UNITED STATES ENVIRONMENTAL PROTECTION AGENCY 

 WASHINGTON D.C. 20460 

 

OFFICE OF THE ADMINISTRATOR 

SCIENCE ADVISORY BOARD 

December 16, 2010 

EPA-COUNCIL-11-001 

The Honorable Lisa P. Jackson 

Administrator 

U.S. Environmental Protection Agency 

1200 Pennsylvania Avenue, N.W. 

Washington, D.C. 20460 

Subject: Review of the Final Integrated Report for the Second Section 812 

Prospective Study of the Benefits and Costs of the Clean Air Act 

(August 2010) 

Dear Administrator Jackson: 

 The Advisory Council on Clean Air Compliance Analysis (Council) has offered technical 

advice and review to the Agency, including over a dozen advisory reports, during the 10-year 

period of the EPA effort to evaluate the benefits and costs of the Clean Air Act out to the year 

2020. This comprehensive assessment, required by Section 812 of the Clean Air Act 

Amendments (CAAA) of 1990, is referred to as the Second Prospective Study. As the EPA 

Project Team developing the Study completed its technical analyses and summarized the study 

findings, the Council has continued to provide advice and consultation. 

The Council met September 2-3, 2010 to review a draft summary report and a, final draft 

of the integrated report for the Agency’s Second Section 812 Prospective Study of the benefits 

and costs of the Clean Air Act Amendments (CAAA). The Second Prospective Study evaluates 

benefits and costs for air quality scenarios with and without the CAAA for the years 2000, 2010, 

and 2020. The study estimates human health benefits that would result from reduced ambient 

concentrations of fine particulate matter (PM2.5) and ozone, as well as benefits to a limited set of 

welfare and ecological endpoints. The report concludes that benefits far exceed costs, with the 

great majority of benefits attributed to reduced premature mortality due to lower ambient 

concentrations of PM2.5. Even without considering health benefits, the value of improvements in 

visibility and crop and forest yields exceed the estimated costs of compliance with CAAA 

provisions. 

   The Council is impressed with the quality, scope, and presentation of the Second 

Prospective Report. The report provides a state-of-the-art analysis of the benefits and costs of 
2

the 1990 CAAA. It is comprehensive in scope, sophisticated in methodology, and is accessible 

to both specialist and non-specialist readers. The report includes methodological innovations 

that enhance our understanding of the benefits and costs of air-quality regulations. These 

innovations should be further refined and applied in future regulatory analysis. The Council 

commends the EPA Project Team for its work. 

The Second Prospective Study has reinforced the need to invest in development of 

methods and studies to predict and value changes in ecosystem services and additional human 

health impacts (such as changes in morbidity and health effects of pollutants other than fine 

particulate matter and ozone). In important areas, the EPA’s 812 Project Team was hampered by 

methodological and data gaps, for example in the area of health effects of hazardous air 

pollutants (HAPs) and in understanding and valuing ecosystem responses to air pollutant 

exposure. 

The Council is pleased with the revisions made to the preliminary draft of the prospective 

study in response to its previous advice (EPA-COUNCIL-10-004). No analysis with the scope 

and complexity of the 812 Study is ever perfect, however, and the Council has suggestions to 

further improve the report. For the most part, our recommendations concern the presentation 

rather than its substance. We anticipate that this report will be of significant interest and value to 

many parties, which puts a premium on clear and comprehensive presentation. We urge the 

Agency to make the data, methodologies, and findings of the Second Prospective Study widely 

available through a variety of distribution mechanisms, including the EPA Web site. 

The Council has appreciated the opportunity to interact with the 812 Project Team over 

the course of the Second Prospective Study and the openness of the Agency to Council 

recommendations and advice. With the completion of the Second Prospective Study, we look 

forward to your response and to future opportunities to assist the Agency with benefit-cost 

assessments of Clean Air Act programs. 

