***E.O. 12866 Review – Draft – Do Not Cite, Quote or Release During Review***

i

TABLES OF CONTENTS

page

TABLES OF CONTENTS .......................................................................................................... viii

LIST OF TABLES........................................................................................................................ xii

LIST OF FIGURES .................................................................................................................... xxii

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

Overview...................................................................................................................................1

ES.1 Overview of Analytical Approach..........................................................................3

ES.1.1 Establishing the Baseline....................................................................................5

ES.1.2 Control Strategies and Emissions Reductions....................................................6

ES.1.2.2 Emissions Reductions beyond Known Controls in 2025.................................9

ES.1.3 Human Health Benefits ....................................................................................10

ES.1.4 Welfare Co-Benefits of the Primary Standard..................................................12

ES.2 Results of Benefit-Cost Analysis..........................................................................13

ES.4 References.............................................................................................................16

CHAPTER 1: INTRODUCTION AND BACKGROUND ............................................................1

Overview...................................................................................................................................1

1.1 Background....................................................................................................................1

1.1.1 NAAQS ..............................................................................................................1

1.1.2 Ozone NAAQS...................................................................................................2

1.2 Role of this RIA in the Process of Setting the NAAQS ................................................2

1.2.1 Legislative Roles ................................................................................................2

1.2.2 Role of Statutory and Executive Orders.............................................................3

1.2.3 The Need for National Ambient air Quality Standards......................................4

1.2.4 Illustrative Nature of the Analysis......................................................................4

1.3 Overview and Design of the RIA...................................................................................5

1.3.1 Existing and Revised Ozone Air Quality Standards...........................................5

1.3.2 Establishing Attainment with the Current Ozone Air Quality Standard ............6

1.3.3 Establishing the Baseline for Evaluation of Alternative Standards...................7

1.4 Health and Welfare Benefits Analysis Approach ..........................................................9

1.4.1 Health Benefits...................................................................................................9

1.4.2 Welfare Co-Benefits...........................................................................................9

1.5 Cost Analysis Approach ..............................................................................................10

1.6 Organization of this Regulatory Impact Analysis........................................................10

1.7 References....................................................................................................................11

CHAPTER 2: DEFINING THE OZONE AIR QUALITY PROBLEM ........................................1
ii

Overview...................................................................................................................................1

2.1 Emissions and Atmospheric Chemistry.........................................................................1

2.2 Spatial and Temporal Variations in Ambient Ozone Concentrations............................3

2.3 Ozone Monitoring..........................................................................................................5

2.3.1 Ozone Monitoring Network................................................................................5

2.3.2 Recent Ozone Monitoring Data and Trends.......................................................7

2.4 Background Ozone.......................................................................................................11

2.4.1 Seasonal Mean Background Ozone in the U.S.................................................13

2.4.2 Seasonal Mean Background Ozone in the U.S. as a Proportion of Total 

Ozone 15

2.4.3 Daily Distributions of Background Ozone within the Seasonal Mean.............16

2.5 References....................................................................................................................20

CHAPTER 3: AIR QUALITY MODELING AND ANALYSIS...................................................1

Overview...................................................................................................................................1

3.1 Modeling Ozone Levels in the Future ...........................................................................2

3.1.1 Selection of Future Analytic Year......................................................................2

3.1.2 Air Quality Modeling Platform ..........................................................................3

3.1.3 Emissions Inventories.........................................................................................6

3.1.4 Emissions Sensitivity Simulations....................................................................10

3.2 Methods for Calculating Current and Future Year Ozone Design Values ..................15

3.2.1 Current Year Ozone Design Value Calculations..............................................15

3.2.2 Future Year Ozone Design Value Projections..................................................16

3.3 Determining Tons of Emissions Reductions to Meet Various NAAQS Levels..........17

3.3.1 Determining Ozone Response from Each Emissions Sensitivity.....................17

3.3.2 Combining Response from Multiple Sensitivity Runs To Construct 

Baseline And Alternative Standard Scenarios.............................................................21

3.3.3 Creation of the Baseline Scenario ....................................................................23

3.3.4 Creation of the 70, 65, and 60 ppb Alternative Standard Level Scenarios.......24

3.3.5 Monitoring Sites Excluded from Quantitative Analysis...................................25

3.4 Creating Spatial Surfaces.............................................................................................27

