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- 1 CHAPTER 6 : IMPACTS ON PUBLIC WELFARE OF ATTAINMENT STRATEGIES TO MEET PRIMARY AND SECONDARY OZONE NAAQS

Overview
This chapter provides a discussion of the welfare related benefits of meeting alternative primary and secondary ozone standards. Welfare benefits of reductions in ambient ozone include increased growth and/or biomass production in sensitive plant species, including forest trees, increased crop yields, reductions in visible foliar injury, increased plant vigor (e.g. decreased susceptibility to harsh weather, disease, insect pest infestation, and competition), and changes in ecosystems and associated ecosyst em services. We provide a limited quantitative analysis for effects associated with changes in yields of commercial forests and agriculture, and associated changes in carbon sequestration and storage.

The EPA is proposing to revise the level of the sec ondary standard to within the range proposed for the primary standard of 65 parts per billion (ppb ) to 70 ppb to provide increased protection against vegetation

- related effects on public welfare. As an initial matter, the EPA is proposing that ambient ozon e concentrations in terms of a three

- year average W126 index value within the range from 13 parts per million

- hours (ppm

- hours) to 17 ppm

- hours, would provide the requisite protection against known or anticipated adverse effects to the public welfare, whic h
d ata analyses indicate would provide air quality in terms of three

- year average W126 index values of a range at or below 13 ppm

- hours to 17 ppm

- h ou rs . Data analyses also indicate that
action s taken to attain a standard in the range of 65 ppb to 70 pp b w ould also improve air quality as measured by the W126 metric. The quantitative analysis in this chapter assesses the welfare benefits of strategies to attain ozone standard levels of 65 to 70 ppb

.

In addition to the direct welfare benefits of decrease d levels of ambient ozone, the emissions reduction strategies used to demonstrate attainment with alternative ozone standards may result in additional benefits associated with reductions in nitrogen deposition and reductions
in ambient concentrations of PM 2.5 and its components. These additional benefits include reductions in nutrient enrichment and acidification impacts on sensitive aquatic and terrestrial ecosystems and improvements in visibility in state and national parks, wilderness areas, and in
the areas where people live and work. We are not able to quantify or monetize these benefits in
this RIA.***E.O. 12866 Review

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- 2 6.1 Welfare Benefits of Strategies to Attain Primary and Secondary Ozone Standards

T h e C le a n Air A c t d e f

i n es w e l f are effe c t s t o i n c l u d e a n y n o n

- h e al t h e ffe c t s, i n c l ud i n g d ir e c t e c ono mic d ama g e s in th e f o rm o f l o s t p r o du c t i v i t y o f c r o p s a n d t r e e s, i nd ir e c t d amag e s th r ou g h al t e ra t i o n o f e c o s y s t e m f u n c t i o n s, i n d ir e c t e c ono mic d ama g e s th r o u gh t h e l o ss in val u e

o f r e c r e a t i on al e x p er i en c e s o r t h e e x is t e n c e va l u e o f im p o r t a nt r e s ou r c e s, a n d d ir e c t d amag e s t o
p r o pe r t y , e i th er t h ro u gh im p ac t s o n ma t erial s t r u ct u r e s o r b y s o ili n g of s u r f ac e s (Section 302(h) (42 U.S.C. § 7602(h)). For welfare effects associated with changes to ecosystem functions, we
use the concept of ecosystem services as a useful framework for analyzing the impact of ecosystem changes on public welfare

. Ecosystem services can be generally defined as the benefits that individuals and organizations obtain from ecosystems. The EPA has defined ecological goods and services as the “outputs of ecological functions or processes that directly or indirectly contribute to social welfare or have the potential to do so in the future. Some outputs may be bought and sold, but most are not marketed” (U.S. EPA, 2006). Changes in these
services can affect human well

- being by affecting security, health, social relationships, and access to basic material goods (MEA, 2005).

