United States EPA Science Advisory EPA-SAB-EC-ADV-03-001
Environmental Board (1400A) December 2002
Protection Agency Washington DC www.epa.gov/sab
vvEPA UNDERGROUND
STORAGE TANKS (UST)
CLEANUP & RESOURCE
CONSERVATION &
RECOVERY ACT (RCRA)
SUBTITLE C PROGRAM
BENEFITS, COSTS, &
IMPACTS (BCI)
ASSESSMENTS: AN SAB
ADVISORY
REVIEW OF THE UST/RCRA
BENEFITS, COSTS & IMPACTS
(BCI) ASSESSMENTS BY THE
UST/RCRA BCI REVIEW PANEL
OF THE SAB'S EXECUTIVE
COMMITTEE
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I UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C. 20460
OFFICE OF THE ADMINISTRATOR
SCIENCE ADVISORY BOARD
December 20, 2002
EPA-SAB-EC-ADV-03-001
Honorable Christine Todd Whitman
Administrator
U.S. Environmental Protection Agency
1200 Pennsylvania Avenue. NW
Washington, DC 20460
Subject: Underground Storage Tanks (UST) Cleanup and Resource Conservation and
Recovery Act (RCRA) Subtitle C Program Benefits, Costs, and Impacts
Assessments: An EPA Science Advisory Board Advisory
Dear Governor Whitman:
On May 20-21, 2002, the Underground Storage Tanks (UST) Cleanup and Resource
Conservation and Recovery Act (RCRA) Subtitle C Program Benefits, Costs, and Impacts
Review Panel ("the Panel;") met to provide advice on four charge questions relating to the
planning of economic assessments of the UST Cleanup and RCRA Subtitle C Programs as
described in two Agency Draft Reports: Approaches to Assessing the Benefits, Costs, and Impacts
of the Office of Underground Storage Tanks Cleanup Program, October 2000; and Approaches to
Assessing the Benefits, Costs, and Impacts of the RCRA Subtitle C Program, October 2000.
These documents describe the fundamental methodological approaches being considered by the
Agency as a framework for assessing the benefits, costs and other impacts of the RCRA Subtitle
C and UST cleanup environmental programs. The Panel reviewed these documents and received
briefings from Agency staff from the Office of Solid Waste and Emergency Response (OSWER).
Subsequent discussions occurred in a technical editing session public conference call on June 18,
2002. The EPA Science Advisory Board Executive Committee approved this advisory on
October 1, 2002.
As result of these deliberations, the Panel has prepared an Advisory Report with detailed
comments and suggestions. This report is attached to this letter. In our judgement, the Agency
has made a good start in developing a framework for assessing the benefits, costs, and other
impacts of these two programs. Most of our comments in the Advisory involve suggestions for
improving the planned assessments. However, we had serious reservations about the Agency's
efforts to expand the scope of the assessments to include some of the so-called "non-traditional
attributes" listed under the category of Program Context Attributes. We provide more detail
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about these reservations and offer suggestions for changes in the framework in our Advisory and
in Item #2 in this letter.
We appreciate being consulted in the relatively early phases of this substantial exercise;
and we recommend further SAB involvement in the Agency assessment process at appropriate
stages in reviewing, for example, significant revisions to these methodological documents, as well
as future work plans and draft assessments.
We wish to bring to your attention the following regarding overall study design:
The Agency proposes a combination of retrospective and prospective analyses of these
two programs. A retrospective study deals with what are now sunk costs; and although it can
provide a useful picture of what has been accomplished, it might have little direct implication for
future policy choices. However, we believe that it is possible in this case to frame a retrospective
study in ways that will also generate information useful for policy analysis. We recommend that
the Agency design these studies to take advantage of differences in approaches to implementation
across states or industrial sectors in an effort to learn if and how these differences affected the
economic performances of the programs. This kind of information could inform future decision
making by EPA managers.
We also wish to bring to your attention the following items regarding four charge
questions:
1. In Charge Question #1 the Agency asked for our evaluation of the "OSWER Program
Attributes Matrix" that is used to list impacts to be included in these studies. The Panel believes
that the Attributes Matrix contained in the UST and RCRA documents (US EPA 2000b and US
EPA. 2000c) creates potential problems for those efforts by loading too many extra considerations
onto the conceptual framework provided by EPA's Guidelines for Preparing Economic Analyses
(US EPA. 2000a) and by introducing distinctions that are not helpful to the analysis. We have
proposed a revised Attributes matrix that lists Social Benefits, Social Costs, and Distributional
Impacts for analysis. Many of the items listed by the Agency in the category of "Program
Context Attributes" have been moved into one of the remaining three categories. The others have
been left out since we believe that they fall outside of the appropriate conceptual framework of
program assessment.
2. In Charge Question #2 the Agency asked for our comments on the methods proposed
for the evaluation. In two instances where alternative methodologies or approaches are presented,
we believe that it is premature to select only one methodology for analysis of the whole program.
Rather we recommend doing case studies with two or more methodologies to learn more about
possible implementation problems and their relative performance. These instances are the
alternative approaches for assessing health impacts for RCRA-C and the UST program.
3. Concerning the quantification and monetization of health benefits for RCRA-C,
because of the variety of substances handled at subject facilities and the variety of possible routes
of human exposure, a range of both cancer and non-cancer health effects must be assessed. But
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for many of these substances, the available toxicological data can not support meaningful
assessments of health benefits. For many of the substances that are categorized as carcinogens,
the only available risk information is the 95% upper confidence interval on cancer potency or
cancer risk. For many of the noncarcinogenic substances, the available toxicological data are in
the form of Reference Doses (RfD) and reference concentrations (RfC) (doses and concentrations
that are not to be exceeded in order to protect human health). These include built in margins of
safety do not permit the quantification of either the number or severity of the health impacts of
exceeding them. These are problems that have been identified in earlier SAB reports (see EPA-
SAB-COUNCIL-ADV-99-005, 1999, p. 10 (U.S. EPA/SAB. 1999); EPA-SAB-COUNCIL-ADV-
99-012, 1999, pp. 12-13 (U.S. EPA/SAB. 1999a), and EPA-SAB-EEAC-LTR-94-001, esp. pp. A-
1 and A-2(U.S. EPA/SAB. 1994)). These comments point to the inadequacy of the current
toxicological data bases for supporting economic analyses of policies to reduce exposures to these
substances. This continues to be a problem that requires the attention of the Agency and research
community.
Also, the Agency proposes calculating individual-based risk measures for the maximally
exposed individual (MEI). Although such conservative measures may serve as an appropriate
guide for some risk policy decisions, they should not be the basis for conducting benefit-cost
analyses.
4. In describing the methods for assessing health benefits from the UST cleanup program,
the Agency mentions only in passing the possibility of using the value of statistical life concept to
obtain a monetary benefit measure. We believe that whenever the Agency can develop
quantitative estimate of health impacts, it should also use the available methodologies to convert
these to dollar values.
5. The Agency proposes to transfer values from three existing contingent valuation
studies of groundwater contamination to estimate total (both use and non-use) values of the UST
cleanup program. We have serious reservations about this proposal because, for several reasons,
there is poor correspondence between the specifically cited studies and the UST and RCRA
situations.
6. The Agency proposes to include a quantification of ecosystem impacts in its
assessments of these two programs without estimating dollar values for these impacts. We
recognize that ecosystem service benefits are particularly difficult to value in monetary terms and
we would not push for the pursuit of dollar-based evaluation of ecosystem benefits in this
particular regulatory context. However, we believe that it is possible to generate more
informative indicators of the possible magnitude of ecological effects than those suggested in the
draft reports, and we encourage the Agency to do so.
7. Charge Question #3 asks whether the methods are clearly and adequately described.
For the most part, the answer is "yes." But there are several cases where descriptions of methods
are incomplete or inadequate, and where problems of implementation are not identified or
addressed. Examples include the quantification of health effects of RCRA-C, using the existing
property value study literature to estimate program benefits, and the valuation of reductions in
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cancer risks.
8. Charge Question #4 asks for our recommendations on evaluating some of the more
non-traditional attributes identified in the Program Attributes Matrix, such as information
provision and sustainability. Our views on many of the nontraditional attributes are presented in
Section 4 of the Report. As for sustainability, this term refers to an economy's ability to maintain
at least the current standard of living or level of well-being over multiple generations. The
economic analysis of sustainability focuses on the roles of nonrenewable and renewable resources
and capital in supporting the production of the goods and services necessary to maintain current
levels of well-being. To the extent that the provisions of RCRA-C and the UST regulations result
in reduced use of nonrenewable resources or substitution of renewable resources for
nonrenewables, they would contribute in at least a small way to sustainability. But the benefits of
such changes would normally be reflected in changes in costs of production at affected facilities.
Thus a separate category of sustainability benefits is not appropriate.
We thank the Agency for the opportunity to be of service in reviewing these documents.
If the Agency decides to go forward with assessments of these two programs, we would be
pleased to be able to review revisions to these documents, more detailed work plans, and/or draft
assessments. We look forward to your response, particularly to the items raised in this cover
letter to you.
Sincerely,
/Signed/ /Signed/
Dr. William H. Glaze, Chair Dr. A. Myrick Freeman, Chair
EPA Science Advisory Board UST/RCRA BCI Review Panel
EPA Science Advisory Board
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NOTICE
This advisory has been written as a part of the activities of the EPA Science Advisory
Board, a public advisory group providing extramural scientific information and advice to the
Administrator and other officials of the Environmental Protection Agency. The Board is
structured to provide a balanced, expert assessment of scientific matters related to problems
facing the Agency. This advisory has not been reviewed for approval by the Agency and, hence,
the contents of this advisory do not necessarily represent the views and policies of the
Environmental Protection Agency nor of other agencies in the Executive Branch of the Federal
government, nor does mention of trade names or commercial products constitute a
recommendation for use.
Distribution and Availability: This EPA Science Advisory Board report is provided to the EPA
Administrator, senior Agency management, appropriate program staff, interested members of the
public, and is posted on the SAB website (www.epa.gov/sab). Information on its availability is
also provided in the SAB's monthly newsletter (Happenings at the Science Advisory Board).
Additional copies and further information are available from the SAB Staff [U.S. EPA Science
Advisory Board (1400A), 1200 Pennsylvania Avenue, NW, Washington, DC 20460-0001; 202-
564-4533].
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ABSTRACT
The Underground Storage Tanks (UST) Cleanup and Resource Conservation and
Recovery Act (RCRA) Subtitle C Program Benefits, Costs and Impacts Review Panel
(UST/RCRA BCI Review Panel, or "the Panel") provided advice on four charge questions
relating to the planning of economic assessments of the UST Cleanup and RCRA Subtitle C
Programs as described in two Agency draft reports. The Panel focused on providing advice
pertaining to study design, and advice pertaining to evaluation of a range of methodological
options. The Panel commented on the relative advantages, disadvantages and data requirements
for each option, as well as possible alternative methods or modifications of methods presented in
the two Agency draft documents to make informed decisions. The Panel also assessed whether
the methods are consistent with EPA's Guidelines for Preparing Economic Analyses.
The Panel critiqued the proposed attributes matrix which is a common element of each
Agency draft document, and noted that the proposed attributes matrix creates potential problems
by loading too many extra considerations onto the conceptual framework provided by EPA's
Guidelines for Preparing Economic Analyses, and by introducing distinctions that are not helpful
to the analysis.
The Panel offered advice pertaining to the UST Cleanup and RCRA Subtitle C Program in
terms of human health benefits, ecological benefits, indicators, avoided costs, the property value
approach, as well as alternative approaches. Other topics touched upon dealt with distributional
impacts, including environmental justice, intragenerational impacts, economic impacts, risk
tradeoffs and intergenerational equity.
