# Leak Repair Rule and Emissions ‘Discounting’ Briefing for Rob Brenner Friday, September 17, 2010 Stratospheric Protection Division

# Scope of Briefing • Background on Leak Repair Rule • History of OMB Review of Rule • Current Status • Relationship to Agency Guidelines and to other OAR Rulemakings • Decision Point • Next Steps

# Background

• Since 1995, 608 CAA rules cover servicing of air conditioning and refrigeration equipment using >=50 lbs of refrigerants that are ozone depleting substances (ODS)

– Comfort cooling building chillers

– Commercial warehouses & supermarket refrigeration equipment

– Many industrial uses (food processing, pharmaceutical, ice rinks, etc.) 

### • Leak repair requirements establish mandatory timeframes for repair or replacement of ODS leaking equipment • Tier 3 NPRM will further reduce ODS emissions (SAN 4856, Tier 3 RIN 2060-AM09)

# Background

• 1995 requirements no longer reflect industry best practices, so Leak Repair Proposed Rule reduces ODS refrigerant emissions by lowering threshold for repair or replacement of leaking equipment

– From 15% down to 10% for comfort cooling appliances

– From 35% down to 20% for commercial refrigeration

– Option to require replacement of consistently leaky components 

### • Annual Benefits:

– Ozone: 316 ODP MT

– Climate: 6.6 MMTCO 2eq. 

### • Issue:

– OMB pushing footnote stating that avoided emissions, attributed to the leak repair NPRM , are not discounted

# OMB Review History

• August 18, 2008: Rule first submitted to OMB; withdrawn in October after OMB request • May 28, 2010: resubmitted to OMB

– August 12, OMB forwarded final comments on NPRM with new footnote (rationale that past OAR rulemakings discounted non -monetized effects)

– Conference Call August 16, 2010 • EPA agreed to make edits to NPRM & check with other EPA offices • OPEI agreed to check for examples 

### • August 25, 2010: OMB Cleared NPRM with discount language

# Documentation Findings

• EPA’s Guidelines for Preparing Economic Analyses, September 2000

– Perspectives on discounting non - monetized effects: • “...discounting is essentially a financial process designed to evaluate investment decisions, it is only relevant to dollar-denominated streams, and so benefits that are in physical rather than dollar terms cannot be discounted.” • “... it is ethically unacceptable to discount physical units.” (e.g. cancer cases)

# When Is Discounting Non - monetized Effects Appropriate? WHEN “Quantitative information on the time streams of physical effects is available and these effects are measured in terms of human health consequences and ecosystem damages that are normally monetized.”

– “Physical effects have been estimated and could be monetized, but this last step – converting measured physical effects into dollar values of benefits – has not been taken.” BUT NOT WHEN

– Conceals information of value to policymakers

– Masks information through implicit assumptions (identical effects over time)

– Detailed linkages of current and future damages do not exist

– Examples of when discounting benefits is not appropriate: • greenhouse effect, pollution damages, effluent discharges to rivers, etc...

– Comparisons of costs and benefits can still be made without directly discounting the benefits

# Discounting Emissions in Past EPA Rules

– 2007 Mobile Source Air Toxics Rule RIA • Emissions not directly discounted; $/ton

– 2002 Non - road Spark Ignition Rule RIA

– 2004 Non - road Diesel Rule RIA

– 2008 Locomotive/Marine Diesel Rule RIA • Emission tons directly discounted; may not be consistent with Economic Guidelines

– Is Discounting Appropriate in OAP Leak Repair Rule?

– No because: • Dynamic nature of ozone depletion and climate change • Cumulative effects of reducing emissions including additional health benefits (e.g. cataracts, skin cancer cases avoided) • Reduces future benefits

# Summary and Options

– Send Rule Forward as Is (cleared ROCIS) and publish proposal with footnote

– Restart process with OMB, with support from OAR front office