This RIA employs reductions in nitrogen oxides (NOx) and volatile organic compound (VOC ) emissions to demonstrate attainment with alternative levels of the NAAQS. Reductions in these emissions will result in changes in ambient concentrations of ozone, as well as changes in ambient concentrations of NOx, PM2.5 and its components, and deposit ion of nitrogen. I t i s
approp ri at e a n d r e as on a b le t o i nclud e all th e benef i t s ass oc i ate d w i t h the se em issi o n r educt i on s
t o pro vi d e a compreh e n sive unde rs tandin g o f th e li ke ly pub lic welfare im p a ct s o f att a in i n g alternative standards

. Tab le 6

- 1 s how s th e welf are effect s ass oc ia te d w i t h emissions of NOx and VOC. The following subsections discuss the direct benefits of reducing ambient ozone
concentrations and the additional welfare benefits associated with reduced emissions of NOx and
VOC.***E.O. 12866 Review

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- 3 Table 6

- 1. Wel fare Effects of NOx and VOC emissions

Pollutant Atmospheric Effects Atmospheric and Deposition Effects Deposition Effects

Vegetation Injury (Ozone) Visibility

Impairment Materials

Damage Climate Ecosystem Effects

— (Organics ) Acidification

(freshwater) Nitrogen

Enrichment

NO x      

VOCs    

6.2 Welfare Benefits of Reducing Ozone

Ozone can affect ecological systems, leading to changes in the ecological commu nity and influencing the diversity, health, and vigor of individual species (U.S. EPA, 2013). Ozone causes discernible injury to a wide array of vegetation (U.S. EPA, 2013). In terms of forest productivity and ecosystem diversity, ozone may be the pollutant with the greatest potential for region

- scale forest impacts (U.S. EPA, 20 13). Studies have demonstrated repeatedly that ozone concentrations observed in polluted areas can have substantial impacts on plant function (De Steiguer et al,. 1990; Pye, 1988).

When ozone is present in ambient air, it can enter the leaves of plants, w here it can cause significant cellular damage. Like carbon dioxide and other gaseous substances, ozone enters plant tissues primarily through the stomata in leaves in a process called “uptake” (Winner and Atkinson, 1986). Once sufficient levels of ozone (a highly reactive substance), or its reaction products, reaches the interior of plant cells, it can inhibit or damage essential cellular components and functions, including enzyme activities, lipids, and cellular membranes, disrupting the plant’s osmotic (i .e., water) balance and energy utilization patterns (U.S. EPA, 2013; Tingey and Taylor, 1982). With fewer resources available, the plant reallocates existing resources away from root growth and storage, above ground growth or yield, and reproductive

proces ses, and toward leaf repair and maintenance, leading to reduced growth and/or reproduction. Studies have shown that plants stressed in these ways may exhibit a general loss of vigor, which can lead to secondary impacts that modify plants' responses to oth er environmental factors. Specifically, plants may become more sensitive to other air pollutants, or***E.O. 12866 Review

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- 4 more susceptible to disease, pest infestation, harsh weather (e.g., drought, frost) and other environmental stresses, which can all produce a loss in plan t vigor in ozone

- sensitive species that over time may lead to premature plant death. Furthermore, there is evidence that ozone can interfere with the formation of mycorrhiza, essential symbiotic fungi associated with the roots of most terrestrial plants, by reducing the amount of carbon available for transfer from the host to the symbiont (U.S. EPA, 2013).

This ozone damage may or may not be accompanied by visible injury on leaves, and likewise, visible foliar injury may or may not be a symptom of the othe r types of plant damage described above. Foliar injury is usually the first visible sign of injury to plants from ozone exposure and indicates impaired physiological processes in the leaves (Grulke, 2003). When visible injury is present, it is commonly m anifested as chlorotic or necrotic spots, and/or increased leaf senescence (accelerated leaf aging). Visible foliar injury reduces the aesthetic value of ornamental vegetation and trees in urban landscapes and negatively affects scenic vistas in protected natural areas.