Key Words: Costs, Benefits, Benefit-Cost Analysis, Underground Storage Tanks, Resource
Conservation Recovery Act, Hazardous Wastes, Valuation, Valuation Methodologies
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U.S. Environmental Protection Agency
Science Advisory Board
Underground Storage Tanks (UST) Cleanup and Resource
Conservation and Recovery Act (RCRA) Subtitle C
Program Benefits, Costs and Impacts (BCI)Review Panel
CHAIR
Dr. A. Myrick Freeman, William D. Shipman Research Professor of Economics, Bowdoin College,
Brunswick, ME
SAB MEMBERS
Dr. W. Michael Hanemann, Chancellor's Professor, Department of Agricultural and Resource Economics,
University of California, Berkeley, CA
Member: Environmental Economics Advisory Committee
Dr. Hilary A. Sigman, Associate Professor, Department of Economics, Rutgers University, New Brunswick,
NJ
Member: Environmental Economics Advisory Committee
CONSULTANTS
Dr. Bruce J. Bauman, Research Program Coordinator, Health & Environmental Services Dept, American
Petroleum Institute, Washington, DC
Dr. James Boyd, Senior Fellow, Resources for the Future, Washington, DC
Dr. George F. Carpenter, Michigan Department of Environmental Quality, Environmental Response
Division, Lansing, MI.
Dr. Gregory L. Poe, Associate Professor, Department of Applied Economics and Management, Cornell
University, Ithaca, NY
Dr. Clifford S. Russell, Professor of Economics, Vanderbilt University, Nashville, TN
SCIENCE ADVISORY BOARD STAFF
Dr. K. Jack Kooyoomjian, Designated Federal Officer, US EPA, Science Advisory Board, Washington, DC
Ms. Betty Fortune, Office Assistant, US EPA, Science Advisory Board, Washington, DC
in
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U.S. Environmental Protection Agency
Science Advisory Board
Executive Committee
CHAIR
Dr. William H. Glaze, University of North Carolina, Chapel Hill, NC
SAB MEMBERS
Dr. Henry Anderson, Wisconsin Division of Public Health, Madison, WI
Also Member: Environmental Health Committee
Dr. Trudy Cameron, University of Oregon, Eugene, OR
Also Member: Advisory Council on Clean Air Compliance Analysis
Dr. Maureen L. Cropper, The World Bank, Washington, DC
Also Member: Environmental Economics Advisory Committee
Dr. Kenneth Cummins, Humboldt State University, Arcata, CA
Dr. Virginia Dale, Oak Ridge National Laboratory, Oak Ridge, TN
Also Member: Ecological Processes and Effects Committee
Dr. Domenico Grasso, Smith College, Northampton, MA
Also Member: Environmental Engineering Committee
Dr. Linda Greer, Natural Resources Defense Council, Washington, DC
Also Member: Research Strategies Advisory Committee
Dr. Philip Hopke, Clarkson University, Potsdam, NY
Also Member: Research Strategies Advisory Committee
Clean Air Scientific Advisory Committee
Dr. Janet A. Johnson, MFG, Inc., Fort Collins, CO
Also Member: Radiation Advisory Committee
Dr. Roger E. Kasperson, Stockholm Environment Institute, Stockholm,
Also Member: Research Strategies Advisory Committee
Dr. Raymond C. Loehr, University of Texas , Austin, TX
Dr. Genevieve Matanoski, Johns Hopkins University, Baltimore, MD
Also Member: Research Strategies Advisory Committee
Dr. M. Granger Morgan, Carnegie Mellon University, Pittsburgh, PA
Dr. Rebecca Parkin, The George Washington University, Washington, DC
Also Member: Integrated Human Exposure Committee
IV
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Dr. William H. Smith, Yale University, Center Harbor, NH
Dr. R. Rhodes Trussell, MWH-Montgomery Watson Harza, Pasadena, CA
Also Member: Drinking Water Committee
SCIENCE ADVISORY BOARD STAFF
Mr. A. Robert Flaak, Designated Federal Officer, US EPA, Science Advisory Board, Washington, DC
Ms Betty Fortune, Office Assistant, US EPA, Science Advisory Board, Washington, DC
Ms. Diana Pozun, Program Specialist, US EPA, Science Advisory Board, Washington, DC
v
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TABLE OF CONTENTS
1. EXECUTIVE SUMMARY 1
1.1 Study Design 1
1.2 Charge Question #1: The Attributes Matrix 1
1.3 Benefits: Human Health 2
1.4 Benefits: Ecosystem Impacts 3
1.5 Benefits: The Property Value Approach 3
1.6 Alternative Approaches to Benefits Modeling 3
1.7 Distributional Impacts 4
1.8 Charge Question #3: Descriptions of Methods 4
1.9 Charge Question #4: Nontraditional Attributes - Sustainability 4
2. INTRODUCTION AND CHARGE 5
3. STUDY DESIGN 7
4. RESPONSE TO CHARGE QUESTION #1 8
4.1 Attributes Matrix: Categories 8
4.2 Attributes Matrix: Short Run versus Long Run 9
4.3 Distributional Impacts 9
4.4 Social Benefits 10
4.5 Social Costs 10
Exhibit 1. Suggested Revision of Attributes Matrix 12
5. RESPONSES TO CHARGE QUESTIONS #2 AND #3 14
5.1 Benefits: Human Health 14
5.2 Benefits - Ecological 17
5.2.1 Ecosystem indicators 18
5.2.2 Population-Level Bio-Physical Analysis 20
5.2.3 Review of the 3MRA Model 20
5.3 Benefits: Avoided Costs 20
5.4 Benefits: Property Value Approach 20
5.4.1 Property Values and Welfare Change 21
5.4.2 Amenity Effects on Property Prices 21
5.4.3 Benefits Transfer 21
5.4.4 Conclusions 22
5.5 Benefits for RCRA Subtitle C: Alternative Approaches 22
5.6 Costs 23
5.7 Distributional Impacts 24
5.7.1 Environmental Justice 24
5.7.2 Intragenerational Impacts 25
5.7.3 Economic Impacts 26
5.7.4 Risk Tradeoffs 26
5.7.5 Intergenerational Equity 27
VI
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6. RESPONSE TO CHARGE QUESTION #4 28
APPENDIX A - A MORE DETAILED DESCRIPTION OF THE SAB PROCESS A-l
APPENDIX B - ACRONYMS B-l
APPENDIX C - BRIEF BIOSKETCHES OF UST/RCRA BCI REVIEW PANEL C-l
REFERENCES CITED R-l
vn
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1. EXECUTIVE SUMMARY
On May 20-21, 2002, the Underground Storage Tanks (UST) Cleanup and Resource
Conservation and Recovery Act (RCRA) Subtitle C Program Benefits, Costs, and Impacts (BCI)
Review Panel ("the Panel;") met to provide advice on four charge questions1 relating to the
planning of economic assessments of the UST Cleanup and RCRA Subtitle C Programs as
described in two Agency Draft Reports: Approaches to Assessing the Benefits, Costs, and Impacts
of the Office of Underground Storage Tanks Cleanup Program, October 2000 (U.S. EPA. 2000b);
and Approaches to Assessing the Benefits, Costs, and Impacts of the RCRA Subtitle C Program.,
October 2000 (U.S. EPA. 2000c). The Panel reviewed these documents and received briefings
from Agency staff from the Office of Solid Waste and Emergency Response (OSWER).
Subsequent discussions occurred in a technical editing session public conference call on June 18,
2002. The EPA Science Advisory Board's (SAB's) Executive Committee approved this advisory
on October 1, 2002 in a public meeting.
The Panel's major comments and recommendations are as follows.
1.1 Study Design
The Agency proposes a combination of retrospective and prospective analyses of these
two programs. A retrospective study deals with what are now sunk costs, and therefore the
analysis may have little direct implication for future policy choices. However, we believe that it
is possible in this case to frame a retrospective study in ways that will generate information useful
for policy analysis. We recommend that the Agency design these studies to take advantage of
differences in approaches to implementation across states or industrial sectors in an effort to learn
if and how these differences affected the economic performances of the programs. This kind of
information could inform future decision making by EPA managers.
1.2 Charge Question #1: The Attributes Matrix
The Panel believes that the Attributes Matrix, which lists impacts to be included in these
studies, creates potential problems for those efforts by loading too many extra considerations onto
the conceptual framework provided by EPA's Guidelines for Preparing Economic Analyses (US
EPA. 2000a) and by introducing distinctions that are not helpful to the analysis. We have
proposed a revised Attributes Matrix that lists Social Benefits, Social Costs, and Distributional
Impacts for analysis. Many of the items listed by the Agency in the category of "Program
Context Attributes" have been moved into one of the remaining three categories. The others have
been left out since we believe that they fall outside of the appropriate conceptual framework of
program assessment.
1 Each charge question is reproduced at the beginning of the appropriate section of this advisory dealing
with it.
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1.3 Benefits: Human Health
In describing the methods for assessing health benefits from the UST cleanup program,
the Agency mentions only in passing the possibility of using the value of statistical life concept to
obtain a monetary benefit measure. We believe that whenever the Agency can develop
quantitative estimates of health impacts, it should also use the available methodologies to convert
these to dollar values. The Agency should be explicit about its plans to assess monetary values
and how it will deal with such issues as determining the appropriate value of statistical life,
treating latency and so forth.
While individual-based risk measures like that for the maximally exposed individual
(MEI) may serve as an appropriate guide for some risk policy decisions, such conservative
measures should not be the basis for conducting benefit-cost analyses. What is relevant for
benefits assessment is the mean exposure, or in the case of nonlinear dose-response functions, the
whole distribution of actual exposure for the affected population.
Concerning the quantification and monetization of health benefits for RCRA-C, because
of the variety of substances handled at subject facilities and the variety of possible routes of
human exposure, a range of both cancer and non-cancer health effects must be assessed. But for
many of these substances, the available toxicological data can not support meaningful
assessments of health benefits. For many of the substances that are categorized as carcinogens,
the only available risk information is the 95% upper confidence interval on cancer potency or
cancer risk. For many of the noncarcinogenic substances, the available toxicological data are in
the form of Reference Doses (RfD) and reference concentrations (RfC) (doses and concentrations
that are not to be exceeded in order to protect human health). These include built in margins of
safety and do not permit the quantification of either the number or severity of the health impacts
of exceeding them. These are problems that have been identified in earlier SAB reports (see
EPA-SAB-COUNCIL-ADV-99-005, 1999, p. 10(U.S. EPA/SAB. 1999); EPA-SAB-COUNCIL-
ADV-99-012, 1999, pp. 12-13 (U.S. EPA/SAB. 1999a), and EPA-SAB-EEAC-LTR-94-001, esp.
pp. A-l and A-2(U.S. EPA/SAB. 1994)). These comments point to the inadequacy of the current
toxicological data bases for supporting economic analyses of policies to reduce exposures to these
substances. This continues to be a problem that requires the attention of the Agency and research
community.
The Agency proposes to transfer values from three existing contingent valuation studies of
groundwater contamination to estimate total (both use and nonuse) values of the UST cleanup
program. We have serious reservations about this proposal because there is poor correspondence
between the specifically cited studies and the UST and RCRA situations. We suggest that the
Agency consider funding contingent valuation studies of groundwater contamination with single
or multiple contaminants that have a known probability of cancer risk. The values obtained from
such research could be compared with the existing body of literature on the value of statistical
lives, and could provide a better source for benefits transfer than the existing research on
groundwater evaluation. To date, no such tests of convergent validity exist between groundwater
valuation research and the broader valuation of risks literature.
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1.4 Benefits: Ecosystem Impacts
The Agency proposes to include a quantification of ecosystem impacts in its assessments
of these two programs without estimating dollar values for these impacts. We recognize that
ecosystem service benefits are particularly difficult to value in monetary terms, and we would not
push for the pursuit of dollar-based evaluation of ecosystem benefits in this particular regulatory
context. However, we believe that it is possible to generate more informative indicators of the
possible magnitude of ecological effects than those suggested in the draft reports, and we
encourage the Agency to do so.
An issue of particular importance is that economic analysis requires ecological analysis of
effects on populations of species, not analysis of individual toxicity effects. This presents a
practical difficulty because ecological analysis typically generates individual toxicity estimates.
The reason population effects are the desirable endpoint is that populations, rather than
individuals, are what is actually economically valuable and estimable.
Ecological benefits for both bio-physical and economic reasons are highly idiosyncratic to
local conditions. Attempts to generate numbers will exhibit a false rigor. The most intellectually
honest approach, at this time, is to acknowledge limitations in the data and our ability to model
complex physical, ecological and economic systems.