 Sincerely, 

 /Signed/ 

 Dr. James K. Hammitt, Chair 

 Advisory Council on Clean Air 

 Compliance Analysis 

 
NOTICE 

This report has been written as part of the activities of the EPA Advisory Council on Clean Air 

Compliance Analysis (Council), a public advisory group providing extramural scientific 

information and advice to the Administrator and other officials of the Environmental Protection 

Agency. The Council is structured to provide balanced, expert assessment of scientific matters 

related to problems facing the Agency. This report has not been reviewed for approval by the 

Agency and, hence, the contents of this report do not necessarily represent the views and policies 

of the Environmental Protection Agency, nor of other agencies in the Executive Branch of the 

Federal government, nor does mention of trade names of commercial products constitute a 

recommendation for use. Reports of the Council are posted on the EPA Web site at 

http://www.epa.gov/advisorycouncilcaa. 

i
U.S. Environmental Protection Agency 

Advisory Council on Clean Air Compliance Analysis 

FY 2010 

CHAIR 

Dr. James K. Hammitt, Professor, Center for Risk Analysis, Harvard University, Boston, MA 

 

SAB MEMBERS 

Dr John Bailar, Scholar in Residence, The National Academies, Washington, DC 

Dr. Michelle Bell, Associate Professor, School of Forestry and Environmental Studies, Yale 

University, New Haven, CT 

Dr. Sylvia Brandt, Associate Professor, Department of Resource Economics, University of 

Massachusetts, Amherst, MA 

Dr. Linda Bui, Associate Professor, Department of Economics, Brandeis University, Waltham, 

MA 

Dr. Dallas Burtraw, Senior Fellow, Resources for the Future, Washington, DC 

Dr. Ivan J. Fernandez, Professor, Department of Plant, Soil and Environmental Sciences, 

University of Maine, Orono, ME 

Dr. Shelby Gerking, Professor, Department of Economics, University of Central Florida, 

Orlando, FL 

Dr. Wayne Gray, Professor, Department of Economics, Clark University, Worcester, MA 

Dr. D. Alan Hansen, Independent Consultant, Fremont, CA 

Dr. Nathaniel Keohane, Chief Economist, Environmental Defense Fund, New York, NY 

Dr. Jonathan Levy, Professor, Department of Environmental Health, Boston University School 

of Public Health, Boston, MA 

Mr. Richard L. Poirot, Environmental Analyst, Air Pollution Control Division, Department of 

Environmental Conservation, Vermont Agency of Natural Resources, Waterbury, VT 

Dr. Arden Pope, Professor, Department of Economics, Brigham Young University, Provo, UT 

Dr. Armistead (Ted) Russell, Professor, Department of Civil and Environmental Engineering, 

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Georgia Institute of Technology, Atlanta, GA 

Mr. Michael Walsh, Independent Consultant, Arlington, VA 

SCIENCE ADVISORY BOARD STAFF 

Ms. Stephanie Sanzone, Designated Federal Officer, U.S. Environmental Protection Agency, 

Science Advisory Board (1400R), 1200 Pennsylvania Avenue, NW, Washington, DC, Phone: 

202-564-2067, Fax: 202-565-2098, (sanzone.stephanie@epa.gov) 
Table of Contents 

1. EXECUTIVE SUMMARY................................................................................................................................1

2. INTRODUCTION..............................................................................................................................................3

2.1. BACKGROUND .............................................................................................................................................3

2.2. CHARGE TO THE COUNCIL...........................................................................................................................3

3. COMMENTS ON SUMMARY REPORT.......................................................................................................4

4. COMMENTS ON THE INTEGRATED REPORT........................................................................................6

4.1. EMISSIONS AND AIR QUALITY MODELING (CHAPTERS 2 AND 4).................................................................6

4.2. DIRECT COSTS (CHAPTER 3) .......................................................................................................................7

4.3. HUMAN HEALTH BENEFITS (CHAPTER 5)....................................................................................................7

4.4. ECOLOGICAL AND OTHER WELFARE BENEFITS (CHAPTER 6)......................................................................8

4.5. BENEFIT-COST COMPARISON (CHAPTER 7).................................................................................................9

4.6. COMPUTABLE GENERAL EQUILIBRIUM ANALYSIS (CHAPTER 8).................................................................9

5. CONCLUSIONS ..............................................................................................................................................10

REFERENCES ....................................................................................................................................................... R-1

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1. EXECUTIVE SUMMARY 

 

Section 812 of the Clean Air Act Amendments (CAAA) of 1990 calls for EPA to 

periodically prepare a comprehensive analysis of the impact of the CAAA on the public health, 

economy, and environment of the United States, and to seek the review and recommendations of 

the Council before issuing a final report. Over the past year, the Council and its technical 

subcommittees have reviewed numerous documents prepared for the Second Section 812 

Prospective Study. 