Ozone can produce both acute and chronic injury in sensitive species depending on the concentration level and the duration of the exposure. Ozone effects also tend to accumulate over the growing season of the plant, so that even lower co ncentrations experienced for a longer duration have the potential to create chronic stress on sensitive vegetation. Not all plants, however, are equally sensitive to ozone. Much of the variation in sensitivity between individual plants or whole species i s related to the plant’s ability to regulate the extent of gas exchange via leaf stomata (e.g., avoidance of ozone uptake through closure of stomata) and the relative ability of species to detoxify ozone

- generated reactive oxygen free radicals (U.S. EPA, 2 013; Winner, 1994). After injuries have occurred, plants may be capable of repairing the damage to a limited extent (U.S. EPA, 2013). Because of the differing sensitivities among plants to ozone, ozone pollution can also exert a selective pressure that l eads to changes in plant community composition. Given the range of plant sensitivities and the fact that numerous other environmental factors modify plant uptake and response to ozone, it is not possible to identify
threshold values above which ozone is c onsistently toxic for all plants.***E.O. 12866 Review

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- 5 Because plants are at the base of the food web in many ecosystems, changes to the plant community can affect associated organisms and ecosystems (including the suitability of habitats that support threatened or endangere d species and below ground organisms living in the root zone). Ozone impacts at the community and ecosystem level vary widely depending upon numerous factors, including concentration and temporal variation of tropospheric ozone, species composition, soil properties and climatic factors (U.S. EPA, 2013). In most instances, responses to chronic or recurrent exposure in forested ecosystems are subtle and not observable for many years. These injuries can cause stand

- level forest decline in sensitive ecosyste ms (U.S. EPA, 2013, McBride et al., 1985; Miller et al., 1982). It is not yet possible to predict ecosystem responses to ozone with certainty; however, considerable knowledge of potential ecosystem responses is available through long

- term observations in highly damaged forests in the U.S. (U.S EPA, 2013). Biomass loss due to ozone exposure affects climate regulation by ecosystems by reducing carbon sequestration. More carbon stays in the atmosphere because carbon uptake by
forests is reduced. The studie s cited in the Ozone ISA demonstrate a consistent pattern of

re duced carbon uptake because of ozone damage, with some of the largest reductions projected
over North America (U.S. EPA, 2013)

.
Ozone also directly contributes to climate change because t ropospheric ozone traps heat, leading to increased surface temperatures

. Projections of radiative forcing due to changing ozone concentrations over the 21st century show wide variation, due in large part to the uncertainty of future emissions of source ga ses (U.S. EPA 2014). However, reduction of tropospheric ozone concentrations could provide an important means to slow climate change in addition to the added benefit of improving surface air quality (U.S. EPA, 2014).

While it is clear that increases in tro pospheric ozone lead to warming, the precursors of ozone also have competing effects on methane, complicating emissions reduction strategies. A
decrease in carbon monoxide or VOC emissions would shorten the lifetime of methane, leading
to an overall coolin g effect. A decrease in NO X emissions could lengthen the methane lifetime in certain regions, leading to warming (U.S. EPA, 2014). Additionally, some strategies to reduce ozone precursor emissions could also lead to the reduced formation of aerosols (e.g., nitrates and sulfates) that c urrently have a cooling effect.***E.O. 12866 Review

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- 6 In this RIA, we are able to quantify only a small portion of the welfare impacts associated with reductions in ozone concentrations to meet alternative ozone standards. Using a model of

commerc ial agriculture and forest markets, we are able to analyze the effects on consumers and producers of forest and agricultural products of changes in the W126 index resulting from meeting alternative standards within the proposed range of 70 to 65 ppb, as we ll as a lower standard level of 60 ppb. We also assess the effects of those changes in commercial agricultural and forest yields on carbon sequestration and storage. This analysis provides limited quantitative
information on the welfare benefits of meeti ng these alternative standards, focused only on one subset of ecosystem services. Commercial and non

- commercial forests provide a number of additional services, including medicinal uses, non

- commercial food and fiber production, arts and crafts uses, habi tat, recreational uses, and cultural uses for Native American tribes. A more complete discussion of these additional ecosystem services is provided in the final Welfare Risk and Exposure Assessment for Ozone (U.S. EPA, 2014).

6.3 Additional Welfare Benefi ts of Strategies to Meet the Ozone NAAQS

Reductions in emissions of NOx and VOC are associated with additional welfare benefits, including reductions in nutrient enrichment and acidification impacts on sensitive aquatic and terrestrial ecosystems and impro vements in visibility in state and national parks, wilderness areas, and in the areas where people live and work.

