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CHAPTER 2. ANALYTICAL FRAMEWORK

TABLE OF CONTENTS

2.1 INTRODUCTION ........................................................................................................... 2-1

2.2 BACKGROUND ............................................................................................................. 2-4

2.3 MARKET AND TECHNOLOGY ASSESSMENT ........................................................ 2-4

2.3.1 Market Assessment .............................................................................................. 2-4

2.3.2 Technology Assessment....................................................................................... 2-5

2.3.3 Product Classes .................................................................................................... 2-5

2.4 SCREENING ANALYSIS .............................................................................................. 2-5

2.5 ENGINEERING ANALYSIS .......................................................................................... 2-5

2.5.1 Representative Product Classes ........................................................................... 2-6

2.5.2 Baseline Ballasts .................................................................................................. 2-6

2.5.3 More Efficient Ballast Designs ............................................................................ 2-6

2.5.4 Efficiency Levels ................................................................................................. 2-7

2.6 ENERGY USE CHARACTERIZATION ....................................................................... 2-7

2.7 MARKUPS ANALYSIS ................................................................................................. 2-7

2.8 LIFE-CYCLE COST AND PAYBACK PERIOD ANALYSIS ..................................... 2-7

2.9 SHIPMENTS ANALYSIS .............................................................................................. 2-8

2.9.1 Shipment Scenarios .............................................................................................. 2-8

2.10 NATIONAL IMPACT ANALYSIS ................................................................................ 2-9

2.10.1 National Energy Savings Analysis....................................................................... 2-9

2.10.2 Net Present Value Analysis ................................................................................. 2-9

2.11 LIFE-CYCLE COST SUB-GROUP ANALYSIS ......................................................... 2-10

2.12 MANUFACTURER IMPACT ANALYSIS.................................................................. 2-10

2.13 UTILITY IMPACT ANALYSIS ................................................................................... 2-11

2.14 EMPLOYMENT IMPACT ANALYSIS ....................................................................... 2-11

2.15 ENVIRONMENTAL ASSESSMENT .......................................................................... 2-11

2.15.1 Carbon Dioxide .................................................................................................. 2-12

2.15.2 Sulfur Dioxide .................................................................................................... 2-12

2.15.3 Nitrogen Oxides ................................................................................................. 2-12

2.15.4 Mercury .............................................................................................................. 2-13

2.15.5 Particulate Matter ............................................................................................... 2-13

2.15.6 Monetization of Emissions Reduction Benefits ................................................. 2-14

2.16 REGULATORY IMPACT ANALYSIS ....................................................................... 2-15

2.17 DEPARTMENT OF JUSTICE REVIEW ..................................................................... 2-15

LIST OF FIGURES

Figure 2.1.1 Flow Diagram of Analyses for the Ballast Rulemaking Process ............... 2-2
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CHAPTER 2. ANALYTICAL FRAMEWORK

2.1 INTRODUCTION

Sections 6295(o)(2)(A) and (3) of Title 42 United States Code (42 U.S.C. 6295(o)(2)(A) 

and (3)) require that energy conservation standards set by the U.S. Department of Energy (DOE) 

be technologically feasible and economically justified, and achieve the maximum improvement 

in energy efficiency. This chapter provides a description of the general analytical framework 

that DOE uses in developing such standards, and in particular, standards for fluorescent lamp 

ballasts. The analytical framework is a description of the methodology, the analytical tools, and 

relationships among the various analyses that are part of this rulemaking. For example, the 

methodology that addresses the statutory requirement for economic justification includes 

analyses of life-cycle cost (LCC); economic impact on manufacturers and users; national 

benefits; impacts, if any, on utility companies; and impacts, if any, from lessening competition

among manufacturers. DOE will also solicit the views of the Department of Justice (DOJ) on 

any lessening of competition that is likely to result from the imposition of a proposed standard. 

Figure 2.1.1 summarizes the analytical components of the standards-setting process. The 

central parts of this figure are the analyses contained in the boxes. The key inputs to the left and 

key outputs to the right show how the analyses fit into the rulemaking process, and how the 

analyses relate to each other. Key inputs are the types of data and information that the analyses 

require. Some key inputs exist in public databases; DOE collects other inputs from stakeholders 

or persons with special knowledge. Key outputs are analytical results that feed directly into the

standards-setting process. Dotted lines connecting analyses show types of information that feed 

from one analysis to another. While Figure 2.1.1 summarizes the inputs, outputs and analyses of 

a typical standards rulemaking, individual inputs and outputs may vary by rulemaking. For 

example, as discussed in chapters 5, 6, and 7, this rulemaking combines the results of the 

engineering analysis, energy use characterization, and the markups analysis to derive typical 

inputs for the LCC and NIA. 
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Figure 2.1.1 Flow Diagram of Analyses for the Ballast Rulemaking Process
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The analyses performed in the notice of proposed rulemaking (NOPR) stage and reported 

in this technical support document (TSD) include: 

A market and technology assessment to characterize the fluorescent ballast market; to 

identify technology options that improve efficiency; and to develop product classes. 