The Second Prospective Study evaluates benefits and costs for air quality scenarios with 

and without the CAAA for the years 2000, 2010, and 2020. The study estimates human health 

benefits that would result from reduced ambient concentrations of fine particulate matter (PM2.5) 

and ozone, as well as benefits to a limited set of welfare and ecological endpoints. The report 

concludes that benefits far exceed costs, with the great majority of benefits attributed to reduced 

premature mortality due to lower ambient concentrations of PM2.5. Even without considering 

health benefits, the value of improvements in visibility and crop and forest yields exceed the 

estimated costs of compliance with CAAA provisions. 

The Council is impressed with the quality, scope, and presentation of the Second 

Prospective Report. The report provides a state-of-the-art analysis of the benefits and costs of 

the 1990 CAAA. It is comprehensive in scope, sophisticated in methodology, and is accessible 

to both specialist and non-specialist readers. The report includes methodological innovations 

that enhance our understanding of the benefits and costs of air-quality regulations. These 

innovations should be refined and applied in future regulatory analysis. The Council commends 

the EPA Project Team for its work. 

Given the extensive previous reviews by the Council of data and methodologies used in 

the Second Prospective Study, the focus of the current report is primarily on the presentation of 

study results, including possible improvements to the clarity and context of key findings. The 

Council endorses the preparation of a Summary Report in addition to the more complete 

Integrated Report. The Summary Report (which the Council reviewed in draft form) provides an 

accessible and comprehensive summary of the Second Prospective Report and should be widely 

read and quoted. 

To further improve the reporting of the study, the Council recommends that the EPA 

Project Team post on the EPA Web site the numerous stand-alone documents and technical 

memoranda that provide supporting information about analytic methods and intermediate results. 

These materials should be supplemented by a short guide that orients readers to the background 

materials and reports any significant differences between the methods and results as described in 

these materials and as incorporated in the Second Prospective Report. 

Looking forward, the Council notes that the benefits quantified in the Second Prospective 

Report are dominated by reductions in mortality risk associated with fine particulate matter, as 

was the case for the Retrospective Report (U.S. EPA, 1997) and First Prospective Report (U.S. 

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2 

EPA, 1999). This dominance reflects not only the magnitude and importance of reductions in 

mortality risk, but also the limited extent to which other benefits are quantified. Because of 

limitations in methods and data, effects of other pollutants (notably Hazardous Air Pollutants or 

HAPs) and effects on ecosystems, agriculture, forestry, and construction materials are 

represented incompletely, in some cases only by case studies. The Council recommends that 

EPA stimulate research on methods to quantify these effects more comprehensively, which will 

allow EPA to provide a fuller understanding of the effects of air quality regulation that will be 

invaluable for future policy-making. 
2. INTRODUCTION 

2.1. Background

Section 812 of the Clean Air Act Amendments (CAAA) of 1990 calls for EPA to 

periodically prepare a comprehensive analysis of the impact of the Clean Air Act on the public 

health, economy, and environment of the United States, and to seek the review and 

recommendations of the Council before issuing a final report. Over the past year, the Council 

and its technical subcommittees have reviewed numerous studies prepared for the Second 

Section 812 Prospective Study, including reports on air emissions inventories and air quality 

modeling (EPA-COUNCIL-10-002 and 10-005); effects of future emissions scenarios on human 

health (EPA-COUNCIL-10-001), welfare and ecosystems (EPA-COUNCIL-10-003); and 

economic benefits and costs of compliance (EPA-COUNCIL-10-004). 

On September 2-3, 2010 the Council met to review a revised draft of the integrated report 

that presented the full array of technical results (the Integrated Report; U.S. EPA, 2010a) and a 

short, less technical document (the Summary Report; U.S. EPA 2010b) that summarizes the 

analytical methods used and the results and findings from the study. A subsequent conference 

call of the Council was held on November 22, 2010 to discuss and adopt this Council report. 