Excess nitrogen deposition can lead to eutrophication of estuarine waters, which is associated with a range of adverse ecological effects. These include low dissolved oxygen (DO), harmful algal blooms (HABs), loss of submerged aquatic vegetation (SAV), and low water clarity

. Low DO disrupts aquatic habitats, causing stress to fish and shellfish, which, in the
short

- term, can lead to episodic fish kills and, in the long

- term, can damage overall growth in fish and shellfish populations. HAB are o ften toxic to fish and shellfish, lead to fish kills and aesthetic impairments of estuaries, and can in some instances be harmful to human health. SAV provides critical habitat for many aquatic species in estuaries and, in some instances, can also protect shorel ines by reducing wave strength . Low water clarity is in part the result of accumulations of both algae and sediments in estuarine waters. In addi tion to contributing to***E.O. 12866 Review

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- 7 declines in SAV, high levels of turbidity also degrade the aesthetic qualities of the estuarine
environment.

Nutrient enrichment from nitrogen deposition to terrestrial ecosystems is causally linked

to al te r a t i o n o f s pe c ies ri ch ne ss , s pe c ies c o m p o si t i o n , a n d b i o d i v e rsi t y (U.S. EPA, 2008b). Nitrogen enrichment occurs over a long time period; as a result, it may take as much as 50 years or
more to see chan ges in ecosystem conditions, indicators , and services

.
Terrestrial acidification resulting from deposition of nitrogen can result in d e c li n e s in

s e n si t i v e t r e e s pe c ies, s u c h as r e d s p r u c e ( P i ce a rub e n s ) a n d s u gar m a p le ( A ce r s a cc haru m ) , and can also impact other plant communities including shrubs and lichen ( U

. S. E P A, 2 00 8 b )

. B i o l o gi c al ef

f e c t s o f a c i d i f

i c a t i o n i n te rr e s t rial e c o s y s te ms a r e g en e rally l i n k e d t o a l u mi nu m
to x i c i t y a n d d e c r e as e d a

b il i t y o f p l a n t r oot s t o t a k e u p b ase c a t i on s ( U

. S. E P A, 2 0 08 b )

. Te rr e s t rial a c i d i f

i c a t i o n a ffe c t s s e v e ral im p o r t a n t e c osystem services
, i n c l ud i n g d e c li n es in
h a b i t a t f o r t h r e a t e n ed a n d e nd a n g e r e d s p e c i e s, d e c li n es in f o r e st a e s th e t i c s, de c l i ne s i n f o r e st
p r o d u c t i v i t y, a n d i n c r e as e s in f o r e st s o il e r o si o n a n d r e du c t i on s i n w a te r r e te n t i o n.
Aquatic acidification resulting from deposition of nitrogen can result in e ff e c t s o n h e al t h
, vig o r, a n d r e p r o du c t i v e s u cc e ss for aquatic species ; a n d e f fe c t s o n b i od i v e rs i t y

. Deposition of nitrogen results in d e c r e as e s in t h e a c i d n e ut rali z i n g c a p a c i t y a n d i n c r e as e s i n i n o rga n ic al u mi nu m

c on c e n t r a t i o n , which c o nt r i b u t e t o d e c li n e s in z o op la n kt on , ma c ro i n v e r t e b r a te s, a n d f ish s p e c i e s ri ch n ess i n a qu a t i c e c o s y s te ms ( U

. S. E P A, 2008 b )

.

Reductions in NOx emissions will i mp r o ve v i si b ili t y in parks and wilderness areas and in places where people live and work be c a u se of their impact on light extinction ( U

. S. E P A, 20 0 9 )

. G oo d visi b il i t y i nc r e as e s q u ali t y o f l i f e wh e re i nd i v i d u als li v e a n d w o r k
, a n d w he re t h e y t rav e l
fo r r e c r e a t i o n al a c t i v i t ies, i n c l u d i n g s i te s o f un i qu e p ub lic val ue , s u c h as t h e Gr e a t Sm o k y Mo u nt a i n s N a t i o n al P a

rk ( U. S. E P A, 20 09 )

. P a r t i c u l a t e n i t ra t e is a n im po r t a n t c o n t r i bu t o r t o lig h t e x t i n c t i o n i n C ali f

o r n ia a n d t h e u p p e r M i d w e s te rn U

. S

. , p ar t i c u l arly d u ri n g w i nt e r ( U

. S.
E P A, 2 00 9 )

