August 16, 2010 External Review Draft
The Benefits and Costs of the
Clean Air Act: 1990 to 2020
- Summary Report
US Environmental Protection Agency
Office of Air and Radiation
8/16/2010
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August 16, 2010 External Review Draft
Acknowledgements
This document is an abridged version of a longer report which evaluates the benefits and costs of
programs implemented pursuant to the 1990 Clean Air Act Amendments. The longer report in turn
summarizes and integrates a series of technical analyses examining particular analytical tasks, such as
estimation of compliance cost and projection of air quality changes. For references to underlying data,
readers are encouraged to consult the full integrated report and the supporting technical analysis
documents. These documents are available at: www.epa.gov/oar/sect812.
The study was led by staff from the US Environmental Protection Agency Office of Air and Radiation,
with support provided, under contract to EPA, by the organizations participating on the Study Team.
The full integrated report has been reviewed by the EPA Science Advisory Board's Advisory Council on
Clean Air Compliance Analysis (hereafter Council) and its three technical subcommittees. Particular
detailed reports focused on each of the key analytical components of the overall study were also
reviewed by the Council and/or one or more relevant subcommittees.
Study Team
US EPA Office of Air and Radiation
Industrial Economic, Incorporated
E.H. Pechan & Associates
ICF International
Research Triangle Institute
Stratus Consulting
Study Review
Advisory Council on Clean Air Compliance Analysis
Air Quality Modeling Subcommittee
Health Effects Subcommittee
Ecological Effects Subcommittee
The study was greatly improved by the ideas and expertise of the individuals and firms participating on
the Study Team, and by the rigorous and thoughtful expert review by the external review panels.
However, responsibility for the study's results, the analytical decisions leading to those results, the
interpretations reported herein, and the recommendations made for future efforts rests with the
Environmental Protection Agency.
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August 16, 2010 External Review Draft
Summary of Findings
• The effects of the 1990 Clean Air Act estimated herein reflect actions and partnerships across
multiple levels of government, private organizations, households, and individuals. This
combined effort involves federal standard setting and implementation, State and local programs
to meet federal standards, and expenditures by private entities to achieve the requisite
emissions reductions.
• These combined public and private efforts to meet the requirements of the 1990 Clean Air Act
Amendments -based on the particular scenarios of Clean Air Act compliance analyzed—rise
throughout the 1990 to 2020 period of the study, and are expected to reach about $65 billion
annually by 2020.
Though costly, these efforts are
projected to yield substantial air
quality improvements which lead to
significant reductions in air pollution-
related premature death and illness,
improved economic welfare of
Americans, and better environmental
conditions. The economic value of
these improvements is estimated to
reach almost $2 trillion for the year
2020, a value which vastly exceeds
the costs of efforts to comply with
the 1990 Clean Air Act and related
programs.
The finding that the benefits of the
1990 Clean Air Act and related
programs exceed costs appears
robust despite uncertainties in the
estimates for both benefits and costs
presented in this study. In addition
to omitting a wide range of
potentially important beneficial
effects, analysis of uncertainties in
the benefits and costs which could
be quantified indicates that the
chances are extremely small that
direct costs exceed direct benefits.
2000
2010
2020
I Costs
I Benefits
Exhibit 1. Primary Central Estimates of direct benefits and
direct costs for the 2000, 2010, and 2020 study target years.
(In billions of 2006 year value dollars).
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August 16, 2010 External Review Draft
• Beyond the direct value people assign to the health and environmental improvements they gain,
1990 Clean Air Act programs are projected to improve U.S. economic growth and the economic
welfare of American households as better health leads to greater worker productivity and
savings on medical expenses for air pollution-related health problems.
• The most significant known human health effects from exposure to air pollution are associated
with exposures to fine particulate matter and ground-level ozone pollution. Many of these
effects could be quantified for this study; but other health effects of particulate matter and
ozone, health effects associated with other air pollutants, and most air pollution-related
environmental effects could be quantified only partially, if at all.
• The limits in available data and modeling tools to address other health and environmental
consequences of air pollutant exposure implies there is an ongoing need for investment in
research to improve the coverage of potentially important effects in benefit-cost studies of air
pollution programs, because not all EPA programs are targeted on reducing particulate matter
and ozone exposures. Additional research also is needed to reduce uncertainties in the
estimates of included effects, especially uncertainties associated with estimating particulate
matter- and ozone-related mortality and the economic value of avoiding those outcomes.
• To improve their usefulness to policymakers and the public, future air pollution policy analyses
could be designed to provide insights on the combined effects of programs to address
greenhouse gas emissions and programs currently implemented under the Clean Air Act.
• Consideration should be given to improving macroeconomic modeling of major environmental
programs so their economic benefits as well as their financial costs are reflected in projections
of how these programs might affect the overall economy and the economic welfare of American
households.
About this Report
This report is the third in a series of EPA studies which estimate and compare the benefits and costs of
the Clean Air Act and related programs.
The first report was called the Retrospective Study, and it was published in 1997. This first study
estimated the benefits and costs of programs implemented pursuant to the 1970 Clean Air Act and the
1977 Amendments, and included an analysis of the benefits and costs of phasing out leaded gasoline.
The second report was called the First Prospective Study. Published in 1999, it evaluated the
incremental benefits and costs of the 1990 Clean Air Act Amendments and associated programs through
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August 16, 2010 External Review Draft
the year 2010, relative to controls in place as of 1990. In addition to evaluating the effects on human
health, the economy, and the environment of Titles I through V of the 1990 Amendments, the First
Prospective Study analyzed the benefits and costs of phasing out stratospheric ozone depleting
chemicals such as chlorofluorocarbons (CFCs) under Title VI.
The current report is called the Second Prospective Study. This new study updates and expands the First
Prospective Study by using new and better data and modeling tools. The new study also looks out
further into the future by evaluating and costs and benefits of 1990 Amendment programs through the
year 2020.
The Second Prospective Study focuses on evaluating
the significant changes made over the last decade in
the implementation of Titles I through IV. Readers
interested in benefit and cost information related to
Title V (permits) and Title VI (stratospheric ozone
protection) are referred to the First Prospective Study
and subsequent Regulatory Impact Analyses.
Goals and Objectives of the Study
During the legislative efforts leading up to enactment
of the 1990 Clean Air Act Amendments, members of
Congress working on the Act's reauthorization made it
clear they wanted more and better information from
EPA about the economic, health, and environmental
effects of air pollution control programs. To ensure
this improved information was available to support
future policymaking, Congress added statutory
language which required EPA to conduct periodic
studies to evaluate the benefits and costs of the Clean
Air Act itself. Enhanced credibility and continual
improvement in data and methods were promoted by
requiring that the design, implementation, and results
of each study were to be reviewed by a
multidisciplinary panel of outside experts.
To meet Congress' goals for the third study in this
series of Clean Air Act benefit-cost analyses, EPA
defined a central objective and three supplemental
objectives. Consistent with the central objectives
defined for the two preceding studies, the current
CLEAN AIR ACT SEC. 312. ECONOMIC IMPACT
ANALYSES (as amended, in part):
(a) The Administrator...shall conduct a
comprehensive analysis of the impact of this Act
on the public health, economy, and environment
of the United States...
(b) In describing the benefits of a standard
described in subsection (a), the Administrator shall
consider all of the economic, public health, and
environmental benefits of efforts to comply with
such standard...
The Administrator shall assess how benefits are
measured in order to assure that damage to
human health and the environment is more
accurately measured and taken into account...
(c) [T]he Administrator shall consider the
effects...on employment, productivity, cost of
living, economic growth, and the overall economy
of the United States.
(e) [T]he Administrator...shall appoint an Advisory
Council on Clean Air Compliance Analysis
of...recognized experts in the fields of the health
and environmental effects of air pollution,
economic analysis, environmental sciences, and
such other fields that the Administrator
determines to be appropriate.
(g) The Council shall-
(1) review the data to be used for any analysis
required under this section and make
recommendations to the Administrator on the
use of such data;
(2) review the methodology used to analyze
such data and make recommendations to the
Administrator on the use of such methodology;
and
(3) prior to the issuance of a report...review
the findings of such report, and make
recommendations to the Administrator
concerning the validity and utility of such findings.
Exhibit 2. 1990 Clean Air Act Section 812
statutory language - abridged.
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August 16, 2010 External Review Draft
study is designed to estimate the direct costs and direct benefits of the Clean Air Act, including the
major federal, State, and local programs implemented to meet its requirements. The present study
focuses on estimating the incremental effects of the 1990 Amendments in particular, and covers the
period from 1990 -when these most recent Amendments were passed—through the year 2020.
