Economic Impact Analysis for the National Emission Standards for Hazardous Air Pollutants: Rubber Tire Manufacturing Amendments, Final


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Economic Impact Analysis for the National
Emission Standards for Hazardous Air
Pollutants: Rubber Tire Manufacturing
Amendments, Final

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EP A-452/R-24-018
November 2024

Economic Impact Analysis for the National Emission Standards for Hazardous Air Pollutants:

Rubber Tire Manufacturing Amendments, Final

U.S. Environmental Protection Agency
Office of Air Quality Planning and Standards
Health and Environmental Impacts Division
Research Triangle Park, NC

in

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CONTACT INFORMATION

This document has been prepared by staff from the Office of Air Quality Planning and
Standards, U.S. Environmental Protection Agency. Questions related to this document should be
addressed to U.S. Environmental Protection Agency, Office of Air Quality Planning and
Standards, C439-02, Research Triangle Park, North Carolina 27711 (email:
oaqpseconomics@epa.gov).

iv

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1.0 Introduction

This report by the U.S. Environmental Protection Agency (EPA) contains the economic
impact analysis for EPA's review of the National Emission Standards for Hazardous Air
Pollutants: Rubber Tire Manufacturing Amendments. This action is a significant regulatory
action and was, therefore, submitted to the Office of Management and Budget (OMB) for
review. However, this action is not significant under 3(f)l of Executive Order 12866 (as
amended by Executive Order 14094).

The analysis in this report uses the information in the memorandum titled Final Rule -
Rubber Processing Control Costs, Emission Reductions, and Cost Effectiveness, which can be
found in the docket for this action. As detailed in that cost memorandum, we anticipate that a
total of 15 production facilities (owned by four ultimate parent companies) may be impacted by
this rulemaking. This includes 15 existing facilities. EPA does not have knowledge of new
facilities or installation of new additional mixers to existing facilities. Of the four affected
ultimate parent entities, none are small businesses. As detailed later in this report, the Agency
has determined that this action will not have a significant economic impact on a substantial
number of small entities (SISNOSE) under the Regulatory Flexibility Act.

This report includes some information on the affected industry and the source category,
rule requirements, compliance cost estimates, an assessment of economic impacts, and a small
business screening analysis.

2.0 Economic Basis for this Rulemaking

Regulation can be used to address market failures, which otherwise lead to a suboptimal
allocation of resources within the free market. Many environmental problems are classic
examples of "negative externalities", which arise when private entities do not internalize the full
opportunity cost of their production, and some of this opportunity cost is borne by members of
society who are neither consumers nor producers of the goods produced (i.e., they are
"external"). For example, the smoke from a factory may adversely affect the health of nearby
residents, soil quality, and visibility. Public goods such as air quality are valued by individuals
but suffer from a lack of property rights, so the value of good air quality tends to be unpriced in

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the markets that generate air pollution. In such cases, markets fail to allocate resources efficiently
and regulatory intervention is needed to address the problem.

While recognizing that the socially optimal level of pollution is often not zero, the
emissions from rubber tire manufacturing facilities impose costs on society (i.e., negative health
impacts) that may not be reflected in the equilibrium market prices for rubber tires. If emissions
from rubber tire manufacturing facilities increase risks to human health, some social costs will be
borne not by the firm and its customers but rather imposed on communities near the rubber tire
manufacturing facilities and other individuals exposed to their emissions. Consequently, absent a
regulation limiting emissions from rubber tire manufacturing facilities and causing firms to
internalize the external costs of their operations, emissions will exceed the socially optimal level.

3.0 Overview of the Industry, Source Category, and Rule Requirements

The rubber tire industry refers to the manufacturing of pneumatic casings, inner tubes,
and solid and cushion tires for all types of vehicles, airplanes, farm equipment, and children's
vehicles.1 The Standard Industrial Classification (SIC) for tire manufacturing is 3011, which
corresponds to the North American Industry Classification System (NAICS) of 326211 for Tire
manufacturing (except retreading). Tire manufacturing is a specialized process and facilities
often only produce tires and do not produce co-products or by-products.

The rubber tire manufacturing source category consists of facilities that produce rubber
tire components including but not limited to rubber compounds, sidewalls, tread, tire beads, tire
cord, and liners. The rubber tire manufacturing source category is further divided into four
subcategories: rubber processing, tire production, tire cord production (any fabric (for example,
polyester, cotton, steel) that is treated with a coating mixture that allows the fabric to more
readily accept impregnation with rubber to become an integral part of a rubber tire), and puncture
sealant application (Puncture sealant means a mixture that may include solvent constituents,
rubber, and process oil that is applied to the inner liner of a finished tire for the purpose of
sealing any future hole which might occur in the tread when an object penetrates the tire). For
additional information, see Section II.B of the preamble, which is in the docket.