2.2. Charge to the Council

 Consistent with the statutory language defining the role of the Council in reviewing the 

812 studies, EPA requested that the Council consider the following questions during its review: 

1) Does the Council support the data choices made by the 812 Project Team for the 

development of the full integrated report and the summary report? If not, are there 

alternative data sets that should have been used? 

2) Does the Council support the methodological choices made for analyzing the data 

referenced in Charge Question 1? If not, are there alternative methodologies that should 

have been used? 

3) Does the Council have advice regarding potential revisions to the revised draft 

integrated report and/or the summary report that might enhance the utility of the final 

versions of these documents? 

Given the extensive previous reviews by the Council of data and methodologies used in 

the Second Prospective Study, the focus of the current Council report is primarily on the 

presentation of study results, including possible improvements to the clarity and context of key 

findings. 

3 
3. COMMENTS ON THE SUMMARY REPORT 

The Council endorses the EPA Project Team’s decision to produce a stand-alone 

Summary Report (U.S. EPA, 2010b) as a complement to the Integrated Report. The summary is 

of a length and level of methodological detail that will make it more accessible and widely read 

than the Integrated Report. In the interest of improving the draft summary report, the Council 

offers the following suggestions: 

• Ensure that all results in the Summary Report also appear, with appropriate 

support, in the Integrated Report. The Council noted one example of a result that does 

not seem to appear in the Integrated Report, the figure of $275,000 per avoided fatality 

(on p. 17). 

• Ensure that each Exhibit is sufficiently well labeled that it stands alone. When 

describing effects that are evaluated, the pollutants whose effect is quantified should be 

identified when this is not evident (e.g., for welfare and ecological effects in Exhibit 11). 

Many readers will not read the full document and some will wish to use results from it in 

their own presentations. To ensure easy and accurate reproduction, it would be useful to 

make digital versions of the Exhibits available (e.g., as presentation slides). Moreover, 

each graphic should be thoroughly examined to make sure that it is reasonable and can be 

explained or else it will harm the credibility of the work (e.g., some of the increases in 

PM2.5 in Exhibit 7 may be artifacts of MATS or other modeling steps). 

• Ensure that the time periods to which monetary values, averted fatalities, and other 

effects pertain are clear (e.g., annual, cumulative, present value, and dates). Also, 

whether monetary amounts are nominal or real, and if real the year to which they are 

indexed, should be clear. 

• Provide more context to help readers understand the magnitudes of the effects of 

the CAAA. For example, it would be helpful to describe how air quality with and 

without the CAAA changes over time and how levels compare with levels observed in 

different locations and/or over time in the United States. This is relevant to 

understanding how much of the benefit comes from improving air quality since 1990 

compared with preventing degradation that might otherwise have occurred and to 

understanding the extent to which estimates of health and other damages require 

extrapolating beyond conditions observed in epidemiological and other studies. 

• Describe benefits and costs on a per-capita or per-household level, in addition to 

national aggregates, to provide further perspective. In 2020, for example, the average 

mortality-risk reduction is approximately 10 percent (age-specific results might be 

preferable), the benefits average about $6,000 per capita, and the direct costs average 

about $200 per capita. 

• Add additional text boxes, FAQs, or other material to address important and 

difficult topics. Examples include the concept of premature mortality (including life 

expectancy gain), the concept and methods used to estimate the monetary value of 

mortality-risk reduction, and the use of probability distributions and fractiles to describe 

uncertainty. It may be useful to address the extent to which estimated benefits are 

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5 

associated with reductions in pollutant concentrations below the NAAQS and, if these are 

significant, to address the apparent conflict between threshold-motivated NAAQS and the 

continuous exposure-response functions used in the 812 analysis. 

• Provide further discussion of the implications of possible differential toxicity of PM 

components for the estimated benefits. It could be useful to report how the populationweighted average PM2.5 composition differs between the with- and without-CAAA 

scenarios (nationally and perhaps regionally). If there is little difference, differential 

toxicity should not significantly affect the estimated benefits, but if composition changes 

substantially then the possibility of differential toxicity could be a significant source of 

uncertainty about the benefits. A brief summary of the evidence concerning differential 

toxicity could be presented in a FAQ or text box. 