We strongly encourage EPA to develop quantitative indicators of ecosystem service
benefits. Quantitative landscape analysis, using GIS tools, can be used to derive indicators of
preserved ecosystem service benefits. A variety of types of indicators could be collected,
including indicators of primary demand, scarcity, and complementary inputs. Integrating this
kind of data into "contamination events avoided" analysis would improve the salience of the
benefits assessment.
1.5 Benefits: The Property Value Approach
One of the approaches proposed by the Agency for estimating the benefits of UST
Cleanup requirements and RCRA-C is to estimate the number of sites avoided by these provisions
and to value each avoided site by the predicted reduction in housing prices based on a review of
the literature on hedonic property values around Superfund sites, hazardous waste sites, and other
local disamenities. If this approach is utilized, the issues of the relationship between property
value changes and welfare, amenity effects on property values, and benefits transfer need to be
addressed. But given the problems with the other approaches proposed, this approach may be a
relatively simple way to get obtain a "ball park" or order-of-magnitude estimate of benefits.
1.6 Alternative Approaches to Benefits Modeling
In the cases of assessing health impacts for RCRA-C and the UST programs, two
alternative methodologies or approaches are presented. We believe that it is premature to select
only one for analysis of the whole program. Rather we recommend doing case studies with two
or more methodologies to learn more about possible implementation problems and their relative
performance.
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1.7 Distributional Impacts
The RCRA and UST documents introduce a large number of dimensions of distribution to
evaluate and methods for doing this evaluation. The Panel urges a more parsimonious choice of
distributional impacts for quantification. We recommend that the assessments focus on the
distribution of beneficial and adverse effects across groups organized by, for example, income,
race, and geographic unit. An assessment of the effect of the RCRA and UST programs on
disadvantaged populations is critical to evaluating their success. The documents discuss
approaches to assessing half of this effect, namely the distribution of benefits. They do not
discuss the equally important other half, namely whether the burden of costs disproportionately
falls on disadvantaged populations. Neither document discusses an assessment of the distribution
of costs by income. The distribution of costs depends on the extent to which compliance costs are
passed forward to consumers in the form of higher prices, which in turn depends on the
elasticities of supply and demand, the extent to which compliance alters marginal costs, and the
market structure of the industry.
1.8 Charge Question #3: Descriptions of Methods
This question asks whether the methods are clearly and adequately described. For the
most part, the answer is "yes." But there are several cases where descriptions of methods are
incomplete or inadequate, and where problems of implementation are not identified or addressed.
Examples include the quantification of health effects of RCRA-C, using the existing property
value study literature to estimate program benefits, and the valuation of reductions in cancer risks.
1.9 Charge Question #4: Nontraditional Attributes - Sustainability
This question asks about "better ways to characterize and/or quantify some of the more
'non-traditional attributes' ... [including] ... sustainability." Our views on many of the
nontraditional attributes are presented in Section 4 of the Report. As for sustainability, this term
refers to an economy's ability to maintain at least the current standard of living or level of well-
being over multiple generations. The economic analysis of sustainability focuses on the roles of
nonrenewable and renewable resources and capital in supporting the production of the goods and
services necessary to maintain current levels of well-being. To the extent that the provisions of
RCRA-C and the UST regulations result in reduced use of nonrenewable resources or substitution
of renewable resources for nonrenewables, they would contribute in at least a small way to
sustainability. But the benefits of such changes would normally be reflected in changes in costs
of production at affected facilities. Thus a separate category of sustainability benefits is not
appropriate.
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2. INTRODUCTION AND CHARGE
On May 20-21, 2002, the Underground Storage Tanks (UST) Cleanup and Resource
Conservation and Recovery Act (RCRA) Subtitle C Program Benefits, Costs, and Impacts (BCI)
Review Panel ("the Panel;") met to provide advice on four charge questions relating to the
planning of economic assessments of the UST Cleanup and RCRA Subtitle C Programs as
described in two Agency Draft Reports: Approaches to Assessing the Benefits, Costs, and Impacts
of the Office of Underground Storage Tanks Cleanup Program., October 2000; and Approaches to
Assessing the Benefits, Costs, and Impacts of the RCRA Subtitle C Program., October 2000. The
Panel reviewed these documents and received briefings form Agency staff from the Office of
Solid Waste and Emergency Response (OSWER). Subsequent discussions occurred in a technical
editing session public conference call on June 18, 2002. The EPA SAB's Executive Committee
approved this advisory on October 1, 2002 in a public meeting.
The Charge to the SAB is as follows:
1. Does the "OSWER Attributes Matrix" (Exhibit 1-1 in both reports) provide a good
list of program attributes that could appropriately be used to describe OSWER
program benefits, costs, impacts, and other key factors influencing program
performance? Does the list provide a reasonable starting point for an analysis of
an OSWER program that would ensure consideration of a broad range of program
impacts and features? Should any attributes be modified, or deleted or added to
this list, and if so, why?
2. Keeping in mind that it was OSWER's intention to evaluate a range of
methodological options, and to include some relatively less resource-intensive
options (recognizing these are likely to be less technically rigorous), are the
methods presented viable and technically sound? Will the methods lead to
defensible conclusions? Are the assumptions associated with the methods
reasonable? If you believe any of these methods or assumptions are not viable,
sound, or defensible, why not? Are the methods consistent with EPA's Guidelines
for Economic Analyses, to the extent the guidelines address the OSWER program
attributes?
3. Are the methods clearly and adequately described, for purposes of making a
decision to select preferred methods for additional development and
implementation? Are the advantages, disadvantages, and data requirements
associated with each option clearly and adequately described? Is additional
information needed for any of these methods in order for OSWER management to
make an informed decision? If so, what information?
4. Are there alternative methods (or modifications of methods presented in the
reports) that could be used to better characterize any of the attributes addressed in
the two reports, keeping potential resource limitations in mind? If so, why? We
are particularly interested in seeking SAB advice on methodologies to characterize
the more traditional human health/environmental benefits (which represent EPA's
core areas of responsibility), but OSWER would also welcome any
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recommendations the SAB might have on better ways to characterize and/or
quantify some of the more "non-traditional" attributes. These include
sustainability and other long-term program impacts; the value of regulatory
requirements that focus on providing information to the public; and the influence
on program performance of factors such as stakeholder concerns and
statutory/legal constraints.
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3. STUDY DESIGN
While the charge questions focus largely on various aspects of implementing a specific
approach to assessing the benefits, costs, and impacts of RCRA Subtitle C and the UST Cleanup
Program based on the Attributes Matrix, the Panel also has comments on a basic issue concerning
the design of these studies.
For RCRA-C, the Agency proposed a retrospective analysis of the overall benefits and
costs of the program from 1980 to 2000. For the UST regulations, the Agency proposed a
retrospective analysis of program benefits and costs covering the period between 1988 (the
implementation of the program) and the present and a prospective analysis of benefits and costs
from the present to 2005.2 The Panel understands the need for, and value of, retrospective studies
for the administrative purpose of the Government Performance and Results Act (GPRA) as well
as for the general purpose of informing the public about what has been accomplished through the
expenditure of funds under these acts. However, we also believe it desirable to try to design such
studies so as to maximize the usefulness and applicability of the information they generate for
guiding future policy decisions.
A retrospective study deals with what are now sunk costs, and therefore the analysis may
have little direct implication for future policy choices. However, we believe that it is possible in
this case to frame a retrospective study in ways that will also generate information useful for
policy analysis. For example, to the extent that the UST or RCRA-C programs were implemented
differently in different states or, in the case of the UST program, to the extent that states adopted a
class approach to UST regulation, the retrospective studies could compare the different
implementations and ask questions such as: Was one implementation (or class approach) more
effective than others in terms of the cleanup benefits achieved, and why? Did one approach cost
more than others, and why? Which approach had the highest benefit/cost ratio? Likewise, in the
case of RCRA-C programs involving different pollutants emitted by different polluters (e.g.,
different industrial sectors), the questions to be asked could include: Which industrial sectors
were the most expensive to clean up, and why? Which industrial sectors could be most
completely and effectively cleaned up, and why? We believe that the answers to questions such
as these could usefully inform future decision making by EPA managers.
For the UST analysis, we felt that the use of 1987 data to capture program impacts was particularly
problematic. 1987 data on cleanup activity and the detection of contamination events are unlikely to be
representative of subsequent UST Program experience. Compliance deadlines for new tank system installations and
the increased availability of public monies to finance cleanup are likely to have affected detection probabilities and
the rate of cleanup. More current OUST and state data on releases and cleanups are available. Any retrospective
analysis should take these data into account.
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4. RESPONSE TO CHARGE QUESTION #1
Charge Question #1 is:
Does the "OSWER Attributes Matrix " (Exhibit 1-1 in both reports) provide a good list of
program attributes that could appropriately be used to describe OSWER program
benefits, costs, impacts, and other key factors influencing program performance? Does
the list provide a reasonable starting point for an analysis of an OSWER program that
would ensure consideration of a broad range of program impacts and features? Should
any attributes be modified, or deleted or added to this list, and if so, why?
Before turning to the content of the Attributes Matrix, the Panel wishes to make a general
observation about the valuation, quantification, and description of program impacts. One purpose
of an economic assessment of a program is to determine whether it results in an increase in the
aggregate level of well-being (net benefits greater than zero). In principle, answering this
question requires a complete accounting of the positive and negative effects on all individuals
where effects are quantified and valued in dollars. It is rarely, if ever, possible to obtain such a
complete accounting. Rather, it will usually be necessary to distinguish among three levels of
data: (a) those impacts that can be quantified and measured in dollars; (b) those impacts that can
be quantified in some meaningful units but that can not be measured in dollars based on currently
available information; and (c) those impacts that can only be described qualitatively. The
Agency understands this. But the Panel believes that for the presentations of the program
attributes, proposed approaches to the assessments, and in the assessments themselves, it would
be helpful to make this point explicitly and to indicate which impacts fall into each category.
The Panel believes that the Attributes Matrix as proposed creates potential problems for
those efforts by loading too many extra considerations onto the conceptual framework provided
by EPA's Guidelines for Preparing Economic Analyses (US EPA. 2000a)3 and by introducing
distinctions that are not helpful to the analysis, however sincere the intentions behind them.
Specific comments and recommendations follow along with our proposed revised Attributes
Matrix. See Exhibit 1. There is also further discussion of some of the elements of the matrix in
the responses to Charge Questions #2 and #3.
4.1 Attributes Matrix: Categories
The proposed OSWER Attributes Matrix has four broad categories: Social Benefits,
Social Costs, Distributional Impacts, and Program Context Attributes. Concerning the fourth
category, the Agency has indicated that one of its goals is to evaluate impacts beyond
consideration of overall costs and benefits and the distribution of these costs and benefits. The
Program Context Attributes section of the matrix undoubtedly draws attention to constraints and
goals highly relevant to the program's design and operation. The difficulty with this goal is that
major programs such as RCRA-C and UST have a large number of such impacts. The
cost/benefit framework and its extension to distribution limit the focus to those impacts of the
3 See Exhibit 7-1 "Benefits" (p. 67); Exhibit 8-2 "Costs" (p. 120); and Exhibit 9-2 "Distribution" (p. 145) in US EPA.
(2000a).
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program on overall welfare and the welfare of sensitive populations. We believe, however, that
the inclusion of the Program Context Attributes category implies a symmetry between these
impacts and the measures of benefits, costs, and distributional impacts that is unhelpful at best
and misleading at worst. Most of the entries in this category appear to us either to be forms of
social benefits or social costs or to fall outside of the appropriate conceptual framework of
program assessment. For this reason, the Panel recommends deleting the Program Context
Attributes section of the Matrix and incorporating relevant impacts into the remaining sections as
appropriate.
The material covered in this section can be dealt with in one of two ways:
a) Much of the "context setting" can usefully be handled in the introduction to the
analysis. This would include: The "Constraints" category; and the
"empowerment," "leveraged public private investment," and "reinvention support"
attributes.
b) Most of the other attributes can be reflected in the Social Benefit, Social Cost, and
Distributional Impact sections of the matrix. For example, "technology forcing"
(which we believe might more usefully be labeled "incentives for technological
change") can be reflected in projections of long run program costs and, to the
extent the case can be made, in discussions of technology spill-overs to other
programs. Similarly, for "long-term behavioral change," "streamlining" of clean-
ups, and "intensity of feeling."4
4.2 Attributes Matrix: Short Run versus Long Run
We have introduced an explicit distinction between the short and long runs, and a
recognition of sources of uncertainty applying with greater force to the long run. This recognizes
the motivation behind the "long-term" categories of benefits and costs in the present Attributes
Matrix without implying that there is something fundamentally different about benefits and costs
occurring over different time horizons.