A second, subsidiary objective of the study was to gauge the economy-wide effects of the 1990 Clean Air
Act programs, including evaluation of the Act's effects on the overall growth of the U.S. economy and
the economic well-being of American households.
EPA also sought to be as comprehensive as possible -subject to practical limitations imposed by budget
and information constraints—by considering a wide range of human health, human welfare (i.e., quality
of life), and ecological effects. While some of these effects may contribute only minimally, if at all, to
the quantitative estimates of benefits and costs generated for this study, looking at a broad range of
effects was intended to ensure that (a) effects of concern to various stakeholders were included and (b)
EPA and outside researchers could obtain additional insights about deficiencies in the scope and quality
of current information.
A fourth and final objective of the current study was to assess its limitations and uncertainties to identify
opportunities for improving data and methods, and to explore the need for refining the scope and
design of future air pollution benefit-cost studies. External peer review by the outside experts serving
on the Council was a critical aspect of efforts to meet this objective, as well as the other objectives of
this study.
Second Prospective
Retrospective
First Prospective
Study Design
The current study is similar to the previous two efforts in its fundamental design. To isolate the effects
of Clean Air Act programs, the study configures and compares two alternative states of the world: one
with the 1990 Clean Air Act
Amendments, and one which
assumes the amendments were not
passed.
In particular, the first scenario was
built to reflect the actual history of
post-1990 Clean Air Act
implementation, including known
programs already established, and
future programs and control
strategies anticipated in the later
years of the study period. This
Wlth-CAAA90
1970
1980
1990
2000
2010
2020
Exhibit 3. Second Prospective Study scenarios conceptual
schematic.
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scenario was called the "with 1990 Clean Air Act Amendments scenario", or With-CAAA90 case for short,
and it represents a world of lower emissions but higher costs following enactment of the 1990
Amendments. The With-CAAA90 case is represented by the lower line in Exhibit 3, which depicts a not-
to-scale schematic illustrating the scenarios analyzed.
The second, contrasting scenario reflects a
hypothetical world which assumes federal Clean Air
Act and related programs were frozen as of November
1990. This is the month the amendments were
actually passed, so 1990 serves as the "base year" of
the analysis when the two scenarios are initially set as
equal but then begin to diverge. The counterfactual
scenario was called the "without 1990 Clean Air Act
Amendments scenario", or Without-CAAA90 case. The
hypothetical Without-CAAA90 case is represented in
Exhibit 3 by the upper 1990 to 2020 trend line showing
the higher emissions which would result if standards
stayed fixed but the economy and the population of
the U.S. grew over the 1990 to 2020 period.
Once they were configured, the With-CAAA90 and
Without-CAAA90 scenarios were processed through a
series of economic and physical effects models, and their differences were estimated and compared.
Specifically, each scenario was analyzed using a sequence of models to estimate what pollution control
measures were (or might be) taken by government, private industry, and individuals; and what the
effects of those measures might be in terms of economic and environmental change. The sequence of
modeling steps followed to analyze the two scenarios is shown in Exhibit 4. Detailed descriptions of
each analytical step -including the particular data, models, and methodologies used and their attendant
uncertainties—are provided in the full integrated report and supporting technical documents.
One consequence of this sequential modeling approach is that the scenarios were defined early in the
study. As such, this study reflects a particular snapshot in time with respect to known and anticipated
control programs, especially those incorporated in the With-CAAA90 scenario. Several important
programs, however, have been initiated or revised since the analytical scenarios were locked for the
study. For example, the With-CAAA90 scenario reflects the Clean Air Interstate Rule (CAIR) which had
been recently promulgated when the scenarios were set, but this rule is now being replaced by an
alternative transport rule. Readers are encouraged to consult the relevant Regulatory Impact Analyses
for information on the estimated benefits and costs of recent rules.
r
Scenario
Development
!
Sector Modeling
I
Emissions |
Air
He
Eci
i
Quality Modeling
alth
Welfare
Dnomic Valuation
L
Benefit-Cost
i
Direct Cost
Comparison
Exhibit 4. Analytical sequence.
To ensure high quality, credible results, the study used the best available data and state of the art
modeling tools and methodologies. Most important, the design of the study, many of the intermediate
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methodological choices and findings, and the final results and their interpretation were all reviewed by
the Advisory Council on Clean Air Compliance Analysis -hereafter, the Council—and its three technical
subcommittees. The specialized expert
review of the emissions and air quality,
human health effects, and ecological
effects study components by the three
technical subcommittees complemented
and supported the Council's broad
expertise and its own specialized
expertise in economics.
Primary Results
Direct Cost
Compared to the baseline scenario
without the 1990 Clean Air Act and
related programs, the With-CAAA90
scenario adds controls across five major
categories of emission sources. All
significant emissions sources are
assigned to one of these five major
source categories. Two of these
categories cover stationary point sources
of emissions, two cover mobile sources,
and the fifth category covers smaller
sources dispersed over wide areas. The categories are:
Utilities
Non-Utility Industrial
Onroad Vehicles & Fuel
Nonroad Vehicles & Fuel
Area Sources
Local Controls
Additional NAAQS Controls
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20
30
Exhibits. Year 2020 direct cost by source category. (In
billions of year 2006 value dollars)
1. Electricity generating units (e.g., coal-fired powerplants)
2. Non-utility industrial sources (e.g., industrial boilers, cement kilns)
3. Onroad vehicles and fuel (e.g., cars, buses, trucks)
4. Nonroad vehicles and fuel (e.g., aircraft, construction equipment)
5. Area sources (e.g., wildfires, construction dust, dry cleaners)
The costs incurred to reduce emissions from these sources under the 1990 Clean Air Act are estimated
to rise steadily throughout the 1990 to 2020 study period. By 2020, the study target year when
differences between the With-CAAA90 and Without-CAAA90 scenarios are at their greatest, additional
annual compliance expenditures are estimated to be about $65 billion (in year 2006 value dollars).
As shown in Exhibit 5, these incremental costs of compliance did not fall evenly across the five major
source categories. Almost half of the year 2020 direct costs are to meet requirements for onroad
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vehicles and the fuels used to operate them. About 40% of the $28 billion in onroad expenditures is to
meet fuel composition requirements and the rest is incurred to meet tailpipe standards and implement
vehicle inspection and maintenance programs.
Electric utilities account for the second largest area of expenditure, with costs in the year 2020 equal to
a little over $10 billion. The programs leading to the bulk of these expenditures include the Title IV acid
rain sulfur dioxide allowance trading program, the Clean Air Interstate Rule (CAIR), programs targeted at
reducing nitrogen oxide emissions (e.g., the NOx SIP Call), and controls required to meet the national
ambient air quality standards for particulate matter and ozone.
Implementation of federal and regional control programs to meet the national particulate matter and
ozone standards accounts for much of the cost incurred by the five major emissions source categories.
However, for many local areas, emissions reductions achieved by these programs are not sufficient to
reach attainment with national air quality standards. Under the Clean Air Act, these local areas are
required to implement additional controls tailored to their particular needs and opportunities for the
further emission reductions needed to improve air quality to healthful levels. Additional local controls
might therefore apply to one or more of the five major source categories. Expenditures for local
controls which could be identified as both suitable for a given location and cost-effective to implement
were estimated to reach about $6 billion by 2020.
By the year 2020, however, the particular challenge of reaching the 8-hour National Ambient Air Quality
Standard (NAAQS) for ozone in some locations is significant. Under the particular With-CAAA90 scenario
analyzed in this study, even the additional local controls described above which apply identified, cost-
effective technologies are insufficient to improve modeled ozone air quality to levels consistent with
NAAQS attainment. Since additional cost-effective local controls using current technologies could not
be identified, the estimated costs of the additional measures these local areas may implement is highly
uncertain. The With-CAAA90 scenario adopts an assumption that the additional emissions reductions
needed beyond those achieved by identified control measures will cost $15,000 per ton, a figure which
could turn out to be too high or too low depending on local circumstances and the prospects for near-
term improvements in control technologies and cost. The total incremental cost of these additional
local controls using unidentified technologies is estimated to be $13 billion, but this estimate is so
uncertain that it is reported as a subtotal separate from the identified control measures subtotal of $52
billion.
Emissions Reductions
Though the controls applied across the major categories of emissions sources were costly, they achieved
substantial reductions in emissions contributing to ambient concentrations of particulate matter, ozone,
and other air pollutants. The full range of emissions reductions estimated under the With-CAAA90 case
and the breakdown by source category are described in the full report, but the overall reductions in
pollutants which contribute most to changes in particulate matter and ozone are highlighted in Exhibit 6.