• Clarify that there are uncertainties associated with estimates of costs, as well as with 

benefits. It is striking that all the non-quantified effects (summarized in Exhibit 17) and 

all but one of the key uncertainties (summarized in Exhibit 18) pertain to estimated 

benefits. Uncertain factors that affect cost estimates, in addition to the one listed in 

Exhibit 18 (unidentified measures for NAAQS compliance) include treatment of 

learning-curve effects and unquantified degradation in the quality of reformulated 

products. Those that are judged most important should be identified. 
4. COMMENTS ON THE INTEGRATED REPORT 

The Integrated Report (U.S. EPA, 2010a) provides a clear description of the data, 

methods, and results of the second prospective analysis. One general comment is that it would 

be preferable to provide more of the uncertainty analysis in the chapters to which it pertains and 

reserve the uncertainty section of Chapter 7 (Comparison of Benefits and Costs) for an 

integrative perspective on how the uncertainties combine. Each section describing a primary 

component of the analysis (e.g., emissions, air quality modeling, and health effects) should 

include a statement of overall uncertainty in that component, e.g., something like “overall, air 

quality modeling results are viewed as contributing substantial/moderate/limited uncertainty to 

the estimated total benefits. These uncertainties contribute directly/indirectly/multiplicatively to 

the uncertainties in the estimation of mortality/morbidity/ecological benefits.” 

Additional comments are provided below, organized by topic and chapter. (For the 

Council’s comments on the preliminary draft of the Integrated Report, see EPA-COUNCIL-10-

004.) 

4.1. Emissions and Air Quality Modeling (Chapters 2 and 4) 

Given the large differences between projected 2020 emissions and air quality with and 

without the CAAA, it would be useful to add context with some illustrations of historical 

changes in PM and/or ozone concentrations in the recent past. For example, there is likely to be 

some ozone and PM data available for locations like Los Angeles, Pittsburgh, or New York from 

the late 1970s or early 1980s. Reference to proportionate historical changes in related indicators 

(such as PM10, other PM size fractions, or visibility) also might be employed here if older PM2.5

measurement data are elusive. 

It would be helpful to provide more discussion about uncertainties in secondary organic 

aerosol (SOA) formation. Figure 4-1 should be modified to include the use of the Modeled 

Attainment Test Software (MATS) to adjust modeled air quality. (Air quality modeling was 

done using the Community Multiscale Air Quality, CMAQ, model and MATS was used to adjust 

CMAQ outputs using monitoring data. For more discussion, see EPA-COUNCIL-10-002 and 

005.) 

It appears that the MATS application may have introduced some small errors in the 

adjusted model results. For example, there appear to be anomalous localized increases in PM2.5

concentrations in several western states in the 2020 with versus without CAAA plots (Figure 4-7, 

reproduced as Exhibit 7 in the Summary Report). If these increases are errors, it would be 

important to understand, explain and if possible correct them. If they are not errors, the text 

should adequately explain them. 

The tabular listings and associated discussions of key uncertainties at the ends of these 

chapters are informative. It would be helpful to add an overview summary of the general 

magnitude of the total uncertainties associated with emissions inventories, projections, and 

MATS-adjusted CMAQ results, which collectively are likely to be moderate compared with 

uncertainties in other components of the analysis. 

6 
4.2. Direct Costs (Chapter 3)

 The Council suggests that there be greater acknowledgment of the conceptual and 

empirical uncertainty about cost reductions that occur over time and whether they are best 

modeled as learning-curve effects or as some other form of endogenous or exogenous 

technological change. A recent working paper suggests that it is difficult to distinguish learningcurve effects from exogenous technological change and that the effect of learning on reducing 

costs typically will be overestimated (Nordhaus, 2008). 

The assumption that costs of identified control measures will not exceed $15,000 per ton 

of pollutant could be better supported, using information on regulations adopted in California 

that was described by the EPA Project Team at the Council meeting. It also would be useful to 

specify the pollutants to which this assumption applies. 

When comparing cost estimates with econometric estimates, another relevant citation is 

the 2005 NAPAP retrospective report (National Science and Technology Council, 2005). 