. While EPA typically estimates the visibility benefits associated with reductions in NOx (U.S. EPA, 2008a), we have not done so here because we do not have estimates of the changes in particulate nitrate needed to calculate changes in light extinction and the resulting changes in
economic benefits.***E.O. 12866 Review

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- 8 Strategies implemented by state and local governments to reduce emissions of ozone precursors may also impact emissions of CO 2 or other long

- lived climate gases. Our ability to quantify the climat e effects of the proposed standard is limited due to lack of available
information on the energy and associated climate gas implications of control technologies assumed in the illustrative regulatory alternatives, remaining uncertainties regarding the impa ct of ozone precursors on climate change , and lack of available information on the co

- con trolled greenhouse gas (GHG) emission reductions. As a result, we do not attempt to quantify the impacts of the illustrative attainment scenarios on GHG emissions an d impacts.

6.4 Analysis of Commercial Agricultural and Forestry Related Benefits Using the Forest and Agricultural Sector Optimization Model

– Greenhouse Gas Version (FASOMGHG)

To estimate the commercial timber effects of ozone induced biomass loss we used the FASOMGHG (Adams et al., 2005) model for the forest and agricultural sectors to calculate the
market

- based welfare benefits associated with the illustrative attainment strategies for the three alternative ozone standard levels of 70, 65, and 60 ppb inc remental to attainment of the current standard level of 75 ppb. This section provides a brief summary of th e analytical approach and
results of the analysi s. More details of the FASOMGHG modeling conducted for this RIA are provided in Appendix 6A, while additional details on the overall FASOMGHG methodology are provided in Appendix 6B of the WREA (U.S. EPA, 2014).

6.4.1 Summary of the analytical approach
We used the ozone exposure

- response functions evaluated in the ISA (U.S. EPA, 2013) for tree seedling s to calculate relative yield loss (RYL), which is equivalent to relative biomass loss, for trees over their entire life span. The RYL for species were aggregated into average RYL for FASOMGHG forest types, based on mapping tree species to forest types us ing the Atlas of
United States Trees ( Little, 1971, 1976, 1977, 1978 ).

We used the NCLAN ozone exposure

- response functions evaluated in the ISA to generate RYL for commercial agricultural crops. For those crops that do not have E

- R functions, we assign them RYLs for each scenario based on the crop proxy mapping shown in Table 6A

- 2 of***E.O. 12866 Review

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- 9 Appendix 6A. 1 The RYL for each crop are aggregated to the regional level by computing a weighted average RYL with weights determined by a county’s share of production for the crop. Additional details of the calculations of RYL are provided in Appendix 6A.

Yield gains for both forest species and crops are calculated as the difference in RYL between the 75 ppb standard baseline and the attainment scenarios for 70, 65, and 60 ppb alternative standard levels. The FASOMGHG model requires estimates of yields over a time horizon from 2010 to 2040. As such, we needed to specify yield gains over this range of years. Yield gains are calculated for three periods, 2010 to 2025, 2025

- 2038, and post

- 2038. The pre

2025 period has no changes in yields. The 2025

- 2038 period represents the effects on the W126 index of attainment of the alternative standards across the U.S. with the exception of California. The post

- 2038 period includes the effects on the W126 index of attaining everywhere across the U.S. including California. There is clearly uncertainty in the path of the yield changes introduced by uncertainties about the specific time pattern of emissions reductions that will be appl ied in California to attain alterative standards.

Changes in yield are associated with changes in consumer and producer/farmer surplus. Consumer surplus is the difference between what a consumer would be willing to pay for a product and the price they have to pay for the product. Producer surplus refers to the benefit, or profit, a producer receives from providing a good or service at a m arket price when they would have been willing to sell that good or service at a lower price. In general, increases in yields will cause crop and timber prices to fall. These reductions in prices will have different impacts on consumer and producer surplu s. Overall effects on producer and consumer surplus depends on the (1) ability of producers/farmers to substitute other crops that are less ozone sensitive, and (2) responsiveness of demand and supply. The FASOMGHG model estimates changes in consumer
and producer surplus and net welfare (sum of consumer and producer surplus). The FASOMGHG model also provides estimates of the changes in carbon sequestration for the commercial forestry and agricultural sectors.

