Regulatory Impact Analysis (RIA) for
Residential Wood Heaters NSPS Revision
Draft Report

-------
February 2012
Regulatory Impact Analysis (RIA) for Residential Wood Heaters NSPS Revision
By:
Jeffrey Petrusa
Stephanie Norris
Brooks Depro
RTI International
3040 Cornwall is Road
Research Triangle Park, NC 27709
Prepared for:
Larry Sorrels
U.S. Environmental Protection Agency
Office of Air Quality Planning and Standards (OAQPS)
Air Economics Group (AEG)
(MD-C439-02)
Research Triangle Park, NC 27711
Contract No. EP-D-06-003
Work Assignment No. 4-84
U.S. Environmental Protection Agency
Office of Air Quality Planning and Standards
Health and Environmental Impacts Division
Air Economics Group
Research Triangle Park, North Carolina

-------
CONTENTS
Section	Page
1	Executive Summary	1-1
1.1	Analysis Summary									1-1
1.2	Organization of this Report			I -2
2	Introduction											2-1
2.1 Background for Proposed Rule	2-1
2.1.1	Subpart AAA, New Residential Wood Heaters	2-1
2.1.2	Subpart QQQQ, New Residential Hydronic Heaters and Forced-
Air Furnaces	2-3
2.1.3	Subpart RRRR, New Residential Masonry Heaters	2-4
3	Industry Profile	....3-1
3.1	Supply Side			3-1
3.1.1	Production Process								 3-2
3.1.2	Product Types 						3-3
3.1.3	Costs of Production					3-5
3.2	Demand Side										 3-8
3.2.1	End-Use Consumer Segments	3-10
3.2.2	Regional Variation in Residential Demand	3-10
3.2.3	National Home Heating Trends	3-13
3.2.4	Substitution Possibilities							.....3-14
3.2.5	Price Elasticity of Demand	3-15
3.3	Industry Organization	3-16
3.3.1	Market Structure 							 3-16
3.3.2	Manufacturing Plants	3-17
3.3.3	Location					3-19
3.3.4	Company Sales and Employment	3-20
iii

-------
3,4 Residential Wood Heater Market					3-21
3.4.1	Market Prices	3-22
3.4.2	International Competition			3-24
3.4.3	Future Market Trends	3-24
4	Baseline Emissions and Emission Reductions					4-1
4.1	Introduction							4-1
4.2	Estimated PM2 5 Emissions from Shipments of New Appliances	4-1
4.3	Methodology for Estimating VOC Emissions from New Units		4-3
4.4	Methodology for Estimating CO Emissions from New Units	4-5
5	Economic Impact Analysis, Energy Impacts, Costs and Executive Order
Analyses											5-1
5.1	Compliance Costs of the Final Rule	5-1
5.2	How Might People and Firms Respond? A Partial Equilibrium Analysis	5-5
5.2.1	Changes in Market Prices and Quantities	5-5
5.2.2	Partial Equilibrium Measures of Social Cost: Changes in
Consumer and Producer Surplus	5-8
5.3	Social Cost Estimate					5-8
5.4	Energy Impacts	5-9
5.5	Unfunded Mandates Reform Act						 5-9
5.5.1	Future and Disproportionate Costs	5-9
5.5.2	Effects on the National Economy	5-10
5.5.3	Executive Order 13045: Protection of Children from
Environmental Health Risks and Safety Risks			5-10
5.5.4	Executive Order 12898: Federal Actions to Address Environmental
Justice in Minority Populations and Low-Income Populations	5-11
5.6	Employment Impacts	5-11
5.6.1	Employment Impacts from Pollution Control Requirements	5-13
5.6.2	Employment Impacts within the Regulated Industry		5-16
iv

-------
6	Small Entity Screening Analysis	6-1
6.1	Small Entity Data Set	6-1
6.2	Small Entity Economic Impact Measures	6-2
6.2.1	Establishment Employment and Receipts	6-2
6.2.2	Establishment Compliance Cost	6-3
6.3	Initial Regulatory Flexibility Analysis	6-10
7	Human Health Benefits of Emissions Reductions	7-1
7.1	Synopsis	7-1
7.2	Calculation of PM2.5 Human Health Benefits	7-1
7.3	Unquantified Benefits	7-11
7.3.1	Carbon Monoxide Benefits	7-12
7.3.2	Black Carbon (BC) Benefits	7-12
7.3.3	HAP Benefits	7-14
7.3.4	VOCs as a PM25 precursor	7-22
7.3.5	Ozone Benefits	7-22
7.3.6	Visibility Impairment	7-23
7.4	Characterization of Uncertainty in the Monetized PM2.5 Benefits	7-23
8	Comparison of Monetized Benefits and Costs	8-1
8.1 Summary	8-1
9	References	9-1
Appendix
A Emissions Performance of Wood Stoves that Are Currently Certified	A-l
v

-------
LIST OF FIGURES
Number	Page
3-1. Census Regions and Divisions of the United States	3-12
3-2. Declining Trend in U.S. Housing Units Using Wood Fuel: 1989-2005		 3-14
3-3. Annual Plant Capacity Utilization for Heating Equipment Manufacturers
(NAICS 333414): 2002-2006									3-18
5-1. Distribution of Annual Compliance Costs by Product Type in 2013-2015
Timeframe and 2018	5-2
5-2. Projected Annual Shipments by Product Type: 2012-2018				5-3
5-3.	Market Demand and Supply Model: With and Without Regulation	5-6
6-1.	Population of Firebox Models and Average Models per Establishment by
Product Type											6-6
6-2.	Distribution of National Compliance Costs by Product Type in 2018	6-7
7-1.	Breakdown of Monetized PM2.5 Health Benefits Estimates using Mortality
Function from Pope et al. (2002)			7-7
7-2. Total Monetized PM2.5 Benefits Estimates for the Proposed Residential Wood
Heaters NSPS in 2018									7-10
7-3. Breakdown of Monetized Benefits for the Proposed Residential Wood Heaters
NSPS by Subcategory...									7-11
7-4. Estimated Chronic Census Tract Carcinogenic Risk from HAP exposure from
outdoor sources (2005 NATA)		 7-16
7-5. Estimated Chronic Census Tract Noncancer (Respiratory) Risk from HAP
exposure from outdoor sources (2005 NATA)		7-17
7-6. Percentage of Adult Population by Annual Mean PM2.5 Exposure in the Baseline.... 7-25
7-7.	Cumulative Distribution of Adult Population by Annual Mean PM2 5 Exposure
in the Baseline	7-26
8-1.	Net annual benefits range in 2018 for PM2 5 reductions for Level 1 ~ III			8-3
vi

-------
LIST OF TABLES
Number	Pa^e
1-I.	Summary of the Monetized Benefits, Social Costs, and Net Benefits for the
Proposed Residential Wood Heaters NSPS in 2018 ($2008 millions)	1-3
2-1.	Subpart AAA Compliance Dates and PM and Efficiency Standards	2-2
2-2.	Subpart QQQQ Compliance Dates and PM and Efficiency Standards			2-3
3-1.	Costs for Labor and Materials for U.S. Heating Equipment and Hardware
Manufacturing: 2008			...					3-7
3-2. Costs for U.S. Masonry Contractors and Single-Family Home Contractors: 2007	3-9
3-3. Costs for U.S. Plumbing and Heating Equipment Supplies Wholesalers: 2007	3-9
3-4. Costs for U.S. Specialized Home Furnishing Stores: 2007	3-9
3-5. Wood as Primary Fuel Source for Home Heating in the United States: 2006-
2008										.3-11
3-6. Wood as Secondary Heat Source by Census Division, 2005	3-12
3-7. Number of U.S. Companies by Business Type	3-19
3-8. U.S. Wood Heat Equipment Industry by Geographic Location			3-20
3-9. U.S. Sales and Employment Statistics by Business Type	3-20
3-10. Profit Margins for NAICS 333414, 238140, and 423720: 2008.,		 3-21
3-11. Unit Shipments and Percentage of Total Units by Product Type: 2008	3-22
3-12. Installation Costs for Average System by Product Type (North America): 2008	3-23
3-13.	Manufacturers" Price by Product Type (North America): 2008			3-23
4-1.	Estimated PM25 Emissions (Tons): Baseline 						4-2
4-2. Estimated PM2.5 Emissions (Tons): NSPS Level 1 + II					4-2
4-3. Estimated PM;.? Emissions (Tons): NSPS Level I + III	4-3
4-4. NSPS VOC Emission Factors			4-3
4-5. Estimated VOC Emissions (Tons): Baseline	4-4
4-6. Estimated VOC Emissions (Tons): NSPS Level I + II					4-4
4-7. Estimated VOC Emissions (Tons): NSPS Level I + III					4-5
4-8. NSPS CO Emission Factors	4-5
4-9. Estimated CO Emissions (Tons): Baseline	4-6
4-10. Estimated CO Emissions (Tons): NSPS Level I + II	4-6
4-11. Estimated CO Emissions (Tons): NSPS Level I + III					4-7
vii

-------
5-la. Industry Level-Annualized Compliance Costs as a Fraction of Total Industry
Revenue by Product Type in the 2013-2015 Timeframe	5-4
5-1 b. Industry Level-Annualized Compliance Costs as a Fraction of Total Industry
Revenue by Product Type in 2018			5-4
5-2. Hypothetical Price Increases for a 1 % Increase in Unit Costs	5-7
5-3, Hypothetical Consumption Decreases for a 1% Increase in Unit Costs,,	5-7
5-4 Labor-based Employment Estimates for Certification. Quality Assurance,
Reporting, Recordkeeping, and Accreditation Requirements for Proposed NSPS .... 5-15
5-5.	Percent of Abatement Expenditures on Changes in Production Processes	5-18
6-1.	Revised NSPS Proposal for Residential Wood Heating Devices: Affected
Sectors and SBA Small Business Size Standards			6-3
6-2. Average Receipts for Affected Industry by Enterprise Employment Size: 2007
($2008 million/establishment)	6-4
6-3. Average Receipts for Affected Industry by Enterprise Receipt Range: 2007
($2008 million/establishment)			6-4
6-4. Per-Entity Annualized Compliance Costs by Product Type ($2008 millions)	6-5
6-5. Representative Establishment Costs Used for Small Entity Analysis ($2008)	6-7
6-6.	Cost-to-Receipt Ratio Results by NAICS Code	6-9
7-1.	Human Health and Welfare Effects of PM2.5	7-2
7-2. Summary of Monetized Benefits Estimates for the Proposed Residential Wood
Heaters NSPS from 2013-2015 and in 2018 ($2008)..			7-8
7-3. Summary of Reductions in Health Incidences from PM2.5 Benefits for the
Proposed Residential Wood Heaters NSPS from 2013-2015 and in 2018	7-9
7-4.	All PM2 5 Benefits Estimates for the Proposed Residential Wood Healers NSPS
at Discount Rates of 3% and 7% from 2013 to 2015 and in 2018 ($2008
millions)			7-9
8-1.	Summary of the Monetized Benefits, Social Costs, and Net Benefits for the
Proposed Residential Wood Heater NSPS in 2018 ($2008 millions)	8-2
viii

-------
SECTION 1
EXECUTIVE SUMMARY
The U.S. Environmental Protection Agency (EPA) is proposing to revise new source
performance standards (NSPS) for residential wood stoves, pellet stoves, furnaces, and masonry
heaters. EPA is also proposing two new subparts to address additional types of wood heating
appliances - hydronic heaters and single-burn rate stoves. This is an economically significant
rule as defined by Executive Order 12866. Therefore, EPA is required to develop a regulatory
impact analysis (R1A) as part of the regulatory process. The RIA includes an economic impact
analysis (EIA), a small entity impacts analysis, and a benefits analysis along with documentation
for the methods and results. We provide annualized results for the 2013-2015 timeframe and for
2018 to reflect differences in impacts due to the proposal of two different alternatives for
regulating hydronic heaters.
1.1 Analysis Summary
The key results of the RIA are as follows:
¦ Engineering Cost Analysis: EPA estimates the revised NSPS's total annualized
costs to affected manufactures in the 2013-2015 timeframe and 2018 will be
$7.94 and $8.05 million ($2008), respectively. These estimates also include costs
to affected manufacturers to comply with two new subparts that address
additional types of wood heating appliances.
Economic Impact Analysis: The economic impacts for industries affected by this
proposed rule in the 2013-2015 timeframe ranged from zero for industries that
produce wood stoves to as much as 9.6% for single bum rate stoves. In 2018 the
range is between zero and 8.5% for single burn rate stoves. These results use
industry-level compliance cost to receipts ratios that approximate the maximum
price increase needed for a producer to fully recover the annual compliance costs
and, therefore, do not presume any pass through of impacts to consumers. With
pass through to consumers, these impact estimates will decline proportionate to
the degree of pass through.
Social Cost Analysis: The estimated annual social cost of the proposed rule will
be $7.9 million in the 2013-2015 timeframe and $8.05 million in 2018 in $2008.
The social cost is equal to the annualized cost to manufacturers.
Small Entity Analyses: EPA performed a screening analysis for impacts on
small entities by comparing compliance costs to sales/revenues (e.g., sales and
revenue tests), EPA's analysis showed the tests were typically higher than 1% for
small entities included in the screening analysis. For these industries, almost all
affected entities are small firms. We concluded that we could not certify that there
would not be a significant economic impact on a substantial number of small
entities (SISNOSE). Pursuant to section 603 of the RFA, EPA prepared an initial
1-1

-------
regulatory flexibility analysis (IRFA) for the proposed rule and convened a Small
Business Advocacy Review Panel to obtain advice and recommendations of
representatives of the regulated small entities. A detailed discussion of the Panel's
advice and recommendations is found in the final Panel Report (Docket ID No,
EPA-HQ-OAR-2009-xxxx). A summary of the Panel's recommendations is also
presented in the preamble to the proposed rule. In the proposed rule, EPA
included provisions consistent with several of the Panel's recommendations.
¦ Benefits Analysis:
-	The benefits from reducing some air pollutants have not been monetized in
this analysis, including reducing 33,000 tons of carbon monoxide (CO), close
to 3,000 tons of volatile organic compounds (VOCs), black carbon and HAPs
emissions, We assessed the benefits of these emission reductions qualitatively
in this analysis.
-	We monetized the benefits from reducing particulate matter (PM). Thus all
monetized benefits reported reflect improvements in ambient PM2.5
concentrations. Thus, although the monetized benefits likely underestimate the
total benefits, the extent of the underestimate is unclear.
-	Using a 3% discount rate, we estimated the total monetized benefits of the
proposed rule to be $2.0 billion to $4.9 billion (2008 dollars) in the year of
analysis (2018). Using a 7% discount rate, we estimate the total monetized
benefits of the proposed rule to be $1.8 billion to $4.4 billion ($2008) in 2018.
However the selected option reached benefits of $3.9 billion to $9.7 billion,
using a 3% discount rate, in the 3 year-period (the 2013-2015 timeframe) after
promulgation and $3.5 billion to $8.7 billion, at 7% discount rate during the
same period. Therefore, an increased benefit of $130 million to $310 million
was realized over other proposed options for the same period at 3% discount
rate. Annual benefits were equal through all options thereafter. Using
alternative relationships between PM25 and premature mortality supplied by
experts, higher and lower benefits estimates are plausible, but most of the
expert-based estimates fall between these estimates.
Net Benefits: For the residential wood healer NSPS, the net benefits are $2.0 billion to
$4.9 billion in 2018 at a 3% discount rate for the benefits and $1.8 billion to $4.4 billion
in 2018 at a 7% discount rate. These results are shown in Table 1-1. In addition, the net
benefits are $3.9 billion to $9.7 billion for the 2013-2015 timeframe at a 3% discount rate
for the benefits and $3.5 to $8.7 billion for the 2013-2015 timeframe at a 7% discount
rate.
1.2 Organization of this Report
The remainder of this report supports and details the methodology and the results of the
RIA:
¦	Section 2 describes the proposed regulation.
¦	Section 3 presents the profile of the affected industries.
1-2

-------
•	Section 4 describes the baseline emissions and emission reductions for the proposed
regulation.
¦	Section 5 describes the engineering costs, economic impacts, analyses to comply with
Executive Orders, and employment impacts.
¦	Section 6 describes the small entity impact analyses and the Initial Regulatory
Flexibility Analysis (IRFA) prepared by EPA.
•	Section 7 presents the benefits estimates.
Section 8 presents the net benefits of the proposed rule.
Table 1-1. Summary of the Monetized Benefits, Social Costs, and Net Benefits for the
Proposed Residential Wood Heaters NSPS in 2018 ($2008 millions)"
3% Discount Rate 7% Discount Rate
Level 1 + III
Total Monetized Benefitsb
$2,000 to $4,900 S 1,800 to $4,400
Total Social Costs
$8 $8
Net Benefits
$2,000 to $4,900 $1,800 to $4,400
Noninonetized Benefits
33,000 tons of CO

2,800 tons ofVOC

Reduced exposure to HAPs, including formaldehyde, benzene, and polycvclic

organic matter

Reduced Climate effects due black carbon emissions

Ecosystem effects

Visibility impairment
Level I + II
Total Monetized Benefits1"
$2,000 to $4,900 $1,800 to $4,400
Total Social Costs
$8 $8
Net Benefits
$2,000 to $4,900 $1,800 to $4,400
Noninonetized Benefits
33,000 tons of CO

2,800 tons ofVOC

Reduced exposure to HAPs, including formaldehyde, benzene, and polycyclic

organic matter

Reduced Climate effects due black carbon emissions

Ecosystem effects

Visibility impairment
° All estimates are for the year of analysis (2018) and are rounded to two significant figures. These results include
units anticipated to come online and the lowest cost disposal assumption.
1-3

-------
b The total monetized benefits refect the human health benefits associated with reducing exposure to PM2S through
reductions of directly emitted PM2 5. It is important to note that the monetized benefits include many but not all
health effects associated with PMj j exposure. Benefits are shown as a range from Pope et al. (2002) to Laden et
al. (2006). These models assume that all fine particles, regardless of their chemical composition, are equally
potent in causing premature mortality because the scientific evidence is not yet sufficient to allow differentiation
of effect estimates by particle type.
1-4

-------
SECTION 2
INTRODUCTION
2.1 Background for Proposed Rule
EPA is proposing to amend subpart AAA, Standards of Performance for New Residential
Wood Heaters. We are also proposing two new subparts to address additional types of wood
heating appliances. Specifically, we are proposing subpart QQQQ, Standards of Performance for
New Residential Hydronic Heaters and Forced-Air Furnaces, and subpart RRRR, Standards of
Performance for New Masonry Furnaces. The following sections describe the major provisions
of each subpart.
2.1,1 Subpart AAA, New Residential Wood Heaters
We propose to broaden the applicability of the wood heater regulation to specifically
include adjustable burn rate stoves (the focus of the original regulation), single burn rate stoves,
and pellet furnaces. The subpart would exempt residential hydronic heaters, residential forced-air
furnaces, and residential masonry heaters, because they would be subject to their own subparts.
We retained the exemption for cook stoves and fireplaces and added definitions for camp stoves
and traditional Native American bake ovens to clarify that they are not subject to this standard
other than appropriate labeling. Finally, we clarified that the standard only applies to wood-
burning devices (e.g., not to coal-only heaters).
Table 2-1 summarizes the proposed compliance dates and particulate matter (PM)
emission limits and overall heat efficiency standards that would apply to each wood heater
appliance. In addition, existing wood heaters that have a wood stove certification under the
current subpart AAA provisions (4.1 g/lir (catalytic) or 7.5 g/hr (non-catalytic)) would be
allowed to maintain that certification until the compliance dates specified under the proposed
revisions occur or that certification expires, whichever is sooner.
Like the current subpart, compliance with the PM and efficiency standards would be
determined based on testing of a representative unit within the model line. The subpart retains
the current process of using EPA-accredited test laboratories followed by an Administrator
Approval Process for the first year following promulgation of the final rule. At that point, or
earlier if chosen by manufacturers, the subpart implements a Certifying Body Based Certification
Process. Under this process, the definition of an accredited laboratory is revised to specify that
the laboratory must be accredited by a nationally recognized accrediting body to perform testing
under ASTM test methods E2558 and E2515 under 1SO-1EC Standard 17025. After testing is
2-1

-------
Table 2-1. Subpart AAA Compliance Dates and PM and Efficiency Standards
Appliance
Compliance Date (manufactured
date/sold at retail date)
Particulate Matter
(catalytic/non-catalytic) Efficiency
Adjustable rate wood
heater
1 year from promulgation date in Federal
Register for manufacture to 18 months for
retail sale from promulgation
2.5 g/hr/4.5 g/hr
70%
Pellet stove
1 year from promulgation date in Federal
Register for manufacture to IS months for
retail sale from promulgation
2,5 g/hr/4.5 g/hr
70%
Single burn rate wood
heater
2 years from promulgation date in Federal
Register for manufacture to 30 months for
retail sale from promulgation
3,0 g/hr
70%
complete, a certification of conformity with the PM emission limits and efficiency standards
must be performed by a certifying body with whom the manufacturer has entered into contract
for certification services.
Each affected unit would need to meet applicable permanent label and temporary label
requirements and have an owner's manual that contains specified information. We have made
relatively minor changes to the existing requirements, except to add requirements that the CO
emissions and efficiency of the device, as measured during the compliance test, must be included
on the label. In addition to the PM emissions standards and efficiency requirements, we are
proposing to retain the provisions that would apply to the owner or operator of a wood heating
appliance. (The current standard already has the requirement that the owner or operator not
operate the heater inconsistent with the owner's manual.) The proposed revision will continue to
include a list of prohibited fuel types that create poor or even hazardous combustion conditions.
This proposed revision also includes requirements for use of pellet fuels that have been
certified by the Pellet Fuels Institute or equivalent to meet certain minimum requirements and
procedures for a quality assurance process.
The proposed subpart still contains crucial quality assurance provisions. For example, a
model line would need to be recertified whenever any change is made in the original design that
is presumed to affect the emissions rate for that model line or when any of several specified
tolerances of key components are changed. The existing manufacturer quality assurance program
is maintained for 1 year following promulgation. At that point, the manufacturer would adopt a
2-2

-------
Certifying Body Based Quality Assurance program. The Certifying Body would conduct audits
to ensure that the manufacturer's Quality Control Plan is being implemented properly.
2,1.2 Subpart QQQQ, New Residential Hydronic Heaters and Forced-Air Furnaces
This new proposed subpart would apply to new residential hydronic heaters and forced-
air furnaces. The provisions apply to each affected unit that is manufactured on or after [INSERT
DATE OF PROPOSAL IN THE FEDERAL REGISTER] or sold at retail on or after 60 days
from the date of promulgation of the final standard.
Table 2-2 summarizes the proposed compliance dates and PM and efficiency standards
that would apply to each hydronic heater and forced-air furnace. We are co-proposing an option
to have hydronic heaters comply immediately with the Level I+III NSPS option instead of
compliance in 2018 (5 years from promulgation). The RIA contains results for this co-proposcd
option with impacts presented for the 2013-2015 timeframe.
Proposed subpart QQQQ also contains owner/operator requirements such as stack height
for outdoor residential hydronic heaters to reduce the likelihood of emissions adversely affecting
Table 2-2. Subpart QQQQ Compliance Dates and PM and Efficiency Standards
Appliance
Compliance Date
Particulate Matter
Efficiency
Outdoor hydronic heater
1 year from promulgation
0.32 lb/mm BTU heat output, cap of
18 g/hr
75%

3 years from promulgation
0.15 lb/mm BTU heat output, cap of
7.5 g/hr
80%
Indoor hydronic heater
2 years from promulgation
0.32 lb/mm BTU heat output, cap of
18 g/hr
75%

5 years from promulgation
0.15 lb/mm BTU heat output, cap of
7.5 g/hr
80%
Outdoor and Indoor
hydronic heater
Upon promulgation
0.15 lb/mm BTU heat output, cap of
7.5 g/hr
80%
Forced-air furnace
2 years from promulgation
0.92 lb/mm BTU
75%
neighbors. We considered also setting setback requirements but decided that such requirements
would best be set by local authorities who could better consider specific terrain and meteorology
and other local circumstances. We are also proposing a list of prohibited fuels because their use
would cause poor combustion or even hazardous conditions.
2-3

-------
As in the residential wood heater standard, we are proposing provisions that would apply
to the owner or operator of a wood heating appliance. First, the owner or operator must not
operate the hydremic heater or forced-air furnace in a manner that is inconsistent with the
owner's manual. Also, this rule would also include requirements for using pellet fuels that have
been certified by the Pellet Fuels Institute or equivalent to meet certain minimum requirements
and procedures for a quality assurance process.
The labeling requirements and owner manual requirements are similar to the voluntary
hydronic heater program, and we request comment on ways to improve the delivery of
information on the label and in the owner's manual and if different information might be useful
to the consumer and to the regulatory authorities.
The structure of the rest of the rule is based on the newly proposed subpart AAA
certification and quality assurance process. We request comment on changes or improvements to
that program that might be needed to address special concerns related to certification of hydronic
heaters and forced-air furnaces.
2.1.3 Subpart RRRR, New Residential Masonry Heaters
This new proposed subpart would apply to new masonry heaters. The provisions apply to
each affected unit that is manufactured on or after [INSERT DATE 2 years after PROPOSAL IN
THE FEDERAL REGISTER] or sold at retail on or after 3 year from the date of promulgation of
the final standard. These units would be subject to the proposed PM emission limits of 0.32
lb/mm BTU heat output. We are also proposing a 3-year small manufacturer compliance
extension cutoff of 15 masonry heater unit sales per year.
The structure of the rest of the rule is based on the newly proposed subpart AAA
certification and quality assurance process. We request comment on changes or improvements to
that program that might be needed to address special concerns related to certification of masonry
heaters.
The rule is economically significant according to Executive Order 12866. As part of the
regulatory process of preparing these standards. EPA has prepared a regulatory impact analysis
(RIA). This analysis includes an analysis of impacts to small entities as part of compliance with
the Small Business Regulatory Enforcement Fairness Act (SBREFA) and analyses to comply
with other Executive Orders.
2-4