A screening analysis to review each technology option and determine if it is 

technologically feasible; practical to manufacture, install, and service; would adversely affect 

lamp utility or lamp availability; or would have adverse impacts on health and safety. 

An engineering analysis to determine manufacturer selling prices (MSPs) associated with 

more efficient fluorescent lamp ballasts by estimating the manufacturing production cost (MPC) 

and applying a manufacturer markup; 

An energy use analysis to determine the annual energy consumption of fluorescent lamp 

ballasts. 

A markup analysis that converts average MSPs to consumer installed prices. 

A life-cycle cost analysis that calculates, at the consumer level, the discounted savings in 

operating costs throughout the estimated average life of the ballast, compared to any increase in 

the installed costs likely to result directly from imposition of the standard. 

A payback period (PBP) analysis to estimate the amount of time it takes consumers to 

recover the higher purchase expense of more energy efficient ballasts through lower operating 

costs.

A shipments analysis to estimate yearly shipments of covered fluorescent lamp ballasts

over the analysis period. 

A national impact analysis (NIA) that assesses the aggregate impacts at the national level 

of potential energy conservation standards as measured by the net present value (NPV) of total 

consumer economic impacts and national energy savings (NES). 

An LCC subgroup analysis that evaluates the economic impacts on identifiable groups of 

customers of fluorescent lamp ballasts, including various categories of ballast purchasers or 

owners who may experience disproportionate impacts from a national energy conservation 

standard. 

A manufacturer impact analysis (MIA) to calculate the financial impacts of energy 

conservation standards on ballast manufacturers and to identify impacts on competition, 

employment at manufacturing plants, and manufacturing capacity. 

A utility impact analysis that estimates the effects of proposed standards on the installed 

capacity and the generating base of electric utilities. 
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An employment impact analysis that estimates the impacts of standards on net jobs 

eliminated or created in the general economy as a consequence of increased spending on the 

installed price of ballasts and reduced customer spending on energy 

An environmental assessment to provide estimates of the effects of amended energy

conservation standards on emissions of carbon (CO2), sulfur dioxide (SO2), nitrogen oxides 

(NOX), and mercury (Hg). 

A regulatory impact analysis (RIA) that presents major alternatives to proposed standards 

that may achieve comparable energy savings at a reasonable cost. 

In response to comments it receives on the NOPR, DOE may revise some of its analyses 

before publishing the final rule. 

2.2 BACKGROUND

As described in chapter 1 of the TSD, in September 1995, the Department announced a 

formal effort to consider further improvements to the process used to develop appliance 

efficiency standards. The Department called on energy-efficiency groups, manufacturers, trade 

associations, state agencies, utilities, and other interested parties to provide input to this effort.

As a result of this combined effort, the Department published Procedures, Interpretations and 

Policies for Consideration of New or Revised Energy Conservation Standards for Consumer 

Products (the “Process Rule”), 10 CFR 430, Subpart C, Appendix A. The Process Rule outlined 

the procedural improvements identified by the interested parties, and included a review of the: 1) 

economic models, 2) analytic tools, 3) methodologies, 4) non-regulatory approaches, and 5) 

prioritization of future rules. The Process Rule recommended that the Department take into 

account uncertainty and variability by carrying out scenario or probability analysis. 

DOE developed the analytical framework for the fluorescent lamp ballast rulemaking 

under the Process Rule. DOE documented this analytical framework in the Energy Conservation 

Standards Rulemaking Framework for Fluorescent Lamp Ballasts (hereafter, “framework 

document”), and presented the analytical approach to stakeholders during a public meeting held 

on February 6, 2008 (hereafter “framework public meeting”). This document is available at

http://www1.eere.energy.gov/buildings/appliance_standards/residential/pdfs/ballast_framework_

011408.pdf. The following sections provide a general description of the different analytical 

components of the rulemaking framework. 

2.3 MARKET AND TECHNOLOGY ASSESSMENT

The market and technology assessment characterizes the relevant product markets and 

existing technology options, including prototype designs, and outlines product classes. 

2.3.1 Market Assessment

When initiating a standards rulemaking, DOE develops information on the industry 

structure and market characteristics of the product(s) concerned. This activity consists of both 
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quantitative and qualitative efforts to assess the industry based on publicly available information. 

As such, DOE addresses: (1) industry structure and manufacturer market shares, (2) existing

regulatory and non-regulatory efficiency improvement initiatives, and (3) trends in product 

characteristics and retail markets. This information serves as resource material throughout the 

rulemaking. 

DOE has used and will use the most reliable and accurate data available at the time of 

each analysis in this rulemaking. DOE welcomes and will consider any submissions of 

additional data. 

