* * * E.O. 12866 Review

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– Do Not Cite, Quote or Release During Review *** **Standards of Performance for New Residential Wood Heaters, New Residential Hydronic Heaters and Forced**  **- Air Furnaces, and New Residential Masonry Heaters**  

### What Factors Influence the Size of the Estimated Benefits of This Rule **?** The estimated monetized benefits of the draft NSPS are substantial. While several factors contribute to the size of these benefits, the two most influential are : (1) the level of expected emission reductions and (2) the dollar per- ton estimate used to monetize the benefits. Following our meeting on August 21, 2013 , w e reviewed the key inputs used in estimating the benefits, and conclude that they

are still appropriate. Note that the estimates of emission reductions are based on the best available data and are more likel y to be understated than overstated. The dollar per ton estimate is also based on the best available data and is slightl y greater than the median estimate for all se ctors . The estimated benefits are directl y proportional to the expected emission reductions for the options outlined in the draft NSPS versus the baseline per ty pe of heater affected. Not surprisingl y, the anticipated reductions are greatest for heaters than have not yet been regulated by a national standard . **Emission reductions from**  **unregulated heaters will be significant**  Unlike adjustable burn rate wood stoves, which reduce d their emissions by more than 70% under the 1988 NSPS, many heaters not yet subject to federal standards remain dirty even today . Under the 2013 draft NSPS, these heaters (e.g. single - bur n - rate stoves, hydronic heaters and forced - air furnaces), would need to make sizeable

– yet relatively eas y and very cost - effective

– “catch - up” emission reductions as they move from the current little or no control status to today ’s best sy stems of emission reduction, which often achie ve a 90 - 95% reduction. The estimated numbers of heaters that would be affected in 2014 are large:  84,000 wood stoves;  27,000 single - burn - rate stoves;  87,000 pellet stoves ;  27,000 forced - air furnaces; and  9,000 hydronic heaters. Unregulated heaters currently are less than 27% of annual sales but account for over 96% of the emission reductions and benefits. ( See Figure 7 - 2 on page 7 - 11 of the RIA. ) The emission reductions that would be required for these previously unregulated heaters will yield benef its that outweigh those from affected heaters covered under the 1988 rule

– even though significantl y more of the previously

affected heaters are sold each year. This is attributable to both that most of the unregulated heaters are still dirty and that the hydronic heaters and forced - air furnaces have larger burn rates. A single h ydronic heater or forced - air - furnace burn s much more wood* * * E.O. 12866 Review

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– Do Not Cite, Quote or Release During Review *** **Standards of Performance for New Residential Wood Heaters, New Residential Hydronic Heaters and Forced**  **- Air Furnaces, and New Residential Masonry Heaters**  than a single woodstove, because they are designed to heat whole houses, whereas wood stoves tend to be room heaters. Note: We conservativel y assume for the baseline that 100% of new adjustable burn rate stoves already meet the tighter Washington State 1995 emission limits and that 80% of new pellet stoves already meet Alternative Approach Step 2 1 . If our estimate s are too conservative and fewer stoves meet the se limits already , emission reductions from the draft NSPS will be larger . Wood smoke emissions contribute to violations of the PM 2.5 standards. Numerous U.S. counties have annual and/or dail y ambient air quality levels that approach or are above the PM 2.5 NAAQS and have significant contributions from wood smoke emissions. See cover note and spreadsheet provided on August 16, 2013 . **Emissions i** 

**nventory estimates are based on best available data** As discussed during the August 21, 2013 presentation on emission estimates, the emission inventory estimates are based on the following equation: E= n (number of appliances) x b (burn rate) x d (density

of wood) x EF (emission factor). The inventory estimates use the best available data for each of these variables. For example, the estimates start with American Housing Survey data and are improved when better, more detailed data are available via regional or state or multi - county