4.3 Distributional Impacts
The Distributional Impacts section of the matrix touches on some quite difficult analytical
matters. Our recommendation is in the nature of a suggestion for recognizing first that, assuming
the ability to do the calculations, differential distribution can be seen to happen over geographic
or political areas, economic sectors, or population groups (defined, for example, by race, income,
or occupation). Second, we think it will be helpful to divide the impacts into short and longer
run. Thus, a program such as UST can lead to short run shifts in economic activity, with business
closures in a location affected by a clean-up. Long term impacts can include redistribution of
benefits and costs across generations.
4 The Panel observed that all programs generate information, and that to take credit for this as a program attribute
would require making the case that the information provides a benefit elsewhere.
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4.4 Social Benefits
Concerning the Social Benefits section, we make the following recommendations:
a) Regarding the Avoided Materials Damages category, the Panel recommends that
aesthetic effects at sites of historic interest and "taste and odor" and "visibility" be
moved to an "Amenity" category as in the "Guidelines" matrix. Also, the avoided
costs from fire and explosion due to migrating vapor are certainly legitimate
benefits. But if it is possible to estimate health damages from such incidents, they
would better be included in the health damage category.
b) The category "Ecological Benefits" should be reorganized to make it more clearly
applicable to the programs in question and to stress the "biodiversity" attribute,
which lay behind several specific attributes.
c) The "Individual risk" sub-category should be removed for consistency with the
"Guidelines." This is not to say that classical individual risk calculations are
irrelevant to program evaluation, but only to make it clear that they do not fit into
program benefit-cost analyses. See the section of this advisory dealing explicitly
with risk to the maximally exposed individual.
d) In the category of "Potential Long-Term Benefits (Sustainability)," the Panel
recommends eliminating the word "sustainability," since what is involved does not
match any definition of sustainability of which we are aware. For more on this,
see our response to Charge Question #4.
e) The Panel believes that the items listed as examples of "long-term benefits" would
be better handled as part of the main long-term damage/benefit estimation process.
For example, changes in populations and in per-unit values of environmental
quality can be reflected, to the extent they can be justified, directly in the estimates
of benefits.
f) Because "unforeseen events" are just that and in principle can be either beneficial
or adverse, the Panel doubts that taking credit for avoiding them is wise or
justifiable.
4.5 Social Costs
Concerning the Social Costs section, we make the following recommendations:
a) We recommend adding transportation cost and its associated risks to the list of
compliance costs, since transportation of wastes or contaminated soil is likely to be
part of the compliance picture.
b) We recommend adding consideration of a broad "transactions cost" category that
would include the effects of "streamlining," which we interpret as reducing
transactions and regulatory costs.
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c) We recommend adding a category that might be labeled: "Private Actions." This
would include the resource costs of private litigation related to the program and the
responses of unregulated parties who act and incur costs because, for example, the
program causes them to fear greater costs if they are swept up in a new wave of
regulatory action. These are costs to private parties that are in addition to the
compliance costs listed above. The benefits of these actions can be included in the
appropriate benefit category.
d) The category of "Social Welfare Losses" should be eliminated. Higher prices will
just be reflections of the costs elsewhere counted. Legal and administrative costs
would be captured under "transactions" and "private litigation" costs.
e) We recommend moving the category presently labeled "Risk Tradeoffs" from
Distributional Impacts to Social Costs and renaming it "Added Risks."
f) We do not endorse inclusion of a separate category of Long-term Costs. It is
inappropriate to consider the two examples presented in the Matrix as costs. The
"potential failure to benefit from [future possible] technological advances" could
be considered a cost of undertaking clean-up or corrective action now rather than
postponing it to some future date. But the assessments being planned here are
asking a different question: What are the costs and benefits of taking action now
compared with doing nothing? As for "Potential failure to invest in more
productive activities," we interpret this as an implicit challenge to the assumption
that the discount rate and the market prices of resources devoted to clean-up and
corrective action are the best estimates of the true opportunity costs of these
resources. Absent any justification for challenging this fundamental assumption of
benefit-cost analysis, this category of costs should be deleted.
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Exhibit 1. Suggested Revision of Attributes Matrix
SOCIAL BENEFITS
Human Health
Population Risk only
Mortality
Morbidity
Short Term
Acute
Explosive
Fire
Poisoning
Asthma
Nausea
Poisoning
Long Term
Chronic
Cancer
(Other?)
Cancer
(Other)
Sources of Uncertainty
Long latency
Contaminant interactions
Changes in behavior
Risk aversion
Popular perception vs. technical
"reality"
Amenity
Taste & odor
Historic preservation
Water
Air
Traffic
Desensitization
Ecological
Market Products
Non-market use
Recreation
Ecosystem Services
Biodiversity
Non-use/Knowledge
Ground & Surface water
contamination
Experience quality
Resource quality
Mortality (resource
quantity)
Habitat
Mortality
Morbidity
Habitat
Reproduction
Bioconcentration
Plume behavior
Treatment cost at intake
Increasing substitute scarcity
"Food Web" interaction
Avoided Costs
Of new drinking water
Supplies
Of future spills
Of materials damage from
fire and explosion
SOCIAL COSTS
Compliance
Short Term
Long Term
Sources of Uncertainty
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Capital
OMR (operation,
maintenance, and
replacement)
Added Risks
Transport (with risks)
Transitional Costs
Temporary losses in
jobs, etc., associated
with adjustment to a new
equilibrium
Technological Changes
Regulation Itself
Monitoring & Enforcement
Administration
Transactions costs
Behavioral change
Private Actions
Litigation
Response of unregulated
parties
(spillovers)
DISTRIBUTIONAL
IMPACTS
By sector
By area
By group
income
race
occupation
By jurisdiction
Short Term
Impacts on sectoral
outputs,
jobs, etc.
Expenditures and Taxes
Long Term
Benefits & Cost,
including across
generations
Sources of Uncertainty
Length of transition
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5. RESPONSES TO CHARGE QUESTIONS #2 AND #3
Charge Question #2 is:
Keeping in mind that it was OSWER 's intention to evaluate a range of methodological
options, and to include some relatively less resource-intensive options (recognizing these
are likely to be less technically rigorous), are the methods presented viable and
technically sound? Will the methods lead to defensible conclusions? Are the assumptions
associated with the methods reasonable? If you believe any of these methods or
assumptions are not viable, sound, or defensible, why not? Are the methods consistent
with EPA 's Guidelines for Economic Analyses, to the extent the guidelines address the
OSWER program attributes?
Charge Question #3 is:
Are the methods clearly and adequately described, for purposes of making a decision to
select preferred methods for additional development and implementation? Are the
advantages, disadvantages, and data requirements associated with each option clearly
and adequately described? Is additional information needed for any of these methods in
order for OSWER management to make an informed decision? If so, what information?
In commenting on the various methodological options for each category of impact, the
Panel decided that it would be better to combine the discussions of the viability and technical
soundness of each method and the adequacy of its description, rather than to develop separate
answers to each of the two charge questions. Hence, in what follows, our answers to questions #2
and #3 are combined for each impact and method.
5.1 Benefits: Human Health
The two documents under review adopt distinctly different approaches to the monetization
of health benefits. But before commenting on the specifics of each document, the Panel wishes to
make two comments concerning the overall assessment of health impacts.
The first concerns the importance of carrying the analysis through to the assessment of
monetary values for reductions in the risk of premature mortality and other adverse health effects.
In particular, the UST document merely mentions the possibility of doing this (p. 4-3). And
neither document provides any detail about methods to be used. The Agency should be explicit
about its plans to assess monetary values to health benefits and how it will deal with such issues
as determining the appropriate value of statistical life, treating latency, and so forth. See the
Agency's Guidelines for Preparing Economic Analyses (U.S. EPA. 2000a).
The second comment concerns the proposal to report risk reductions for the maximally
exposed individual (MEI). While individual-based risk measures like that for the MEI may serve
as an appropriate guide for some risk policy decisions, such conservative measures should not be
the basis for conducting benefit-cost analyses. Often such calculations result in an exposure that
might best be termed the maximum conceivable exposure and which might be substantially
greater than the exposure of any actual individual. What is relevant for benefits assessment is the
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mean exposure, or in the case of nonlinear dose-response functions, the whole distribution of
actual exposures for the affected population.
For the UST analysis, the Agency proposes to assess only the risk of cancer from exposure
to benzene. Given the importance of gasoline storage tanks, this seems to the Panel to be a
reasonable simplification of the problem.
A principal component of the health benefits assessment is the estimation of the potential
human exposure to benzene from each leaking tank. The Agency proposes three alternative
approaches for carrying out this part of the analysis. With regard to the question of using a
simple benefits analysis versus a spatial analysis with or without pathway modeling, we are
concerned that, because of the underlying heterogeneity among UST sites and the potential non-
linearities in the cost and benefit functions, it is unlikely that accurate or reliable results can be
obtained using a simple benefits analysis. Essentially the same concern applies to the spatial
analysis. The preferred way to make either of these two alternatives credible is to conduct some
case studies using a spatial analysis with pathway modeling to see whether these latter are
unbiased on average in relation to the more sophisticated method. If they are biased, then the
spatial analysis with pathway modeling, as presumably more accurate in its predictions, should be
employed. If they are not then using one of the simpler approaches will generally be more cost
effective, though it may be desirable to include calibration factors, if any are discovered from the
case studies for particular physical situations in which the methods do differ.
The UST document goes on in Sections 4-2 to 4-4 to discuss ecological benefits, avoided
costs, and the use of property value studies. Our comments on the assessment of ecological and
property value benefits are presented below. The section of the UST document on ecological
benefits concludes (Section 4.2.2) with a suggestion that benefit transfers of contingent valuation
estimates from previous groundwater research be used as a way of measuring total use and non-
use values. Specifically, it is proposed that values from three existing contingent valuation
groundwater studies (Edwards, 1988; McClelland et al. 1993; Powell, Allee, and McLintock.
1994) be used to assess the total value (including, health benefits, ecological benefits, and non-
use benefits).
The Panel has serious reservations about this proposal. First, the perceived benefits, as
measured by willingness to pay, are likely to be context and/or contaminant specific. None of the
studies cited addresses benzene, a carcinogen. Two of the studies (Edwards. 1988; McClelland et
al. 1992) told respondents that there would be no health risks since wells would be monitored.
Only the McClelland et al. study explicitly mentioned cancer risks, a consideration that is
believed to elevate stated values relative to non-carcinogenic groundwater risks (Boyle, Poe, and
Bergstrom. 1994). Thus, there is poor correspondence between the specifically cited studies and
the UST and RCRA situations.
A second point of concern with adopting a contingent valuation based benefits transfer
approach is that, despite meta analyses suggesting that groundwater valuation studies exhibit
"systematic consistency" (Boyle, Poe, and Bergstrom. 1994; Poe, Boyle, and Bergstrom. 2001),
the accuracy of such transfers for groundwater is open to question, even when contaminants are
similar and common survey materials are utilized (see Bergstrom, Boyle and Poe. 2001).
Moreover, substantial concerns about the use of the McClelland et al. (1993) study have been
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raised in a previous SAB report (EPA-SAB-EEAC-LTR-94-001, 1993 (U.S. EPA/SAB. 1994)
specifically related to RCRA. See also Boyle (1993, 1994).
For these reasons, we believe that the three studies cited, and to our knowledge any
existing contingent valuation groundwater research, should not be used as estimates of total value
(or the subset of health benefits) for the UST programs. However, we suggest that the Agency
consider funding groundwater contamination research with single or multiple contaminants that
have a known probability of cancer risk. The values obtained from such research could be
compared with the existing body of literature on the value of statistical lives and would provide a
better source for benefits transfer than the existing research on groundwater valuation. To date,
no such tests of convergent validity exist between groundwater valuation research and the broader
valuation of risks literature.
Regarding the use of avoided costs as a component of benefits, we have two specific
comments.