2.3.2 Technology Assessment

DOE typically uses information relating to existing technology options to develop more 

efficient fluorescent lamp ballast designs. DOE prepared a list of technologies for consideration 

which could improve the efficiency of these products. To develop this list, DOE reviewed 

manufacturer catalogs, recent trade publications and technical journals, and consulted with 

technical experts.

2.3.3 Product Classes

DOE divides covered products into classes by: (a) the type of energy used; and (b) 

capacity of the product or any other performance-related feature that justifies different standard 

levels, such as features affecting consumer utility. (42 U.S.C. 6295(q)) In general, DOE defined 

product classes using information obtained from manufacturers, trade association, and other 

interested parties.

2.4 SCREENING ANALYSIS

The screening analysis examines the technology options from the technology assessment 

as to whether they: (1) are technologically feasible; (2) are practical to manufacture, install, and 

service; (3) do not have an adverse impact on product utility or availability; and (4) do not have 

adverse impacts on health and safety. As described above, DOE develops an initial list of 

technology options from the technologies identified in the technology assessment. Then, in 

consultation with interested parties, DOE reviews the list to determine if these technologies meet 

the screening criteria. In the engineering analysis, DOE only considers design options that meet 

all four of the screening criteria. 

2.5 ENGINEERING ANALYSIS

DOE performed an engineering analysis to establish the relationship between the 

manufacturer production cost (MPC) and the energy efficiency of ballasts. The relationship 

between the MPC and energy efficiency serves as the basis of the cost-benefit calculations for 

individual consumers, manufacturers, and the Nation. 

In the engineering analysis, DOE selects representative product classes to analyze. It 

then selects representative ballast types within those representative product classes, and develops 
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ballast designs that represent more efficient versions of the baseline ballasts. DOE then uses 

these ballast designs to develop efficiency levels (ELs) and calculates price for each of these 

levels. The primary output of the engineering analysis is a set of cost-efficiency curves. In a 

subsequent life-cycle cost analysis (chapter 8 of the NOPR TSD), DOE used the cost-efficiency 

curves to determine customer prices for each product by applying the appropriate distribution 

channel markups. The engineering analysis also develops system power ratings in which DOE 

uses to develop energy consumption in chapter 6 of the NOPR TSD.

2.5.1 Representative Product Classes

DOE reviewed covered ballasts and the associated product classes. DOE identified and 

selected certain product classes as “representative” product classes and concentrated its 

analytical effort on these classes. DOE chose these representative product classes primarily 

because of their high market volumes. 

2.5.2 Baseline Ballasts 

DOE selected representative ballast types within each representative product class. For 

each representative ballast type, DOE selected a baseline model as a reference point against 

which to measure changes resulting from energy conservation standards. Typically, a baseline 

ballast is a unit that just meets current Federal energy conservation standards and provides basic 

consumer utility. To determine energy savings and changes in price, DOE compared each higher 

energy efficiency level with the baseline unit. DOE considered the ballast’s characteristics in 

choosing the most appropriate baseline ballast for each ballast type. These characteristics include 

the ballast’s starting method (e.g., rapid start (RS), instant start (IS), or programmed start (PS)), 

input voltage (277V vs. 120V), type (electronic vs. magnetic), power factor (PF), total harmonic 

distortion, ballast factor (BF), input power, ballast efficiency, and whether the ballast can operate 

at multiple voltages1

 (universal voltage) or only one (single voltage). For some of the 

representative ballast types, DOE selected multiple baseline ballasts, to ensure consideration of 

different high-volume ballasts and their associated consumer economics. 

2.5.3 More Efficient Ballast Designs 

DOE selected more-efficient ballasts for each of the baseline models considered for each 

representative ballast type. DOE only considered technologies that met all four criteria in the 

screening analysis. DOE considered these technologies either explicitly as design options or 

implicitly as design options incorporated into commercially available ballasts at the efficiency 

levels evaluated. These selections were made such that potential substitutions maintained light 

output within 10-percent of the baseline lamp’s light output when possible. In identifying the 

more-efficient substitutes, DOE surveyed and tested many of the manufacturers’ product 

offerings for ballast efficiency to identify the efficiency levels corresponding to the highest 

number of models. 

 

1 Universal voltage ballasts can operate at 120V or 277V.
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2.5.4 Efficiency Levels 

Having identified the more-efficient substitutes for each of the baseline ballasts, DOE 

developed efficiency levels based on the consideration of several factors including: (1) the 

design options associated with the specific ballasts being studied; (2) the ability of ballasts across 

wattages to comply with the standard level of a given product class;2 and (3) the maximum 

technologically feasible level. 

2.6 ENERGY USE CHARACTERIZATION

The energy use characterization provides estimates of annual energy use for 

representative lamp-and-ballast systems that DOE evaluates in the LCC and PBP analyses and 

the NIA. To develop annual energy use estimates, DOE multiplied annual usage (in hours per 

year) by the system input power (in watts). To derive annual energy usage, DOE used data 

published in the U.S. Lighting Market Characterization: Volume I (LMC), the Residential 

Energy Consumption Survey (RECS), the Commercial Building Energy Survey (CBECS) and 

the Manufacturer Energy Consumption Survey (MECS). 

