## PM2.5 and Other Emission Reductions for NSPS Options Analyzed

– Annual Average Reductions for 2014-2022 Timeframe 1



##  

# Under Proposed Option, PM2.5 reductions are about 4,700 tons; for Alternative Option, reductions are about 4,800 tons  

# VOC reductions are about 3,200 tons under each option; CO reductions are about 33,000 tons  

# We show impacts in the RIA for the 2014- 2022 timeframe because of the difference in the compliance times for options and differences in year to year impacts

# Total Annualized Costs (millions of 2010 $, annual

average for 2014- 2022)* Affected Source Proposed Option Alternative

Option Wood Stoves $4.2 $8.1 Single-Burn-Rate Stoves 0.9 1.5 Pellet Stoves 3.5 6.2 Forced Air Furnaces 2.3 3.8 Hydronic Heaters 4.5 8.3 Masonry Heaters 0.3 0.3 Total **$15.7 $28.3**  Cost-effectiveness for PM2.5 Reductions **$3,300 $5,900**  *All estimates based on R&D costs of 6 years, not the full model life

# Economic Impacts - Annual Cost to Sales Across All

Firms for Each Option(percentage) Affected Source Proposed Option (%) Alternative

Option(%) Wood Stoves 4.3 8.3 Single-Burn-Rate Stoves 6.4 10.7 Pellet Stoves 2.3 4.1 Forced Air Furnaces 2.4 4.0 Hydronic Heaters 3.3 6.1 Masonry Heaters 4.8 4.8 Average Cost/Sales **3.9 6.3** 

# Cost/Price/Economic Perspectives 4

 Almost all potentially affected manufacturers are small businesses and many are very small. There are a relatively large number of manufacturers and a relatively small number of unit sales over which to spread the compliance costs.  Sales have been down >30% from 2008 to 2009 and are forecast to not return to 2008 levels until 2017.  Wood stove sales prices are very competitive at the consumer level and are correlated with looks and size more often than emissions and energy efficiency; often marketed “like furniture and how it looks in the room”.  There are large differences in baseline costs within most subcategories and categories, regardless of emission performance.  There is much uncertainty in the cost impact estimates. A great majority (more than 90%) of the costs of the proposal are for R&D of new model lines. We have had to depend on manufacturers’ estimates, e.g., $340,000 per new model line every 6 years.  With consolidation in the industries affected by this proposal, average firm size could eventually increase and so will revenues. The result of this could be that firm-level impacts as a result of this rule may be smaller to the extent this is a trend.

# Small Business Impacts 5  Potential impacts to small businesses are generally considered significant (for a substantial number affected) if cost as a percentage of sales is above the 1-3% range – from EPA’s SBREFA guidance and  More than 90% of the more than 600 businesses affected by this NSPS are defined as small under SBA’s size standard definition – clearly, a substantial number affected  Potential cost as a percentage of sales is > 1% for more than 80% of affected small entities under the Proposed Option, and more than 99% for the Alternative Option.  The potential average cost as a percentage of sales for small entities is 6% for the Proposed Option, and about 10% for the Alternative Option. The cost/sales for some very small entities exceeds 100% under each option.  Based on this information, we conclude that a SISNOSE (Significant Economic Impact to a Substantial Number of Small Entities) would potentially result from implementing requirements under either option  A cost to sales ratio reflects an estimate of direct impact to affected firms with no cost passthrough to consumers – no change in appliance price  Thus, these ratios are an overestimate of cost impacts to manufacturers  The analysis approach is consistent with that used for other rules  SBREFA panel was held in 2010 – recommended flexibilities from Panel report included in the proposal package.

# Summary of Impacts for the Proposal 6 

##  

# Net benefits are quite large under each option, but the potential economic and small business impacts are also large under each option  

## Benefits are far larger than costs ($1.8 to $4.2 billion in benefits compared to $16 million in costs for the proposal – a ratio of $115 – 270 to $1 in costs)  

## For the Alternative option, the ratio is $70- 150 to $1 in costs  

## Economic impacts as measured by annual cost to sales are 2- 6% across all firms for the Proposed option, and 4- 11% for the Alternative option  

## Small business impacts as measured by annual cost to sales average 6% for the Proposed option and 10% for the Alternative Option. Under each option, some very small businesses have potential cost to sales > 100% (very small revenue estimate per firm for some industries).