-------
SECTION 3
INDUSTRY PROFILE
As described in Section 2, the EPA is considering amending the New Source
Performance Standard (NSPS) for new residential wood heaters. EPA promulgated the original
NSPS for new residential wood heaters including wood stoves in 1988. Based on a review of the
NSPS in 2009, EPA noted significant technological improvements that allow emissions from
these sources to be better controlled than the current standard. In light of the recent findings,
EPA is proposing to revise the current NSPS standards to improve regulation of wood heaters
and broaden the new regulation to cover other residential devices that use other solid biomass
fuels.
The proposed revisions to the NSPS for residential wood heaters would potentially cover
a number of devices that include wood stoves, pellet stoves, other solid biomass stoves; masonry
heaters; fireplaces; fireplace inserts; outdoor stoves; indoor and outdoor hydronic heaters and
forced-air furnaces; and coal-burning stoves.
EPA has developed this industry profile to provide the reader with a general
understanding of the technical and economic aspects of the industries that would be directly
affected by potential revisions to the NSPS regulation for new residential wood heaters and to
offer information relevant to preparing an EIA for this proposed revision to the NSPS. We begin
by outlining the supply side by discussing the production process for wood heaters and the
associated costs and follow this with an overview of the demand side of the market for
residential wood heaters as a primary or secondary home heating system. We then address the
characteristics that define the residential wood heating market and profile the companies that
produce wood heating systems. Although the wood heating equipment industry includes multiple
product markets, there is little published information about the intricacies of each individual
market. For this profile, we analyzed the wood heating market primarily on an aggregated level
and provide detailed information for specific product markets when such information is
available.
3.1 Supply Side
Wood heating devices embody a variety of products that provide heat and/or aesthetic
ambiance for residential consumers both indoors and outdoors by burning wood or other solid
biomass fuel. Indoor wood-burning devices provide space heating for a single room or area of a
residential home. Indoor heating devices include freestanding wood stoves, pellet stoves,
masonry heaters, fireplace inserts, and forced-air furnaces. Outdoor wood heating devices, also
3-1

-------
known as outdoor wood boilers, or water stoves, are typically located adjacent to the home they
heat in small sheds with short smoke stacks. Other products considered in the development of
potential proposed revisions of this NSPS include low-mass fireplaces, open masonry fireplaces,
fireplaces, fire pits, chimineas, cook stoves, and pizza ovens.
This section provides a general description of the residential wood heater manufacturing
processes. We then provide more detailed definit ions of the indoor and outdoor wood heater
products considered and the wood fuels used in their operation.
3.1.1 Production Process
The manufacturing process for residential wood heaters varies depending on the product
type being produced. Generally, the manufacturing process entails the assembly of several
prefabricated metal components. Major inputs include cast iron, metal products, heat-proof glass,
fireproof fabric insulation, refractory brick, and heat-tolerant enamels or coatings.
Wood heating devices are typically categorized by efficiency ratings. The ratings are
based on efficiency tests that measure the amount of heating value transferred from a full load of
wood or other biomass fuel (fuel type varies based on the product being tested) to the living
space. Efficiency tests evaluate two performance metrics that include combustion and heat
transfer efficiency. Combustion efficiency determines how effective the fire box design is at
burning the fuel and extracting its heating value. Heat transfer efficiency tests are potentially
conducted in calorimeter rooms equipped with temperature sensors to measure the degree
changes in the heated living space and the flue exhaust to determine how much heat from the fire
is delivered to the living space compared with the heat lost up the flue (EPA, 2009c).
Thermal output, typically expressed in British thermal units per hour (BTU/hr) in the
United States, is the heat output measure that tells the amount of heat produced each hour. A
higher BTU/hr rate suggests that a stove will produce more heat per hour than a stove with a
lower rating. Depending on design and size characteristics, a space heating device heat output
rating ranges between 8,000 and 90,000 BTU/hr. Larger heating systems designed to provide
whole home heating have heat output ratings that range from 100,000 to greater than one million
BTU/hr.
3-2

-------
3.1.2 Product Types
3. 1.2.1 Wood and Coal Stoves
EPA-certified wood stoves are enclosed combustion devices that provide direct space
heating for a specific room or area of a home.1 Catalytic and noncatalytic wood stoves are two
general types of wood stoves available in the United States. This designation refers to the design
of the combustion system. Noncatalytic combustion systems rely on high temperatures
(>1,000°F) within the fire box to fully combust the chemical compounds (combustible gases and
particles) in the wood smoke. In catalytic combustion systems, the presence of the catalytic
element lowers the temperature at which wood smoke chemical compounds combust. Catalytic
elements or combustion system designs in noncatalytic combustion systems are used in existing
stoves to meet EPA emission standards.
Coal stoves are similar in structure and appearance to wood stoves. Most coal stoves are
designed to burn hard anthracite coal instead of soft bituminous coal (Houck, 2009), but different
varieties of coal have been used in coal stoves over time.
3.1.2.2	Wood Pellet Stoves and Biomass Stoves
Wood pellet and biomass stoves are similar in application to wood stoves but generate
heal through pellet combustion. Wood pellet stoves use tightly compacted pellets of wood as
fuel, whereas biomass stoves can use a variety of pellet types, including corn, fruit pits, and
cotton seed (EPA, 2009c). A load of pellets is poured into the stove's hopper; then the user sets a
thermostat that controls a feed device within the stove. The feed device regulates the amount of
fuel that is released from the hopper into the heating chamber, which is where the combustion
takes place (EPA, 2009c), Pellet stoves are typically more efficient in terms of combustion and
heating than standard wood stoves but require electricity to operate the fans, controls, and pellet
feeders (EPA, 2009c).
3.1.2.3	Masonry Heaters
A masonry heater is a solid-fueled heating device that is pre-manufactured or constructed
on site using mainly masonry or ceramic materials (Masonry Heater Association of North
America, 1998). Though masonry heaters and traditional fireplaces are similar in appearance,
masonry heaters are used primarily to generate heat, whereas fireplaces typically serve a more
aesthetic purpose. The heater itself is made up of an interior construction unit consisting of a
1 EPA-certified wood stoves are those wood stoves that meet the requirements under the current residential wood
heater NSPS.
3-3

-------
firebox and a set of heat exchange channels (Chernov. 2008). The hot gas produced during rapid
combustion of fuel within the firebox passes through the heat exchange channels, which run
throughout the structure and saturate the masonry mass with heat (Chernov. 2008). Most
masonry heaters weigh over 800 kg. After the masonry walls are saturated, the masonry heater
radiates the heat into the area for 12 to 15 hours (Chernov, 2008). Masonry heaters can heat a
home all day without having to burn continuously and are often used in areas where traditional
fuel sources are unavailable (Chernov, 2008). However, there is a significant lag time between
the initial burn and the time that the masonry structure releases sufficient heat to warm a living
space (U.S. Department of Energy [DOE], 2010).
3.1.2.4	Fireplace Inserts
A fireplace insert is a type of stove that is designed to fit inside the firebox of an existing
wood-burning fireplace (Wood Heat Organization, 2010). EPA-certified fireplace inserts are
essential wood stoves without legs or pedestals. An insert is made of steel or cast iron and is
typically installed in masonry fireplaces or traditional fireplaces to enhance a fireplace's
efficiency (Hearth, Patio, and Barbeque Association [HPBA], 2010b). As an insulated closed-
door system, a fireplace insert enhances combustion by slowing down the fire and increasing the
fire's temperature (HPBA, 2010b). In addition to wood-fueled fireplace inserts, other inserts can
be fueled with natural gas, propane, pellets, or coal (HPBA, 2010b).
3.1.2.5	Forced Air Furnaces
A forced-air furnace is a type of central heating system that typically burns cordwood or
pellets. A forced-air furnace can be located inside a house or outdoors and provides controlled
heat throughout a home using a network of air ducts (EPA, 2009c).
3.1.2.6	Outdoor Wood Heaters
An outdoor wood heater, also called a wood-fired boiler, is a type of hydronic heater that
is designed to be the home's primary heating system. Wood boilers are typically located
outdoors and have the appearance of a small shed with a smokestack (EPA, 2009c). Hydronic
heaters burn wood to heat a working liquid contained in a closed-loop system. The heated liquid
is then circulated to the house to provide heat and hot water (EPA, 2009). Hydronic heaters are
typically sold in rural areas with cold climates where wood may be the most readily available
fuel source (EPA, 2009c). In addition to outdoor hydronic heaters, there is an emerging market
for indoor hydronic heaters. Currently, the indoor hydronic heater market is approximately 10%
of the hydronic heater market.
3-4

-------
3.1.2.7	Indoor and Outdoor Fireplaces
Fireplaces are typically not primary heating sources and are typically considered more of
an aesthetic feature than a functional device. The common low-mass fireplace is a fireplace and
attached chimney that can be weighed on a platform scale (EPA, 2009c). Not to be confused with
masonry heaters, masonry fireplaces are traditional, aesthetic fireplaces constructed of brick,
stone, or other masonry materials with a chimney like a traditional fireplace and do not have the
extensive heal channels that define masonry heaters (Fireplaces & Woodstoves, 2010).
Fireplaces are also used to enhance the outdoor area of a house. A portable grated
cylinder style has a bottom basin surrounded by open grating for a fire, a cooking grate, and a lid
(EPA, 2009c). A permanent outdoor fireplace is similar to one that would be found indoors.
They can be freestanding or attached to the outside of the house (EPA, 2009c).
3.1.2.8	Fire Pits, Chimineas. Cook Stoves, and Pizza Ovens
Several outdoor appliances involve using wood fuel for cooking or heating. A fire pit is a
round outdoor hearth appliance that is designed to replicate the ambiance of a campfire by
radiating heat in 360 degrees around the pit (HPBA, 2010c). A chiminea is typically constructed
out of cast iron, terra cotta, or clay and burns firewood inside the internal oven. As the fire burns,
the walls of the oven absorb heat. After the dome chamber reaches the desired temperature, the
fire can be allowed to die down (EPA, 2009c). Wood cook stoves are made of cast iron to
withstand the high temperatures produced by the fire (EPA, 2009c), They are similar in
appearance to a conventional stove, complete with an oven and cooking ranges, but are larger in
order to accommodate the wood fuel (EPA, 2009c). North American traditional cook stoves have
defined dimensions and cooking performance characteristics. Native American bake ovens have
defined cultural and cooking functions. Pizza ovens arc made out of a masonry material, such as
clay adobe or refractory bricks, which can endure high temperatures for an extended period of
time (EPA, 2009c).
J. 1.3 Costs of Production
Because of the variety of products covered under the wood heat source category, different
manufacturers use a wide range of materials and have varying labor requirements. Since there is
significant diversity in output between the producers in this category, as well as the broader
industries in which they may be classified for data purposes, this section highlights the
production costs associated with several of the North American Industry Classification System
(NAICS) codes under which a significant number of the wood heating equipment manufacturing
facilities in our database are included.
3-5

-------
Table 3-1 displays costs for the heating equipment and hardware manufacturing
industries. The production of devices like wood stoves, hydronic heaters, and fireplace inserts is
included under the heating equipment category (NAICS 333414), In 2008, the total cost of
materials used for production represented roughly 40% of the industry's total value of shipments,
while labor costs only accounted for 17%. The hardware manufacturing industry (NAICS
332510) had similar statistics: materials used and annual payroll accounted for 38% and 18% of
the total value of shipments, respectively.
3-6

-------
Table 3-1. Costs for Labor and Materials for U.S. Heating Equipment and Hardware Manufacturing: 2008
NA ICS-
Based
Code
Meaning of
N'AICS-Based
Code
Year
Number of
Employees
Annual Payroll
(SI,000)
Production
Workers
Average per
Year
Total Cost of
Materials
($1,000)
Materials, Parts,
Containers,
Packaging, etc.
Used ($1,000)
Cost of
Purchased
Fuels ($1,000)
Cost of
Purchased
Electricity
(SI,000)
Total
Value of
Shipments
($1,000)
333414
Heating Equipment
(except warm air
furnace)
2008
20,619
956.254
12,605
2.685,779
2.242.872
16.490
31.072
5.617.465
332510
Hardware
Manufacturing
2008
36,335
1,571.070
25.488
4,139.425
3.373,896
35,265
67,018
8.948,790
Source: U.S. Census Bureau. 2010a American Fact Finder. Sector 31: Annual Survey of Manufactures: General Statistics: Statistics for Industry Groups and
Industries: 2008 and 2007. http://factfinder.census.gov. Accessed July 20, 2010.

-------
Masonry fireplace construction and other site-assembled fireplace construction are
covered under the two industries displayed in Table 3-2. The new single-family construction
general contractors industry (NAICS 236115) covers a broad spectrum of construction activities
beyond masonry and fireplace construction. Like heating equipment and hardware
manufacturing, this industry is highly capital intensive; 42% of the value of the construction
work is attributed to the cost of materials. Labor accounts for only 12%. For the masonry
contractor industry, however, payroll costs represent over 30% of the value of construction work
suggesting that masonry contracting requires a special skill set and a specific degree of
craftsmanship.
The 2007 costs for plumbing and heating equipment wholesalers (NAICS 423720) are
outlined in Table 3-3. This category, which includes the merchant wholesale production of
cooking and heating stoves and hydronic heaters, made over $50 billion in sales in 2007.
Table 3-4 displays the costs for certain home furnishing stores, including those that sell wood
stoves at retail prices. The costs for these industries may be more indicative of the wholesale and
retail exchanges of wood-heating equipment rather than the actual production process.
3.2 Demand Side
The subject wood-fired heaters are sold explicitly for use in residential homes. These
devices can be included in the original construction of a new home or installed later in the life of
the home. Demand for residential wood heating devices is driven by several key factors that
include size, price, efficiency, aesthetics, and fuel type (e.g., cord wood, pellet wood, or other
biomass fuels). However, consumer demand for any one product discussed in Section 3.1 is
driven primarily by the intended end-use heating application. This section defines the three major
consumer segments that drive demand based on the end-use application. Following this
discussion, we present some national statistics on the variation in residential wood heat
consumers in the United States. We conclude our discussion of the demand side by
characterizing some of the substitutes for residential wood-burning devices.
3-8

-------
Table 3-2. Costs for U.S. Masonry Contractors and Single-Family Home Contractors: 2007
NAICS-Based
Code
Meaning of NAICS-Based
Code
Year
Number of Employees
Total Payroll (SI,000)
Cost of Materials,
Components, and
Supplies (51,000)
Total Value of
Construction Work
($1,000)
236115
New single-family general
contractors
2007
259.905
10,834,064
37,676,878
89,282,708
238140
Masonry contractors
2007
232,315
8,250,581
8,594,565
26,984,381
Source: U.S. Census Bureau. 2010b. American Fact Finder. Sector 23: EC0723SG01: Construction: Summary Series: General Summary: Detailed Statistics for
Establishments: 2007. Released May 18, 2010. http://factflnder.census.gov.
Table 3-3. Costs for U.S. Plumbing and Heating Equipment Supplies Wholesalers: 2007
NAICS-Based
Code
Meaning of NAICS-Based
Code Year
Number of Employees
Annual Payroll
(SI ,000)
Operating Expenses
($1,000)
Sales
($1,000)
423720
Plumbing and heating 2007
equipment supplies
(hydronics) merchant
wholesalers
87,907
4,542,337
8,311,462
50,316,133
Source: U.S. Census Bureau, 2010c. American Fact Finder. Sector 42: EC0742AI: Wholesale Trade: Geographic Area Series; Summary Statistics for the United
States, States, Metro Areas, Counties, and Places: 2007. Released July23,2010. http;//factfInder.census.gov.
Table 3-4. Costs for U.S. Specialized Home Furnishing Stores: 2007
NAICS-Based
Meaning of NAICS-Based



Code
Code Year
Number of Employees
Annual Payroll ($1,000)
Sales ($1,000)
442299
All other home furnishing 2007
19,057
3,427,682
27,326,976

stores



Source: U.S. Census Bureau, 201 Od. American Fact Finder. Sector 44: EC0744A1: Retail Trade; Geographic Area Series: Summary Statistics for the United
States, States, Metro Areas, Counties, and Places: 2007. Released July 23, 2010. http://factfinder.census.gov.

-------
3.2.1	End-Use Consumer Segments
The intended end-use heating application is a primary driver of demand for residential
heating devices. The U.S. Annual Housing Survey (HUD, 2008) provides a starting point for
classifying the various types of residential consumer of heating equipment. For the purposes of
this profile we grouped consumers into three major segments based on their desired heating
needs: whole-house heating, secondary or zone heating, and recreational outdoor heating
applications.
The primary, or whole-house heating segment, includes homes with no other central
heating system that can provide heating service in or outside the house. In smaller homes, a large
stove or masonry heater may be sufficient to provide heat to the entire house. However, larger
homes typically require, either individually or in some combination thereof, an outdoor wood
boiler, a hydronic heater, or a pellet-burning forced-air furnace, to meet the consumers' heating
needs.
The secondary, or zone heating segment, includes consumers that desire supplemental
heat from a wood-burning device in homes with an existing central heating system that serves as
the home's primary heat source. Cordwood and wood pellet-burning stoves are ideal for heating
a single room or zone within a home. Smaller masonry heaters are also well suited for zone
heating needs.
Finally, a third component of demand is represented by consumers who desire a wood-
burning device for recreational aesthetic heating applications. Outdoor fireplaces, chimineas,
outdoor ovens, and pizza stoves are some examples of the wood-burning devices designed for
recreational healing applications. The products that address the needs of this consumer segment
are primarily intended to enhance the aesthetics or landscape outside the home.
Fireplaces are one type of heating equipment that stretches across multiple consumer
demand segments. Although the primary functional purpose of an indoor fireplace is to provide
room heat, only about 9% of wood fireplaces are used for heat generation. The remaining
fireplaces serve an aesthetic or recreational purpose only (HPBA, 2010a).
3.2.2	Regional Variation in Residential Demand
Between 2006 and 2008, roughly 1,7 million or 2.26% of total occupied homes in the
United States relied on wood heat as the primary fuel source for home heating. The demand for
wood heat is concentrated in the Northeast, the Northwest, and the northern Midwest regions of
the United States. Table 3-5 illustrates this regional concentration by listing the 20 states that
3-10

-------
Table 3-5. Wood as Primary Fuel Source for Home Heating in the United States: 2006-
2008
State
Percentage of State Owner-
Occupied Houses
Percentage of National
Owner-Occupied Houses
Count
California
2%
9%
165,440
New York
3%
6%
103,740
Pennsylvania
3%
6%
100,355
Washington
6%
5%
92,664
Michigan
3%
5%
85,712
Wisconsin
5%
5%
83,040
Oregon
8%
4%
79,637
Ohio
2%
4%
67,665
Virginia
3%
3%
60,579
North Carolina
2%
3%
58,397
Minnesota
3%
2%
43,234
Maine
10%
2%
41,509
Indiana
2%
2%
38,550
West Virginia
7%
2%
38,142
Idaho
OQ
v©
©s
2%
32,817
Colorado
2%
2%
28,668
Vermont
15%
1%
26,601
Massachusetts
2%
1%
25,870
Montana
9%
1%
24,355
New Hampshire
7%
1%
24,07!
Top 20 total

68%
1.221,046
National total

100%
1,792,741
Source: U.S. Census Bureau. 2009. American Community Sun-ey: 2006-2008. Available at:
http://factf1nder.census.gov/servlet/DataseiMainPageServlet?_prograin=ACS&_submenuId=& Iang=en&_ts=.
represent the highest percentage of households that use wood heat. The second column shows the
number of wood-heat users as a percentage of the total homes in the state, while the third column
shows the number of wood-heated homes as a percentage of the total users in the United States.
These 20 states account for over two-thirds of the total primary U.S. residential wood heat
demand.
Table 3-6 illustrates the regional breakdown of secondary wood heat demand by U.S.
Census divisions in 2005, which is the most recent year for which data are available. Figure 3-1
3-11

-------
Table 3-6. Wood as Secondary Heat Source by Census Division, 2005
Percentage of Total
Census Division
Number of Households
Percentage of Total
U.S. House
South Atlantic
2,268.786
20%
2%
Pacific
2.080,149
18%
2%
East North Central
1.788,845
15%
2%
West North Central
1,175,763
10%
1%
West South Central
1,174,157
10%
1%
Mountain
1,089,557
9%
1%
Middle Atlantic
813,045
7%
1%
East South Central
678,226
6%
1%
New England
491,678
4%
0%
Grand total
11,560,207
100%
10%
Total U.S. households
1 11,090,617


Source: U.S. Energy Information Administration, 2009. Residential Energy Consumption Survey: 2005. Available at
http://www.eia.doe.gov/emeu/recs/recspubuse05/pubuse05.html.
Census Regions and Divisions of the United States
MIDWEST
PACiric
SOUTH
Figure 3-1. Census Regions and Divisions of the United States
Source: U.S. Census Bureau, 201 Oe. Census Regions and Divisions of the United States. Available at
http://www.census.go\'/geo/ww\v/us_regdiv.pdf.
3-12

-------
shows which states fall into which Census divisions. More households rely on wood fuel as a
supplemental heat source rather than as a primary source. Roughly 10% of American households
used wood fuel for a secondary heat source in 2005, whereas 3% of households relied on wood
for their primary heat source in the same year. The proportion of the population using primary
wood heat was relatively consistent between 2005 data presented in Table 3-6 and the 2006 to
2008 period, as shown in Table 3-5.' One interesting note about secondary wood fuel use is that
it does not appear prevalent in the Middle Atlantic or New England states, which account for
only 11% of the total secondary use. This fact is in contrast to the primary use data in Table 3-5,
which shows households in Vermont, New Hampshire, Maine, Pennsylvania, Massachusetts, and
New York accounting for 17% of the total national primary demand.
Within the wood heat demand constituency, there is also regional demand variation for
different wood-fueled appliances. For example, the demand for wood-fired forced-air furnaces is
concentrated primarily in the Great Lakes region of the country and, to a lesser extent, the
Midwest (HPBA, 2010a). These two regions account for 82% of the 30,000 to 35,000 furnaces
sold annually in the United States (HPBA, 2010a). Demand for wood-fueled cook stoves is
concentrated in the Amish and Mennonite communities in the Midwest (HPBA, 2010a).
3.2.3 National Home Heating Trends
Residential demand for wood fuel has been declining steadily throughout the United
States. Figure 3-2 illustrates the number of households from 1989 to 2005 that reported using
wood fuel for heating, cooking, or heating water. In 1989, roughly 15% of all occupied housing
units used wood fuel. The proportion of wood-fuel users has declined relatively steady
throughout the past 20 years. By 2005, fewer than 9% of the total 109 million occupied
households in the United States used wood fuel for heating, cooking, or heating water.
The indoor fireplace market illustrates the continuing decline in wood fuel use over the
past decade (HPBA, 2010a). As discussed in the next section, consumers are trending toward gas
fireplaces instead of wood-fiieled fireplaces. Fireplace manufacturers report that shipments of
wood-fired factory-buiIt fireplaces have been declining over the past decade as a result of the
weakening new home construction market and the shift in consumer preferences toward gas
1 Although ihe total occupied households between the Department of Energy's Residential Energy Consumption
Survey [RECS] and the Census Bureau's American Community Survey [ACS] differ, the proportion of total
occupied households using wood fuel as their primary home heating fuel is consistent. The survey data sources
used in Table 3-6 assumes 111 million occupied homes in 2005 while Figure 2-2 assumes 109 million for the
same year.
3-13

-------
1989 1991 1993 1995 1997 1999 2001 2003 2005
Year
							1
Figure 3-2. Declining Trend in U.S. Housing Units Using Wood Fuel: 1989-2005
Source: U.S. Housing arid Urban Development [HUD]. 2008. American Housing Survey for the United Stales.
Multiple Years. Table 3-5. Available at http://wvvw.census.gov/hhcs/vwvw/housing/ahs/nationaldata.html.
fireplaces in the new homes that are being built (HPBA, 2010a). Of new home fireplaces, only
35% bum wood, whereas 65% are fueled by gas (HPBA, 2010a).
3.2.4 Substitution Possibilities
The availability of close substitutes for wood heating equipment is largely contingent on
two key factors: (1) the consumer's heating needs and preferences and (2) the price and
availability of an alternative heating source. As discussed in Section 3.2.1, consumers tend to fall
into one of three demand segments depending on their desired end use for their heating device.
Each consumer group displays varying degrees of substitutability. The relative price of
alternatives is also an important aspect of product substitution, which includes the cost of the
heating equipment itself and the price and availability of the fuel it requires.
For most consumers looking for whole-house heat or single-room heat, gas or electric
heat provides a common substitute for wood fuel. Electricity can power central heating systems
for whole-house heat and smaller space heaters for single rooms. Since the majority of American
households have easy access to electric power, these home heating options are often a convenient
and low-cost alternative to wood heat. Gas-powered central furnaces and room heaters and oil-
powered central heating systems are also on the market for residential use (DOE, 2009).
Although most consumers have homes equipped for gas or electric power, more rural areas of the
3-14

-------
country have limited access to reliable utilities. In these regions, electric or gas heat may not be
an available or cost-efficient choice relative to wood heat.
Recreational or aesthetic wood-fired appliances have fewer direct substitutes. Traditional
indoor fireplaces and masonry fireplaces can be outfitted for burning natural gas rather than
wood. Consumers may have a preference for one over the other. Wood fuel can be messy and
somewhat difficult to store, whereas natural gas can be more convenient. Outdoor recreational
appliances may be difficult to substitute directly because many consumers desire the aesthetic
effect created by a wood-burning fire pit or chiminea. Outdoor charcoal or gas grills provide an
alternative for outdoor wood-fired cooking appliances, but consumers may not consider these a
direct substitute.
3.2.5 Price Elasticity of Demand
Price elasticity of demand is a numeric measure of the sensitivity of demand following an
increase in the product's price. The level of sensitivity is determined by a number of factors that
include the availability and price of substitutes (e.g., other types of heating equipment, gas or
electric space heaters and furnaces) and the price of complements (wood fuels).
In preparing this profile, we searched for, but were unable to identify, any empirical
estimates of the price elasticity of demand for residential wood heating equipment. Although
numerous articles estimate the elasticity of demand for residential energy and heating fuels, these
estimates focus almost exclusively on electricity, natural gas, and fuel oil. These estimates find
that residential energy and heating fuel demand is relatively inelastic (i.e., there are only very
small changes in demand in response to an increase in energy or fuel prices). A recent RAND
report suggests that in the short term, demand for electricity and natural gas in residential
markets is relatively inelastic (Bernstein and Griffin, 2005). However, the authors of the report
also note that sustained higher energy prices in the long term may result in demand for energy
becoming more elastic as consumers have time to identify more energy-efficient options.
In the absence of empirical estimates, we offer a qualitative discussion of the key
determinants of the price elasticity of demand to provide a general sense of whether consumer
demand is elastic or inelastic. As mentioned earlier, the determinants of elasticity include the
degree of substitutability, product necessity, and duration of the price increase.
There are a number of close substitutes for residential wood heating devices that include
electric and gas furnaces and space heaters. The extent to which consumers are able to substitute
between these options is likely to vary depending on geographic location. Overall, the presence
3-15