1 Occupational Safety and Health Administration (OSHA). (1987). Description for 3011: Tires and inner tubes.

2

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Annual sales in the United States tire manufacturing industry were estimated to be
approximately $19 billion in 2021, according to the Annual Survey of Manufactures.2 The sector
was estimated to employ approximately 47,000 employees in 2021, and this estimated level of
employment is similar over the 2018 to 2021 timeframe.3

Table 1 displays annual production cost estimates for all US rubber tire manufacturing
establishments for 2021.4 The table split the costs of production into capital expenditure costs,
material costs, labor costs, electricity costs, and fuel costs. The cost of materials accounts for
most of the total production cost, followed by labor costs.

Table 1. Annual Production Costs of US Tire Manufacturing, 2021 (million dollars)

Year

Total Costs (million dollars)

Raw Materials

8,439

Labor Costs

3,215

Other Operating Expenses

1,416

Capital Expenditures

941

Electricity Costs

244

Fuel Costs

Source: Annual Production Costs, 2021. US Department of Commerce. 2018-2021. Annual Survey of
Manufacturers, Statistics for Industry Groups, and Industries.

Notes: (1) This data is for the NAICS code 326211, which is Tire manufacturing (except retreading). (2) Labor costs
reflect the Annual Payroll estimate in the source data.

Capital expenditures in 2021 were estimated to be $941 million, representing less than
seven percent of the estimated production costs detailed in Table 1. Of this 941 million annual
total for capital expenditures, $859 million is estimated to be capital expenditures for machinery
and equipment.5

Manufacturers of rubber tires use both natural and synthetic rubber to produce tires
Additionally, silica is used when manufacturing tread rubber as it improves performance and

2 U.S. Census Bureau. "Annual Survey of Manufactures: Summary Statistics for Industry Groups and Industries in
the U.S.: 2018 - 2021." Economic Surveys, ECNSVY Annual Survey of Manufactures Annual Survey of
Manufactures Area, Table AM1831BASIC01, 2021,

https://data.census.gov/table/ASMAREA2017.AM183 lBASIC01?q=AM183 lBASIC&n=326211. Accessed on
October 3, 2024. Note: This data is for the NAICS code 326211, which is Tire manufacturing (except retreading).

3 Ibid.

4 Ibid.

5 Ibid.

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durability. The supply of tires depends greatly on the production of rubber and can be influenced
by price swings in that market. Natural rubber producers are generally highly competitive
national companies from various countries in Southeast Asia, and do not hold very strong pricing
power.6 The supply elasticity of the natural rubber industry, a major input for tire production, is
estimated to be 0.3005.7 There are few substitution possibilities for pneumatic tires (e.g.,
passenger vehicle tires, truck tires, heavy equipment tires, etc.) However, there are different
recipes and processes used across companies resulting in variations of performance
specifications that allow companies to distinguish themselves competitively. The demand
elasticity for tires is fairly inelastic with respect to changes in price and is estimated to be -
0.3804.8 Assuming the affected industries are imperfectly competitive, based on this information,
one can conclude that demand is inelastic (i.e., will respond less than 1:1) with a change in price,
and that supply is somewhat inelastic (i.e., will respond less than 1:1) with a change in price.

This action amends the national emission standards for hazardous air pollutants
(NESHAP) for the Rubber Tire Manufacturing source category. This action sets maximum
achievable control technology floor emission limits for new and existing sources in the rubber
tire manufacturing source category, specifically the rubber processing subcategory. As detailed
in the cost memorandum, we anticipate that a total of 15 production facilities, owned by four
ultimate parent companies, may be impacted by this final rulemaking. Although the action
contains requirements for new sources, the EPA is not aware of any new sources being
constructed now or planned in the next three years, and, consequently, did not estimate any cost
impacts for new sources.

As described in Section III of the preamble for this action, the EPA is setting limits for
total hydrocarbon (THC) emissions as a surrogate for polycyclic aromatic hydrocarbons (PAH)
and all organic hazardous air pollutant (HAP) emissions, and filterable particulate matter (fPM)
emissions as a surrogate for metal HAP emissions. The EPA projects that many existing sources

6 Trangadisaikul, S. (2009). Oligopsony in the tire industry: A study of its impacts on the natural rubber industry in

Thailand. Doctoral thesis, Charles Sturt University.

https://researchoutput.csu.edu.au/files/109544308/Saowalak Trangadisaikul thesis.pdf

7 Ibid.

8 Trangadisaikul, S. (2011). Oligopsony in the tire industry: A study of its impacts on the natural rubber industry in

Thailand. Thailand and The World Economy, 29(1), 128-169. https://so05.tci-
thaii o. ore/index. php/TER/article/view/13 73 96

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would need to install add-on controls to comply with the emission limits, including new
regenerative thermal oxidizers (RTOs), and new or upgraded fabric filter baghouses. These
sources would require time to construct, conduct performance testing, and implement monitoring
to comply with the revised provisions. Sources would also be required to install total
hydrocarbon (THC) continuous emission monitoring system (CEMS) and conduct performance
testing. The final rule allows three years for existing source to become compliant with the new
emission standards.