In addition to directly emitted fine particles, three other pollutants contribute to increases in ambient
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Without-CAAA H With-CAAA
15
10
concentrations of fine particles through
secondary formation and transport in
the atmosphere. For example, gaseous
sulfur dioxide can be transformed in the
atmosphere to particulate sulfates.
Hydrocarbons and nitrogen oxides are
also key pollutants contributing to the
formation of ground-level ozone.
The estimated reductions in these
pollutants achieved as of 2020 under the
With-CAAA90 case are large for two
reasons: they reflect both absolute
reductions relative to 1990 base year
conditions and avoided increases in
emissions which result under the
Without-CAAA90 case when standards
stay fixed at 1990 levels but economic
activity increases from 1990 to 2020.
Approximately 75 percent of the 2020
emissions reductions are attributable to
improvements relative to 1990, while
the remaining 25 percent is attributable
to avoiding increases in emissions that
could have resulted if Clean Air Act
standards stayed fixed while population
, ... Exhibit 6. Year 2020 key pollutant emissions under the With-
and economic activity grew.
CAAA90 and Without-CAAA90 scenarios. (In millions of short
tons)
Most of the reduction in volatile organic
compounds (VOCs) or hydrocarbons is achieved by controls on evaporative emissions from area sources
(e.g., household solvents), tailpipe and evaporative emission from vehicles and nonroad engines, and
non-utility industrial sources.
0
*&
^N
For nitrogen oxide (NOx) emissions, all five major source categories achieve emissions reductions under
the With-CAAA90 scenario; but the most substantial contributions to lower emissions are attributable to
tailpipe standards for onroad vehicles and reductions achieved by utilities subject to cap and trade
programs and/or the Clean Air Interstate Rule. Requirements related to the national standards for fine
particulate matter also reduce NOx emissions.
Utilities are also the source category which achieves the most significant reductions in sulfur dioxide
(SO2) emissions, accounting for about 75 percent of the total reduction achieved in 2020. Cap and trade
programs, CAIR, and other control programs implemented pursuant to the national particulate matter
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standards account for most of the difference in sulfur dioxide emissions estimated between the With-
CAAA90 and Without-CAAA90 scenarios.
About 40 percent of the year 2020 reduction in directly emitted fine particles is achieved by controls on
area sources such as construction dust and residential woodstoves. Reductions from utilities and from
nonroad and onroad sources also contribute significantly toward meeting the requirements of the
national ambient air quality standards for particulate matter.
Air quality improvements
The substantial reductions in emissions contributing to ambient concentrations of ozone and fine
particulate matter lead to significant differences in modeled air quality conditions under the With-
CAAA90 and Without-CAAA90 scenarios.
Exhibit 7. Difference in annual average fine particle (PM2.5) concentrations between the With-CAAA90 and
Without-CAAA90 scenarios: With-CAAA90 minus Without-CAAA90 for 2020. (In micrograms per cubic meter).
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Air quality modeling results for all pollutants and target years analyzed in this study are available in the
full report, but Exhibit 7 highlights the estimated change in fine particle concentrations between the
With-CAAA90 and Without-CAAA90 cases. The particulate matter differences are worth emphasizing
because reductions in fine particle exposures are responsible for the vast majority of the benefits which
could be evaluated in economic terms for this study.
Exhibit 7 indicates that reductions in fine particle concentrations are large and widespread, particularly
in California and the Eastern U.S., especially the Ohio Valley region. Because these areas had relatively
high particulate matter concentrations in the 1990 base year, the modeling results imply that 1990
Clean Air Act programs were effective in targeting high emissions sources, especially those affecting
population centers where improvements in air quality would benefit the greatest number of people.
There are a few locations in the West where fine particle concentrations are estimated to be slightly
higher in 2020 under the With-CAAA90 scenario, but these isolated spots of small disbenefit represent
increases of less than 1 microgram per cubic meter. Investigation of these small disbenefits indicated
that they primarily arise due to increases in electricity generation by Western powerplants which burn
low-sulfur coal. Overall, the principal outcome demonstrated by Exhibit 7 is the breadth and magnitude
of reductions in fine particle concentrations across the 48 States under the With-CAAA90 case.
Ozone concentrations are also significantly lower under the With-CAAA90 scenario relative to the
Without-CAAA90 scenario, both in the West as shown in Exhibit 9; and across the East as shown in
Exhibit 8. The patterns of air quality improvements for ozone shown in Exhibit 9 and Exhibit 8 are similar
to those observed in Exhibit 7 for fine particles: widespread regional improvements across the East, with
improvements in the West occurring predominantly in areas influenced by Southern California
population centers.
Exhibit 9. Difference in simulated daily maximum 8-
hour ozone concentration for the Western US CMAQ
domain for the August 15 episode day: With-CAAA90
minus Without-CAAA90 for 2020. (In parts per
billion).
Exhibit 8. Difference in simulated daily maximum 8-
hour ozone concentration for the Eastern US CMAQ
domain for the July 15 episode day: With-CAAA90
minus Without-CAAA90 for 2020. (In parts per
billion).
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Health Improvements
The steady improvements in air quality
estimated under the With-CAAA90 case from
1990 to 2020 period lead to increasing health
and environmental benefits over the entire
study period. By 2020, the last year analyzed
in this study, the differences in air quality and
human health outcomes between the With-
CAAA90 and Without-CAAA90 scenarios are
substantial.
As discussed above and illustrated in Exhibit
7, the most significant reductions in fine
particle concentrations are achieved in areas
with relatively poor air quality and/or high
population density. This result is due in large
part to the effective design of federal, State,
and local programs aimed at meeting
ambient air quality standards in ways which
maximized public health improvements. The
effectiveness of these programs in achieving
well-targeted reductions in exposure means
that the differences in health outcomes
between the With-CAAA90 and Without-
CAAA90 scenarios are substantial, even
dramatic. For example, as early as 2000,
annual average exposures to fine particles
Health Effect Reductions
(PM2.5 & Ozone Only)
Year 2010 Year 2020
PM2. 5 Adult Mortality
PM2.5 Infant Mortality
Ozone Mortality
Chronic Bronchitis
Acute Bronchitis
Acute Myocardial Infarction
Asthma Exacerbation
Hospital Admissions
Emergency Room Visits
Restricted Activity Days
School Loss Days
Lost Work Days
160,000
230
4,300
54,000
130,000
130,000
1,700,000
86,000
86,000
84,000,000
3,200,000
13,000,000
230,000
280
7,100
75,000
180,000
200,000
2,400,000
135,000
120,000
110,000,000
5,400,000
17,000,000
Exhibit 10. Differences in key health effects outcomes
associated with fine particles (PM2.5) and ozone between
the With-CAAA90 and Without-CAAA90 scenarios for the
2010 and 2020 study target years. (In number of cases
avoided, rounded to 2 significant digits).
among the U.S. population are lower by an average of 5 micrograms per cubic meter under the With-
CAAA90 scenario. By 2020, this population-weighted, annual average exposure difference between the
scenarios increases to an estimated 9 micrograms per cubic meter, all as a result of programs related to
the 1990 Clean Air Act Amendments.
The most significant outcome among those listed in Exhibit 10 is the large reduction in risk of premature
mortality associated with fine particulate matter. Ozone health studies also indicate there is a separate,
additive contribution to reduced premature mortality risk from this pollutant beyond the premature
mortality effect associated with fine particle exposures. This study's estimates for these incidence
reductions are based on a strong and extensive foundation of peer-reviewed epidemiological literature.
The methodologies used to apply these epidemiological studies to the estimation of reduction in
population risks from particulate matter and ozone exposure have also been extensively peer-reviewed.
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In addition to reductions in incidences of premature mortality, reductions in exposure to fine particles
and ozone are also estimated to achieve major reductions in serious diseases such as chronic bronchitis
and acute myocardial infarction, as well as fewer hospital admissions, emergency room visits, lost work,
and lost school days.
Controls on emissions of hazardous air pollutants, including heavy metals and toxic gases, are known to
reduce adverse health effects, though data and tools to quantify the full extent of the reductions in
health risks from these pollutants are limited. A case study assessing the effects of the 1990 Clean Air
Act in reducing benzene emissions and exposures in the Houston area was conducted as part of this
study. The case study found a significant cancer-reducing benefit from 1990 Clean Air Act Amendment
programs overall in the region, but also found that 1990 Amendment programs led to the most
substantial reductions in those areas with the highest baseline cancer risks. These results are described
in greater detail in the full report and in a separate technical report documenting the Houston benzene
case study.
