppm 03. Field studies have
also noted similar responses.
• Pulmonary function can also be impaired during lighter
periods of exercise. Exposure to 0.2 ppm 03 for two hours
was shown to decrease pulmonary function by 1.6 percent
during intermittent light exercise, 2.4 percent during
moderate exercise, 2.8 percent during heavy exercise, and
4.7 percent during very heavy exercise.
• Some fraction of individuals appears to be more affected by
ozone than others. In tests on healthy exercising adult
7 See whitten, G. Z. and M. Gery, "Effects of Increased UV Radiation on
Urban Ozone," presented at EPA Workshop on Global Atmospheric Change and EPA
Planning, edited by Jeffries, H., EPA Report 600/9-86016, July 1986. The
dose-response relationship between UV radiation and ozone levels may be linear
or non-linear depending on the interplay between several factors, including
temperature, local conditions, and other factors.
Review of the National Ambient Air Quality Standards for Ozone:
Preliminary Assessment of Scientific and Technical Information, staff paper,
prepared by Office of Air Quality Planning and Standards (OAQPS), U.S.
Environmental Protection Agency, March 1986.
Q
Pulmonary function is measured by the forced expiratory volume in 1.0
second, i.e., the volume of air that can be expelled in the first second of a
maximal expiration.
-------
F-15
males, pulmonary function decreased by more than 10 percent
when exposed to 0.12 ppm 03.
• Preliminary results indicate that acute and chronic
exposures to ozone may cause longer term effects on
pulmonary function and lung structure, although the data do
not yet establish a statistically significant relationship.
• Work performance may be limited by exposure to ozone,
although the magnitude of this impairment has not been
quantified.
• Changes in pulmonary function due to exposure to ozone may
cause other respiratory and non-respiratory symptoms, such
as throat dryness, chest tightness, difficulty or pain in
inspiring deeply, cough, wheeze, headache, etc.
• People with asthma may be more likely to have an asthmatic
attack due to ozone; people with preexisting respiratory
diseases are also more likely to be at risk.
• Exposures to ozone, could affect host defense systems by possibly
decreasing resistance to bacterial and viral infections.
• Extrapulmonary effects may be more likely to occur due to
ozone exposure, e.g., alterations in red blood cell
structure and enzyme activity, liver metabolism effects,
etc.
In addition to human health effects, increases in tropospheric ozone may
also affect agricultural yields, forests, other plant species, ecosystems, and
materials. As summarized in the Risk Assessment (EPA 1987), these effects are:
(1) The mechanisms by which 03 may injure plants and plant
communities include (a) absorption of 03 into leaf through
stomata followed by diffusion through the cell wall and
membrane, (b) alteration of cell structure and function, as
well as critical plant processes, resulting from the
chemical interaction of 03 with cellular components, and
(c) occurrence of secondary effects including reduced
growth and yield and altered carbon allocation;
(2) The magnitude of the 03-induced effects depends upon the
physical and chemical environment of the plant, as well as
various biological factors (including genetic potential,
the developmental age of the plant and interaction with
plant pests);
(3) Effects of 03 on vegetation and ecosystems have been
demonstrated to occur from both short-term and long-term
exposures. Although there are a limited number of studies
in which short-term (1-2 hour) exposures have resulted in
-------
F-16
growth and yield reduction, there is a growing body of
evidence that repeated peaks above a given level are
important in eliciting plant response;
(4) Concerning long-term exposures, the bulk of the evidence
indicates that growth and yield losses occur in several
plant species exposed to seasonal concentrations of 03,
typically characterized as the daily daylight mean over the
growing season. In addition, evidence indicates that
forests experience cumulative stress as a result of chronic
exposure to 03. Exhibit 14-1 [See Exhibit F-6] summarizes
the range of 03 levels and exposure times required to
induce 5% and 20% foliar injury. Exhibit 14-2 (EPA 1986)
[See Exhibit F-7] provides a more complete survey; and
(5) Damage to materials is another effect of 03. There appears to be
no threshold level below which material damage will not occur; the
slight acceleration of the aging processes of materials occurs at
the level of the proposed standard. The materials known to be most
susceptible to ozone attack are elastomers, textile fibers and
dyes, and certain types of paint.
3.2 Valuation of Impacts
As discussed in the previous section, tropospheric ozone can affect human
health, agricultural yields, forest productivity, other plant species,
ecosystems, and materials. In this section, only the agricultural impacts are
quantified because insufficient information exists to attempt to value the other
impacts. These data limitations include little or no information on
dose-response relationships for some of the impacts and an inability to place a
meaningful dollar value on the impact, e.g., decreases in pulmonary function as
a result of ozone exposure.
One should not conclude from this inability to quantify the value of some
potential impacts due to tropospheric ozone that these impacts are not
important. In fact, the human health impacts may be the most important, e.g.,
the Primary National Ambient Air Quality Standard (NAAQS) for ozone is based on
human health considerations. Unfortunately, appropriate methods were not
available to quantify the value of several effects, including those relating to
human health. These effects do raise, however, significant concerns over
increases in tropospheric ozone. Their importance should not be overlooked.
3.2.1 AGRICULTURAL IMPACTS
To determine the economic impact of tropospheric ozone on agricultural
crops, a study by Rowe and Adams (1987) that analyzed the economic impacts of
stratospheric ozone depletion on crop yields was used. In their analysis, Rowe
and Adams used the National Crop Loss Assessment Network (NCLAN) to evaluate the
economic impacts. NCLAN was originally developed to assist EPA in the
evaluation of various National Ambient Air Quality Standards (NAAQS) for
tropospheric ozone. For their analysis Rowe and Adams used information supplied
-------
F-17
EXHIBIT F-6
OZONE CONCENTRATIONS FOR SHORT-TERM EXPOSURE THAT PRODUCE
5% or 20% INJURY TO VEGETATION GROWTH
UNDER SENSITIVE CONDITIONS*
Ozone Concentrations (ppm)
that may Produce 5% (20%) Iniurv:
Exposure
Time , Hour
0.5
1.0
Sensitive Plants
0.35 to 0.50
(0.45 to 0.60)
0.15 to 0.25
Intermediate Plants
0.55 to 0.70
(0.65 to 0.85)
0.25 to 0.40
Less
Sensitive Plants
>0.70 (0.85)
>0.40 (0.55)
(0.20 to 0.35) (0.35 to 0.55)
2.0 0.09 to 0.15 0.15 to 0.25 >0.30 (0.40)
(0.12 to 0.25) (0.25 to 0.35)
4.0 0.04 to 0.09 0.10 to 0.15 >0.25 (0.35)
(0.10 to 0.15) (0.15 to 0.30)
8.0 0.02 to 0.04 0.07 to 0.12 >0.20 (0.30)
* The concentrations in parenthesis are for the 20% injury level.
Source: EPA (1987), p. 14-6.
-------
EXHIBIT F-7
OZOHE CORCENTBAIIONS AT WHICH SIGHIETCART YIELD LOSSES HAVE HEEH NOTED FOR
A VARIETY OF PLAHT SPECIES EXPOSED UNDER VARIOUS EXPERIMENTAL CCHDITICHS
Plant Species
Exposure Duration
Yield Reduction.
X of Control
0 Concentration, ppm Reference
Alfalfa
Alfalfa
Pasture grass
Ladino clover
Soybean
Sweet corn
Sweet corn
Wheat
Radish
Beet
Potato
Pepper
Cotton
Carnation
Coleus
Begonia
Ponderosa pine
Western white pine
Loblolly pine
Fitch pine
Poplar
Hybrid poplar
Hybrid poplar
Red maple
American sycamore
Sweetgum
White ash
Green ash
Willow oak
Sugar maple
7 hr/day, 70 days
2 hr/day, 21 day
4 hr/day, 5 days/wk, 5 wk
6 hr/day, 5 days
6 hr/day, 133 days
6 hr/day, 64 days
3 hr/day, 3 days/wk, 8 wk
4 hr/day, 7 day
3 hr
2 hr/day, 38 days
3 hr/day, every 2 wk,
120 days
3 hr/day, 3 days/wk, 11 wk
6 hr/day, 2 days/wk, 13 wk
24 hr/day, 12
2 hr
4 hr/day, once every 6 days
for a total of 4 times
6 hr/day, 126 days
6 hr/day, 126 days
6 hr/day, 28 days
6 hr/day, 28 days
12 hr/day, 5 mo
12 hr/day, 102 days
8 hr/day. 5 day/wk, 6 wk
8 hr/day, 6 wk
6 hr/day, 28 days
6 hr/day, 28 days
6 hr/day, 28 days
6 hr/day, 28 days
6 hr/day, 28 days
6 hr/day, 28 days
51, top dry wt 0.10
16, top dry wt 0.10
20, top dry wt 0.09
20, shoot dry wt 0.10
55, seed wt/plant 0.10
45, seed wt/plant 0.10
13, ear fresh wt 0.20
30, seed yield 0.20
33, root dry wt 0.25
40, storage root dry wt 0.20
25, tuber wt 0.20
19, fruit dry wt 0.12
62, fiber dry wt 0.25
74, no. of flower buds 0.05-0.09
20, flower no. 0.20
55, flower wt 0.25
21, stem dry wt 0.10
9, stem dry wt 0.10
18, height growth 0.05
13, height growth 0.10
+1333, leaf abscission 0.041
58, height growth 0.15
50, shoot dry wt 0.15
37, height growth 0.25
9, height growth 0.05
29, height growth 0.10
17, total dry weight 0.15
24, height growth 0.10
19, height growth 0.15
12, height growth 0.15
Neely et al., 1977
Hoffman et al , 1975
Horsman et al., 1980
Blum et al., 1982
Beagle et al., 1974
Heagle et al., 1972
Oshima, 1973
Shannon and Mulchi, 1974
Adedipe and Onnrod, 1974
Ogata and Maas, 1973
Pell et al., 1980
Bennett et al., 1979
Oshima et al., 1979
Feder and Campbell, 1968
Adedipe et al., 1972
Reinert and Nelson, 1979
Wilhour and Neely, 1977
Wilhour and Neely, 1977
Wilhour and Neely, 1977
Wilhour and Neely, 1977
Wilhour and Neely, 1977
Fatten, 1981
Patton, 1981
Dochinger and Townsend, 1979
Kress and Skelly, 1982
Kress and Skelly, 1982
Kress and Skelly, 1982
Kress and Skelly, 1982
Kress and Skelly, 1982
Kress and Skelly, 1982
oo
Source: EPA (1987), p. 14-7.
-------
F-19
by EPA that indicated the percentage increase in tropospheric ozone due to
decreases in stratospheric ozone. Given these assumed levels of increase in
tropospheric ozone, NCLAN was then used to determine the annual changes in
economic surplus that would occur for the estimated changes in crop yield.
In their analysis Rowe and Adams estimated crop losses for soybeans, corn,
wheat, cotton, rice, barley, sorghum, and forage. They developed the following
relationship between tropospheric ozone changes and economic damage:
Dl = -0.0678 * T - 0.000195 * T2
where:
Dl = annual change in economic surplus, in billions of 1982 dollars, due
to tropospheric ozone.
T = percent change in tropospheric ozone.
Using this equation, annual decreases in economic surplus can be calculated
for assumed increases in tropospheric ozone. To estimate the impact of
potential changes in crop yields over time, the following additional steps are
taken:
• Average values from 1980-83 on market prices and quantity of
agricultural production were used to establish a baseline from which
all changes were measured. Other actual agronomic, meteorological,
and economic variables for the 1980-83 period were included to model
conditions over this period as closely as possible. The type of
information available from one of these years--1980--is summarized in
Exhibit F-8.
• Dose-response relationships between tropospheric ozone levels and crop
yield were specified. Exhibit F-9 provides these relationships by
state for a 25 percent increase in tropospheric ozone for the major
agricultural crops.
• Differences in economic surplus between the NCLAN baseline and
alternative ambient ozone levels defined the benefits or costs
associated with changes in tropospheric ozone.
• All results are converted to 1985 dollars.
The changes in economic surplus reported by Rowe and Adams (1987) for
alternative tropospheric ozone levels were reported as annual cost impacts,
i.e., they were based on economic surplus changes that would occur each year
whenever ozone levels differed from the baseline. For example, Rowe and Adams
estimated that a 15 percent decrease in stratospheric ozone levels would cause
about a $1.0 billion decrease (1985 dollars) annually in economic surplus.
To determine the potential cost impacts of increased tropospheric ozone
levels due to stratospheric ozone depletion, the annual cost impacts for each
-------
F-20
EXHIBIT F-8
1980 CROP PRODUCTION QUANTITIES USED IN NCLAN^/
Commodity
Cotton
Corn
Soybeans
Wheat
Sorghum
Rice
Barley
Oats
Silage
Hay
Soybean Heal
Soybean Oil
1980 Prices
fey
$/unit
366.72
3.25
7.74
3.71
3.00
12.79
2.91
1.93
19.46
70.90
0.11
0.24
1980 Quantities
(million units)
17.45
7,339.85
1,778.07
2,633.94
700.88
164.78
335.50
472.91
91.24
141.58
46,180.80
10,755.81
a/ Average values from 1980-1983 were actually used in this analysis.
Documentation for these average values was not publicly available in time
for this study, so just 1980 data is shown here. '
b/ Units are as follows: 500 pound bales for cotton; bushels for corn,
soybeans, wheat, barley, oats, and sorghum; hundredweight for rice; tons for
hay and silage; pounds for soybean meal and oil.
Source: Adams (1984).
-------
F-21
EXHIBIT F-9
DECLINES IN CROP YIELD ASSUMING A
25 PERCENT INCREASE IN TROPOSPHERIC OZONE
STATE
ALABflflA
ARIZONA
ARKANSAS
CALIFORNIA
COLORADO
CONNECTICUT
DELAUARE
FLORIDA
GEORGIA
IDAHO
ILLINOIS
INDIANA
I QUA
KANSAS
KENTUCKY
LOUISIANA
(1AINE
HARYLANO
HASSACHUSETTS
niCHICAN
IlINNESOTA
MISSISSIPPI
nissouRi
HONTANA
NEBRASKA
NEVADA
NEU HAnPSHIRE
NEU JERSEY
NEJ HEXICO
NEU YORK
NORTH CAROLINA
NORTH DAKOTA
OHIO
OK'.AHOrtA
OREGON
PENNSYLVANIA
RHODE ISLAND
SOUTH CAROLINA
SOUTH DAKOTA
TENNESSEE
TEXAS
UTAH
VER10NT
VIRGINIA
UASHINCTON
UEST VIRGINIA
WISCONSIN
UYOniNC
CORN
.990
.977
.984
.976
.978
.964
.994
.996
.960
.985
.988
.986
.992
.985
.990
.989
.994
.986
.988
.993
.994
.986
.986
.986
.989
.978
.991
.982
.985
.991
.982
.994
.988
.988
.996
.986
.978
.980
.991
.987
.992
.975
.988
.972
.998
.987
.986
.983
SOYBEANS
.958
.000
.952
.000
.000
.000
.954
.974
.962
.000
.955
.945
.961
.953
.957
.944
.000
.951
.000
.y51
.963
.953
.985
.000
.954
.000
.000
.950
.000
.957
.950
.964
.943
.956
.000
.939
.000
.945
.956
.950
.966
.000
.000
.924
.000
.000
.963
.000
COTTON
.947
.840
.953
.837
.000
.000
.000
.971
.952
.000
.000
.000
.000
.000
.000
.939
.000
.000
.000
.000
.000
.938
.940
.000
.000
.846
.000
.000
.880
.000
.924
.000
.000
.973
.000
.000
.000
.919
.000
.938
.978
.000
.000
.884
.000
.000
.000
.000
SPRING
UHEAT
.000
.974
.000
.973
.975
.000
.000
.000
.000
.981
.000
.000
.000
.000
.000
.000
.000
.000
.000
.000
.991
.000
.000
.982
.000
.975
.000
.000
.000
.000
.000
.992
.000
.000
.993
.000
.000
.000
.988
.000
.000
.972
.000
.000
.996
.000
.991
.979
UINTER
UHEAT
.971
.957
.969
.998
.951
.000
.964
.000
.973
.951
.973
.979
.975
.975
.976
.973
.000
.973
.000
.975
.975
.966
.967
.951
.970
.957
.000
.974
.962
.974
.962
.973
.978
.985
.Ml
.966
.000
.954
.973
.966
.978
.940
.000
.953
.984
.969
.970
.951
GRAIN
SORCHUR
.993
.967
.978
.987
.987
.000
.000
.000
.993
.000
.992
.990
.994
.992
.993
.992
.000
.000
.000
.000
.000
.992
.992
.000
.992
.000
.000
.000
.990
.000
.990
.000
.000
.992
.000
.990
.000
.989
.994
.991
.993
.000
.000
.985
.000
.000
.000
.000
BARLEY
.000
.996
.000
.996
.996
.000
.999
.000
.000
.997
.998
.000
.000
.999
.999
.000
.000
.998
.000
.999
.999
.000
.000
.998
.999
.996
.000
.997
.997
.998
.996
.993
.998
.998
.999
.998
.000
.996
.998
.998
.999
.995
.000
.994
.999
.998
.999
.997
Source: Adams (1984)
-------
F-22
scenario were estimated using the function cited above. For example, if
tropospheric ozone levels were forecast to increase 10 percent in each year,
then annual costs would be about $0.8 billion. For each scenario a stream of
annual impacts was determined over time, then the present value of these annual
impacts was calculated using a specified discount rate. A summary of these cost
impacts is provided in Exhibit F-10 for the baseline scenario for a discount
rate of two percent.
4. EFFECTS OF DV-B ON POLYMERS
4.1 Physical Effects
Many polymers currently used are sensitive to UV radiation. In many
instances, steps are taken to protect polymeric materials from current UV
levels. If UV radiation levels were to increase, many polymeric materials would
be at greater risk than they are currently. As reported in the Risk Assessment
(EPA 1987):
Several polymers (and largely the impurities present in the
polymers) readily absorb the ultraviolet (UV) radiation. One
effect of increased UV-B radiation, resulting from possible
future depletion of the ozone layer in the stratosphere, will be
accelerated degradation of the polymeric materials. Energies
associated with the UV radiation are large enough to initiate
reactions in polymers, which lead to their degradation by
affecting their mechanical and optical properties and thus
reducing their service life. Several methods are used to
stabilize the polymers to maintain a useful service life in
their various important applications.
While much is known about the physical processes of
degradation, little research has focused to date on the
potential costs and responses to such degradation. Initial
studies suggest that one likely response to increased UV-B
induced damage is to increase the amount of light stabilizer in
the polymers. Because of the lack of relevant data, only
approximate estimation methods are available to determine the
extent of light-induced damage and the degree of stabilization
required to minimize it. The effect of increased UV-B radiation
is manifested in increased costs of production, including raw
material costs, energy costs, and maintenance costs.
The available evidence on the molecular structure of polymers indicates that
the chemical bonds in the polymer can be broken by different types of energy,
particularly heat, mechanical energy, and radiation. It is the UV component of
sunlight that is the most common form of radiant energy that causes degradation.
Different polymeric materials are most sensitive to degradation at different
wavelengths of UV radiation (Kelen, 1983).
The exposure of polymeric materials to radiation can affect their properties
in a number of ways. For example, mechanical properties such as tensile
strength, elongation, modulus, and impact strength can be affected, as well as
-------
F-23
EXHIBIT F-10
POTENTIAL IMPACT ON U.S. AGRICULTURAL OUTPUT
DUE TO INCREASED TROPOSPHERIC OZONE LEVELS
(billions of 1985 dollars)
Tropospheric Ozone
Scenario Increase by 2075 (%) 2% Discount Rate
No Controls >30.9% 18.3
Source: ICF estimates based on Rowe and Adams (1987).
-------
F-24
optical properties such as transparency, color, chalking or cracking of
surfaces, and yellowing. The most likely areas where these effects may be
observed are in outdoor applications, primarily the use of plastics in the
building industry and in paints and coatings. There are other applications
where radiation exposure may occur, but the length of exposure tends to be on a
more limited, possibly intermittent, basis (e.g., packaging, outdoor
furnishings, housewares, and toys). Exhibit F-ll indicates a number of
applications where exposure of the material to sunlight might be expected.
In many of these applications some degradation of product quality due to UV
exposure is expected under current atmospheric conditions. The most common
technique employed to counteract these effects is the addition of a light
stabilizer to the polymer product. The purpose of these light stabilizers is to
absorb the light in the UV-fi range of the spectrum in a manner that is more
efficient than the polymeric material itself. Light stability can be achieved
in three ways: (1) the use of UV-absorbing compounds to dissipate the light
without degrading the polymer; (2) light-shielding techniques that prevent light
from reaching the polymer by including a light-absorbing or reflecting pigment;
or (3) the addition of substances to deactivate or quench the excited molecular
state caused by the interaction of the light with the polymer before degradation
can occur.
From the available information it is not easy to determine when polymers may
require additional protection from increases in UV radiation. Exhibit F-ll
indicates the types of polymer products that may be more likely to be exposed to
UV radiation. Of note is that not enough is known about the use of polymer
products to conclude that even polymers with a relatively low degree of exposure
to UV radiation would not require additional protection. Furthermore, the
limited amount of dose-response information available in the literature is
difficult to apply here because "... (a) the action spectra, where available,
are often related to properties of little practical interest, (b) the polymer
systems used in the studies do not represent those compounds typically used in
outdoor applications, and (c) the light sources used in early experiments had
spectra quite different from that of sunlight."1"
To date, data for assessing the potential future markets and potential
damages due to UV have only been developed for the portion of the PVC market
used in construction (siding, window profiles, rainwater systems, and pipe and
conduit). This PVC market accounts for about 26 percent of all polymers subject
to exposure to UV (measured by production volume); consequently, any damage
estimates based on these products only are underestimates of the potential risks
of polymer degradation due to ozone depletion.
^ Research Triangle Institute, Analysis of Technical Issues Related
to the Effect of UV-B on Polymers, draft final report, EPA Contract No.
68-01-7033. March 1986.
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F-25
EXHIBIT F-ll
PLASTICS USED IN APPLICATIONS WHERE EXPOSURE OF THE
MATERIAL TO SUNLIGHT MIGHT BE EXPECTED
Type of Plastic
Poly (vinyl chloride)
(rigid)
Poly (vinyl chloride)
(plasticized)
Unsaturated
Polyester
Polycarbonate
Acrylic
Polyethylene
Polypropylene
Application
Building Industry
siding
door/window
other
conduit
irrig. pipe
other pipe
roofing
liners
wire -cable
weatherstrip
garden hose
glazing
panels/siding
pipe
glazing
fixtures
glazing
Packaging
film
containers
film
containers
Usage
1000 m.t.
410
284
33
493
247
1912
22
25
410
38
48
41
122
237
90
9
84
696
2990
375
325
Exposure
high
high
high
moderate
high
low
high
moderate
moderate
high
high
high
low
high
low
high
.
-
Thermoplastic
Polyester
containers
635
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F-26
EXHIBIT F-ll (continued)
PLASTICS USED IN APPLICATIONS WHERE EXPOSURE OF THE
MATERIAL TO SUNLIGHT MIGHT BE EXPECTED
Usage
Type of Plastic Application 1000 m.t. Exposure
Housewares and Toys
Polyethylene 954
Polystyrene 378
Polypropylene 176
Source: Andrady, A., Research Triangle Institute, Analysis of Technical
Issues Related to the Effect of UV-B on Polymers. Draft final report,
submitted to EPA, Contract No. 68-01-7033, March 1986, p. 22.
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F-27
4.2 Valuation of Impacts on Polymers
As indicated above, there are a number of actions that polymer manufacturers
can take to protect their products from exposure to UV radiation. In one case
study that analyzed the costs to protect rigid PVC products used in building and
construction from increases in UV radiation, Horst (1986) assumed that polymer
manufacturers would need to increase the amount of titanium dioxide added to
their products as a UV stabilizer.11 To determine the costs that would be
incurred to protect rigid PVC products from UV radiation, Horst used three basic
steps:
1. Projected the size of the market for rigid PVC in construction
applications that may be subject to degradation due to UV.
2. Assessed the damage that increases in UV (due to ozone depletion) may
have on the polymers.
3. Assessed the costs of the damage to the polymers.
Each step is described in turn.
STEP 1 -- MARKET FOR POLYKERS
The future market for PVC polymers in construction will be influenced by
construction activity and the costs and performance of substitute materials.
Horst (1986) developed several approaches for projecting the expected production
and use of PVC over the next 90 years. The approach used here reflects expected
market saturation and is of the following form:
Q = A (1-exp (-k(T - To)))
where:
Q = quantity per person per year in pounds;
A = a constant;
k = a constant;
T = the current year of the projection; and
To = a base year identified for the polymer type.
The constants and base year computed for PVC by Horst (1986, p. 4A-3) using
statistical analyses of historical data are as follows: A = 63.0308; k =
0.01265; and To = 1966. These values are used along with the U.S. population
projections to compute a middle estimate of the size of the future market for
-1-1 Horst, et al., The Economic Impact of Increased UV-B Radiation on
Polymer Materials: A Case Study of Rigid PVC. draft final report prepared by
Mathtech, Inc., for EPA, June 1986.
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F-28
PVC in pounds. By using the same population estimates used in other parts of
the analysis, the estimates of the PVC market will be consistent with the values
used to develop the scenarios of production of CFCs and the other trace gases,
and the evaluation of human health effects.
Because there is uncertainty in the expected future market for PVC, low and
high estimates of future demand were also calculated. The low and high
estimates are based on the statistical uncertainty in the estimates of A and k.
These low and high values (along with the middle value described above) are used
in step 3 to evaluate the costs associated with the degradation of these
polymers.
STEP 2 -- POLYMER DAMAGE
A damage index that indicates the level of degradation of polymer
characteristics was developed by Andrady (1986). When there is no degradation,
the index value equals 1.0. Degradation is indicated by increasing values of
the index, such as 1.1. This index is used here to describe the potential
damage to polymers due to increased UV flux associated with ozone depletion.