-------
of good substitutes will increase the elasticity of demand for wood heating equipment. In
contrast, sustained higher prices for heating fuel (i.e., electricity, natural gas, and fuel oil) may
make switching away from wood heating equipment less likely and, ultimately, make demand
for wood heating equipment more inelastic.
Finally, the magnitude of the cost for residential wood heating equipment may also
increase the elasticity of demand. Consumer demand tends to be more elastic when the price of
the good represents a large proportion of consumer income (Bernstein and Griffin, 2005). In
other words, consumers become more sensitive to small price changes when considering the
purchase of a large household appliance (e.g., refrigerator, oven range, or heating system),
3.3 Industry Organization
A review and description of market characteristics (i.e., geography, product
differentiation, product transportation, entry barriers, and degree of concentration) can enhance
our understanding of the mechanisms underlying the wood heating equipment industry. These
characteristics provide indicators of a firm's ability to influence market prices by varying the
quantity of product it sells. For example, in markets with large numbers of sellers and identical
products, firms are unlikely to be able to influence market prices via their production decisions
(i.e., they are "price takers" and operate in highly competitive markets). However, in markets
with few firms, significant barriers to entry (e.g., licenses, legal restrictions, or high fixed costs),
or products that are similar but can be differentiated, a firm may have some degree of market
power (i.e., to set or significantly influence market prices). In addition, if a product is difficult to
transport over long distance (due to weight or hazardous nature), then the market size may be
more restricted than one might expect, all other things being equal.
3.3. / Market Structure
Market structure characterizes the level of competition and determines the extent to
which producers and sellers can influence market prices. Economic market structure typically
focuses on the number of producers and consumers, the barriers to market entry, and product
substitutability.
The residential wood heater market contains a number of large producers selling a
number of differentiated products along with a large number of small producers. These
characteristics suggest a quasi-monopolistic competitive market (i.e., somewhere between highly
competitive and less competitive) for large producers who will have some influence over market
prices. For small producers, the market will be highly competitive in nature. In addition, existing
regulatory requirements for product testing and certifications represent a barrier to market entry
3-16

-------
for new producers of wood heating devices. Competition in this market may be further
constrained by transportation costs due to the weight of these products, A similar assessment was
determined in the 1986 study by the American Enterprise Institute (AEI) and Brookings
Institution Joint Center for Regulatory Studies.
The AEI-Brookings report also identified several key factors that influence
manufacturers' pricing decisions. These factors included production prices, prices of similar
products sold by competitors, transportation costs, combustion technology and efficiency, and
consumers' ability to differentiate products based on brand name and efficiency.
Price elasticity of supply is a numeric measure of the industry's response to a small
percentage increase in the product price (Landsburg, 2005). The law of supply suggests
producers supply greater quantities at higher prices as a result of increasing marginal returns for
each additional unit produced as the average cost per unit of output declines. As a result, the
elasticity of supply for most industries is positive. Determinants of supply elasticity are
flexibility of sellers to adjust production and the time period being considered in estimating the
elasticity. Most manufactured goods have an elastic supply, meaning that sellers can adjust
production quickly in response to a change in prices (Mankiw, 1998). Industries with excess
plant capacity are likely to have elastic supply as sellers can ramp up production in a relatively
short time frame.
Based on 2006 plant capacity utilization data as shown in Figure 3-3, the heating
equipment manufacturing industry averaged 60% utilization, growing from 59% in 2002 to a
maximum utilization of 65% in 2005 and then falling to 54% in 2006 (U.S. Census Bureau,
2007). Similar statistics are not available for more recent years because this survey was
discontinued after 2006. The available data suggest that there is ample existing capacity to
increase production in the short and long terms, assuming an increase in price of residential
wood-burning heating equipment.
3.3,2 Manufacturing Plants
Since 1988, the change in the number of residential wood-fired heater producers is
unclear. The U.S. Economic Census reports that between 1992 and 2007 the number of
establishments (places of business) in the industry has remained unchanged. Alternatively, the
industry association (IIPBA) has suggested that the number of manufacturers of wood-fired
heaters fell by 80% following the 1988 NSPS, down from approximately 500 to roughly 120
manufacturers today (Houck and Tiegs, 2009). The difference between the 2 estimates is thought
to be due to the large number of "backyard welders" in 1988 who built handmade stoves in their
3-17

-------
backyard as a sideline rather than their main source of income and chose to not attempt to
develop competitive designs for the marketplace after the 1988 NSPS was promulgated.
100% -
90% -
80%
2002	2003	2004	2005	2006
Year
Figure 3-3. Annual Plant Capacity Utilization for Heating Equipment Manufacturers
(NAICS 333414): 2002-2006
Source; U.S. Census Bureau. 2007. Survey of Plant Capacity: 2006. "Table la. Full Capacity Utilization Rates by
Industry Fourth Quarter 2002-2006," Census Bureau, Washington DC. Report No. MQ-Cl(06).
For this analysis, we were able to identify 635 firms in the residential wood heating
equipment industry in the United States. RTI developed this estimate leveraging a number of
different sources that included EPA's official list of certified wood heater manufacturers, Dun &
Bradstreet's online company database, and a number of industry association membership lists.
The estimate includes the manufacturers listed on EPA's official certification lists (-120
manufacturers). We then expanded this list to include manufacturers of masonry heaters and
outdoor wood boilers and manufacturers of non-heating devices, such as cook stoves, outdoor
fireplaces, and bake ovens. Table 3-7 reports the count of U.S.-based companies in the industry
by major business type.
Residential wood heater manufacturers account for over 90% of the industry and span 14
different NAICS codes, of which 560 are categorized as NAICS 333414, as establishments
primarily engaged in manufacturing heating equipment (except electric and warm air furnaces),
such as heating boilers, heating stoves, floor and wall furnaces, and wall and baseboard heating
units (Census Bureau, 201 Of). An average manufacturer may produce anywhere from one to five
3-18

-------
technically different products (HPBA, 2010a). Manufacturers dominate the market, accounting
for over 96% of sales for the industry in 2008.
Table 3-7. Number of U.S. Companies by Business Type
Business Type
Number of Companies
Reported Sales 2008
($1,000s)
U.S. Market Share
(% of Net Sales)
Manufacturers
577
$1,285,800
96.60%
Masonry contractors
24
$7,200
0.54%
Wholesalers, distributors
19
$34,200
2.57%
Residential construction
10
$3,200
0.24%
Retailers
5
$600
0.05%
U.S. Totals
635
SI,331,000
100%
Sources: Dun & Bradstreet Marketplace, a company database. RTI International calculations.
Masonry contractors are the second largest group of businesses, accounting for 5% of the
companies, and almost all masonry contractors are classified as NAICS 238140 establishments
primarily engaged in masonry work, stone setting, brick laying, and other stone work for new
construction, additions, alterations, maintenance, and repairs (U.S. Census Bureau, 201 Of).
Masonry contractors account for less than 1% of the industry sales. The remaining 5% of
businesses are classified as residential construction contractors, wholesalers, distributors, and
retailers. Residential construction contractors are primarily associated with design construction
and installation of masonry heaters, outdoor fireplaces, and hvdronic heaters. Companies
classified as wholesalers, distributors, and retailers do not manufacture products but may be tied
exclusively to a single brand or manufacturer, while others distribute and sell multiple products
and brands.
3.3.3 Location
The industry is, for the most part, co-located in areas of the country with the largest
demand for winter heating. Over 50% of U.S.-owned companies are located in 10 states in the
northern half of the country. The largest number of companies is located in California, with
additional concentrations in the Northwest, Northeast, the upper Midwest, and Central Plains.
Table 3-8 reports the number of U.S. companies for the top 10 states. Additionally,
approximately 104 foreign-based companies operate in the United States, two-thirds of which are
Canadian-based companies.
3-19

-------
Table 3-8. U.S. Wood Heat Equipment Industry by Geographic Location
Location
Business Count
% of Total U.S. Industry
California
63
10%
Pennsylvania
36
6%
Minnesota
35
6%
New York
33
5%
Washington
31
5%
Ohio
29
5%
Texas
29
5%
Wisconsin
26
4%
Michigan
25
4%
Illinois
21
3%
U.S. Total
635
86%
Canada
67
9%
Other foreign
37
5%
Industry Total
739
100%
Sources: Dun & Bradstreet Marketplace, a company database. RTl International calculations.
3.3.4 Company Sales and Employment
Overall sales for the residential wood heating industry totaled more than $1.3 billion in
2008. Based on company data obtained for this profile, the industry employs approximately
17,000 workers annually. Previous analysis suggests that the industry relies on seasonal labor,
ramping up production in months leading up to winter and reducing employment and production
during the warmer parts of the year (AEI, 1986). Table 3-9 presents median sales and
employment for the industry by business type,
Table 3-9. U.S. Sales and Employment Statistics by Business Type
Median Sales 2008	Median Employment
Business Type Number of Companies (SI,000s)	per Company
Manufacturers 577 $200	4
Masonry contractors 24 $100	3
Wholesalers, distributors 19 $500	5
Residential construction	10	$100
Retailers 5 $100	2
LIS. Totals 635 $200	4
Sources: Dun & Bradstreet Marketplace, a company database. RTI International calculations.

3-20

-------
Firms manufacturing heating equipment (except electric and warm air furnaces), such as
heating boilers, heating stoves, floor and wall furnaces, and wall and baseboard heating units
(NAICS 333414), are classified as small by the Small Business Administration (SBA, 2008) if
they have fewer than 500 employees. Looking across the 14 manufacturing-related NAICS codes
in our analysis, we find that approximately 90% of manufacturers are considered small
businesses based on their reported employment compared with the SBA threshold. SBA
classifies wholesalers and distributors as small if their employment is fewer than 100 workers.
Approximately 68% of the industry's wholesalers and distributors are considered small based on
the employment data obtained for this analysis.
SBA thresholds for masonry, construction, and retail firms are based on annual sales.
SBA standards for NAICS codes under these business types range between $7 and $33 million in
annual revenue. As reported in Table 3-9, median sales in these business categories are far below
the range of SBA standards. As one would expect, our analysis finds that all 39 firms are
considered small based on their reported annual sales compared with the SBA standards for their
respective NAICS code classifications.
3.3,4, J Profits of Affected Entities
Table 3-10 reports profit margins for manufacturers, masonry contractors, and
wholesalers and distributors. The profit margin represents an average of reported profit per unit
sales across the industry classified by the 6-digit NAICS code.
Table 3-10. Profit Margins for NAICS 333414, 238140, and 423720: 2008
NAICS
Code	NAICS Description
Industry
Profit Sales
Margin <510*)
333414 Heating Equipment Manufacturers	4.3% $70,965
238140 Masonry Contractors	4,7% $9,676
423720 Plumbing and Healing Equipment Supplies (Hydronics) Merchant Wholesalers 3.4% 558,907
Source: The Risk Management Association, 2008. Annual Statement Studies, Financial Ratio Benchmarks 2008-
2009. Risk Management Association, Philadelphia: 2008.
3.4 Residential Wood Heater Market
Residential wood heating device shipments in the United States were relatively consistent
from year to year between 1998 and 2005, according to the HPBA's reported hearth industry
shipment data (2009). Since 2005, total industry shipments on average have declined annually by
24%. Industry experts attribute this decline in large part to the broader economic downturn and
3-21

-------
poor housing market. Renewable energy tax rebates offered in 2008 provided some relief for
pellet-fueled devices, resulting in a 1-year increase in shipments of 161%, only to steeply decline
again in 2009. Table 3-11 presents shipment volumes by product type in 2008.
Table 3-11. Unit Shipments and Percentage of Total Units by Product Type: 2008
Product Type
Units
% of Total Units
Wood stove
Pellet stove
Biomass stove
Wood fireplaces3
Outdoor fireplaces
Masonry heaters
Hydronic central heating systems
Total
166,527
130,381
6,819
180,966
6,302
730
13.385
505,110
33%
26%
1%
36%
0%
3%
100%
* Wood fireplaces in this table include both factory-built and site-built models.
Source: Frost & Sullivan. 2010. Market Research Report on North American Residential Wood Healers, Fireplaces,
and Hearth Heating Products Markets. Prepared for EC/R Inc.
Outdoor wood boilers are a relatively new product in the market since 1990. Previous
studies have reported annual growth in sales of between 30 and 128%, with over 155,000
outdoor wood boilers in use in the United States in 2006 (NESCAUM, 2006). Sales have been
regionally focused in the Northeast (especially the Great Lakes region) and Midwestern states.
The NESCAUM report predicts that over 500,000 outdoor wood boilers will be in use before the
end of 2010 if trends in annual sales continue to follow growth rates observed between 1990 and
2006.
Market data for coal-burning stoves are very limited. However, anecdotal evidence
suggests that coal stove use is limited to major coal states, including Pennsylvania, West
Virginia, and Indiana, where coal is abundant and cheap relative to other heating fuels (Dagan,
2005). Most of the major stove manufacturers feature at least one coal-burning stove model.
However, at the time of writing this profile, we were unable to locate any reliable estimate of
shipments in the United States for coal stoves.
3.4.1 Market Prices
Residential wood heater prices range from $200 to $50,000 depending on the product
type and characteristics. Consumers who purchase these products must also consider the costs of
3-22

-------
installation, which range between $300 and $6,000 on average. Tables 3-12 and 3-13 report the
average cost of installation and purchase price for residential wood heating appliances.
Table 3-12. Installation Costs for Average System by Product Type (North America); 2008
Product Type	Installation Cost
Wood stove	$500
Pellet stove	$300
Biomass stove	S3 00
Wood fireplaces	$600
Outdoor fireplaces	$350
Masonry heaters	$6,000
Hydronic central healing systems	$2,000
Source: Frost & Sullivan. 2010. Market Research Report on North American Residential Wood Heaters, Fireplaces,
and Hearth Heating Products Markets. Prepared for EC/R Inc.
Table 3-13. Manufacturers' Price by Product Type (North America): 2008
Product Type	Average Price	Price Range
Wood stove
$848
$200 to $2,800
Pellet stove
$1,279
$300 to $3,500
Biomass stove
$1,403
$350 to $4,000
Wood fireplaces
$450
$150 to $5,000
Outdoor fireplaces
$755
$250 to $6,000
Masonry heaters
$9,041
$4,000 to $15,000
Hydronic central heating systems
$7,433
55,000 to $35,000
Source: Frost & Sullivan. 2010. Market Research Report on North American Residential Wood Heaters, Fireplaces,
and Hearth Heating Products Markets. Figure 2.6. Prepared for EC/R Inc.
Given the specialized skills and materials required to construct a masonry heater, it is not
surprising that this product has the highest average market price. Hydronic heaters are the second
most expensive product partly because of the additional material requirements. The price of
freestanding stoves and fireplace inserts varies depending on the fuel it burns. Biomass stoves
are almost twice as expensive as cord wood-burning stoves because biomass stoves are more
similar in construction to pellet stoves. Although no price data exist on coal-burning stoves, costs
are comparable to traditional cord wood stoves. Coal stove prices for 2010 collected for this
profile averaged $ 1,338 and ranged between $500 and $3,000 depending on the size and
manufacturer.
3-23

-------
3.4.2	International Competition
The U.S. market for wood-fueled heating products has been concentrated on the local
scale in recent years. Manufacturers concentrate production where wood heat is in demand,
which is in the Northeast and Northwest. Some regions of the country have specific emissions
requirements on wood burning, so consumers may be restricted to buying stoves and heaters that
can cater to local regulations (Frost & Sullivan, 2010). Domestic producers have traditionally
faced some competition from European manufacturers in certain wood heat markets, but Asian
manufacturers have been gaining market share, especially in the EPA-certified wood stove and
currently exempt single-burn-rate stove markets (Frost & Sullivan, 2010).
Asian-based companies, especially those in China, have the advantage of relatively low-
overhead and labor costs compared with other companies worldwide (Frost & Sullivan, 2010).
Although the products coming from these producers are lower in price, they are also lower in
quality (Frost & Sullivan, 2010). However, money-conscious consumers have been willing to
settle for lower quality stoves as the economy remains uncertain (Frost & Sullivan. 2010).
Companies from all over the world have been moving some manufacturing operations to China
in an attempt to compete with Asian producers through low-cost production (Frost & Sullivan,
2010). Still, U.S. manufacturers are likely to see increased competition from Asia in the future.
The masonry heater industry is one in which foreign manufacturers play a substantial
role. Over two-thirds of masonry heaters installed in the United States are manufactured outside
of the country (Seaton, 2010). Canadian and European producers sell masonry products through
U.S. distributors, but most of these companies do not manufacture within the United States
(Seaton, 2010). Some stove companies perform research and development, as well as assembly
of wood stoves in the United States, but import cast parts and components from Europe and
China (HPBA, 2010a). The pellet stove industry has seen increasing foreign competition in
recent years. Many of the foreign manufacturers have made the business decision to sell products
through American-owned businesses and thus the costs of EPA certification are sometimes
passed on to the American seller/importer/licensee.
3.4.3	Future Market Trends
Following a year with an impressive growth rate of 16.4% between 2007 and 2008, the
market for residential wood heaters, fireplaces, and hearth products fell victim to the recession in
2009 (Frost & Sullivan, 2010). A weak residential construction market coupled with a tight
credit market decreased overall demand in the market for wood heating products, leading
analysts to project a 2009 growth rate of-36.1% (Frost & Sullivan, 2010). The growth forecast
3-24

-------
for 2010 is expected to improve relative to 2009 to a rate of -4.1%, due in part to the residual
effects of the severe 2009 winter temperatures and the financial incentive provided by the federal
energy efficient tax credit (Frost & Sullivan, 2010).
As the economy continues to recover beyond 2010, demand should trend upward as
consumers look to cut heating costs with wood and biomass (Frost & Sullivan, 2010). New home
construction and increased credit availability will further foster demand, which is expected to
grow at a compound annual rate of 4.1% from 2009 to 2015 (Frost & Sullivan, 2010). The
current regional demand patterns are expected to continue, with the Northeast and Northwest
regions of the country driving wood fuel combustion demand, but analysts anticipate that the
wood heat product market will be embraced in other areas of the country in which wood and
biomass are viable and inexpensive fuel sources (Frost & Sullivan, 2010).
Although the overall residential wood heat market is expected to grow, there may be
variation in demand between individual product segments. Pellet and biomass stoves are
expected to lead the way in demand as consumers look for options with sustainable fuel sources
and cleaner-burning technologies (Frost & Sullivan, 2010). Outdoor wood boilers (hydronic
heaters) saw a surge in demand throughout the 1990s and mid-2000s, a trend that is projected to
continue (Northeast States for Coordinated Air Use Management, 2006). Future demand for
primary and secondary wood-buming heating devices will be somewhat dependent on the price
of wood fuel relative to electric and gas heat, as well as consumer preferences. Since fireplaces
and masonry fireplaces purchases are based on the added aesthetic value rather than function,
future demand will likely stay in line with consumer preferences.
3-25

-------
SECTION 4
BASELINE EMISSIONS AND EMISSION REDUCTIONS
4.1	Introduction
This section presents the baseline emissions for the pollutants emitted by affected units
and also the resulting emissions in 2018 after imposition of various options considered for the
proposed NSPS. We present the baseline emissions and emission reductions for PM2 5 and also
for other pollutants from affected units such as VOCs and CO. Baseline emissions were
calculated using a 2008 base inventory and were then projected to future years, including 2018,
using emissions factors specific to the category of the affected unit (e.g., certified wood stove,
pellet stove). Emission reductions were calculated from the baseline emissions based on the
proposed emissions limits for each appliance type affected, and the emission reductions were
used as inputs to the benefits analysis presented in Section 7,
4.2	Estimated PM2.5 Emissions from Shipments of New Appliances
We calculated the average emissions per appliance type using the emission factor for
each category multiplied by the inventory value of total tons of wood burned divided by the
number of appliances in the inventory population. This value was then multiplied by the number
of shipments to calculate total emissions from each category per year under baseline conditions
(i.e., in the absence of an NSPS). More information on these calculations is available in the
emissions memorandum in the docket for this rulemaking.1 Appendix A of this RIA also
provides more information on PM emissions from catalytic and non-catalytic wood stoves.
For wood stoves, we used the average values of all four wood stove types (freestanding
vs. fireplace inserts, noncatalytic vs. catalytic) to represent the total population. We assumed that
the baseline units are already emitting at levels consistent with the Washington state standard.
The same is true for pellet stoves. Table 4-1 presents the baseline estimates for PM emissions
from wood stoves between 2008 and 2018 for each affected product type.
We then estimated NSPS Level 1, II, and III emissions based on the NSPS option
assumptions described earlier in this RIA. The blue shaded areas represent Level I
implementation; the green shaded areas represent Level II implementation; and the pink shaded
areas represent Level III implementation. The emissions estimates assume that the total number
of shipped units meet the standards in the year the standard is implemented.
1 Memorandum from Beth Friedman, EC/R, Inc. to Gil Wood, U.S. EPA/OAQPS/OID/R.DPAG. Emissions
Estimates from Hearth Products. February 11, 2011.
4-1

-------
Table 4-1. Estimated PM2.5 Emissions (Tons): Baseline

2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
Wood stoves
761
486
467
482
538
562
589
617
642
669
669
Single burn rate
1,295
827
794
820
916
956
1,002
1,050
1,093
1,138
1,184
stoves











Pellet stoves
277
177
170
175
196
204
214
224
234
243
253
Furnace: indoor,
4.230
2,703
2,595
2,678
2,991
3,123
3,272
3,430
3,570
3,717
3,869
cordwood











Outdoor hydronic
1,666
1,065
1,022
1,055
1,178
1,230
1,289
1.351
1,406
1,464
1,524
heating systems











Indoor hydronic
185
118
114
117
131
137
143
150
156
163
169
heating systems











Total
8,414
5,376
5,161
5,326
5,950
6,211
6,510
6,822
7,102
7,393
7,696
In summation, the PM2.S reductions for the proposed rule are represented by the Level
I + II implementation estimates above. These reductions for 2018 (the analysis year for this
proposed rule) are the baseline emissions - Level I + II emissions total for 2018, or 5,356 tons of
PM25 reductions. This level of reductions in 2018 is the same under Level I+II and 11 III under
the alternative scenarios. However, under Level I+I1I there are slightly greater reductions in the
earlier years (2013 through 2015). This is a result of the tighter emissions limit for hydronic
heaters proposed under Level I+III as compared to the hydronic heaters emissions limit proposed
under Level I+II.
Tables 4-2 and 4-3 present the alternative estimates for PM emissions under each NSPS
scenario over the same period used to estimate baseline emissions in Table 4-1.
Tabic 4-2. Estimated PM2.5 Emissions (Tons): NSPS Level I + II

2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
Wood stoves
761
486
467
482
538
562
589
617
642
669
696
Single burn rate
1,295
827
794
820
916
956
287
301
313
326
339
stoves











Pellet stoves
277
177
170
175
196
204
214
224
234
243
253
Furnace: indoor,
cordwood
4,230
2,703
2,595
2,678
2,991
3,123
818
857
893
929
967
Outdoor hydronic
heating systems
1,666
1,065
1,022
1,055
1,178
123
129
135
70
73
76
Indoor hydronic
heating systems
185
118
114
117
131
137
14
15
8
8
8
Total
8,414
5,376
5,16!
5,326
5,950
5,104
2,051
2,149
2,159
2,248
2,340
4-2

-------
Table 4-3. Estimated PM2.s Emissions (Tons): NSPS Level I + III

2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
Wood stoves
761
486
467
482
538
562
589
617
642
669
696
Single burn rate
1,295
827
794
820
916
956
287
301
313
326
339
stoves











Pellet stoves
277
177
170
175
196
204
214
224
234
243
253
Furnace: indoor,
4,230
2,703
2.595
2,678
2,991
3,123
818
857
893
929
967
cordwood











Outdoor hydronic
1,666
1,065
1,022
1,055
1,178
62
64
68
70
73
76
heating systems











Indoor hydronic
185
118
114
117
131
7
7
8
8
8
8
heating systems











Total
8,414
5,376
5,161
5,326
5,950
4,913
1,979
2,074
2,159
2,248
2,340
4.3 Methodology for Estimating VOC Emissions from New Units
We used the same methodology described in Section 4,2 to develop emission estimates
for VOC emissions. Using the Residential Wood Combustion (RWC) database, we developed an
estimate of VOC emissions per appliance using baseline emission factors. Then, using the same
NSPS phase-in assumptions and anticipated emission reductions (i.e., that VOC reductions are
comparable to FM?. 5 reductions), we developed NSPS Level 1 and Level II emission factors.
Table 4-4 provides the VOC emission factors.
Table 4-4. NSPS VOC Emission Factors




NSPS U/III

Emission Inventory Category
NSPS I
Emission
Factor
(lb/ton)
Emissions
(tons)
Tons/
Appl/Yr
Level II
Emission
Factor
(lb/ton)
Emissions Tons/
(tons) Appl/Yr
Woodstove: fireplace inserts;
EPA certified; non-catalytic
12
7,357
0.0056


Woodstove: fireplace inserts;
EPA certified; catalytic
15
3,121
0.0073


Woodstove: freestanding, EPA
certified, non-catalytic
12
9,240
0.0106


Woodstove: freestanding, EPA
certified, catalytic
15
5,817
0.0155


Woodstove: pellet-fired, general
0.041
24
0.0000


Hydronic heater: outdoor
1.17
2,138
0.0059
0.585
1,069 0.0029
Furnace: indoor, cordwood
2.925
3,838
0.0109


Single bum rate stoves
12
21,288
0.0071


4-3

-------
Using the same assumptions as we used for PM2.5, we calculated VOC emissions at
baseline and under Level I and Level II conditions. Tables 4-5 through 4-7 provide the time
series of VOC emissions estimates between 2008 and 2018 for baseline, and alternative NSPS
stringencies considered under the proposed revision.
Table 4-5. Estimated VOC Emissions (Tons): Baseline

2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
Wood stoves
1.085
693
666
687
767
801
839
880
916
953
992
Single burn rate
stoves
1,248
797
765
790
882
921
965
1,012
1,053
1,096
1,141
Pellet stoves
4
2
2
2
3
3
3
3
3
-%
J
3
Furnace: indoor,
cordwood
1,793
1,146
1,100
1,135
1,268
1,324
1,387
1,454
1,513
1,575
1,640
Outdoor hydronic
healing systems
706
451
433
447
500
521
547
573
596
621
646
Indoor hydronic
heating systems
78
50
48
50
56
58
61
64
66
69
72
Total
4,914
3,140
3,015
3,111
3,475
3,628
3,802
3,984
4,148
4,318
4,495
Table 4-6. Estimated VOC Emissions (Tons): NSPS Level I + II

2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
Wood stoves
1,085
693
666
687
767
801
839
880
916
953
992
Single bum rate
stoves
1,248
797
765
790
882
921
219
229
238
248
258
Pellet stoves
4
2
2
2
3
3
3
3
3
.3
3
Furnace: indoor,
cordwood
1,793
1,146
1,100
1,135
1,268
1,324
347
363
378
394
410
Outdoor hydronic
heating systems
706
451
433
447
500
52
55
57
30
31
32
Indoor hydronic
heating systems
78
50
48
50
56
58
6
6
3
3
4
Total
4,914
3,140
3,015
3,111
3,475
3,159
1,468
1,539
1,569
1,633
1,700
In summation, the VOC reductions for the proposed rule are represented by the Level
I + II implementation estimates above. These reductions for 2018 are the baseline emissions -
Level I + II emissions total for 2018. or 2,795 tons of VOC reductions. This amount of
4-4