Reductions in ambient concentrations of other criteria pollutants such as carbon monoxide also confer
health benefits, though many of these benefits are difficult to quantify for various reasons. For
example, in the case of carbon monoxide, available health studies are not well suited to isolating the
incremental contribution of carbon monoxide reductions to improved health when significant
reductions in other pollutants, such as particulate matter, are modeled at the same time. Furthermore,
some criteria pollutant health effects can be quantified in physical terms but economic studies
supporting valuation of the changes in physical outcomes are unavailable. Whether the limits on
quantification of these other criteria pollutant effects emerge at the physical effect or economic
valuation step, the result is that these effects are not reflected in the Primary Estimates of health
improvements presented in this report.
Other Benefits to People and the Environment
Beyond the direct health benefits of Clean Air Act programs, a variety of other improvements to human
well-being and ecological health are assessed in this study. Efforts to evaluate these other "non-health"
effects were motivated by the study's goal of providing insights on the full range of outcomes which may
affect people and the environment, including those which might either be important to particular
stakeholders or warrant further research to support more or better quantitative treatment in future
studies.
The first step in this study's assessment of non-health effects was a literature survey to identify
ecological effects of Clean Air Act-related pollution reductions at various levels of biological organization
(e.g., ecosystem, community, individual, cellular). The range of potentially relevant effects found in this
literature review is described in the full report and supporting technical documents. Based on the
results of this broad assessment, the analysis was then narrowed to focus on those ecological and
human health effects for which economic valuation information was available and could be applied.
This narrowing of focus served the principal goal of the study, which was to evaluate the various health,
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economic, and environmental effects of the Clean Air Act using comparable measures of value. In the
end, only a very limited number of non-health effects could be included in the Primary Estimate of
benefits, and these quantified and monetized ecological and welfare effects are listed in Exhibit 11.
Quantified Human Welfare and Ecological Effects
Visibility in residential areas (metropolitan areas)
Visibility in recreational areas (large parks in three regions)
Commercial timber (commercially important tree species)
Agriculture (commercially important crops)
Recreational fishing (Adirondacks)
Materials damage (a few acid-sensitive materials)
Exhibit 11. Ecological and Welfare Effects included in Primary Estimate of
Benefits.
In addition to limitations in the
range of effects included in the
Primary Estimate results, several
of the included effects were
subject to limitations in
geographic coverage or the
number of commodities or
ecosystems covered. Relevant
limitations are listed in
parentheses following each
quantified endpoint in Exhibit 11.
For example, available data and
modeling tools supported
assessment of the effects of changes in ozone exposure only for commercially important crops and tree
species; and other effects such as changes in recreational fishing opportunities due to acidic deposition
could only be addressed through case study examinations not suitable for extrapolation to the other
areas of the country. This study therefore suffers from the same persistent limitations on data and
methods for evaluating potentially important ecological and human welfare outcomes which have
plagued other benefit-cost studies of air pollution control programs. The consequence is ongoing
uncertainty about the potential magnitude of these effects relative to the human health effects which
can be more readily evaluated in terms of physical outcomes and changes in economic value.
Visibility
One particular non-health effect of better air quality under the With-CAAA90 scenario is worth
highlighting: improved visibility. This study applies a new methodology for estimating the economic
value of visibility improvements in metropolitan areas, and the effect of this new approach is to expand
the number of locations where visibility improvements can be valued in economic terms. The
significance of the results obtained using this new methodology highlights the importance of improved
visibility for enhanced quality of life.
There are two types of visibility improvement benefits estimated in this study: recreational visibility and
residential visibility. Recreational visibility benefits reflect the values people assign to reductions in
obscuring haze and resulting improvements in scenic views at important U.S. recreational areas, such as
the Grand Canyon. Residential visibility benefits capture the value people assign to improved visibility
where they live.
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The differences in air pollution-related visibility impairment under the With-CAAA90 and Without-
CAAA90 scenarios used to estimate both recreational and residential visibility benefits are shown in
Exhibit 12. While benefits are estimated for all target years of the study, Exhibit 12 shows the estimated
county-level improvements in visibility under the With-CAAA90 case relative to the Without-CAAA90
case for the year 2020. Improvements are measured in Deciviews, which is a rating scale aimed at
measuring and then valuing perceptible changes in visibility.
Mount Rainier
Yellowstone
Olympic
Ybsemite
Rocky Mountain
Acadia
Sequoia
Kings Canyon
Great Smoky
Mountains
Zion
Grand Canyon
Change in Deciviews
Below07 07to18 1.8to2.5 2.5to30 30to3.4 3,4to3.8 38to41 4.1to44 44to4,7 Above 4 7
Smallest Biggest
lmprovement A Symbolizes National Parks Improvement
Exhibit 12. Differences in visibility at the county level between the With-CAAA9Q and Without-CAAA90
scenarios for 2020.
Previously established methods were used to estimate the value of the visibility improvements at the
recreational areas shown in Exhibit 12. Visibility improvements in these "Class I" recreational areas are
estimated to reach $18 billion by the year 2020. Applying the new methodology supporting expanded
coverage of U.S. metropolitan areas, residential visibility benefits are estimated to reach $49 billion in
2020, a number which is significant but consistent with the substantial improvements in visibility across
major population centers depicted in Exhibit 12. The $67 billion combined total for residential and
recreational visibility benefits in the year 2020 slightly exceeds the entire $65 billion estimated cost of
1990 Clean Air Act compliance for that year.
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Comparison of Direct Costs and Direct Benefits
The final step in the benefit-cost analysis conducted for this study is to express the various health,
welfare, and environmental benefits of 1990 Clean Air Act programs in dollar values so the benefits can
be compared to the dollar-based estimates for control costs. As described above, many of these
beneficial outcomes cannot be expressed in terms of economic value because the scientific and
economic studies to support such
valuations are either inadequate or
unavailable. For those effects which
could be converted to measures of
economic value, important uncertainties
or limitations remain.
Some who consider these uncertainties
and other limitations of benefit-cost
analysis may prefer to use other
paradigms for measuring, comparing, and
evaluating the outcomes projected by this
study. For example, some may prefer not
to attempt to assign uncertain dollar-
based values to changes in risk of
premature mortality, preferring instead,
for example, to compare the costs of
Clean Air Act programs with the number
of avoided incidences of premature
mortality or illness they achieved.
The full report for this study and the
supporting technical documents provide
details about the estimated benefits
achieved in terms of physical outcomes as
well as the estimated economic value of
those outcomes, and these detailed results
can be used to support alternative
assessments of value.
m
^
Direct benefits by category
7
•
y H _ L
Exhibit 13. Year 2020 Primary Central Estimates of direct
costs and direct benefits with breakdown of benefits by
effect category. (In billions of year 2006 dollars).
One example of an alternative paradigm for assessing and comparing the value of premature mortality
risk reductions achieved by the 1990 Clean Air Act programs is to divide compliance costs for a given
year by the number of incidences of avoided premature mortality achieved by that year's emissions
reductions. The result of this calculation for With-CAAA90 emission reductions achieved in the year
2020 is about $275,000 per avoided incidence. This and similar calculations, however, must be
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interpreted cautiously because cost-
effectiveness comparisons typically divide
costs by an effectiveness measure for a
single beneficial outcome. Using the
current example, comparing costs only to
reductions in incidences of premature
mortality may result in a failure to account
for other potentially important benefits
such as improved ecosystem protection,
especially when improvements ancillary to
the cost-effectiveness calculation cannot
be quantified and then netted out of the
cost side of the equation.
While this study provides data supporting
various approaches for evaluating Clean Air
Act program outcomes, a central objective
of the study was to estimate the net
economic benefit (i.e., quantified direct
benefits minus quantified direct cost) of
differences between the With-CAAA90 and
Without-CAAA90 scenarios. The separate
totals for benefits and costs were reported
earlier based on rounding to two
significant digits to avoid creating an
undue impression of precision in the
estimates. The specific outcomes for the
year 2020 are direct costs of $65 billion
and direct benefits of $2,000 billion (i.e.,
$2 trillion). Prior to rounding to two
significant digits for reporting purposes,
the benefit estimate is $1,951 billion.
Subtracting the $65 billion in direct costs
from $1,951 billion in direct benefits
results in a net benefit estimate of $1,886
billion, which resolves to a two significant
digit estimate of $1,900 billion (in year
2006 value dollars).
Avoiding incidences of premature
mortality, especially those associated with
Comparison of First Prospective Study and Second
Prospective Study benefit estimates for the year 2010.
The previous study in this series of reports, the First
Prospective Study, was published in 1999. Since then,
significant improvements have been made in air pollution-
related benefit-cost analysis data and methods, especially
those associated with the fine particulate matter and
ground-level ozone pollutants which are the focus of the
present study. Insights about the significance of these
methodological changes can be gained by comparing the
results of the current study with those of the previous study
for the year 2010, a key target year common to both
analyses.