1. For public water systems, the probability of averting is assumed to equal one, i.e., once
a leak is detected the water will be treated. For private wells there is some evidence (see UST US
EPA 2000b, p. 4-30) indicating that the probability that individuals will undertake averting
actions is substantially less than one but greater than zero. These probabilities need to be
identified for a "typical" case of groundwater benzene contamination. The need to identify a
benzene-specific probability of private averting actions is particularly of concern if the odor/taste
threshold for benzene differs from the health threshold, as appears to be the case for Methyl
Tertiary Butyl Ether (MTBE). In particular, should the odor/taste threshold be lower than the
health standards for benzene, then individuals' amenity-based averting actions undertaken prior to
actual determination of a health-related contamination incident need to be accounted for in
providing estimates of benefits. For the proportion of the population that fails to take averting
activities even when such actions are recommended by health authorities, the reductions in health
risks associated with cleanup should be estimated and valued as long as the risk measures for
benzene are based on maximum likelihood estimates and latency and other risk-specific factors
have been accounted for in the valuation.
2. The relationship of avoided costs/averting/ remediation values to actual willingness to
pay for avoiding a risk is an open theoretical and empirical question. Whereas much of the
literature on this subject argues that, under certain theoretical conditions, averting/avoidance/
remedial costs should be treated as a lower bound (see for example, Courant and Porter. 1981;
Bartik. 1988a; Harrington, Krupnick and Spofford. 1991; Quiggen. 1992) of damages, recent
theoretical work by Shogren and Crocker (1991, 1999) suggests that the endogeneity and
lumpiness of risk averting actions is such that self-protection activities need not represent a lower
bound on the value of risk reductions. Hence, at this point any estimate of averting costs
represents, at best, a rough estimate of avoided damages. The precision and potential bias of this
type of measure may be further complicated if the odor/taste thresholds differ from the health risk
threshold set by the EPA, and needs to be specifically accounted for in a quantitative analysis or
qualitative discussion.
Concerning the quantification and monetization of health benefits for RCRA-C, the
document states that because of the variety of substances handled at subject facilities and the
variety of possible routes of human exposure, a range of both cancer and non-cancer health
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effects must be assessed. But the document does not address two major problems that must be
confronted.
First, for many of the substances that are categorized as carcinogens, the only available
risk information is the 95% upper confidence interval on cancer potency or cancer risk. The
problem is that these upper-bound estimates of risks are not consistent with the best estimates of
risk necessary for unbiased benefit-cost analyses. Previous SAB review panels have noted similar
concerns in the context of hazardous air pollutants (see EPA-SAB-COUNCTL-ADV-99-005,
1999, p. 10 (U.S. EPA/SAB. 1999); EPA-SAB-COUNCIL-ADV-99-012, 1999, pp. 12-13 (U.S.
EPA/SAB. 1999a)). See also, EPA (2002).
Second, for many of the noncarcinogenic substances, the available toxicological data do
not come in the form of the dose-response functions used to quantify health impacts. Rather they
are in the form of Reference Doses (RfD) and reference concentrations (RfC) (doses and
concentrations that are not to be exceeded in order to protect human health). These include built
in margins of safety and do not permit the quantification of either the number or severity of the
health impacts of exceeding them. This problem has also been discussed in at least one earlier
SAB report dealing with the evaluation of RCRA corrective action rule (EPA-SAB-EEAC-LTR-
94-001, esp. pp. A-l and A-2(U.S. EPA/SAB. 1994)).
The Agency has not explained how it plans to deal with these two problems. In the
absence of such a plan, the Panel questions whether it will be possible to provide credible
estimates of either numbers of adverse health effects avoided or the monetary value of health
benefits associated with RCRA-C. We hope that the Agency can successfully address these
problems.
5.2 Benefits - Ecological
The proposed ecological benefit assessment methods vary in their sophistication and
complexity. All of the methods, however, are "physical" fate and transport models. None of
them promise to calculate dollar-denominated benefits arising from ecological services. Instead,
the models differ primarily in terms of the data they use and the physical modeling of transport.
For example, in the UST document, the methods proposed seek to estimate the number of surface
water contamination events avoided, while the Subtitle C methods generate estimates of avoided
contamination incidents or, at best, avoided contaminant concentrations in surface waters.
Counting avoided surface water contamination incidents is an important analytical step. But this
kind of bio-physical indicator bears only a crude relation to the social benefits of the program.
Monetized benefit estimates are the appropriate aspiration for evaluation. Unfortunately,
ecosystem service benefits are particularly difficult to value in this way. Accordingly, and for
reasons detailed below, we do not recommend the pursuit of dollar-based evaluation of ecosystem
benefits in this particular regulatory context. However, we do have suggestions for the
development of more informative data about ecosystem impacts.
Concerning the difficulties in developing monetary estimates of ecosystem benefits, the first is
the significant complexity that is associated with the analysis of the physical and biological
processes that give rise to socially valuable ecosystem services. Second, there is a significant
problem associated with the "linkage" between bio-physical modeling and the economic
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modeling necessary to generate monetary benefit estimates. The generic difficulty can be
presented as follows: How does physical analysis (e.g., engineering, hydrology, soil chemistry)
generate data that are useful for ecological analysis of toxicity to species? Assuming that
problem is solved, how does the resulting ecological analysis generate data that are useful for
economic analysis? Existing modeling techniques achieve these linkages only with great
difficulty. Yet they are a necessary condition for the generation of defensible monetary benefit
estimates. Finally, assuming these linkages can be established, the choice of economic estimation
technique must be made. The appropriate estimation technique will depend on the affected
ecosystem service being analyzed—an economic challenge that is itself significant. But that
challenge is not worth confronting until a better ecological and economic linkage can be made.
An issue of particular importance is that economic analysis requires ecological analysis of
effects on populations of species, not analysis of individual toxicity effects. This presents a
practical difficulty because ecological analysis typically generates individual toxicity estimates.
The reason population effects are the desirable endpoint is that populations, rather than
individuals, are what is actually economically valuable and estimable. Generally, people value
the ability to observe, appreciate, fish, or hunt, a population.^ The size and health of that
population determines the value of the service the population provides. Because population
effects will be very difficult to estimate, there is no clear point of linkage between the
engineering/ecological analysis and an economic analysis of monetizable benefits.
Ecological benefits, for both bio-physical and economic reasons, are highly idiosyncratic
to local conditions. Detailed analysis of a small number of sites could yield defensible benefit
estimates at a relatively high cost. But the transfer of such estimates to the universe of sites is, in
our judgment, not defensible. Attempts to generate numbers will exhibit a false rigor. The most
intellectually honest approach is to acknowledge limitations in data and our ability to model
complex physical, ecological, and economic systems.
We have three specific recommendations for the assessment of ecosystem impacts.
5.2.1 Ecosystem indicators
We strongly encourage EPA to develop quantitative indicators of ecosystem service
benefits. In general, the reports could more strongly emphasize the way in which site cleanups
and release prevention contribute to the provision of ecosystem services that are valuable to
society. The basic categories of service benefits being generated are recreational benefits,
aesthetic benefits, and existence benefits associated with the preservation of focal species. A
quantitative (but non-monetary) analysis of ecosystem services should feature: (1) A description
of the bio-physical functions preserved by RCRA, in particular, a discussion of the ways in which
improved surface water quality affects a range of terrestrial and aquatic species (both flora and
fauna). (2) A discussion of the socially valuable services dependent on those functions. (3)
Analysis of factors that contribute to the value of those services. Important factors include
proximity to populations that can benefit (primary demand), complementary assets, and the
scarcity of the service at different geographic scales.
5 Focal species are an exception, since individual effects are closely related to the effect on the population. Focal
species are species that exert a disproportionately important influence on the condition of an ecosystem.
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Quantitative landscape analysis, using Geographic Information System (GIS) tools, can be used to
derive indicators of preserved ecosystem service benefits. Landscape analysis can effectively
combine economic valuation principles with existing data sources to improve understanding of
the relative benefits generated by different ecological systems. Indicators can be used to evaluate
the scarcity of ecosystem services in the landscape, the accessibility of sites for recreation and
aesthetic enjoyment, future risks to the ecological system, and the ecological system's marginal
impact on a larger area's provision of ecosystem services. For example, in the UST study it is
possible to characterize the "avoided contaminated water bodies" generated by the pathway
models. The proposed models associate plumes with particular water bodies. It would be
relatively straightforward to classify or rank those water bodies in terms of whether or not they
are "service rich." For example, GIS data on boat ramps and docks can be used to determine
whether a water body is used for recreational fishing.
A variety of types of indicators could be collected, including indicators of primary
demand, scarcity, and complementary inputs. Consider primary demand indicators first. The
values of the services provided by ecosystem functions depend, in part, on the demands for these
services. Demand for services can arise, for example, when the ecological system provides an
amenity or helps avoid a disamenity. For an amenity (e.g., aesthetic enjoyment) to be provided,
proximity to populations that benefit is a necessary condition for demand.6 For a disamenity to be
avoided there has to be such a disamenity (e.g., water contamination) and a population that
benefits. Scarcity indicators are important because scarcity increases the value of a service.
Scarcity indicators relate to the local prevalence of other similar resources. Complementary input
indicators are important because some services can be enjoyed only if accompanied by
complementary landscape characteristics or infrastructure. This is particularly important for
recreation, where access is a key determinant of the ability to enjoy the service.
The following specific types of GIS data could be collected, all of which speak to the
benefits associated with avoided surface water contamination:
a) proximity to globally or locally endangered species habitat
b) proximity to flyways or green ways relied upon by recreationally valuable
migratory species
c) proximity to recreational areas (parks, beaches, public forests)
d) proximity to sensitive areas (preserves)
e) proximity to commercial fishing operations
f) presence of complementary infrastructure (docks, ramps, trails), and
g) relative abundance of water bodies (to assess scarcity)
Integrating this kind of data into the "contamination events avoided" analysis would
improve the salience of the benefits assessment. With this kind of exercise, the assessment could
move beyond saying "x water bodies avoided contamination under RCRA," to something more
evocative of the benefits. For example, "x water bodies used for recreational angling avoided
contamination." Or "x water bodies that support protected areas important to bird migration
avoided contamination." Note that the "Facility Siting Restrictions Analysis" in the Subtitle C
report seems to be closest in spirit to this kind of activity. The proposal there is to collect GIS
' An exception is the existence value of species, where demand does not depend on proximity.
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data on flood plains, flood events, and "fragile systems" in order to identify beneficial siting
trends, presumably away from flood-prone and ecologically sensitive areas.
5.2.2 Population-Level Bio-Physical Analysis
Program evaluations will benefit greatly from a successful marriage of bio-physical
impact models and economic estimation of those impacts. While many of the tools are in place,
the crucial point of linkage between physical and economic modeling is not yet in place. The
point of linkage is the estimation of population impacts. Population, not individual, impacts
provide the "endpoint" where economic and bio-physical assessment can engage.
Econometric analysis can be linked with bio-physical pathway models only if they
generate population-level impact estimates. Investigation of methods designed to specifically
address this issue would be extremely valuable. The endpoint problem is not unique to this
specific evaluation exercise. The need to link the endpoints of ecological analysis with economic
analysis of services is a challenge for both the ecological and economic professions and arises in
many other agency contexts. The challenge should be placed in this larger context.
5.2.3 Review of the 3MRA Model
We urge the SAB 3MRA Review Panel to devote attention to the model's ability to
estimate population-level rather than individual ecological effects. A way in which to judge
3MRA is on its ability to provide a linkage with economic assessment of ecosystem services.
5.3 Benefits: Avoided Costs
The reports recognize that there is a connection between "avoided costs of providing
government-mandated alternate drinking water supplies" and the health damages estimated for a
program. Thus, speaking roughly, if alternative supply costs are incurred, they will in general
reduce damages. It is necessary, therefore, to be consistent in the assumptions that lie behind the
two category estimates. One way of thinking about the problem is as the minimization of the sum
of averting costs and residual damages for any particular incident or program decision. The
calculation in reality is greatly complicated by the timing of the discovery of the need for action
and of the action itself. A similar line of comment applies to the attribute labeled, "Avoided
costs. . .of mandated clean-ups. . ."