-------
reductions in 2018 is equal to those for the Level I + III implementation estimates. However,
under Level I+1II there are slightly greater reductions in the earlier years (2013 through 2015).).
This is a result of the tighter emissions limit for hydronic heaters proposed under Level I+III as
compared to the hydronic heaters emissions limit proposed under Level I+Il.
Table 4-7. Estimated VOC Emissions (Tons): NSPS Level I + III

2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
Wood stoves
1.085
693
666
687
767
801
839
880
916
953
992
Single burn rate
1,248
797
765
790
882
921
219
229
238
248
258
stoves











Pellet stoves
4
*>
2
2
3
3
3
3
3
3
3
Furnace: indoor.
1,793
1,146
1,100
1.135
1.268
1.324
347
363
378
394
410
cordwood











Outdoor hydronic
706
451
433
447
500
26
27
29
30
31
32
healing systems











Indoor hydronic
78
50
48
50
56
3
3
3
3
3
4
heating systems











Total
4,914
3,140
3,015
3,111
3,475
3,077
1,438
1,507
1,569
1,633
1,700
4.4 Methodology for Estimating CO Emissions from New Units
We used the same methodology described in Section 4.2 to develop emission estimates
for CO emissions. Using the RWC database, we developed an estimate of CO emissions per
appliance using baseline emission factors. Then, using the same NSPS phase-in assumptions and
anticipated emission reductions (i.e., that CO reductions are comparable to PM? s reductions), we
developed NSPS Level I and Level II emission factors. Table 4-8 presents the CO emission
factors.
Table 4-8. NSPS CO Emission Factors
Emission Inventory Category
NSPS 1/11
Level I
Emission
Factor
(lb/ton)
Emissions
(tons)
Tons/
Appl/Yr
NSPS II/III
Level II
Emission
Factor
(lb/ton)
Emissions Tons/
(tons) Appl/Yr
Woodstove: fireplace inserts;
EPA certified; non-catalytic
140.8
86,323
0.0662


Woodstove: fireplace inserts;
EPA certified; catalytic
104.4
21,725
0.0509


Woodstove: freestanding, EPA
certified, non-catalytic
140.8
108,418
0.1241


4-5

-------
Woodstove: freestanding, EPA
certified, catalytic
Woodstove: pellet-fired, general
Hydronic heater: outdoor
Furnace: indoor, cordwood
Single burn rate stoves
104.4
40,486
0.1082
15.9
9,344
0.0110



18.4
33,618
0.0922
9.2
16,809
0.0461
46
60,355
0.1719



40.8
249,785
0.0829



Using the same assumptions as we used for PM2 s, we calculated CO emissions at
baseline and under Level I + II and Level I + III conditions. Tables 4-9 through 4-11 provide CO
emissions.
Table 4-9. Estimated CO Emissions (Tons): Baseline
2008 2009 2010 2011
2012 2013 2014 2015 2016 2017
2018
Wood stoves
Single burn rate
stoves
Pellet stoves
10,918 6,976 6,697 6,912 7,720 8,060 8,447 8,852 9,215 9,593 9,986
5,433 3,471 3,333 3,439 3,842 4,011 4,203 4,405 4.586 4,774 4,969
1,438 919 882 911 1.017 1,062 1,113 1,166 1,214 1,264 1,316
Furnace: indoor, 28,198 18,019 17,298 17,851 19,940 20.817 21,817 22,864 23,801 24,777 25,793
cordwood
Outdoor hvdronic 11,109 7,099 6,815 7,033 7,855 8,201 8,595 9,007 9,377 9,761 10,161
heating systems
Indoor hydronic
heating systems
Total
1,234 789 757 781 873 911 955 1,001 1,042 1.085 1,129
58,330 37,273 35,782 36,927 41,247 43,062 45,129 47,295 49,235 51,253 53,355
Table 4-10. Estimated CO Emissions (Tons); NSPS Level I + II

2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
Wood stoves
10,918
6,976
6,697
6,912
7,720
8,060
8,447
8,852
9,215
9,593
9,986
Single burn rate
stoves
5,433
3,471
3,333
3,439
3,842
4.011
2,564
2,687
2,797
2,912
3,032
Pellet stoves
1,438
919
882
911
1,017
1,062
1,113
1,166
1,214
1,264
1,316
Furnace: indoor,
cordwood
28,198
18,019
17,298
17,851
19,940
20,817
5,454
5,716
5,950
6,194
6,448
Outdoor hydronic
heating systems
11,109
7,099
6,815
7,033
7.855
820
859
901
469
488
508
Indoor hydronic
heating systems
1,234
789
757
781
873
911
95
100
52
54
56
4-6

-------
Total
58,330
37,273
35,782
36,927
41,247
35,681
18,533
19,423
19,698
20,506
21,346
Table 4-11. Estimated CO Emissions (Tons): NSPS Level I + 111

2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
Wood stoves
10.918
6,976
6.697
6,912
7,720
8,060
8,447
8,852
9,215
9,593
9,593
Single burn rate
stoves
5,433
3,471
3,333
3,439
3,842
4,011
2,564
2,687
2,797
2,912
3,032
Pellet stoves
1,438
919
882
911
1,017
1,062
1,113
1,166
1,214
1,264
1,316
Furnace; indoor,
cordwood
28,198
18,019
17,298
17,851
19,940
20,817
5,454
5,716
5,950
6,194
6,448
Outdoor hydronic
heating systems
11,109
7,099
6,815
7,033
7,855
410
430
450
469
488
508
Indoor hydronic
heating systems
1,234
789
757
781
873
46
48
50
52
54
56
Total
58,330
37,273
35,782
36,927
41,247
34,406
18,056
18,922
19,698
20,506
21,346
In summation, the CO reductions for the proposed rule are represented by the Level I + II
implementation estimates above. Under Level I + II stringency CO emission reductions in 2018
will be 32,008 tons [53,355 -21,346]. Under NSPS Level I + III the level of emissions in 2018
are equal to those under Level I + II. Thus, this amount of reductions in 2018 is equal to those
for the Level I + M implementation estimates.
4-7

-------
SECTION 5
ECONOMIC IMPACT ANALYSIS, ENERGY IMPACTS, COSTS AND EXECUTIVE
ORDER ANALYSES
The EIA provides decision makers with social cost estimates and enhances understanding
of how the costs may be distributed across stakeholders (EPA, 2010). Although several
economic frameworks can be used to estimate the social costs of regulations, OAQPS has
traditionally relied on partial equilibrium market models. Previous NSPS economic impact
analyses for the residential wood stove market were prepared reflecting such a model standpoint.
However, the current data do not provide sufficient details to develop a market model; the data
that are available have little or no sector/firm detail and are reported at the national level. In
addition, some sectors have unique market characteristics that make developing partial
equilibrium models difficult. Given these constraints, we used the direct annual compliance costs
as an approximate measure of total social costs. In addition, we provide a qualitative analysis of
the proposed rule's impact on consumer and producer decisions, a qualitative discussion on
unfunded mandates that may occur as a result of this final rule, and a partial analysis of the
impacts of this proposal on employment.
5.1 Compliance Costs of the Final Rule
EPA's engineering cost analysis estimates that the total annualized cost of the proposed
rule to manufacturers is $7.9 million in the 2013-2015 timeframe and $8.05 million in 2018 (all
cost are reported in 2008 dollars) (EC/R, December 2011). Figure 5-1 illustrates the distribution
of total annualized costs in the 2013-2015 timeframe and 2018 by product type.
Under the proposed NSPS revision, the majority of the costs in the 2013-2015 timeframe
fall on manufacturers of hydronic heating systems (45%), followed by forced-air furnace
manufacturers (38%). The remaining 17% of the costs are distributed to manufacturers of single
burn rate stoves (15%), and masonry heaters (2%). Under the proposed revision, certified wood
stove and pellet stove manufacturers would not face any additional compliance costs.
The distribution of the annual compliance costs is slightly different in 2018 when
compared to the 2013-2015 timeframe. Looking at the annual compliance costs in 2018,
hydronic heating systems (44%), followed by forced-air furnace manufacturers (37%), The
remaining 19% of the costs are distributed to manufacturers of single bum rate stoves (15%),
pellet stoves (2%), and masonry heaters (2%).
5-1

-------
The annualized compliance costs per manufacturer vary by product type under the
revised NSPS proposal (see Figure 5-1). Certified wood stove manufacturers incur no additional
costs under the revised NSPS proposal. For other product types, the average annual cost per
model was $196,000. The costs range from $426,000 for manufacturers of forced-air furnaces to
$15,000 for pellet wood stove manufacturers.
Annual Compliance Costs in 2018 = $8.0 Million
Figure 5-1. Distribution of Annual Compliance Costs by Product Type in 2013-2015
Timeframe and 2018
The revised rule, as proposed would affect an estimated 2 million new residential wood
heating devices between 2012 and 2018 assuming an average of ~296,000 new shipments
annually. As shown in Figure 5-2, annual shipments are forecasted to increase for all product
types over the same time period.
To assess the size of the compliance costs relative to the value of shipments to end-use
consumers, we compared industry compliance costs relative to projected sales. In this case, cost-
to-receipts ratios approximate the maximum price increase needed for a producer to fully recover
the annual compliance costs associated with a regulation. These industry-level cost-to-receipts
ratios can be interpreted as an average impact on potentially affected firms in these industries
where ratios less than 1% suggest the rule will not have a significant impact. Results for affected
industries for the 2013-2015 timeframe and 2018 can be found in Tables 5-la and 5-lb.
Pellet Stovei
Hydronlc
Halting Systems
45%
Masonry Heaters
2*
Annual Compliance Costs in 2015 = $7.9 Million
Wood Stoves
0%
Hydronlc
Heating System*
44%
Wood Stoves
0%
Pellet Stoves
2%
Masonry Heaterj
2%
5-2

-------
120,000
100,000
80,000
J3
e
«
£
% 60.000
40,000
20,000
~
2016
Pellet Stoves
Certified Wood Stoves
Forced Air Furnscel
Single Burn Rate Stoves
/ Outdoor Hydronlc Heating..
Indoor Hydronlc Heatfng—
Masonry Heaters
2017
2018
Figure 5-2. Projected Annual Shipments by Product Type: 2012-2018
5-3

-------
Table 5-la. Industry Level-Annualized Compliance Costs as a Fraction of Total Industry
Revenue by Product Type in the 2013-20IS Timeframe
Product Type
Total Annualized Costs
(S millions)
Product Sales in 2015
{$ millions)*
Cosl-to-Receipts
Ratio
Wood stoves
$0.0
$87.0
0.0%
Single burn rale stoves
$1.2
$12.4
9.6%
Pellet stoves
$0.0
$135,4
0.0%
Forced-air furnaces
$3.0
$85.6
3.5%
Masonry heaters
$0.2
$5.6
3.5%
Hydromc heating systems
$3.6
$119.2
3.0%
* Sales based on projected product shipments and average unit costs estimates. We use annual sales in 2015 to
approximate annual sales for years from 2013 to 2015. This may overestimate the average annual sales to be used
in this analysis, and may lead to an underestimate of impacts.
Sources; Masonry Heater Compliance Costs from Masonry Heater NSPS Annual Cost 12 8 1 t.xls. Received from
EPA on December 16,2011.
Unit Costs and Shipment Projections from Unit Cost Memo 12 8 II Received from EPA on December 16,
2011.
Industry Compliance Costs from Wood Stove NSPS Annual Costs 12 S ll.xls. Received from EPA
December 16,2011.
Table 5-lb. Industry Lcvei-Annualizcd Compliance Costs as a Fraction of Total Industry
Revenue by Product Type in 2018
Product Type
Total Annualized Costs
($ millions)
Product Sales in 2018
(S millions)*
Cost-to-Receipls
Ratio
Wood stoves
$0.0
$98.1
0.0%
Single burn rate stoves
$1.2
$14.0
8.5%
Pellet stoves
$0,1
$152.8
0.1%
Forced-air furnaces
$3.0
$96.6
3.1%
Masonry heaters
$0.2
$6.3
2,6%
Hydronic heating systems
$3.6
$134.4
2.7%
Sales based on projected product shipments and average unit costs estimates.
Sources: Masonry Heater Compliance Costs from Masonry Heater NSPS Annual Cost 12 8 ll.xls. Received from
EPA on December 16, 2011.
Unit Costs and Shipment Projections from Unit Cost Memo 12 S 11 Received from EPA on December 16,
2011.
Industry Compliance Costs from Wood Stove NSPS Annual Costs 12 8 ll.xls. Received from EPA
December 16, 2011.
Under the revised NSPS proposal, of the six affected product types only wood and pellet
stove manufacturers would have an annualized cost-to-receipts ratio of less than 1%. In the
5-4

-------
2013-2015 timeframe, eost-to-receipts ratios range from 3.0% for hydronic heating systems to
9.6% for single burn rate stoves. In 2018, eost-to-reeeipts ratios range from 0.1 % for pellet
stoves to 8.5% for single burn rate stoves. Single burn rate stoves and forced air furnaces have
the highest cost-to-receipts ratios. Masonry heaters and hydronic heating systems also have cost-
to-receipts ratios greater than 1%. Certified wood stoves face no additional cost because the vast
majority of these appliances (more than 85%) already meet the revised standards being proposed.
5,2 How Might People and Firms Respond? A Partial Equilibrium Analysis
Markets are composed of people as consumers and producers trying to do the best they
can given their economic circumstances. One way economists illustrate behavioral responses to
pollution control costs is by using market supply and demand diagrams. The market supply curve
describes how much of a good or service firms are willing and able to sell to people at a
particular price; we often draw this curve as upward sloping because some production resources
are fixed. As a result, the cost of producing an additional unit typically rises as more units are
made. The market demand curve describes how much of a good or service consumers are willing
and able to buy at some price. Holding other factors constant, the quantity demanded is assumed
to fall when prices rise. In a perfectly competitive market, equilibrium price (P0) and quantity
(Qo) are determined by the intersection of the supply and demand curves (see Figure 5-3).
5.2.1 Changes in Market Prices and Quantities
To qualitatively assess how the regulation may influence the equilibrium price and
quantity in the affected markets, we assumed the market supply function shifts up by the
additional cost of producing the good or service; the unit cost increase is typically calculated by-
dividing the annual compliance cost estimate by the baseline quantity (Qo) (see Figure 5-3). As
shown, this model makes two predictions: the price of the affected goods and services are likely
to rise and the consumption/production levels are likely to fall.
The size of these changes depends on two factors: the size of the unit cost increase
(supply shift) and differences in how each side of the market (supply and demand) responds to
changes in price. Economists measure responses using the concept of price elasticity, which
represents the percentage change in quantity divided by the percentage change in price. This
dependence has been expressed in the following formula:'
1 For examples of similar mathematical models in the public finance literature, see Nicholson (1998), pages 444-
447, or Fullerton and Metcalf (2002).
5-5

-------
Share of per-unit cost -
Price Elasticity of Supply
(Price Elasticity of Supply - Price Elasticity of Demand))
Price
Increase
{
Si: With Regulation
Unit Cost Increase
S0: Without Regulation
Qi	Qo	Output
consumer surplus = -[fghd + dhc]
producer surplus = [fghd - aehb] - bdc
total surplus = consumer surplus + producer surplus =
-[aehb + dhc + bdc]
Figure 5-3. Market Demand and Supply Model; With and Without Regulation
As a general rule, a higher share of the per-unit cost increases will be passed on to
consumers in markets where
¦ goods and services are necessities and people do not have good substitutes that they
can switch to easily (demand is inelastic) and
• suppliers have excess capacity and can easily adjust production levels at minimal
costs, or the time period of analysis is long enough that suppliers can change their
fixed resources; supply is more elastic over longer periods.
Short-run demand elasticities for energy goods (electricity and natural gas), agricultural
products, and construction are often inelastic. Specific estimates of short-run demand elasticities
for these products can be obtained from existing literature. For the short-run demand of energy
products, the National Energy Modeling System (NEMS) buildings module uses values between
0.1 and 0.3; a 1% increase in price leads to a 0.1 to 0.3% decrease in energy demand (Wade,
5-6

-------
2003). For the short-run demand of agriculture and construction, EPA has estimated elasticities
to be 0,2 for agriculture and approximately 1 for construction (EPA, 2004). As a result, a 1%
increase in the prices of agriculture products would lead to a 0.2% decrease in demand for those
products, while a 1% increase in construction prices would lead to approximately a 1% decrease
in demand for construction. Given these demand elasticity scenarios (shaded in gray),
approximately a 1 % increase in unit costs would result in a price increase of 0.1 to 1%
(Table 5-2). As a result, 10 to 100% of the unit cost increase could be passed on to consumers in
the form of higher goods/services prices. This price increase would correspond to a 0.1 to 0.8%
decline in consumption in these markets (Table 5-3).
Table 5-2. Hypothetical Price Increases for a 1% Increase in Unit Costs
Market Demand


Market Supply Elasticity


Elasticity
0.1
0.3
0.5
0.7
1
1.5
3
-0.1
0.5%
0.8%
0.8%
0.9%
0.9%
0.9%
1.0%
-0.3
0.3%
0.5%
0.6%
0.7%
0.8%
0.8%
0.9%
-0.5
0.2%
0.4%
0.5%
0.6%
0.7%
0.8%
0.9%
-0.7
0.1%
0.3%
0.4%
0.5%
0.6%
0.7%
0.8%
-1.0
0.1%
0.2%
0.3%
0.4%
0.5%
0.6%
0.8%
-1.5
0.1%
0.2%
0.3%
0.3%
0.4%
0.5%
0.7%
-3.0
0.0%
0.!%
0.1%
0.2%
0.3%
0.3%
0.5%
Table 5-3, Hypothetical Consumption Decreases for a 1% Increase in
Unit Costs

Market Demand
Elasticity


Market Supply Elasticity


0.1
0.3
0.5
0.7
1
1.5
3
-0.)
-0.1%
-0.1%
-0.1%
-0.1%
-0.1%
I
O
-0.1%
-0.3
-0.1%
-0.2%
-0.2%
-0.2%
-0.2%
-0.3%
-0.3%
I
O
i/i
-0.1%
-0.2%
-0.3%
-0.3%
-0.3%
-0.4%
-0.4%
-0.7
-0.1%
-0.2%
-0.3%
-0.4%
1
o
6s
-0.5%
-0.6%
-1.0
-0.1%
-0.2%
-0.3%
-0.4%
-0.5%
-0.6%
-0.8%
-1.5
-0.1%
-0.3%
-0.4%
-0.5%
-0.6%
-0.8%
-1.0%
-3.0
-0.1%
-0.3%
-0.4%
-0.6%
-0.8%
-1.0%
-1.5%
5-7

-------
5.2.2 Partial Equilibrium Measures of Social Cost: Changes in Consumer and Producer
Surplus
In partial equilibrium analysis, the social costs are estimated by measuring the changes in
consumer and producer surplus, and these values can be determined using the market supply and
demand model (Figure 5-3). The change in consumer surplus is measured as follows:
ACS = - [AQ, x Ap] + [0.5 x AQ * Ap\.	(5.1)
Higher market prices and lower quantities lead to consumer welfare losses. Similarly, the change
in producer surplus is measured as follows:
APS = [AQ, x A/?] - [AQi x t] - [0.5 x AQ * (Ap - /)].	(5.2)
Higher unit costs and lower production levels reduce producer surplus because the net
price change (Ap - t) is negative. However, these losses are mitigated because market prices tend
to rise.
5.3 Soeial Cost Estimate
As shown in Table 5-1, the social cost as approximated by the annual compliance costs
represent a fraction of the affected product value that is greater than 1% for a number of product
categories; this suggests that the shift of the supply curve may be large for some product types
and result in larger changes in market prices and consumption. EPA believes the national
annualized compliance cost estimates provide a reasonable approximation of the social cost of
this proposed rule. EPA believes this approximation is better for industries whose markets are
well characterized as perfectly competitive. However, given the data limitations noted earlier,
EPA believes the accounting for annual compliance costs is a reasonable approximation to
inform policy discussion in this rulemaking. Most of the affected industries can be characterized
as having a high degree of competitive market behavior. To shed more light on this issue, EPA
ran hypothetical analyses and the results are in Tables 5-2 and 5-3.
5-8

-------
5.4	Energy Impacts
Executive Order 13211 (66 FR 28355, May 22, 2001) provides that agencies will prepare
and submit to the Administrator of the Office of Information and Regulatory Affairs, Office of
Management and Budget, a Statement of Energy Effects for certain actions identified as
"significant energy actions." Section 4(b) of Executive Order 13211 defines "significant energy
actions" as any action by an agency (normally published in the Federal Register) that
promulgates or is expected to lead to the promulgation of a final rule or regulation, including
notices of inquiry, advance notices of proposed rulemaking, and notices of proposed rulemaking:
(1) (i) that is a significant regulatory action under Executive Order 12866 or any successor order,
and (ii) is likely to have a significant adverse effect on the supply, distribution, or use of energy;
or (2) that is designated by the Administrator of the Office of Information and Regulatory Affairs
as a significant energy action.
This rule is not a significant energy action as designated by the Administrator of the
Office of Information and Regulatory Affairs because it is not likely to have a significant adverse
impact on the supply, distribution, or use of energy. In general, we expect the NSPS to improve
technology, including energy efficiency. By making the use of wood fuel less polluting and more
efficient, we might see an increase in the use of wood fuel, which would relieve pressure on
traditional coal- or petroleum-based energy sources. However, it is difficult to determine the
precise energy impacts that might result from this rule because wood-fueled appliances compete
with other biomass forms as well as more traditional oil, electricity, and natural gas. We have not
determined the potential conversion to other types of fuels and their associated appliances if the
consumer costs of wood-fueled appliances increase and at what level that increase would drive
consumer choice.
5.5	Unfunded Mandates Reform Act
5.5.1 Future and Disproportionate Costs
The UMRA requires that we estimate, where accurate estimation is reasonably feasible,
future compliance costs imposed by the rule and any disproportionate budgetary effects. Our
estimates of the future compliance costs of the proposed rule are discussed previously in this
RIA. We do not believe that there will be any disproportionate budgetary effects of the proposed
rule on any particular areas of the country, state or local governments, types of communities
(e.g., urban, rural), or particular industry segments.
5-9

-------
5.5.2	Effects on th e Nation a I Economy
The UMRA requires that we estimate the effect of the proposed rule on the national
economy. To the extent feasible, we must estimate the effect on productivity, economic growth,
full employment, creation of productive jobs, and international competitiveness of U.S. goods
and services if we determine that accurate estimates are reasonably feasible and that such effect
is relevant and material. The nationwide economic impact of the proposed rule is presented
earlier in this RIA chapter. This analysis provides estimates of the effect of the proposed rule on
most of the categories mentioned above, and these estimates are presented earlier in this RIA
chapter. The nature of this rule is such that it is not practical for us to use existing approaches,
such as the Morgenstern et al. approach,2 to estimate the impact on employment to the regulated
entities and others from this proposed rule. We explain why this is true, and provide impacts
associated with the monitoring, recordkeeping, and reporting requirements to provide some
understanding of what impacts this proposal will have on employment for affected firms in
section 5.6 below.
In addition, we have determined that the proposed rule contains no regulatory
requirements that might significantly or uniquely affect small governments. Therefore, today's
rule is not subject to the requirements of section 203 of the UMRA.
5.5.3	Executive Order 1304$: Protection of Children from Environmental Health Risks and
Safety Risks
Executive Order 13045, "Protection of Children from Environmental Health Risks and
Safety Risks" (62 FR 19885, April 23. 1997), applies to any rule that (1) is determined to be
"economically significant/' as defined under Executive Order 12866, and (2) concerns an
environmental health or safety risk that EPA has reason to believe may have a disproportionate
effect on children. If the regulatory action meets both criteria, EPA must evaluate the
environmental health or safety effects of the planned rule on children and explain why the
planned regulation is preferable to other potentially effective and reasonably feasible alternatives
considered by the Agency.
This proposed rule is not subject to Executive Order 13045 (62 FR 19885, April 23,
1997) because the Agency does not believe the environmental health risks or safety risks
addressed by this action present a disproportionate risk to children. The report, Analysis of
Exposure to Residential Wood Combustion Emissions for Different Socio-Economic Groups,
2 Morgenstern, R. D„ W. A. Pizer, and J. S. Sbih. 2002. "Jobs versus the Environment: An Industry-Level
Perspective." Journal of Environmental Economics and Management 43(3):412-436.
5-10

-------
SECTION 6
SMALL ENTITY SCREENING ANALYSIS
The Regulatory Flexibility Act as amended by the Small Business Regulatory
Enforcement Fairness Act (SBREFA) generally requires an agency to prepare a regulatory
flexibility analysis of any rule subject to notice and comment rulemaking requirements under the
Administrative Procedure Act or any other statute, unless the agency certifies that the rule will
not have a significant economic impact on a substantial number of small entities. Small entities
include small businesses, small governmental jurisdictions, and small not-for-profit enterprises.
After considering the economic impact of the final rule on small entities, the screening
analysis indicates that this final rule may have a significant economic impact on a substantial
number of small entities (or "SISNOSE") for certain residential wood heating products covered
under the revised NSPS proposal. For this analysis EPA considered sales and revenue tests for
establishments owned by representative small entities that manufacture or construct residential
wood heating devices.
6.1 Small Entity Data Set
The industry sectors covered by the final rule were identified during the development of
the cost analysis (see Sections 2 and 5). The Statistics of U.S. Businesses (SUSB) provides
national information on the distribution of economic variables by industry and enterprise size
(U.S. Census, 2008a, 2008b). The Census Bureau and the Office of Advocacy of the Small
Business Administration (SBA) supported and developed these files for use in a broad range of
economic analyses.1 Statistics include the total number of establishments and receipts for all
entities in an industry; however, many of these entities may not necessarily be covered by the
final rule. SUSB also provides statistics by enterprise employment and receipt size.
The Census Bureau's definitions used in the SUSB are as follows:
¦	Establishment: An establishment is a single physical location where business is
conducted or where services or industrial operations are performed.
¦	Receipts: Receipts (net of taxes) are defined as the revenue for goods produced,
distributed, or services provided, including revenue earned from premiums,
commissions and fees, rents, interest, dividends, and royalties. Receipts exclude all
revenue collected for local, state, and federal taxes.
1 See http://www.ccnsus.gov/csd/susb/ and http://www.sba.gov/advo/research/dala.html for additional details.
6-1