special survey s focus ed on wood combustion appliances. In addition, the NSPS analy ses for this proposal use more detailed annual sales data from the Hearth Patio and Barbecue Association , market analy ses and projections by Frost & Sullivan, data from Internet searches of manu facturer websites, and confidential business information from manufacturers of specific ty pes of appliances ( such as forced - air furnaces, hydronic heaters, and single - burn - rate stoves ) . Sales vary considerabl y from year to ye ar with variations in the econo my , housing starts, and oil prices . F or example, pellet stove sales were 141,000 in 2008 and 46,000 in 2009. We adjust ed for the slow economy in 2009 and 2010 and then use d growth projections of 2% to match current published real GDP projections by the Con ference Board in November 2012. (See Chapter 4 of the RIA.) The growth rate assumption is not as large a factor as some other factors, i.e. , if we were to assume 0% growth, the emission reduction would only be 35% less and would still be significant in many states and local areas. The baseline and options use the same estimates for number/proportion of appliances. We are not aware of any reason wh y manufacturers would overestimate numbers of appliances affected

1 Discussed in RIA on page s 4 - 5 and 4 - 6 . Also discussed in memos: Estimated Emissions from Wood Heaters, 2/15/13; Unit Cost Estimates of Residential Wood Heating Appliances, 2/21/13; and “Estimated Residential Wood Heater Manufacturing Cost Impacts, 2/22/13.* * * E.O. 12866 Review

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– Do Not Cite, Quote or Release During Review *** **Standards of Performance for New Residential Wood Heaters, New Residential Hydronic Heaters and Forced**  **- Air Furnaces, and New Residential Masonry Heaters**  when characterizing the magnitude of the emission problems , but if they did, the emission reductions (and costs) would be reduced proportionally . For example, if the sales of single - burn rate stoves were onl y half of the estimate the manufacturers provided us, the emission reductions would be half of the values presented in the RIA, but would still be significant to the states and local agencies that are very concerned about these sources. To the degree that manufacturers shift production to cleaner appliances already in the marketplace, the emissi on reductions would be higher (and costs would be lower). The N ew York State Office of the Attorney General, NESCAUM and others have stated that hydronic heater sales are much larger than our estimates , which are based on industry data. However, we believe our estimates better reflect the significant declines in annual sales that occurred after 2007, when EPA launched its voluntary hydronic heater program, several states developed emissions regulations and numerous local authorities banne d new hydronic heaters amid increasing concerns about emissions. Our estimates are informed by annual sales data from manufacturers that participate in the EPA voluntary partnership program to qualify cleaner hydronic heaters. If h ydronic heater sales are indeed greater than we have estimated, emission reductions from the NSPS would be greater in turn

– potentially by

a factor of 2 to 10. **The PM** 

**2.5 benefit per ton estimate for the residential wood combustion sector is**  **slightly greater than the median estimate for all sectors**  The substantial size of the benefit per ton estimates is influenced by the characteristics of residential wood combustion . C ertain attributes of wood stove combustion tend to increase the size of the benefit per ton estimate of this sector compared to other sectors for which EPA has recentl y estimated benefits. These factors include:  This sector directl y emits a large fraction of total PM 2.5 mass (direct PM 2.5 ) , and so there are no additional chemical transformations before the PM 2.5 reaches human populations.  People live in close proximity to the se source s , which contribut es to their PM 2.5 exposure.  Wood heaters tend to have short stacks, low gas velocities and low stack gas temperatures

— each of which tends to disperse PM 2.5 near the source and populations. The direct PM 2.5 b enefit per ton estimate for the residential wood combustion sector is $360,000

-- slightl y greater than the median estimate for all sectors. See attach ed table for a list b y sector .* * * E.O. 12866 Review

– 8/2 9 /13 Draft

– Do Not Cite, Quote or Release During Review *** **Standards of Performance for New Residential Wood Heaters, New Residential Hydronic Heaters and Forced**  **- Air Furnaces, and New Residential Masonry Heaters**  

### Attachment Copied below is Figure 3 from Fann, N, Baker KR & Fulcher CM, 212. Characterizing the PM 2.5 - related health benefits of emission reductions for 17 industrial, area and mobile emission sectors across the U.S. Environment International , 49 pp 141 - 51. Available at: http://www.ncbi.nlm.nih.gov/pubmed/23022875 .

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