3.4.1 BenMap Surfaces..............................................................................................27

3.4.2 W126 surfaces ..................................................................................................34

3.5 References....................................................................................................................39

APPENDIX 3: Additional Air Quality analysis and Results..........................................................1

3A.1 2011 Model Evaluation for Ozone .........................................................................1

3A.2 California Sub-regions and Areas of Influence ....................................................17

3A.3 VOC impact areas.................................................................................................22

3A.4 Numeric examples of calculation methodology for changes in design values.....23

3A.5 Emissions reductions applied to create baseline and alternative standard 

level scenarios.....................................................................................................................25

3A.6 Design values for all monitors included in the quantitative analysis ...................27

3A.7 Monitors excluded from the quantitative analysis................................................51

3A.7.1 Sites without projections due insufficient days................................................51
iii

3A.7.2 Winter ozone.....................................................................................................52

3A.7.3 Monitoring sites in rural/remote areas of the West and Southwest..................53

3A.8 Calculation methodology for W126 metric ...................................................................63

3A.9 References......................................................................................................................64

CHAPTER 4: CONTROL STRATEGIES AND EMISSIONS REDUCTIONS ...........................1

Overview...................................................................................................................................1

4.1 Control Strategy Analysis Steps....................................................................................3

4.2 Baseline Control Strategy ..............................................................................................5

4.3 Alternative Standard Analyses.....................................................................................11

4.3.1 Identifying Known Controls Needed to Meet the Alternative Standards.........13

4.3.2 Known Control Measures Analyzed.................................................................18

4.3.3 Emissions Reductions beyond Known Controls Needed to Meet the 

Alternative Standards...................................................................................................20

4.3.4 Summary of Emissions Reductions Needed to Meet the Alternative 

Standards......................................................................................................................21

4.4 Limitations and Uncertainties......................................................................................22

4.6 References....................................................................................................................24

APPENDIX 4: CONTROL STRATEGIES AND EMISSIONS REDUCTIONS..........................1

Overview...................................................................................................................................1

A.4.1 Types of Control Measures.....................................................................................1

A.4.2 Application of Control Measures in Geographic Areas .........................................1

A4.3 NOx Control Measures for NonEGU Point Sources...............................................4

A4.4 VOC Control Measures for Non-EGU Point Sources..........................................12

A4.5 NOx Control Measures for Nonpoint (Area) and Nonroad Sources.....................12

CHAPTER 5: HUMAN HEALTH BENEFITS ANALYSIS APPROACH AND RESULTS ......1

5.1 Synopsis.........................................................................................................................1

5.2 Overview........................................................................................................................4

5.3 Updated Methodology Presented in this RIA ................................................................8

5.4 Human Health Benefits Analysis Methods..................................................................10

5.4.1 Health Impact Assessment................................................................................12

5.4.2 Economic Valuation of Health Impacts............................................................13

5.4.3 Estimating Benefits for the 2025 and Post-2025 Scenarios .............................15

5.4.4 Benefit-per-ton estimates for PM2.5 ..................................................................16

5.5 Characterizing Uncertainty ..........................................................................................18

5.5.1 Monte Carlo Assessment..................................................................................20

5.5.2 Sensitivity Analysis Addressing Both Incidence and Dollar Benefit 

Valuation......................................................................................................................20

5.5.3 Supplemental Analyses.....................................................................................22

5.5.4 Qualitative Assessment of Uncertainty and Other Analysis Limitations.........24

5.6 Benefits Analysis Data Inputs......................................................................................25

5.6.1 Demographic Data............................................................................................25
iv

5.6.2 Baseline Incidence and Prevalence Estimates..................................................26

5.6.3 Effect Coefficients............................................................................................29

5.6.4 Economic Valuation Estimates.........................................................................54

5.7 Benefits Results ...........................................................................................................76

5.7.1 Benefits of the Proposed and Alternative Annual Primary ozone standards 

for the 2025 scenario....................................................................................................77

5.7.2 Benefits of the Proposed and Alternative Annual Primary ozone standards 

for the post-2025 scenario............................................................................................83