$1,500
Welfare
I Morbidity
I Mortality
First Second
Prospective Prospective
Exhibit 14. Comparison of 2010 Benefits from First and
Second Prospective Studies. (In billions of year 2006 value
dollars)
As shown in Exhibit 14, benefits estimates for all three main
categories of effect are significantly higher for the current
study. There are several reasons these differences are so
significant. Some of the difference results from the addition
of several new and important control programs
implemented since 1999, including the Clean Air Interstate
Rule and major programs to reduce onroad and nonroad
emissions. Welfare and morbidity effects are also higher
because of the addition of new endpoints, such as
improvements in residential visibility and reductions in
acute myocardial infarctions. Air quality models have also
been significantly improved since 1999, allowing analysis of
fine particle species such as secondary organic aerosols
which had been omitted in the First Prospective Study. The
most influential change, however, appears to result from
updates over the last decade in the epidemiological studies
which provide estimates of changes in population risk of
premature mortality associated with exposure to fine
particulates.
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exposure to fine particulate matter, contributes the vast majority of the direct benefits of 1990 Clean Air
Act programs measured in dollar value terms, as shown in Exhibit 13. There are two principal reasons
mortality effects dominate the estimated differences in value between the With-CAAA90 and Without-
CAAA90 cases. First, as described above in the section on health improvements, the differences in air
quality, human exposure, and resulting risk of premature mortality between the two scenarios are
substantial, but are based on an extensive literature and peer-reviewed methods. Second, these
changes in risk of premature mortality are estimated to have significant economic value, as measured by
studies which assess what people are willing to pay to reduce such risks. The methods used in this study
for valuing reductions in risk of premature mortality are consistent with the methods used in the two
prior studies in this series, are consistent with prevailing default values described in longstanding EPA
economic guidelines, and are consistent with recent EPA Regulatory Impact Analyses. The valuation
estimates used herein are also fairly consistent with literature which is more recent than the literature
used as the foundation for the longstanding methods applied here. However, the appropriate value to
assign to premature mortality risk reductions achieved through air pollution control remains an area of
significant uncertainty as discussed further below and in this study's full report and detailed technical
documents.
Other categories of benefits presented in Exhibit 13 include total morbidity effects, visibility
improvements, other welfare and ecological effects which could be expressed in terms of dollar values,
and other welfare and ecological effects which were not quantified and monetized in the Primary
Estimates of benefits for this study. This last category of benefits is presented as a question mark in
Exhibit 13 to emphasize that the potential contribution to total benefits of these unquantified effects is
simply unknown, but could conceivably be substantial.
While the principal message conveyed by Exhibit 13 is the extent to which mortality reduction benefits
far exceed all other effects, it is also noteworthy that morbidity reduction benefits and visibility
improvement benefits are each roughly comparable to direct costs. This implies that either of these
benefit categories alone might justify the direct costs of compliance from an economic standpoint, even
if mortality reduction and all other known and unknown benefits are disregarded.
Economy-Wide Effects
The main results of this study are the direct benefits of 1990 Clean Air Act programs relative to the
direct costs of those programs. However, some public policy programs have such significant economic
effects that they can influence the levels and patterns of activity across the larger economy, and it can
be important to assess these broader economic consequences. The differences between the With-
CAAA90 and Without-CAAA90 scenarios modeled in this study were expected to manifest these types of
large, "spillover" effects on important sectors of the economy due, for example, to the potential effects
of higher electricity prices under the With-CAAA90 case on sectors which are major consumers of
electricity. Therefore, a model of the overall economy was configured and run to estimate how the size
and structure of the economy might be different under the two scenarios analyzed.
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The first set of macroeconomic model runs followed the customary practice of altering only cost-side
effects, in this case the effects of diverting significant resources toward air pollution control and away
from other potential economic uses of those resources. In particular, the macroeconomic model was
configured to assess the effects of larger investments in air pollution control under the With-CAAA90
scenario on prices and quantities of goods and services produced and consumed by different sectors,
including households and various categories of industrial activity.
The full set of modeling results, including the changes in output from each of the economic sectors
covered by the EMPAX macroeconomic model, are presented in the full report and supporting technical
document; but the key results of the "Cost-Only" runs are shown in Exhibit 15. These key effects include
changes in overall economic growth through the year 2020 as a result of investments made in Clean Air
Act programs between 1990 and 2020; and the effect of economic changes on a particular measure of
the economic welfare of households. Specifically, the results for the "Cost-Only" run show that
economic growth -as measured by Gross Domestic Product (GDP)—is about 0.54% lower in the year
2020 under the With-CAAA90 scenario than under the Without-CAAA90 scenario, mostly due to the
effects of higher energy costs on various sectors of the economy.
The estimated reduction in the economic welfare of households in 2020 is about 0.39%, which is smaller
than the reduction in GDP due to adjustments made by households which offset the adverse effect of
reductions in household consumption of goods and services. The dollar equivalent of this 0.39%
reduction in household welfare is about $75 billion.
The implication of the "Cost-Only"
macroeconomic modeling is that
1990 Clean Air Act programs both
shrank the economy relative to what
it would have been without these
programs, and caused the average
household to be worse off, at least as
measured in the limited "economic
efficiency" terms reflected in the
macroeconomic model's measure of
household welfare.
However, in reality effective air
pollution control programs do not
simply impose costs on the economy.
They also improve air quality, which
in turn affects the health and
productivity of workers, reduces
a GDP
H Economic
Welfare
2010 2015 2020
Exhibit 15. Differences in "Cost-Only" model projections of GDP and
economic welfare between the With-CAAA90 and Without-CAAA90
scenarios.
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household medical expenditures for air pollution-related health problems, and protects the quality of
the environment on which economic activity and growth depend.
The current study, for the first time, attempts to capture the broader economic effect of at least some
of the benefits along with all of the costs of 1990 Clean Air Act programs. This was accomplished by
adjusting the macroeconomic model's inputs and configuration to reflect some of the reductions in lost
work days resulting from health improvements modeled in the health effect analysis. In addition to
these labor productivity improvements achieved by reducing lost work days, the "Labor Force-Adjusted"
model runs were configured to include the savings in medical expenditures implied by improved health
outcomes projected under the With-CAAA90 scenario.
Exhibit 16 shows the results for the "Labor Force-Adjusted" macroeconomic modeling of the With-
CAAA90 and Without-CAAA90 scenarios, and it is a very different set of results from the "Cost-Only"
modeling results. By capturing some of the benefit-side effects, GDP eventually improves overall, and
the measure of household economic welfare change produced by the macroeconomic model is positive
throughout the modeled period. Compared to the 0.54% reduction in GDP for the year 2020 under the
"Cost-Only" run, GDP is higher by 0.02%. More important, household economic welfare is also higher,
reflecting a 2020 welfare improvement of 0.15% rather than a 0.39% reduction under the "Cost-Only"
method. The 0.15% welfare improvement for households under the "Labor Force-Adjusted" method is
equivalent to about $29 billion for the year 2020. This estimate of welfare improvement is much smaller
than that estimated in the main benefit-cost calculations because it excludes almost all of the value of
mortality risk reduction, most
of which cannot yet be
incorporated in the type of
economy-wide model used
here.
As noted above, the measure of
economic welfare provided by
the economy-wide model is
limited. It captures only the
value to households of
improvements in household
financial circumstances. It does
not capture many of the other
significant improvements to
well-being measured by the
direct benefits analysis, such as
the value of improved longevity
to people both inside and
outside the formal workplace
I GDP
H Economic
Welfare
2010 2015 2020
Exhibit 16. Differences in "Labor Force-Adjusted" model projections of
GDP and economic welfare between the With-CAAA90 and Without-
CAAA90 scenarios.
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economy, or the value of avoiding the pain and suffering caused by air pollution-related disease.
Nevertheless, the finding that both direct net benefits and measures of household financial well-being
are improved by 1990 Clean Air Act Amendment programs supports an interpretation that the 1990 Act
improved the economy as well as public health and environmental quality. This finding contradicts the
longstanding belief of some stakeholders that air pollution control programs are always detrimental to
the economy even if they improve public health and the environment.
Important Uncertainties and Limitations
Benefit-cost studies of environmental programs are often highly complex, requiring acceptance of
significant uncertainties in the underlying scientific and economic information needed to estimate and
value effects. In addition, environmental benefit-cost studies are significantly influenced by external
factors and conditions, such as rates of technology change, shifts in rates or patterns of overall
economic growth, and -in the case of air pollution studies—meteorological patterns and fluctuations
overtime.