5.4 Benefits: Property Value Approach
One of the approaches proposed by the Agency for estimating the benefits of UST
Cleanup requirements and RCRA-C is to estimate the number of sites avoided by these provisions
and to value each avoided site by the predicted reduction in housing prices based on a review of
the literature on hedonic property values around Superfund sites, hazardous waste sites, and other
local disamenities (e.g., trash incinerators and landfills). There are three sets of issues
concerning this approach.
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5.4.1 Property Values and Welfare Change
Is the change in property values a correct indicator of welfare change in principle? Under
the assumptions that the hedonic price function for the housing market does not change with the
introduction of a disamenity (or its removal) and that transactions and moving costs are zero, the
change in housing prices is a valid measure of the welfare change or benefit (Palmquist. 1992a,
1992b). However, if either assumption is not satisfied, this approach is likely to lead to an
overestimate of true benefits (Bartik. 1988b). The hedonic price function is likely to shift if
policy affects amenity levels at a substantial proportion of the properties in a market. Our
concern with this issue was prompted, in part, by a recent report that 23% of all residents of New
York State live within 1 mile of a Superfund site (Stashenko. 2002). If RCRA-C facilities are as
numerous and widespread as Superfund sites in New York, the assumption of an unchanged
hedonic price function may be difficult to justify. This issue should be discussed before a
decision is made to proceed with this approach.
5.4.2 Amenity Effects on Property Prices
Will the full range of likely beneficial effects be reflected in property prices? There is
little doubt that a range of environmental disamenities is reflected in lower property prices near
facilities such as hazardous waste sites and that eliminating those disamenities will result in
increases in the values of the affected houses. But several issues must be addressed. It is possible
that the individual behaviors that lead to changes in property prices are based on incorrect
perceptions of the risks created by the facility in question, in which case the changes in prices will
be biased estimates of the true benefits of reducing the disamenities in question. Also, to the
extent that ecological benefits and historical preservation benefits (if any) accrue also to people
not residing in proximity to the facility, property price changes will underestimate the true
benefit. And finally, since the property price studies available in the literature focus on single
family dwellings, these studies provide no information on potential benefits to owners or
occupiers of multiple family housing or owners of commercial properties. These issues need to
be addressed before a decision is made to proceed with this approach.
5.4.3 Benefits Transfer
Can estimates of changes in property values from other studies be "transferred" to the sites
in question? It is not clear that the attributes of the RCRA-C facilities match those of the
facilities in the studies reviewed for the RCRA-C document. The percentage reduction in housing
prices at any given distance from the facility is likely to depend on the characteristics of the
facility as well as socioeconomic characteristics of the population in the housing market being
analyzed. Also, it is not clear that the analysis should consider only houses within one mile of the
facility. It would be desirable to use meta-analysis to estimate a function that relates the
percentage change in housing prices to facility characteristics and distance from the site. Also,
we are not familiar with the unpublished report on property value effects of LUSTs (see footnote
54 on p. 4-36 of the UST document, US EPA. 2000b). So we can not comment on the quality of
the data available for benefits transfer in the case of UST.
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5.4.4 Conclusions
If this approach is utilized, the above issues need to be addressed. But given the problems
with the other approaches proposed, this approach may be a relatively simple way to obtain a
"ball park" or order-of-magnitude estimate of benefits. However, if this approach is followed, the
review of the literature should be updated and restricted to studies appearing in peer reviewed
economics journals. Consideration should also be given to conducting new hedonic property
value analyses designed specifically to support this economic assessment and to deal with the
shortcomings of the available studies.
5.5 Benefits for RCRA Subtitle C: Alternative Approaches
The document proposes three methodologies to estimate the health and ecosystem effects
of RCRA Subtitle C. The choice among these methodologies involves trade-offs in three
important dimensions:
a) The plausibility of without-RCRA scenario. Approaches B and C assume
hazardous waste would continue to be managed in the management units used
before RCRA. Approach D assumes that hazardous waste would be managed as
ordinary (non-hazardous) industrial waste. The assumption involves a different set
of management facilities and thus creates an artificial break with the inception of
the program in the without-RCRA scenario.
b) The sophistication of the pathway modeling. Approach D would use the 3MRA
model to generate estimates of health and ecosystem effects, whereas Approach B
would use the older MMSOILS model. The 3MRA model considers a broader set
of ecological endpoints and uses more sophisticated analytical methods. (The
document describes approach C as using MMSOILS. However, Agency staff
suggested that if effort were expended to collect the extra data envisioned by
Approach C, 3MRA might be used instead), and
c) Cost. According to OSW staff, Approach D would be the least costly to undertake,
but is similar in cost to Approach B. Approach C involves collection of substantial
additional data, along the lines of those used from the 1988 RIA under Approach
B, but with some modification of the sample and the releases evaluated.
The Panel has several reactions to the evaluation of these tradeoffs, especially the
comparison of the pathway models. First, we encourage the Agency to take an empirical
approach to the presumed superiority of the 3MRA model. A preliminary analysis should
compare the difference in the estimated effects from 3MRA with MMSOILS at some sample of
facilities. Second, we are concerned that the ecological effects estimated by 3MRA, although
more complete and delineated than those from MMSOILS, may still be too abstract to provide
meaningful policy evaluation (see the discussion above on ecosystem effects). This limitation
renders superiority in this dimension not especially useful. Finally, we are very concerned about
the use of 95% confidence values for health risks (see the discussion above on health effects).
Agency staff indicated that 3MRA might make it possible to conduct estimates with the full
distribution of risk values for some contaminants. If this is not possible with MMSOILS, this
consideration provides strong support for an approach that uses 3MRA.
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Our skepticism about the value of a retrospective analysis and its accuracy (given the
difficulty of any certainty about the without RCRA counterfactual) make us discourage a large
commitment of resources to this exercise. As a result, we encourage the use of available data,
such as through Approaches B and D, rather than the costly data collection exercise suggested in
Approach C.
5.6 Costs
The two documents under review differ in their methods proposed for estimating program
costs, apparently for two reasons: (1) In the case of RCRA-C there would be costs of dealing
with hazardous wastes even in the absence of the particular subtitle C rules, while in the absence
of the UST program, it is reasonable enough to assume that no costs would be incurred (though
damages would be); (2) The RCRA-C document only discusses costs already incurred (through
2000).
The UST methodology is straightforward. Data will be obtained from the states on the
costs incurred in actual cleanups. From this an average cost per site will be calculated, which will
then be applied to projections of future sites to be dealt with. The Panel believes this to be
feasible and defensible in this context.
The approach to estimating the with-RCRA-C costs stresses aggregate annual costs over
the period 1983 - 2000. There is no effort made to project future costs. This is consistent with an
evaluation of the effect so far of the program. But it sits oddly with the reference on page 1-4 to
the GPRA "sub-objectives" for 2005, unless the assumption is that all the costs that matter for
those sub-objectives have already been incurred.
The problem of estimating without-RCRA-C costs to subtract from the with variety to get
program costs is the subject of two suggested methods: "simple" and "industry-specific." The
simple approach assumes that the volume of hazardous wastes to be disposed of in the absence of
RCRA-C would have been dealt with as per the requirements of schedule D of the law, the per
unit costs for which can be estimated. The trick then is estimating the volumes to be disposed of.
For this, three methods, of increasing complexity, are suggested, with the simplest being to
assume that hazardous wastes would have been a constant fraction of total solid wastes in the
absence of the law's requirements for management. The panel is concerned that none of the
methods try to reflect the incentive effects on volumes that lie behind the observed pattern of total
annual costs, and that are recorded in the TRI inventories for the years since 1989. These
incentive effects reflect the complex mix of legislation and litigation outcomes over the period
(most importantly RCRA, Superfund, and TRI), and separating out what would have happened
without only RCRA-C will be extremely difficult at best. But ignoring these effects implies the
likelihood of underestimating program costs by overestimating the without costs.
The more complex possible method for obtaining the without scenario in the RCRA
document involves trying to find "pre-1983, industry-specific" cost estimates for hazardous waste
disposal. In the experience of at least one member of the Panel, finding the necessary pre-RCRA
hazardous waste volumes and costs will be very difficult, leading us to doubt that this will prove
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feasible.7 Such data as exists on these matters seem to be both very limited and very closely
guarded.
Turning to transitional costs, these are real costs; but, in an economy operating at close to
full employment and with mobility of resources, they should not persist as displaced workers find
jobs elsewhere in the economy.8 If transition costs are to be counted, the adjustment processes of
the relevant markets must be modeled to predict the likely duration of unemployment and likely
earnings in the new jobs.
Long-term costs, as discussed in the documents, seem to the Panel to belong elsewhere, as
already noted in the discussion of the Matrix. The matter of technical change, leading to lower
costs, may even be irrelevant to the RCRA analysis if it is going to remain focused on the years
before 2000. To the extent it has happened, it will be in the numbers already found and used.
5.7 Distributional Impacts
An analysis of the distributional impacts of the RCRA and UST programs can provide
important information for policy makers. Studying these impacts may also help improve future
policy by showing components of the program that have been a particular success or hindrance.
The RCRA and UST documents introduce a large number of aspects of distribution to
evaluate and methods for doing this evaluation. The Panel urges a more parsimonious choice of
distributional impacts for quantification. Quantifying too many issues obscures the most
important dimensions of the program and appears to provide false precision. As suggested in our
Revised Attributes Matrix (Exhibit 1), we recommend that the assessments focus on the
distribution of beneficial and adverse effects across groups organized by, for example, income,
race, and geographic unit. In addition we offer the following comments on the Agency's
proposed methods as described in the volumes under review.
5.7.1 Environmental Justice
An assessment of the effect of the RCRA and UST programs on disadvantaged
populations is critical to evaluating their success. The documents discuss approaches to assessing
half of this effect, namely the distribution of benefits. They do not discuss the equally important
other half, namely whether the burden of costs disproportionately falls on disadvantaged
populations.
Two options are presented for evaluating environmental justice in RCRA. Option 1, "use
existing literature to identify possible negative environmental justice impacts associated with
RCRA," lacks a clear definition of the without-RCRA baseline. Thus, any effects identified
cannot clearly be associated with the program, and risk confusing the assessment.
7 See Timothy T. Greene, Hazardous Waste Matters: Three Essays in Corporate Environmental
Management and Performance. PhD. Dissertation, Vanderbilt University, December 1998.
8 Similarly, jobs "created" in response to regulation have opportunity costs as workers are drawn from other
activities. Any effort to estimate job creation benefits must take account of these opportunity costs. See, for
example, Haveman and Krutilla (1967).
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The method sketched in Option 2 should be linked more directly to the methods for
evaluating overall benefits proposed in Chapter 3. Chapter 3 identified two components of
RCRA's effects to value: avoided TSDs and changes in practice at TSDs. An appropriate and
consistent methodology would locate the avoided TSDs and (if Approach B is used) TSDs that
appear to have improved practice and then compare the local demographics with the population at
large. If a pathway analysis is used for overall benefits, the evaluation should consider the
distribution of exposure, rather than the location of facilities.
For USTs, the document contains an assertion (US EPA. 2000b, p. 6-1) that the UST
program does not have a significant environmental justice impact. Despite the ubiquity of USTs ,
disadvantaged groups may benefit from cleanup. Facilities with USTs are likely to be associated
with other disamenities, such as traffic, and therefore may be concentrated in low-income
communities. Substandard tanks and thus Leaking Underground Storage Tanks (LUSTs) may be
even more skewed toward lower income regions and communities. In short, the document slights
this dimension of the program's impacts, particularly by comparison with some more ambiguous
measures later in this chapter.
The approach suggested in the document is to compare the demographic characteristics of
communities neighboring USTs with the population as a whole. However, the approach should
focus more on the distribution of exposures eliminated. This would require considering the
locations of remediated USTs to account for distribution of the tanks most prone to leaks and the
effort devoted to cleanup. In addition, the analysis should consider household characteristics that
effect exposure, such as reliance on well water and avoided exposure of children to contaminated
soils (if there is a pathway analysis).