Andrady (1986) developed an estimate of how the damage index may vary as a
function of ozone depletion. Due to uncertainties in the relationship between
ozone depletion and UV, and UV and polymer characteristics, the relationship
between ozone depletion and the damage index is represented as a range. These
ranges are displayed in Exhibit F-12.
To evaluate the damage index in each year, the ozone depletion estimate for
that year is used to get a range of values in the damage index table. The
result of this method is a range of damage index values for each year (low,
middle, and high).
STEP 3 -- ASSESS DAMAGE COSTS
The costs of polymer degradation depend on the manner in which the charac-
teristics of the polymers degrade, and the steps that are taken in response to
the degradation. Horst (1986) developed an approach for evaluating the costs
associated with the production of new PVC each year. These costs represent the
implications of changing the formulation of PVC during manufacture in order to
maintain its characteristics in light of increased UV exposure. These costs do
not include the potential damages to PVC already in place. Additionally, these
estimates do not reflect the losses that may be associated with polymer
degradation in the absence of changes in the polymer formulation. Therefore,
these estimates are an underestimate of the damages resulting from exposure of
polymers to UV radiation.
Horst (1986) identified the costs of changing the formulation of PVC as a
function of the increased amount of stabilizer that needs to be added to the
polymer to maintain its characteristics. A 25 percent increase in stabilizer
was estimated to lead to a 1.86 percent increase in the price of PVC, from its
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F-29
EXHIBIT F-12
DAMAGE INDEX AND INCREASE IN STABILIZER
FOR RANGES OF OZONE DEPLETION
Ozone Depletion
( percent)
0-5
5-10
10-20
i Damage Index
Low
1.01
1.01
1.03
Middle
1.015
1.025
1.105
High
1.02
1.04
1.18
Stabilizer Increase .(%)
Low
1.0
1.0
3.0
Middle
3.0
5.0
20.5
High
5.0
9.0
38.0
Source: Derived from Horst (1986), p. 6-10.
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F-30
current cost of $0.604 per pound.12 (Horst 1986, p. 5-16 and 6-8). The
increased amount of stabilizer required as a function of ozone depletion was
identified by Andrady (1986) and is also presented in Exhibit F-12.
To estimate the costs of increasing the stabilizer in response to ozone
depletion, Horst recommends using a ten year lag between the increase in
stabilizer required and the increase in the price of PVC. This lag reflects the
time needed for the industry to respond to changing environmental conditions and
the fact that the current stabilizer concentrations include a margin of safety.
This ten year lag has been assumed for purposes of this analysis.
To compute the costs in year T, the following computations are performed:
• compute the increased amount of stabilizer required, based
on the ozone depletion in year T - 10;
• compute the increase in price by interpolating between no
increase in price, and a 1.86 percent increase in price for
a 25 percent increase in stabilizer;
• given the increase in price, compute the cost as follows:
C(T) = (D(T)/Pob)/(l+b) * [Po(1+b) - Pl(1+b)]
where
C(T) = cost in year T;
D(T) = demand in year T;
Po = price of PVC in the absence of changes in the
formulation of the polymer;
b = price elasticity of demand for PVC;
PI = the new price for PVC given the change in the
formulation of the polymer.
This equation represents the annual loss in consumer surplus associated with
the estimated changes in price. The price elasticity of demand estimated by
Horst (1986) is -1.956. This value represents (in part) the estimated
availability of appropriate substitutes for PVC.
This equation is evaluated for each year to generate low, medium, and high
estimates of the costs. The low estimate uses the low demand value (from step
1) and the estimate of the change in price associated with the low estimate of
the increase in stabilizer associated with ozone depletion. The middle and high
estimates use the middle and high values for these components respectively. If
there is an increase in ozone abundance, the damage index is set to zero and
12 Ibid, pp. 5-16 and 6-8.
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F-31
there are no estimated costs. The maximum price increase (1.86 percent)
estimated by Horst is associated with a 25 percent increase in stabilizer.
Price increases are capped at this value (1.86 percent) even when an increase in
stabilizer exceeding 25 percent may be required to provide sufficient
protection.
Using the Horst (1986) damage estimates as a reference point for
potential damages to rigid PVC products, damage estimates for the baseline
scenario can be calculated as summarized in Exhibit F-13. These damage
estimates are shown for a discount rate of two percent.
The damage estimates summarized in Exhibit F-13 were estimated only for
extruded PVC products used in building and construction. However, these
materials represent only a portion of all polymer materials that could be
damaged by increased UV-B radiation. The Horst (1986) case study focused on
products that comprise about 1.2 million metric tons of annual plastic
consumption." As shown in Exhibit F-ll, however, the building industry alone
consumed approximately 4.5 million metric tons of plastics in 1985 that Andrady
(1986) estimated could be exposed to UV radiation. Studies have not been
conducted to determine how other polymers would respond to increased UV
radiation. However, if one assumes that all of these materials require the same
level of additional protection identified by Horst (1986) for PVC products at
the same incremental cost per pound, the costs to protect all of these products
could be substantially higher. Exhibit F-14 summarizes the potential magnitude
of these additional costs.
Furthermore, Andrady (1986) identified an additional 6.5 million metric tons
of plastic applications in the packaging, housewares, and toys industries that
may be subject to intermittent doses of UV radiation. These materials may also
require additional UV protection, but information is not available to determine
whether such protection would be necessary.
It should also be noted that the estimates in Exhibit F-14 have been adapted
from the Horst (1986) case study analysis as a means to approximate the
potential costs due to damage from UV radiation. However, it is not clear
whether the methodology employed by Horst (1986) for extruded PVC products in
the building and construction industries can be easily extrapolated to all other
plastic applications. The method used to protect the products from increased UV
radiation -- the addition of titanium dioxide to the product -- may not be
appropriate. It is also not known whether additional protection may be
warranted for these other products. These determinations could not be made with
a higher level of confidence without substantial additional analytic efforts.
13 Horst, p. 7-3.
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F-32
EXHIBIT F-13
POTENTIAL IMPACTS ON RIGID PVC DUE TO OZONE DEPLETION
(billions of 1985 dollars)
Scenario
No Controls
Ozone Depletion
bv 2075 (%)
50.00%
2% Discount Rate
1.37
Source: ICF estimates based on Horst (1986).
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F-33
EXHIBIT F-14
POTENTIAL IMPACTS ON PLASTICS IN THE
BUILDING INDUSTRY DUE TO OZONE DEPLETION
(billions of 1985 dollars)^/
Ozone Depletion
Scenario by 2075 (%) 2% Discount Rate
No Controls 50.00% 5.14
a/ Horst (1986) estimated only the cost of
potential damages to rigid PVC products in the
building and construction industries, as shown
in Exhibit F-ll. These estimates have been
extrapolated from the Horst (1986) case study.
Source: ICF estimates based on Horst (1986).
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F-34
5. SEA LEVEL RISE IMPACTS
5.1 Physical Effects
Increased concentration of CFCs are expected to contribute to global
warming, of which one impact is the rise in the level of the seas. According to
the Risk Assessment (EPA 1987):
One of the most widely examined impacts of the projected
global warming is the possible rise in sea level. Researchers
have identified at least four mechanisms that might cause a
significant rise: the warming and resulting expansion of the
upper layers of the ocean, the melting of alpine glaciers, the
melting of polar ice sheets in Greenland and Antarctica, and the
disintegration of these land-based ice sheets. Estimates of the
rise through the year 2100, in the absence of efforts to limit
the greenhouse warming, range from 50 cm to over 2 m. Even the
most conservative estimate implies a substantial acceleration
over the 10-15 cm rise of'the last century.
A rise in sea level in that range would permanently inundate
wetlands and lowlands, accelerate coastal erosion, exacerbate
coastal flooding, and increase the salinity of estuaries and
aquifers. Although wetlands have kept pace with sea level rise
in the last several thousand years, a 1- to 2-m rise would
destroy a majority of U.S. coastal marshes and swamps. River
deltas, such as those of the Mississippi, Ganges, and Nile
Rivers, appear to be particularly vulnerable.
Along the open coast, beach erosion could reach 1 to 2 m for
every 1-cm rise in sea level, in addition to whatever erosion
might be caused by other factors. Because buildings are
generally found within 50 m of the shore, even the 30-cm rise
projected for the next 40 years could threaten coastal property
and the recreational use of beaches, unless additional remedial
measures are implemented.
Sea level rise would also increase the vulnerability of
coastal areas to flooding from storm surges and rainwater. In
the area of Charleston, S.C., for example, the area now flooded
once every 100 years would be flooded every 10 years if sea
level rises 1.6 m. Protecting against increased flooding would
require improvement or construction of levees, seawalls, and
drainage facilities.
Higher water levels would also increase the salinity of
estuaries and aquifers. For example, Philadelphia's drinking
water intake on the Delaware River would be threatened by a
73-cm rise, as would adjacent aquifers in New Jersey that are
recharged by the (currently) fresh part of the river.
Construction of additional reservoirs might be necessary to
offset salinity increases.
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F-35
Few studies have estimated the economic significance of
future sea level rise. One study suggests that the impacts of a
0.9- to 2.4-m rise by 2075 could be as great as 17% to 35% of total
economic activity in the Charleston, South Carolina, area and 5%
to 16% of the activity around Galveston, Texas. No one has yet
estimated the potential nationwide cost of defending shorelines and
other resources from the projected rise in sea level.
For purposes of evaluating the impact of CFC emissions on global sea level,
a statistical representation of a one-dimensional box model of the atmosphere
and oceans was used.*4 This model evaluates the expected change in average
global air temperature as a function of: (1) the changing atmospheric
concentration of trace gases (including CFCs); (2) an assumed level of climate
sensitivity of greenhouse-gas forcings; and (3) an assumed rate of diffusion of
heat into the oceans. Based on these calculations, the change in global sea
level due to the following components is estimated:
• thermal expansion;
• Alpine meltwater; and
• Greenland meltwater.
Exhibit F-15 displays the estimates of the contribution to sea level rise
for the period 1985 to 2075 for the No Controls scenario. A value of 3.0°C is
used for climate sensitivity based on the middle of the range recommended by the
National Academy of Sciences."
Also shown in the exhibit is a potential range of sea level rise due to
Antarctic ice discharge. The model used to evaluate the other components of sea
level rise does not incorporate this factor in a manner that is sensitive to
rates of change of temperature. Therefore, there are no estimates of how this
component of sea level rise may vary with alternative CFC emission scenarios.
The range of sea level rise contribution from Antarctic ice discharge displayed
in Exhibit F-15 was presented in Thomas (1985). A middle value of 42 cm is used
in this analysis. Of note is that Exhibit F-15 shows that potential Greenland
Ice Discharges and Antarctic meltwater are not evaluated.
To evaluate the sea level rise associated with alternative CFC emission
scenarios, the model was run using the alternative scenario emission estimates,
resulting in alternative scenario estimates of sea level rise due to thermal
expansion, Alpine meltwater, and Greenland meltwater. As mentioned above, the
Antarctic ice discharge estimates do not vary across the scenario, and a middle
value of 42 cm is used throughout for this component.
14 The model developed by Lacis et al. (1981), and subsequently modified by
Hoffman, Keyes, and Titus (1983), and Hoffman, Wells, and Titus (1986).
15 Climate sensitivity refers to the equilibrium increase in global average
surface air temperature expected for a doubling of carbon dioxide concentrations
in the atmosphere. The entire range recommended by the National Academy of
Sciences was 1.5CC to 4.5°C. See NAS (1983).
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F-36
EXHIBIT F-15
FUTURE SEA LEVEL RISE FOR THE NO CONTROLS SCENARIO:
1985-2075
(centimeters )
Sea Level Rise Component
Global Climate
Sensitivity of 3.0°C
Thermal Expansion
Alpine Meltwater
Greenland Meltwater
Antarctic Ice Discharge
Antarctic Meltwater
Greenland Ice Discharged
32.9
15.1
6.5
(10 cm to 107 cm)
Not Evaluated
Not Evaluated
a/ Estimates are not a function of trace gas
concentration and global warming in this
analysis. Range is taken from Thomas (1985).
Source: Based on sea level use model described in
Hoffman, Wells and Titus (19S6).
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F-37
5.2 Valuation of Sea Level Rise Impacts
As discussed above, sea level rise can have a number of impacts, including
loss of coastal wetlands, higher storm surges, flooding, and beach erosion.
There have been very few studies that have examined the economic costs
associated with sea level rise impacts. In one study by Gibbs (1984), the
potential impacts of a 0.75 to 2.2 meter rise by 2075 were evaluated for two
coastal communities -- Charleston, South Carolina and Galveston, Texas. Gibbs
concluded that the major impact would be due to increased storm damage.
To evaluate the economic impacts of sea level rise, Gibbs measured changes
in net economic services (NES) that could result over time due to sea level
rise. Net economic services were defined as the returns to a set of investments
(referred to as gross services) minus the costs of the investments. For any
community, net economic services were determined using the following equation:
NES = S - H - NI + CS
where:
NES = net economic services
S = returns generated by a set of investments (also called gross
services)
H = costs to individuals to maintain their investments
NI = new investment by a community to serve the growing population
CS = value of the capital stock at the end of a finite period of time
(the remaining useful life at the end of the period of analysis,
e.g., in the year 2075).
The aggregate value of NES over a period of time was calculated by
estimating the present value of the time stream of NES values for each year
using a specified discount rate. The cost impacts associated with sea level
rise were evaluated by determining the changes in the present value of NES as a
result of increasing sea levels.
In addition to analyzing the impacts of different levels of sea rise, (as
determined by changes in NES), Gibbs also estimated the impacts for two
different types of community response -- damages if anticipatory actions were
taken and damages if they were not. If communities do not anticipate the
problems of higher sea levels, this study estimated that costs in Charleston
would range from $1.3 to $2.6 billion (depending on the level of sea rise) and
costs in Galveston would range from $0.6 to $2.0 billion (all costs in 1985
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F-38
dollars). 1° If measures were taken in anticipation of the higher sea levels,
then costs in Charleston would range from $0.5 to $1.2 billion and costs in
Calves ton would range from $0.3 to $0.8 billion.
Detailed estimates of the potential amount of damage that could occur to
U.S. ports due to sea level rise could be done most reliably by conducting
site -specific analyses for each port. However, since this approach was not
feasible for this study, estimates of the amount of damage that could occur due
to sea level rise have been estimated for the major ports in the U.S. using the
potential damage estimates from the Gibbs study to represent the potential range
of impacts due to sea level rise. The list of ports evaluated is shown in
Exhibit F-16. The potential range of cost impacts due to sea level rise at
these ports is summarized in Exhibit F-17 for the baseline scenario. The steps
taken to provide these estimates were:
• The cost estimates for Galveston and Charleston were divided
by the total tonnage shipped annually from the port to
determine damage costs for each ton shipped through the
port. This value was used to represent the relative
severity of impacts due to sea level rise. The higher the
dollar per ton value , the greater the impact due to sea
level rise. This approach assumes that port size can be
related to the amount of tonnage shipped through the port
and that potential cost impacts can be directly related to
the total amount of tonnage. Based on the cost estimates in
Gibbs (1984), the costs per ton shipped for a 98 cm rise in
sea level were $66 to $181 per ton for Charleston and $8 to
$16 per ton for Galveston.
• Because Charleston had higher estimated impacts and lower
tonnage shipped than Galveston, the Charleston cost
estimates represent the upper end of the range of cost
impacts with Galveston representing the lower end. A medium
range value was estimated by examining maps of each coastal
port to determine whether the port tended to be protected
(like Galveston, and therefore would tend to incur costs
more similar to Galveston than to Charleston) or unprotected
(like Charleston).
• Cost estimates are based on cumulative impacts from 1985-2075.
• A discount rate of three percent was assumed. (Data were
unavailable from the Gibbs study to calculate costs using
other discount rates . )
The impacts summarized in Exhibit F-17 are estimated for all damages expected in
major U.S. coastal ports if the sea level were to rise by the amount indicated.
° Gibbs, M., "Economic Analysis of Sea Level Rise: Methods and Results,"
in Barth, M. C. and J. G. Titus (editors), Greenhouse Effect and Sea Level Rise:
A Challenge for this Generation. New York, Van Nostrand Reinhold, 1984.
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F-39
EXHIBIT F-16
MAJOR SHIPPING PORTS VULNERABLE TO SEA. LEVEL RISE
1985 Tonnage Shipped
Port (thousand short tons)
New York, NY 161,676,654
New Orleans, LA 154,220,218
Houston, TX 96,777,619
Valdez Harbor, AK 92,047,493
Baton Rouge, LA 66,198,761
Tampa Harbor, FL 46,517,226
Norfolk Harbor, VA 44,897,403
Corpus Christ! 44,081,109
Ship Channel, TX
Long Beach, CA 42,848,658
Texas City 42,409,947
Calveston, TX
Corpus Christi, TX 42,281,512
Baltimore Harbor, MD 37,306,504
Mobile, AL 35,718,226
Beaumont, TX 33,004,372
Los Angeles, CA 31,242,369
Philadelphia, PA 28,509,784
Portland, OR 27,302,664
Lake Charles, LA 27,238,993
Pascagoula, MS 24,153,100
Seattle, WA 20,327,874
Boston, MA, Port of 19,888,675
Paulsboro, NJ 18,197,352
Tacoma Harbor, WA 17,383,225
Port Arthur, TX 16,430,368
Richmond, CA 16,341,341
Newport News, VA 15,552,908
Freeport, TX 15,122,761
Charleston Harbor, SC 8,086,893
U.S. Total 1,225,764,009
Source: The World Almanac and Book of Facts
1987. p. 161.
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F-40
EXHIBIT F-17
POTENTIAL IMPACTS OF SEA LEVEL RISE ON
MAJOR COASTAL PORTS
(billions of 1985 dollars)^/
Scenario
No Controls
Anticipated
Unanticipated
Sea Level Rise
bv 2075 Low Medium High Low Medium High
99.6 cm
13.0
55.1 106.2 26.1
145.7 290.7
a/ Assuming a discount rate of three percent.
Source: Based on Gibbs (1984).
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F-41
REFERENCES
Andrady, Anthony, Analysis of Technical Issues Related to the Effect of UV-B«-
on Polymers. Research Triangle Institute, Research Triangle Park, North
Carolina, March 1986.
Gibbs, M. "Economic Analysis of Sea Level Rise: Methods and Results." In:
Earth, M.C. andJ.G. Titus (eds.), Greenhouse Effect and Sea Level Rise: A
Challenge for this Generation. New York, Van Nostrand Reinhold, 1984.
Hoffman, J.S., D. Keyer, and J.G. Titus (1983), Projecting Future Sea Level
Rise. Methodology. Estimates to the Year 2100. and Research Needs. U.S.
EPA, Washington, D.C.
Hoffman, J.S., J.B. Wells, and J.G. Titus (1986), "Future Global Warming and
Sea Level Rise," U.S. EPA and the Bruce Company, Washington, D.C.
Horst, R., K. Brown, R. Black, and M. Kianka, The Economic Impact of Increased
UV-B Radiation on Polymer Materials: A Case Study of Rigid PVC. Mathtech,
Inc., Princeton, New Jersey, June 1986.
Hunter, J.R., Kaupp, S.E., Taylor, J.H. (1982). "Assessment of effects of
radiation on marine fish larvae." In: Calkins, J. (e.) The Role of Solar
Ultraviolet Radiation in Marine Ecosystems, pp 459-497, Plenum, New York.
Jewell, L. Duane (1986). Agricultural Statistics 1986. U.S. Department of
Agriculture, Washington, D.C.
Kelen, T., Polymer Degradation. Van Nostrand Reinhold Company, Inc., New York,
1983.
Lacis, A. et al. (1981), "Greenhouse Effect of Trace Gases," Geophysical
Research Letters. 8:1035-1038.
National Academy of Sciences (1983), Changing Climate. National Academy Press,
Washington, D.C.
Research Triangle Institute, Analysis of Technical Issues Related to the Effect
of UV-B on Polymers, Draft final report, submitted to EPA, Contract No.
68-01-7033, March 1986.
Review of the National Ambient Air Quality Standards for Ozone: Preliminary
Assessment of Scientific and Technical Information, staff paper, prepared by
Office of Air Quality Planning and Standards (QAQPS), U.S. Environmental
Protection Agency, March 1986.
Rowe, R.D. and Adams, R. M., (1987). Analysis of Economic Impacts of Lower
Crop Yields Due to Stratospheric Ozone Depletion, draft report for the U.S.
EPA, Washington, D.C., August 1987.
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F-42
REFERENCES (Continued)
Teramura, A.H., (1983). Effects of ultraviolet-B radiation on the growth and
yield of crop plants. Plant Physiology. 58:415-427.
Teramura, A.H. and N.S. Murali (1986). Introspective differences in growth
and yield of soybean exposed to ultraviolet-B radiation under greenhouse and
field conditions. Env. Exp. Bot. In press 1986.
Teramura, A.H., "Current Understanding of the Effects of Increased Levels of
Solar Ultra-violet radiation to Crops and Natural Plant Ecosystems,"
Testimony before U.S. Senate, May 1987.
Thompson, B.C., (1986). Fisheries of the United States. 1985. U.S. Department
of Commerce, National Oceanic and Atmospheric Administration, Washington,
D.C., April 1986.
Thomas, R.H. (1985), "Response of the Polar Ice Sheets to Climate Warning,"
Glaciers. Ice Sheets, and Sea Level: Effect of a C02-Induced Climatic
Change. Seattle, Washington, September 13-15, 1984, U.S. Department of
Energy, DOE/EV/60235-1, Washington, D.C.
U.S. EPA (1987), Assessing the Risks of Trace Gases that can Modify the
Stratosphere. U.S. Environmental Protection Agency, Washington, D.C.
Whitten, G.Z. and M. Gery (1986). "Effects of Increased UV Radiation on Urban
Ozone," Presented at EPA Workshop on Global Atmospheric Change and EPA
Planning. Edited by Jeffries, H. EPA Report 600/9-8 6016, July 1986.
The World Almanac and Book of Facts 1987. Hoffman, M.S. (ed.), New York, New
York, 1987.
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APPENDIX G
THE VALUE OF MORTALITY RISK REDUCTIONS FROM THE
PREVENTION OF STRATOSPHERIC OZONE DEPLETION
1. INTRODUCTION
The benefits of environmental protection include the avoidance of
detrimental effects on human health and welfare plus reductions in damages to
the natural environment and ecosystems. Many of these benefits, such as the
avoided impacts of crop losses from the prevention of ozone depletion, can be
translated into monetary values. Other benefits however, such as avoided
deaths, are not readily translated into monetary terms.
Efforts to quantify and monetize such nonmonetary benefits must rely on
implicit valuation and other economic analytical techniques. The most widely
pursued, and the most controversial, of these efforts involves the attempt to
determine the value of reducing risks of premature mortality resulting from
adverse environmental conditions.
In markets for ordinary consumer goods and services, a demand function could
be estimated to reveal a consumer's willingness to pay for that good or service.
From observed prices and.quantities on the demand curve, monetary benefits to
the consumer could be derived. For instance, to derive monetary benefits in the
case of crop losses from damage due to photochemical oxidants, the price of the
commodity and the value of the lost output can be determined through the
existing market. If production of that particular commodity is affected by
photochemical oxidants, an estimate of that loss could be determined by the
different price/quantity combinations in that market. Eliminating the crop loss
by attempting to control the cause of ground-based oxidants can be expressed as
a monetary benefit to society.
However, a market structure of this type does not exist for reductions in
risk of mortal injury. Such risks are different from other commodities our
society produces and exchanges through markets. Therefore, there is no
discernible set of market prices for mortality risk reductions.
Without such direct, market-based, monetary value for mortality risk
reduction, environmental regulatory analysts are confronted by a difficult
problem. Executive Order 12291 requires that potential benefits of major
regulation must be shown to outweigh potential costs before enactment. In order
to make such a demonstration, it would be desirable to be able to express all of
the costs and benefits of the regulatory alternatives in common units. However,
dollars1 are the most commonly used units of value for cost-benefit analysis
and, as discussed previously, many environmental protection benefits cannot be
readily expressed in monetary terms.
Some analysts have suggested that this dilemma is best resolved by applying
economic valuation techniques to derive a value for a unit of mortality risk
Actually, most economists prefer using "uncommitted foreign exchange in
government hands" as the common unit of value, or numeraire, for cost-benefit
analysis.
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reduction. These values are then applied within the framework of traditional
cost-benefit analysis. However, other analysts have pointed out that "such a
value, given the current state of knowledge in this area, might not be
analytically discoverable."* Some of the considerations underlying this
conclusion are discussed later in this appendix.
These latter analysts have suggested that the best way to approach the
problem of evaluating and comparing regulatory effects is to develop, and
present to decisionmakers, some type of structured representation of regulatory
costs and benefits which avoids reducing these effects to a single net benefit
value. Approaches which have been suggested include (1) a balance sheet format
which shows nonmonetary benefits plus monetary benefits on one side and
nonmonetary costs plus monetary costs on the other side, and (2) an impact
matrix, or cost-benefit trade-off chart. Using one of these methods, the
decisionmakers are thus presented with cost and benefit information distilled to
the lowest non-controversial level, and potential distortions in the comparison
of costs and benefits created by imprecise monetary valuation of factors such as
mortality risk reduction benefits are avoided.
The approach taken in this appendix is to develop and apply a range of
monetary values for the mortality risk reduction benefits achieved by
alternative stratospheric ozone protection strategies. This approach is taken
with some trepidation, however, given the severe theoretical and empirical
limitations of implicit valuation of risk reductions resulting from
environmental regulation. As stated by Zeckhauser and Shepard, "(t)here is no
unambiguous procedure for valuing human life; indeed, evidence suggests that
life valuation should not be approached for an elusive number."^ To partially
mitigate the potential distortions resulting from reliance on imprecise values
for environmentally-related mortality risk reductions, a range of values is used
in the present analysis.