5.7.3 Uncertainty in Benefits Results (including discussion of sensitivity 

analyses and supplemental analyses)...........................................................................88

5.7.3.1 Sensitivity Analyses .........................................................................................90

5.7.3.2 Supplemental Analyses.....................................................................................92

5.8 Discussion....................................................................................................................93

5.9 References....................................................................................................................96

APPENDIX 5A: COMPREHENSIVE CHARACTERIZATION OF UNCERTAINTY IN O3

BENEFITS ANALYSIS...........................................................................................................1

Overview...................................................................................................................................1

5A.1 Description of Classifications Applied in the Uncertainty Characterization..........1

5A.1.1 Direction of Bias.................................................................................................2

5A.1.2 Magnitude of Impact ..........................................................................................2

5A.1.3 Confidence in Analytic Approach ......................................................................3

5A.1.4 Uncertainty Quantification .................................................................................4

5A.2 Organization of the Qualitative Uncertainty Table ................................................5

5A.3 References.............................................................................................................16

Appendix 5B: ADDITIONAL SENSITIVITY ANALYSES RELATED TO THE OZONE 

HEALTH BENEFITS ANALYSIS..........................................................................................1

Overview...................................................................................................................................1

5B.1 Threshold Sensitivity Analysis for Premature Mortality Incidence and 

Benefits from Long-term Exposure to O3 .............................................................................2

5B.2 Alternative Concentration-Response Functions for PM2.5–Related Mortality .......4

5B.3 Income Elasticity of Willingness to Pay.................................................................7

5B.4 References...............................................................................................................9

APPENDIX 5C: SUPPLEMENTAL ANALYSES RELATED TO THE OZONE HEALTH 

BENEFITS ANALYSIS...........................................................................................................1

Overview...................................................................................................................................1

5C.1 Age Group-Differentiated Aspects of Short-Term Ozone Exposure-Related 

Mortality................................................................................................................................1

5C.2 Evaluation of mortality impacts relative to the baseline pollutant 

concentrations (used in generating those mortality estimates) for both short-term 

ozone exposure-related mortality and long-term PM2.5 exposure-related mortality ...........6
v

5C.3 Core Incidence and Dollar Benefits Estimates Reflecting Application of 

Known Controls for the 2025 Scenario...............................................................................14

5C.4 References.............................................................................................................19

APPENDIX 5D: DISCUSSION OF EFFECT ESTIMATES REFLECTED IN THE 

DEVELOPMENT OF DOLLAR-PER-TON VALUES USED IN MODELING PM2.5 

COBENEFITS ..........................................................................................................................1

Overview...................................................................................................................................1

5D.1 PM2.5 Premature Mortality Effect Coefficients.......................................................5

5D.2 Hospital Admissions and Emergency Department Visits.....................................14

5D.3 Acute Health Events and School/Work Loss Days ..............................................16

5D.4 Nonfatal Acute Myocardial Infarctions (AMI) (Heart Attacks)...........................19

5D.5 References.............................................................................................................21

CHAPTER 6: IMPACTS ON PUBLIC WELFARE OF ATTAINMENT STRATEGIES TO 

MEET PRIMARY AND SECONDARY OZONE NAAQS....................................................1

Overview...................................................................................................................................1

6.1 Welfare Benefits of Strategies to Attain Primary and Secondary Ozone Standards .....2

6.2 Welfare Benefits of Reducing Ozone ............................................................................3

6.3 Additional Welfare Benefits of Strategies to Meet the Ozone NAAQS........................6

6.4 Analysis of Commercial Agricultural and Forestry Related Benefits Using the 

Forest and Agricultural Sector Optimization Model – Greenhouse Gas Version 

(FASOMGHG)......................................................................................................................8

6.4.1 Summary of the analytical approach ..................................................................8

6.4.2 Summary of FASOMGHG results ...................................................................10

6.5 References....................................................................................................................15

APPENDIX 6A: Methods and Data Used to Develop estimates of Ozone Effects on Crop 

and Forest Productivity.............................................................................................................1

6A.1 Methodology...........................................................................................................1

6A.1.1 Calculation of Relative Yield Loss.....................................................................4