2.7 MARKUPS ANALYSIS

In this rulemaking, DOE performed teardown analyses and a manufacturer markup 

analysis to develop MSPs for representative ballast types (chapter 5 of the NOPR TSD). DOE 

then applied distribution channel markups and sales tax to derive end-user prices (chapter 7 of 

the NOPR TSD). By combining the engineering analysis results and the distribution channel 

markups analysis, DOE derived typical inputs for use in the LCC analysis and the NIA. 

2.8 LIFE-CYCLE COST AND PAYBACK PERIOD ANALYSIS

Energy conservation standards on equipment usually reduce operating expenses and 

increase end-user prices. DOE analyzed the net effect of amended standards on end-users by 

evaluating the net LCC using the cost-efficiency relationship derived in the engineering analysis, 

as well as the energy usage and costs derived from the energy use characterization. Inputs to the 

LCC calculation include the installed cost to the end-user (purchase price plus installation cost), 

disposal costs (ballast and lamp recycling), operating expenses (energy expenses and 

maintenance costs), the lifetime of the ballast, and a discount rate. Chapter 8 of the NOPR TSD 

describes these inputs. 

DOE estimated electricity prices for commercial, industrial, and residential consumers by 

using Energy Information Administration (EIA) data. EIA’s Annual Energy Outlook (AEO2010) 

was the default source of projections for future electricity prices.

 

2 Efficacy levels span multiple ballasts of different wattages. In selecting ELs, DOE considered whether these 

multiple ballasts can meet the efficiency levels.
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DOE developed discount rates by estimating the cost of capital to end users that purchase 

the ballasts covered under this rulemaking. For commercial and industrial end users, DOE used 

the cost of capital to estimate the present value of cash flows to be derived from a typical

company project or investment. Most companies use both debt and equity capital to fund 

investments, so the cost of capital is the weighted-average cost to the firm of equity and debt 

financing. This corporate finance approach is referred to as the weighted-average cost of capital. 

DOE used currently available economic data in developing discount rates. 

For residential end users, DOE derived the discount rates from estimates of the interest or 

“finance cost” to purchase residential products. The finance cost of raising funds to purchase 

residential products can be interpreted as (1) the financial cost of any debt incurred to purchase 

residential products, principally interest charges on debt; or (2) the opportunity cost of any equity 

used to purchase residential products, principally interest earnings on household equity. 

Household equity is represented by holdings in assets such as stocks and bonds, as well as the 

return on homeowner equity. DOE obtained data required to determine the cost of debt and 

equity from the Federal Reserve Board’s triennial Survey of Consumer Finances. 

For more detail on the LCC and PBP analyses, see chapter 8 of the NOPR TSD. 

2.9 SHIPMENTS ANALYSIS

Shipments of ballasts are key inputs to the national energy savings and net present value 

calculations in the NIA model. Shipments are also a necessary input to the MIA. DOE followed a 

three-step process to forecast ballast shipments. First, DOE used historical shipment data from 

the U.S. Census Bureau to estimate the total historical shipments of each ballast type analyzed. 

Second, DOE calculated an installed stock for each ballast type based on the average service 

lifetime of each ballast type. Third, by modeling ballast purchasing events, such as replacement 

and new construction, and applying growth rate, replacement rate, and emerging technologies 

penetration rate assumptions, DOE developed annual shipment projections. 

2.9.1 Shipment Scenarios

To calculate shipments, DOE created several base-case and standards-case shipment 

scenarios. As rapidly emerging new lighting technologies (such as light-emitting diodes) could 

penetrate the fluorescent lamp ballast market and significantly affect shipment forecasts, DOE 

creates two base-case shipment scenarios: existing technologies and emerging technologies. The 

existing technologies scenario, considering only technologies that have already achieved 

technological and market maturation, assumes more limited penetration of other higher 

efficiency products than the emerging technologies scenario.

To characterize consumer behavior in the standards-case, DOE develops two shipment 

scenarios, “roll-up” and “shift.” The roll-up scenario represents a standards-case in which all 

products in the base case that do not meet the standard would roll up to meet the new standard 

level. Consumers who in the base case purchase ballasts above the standard level are not 

affected as they are assumed to continue to purchase the same base case ballast in the roll-up 

scenario. The roll-up scenario characterizes consumers primarily driven by the first-cost of the 
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ballast. In contrast, the shift scenario models a standards-case in which all base case consumer 

purchases are affected by the standard (whether or not their base case efficiency is below the 

standard). 