-------
Enterprise: An enterprise is a business organization consisting of one or more
domestic establishments that were specified under common ownership or control. The
enterprise and the establishment are the same for single-establishment firms. Each
multi-establishment company forms one enterprise—the enterprise employment and
animal payroll are summed from the associated establishments. Enterprise size
designations are determined by the summed employment of all associated
establishments.
Because the SBA's business size definitions (SBA, 2010) apply to an establishment's
"ultimate parent company," we assumed in this analysis that the "enterprise" definition above is
consistent with the concept of ultimate parent company that is typically used for SBREFA
screening analyses and the terms are used interchangeably.
6.2 Small Entity Economic Impact Measures
The analysis generated a set of establishment sales tests (represented as cost-to-receipt
ratios) for NAICS codes associated with sectors listed in Table 6-1. Although the appropriate
SBA size definition should be applied at the parent company (enterprise) level, we can only
compute and compare ratios for a model establishment owned by an enterprise within an SUSB
size range (employment or receipts). Using the SUSB size range helps us account for receipt
differences between establishments owned by large and small enterprises and also allows us to
consider the variation in small business definitions across affected industries. Using
establishment receipts is also a conservative approach, because an establishment's parent
company (the "enterprise") may have other economic resources that could be used to cover the
costs of the final rule. It should be noted that these impacts are only for 2018; the small entity
impacts for the 2013-2015 timeframe should change minimally from the impacts presented in
this RIA chapter.
6,2.1 Establishment Employment and Receipts
The sales test compares a representative establishment's total annual compliance costs to
the average establishment receipts for enterprises in several size categories.1 For industries with
SBA employment size standards, we calculated average establishment receipts for each
enterprise employment range (Table 6-2). ' For industries with SBA receipt size standards, we
calculated average establishment receipts for each enterprise receipt range (Table 6-3). The
: For the 1 to 20 employee category, we excluded SUSB data for enterprises with zero employees. These enterprises
did not operate the entire year.
i We used 2002 Economic Census data in estimating number of establishments by industry instead of using 2007
Economic Census since these data were not available in time for use in our analysis. The release schedules for
different types of 2007 Economic Census data are at http://www.census.gov/econ/census07/pdf/
EconCensusScheduleByDate.pdf.
6-2

-------
analysis assumes that the majority of affected entities are covered under hardware manufacturing
(NAICS 332510) and heating equipment manufacturing (NAICS 333414).
Table 6-1. Revised NSPS Proposal for Residential Wood Heating Devices: Affected
Sectors and SBA Small Business Size Standards
Industry Description
Corresponding
NAICS
SBA Size Standard for Businesses
(November S, 2010)
Type of Small
Entity
New single-family general contractors
236115
$33.5 million
in annual receipts
Masonry
Masonry contractors
238140
$14,0 million
in annual receipts
Masonry-
Hardware manufacturing
332510
500 employees
All product
types
Heating equipment manufacturing
333414
500 employees
AH product
types
Plumbing and heating equipment
wholesalers
423720
100 employees
All product
types
Ail other home furnishing stores
442299
$7.0 million
in annual receipts
Business
However, the revised NSPS proposal has the potential to affect small entities classified as new
home construction and masonry contractors. In addition, wholesalers of imported residential
heating devices may also be affected if these establishments are required to certify imported
products.
6,2,2 Establishment Compliance Cost
Annual entity compliance costs vary depending on the product type manufactured and the
number of product models they would need to redesign under the revised NSPS proposal. For
this analysis compliance costs were estimated based on the average development costs defined in
the engineering cost analysis, presented in Section 5-1. The analysis assumes that manufacturers
hold between two and seven model fireboxes that would be subject to the new NSPS. There is
limited information on the actual number of model fireboxes associated with small businesses.
Hence, for purposes of the small entity screening analysis, we assumed that smaller companies
maintain fewer than three firebox models that would be subject to the revised NSPS. In the
absence of better data, EPA believes that between one and three firebox models is a reasonable
assumption for our analysis of impacts to potentially affected small businesses.
6-3

-------
Table 6-2. Average Receipts for Affected Industry by Enterprise Employment Size; 2007 ($2008 million/establishment)


SBA Size


Owned by Enterprises with Employment Ranges:


NAICS
NAICS Description
Standard
for Businesses
(effective
November 5,
2010)
All
Enterprises
Fewer than
20 22 to 99 100 to 499 500 to 749
Employees Employees Employees Employees
750 to 999
Employees
1,000 to
1,500
Employees
1,500+
Employees
332510
Hardware
manufacturing
500 employees
$12.98
$1.30
$7.54 $25.69
$71.26
$60.84
$37.08
$60.93
333414
Heating equipment
manufacturing
500 employees
SI 3.48
$1.24
$10.93 $38.95
NA
NA
NA
$7.92
423720
Plumbing and heating 100 employees
equipment wholesalers
$7.33
$2.52
$9.47 $10.56
$9.61
NA
NA
$0.14
NA = Not available. SUSB did not report this data disclosure or other reasons.





Table 6-3. Average Receipts for Affected Industry by Enterp
rise Receipt Range: 2007 ($2008 million/establishment)



SBA Size


Owned By Enterprises with Receipt Range:


NAICS
NAICS
Description
Standard
for Businesses
(effective
November 5,
2010)
All
Enterprises
Less than 100 to 500 to 1,000 to
100K 499K 999 K 4,999K
Receipts Receipts Receipts Receipts
5,000 to
9,999K
Receipts
10,000 to
49,999 K
Receipts
50,000 to
99,999K
Receipts
1O0,OOOK +
Receipts
236115
New single-family
general contractors
$33.5 million in
annual receipts
$1.73
$0.05
$0.28 $0.75 $2.19
$6.92
$18.92
$57.87
$264.12
238140
Masonry
Contractors
$14.0 million in
annual receipts
$1.06
$0.05
$0.26 $0.75 $2.27
$7.21
$18.24
$47.00
$57.98
442299
AH other home
furnishing stores
S7.0 million in
annual receipts
$2.62
$0.05
$0.27 $0.76 $1.95
$6.01
NA
NA
$392.59
NA _ Not available. SUSB did not report this data disclosure or other reasons.

-------
Then, we computed per-entity compliance costs for representative establishments and for
manufacturing each product type (see Table 6-4). For this analysis, the annualized costs as
presented in Table 6-4 assumed the total model development costs for four model fireboxes
spread over a 6-year model development time frame and scaled to a single model. Table 6-4
shows the estimated average annualized cost of $60,000 per model and its use in deriving the
national total compliance costs. This cost was assumed to be constant for most product types.
Lower compliance cost for pellet stoves due to the fact that most existing models already comply
with the regulation. Lower bound on compliance cost for masonry heaters consists of a nominal
licensing fee ($200) for the use of computer simulation model software to certify the site built
units.
Table 6-4. Pcr-Entity Annualized Compliance Costs by Product Type ($2008 millions)
Product Type
No.
Establishments
Assumed Affected
Models per
Establishment"
Annual
Compliance Cost
per Model Firebox
(S millions)
Total Industry
Costs
(S millions)
Wood stoves
34
3
S0.00
$0.00
Single burn rate stoves
3
7
$0.06
SI.19
Pellet stoves
29
4
$0,003
$0.42
Forced-air furnaces
7
7
SO. 06
$2.98
Masonry heatersb
47
2-9
<$0,001 to $0.04
$0.16
Hydronic heating systems
30
4
$0,03
$3,58
National Compliance Cost



$8.33
3 Table totals may differ because of rounding.
b Masonry healer establishments include I large and 4 medium manufacturers, and 42 small custom builders.
For each case in this analysis, the number of models each representative establishment
must redesign to comply with the revised and new NSPS limits varies by product type. The total
annualized compliance cost per establishment is calculated by multiplying the number of firebox
models requiring redesign by the annualized cost per model ($60,000). Table 6-4 presents the
assumed number of models per establishment by product type. Figures 6-1 and 6-2 illustrate the
distribution of compliances costs by product type.
For the sales test, we divided the representative establishment compliance costs reported
in Table 6-5 by the representative establishment receipts reported in Tables 6-2 and 6-3. This is
known as the cost-to-receipt (i.e., sales) ratio, or the "sales test." The "sales test" is the impact
6-5

-------
methodology EPA employs in analyzing small entity impacts as opposed to a "profits test," in
which annualized compliance costs are calculated as a share of profits.
140
120
100
80
JS
«
E
o
2
60
40
20
7
w
f 1

~




~

M


. J





i


S
r
N
	 -
%
./<¦
i


Q!
4
i I

4
»t,


3
¦!
"j


!«






'

-

;4
Sf

>1 f\




( ,]
l
1
HHI
•
J
tJ i
Lti



Wood Stoves Single Burn Rate PelletStoves ForcedAir
Stoves	Furnaces
Masonry Heaters Hydronlc Heating
Systems
6 1
n
V*
5 t
4 I
i Total Model Population ~ Average Models per Establishment
Figure 6-1. Population of Firebox Models and Average Models per Establishment by
Product Type
6-6

-------
						————		1
Wood Stoves
0%
Pellet Stovei
2%
¦H
, Hyd/onie Hcstinj'Syster
' I M*": -
I '
lit\	•
Masonry Heaters
2%
Figure 6-2. Distribution of National Compliance Costs by Product Type in 2018
Table 6-5. Representative Establishment Costs Used for Small Entity Analysis (S2008)
Best Estimate
Number of models requiring redesign
2
Annual cost per model
$59,598
Average annual cost per establishment
$119,195
Information on annual revenues or sales is more commonly available data for entities
normally affected by EPA regulations, and profits data normally made available are often not the
true profit earned by firms because of accounting and tax considerations. Revenues as typically
published are usually correct figures and are more reliably reported when compared with profit
data. The use of a "sales test" for estimating small business impacts for a rulemaking such as this
6-7

-------
one is consistent with guidance offered by EPA on compliance with SBREFA7 and is consistent
with guidance published by the SBA's Office of Advocacy that suggests that cost as a percentage
of total revenues is a metric for evaluating cost increases on small entities in relation to increases
on large entities (SBA, 2003).
For purposes of this analysis, EPA assumes most small entities in the residential wood
heating industry are likely to manufacture fewer than three distinctive firebox models and in
many eases they would support only one model. We assume for this analysis that most small
entities in this industry will manufacture an average of two distinctive firebox models. Hence,
EPA believes that the estimate in Table 6-5 above is the most representative establishment costs
to assess impacts on small businesses. If the cost-to-receipt ratio is less than 1%, then we
consider the final rule to not have a significant impact on the establishment (and, company) in
question. Table 6-6 presents the cost-to-receipt ratios for each category of
establishments(establishments with ratios that exceed 1% under each case are highlighted).
7 The SBREFA compliance guidance to EPA rule writers (EPA, 2006a) regarding the types of small business
analysis that should be considered can be found at http://www.epa.gov/sbrefa/documents/rfafinalguidance06.pdf,
pp. 24-25.
6-8

-------
Table 6-6. Cost-to-Receipt Ratio Results by NAICS Code
NAICS
Description
All
Establishments
Fewer than 20 22 to 99
Employees Employees
100 to 499
Employees


332510
Hardware manufacturing
0.92%
9.18%

1.58%
0.46%


333414
Heating equipment manufacturing
0.88%
9.64%

1.09%
0.31%


423720
Plumbing and heating equipment
wholesalers
1.63%
4.72%

1.26%
1.13%











NAICS
Description
Total
Less than
100K
Receipts
100 to
499K
Receipts
500 to
999K
Receipts
1,000 to
4,999K
Receipts
5,000 to
9,999K
Receipts
10,000 to
49,999K
Receipts
236115
New single-family general contractors
7.18%
231.81%
43.78%
16.39%
5.62%
1.78%
0.69%
238140
Masonry contractors
11.59%
232.50%
47.70%
16.54%
5.43%
1.72%
0.74%
442299
All other home furnishing stores
7.86%
224.82%
46.00%
17.02%
7.47%
3.84%


-------
Analysis Results:
Small entities support two firebox models (annual cost = $120,000)
-	Only establishments in NAICS 332510 and 333414 with fewer than 100
employees and establishments in NAICS 423720 with fewer than 500 employees
have cost-to-receipt ratios higher than 1%.
-	Establishments in NAICS 236115, 238140, and 442299 with receipts less than
$10 million have cost-to-receipt ratios higher than 1%.
In our small entity analysis, only establishments in NAICS 332510, 333414, and 423720
with fewer than 500 employees have cost-to-receipt ratios higher than 1%. However,
establishments in NAICS 236115, 238140, and 442299 with receipts less than $10 million have
cost-to-receipt ratios higher than 1%.
After considering the economic impacts of this proposed rule on small entities, we cannot
certify that this action will not have a significant economic impact on a substantial number of
small entities. This certification is based on the economic impact of this action to all affected
small entities across all industries affected. Using the estimate of impacts presented earlier in this
chapter, we estimate that all small entities will have annualized costs of less than 1% of their
sales in all industries except NAICS 332510, 333414, and 423720 with fewer than 20 employees
and NAICS 236115, 238140, and 442299 with receipts less than $10 million. Those
establishments in NAICS 332510, 333414, and 423720 with cost-to-receipt ratios higher than 1%
account for 75% of small entities. Establishments in NAICS 236115, 238140, and 442299 with
cost-to-receipt ratios higher than 1% account for 98% of small entities. We thus conclude that we
cannot certify that there is not a significant economic impact on a substantial number of small
entities (SISNOSE) for this rule.
6.3 Initial Regulatory Flexibility Analysis
An IRFA illustrates how EPA considered the proposed rules's small entity effects before
a rule is finalized and provides information about how the objectives of the rule were achieved
while minimizing significant economic impacts on small entities. We provide a summary of
IRFA elements; the preamble for this rule provides additional details.
6.3.1 Reasons Why Action Is Being Considered
These proposals were developed following a Clean Air Act (CAA) section 111(b)(1)(B)
periodic review of the existing residential wood heater new source performance standards
(NSPS).
6-10

-------
6.3.2	Statement of Objectives and Legal Basis of Proposed Rule
The EPA is proposing to amend Standards of Performance for New Residential Wood
Heaters, and to add two new subparts: Standards of Performance for New Residential Hydronic
Heaters and Forced-Air Furnaces and Standards of Performance for New Residential Masonry
Heaters. These proposals are aimed at achieving several objectives, including applying tighter
emission limits that reflect today's best systems of emission reduction; eliminating exemptions
over a broad suite of residential wood combustion devices; revising test methods as appropriate;
and streamlining the certification process. These proposals do not include any requirements on
heaters that are solely fired by gas or oil.
These proposals were developed following a Clean Air Act (CAA) section 11 1(b)(1)(B)
periodic review of the existing residential wood heater new source performance standards
(NSPS). We concur with numerous stakeholders that the current body of evidence justifies that
the periodic review and revision of the current residential wood heaters NSPS are needed to
capture the improvements in performance of such units and to expand the applicability of this
NSPS to include additional wood-burning residential heating devices. The changes being
proposed with this action are aimed at achieving several objectives, including applying tighter
emission limits that reflect today's best systems of emission reduction; eliminating exemptions
over a broad suite of residential wood combustion devices; revising test methods as appropriate;
and streamlining the certification process.
6.3.3	Description and Estimate of the Number of Small Entities
Small entities that EPA anticipates being affected by the standards would include almost
all manufacturers of wood heaters listed in Section 2.2 of this document. EPA estimates that
roughly 250-300 U.S. companies manufacture residential wood heaters. EPA believes that
approximately 90 percent of these manufacturers meet the SBA small-entity definition of having
fewer than 500 employees.
6.3.4	Description and Compliance Costs
A discussion of the methodology used to estimate cost impacts is presented in Section 4
of this RIA.
6-11

-------
As required by section 609(b) of the RFA, as amended by SBREFA, EPA has conducted
outreach to small entities and convened a SBAR Panel to obtain advice and recommendation of
representatives of the small entities potentially subject to the requirements of this rule. On
August 4, 2010, EPA's Small Business Advocacy Chairperson convened a Panel under section
609(b) of the RFA. In addition to the Chair, the Panel consisted of representatives of the
Director of the Outreach and Information Division within EPA's Office of Air and Radiation, the
Chief Counsel for Advocacy of the SBA, and the Administrator of the Office of Information and
Regulatory Affairs within the Office of Management and Budget.
Based on consultations with the SBA, and resulting from solicited self-nominations, we
prepared a list of 30 potential small entity representatives (SERs), from residential wood heating
appliance manufacturers (wood stoves, pellet stoves, hydronic healers, forced-air furnaces, and
masonry heaters), other wood burning appliance manufacturers (fireplaces, cook stoves),
equipment suppliers, chimney sweeps, test laboratories, masons, and trade associations. Once the
pre-Panel process began and potential SERs were identified, EPA held an outreach meeting with
the potential SERs and invited representatives from SBA's Office of Advocacy and the Office of
Information and Regulatory Affairs within the Office of Management and Budget on June 29,
2010, to solicit their feedback on the upcoming proposed rulemaking. Representatives from 26 of
the 30 companies and organizations that we selected as potential SERs for this SBREFA process
participated in the meeting (in person and by phone). At that meeting EPA solicited written
comments from the potential SERs, which were later summarized and shared with the Panel as
part of the Panel convening document.
After the SBAR Panel was convened, the Panel distributed additional information to the
SERs on August 11 and August 19, 2010, for their review and comment and in preparation for
another outreach meeting. On August 25, 2010, the Panel met with the SERs to hear their
comments on the information distributed via email. The Panel received written comments from
the SERs in response to the discussions at this meeting and the outreach materials. The Panel
asked the SERs to evaluate how they would be affected and to provide advice and
recommendations regarding early ideas to provide flexibility.
Many of the SERs and the Panel hadconcerns about the breadth of this rulemaking and
the challenges EPA faces in conducting rulemaking for all of these source categories at one time
and the challenges that the small businesses will face in having to comply with standards for all
of these source categories at one time. The Panel recommended that EPA should consider
6-12

-------
focusing efforts first on emissions sources that have the greatest potential to impact public health
through the magnitude of emissions and population exposure. The Panel was sensitive to the
need to carefully develop a rule that will minimize business closures, while still achieving
significant emission reductions.
6.2.6.1 Panel Recommendations for Small Business Flexibilities
The Panel recommended that EPA consider and seek comment on an extensive range of
regulatory alternatives to mitigate the impacts of the rulemaking on small businesses, including
the options listed below. The following section summarizes the SBAR Panel recommendations.
Consistent with the R FA/SB RE FA requirements, the Panel evaluated the assembled
materials and comments related to elements of the IRFA. A copy of the Final Panel Report
(including all comments received from SERs in response to the Panel's outreach meetings), as
well as summaries of both outreach meetings that were held with the SERs, is included in the
docket for the proposed rules. The following paragraphs are a subset of the full report.
The Panel encouraged EPA to consider flexibilities that will most directly minimize the
small business burdens: Exemptions from the standards based on very low volume production,
and delayed compliance dates for low volume production. The delayed compliance approach is
predicated on the concept that it will take a number of years for manufacturers to recover the
costs of the R&D investment in order to achieve compliance.
The Panel recommended that the EPA Administrator should consider the availability and
feasibility of certification, testing labs, testing standards, and other requirements,
The Panel recommended that the EPA Administrator should consider emphasizing that
the NSPS will address only new units, and the EPA Administrator should consider clarifying
whether exemptions will be considered for historic replica equipment and historic properly
renovations.
EPA is looking at opportunities for reducing the burden on small entities of potential
reporting, record keeping, and compliance requirements. For reporting and record keeping
requirements in the revised NSPS, EPA is considering providing flexibilities similar to those in
the 1988 NSPS. For example, the Panel recommended that EPA continue allowing
manufacturers to keep records and report test results for a representative model appliance rather
than testing and reporting results for each individual unit.
6-13

-------
Many SERs expressed concern about potential compliance requirements associated with
the planned proposed standards. Specifically, SERs anticipated potential logjams at third-party
testing facilities as a result of EPA \s regulating a broader range of product categories, which the
SERs believe will slow down the certification process. In addition, many SERs are concerned
about the costs associated with compliance requirements, including research and development,
preliminary testing and certification of new products and recertification of products approved
under the 1988 NSPS. The Panel recommended that EPA consider ways to streamline
compliance certification, in particular, identifying flexible approaches and procedures that will
reduce the burden and time for manufacturers to complete the application, testing and approval
process for new model lines. For example, the Panel recommended that EPA consider allowing
the use of International Standards Organization (ISO)-accredited laboratories and certifying
bodies to expand the number of facilities that would be required for testing and certification of
the new residential solid biomass combustion appliances. Additionally, the Panel recommended
that EPA consider different compliance time frames for different product categories to reduce the
potential for logjams at test labs and the overall impact on companies that manufacture multiple
categories. More flexible compliance schedules would also help manufacturers of additional
new appliances, such as hydronic heaters and forced-air furnaces, which were not subject to the
1988 standards.
Consistent with the RFA/SBREFA requirements, the Panel evaluated the assembled
materials and small-entity comments on issues related to elements of the 1RFA. A copy of the
Panel report is included in the docket for this proposed rule. We invite comments on all aspects
of the proposal and its impacts on small entities.
6-14

-------
SECTION 7
HUMAN HEALTH BENEFITS OF EMISSIONS REDUCTIONS
7.1	Synopsis
In this section, we provide an estimate of the monetized benefits associated with reducing
PM for the proposed residential wood heaters NSPS. For this rule, the PM reductions are the
result of emission limits on PM that are being tightened for a number of categories, and imposed
for the first time for other categories, The total PM? 5 reductions are the consequence of the
expected design changes to the affected appliances needed in order to meet these multiple limits.
These estimates reflect the monetized human health benefits of reducing cases of morbidity and
premature mortality among populations exposed to PM2 > resulting from PM?_ 5 precursors
reduced by this rulemaking. Using a 3% discount rate, we estimate the total monetized benefits
of the proposed residential wood heaters NSPS to be $2.0 billion to $4.9 billion in the year of
analysis (2018). Using a 7% discount rate, we estimate the total monetized benefits of the
proposed residential wood heaters NSPS to be $1.8 billion to $4,4 billion in the year of analysis
(2018). However the selected option reached benefits of $3.9 billion to $9.7 billion, using a 3%
discount rate, in the 3 year-period (2013-2015) after promulgation and $3.5 billion to $8.7
billion, at 7% discount rate during the same period. Therefore, an increased total benefit of $130
million to $310 million was realized over other proposed options for the same 3 year period at a
3% discount rate. Annual benefits were equal through all options thereafter. All estimates are in
2008 dollars.
These estimates reflect EPA's most current interpretation of the scientific literature.
Higher or lower estimates of benefits are possible using other assumptions; examples of this are
provided in Figure 7-2. Data, resources, and methodological limitations prevented EPA from
monetizing the benefits from several important benefit categories such as ecosystem effects and
visibility impairment. In addition, the benefits from reducing air pollutants other than PMi 5 have
not been monetized in this analysis, including reducing 33,000 tons of CO, 2,800 tons of VOCs
and HAPs emissions such as formaldehyde, benzene, polycyclic organic matter, and dioxins each
year. Several of these HAPs are associated with increased risk of cancers and other serious
health effects.
7.2	Calculation of PM2.5 Human Health Benefits
This rulemaking would reduce emissions of PM2.5, and the incidence of PM2 5-related
health effects. For this rule, the PM reductions are the result of emission limits on directly
emitted PM. The total PM2 5 reductions are the consequence of the technologies installed to meet
7-1

-------
these limits. Due to analytical limitations, it was not possible to provide a comprehensive
estimate of PMj.s-related benefits. Instead, we used the "benefit-per-ton" approach to estimate
these benefits. The methodology employed in this analysis is similar to the work described in
Fann. Fulcher. and Hubbell (2009), but represents an improvement that EPA feels leads to more
reliable estimates of PM2 5-related health benefits for emissions reductions in specific sectors.
The key assumptions are described in detail below. These PM2.5 benefit-per-ton estimates
prov ide the total monetized human health benefits (the sum of premature mortality and
premature morbidity) of reducing one ton of PM2 5 from a specified source. EPA has used the
benefit per-ton technique in several previous RJAs, including the recent SO; NAAQS R1A (U.S.
EPA, 2010a). Table 7-1 shows the quantified and unquantified benefits captured in those benefit-
per-ton estimates.
Table 7-1. Human Health and Welfare Effects of PM2.5
Category
Specific Effect
Effect Has
Been
Quantified
Effect Has
Been
Monetized
More
Information
(refers to
CSAPR RIA)
Improved Human Health
Reduced incidence of
premature mortality
from exposure to PM2 <
Reduced incidence of
morbidity from
exposure to PMi 5
Adult premature mortality based on cohort



study estimates and expert elicitation

~
Section 5.4
estimates (age >25 or age >30)



Infant mortality (age <1)
~
~
Section 5.4
Non-ratal heart attacks (age > 18)
~
~
Section 5.4
Hospital admissions—respiratory (all ages)
~

Section 5.4
Hospital admissions—cardiovascular (age
~
~
Section 5.4
>20)


Emergency room visits for asthma (all ages)
~
~
Section 5.4
Acule bronchitis (age 8-12)
~
~
Section 5.4
Lower respiratory symptoms (age 7-14)
~
~
Section 5.4
Upper respiratory symptoms (asthmatics
~
~
Section 5.4
age 9-11)


Asthma exacerbation (asthmatics age 6-18)
~
~
Section 5.4
Lost work days (age 18-65)
~
~
Section 5.4
Minor restricted-activity days (age 18-65)
~
-/
Section 5.4
Chronic Bronchitis (age >26)
~
~
Section 5.4
Emergency room visits for cardiovascular
effects (all ages)
-
-
Section 5.4
Strokes and cerebrovascular disease (age
50-79)
..
-
Section 5.4
Other cardiovascular effects (e.g., other


PM ISA2
ages)



Other respiratory effects (e.g., pulmonary



function, non-asthma ER visits, non-


PM ISA2
bronchitis chronic diseases, other ages and


populations)



7-2

-------
Reproductive and developmental effects
(e.g., low birth weight, pre-term births, etc)
Cancer, mutagenicity, and genotoxicity
effects
1	We assess these benefits qualitative due to time and resource limitations for this analysis.
2	We assess these benefits qualitatively because we do not have sufficient confidence in available data or methods.
5 We assess these benefits qualitatively because current evidence is only suggestive of causality or there are other
significant concerns over the strength of the association.
Consistent with the Portland Cement NESHAP (EPA, 2009a), the PM2.S benefits
estimates use the concentration-response (C-R) functions as reported in the epidemiology
literature, as well as the 12 functions obtained in EPA's expert elicitation study as a sensitivity
analysis.
¦	One estimate is based on the concentration-response function developed from the
extended analysis of the American Cancer Society (ACS) cohort, as reported in Pope
et al. (2002), a study that EPA has previously used to generate its primary benefits
estimate. When calculating the estimate, EPA applied the effect coefficient as
reported in the study without an adjustment for assumed concentration threshold of
10 fig/in3 as was done in recent (2006-2009) Office of Air and Radiation RIAs.
• One estimate is based on the C-R function developed from the extended analysis of
the Harvard Six Cities cohort, as reported by Laden et al. (2006). This study,
published after the completion of the Staff Paper for the 2006 PMi 5 NAAQS, has
been used as an alternative estimate in the PM2.5 NAAQS RIA and PM2 5 benefits
estimates in RIAs completed since the PM2.5 NAAQS. When calculating the estimate,
EPA applied the effect coefficient as reported in the study without an adjustment for
assumed concentration threshold of 10 |ig/m3 as was done in recent (2006-2009)
RIAs.
¦	Twelve estimates are based on the C-R functions from EPA's expert elicitation study
(IEc, 2006; Roman et al., 2008) on the PM2.5 -mortality relationship and interpreted
for benefits analysis in EPA's final RIA for the PMb 5 NAAQS. For that study, twelve
experts (labeled A through L) provided independent estimates of the PM2.5-mortality
concentration-response function. EPA practice has been to develop independent
estimates of PMi> -mortality estimates corresponding to the concentration-response
function provided by each of the twelve experts, to better characterize the degree of
variability in the expert responses.
¦	Readers interested in reviewing the general methodology for creating the benefit-per-
ton estimates used in this analysis should consult the draft Technical Support
Document (TSD) on estimating the benefits per ton of reducing PMi 5 and its
PM ISA"1
PM ISA:'
7-3