Neither document discusses an assessment of the distribution of costs by income. The
distribution of costs depends on the extent to which compliance costs are passed forward to
consumers in the form of higher prices, which in turn depends on the elasticities of supply and
demand, the extent to which compliance alters marginal costs, and the market structure of the
industry. A description of the breakdown on the compliance costs (from chapter 5) across
industries would be somewhat informative. A full analysis would require tracing these costs
through the consumers' prices and expenditures with an input-output table or a more sophisticated
equilibrium model.9
5.7.2 Intragenerational Impacts
A section called "Intrageneration Impacts" in the RCRA-C document (US EPA. 2000c)
discusses the "public/private distribution of costs" and the "polluter pays principle." If it
considers the "polluter pays principle," the Panel urges the Agency to consider a version of the
principle that one might call "beneficiary pays." It would require that those who benefit from
pollution — whether they be producers or consumers — pay for its reduction and cleanup. A
desirable public/private distribution of costs would follow and not require separate analysis. This
version of polluter pays is satisfied by RCRA, which raises waste management costs, and would
9 Fullerton and Tsang (1996) provide an example of the use of an input-output approach. For an earlier example, see
Gianessi and Peskin (1980).
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not require additional analysis. For clean-up programs such as the LUST program, evaluating this
fairness principle would require a more complex analysis of the incidence of the costs.
Another interpretation of the polluter pays principle requires that the firm that initially
produced the pollution pay for its cleanup. This interpretation may not impose the burden of
cleanup on the true beneficiaries, for example, when they are consumers who purchased lower
price goods because of the pollution. The importance of implementing this version of the
polluter pays principle lies in its creation of incentives for polluters to reduce their pollution by
"internalizing the externality." The principal economic impacts of implementing the principle
would be captured by measures of the benefits and costs of the program and the distribution of
benefits and costs across relevant groups. And these impacts are already dealt with elsewhere in
the document. Thus, the analysis described in Section 6.1 does not assist in evaluating the
program.
5.7.3 Economic Impacts
The methodologies presented for a quantitative evaluation of the economic impacts of
RCRA and UST rely heavily on surveying facilities to obtain information on plant closures and
layoffs as a result of the program. It is difficult to link the program to closures or job losses using
a survey. Costs imposed by the program may increase the probability of these changes but will
rarely be the only cause. Thus, even a careful survey is unlikely to be definitive.
The UST document also has a method for quantifying the job creation from the program.
This implies that job creation is a benefit. But workers pulled from alternative employment
represent opportunity costs. It is true that job creation may yield benefits if the workers in
relevant labor market sectors experience unemployment. The evaluation would require an
analysis of labor market conditions to determine whether job creation does create benefits.
5.7.4 Risk Tradeoffs
The RCRA (US EPA. 2000c) and UST (US EPA 2000b) documents propose similar
methods for examining risk tradeoffs. We have four comments on risk tradeoffs. First, since
increases in risks are adverse, the Panel recommends that they be analyzed as a component of
Social Cost. See Exhibit 1. Second, both documents propose to estimate occupational risks to
cleanup workers. The evidence presented in the document suggests that elevated risks to cleanup
workers are not great, so it does not appear that leaving out this calculation would constitute a
serious omission from the overall evaluation. More importantly, it is not clear that these costs are
additive with compliance costs already identified, with implications for their distribution.
Cleanup workers may receive higher wages as compensation for elevated risks: thus, cleanup
costs would already include a valuation of these risks. The incidence of these costs would not be
on the workers (who are compensated), but on whomever bears the rest of cleanup cost.
Third, the RCRA document also includes an estimate of transportation risks, which is not
subject to this interpretative problem. The methodology presented here seems a sensible
approach to estimating the overall magnitude of this risks, but, as described, does not break out
the groups (geographic or income based) on which these risks fall. It would be preferable to
conduct a preliminary analysis to determine whether these costs are significant before embarking
on a full evaluation.
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Fourth, risks from illegal disposal are a missing category of risks from RCRA. By raising
the costs of legal waste management, the program may encourage some generators, especially
small quantity generators, to substitute illegal waste management, either through mixing wastes
with ordinary solid waste or through direct environmental releases. Although nearly impossible
to quantify, these risks deserve mention if other risk tradeoffs are considered.
5.7.5 Intergenerational Equity
Intergenerational equity may be an important equity impact of the RCRA and UST
programs when contaminants persist in the environment. The UST document (US EPA. 2000b)
suggests a qualitative discussion of the benefits of the program for future generations. This
approach may be desirable because distant future benefits are very difficult to assess given
uncertain future exposures and cleanup activities. By contrast, the RCRA document attempts to
quantify this aspect of the program. It calls for evaluation of land disposal reductions and
avoided cleanup delays. The use of these numbers in evaluating the intergenerational distribution
of program benefits is not clear. A qualitative discussion of the problems the program avoids for
future generations might be preferable.
If monetary estimates of long term costs and benefits are generated, they should be
presented both as undiscounted flows and as present values discounted at alternative discount
rates, as outlined in the EPA Guidelines (US EPA. 2000a, p. 52).
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6. RESPONSE TO CHARGE QUESTION #4
Charge question #4 is:
Are there alternative methods (or modifications of methods presented in the reports) that could be
used to better characterize any of the attributes addressed in the two reports, keeping potential
resource limitations in mind? If so, why? We are particularly interested in seeking SAB advice
on methodologies to characterize the more traditional human health/environmental benefits
(which represent EPA 's core areas of responsibility), but OSWER would also welcome any
recommendations the SAB might have on better ways to characterize and/or quantify some of the
more "non-traditional" attributes. These include sustainability and other long-term program
impacts; the value of regulatory requirements that focus on providing information to the public;
and the influence on program performance of factors such as stakeholder concerns and
statutory/legal constraints.
Advice on methodologies for evaluating traditional human health and environmental
benefits is offered in Section 5 as part of our responses to Charge Questions #2 and #3. Similarly,
our views on many of the nontraditional attributes are presented in Section 4, especially Section
4.1.
As for sustainability, this term refers to an economy's ability to maintain at least the
current standard of living or level of well-being over multiple generations.10 The economic
analysis of sustainability focuses on the roles of nonrenewable and renewable resources and
capital in supporting the production of the goods and services necessary to maintain current levels
of well-being. To the extent that the provisions of RCRA-C and the UST regulations result in
reduced use of nonrenewable resources or substitution of renewable resources for nonrenewables,
they would contribute in at least a small way to sustainability. But the benefits of such changes
would normally be reflected in changes in costs of production at affected facilities. Thus a
separate category of sustainability benefits is not appropriate.
10 For example, the World Commission on Environment and Development (also known as
the Bruntland Commission) said "Sustainable development is development that meets the needs
of the present without compromising the ability of future generations to meet their own needs
(1987, p. 43)."
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APPENDIX A - A MORE DETAILED DESCRIPTION OF THE SAB
PROCESS
The SAB recruited Dr. A. Myrick Freeman to be Chair of the Underground Storage Tanks
(UST) and Resource Conservation and Recovery Act (RCRA) Subtitle C Program Benefits, Costs
and Impacts (BCI) Review Panel of the Science Advisory Board's (SAB) Executive Committee
(EC). Working with the Chair, other SAB Members and Consultants, Agency Staff and
suggestions from the public through a Federal Register solicitation of August 23, 2001 (see FR,
Vol. 66, No. 164, pp. 44343-44344), the SAB Staff selected a list of over 120 scientists and
engineers ("Wide Cast") whose expertise appeared to be relevant to answering the questions in
the Charge. Nearly two-dozen nominations were received as a result of the FR solicitation
process. In the FR solicitation, the expertise needed included environmental economics,
preferably with experience in waste, groundwater and surface water contamination issues,
particularly in the UST and RCRA contexts, health risk assessment, and ecological impact
assessment, as well as a reviewer who is familiar with social science issues related to topics such
as environmental justice, stakeholder values, the value of regulations requiring that information
be provided to the public, and changes in the long-term behavior of the regulated community
resulting from environmental regulatory requirements.
A communication was sent by the DFO enquiring as to interest and availability on
specific dates for the review and over 50 individuals who might be interested and available
("Middle-Cast") were identified. Subsequently, the Panel Chair, the SAB Staff Director and the
DFO reviewed the list in some detail and identified nearly 30 individuals ("Narrow Cast") who
were available and interested in serving on the Panel and whose expertise and experience would
be especially suitable to answer the specific charge questions. Based on this information and the
importance of having a balanced range of views on the technical issues represented on the Panel,
the Chair and the DFO made recommendations for membership to the Staff Director, who made
the final decision on the composition of the Panel. This process included assigning each person
responsibilities to specific charge questions.
The Agency provided the review and background materials for a mailing to the Panel on
April 19, 2002. In the Federal Register solicitation announcing the meetings (see FR, Vol.67, No.
77, pp. 19572-19575, dated April 22, 2002), the Agency announced a May 9, 2002 public
conference call meeting to a) discuss the Charge and the adequacy of the review materials
provided to the Panel; b) to clarify any questions and issues relating to the charge and the review
materials; c) to discuss specific charge assignments to the Panelists; and d) to clarify specific
points of interest raised by the Panelists in preparation for the face-to-face meeting of May 20 and
21, 2002. In this FR announcement, the Agency also announced the May 20 & 21 face-to-face
meeting, and a contingent conference call for June 18, 2002 to conduct edits to an anticipated
draft advisory.
The Panel met and convened a public meeting in conformance to the Federal Advisory
Committee Act (Public Law 92-463)on May 20 & 21, 2002 in the Washington, DC area at EPA
Headquarters and conducted a review of the UST and RCRA Subtitle C Benefit, Cost and Impact
documents (U.S. EPA. 2000b and U.S. EPA. 2000c). The Panel engaged in dialogue with the
Agency officials who were responsible for preparation and utilization of the draft documents
dated October 2000, received public comments from a representative of the American Chemistry
Council, and began to prepare responses to the charge questions.
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The Panel met on June 18, 2002 in a public conference call to discuss edits to its draft
advisory (see FR, Vol. 67, No. 77, pages 19572-19575). The Panel conducted edits to its working
draft document dated June 14, 2002 and agreed to prepare a public draft following this work
session. A public draft was released on June 25, 2002 and was posted to the SAB website
(www.epa.gov/sab). The Panel completed its edits on July 22, 2002, and at which time the Chair
of the Panel forwarded an electronic draft to the DFO. The DFO prepared this draft for the SAB
Executive Committee (EC)review, having prepared a draft dated August 8, 2002. The SAB EC
reviewed and approved this draft in a public session on October 1, 2002 (See FR, Vol 67, No.
180, pp. 58604-58605 for the announcement of this public meeting). The Panel incorporated
recommended edits in October and November following the meeting and forwarded the final,
approved Advisory to the EPA Administrator.
A-2
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APPENDIX B - ACRONYMS
ADV
BCI
CERCLA
COUNCIL
DFO
EC
EEAC
EPA
FR
GIS
GPRA
LTR
LUST
MEI
MMSOILS
3MRA
MTBE
OSWER
OUST
RCRA
RCRA-C
RCRA-D
RfD
RfC
SAB
TRI
TSDs
UST
Advisory
Benefits, Costs and Impacts
Comprehensive Environmental Response Compensation and Liability Act
Advisory Council on Clean Air Act Compliance Analysis
Designated Federal Official
Executive Committee (of the U.S. EPA/SAB/EC)
Environmental Economics Advisory Committee (U.S. EPA/SAB/EEAC)
Environmental Protection Agency (U.S. EPA)
Federal Register
Geographic Information System
Government Performance and Results Act
Letter Report
Leaking Underground Storage Tank
Maximally Exposed Individual
Multi-Media Soils Model
Multi-Media Risk Assessment Model (Air, Land, Water and Ground-
Water)
Methyl Tertiary Butyl Ether
Office of Solid Waste and Emergency Response (U.S. EPA)
Office of Underground Storage Tanks
Resource Conservation and Recovery Act
Resource Conservation and Recovery Act - Subtitle C (Hazardous Wastes)
Resource Conservation and Recovery Act - Subtitle D (Non-Hazardous
Wastes)
Reference Doses (doses and concentrations that are not to be exceeded in
order to protect human health)
Reference Concentrations (concentrations that are not to be exceeded in
order to protect human health)
Science Advisory Board (U.S. EPA/SAB)
Toxics Release Inventory
Treatment, Storage and Disposal Facilities
Underground Storage Tanks
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APPENDIX C - BRIEF BIOSKETCHES OF UST/RCRA BCI REVIEW
PANEL
Dr. Bruce Bauman is the research program coordinator in the soil, groundwater, health and
environmental sciences, and regulatory affairs departments at the American Petroleum Institute
(API) in Washington, DC. Since 1990 he has served as API's technical program coordinator
1990 for the annual API-National Ground Water Association Conference. He is a member of the
editorial board of'the Journal of 'Soil Contamination since 1996. From 1992 to 1995 Dr. Bauman
was a Consultant to the EPA Science Advisory Board's Environmental Engineering Committee's
Underground Storage Tank (UST) Research Subcommittee during the time that it generated
[Review of the Underground Storage Tank (UST) Research Program, EPA-SAB-EEC-93-008].