2.10 NATIONAL IMPACT ANALYSIS

The national impact analysis assesses the net present value of total end-user LCC and 

NES. DOE determined both the NPV and NES for the performance levels considered for the 

ballast product classes analyzed. To make the analysis more transparent to all interested parties, 

DOE prepared an NES spreadsheet model to forecast energy savings and the national economic 

costs and savings resulting from amended standards. The NES model does not use probability 

distributions for inputs or outputs. To assess the impact of input uncertainty on the NES and 

NPV results, DOE can conduct sensitivity analyses by running scenarios on input variables 

relevant to interested parties. DOE assessed the aggregate economic impacts at the national level 

for this NOPR analysis. Chapter 11 of the TSD describes DOE’s assessment of the aggregate 

economic impacts at the national level.

2.10.1 National Energy Savings Analysis 

The inputs for determining NES are (1) annual energy consumption per unit; (2) 

shipments; (3) stock; (4) national energy consumption (calculated from consumption per unit and 

equipment stock); (5) site-to-source conversion factors; (6) a heating, ventilation, air 

conditioning (HVAC) factor; and (7) rebound rates. DOE calculated the national energy 

consumption by multiplying the number of units, or stock, of lamp-and-ballast systems (by 

vintage, which represents the age of the ballasts) by the unit energy consumption (also by 

vintage). Then, DOE calculated national annual energy savings from the difference between 

national energy consumption in the base case (without amended efficiency standards) and in 

each higher-efficiency standards case. DOE estimated energy consumption and savings based on 

site energy, and converted the electricity consumption and savings to source energy. DOE also 

examined potential energy savings due to HVAC interactions, as well as rebound effects (an 

energy savings “take-back”) based on consumer usage patterns. Cumulative energy savings are 

the sum of the annual NES, which DOE determined over specific time periods.

2.10.2 Net Present Value Analysis

The inputs DOE used to determine the NPV were (1) total annual installed cost, (2) total 

annual operating cost savings, (3) discount factor, (4) present value of costs, and (5) present 

value of savings. DOE calculates net savings each year as the difference between total operating 

cost savings and increases in total installed costs (including price and installation cost). DOE 

calculates savings over the life of the equipment, accounting for differences in yearly energy 

rates. DOE calculates NPV as the difference between the present value of operating cost savings 

and the present value of increased total installed costs. DOE discounts future costs and savings to 

the present with a discount factor.
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DOE calculated increases in total installed costs as the product of the difference in the 

total installed cost between the base case and standards case and the annual shipments in the 

standards case. Because purchase costs of the higher-efficiency equipment in the standards case 

are generally greater than the purchase costs of equipment in the base case, price increases 

appear as negative values in the NPV. DOE expressed operating cost savings as decreases in 

operating costs associated with the lower energy consumption of equipment in the standards case 

compared to the base efficiency case. Total operating cost savings are the product of savings per 

unit and the number of units of each vintage surviving in a particular year. 

2.11 LIFE-CYCLE COST SUB-GROUP ANALYSIS

A consumer subgroup comprises a subset of the population that is likely, for one reason 

or another, to be impacted disproportionately by new or revised energy conservation standards. 

In this NOPR, DOE identified low-income consumers, houses of worship, historical facilities, 

and institutions that serve low-income populations as consumers that would be 

disproportionately impacted by the proposed standards. The LCC sub-group analysis evaluates 

impacts on these consumer sub-groups by accounting for variations in key inputs to the LCC 

analysis. 

2.12 MANUFACTURER IMPACT ANALYSIS

DOE performed a MIA to estimate the financial impact of higher energy conservation 

standards on fluorescent lamp ballast manufacturers, and to calculate the impact of such 

standards on domestic manufacturing employment and capacity. The MIA has both quantitative 

and qualitative aspects. The quantitative part of the MIA primarily relies on two separate 

Government Regulatory Impact Models (GRIMs)industry-cash-flow models customized for 

this rulemaking. The GRIM inputs are data characterizing the industry cost structure, shipments, 

and revenues. The key output is the industry net present value. Different sets of assumptions 

(scenarios) produce different results. The qualitative part of the MIA addresses factors such as 

product characteristics, characteristics of particular firms, and market and product trends, and 

includes an assessment of the impacts of standards on subgroups of manufacturers. The 

complete MIA is outlined in chapter 13 of the TSD.

DOE conducted the MIA in three phases. Phase 1, “Industry Profile,” consisted of the 

preparation of an industry characterization. Phase 2, “Industry Cash Flow,” focused on the 

industry as a whole. DOE used publicly available information developed in Phase 1 to adapt the 

GRIM structure to facilitate the analysis of amended ballast standards. In Phase 3, “Subgroup 

Impact Analysis,” DOE conducted interviews with manufacturers representing the majority of 

domestic ballast sales. During these interviews, DOE discussed engineering, manufacturing, 

procurement, and financial topics specific to each company, and also obtained each 

manufacturer’s view of the industry as a whole. The interviews provided valuable information 

DOE used to evaluate the impacts of an amended energy conservation standard on manufacturer 

cash flows, manufacturing capacities, and employment levels.
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2.13 UTILITY IMPACT ANALYSIS

The utility impact analysis includes an analysis of the impact of higher energy 

conservation standards on the electric utility industries. DOE adapted the National Energy 

Modeling System (NEMS) produced by the EIA for this analysis. NEMS (EIA 2005) is a large 

multi-sector general-equilibrium model of the U.S. energy sector that has been developed over 

the past decade by the EIA, primarily for the purpose of preparing DOE’s AEO. In prior 

rulemakings, a variant of NEMS (currently termed NEMS-BT, BT referring to the DOE’s

Building Technologies Program) was developed to better address the specific impacts of an 

equipment efficiency standard. 