-------
precursors from the Ferroalloy Sector.1 The primary difference between the estimates
used in this analysis and the estimates reported in Fann, Fulcher, and Hubbell (2009)
is the air quality modeling data utilized. While the air quality data used in Fann,
Fulcher, and Hubbell (2009) reflects broad pollutant/source category combinations,
the source apportionment modeling data used in this analysis is sector-specific. As a
result, the benefit-per-ton estimates presented herein better reflect the geographic
areas and population likely to be affected by the proposed rule. In this analysis, we
apply the national average benefit-per-ton estimate for a 2016 analysis year and
multiply it by the corresponding emission reductions of directly emitted PM2 5 to
quantify the benefits of this rule.
These models assume that all fine particles, regardless of their chemical composition,
are equally potent in causing premature mortality because the scientific evidence is
not yet sufficient to allow differentiation of effect estimates by particle type (U.S.
EPA, 2009b). Directly emitted PM is the only PM2.5 precursor affected by this rule.
Even though we assume that all fine particles have equivalent health effects, the
benefit-per-ton estimates vary between precursors because each ton of precursor
reduced has a different propensity to form PM2.5 and a different pattern of transport,
resulting geographic distribution of exposure. When more people are exposed, the
benefits per ton are greater. For example, NOx emissions have a lower benefit-per-
ton estimate than direct PMi.5 because it does not directly transform into PM2.5 and
because particles formed from NOx can transport many miles, including over areas
with low populations. The benefit-per-ton coefficients in this analysis were derived
using modified versions of the health impact functions used in the PM NAAQS
Regulatory Impact Analysis. Specifically, this analysis uses the benefit-per-ton
method first applied in the Portland Cement NESHAP III A (U.S. EPA, 2009a), which
incorporated three updates; a new population dataset, an expanded geographic scope
of the benefit-per-ton calculation, and the functions directly from the epidemiology
studies without an adjustment for an assumed threshold.2 Removing the threshold
assumption is a key difference between the method used in this analysis of PM
benefits and the methods used in RIAs prior to the Portland Cement proposal, and we
now calculate incremental benefits down to the lowest modeled PM2.5 air quality
levels.
¦ Based on our review of the current body of scientific literature, EPA estimated PM-
related mortality without applying an assumed concentration threshold. EPA's
Integrated Science Assessment for Particulate Matter (U.S. EPA. 2009b), which was
reviewed by EPA's Clean Air Scientific Advisory Committee (U.S. EPA-SAB,
2009a; U.S. EPA-SAB, 2009b), concluded that the scientific literature consistently
finds that a no-threshold log-linear model most adequately portrays the PM-mortality
1 U.S. Environmental Protection Agency. 2011. Technical support document: Estimating the benefit per ton of
reducing PM,, precursors from the ferroalloy sector (Draft)-, EPA: Research Triangle Park, NC.
2These updates were already included in Fann el al. (2009). An example of the effect of these updates is available in
the Portland Cement proposal RIA (U.S. EPA, 2009a). The benefit-per-ton estimates have also been updated
since the Portland Cement proposal RIA (U.S. EPA, 2009a) to incorporate a revised VSL, as discussed on the next
page.
7-4

-------
concentration-response relationship while also recognizing potential uncertainty
about the exact shape of the concentration-response function. Consistent with this
finding, we incoiporated a "Lowest Measured Level" (LML) assessment, which is a
method EPA has employed in several recent RJA's including the Cross-State Air
Pollution Rule (U.S. EPA, 201 lb). One key feature of this LML assessment is that it
arrays the estimated PM2.s-related avoided deaths relative to an air quality scenario in
which the Ferroalloy-attributable PMi 5 would be eliminated entirely. While this is a
conservative assumption, the source apportionment air quality modeling informing
this LML assessment is not designed to predict PM2.5 levels from marginal changes in
emissions from each sector.
•	For this analysis, policy-specific air quality data is not available due to time or
resource limitations. For this rule, we are unable to estimate the percentage of
premature mortality associated with this specific rule's emission reductions at each
PM2.5 level. However, we believe that it is still important to characterize the
distribution of exposure to baseline air quality levels. As a surrogate measure of
mortality impacts, we provide the percentage of the population exposed at each PM2 5
level using the air quality baseline used for the source apportionment modeling.
Readers interested in a full discussion of the source apportionment air quality
modeling may consult "Air Quality Modeling Technical Support Document: Source
Sector Assessments" (EPA, 201 lc). It is important to note that baseline exposure is
only one parameter in the health impact function, along with baseline incidence rates
population, and change in air quality. In other words, the percentage of the population
exposed to air pollution below the LML is not the same as the percentage of the
population experiencing health impacts as a result of a specific emission reduction
policy. The most important aspect, which we are unable to quantify for rules without
air quality modeling, is the shift in exposure associated with this specific rule.
Therefore, caution is warranted when interpreting the LML assessment. For more
information on the data and conclusions in the LML assessment for rules without
policy-specific air quality modeling, please consult the LML TSD (U.S. EPA, 201 Od).
The results of this analysis are provided in Section 7.4 of this RIA.
*	As is the nature of Regulatory Impact Analyses (RIAs), the assumptions and methods
used to estimate air quality benefits evolve over time to reflect the Agency's most
current interpretation of the scientific and economic literature. For a period of time
(2004-2008), the Office of Air and Radiation (OAR) valued mortality risk reductions
using a value of statistical life (VSL) estimate derived from a limited analysis of some
of the available studies. OAR arrived at a VSL using a range of $1 million to $10
million (2000$) consistent with two meta-analyses of the wage-risk literature. The $1
million value represented the lower end of the interquartile range from the Mrozek
and Taylor (2002) meta-analysis of 33 studies. The $10 million value represented the
upper end of the interquartile range from the Viscusi and Aldy (2003) meta-analysis
of 43 studies. The mean estimate of $5.5 million (2000$)' was also consistent with the
5 After adjusting the VSL to account for a different currency year (2010$) and to account for income growth to
2015, the $5.5 million VSL is $8.0 million. In this analysis, we use 2016 estimates as a surrogate for 2018
estimates, which results in a slight underestimate of the benefits.
7-5

-------
mean VSL of $5.4 million estimated in the Kochi et al. (2006) meta-analysis.
However, the Agency neither changed its official guidance on the use of VSL in rule-
makings nor subjected the interim estimate to a scientific peer-review process through
the Science Advisory Board (SAB) or other peer-review group.
¦	During this time, the Agency continued work to update its guidance on valuing
mortality risk reductions; including commissioning a report from meta-analytic
experts to evaluate methodological questions raised by EPA and the SAB on
combining estimates from the various data sources. In addition, the Agency consulted
several times with the Science Advisory Board Environmental Economics Advisory
Committee (SAB-EEAC) on the issue. With input from the meta-analytic experts, the
SAB-EEAC advised the Agency to update its guidance using specific, appropriate
meta-analytic techniques to combine estimates from unique data sources and different
studies, including those using different methodologies (i.e., wage-risk and stated
preference) (U.S. EPA-SAB, 2007).
¦	Until updated guidance is available, the Agency determined that a single, peer-
reviewed estimate applied consistently best reflects the SAB-EEAC advice it has
received. Therefore, the Agency has decided to apply the VSL that was vetted and
endorsed by the SAB in the Guidelines for Preparing Economic Analyses (U.S. EPA,
2000)4 while the Agency continues its efforts to update its guidance on this issue.
This approach calculates a mean value across VSL estimates derived from 26 labor
market and contingent valuation studies published between 1974 and 1991. The mean
VSL across these studies is $6.3 million (2000$).5 The Agency is committed to using
scientifically sound, appropriately reviewed evidence in valuing mortality risk
reductions and has made significant progress in responding to the SAB-EEAC's
specific recommendations.
• In implementing these rules, emission controls may lead to reductions in ambient
PM2.S below the National Ambient Air Quality Standards (NAAQS) for PM in some
areas and assist other areas with attaining the PM NAAQS. Because the PM NAAQS
RIAs also calculate PM benefits, there are important differences worth noting in the
design and analytical objectives of each RIA. The NAAQS RIAs illustrate the
potential costs and benefits of attaining a new air quality standard nationwide based
on an array of emission control strategies for different sources. In short, NAAQS
RIAs hypothesize, but do not predict, the control strategies that States may choose to
enact when implementing a NAAQS. The setting of a NAAQS does not directly
result in costs or benefits, and as such, the NAAQS RIAs are merely illustrative and
are not intended to be added to the costs and benefits of other regulations that result in
''in the (draft) update of the Economic Guidelines (U.S. EPA, 20101), EPA retained the VSL endorsed by the SAB
with the understanding that further updates to the mortality risk valuation guidance would be forthcoming in the
near future. Therefore, this report does not represent final agency policy.
!In this analysis, we adjust the VSL to account for a different currency year (2008S) and to account for income
growth to 2018. After applying these adjustments to the $6.3 million value, the VSL is $9.2 million. In this
analysis, we use 2016 estimates as a surrogate for 2018 estimates, which results in a slight underestimate of the
benefits.
7-6

-------
specific costs of control and emission reductions. However, some costs and benefits
estimated in this RIA account for the same air quality improvements as estimated in
the illustrative PM2 5NAAQS RIA.
By contrast, the emission reductions for this NSPS are from a specific class of well-
characterized sources (residential wood stoves, hydronic heaters, and other sources
affected by this proposal). In general, EPA is more confident in the magnitude and
location of the emission reductions for these rules. It is important to note that
emission reductions anticipated from these rules do not result in emission increases
elsewhere. Emission reductions achieved under these and other promulgated rules
will ultimately be reflected in the baseline of future NAAQS analyses, which would
reduce the incremental costs and benefits associated with attaining the NAAQS. EPA
remains forward looking towards the next iteration of the 5-year review cycle for the
NAAQS, and as a result does not issue updated RIAs for existing NAAQS that
retroactively update the baseline for NAAQS implementation. For more information
on the relationship between the NAAQS and rules such as analyzed here, please see
Section 1.2.4 of the S02 NAAQS RIA (U.S. EPA, 2010b).
Other 1%
¦f|lr

HospitalAdrrmsioni, Resp
0.04%
Asthma Exacerbation0.01%
Acule Bronchitis 0 01%
Upper Resp Symp 0.00%
Lower Resp Symp 0.00%
ERVisits. Resp0.00%
Figure 7-1. Breakdown of Monetized PM2.5 Health Benefits Estimates using
Mortality Function from Pope et al. (2002)°
This pie chart breakdown is illustrative, using the results based on Pope et al. (2002) as an example.
Using the Laden et al. (2006) function for premature mortality, the percentage of total monetized
benefits due to adult mortality would be 97%. This chart shows the breakdown using a 3% discount
rate, and the results would be similar if a 7% discount rate was used.
Table 7-2 provides a general summary of the primary approach results by pollutant,
including the emission reductions and monetized benefits-per-ton at discount rates of 3% and 7%
7-7

-------
for the different years of the analysis.6 Table 7-3 provides a summary of the reductions in health
incidences as a result of the pollution reductions. In Table 7-4, we provide the benefits using our
anchor points of Pope et al. and Laden et al. as well as the results from the expert elicitation on
PM mortality. Figure 7-2 provides a visual representation of the range of benefits estimates of
PM2 5 reductions and the pollutant breakdown of the monetized benefits.
Table 7-2. Summary of Monetized Benefits Estimates for the Proposed Residential Wood
Heaters NSPS from 2013-2015 and in 2018 ($2008)a
Emissions
Reductions
Pollutant
Benefit
per toil
(Pope,
3%)
Benefit
per ton
(Laden,
Benefit
per Ion
(Pope,
7%)
Benefit
per ton
(Laden,
7%)
Total Monetized
Benefits (millions
Total Monetized
Benefits (millions

PM;) 2018
5.356
$373,000
$914,000
$333,000
$820,000
$2,000
to
S4.900
51,800
to
$4,400
c8
PM.,2013-
10,238




$3,800

$9,300
$3,400

$8,400
2015











i/i
Q.
l/l
7
voc
2.795
-
-
-
-
NA

NA
NA

NA





Average
3yr
$1,300
to
$3,100
$1,100
to
52,800

I'M,, 2018
5,356
S373.000
$913,000
S333.000
$820,000
$2,000
to
$4,900
$1,800

$4,400
o3
I'M;,2013-
2015
10.576




$3,900
to
$9,700
$3,500
to
SS.700
Kfi
a.
t/i
z
VOC :u,»
2,795
-
-
-
-
NA

NA
NA

NA





Average
3yr
$1,300
to
$3,200
$1,200
10
S 2,900
All estimates are rounded to two significant figures so numbers may not sum across columns. In this analysis, we
use 2016 estimates as a surrogate for 2018 estimates, which results in a slight underestimate of the benefits. These
models assume that all fine particles, regardless of their chemical composition, are equally potent in causing
premature mortality the scientific evidence is not yet sufficient to allow differentiation of effect estimates by
particle type. The benefit per ton estimates vary because each ton of precursor reduced has a different propensity to
form PM3 5. The monetized benefits incorporate the conversion from precursor emissions to ambient fine particles.
Confidence intervals are unavailable for this analysis because of the benefit-per-ton methodology. NA: Not
Applicable given the lack of confidence in current data.
6To comply with Circular A-4, EPA provides monetized benefits using discount rates of 3% and 7% (OMB, 2003).
These benefits are estimated for a specific analysis year (i.e., 2018 using 2016 values as a surrogate), and most of
Ihe PM benefits occur within that year with two exceptions: acute myocardial infarctions (AMls) and premature
mortality. For AMls, we assume 5 years of follow-up medical costs and lost wages. For premature mortality, we
assume that there is a "cessation" lag between PM exposures and the total realization of changes in health
effects. Although the structure of the lag is uncertain. EPA follows the advice of the SAB-HES to assume a
segmented lag structure characterized by 30% of mortality reductions in the first year, 50% over years 2 to 5, and
20% over the years 6 to 20 after the reduction in PM; 5 (U.S. EPA-SAB, 2004). Changes in the lag assumptions
do not change the total number of estimated deaths but rather the timing of those deaths. Therefore, discounting
only affects the AMI costs after the analysis year and the valuation of premature mortalities that occur after the
analysis year. As such, the monetized benefits using a 7% discount rate are only approximately 10% less than the
monetized benefits using a 3% discount rate.
7-8

-------
Table 7-3. Summary of Reductions in Health Incidences from PM2.5 Benefits for the
Proposed Residential Wood Heaters NSPS from 2013-2015 and in 2018"

2013-2015
Level I +
II
2013-2015
Level I +
III
2013-2015
Difference
Yearly
Average
Both Level
in 2018
Avoided Premature





Mortality





Pope
430
440
14
5
220
Laden
1100
1100
36
12
570
Avoided Morbidity





Chronic Bronchitis
300
320
10
3
160
ER Visits, Respiratory
310
320
10
3
160
Acute Bronchitis
650
680
22
7
340
Lower Respiratory
8400
8600
280
92
4400
Upper Respiratory
6400
6600
210
70
3300
Acute Respiratory
349900
361400
11600
3800
183000
Work Loss Days
59100
61000
2000
650
39000
Asthma Exacerbation
14000
14500
460
150
7300
AMI
450
460
15
S
240
HA, Respiratory
69
71
2
1
36
HA, Cardiovascular
160
160
5
2
84
" All estimates are rounded to whole numbers with two significant figures. In this analysis, we use 2016 estimates as
a surrogate for 2018 estimates, which results in a slight underestimate of the benefits. These models assume that
all fine particles, regardless of their chemical composition, are equally potent in causing premature mortality
because the scientific evidence is not yet sufficient to allow differentiation of effect estimates by particle type.
The monetized benefits incorporate the conversion from precursor emissions to ambient fine particles. Confidence
intervals are unavailable for this analysis because of the benefit-per-ton methodology.
Table 7-4, AH PM2.5 Benefits Estimates for the Proposed Residential Wood Heaters NSPS
at Discount Rates of 3% and 7% from 2013 to 2015 and in 2018 ($2008
millions)*
Level I + II 2013-2015 Level I + III 2013-2015
Either Levels in
2018
3%
7%
3%
7%
3%
7%
Benefit-per-ton Coefficients Derived from Epidemiology
Literature
Pope et al.	$3,800 $3,400
Laden et al.	$9,300 $8,400
Benefit-per-ton Coefficients Derived from Expert
Elicitation
Expert A
Expert B
Expert C
Expert D
$7,400
$7,600
$5,400
$1,200
$6,600
$6,800
$4,800
$1,100
$3,900
$9,700
$1,000
$7,700
$7,800
$5,500
$3,500
$8,700
$9,200
$6,900
$7,000
$5,000
$2,000
$4,900
$5,200
$3,900
$4,000
$2,800
$1,800
$4,400
$4,700
$3,500
$3,500
$2,500
7-9

-------
Expert E
$6,800
$6,100
$1,300
$1,100
$6,400
$5,800
Expert F
$4,500
$4,000
$7,000
$6,300
$3,600
$3,200
Expert G
$5,700
$5,100
$4,700
$4,200
$2,400
$2,100
Expert H
$7,500
$6,700
$5,900
$5,300
$3,000
$2,700
Expert 1
$6,100
$5,500
$7,700
$6,900
$3,900
$3,500
Expert J
$1,400
$1,300
$6,300
$5,700
$3,200
$2,900
Expert K
$4,900
$4,400
$1,500
$1,300
$800
$700
Expert L
$4,900
$4,400
$5,000
$4,500
$2,500
$2,300
All estimates are rounded to two significant figures. Estimates do not include confidence intervals because they
were derived through the heneflt-per-ton technique described above. The benefits estimates from the expert
elicitation are provided as a reasonable characterization of the uncertainty in the mortality estimates associated
with the concentration-response function. Confidence intervals are unavailable for this analysis because of the
benefit-per-ton methodology.
Benefits Estimates from 2 epidemiology functions and 12 Expert
functions
$7,000
$6,000
oS"$5,000
o
§ $",000
g $3,000
| $2,000
$1,000
I 3% DR
17% DR
Figure 7-2, Total Monetized PM2.5 Benefits Estimates for the Proposed Residential Wood
Heaters NSPS in 2018
a This graph shows the estimated benefits at discount rales of 3% and 7% using effect coefficients derived from the
Pope et al. (2002) study and the Laden et al. (2006) study, as well as 12 effect coefficients derived from EPA's
expert elicitation on PM mortality. The results shown are not the direct results from the studies or expert
elicitation; rather, the estimates are based in part on the concentration-response function provided in those studies.
7-10

-------
Monetized Benefits Breakdown
by Category for 2018
3% 0%
¦ Wood Stoves
¦ Single Burn Rate Stoves
is Pellet Stoves
¦ Furnace: indoor, cordwood
¦ Outdoor Hydronic Heating
Systems
Figure 7-3. Breakdown of Monetized Benefits for the Proposed Residential Wood Heaters
NSPS by Subcategory
The benefits from reducing other air pollutants have not been monetized in this analysis,
including reducing close to 33,000 tons of CO and HAPs emissions such as formaldehyde,
benzene, polycyclic organic matter, and dioxins, and pollutants such as black carbon each year.
Because we were unable to monetize the direct benefits associated with reducing HAPs, CO, and
black carbon, the monetized benefits estimate is an underestimate of the total benefits. The extent
of this underestimate, whether small or large, is unknown.
7.3 Unqualified Benefits
The monetized benefits estimated in this RIA only reflect the portion of benefits
attributable to the health effect reductions associated with ambient fine particles. Methodological
and time limitations prevented EPA from quantifying or monetizing the benefits from several
important benefit categories, including benefits from reducing, ecosystem effects, and visibility
impairment. As mentioned previously, the health benefits from reducing VOCs, HAPs and
carbon monoxide (CO) have not been monetized in this analysis. In addition to being a PM? 5
precursor, VOCs can undergo a chemical reaction in the atmosphere to form ozone. Reducing
ambient ozone concentrations is associated with significant human health benefits, including
n
mortality and respiratory morbidity (EPA, 2008). Because we were unable to monetize the
7 U.S. Environmental Protection Agency (EPA). 2008. Regulatory Impact Analysis, 2008 National Ambient Air
Quality Standards for Ground-level Ozone, Chapter 6. Available at http://wwvv.epa.g0v/ttn/ecas/regdata/RIAs/6'
ozoneriachapter6.pdf.
7-11

-------
direct benefits associated with reducing VOCs and HAPs among other pollutants, the monetized
benefits estimate is an underestimate of the total benefits. The extent of this underestimate,
whether small or large, is unknown.
7.3.1	Carbon Monoxide Benefits
CO exposure is associated with a variety of health effects. Without knowing the location
of the emission reductions and the resulting ambient concentrations using fine-scale air quality
modeling, we were unable to estimate the exposure to CO for nearby populations. Because of
methodological and time limitations, we were unable to estimate the benefits associated with the
reductions in CO emissions that would occur as a result of this rule.
CO in ambient air is formed primarily by the incomplete combustion of carbon-
containing fuels and photochemical reactions in the atmosphere. The amount of CO emitted from
these reactions, relative to carbon dioxide (CO2), is sensitive to conditions in the combustion
zone, such as fuel oxygen content, burn temperature, or mixing time. Upon inhalation, CO
diffuses through the respiratory system to the blood, which can cause hypoxia (reduced oxygen
availability).
The Integrated Science Assessment for Carbon Monoxide (EPA, 2010a) concluded that
short-term exposure to CO is 'likely to have a causal relationship" with cardiovascular
morbidity, particularly in individuals with coronary heart disease. Epidemiologic studies
associate short-term CO exposure with increased risk of emergency department visits and
hospital admissions. Coronary heart disease includes those who have angina pectoris (cardiac
chest pain), as well as those who have experienced a heart attack. Other subpopulations
potentially at risk include individuals with diseases such as chronic obstructive pulmonary
disease (COPD), anemia, or diabetes, and individuals in very early or late life stages, such as
older adults or the developing young. Additionally, ISA judges the evidence to be suggestive of
causal relationships between relevant short- and long-term CO exposures and central nervous
system (CNS) effects, birth outcomes and developmental effects following long-term exposure,
respiratory morbidity following short-term exposure, and mortality following short-term
exposure to CO.
7.3.2	Black Carbon (BC) Benefits
Incomplete combustion of wood results in emissions of fine and ultraline particles,
including black carbon (BC), brown carbon (BrC), and other nonlight, absorbing organic carbon
(OC) particles. BC and BrC are collectively considered light, absorbing carbon (LAC) with BC
referring to the most strongly light-absorbing form of carbon per unit mass. BC impacts the
7-12

-------
earth's climate because of its high capacity for light absorption. The role of BC in key
atmospheric processes links it to a range of climate impacts, including increased temperatures,
accelerated ice and snow melt, and disruptions in precipitation patterns, A recent study by the
UN Environment Programme (UNEP) concluded that reductions in BC and ozone will slow the
rate of climate change within the first half of this century with a small number of targeted BC
and ozone precursor emissions mitigation measures providing immediate protection for climate,
public health, water and food security, and ecosystems (UNEP, 2011).8
While less effective in absorbing solar radiation than BC, BrC may contribute
significantly to positive radiative forcing. At present the ability to quantify the climate impacts of
BrC is limited. OC from incomplete combustion of wood (exclusive of BrC) is generally
considered nonlight-absorbing carbon. Nonlight absorbing compounds scatter rather than absorb
solar radiation and, therefore, provide a net direct cooling effect on climate. Thus, particles
generated by residential wood combustion consist of components that are warming to the
atmosphere (BC and BrC) and particles thai are cooling (OC exclusive of BrC).
Residential wood combustion contributed about 380,000 tons of PM2 5 emissions across
the United States in 2005. Of these PM2 5 emissions, approximately 21,000 tons are estimated to
be elemental carbon (EC)9 (EPA NEI, 2005).10 The key emitting source categories that comprise
residential wood combustion (RWC) are wood stoves, manufactured and masonry fireplaces,
hydronic heaters, and indoor furnaces. The 2005 PM2 5 inventory shows that cord wood stoves
contribute about 52%, fireplaces 16%, hydronic heaters 16%, indoor furnaces 11%, and pellet
stoves and chimineas (free-standing outdoor fireplaces) the remaining 5% to total PM2 >
emissions. Since 2005, the popularity and use of outdoor hydronic heaters has grown and
emissions from these units are likely growing.
The EC/OC ratio is a metric sometimes used to crudely compare the warming potential of
emissions from various BC sources with a ratio of less than 1 indicating that cooling potential
exceeds warming. Based on the spedaled 2005 NEI, the EC/OC for residential wood combustion
s UN Environment Programme, World Meteorological Organization. 2011, February. Integrated Assessment of Black
Carbon and Tropospheric Ozone: Summary for Decision Makers. Available at
http://www.unep.org/gc/gc26/download.asp?ID=2197.
* BC is roughly equivalent to 'soot carbon' or the portion of soot that is closest to elemental carbon. The most
commonly used measurement technique, the "thermal optical method* quantifies the portion of PM that is EC.
EC is frequently used for emissions characterization and ambient measurements. The terms EC and BC are used
interchangeably in this discussion.
10 U.S. EPA. 2005. National Emissions Inventory. 2005 Modeling Inventory. Available at
http://www.epa.gov/ttn/chief/emch/index.html.
7-13