The principal advantages of incorporating monetized values for nonmonetary
benefits such as mortality risk reductions are that this approach satisfies the
requirements of E.O. 12291 and satisfies those who prefer to examine single net
benefit estimates. Others who prefer to rely on other approaches, such as the
balance sheet approach described above, will find the basic estimates of
nonmonetary costs and benefits retained in the document.
The remainder of this appendix consists of, first, an examination of the
human capital approach to valuing mortality risk reductions and its potential
for providing reliable estimates for use in the present analysis. Second, the
willingness to pay approach to obtaining such values is similarly treated. The
third section of the appendix presents, and describes the basis for, the values
chosen for the present analysis. The final section presents a justification for
adjusting, over time, the mortality risk reduction value based on income
effects.
2 Ashford and Stone (1988), p. 38.
3 Ashford and Stone (1988) pp. 54-59.
^ Zeckhauser and Shepard (1981).
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2. HUMAN CAPITAL APPROACH
The human capital method defines a person's worth to society as their future
earnings. It is assumed that the value of an individual's life is measured by
future production potential often calculated as the present discounted value of
expected labor earnings. A variation to this approach reduces the estimated
value of human life by subtracting medical and other costs of supporting life.
The following aspects make the use of the human capital approach to the
valuation of life attractive:
• The human capital approach is easily calculated and provides reliable
and consistent methods of estimating foregone earnings.
• Estimates derived by using the human capital approach may have the
expected value over the range of human ages.
• The human capital approach is considered an appropriate although
partial, measure of certain economic impacts, such as the economic
burden of cancer in a given (past) year, the resources that would be
saved by preventative measures that reduce the incidence of cancer, and
the economic impact of improved survival rates.7
While the human capital approach to valuing life has some attractive
features and was a widely used method of calculating health benefits in the
past, it is no longer considered an acceptable measure of estimating the
benefits of reductions in mortal risk. The following are serious drawbacks to
the use of the human capital approach:
• The perspective that the value of human life depends solely on earnings
is highly controversial. The human capital approach implies that the
average white is more valuable than the average black, men more valuable
than women, the rich more valuable than the poor, the educated more
valuable than the uneducated, etc.
• The human capital approach ignores other dimensions of illness and death
as well as nonmarket activities that may be more important to an
individual than economic loss. These include pain, suffering, aversion
to risks and loss of leisure.**
• Because the human capital approach measures the value of a human life as
the additional dollar amount of wages a person could have earned had he
or she not died prematurely, it undervalues the lives of the elderly,
mentally or physically incapacitated or any other people not expected to
earn substantial wages in the future.9
5 Rice and Hodgson (1982); Vaupel (1981).
6 Vaupel (1981).
7 Rice and Hodgson (1982).
8 Landefeld and Seskin (1982).
9 DeMocker (1986).
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While the human capital approach may be an appropriate measure of benefits
in some instances, it has drawbacks which make this procedure inadequate to use
when trying to determine the benefits of a specific government regulation which
could save many lives in the future.
The benefit of a health and safety regulation is not merely the monetary
value of earnings, rather it is the avoidance of risks of premature death,
injury, or illness. The benefits are a reduction in the probability that all
members of some population group will encounter some specific form of
suffering. ° For the reasons described above and because there are more
promising alternative approaches, the human capital approach is not used herein
as the basis for estimating the value of environmentally-related mortality risk
reductions.
3. WILLINGNESS TO PAY APPROACH
Today, most analysts attempting to estimate the value of health risk
reductions have focused on alternative approaches based on empirical
examinations of individuals' willingness to pay to avoid risk. Using the
willingness to pay approach overcomes some of the limiting factors of the human
capital approach. The values derived from the willingness to pay approach are
ex ante measures of the monetary values individuals attach to changes in welfare
that would accompany changes in the probability of a death occurring.
Willingness to pay is basically the algebraic sum of the amounts all affected
persons are willing to pay for a change in the status quo, such as a regulation
that has life saving potential. Analysts such as Rice and Hodgson argue that,
through valuation by the willingness to pay method, individual preferences,
freedom of choice, and maximum social welfare are reflected.^
However, the willingness to pay approach is not universally approved. The
principal criticisms against this approach include:
• The willingness to pay approach is only concerned with the aggregate
level of welfare and does not adequately consider distributional and
equity effects.
• The willingness to pay approach assumes that individuals have adequate
information and make rational decisions regarding their own welfare,
both of which have been shown in the literature to be frequently
unfounded.
• The willingness to pay approach is biased if the expressed values are
limited by an individual's ability to pay due to constraints on health,
wealth, or income. '
10 Ferguson and Figge (1981), preface.
11 Rice and Hodgson (1982).
12 See Zechkauser and Shepard (1981); also see Rice and Hodgson (1982).
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• There is evidence in the literature that willingness to pay valuations
are context-dependent, in that "an individual's willingness to pay for
reduced risk to life is a function of the level of risk ... and that
person's life expectancy and quality of life after removal of the
incremental risk. "I-*
• There is evidence in the literature that willingness to pay valuations
of mortality risk reduction may reflect an oversimplification of the
true measures of change in individual and social welfare, in that the
potential differences between compensating variation and equivalent
variation are often ignored.^
• Frequently, valuations based on the willingness to pay approach ignore
potentially significant externalities associated with the welfare effect
in question. Specifically, an individual's willingness to pay to avoid
an increment of job-related mortal risk may not adequately reflect the
willingness to pay of his/her family and friends to reduce this risk.^5
Notwithstanding these criticisms, there are two distinct procedures which
have been used to calculate willingness to pay estimates of the value of
mortality risk reductions: direct surveying of individuals, and estimation of
individuals' preferences as revealed through consumer behavior or labor market
behavior.
3.1 Direct Surveys
Surveys asking people what they would pay for stated risk reductions have
been used to attempt to value mortality risk reductions.^7 Individuals are
asked open-ended questions about their willingness to pay for a program or
service designed to reduce a probable risk of death.
13 Ashford and Stone (1988), p. 4.
*•* There are two symmetrical concepts which are used in determining changes
in individual or social welfare: the compensating variation and the equivalent
variation. According to Ashford and Stone (1988, p. 10), there is "evidence ...
from a variety of sources which shows consistent and sizable differences between
the compensation individuals demand to give up good ... and the amount they are
willing to pay to acquire it. Compensation demanded regularly exceeds
willingness to pay by 100 percent, but the disparity is sometimes a five-fold,
ten-fold, and even a fifteen-fold difference in value ..." Ashford and Stone
(1988, p. 11) further state that, if the basis for this difference is that
individuals must be compensated for their entitlement to the commodity, such an
interpretation "has implications for valuing reductions in risk to life, since
an individual's valuation then depends on his entitlements to health and safety
as far as the risk-generating activity is concerned."
15 Ashford and Stone (1988), p. 13.
16 Landefeld and Shepard (1982).
17 Bailey (1980).
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The survey method provides an estimate of an individual's willingness to
pay; however, the validity of such estimates has been questioned.^ One problem
with the application of this methodology is that sometimes what an individual
says they will do under a hypothetical survey situation and what they actually
do when confronted with an actual situation differs. Also, individuals may not
be able to respond rationally and consistently to the abstract and complex
questions involving hypothetical risk. *
Procedures that reflect an individual's actual behavior, or revealed
preferences in risk reduction choices, are more acceptable to some economists.2^
This can be done in two ways: analysis of markets for products that affect
health and safety, and labor market data. Neither of these approaches, however,
overcomes the fundamental problem of estimating a value for a risk reduction for
a future generation since, until recently, people did not realize that these
choices were necessary and therefore have little experience in these decisions.
3.2 Consumer Behavior Studies
Consumer behavior studies use markets for products that affect health and
safety to estimate the value of mortality risk reduction. Estimates by the use
of this method will show the amounts people are willing to pay directly for
reductions in risk, i.e., the purchase of smoke detectors to reduce the
likelihood of death and injury in case of fire.2*
The criticisms of this procedure are that, among others, data constraints
may bias the statistical estimates, and the quantitative information on the risk
reducing potential of various activities is scarce.22
3.3 Labor Market Studies
Another approach to estimating the value that individuals are willing to pay
for a reduction in health risk is to examine the wage premiums that must be paid
to induce people to take more risky jobs.
The following are some of the problems associated with using the estimates
of the value of mortality risk reductions derived from labor market studies in
environmental cost-benefit studies :24
18 Bailey (1980).
19 Landefeld and Shepard (1982).
20 Bailey (1980).
21 DeCanio and Woodward (1987).
22 Landefeld and Shepard (1982).
23 Viscusi (1986).
24 Landefeld and Shepard (1982); Ashford and Stone (1988); DeMocker,
(1986); Bailey (1980).
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G-7
Wage premiums may not accurately reflect worker risk preferences if
workers have incomplete information regarding risks to which they are
exposed or if workers are so desperate for income that they cannot
refuse available, but dangerous, jobs. One potential analytical
consequence of the latter point is that, as Graham, Shakow and Cyr have
demonstrated, such labor market conditions may lead to labor market
segmentation which distorts derived wage risk premiums.2^
Even if the risk is perfectly known and the acceptance of the wage
premium is by choice, it is a voluntary risk. Estimates of the value of
voluntary risk reductions would underestimate the value of involuntarily
incurred risks, such as environmental risks.2^
People may accept wage premiums for self-incurred risk substantially
lower than the amount they would pay to protect others, including
children and grandchildren, from future risk.
Statistical problems arise in attempting to isolate a value for
reductions in mortal risk from the entire range of health risks,
including risk of illness and risk of injury.
Life and health insurance policies can distort the wage premium workers
will accept for more risky jobs. Moore and Viscusi concluded that, if
death benefits from workers compensation are eliminated, age risk
premiums more than double. '
Labor market studies may suffer from sampling errors resulting in the
underrepresentation of actual job fatalities discovered in the
frequently used Bureau of Labor Statistics (BLS) data. Moore and
Viscusi relied on NIOSH data to conclude the wage premiums derived from
BLS data should be more than doubled.28
Risk valuations based on labor market studies frequently omit the
willingness to pay of family members and friends to reduce risks faced
by workers. This externality may or may not be adequately compensated
by the wage premium. *
Other externalities not reflected in the worker risk wage premium are
the employers' productivity losses and the societal psychic loss
resulting from worker death, injury, or illness.-^
25 Graham, Shakow and Cyr (1983).
26 Mishan (1971).
27 Moore and Viscusi (1987).
28 Moore and Viscusi (1987).
29 Ashford and Stone (1988), p. 21.
30
Ashford and Stone (1988), p. 21.
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G-8
There have been a number of empirical studies which have attempted to
estimate the value of mortality risk reductions using the labor market approach.
These studies have consistently found a significant relationship between on-the-
job risks and wages. Given that the results of consumer market studies have not
been validated by repeated estimation in the same market, the results derived
from labor market studies are considered more credible. *
It should be noted that while some of the wage-risk premium studies may be
relatively credible statistically, many of the above-described deficiencies in
this approach have not been satisfactorily managed. There have been a number of
articles written32 which attempt to identify the value of a reduction in unit
mortality risk based on the wage-risk premiums. The ranges of estimates derived
in each of these review are presented in Exhibit G-l.
An examination of this exhibit shows that the range of values derived can
vary significantly, sometimes by an order or magnitude, and even to the point
that one author's lower end value approximates another author's upper end value.
The next section attempts to develop a range of values for mortality risk
reduction which can be used to estimate the monetary benefits of preventing
stratospheric ozone depletion.
4. BASIS FOR RANGE OF ESTIMATED VALUES FOR REDUCTION IN RISK FROM STRATOSPHERIC
OZONE DEPLETION
Before an estimate of the value of unit mortality risk reduction is
determined, it is important to reiterate that this value should not be thought
of as an amount of money an individual would accept in exchange for his or her
life. Rather, it is the summation of small reductions in life-threatening risk
imposed on a large number of people. 3
The risk of premature death from skin cancer occurring from a depletion of
stratospheric ozone is an involuntary environmental risk which will affect
people and their descendants for generations to come. A depletion of
stratospheric ozone will prevent or disrupt people's attempts to pursue
enjoyable leisure and sport activities. A depletion of stratospheric ozone will
also affect people who make their living working outdoors, such as construction
workers, gardeners and landscapers, painters, farmers, and others.
This Regulatory Impact Analysis selects as one value for mortality risk
reductions resulting from stratospheric ozone protection, an estimate of $3
million per unit mortality risk reduction.3^ This value is in the range of
31 ERG (1983).
32 Landefeld and Shepard (1982); Bailey (1986); Viscusi (1986); Miller
(1986); and ERG (1983).
33 ERG (1983).
•^ This unit of risk is also referred to by some analysts as "a statistical
life saved," although such a term is less favorable since it tends to connote a
risk of an individual death, rather than the sum, over large numbers of people,
of small increments of mortal risk.
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G-9
EXHIBIT G-I
WILLINGNESS TO FAY ESTIMATES OF THE VALUE
OF MORTALITY RISK REDUCTIONS
Value Per Unit Mortality Risk
Reviewer Low Range(S) High Range(S)
ERG & 400,000 7,500,000
Bailey b/ 170,000 584,000 to 715,000
Viscusi £/ 580,000 11,000,000
Landefeld and
Shepard s/
Miller «/
277,000
0
5,900,000
3,462,000
NOTE: All studies were based on wage-risk premiums.
a/ Values in 1982 dollars. Studies reviewed included R. Smith (1974 and
1976); Thaler and Rosen (1975); Viscusi (1978); Dillingham (1979); Olson
(1981); V.K. Smith (1982); Arnould and Nichols (1983).
b/ Values in 1978 dollars. Studies reviewed included Thaler and Rosen (1975);
R. Smith (1974); Viscusi (1978); and Dillingham (1979).
c/ Values in 1982 dollars. Studies reviewed included Brown (1980); Leigh
(undated); Olson (1981); Smith (1965); Thaler and Rosen (1976); Viscusi
(1979 and 1981); Viscusi and O'Conner (1984).
d/ Values in 1977 dollars. Studies reviewed included Dillingham (1979);
Thaler and Rosen (1975); Viscusi (1978); Smith (1974); and Olson (1981).
e/ Values reported in 1985 dollars and adjusted by Miller from author's
original estimates to reflect after tax dollars. Studies reviewed
included Viscusi (1978 and 1980); Brown (1980); V. Smith (1983 and 1984);
Dillingham (1985); Dillingham and Smith (1984); Gegax, Gerking and
Schultze (1985); Dickens (1984); Melinek (1974); Marin and Psacharopoulos
(1982); Butler (1983); Viscusi (1986).
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G-10
values identified by Viscusi for small, involuntary, life threatening risks.35
This $3 million estimate is selected as one of the values for the present
analysis primarily because the risk associated with depletion of stratospheric
ozone, as was previously shown, is small and involuntary.
The RIA also tests the impact of a second value for a unit mortality risk
reduction equal to $12 million. This value is based on the $3 million value,
with adjustments to take account of risk sampling error3** and insurance
effects,37 each of which lead to a rough doubling of the unit mortality risk
reduction value. However, most runs use the $3 million dollar value.3^
The analysis recognizes that the values for mortality risk reduction
presented in this appendix, and used in the calculation of the cost-benefit
ratios for stratospheric ozone protection options, are crude and still reflect
many of the problems with wage-based risk valuation described in the previous
section.
35 Viscusi stated: "If a regulation affects individuals who have
voluntarily put themselves into high risk activities, a value of life around
$600,000 seems appropriate. For risks that are more modest or have been
incurred involuntarily, the appropriate value of life will be that of a more
representative worker, which is in the range of $2 million to $3 million or
more. Very small, involuntary risks, such as those associated with nuclear or
airline safety, may command much higher values." (For a description of the
analytical linkages leading to these conclusions, the reader is referred to
Viscusi's studies.) However, later work by Viscusi raises serious questions
about the $2 to $3 million estimates and suggests $5 to $6 million as more
likely.
The adjustment for risk sampling error is made to account for the
apparent underrepresentation of actual job fatalities discovered in Bureau of
Labor Statistics (BLS) data. Moore and Viscusi (1987) relied on National
Institutes for Occupational Health and Safety (NIOSH) data to conclude that wage
premiums derived from BLS data should be more than doubled. (For a more
complete discussion of risk sampling error and the appropriate adjustment to
wage-risk estimates, the reader is referred to Ashford and Stone (1988), p. 34).
^7
The adjustment for insurance effects is made to account for the effects
of life and health insurance on wage-risk premiums. Moore and Viscusi (1987)
concluded that, if death benefits from worker's compensation are eliminated,
wage risk premiums more than double. (For a more complete discussion of the
insurance adjustment to wage-risk estimates, the reader is referred to Ashford
and Stone (1988), p. 35.)
OQ
As discussed, establishing a value of preventing risks to human life is
context dependent. Use of $3 million dollars was the most commonly shown case
should not be taken by readers as an indication that the analytical questions
have been addressed to support $3 million rather than the higher values
suggested by Viscusi and Ashford for nonvoluntary risks.
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G-ll
5. BASIS FOR ADJUSTMENT OVER TIME TO MORTALITY RISK VALUES BASED ON INCOME
EFFECTS
This section presents a basis for adjusting the value for mortality risk
reductions in the future. This adjustment addresses one of the problems with
intergenerational valuation of health and environmental effects.
It is primarily future generations that will be adversely affected by
stratospheric ozone depletion. The value which future society is willing to pay
to reduce the risk of death from skin cancer is not expected to be the same as
what society is willing to pay today. The future value will be dependent upon
many factors, including education, values, and income. As these factors change
over time, the actual amount paid for risk reduction will change as well.
Generally, as income rises, the amount of money people are willing to expend
for a given commodity increases. In some instances, however, it has been shown
that people will actually buy less of a good as their income rises. Economists
have defined three types of goods to describe these various responses to consume
goods as incomes rise: inferior goods, neutral goods, and superior goods.
Inferior goods are ones which people would buy proportionally less of as income
rises. For a neutral good, people would buy more in the same proportion as the
rise in income. In the case of superior goods, people would buy proportionally
more than the rise in income. For example, tickets to the movies might be a
good that rises proportionally to income; education might be a superior good;
potatoes an inferior good. The amount of risk reduction a person would purchase
with a rise in income would vary according to the type of good it was perceived
to be.
A simple measure of this responsiveness of the quantity demanded of a
particular good from changes in income is the income elasticity of demand. For
example, a superior good is referred to as income elastic, because it is more
responsive to a change in income. To calculate the income elasticity of a
particular good, it is necessary to know the percentage change in income and the
corresponding percentage change in the quantity demanded of that good.
It is a generally accepted assumption that real income will rise in the
future. Historically, total disposable, personal income has followed an
increasing trend, rising from $791.8 billion in 1950 to $2,603.7 billion in 1986
(in constant 1982 dollars). In that same time period, income rose from $5,220
to $10,780 on a per capita basis (1982 dollars).39 In the present analysis of
ozone depletion, per capita income was assumed to continue to increase, albeit
at a diminishing rate. Of note is that if the historical rate of growth of per
capita income had been assumed, CFG demand would have grown faster, and greater
ozone depletion would have occurred earlier.
It is expected that as per capita income increases, the calculated values of
mortality risk reductions will also increase. According to DeCanio and
Woodward, "both evidence and intuition indicate that 'willingness to pay' to
reduce risk has a high income elasticity."^ In other words, the value of risk
reduction is very responsive to changes in income. This theory is evident by
39 Economic Report of the President, Jan. 1987, Table B.27.
^° DeCanio and Woodward (1987).
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G-12
looking at the many areas in which increases in spending have recently occurred
to achieve additional safety and reductions in mortal risks. The mandatory
requirements for seat belt installation and use in automobiles, purchases of
home fire detectors, and purchases of life insurance polices are all examples of
increased payments by a wealthier society to reduce the risks or consequences of
death. These examples show that risk reduction is expected to be income elastic
and a superior good.
In order to predict the value in which a future society would be willing to
pay for risk reduction, two key pieces of information are necessary: the income
elasticity of risk reduction and the expected rate of future per capita income
increases. While the values of these factors are unknown, it is possible to
make assumptions and develop scenarios which show that the estimated values of a
mortality risk reductions will increase.
Given that per capita income is projected to increase into the future, the
increased value of risk reduction will vary depending upon its income
elasticity. If the value of risk reduction had an income elasticity of one,
then it is unitary with respect to income and the value will increase in
proportion to the expected rise in per capita income. If the income elasticity
is 1.5 (an elastic good has a value greater than one), then the value of risk
reduction is a "superior" good. In this instance, the value increases by 1.5
times the amount of the rise in income. If the income elasticity were 0.5 (an
inelastic good has a value less than one), risk reduction would be considered
"inferior" and the value would increase at one half the rate of the rise in
income. For the standard case, we shall assume risk reduction is a neutral good
(i.e., an elasticity of 1.0).
No matter what income elasticity is associated with risk reduction, the
result is still an increase in its value. This then indicates that the values
chosen in this analysis for mortality risk reductions resulting from
stratospheric ozone protection probably underestimate the value(s) which a
future wealthier society would be willing to pay to reduce the same risks.
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G-13
REFERENCES
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Environmental Decision-making: Theoretical Considerations and Applications
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Arnould, Richard J. and Len M. Nichols (1983). "Wage-Risk Premiums and Workers
Compensation: A Refinement of Estimates of Compensating Wage Differential,"
Journal of Political Economy. Vol. 91, No. 2. 1983.
Bailey, Martin J. (1980) Reducing Risks to Life. Measurement of the Benefits.
American Enterprise Institute for Public Policy Research, Washington D.C.
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Safety Regulation. Ballinger Publishing Co., Cambridge, Massachusetts.
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In Theory and In Practice," Environment.
Knesse, Allen V. and Ralph C. d'Arge (1981), "Benefit Analysis and Today's
Regulatory Problems," Benefits of Health and Safety Regulation. Ballinger
Publishing Co., Cambridge, Massachusetts, pp. 65-90.
Landefeld, Steven J. and Eugene P. Seskin (1982), "The Economic Value of Life:
Linking Theory to Practice," American Journal of Public Health. Vol. 72,
No. 6, pp. 555-566.
Miller, Ted R. (1986), "Benefit-Cost Analysis of Health and Safety: Conceptual
and Empirical Issues," Working Paper: The Urban Institute, Washington D.C.
Moore, Michael J. and W. Kip Viscusi (1987), "Doubling the Estimated Value of
Life: Results Using New Occupational Fatality Data," Working Paper (to be
published in the Journal of Policy Analysis and Management).
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Rice, Dorothy P. and Thomas A. Hodgson (1982), "The Value of Human Life
Revisited," American Journal of Public Health. Vol. 72, No. 6, pp. 536-
537.
Sugden, Robert and Alan Williams (1978), The Principles of Practical Cost-
Benefit Analysis. Oxford University Press, pp. 172-174.
Vaupel, James W. (1981), "On the Benefits of Health and Safety Regulations,"
Benefits of Health and Safety Regulation. Ballinger Publishing Co.,
Cambridge, Massachusetts, pp. 1-22.
Viscusi, W. Kip (1986), "The Valuation of Risks to Life and Health: Guidelines
for Policy Analysis." in J.D. Benthover et al, Benefits Assessment: The
State of the Art. (Vordrecht, Holland: D. Reidel).
Zeckhauser, Richard and Donald S. Shepard (1981), "Principles for Saving and
Valuing Lives," Benefits of Health and Safety Regulation. Ballinger
Publishing Co., Cambridge, Massachusetts, pp. 91-130.
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II
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APPENDIX H
SELECTION OF DISCOUNT RATE FOR VALUING FUTURE COSTS AND BENEFITS
FROM THE PREVENTION OF STRATOSPHERIC OZONE DEPLETION
1. INTRODUCTION
Control of potential ozone depleting substances, like many environmental
regulations, offers benefits and imposes costs over several years, sometimes
extending into the quite distant future. Indeed, some of the benefits
conferred by the proposed regulations of chlorofluorocarbons (CFCs) may extend
for many decades (or even centuries) and span several generations. The method
used in this Regulatory Impact Analysis (RIA) to compare these benefits and
costs accruing at different points in time is to convert both the benefit
stream and the cost stream into a single measure of benefits and costs (as
discussed in more detail in Appendix G, there are other numerous problems with
applying this method to evaluate the costs and benefits of environmental
regulation). This is accomplished by discounting each of the streams at the
appropriate discount rate and summing the resulting discounted values. This
yields a present value measure for each of the two streams. Given the
extended period of time over which the benefits and costs of CFC controls may
accrue, the choice of discount rate can have an important impact on the
relative magnitude of the present value of the benefits and costs.
This appendix presents, and describes the basis for, the choice of
discount rates for evaluating the costs and benefits for CFC control. It is
important to note that the process of choosing a discount rate described in
this appendix is based on the methodology and assumptions made in the
preceding appendix on the valuation of nonmonetary costs and benefits. If
some of the costs and/or benefits incorporated in a cost-benefit analysis are
not measurable in dollars, then the entire process associated with identifying
the time value of these costs and benefits must be re-examined. For example,
if one assumes that the value of environmentally-related, life-threatening
risk reductions cannot be expressed in monetary terms, then a different rate
of time preference would apply to these reductions than would apply to the
monetary valuation of the same reductions. Nevertheless, the present analysis
of the costs and benefits of stratospheric ozone depletion control options
assumes that all relevant costs and benefits can be translated into monetary
values, although this is controversial.1
This appendix briefly summarizes a number of ethical, analytical, and
empirical issues associated with discounting future costs and benefits. Many
of these issues remain unsolved or are at least in dispute in the academic
literature. Because of the depth, scope and complexity of these issues, this
appendix does not attempt to resolve them. Instead, its more modest goals
are: (1) to raise these different sets of concerns in a coherent fashion; (2)
to indicate which discount rates may be appropriate under alternative
For a more detailed discussion of the issues associated with monetary
valuation of nonmonetary costs and benefits, see Appendix G.
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viewpoints; and (3) to select a discount rate from the various rates suggested
by the different approaches to be used in this RIA.
