D R A F T

OCTOBER 1990

B.41

coating operation was based on a VOC content coating or application rate that

is too low [when the source had the ability and intent to utilize (even

infrequently) a higher VOC content coating or application rate].

Incremental Cost Effectiveness

In addition to the average cost effectiveness of a control option,

incremental cost effectiveness between control options should also be

calculated. The incremental cost effectiveness should be examined in

combination with the total cost effectiveness in order to justify elimination

of a control option. The incremental cost effectiveness calculation compares

the costs and emissions performance level of a control option to those of the

next most stringent option, as shown in the following formula: 

 Incremental Cost (dollars per incremental ton removed) = 

Total costs (annualized) of control option - Total costs (annualized) of next control option

Next control option emission rate - Control option emissions rate

Care should be exercised in deriving incremental costs of candidate

control options. Incremental cost-effectiveness comparisons should focus on

annualized cost and emission reduction differences between dominant

alternatives. Dominant set of control alternatives are determined by

generating what is called the envelope of least-cost alternatives. This is a

graphical plot of total annualized costs for a total emissions reductions for

all control alternatives identified in the BACT analysis (see Figure B-1).

For example, assume that eight technically available control options for

analysis are listed in the BACT hierarchy. These are represented as A through

H in Figure B-1. In calculating incremental costs, the analysis should only

be conducted for control options that are dominant among all possible options. 

In Figure B-1, the dominant set of control options, A, B, D, F, G, and H,

represent the least-cost envelope depicted by the curvilinear line connecting

them. Points C and E are inferior options and should not be considered in the 
D R A F T

OCTOBER 1990

B.42

INCREASING TOTAL ANNUAL COSTS ($/yr)

INCREASING EMISSIONS REDUCTION (Tons/yr)

A

B

C

E

D

F

G

H

Inferior controls (A,C,E)

Dominant controls (A, B, D, F, G, H) lie on envelope

"delta" Emissions Reduction

"delta" Total Annual Costs

Figure B-1. LEAST-COST ENVELOPE
D R A F T

OCTOBER 1990

B.43

derivation of incremental cost effectiveness. Points A, C and E represent

inferior controls because B will buy more emissions reduction for less money

than A; and similarly, D and F will by more reductions for less money than E,

respectively.

Consequently, care should be taken in selecting the dominant set of

controls when calculating incremental costs. First, the control options need

to be rank ordered in ascending order of annualized total costs. Then, as

Figure B-1 illustrates, the most reasonable smooth curve of the control

options is plotted. The incremental cost effectiveness is then determined by

the difference in total annual costs between two contiguous options divided by

the difference in emissions reduction. An example is illustrated in Figure

B-1 for the incremental cost effectiveness for control option F. The vertical

distance, "delta" Total Costs Annualized, divided by the horizontal distance,

"delta" Emissions Reduced (tpy), would be the measure of the incremental cost

effectiveness for option F.

A comparison of incremental costs can also be useful in evaluating the

economic viability of a specific control option over a range of efficiencies. 

For example, depending on the capital and operational cost of a control

device, total and incremental cost may vary significantly (either increasing

or decreasing) over the operation range of a control device.

As a precaution, differences in incremental costs among dominant

alternatives cannot be used by itself to argue one dominant alternative is

preferred to another. For example, suppose dominant alternative is preferred

to another. For example, suppose dominant alternatives B, D and F on the

least-cost envelope (see Figure B-1) are identified as alternatives for a BACT

analysis. We may observe the incremental cost effectiveness between dominant

alternative B and D is $500 per ton whereas between dominant alternative D and

F is $1000 per ton. Alternative D does not dominate alternative F. Both

alternatives are dominant and hence on the least cost envelope. Alternative D

cannot legitimately be preferred to F on grounds of incremental cost

effectiveness.
D R A F T

OCTOBER 1990

B.44

In addition, when evaluating the total or incremental cost effectiveness

of a control alternative, reasonable and supportable assumptions regarding

control efficiencies should be made. An unrealistically low assessment of the

emission reduction potential of a certain technology could result in inflated

cost effectiveness figures.

The final decision regarding the reasonableness of calculated cost

effectiveness values will be made by the review authority considering previous

regulatory decisions. Study cost estimates used in BACT are typically

accurate to ± 20 to 30 percent. Therefore, control cost options which are

within ± 20 to 30 percent of each other should generally be considered to be

indistinguishable when comparing options.

IV.D.2.c. DETERMINING AN ADVERSE ECONOMIC IMPACT

 

It is important to keep in mind that BACT is primarily a technologybased standard. In essence, if the cost of reducing emissions with the top

control alternative, expressed in dollars per ton, is on the same order as the

cost previously borne by other sources of the same type in applying that

control alternative, the alternative should initially be considered

economically achievable, and therefore acceptable as BACT. However, unusual

circumstances may greatly affect the cost of controls in a specific

application. If so they should be documented. An example of an unusual

circumstance might be the unavailability in an arid region of the large

amounts of water needed for a scrubbing system. Acquiring water from a

distant location might add unreasonable costs to the alternative, thereby

justifying its elimination on economic grounds. Consequently, where unusual

factors exist that result in cost/economic impacts beyond the range normally

incurred by other sources in that category, the technology can be eliminated

provided the applicant has adequately identified the circumstances, including

the cost or other analyses, that show what is significantly different about

the proposed source.

Where the cost of a control alternative for the specific source being

reviewed is within the range of normal costs for that control alternative, the