As stated in the preamble for this rulemaking, these requirements are expected to reduce
total hydrocarbons and fPM. For THC, we estimate that the installation of RTOs or similar
control devices will achieve annual reductions of THC of 94.0 Mg (104 tpy) across the source
category. For fPM and metal HAP, we estimate that the replacement or upgrade of fabric filter
baghouses will achieve annual reductions of fPM of 60.7 Mg (66.7 tpy) or 72.7 kg (160 lbs) of
metal HAP across the source category. We do not estimate the health and ecosystem benefits
associated with the estimated reductions in THC and fPM.

In accordance with executive orders and Agency policy, the Agency has carefully
considered the impacts of this action on communities with environmental justice concerns. This
is summarized in Section V.F of the preamble for this final rule.

More information on the requirements of this rule can be found in the preamble found in
the docket.

4.0 Benefits

This rule is projected to have benefits relating to the reduction of emissions of organic
HAP and fPM, and disbenefits from secondary energy impacts on carbon dioxide (CO2) and
methane (CH4) emissions. The rule is projected to reduce emissions of THC, as a surrogate for
organic HAP and fPM, as a surrogate for metal HAP through the installation and operation of
control devices. The reduction in fPM can result in associated reduction in PM-related mortality
and morbidity.

HAP emission reductions from this rulemaking may include, but are not limited to, the
following: organic HAPs such as 2-butanone, acetophenone, cumene, hexane, isooctane,
methylene chloride, phenol, toluene, and xylene, and metal HAPs such as antimony, arsenic,

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beryllium, cadmium, chromium, cobalt, lead, manganese, mercury, nickel, phosphorus, and
selenium.9 The EPA is currently unable to monetize benefits associated with HAP reductions due
to methodology and data limitations, which includes lack of central estimates of endpoint risks,
exposure data, and estimates of the value of avoided cases of cancerous and non-cancerous
endpoints. The potential benefits from reducing THC were not monetized and are therefore not
reflected in the benefit estimates associated with this rulemaking. However, we estimate that the
final rule amendments would reduce THC emissions by 104 tons/yr and metal HAP emissions by
160 lbs/yr and thus lower risk of serious adverse health effects from exposure to certain HAPs in
communities near rubber tire manufacturing plants. It is reasonable to expect that emissions
reductions from this rule will improve air quality and public health for populations exposed to
emissions from rubber tire manufacturing facilities.

The control measures are also expected to reduce fPM by 66.7 tons/yr for the source
category. The monetization of PM-related health benefits would require EPA to make an
assumption about the percentage of fPM that is PM2.5. As the percentage of the fPM reductions
that is PM2.5 is unknown, it is too uncertain to estimate the PM-related benefit impacts of this
rule. For purposes of assessing the benefits, we can determine that if all of the fPM were PM2.5,
the annual benefits would be estimated to be no greater than $24 million, occurring in 2028.10
This rule is expected to limit emissions of directly emitted PM2.5, which may reduce ambient
concentrations of PM2.5 and benefit public health. Though EPA neither quantified nor monetized
these benefits, we anticipate reducing PM2.5 concentrations will reduce the incidence or
premature death, non-fatal heart attacks, cases of aggravated asthma, lost days of work and
school and other adverse effects (U.S. EPA, 2022).11 This rule is also expected to reduce
emissions of Hg. Methylmercury (MeHg), which is formed by microbial action in the top layers

9 Information about the health effects of these HAPs is available in US EPA's Health Effects Notebook for

Hazardous Air Pollutants, which is found here: https://www.epa.gov/haps/health-effects-notebook-hazardous-
air-pollutants

10 This estimate is based on the use of a "benefit-per-ton" (BPT) approach to estimate the benefits of this rulemaking

assuming that all fPM is PM2.5. These BPT estimates provide the estimated monetized human health benefits (the
sum of premature mortality and premature morbidity) of reducing one ton of the PM2.5 from a specified source.
Specifically, in this analysis, we multiplied the estimates from the "Synthetic Organic Chemicals" sector by the
corresponding emission reductions. The method used to derive these estimates is described in the BPT Technical
Support Document on Estimating the Benefit per Ton of Reducing Directly Emitted PM2.5
(https://www.epa.gov/svstem/files/documents/2024-06/source-apportionment-tsd-2024.pdf).

11 U.S. EPA, 2022. Estimating PM2.5- and Ozone-Attributable Health Benefits. Office of Air and Radiation,

Research Triangle Park, NC.