Dr. Bauman received his Ph.D. in Soil Science with a minor in water resources from
Montana State University, and a B.S. in soil science from the University of Wisconsin-Madison.
Dr. James Boyd: is a Senior Fellow at Resources for the Future (RFF), and is currently Director,
Energy and Natural Resources Division, having served as a Fellow at RFF from 1992-2000. He
has been a visiting professor for Business strategy in the legal and regulatory environment in the
Olin School of Business (1997) at Washington University in St. Louis, as well as a lecturer in
managerial economics and public policy at the Wharton Business School at the University of
Pennsylvania (1991 & 1992). His primary research interests are in the areas of law and
economics, environmental policy and regulatory economics. He has published articles dealing
with such topics as financial responsibility for environmental obligations, benefit-based transfer
ratios as compensation for lost ecosystem services, wetland value indicators for scoring
mitigation trades,analysis of easement acquisitions, the law and economics of habitat
conservation, liabilities, the law and economics of implicit contracts, barriers and opportunities to
corporate pollution prevention, expanding wetland assessment procedures, the economics of
tailored regulation, and numerous other topics.
Dr. Boyd received his Ph.D. in Applied Microeconomics from the Wharton Business
School, University of Pennsylvania, and his B.A. in History from the University of Michigan.
Dr. George Carpenter is currently employed in the Superfund Section of the Environmental
Response Division of the Michigan Department of Environmental Quality. Dr. Carpenter has
extensive state experience dealing with topics such as environmental impact assessments, remote
sensing, evaluation of site assessment ranking models, quality assurance review of sites, site
inspections, NPL scoring, evaluating the impacts of toxic substances on aquatic life and public
health, recommending effluent limits for organic chemicals in industrial and public wastewater
treatment system discharges, and administration of the Michigan Critical Materials Register
Annual Wastewater Report System. In the private sector, he has experience as a laboratory
manager for acute and chronic sediment bioassays of specific chemicals, industrial discharges,
and other point source pollution using fish, invertebrates and algae. He also conducted
zooplankton and plankton standing crop studies on many of the Great Lakes. He has authored or
co-authored publications spanning many of the above topics. He served as a consultant(4 years)
and member (6 years) of the Science Advisory Board's (SAB) Environmental Engineering
Committee (EEC) from 1987 to 1997. He Chaired a Constructed Wetland Review Subcommittee
for the SAB's EEC (Research-in Progress-Review of ORD's "Constructed Wetlands for
Wastewater Treatment," EPA-SAB-EEC-LTR-92-006), which was jointly conducted with the
SAB's Environmental Processes and Effects Committee (EPEC) review of wetlands ecology. His
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experience with the SAB includes numerous groundwater reviews, including several groundwater
contaminant transport models, database development plans, pollution prevention policy, redesign
of the Hazard Ranking System for environmental contamination sites, evaluation of the Agency's
municipal solid waste program, and evaluation of the Superfund Innovative Technology
Evaluation (SITE) program.
He received his Ph.D. in Fisheries and Wildlife from Michigan State University, an M.S.
in Limnology and Biology from McGill University, and B.A. in Zoology and Botany from
Wabash College.
Dr. A. Myrick Freeman is the William D. Shipman Research Professor of Economics at
Bowdoin College, where he has been on the faculty since 1965 and has served as Chair of the
Economics Department, as well as Director of the Environmental Studies Program. He has also
held appointments as Visiting Professor at the University of Washington, and the Robert M. La
Follette Distinguished Visiting Professor at the University of Wisconsin-Madison and as a Senior
Fellow at Resources for the Future, a research organization in Washington, DC.
Dr. Freeman's principal interests are in the areas of applied welfare economics, benefit-
cost analysis, and risk management as applied to the development of models and techniques for
estimating the welfare effects of environmental changes such as the benefits of controlling
pollution and the damages to natural resources due to releases of chemicals into the environment.
Dr. Freeman has authored or co-authored eight books including The Economics of Environmental
Policy (with Robert Haveman and Allen Kneese), The Benefits of Environmental Improvement:
Theory and Practice, Air and Water Polltion Control: A Benefit-Cost Assessment, and most
recently The Measurement of Environmental and Resource Values: Theory and Methods. He has
also published more than 70 articles and papers in academic journals and edited collections.
Dr. Freeman is presently a consultant to the SAB, having served as a member of the
Advisory Council on Clean Air Compliance Analysis (the Council), as well as a member of the
Environmental Economics Advisory Committee (EEAC).
Dr. Freeman received his Ph.D. and M.A. in Economics from the University of
Washington, and his A.B. in Economics from Cornell University.
Dr .W. Michael Hannemann is Professor of Agricultural and Resource Economics at the
University of California, Berkeley. He has worked on water resource economics since his days in
graduate school at Harvard in 1970, working on the economics of water supply and wastewater
disposal. He has recently served as the economics staff for the California State Water Resources
Control Board. He has also served on a Blue Ribbon Panel for the Mayor of Los Angeles on
designing the water rate schedule for LA, as well as a Blue Ribbon Panel on water pricing for the
Metropolitan Water District of Southern California. He has been a consultant to the Urban Water
Conservation Council of California and has co-authored three reports on water rate design and
assessment of water conservation.
Dr. Hannemann is widely published, having authored or co-authored over 30 refereed
articles, over 30 research reports, nearly 30 contributions to books, a number of books and
monographs, and over 40 working papers dealing with economics and environmental issues.
Dr. Hannemann has served as a teaching fellow in the Department of Economics at
Harvard University, a Lecturer in the Department of Economics at Northeastern University, a
staff Economist and Consultant at Urban Systems Research in Cambridge, Massachusetts, and
other teaching and consulting appointments. He was a member of the United Nations
Environmental Program (UNEP) Working Group on Benefits of Biodiversity Conservation, a
University Fellow at Resources for the Future, a Member of the Board of Directors for the
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Association of Environmental & Resource Economists, and a Member of the National Academy
of Sciences (NAS), National Research Council (NRC) Committee to Review the Glen Canyon
Environmental Studies Program and the Committee on Wolf and Bear Control in Alaska.
Dr. Hannemann received his Ph.D. in Economics and his M. A. in Public Finance and
Decision Theory from Harvard University, a M.Sc. in Development Economics from the London
School of Economics, and a B.A. in Philosophy, Politics and Economics from Oxford University
in England.
Dr. Gregory Poe is Associate Professor in the Department of Applied Economics and
Management at Cornell University. His present appointment involves research, teaching, and
extension in environmental, policy and welfare economics, non-market valuation, experimental
economics, and non-point source pollution policy Other areas of research have included fisheries
management in developing countries, geographical information systems, erosion economics, and
technical efficiencies in agricultural production. While on sabbatical leave he recently served as a
Visiting Fellow at the Jackson Environmental Institute and the Centre for Economic and Social
Research on the Global Environment. He has published over 2-dozen articles in refereed journals
a number of research manuscripts over two dozen monographs, nearly 40 presentations at
professional meetings, over 40 extension publications, on a broad variety of economics topics.
Topics covered include non-market valuation methodologies, contingent valuation, incremental
benefits of groundwater benefits, measuring differences in willingness-to-pay, land allocation
model to assess welfare implications of a conservation reserve program, connecting taxes and
willingness to pay for farmland protection, valuation of ground water quality, nitrates in ground
water, well testing programs and exposure and health risk perceptions, the evolution of federal
water pollution control policies, and numerous related topics.
Dr. Poe has a recently funded grant though the National Science Foundation with other
colleagues on "Ecosystem Values and Surface Water Protection: Basic Research on the
Contingent Valuation Method." He also had recently received Hatch funds (from 2000 to 2002)
on "Environmental Policy and Agriculture," as well as Hatch funds (1998-2000) for "Analyzing
the Conflict Between 'Harm Preventing' versus 'Public Good Providing' Environmental
Policies." He has received other funds in the past from NSF, NSF/EPA, Hatch Funds, Niagara
Mohawk Power Corporation ("An Analysis of Niagara Mohawk's Green Pricing Program"),
USD A, and the University of Wisconsin-Madison for a variety of research activities.
Dr. Poe has his Ph.D. in Natural Resource Economics and his M.S. in Production
Economics from the University of Wisconsin, Madison. He has his B.A. in Economics from
Pomona College.
Dr. Clifford S. Russell is currently Professor of Economics and Director, Vanderbilt Institute for
Public Policy Studies. He has served on the EPA/SAB Joint Subcommittee on Industrial Ecology
and Environmental Systems Management. He has served on a number of prestigious advisory
committee appointments in other organizations. For instance, he has served on the National
Academy/National Research Council Environmental Research Assessment Committee, 1975-77,
the Committee on Steel Research, 1978, the Environmental Studies Board, 1983-85, the
Committee on Multimedia Approaches to Pollution Control, 1986-88, the Committee on Water
Resources Research, 1988-90, the Panel for the Review of the DOE Environmental Restoration
Priority System, Chair, 1992-93, the Committee to Review Risk Management in the DOE's
Environmental Remediation Program, 1993, and the Committee on Watershed Management,
1996. He has written and co-authored at least 8 textbooks on a variety of subjects, including
drought and water supply, residuals management in industry: a case study of petroleum refining,
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steel production: processes, products and residuals, environmental quality management,
freshwater recreational fishing: the national benefits of water pollution control, enforcing
pollution control laws, applying economics to the environment, and investing in water quality:
benefits, costs and risks. He has edited at least 9 textbooks dealing with these and related topics,
as well as publishing over 60 articles, nearly 40 notes, comments and reviews, and over 50 other
products. He has served as a member of a variety of Governing Boards, including the Board of
Trustees of the Environmental Defense Fund (1973-85), and the Tennessee Environmental
Council (1989-present). He is Past President of the Association of Environmental and Resource
Economists, and has served on a number of other advisory and organizing committees.
Dr. Russell has his Ph.D. in Economics from Harvard University, and his B.A. in
Mathematics from Dartmouth University.
Dr. Hilary A. Sigman is currently Associate Professor in the Department of Economics at
Rutgers University. Dr. Sigman has published over a dozen publications on such topics as the
economics of international spillovers and water quality, liability for cleanup of contaminated sites
under Superfund, hazardous waste and toxic substance policies, an empirical analysis of
Superfund litigation, reforming hazardous waste policy, midnight dumping: public policies and
illegal disposal of used oil, the cost of reducing municipal solid waste, cross-media pollution and
responses on chlorinated solvent releases, the effects of hazardous waste taxes on waste
generation and disposal, and a comparison of public policies for lead recycling. He has been a
reviewer on a number of economics journals, and has conducted a number of presentations at over
thirty organizations since 1994. Since 1994 to the present he has maintained a research affiliation
as a Faculty Research Fellow with the National Bureau of Economic Research. He currently
serves on the SAB's Environmental Economics Advisory Committee (EEAC). He has been a
member of the Editorial Council of'the Journal of'Environmental Economics and Management.
He is a recipient of a number of research contracts and grants. For instance, an NSF research
grant (1999-2002) for "International spillovers and water quality in rivers," EPA/Office of
Exploratory Research Grant (1994-97) "Liability funding and Superfund clean-up strategies,"
U.C. Toxic Substances Research and Teaching Program Research Grant, "Cross-media
substitution in toxic chemical emissions," a Marine Policy Center, Woods Hole Oceanographic
Institution Subcontract for focal study entitled "The cost of waste reduction," and others (such as
a UCLA Academic Senate Committee on Research, and an MIT Center for Energy and
Environmental Policy Research Dissertation Funding.)
Dr. Sigman received his Ph.D. in Economics from the Massachusetts Institute of
Technology, his M.Phil, in Economics from Cambridge University (England), study in Human
and Physical Geography from the University College of Wales, Alberystwyth, and a B.A. in
Economics and Studies in the Environment from Yale College.
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