The remainder of this appendix is organized into four sections as
follows:
• Section 2 discusses some ethical concerns associated with
discounting future costs and benefits;
• Section 3 presents alternative economic perspectives on the
appropriate discount rate and the estimates of the discount rate
they generate; and
• Section 4 concludes the appendix with a brief discussion of the
reference discount rate chosen for the analysis and of the range of
rates selected for the sensitivity analysis.
2. ETHICAL AND ANALYTICAL ISSUES IN DISCOUNTING
There is a substantial body of economic literature concerning discounting
and public project evaluation which ranges from discussions of theoretical
aspects of the appropriate rate to analyses of how various complications such
as risky costs and benefits, should be addressed.^ Behind this literature,
however, are ethical frameworks which motivate the various theoretical and
empirical discussions. These ethical foundations are logically prior to the
specific suggestions for discount rates in the literature. Hence, this
section of the appendix reviews these ethical issues and concerns. The
following section then presents the various suggestions in the literature for
the appropriate rate of discount for use in evaluating public policies and
regulations.
2.1 The Ethical Underpinnings of Cost-Benefit Analysis
Cost-benefit analysis, in general terms, is a branch of applied economics
in which the overall goal is to define and measure the consequences of
regulatory (and other) actions, to value these consequences, and then to
compare the costs with the benefits. Clearly, from an analytical perspective,
the basic idea behind cost benefit analysis is straightforward. If the
benefits of a regulation or other intervention in the private economy exceed
the costs, the policy is deemed to be desirable from the perspective of cost-
benefit analysis.
r\
*• The modern literature on project evaluation and discounting from a
social perspective began in the late 1950s with Eckstein (1958), Steiner
(1959), and Bailey (1959). Subsequently, Feldstein (1964) and Marglin (1963a,
1963b) sparked a lively controversy resulting in, to date, a two decade
exchange of views. See e.g., Diamond (1963), Lind (1963), Tullock (1963),
Baumol (1968), Kay (1972), Harberger (1972), Feldstein (1970), Dreze (1974),
Arrow (1966), Arrow and Lind (1970), Hirschleifer (1966), Bradford (1970,
1975), and Lind (1982).
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Although this rule appears to be a simple and intuitive guide for
evaluating policies, it nonetheless relies on several ethical tenets with
which one does not necessarily have tb agree. First, there are some cost-
benefit analysts who choose to assume that the social value of costs or
benefits is independent of the identity of the individual experiencing them.
Thus, one dollar's worth of benefit to a rich individual is worth the same to
society as a dollar's worth of benefit to a less advantaged person. Other
analysts have argued that benefits and costs should be weighted differently
depending on the identities and circumstances of the parties that experience
them. The present cost-benefit analysis weighs the welfare of individuals
equally.
A second, and perhaps more important, assumption made by some cost-
benefit analysts is that a policy can be considered to be desirable if its
benefits exceed its costs even if particular individuals in society are made
worse off by the policy. That is, as long as the "winners" under a particular
policy could compensate the "losers" for their losses and still be better off,
then the policy enhances social welfare. This is a significant assumption
because classical economic literature refers to a change that makes at least
one person better off and no one worse off as a "Pareto improvement" in social
welfare terms. In such a case, in the absence of strategic behavior, a vote
on the proposed change would be unanimously favorable.
The link between the Pareto improvement's intuitive prescription for
determining whether a policy enhances social welfare (i.e., that everyone
would agree that the change either confers a positive benefit or is
indifferent about the change) and the aggregate benefits-greater-than-cost
rule pursued by some cost-benefit analysts is the possibility that the gainers
could compensate the losers and remain better off under the policy. Some
refer to such situations as "potential Pareto improvements." The fact that
the compensation does not have to take place for the policy to be judged to
improve social welfare is a value judgment not to be ignored in understanding
and evaluating the prescriptions of cost-benefit analyses conducted from this
perspective. Indeed, as the analysis in the following subsection indicates,
the fact that the compensation is not made in cases in which the benefits and
costs are distributed through time introduces a host of ethical and economic
issues.
The basic cost-benefit framework used in the present analysis requires
that costs and benefits be quantified and expressed in the same units (e.g.,
dollars) so that it is meaningful to inquire whether the costs are greater or
less than the benefits. This is not always an easy task because, in many
instances, the benefits and costs may not be quantifiable and/or monetizable.^
Whether or not one assumes that the values of the costs and benefits can be
quantified, a residual problem remains for policies or regulations that impose
costs and offer benefits in different time periods. This problem is that the
costs and benefits occurring at different times must be expressed in relation
to a common point in time by applying the analytical constructions of
discounting (or compounding).
See more detailed discussion of these issues in Appendix G.
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2.2 Ethical Issues in the Choice of a Discount Rate
The choice of appropriate discount rates to apply to the various streams
of future costs and benefits can significantly affect resultant net benefit
estimates. Choosing lower or higher rates of discount for evaluating public
policies implies a systematic weighting for or against future welfare versus
present welfare. Consequently, selecting particular discount rates for use in
public policy evaluation requires an ethical stance on the relative value of
future versus present current benefits.
Establishing this relative value, however, is difficult. A number of
ethical positions and problems have been discussed in this connection:
i. In many cases, the parties who will bear costs or enjoy benefits may
not yet exist. In these cases, one can hardly argue that one has measured
their preferences and assigned values for these costs and benefits in a
scientific fashion. Moreover, it is possible to argue that applying the
entire "potential" Pareto improvement framework (in which compensation could
be paid by the gainers to compensate the losers, but is not) to cases in which
many of the parties do not yet exist is too much of a strain on the ethical
underpinnings of the framework.4 Valid though these criticisms may be,
policymakers nevertheless must make decisions that inevitably affect future
generations. Acknowledging the limitations inherent in these situations does
not absolve one of the necessity of choosing.
ii. If currently living individuals attach a positive value to
additional saving for future generations, including members of future
generations that are not their direct descendants, then the unregulated market
will-probably not result in the optimal level of saving for the future.-* The
mechanism producing this outcome results from a market failure caused by a
"free rider" situation (i.e., one in which an individual who bears no costs is
potentially able to receive a benefit). Suppose that the welfare of future
generations enters the utility functions of currently living individuals and
that this is sufficiently important to them that each person saves for these
future generations. Each individual will save up to the point at which the
marginal value of his or her own consumption equals the value to that
individual of marginal future consumption by future generations. However, if
each person does not account for the "external" increase in welfare of other
currently living individuals attributable to his or her own saving, then too
few resources may be allocated to these future generations.
If the empirical conditions underlying this view are correct, then some
argue that the rate of discount for use in evaluating public policies ought to
be lower than the private rate of discount to reflect this failure of the
private market to provide the optimal level of resources for the future. This
line of reasoning implies that all public policies, including environmental
4 Mishan (1981) discusses this problem in considerable depth.
See, e.g., Marglin (1963a) for arguments along these lines.
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regulations, should be viewed in the context of this "underprovisioning" of
future generations. Hence, costs and benefits imposed on future generations
should receive greater weight in public decisions and this can be accomplished
through reducing the discount rate.
iii. Irreversibility of the consequences of some policies is sometimes
advanced as a reason for adopting a more cautious attitude toward imposing
burdens on future generations.° In the context of regulating potential ozone
depleters, this line of reasoning would run as follows. In the absence of
controls on potential ozone depleters, a number of possible harmful effects
could occur and the source of these harmful effects may not be easily
reversed; indeed, it may be impossible to reverse them in any reasonable time
frame. Of course, by itself irreversibility does not necessarily imply that
society should operate differently than in other circumstances. Many actions
may have irreversible consequences (e.g., mining minerals irreversibly reduces
the stock), but they are nonetheless undertaken.
However, if there is some uncertainty concerning the magnitude or
severity of the harmful effects of ozone depletion and some or all of this
uncertainty may be resolved during the future, this may have implications for
the choice of whether and to what extent to control potential ozone depleters.
In this case, even if society is risk neutral (in the sense that only expected
values of costs and benefits motivate choices), the optimal degree and timing
of controls for potential ozone depleters may appear to be based on risk
aversion. That is, if only the currently expected values of costs and
benefits were inspected, controls on potential ozone depleters might be too
few and too late relative to the actual optimal choice. This is because there
is always the opportunity to reverse the controls on potential ozone depleters
but not the reverse. Hence, ozone depletion in the future might be larger
than now projected (and thus possibly alter one's choice concerning optimal
controls on ozone depleters), then the irreversibility of ozone depletion may
play a role in the selection of the optimal extent and timing of controls on
potential ozone depleters. This influence could be translated into using a
lower discount rate for evaluating the benefits of controlling potential ozone
depleters, thereby raising the present value of benefits of protection to
encourage this more cautious attitude.
iv. Future generations may be richer than existing ones.^ Hence, if the
government is considering policies that involve altering the relative
distribution of welfare between current and future generations, either
explicitly or implicitly, then it should place more weight on offering
benefits to (or avoiding costs on) current generations. In essence, this view
argues for the desirability of (or at least provides the moral justification
for) borrowing from future generations to benefit the present. Using higher
6 This section follows Arrow and Fisher (1974).
7 Indeed, Tullock (1963) and Stiglitz (1982) argue that the more likely
market failure is one concerning transfers to poor members of existing
society, not transfers to future members of society.
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rates of discount for evaluating public policies that have costs and benefits
that accrue over time serves this goal.
v. The current generation should treat future generations as they treat
themselvesT8Thus, this view recommends that current society make decisions
about regulations and intertemporal resource allocation involving yet-to-be-
born generations as if they themselves were both the current and the future
generations. This recommendation, consequently, argues for a discount rate
equal to the rate at which the current generations trade with themselves over
time.
vi. The current generation should treat future generations so as to
improve their life from current conditions. Many U.S. Presidents have held
this view and it is part of the American Dream. This argues for a low
discount rate vis-a-vis projects affecting future welfare.
vii. The current generation should not discount future lives, since
human life is not fungible. Many people would find the discounting of future
life ethically unacceptable.
The ethical issues and considerations discussed above are not easy to
resolve. The resolution of some of the issues depends on empirical
information that is not available (such as the free rider problem, whose
existence depends on the nature and strength of existing individuals'
preferences concerning the welfare of future generations), and the fact that
the preferences of future generations is inherently unknowable. Similarly,
the irreversibility problem may have some factual basis, but it is not
entirely clear that adjusting the discount rate to account for this problem is
the theoretically correct, much less empirically precise, solution. The
"let's borrow from our richer descendants" position rests on assertions about
facts (the rate of increase of wealth over time) and attitudes concerning
intertemporal welfare maximization. Finally, the approach of valuing future
generations' welfare over time at the same rate as the current generation has
been criticized since it ignores the consequences of intergenerational
distributional inequities and externalities, the undesirability of which is
presumably embedded in whatever social welfare function the current society
subscribes to.
After considering these difficulties, many cost-benefit analysts choose
to ignore them as intractable and unresolvable and adopt the approach in which
current members of society are assumed to treat future generations in the same
way that they treat themselves. The disadvantages of this (non)resolution of
these problems is that some of the other ethical considerations raised may be
true or applicable (although this is unknown or, in some cases, unknowable).
In this case, cost-benefit analyses which incorporate an unrealistic discount
rate may themselves be inaccurate and, therefore, potentially unreliable. On
o
Lind (1982) implicitly adopts this approach, although he discusses
these ethical issues in some detail.
9 Ashford and Stone, 1988, p. 51.
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the other hand, bypassing these "top level" ethical issues offers the
advantage of allowing the search for the appropriate rate of discount for
public policy evaluation to proceed to other analytical issues and empirical
research. In this analysis, the position of ethical position "v" is used in
most cases, but the sensitivity of this assumption is analyzed by considering
results with different discount rates.
3. ALTERNATIVE PERSPECTIVES ON THE APPROPRIATE DISCOUNT RATE
Some of the remaining analytical issues underlying the selection of a
discount rate are complex and have been approached in different ways in the
literature, not all of which can be reconciled. In view of this complexity,
this section does not attempt to reconcile the various approaches suggested in
the literature. The purpose of this appendix is only to report these
approaches and the discount rates implied under each. This review then serves
as the basis for selecting the range of discount rates to be used in the
regulatory analysis of potential ozone depleters. Therefore, this section
presents these various approaches, their underlying motivations and indicates
the relationships between them. Computations based on the different
approaches are presented in the following section.
3.1 Consumption Rate of Interest -- Shadow Price of Capital Approach
Much of the economic literature concerning the appropriate rate of
discount for public policy evaluation focuses on the implications of pre-
existing "distortions"10 such as taxes on investment earnings for the
selection of the discount rate.11 In simple and stylized terms, the problem
raised by the existence of distortions in the economy is as follows. Suppose
that investments in the private economy are taxed so that the pre-tax rate of
return on these investments exceeds their post-tax rate of return, the latter
of which is received by private investors. In this event, some of the
proceeds of these private investments accrue to the government in the form of
tax revenues and the remainder accrues to the owners of the investments.
The problem that this situation poses for determining the appropriate
discount rate for public decision making stems from two observations. First,
if a public project (e.g., dams, military expenditures, regulations) diverts
funds from private investments into the public project, then it may be
reasonable, assuming all costs and benefits can and have been appropriately
valued and incorporated, to require that the value of the public project be
high enough to compensate both for the loss of private returns and the loss of
tax revenues that would have been generated by the foregone private
investments. Second, the fact that private individuals "trade" between the
10 In the economics literature, a distortion refers to something that
prevents conditions from being optimal. Taxes, for example, make society's
and an individual's points of view diverge because the prices faced by
individuals are not necessarily the same as prices faced by society.
11 See, e.g., Bradford (1970, 1975), Feldstein (1970), Harberger (1972),
and Stiglitz (1982).
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present and the future at the post-tax rate of return on private investments
means that their discount rate is not the pre-tax rate on private investments;
it is the post-tax rate. Because public decisions concerning policies that
affect both the present and the future should mimic (according to this
approach) the way that private individuals are willing to trade consumption
through time, clearly this post-tax rate should be relevant as well.
Combining these two considerations yields the "Consumption Rate of Interest --
Shadow Price of Capital" approach to public project evaluation.
According to this approach, the correct discount rate for evaluating
public policies is the rate that individuals use to determine the present
value of future consumption, which the literature refers to as the
"consumption rate of interest." The consumption rate of interest is
identified with the post-tax real rate of return that private investors
receive on their investments precisely because individuals trade between the
present and the future at that rate. Accordingly, this approach recommends
that the consumption rate of interest be used as the discount rate for
evaluating public policies.
Before discounting, however, the costs and benefits associated with the
policy must be examined to determine whether they displace or encourage
private investment. This is crucial because of the gap between the pre-tax,
or social rate of return on private investments, and the post-tax rate of
return received by individuals. This gap implies that the social value of
private investments exceeds the private or market value of these investments.
The term "shadow price of capital" is used to denote this distinction between
the private value of investments and the social value. A marginal dollar's
worth of private investment is worth one dollar to the private market, but it
is worth more than one dollar to society, implying that the shadow price of
capital is greater than unity. The shadow price of capital may be greater
than unity for two interrelated reasons. First, the rate of return to society
on private investments may be greater than that received by individuals
because of taxes on income. Second, if the proceeds from private investments
are reinvested in yet more private sector capital (which also has a social
rate of return in excess of the private rate of return), then this causes the
shadow price of capital to be even higher because a dollar's worth of private
capital represents even more private capital to be created in the future.
The result of this approach is that any costs that displace private
capital must be multiplied by the shadow price of capital prior to discounting
them to the present at the consumption rate of interest. Similarly, if some
of the benefits of the public policy or project encourage private investments,
then these too must be appropriately multiplied by the shadow price of capital
to arrive at the actual social value of these benefits. These adjusted cost
and benefit estimates then should be discounted to the present using the
consumption rate of interest. This method, consequently, accounts for the
pre-existing distortion issue by directly measuring the social values of all
of the benefit and cost flows generated or caused by a change in public
policy. After doing so, these are all discounted at the consumption rate of
interest, reflecting the fact that this is the rate at which individuals trade
between the present and the future.
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One final aspect of this approach is the treatment of riskiness of the
public project's costs or benefits. Whether or not any adjustments to the
measured benefits and costs are required to account for this depends on
several factors. First, if the benefits and costs are small relative to
income and are uncorrelated with other income, then no adjustment is required.
Other income is defined broadly here to include not only income that can be
translated into private consumption goods, but also "income" from non-market
sources, such as public goods and other forms of consumption not explicitly
purchased in the market. Only if the costs or benefits are large relative to
other income or if they are correlated with other income would any adjustments
be required.
For example, if the public project produces costs and benefits that are
extremely large relative to other income, then the attitudes of those who bear
these costs or enjoy these benefits must be considered. In this case, one
should estimate the "certain monetary equivalent"^ (CME) of the risky costs
or benefits, rather than their expected values. For large and uncertain
positive (negative) outcomes risk averse individuals, CME will be less (more)
than the expected value of the outcomes. On the other hand, if the project's
costs and benefits are not large, but are correlated with other income, then
they should be adjusted to reflect either the added riskiness they impart to
the portfolio (if they are positively correlated with other income) or the
"insurance" function they offer (if they are negatively correlated with other
income). For the most part, however, adjustments for risk are not common
because most public projects are not obviously large or correlated with other
income.
The data required to conduct public project evaluation using this method
exceed those associated with more limited cost-benefit analyses because
additional features of these project's consequences beyond the gross costs and
benefits are important. Thus, in addition to the standard measurement of
costs and benefits and their timing, the sources of the funds for the costs
and the degree to which the benefits encourage or discourage private capital
formation are also required. If the funds for the project are raised through
simple income taxation, the social costs of the project could be lower than if
the funds are drawn predominantly from private investments via deficit finance
(assuming that funds drawn from taxes displace primarily current consumption).
Similarly, the social benefits of the project could be higher if they tend to
encourage some additional saving (as might any source of additional income)
than if, on the other hand, the benefits tend to be viewed as substitutes for
private investments (so that saving and investment might be discouraged).
Furthermore, the social costs of a project resulting from the displacement of
private investment in an industry subject to new, more costly environmental
controls may be offset to some extent by increased private investment in the
pollution control industry.
1
*•*• The certain monetary equivalent is the perfectly certain sum of money
that an individual would view as equivalent (in utility terms) to an uncertain
prospect. For example, one might view a perfectly certain payment of $400 as
equivalent to an even chance of receiving nothing or $1,000. Hirschleifer
(1966) provides a good exposition of this concept.
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In addition to the information on the source of the funds and the
secondary effects of the public project on private investment, this approach
also requires information on the level of taxation of private investments
(both corporate and individual), the level of nominal returns on private
investments, the expected rate of inflation, and the risk class of the public
investment under consideration. Finally, to calculate the shadow price of
capital the pre-tax and post-tax rates of return on private capital, the level
of reinvestment of returns from private capital, and the duration of a typical
private investment project are required.
Lind (1982) presents some estimates of both the consumption rate of
interest and the shadow price of capital using a variety of rates of return
and other information. Although his estimates for both the consumption rate
of interest and the shadow price of capital depend on the specific estimates
of the rates of return, reinvestment rates, and tax rates required to compute
them, he finally settles on a set of estimates which he deems to be
reasonable.
The most plausible measures of the consumption rate of interest are the
post-tax real rate of return on "safe" government securities such as Treasury
bills and long-term government bonds. The pre-tax, nominal rate of return on
Treasury bills over the period 1956-1986 was 5.8 percent.^- Assuming a modest
20 percent individual marginal tax rate, this yields a post-tax nominal rate
of return of about 4.6 percent. Given an inflation rate of 4.7 percent over
the same period, the post-tax, real rate of return on Treasury bills was about
-0.1 percent.
For long-term government bonds, the pre-tax, nominal rate of return for
1956-1986 was 4.7 percent. Once again using a 20 percent marginal tax bracket
and 4.7 percent inflation rate, the post-tax, real rate of return on long-term
government bonds was -0.9 percent.
Both measures indicate a negative consumption rate of interest. It has
been argued, however, that these measures slightly underestimate the true
consumption rate of interest because it is likely that on the average, actual
inflation has exceeded anticipated inflation, especially during the 1970s.
For this reason, Lind suggests a post-tax real rate of return on a "safe"
asset such as Treasury bills, of 1 percent, and 2 percent as the rate of
return on safe, long-term assets such as long-term government bonds.^ Thus,
Lind's recommendation is that if one is discounting the costs and benefits of
i ^
±J The data on Treasury bills, long-term government bonds, and inflation
rates are from Ibbotson Associates (1987), Exhibits A-4, A-5, and A-6. Data
for only the last three decades were used in order to exclude the effects of
World War II and the depression. In addition, these data are likely to
reflect better the consumption rate of interest of current generations.
Of course, other portfolios yielded higher historical rates of return.
Lind estimates that the "market portfolio" (which reflects risk as well as
time discounting) yielded about 4.6 percent.
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a project with returns that are small and uncorrelated with the market
portfolio, then one should use 1 percent to 2 percent as the consumption rate
of discount.
Baumol suggests values in this same range in stating: "The approximate
range in rates of return of from zero to 5.0 percent ... brackets the real,
after-tax rate of return that individual consumers are likely to receive on
their savings. Discount rate values on the lower end of this range -- zero to
2 percent -- should be used for government projects or regulations that are
regarded as risk-free, whereas discount rates on the upper end should be used
for those government actions that are regarded as risky."^ Baumol justifies
the zero value by pointing out that "(z)ero or even negative rates of return
are consistent with rational consumer behavior. Some individuals are willing
to forego some real income for the certainty of assuring consumption at a
future time, such as the period after retirement."16
For the shadow price of capital, Lind performs a number of calculations,
finally resulting in an estimate of 3.8 (i.e., the social value of one
dollar's worth of private capital is actually $3.80). He bases this estimate
on a rate of reinvestment of earnings from private capital of 20 percent, on
an average private project life of 15 years, an average pre-tax rate of return
of 12.41 percent, and a post-tax rate of return of 5.77 percent. Lind argues,
furthermore, that the inconsistency between the rate of return estimates used
in the shadow price of capital estimate and the calculations of the
consumption rate of interest is not critical since the shadow price of capital
is sensitive to the ratio of the pre-tax and post-tax rates of return, and not
particularly to their levels.
There continues to be disagreement among economists with regard to the
appropriate definition and measurement of the shadow price of capital.
Nonetheless, some measure must be selected if evaluation of time streams of
benefits and costs is to proceed using a Consumption Rate of Interest --
Shadow Price of Capital approach. Our review suggests that most reasonable
values for these parameters are a 1.5 percent consumption rate of discount
with benefits and costs (to be varied in a sensitivity analysis) adjusted by
Lind's estimate of the shadow price of capital (3.8).
3.2 Consumption Rate of Interest Approach
A modification of the Consumption Rate of Interest -- Shadow Price of
Capital approach discussed above is to use the consumption rate of interest
for discounting purposes, but not to adjust any of the costs and benefits by
the shadow price of capital. The rationale for using the consumption rate of
interest as the discount rate in this approach is identical to the reasoning
outlined in the previous approach. The absence of adjustments of the costs
Baumol, W.J. (1982); Baumol (personal communication) does note that
higher rates of social discount can be defended in cases where public projects
may result in environmental damages, the costs of which have not been assessed.
16 Baumol, W.J. (1982), ibid., p. 12, footnote 12.
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and benefits by the shadow price of capital, on the other hand, could be
justified in two ways. First, if there is no gap between the pre-tax, or
social rate of return, and the post-tax, or private rate of return, then the
shadow price of capital will be unity. Hence, no special adjustments are
required.
An alternative justification for this approach is as follows. Even if
the shadow price of capital is greater than unity, under certain conditions,
no adjustments may be required because the policy under consideration may not
displace private investments on net.1^ For example, if a regulation causes
some investment to be channelled into projects required for compliance rather
than into other private sector projects, but the regulated entities have the
option of exiting the industry rather than bearing compliance costs, then the
rate of return on the compliance-related investments pre-tax must be equal (in
long-run equilibrium) to the pre-tax rate of return elsewhere in the economy.
In this event, there may be no net change in the amount of investment in the
economy, only a redirection. If the welfare effects of the regulation are
correctly calculated, no adjustments will be required for the shadow price of
capital.
All other aspects of this approach are the same as the previous one,
including the adjustments required, if applicable, for risky costs and
benefits. Hence, the data requirements for implementing this approach are
similar, but fewer than those for the Consumption Rate of Interest -- Shadow
Price of Capital approach precisely because the shadow price of capital is
irrelevant. That is, information on the degree to which private investment is
encouraged or discouraged by the public project are not required. All that is
required is an estimate of the consumption rate of interest, which is
identified as the real rate of interest at which individuals trade between the
present and the future.
If the consumption rate of interest approach alone is adopted (because
either one believes that the shadow price of capital is unity or if one is
merely redirecting private investments), then the estimates of the consumption
rate of interest presented in the previous section are appropriate. Some
analysts argue that this approach may be more appropriate for discounting the
effects of regulations to project stratospheric ozone. Their rationale is
that, rather than displacing private investment, "private investments are
redirected into product and process redesign and control technologies which
permit regulatory compliance."^° If correct, this conclusion would argue for
a limited use, or elimination of, the shadow price of capital multiplier.
3.3 Gross Rate of Return on Private Capital Approach
Another approach for determining the discount rate for public policy
evaluation arrives at a different recommendation based on the observation that
1' This argument is made in ICF Incorporated (1986). See also the
qualifications discussed there, but not in this appendix.