To address these uncertainties in underlying scientific information and important external influences,
analysts often evaluate such uncertainties by analyzing multiple scenarios to gauge the importance of
both variability in conditions and uncertainty in the estimates of effects. The current study includes a
range of in-depth uncertainty analyses which are described in the full report and supporting technical
documents on uncertainty analysis.
For the purposes of this summary report, it is important to acknowledge the critical uncertainties and
limitations in the study's data, methods, and resulting model outputs and emphasize that the results
presented herein provide just one snapshot of the potential differences between conditions with and
without 1990 Clean Air Act programs. Depending on the particular uncertainty or study limitation in
question, the results of this study could change significantly if alternative data, methods, or assumptions
are adopted.
Key Uncertainties
Most benefit-cost analyses of environmental programs, including the present study, must confront three
categories of uncertain effect estimates: effects which exist but are not seen because of limited
scientific information, effects which are known to scientists but which cannot be expressed in
quantitative physical and/or economic value terms, and effects which can be quantified and monetized
but not with certainty.
Some researchers, analysts, and stakeholders emphasize the importance of the first category of
unknown effects, raising concerns about environmental benefit-cost studies which focus only on known
effects. Such analyses may lead to systematic biases in evaluation of public policy, which some in turn
have suggested could be addressed by considering the need for precaution in the face of unknown
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and/or potentially catastrophic consequences when reviewing the results of environmental benefit-cost
analyses. While important, evaluation of the implications for policy of this first category of uncertain
effects and strategies for ameliorating the consequences of these uncertainties is beyond the scope of
this study.
This study does, however, address the
second and third categories of uncertain
effects. In implementing the study, it
became clear that there was a large
number of known effects which could
not be carried all the way through the
analytical sequence from effect
identification to full economic
evaluation. Potentially significant
effects which are addressed in very
limited quantitative terms, if at all,
include most hazardous air pollutant
effects and virtually all effects of Clean
Air Act programs on ecosystems,
including ecosystems services which
improve human welfare and quality of
life. A variety of known or suspected
human health effects associated with
particulate matter, ozone, or other
Clean Air Act criteria pollutants were
also excluded from this study's
quantitative results. Some of the
omitted effects considered most
significant by the Study Team are listed
in Exhibit 17.
Unquantified Effects
Health Effects
Cancer
Stroke & cardiovascular disease
Low birth weight
Subchronic bronchitis
Pulmonary function
Premature aging of the lungs
Inflammation of the lung
Acute respiratory cell damage
Increased respiratory infection
Behavioral & developmental effects
All health effects of hazardous air pollutants
Welfare and Ecological Effects
Recreational visibility outside California , SW States, SW States
Residential visibility outside major metropolitan areas
Agricultural effects from pollutants other than ozone
Damage to most pollution-sensitive materials
Most ecological effects
Exhibit 17. Sample of potentially significant effects which could
not be effectively quantified in the present study.
Finally, there are known effects which can be valued in economic terms but the estimates presented
herein could differ from their "true" values due to uncertainties in underlying studies, input data, the
models used to analyze those data, or the assumptions made in the absence of data. The issues
associated with uncertainty in the effects estimates included in this study are explored in detail in the
full report and in greater depth in a separate technical report documenting the study's extensive
uncertainty analysis. The particular uncertainties which the Study Team judged might most influence
the bottom line estimate of net quantified benefits are listed in Exhibit 18.
Among the potentially major uncertainties identified in the detailed uncertainty analysis, the most
important uncertainties are those which influence the following:
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1. Particulate matter premature mortality
2. Ozone premature mortality
3. Economic value assigned to reductions in premature mortality risk
As mentioned briefly in the
preceding section on comparison of
benefits and costs, the third factor
strongly influences this study's
results but is uncertain. One metric
often used to describe small
changes in risk and their associated
economic value is called the "value
of a statistical life", or VSL for short.
The VSL is derived by estimating the
amounts people are willing to pay to
gain small reductions in mortality
risk, then calculating the value
which is equivalent to avoiding a full
instance of premature mortality
(i.e., one full "statistical life"). The
present study applies a range of
estimates for VSL, represented by a
central value of about $7.4 million
(in year 2006 value dollars). As
described earlier, the method is
consistent with prior studies in this
series and with prevailing EPA
economic guidelines. Estimates for
the VSL, however, may be
significantly influenced by factors
such as age and health status.
Other factors may also influence
estimates of the VSL, including the
nature of the mortality risk being
valued; for example whether the
risk in question is voluntarily
accepted through a personal
decision to engage in some
hazardous but rewarding activity or
involuntarily imposed by external
sources of air pollution.
UNCERTAINTY EFFECTOR
RESOLUTION
Emissions Uncertainty about estimates of emissions Unknown
changes under Without-CAAA90 scenario
Emissions Uncertainty about economic growth factors Unknown
Emissions Uncertainty about final form and compliance Unknown
with CAMR and CAIR
Cost Some costs of compliance with NAAQS not Lower Net
captured Benefits
Health Uncertainty regarding degree PM causes Lower Net
mortality Benefits
Health Uncertainty regarding degree ozone causes Lower Net
mortality Benefits
Health Uncertainty about effects socioeconomic status Unknown
may have on PM mortality
Health Uncertainty regarding classification of PM Higher Net
exposures [need better description] Benefits
Health Short-term mortality effects of PM were not Higher Net
captured beyond incidences captured by long- Benefits
term studies
Health Uncertainty about rate of reduction in PM Unknown
mortality once exposure is reduced (aka
"cessation lag")
Valuation Value of premature mortalities avoided is based Unknown
on a Weibull distribution of 26 relatively old
studies
Valuation Uncertainty regarding transfer of mortality risk Unknown
reduction values from one population or set of
circumstances to others (aka "benefits transfer")
Valuation Uncertainty about adjustments to value people Unknown
assigned to effects based on their income
Ecological Incomplete coverage of effects Higher Net
Benefits
Ecological Incomplete coverage of long-term Higher Net
bioaccumulative and persistent effects Benefits
Exhibit 18. Potentially major uncertainties and the estimated effect
elimination of each uncertainty may have on this study's results.
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The uncertainties surrounding the VSL used to translate the small but widespread reductions in risk of
premature mortality under the With-CAAA90 scenario are important to consider when interpreting the
results of this study. For example, if a different central estimate for the VSL were adopted, the year
2020 Primary Central estimate of $1.8 trillion in direct benefits from avoided premature mortality would
be affected proportionately.
Key Limitations
Practical constraints on available time and resources often require compromises in study design and
implementation which limit the scope of the insights which can be obtained from an analysis.
Furthermore, benefit-cost studies often involve comparison of alternative potential states of the world
for which information is limited or even nonexistent. Four particularly important analytical limitations
are manifest in this study.
One representation of potential states of the world
The study configures and analyzes one particular current and future pathway of Clean Air Act
implementation and contrasts it with a counterfactual baseline which assumes Federal, State, and local
standards were not updated after passage of the last amendments to the Clean Air Act in November
1990. While useful to illustrate the overall incremental benefits and costs of the 1990 Amendments
and their related programs and policies, neither scenario is intended to represent a definitive historical
account or projection of potential past or future states of the economy, public health, and the
environment. Nevertheless, a reasonable representation of the potential contrasts between these two
representations of the world with and without 1990 Clean Air Act Amendment programs is useful. This
is why the study focuses on the differences between the two main scenarios, and does not focus on
absolute conditions since the simplified representations of the scenarios would not be expected to
match real world conditions which are influenced by year to year fluctuations in key factors, such as
meteorological conditions and business cycles.
Fixed effects
Another important, related limitation arises due to the complexity and scope of the analysis, which are
so great that certain potentially important factors had to be kept fixed between the scenarios in order to
make the analysis feasible. In addition, certain factors were held fixed so the study would remain
focused on the particular influence of 1990 Clean Air Act programs on the environment and the
economy. For example, the study did not assume any differences between the With-CAAA90 and
Without-CAAA90 scenarios in terms of total electricity demand or the distribution of economic activity
and population, though some interactions between clean air policies and these conditions can be
expected. Nevertheless, the study does provide an overall perspective on the magnitude and broad
distribution of the effects of the 1990 Clean Air Act on the U.S. economy, population, and environment.