-------
is estimated to be less than one (~ 0.11), indicating a predominance of OC or light-scattering
particles relative to light absorbing ones. Exactly how much of the OC from RWC sources is
light absorbing (BrC) is not known currently, and the LAC may vary by fuel type, combustion
conditions, and operating environment.
While OC emissions are generally considered to have a cooling effect, OC emissions
over areas with snow and ice may be less reflective than OC over dark surfaces and may even
have a slight warming effect (Flanner et al., 2007)." Significantly, the vast majority of
residential wood smoke emissions occur during the winter months; the highest percentage of
wood stove use is in the upper Midwest (e.g., Michigan), the Northeast (e.g., Maine), and the
mountainous areas of the Pacific Northwest (e.g., Washington), where snow is present a good
portion of the winter months. A recent study of the effect of soot-induced snow albedo on
snowpack and hydrological cycles in the western United States concludes that radiative forcing
induced by soot deposition on snow is an important anthropogenic source affecting the global
climate. The study concludes that soot-induced snow albedo perturbations increase the surface
net solar radiation flux during late winter to early spring, increase the surface air temperature,
reduce the snow accumulation and spring snowmelt, and may alter stream flows with
implications for water resources in the western United States (Qian, et al., 2009).12 Further study
is needed to better understand and quantify the impact of PM2.5 emissions and deposition from
the RWC sector on climate.
7.3.3 HAP Benefits
Even though emissions of air toxics from all sources in the U.S. declined by
approximately 42% since 1990, the 2005 National-Scale Air Toxics Assessment (NATA)
predicts that most Americans are exposed to ambient concentrations of air toxics at levels that
have the potential to cause adverse health effects (U.S. EPA, 201 lb).11 The levels of air toxics to
which people are exposed vary depending on where people live and work and the kinds of
activities in which they engage. In order to identify and prioritize air toxics, emission source
11 Flanner, M. G., Zender, C. S., Randerson, J. T., and Rasch, P. J. 2007. Present-day climate forcing and response
from BC in snow. Journal of Geophysical Research-Atmospheres, 12(D11). doi:10.I029/2006JD008003
13 Qian, Y., W. I. Gustafson, L. R. Leung, and S. J. Ghan. 2009. Effects of soot-induced snow albedo change on
snowpack and hydrological cycle in western United States based on Weather Research and Forecasting
chemistry and regional climate simulations,./. Ceophys. Res. 114, D03108. doi: 10.1029/2008JDO 11039
13 The 2005 NATA is available on the Internet at http://www.epa.gov/ttn/atw/nata2005/.
7-14

-------
types and locations that are of greatest potential concern, U.S. EPA conducts the NATA.14 The
most recent NATA was conducted for calendar year 2005 and was released in March 2011.
NATA includes four steps:
1.	Compiling a national emissions inventory of air toxics emissions from outdoor
sources
2.	Estimating ambient and exposure concentrations of air toxics across the United States
3.	Estimating population exposures across the United States
4.	Characterizing potential public health risk due to inhalation of air toxics including
both cancer and noncancer effects
Based on the 2005 NATA, EPA estimates that about 5% of census tracts nationwide have
increased cancer risks greater than 100 in a million. The average national cancer risk is about 50
in a million. Nationwide, the key pollutants that contribute most to the overall cancer risks are
formaldehyde and benzene.15 Secondary formation (e.g., formaldehyde forming from other
emitted pollutants) was the largest contributor to cancer risks, while stationary, mobile and
background sources contribute almost equal portions of the remaining cancer risk.
Noncancer health effects can result from chronic,16 subchronic,17 or acute18 inhalation
exposures to air toxics, and include neurological, cardiovascular, liver, kidney, and respiratory
effects as well as effects on the immune and reproductive systems. According to the 2005
NATA, about three-fourths of the U.S. population was exposed to an average chronic
concentration of air toxics that has the potential for adverse noncancer respiratory health effects.
HThe NATA modeling framework has a number of limitations that prevent its use as the sole basis for setting
regulatory standards. These [imitations and uncertainties are discussed on the 2005 NATA website. Even so, this
modeling framework is very useful in identifying air toxic pollutants and sources of greatest concern, setting
regulatory priorities, and informing the decision making process. U.S. EPA. (2011) 2005 National-Scale Air
Toxics Assessment, http://www.epa.gov/ttn/atw/nata2005/
15	Details about the overall confidence of certainty ranking of the individual pieces of NATA assessments including
both quantitative (e.g., model-to-monitor ratios) and qualitative (e.g., quality of data, review of emission
inventories) judgments can be found at http://www.epa.gov/ttii/atw/nata/roy/pagel6.html.
16	Chronic exposure is defined in the glossary of the Integrated Risk Information (IRIS) database
(http://www.epa.gov/iris) as repeated exposure by the oral, deniial. or inhalation route for more than
approximately 10% of the life span in humans (more than approximately 90 days to 2 years in typically used
laboratory animal species).
'' Defined in the IRIS database as repeated exposure by the oral, dermal, or inhalation route for more than 30 days,
up to approximately 10% of the life span in humans (more than 30 days up to approximately 90 days in typically
used laboratory animal species).
,b Defined in the IRIS database as exposure by the oral, dermal, or inhalation route for 24 hours or less.
7-15

-------
Results from the 2005 NATA indicate that acrolein is the primary driver for noncancer
respiratory risk.
Figures 7-4 and 7-5 depict the estimated census tract-level carcinogenic risk and
noncancer respiratory hazard from the assessment. It is important to note that large reductions in
HAP emissions may not necessarily translate into significant reductions in health risk because
toxicity varies by pollutant, and exposures may or may not exceed levels of concern. For
example, acetaldehyde mass emissions are more than double acrolein emissions on a national
basis, according to EPA's 2005 National Emissions Inventory (NEI). However, the Integrated
Risk Information System (IRIS) reference concentration (RfC) for acrolein is considerably lower
than that for acetaldehyde, suggesting that acrolein could be potentially more toxic than
acetaldehyde. Thus, it is important to account for the toxicity and exposure, as well as the mass
of the targeted emissions.
• f
4#
Cancer Risk
(in a million)
1 «2S
25-50
50-75
75- 100
> 100
Z«ro Population Tract*
J
•x

' ~ +* •
-i. ij x
k *
Mm. ^Mr'

¦ ' > * ¦ . *
, K||

Figure 7-4. Estimated Chronic Census Tract Carcinogenic Risk from HAP exposure from
outdoor sources (2005 NATA)
7-16

-------
1
Total Respiratory
Hazard Index
0-1
1-6
5- 1C
10- IS
15-20
>20
Zero Poputabon Tracts
Figure 7-5. Estimated Chronic Census Tract Noncancer (Respiratory) Risk from HAP
exposure from outdoor sources (2005 NATA)
Due to methodology and time limitations under the court-ordered schedule, we were
unable to estimate the benefits associated with the hazardous air pollutants that would be reduced
as a result of these rules. In a few previous analyses of the benefits of reductions in HAPs, EPA
has quantified the benefits of potential reductions in the incidences of cancer and non-cancer risk
(e.g., U.S. EPA, 1995). In those analyses, EPA relied on unit risk factors (URF) developed
through risk assessment procedures.19 These URFs are designed to be conservative, and as such,
are more likely to represent the high end of the distribution of risk rather than a best or most
likely estimate of risk. As the puipose of a benefit analysis is to describe the benefits most likely
to occur from a reduction in pollution, use of high-end, conservative risk estimates would
overestimate the benefits of the regulation. While we used high-end risk estimates in past
analyses, advice from the EPA's Science Advisory Board (SAB) recommended that we avoid
"The unit risk factor is a quantitative estimate of the carcinogenic potency of a pollutant, often expressed as the
probability of contracting cancer from a 70-year lifetime continuous exposure to a concentration of one |ig/m3 of
a pollutant
7-17

-------
using high-end estimates in benefit analyses (U.S. EPA-SAB, 2002). Since this time, EPA has
continued to develop better methods for analyzing the benefits of reductions in HAPs.
As part of the second prospective analysis of the benefits and costs of the Clean Air Act
(U.S. EPA, 201 la), EPA conducted a case study analysis of the health effects associated with
reducing exposure to benzene in Houston from implementation of the Clean Air Act (IEc, 2009).
While reviewing the draft report, EPA's Advisory Council on Clean Air Compliance Analysis
concluded that "the challenges for assessing progress in health improvement as a result of
reductions in emissions of hazardous air pollutants (HAPs) are daunting..due to a lack of
exposure-response functions, uncertainties in emissions inventories and background levels, the
difficulty of extrapolating risk estimates to low doses and the challenges of tracking health
progress for diseases, such as cancer, that have long latency periods" (U.S. EPA-SAB, 2008).
In 2009, EPA convened a workshop to address the inherent complexities, limitations, and
uncertainties in current methods to quantify the benefits of reducing HAPs. Recommendations
from this workshop included identifying research priorities, focusing on susceptible and
vulnerable populations, and improving dose-response relationships (Gwinn et al., 2011).
In summary, monetization of the benefits of reductions in cancer incidences requires
several important inputs, including central estimates of cancer risks, estimates of exposure to
carcinogenic HAPs, and estimates of the value of an avoided case of cancer (fatal and non-fatal).
Due to methodology and time limitations under the court-ordered schedule, we did not attempt to
monetize the health benefits of reductions in HAPs in this analysis. Instead, we provide a
qualitative analysis of the health effects associated with the HAPs anticipated to be reduced by
these rules and we summarize the results of the residual risk assessment for the NESHAP. EPA
remains committed to improving methods for estimating HAP benefits by continuing to explore
additional concepts of benefits, including changes in the distribution of risk.
Available emissions data show that several different HAPs are emitted from residential
wood heaters. In the subsequent sections, we describe the health effects associated with the main
HAPs of concern. With the data available, it was not possible to estimate the tons of each
individual HAP that would be reduced.
7.3.3.1 Benzene
The EPA's IRIS database lists benzene as a known human carcinogen (causing leukemia)
by all routes of exposure, and concludes that exposure is associated with additional health
effects, including genetic changes in both humans and animals and increased proliferation of
7-18

-------
bone marrow cells in mice.20,21-22 EPA states in its IRIS database that data indicate a causal
relationship between benzene exposure and acute lymphocytic leukemia and suggest a
relationship between benzene exposure and chronic non-lymphocytic leukemia and chronic
lymphocytic leukemia. The I ARC has determined that benzene is a human carcinogen and the
DHHS has characterized benzene as a known human carcinogen.23,24
A number of adverse noncancer health effects including blood disorders, such as
preleukemia and aplastic anemia, have also been associated with long-term exposure to
benzene.2^26
7.3.3.2 Dioxim (Chlorinateddibemodioxim (CDDs)"
A number of effects have been observed in people exposed to 2,3,7,8-TCDD levels that
are at least 10 times higher than background levels. The most obvious health effect in people
exposed to relatively large amounts of 2,3,7,8-TCDD is chloracne. Chloracne is a severe skin
disease with acne-like lesions that occur mainly on the face and upper body. Other skin effects
noted in people exposed to high doses of 2,3,7,8-TCDD include skin rashes, discoloration, and
excessive body hair. Changes in blood and urine that may indicate liver damage also are seen in
people. Alterations in the ability of the liver to metabolize (or breakdown) hemoglobin, lipids,
sugar, and protein have been reported in people exposed to relatively high concentrations of
2,3,7,8-TCDD. Most of the effects are considered mild and were reversible. However, in some
people these effects may last for many years. Slight increases in the risk of diabetes and
abnormal glucose tolerance have been observed in some studies of people exposed to 2,3,7,8-
TCDD. We do not have enough information to know if exposure to 2,3,7,8-TCDD would result
20	U.S. Environmental Protection Agency (U.S. EPA). 2000. Integrated Risk Information System File for Benzene.
Research and Development, National Center for Environmental Assessment, Washington, DC. This material is
available electronically at: http://www.epa.gov/iris/subst/0276.htm.
21	International Agency for Research on Cancer, IARC monographs on the evaluation of carcinogenic risk of
chemicals to humans, Volume 29. Some industrial chemicals and dyestulTs, International Agency for Research
on Cancer, World Health Organization, Lyon, France, p. 345-389, 1982.
22	Irons, R.D.; Stillman. W.S.; Colagiovanni, D.B.; Henry, V.A. (1992) Synergistic action of the benzene metabolite
hydroquinone on myelopoietic stimulating activity of granulocyte/macrophage colony-stimulating factor in vitro,
Proc, Natl. Acad. Sci. 89:3691-3695.
25 International Agency for Research on Cancer (IARC). 1987. Monographs on the evaluation of carcinogenic risk of
chemicals to humans, Volume 29, Supplement 7, Some industrial chemicals and dyestuffs, World Health
Organization, Lyon, France.
34 U.S. Department of Health and Human Services National Toxicology Program 11 th Report on Carcinogens
available at; http://ntp.niehs.nih.gov/go/l6183.
25 Aksoy, M. (1989). Hcmatotoxicity and carcinogenicity of benzene. Environ. Health Perspect. 82: 193-197.
24 Goldstein. B.D. (1988). Benzene toxicity. Occupational medicine. State of the Art Reviews. 3; 541-554.
7-19

-------
in reproductive or developmental effects in people, but animal studies suggest that this is a
potential health concern.
In certain animal species, 2,3,7,8-TCDD is especially harmful and can cause death after a
single exposure. Exposure to lower levels can cause a variety of effects in animals, such as
weight loss, liver damage, and disruption of the endocrine system. In many species of animals,
2,3,7,8-TCDD weakens the immune system and causes a decrease in the system's ability to fight
bacteria and viruses at relatively low levels (approximately 10 times higher than human
background body burdens). In other animal studies, exposure to 2,3,7,8-TCDD has caused
reproductive damage and birth defects. Some animal species exposed to CDDs during pregnancy
had miscarriages and the offspring of animals exposed to 2,3,7,8-TCDD during pregnancy often
had severe birth defects including skeletal deformities, kidney defects, and weakened immune
responses. In some studies, effects were observed at body burdens 10 times higher than human
background levels.
7.3.3.3 Formaldehyde
Since 1987, EPA has classified formaldehyde as a probable human carcinogen based on
evidence in humans and in rats, mice, hamsters, and monkeys.28 EPA is currently reviewing
recently published epidemiological data. After reviewing the currently available epidemiological
evidence, the IARC (2006) characterized the human evidence for formaldehyde carcinogenicity as
"sufficient,based upon the data on nasopharyngeal cancers; the epidemiologic evidence on
leukemia was characterized as "strong."29 EPA is reviewing the recent work cited above from the
NCI and NIOSH, as well as the analysis by the CUT Centers for Health Research and other studies,
as part of a reassessment of the human hazard and dose-response associated with formaldehyde.
Formaldehyde exposure also causes a range of noncancer health effects, including irritation of
the eyes (burning and watering of the eyes), nose, and throat. Effects from repeated exposure in
humans include respiratory tract irritation, chronic bronchitis, and nasal epithelial lesions such as
metaplasia and loss of cilia. Animal studies suggest that formaldehyde may also cause airway
28	U.S. EPA. 1987. Assessment of Health Risks to Garment Workers and Certain Home Residents from Exposure to
Formaldehyde. Office of Pesticides and Toxic Substances, April 1987.
29	International Agency for Research on Cancer (2006) Formaldehyde, 2-Butoxycthanol and l-tcrt-Butoxypropan-2-
ol. Monographs Volume 88. World Health Organization. Lyon, France.
7-20

-------
inflammation—including eosinophil infiltration into the airways. Several studies suggest that
formaldehyde may increase the risk of asthma—particularly in the young.30 31
7.3.3.4 Polycyclic Organic Mailer (POM)
The term polycyclic organic matter (POM) defines a broad elass of compounds that
includes the polycyclic aromatic hydrocarbon compounds (PAHs), of which benzo[a]pyrene is a
member, POM compounds are formed primarily from combustion and are present in the
atmosphere in particulate form. Sources of air emissions are diverse and include cigarette smoke,
vehicle exhaust, home heating, laying tar, and grilling meat. Cancer is the major concern from
exposure to POM. Epidemiologic studies have reported an increase in lung cancer in humans
exposed to coke oven emissions, roofing tar emissions, and cigarette smoke; all of these mixtures
contain POM compounds. Animal studies have reported respiratory tract tumors from
inhalation exposure to benzofajpyrene and forestomach tumors, leukemia, and lung tumors from
oral exposure to benzo[a]pyrene. EPA has classified seven PAHs (benzo[a]pyrene,
benz[a]anthracene, chrysene, benzo[b]fluoranthene, benzo[k]fluoranthene,
dibenz[a,h]anthracene, and indeno[l,2,3-cd]pyrene) as Group B2, probable human carcinogens.33
Recent studies have found that maternal exposures to PAHs in a population of pregnant women
were associated with several adverse birth outcomes, including low birth weight and reduced
length at birth, as well as impaired cognitive development in preschool children (3 years of
age).34,35 EPA has not yet evaluated these recent studies.
,0 Agency for Toxic Substances and Disease Registry (ATSDR). 1999. Toxicological profile for Formaldehyde.
Atlanta. GA: U.S. Department of Health and Human Services, Public Health Service. Available at
http://www.atsdr.cdc.gov/toxprofiles/lpI 11 .html.
" WHO. 2002. Concise International Chemical Assessment Document 40: Formaldehyde. Published under the joint
sponsorship of the United Nations Environment Programme, the International Labour Organization, and the
World Health Organization, and produced within the framework of the Inter-Organization Programme for the
Sound Management of Chemicals. Geneva.
" Agency for Toxic Substances and Disease Registry (ATSDR). 1995. Toxicological profile for Polycyclic
Aromatic Hydrocarbons (PAHs). Atlanta, GA: U.S. Department of Health and Human Services, Public Health
Service. Available electronically at http://www.atsdr.cdc,gov/ToxProfiles/TP,asp?id=122&tid=25,
U.S. EPA. 1997. Integrated Risk Information System File of indeno(l,2,3-cd)pyrene. Research and Development,
National Center for Environmental Assessment, Washington, DC. This material is available electronically at
http://www.epa.gov/ncea/iris/subst/0457.htm,
34	Perera, F.P.; Rauh, V.; Tsai, W-Y.; et al. 2002. Effect of transplacental exposure to environmental pollutants on
birth outcomes in a multiethnic population. Environ Health Perspect. 111:201-205,
35	Perera, F.P.; Rauh, V.; Whyatt, R.M.: Tsai, W.Y,; Tang, D.; Diaz, D.; Hoepner, L.; Barr, D.; Tu, Y.H.; Camann,
D.; Kinney, P. 2006. Effect of prenatal exposure to airborne polycyclic aromatic hydrocarbons on
neurodevelopment in the first 3 years of life among inner-city children. Environ Health Perspect i 14:1287-1292.
7-21

-------
7.3.3.5 Other Air Toxics
In addition to the compounds described above, other compounds from would be affected
by this rule. Information regarding the health effects of these compounds can be found in EPA's
IRIS database.36
7.3.4	VOCs as a PM2.$ precursor
This rulemaking is expected to reduce emissions of VOCs, which are a precursor to
PM2.5 Most VOCs emitted are oxidized to carbon dioxide (C02) rather than to PM, but a portion
of VOC emission contributes to ambient PM2.5 levels as organic carbon aerosols (U.S. EPA,
2009a). Therefore, reducing these emissions would reduce PM2.5 formation, human exposure to
PM2 5, and the incidence of PM2 s-related health effects. However, we have not quantified the
PM2 s-related benefits in this analysis. Analysis of organic carbon measurements suggest only a
fraction of secondarily formed organic carbon aerosols are of anthropogenic origin. The current
state of the science of secondary organic carbon aerosol formation indicates that anthropogenic
VOC contribution to secondary organic carbon aerosol is often lower than the biogenic (natural)
contribution. Given that a fraction of secondarily formed organic carbon aerosols is from
anthropogenic VOC emissions and the extremely small amount of VOC emissions from this
sector relative to the entire VOC inventory it is unlikely this sector has a large contribution to
ambient secondary organic carbon aerosols. Photochemical models typically estimate secondary
organic carbon from anthropogenic VOC emissions to be less than 0.1 ug/m .
Due to limited resources, we were unable to perform air quality modeling for this rule.
Therefore, given the high degree of variability in the responsiveness of PM2 5 formation to VOC
emission reductions, we are unable to estimate the effect that reducing VOCs will have on
ambient PM2 5 levels without air quality modeling.
7.3.5	Ozone Benefits
In the presence of sunlight, NOx and VOCs can undergo a chemical reaction in the
atmosphere to form ozone. Reducing ambient ozone concentrations is associated with
significant human health benefits, including mortality and respiratory morbidity (U.S. EPA,
2008a). Epidemiological researchers have associated ozone exposure with adverse health effects
in numerous toxicological, clinical and epidemiological studies (U.S. EPA, 2006c). These health
effects include respiratory morbidity such as fewer asthma attacks, hospital and ER visits, school
loss days, as well as premature mortality.
U.S. EPA Integrated R
sk Information System (IRIS) database is available at; www.epa.gov/iris.
7-22

-------
7. J. 6 Visibility Impairment
Reducing secondary formation of PM2 5 would improve visibility throughout the U.S.
Fine particles with significant light-extinction efficiencies include sulfates, nitrates, organic
carbon, elemental carbon, and soil (Sisler, 1996). Suspended particles and gases degrade
visibility by scattering and absorbing light. Higher visibility impairment levels in the East are
due lo generally higher concentrations of fine particles, particularly sulfates, and higher average
relative humidity levels. Visibility has direct significance to people's enjoyment of daily
activities and their overall sense of wellbeing. Good visibility increases the quality of life where
individuals live and work, and where they engage in recreational activities. Previous analyses
(U.S. EPA, 2006; U.S. EPA, 201 la; U.S. EPA, 201 lb) show that visibility benefits are a
significant welfare benefit category. Without air quality modeling, we are unable to estimate
visibility related benefits, nor are we able to determine whether VOC emission reductions would
be likely to have a significant impact on visibility in urban areas or Class I areas.
7.4 Characterization of Uncertainty in the Monetized PM2.5 Benefits
In any complex analysis, there are likely to be many sources of uncertainty. Many inputs
are used to derive the final estimate of economic benefits, including emission inventories, air
quality models (with their associated parameters and inputs), epidemiological estimates of
concentration-response (C-R) functions, estimates of values, population estimates, income
estimates, and estimates of the future state of the world (i.e., regulations, technology, and human
behavior). For some parameters or inputs it may be possible to provide a statistical
representation of the underlying uncertainty distribution. For other parameters or inputs, the
necessary information is not available. As discussed in the PM2.5 NAAQS RIA (Table 5.5) (U.S.
EPA, 2006), there are a variety of uncertainties associated with these PM benefits. Therefore,
the estimates of annual benefits should be viewed as representative of the magnitude of benefits
expected, rather than the actual benefits that would occur every year.
It is important to note that the monetized benefit-per-ton estimates used here reflect
specific geographic patterns of emissions reductions and specific air quality and benefits
modeling assumptions. For example, these estimates do not reflect local variability in population
density, meteorology, exposure, baseline health incidence rates, or other local factors. Use of
these $/ton values to estimate benefits associated with different emission control programs (e.g.,
for reducing emissions from large stationary sources like EGUs) may lead to higher or lower
benefit estimates than if benefits were calculated based on direct air quality modeling. Great care
should be taken in applying these estimates to emission reductions occurring in any specific
location, as these are all based on national or broad regional emission reduction programs and
7-23

-------
therefore represent average benefits-per-ton over the entire United States. The benefits-per-ton
for emission reductions in specific locations may be very different than the estimates presented
here.
PM2.5 mortality co-benefits are the largest benefit category that we monetized in this
analysis. To better characterize the uncertainty associated with mortality impacts that are
estimated to occur in areas with low baseline levels of PM2.5. we included the LML assessment.
For this analysis, policy-specific air quality data is not available due to time or resource
limitations, thus we are unable to estimate the percentage of premature mortality associated with
this specific rule's emission reductions at each PM2.5 level. As a surrogate measure of mortality
impacts, we provide the percentage of the population exposed at each PM2.5 level using the
source apportionment modeling used to calculate the benefit-per-ton estimates for this sector. A
very large proportion of the population is exposed at or above the lowest LML of the cohort
studies (Figures 7-6 and 7-7), increasing our confidence in the PM mortality analysis. Figure 7-6
shows a bar chart of the percentage of the population exposed to various air quality levels in the
pre- and post-policy policy. Figure 7-7 shows a cumulative distribution function of the same
data. Both figures identify the LML for each of the major cohort studies. As the policy shifts
the distribution of air quality levels, fewer people are exposed to PM2 5 levels at or above the
LML. Using the Pope et al. (2002) study, the 77% of the population is exposed to annual mean
PMi 5 levels at or above the LML of 7.5 pg/m3. Using the Laden et al. (2006) study, 25% of the
population is exposed above the LML of 10 pg/m3. As we model avoided premature deaths
among populations exposed to levels of PM2.5, we have lower confidence in levels below the
LML for each study. It is important to emphasize that we have high confidence in PM?. s-related
effects down to the lowest LML of the major cohort studies. Just because we have greater
confidence in the benefits above the LML, this does not mean that we have no confidence that
benefits occur below the LML.
A large fraction of the baseline exposure occurs below the level of the National Ambient
Air Quality Standard (NAAQS) for annual PM2.5 at 15 pg/m3, which was set in 2006. It is
important to emphasize that NAAQS are not set at a level of zero risk. Instead, the NAAQS
reflect the level determined by the Administrator to be protective of public health within an
adequate margin of safety, taking into consideration effects on susceptible populations. While
benefits occurring below the standard may be less certain than those occurring above the
standard, EPA considers them to be legitimate components of the total benefits estimate.
7-24

-------
2S'.
20%
tor.
STi
or.
LML of Pope ct 2002 study
I
7.5 8
LML of Laden et M. 2006 '?tgdy
19 1} 14 16 18 20
12
S&solino annua! mean PMj j level (pg/ni3)
Among the populations exposed to PM2 s in the baseline:
77% are exposed to PMIS levels at or above the LliL of the Pope et al. (2002) stud/
25% are exposed to PM^ s levels at or above the LML of the Laden ec al. (2006) study
Figure 7-6. Percentage of Adult Population by Annual Mean PM2.5 Exposure in the
Baseline
7-25

-------
c
w
o
a.
o
CL
LML of Pope ct nl. 2002 sludy
LML of Lid en ci al. 2006 stud*'
0% 			
I 2 3 4 S 6 7 7.S 8 9 10 12 14 16 IB 20 22
BaselineanriuaJ mew PM1S level (wg'nv5)
Among the populations exposed to PM2.$ in the baseline:
77% are exposed to PM>S levels at or above the LML of the Pope et aJ. (2002) study
25% are exposed to PM>S levels at or above the LML of the Laden et al (2006) study
Figure 7-7. Cumulative Distribution of Adult Population by Annual Mean PM2.5 Exposure
Above we present the estimates of the total benefits, based on our interpretation of the
best available scientific literature and methods and supported by the SAB-HES and the NAS
(NRC, 2002). The benefits estimates are subject to a number of assumptions and uncertainties.
For example, for key assumptions underlying the estimates for premature mortality, which
typically account for at least 90% of the total benefits, we were able to quantify include the
following:
1.	PM2.5 benefits were derived through benefit per-ton estimates, which do not reflect
local variability in population density, meteorology, exposure, baseline health
incidence rates, or other local factors that might lead to an over-estimate or under-
estimate of the actual benefits of controlling directly emitted fine particulates.
2.	We assume that all fine particles, regardless of their chemical composition, are
equally potent in causing premature mortality. This is an important assumption,
because PM2.5 produced via transported precursors emitted from EGUs may differ
significantly from direct PM2.5 released from diesel engines and other industrial
in the Baseline
7-26