1 F or oranges, rice, and tomatoes, which have ozone E

- R functions that are not W126

- based (they are defined based on alternative measures of ozone concentrations), we directly used the median RYG values under the “13 ppm

- hrs” ozone concentration reported in T able G

- 7 of Lehrer et al. (2007).***E.O. 12866 Review

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- 10 The model calculates market equilibria under each of the alternative standard scenarios reflecting different forest and agricultural yields resulting from different ozone exposures. By comparing the market equilibria under different scenarios, we can calculate the welfare and carbon sequestration im pacts of alternative ozone standards for the U.S. agricultural and forest

sector.

6.4.2 Summary of FASOMGHG results

Tables 6

- 1 and 6

- 3 show the estimated changes in consumer and producer surplus
associated with attainment of the alternative ozone standard s compared to attaining the current standard for the forestry and agricultural sectors, respectively

. Tables 6

- 2 and 6

- 4 show the percent change in consumer and producer surplus associated with attainment of the alternative ozone standards compared to atta ining the current standard for the forestry and agricultural sectors, respectively. Consumer and producer welfare are affected more in the forest ry sector than the agricultural sector. In general, consumer welfare increases in both the forest ry and agric ultural sectors because higher yields lead to lower prices. Because the quantity demanded for most forestry and agricultural commodities is not highly responsive to changes in price, producer surplus often declines when lower prices reduce producer profit s more than can be offset by higher yields. In other words consumers do not increase their demand in response to
the fal ling prices enough to offset the producer’s loss of revenue. The increase in consumer
welfare is not as large as the loss of producer w elfare resulting in net welfare losses in the forestry sector nationally

.

Table 6

- 2. Change in Consumer and Producer Surplus in the Forestry Sector from

Attaining Alternative Ozone Standard Levels Compared to Attaining the Current Ozone Standard (Million 2 011$)
Alternative Standard Level 2010 2015 2020 2025 2030 2035 2040

Consumer Surplus Change with Respect to Existing Standard

70 ppb 3 24,592

- 8 111 136 225 61 65 ppb 11 24,596 8 305 337 552 162 60 ppb 30 24,742 136 719 533 1,094 311

Producer Surplus Change with Respect to Existing Standard

70 ppb 1,203

- 22,160 1,768 703

- 1,167 523

- 52,496 65 ppb 211

- 24,091

- 480 1,464

- 3,044

- 39,691

- 10,246 60 ppb

- 233

- 23,711

- 1,731 1,455

- 1,963

- 39,291

- 8,082***E.O. 12866 Review

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- 11 Table 6

- 3. Percent Change in Consumer and Producer Surplus in the Forestry Sector from

Attaining Alternative Ozone Standard Levels Compared to Attaining the Current Ozone Standard
Alternative Standard Level 2010 2015 2020 2025 2030 2035 2040

Consumer Surplus Percent Change with Respect to Existing Standard

70 ppb 0.00% 3.10% 0.00% 0.01% 0.02% 0.03% 0.01% 65 ppb 0.00% 3.10% 0.00% 0.04% 0.04% 0.06% 0.02% 60 ppb 0.00% 3.12% 0.02% 0.09% 0.06% 0.12% 0.03%

Producer Surplus Percent Change with Respect to Existing Standard

70 ppb 0.15%

- 2.28% 0.18% 0.07%

- 0.12% 0.05%

- 5.04% 65 ppb 0.03%

- 2.48%

- 0.05% 0.14%

- 0.32%

- 3.88%

- 0.98% 60 ppb

- 0.03%

- 2.44%

- 0.18% 0.14%

- 0.20%

- 3.84%

- 0.78%

Table 6

- 4. Change in Consumer and Producer Surplus in the Agricultural Sector from

Attaining Alternative Ozone Standard Levels Compared to Attaining the Current Ozone Standard (Million 2011$)