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Aggregated results
To support effective evaluation and design of air pollution control programs, it is useful to analyze the
relative value of controlling different pollutants, and also to compare the cost-effectiveness of controls
applied to different sources. Furthermore, pollution reductions in one location may yield a greater
return on investment than reductions achieved in another location. For this reason, it would have been
desirable to configure this study to provide benefit-cost results disaggregated by pollutant, source
category, major program area, and/or location. However, while costs can be reported by source
category or major program area, benefits are estimated by pollutant. Even reporting benefits by
individual pollutant is complicated given interactions among pollutants which influence overall changes
in air quality and in health or environmental outcomes. As a result, the only way to provide
disaggregated benefit and cost results by individual pollutant, by location, or by source is to configure
and run the entire benefit-cost modeling system in a manner which isolates a given pollutant or location
or program. This level of resource investment was beyond reach for the present study. Therefore, this
study does not support comparisons of net benefit or cost-effectiveness across pollutants, economic
sectors or geographic areas.
Interactions with climate change programs and outcomes
This study is unique because it captures the significant interactions among various criteria pollutant
control programs, such as the combined effects of reducing different fine particle precursors across a
range of stationary and mobile sources. However, even this study's broad scope is insufficient to
capture interactions between pollutant reductions achieved by current Clean Air Act programs and the
potential costs and benefits of programs to address climate change. Because Clean Air Act criteria
pollutants, hazardous air pollutants, and greenhouse gases are all associated with the same major
emissions sources, such as utility powerplants, an ideal evaluation of Clean Air Act program benefits and
costs would include consideration of the interactions among programs to address all three categories of
air pollution and the outcomes achieved by such programs.
Conclusions
The objectives of this study included estimation of the incremental direct benefits and costs of the 1990
Clean Air Act Amendments, evaluation of economy-wide effects, assessment of a broad range of effects
with potential significance for stakeholders and researchers, and consideration of the implications of
study limitations and uncertainties for research and the design of future studies. Considering these
objectives and the results obtained, EPA reaches the following conclusions.
1. The direct benefits of the 1990 Clean Air Act Amendments and associated programs
significantly exceed the direct public and private costs of these programs, even when counting
only those effects which could be evaluated in economic terms.
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2. Macroeconomic modeling of the scenarios evaluated in this study indicates the broader
economy is improved overall by the 1990 Clean Air Act and related programs. Cleaner air is
projected to result in significant improvements in worker health and productivity and reductions
in medical costs. Other potentially significant economic benefits, such as improved longevity,
could not be captured; however, the reductions in work loss days and savings on medical costs
alone eventually more than offset the costs of investing in air pollution controls, as
demonstrated by modeling results which show positive net effects of the 1990 Clean Air Act on
GDP growth and the economic welfare of American households.
3. The significant uncertainties and limitations which persist for benefit-cost studies of air pollution
control programs imply the need for ongoing investments in research to improve data and
methods. In particular, research is needed to improve the range of effects which can be
quantified and evaluated in economic terms and to reduce important uncertainties in the
estimates of currently quantified effects.
4. Efforts to design and implement the current study, and the results obtained, led the Study Team
to identify several potential improvements to future analytical efforts. As described in the next
section, future evaluation of Clean Air Act programs might be improved through scenarios
analysis or an alternative analytical framework capable of evaluating criteria pollutant,
hazardous air pollutant, and climate change pollutants in an integrated manner.
Looking Ahead
Beyond the intrinsic value of the present study with respect to its defined goals and objectives, there are
at least two additional potential uses for this study. First, the methods or results of the study may
contribute directly to other studies. Second, the lessons learned from efforts made pursuant to this
study may provide insights which improve future research and the design of future studies.
Additional direct uses for the present study
Energy externalities
The methods and results of the First Prospective Study were used by the National Academy of Sciences
to support their analysis of energy externalities (see National Research Council, Hidden Costs of Energy:
Unpriced Consequences of Energy Production and Use, June 2010). The current, Second Prospective
Study could provide significantly improved information in support of future efforts to estimate the
criteria pollutant-related externalities associated with energy production and use.
Data, methods, and modeling tools
The Advisory Council for Clean Air Compliance Analysis (Council) and its technical subcommittees
provided effective and rigorous evaluation of the data and methods used in the present study. EPA and
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other federal agencies, States and local agencies, and other researchers may find the methods
developed and/or evaluated herein to be useful for their work. For example, since the Second
Prospective Study adopts a relatively consistent analytical framework for evaluating a broad range of
controls across multiple emissions sectors, its results could be adapted to provide useful metrics such as
relative "dollar per ton" estimates. Such "rule of thumb" valuation metrics could provide useful
benchmarks for judging the expected value of local investments in particular control measures.
Improving future studies
Redesigning analytical frameworks
Some of the limitations in the information this and other current studies provide to policymakers and
the public can be addressed by redesigning the scope and frameworks for analysis to better capture
important interactions among pollution control programs. It may be especially useful to explore
building an analytical framework which evaluates criteria pollutant control programs in conjunction with
programs to address climate change. An approach which focuses on analyzing broad scenarios, rather
than small incremental differences in individual programs, may provide more useful insights into the
ways such programs interact, capturing important effects of one program which influence the costs or
effectiveness of other programs. For example, under a scenario involving unchecked greenhouse gas
emissions, it is reasonable to anticipate an atmosphere prone to more and worse extreme temperature
days. An increase in extreme temperature days may lead to more Code Red air quality alerts for ozone,
which may lead to a reduction in outdoor activity, which may lead to greater use of air conditioning,
which may lead to higher fine particle emissions from coal-fired powerplants due to higher demand for
electricity to run those air conditioners. A scenarios analysis approach would allow analysts to capture
important consequences of one program when evaluating policy options for another control program. A
scenarios analysis approach might also allow more realistic treatment of other external trends and
conditions which influence a program's cost and prospects for success. Examples of factors which could
be treated in a more consistent manner under a scenarios analysis approach include patterns of
economic growth, rates of technological development, patterns and intensity of fuel use, changes in
atmospheric conditions, and population behavioral responses to clean air programs.
Value of Information analysis
Formal Value of Information analysis has rarely been applied in evaluations of air pollution control
programs. Value of information principles are sometimes followed informally in the design and
implementation of studies, as they were for the present study. However, more formal exercises aimed
at assessing the policy and analytical implications of uncertainties in key variables could help guide
priority-setting for research, analytical design, and efforts to improve data and methods.
Ex ante versus ex post evaluations of data and modeling tools
Data and modeling tools could also be improved by more extensive evaluation of the validity of existing
data and the performance of current models. Though not all data and modeling tools can be evaluated
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in this manner, formal data and model validation exercises based on comparisons of ex ante projections
and ex post outcomes (e.g., comparing projections from current air quality models against air quality
monitoring data) could improve the accuracy and reliability of future air pollution program benefit-cost
studies.
Improved sharing of data and methods development
Sharing of data among researchers usually leads to significant improvements in the quality and
usefulness of information. Formal collaborations among researchers to develop improved analytical
methods could also significantly improve the quality of air pollution program benefit-cost analysis. For
example, the Council panel which reviewed the initial analytical blueprint for the present study
recommended the Agency consider organizing "Learning Laboratories" focused on addressing
particularly important analytical challenges through a public-private collaborative process aimed at
developing and vetting new methods and assumptions. The current Council panel proposes more
extensive release to the public of underlying data for use and improvement by other researchers. Both
initiatives could lead to significant improvements in air pollution program evaluations.
Beyond the existing Clean Air Act
The statutory language defining the parameters for the present study limited its scope to evaluation of
the effects of the existing Clean Air Act. However, since the Clean Air Act was last amended in 1990, the
science and economics of air pollution control have progressed significantly. For example, much has
been learned in recent years about the role ammonia plays in formation of the secondary particles
which dominate this study's estimates of direct benefits. Future air pollution control program
evaluations could be expanded to consider pollutants which may be beyond the scope of existing Clean
Air Act authorities so the potential value of addressing such pollutants is clarified for policymakers and
the public.
Cheaper, faster, better
Benefit-cost analysis of air pollution control programs are enormously complicated exercises, usually
requiring operation of a long chain of highly complex models involving numerous, large data sets. The
resource and time burdens of exercising the modeling systems used in the present study were so great
that they precluded conduct of the multiple model system runs which could have provided policy-useful
results disaggregated by pollutant, program element, and/or location. EPA continues to engage in and
support model development efforts aimed at reducing the time and cost required to evaluate air
pollution control program effects, while maintaining the high standards for scientific and economic rigor
expected of EPA analysis. Achieving further gains in data quality and model speed and performance,
and improving linkages between models in the analytical sequence, will require significant ongoing
investment in model development. However, the results of this study demonstrate that the effects of
1990 Clean Air Act programs on public health, the environment, and the economy are so significant that
improving Agency capabilities to conduct such analyses would appear to be a sound investment.