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of sediment and soils, after mercury has precipitated from the air and deposited into waterbodies
or land, can cause a number of adverse effects when impacting fishes associated with
recreational or commercial consumption and present at sufficiently elevated levels. Though not
quantified here, these effects include IQ loss measured by performance on neurobehavioral tests,
particularly on tests of attention, fine motor-function, language, and visual spatial ability.

The rule is also projected to have secondary energy impacts that result in CO2 and CH4
emission increases associated with the increased electricity and natural gas usage of RTOs, as
detailed in Section 3.4 of the cost memorandum. These emission increases are estimated and
presented in terms of carbon dioxide equivalents (CChe). This secondary impact of greenhouse
gas emissions is estimated to be approximately 17,536 metric tons of CChe tons per year. For
purposes of assessing the projected disbenefits, we estimate that the monetized disbenefits would
be no greater than $8.1 million in any year, with estimates ranging from $2.7 million to $8.1
million per year depending on the discount rate assumption.12

5.0 Cost Analysis

In the cost memorandum, the EPA summarizes the methodology used and the results of
estimating the cost and the environmental impacts (emission reductions) associated with the
regulations for existing or new rubber processing operations in the Rubber Tire Manufacturing
Source Category (40 CFR Part 63, Subpart XXXX). The cost memorandum also discusses the
resources and methods used to estimate the capital and annual costs per facility, the total costs
for the industry in years five and eight after the rule is final, and the environmental impacts.

As described in the cost memorandum, compliance costs are anticipated relating to the
installation and operation of RTOs, new or upgraded fabric filter baghouses, baghouse leak
detection systems (BLDS) and CEMS.

12 This range of disbenefit estimates is presented in 2022 dollars and was calculating by multiplying the social cost
of carbon (SC-CO2) by 17,536 metric tons of CO2Q reductions for each year in the timeframe of 2027 to 2036.
We applied near-term Ramsey discount rates of 2.5 percent, 2.0 percent, and 1.5 percent, and found that the
largest disbenefit estimate was for 2036 when using a 1.5 percent near-term Ramsey discount rate. Additional
information on the social cost of carbon and an EPA workbook for applying SC-CO2 estimates is found here:
https://www.epa.gov/environmental-economics/scghg

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In this report we evaluate the economic impact associated with the final rule at the
ultimate parent company level.13 As stated earlier, the final rules allows three years for existing
source to become compliant with the new emission standards. Compliance costs are projected to
begin during 2027. Therefore, we estimate that facilities will make capital investments for
compliance purposes by 2027. For the purposes of economic analysis, we estimate the impacts if
all initial compliance costs are incurred in 2027, rather than being spread out over the three-year
period leading up to this point. While the affected companies may instead spread out these initial
compliance costs over the three-year timeframe, our methodological approach in this economic
analysis presents a worse-case scenario where all initial costs are incurred in one year (i.e.,
2027). This differs from the methodology in the cost memorandum, which estimates the impact
in the more likely scenario where initial costs are spread across the three years.

For the economic analysis of the rule, the timeframe of 2025 to 2036 was selected as the
best measure of the economic effects of this action. Monitoring, reporting, and recordkeeping
(MR&R) costs are estimated to begin in 2025, and under the assumptions of the economic
analysis, initial compliance costs for control measures are estimated to be incurred in 2027.14 The
timeframe of 2025 to 2036 is inclusive of the first MR&R costs, and a period of 10 years from
when the compliance measures are expected to be fully installed (i.e., 2027 to 2036). While this
is a longer timeframe than what that presented in the cost memorandum, the analytical inputs and
methodologies are comparable. In this analysis, we estimate that there are no costs incurred in
2024.

Table 2 summarizes when different costs are estimated to be incurred for purposes of the
economic analysis, differentiating between capital and annual costs.

13 Further details can be found in Rubber Tire Manufacturing - 2024 Final - EIA Spreadsheet.xlsx, which is a

spreadsheet that documents facility-level and ultimate parent company-level economic impact estimates
developed for this economic impact analysis. This spreadsheet was generated by US EPA and can be found in
the docket for this rulemaking.

14 As described in the Information Collection Request (ICR), there are estimated MR&R costs in 2025 and 2027, but

not in 2026.