Product Alternative

Standard Level 2010 2015 2020 2025 2030 2035 2040

Consumer Surplus Change with Respect to Existing Standard

70 ppb 0 0 0 113 66 58

- 10 65 ppb

- 1 1 4 262 148 289 24 60 ppb 0 47 9 462 100 408 66

Producer Surplus Change with Respect to Existing Standard

70 ppb 1,202 2,454 1,796 609

- 1,144 675

- 52,504 65 ppb 216 530

- 407 1,174

- 2,933

- 39,605

- 10,211 60 ppb

- 176 1,015

- 1,470 1,320

- 1,492

- 38,788

- 8,119

Table 6

- 5. Percent Change in Consumer and Producer Surplus in the Agricultural Sector

from Attaining Alternative Ozone Standard Levels Compared to Attaining the Current Ozone Standard

Product Alternative

Standard Level 2010 2015 2020 2025 2030 2035 2040

Consumer Surplus Percent Change with Respect to Existing Standard

70 ppb 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 65 ppb 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 60 ppb 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Producer Surplus Percent Change with Respect to Existing Standard

70 ppb 0.17% 0.30% 0.22% 0.07%

- 0.14% 0.08%

- 5.78%***E.O. 12866 Review

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- 12 65 ppb 0.03% 0.06%

- 0.05% 0.14%

- 0.36%

- 4.53%

- 1.12% 60 ppb

- 0.02% 0.12%

- 0.18% 0.15%

- 0.18%

- 4.44%

- 0.89%

Since the forestry and agriculture sectors are interlinked and factors affecting one sector can lead to changes in the other, it is important to consider the overall effect of ozone changes in the context of producer and consumer welfare across both sector s. The impacts on consumer surplus are positive for both sectors, with benefits increasing with lower alternative standards. For producer surplus, however, impacts are negative for all alternative standards . Table 6

- 5 and
6

- 7 present the annualized surpl us (over the period 2010 to 2040) for both sectors using 3 and 7 percent discount rates, while Table 6

- 6 and 6

- 8 present the percent change in surplus for both sectors using 3 and 7 percent discount rates

.

Table 6

- 6. Annualized Changes in Consumer and Pro ducer Surplus in Agriculture and

Forestry from Attaining Alternative Ozone Standard Levels Compared to Attaining the Current Ozone Standard , 2010

- 2040, Million 201 1 $ ( 3 % Discount Rate) Alternative

Standard Level Agriculture Forestry Total

Consumer surplus Change with Respect to Existing Standard 70 ppb 28 4,552 4,580 65 ppb 86 4,592 4,678 60 ppb 132 4,744 4,877

Producer surplus Change with Respect to Existing Standard 70 ppb

- 3,601

- 4,534

- 8,135 65 ppb

- 5,035

- 4,524

- 9,559 60 ppb

- 4,741

- 4,684

- 9,425

Total surplus Change with Respect to Existing Standard 70 ppb

- 3,573 18

- 3,555 65 ppb

- 4,949 68

- 4,882 60 ppb

- 4,608 60

- 4,548***E.O. 12866 Review

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- 13 Table 6

- 7. Annualized Percent Changes in Consumer and Producer Surplus in Agriculture

and Forestry from Attaining Alternative Ozone Standard Levels Compared to Attaining the Current Ozone Standard , 2010

- 2040, ( 3 % Discount Rate)

Alternative Standard Level Agriculture Forestry Total

Consumer surplus Percent Change with Respect to Existing Standard 70 ppb 0.00% 0.57% 0.17% 65 ppb 0.00% 0.57% 0.17% 60 ppb 0.01% 0.59% 0.18%

Producer surplus Percent Change with Respect to Existing Standard 70 ppb

- 0.44%

- 3.35%

- 0.85% 65 ppb

- 0.62%

- 3.34%

- 1.00% 60 ppb

- 0.58%

- 3.46%

- 0.99%

Total surplus Percent Change with Respect to Existing Standard 70 ppb

- 0.13% 0.00%

- 1.10% 65 ppb

- 0.18% 0.01%

- 0.13% 60 ppb

- 0.17% 0.01%

- 0.12%

Table 6

- 8. Annualized Changes in Consumer and Producer Surplus in Agriculture and

Forestry from Attaining Alternative Ozone Standard Levels Compared to Attaining the Current Ozone Standard, 2010

- 2040, Million 2011$ ( 7 % Discount Rate) Alternative Standard Level Agriculture Forestry Total Change with Respect to Existing Standard Consumer surplus 70 ppb 21 5,570 5,592 65 ppb 61 5,599 5,660 60 ppb 100 5,721 5,821