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Frequently Asked Questions
Can the results of this study be added to the Retrospective study to get a full picture of the
benefits and costs of clean air programs since the 1970 Act?
The Retrospective Study evaluates the benefits and costs of the 1970 Clean Air Act and its 1977
Amendments up through the year 1990. The current Second Prospective Study evaluates the
incremental effect of the 1990 amendments, using a baseline which reflects continuation after 1990 of
only those programs in place when the 1990 amendments were passed. The results of the two studies,
therefore, are at least conceptually additive. However, any attempt to add the benefits and costs
estimated by these two studies would reflect at least two significant shortcomings. First, the
Retrospective Study used data and modeling tools which are significantly different from those applied in
the current study. If the Retrospective Study were done again using current data and modeling tools,
the resulting estimates of benefits and costs would be significantly different. The second deficiency
which must be confronted when adding the results of the two studies is that neither study provides
information about the post-1990 effects of 1970 and 1977 Clean Air Act programs, except to the extent
they are directly superseded by 1990 Amendment requirements and programs.
What about the benefits of reductions in hazardous air pollutants achieved by Title III? Are
those counted?
The costs of complying with Title III Maximum Achievable Control Technology (MACT) standards for
hazardous air pollutants are included in the Primary Estimates. These MACT standards achieved
reductions in volatile organic compound (VOC) emissions beyond the VOC reductions attributed to other
Clean Air Act titles. Therefore, while the incremental effects of Title III programs on criteria pollutant
emissions are captured, the benefits of reductions in the direct toxic effects of hazardous air pollutants
across the country are not captured. Pursuant to the study's goal to assess a broad range of potentially
important effects, a case study evaluating the costs and benefits of reduced exposures to benzene
achieved by the 1990 Clean Air Act in the Houston area was conducted. A central purpose of the case
study was to explore the specific data and model deficiencies which currently preclude effective
quantification of hazardous air pollutant reduction benefits, perhaps providing insights to guide future
research and development efforts. The benzene case study is available as a supporting technical
document for the Second Prospective Study.
Isn't it likely other actions would have been taken at the federal, State, local or even private
levels to address the problem of worsening air pollution if the 1990 Clean Air Act hadn 't been
enacted? So isn't the study giving too much credit to the Clean Air Act for all the air quality
improvements since 1990?
The projected air quality conditions under the Without-CAAA90 scenario are significantly worse than
projected under the With-CAAA90 case, so it does seem likely actions would have been taken through
other federal programs, State/local regulations, and/or voluntary private actions to protect air quality.
The extent and character of the alternative actions which might have been pursued, however, are
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unknown. Such measures would have also imposed costs, perhaps similar to those estimated herein
and attributed to the 1990 Clean Air Act Amendments. Since it is a matter of speculation what actions
may have been taken in the absence of the 1990 Amendments, the present study is designed to show
the difference between a world with and without all the federal, State, and local programs associated
with the 1990 Amendments. As such, this study is best interpreted as capturing the value of the full
range of public and private actions taken to improve air quality to levels consistent with overarching
federal law. Significant credit is due to EPA's State and local partners, and to private firms and
individuals, for the significant benefits achieved by the improvements in air quality and the resulting net
benefits estimated by this study.
7s it plausible that clean air programs are responsible for yielding benefits equal in value to
$6,000 per person, a figure which is about 6-7% of projected mean personal income in 2020?
It is true that this study's direct benefit results imply a very substantial gain in value to people living in
the United States, especially from reductions in risk of particulate matter-related premature mortality.
The difference in health outcomes with and without 1990 Clean Air Act programs may be so great that
the customary measures used to translate small, marginal changes in health outcomes to dollar values
may misestimate the economic value of the non-marginal changes in health outcomes between the two
scenarios analyzed. This issue warrants further consideration. Nevertheless, there is an important
difference between the value people may assign to improved health and what it costs them to acquire
it. It is not the case that Americans had to spend $6,000 per person per year for the cleaner air achieved
by 1990 Clean Air Act programs. Instead, as shown by the direct cost results of this study, the costs to
society of implementing these programs only reaches about $200 per capita by 2020, the study year
when the incremental costs are highest. The $6,000 figure is more of a dollar-based value for the
welfare improvement people enjoyed by avoiding the poor air quality conditions projected under the
Without-CAAA90 scenario, and is not an estimate of what people actually had to pay for the
improvements in health, welfare, and environmental conditions achieved by 1990 Clean Air Act
programs.
The Second Prospective Study results are dominated by the benefits of reducing overall
exposures to fine particulate matter. But there are several different species of fine particles,
including sulfates and nitrates, and there is some evidence they aren't all equally toxic. Why
didn't the study evaluate the possibility that some species of fine particulates are more toxic
than others?
Scientific evidence establishing the potential differential toxicity of particle species is still considered by
EPA to be insufficient to support effective analysis of the potential consequences if specific species of
fine particles are found to manifest different degrees of toxicity. Available epidemiological studies
supporting the association between particulate matter exposure and health effects such as premature
mortality are based on aggregate measures of particulate matter exposure. Assuming one particular
species is more toxic requires adjustments to the known or presumed toxicity of all other particle
species, including potentially critical interaction effects among them. Absent adjustments to maintain
coherence, the set of differentiated, species-specific concentration-response functions developed for
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analytical purposes may be inconsistent with the underlying health studies. While notional species-
specific risk coefficients might theoretically be constructed, EPA believes that unfounded and
inconsistent species-specific risk functions would be highly uncertain and could be biased, leading to
analytical results which may be significantly more misleading than informative. There is ongoing
research on the issue of potential differential toxicity of fine particles and EPA looks forward to
improvements in the scientific information available to address this question.
The study uses a model of the overall economy to estimate changes due to the 1990 Clean Air
Act Amendments, including GDP and a measure of "economic welfare." Does this measure of
economic welfare capture everything that affects people's well-being?
The formal, measured economy captures many aspects of the welfare of households, such as wages
earned and the cost of goods and services. However economic models do not capture everything which
affects people's welfare. For example, economic models do not directly capture the full costs of adverse
health effects from air pollution. They may capture what people spend for preventive measures or
medical costs, but they don't effectively capture the value people assign to avoiding the pain and
suffering, inconvenience, or many other costs of being afflicted. In this sense economic welfare as
measured in a model of the overall economy provides only a limited measure of the changes which
affect quality of life. For this reason, the principal focus of the present study is to estimate the direct
benefits of air quality improvements using more complete, "willingness to pay" measures of economic
value and comparing those direct benefits to the direct costs of regulatory compliance. Both measures
of welfare change, however, provide potentially useful insights about the economic and welfare
consequences of Clean Air Act programs.
Why doesn't this study include the costs and benefits of climate change programs?
The 1990 statutory language establishing this series of Clean Air Act benefit-cost studies did not include
climate change program evaluation within its scope. However, EPA has conducted numerous studies
assessing the environmental and economic effects of proposed climate change programs. In the future,
EPA expects to conduct and/or encourage studies which more effectively integrate evaluations of
climate change policy options with evaluations of ongoing and future Clean Air Act programs.
Does this study predict what will happen in particular locations, especially whether a given
county or State or air quality management district will or won't attain federal air quality
standards in the future?
This study focuses on analyzing differences in air quality between one particular, assumed pathway for
implementation of the 1990 Clean Air Act versus a hypothetical, counterfactual state of the world
without the 1990 Act. As such, though the study applies several models which have high levels of spatial
detail and are used for attainment demonstrations, the study focuses on estimating potential
differences in air quality between two constructed scenarios over a period of decades and across the
entire 48 States. It therefore does not provide the kind of highly localized analyses of location-specific
meteorological data, control measures, and consecutive year air quality change which are used to
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determine attainment with air quality standards. Nevertheless, the study does provide insights on the
overall magnitude of 1990 Clean Air Act compliance costs and the substantial benefits achieved by the
measures taken.
For further information
Contact us
For information about the technical aspects of the report, contact Jim DeMocker, Senior Policy Analyst,
Office of Air and Radiation, US EPA. Send email to: democker.iim@epa.gov
For information about the external peer review of the study, contact Stephanie Sanzone, Designated
Federal Official for the Advisory Council on Clean Air Compliance Analysis (Council). Send email to:
sanzone.stephanie@epa.gov
How to obtain copies
Copies of this summary report can be obtained by contacting Jim DeMocker, Senior Policy Analyst,
Office of Air and Radiation, US EPA. Send email to: democker.iim@epa.gov
Electronic copies of the full integrated report and all publicly available supporting technical documents
are available online at: http://www.epa.gov/oar/sect812/prospective2.html
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