-------
sources, but no clear scientific grounds exist for supporting differential effects
estimates by particle type.
3.	We assume that the health impact function for fine particles is linear down to the
lowest air quality levels modeled in this analysis. Thus, the estimates include health
benefits from reducing fine particles in areas with varied concentrations of PM25.
including both regions that are in attainment with fine particle standard and those that
do not meet the standard down to the lowest modeled concentrations.
4.	To characterize the uncertainty in the relationship between PM2.5 and premature
mortality (which typically accounts for 85% to 95% of total monetized benefits), we
include a set of twelve estimates based on results of the expert elicitation study in
addition to our core estimates. Even these multiple characterizations omit the
uncertainty in air quality estimates, baseline incidence rates, populations exposed and
transferability of the effect estimate to diverse locations. As a result, the reported
confidence intervals and range of estimates give an incomplete picture about the
overall uncertainty in the PM2.5 estimates. This information should be interpreted
within the context of the larger uncertainty surrounding the entire analysis. For more
information on the uncertainties associated with PM2 > benefits, please consult the
PM2 5 NAAQS R1A (Table 5.5).
This RIA does not include the type of detailed uncertainty assessment fotmd in the PM
NAAQS RIA because we lack the necessary air quality input and monitoring data to run the
benefits model. In addition, we have not conducted any air quality modeling for this rule.
Moreover, it was not possible to develop benefit-per-ton metrics and associated estimates of
uncertainty using the benefits estimates from the PM RIA because of the significant differences
between the sources affected in that rule and those regulated here. However, the results of the
Monte Carlo analyses of the health and welfare benefits presented in Chapter 5 of the PM RIA
can provide some evidence of the uncertainty surrounding the benefits results presented in this
analysis.
7-27

-------
SECTION 8
COMPARISON OF MONETIZED BENEFITS AND COSTS
8.1 Summary
Because we were unable to monetize the co-benefits associated with reducing HAPs and
other pollutants such as VOCs and CO. ail monetized benefits reflect improvements in ambient
PM?.s concentrations. This results in an underestimate of the monetized benefits. Using a 3%
discount rate, we estimate the total monetized benefits of this proposed rule to be $2.0 billion to
$4.9 billion in the year of analysis (2018) (Table 8-1). Using a 7% discount rate, we estimate the
total monetized benefits to be $1.8 billion to $4.4 billion in 2018. The annualized social costs are
$8.0 million in 2018. The net benefits are therefore $2.0 billion to $4.9 billion at a 3% discount
rate for the benefits and $1.8 billion to $4.4 billion at a 7% discount rate. Considering the co-
proposed option to require hydronic healers to comply immediately upon promulgation, the
selected option reached benefits of $3.9 billion to $9.7 billion, using a 3% discount rate, in the 3
year-period (the 2013-2015 timeframe) after promulgation and $3.5 billion to $8.7 billion, at 7%
discount rate during the same period. Therefore, an increased benefit of $130 million to $310
million was realized over other proposed options for the same period at 3% discount rate. Annual
benefits were equal through all options thereafter. The net benefits of the hydronic heaters
option to require compliance upon promulgation are $3.9 billion to $9.7 billion, using a 3%
discount rate for benefits, in the 2013-2105 timeframe after promulgation and $3.5 billion to $8.7
billion, using a 7% discount rate for benefits, for that same time period. All estimates are in
2008$. The benefits from reducing other air pollutants have not been monetized in this analysis,
including reducing 33,000 tons of carbon monoxide, black carbon and several HAPs emissions
such as formaldehyde and benzene among others each year.
8-1

-------
Table 8-1. Summary of the Monetized Benefits, Social Costs, and Net Benefits for the
Proposed Residential Wood Heater NSPS in 2018 ($2008 millions)*
3% Discount Rate	7% Discount Rate
Level I + HI
Total Monetized Benefits'*
$2,000 to
$4,900
$1,800 to $4,400
Total Social Costs
$8

$8
Net Benefits
$2,000 to
$4,900
$1,800 to $4,400
Nontnonetized Benefits
33,000 tons of CO
2,800 tons ofVOC



Reduced exposure to HAPs, including formaldehyde, benzene, and polycyclic

organic matter



Reduced Climate effects due to black carbon emissions

Ecosystem effects



Visibility impairment


Level i +11
Total Monetized Benefits1'
$2,000 to
$4,900
$1,800 to $4,900
Total Social Costs
$8

$8
Net Benefits
$2,000 to
$4,900
$1,800 to $4,900
Nonmonetized Benefits
33,000 tons of CO


2,800 tons ofVOC
Reduced exposure to HAPs, including formaldehyde, benzene, and polycyclic
organic matter
Reduced Climate effects due to black carbon emissions
Ecosystem effects
Visibility impairment
a All estimates are for the year of analysis (2018) and are rounded to two significant figures. These results include
units anticipated to come online and the lowest cost disposal assumption.
b The total monetized benefits reflect the human health benefits associated with reducing exposure to PM2 S through
reductions of directly emitted PM2>. It is important to note that the monetized benefits include many but not all
health effects associated with PM, s exposure. Benefits are shown as a range from Pope et al. (2002) to Laden et
al. (2006). These models assume that all fine particles, regardless of their chemical composition, are equally
potent in causing premature mortality because the scientific evidence is not yet sufficient to allow differentiation
of effect estimates by particle type.
Figure 8-1 shows the full range of net benefits estimates (i.e., annual benefits minus
annualized costs) quantified in terms of PM2.5 benefits for the year of analysis (2018) under
Level I + III (and Level I+II).
8-2

-------
$7,000,000,000
$6,000,000,000
$5,000,000,000
W
§ $4,000,000,000
0
«/»
1
o
= $3,000,000,000
5
$2,000,000,000
$1,000,000,000
$0
Pope et al>

Cost estimate combined with total monetized benefits estimates derived from 2
epidemiology functions and 12 expert functions
Figure 8-1. Net annual benefits range in 2018 for PM2.5 reductions for Level I+III
8-3

-------
SECTION 9
REFERENCES
Agency for Toxic Substances and Disease Registry (ATSDR). 1995. Toxicologiccil Profile for
Polycyclic Aromatic Hydrocarbons (PAHs). Atlanta, GA: U.S. Department of Health and
Human Services, Public Health Service. Available at:
http://www,atsdr.cdc.gov/ToxProfiles/TP.asp?id=122&tid=25.
American Enterprise Institute (AEI) and Brookings Institution Joint Center for Regulatory
Studies. 1986. NSPS for Residential Wood Healers. Regulatory Impact Analysis. RIN:
2060-AB68. Available at; http://reg-markets.org/admin/authorpdfs/redirect-
safely.php?fname=,./pdfftles/2060-AB68.RIA.pdf.
Bernstein, M.A., and J. Griffin. 2005. Regional Differences in the Price-Elasticity of Demand for
Energy\ The RAND Corporation. Available at:
http://www.rand.org/pubs/technical_reports/2005/RAND_TR292.pdf,
Chernov, A. 2008. Masonry Heaters: Planning Guide for Architects, Home Designers, and
builders. Stovemaster Web site. Available at:
http://www.stovemaster.com/files/masonry.pdf.
Dagan, D. January 7, 2005. "Warming Up to Stoves.*' Central Penn Business Journal. Available
at: http://www.allbusiness.eom/sales/l 033217-1 .html.
Dun & Bradstreet (D&B). 2010. D&B Marketplace. A company information database searchable
by NA1CS code. Accessed on July 15, 2010.
Fann, N., C. M. Fulcher, and B. J. Hubbcll. 2009. "The Influence of Location, Source, and
Emission Type in Estimates of the Human Health Benefits of Reducing a Ton of Air
Pollution." Air Quality, Atmosphere, and Health 2:169-176.
Fireplaces & Woodstoves. 2010. "Masonry Heaters."
http://www.fireplacesandwoodstoves.com/indoor-firepIaces/masonry-fireplaces.aspx.
Frost & Sullivan. 2010. Project; Market Research and Report on North American Residential
Wood Healers, Fireplaces, and Hearth Heating Products Market (P.O. # PO1-IMP402-
F&S). Prepared for EC/R.
Fullerton, D., and G. Metcalf. 2002. "Tax Incidence." In A. Auerbach and M. Feldstein, eds.,
Handbook of Public Economics, Vol. 4, Amsterdam: Elsevier.Hearth, Patio, and
Barbeque Association (HPBA). 2010a. "Comments for the Small Business Advocacy
Review (SBAR) Panel, Regarding the Revision of New Source Performance Standards
for New Residential Wood Heaters." Comments submitted to EPA on September 12,
2010.
9-1

-------
Gwinn, M.R.. J, Craig, D.A. Axelrad, R. Cook, C. Dockins, N, Farm. R. Fegley, D.E. Guinnup.
G, Helfand, B. Hubbell, S.L. Mazur, T. Palma, R.L. Smith, J. Vandenberg, and B.
Sonawane. 2011. "Meeting report: Estimating the benefits of reducing hazardous air
pollutants—summary of 2009 workshop and future considerations." Environ Health
Perspect. 119(1): p. 125-30.
Hearth, Patio, and Barbecue Association (HPBA). 2010c. "Outdoor Heating Options." Available
at: http://www.hpba.org/consumers/outdoor-living/outdoor-heating-options.
Hearth, Patio, and Barbeque Association (HPBA). 2010b. "Fireplace Insert Fact Sheet."
Available at: http://static.hpba.org/fileadmin/factsheets/product/FS_FireplaceInsert.pdf.
Houck, J. 2009. "Let's Not Forget about Coal." Hearth Home, December. Available at:
http://w\vw. hearthandhome.com/articles. html.
Houck, J., and P. Tiegs. 2009. "There's a Freight Train Comin'." Hearth & Home. December.
Available at: http://www.hearthandhome.com/articles.html.
Industrial Economics, Inc (IEc). 2006. Expanded Expert Judgment Assessment of the
Concentration-Response Relationship Between PM?, Exposure and Mortality. Prepared
for the U.S. EPA, Office of Air Quality Planning and Standards, September. Available at:
http://www.epa.gov/ttn/ecas/regdata/Uncertainty/pm_ee_report.pdf.
Industrial Economics, Inc (IEc). 2009. Section 812 Prospective Study of the Benefits and Costs of
the Clean Air Act: Air Toxics Case Study—Health Benefits of Benzene Reductions in
Houston, 1990-2020. Final Report, July 14, 2009. <
http://www.epa.gov/air/sect812/dec09/812CAAA_Benzene_Houston_Final_Report_July
2009.pdf >. Accessed March 30. 2011.
Kochi, I., B. Hubbell, and R. Kramer. 2006. "An Empirical Bayes Approach to Combining
Estimates of the Value of Statistical Life for Environmental Policy Analysis."
Environmental and Resource Economics 34:385-406.
Krewski D, Jerrett M, Burnett RT, Ma R, Hughes E, Shi, Y, et al. 2009. Extended follow-up and
spatial analysis of the American Cancer Society study linking particulate air pollution
and mortality. HEI Research Report, 140, Health Effects Institute, Boston, MA.
Laden, F., J. Schwartz, F.E. Speizer, and D W. Dockery. 2006. Reduction in Fine Particulate Air
Pollution and Mortality. American Journal of Respiratory and Critical Care Medicine.
173: 667-672.
Landsburg, S.H. 2005. Price Theory and Applications. 6th Ed. Thomson South Western.Mason,
OH.
Mankiw, N.G. 1998. Principles of Economics. Orlando, Fl: Dryden Press.
Masonry Heater Association of North America (MHA). 1998. MI-IA Masonry Heater Definition.
Available at: http://mha-net.org/docs/def-mha.htm.
9-2

-------
Morgenstern, R. D„ W. A. Pizer, and J. S. Shih. 2002. "Jobs versus the Environment: An
Industry-Level Perspective." Journal of Environmental Economics and Management
43(3):412-436.
Mrozek, J.R., and L.O. Taylor. 2002. "What Determines the Value of Life? A Meta-Analysis."
Journal of Policy Analysis and Management 21 (2):253-270.
National Research Council (NRC). 2002. Estimating the Public Health Benefits of Proposed Air
Pollution Regulations. Washington, DC: The National Academies Press.
Nicholson, Walter. 1998. Microeconomic Theory. Orlando: The Dryden Press.
Northeast States for Coordinated Air Use Management (NESCAUM). 2006. Assessment of
Outdoor Wood-Fired Boilers. March, 2006 (Revised June, 2006). Available at:
http://www.nescaum.org/documents/assessment-of-outdoor-wood-fired-boilers.
Office of Management and Budget (OMB). 2003. Circular A-4: Regulatory Analysis.
Washington, DC. Available on the Internet at
http://wwvv.whitelioiise.gov/omb/circiilars/a004/a-4.html.
Pope, C.A., III, R.T. Burnett, M.J. Thun, E.E. Calle, D. Krewski, K. Ito, and G.D. Thurston.
2002. "Lung Cancer, Cardiopulmonary Mortality, and Long-term Exposure to Fine
Particulate Air Pollution." Journal of the American Medical Association 287:1132-1141.
Roman, Henry A., Katherine D. Walker, Tyra L. Walsh, Lisa Conner, Harvey M. Richmond,
Bryan.J. Hubbell. and Patrick L. Kinney. 2008. "Expert Judgment Assessment of the
Mortality Impact of Changes in Ambient Fine Particulate Matter in the U.S.
Environmental Science & Technology 42(7):2268-2274,
Seaton, T. 2010. "Masonry Heater Industry Analysis: Residential Sold Fuel Burning Appliance
SBREFA Process." Industry comments submitted to EPA on September 12, 2010.
Sisler, J.F. 1996. Spatial and seasonal patterns and long-term variability of the composition of
the haze in the United States: an analysis of data from the IMPROVE network. CIRA
Report, ISSN 0737-5352-32. Colorado State University.
The Risk Management Association. 2008. Annual Statement Studies, Financial Ratio
Benchmarks 2008-2009. Risk Management Association, Philadelphia: 2008.
U.S. Census Bureau. 2007. Survey of Plant Capacity 2006. "Table la. Full Capacity Utilization
Rates by Industry Fourth Quarter 2002-2006." U.S. Census Bureau: Washington DC.
Report No. MQ-CK06). Available at:
http://www.census.gov/manufacturing/capacity/historical_data/index.html.
U.S. Census Bureau. 2008a. Firm Size Data from the Statistics of U.S. Businesses: U.S. Detail
Employment Sizes: 2002. ,
9-3

-------
U.S. Census Bureau. 2008b. Firm Size Data from the Statistics of U.S. Businesses, U.S. All
Industries Tabulated by Receipt Size: 2002, .U.S. Census Bureau. 2009. American Community Survey: 2006-2008.
Available at:
http://factfinder.census.gov/servlet/DatasetMainPageServlet? program ACS&submenu
Id=&_lang=en&_ts=.
U.S. Census Bureau. 2010a. American Fact Finder. Sector 31: Annual Survey of Manufactures:
General Statistics: Statistics for Industry Groups and Industries: 2008 and 2007.
Available at: http://factfinder.census.gov. Accessed July 20, 2010.
U.S. Census Bureau. 2010b. American Fact Finder. Sector 23: EC0723SG01: Construction:
Summary Series: General Summary: Detailed Statistics for Establishments: 2007.
Available at: http://factfinder.census.gov. Accessed July 20, 2010.
U.S. Census Bureau. 2010c. American Fact Finder. Sector 42: EC0742A1: Wholesale Trade:
Geographic Area Series: Summary Statistics for the United States, States, Metro Areas,
Counties, and Places: 2007. Available at: http://factfinder.census.gov. Accessed July 20,
2010.
U.S. Census Bureau. 2010d. American Fact Finder. Sector 44: EC0744A1: Retail Trade:
Geographic Area Series: Summary Statistics for the United States, States, Metro Areas,
Counties, and Places: 2007. Available at: http://factfmder.census.gov. Accessed July 20.
2010.
U.S. Census Bureau. 2010e. Census Regions and Divisions of the United States. Available at:
http://www.census.gov/geo/www/us_regdiv.pdf. Accessed September 12, 2010.
U.S. Census Bureau. 201 Of. North American Industrial Classification System [NAICS] Code
Definitions Web site. Available at: http://www.census.gov/eos/www/naics/.
U.S. Department of Energy (DOE). 2009. "Your Home: Selecting Heating Fuel and System
Types." ENERGYSTAR Web site. U.S. Department of Energy. Available at:
http: //www. e nergy savers. go v/
your home/space healing cooling/index.cfm/mytopic=l 2330.
U.S. Department of Energy (DOE). 2010. "Your Home: Masonry Heaters." ENERGYSTAR
Web site. U.S. Department of Energy. Available at:
http://www.energysavers.gov/your home/space_heating_cooling/index.cfm/mytopic= 125
70.
U.S. Energy Information Administration (EIA). 2009. Residential En erg}' Consumption Survey:
2005. Available at: http://www.eia.doe.gov/emeu/recs/recspubuse05/pubuse05.htnil.
9-4

-------
U.S. Environmental Protection Agency - Science Advisory Board (U.S. EPA-SAB). 2007. SAB
Advisory on EPA's Issues in Valuing Mortality Risk Reduction. EPA-SAB-08-001.
October. Available on the Internet at
.
U.S. Environmental Protection Agency - Science Advisory Board (U.S. EPA-SAB). 2009a.
Review of EPA's Integrated Science Assessment for Particulate Matter (First External
Review Draft, December 2008), EPA-COUNCIL-09-008. May. Available on the
Internet at
.
U.S. Environmental Protection Agency (EPA). 2002. "Profile of the Pulp and Paper Industry."
Sector Notebook Project. Available at:
http://www.epa.gov/Compliance/resources/publications/assistance/sectors/notebooks/inde
x.html.
U.S. Environmental Protection Agency (EPA). 2006a. Final Guidance EPA Rulewriters:
Regulatory Flexibility Act as Amended by the Small Business and Regulatory
Enforcement Fairness Act. < http://www.epa.gov/sbrefa/documents/rfaguidance 11 -00-
06,pdf>
U.S. Environmental Protection Agency (EPA). 2006b. Regulatory Impact Analysis. 2006
National Ambient Air Quality Standards for Particulate Matter. Chapter 5. Available at:
http://www.epa.gov/ttn/ecas/regdata/RIAs/Chapter%205--BeneFits.pdf.
U.S. Environmental Protection Agency (EPA). 2008. Integrated Science Assessment for Sulfur
Oxides—Health Criteria (Final Report). National Center for Environmental Assessment,
Research Triangle Park, NC. Available at:
http://cfpub.epa.gov/ncea/cfm/recordisplay.cfm?deid=l 98843.
9-5

-------
U.S. Environmental Protection Agency (U.S. EPA). 2009a. Regulatory Impact Analysis:
National Emission Standards for Hazardous Air Pollutants from the Portland Cement
Manufacturing Industry. Office of Air Quality Planning and Standards, Research
Triangle Park, NC. April. Available on the Internet at
.
U.S. Environmental Protection Agency (U.S. EPA). 2009b. Integrated Science Assessment for
Particulate Matter (Final Report). EPA-600-R-08-139F. National Center for
Environmental Assessment - RTP Division. December. Available on the Internet at
.
U.S. Environmental Protection Agency (EPA). 2009c. Subpart AAA-Standards of Performance
for New Residential Wood Heaters. Discussion Draft. Available at:
http://www.hpba.org/admin/NSPS-Review-Document.pdf.
U.S. Environmental Protection Agency (EPA). 2010a. Integrated Science Assessment for Carbon
Monoxide. National Center for Environmental Assessment, Research Triangle Park, NC.
EPA/600/R-09/019F. January. Available at:
http://cfpub.epa.gov/ncea/cfm/recordisplay. cfm?deid=218686.
U.S. Environmental Protection Agency (EPA). 2010b. Final Regulatory Impact Analysis (RIA)
for the SO2 National Ambient Air Quality Standards (NAAOS). Office of Air Quality
Planning and Standards, Research Triangle Park, NC. June. Available at:
http://www.epa.gov/ttn/ecas/regdata/RIAs/fso2rial00602full.pdf.
U.S. Environmental Protection Agency (EPA). 2010c. Guidelines for Preparing Economic
Analyses. EPA 240-R-10-001. Washington, DC: National Center for Environmental
Economics, Office of Policy Economics and Innovation. Available at:
http://yosemite.epa.gov/ee/epa/eed.nsf/webpages/Guidelines.html/$file/cover.pdf.
U.S. Environmental Protection Agency (EPA). 2010d. Lowest Measured Level (LML)
Assessment for Rules without Policy-Specific Air Quality Data Available: Technical
Support Document. Office of Air Quality Planning and Standards, Research Triangle
Park, NC. July. Available at:
http://www.epa.gov/ttn/ecas/regdata/Benefits/thresholdstsd.pdf.
U.S. Environmental Protection Agency (EPA). 2010e. Regulatory Impact Analysis for the
Proposed Federal Transport Rule. Office of Air Quality Planning and Standards,
Research Triangle Park, NC. July. Available at:
http://www.epa.gov/ttn/ecas/regdata/RIAs/proposaltrria_final.pdf.
U.S. Environmental Protection Agency (EPA). 201 Of. Regulatory Impact Analysis for the SO:
NAAQS. Office of Air Quality Planning and Standards, Research Triangle Park, NC.
June. Available at: http://www.epa.gov/ttn/ecas/regdata/RlAs/fso2rial00602full.pdf.
U.S. Environmental Protection Agency (EPA). May 2004. Final Regulator)' Analysis: Control of
Emissions from Nonroad Diesel Engines. EPA420-R-04-007. Washington, DC: EPA. <
http://www.epa.gov/nonroad-diesel/2004fr/420r04007.pdf>.
9-6

-------
U.S. Environmental Protection Agency (U.S. EPA). 2000. Guidelines for Preparing Economic
Analyses. EPA 240-R-00-003. National Center for Environmental Economics, Office of
Policy Economics and Innovation. Washington, DC. September. Available on the
Internet at
.
U.S. Environmental Protection Agency (U.S. EPA). 201 lb. Regulatory Impact Analysis for the
Final Transport Rule. Office of Air Quality Planning and Standards, Research Triangle
Park, NC. June. Available at .
U.S. Environmental Protection Agency (U.S. EPA). 2008b. Integrated Science Assessment for
Sulfur Oxides—Health Criteria (Final Report). National Center for Environmental
Assessment, Research Triangle Park, NC. Available at
.
U.S. Environmental Protection Agency (U.S. EPA). 2008c. Integrated Science Assessment for
Oxides of Nitrogen - Health Criteria (Final Report). National Center for Environmental
Assessment, Research Triangle Park, NC. July. Available at at
.
U.S. Environmental Protection Agency (U.S. EPA). 2008d. Integrated Science Assessment for
Oxides of Nitrogen and Sulfur-Ecological Criteria National (Final Report). National
Center for Environmental Assessment, Research Triangle Park, NC. EPA/600/R-08/139.
December. Available at .
U.S. Environmental Protection Agency (U.S. EPA). 2010b. Technical Support Document:
Summary of Expert Opinions on the Existence of a Threshold in the Concentration-
Response Function for PM^.s-related Mortality. Research Triangle Park, NC. June.
Available on the Internet at .
U.S. Environmental Protection Agency (U.S. EPA). 2010c. Guidelines for Preparing Economic
Analyses. EPA 240-R-10-001. National Center for Environmental Economics, Office of
Policy Economics and Innovation. Washington, DC. December. Available on the Internet
at .
U.S. Environmental Protection Agency (U.S. EPA). 201 la. The Benefits and Costs of the Clean
Air Act from 1990 to 2020. Office of Air and Radiation, Washington, DC. March.
. Accessed March 30, 2011.
9-7

-------
U.S. Environmental Protection Agency EPA). 2010c. Summary of Expert Opinions on the
Existence of a Threshold in the Concentration-Response Function for PM2.$-r elated
Mortality: Technical Support Document. Compiled by Office of Air Quality Planning and
Standards, Research Triangle Park, NC. July. Available at:
http://www.epa.gov/ttn/ecas/benefits.html.
U.S. Environmental Protection Agency. 2006. Regulatory Impact Analysis, 2006 National
Ambient Air Quality Standards for Particulate Matter, Chapter 5. Available at
.
U.S. Environmental Protection Agency. 2008a. Regulatory Impact Analysis, 2008 National
Ambient Air Quality Standards for Ground-level Ozone, Chapter 6. Available at
.
U.S. Small Business Administration (SBA). September 2008. Table of Small Business Size
Standards Matched to North American Industry Classification Codes. Available at:
http://www.sba.gov/idc/groups/public/documents/sba_homepage/serv_sstd_tablepdf.pdf.
Viscusi, V.K., and J.E. Aldy. 2003. "The Value of a Statistical Life: A Critical Review of
Market Estimates throughout the World." Journal of Risk and Uncertainty 27(l):5-76.
Wade, S.H. 2003. "Price Responsiveness in the AE02003 NEMS Residential and Commercial
Buildings Sector Models." http://www.eia.doe.eov/oiaf/analvsispaper/elasticitv
/pdf/buildings.pdf
Wood Heat Organization. 2010. "Fireplace Inserts: The Cure for Cold Fireplaces." Available at:
http://www.woodheat.org/technology/inserts.htm.
9-8

-------
APPENDIX A:
EMISSIONS PERFORMANCE OF WOOD STOVES THAT ARE CURRENTLY
CERTIFIED
All (Non-Pellet) Heater Weighted Average Emissions Distribution
«.C	•		—	, , 									
7.0 -— Mean of EPA tmimwis for All (nor peltet) healers = 3.SS |/hr
Media n of EPA vwigtotd emissions for All (nor -pellet) heaters = &AO |/hr
n « 121 models. Stdev =1J2
60 — -	, 	 				„
SO	—								
WA State r/nir(4 5 £/hf} ?o? Non-Catalytic Keattrs,
4 0				
Median o' Weighted Emisiiots=3.4g/hr
ia : —,—_—		
WA State Umit [2.5 j/hr) for Catalytic Me ate rs
Jill I III I I 111
1	11	a	31	*1	51	61	71	II	91	101	in	171
Ranking
¦W«l|htad [witaiafli l|/«vr]
Non-Cataytic Heater Weighted Average Emissions Distribution
Average of alt Weighted Average Emissions ¦ 3.53 g/hf		
n = 106 models. Stdev. = 127
Average of d II weighted Ave rage Emissions	~	
lor He iters meeting Wash, state Umit = 3,19 g/ht,
wasrvington State umit (4.i g/hrj for Non- Cat a 'vt¦< Heater?
fiO
3 0 •
I
7.0
l	il	U	St	41	Si	61	71	II	<91	lot
RankJAf
A-l

-------
Cataytic Heater Weighted Average Emissions Distribution
i
«o ! A vera ge of weighted a veragsEmitsiop* = 2.05 g/hr. n = 13 mode's, Stdev.=0.91
Aver»geof allweighiedAverageEmusiona for Heaters meetingw«h. $iatelJmU = 1.77 g/hr,
Washington StateUmll j 2.5 g/hr) for Catalytic Heaters
¦ II 111
A-2

-------