The NEMS produces a widely recognized baseline energy forecast for the United States 

through the year 2030, and is available in the public domain. The typical NEMS outputs include 

forecasts of electricity sales, price, and avoided electric generating capacity. DOE conducted the 

utility impact analysis as a scenario departing from the latest AEO reference case. In other 

words, the energy savings impacts from amended energy conservation standards were modeled 

using NEMS-BT to generate forecasts that deviate from the AEO reference case.

2.14 EMPLOYMENT IMPACT ANALYSIS

The imposition of standards can impact employment both directly and indirectly. Direct 

employment impacts are changes in the number of employees at the factories that produce the 

covered ballast types, along with the affiliated distribution and service companies, resulting from 

the imposition of new standards. DOE evaluates direct employment impacts in the MIA. 

Indirect employment impacts may result from expenditures shifting between goods (the 

substitution effect) and changes in income and overall expenditure levels (the income effect) that 

occur due to the imposition of standards. The combined direct and indirect employment impacts 

are investigated in the employment impact analysis using the Pacific Northwest National 

Laboratory’s “Impact of Sector Energy Technologies” (ImSET) model. The ImSET model was 

developed for DOE’s Office of Planning, Budget, and Analysis, and estimates the employment 

and income effects of energy-saving technologies in buildings, industry, and transportation. In 

comparison with simple economic multiplier approaches, ImSET allows for more complete and 

automated analysis of the economic impacts of energy conservation investments. 

2.15 ENVIRONMENTAL ASSESSMENT

The intent of the environmental assessment is to quantify and consider the environmental 

effects of amended energy conservation standards for fluorescent lamp ballasts. The primary 

environmental effects of these standards would be reduced power plant emissions resulting from 

reduced consumption of electricity. DOE assesses these environmental effects by using NEMSBT to provide key inputs to its analysis. The portion of the environmental assessment that is

produced by NEMS-BT considers carbon dioxide (CO2), nitrogen oxides (NOX), and mercury 

(Hg). The environmental assessment also considers impacts on SO2 emissions.
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2.15.1 Carbon Dioxide 

In the absence of any Federal emissions control regulation of power plant emissions of 

CO2, a DOE standard is likely to result in reductions of these emissions. The CO2 emission 

reductions likely to result from a standard are estimated using NEMS-BT and national energy 

savings estimates drawn from the NIA spreadsheet model. The net benefit of the standard is the 

difference between emissions estimated by NEMS-BT at each standard level considered and the 

AEO Reference Case. NEMS-BT tracks CO2 emissions using a detailed module that provides 

results with broad coverage of all sectors and inclusion of interactive effects.

2.15.2 Sulfur Dioxide

DOE has preliminarily determined that SO2 emissions from affected Electric Generating 

Units (EGUs) are subject to nationwide and regional emissions cap and trading programs that are 

likely to eliminate the standards’ impact on SO2 emissions. The costs of meeting such emission 

cap requirements are reflected in the electricity prices and forecasts used in DOE’s analysis of 

the standards. Title IV of the Clean Air Act sets an annual emissions cap on SO2 for all affected 

EGUs. SO2 emissions from 28 eastern States and the District of Columbia (DC) are also limited 

under the Clean Air Interstate Rule (CAIR, published in the Federal Register on May 12, 2005. 

70 FR 25162 (May 12, 2005)), which creates an allowance-based trading program that will 

gradually replace the Title IV program in those States and DC. (The recent legal history 

surrounding CAIR is discussed below.) The attainment of the emissions caps is flexible among 

EGUs and is enforced through the use of emissions allowances and tradable permits. Under 

existing EPA regulations, any excess SO2 emission allowances resulting from the lower 

electricity demand caused by the imposition of an efficiency standard could be used to permit 

offsetting increases in SO2 emissions by any regulated EGU. However, if the standard resulted in 

a permanent increase in the quantity of unused emission allowances, there would be an overall 

reduction in SO2 emissions from the standards. While there remains some uncertainty about the 

ultimate effects of efficiency standards on SO2 emissions covered by the existing cap and trade 

system, the NEMS-BT modeling system that DOE used to forecast emissions reductions 

currently indicates that no physical reductions in power sector emissions would occur for SO2. 

Even if there is no significant reduction in the overall emissions of SO2 that results from 

the standard, there may still be some economic benefit from reduced demand for SO2 emission 

allowances that is not fully reflected in the cost savings experienced by individual consumers. 