Producer surplus Change with Respect to Existing Standard 70 ppb

- 945

- 5,561

- 6,506 65 ppb

- 2,719

- 5,555

- 8,273 60 ppb

- 2,635

- 5,694

- 8,328

Total surplus Change with Respect to Existing Standard 70 ppb

- 923 9

- 914 65 ppb

- 2,658 45

- 2,613 60 ppb

- 2,535 27

- 2,508

Table 6

- 9. Annualized Percent Changes in Consumer and Producer Surplus in Agriculture

and Forestry from Attaining Alternative Ozone Standard Levels Compared to Attaining the Current Ozone Standard, 2010

- 2040, ( 7 % Discount Rate)

Alternative Standard Level Agriculture Forestry Total***E.O. 12866 Review

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– Do Not Cite, Quote or Release During Review***

6

- 14 Percent Change with Respect to Existing Standard Consumer surplus 70 ppb 0.00% 0.71% 0.20% 65 ppb 0.00% 0.72% 0.21% 60 ppb 0.01% 0.73% 0.21%

Producer surplus Percent Change with Respect to Existing Standard 70 ppb

- 0.12%

- 4.26%

- 0.70% 65 ppb

- 0.34%

- 4.25%

- 0.89% 60 ppb

- 0.33%

- 4.36%

- 0.89%

Total surplus Percent Change with Respect to Existing Standard 70 ppb

- 0.03% 0.00%

- 0.02% 65 ppb

- 0.10% 0.00%

- 0.07% 60 ppb

- 0.09% 0.00%

- 0.07%

The impacts of the simulations of meeting the existing and alternative ozone standards on carbon sequestration potential in U.S. forest and agricultural sectors are presented in Table 6

- 9 , in millions of metric tons of carbon dioxide equivalence, and the percent change in carbon sequestration potential is presented in Table 6

- 10 . As shown in the table, much greater sequestration changes are projected in the forest sector than i n the agricultural sector. The baseline stock of carbon storage decreases over time for agriculture because the agriculture sector GHG emissions sources are released every year and soil carbon sequestration stabilizes
over the 30

- year period. There are on ly small increases in net carbon sequestration compared to the existing standard for each of the alternative scenarios modeled.

While we did not quantify the effects in this RIA , increases in growth for trees in urban settings that results from reduced ozone concentrations can have additional benefits from removal of air pollution. The WREA (U.S. EPA, 2014) provides a case study of the potential impacts of ozone reductions on po llution removal in several eastern U.S. urban areas using the i

Tree model. See appendix 6D of the WREA (U.S. EPA, 2014) for details and references for the
i

- Tree model.***E.O. 12866 Review

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– Do Not Cite, Quote or Release During Review***

6

- 15 Table 6

- 10. Increase in Carbon S equestration from Attaining Alternative Ozone

Stan dard Levels Compared to Attaining the Current Ozone Standard , MMtCO 2 e Alternative Standard Level 2010 2020 2030 2040 2010

- 2040*

Agriculture Change with Respect to Existing Standard

70 ppb 0 1 3 1 24 65 ppb 0 2 6 4 62 60 ppb 1 4 11 11 132

Forestry Change with Respect to Existing Standard

70 ppb

- 1

- 51 100 259 1,537 65 ppb

- 2

- 53 323 774 5,207 60 ppb

- 12

- 94 465 1,189 7,739

Table 6

- 11. Percent Change in Carbon S equestration from Attaining Alternative Ozone

Standard Levels Compared to Attaining the Current Ozone Standard , MMtCO 2 e Alternative Standard Level 2010 2020 2030 2040 2010

- 2040*

Agriculture Percent Change with Respect to Existing Standard

70 ppb 0 .00% 0.00% 0.03% 0.01% 0.01% 65 ppb 0.00% 0.01% 0.05% 0.06% 0.02% 60 ppb 0.00% 0.03% 0.10% 0.13% 0.05%

Forestry Percent Change with Respect to Existing Standard

70 ppb 0.00%

- 0.07% 0.13% 0.32% 0.10% 65 ppb 0.00%

- 0.07% 0.41% 0.95% 0.34% 60 ppb

- 0.02%

- 0.13% 0.60% 1.47% 0.50%

6.5 References
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