Some of the costs of the CAAA are not reflected as increased market prices, but can be 

characterized as reductions in product quality. For example, motor-vehicle emission controls 

may reduce performance. The stricter emissions regulations on automobiles than on light duty 

trucks (LDTs) likely contributed to the shift in the vehicle fleet toward LDTs, with some 

consumers who would have preferred automobiles purchasing LDTs. Substitution of other 

devices for charcoal lighting fluid, reformulation of paints, and other product changes also may 

have reduced the quality of products consumed. The Council suggests including some 

discussion of the components of costs that are not likely to be captured in the analysis. 

4.3. Human Health Benefits (Chapter 5)

The Council suggests including more discussion of the evidence related to possible 

differential toxicity of PM2.5 components and the implications for estimated benefits. This 

discussion should present the core argument for why quantitative sensitivity analysis of 

differential toxicity is not incorporated. It could be enhanced by presenting information on how 

PM composition differs between the with- and without-CAAA scenarios and explaining how this 

difference influences the extent to which possible differences in toxicity could affect benefits. 

Much of the necessary material for this discussion is presented in the Uncertainty Analysis report 

(Uncertainty Analyses to Support the Second Section 812 Benefit-Cost Analysis of the Clean Air 

Act – Draft, November 2009), which should be referenced. 

Some discussion should be provided of the uncertainty and possible bias in estimated 

health effects that come from reliance on fixed ambient-air-quality monitors rather than personal 

exposure. The current approach can be described as a reduced-form relationship that has 

embedded within it people’s behavior, including the extent to which they vary their activity in 

ways that alters PM exposure. 

It would be useful to explain why different model runs, time periods, and domains were 

used to estimate PM2.5 and ozone exposures and to provide a brief explanation of the enhanced 

Voronoi Neighbor Averaging procedure. 

7 
With regard to monetary valuation of health risk, the Council recommends further 

clarification of the concept of value per statistical life (VSL) and acknowledgment of uncertainty 

about the appropriate value(s) for use in this analysis. As nicely described in the Summary 

Report, the extent to which VSL depends on age and health status and on the source of risk are 

significant uncertainties. These are important because most of the VSL estimates relied on are 

obtained by studies of working-age populations and concern the risk of fatal occupational injury 

rather than older (and younger) populations and risk of heart attack or disease from ambient air. 

An additional uncertainty concerns the potential bias in using estimates of VSL that correspond 

to very small risk changes for the rather large risk changes associated with the CAAA (averaging 

on the order of a 10 percent reduction in total mortality risk). It is clear that an individual’s 

incremental willingness to pay to reduce mortality risk declines as he purchases more 

increments, but the rate at which it declines is uncertain. Moreover, a case could be made that 

willingness to accept compensation to forgo air quality improvement is the relevant measure, and 

incremental willingness to accept could increase with increasing air quality improvement. 

4.4. Ecological and Other Welfare Benefits (Chapter 6)

There are potentially large ecological benefits of air-pollution control that are not 

currently quantified. Some of the most important categories of unquantified effects may include 

the effects of nitrogen deposition on estuaries, sulfur deposition on terrestrial ecosystems, and 

interactive and synergistic effects of multiple air pollutants. Some effects of air-pollution control 

may be adverse, at least in the short term, such as reductions in nitrogen deposition at sites where 

it is a limiting nutrient. Also important, but more subtle, are the long-term effects of a wide 

range of air pollutants on ecosystem structure and function, and therefore the ecosystem services 

on which society depends. 

The values in Figures 6-2 (NOx and SOx deposition) and 6-3 (total N deposition) appear 

high compared with National Atmospheric Deposition Program (NADP) measurements. It 

would be useful to verify and explain important differences between what is modeled and what is 

measured. 

The FASOM model, used to estimate agricultural benefits, should be more fully 

explained. Issues that merit attention are the accuracy with which it has predicted results in 

previous studies, the effects of assuming farmers have perfect foresight, and the assumption that 

imports are fixed and do not respond to domestic prices. 