Electricity savings that decrease the overall demand for SO2 emissions allowances could lower 

allowance prices and thereby result in some economic benefits for all electricity consumers, not 

just those that reduced their electricity use as a result of an efficiency standard. DOE did not to 

monetize this particular benefit because the effect on the SO2 allowance price from any single 

energy conservation standard is likely to be small and highly uncertain. 

2.15.3 Nitrogen Oxides

NEMS-BT also has an algorithm for estimating NOx emissions from power generation. 

The impact of these emissions, however, will be affected by the CAIR, which the Environmental 
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Protection Agency (EPA) issued on May 12, 2005. CAIR will permanently cap emissions of 

NOX in 28 eastern states and the District of Columbia. 70 FR 25162 (May 12, 2005). 

Much like SO2 emissions, a cap on NOX emissions means that the amended fluorescent 

lamp ballast standards may have little or no physical effect on these emissions in the 28 eastern 

States and the DC covered by CAIR. Although CAIR has been remanded to the EPA by the DC 

Circuit, it will remain in effect until it is replaced by a rule consistent with the Court’s July 11, 

2008, opinion in North Carolina v. EPA. 531 F.3d 896 (DC Cir. 2008); see also North Carolina 

v. EPA, 550 F.3d 1176 (DC Cir. 2008). Because all States covered by CAIR opted to reduce 

NOX emissions through participation in cap-and-trade programs for electric generating units, 

emissions from these sources are capped across the CAIR region.

Standards may produce an environmental-related economic benefit in the form of lower 

prices for emissions allowance credits. As with SO2 allowance prices, DOE did not to monetize 

this particular benefit because the effect on the NOX allowance price from any single energy 

conservation standard is likely small and highly uncertain. DOE plans to use NEMS-BT to 

estimate the emissions reductions from possible standards in the 22 States where emissions are 

not capped. 

2.15.4 Mercury

Similar to emissions of SO2 and NOX, future emissions of Hg would have been subject to 

emissions caps. In May 2005, EPA issued the Clean Air Mercury Rule (CAMR). 70 FR 28606 

(May 18, 2005). CAMR would have permanently capped emissions of mercury for new and 

existing coal-fired power plants in all States by 2010. However, on February 8, 2008, the DC 

Circuit issued its decision in New Jersey v. Environmental Protection Agency, in which the DC 

Circuit, among other actions, vacated the CAMR. 517 F.3d 574 (DC Cir. 2008). EPA has 

decided to develop emissions standards for power plants under the Clean Air Act (Section 112), 

consistent with the DC Circuit’s opinion on the CAMR. See 

http://www.epa.gov/air/mercuryrule/pdfs/certpetition_withdrawal.pdf. Pending EPA's 

forthcoming revisions to the rule, DOE is excluding the CAMR from its Environmental 

Analysis. In the absence of CAMR, a DOE standard would likely reduce Hg emissions and DOE 

used NEMS-BT to estimate these emission reductions. 

2.15.5 Particulate Matter

DOE acknowledges that particulate matter (PM) impacts are of concern due to human 

exposures that can impact health. But impacts of PM emissions reduction are much more 

difficult to estimate than other emissions reductions due to the complex interactions between 

PM, other power plant emissions, meteorology, and atmospheric chemistry that impact human 

exposure to particulates. Human exposure to PM usually occurs at a significant distance from the 

power plants that are emitting particulates and particulate precursors. When power plant 

emissions travel this distance, they undergo highly complex atmospheric chemical reactions. 

Although the EPA does keep inventories of direct PM emissions of power plants, in its source 

attribution reviews, the EPA does not separate direct PM emissions from power plants from the 

sulfate particulates indirectly produced through complex atmospheric chemical reactions. The 

great majority of PM emissions from power plants are of these secondary particles (secondary 
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sulfates). Thus, it is not useful to examine how the amended standard impacts direct PM 

emissions independent of indirect PM production and atmospheric dynamics. Therefore, DOE 

did not assess the impact of these standards on particulate emissions. Further, even the 

cumulative impact of PM emissions from power plants and indirect emissions of pollutants from 

other sources is unlikely to be significant.

2.15.6 Monetization of Emissions Reduction Benefits

For those emissions for which real national emission reductions are anticipated (CO2, Hg, 

and NOX for 22 states), only ranges of estimated economic values based on environmental 

damage studies of varying quality and applicability are available. Therefore, DOE reported

estimates of monetary benefits derived using these values and considered these benefits in 

weighing the costs and benefits of each of the standard levels considered. 

In order to estimate the monetary value of benefits resulting from reduced emissions of 

CO2 emissions, DOE used in its analysis the most current Social Cost of Carbon (SCC) values 

developed and/or agreed to by interagency reviews. The SCC is intended to be a monetary 

measure of the incremental damage resulting from greenhouse gas (GHG) emissions, including, 

but not limited to, net agricultural productivity loss, human health effects, property damage from 

sea level rise, and changes in ecosystem services. Any effort to quantify and to monetize the 

harms associated with climate change will raise serious questions of science, economics, and 

ethics. But with full regard for the limits of both quantification and monetization, the SCC can be 

used to provide estimates of the social benefits of reductions in GHG emissions. 