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Table 2. When Different Costs are Estimated to be Incurred

Cost Category

Capital or
Annual

When Incurred

RTOs

RTO total cost

Capital

every 20 years, starting in 2027

Civil and mechanical work

Capital

every 20 years, starting in 2027

Electrical and controls

Capital

every 20 years, starting in 2027

Permitting

Capital

every 20 years, starting in 2027

Natural Gas

Annual

every year, starting in 2027

Annual maintenance and PM

Annual

every year, starting in 2027

Media replacement

Capital

every 5 years, starting 5 years after 1st
year of 2027

Destruction efficiency performance
testing

Capital

every 5 years, starting in 2027

Baghouses

New baghouses

Capital

every 20 years, starting in 2027

Bag replacement

Annual

every year, starting in 2028

Upgraded bags

Annual

every year, starting in 2027

Bag Leak Detection Systems (BLDS)



Annual

every year starting in 2027



Capital

every 5 years, starting in 2027

CEMS



Annual

every year starting in 2027



Capital

every 20 years, starting in 2027

Other Monitoring, Reporting, and
Recordkeeping

Annual

every year starting in 2027

Note: This table reflects the assumptions for the economic impact analysis. Some of these timeframes differ slightly
from those in the cost memorandum. The frequency of when capital costs are incurred reflects the estimated average
useful life of the equipment. For example, we estimate the average useful life of an RTO to be 20 years, so the
capital costs associated with RTOs are estimated to be incurred every 20 years.

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Table 3 and Table 4 present estimated costs by year, with Table 3 presenting the costs as
unannualized values, and Table 4 presenting the costs as annualized values.15 Some of these costs
differ from those in the cost memorandum because these costs are based on assumptions for the
timeframe of the economic impact analysis. As noted earlier, in the economic analysis we
assume that all capital investment occurs in the first year of full implementation in 2027. The
estimated total costs in these two tables are inputs to the small business screening analysis and
the economic impact analysis, which are presented in Sections 6 and 7.

Table 3. Total Unannualized Costs for the Final NESHAP Amendments, 2025 to 2036

(Millions of 2022$)



Capital

Annual

Total Costs

2025

-

0.0790

0.0790

2026

-

-

-

2027

63.8

5.36

69.1

2028

1.14

5.36

6.50

2029

1.14

5.36

6.50

2030

1.14

5.36

6.50

2031

1.14

5.36

6.50

2032

8.65

5.36

14.0

2033

1.14

5.36

6.50

2034

1.14

5.36

6.50

2035

1.14

5.36

6.50

2036

1.14

5.36

6.50

Notes: (1) All estimates are rounded to three significant figures; (2) Some of these costs may differ from those in the
cost memorandum because these costs are based on assumptions for the economic impact analysis; (3) As described
in the ICR, there are estimated MR&R costs in 2025 and 2027, but not in 2026.

15 Capital costs are not double counted when they are annualized.

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Table 4. Total Annualized Costs for the Final NESHAP Amendments, 2025 to 2036

(Millions of 2022$)



Capital

Annual

Total Costs

2025

-

0.0790

0.0790

2026

-

-

-

2027

7.63

5.36

13.0

2028

8.29

5.36

13.7

2029

8.29

5.36

13.7

2030

8.29

5.36

13.7

2031

8.29

5.36

13.7

2032

8.99

5.36

14.4

2033

8.99

5.36

14.4

2034

8.99

5.36

14.4

2035

8.99

5.36

14.4

2036

8.99

5.36

14.4

Notes: (1) All estimates are rounded to three significant figures; (2) Some of these costs may differ from those in the
cost memorandum because these costs are based on assumptions for the economic impact analysis; (3) As described
in the ICR, there are estimated MR&R costs in 2025 and 2027, but not in 2026.

The highest unannualized total cost in any one year is estimated to be approximately
$69.1 million in 2027. Further details on the economic analysis are presented in the spreadsheet
titled Rubber Tire Manufacturing - 2024 Final - EIA Spreadsheet.xlsx, which can be found in the
docket.16

6.0 Small Business Screening Analyses

We conducted a small business screening analysis considering the 15 facilities that are
expected to be affected by this action. We conducted this small business screening analysis at the
ultimate (i.e., highest) level of ownership, evaluating parent entities of potentially affected
facilities. This analysis draws on ownership, employment, and financial information for the
potentially affected entities drawn from resources described in more detail below.

First, we determined facility ownership information for each facility projected to incur
compliance costs. To do this, we identified the ultimate parent entity owning each facility, and
then determined the status of each ultimate parent entity (e.g., federal government, state,

16 For detailed breakdowns on the estimated revision costs associated with each facility, please see the sheet titled
"company-level costs, by year" in the US EPA spreadsheet titled Rubber Tire Manufacturing - 2024 Final - EIA
Spreadsheet.xlsx. This spreadsheet can be found in the docket for this rulemaking.

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municipality, firm, etc.).17 Each of the facilities projected to incur costs is ultimately privately
owned. We did not identify any facilities that were ultimately owned by states, municipalities, or
other types of owners. We used annual reports from the companies to identify the ultimate owner
of each company that owns a potentially affected facility.