18 Ashford and Stone (1988), p. 50.
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the pre-tax, or social rate of return to private investment, is greater than
the post-tax or private rate of return. The argument is that if government
actions are funded for the most part by displacing private investments, then
the rate of return required for public projects to be considered to be
desirable must be at least as great as this pre-tax or social rate of
return. Thus, this approach argues that the "hurdle" internal rate of
return below which public project should be rejected equals the pre-tax real
rate of return on private investments (assuming that marginal funds for the
government displace private investments). An alternative justification for
this approach is that if the relevant alternative use of the funds for the
project under investigation is understood to be government investment in the
private sector, then the opportunity cost of using the funds in the project
itself is again the pre-tax social rate of return on private investments.^
According to this "Gross Rate of Return on Private Capital" approach, the
post-tax private rate of return (i.e., the consumption rate of interest) is
irrelevant for discounting public sector policies and projects. Thus, all
that is required for this approach is an estimate of the pre-tax real rate of
return for typical private sector projects. Of course, actually deciding
which of the many rates of return that coexist in the economy to use makes the
practical application of this approach, as well as the two previous
approaches, somewhat less straightforward than they seem from a theoretical
perspective.
There are several estimates in the literature of the historical pre-tax,
real rate of return on private capital. In virtually all cases, these rates
are calculated as a weighted average of the rates of return on various
tangible assets, where the weights are the shares of the assets in the total
capital stock. The estimates differ in terms of the assets included in the
calculations and the time period for which data are used.
Stockfish (1982) reports estimates of the real overall private sector
rate of return of 10.6 percent and 12.8 percent for the period 1961-1965.
These estimates are weighted averages of the returns in both the corporate and
noncorporate sectors. Stockfish suggests that the "true" average rate of
return is likely to be between 8 and 12 percent. Another estimate is provided
by Holland and Myers (1979). They calculate a real pre-tax rate of return in
the corporate sector of 12.4 percent for the period 1946 to 1976.
Two rough, but more up-to-date estimates of the real, pre-tax rate of
return on private capital were calculated as part of this study. The
estimates are a weighted average of the returns to common stocks, long-term
The Office of Management and Budget's 10 percent real rate of discount
for public projects (Circular A.94) appears to be based on this line of
reasoning.
20 Defining the appropriate scope of opportunity cost in this context is
extremely important. Feldstein (1970), for example, argues that the relevant
definition is what would be done with the funds, not what could be done with
them.
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corporate bonds, and residential real estate over the past three decades.
Both estimates are derived from data on post-tax nominal returns.^ The two
estimates differ in terms of the assumed relationship between inflation and
the marginal tax rate on capital income.
In calculating the first estimate, it is assumed that the tax rate on
capital income is exogenous (i.e., the tax rate has not changed over time in
response to inflation). Therefore, the average tax rate for the period in
question is applied to nominal rather than real returns. Thus, in calculating
the pre-tax, real rate of return from the data, taxes on capital income are
put back in before expressing returns in real terms. Given an estimated
weighted average, post-tax, nominal rate of return of 8.1 percent, and an
average marginal tax rate on capital income of 34.5 percent, the pre-tax.
nominal rate of return is 12.4 percent. Subtracting the 4.7 percent average
annual inflation rate over the period, the estimated pre-tax, real rate of
return on private capital is 7.7 percent.
The second estimate is calculated under the assumption that the tax rate
on capital income is endogenous. Hence, the average tax rate for the period
in question is applied to real rather than nominal returns. This implies that
there has been de facto indexing of taxes on capital income during periods of
high inflation. There is some evidence that during the 1970s, changes in
deduction and depreciation provisions in the tax code did in fact dampen the
effects of inflation. Under this assumption of an endogenous tax rate, taxes
on capital income are put back in after expressing returns in real terms.
Given the 4.7 percent inflation rate, the post-tax, nominal rate of return of
8.1 percent translates to a post-tax, real rate of return of 3.4 percent.
Applying the 34.5 percent marginal tax rate, yields an estimated pre-tax, real
rate of return on private capital of 5.2 percent. This estimate is
considerably lower than the estimate derived under the assumption of an
exogenous tax rate.
Two points regarding the above estimates should be noted. First, the
estimates are for the average rate of return, whereas the quantity that is
actually being sought is the marginal rate of return. If, as is commonly
argued, the schedule for the marginal efficiency of capital is downward
sloping, the average rate of return will exceed the marginal rate of return.
Hence, the above estimates represent upper bounds on the marginal rate of
return to private capital. Second, the estimates undoubtedly include returns
to risk since the underlying assets are risky. Thus, they do not represent
91
Returns on common stocks and long-term corporate bonds as well as the
inflation rate are the (geometric) averages for the period 1956-1986 and are
taken from Ibbotson Associates (1987), Exhibits A-l, A-3, and A-6. The return
to residential real estate is the (geometric) mean for the period 1947-1982
and is from Ibbotson and Siegel (1984). The weights for the three assets are
from Stambaugh (1982). The average of the weights reported in Table 1 of
Stambaugh for common stocks, government bonds, and residential real estate
were re-scaled to sum to unity. The estimate of the average marginal tax rate
on capital income is from the Council of Economic Advisers (1987), Table 2.6,
p. 91.
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the "riskless" rate of return to private capital, which, it would be argued,
is the relevant quantity if the riskiness of the proposed public investment is
relatively small.
One possible measure of the riskless rate of return to private capital is
the pre-tax, real rate of return to long-term corporate bonds. The nominal,
post-tax rate of return to these bonds over the period 1956-1986 was 5.7
percent. Using the marginal tax rate on capital income of 34.5 percent and
the inflation rate of 4.7 percent, the implied pre-tax, real rate of return is
4.0 percent when the tax rate is assumed to be exogenous. Under the
assumption of an endogenous tax rate, the pre-tax, real rate of return is 1.5
percent.
In summary, the estimates of the pre-tax, rate of return to private
capital range from about 2 percent to 12 percent with the lower end of the
scale reflecting returns to risk-free assets and the higher end reflecting
returns to risky assets. Within this range, we believe a value toward the
lower end is most appropriate (to reflect the factors relating to the marginal
and riskless rate of return). Thus, for this approach, a central value might
be 5 percent, with sensitivity values of 2 percent and 12 percent.
3.4 "Implicit" Consumption Rate of Interest Approach
Another approach is closely related to the consumption rate of interest
approaches discussed in subsections 3.1 and 3.2 in the sense that its
analytical focus is on rates at which individuals and society are willing to
trade consumption through time. However, this approach assumes that for a
variety of possible reasons, the interest rates produced in the market (net of
inflation and taxes) are not adequate guides to how people currently alive and
those yet to be born would actually trade consumption over long periods of
time.^^ Hence, market rates are not, according to this approach, an
acceptable guide for discounting from a social point of view. Thus, although
the goal is to determine the consumption rate of interest from society's point
of view, this approach ignores market rates of interest and instead attempts
to build the consumption rate of interest from another direction, hence the
term "implicit."
Deriving the consumption rate of discount under this approach is somewhat
more complex than the market-based approaches. Indeed, in many formulations,
the consumption rate of interest for a particular project depends on the
identities of the parties involved and the timing of the benefits and costs,
making general statements about the level of consumption rate of interest for
discounting public benefits and costs impossible. For purposes of
illustrating the fundamentals of this approach, however, many of the
complications will be ignored.
The first step in defining the consumption rate of interest under this
approach is to note that an individual's (or society's) rate of discount for
22 A recent summary of this approach, with citations to the relevant
literature, is Ray (1984).
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consumption, in general, equals the sum of two terms. The first is a "global"
utility discount factor which reflects the individuals' or society's general
weighting of current versus future utility. This factor may be positive,
negative, or zero and different authors choose various values. From a social
perspective, the value of this global utility discount factor reflects one's
resolution of some of the ethical considerations discussed above. A zero
utility discount factor weights current and future utilities equally. A
positive (negative) value weights future utilities lower (higher) than current
utility).
The second term defining the consumption rate of interest under this
approach is the product of two factors -- the rate of growth of consumption
over time and the elasticity of marginal utility with respect to consumption
(defined positively). This term, consequently, is designed to measure the
degree to which marginal utility of additional consumption in the future falls
depending on the expected growth of consumption over time. The higher the
expected rate of growth of consumption over time (ceteris paribus), the higher
the consumption rate of interest. Similarly, the higher the elasticity of
marginal utility with respect to consumption (again, ceteris paribus), the
higher the consumption rate of interest. These observations should be fairly
intuitive. Because the object is to determine how to value future benefits
and costs from the perspective of today, the utility to be derived from
marginal amounts of consumption in the future given expected increases (or
decreases) in consumption over time should be relevant.
Finally, this approach defines the consumption rate of interest as the
global utility rate of discount plus the product of the elasticity of marginal
utility with respect to consumption and the expected rate of growth of
consumption. Intuitively, the formulation is appealing. If one wants to know
what the value is today of some future benefit, one would consider both the
marginal utility to be generated in the future (which depends on the
sensitivity of marginal utility and the growth of consumption over time) and
the inherent discount (if any) of future utility. Together, these determine
the rate at which consumption in the future should be discounted.
In addition, there is an implicit linkage of this approach to market
rates of interest in the following sense. In the event that individuals today
are assumed to maximize their consumption patterns intertemporally (which
generally is assumed not to take place perfectly under this approach), then
the market rate at which they trade consumption through time equals their
global utility rate of discount plus the product of their elasticity of
marginal utility and their expected growth of consumption. If they are
assumed not to maximize or if there are other reasons why the individuals'
perspective does not define the social perspective, then this equality will
not hold and the better guide to discounting from a social perspective is this
"implicit" component approach to defining the consumption rate of discount.
The data requirements for this approach are reasonably simple to state,
but much harder to measure. It requires the elasticity of marginal utility,
the expected rate of growth of consumption, the global social utility discount
rate, and in more complex formulations, the time and interpersonal
distribution of costs and benefits. In most applications of this framework,
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the interpersonal distribution of costs and benefits is ignored. The rate of
growth of consumption is generally derived from historical data. However, the
values of the global utility discount rate and the elasticity of marginal
utility can only be assumed. Moreover, as is evident from the definition of
the consumption rate of discount according to this approach, these two factors
can be varied independently. Indeed, even for an individual who is assumed to
maximize intertemporal consumption, so that his or her consumption rate of
interest (as defined by this approach) equals the market rate of interest,
these two utility-function related factors can take on an infinite number of
pairs, all of which produce an equality between the market rate and this
estimated consumption rate of interest. Thus, there is virtually no guide to
specifying these two factors correctly. In the application of this approach
in the following section, values for these factors in the literature will be
used.
The data required for estimating the implied consumption rate of interest
under this approach are not easy to obtain. Although the rate of growth of
consumption over time is observable, both the "global" utility rate of
discount and the elasticity of marginal utility are not. Ray (1984) cites a
number of different studies that used this approach for determining the
discount rate for public projects, mostly in developing countries. The range
of assumptions for the global utility rate of discount in these studies is
zero to 5 percent. For the value of the elasticity of marginal utility, Ray
reports a range of 1 to 3. Finally, the rate of growth of consumption is
generally assumed to be around 2 percent, although this can vary with
individual countries' experiences. Together, these imply that the range for
the estimated consumption rate of interest is 2 to 11 percent, although the
higher end of the range is overstated because studies that use higher
estimates for the elasticity of marginal utility appear to use lower estimates
for the global utility rate of discount and vice versa.
Ray also reports the results of a study by Scott (1977), in which an
econometric "search" for the pair of global utility discount factor and
elasticity of marginal utility times the rate of growth of consumption that
best "fit" the observed market rate of interest. Ray reports that the pair
that produced the best fit was a global rate of .5 percent and an elasticity
of marginal utility of 1.5. If consumption is assumed to grow at about 2
percent, then this would imply an estimated consumption rate of interest of
3.5 percent.
3.5 Growth Theory Approach
A final approach suggested by the economics literature is based on the
optimal economic growth literature. Broadly speaking, this literature
discusses intertemporal optimization of consumption under a variety of
assumptions and circumstances. Various propositions are advanced and explored
using both single- and multi-sector models. The distinguishing feature of all
of this literature, however, is a reliance on steady state growth, or optimal
paths which approach steady state conditions. Steady state growth occurs when
all relevant economic variables, e.g., capital output, etc., grow at constant
rates so that in per capita (or similar) terms, these economic variables do
not change over time.
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One special case of steady state economic growth is referred to as the
"Golden Rule."" In its simplest form, this occurs when population is growing
at a constant rate and consumption per person is at its highest constant and
sustainable level. This requires that capital, output, and all other relevant
economic variables grow at the same rate as population. In more complex
formulations, if productivity is rising over time, then all relevant economic
variables must grow at the sum of the rate of population and productivity
growth (often referred to as the growth rate of labor in efficiency units).
In all formulations, however, if a steady state growth path could be chosen,
this "Golden Rule" path is optimal given that a steady state path must be
maintained. *
If the economy were growing along this steady state "Golden Rule" path,
then certain other conditions also hold. Most relevant for the search for the
appropriate discount rate for evaluating public policies is the level of the
consumption rate of discount. In a "Golden Rule" situation, the interest rate
equals the marginal productivity of capital (the rate of return on
investments) which also equals the rate of growth of population (or of
population plus productivity in more complicated formulations), all of which,
in turn, equal the rate of output growth. Thus, if the economy were in a
steady state "Golden Rule" path, then the interest rate appropriate for
discounting public policies or projects would equal the long-run rate of
output growth, which also would equal the long-run constant rate of growth of
population plus the long-run rate of growth of productivity.
Although casual inspection suggests that growth has been neither constant
nor always positive if one were to assume (1) that the current population and
productivity growth rates will continue forever, (2) that steady state growth
at these rates for all other variables would now obtain, and (3) that this
steady state is the "Golden Rule" steady state, then the implications for the
discount rate would follow. Thus, if these assumptions were made and this
approach were adopted, one would need only the long-run rate of output growth
to calculate the discount rate for public policy evaluation.
The observed real rate of output growth over the period 1929-1986 was 2.9
percent annually.25 Over the past three decades (1956-1986), the rate was
slightly higher at 3.0 percent. Thus, the growth theory approach implies a
discount rate on the order of 3 percent.
23 The seminal article is Phelps (1961).
2 The fact that the steady state must be maintained is crucial for this
argument. Clearly, one generation could improve it's position by failing to
save enough output to equip future generations with sufficient capital.
However, this would mean reduced welfare for future generations, implying that
the improved welfare of the current generation is not sustainable.
25 The estimates are based on GNP data for the U.S. from the Council of
Economic Advisors (1987), Table B-2, p. 246.
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4. CHOOSING A DISCOUNT RATE FOR THE PRESENT ANALYSIS
The range indicated is from about zero percent to about 8 percent (if one
ignores the high ends of the "Implicit" Consumption Rate of Interest approach
and the Gross Rate of Return on Private Capital approach), where the lowest
estimate is based on the Consumption Rate of Interest approach and the highest
on the Gross Rate of Return on Private Capital approach.
For the purposes of the present analysis, a value of 2 percent for
discounting future monetary costs and benefits is selected for the reference
case, and values of one and 6 percent are selected for the sensitivity
analysis. The use of these estimates is based on the conclusion that not all
of the different approaches to determining the social rate of discount are
equally applicable to the regulatory options for controlling potential ozone
depleters. That is, the logical and economic underpinnings of some of the
approaches reviewed in this appendix may not correspond to those inherent in
regulating potential ozone depleters.
First, the "Gross Rate of Return on Private Capital" approach reviewed
above. The intuitive appeal of this approach has its roots in the view that
the government "projects" being evaluated displace private capital formation
by reducing the amount of private investment in order to fund dams, social
programs, and other government undertakings. This view of government
programs, however, does not really correspond to the character of regulating
potential ozone depleters. Under these regulations, private capital is not
really displaced. Instead, investments are redirected into control
technologies to reduce emissions of these substances. Thus, the level of
private capital formation is not obviously reduced, only its composition is
changed. This means that the redirected investments still earn the pre-tax
return, just as they would have in their original deployment. (This might be
marginally lower, but, given the likely investment flow affected, the decrease
could hardly be significant.) Consequently, the intuitive justification for
using the pre-tax social rate of return on private investments as the social
rate of discount (i.e., that a stream of government revenues from the
displaced private investments is lost) does not really apply for these
regulations.
Second, the "Implicit Consumption Rate of Interest" approach is very
difficult to apply in practice. As the discussion of this approach indicated,
little economic or ethical guidance exists for choosing the global discount
factor, and no reliable empirical evidence exists for the magnitude of the
elasticity of marginal utility. Furthermore, the range of discount rates
generated using this approach includes relatively high rates only when the
global discount factor is positive, which implies a systematic bias against
the welfare of future generations. It is not at all clear that such an
ethical stance is appropriate in the context of regulating potential ozone
depleters.
Third, the "Golden Rule" approach for determining the social rate of
discount assumes economic conditions that may not apply at present in the case
of regulations on potential ozone depleters. In particular, this approach
assumes that the economy is in steady state growth and that the rate of saving
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equals the golden rule. Causal observation suggests that these conditions may
not be true presently. In fact, the long-term growth rate of the economy used
to generate emissions and ozone depletion estimates is lower in the scenarios
used to generate emissions and ozone depletion estimates than past rates of
economic growth. In those scenarios (upon which damage estimates are based),
the growth rate of the economy starts off in 1985 at 2.8 percent and declines
to 1.9 percent by 2050, a reduction of 30 percent. By 2100, it is assumed
that no growth is occurring. Not only would this lower growth rate imply a
lower discount rate for the "Golden Rule" approach, but it would also indicate
that the shadow price of capital or the consumption rate of interest would
also decrease with time. Thus, the slowing growth would significantly
decrease the discount rates since, in essence, it rejects the approach of
extrapolating the past indefinitely into the future (which is what usually is
done for discounting problems of shorter duration).
In conclusion, it is possible to make a more refined selection of the
rate to use in evaluating the effects of controlling potential ozone
depleters. First, the regulations under study have effects in a future later
in time than usually considered in evaluating typical regulations. Second,
there is an asymmetrical character to the uncertainties that characterize
costs and benefits that cannot be quantitatively estimated, but could be
large. For example, the possibility exists that damage to aquatic systems
could destroy the food chain in some regions leading to catastrophic failure
of fisheries and the functioning of that part of the ocean in the
biogeochemical cycle. Because ozone depletion would be quasi-irreversible,
there is a high insurance premium on avoiding both potentially projected
damages and the possibility of large disruptions not encompassed in the
standard estimation of discount factors. A discount rate in the lower end of
the range indicated above follows from such a view. Finally, the regulations
on potential ozone depleters do not obviously displace private investments;
rather they tend merely to redirect private capital formation. Thus, the
approaches that argue for higher discount rates (or for adjusting costs by the
shadow price of capital) are less relevant for the regulations under study
here.
Based on this analysis, a social rate of discount in the lower portion of
the range suggested by all of the approaches seems appropriate. This is the
basis for the previously mentioned estimates used in the present analysis: a
rate of two percent is adopted as the reference value, and zero, one and six
percent are used in the sensitivity analyses.
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Investment," in Lind, R.C., ed., Discounting for Time and Risk in Energy
Policy (Resources for the Future, Inc.: Washington, D.C.).
Tullock, G. (1963), "The Social rate of Discount and the Optimal Rate of
Investment: Comment," Quarterly Journal of Economics. Vol. 78, pp. 331-
345.
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APPENDIX I
FRAMEWORK AND METHOD FOR
ESTIMATING COSTS OF REDUCING THE USE OF
OZONE-DEPLETING COMPOUNDS IN THE U.S.
This paper describes the analytical framework and methods used to estimate
the costs of reducing the use of potential ozone-depleting compounds. The
emphasis of the approach is on estimating the net social costs of reducing the
use of the compounds. An essential step in estimating these social costs is
assessing potential industry responses to regulations which would be implemented
to achieve the desired reductions. This assessment, in turn, calls for estimates
of the private costs faced by the affected industries of complying with the
regulations. These private compliance costs are also required for performing a
Regulatory Flexibility Act analysis.^ Hence, the approach employed provides
estimates of both private and social costs.
The framework for estimating social costs essentially consists of measuring
the changes in consumer surplus caused by the regulations in the markets for
chlorofluorocarbon (CFC) and halon compounds (hereafter referred together as
CFCs). Hence, a major component of the analysis is characterizing these CFC
markets and, in particular, estimating the derived demand schedules for each.
The appendix is organized as follows:
• Section 1 presents the economic framework for estimating
costs. It discusses the assumptions employed in the
analysis and the economic justification for measuring
changes in consumer surplus in the CFC markets.
• Section 2 discusses the analysis of the four basic
regulatory alternatives -- auctioned rights,
allocated quotas, regulatory fees, and engineering
controls and product bans.
• Section 3 describes the methods used to estimate derived
demand schedules for CFCs using the engineering and
financial data collected by EPA. It also describes the
procedure for estimating changes in consumer surplus using
the estimated derived demand schedules.
• Section 4 discusses some of the inherent limitations of
the analytic methods used.
1 The methods and results of the Regulatory Flexibility Act analysis are
presented separately in Appendix L.
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1-2
1. CONCEPTUAL APPROACH FOR ESTIMATING REGULATORY COSTS
This section discusses the economic theory that underlies the approach used
to estimate the private and social costs of regulations that restrict the use of
CFCs. The basic method for estimating costs is to measure changes in producer
and consumer surplus in the relevant markets that result from restrictions on
CFC use required by regulation.
The section initially identifies the relevant markets, establishes the
relationships between these markets, and characterizes the supply and demand
schedules that underlie them. The section then turns to the issue of measuring
changes in producer and consumer surplus in these markets due to exogenously
imposed restrictions on CFCs. The section ends with a discussion of the
differences between private and social costs.
1.1 Affected Parties and Relevant Markets
To analyze the costs of the proposed regulations it is necessary, first, to
identify the parties that are likely to be significantly affected by the
regulations and the markets in which the changes in the welfare of these parties
can be measured.
The parties likely to be affected by the regulations are:2
• firms producing CFCs;
• owners of factors employed in the production of CFCs;
• firms in the CFC-using industries;
• owners of factors employed in the CFC-using industries;
and
• final consumers of goods manufactured using CFCs.
To determine the costs borne by each of these parties it is generally
necessary to measure changes in consumer and producer surpluses in two sets of
markets:
• the markets for the various CFC compounds, i.e., the
markets in which CFCs are sold by producers of these
compounds to the various CFC-using industries; and
• the markets for the outputs of the CFC-using industries,
i.e., the markets in which the products of the CFC-using
industries are sold to consumers.
o
It is assumed that the markets for complements and substitutes for the
outputs of CFC-using industries would not experience price changes as the result
of reductions in CFC use. Therefore, these markets do not experience gains or
losses.
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1-3
It is possible, however, to measure the net costs of the proposed regulations by
measuring changes in surpluses in the CFG markets alone. Here net costs are
defined to be the sum of the costs borne by the affected parties minus any
transfers (e.g., to the government) in the form of revenues generated by the
regulations (e.g., fees collected). The rationale for measuring these costs
entirely in the CFC markets is explained in the following sections.
1.2 General Analysis of the Relationships Between the Relevant Markets
A general overview of the relationships between the markets for CFCs and the
markets for the outputs of the CFC-using industries is presented in this
section. The overview is a stylized one in that it employs very general
assumptions about the shapes of the various supply and demand curves. This
allows a derivation of the full range of relationships that may exist between
the relevant markets.
An important assumption maintained throughout the analysis is that all
relevant markets are competitive. Furthermore, it is assumed that the various
"application categories" discussed in Section 3 of this appendix roughly
correspond to distinct industries. Hence, the term application category and
industry are used synonymously in this appendix.
Note, finally, that the discussion in this and subsequent sections is
couched frequently in terms of a s.ingle ozone-depleting compound (e.g., CFC-11).
Thus, reference is made to a single market. However, the analysis applies to
the markets for all of the CFC and halon compounds subject to the proposed
regulations.
Before examining the relationships between the relevant markets, the supply
and demand schedules underlying these markets are briefly characterized.
1.2.1 DEMAND SCHEDULES
Three sets of relevant demand schedules can be identified:
• the derived demand for CFCs of a single CFC-using
industry;
• the demands for the outputs of the CFC-using industries;
and
• the aggregate derived demand for CFCs of all CFC-using
industries.
The relationship among these demands is best explained by means of an example.
An important use of CFCs is in manufacturing air-conditioners. This industry
has a derived demand schedule for CFCs that specifies the quantity of CFCs it
o
The assumption of competitiveness is probably reasonable for the
CFC-using industries. However, the CFC-producing industry is highly
concentrated, potentially leading to a non-competitive situation. The
implications of a non-competitive CFC-producing industry are described below.
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1-4
would buy at various CFG prices. This industry derived demand schedule is
obtained by horizontally summing the derived demand schedules of the firms in
the air-conditioner industry.^ The shape of this derived demand schedule for
this industry is influenced, in part, by the demand for air-conditioners (i.e.,
by the demand for the outputs of the CFC-using industry).
The aggregate derived demand schedule for CFCs is obtained by horizontally
summing the derived demand schedules of all the CFC-using industries
(air-conditioning, foam blowing, etc.). Thus, the aggregate derived demand
schedule for CFCs is obtained via a two-stage procedure:
• First, the derived demand schedules of firms in a given
industry are summed to obtain the derived demand schedule
for CFC of that industry. This is carried out for each
CFC-using industry.
• Then, the derived demand schedules for CFC of all
CFC-using industries are summed to obtain the aggregate
derived demand schedule for CFC.
Typically, derived demand schedules for an input to production assume that
factors influencing the demand for the input other than its price -are held
constant. Most important among these factors are the prices of other inputs and
the price of the output produced using the input in question. The relationship
between other input prices and the demand for CFC inputs depends on whether
other inputs complement or substitute for the use of CFCs in the production
process.
The relationship between output price and CFC input demand hinges on the
link between output price and output quantity. The price a competitive firm
receives for its output determines the level of output that it produces. The
higher the price the firm receives; the larger is the quantity of output it
produces (provided that marginal production costs are increasing, as is commonly
assumed). This output level, in turn, determines the quantity of input that is
needed by the firm. Higher output levels imply higher demands for the input.
Thus, there is a positive relationship between output price and input demand.
Although derived demand schedules are commonly specified with output price
held constant, this need not be the case. Derived demand schedules can also be
specified holding output quantity constant, requiring only the removal of the
intermediate link between output price and output quantity. In later sections,
derived demand schedules are specified in this manner. However, in this section
we adhere to economic convention and assume output price is held constant.