 

At the time of this notice, the most recent interagency estimates of the potential global 

benefits resulting from reduced CO2 emissions in 2010 were $4.7, $21.4, $35.1, and $64.9 per 

metric ton in 2007 dollars. These values are then adjusted to 2009$ using the standard GDP 

deflator value for 2008 and 2009. For emissions (or emission reductions) that occur in later 

years, these values grow in real terms over time. Additionally, the interagency group determined 

that a range of values from 7 percent to 23 percent should be used to adjust the global SCC to 

calculate domestic effects, although preference will be given to consideration of the global 

benefits of reducing CO2 emissions. See appendix 16A for the full range of annual SCC 

estimates from 2010 to 2050. To calculate a present value of the stream of monetary values, 

DOE discounted the values in each of the four cases using the discount rates that had been used 

to obtain the SCC values in each case.

DOE recognizes that scientific and economic knowledge continues to evolve rapidly as to 

the contribution of CO2 and other GHG to changes in the future global climate and the potential 

resulting damages to the world economy. Thus, these values are subject to change. 

DOE also estimated the potential monetary benefit of reduced NOX, and Hg emissions 

resulting from the standard levels it considers. For NOX emissions, available estimates suggest a 

very wide range of monetary values for NOX emissions, ranging from $370 per ton to $3,800 per 

ton of NOX from stationary sources, measured in 2001$ (equivalent to a range of $442 to $4,540 

per ton in 2008$). Refer to the OMB, Office of Information and Regulatory Affairs, “2006 

Report to Congress on the Costs and Benefits of Federal Regulations and Unfunded Mandates on 

State, Local, and Tribal Entities,” for additional information. 
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For Hg emissions reductions, DOE has previously determined that the impact of mercury 

emissions from power plants on humans is considered highly uncertain. However, DOE 

identified two estimates of the environmental damage of mercury based on two estimates of the 

adverse impact of childhood exposure to methyl mercury on intelligence quotient (IQ) for 

American children, and subsequent loss of lifetime economic productivity resulting from these 

IQ losses. The high-end estimate is based on an estimate of the current aggregate cost of the loss 

of IQ in American children that results from exposure to mercury of U.S. power plant origin 

($1.3 billion per year in year 2000$), which works out to $33.3 million per ton emitted per year 

(2008$). Refer to L. Trasande et al., “Applying Cost Analyses to Drive Policy that Protects 

Children,” 1076 Ann. N.Y. Acad. Sci. 911 (2006) for additional information. The low-end 

estimate is $0.66 million per ton emitted (in 2004$) or $0.745 million per ton in 2008$. DOE 

derived this estimate from a published evaluation of mercury control using different methods and 

assumptions from the first study but also based on the present value of the lifetime earnings of 

children exposed to mercury. See Ted Gayer and Robert Hahn, “Designing Environmental 

Policy: Lessons from the Regulation of Mercury Emissions,” Regulatory Analysis 05–01, 

American Enterprise Institute-Brookings Joint Center for Regulatory Studies, Washington, DC 

(2004). A version of this paper was published in the Journal of Regulatory Economics in 2006. 

The estimate was derived by back-calculating the annual benefits per ton from the net present 

value of benefits reported in the study. 

In accordance with U.S. Office of Management and Budget (OMB) guidance, DOE 

conducted two calculations of the monetary benefits derived using each of the economic values 

used for NOX and Hg, one using a real discount rate of 3 percent and another using a real 

discount rate of 7 percent.3

2.16 REGULATORY IMPACT ANALYSIS

DOE prepared a regulatory impact analysis (RIA) pursuant to Executive Order 12866, 

“Regulatory Planning and Review,” 58 FR 51735, October 4, 1993, which is subject to review 

under the Executive Order by the Office of Information and Regulatory Affairs at the Office of 

Management and Budget. The RIA addressed the potential for non-regulatory approaches to 

supplant or augment energy conservation standards to improve the energy efficiency of 

fluorescent lamp ballasts on the market. 

2.17 DEPARTMENT OF JUSTICE REVIEW

Section 325(o)(2)(B)(i)(V) of the Energy Policy and Conservation Act (EPCA) states 

that, before the Secretary of Energy may prescribe a new or amended energy conservation 

standard, the Secretary shall ask the U.S. Attorney General to make a determination of “the 

impact of any lessening of competition...that is likely to result from the imposition of the 

standard.” (42 U.S.C. 6295) Pursuant to this requirement, DOE will solicit the views of DOJ on 

 

3

 OMB, Circular A-4: Regulatory Analysis (Sept. 17, 2003).
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any lessening of competition that is likely to result from the imposition of a proposed standard 

and will give the views provided full consideration in assessing economic justification of a 

proposed standard.