Second, we followed Small Business Administration (SBA) size standards to determine
which privately-owned ultimate parent entities should be considered small entities in this
analysis.18 The criteria for size determination vary by the organization/operation category of the
ultimate parent entity. For privately-owned (non-government) entities, small entities are those
with less than the threshold level of sales or number of employees specified by SBA for each of
the relevant North American Industry Classification System (NAICS) sectors.

Third, based on each ultimate parent company's NAICS code, we compared the sales and
number of employees of the ultimate parent company to the appropriate SBA size standard. We
used information from the company annual reports to determine revenues of each ultimate parent
entity, and information for each company website to determine the number of employees. For
tire manufacturing industry, the applicable NAICS Code is 326211, having an SBA size standard
of 1,500 employees. We find that none of potentially affected companies are small according to
the Small Business Administration's (SBA) small business size standards. The four ultimate
parent companies each have 7,500 employees or greater.

The Agency has determined that this action will not have a significant economic impact
on a substantial number of small entities under the Regulatory Flexibility Act. We have
determined that there are no small businesses subject to the requirements of this action.19

7.0 Economic Impact Analyses

As described in earlier sections, the timeframe of 2025 to 2036 was selected as the best
measure of the economic impacts of this action, presenting 10 years of impacts from when the

17 The U.S. Census Bureau's Statistics of U.S. Businesses includes the following relevant definition: (i) firm - a firm

is a business organization consisting of one or more domestic establishments in the same state and industry that
were specified under common ownership or control.

18 SBA's small business size standards can be found on the Internet at httos://www. sba. gov/document/support--
table-size-standards. These standards were updated on March 17, 2023.

19 Impact estimates for each affected ultimate parent company can be found in Rubber Tire Manufacturing - 2024

Final - EIA Spreadsheet.xlsx, a spreadsheet that includes the basis for the economic impacts that was generated
by US EPA for this analysis report. This spreadsheet can be found in the docket for this rulemaking.

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initial compliance costs are expected to be incurred (i.e., 2027). This allows for a reasonable
timeframe over which to examine impacts of this action from a present value (PV) perspective.

Table 5 shows the costs per year discounted to 2024 in 2022 dollars using discount rates
of two percent, three percent, and seven percent.20 Table 5 also shows the PV and the Equivalent
Annualized Values (EAV) of total costs discounted to 2024 in 2022 dollars, using discount rates
of two percent, three percent, and seven percent.21 The EAV is the annualized present value of
the costs, and represents a flow of constant annual values that, had they occurred in each year
from 2025 to 2036, would yield an equivalent present value. The estimated PV of the compliance
costs over the 12-year period from 2025 to 2036 is about $119 million ($11.3 million EAV)
using a two percent discount rate, about $112 million ($11.3 million EAV) using a three percent
discount rate, and about $89.2 million ($11.2 million EAV) using a using a 7 percent discount
rate.22

20	Results using the 2 percent discount rate were not included in the proposals for these actions. The 2003 version of

OMB 's Circular A-4 had generally recommended 3 percent and 7 percent as default rates to discount social
costs and benefits. The analysis of the proposed rule used these two recommended rates. In November 2023,
OMB finalized an update to Circular A-4, in which it recommended the general application of a 2 percent rate
to discount social costs and benefits (subject to regular updates), which is an estimate of consumption-based
discount rate. We include cost results calculated using a 2 percent discount rate consistent with the update to
Circular A-4.

21	Present value and equivalent annualized value calculations can be found in Rubber Tire Manufacturing - 2024

Final - EIA Spreadsheet.xlsx, a spreadsheet that includes the basis for the economic impacts that was generated
by US EPA for this analysis report. This spreadsheet can be found in the docket for this rulemaking.

22	The EAV values under the three discount rates are different but two of them round to the same value when

presented at three significant figures.

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Table 5. Present-Value (PV) of Costs, Equivalent Annualized Value (EAV) of Costs, and

Discounted Costs, 2025 to 2036 (Millions of 2022$, Discounted to 2024)

Discount Rate (Discounted to 2024)

Year

2 Percent

3 Percent

7 Percent

2025

0.0759

0.0745

0.0690

2026

2027

63.9

61.4

52.7

2028

5.89

5.61

4.64

2029

5.78

5.45

4.33

2030

5.66

5.29

4.05

2031

5.55

5.14

3.79

2032

11.7

10.7

7.62

2033

5.34

4.84

3.31

2034

5.23

4.70

3.09

2035

5.13

4.56

2.89

2036

5.03

4.43

2.70

119

112

89.2

EAV

11.3

11.2

Note: (1) All estimates are rounded to three significant figures; (2) Some of these costs may differ from those in the
cost memorandum because these costs are based on assumptions for the economic impact analysis; (3) As described
in the ICR, there are estimated MR&R costs in 2025 and 2027, but not in 2026; (4) The EAV values under the three
discount rates are different but round to the same value when presented at three significant figures.