It is assumed throughout that external effects of scale are negligible so
that industry demand and supply curves can be approximated by horizontally
summing individual firm demand and supply curves. An example of an external
effect of scale is factor prices rising as industry output expands.
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1-5
1.2.2 SUPPLY SCHEDULES
Two sets of relevant supply schedules can be identified:
• the supply schedule for CFCs of the CFC-producing
industry; and
• the output or product supply schedules of the CFC-using
industries.
The supply schedule for CFCs gives the total amount of CFCs that would be
supplied by CFC producers for various prices of CFCs. This supply schedule is
obtained by horizontally summing the supply schedules of the individual
CFC-producing firms.
Turning to the CFC-using industries, each industry has an output supply
schedule that specifies the level of output it supplies for different output
prices. The output supply schedule for each industry is obtained by
horizontally summing the supply curves of the firms in the industry. These
firm-level supply schedules are based on firms' marginal costs of production.
Thus, along a supply schedule, the prices of inputs are held constant.^ The
effect of a change in the price of an input, such as CFCs, is to shift the
output supply schedules because of its effect on the marginal cost of
production.
1.2.3 RELATIONSHIPS BETWEEN THE CFC (INPUT) MARKET AND THE OUTPUT MARKET
Exhibit 1-1 shows an illustrative supply schedule and an illustrative
aggregate derived demand schedule for a CFC. Along the aggregate derived demand
schedule, the prices of the outputs of the various CFC-using industries are held
constant at their current equilibrium values. The equilibrium price and
quantity of the CFC are determined by the intersection of the supply schedule
and the aggregate derived demand schedule. The equilibrium price p is the
price of the CFC faced by all the firms in CFC-using industries. The
equilibrium quantity q is the total quantity of the CFC demanded by the
CFC-using industries at this price.
Exhibit 1-2 shows the output supply curve of one of the many CFC-using
industries as well as the demand schedule it faces for its output. Along the
output supply curve, the price of the CFC is held constant at its current
equilibrium value, p The equilibrium price and quantity in the output
0 0
market, P and Q , are given by the intersection of the supply and demand
schedules.
5 It is assumed that supplies of all inputs (other than CFCs) are perfectly
elastic.
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1-6
EXHIBIT 1-1
MARKET FOR A CFG
Price of
CFC in
Year t
P?
Supply of CFC
Aggregate
Derived
Demand for
CFC
Quantity of
CFC in Year t
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1-7
EXHIBIT 1-2
MARKET FOR THE OUTPUT OF A CFC-USING INDUSTRY
Price of
Output
in Year t
Supply of Output
Q»
Demand for
Output
Quantity of
Output in Year t
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1-8
The relationships between the CFC market and the output markets can be
identified by tracing the effects of an increase in CFC price due to an upward
shift in the supply schedule for CFC. The initial effect of the higher CFC
price is to shift up the output supply schedules of the CFC-using industries.
This shift would eventually result in a higher equilibrium output price and a
lower equilibrium quantity in each output market.
Given the dependence of the derived demand schedule for CFCs on the level of
output produced, the lower equilibrium output quantities would cause a
contraction in the aggregate derived demand for CFCs. This contraction would
lower the equilibrium price of CFCs, assuming the supply curve for the CFCs is
upward sloping, and initiate a new round of shifts in the two markets.
The above interaction between the input and output markets would continue
until a new equilibrium is established in both markets. This new equilibrium is
illustrated in Exhibit 1-3. Panel (a) shows the input market and panel (b)
shows one of _ the many output markets. The equilibrium CFC price in. panel (a)
rises from p to p and the equilibrium quantity falls from q to q . In
01
panel (b) , the equilibrium output price rises from P to P and the equilibrium
01 t t
output quantity falls from Q to Q . Along the new output supply schedule,
1
labeled S. , the price of the CFC is held constant at its new equilibrium level
To summarize, the key relationships between the market for a CFC and the
markets for outputs are: (1) the dependence of the derived demand for the CFC on
the demand for the outputs of the CFC-using industry; and (2) the relationship
between the equilibrium price of the CFC, which is determined in the input
(i.e., CFC) market, and the positions of the output (i.e., CFC-using industry)
supply curves. In the general setting examined, an upward shift in the CFC
supply curve triggers a series of linked adjustments in each of the markets
before a new equilibrium is achieved.
1.3 Assumptions Regarding CFC Supply and CFC -Us ing Product Demands
The discussion contained in the previous section is based on very general
assumptions about the characteristics of the various supply and demand
schedules. This section presents the specific assumptions we make about the
supply curve for CFCs and the output demand curves faced by the CFC-using
industries, and the justification for these assumptions.
Given the assumption that all relevant markets are competitive, the supply
schedule for CFCs reflects the marginal costs of producing CFCs . A survey of
the available literature on the CFC industry revealed no engineering data on
marginal production costs. Moreover, data suitable for econometric estimation
of CFC supply schedules are also not available. Therefore, empirical derivation
of CFC supply curves is not possible.
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1-9
EXHIBIT 1-3
EFFECTS OF A SHIFT IN THE CFG SUPPLY CURVE: GENERAL CASE
Price of
CFC in
Year t
(a) Market for CFC
Quantity of CFC
in Year t
Price of
Output
in Year t
P°
(b) Market for Output of
a CFC-Using Industry
1 O° Quantity of Output
» w t in Year t
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1-10
An examination of the CFC production process, and those of similar
chemicals, suggests, however, that the marginal costs of production are likely
to be constant over a very large range of output. This implies that the supply
schedule for CFCs is perfectly elastic (i.e., horizontal) over a large range of
output. For purposes of this analysis, it is assumed that the supply curve is
perfectly elastic over its entire range.
Because the CFC-producing industry is highly concentrated in the U.S., it
may not exhibit all the necessary characteristics of a competitive market. In
such cases, price may exceed marginal costs. Due to the lack of empirical data,
the extent to which the price of CFCs exceeds the marginal cost of production
has not been assessed.
A review of the available data on production costs for the CFC-using
industries indicates that CFC costs account for only a small fraction (under 5
percent) of total production costs for a majority of the outputs examined. This
implies that even substantial increases in the price of CFCs would cause only
small increases in the marginal costs of production in the CFC-using industries.
Hence, the shifts in the output supply curves for these industries caused by
higher CFC prices will be small. This, in turn, implies that higher CFC prices
will induce only small changes in equilibrium prices and quantities in the
output market if demand is not very elastic.
Therefore, for outputs that have low CFC cost shares and low demand
elasticities, a simplifying assumption is made that,.over the relevant range,
demand for outputs is perfectly inelastic. That is, the demand schedules for
these outputs are assumed to be vertical so that changes in output price have no
effect on the quantity of output demanded. This approximation is acceptable
given the small changes in output price and output quantity associated with
higher CFC prices. In terms of the final social cost estimates derived, the
approximation generates a small upward bias in the estimates.
For the few outputs that have relatively large CFC cost shares and possibly
higher demand elasticities, the potential for output substitution is
accommodated by interpreting the demand for output in terms of the services
provided by the CFC-based output. This services-provided demand is then assumed
to be perfectly inelastic.
For example, CFC costs account for roughly 16 percent of the total costs of
making rigid polyurethane foam, a material used as insulation in building
construction. The services provided by this foam consist of insulation
(measured as an R-value) over the expected life of the foam. Because substitute
insulation materials are available at reasonable prices, it would be
inappropriate to assume that the quantity of rigid foam demanded is constant
when there are large increases in the price of CFCs. Thus, in modeling the
demand for rigid polyurethane foam, the price of the foam is compared to the
cost of using substitute insulation materials. (The costs of using substitutes
include the costs of higher energy bills given their inferior insulation
properties). If the price of rigid polyurethane foam exceeds the cost of using
a substitute (including the increased energy costs), consumers are assumed to
switch to the substitute and to stop buying rigid polyurethane foam.
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1-11
1.4 Characteristics of Derived Demand Schedules for CFCs
The smooth derived demand schedules drawn in Exhibits 1-1 and 1-3 are
consistent with the assumption, traditional in economic theory, that production
processes are such that inputs can be continuously substituted for one another.
In other words, it is always possible to reduce use of an input and keep the
level of output constant by increasing the use of other inputs. This assumption
implies that increases in the price of an input invariably result in a lower
quantity demanded of that input (assuming other input prices are constant).
Engineering data on production processes indicate, however, that
substitution possibilities are limited for any given production technology.
In general, these data imply that, for a specific production technology, no
substitution of inputs is possible. In other words, it is not possible to
reduce use of one input and keep the quantity of output constant by raising the
use of other inputs. Production technologies of this type are called
fixed-proportions technologies. For these technologies, the quantity of input
used per unit of output is a constant.
The data collected on options for reducing CFC use in the various
application categories imply that the portions of the overall production
processes related to CFC use are characterized by fixed proportions. Thus, for
a given production technology, the quantity of CFCs used per unit of output is a
constant. It follows that the quantity of CFCs demanded for a given level of
output is constant over some range of CFC price. This implies that the derived
demand schedule for CFCs of a single CFC-using firm or industry (along which
output is held constant) is a series of vertical line segments or a step
function. As shown in Exhibit 1-4, the quantity of output (rather than the
price of output) is constant along each of these segments.
Although substitution of inputs is not possible within any given
fixed-proportions technology, it is possible across fixed-proportions
technologies. For instance, in the context of CFC use, the quantity of CFCs
used per unit of output is constant for a given fixed-proportions production
technology, but the quantity may be changed by "switching" to a different
fixed-proportions production technology. As used here, switching technologies
encompasses replacing CFCs with less ozone depleting chemicals, modifying
production processes, and recycling or recovering CFCs.
CFC-using firms will choose the production technology that minimizes
production costs given prevailing input prices. Changes in input price, if
sufficiently large, will induce firms to switch technologies and alter their
levels of input use for a given level of output.
For example, if the price of CFC rises sufficiently, CFC-using firms will
switch to less CFC-intensive production technologies (assuming these exist) and
° See P.R.G. Layard and A.A. Walters, Microeconomic Theory. McGraw-Hill,
1978, Chapter 10 for a general discussion of this issue. For a good case study,
see J.M. Griffin, "The Process Control Alternative to Statistical Cost
Functions: An Application to Petroleum Refining," American Economic Review.
March 1972, Vol. 62, pp. 46-56.
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1-12
EXHIBIT 1-4
CHARACTERIZING THE DERIVED DEMAND SCHEDULE FOR CFOb
AS A STEP FUNCTION
Price of
CFC in
Year t
Pt
2
Pt
Pt
«
Pt
Pt
F
C B
2 _ I q 0 Quantity of
q l M l M * CFC in Year t
-------
1-13
reduce their use of CFCs per unit of output. This is reflected in Exhibit
1-4 by a switch from line segment AB to the line segment labeled CD. For a CFG
1 2
price above p but below p , the switch to a less CFC-intensive production
t t 01
technology implies a reduction in the quantity of CFC demanded from q to q .
t t
The derived demand schedule in Exhibit 1-4 further implies that if the CFC
2
price rises above p , firms switch to an even less CFC-intensive production
t 12
technology that reduces their CFC use from q to q .
t t
Thus, each vertical "step" in the derived demand schedule corresponds to a
different fixed-proportions production technology. As the price of CFCs
increases, firms "climb up" the demand schedule and switch to less CFC intensive
technologies. Along the entire demand schedule, the quantity of output produced
by the firm or CFC-using industry in question is constant, as are the prices of
other inputs.
Although there are three steps in Exhibit 1-4, the actual number of steps in
a derived demand schedule may be smaller or larger. The number of steps depends
on the number of suitable production technologies: more technologies imply more
steps in the schedule. For derived demand schedules that are obtained by
horizontally summing demand schedules for different firms or different
industries, such as the aggregate derived demand schedule for CFC defined above,
the number of steps is likely to be large.
1.5 Relationships Between the Relevant Markets
Given the assumptions regarding the shapes of the relevant supply and demand
schedules, the relationships between the CFC market and the various output
markets are simpler than those described in Section 1.2. This can be
established by once again tracing the effects of an increase in CFC price due to
an upward shift in the supply curve for CFC.
Panel (a) of Exhibit 1-5 shows the CFC market with a perfectly elastic
supply schedule and a step aggregate derived demand schedule for CFC. Along
this demand schedule, the level of output of each of the CFC-using industries is
held constant.
1 2
' For "switch" prices such as p and p , the quantity of CFCs demanded is
t t
1
indeterminate. For example, at a price of p , the quantity of CFCs demanded
01 t
may range from q to q . At prices other than these switch prices, however, the
t t
quantity of CFC demanded is determinate.
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1-14
EXHIBIT 1-5
EFFECTS OF A SHIFT IN THE CFG SUPPLY CURVE
Price of
CFC in
Year t
(a) Market for CFC
d°
Quantity of
CFC in Year t
Price of
Output
in Year t
Pi
(b) Market for Output of a
CFC-Using Industry
Quantity of
Output in Year t
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1-15
Panel (b) shows the output market of a single CFC-using industry (recall
that there are many such industries). The demand curve for the output is drawn
as being vertical over the relevant range. The dashed portions of the demand
schedules are those outside the relevant range and no assumptions are made about
the shape of the demand schedule over these ranges. As before, the output
supply schedules are drawn as upward sloping.
The effect of the higher CFG price due to the upward shift in the CFG
supply curve is to push up the output supply curve from S to S . This raises
the equilibrium price of output from P to P , but, given the shape of the
relevant portion of the demand curve, it does not alter the equilibrium
quantity of output, which remains at Q . Because the aggregate derived demand
schedule for CFC in panel (a) is specified holding output levels constant, there
is, therefore, no "feedback" contraction of the derived demand schedule. Thus,
the new equilibrium in the input market is simply given by the intersection of
S1 and the existing aggregate derived demand schedule, while the new
equilibrium in the output market is given by the intersection of S^- and the
output demand schedule.
1.6 Measuring Social Costs in the Input and Output Markets
The welfare measures relevant to the calculation of the economic costs of a
regulation are producer surplus and consumer surplus:
• Consumer surplus is a measure of the difference between
what consumers are willing to pay for a good and what they
have to pay for it. As such, it indicates the net gain to
consumers of being able to buy all units of the good at
the prevailing price. In graphical terms, consumer
surplus is given by the area under a demand curve above
the price line.
• Producer surplus is a measure of the difference between
the price firms received for their output and the price at
which they are willing to supply the output. Thus, it is
a measure of the net gains to firms of being able to sell
all of their output at the prevailing price. In graphical
terms, the aggregate producer surplus of a competitive
industry is given by the area above the industry's supply
curve under the price line.
Panel (a) of Exhibit 1-6 shows consumer surplus under the aggregate derived
demand schedule for CFCs. There is no producer surplus in the CFC market
because of the assumption that price equals marginal cost and that CFC supply is
perfectly elastic. Panel (b) shows consumer and producer surpluses in the
Q
We do not have data on the shapes of these output supply curves. But
upward sloping curves are not inconsistent with the assumption that the
CFC-related portion of the production process is of the fixed-proportions
variety.
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1-16
EXHIBIT 1-6
ILLUSTRATION OF CONSUMER AND PRODUCER SURPLUS IN
THE CFC AND CFC-USING PRODUCT MARKETS
Price of
CFC in
Year t
(a) Market for CFC
Consumer
Surplus
Quantity of
CFC in Year t
Price of
Output
in Year t
(b) Market for Output of a
CFC-Using Industry
Consumer
Surplus
Producer
Surplus
Quantity of
Output in Year t
-------
1-17
output market of a CFC-using industry. Consumer surplus is not well-defined in
this panel since the shape of the demand curve is specified over only a small
range.
The social costs of an increase in the price of CFCs due to higher
production costs can be measured in terms of the changes in consumer surplus in
the CFC market or the changes in producer and consumer surplus in the output
markets. Panel (a) of Exhibit 1-7 shows the effect in the CFC market of an
increase in CFC price from p to p . Consumer surplus under the aggregate
t U
derived demand schedule falls by an amount equal to the irregularly-shaped area
C. Thus, the net social cost of the CFC price increase is given by area C.^
Panel (b) of Exhibit 1-7 shows the change in producer and consumer surplus due
to the CFC price increase in an output market. Consumer surplus in this market
falls by an amount equal to the rectangular area D+E. The change in producer
surplus is equal to the difference between the lower triangular area F+G and the
upper triangular area D+F; this difference is area G-D. If the higher CFC price
simply results in a parallel shift in the output supply curve, area D is equal
to area G and there is no change in producer surplus.
The net change in the sum of producer and consumer surpluses in the output
market is equal to area D+E plus area G-D, which is areas E+G. Thus, the cost
of the CFC price increase in this particular output market is equal to area E+G.
Given the links between the CFC market a.nd the output markets of the
CFC-using industries, we would expect some relationship between the social cost
measures in the two sets of markets. In fact, area C in the CFC market is equal
to the sum of the E+G areas in all the output markets of the CFC-using
industries.10 Thus, the social cost of a change in CFC price can be measured in
either the CFC market or the relevant output markets. Given the nature of the
data collected as part of this analysis, it is far easier to measure costs in
the CFC market.
1.7 Social Versus Private Costs
In the discussion thus far, no distinction has been made between the private
costs of undertaking an action to reduce CFC use and the social costs of such an
action. The distinction is unnecessary if private and social costs are
identical. However, there are two reasons why the two costs measures diverge:
• businessmen are concerned only with their profits after
taxes while society is concerned with total costs
including taxes and
9 If the price exceeds marginal cost in the CFC-using industry, then
additional social costs are incurred, equal to the reduction in CFC production
times the amount by which price exceeds marginal cost.
10 See R. E. Just, D.L. Hueth, and A. Schmitz (1982), Applied Welfare
Economics and Public Policy. Prentice-Hall, Englewood Cliffs, New Jersey,
Chapters 4 and 9.
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1-18
EXHIBIT 1-7
CHANGES IN CONSUMER AND PRODUCER SURPLUS
DUE TO AN INCREASE IN CFG PRICE
Price of
CFC in
Year t
(a) Market for CFC
d°
Quantity of
CFC in Year t
(b) Market for Output of a
CFC-Using Industry
Price of
Output
in Year t
Quantity of
Output in Year t
-------
1-19
• the private discount rate exceeds the social discount
rate.
The first factor implies that social costs exceed private costs if the firm's
tax burdens are reduced by the CFC regulations. The second factor implies
relatively higher private costs because the amortized value of capital
expenditures increases with a higher discount rate.
Because the primary purpose of the cost analysis described in this appendix
is to determine the social costs of the proposed regulations, the relevant cost
measure is the social one. Thus, the final cost estimates are based on the real
before-tax costs of industry responses to the proposed regulations. However, to
assess potential industry responses, private costs are the relevant measure
because they determine the choice of control options by CFC-using firms. In
evaluating alternative control options, these firms will compare the private
(rather than the social) costs of the options.
In terms of the supply and demand relationships discussed earlier, the
divergence between private and social costs is accommodated in the following
manner:
• The ordering of technologies along the steps of the
derived demand schedules for CFC is always based on
private costs. This is consistent with firms choosing
technologies on the basis of private costs.
• The aggregate derived demand schedule used to determine
equilibrium prices and quantities in the CFC market is
based on private costs.
• The aggregate derived demand schedule under which changes
in consumer surplus are measured is expressed in terms of
social costs. That is, for each of the underlying derived
demand schedules, the heights of each of the steps in the
demand schedules reflect social rather than private costs.
Thus, for each CFC compound there are two sets of derived demand schedules:
one reflecting private costs and another reflecting social costs. The two sets
of demand schedules differ only in terms of the heights of the steps; the
correspondence between technologies and steps is identical for the two sets.
2. ANALYSIS OF THE REGULATORY ALTERNATIVES
There are four basic regulatory alternatives for controlling the use of
CFCs: a regulatory fee on CFCs; auctioned rights for CFC use; quotas on CFC
production; and engineering restrictions and product bans on the use of CFCs in
particular applications. Combinations of these alternatives may also be used.
Each of these alternatives is analyzed below in terms of the framework developed
in Section 1. For purposes of exposition, a stylized version of each of the
regulatory alternatives is analyzed. The actual alternatives being considered
are considerably more complex, but their salient features are captured by the
constructs employed here.
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1-20
2.1 Regulatory Fees on CFCs
The regulatory fee alternative under consideration is simply a constant fee
imposed on producers of virgin (i.e., non-recycled) CFCs. The fee may differ
across CFC compounds depending on their ozone depletion potential.
The basic effect of a fee is to raise the price of CFC faced by users. This
is illustrated in Exhibit 1-8. The fee pushes up the supply curve for CFC by an
amount equal to the fee itself. The effect of this shift is to raise the
equilibrium price of CFCs and to lower the equilibrium quantity. As shown, the
equilibrium price rises from p to p and the equilibrium quantity falls from
0 1 1
qt to q . At the new equilibrium, the price paid by users of CFC is p and,
0
given the horizontal supply curve, the price received by sellers is p . The
difference between the two prices is the regulatory fee per unit of CFCs.
The rectangular area A in the exhibit represents the revenue generated by
the fee. It is equal to the difference between the price paid by users at the
new equilibrium and the price received by suppliers times the new equilibrium
quantity. The revenue generated comes out of the producer surplus of the
CFC-using industries and the consumer surplus of the buyers of the outputs of
these industries.^*- However, the revenue generated offsets some of the losses
experienced by these parties, hence the revenue is a transfer from the affected
parties to the government. It does not represent a net social cost.
The net social cost of the fee is given by the irregularly shaped area B in
Exhibit 1-8. The costs captured by this area are borne by the same set of
parties as those identified above. Because of the horizontal supply curve for
CFCs and the assumption that price equals marginal cost, there are no losses (in
terms of producer surplus) experienced by the producers of CFCs or the owners of
the factors used in its production.
2.2 Auctioned Rights for CFC Use
The auctioned rights alternative would require firms to purchase rights in
order to use CFCs. The total number of rights available would be set by EPA.
The rights would initially be allocated via an auction, but firms would
subsequently be allowed to buy and sell rights from one another. The rights
would not be defined by CFC compound, but in terms of ozone depletion
equivalents. For example, if the ozone depletion potential of CFC-11 is taken
as the base, then using ten kilograms of CFC-11 would require purchasing rights
worth 10 kilograms. Fewer rights would be needed to use ten kilograms of a CFC
Losses in producer surplus occur to the extent that the higher CFC price
induces consumers to switch to substitute non-CFC based outputs. Given the
assumption that the supplies of all inputs are perfectly elastic, no losses
accrue to the owners of the factors employed in the CFC-using industries.
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1-21
EXHIBIT 1-8
SOCIAL COSTS OF A REGULATORY FEE ON CFC
Price of
CFC in
Year t
Pi
P?
T
fee A
1
transfer
B
net social costs
0 Quantity of
' CFC in Year t
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1-22
that is less ozone depleting than CFC-11, and more rights would be needed to use
one that is more ozone depleting. Thus, there would be a single right market
for all CFC compounds instead of separate markets for each compound.
To model the market for rights that would develop under this regulatory
alternative, it is necessary, first, to specify the conduct of the market.
Given the large numbers of firms that use CFC compounds and would participate in
the market, it may be reasonable to assume that the market is a competitive one.
Although this is the assumption adopted in the analysis, alternative assumptions
are possible. ^
The second step is to determine the aggregate demand for rights. Because
the rights are based on ozone depletion equivalents, it is necessary to
translate the demands for the various CFC compounds into ozone depletion
equivalents and then sum these translated demands. Conceptually, this is
accomplished by multiplying the vertical and horizontal scales on the aggregate
derived demand schedule for each CFC compound by its corresponding ozone
depletion index. The individual aggregate derived demand schedules for
different CFCs are then measured in the same units. These aggregated derived
demand schedules can then be horizontally summed to obtain a single "composite"
aggregate derived demand schedule for rights defined in terms of ozone depletion
equivalents.
This composite demand schedule is depicted in Exhibit 1-9 along with a
vertical line representing the total number of rights available at a given
time.13 The intersection of this line with the demand schedule gives the
composite "full" price, r , paid for CFCs in terms of their ozone depletion
equivalents. This composite full price can be translated back to a full price
for each CFC compound (in standard units) by dividing the composite full price
by the ozone depletion index for the compound.
The result is illustrated in Exhibit I-10 for a single CFC market. In
addition to the standard aggregate demand and supply schedules, a line
representing the full price for this CFC compound is presented. The full
1
price, pt, is the price paid by users of the CFC for both the compound itself
1 9
The highly-concentrated CFC-producing industry could lead to a
highly-concentrated market for permits. In such a case, the observed market
price for the permits would be below their true value, and the transfer payments
would flow to the holders of the permits instead of to the permit-issuing agency
(presumed to be the government). Assuming that the same non-competitive market
behavior exists both before and after the permits are auctioned, the assumption
of a competitive market for permits does not bias the estimates of net social
costs.
1 o
The above discussion implicitly assumes that the number of permits
issued is binding. In other words, the level of CFC use allowed under the
permit scheme is lower than that in the absence of regulations. The permit
scheme would otherwise be redundant and permits would have no value.
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EXHIBIT 1-9
MARKET FOR PERMITS IN OZONE DEPLETION EQUIVALENTS
Composite Price
in Year t
Composite
full price
Permits Available
Composite Aggregate
~" Derived Demand
Composite Quantity
in Year t
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1-24
EXHIBIT I-10
SOCIAL COSTS OF AUCTIONED PERMITS FOR CFC USE
Price of
CFC in
Year t
price) p|
price) pj
T
permit A
price
transfer
net social costs
0 Quantity of
* n?r :« v««.
-------
1-25
and the rights required to use it. The price of the CFC is given by pt; this
is the price received by the producers of the compound. The price of a right
is equal to the difference between the full price and the price received by the
producers.