The chapter notes that the Air Pollution Emissions Experiments and Policy (APEEP) 

model was used to simulate ambient SO2 levels as input to the estimation of materials damage 

under the various emissions scenarios. The discussion of APEEP should make clear that CMAQ 

is a far more sophisticated model. In addition, some characterization of how well APEEP 

replicates CMAQ results should be provided to supplement the statement that APEEP has been 

statistically tested against CMAQ (p. 6-32). Logically, APEEP might be described in Chapter 4 

on air quality modeling, but given its limited use perhaps it is better to keep the description in 

Chapter 6. 

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4.5. Benefit-Cost Comparison (Chapter 7)

This chapter could be better organized by focusing sequentially on benefit and cost 

results, uncertainties, methodological advances, and other issues. At present, these topics are 

somewhat mixed together. As noted earlier, much of the discussion of component-specific 

uncertainties should be moved to the relevant chapters with this chapter providing integration 

and overview. 

The information on benefits per ton emitted from different sources could be very useful if 

it were provided in terms of dollars per ton of the same pollutant emitted from different sources. 

The current results, which aggregate emitted pollutants with different characteristics (e.g., 

primary PM, SO2) on an equal mass basis, are not particularly meaningful. 

It could be useful to compare the benefits estimated in this report with estimates that 

could be derived using alternative approaches, such as econometric studies of housing or other 

markets and stated preferences. In making such comparisons, it would be important to account 

for differences between the scenarios analyzed, pollution metrics, effects of air pollution that are 

included, and other factors. 

4.6. Computable General Equilibrium Analysis (Chapter 8)

 The inclusion of benefit-side effects (reductions in mortality, morbidity, and health-care 

expenditures) in a computable general equilibrium (CGE) model represents a significant step 

forward in benefit-cost analysis. (In the past, only cost-side effects have been included.) The 

Council’s primary concern is that the Summary and Integrated Reports be clear about which 

effects are, and are not, included in the CGE model. To this end, we suggest that references to 

the adjustments use uniform terminology, such as “labor force” and “health expenditure” 

adjustments, and not risk confusion by also using alternative terms such as “labor market” or 

“health benefits.” In the Summary Report, it would be better to substitute “productivity” for 

“efficiency” in the phrase about “the limited ‘economic efficiency’ terms reflected in the 

macroeconomic model’s measure of household welfare” (p. 20). Also, the Summary Report 

should make clear that the CGE model accounts for household leisure as well as income. 

It would be useful to provide information about how important the various adjustments 

are to the total effects on GDP and welfare (as calculated by the CGE model), i.e., are the laborforce adjustments significantly more influential on GDP than the reductions in health-care 

expenditure? Indeed, does the reduction in health-care expenditure increase or decrease GDP? 

For overall well-being, how important is the increased income associated with greater labor input 

compared with the additional leisure time available? If the labor-force adjustments dominate, 

that would help justify use of the “labor-force-adjusted” description; if not, perhaps some better 

term could be chosen. 

Finally, the report notes the exclusion from cost estimates of motorist waiting time for 

inspection and maintenance (I&M) programs (p. 8-11). It would be useful to indicate the likely 

importance of this exclusion based on the size of these costs within the total direct costs of the 

I&M programs. 

 
5. CONCLUSIONS 

Overall, the Council is impressed by the scope, sophistication, and clarity of the draft 

second prospective report. It will provide a state-of-the-art assessment of the benefits and costs 

of the 1990 CAAA and the Summary Report should be widely read and quoted. 

The Second Prospective Report is not a single document, but consists of several. In 

addition to the Summary Report and Integrated Report, supporting material is provided by 

numerous stand-alone documents and technical memoranda, drafts of which were reviewed by 

the Council or its subcommittees. These documents include: 

• Benefits Analyses to Support the Second Section 812 Benefit-Cost Analysis of the Clean Air 

Act – Draft, November 2009 (prepared by Industrial Economics, Inc)

• Uncertainty Analyses to Support the Second Section 812 Benefit-Cost Analysis of the Clean 

Air Act – Draft, November 2009 (prepared by Industrial Economics, Inc)

• Second Prospective Analysis of Air Quality in the U.S.: Air Quality Modeling – Draft Report, 

September 2008 (prepared by ICF International)

• Evaluation of CMAQ Model Performance for the 812 Prospective II Study, November 2009 

(memorandum prepared by ICF International)

• Effects of Air Pollutants on Ecological Resources: Literature Review and Case Studies – 

Draft Report, February 2010 (prepared by Industrial Economics, Inc.)