For economic impact analyses of rules that directly affect a single or a few industries, the
EPA often prepares a partial equilibrium analysis. In this type of economic analysis, the focus of
the effort is on estimating impacts on the single affected industry or several affected industries,
and all impacts of this rule on industries outside of those affected are assumed to be zero or so
inconsequential to not be considered in the analysis.23 If the compliance costs, which are key
inputs to an economic impact analysis, are quite insignificant, then the impact analysis could
consist of a calculation of annual (or annualized) costs as a percentage of sales for affected
parent companies. This latter type of analysis is called a screening analysis and is applied when a
partial equilibrium or more complex economic impact analysis approach is deemed not necessary
given the expected size of the impacts.

We apply a screening analysis to estimate the economic impacts for this final rule, given
that the annualized total compliance costs, as shown in Tables 4 and 5, are small relative to the

23 U.S. EPA. Guidelines for Preparing Economic Analyses. May 2016. p. 9-17. Available at
https://www.epa.gov/sites/production/files/2017-09/documents/ee-0568-09.pdf.

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size of the affected industry. The analysis employed here is a "sales test" that computes the
annualized compliance costs as a share of sales for each company. The annualized cost per sales
for a company represents the maximum price increase in affected product needed for the
company to completely recover the annualized costs imposed by the regulation.

The "sales test" is the impact methodology EPA employs in economic impact analyses
such as this one, as opposed to a "profits test", in which annualized compliance costs are
calculated as a share of profits.24 When cost estimates for all businesses are annualized over the
2025 to 2036 timeframe, we estimate that none of the ultimate parent owners affected by this
rule will incur total annualized costs of 0.04 percent or greater of their revenues (approximately
$6.6 million per year), whether using a discount rate of two percent, three percent, or seven
percent. The average annualized cost-to-sales impact is approximately 0.014 percent when
discounting at two percent and three percent, and is approximately 0.013 percent when
discounting at seven percent.

In addition, we also include a brief qualitative consideration of measures of producer and
consumer demand's responsiveness to price changes to help with examining the economic
impacts of these rules. As literature on market elasticities for domestic rubber tire manufacturing
is scarce, we examined the global market elasticities. We were unable to find sufficient
information on market elasticities for domestic tire United States manufacturing as the best
information we could find was for global market elasticities. We used demand and supply
elasticity data to illustrate potential price changes for affected products. The price elasticity of
global tire demand is estimated to be -0.3804. The price elasticity of supply for the global natural
rubber industry, a major input for tire production, is 0.3005. This supply elasticity for the global
natural rubber industry serves as the best available data in in this analysis to represent the supply
elasticity of rubber tires. Assuming the affected industries are imperfectly competitive, based on
this information, one can conclude that demand is inelastic (i.e., will respond less than 1:1) with
a change in price, and that supply is somewhat inelastic (i.e., will respond less than 1:1) with a
change in price. Thus, the direct economic impact of this rule as measured by changes in price
and output appears quite minor based on the low annualized cost to sales estimates and these

24 More information on sales and profit tests as used in analyses done by U.S. EPA can be found at
http://www.epa.gov/sbrefa/documents/rfaguidancell-00-Q6.pdf. pp. 32-33.

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elasticities, and thus it is reasonable to infer that the impact on consumers from this rule should
also be minor. In addition, any other economic impacts, such as changes in firm concentration
within the affected industries or movement of rubber tire manufacturing outside of the U.S.,
should also be relatively minor.

Given the results of the analysis, these economic impacts are relatively low for affected
companies and the industry impacted by this final rule, and there will not be substantial impacts
on the markets for affected products. The costs of the final rule are not expected to result in a
significant market impact, regardless of whether they are passed on to the purchaser or absorbed
by the firms.

Employment impacts of environmental regulations are generally composed of a mix of
potential declines and gains in different areas of the economy over time. Regulatory employment
impacts can vary across occupations, regions, and industries; by labor and product demand and
supply elasticities; and in response to other labor market conditions. Isolating such impacts is a
challenge, as they are difficult to disentangle from employment impacts caused by a wide variety
of ongoing, concurrent economic changes. The EPA continues to explore the relevant theoretical
and empirical literature and to seek public comments in order to ensure that the way the EPA
characterizes the employment effects of its regulations is reasonable and informative. As noted in
Section 3, the domestic rubber tire industry has approximately 47,000 employees.25 Existing
labor costs are estimated to be about $3.2 billion, and existing capital expenditures are estimated
to be about $940 million.26 The estimated annualized cost of this rule is approximately $11
million per year. As indicated by the analysis in this report, this rule is not projected to cause
significant changes in this industry. As a result, the labor employed in this industry is not
expected to experience significant impacts due to this rule.