The total amount spent on rights is given by the rectangular area A. This
area is simply equal to the right price times the quantity of the CFC demanded
at the full price. As in the case of a regulatory fee, the right payments
represent a transfer from one firm to either another firm or to the government.
As such, right payments are not counted as net social costs.
The net social costs of the right scheme are given by the irregularly shaped
area B. These costs are borne by the same set of parties as those in the
regulatory fee case. Once again, because of the horizontal supply curve for CFC
and the assumption that price equals marginal cost, there are no losses
experienced by the producers of CFC or the owners of the factors used in its
production.
2.3 Allocated Quotas
Under the allocated quota alternative, producers and importers of CFCs would
be issued quotas based on their historical market shares. They would then be
allowed to trade these quotas among themselves. Like the auctioned rights,
these quotas would be defined in terms of ozone depletion equivalents.
Conceptually, the allocated quota and auctioned rights alternatives are very
similar. The major differences between them are: (1) allocated quotas are
targeted specifically at producers/importers, whereas auctioned rights are also
bought and sold by CFC users; and (2) quotas are initially issued free, whereas
auctioned rights are auctioned off by EPA.
Because the allocated quotas can be traded, the analytical procedure for
determining the social costs of allocated quotas is identical to that for
auctioned rights. The differences noted above only affect the magnitude of the
transfers under the two alternatives, and the parties across which they take
place. In terms of the framework outlined in the previous section for measuring
the costs of a auctioned rights scheme, the total number of quotas issued
corresponds to the available number of rights and the quota price corresponds to
the right price.
2.4 Command and Control Alternatives
The two major command and control alternatives being considered are:
0 mandatory adoption by some industries of specific
engineering controls; and
0 bans on the use of CFCs in selected products.
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The procedure for calculating the costs associated with the first alternative is
straightforward. Because it is not necessary to first determine the response of
the CFC-using industries to the regulations (unlike the case for the economic
incentive based alternatives), the cost analysis entails tabulating and summing
the social costs of implementing the required engineering controls.
The method for determining the costs of bans on CFC use in specific products
is also straightforward. The costs can be determined by measuring the consumer
surplus under the derived demand schedule of the industry producing the banned
output. Exhibit I-11 depicts the derived demand schedule and associated
consumer surplus for an industry manufacturing a banned product. To reduce CFC
use in the product to zero, the industry must implement all the control options
to the left of the one employed in the baseline. Hence, all consumer surplus in
this market is lost. None of this loss is a transfer. Therefore, the costs of
the regulation are equal to the baseline consumer surplus, represented by area A
in Exhibit I-ll.1^ As in the previous cases, the loss comes out of the producer
surplus of the CFC-using industries and the consumer surplus of the buyers of
their output.
3. EMPIRICAL APPROACH FOR ESTIMATING COSTS OF REGULATION
This chapter describes the manner in which the framework presented in the
previous chapter was implemented to estimate the social and private costs of
U.S. regulations aimed at reducing the domestic use of CFCs. To compute the
social and private costs of regulations, demand schedules for CFCs were
estimated that define the amount of CFCs that would be demanded in each of the
major CFC applications (i.e., industries) at higher CFC prices. With these
schedules, the costs of regulations that restrict domestic CFC use were
estimated as changes in consumer and producer surplus.
The demand schedules were estimated from engineering cost data developed for
EPA.15 These engineering data describe the capital and operating costs of
options for modifying the manner in which products are produced and/or used in
order to reduce the use and/or emissions of CFCs. These options for reducing
CFC use and/or emissions have been variously referred to as "control options,
control possibilities, technical possibilities, and alternative technologies."
In the previous sections of this appendix, the opportunities for reducing CFC
use were discussed in terms of alternative "fixed proportion production
technologies." In this chapter, all the above terms are considered to be
interchangeable.
The data upon which the derived demand schedules are based describe the
steps that firms may take in response to increased CFC prices. These steps
include using alternative production methods, using alternative chemicals,
• Because the supply curve for CFCs is perfectly elastic, the price of
CFCs does not change in response to the lower demand for CFCs resulting from the
ban. Hence, there are no changes in non-banned markets. This would not be true
if the supply curve for CFCs were upward sloping. It would then be necessary to
examine non-banned markets.
The engineering data are described separately in a series of addenda to
the RIA, found in Volume III.
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1-27
EXHIBIT I-11
SOCIAL COSTS OF A PRODUCT BAN
Price of CFC
in Year t
Derived Demand Schedule of
Industry Producing Banned Product
P?
Quantity of CFC
in Year t
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1-28
installing equipment to collect and recycle CFCs, and switching to non-CFC
products. The increased prices of CFCs (caused by the restrictions imposed by
the regulation) are assumed to drive the adoption of these steps by firms.
Based on the derived demand curves developed from the engineering data,
social costs are evaluated using pre-tax costs discounted at a social discount
rate. Private costs are evaluated using after-tax costs discounted using a
private after-tax discount rate.
The steps used to estimate costs are as follows:
1. Identify Major CFG Applications. The major CFC
applications were identified and divided into key product
areas. The patterns of CFC use in each application were
defined.16
2. Specify Control Possibilities Applicable in Each
Application. A wide range of control possibilities was
identified for each of the application categories. Some
controls are available today, while others are expected to
become available in the future. For each of the control
possibilities, the potential cost of undertaking the
control and the influence that the control may have on CFC
use and emissions was defined.
3. Estimate CFC Use Reductions Achievable with Each Control
Possibility. The annual reduction in CFC use that can be
achieved if the control possibility were implemented was
estimated for each control individually, using the 1985
pattern of use.
4. Estimate Annualized Costs of the Control Possibilities.
Social and private annualized costs of the control
possibilities were estimated from the capital and
operating data provided. One-time costs (such as capital
costs) were converted into equivalent annual costs using a
standard annualization factor. The annualized costs were
expressed in terms of dollars per kilogram of CFC use
avoided by dividing the annualized cost estimate by the
number of kilograms of CFC use that are avoided by
implementing the control.
5. Construct Derived Demand Schedules for Each Application.
Derived demand schedules were constructed for each
application using subsets of the control possibilities.
The subsets of the control possibilities were selected to
represent groups of options that may be undertaken over
time in response to increased prices of CFCs. The groups
represent internally consistent sets of steps that may be
undertaken within each of the applications.
*-° The definitions of the CFC applications and their products are
presented separately in addenda to the RIA, found in Volume III.
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1-29
The general shape of these schedules is shown in Exhibit
1-4. The height of each vertical step in the schedules
represents the annualized costs of each control
possibility (on a per kilogram basis). The width of each
horizontal step represents the reduction in annual CFC use
associated with the controls. Different schedules were
developed for: (1) social and private costs, and (2) each
year in the analysis period reflecting the expected future
availability of control possibilities over time.
6. Aggregate Derived Demands for CFCs. The derived demand
schedules for each of the applications were summed
horizontally to estimate aggregate derived demand.
7. Estimate Private and Social Costs. The social and private
costs of regulatory alternatives were computed by
comparing the required reduction in CFC use to the
aggregate derived demand schedule. The changes in consumer
surplus were estimated using both the private and social
derived demand schedules, resulting in estimates of the
private and social costs of the required reduction.
Each of these steps is described below, followed by a description of major
limitations.
3.1 Identify Major CFC Applications
The major uses of CFCs are in:
refrigeration;
foam blowing;
fire extinguishing;
solvent cleaning;
sterilization; and
miscellaneous applications.
For this analysis, these broad end-uses were divided into more detailed
application categories that differentiate the types of products made with CFCs.
A list of these applications is shown in Exhibit 1-12 along with estimates of
the 1985 CFC use in each.
The applications were defined as products (e.g., insulating foam) or
services (e.g., metal cleaning). In some cases a single product is divided into
separate applications. For example, two applications are defined for boardstock
rigid polyurethane foams -- construction and industrial. Although the
manufacturing processes and firms producing foams for both applications are
similar, a division between the two was kept in order to capture possible
differences in control options available for each.
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EXHIBIT 1-12
LIST OF CFC APPLICATIONS USED IN THE ANALYSIS
1985 Use
Abdication
FOAM BLOWING
Rigid Polyurethane Foam
Laminated- Construct ion
Boards tock-Construction-Bldg.
Boards tock - Cons true t ion - Ind .
Poured-Refrigeration
Poured- Packaging
Poured-Transportation
Poured- Cons truction- Bldg .
Poured- Construction- Ind .
Poured- Cons truction- Bldg.
Poured- Construction- Ind.
Sprayed-Transportation
Flexible Polvurethane Foam
Slabstock
Molded
Phenolic Foam
Polypropylene Foam
Polyethylene Foam
PVC Foam
Extruded Polystyrene Foam
Sheet
Boards tock
Compound
CFC -11
CFC -11
CFC -11
CFC-ll/CFC-12
CFC-ll/CFC-12
CFC-ll/CFC-12
CFC-ll/CFC-12
CFC-ll/CFC-12
CFC-ll/CFC-12
CFC-ll/CFC-12
CFC-ll/CFC-12
CFC -11
CFC -11
CFC-ll/CFC-113
CFC-ll/CFC-114
CFC-ll/CFC-114
CFC-ll/CFC-12
CFC -12
CFC -12
(million of kilograms)
12.8
2.7
0.2
9.2
3.4
3.4
3.2
0.5
8.0
3.0
1.3
11.5
3.3
1.4
1.9
3.1
<0.1
6.3
3.0
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EXHIBIT 1-12 (continued)
LIST OF CFC APPLICATIONS USED IN THE ANALYSIS
1985 Use
Application Compound (million of kiloerams)
REFRIGERATION
Mobile Air Conditioners
Retail Food
Cold Storage
Centrifugal Chillers
Refrigerators
Transport
Process Refrigeration
Freezers
Reciprocating Chillers
Dehumidifiers
Ice Machines
Water Coolers
Vending Machines
Centrifugal Chillers
Centrifugal Chillers
Centrifugal Chillers
Retail Food
Cold Storage
SOLVENTS
Conveyorized Vapor Degreasing
Open Top Vapor Degreasing
Cold Cleaning
Dry Cleaning
STERILIZATION
Hospitals
Medical Equipment
Contract Sterilization
Pharmaceutical
Spice Fumigant
Commercial R&D Labs
Libraries
Non- commercial R&D Labs
Animal Labs
Bee Hive Fumigant- -DOA
CFC -12
CFC -12
CFC -12
CFC -12
CFC -12
CFC -12
CFC -12
CFC -12
CFC -12
CFC -12
CFC -12
CFC -12
CFC -12
CFC -11
CFC -114
CFC -500
CFC -502
CFC -502
CFC-113
CFC -113
CFC-113
CFC-113
CFC -12
CFC -12
CFC -12
CFC -12
CFC -12
CFC -12
CFC -12
CFC -12
CFC -12
CFC -12
54.1
4.7
2.6
2.0
1.8
0.7
0.7
0.5
0.4
0.3
0.2
<0.1
<0.1
5.5
0.8
0.9
6.2
3.0
18.1
15.9
4.6
1.4
6.9
3.1
1.3
0.6
0.2
0.1
<0.1
<0.1
<0.1
<0.1
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EXHIBIT 1-12 (continued)
LIST OF CFG APPLICATIONS USED IN THE ANALYSIS
Application
1985 -Use
FIRE EXTINGUISHING
Total Flooding Systems
Civilian Electronic
Military
Civilian Flammable Liquid
Civilian Other
Civilian Electronic
Military
Civilian Flammable Liquid
Civilian Other
Portable Systems
Civilian Electronic
Military
Civilian General
Civilian Residential
Civilian Flammable Liquid
Military
Locally Applied Systems
Locally Applied Systems
Halon 1211
Halon 1211
Halon 1211
Halon 1211
Halon 1301
Halon 1301
Halon 1301
Halon 1301
Halon 1211
Halon 1211
Halon 1211
Halon 1211
Halon 1211
Halon 1301
Halon 1211
Halon 1301
<0.1
<0.1
<0.1
<0. 1
2.2
0.5
0.4
0.3
1.3
0.8
0.2
0.2
0.1
0.1
<0.1
<0.1
MISCELLANEOUS
Skin Chiller/Cleaner
Liquid Food Freezing
Blower Cleaner
Warning Devices
Heat Detectors
Whipped Topping Stabilizer
Aerosol Propellant
CFC-113
CFC-12
CFC-12
CFC-12
CFC-12
CFC-115
CFC-ll/CFC-12
3.0
0.9
0.6
0.9
0.1
9.5
Source: See addenda to the RIA, Volume III.
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The applications cover all CFC use associated with manufacturing,
installation, and use of the application.1^ Mobile air conditioners, for
example, require CFCs during manufacturing, installation, and for replacing CFCs
lost during product use. Manufacturing, installation and service use of CFCs
are each analyzed within this application, recognizing that the control
possibilities may influence each portion of the use separately from the other
portions.
For some applications, the output produced can best be described as a
"service." Examples include solvent and sterilization uses. For service uses,
applications were defined by the entity performing the service (e.g., hospitals
sterilizing surgical equipment) or the type of service being performed (e.g.,
conveyorized vapor degreasing).
3.2 Specify Control Possibilities Applicable in Each Application
Having identified the primary applications of CFCs, the next step was to
define the set of control possibilities that may be undertaken for purposes of
reducing CFC use within each application. The following types of control
possibilities were identified:
• Product substitutes -- replace CFC-consuming products with
non- (or less-) CFC-consuming substitute products. An
example is substituting packaging materials manufactured
using CFC-blown foam with paper-based packaging materials..
• Chemical substitutes - - replace CFCs used in the
manufacture, installation, or use of products with less
ozone depleting chemicals.
• Process substitutes and other controls - - process changes,
use of add-on recovery/recycling equipment, and other
kinds of controls for reducing CFC use or emissions (e.g.,
recovery of CFCs from existing products).
For the 74 applications identified in this analysis, a total of nearly 900
control possibilities were identified.18 These controls form a "menu" of
actions from which firms within each of the applications may choose to reduce
their consumption of CFCs. Although the identification of control possibilities
was designed to be as comprehensive as possible, additional options may be
available that are not included in the data available for this analysis.
The available application data do not account for the total amount of
CFC produced, imported, and exported in the U.S. The difference between the sum
of the use across all the application data and the total amount produced is
referred to as "unallocated use."
1 R
The data on the control possibilities are documented separately in
addenda to the RIA, found in Volume III.
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Of note is that not all of the options identified are available immediately.
For each control option an estimate was made of its expected future availability
over time. The following definitions were used:
• short term -- available in 0 to 3 years;
• medium term -- available in 4 to 7 years; and
• long term -- available in more than 7 years.
Of the nearly 900 control possibilities identified, about 350 were excluded
from further analysis because of factors that make the controls unacceptable for
use by industry, including:
• risk/toxicity;
• technical feasibility;
• cost;
• effectiveness at reducing CFC use;
• enforceability; and
• insufficient data to evaluate the costs and reduction
achieved by the substitute.
For the remaining approximately 550 control options identified, detailed
estimates were prepared concerning the cost of undertaking the control and the
possible reduction in annual CFC use achievable with the control over time.
These factors were used to estimate the annualized cost of the control per
kilogram of use avoided, which is used to estimate the appropriate derived
demand schedules.
3.3 Estimate CFC Use Reductions Achievable with Each Control Possibility
The potential effectiveness of each control possibility to reduce CFC use
was estimated within its application category based on three factors:
• the portion of the application for which the control is
effective;
• the reduction potential of the control; and
• 1985 U.S. CFC use and emissions within the application.
The portion of the application for which the control is effective defines
the segment of the application that may reduce its CFC use through the
implementation of the control. For example, the mobile air conditioning
application includes several types of use, including service use. The control
being analyzed may be applicable for the service use segment of the application,
but may not be applicable for the other segments. In this case, the control is
analyzed as being capable of reducing only the climate service use, and the
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other uses are assumed to be unaffected. This case is further refined in that
the control may apply only to a portion of the service use segment (e.g., only
larger automotive repair shops). In this case, the control is analyzed as being
capable of reducing only a portion of the service use, and the remaining service
use is assumed to be unaffected.
An alternative example is the case where a chemical substitute is estimated
to be applicable to only a portion of the total application's use of CFCs. The
portion for which the chemical substitute is not applicable may have certain
product characteristics or manufacturing requirements that preclude the use of
the substitute. In this case, the chemical substitute is assumed to be capable
of replacing only the applicable segment of the application, and the
non-applicable segment is assumed to be unaffected.
Reduction potential refers to the extent to which a control reduces CFC use
in its applicable segment of the application. For example, recovery equipment
used during mobile air conditioning servicing may result in a fraction of
service use being recycled, thereby reducing total use in the application. In
this example, only the fraction of the use that is recovered is counted as a
potential reduction in compound use. The reduction potential is generally less
than 100 percent for engineering controls. The reduction potential for chemical
substitutes was assumed to be 100 percent (within the applicable segment of the
application) because chemical substitutes generally result in a complete
replacement of a CFC.1^ Similarly, the reduction potential for product
substitutes is 100 percent.
The final factor considered is the use and emissions of the compound in the
applications. The 1985 use in the application is divided into manufacturing
use, installation use, service use, other use, and unallocated use. The total
use in the application equals the sum of these component uses. The total use in
some applications could not be allocated to manufacturing, installation, or
service. In this case, an amount was identified as "other or unallocated," and
unless specifically assumed otherwise, this portion of the use was assumed to be
controllable to the same extent as the allocated portion of CFC use in that
control option.
Emissions in 1985 are divided into emissions during manufacturing,
installation, product use and servicing, product disposal, and "other"
emissions. Engineering controls are assumed to reduce CFC emissions in these
categories. As with unallocated use, "other" emissions were assumed to be
controllable to the same extent as allocated emissions.
Given these definitions, the approach used to estimate the potential for
control options to reduce CFC use differed by the type of control as follows:
• Product substitutes were assumed to reduce CFC use during the
manufacturing and installation of CFC-consuming products they
replaced. Therefore, the use reduction of product substitute
controls was estimated by multiplying the 1985 compound use
•"•* Some of the chemical substitutes are themselves potential ozone
depleters. The increase in the use of these compounds as a consequence of the
undertaking of the control option is identified as well.
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during manufacturing and installation in the application
category by the estimated portion of the manufacturing and
installation use to which the product substitute applies.
• Chemical substitutes may be capable of replacing CFC use in:
(1) manufacturing and installing new products (e.g., making a
new refrigerator) and/or (2) servicing existing products
(e.g., replacing CFCs while servicing an old refrigerator).
Therefore, separate use reductions were estimated for chemical
substitutes in new products and in existing products. The use
reduction associated with chemical substitute in new products
was estimated by multiplying the portion of new production
that may adopt the chemical substitute by the 1985 CFC use
during manufacturing and installation. Similarly, for
existing products, the reduction potential was estimated by
multiplying the portion of existing products for which the
substitute may be applicable by the 1985 CFC use for service
existing products.
• For process substitutes, add-on engineering controls, and
other kinds of controls, use reduction potentials were
calculated as the sum of the reductions possible in each of
the emissions categories. The separate emissions reductions
estimates for the emissions categories (i.e., manufacturing,
etc.) were multiplied by the 1985 emissions estimates to
estimate the total.
The estimates of the portion of the application to which each control
applies were allowed to change over time. A maximum level was defined,
indicating the likely full extent to which the control would be implemented in
the application, given time for the firms in the application to implement the
controls. The time required to implement the controls was also estimated (and
is generally on the order of 3 to 10 years), so that the estimated use reduction
changes over time as the level of applicability of the control increases. For
purposes of this analysis the increase in the applicability of the control over
time is modelled using linear interpolation, so that the maximum likely
penetration is reached in the time required for firms to adopt the control.
3.4 Estimate Annualized Costs of the Control Possibilities
For each control possibility, both social and private annualized costs were
estimated. These annualized costs reflect the capital, operating, and other
costs that are incurred when the control is undertaken. These costs are based
on engineering estimates and are defined as the costs that are incremental
relative to continuing to manufacture and use the CFC-related products in their
current forms. The social costs reflect the total resource costs to society,
and the private costs reflect the costs faced by firms, including appropriate
adjustments for tax liabilities and costs of capital.
To enable the controls to be compared and analyzed in relation to a policy
of restricting the use of CFCs, the annualized costs are expressed on a per
kilogram of use avoided basis. This "per kilogram" estimate is made by dividing
the annualized cost of undertaking the control by the amount of the compound use
that may be reduced by the control. The resulting value (based on private
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1-37
costs) is taken as an indication of the increase in the price of CFCs that would
be required in order for firms to be indifferent between undertaking the control
or continuing to use the CFCs. If the price of the CFCs exceeds this annualized
value, the firm would be better, off to reduce its use of CFC and undertake the
control. Consequently, the cost estimates are designed to be used in the
analysis framework described in the previous chapter, where derived demand
schedules form the basis of the analysis.
The following types of costs were reported (where applicable) for each
control possibility:^
• capital costs -- such as the acquisition cost of equipment
required to convert production capacity to use substitute
chemicals. Capital costs are one-time costs that are
subject to depreciation.
• non-recurring costs -- transitional, one-time costs such
as research and development, reformulation, or training
required to implement a control. For purposes of
computing private annualized costs, non-recurring costs
were considered not to be depreciable.
• annual operating costs -- incremental materials, and labor
required to implement the control.
• salvage of capital equipment -- residual value of
equipment used to implement a control.^
• annual offsetting savings -- reduced expenditures due to
lower use of CFCs and other factors.
In addition to the costs identified above, several special costs were
reported for product and chemical substitutes:
• Product substitutes.
the price differential between the CFC-using product
and its replacement product was included as a cost (or
possibly a savings); and
for insulating foams, an estimate was made of the
potential stream of annual energy losses caused by the
use of less-well-insulating products.
^u Not all of these cost categories apply to all of the controls. Some
chemical substitutes, for example, can be used without additional capital
investment.
on
A salvage value for necessary capital equipment was included
in only a few instances.
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• Chemical substitutes -- the expected future price per
kilogram of CFC- replacing chemicals was estimated along
with the amount of the substitute needed to replace a
single kilogram of CFC.
All of these reported engineering-based cost estimates are on a before-tax, real
basis in 1985 U.S. dollars.
3.4.1 METHODS FOR COMPUTING SOCIAL ANNUALIZED COSTS
Estimates of capital and non-recurring costs were annualized by multiplying
these costs by:
_ r _ t
where r is the real social discount rate and t is the estimated economic life of
capital. This factor is used to spread capital and non-recurring costs over the
economic life of the capital to which a control is applied. The economic life
of the capital equipment for each control was estimated, and ranged between 5 to
20 years.
Non-recurring costs (such as research and development costs) represent
one-time costs which, in practice, will not be replicated in future years.
Using this interpretation, such non-recurring costs should not be included in
annualized costs because they will not recur at a constant scale (i.e., the
costs only occur once, regardless of how long the control is undertaken).
Nonetheless, non-recurring costs were included with capital costs so that the
annualized cost estimates would reflect the full social costs of controls.
To compute total annualized costs, annualized capital and non-recurring
costs were added to estimates of other annual pre-tax costs as follows:
• annual operating costs -- annual operating costs such as
labor and utilities were added directly.
• salvage of control equipment -- few controls were expected
to have salvageable capital. The present value of the
salvage value of control equipment was estimated as :
S * C/(l+r)c
where S is the percentage of capital costs estimated to be
recoverable on salvage, C is the original capital cost, t
is the useful life of capital, and r is the real social
discount rate. This present value salvage amount was
annualized in the same manner as described above for
capital and non-recurring costs. The resulting annualized
salvage value was then deducted from total annualized
costs.
• annual savings -- the estimated annual savings due to
reduced CFC use, operating efficiencies, or other factors
associated with implementing a control were subtracted
from total annualized costs.
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In addition to these cost components, adjustments are required for product
substitute and chemical substitute controls. For product substitutes, the
differential costs of the products and their differences in lifetimes must be
reflected.22 The annualized cost associated with replacing one CFC-related
product was estimated as: ^
-Pc + Ps *
where: PC - the 1985 price of the CFC-based product;
Ps = the 1985 price of the product substitute;
tc = the average useful life of the CFC-based product;
ts = the average useful life of the product substitute; and
r = real social discount rate.
This annualized cost was added to the annualized costs computed above.
For substitute insulating materials, the costs of reduced insulating
capacity was reported in terms of the annual incremental energy costs
experienced per metric ton of CFC -blown foam replaced. Because these energy
costs occur during each year for which alternative insulating materials are
used, annual energy costs were aggregated to reflect the stream of costs
incurred over the useful life of the product as follows:
PV(E) = E *
with r representing the real social discount rate, t the life of the CFC-blown
foam product, and E the real before-tax annual energy penalty. This energy cost
value was added to the annualized cost estimates described above.
The adjustment to the annualized cost estimate for chemical substitute
controls was based on two factors: (1) the price of the chemical substitute
compared to the price of the CFC it replaces and (2) the amount of substitute
required to replace a unit of the CFC. These factors were combined to estimate
the relative cost of replacing one kilogram of the CFC with the substitute as:
Ps * R - PC
where Ps is the price of the chemical substitute, R is the number of kilograms
of substitute required to replace one kilogram of the CFC, and PC is the price
of the displaced CFC. Separate estimates of R were made for chemical
22 The difference in the lifetimes of the CFC-related product and the
substitute product must be incorporated so that the relative cost of switching
to the substitute can reflect the costs over the full lifecycle of the products.
If the substitute product lasts longer than the current CFC-related product,
then the cost of switching is reduced; if the product life of the substitute is
shorter, then the cost of switching is increased. In general, the reported
lifetime differences were small, so that the lifetime adjustment had a small
impact on the cost estimate.
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substitutes in new and existing products. Annual chemical replacement costs
were added to annualized capital, operating, and other costs of chemical
substitutes (if any). As a final step, the annualized costs were adjusted to
reflect differences in the basis for expressing the engineering cost estimates,
which included:
• Costs reported for the maximum fraction of the application
expected to take the control. In this case the cost
estimates are based on the segment of the application
expected to implement the control, and consequently no
adjustment was required.