• 812 Economic Analyses Using the EMPAX-CGE Modeling System—Revised Draft, April 

2010 (prepared by ICF Inc.) 

• Direct Cost Estimates for the Clean Air Act Second Section 812 Prospective Analysis – 

Draft Report (prepared by Pechan & Associates, Inc.) 

To provide coherence, the Council recommends that the EPA Project Team prepare a short guide 

or table of contents to the full set of documents, so that readers can readily determine what exists 

and which parts are relevant to any particular topic. For these documents to serve their role of 

supporting the Second Prospective Report, any changes between the methods and results as 

presented in the final versions of these documents and as incorporated in the Second Prospective 

Report should be described, in the short guide or elsewhere. We urge that this guide and all the 

relevant reports be easily accessible through the EPA Web site. 

Looking toward the future, the Council notes that the current report provides sparse 

quantitative information about the consequences of the CAAA on endpoints other than the 

human-health effects of PM2.5 and ozone. Moreover, even the morbidity effects of these 

pollutants are less well quantified than the mortality effects. Health effects of hazardous air 

pollutants (HAPs) are represented only by a case study of the effects of benzene in the Houston 

metropolitan area and effects on unmanaged ecosystems are included only as a case study of lake 

acidification and recreational fishing in the Adirondacks. Some effects of single pollutants on 

large categories of endpoints are estimated nationwide, i.e., effects of ozone on commercial 

agriculture and forestry and effects of SO2 on some building and infrastructure categories. In 

large part, the limited coverage of non-health endpoints reflects their physical complexity, sitespecificity (and hence dependence on site-specific data), and limitations of methods and 

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estimates for economic valuation. The value of enhanced visibility is incorporated 

comprehensively for metropolitan regions but selectively for recreational sites (e.g., national 

parks) and the studies used for valuing visibility are dated. 

In order to provide a more comprehensive understanding of the effects of the CAAA and 

other air-quality regulations, EPA should stimulate more research on the effects of air quality on 

managed and unmanaged ecosystems, on methods to comprehensively quantify human exposure 

to air pollutants whose concentrations vary dramatically in time and space (HAPs, but also PM2.5

near traffic and other sources), and to improve estimates of the monetary value of changes in 

these endpoints. Uncertainty about the shape of the exposure-response function relating 

mortality to PM and the appropriate valuation of air-pollution-related mortality risk will continue 

to be important in estimating the benefits of air-quality regulation and so EPA should also 

continue to support research on these topics. In addition, future studies that assess effects over 

multi-decadal periods should consider the effects of climate change, which can alter atmospheric 

concentrations of pollutants and the distribution, sensitivity, and other characteristics of 

ecosystem receptors, including agricultural receptors. 
REFERENCES 

National Science and Technology Council. 2005. National Acid Precipitation Assessment Panel 

Report to Congress: An Integrated Assessment, Executive Office of the President, 

Washington, DC. 

Nordhaus, W.D. 2008. The Perils of the Learning Model for Modeling Endogenous 

Technological Change. Mimeo, Yale University, December 15, 2008. Available at 

http://nordhaus.econ.yale.edu/documents/LearningPerils_v8.pdf [accessed 10/01/10]. 

U.S. EPA (Environmental Protection Agency). 1997. The Benefits and Costs of the Clean Air 

Act, 1970 to 1990. EPA Office of Air and Radiation, Washington, DC. 

U.S. EPA (Environmental Protection Agency). 1999. The Benefits and Costs of the Clean Air 

Act, 1990 to 2010. EPA Office of Air and Radiation, Washington, DC. 

U.S. EPA (Environmental Protection Agency). 2010a. The Benefits and Costs of the Clean Air 

Act: 1990 to 2020, Revised Draft (August 2010). EPA Office of Air and Radiation, 

Washington , DC. 

U.S. EPA (Environmental Protection Agency). 2010b. The Benefits and Costs of the Clean Air 

Act: 1990 to 2020 – Summary Report (August 16, 2010 External Review Draft). EPA 

Office of Air and Radiation, Washington, DC. 

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