25 U.S. Census Bureau. "Annual Survey of Manufactures: Summary Statistics for Industry Groups and Industries in

the U.S.: 2018 - 2021." Economic Surveys, ECNSVY Annual Survey of Manufactures Annual Survey of
Manufactures Area, Table AM1831BASIC01, 2021,

26 Ibid.

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8.0 Comparison of Costs and Benefits
8.1 Results

The net benefits for the final amendments to the NESHAP for Rubber Tire
Manufacturing facilities are presented in Table 6. This table includes the present values (PV) and
the equivalent annualized values (EAV) of the final amendment costs from Table 5. Because the
EPA estimated the compliance costs of the final amendments but was unable to monetize the
health benefits of this rule, there is no value reported in this table for monetized benefits and the
net benefits of this rule are therefore unclear. However, the changes will have beneficial effects
on air quality and public health for populations exposed to emissions from rubber tire
manufacturing facilities.

Table 6. Summary of Benefits, Costs and Net Benefits for the Final Amendments from 2025

to 2036 (Million 2022$)

2% Discount Rate

PV EAV

Monetized Benefits N/A

Total Annual Costs $119 $11.3

Moncli/.cd Disbcncfils " $26.1 to $68.9 $2.47 to $6.51

• 104 tpy THC emissions

xt »f j • 160 lbs/y HAP emissions

Non-Monetized Benefits ^ , . .

• 66.7 tpy fPM emissions

• Methylmercury emissions

Non Monetized Costs * Costs associated with any incremental facility downtime

needed to install controls

• Health impacts associated with increased emissions from
Non-Monetized Disbenefits natural gas use and electricity generation needed for

emissions controls

Net Benefits N/A

Note: Values rounded to three significant figures. While we expect these emissions reductions to have beneficial
effects on air quality and public health for populations exposed to emissions from rubber tire manufacturing
facilities, we have determined that quantification of those benefits cannot be accomplished for this final
rule. This is not to imply that there are no benefits of the amendments. Rather, it is a reflection of the
difficulties in modeling the health effects and monetizing the benefits of reducing PM and HAP emissions
from this source category with the data currently available.

a The monetized disbenefits are for the greenhouse gas emissions increases associated with the increased
electricity and natural gas usage of RTOs, as described in Section 4 of this report, and Section 3.4 of the
cost memorandum.

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8.2 Uncertainties and Limitations

The analysis presented in this economic impact analysis is subject to many sources of
uncertainty. This analysis includes many data sources as inputs, including information about the
types of affected units derived from information collection request responses, equipment and
labor costs derived from the EPA Air Pollution Control Cost Manual (U.S. EPA, 2017) and other
sources, and assumptions regarding the current state of the rubber tire manufacturing industry
and how individual facilities carry out their operations.

As noted in the preamble, the final rule does not dictate that controls must be installed to
control pollutants, and companies may find other ways to comply with the emissions limits.
Furthermore, the cost estimates necessarily include assumptions that may not be true for all
facilities that install controls such as how many controls will need to be installed (e.g., RTOs).
There is also uncertainty about the specific components of the engineering costs, such as the
costs of the equipment and labor required to comply with the amendments and how the costs
might change over time, as well as the interest rate firms may be able to obtain when financing
capital expenditures.

This analysis is also unable to account for the future state of the industry or the future
state of the world (e.g., regulations, technology, economic activity, and human behavior). While
no new major sources are currently predicted in the industry, this could change as the economy
evolves. Recent market trends indicate that the production of rubber tires has been relatively
steady in recent years. EPA does not have current data or information regarding the increased
production of heavier tires for electric vehicles that would result in additional mixers or facilities
in the United States.

Health benefits are not quantified and monetized in this economic impact analysis, as
described in Section 4. Currently, EPA does not monetize health benefits from the reduction of
HAPs. This is due to methodology and data limitations related to the association between HAP
pollutant exposure and the reductions in cancer and non-cancer endpoints. These include central
estimates of endpoint risks, estimates of exposure to HAP, and estimates concentration-response
relationships between pollutants and cancerous and non-cancerous endpoints (fatal and non-
fatal). EPA is currently working on methodology to estimate HAP benefits.

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Finally, there is uncertainty in the cost impact analysis and economic impact analysis
conducted. The cost-to-sales ratios for individual firms reported in Section 7 are based upon the
best information the EPA had available, but because the cost estimates are subject to the
uncertainty described above, the cost-to-sales ratios may overestimate or underestimate the true
impact for affected firms. Uncertainties in the economic impact modeling include data
limitations due to limited literature on the market elasticities for domestic rubber tire
manufacturing.

Despite these uncertainties and limitations, the EPA believes these costs are a reasonable
estimate of the costs and impacts of the final rule.

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United States	Office of Air Quality Planning and Standards	Publication No. EPA-452/R-24-018

Environmental Protection	Health and Environmental Impacts Division	November 2024

Agency	Research Triangle Park, NC

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