• Costs reported per unit of application (e.g., per metric
ton of foam produced). In this case the costs had to be
multiplied by the number of units (e.g., the number of
metric tons of foam) expected to be affected
by the control. The number of units was estimated as the
total units in the application times the expected fraction
of the application that could undertake the control.
• Costs reported as if the entire application adopted the
control. In this case the costs were multiplied by the
maximum fraction of the application expected to implement
the control (if the entire application was expected to
implement the control, then no adjustment was required).
Once these adjustments are made, the total annualized costs for the control
are divided by the reduction potential for the control to produce a social
annualized cost per kilogram of use avoided. Detailed examples of social
annualized cost calculations are shown in Exhibits 1-13 through 1-15 for product
substitute, chemical substitute, and add-on engineering control options.
3.4.2 METHODS FOR COMPUTING PRIVATE ANNUALIZED COSTS
For purposes of assessing firms' potential reactions to restrictions on
CFCs, the costs faced by the firms must be estimated. These costs are referred
to as private costs. As discussed in Section 1, private costs will differ from
social costs because of tax effects, differences in discount rates, and possible
differences in the kinds of costs incurred.
To estimate private costs, a discounted cash flow analysis was used. This
cash flow analysis: (1) computes annualized before-tax costs using a before-tax
private discount rate, (2) estimates incremental cash flows incurred by private
entities including the effects of depreciation and taxes on cash flows, and (3)
computes an annual cost as the net of all annualized cash flows.
In general, the methods used to compute private annualized costs follow
those described to compute social annualized costs. The methods used to
estimate private annualized costs are comprised of the following steps:
1. The magnitude and timing of pre-tax costs (i.e., capital and
operating costs) were specified. Assumptions regarding the
timing of the costs and expenses (relative to the initiation
of the control) are:
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EXHIBIT 1-13
EXAMPLE SOCIAL COST ESTIMATE
FOR A PRODUCT SUBSTITUTE
Control Description: Fiberglass Batts -- Use Fiberglass as an
alternative insulating material
Application Category: Rigid Polyurethane Foam -- Boardstock Building
Construction
Ozone-Depleting Compound: CFC-11
1. Estimated Use Reduction Potential for Application Category
CFC-11 Market Use Reduction
Use in 1985 Penetration For Application
(Metric Tons) * (Percent) - (Metric Tons)
During Manufacturing 2,700 10 270 •
During Installation 0 10 0
During Product Use
or Servicing 0
Other Use 0
Unaccounted For 0
TOTAL 2,700 270
2. Estimated Annualized Costs per Metric Ton of Foam Replaced
Annualized
Costs f$)
Capital Cost 0 * 0.062 S/ - 0.00
Annual Operating Cost = Q.QQ
a/ Represents annualization factor used to spread capital costs. Calculated as:
90
0.02/(1-(1/(1+0.02) )) = 0.062.
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EXHIBIT 1-13 (continued)
EXAMPLE SOCIAL COST ESTIMATE FOR A PRODUCT SUBSTITUTE
Annualized
Costs CS")
Salvage of Capital
0 % Salvageable Capital
x $ 0 Capital Cost
x 0.673 fe/
x 0.062 £/ - 0.00
Product Substitution Costs
+ $11.820 Price of Fiberglass
Required to Replace One Metric
Ton of Rigid PU Foam
x 1.0 d/
= $11,820
$4,600 Price per Metric
Ton of Rigid PU Foam = $7,220
Present Value Energy Cost
$0 Annual Energy Cost
x 31.42 £/ $ 0
TOTAL ANNUALIZED COST $7,220
20
b/ Present value factor calculated as: 1/(1+0.02) = 0.673
c/ See footnote a/.
d/ Factor that accounts for differences in useful lives of fiberglass and
rigid polyurethane foam in this application. In this case, the lives are
the same, so the factor equals 1.0.
e/ Annuity factor calculated as: (1-1/(1+0.02) )/0.02 = 31.42 where 50 years
is the estimated useful life of fiberglass board.
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EXHIBIT 1-13 (continued)
EXAMPLE SOCIAL COST ESTIMATE FOR A PRODUCT SUBSTITUTE
3. Cost Adjustment to Industry-Wide Values
19.100 1985 U.S. Consumption of Rigid PU Foam for Application
(Metric Tons)
X 10% Estimated Market Penetration for Fiberglass
1,910 Metric Tons of Rigid PU Foam Potentially Replaced
X $ 7,220 Annualized Cost Per Metric Ton of Foam
= $13.8 Million
4. Annualized Cost Per Kilogram of CFG Use Reduction
$13.8 Million Adjusted Annualized Costs
270,000 Use Reduction for Application (Kilograms)
Social Annualized cost Per Kilogram = $51
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EXHIBIT 1-14
EXAMPLE SOCIAL COST FOR A CHEMICAL SUBSTITUTE
Control Description: FC-123
Application Category: Rigid Polyurethane Foam Boardstock -- Building
Construction
Ozone-Depleting Compound: CFC-11
1. Estimated Use Reduction Potential for Application Category
CFC-11 Market Use Reduction
Use in 1985 Penetration For Application
(Metric Tons) * (Percent) - (Metric Tons)
During Manufacturing 2,700 90 ^/ 2,430
During Installation 0 90 ^/ 0
During Product Use
or Servicing 0 0 ^/ 0
Other Use 0 0 k/ 0
Unaccounted For 0 -- ..
TOTAL 2,700 2,430
2. Estimated Annualized Costs per Metric Ton of Foam Replaced
Annualized
Costs (S)
Capital and 92 * 0.062 £/ = 5.70
non-recurring Cost
Annual Operating Cost = 0
a/ Estimated market penetration for new products.
b/ Estimated market penetration for existing products. Not relevant for
foams.
c/ Annualization factor used to spread capital and non-recurring costs.
Calculated as:
90
0.02/(l-(l/(l+0.02)zu))=0.062.
Note in this example all costs are non-recurring reformulation costs, and no
capital costs are expected.
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EXHIBIT 1-14 (continued)
EXAMPLE SOCIAL COST FOR A CHEMICAL SUBSTITUTE
Annualized
Costs (S)
Salvage of Capital
0 % Salvageable Capital
x S 0 Capital Cost
x 0.673 d/
x 0.062 S/ 0.00
Chemical Substitution Costs
New Existing
Products Products
4.14 NA Price of FC-123
x 1.25 NA Kilograms of FC-123
Blowing Agent Needed to
Replace 1 Kilogram of CFG-11
5.18 NA
1.41 NA Price of CFC-11 ($/kg)
3.77 NA Cost of Substituting 1 kg of
CFC-11
x 1.41 £/ NA
531.57 NA
20
d/ Present value factor calculated as: 1/(1+0.02) = 0.673
ey See footnote c/
f/ Estimated number of kilograms of CFC-11 used per metric ton of foam.
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EXHIBIT 1-14 (continued)
EXAMPLE SOCIAL COST FOR A CHEMICAL SUBSTITUTE
Total Annualized Costs (New Products) • 537.27
Total Annualized Costs (Existing Products) NA
3. Cost Adjustment to Industry-Wide Values (New Products Only)
19.100 1985 U.S. Consumption of Rigid PU Foam for
Application (Metric Tons)
x 90% Market Penetration for FC-123
17,190 Metric Tons of Foam
x $537.27 Annualized Cost Per Metric Ton of Foam
- $9.2 million
4. Annualized Cost Per Kilogram of. CFC Use Reduction
$9.2 million Adjusted Annualized Costs
2,430,000 Use Reduction for Application (Kilograms)
- $3.80 Social Annualized Cost per Kilogram
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EXHIBIT 1-15
EXAMPLE SOCIAL COST ESTIMATE FOR AN ADD-ON
ENGINEERING CONTROL OPTION
Control Description: Vertical Foam Chamber with Carbon Absorption
and Recovery*
Application Category: Flexible Polyurethane Foam -- Slabstock
Ozone-Depleting Compound: CFC-11
1. Estimated Use Reduction Potential for Application Category
CFC-11 Estimated
Emissions Market Control Use Reduction
in 1985 Penetration Effectiveness For Application
(Metric Tons) x (Percent) x (Percent) = (Metric Tons)
During Manufacturing 11,500 2 60 138
During Installation 00 0 0
During Product Use
or Servicing 00 0 0
During Product
Disposal
Other Use
Unaccounted For
TOTAL 11,500 138
2. Estimated Annualized Costs for All Industry
Annualized
Costs (S)
Capital Cost 155.000.000 x 0.062 £/ = 9,610,000
Non-Recurring Cost 57.500.000 x 0.062 & = 3,565,500
Annual Operating Cost = 21.000.000
0
0
0
0
0
_ _
0
0
_ _
0
0
_ _
*Note: This control is used here to illustrate the method used to estimate
costs. It is not anticipated that this control is likely to be undertaken in
response to regulations on CFCs.
a/ Annualization factor used to spread capital costs. Calculated as:
90
0.02/(1-(1/(1+0.02) )) = 0.062.
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EXHIBIT 1-15 (continued)
EXAMPLE SOCIAL COST ESTIMATE FOR AN ADD-ON
ENGINEERING CONTROL OPTION
Annualized
Costs (S)
Salvage of Capital
10 % Salvageable Capital
x 155.000 OOP Capital Cost
x 0.673 £/
x 0.062 fi/ - -647,000
Annual Offsetting Savings -8.000.000
TOTAL
25,528,000
3. Cost Adjustment to Industry-Wide Values
$25,528,000 Annualized Costs
x 2% Market Penetration
$ 510,560
4. Annualized Cost per Kilogram of CFC Use Reduction
$ 510,560 Adjusted Annualized Costs
138,000 Use Reduction for
Application (Kilograms)
Social Annualized cost per kilogram = $3.70
20
b/ Present value factor calculated as: l/(l-f0.02) - 0.673
c/ See footnote a/
d/ Negative cost.
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• capital and non-recurring costs occur in year 0;
• capital salvage occurs at end of the capital's
operating life;
• depreciation expense occurs over seven years;
operating costs and offsetting savings are
incurred during the technical substitute's
operating life.
2. Total pre-tax costs were calculated for each year over the
control's operating life.
3. Taxes were applied to costs incurred after year 0 by
multiplying the costs by (1-tax rate). Annual offsetting
savings were also multiplied by (1-tax rate).
4. Depreciation was "added back" to net after-tax costs to
account for the tax savings attributable to this non-cash
expense.
5. The stream of after-tax cash flows was discounted using
the private cost of capital to compute a net present value
of the costs of the control over its entire life.
6. The present value of the after-tax costs was annualized
using the private cost of capital as the discount rate.
This present value is then divided by the total reduction
in CFG use that can be achieved by the control to produce
an annualized private cost per kilogram of use avoided.
Taxes were calculated using a marginal total tax rate of 44 percent. This
rate includes a federal corporate income rate of 34 percent and an assumed
average state tax rate of 10 percent. Investment Tax Credits (ITCs) were
assumed not to be available. After-tax cash flows arising from capital salvage
were calculated by multiplying pre-tax salvage by (1-tax rate). A tax loss was
included on undepreciated capital whenever the depreciable life exceeded the
operating life of capital.
Annual depreciation expense was calculated using the straight line method
over seven years. This assumption is conservative because depreciation expenses
occur uniformly over the depreciation period, whereas accelerated depreciation
methods produce tax benefits in earlier years. Because depreciation is based on
initial acquisition costs, annual depreciation expense was deflated by an
inflation index to calculate real depreciation. An inflation rate of 4 percent
was used.
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To select the appropriate rate of private discount, the available literature
was surveyed.23 As was the case for the social rate of discount (see Appendix
H), little consensus existed among the experts who have studied this problem.
The range of estimated values for the real rate of return on private investments
was from 4 to 9 percent. Accordingly, 6 percent was selected as a median
estimate.
This range of estimates agrees well with the cited range for the rate of
social discount. One would expect the private rate to be from 2 to 5 percentage
points higher than the social rate because of (a) the taxation of private income
and (b) the need for society to subsidize capital formation to provide for
future generations.
The costs of energy losses due to reduced insulating abilities of product
substitutes may not be incurred by firms. Instead, these costs (or a portion of
these costs) may be incurred by consumers if the reduced insulating value of the
product substitutes is not capitalized into their market price. The analysis
assumes that the reduced insulating value of the substitutes is capitalized into
the price of the substitutes, meaning that consumers are left unaffected, and
the firms making the substitutes "incur" these costs. The importance of this
baseline assumption may be explored through sensitivity analysis by varying the
portion of these costs incurred by firms, and the portion incurred by
consumers.^
3.5 Construct Derived Demand Schedules for Each Application
Based on estimates of social and private annualized costs and reduction
potentials for control possibilities, two derived demand schedules for CFCs
(social and private) were constructed for each application. The demand
schedules reflect the amounts of reduction that the controls can achieve and the
annualized cost per kilogram of achieving them.
Of particular importance in developing these demand schedules is that the
individual control possibilities be aggregated in a proper manner, so that
compatible controls are adopted over time. To specify the set of compatible
Studies surveyed included Jacob Stockfish, "The Interest Rate Applicable
to Government Investment Projects," in Program. Budgeting and Benefit Cost
Analysis. Hinrichs and Taylor (eds.); Daniel Holland and Stewart Myers,
"Profitability and Capital Costs for Manufacturing Corporations and All
Nonfinancial Corporations," American Economic Review. May 1980; Barbara Fraumeni
and Dale Jorgenson, "Rates of Return by Industrial Sector in the United States,
1948-1976," American Economic Review. May 1980; William Brainard, John Shoven
and Laurence Weiss, "The Financial Valuation of the Return to Capital,"
Brookings Papers on Economic Activity. 1980; Robert Lind, "A Primer on the Major
Issues Relating to the Discount Rate for Evaluating National Energy Options," in
Discounting for Time and Risk in Energy Policy. Resources for the Future, 1982.
This issue does not arise in the computation of social costs because
the distribution of the costs (i.e., between manufacturers and consumers) is
not considered.
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controls, the full list of control possibilities for each application was
examined, and a subset of likely controls was identified. This subset is
referred to as a control plan.
The choice of options to include in the control plan is uncertain and
somewhat subjective. The key factors considered in developing the control plans
were: technical feasibility and expected availability; cost; potential impacts
on product quality; and internal consistency both within each year (i.e.,
substitutes may be mutually exclusive) and across time (i.e., firms may decide
not to undertake controls available today in anticipation of other, preferred
controls becoming available later). For example:
• although several potential chemical substitutes may be
feasible, only one chemical substitute is likely to be
used, particularly if different process modifications are
required to use each of the substitutes;
• some controls are likely to be used in tandem, requiring
the analysis to ensure equal adoptions of each; and
• two (or more) controls may be mutually exclusive, meaning
that only one is likely to be undertaken.
In general, the development of the control plan reduced the menu of likely
controls from the total of about 550, to about 350. The number of control
possibilities per application generally ranges from about three to ten. These
three to ten control possibilities were used to construct the derived demand
schedule for each of the applications.
The control possibilities in the control plan for each application were then
ordered from least to most costly based on the private annualized cost,
representing the assumption that the available least costly controls would be
undertaken first. Then the use reduction potential over time for each of the
controls was modified to reflect the impacts of the controls being taken in a
group. (The use reduction estimates described above in section 3.3 were
estimated based on the assumption that the controls were taken individually.)
For controls that are independent, the least expensive control was assumed
to achieve its full use reduction potential. More costly controls are modeled
to result in less reductions, because the cheaper controls have already reduced
the total use in the application. In general, the more expensive controls are
assumed to apply only to the portion of the application not affected by the
cheaper controls. •*
Because the various controls are estimated to become available over time,
and because each control requires time to penetrate the market and become
implemented, the potential reductions that can be achieved increase over time.
9 S
Several exceptions to this procedure were implemented in cases where the
control plans specified that the separate controls applied to different segments
of the application in a manner that results in the full reduction potential of
each being achievable.
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Based on these estimates, the private and social derived demand schedules
for each application can be drawn. The private derived demand schedule is drawn
first because the private costs determine the order of the controls in the
curve. As shown in Exhibit 1-16, the horizontal steps in the demand schedule
represent the reduction in annual CFG use associated with the controls. The
vertical steps are the annualized costs per kilogram of undertaking the
controls. The private derived demand schedule slopes downward because the
controls are ordered from least to most costly.
Also shown in Exhibit 1-16 is the fact that the derived demand schedule
shifts over time. As additional controls become available and may be
implemented, the level of reduction that can be achieved increases. Therefore,
the curve appears to shift downward over time.
Exhibit 1-17 displays a social derived demand schedule. The format for the
curve is the same, but it need not be downward sloped because the order of the
controls is defined by the private costs.
3.6 Aggregate Derived Demand for CFCs
The social and private aggregate derived demand schedules for all the CFCs
being controlled as a group were estimated by: (1) summing the derived demand
schedules from all the applications within each compound to create aggregate
compound derived demand schedules; and (2) aggregating across compounds by
scaling according to the ozone depletion potential of each. The results are
social and private aggregate derived demand schedules that relate total demand
for all the ozone depleting compounds to their price (expressed in ozone
depleting potential units as well).
These aggregate derived demand schedules are analogous to the individual
application schedules and have the same general shape. The primary difference
is that the aggregate schedule is expressed in terms of ozone depleting
potential, and there are many more steps.
3.7 Estimate Social and Private Costs
The social and private costs of restricting the use of CFCs is estimated by
identifying the appropriate area under the derived demand schedule as described
in Section 1. For each year of the analysis, the appropriate aggregate derived
demand curve is first identified. Then the level of reduction required by the
policy in that year is identified. The level of reduction is equal to the
percentage change from the baseline level of CFG use (that would occur in the
absence of the controls) that is required. Because the level of CFG use is
generally expected to increase in the absence' of regulatory requirements, even a
freeze in the amount of allowable CFC use at, say, 1986 levels will require a
reduction in use over time. Because baseline CFC use is expected to grow, the
required amount of reduction will also grow.
The level of reduction required is used to identify which controls in the
aggregate derived demand schedule must be undertaken. For example, Exhibit 1-18
displays the requirements of a 20 percent reduction. All the controls that fall
to the right of the line marked "quota" are simulated to be needed to reach the
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EXHIBIT 1-16
EXAMPLE OF A PRIVATE DERIVED DEMAND SCHEDULE
CFC
Price
I
I
I
Private
Derived Demand
Schedule for T,
Private
Derived Demand
Schedule for Tn
n:
1
100%
0%
Percent
Reduction
Achieved
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EXHIBIT 1-17
EXAMPLE OF A SOCIAL DERIVED DEMAND SCHEDULE
Social
Costs
Per
Kilogram
Social
Derived Demand
Schedule for Tn
Social
Derived Demand
I
Schedule for T, --- --
100%
0%
Percent
Reduction
Achieved
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1-55
desired 20 percent reduction. These controls may fall in any number of
applications, and some applications may be simulated to undertake no controls at
all (at this level of reduction).
As shown in the exhibit, the quota may fall in the middle of a horizontal
step. For purposes of analysis, it is assumed that the entire control
represented by that step will be undertaken. In this case, the actual reduction
achieved will exceed the desired reduction. The "over reduction" is expected to
be small, however, because the reductions achievable with individual controls
are small relative to the total use of the compounds.
The area labeled C in Exhibit 1-18 is used to estimate the private cost of
achieving the 20 percent reduction (an analogous area exists on the social
derived demand schedule for purposes of estimating social costs).^ An
analogous calculation is made using the social derived demand curve for purposes
of estimating the total social costs.
Exhibit 1-18 also identifies the transfer payments made by firms as the
result of the restriction in CFC production. The increased cost per kilogram
that results is given by P(l), the simulated resulting price, minus P(0), the
original price. This cost is equal to the incremental cost of the most costly
control simulated to be taken in that year. This value times the remaining CFC
use (in this example, 80 percent of the baseline use) gives the estimate of the
transfer payments. '
The implications for each application can also be evaluated by breaking the
aggregate derived demand curve back into its individual components. The costs
of the controls that are simulated to be taken within each application can be
estimated, along with the level of reduction achieved and the transfer payment.
To compute the transfer payment for an application, the most costly control
simulated to be taken in the aggregate derived demand schedule is used, and not
the most costly control simulated in the application derived demand schedule.
As noted above, the level of reduction may vary across the applications.
By breaking the aggregate derived demand curve into its individual
components, the level of chemical substitute use can also be estimated. This
level is of interest because it depends upon the simulated availability of
potentially new compounds that are currently under development.
This method of analyzing a reduction in use can also be applied to the
evaluation of a fee or a command and control policy. The fee is evaluated by
identifying the intersection of the fee level with the derived demand curve. In
Exhibit 1-18 the fee level would be equal to P(l) minus P(0), and the cost of
the reductions associated with the fee would be the same as the cost of the
quota.
O £
Note that the calculation is made on an aggregate basis. The cost of
the reduction is multiplied by the number of kilograms reduced. This method
assumes implicitly that the mix of uses in the baseline remains unchanged.
9 7
Transfer payments are only estimated using the private derived demand
schedule. The transfers are not considered to be social costs.
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EXHIBIT 1-18
EXAMPLE OF A PRIVATE COST ESTIMATE USING THE
PRIVATE DERIVED DEMAND CURVE
Price
Per
Kg Weighted
For Ozone-
Depleting
Potential
100%
Transfer Payments
Quota
20% 0% Percent
Reduction
Achieved
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To evaluate a command and control option, the controls required are arranged
into a derived demand schedule, and the area beneath it is used to estimate
social and private costs. Because the controls are not simulated to be
undertaken in response to increased prices for CFCs, there is no transfer
payment in the command and control evaluation.
4. LIMITATIONS
The methods used to assess the social private costs of proposed restrictions
on CFC use are limited in terms of the data available and the manner in which
the method is applied. The primary limitations of the data include:
• Identification of Control Possibilities. By definition,
only those control possibilities that are currently known
are included in the analysis. It is likely that as the
prices of CFCs rise in response to the constriction of
supply that additional control possibilities will be
identified. The inability to incorporate unknown control
possibilities biases the estimates of costs upward,
although the extent of the bias is not known.
• Aggregation of Control Possibilities. The aggregation of
the control possibilities to reflect the impacts of taking
groups of controls is subjective. Alternative views of
aggregation could lead to alternative estimates of control
costs and achievable reductions.
• Uncertainty Surrounding New Chemical Substitutes. Many of
the data estimates are very uncertain, and consequently
ranges of values are used, and sensitivity analysis is
performed. Nevertheless, the uncertainty surrounding the
data describing the new chemical substitutes has a large
influence on the cost estimates produced. The areas of
uncertainty primarily include the timing of availability
of the new chemical substitutes (which has a large
influence on the level of reductions that can be
achieved), the cost of the new chemical substitutes, and
the extent to which the new chemical substitutes can be
used in existing products.
• Unallocated Use. A significant portion of current CFC use
cannot be allocated to specific applications. Therefore,
there are no specific methods identified for controlling
these uses. The analysis addresses this problem by
assuming that the costs of controlling this unallocated
use are similar to the costs of controlling the allocated
use. As a sensitivity, the unallocated use may be assumed
to be uncontrollable. Because the unallocated use must be
controllable at some cost, the sensitivity analysis must
be biased upward. The potential bias of the base
assumption is not known, although the fact that the use is
not easily identifiable may imply that it is more
difficult to control than the identified use. If this is
the case, then the base assumption is biased downward.
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Another set of limitations of the method used relates primarily to the
aggregate manner in which the control data are applied. The aggregate derived
demand curve indicates the levels of reductions that can be achieved at various
levels of costs. The costs are expressed on a per kilogram basis, and are
estimated based on 1985 values. The method implicitly assumes that the controls
are divisible (i.e., there are no major economies of scale) and that they can be
phased in over time. Further, because the estimates are based on 1985 data, the
potential changing mix of uses (in the absence of controls) is not reflected.
Because the implementation of individual pieces of equipment are not tracked
over time, the implications of this aggregate approach cannot be assessed.
The method also assumes that the primary mechanism driving the allocation of
CFCs across competing uses is price. Although this is a standard assumption for
analyses of this type, other factors (such as the relationship between producers
and their customers) may influence the allocation of CFCs. To the extent that
CFCs are not allocated based on price, the estimates of costs will be biased
downward. A related assumption is that manufacturers implement the least costly
control options. If more costly controls are undertaken, the cost estimates are
also biased downward. The implications of the least costly controls not being
taken is evaluated by "omitting" sets of inexpensive controls from the menu of
control possibilities. (See Chapter 9 of Volume I.)
Two types of costs not considered are transition costs and risks.
Transition costs (e.g., temporary unemployment or premature retirement of
capital equipment) are generally small over the long-term, but may be important
when reductions are initially required. Because significant phase-in times are
contemplated, transition costs are likely to be small. Also many of the control
options are compatible with existing equipment (thereby avoiding the premature
retirement of capital).
The additional risks posed by the control options have not been evaluated.
Numerous options were deleted from consideration due to risks, so
that the options used in the analysis may not result in significant risks.
However, some examples of risks are evident, and additional analysis to assess
these risks may be warranted.^
A key assumption is that the demand for the services provided by the
CFC-related products is sufficiently inelastic and the portion of the products'
costs accounted for by CFCs is sufficiently small that the reductions in end
useproduct demand that result from increased prices of CFCs can be ignored.
This is probably a reasonable assumption in most cases. The implications of the
assumption are that more controls are simulated to be taken than would otherwise
be the case, and social costs are biased upward.
Finally, the analysis assumes that the CFC supply curve is horizontal and
CFC prices equal their marginal costs. This assumption results in no estimates
of lost producer surplus in the CFC market. If the price of CFCs exceeds
98
For example, pentane is listed as an alternative blowing agent.
Although the costs of equipment to address its potential fire hazard are
included in the cost estimates, the potential impact of pentane emissions on
smog conditions has not been evaluated, except as it adds costs to that option.
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marginal cost, and if the supply curve for CFCs is not horizontal in the
relevant range, then the social cost estimates are biased downward.
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