6A.1.2 Conducting Model Scenarios in FASOMGHG..................................................8

6A.1.3 Data Inputs........................................................................................................10

6A.2 Model Results.......................................................................................................25

6A.2.1 Agricultural Sector ...........................................................................................25

6A.1.3 Forestry Sector..................................................................................................30

6A.1.4 Cross-Sectoral Policy Impacts..........................................................................35

6A.2 Summary...............................................................................................................43

6A.3 References.............................................................................................................45

CHAPTER 7: ENGINEERING COST ANALYSIS and Economic Impacts ................................1

Overview...................................................................................................................................1

7.1 Estimating Engineering Compliance Costs ...................................................................2

7.1.1 Methods and Data...............................................................................................2
vi

7.1.2 Compliance Cost Estimates for Known Controls...............................................3

7.2 The Challenge of Estimating Costs for Unknown Controls ..........................................9

7.2.1 Incomplete Characterization of NOx Marginal Abatement Cost Curves.........10

7.2.2 Comparison of Baseline Emissions and Controls across Ozone NAAQS 

RIAs from 1997 to 2014 ..............................................................................................13

7.2.3 Impact of Technological Change......................................................................16

7.2.4 Experience Curves and Learning by Doing......................................................18

7.2.5 Using Regional NOx Offset Prices to Estimate Costs of Unknown 

Emissions Controls......................................................................................................20

7.2.6 Conclusion........................................................................................................23

7.3 Compliance Cost Estimates for Unknown Emissions Controls...................................23

7.3.1 Methods............................................................................................................23

7.3.2 Unknown Compliance Cost Estimates.............................................................28

7.4 Total Compliance Cost Estimates................................................................................29

7.5 Updated Methodology Presented in this RIA ..............................................................31

7.6 Economic Impacts........................................................................................................32

7.6.1 Introduction ......................................................................................................32

7.6.2 Summary of Market Impacts............................................................................34

7.7 Uncertainties and Limitations......................................................................................35

7.8 References....................................................................................................................37

APPENDIX 7A: ENGINEERING COST ANALYSIS..................................................................1

Overview...................................................................................................................................1

A.7.1 Cost of Known Controls in Alternative Standards Analyses..................................1

A.7.2 Alternative Estimates of Costs Associated with Emissions Reductions from 

Known Controls....................................................................................................................6

CHAPTER 8: COMPARISON OF COSTS AND BENEFITS .......................................................1

Overview...................................................................................................................................1

8.1 Results............................................................................................................................1

8.2 Discussion of Results.....................................................................................................6

8.2.1 Relative Contribution of PM Benefits to Total Benefits....................................6

8.2.2 Developing Future Control Strategies with Limited Data..................................7

8.3 Framing Uncertainty ......................................................................................................9

CHAPTER 9: STATUTORY AND EXECUTIVE ORDER IMPACT ANALYSIS......................1

Overview...................................................................................................................................1

9.1 National Technology Transfer and Advancement Act ..................................................1

9.2 Paperwork Reduction Act..............................................................................................1

9.3 Regulatory Flexibility Act .............................................................................................2

9.4 Unfunded Mandates Reform Act...................................................................................3

9.5 Executive Order 12866: Regulatory Planning and Review ...........................................4

9.6 Executive Order 12898: Federal Actions to Address Environmental Justice in 

Minority Populations and Low-Income Populations ............................................................5
vii

9.7 Executive Order 13045: Protection of Children from Environmental Health & 

Safety Risks...........................................................................................................................7

9.8 Executive Order 13132: Federalism ..............................................................................7

9.9 Executive Order 13175: Consultation and Coordination with Indian Tribal 

Governments.........................................................................................................................8

9.10 Executive Order 13211: Actions that Significantly Affect Energy Supply, 

Distribution, or Use...............................................................................................................9

CHAPTER 10: QUALITATIVE DISCUSSION OF EMPLOYMENT IMPACTS OF AIR 

QUALITY.................................................................................................................................1

Overview...................................................................................................................................1

10.1 Economic Theory and Employment ..............................................................................1

10.2 Current State of Knowledge Based on the Peer-Reviewed Literature...........................6

10.2.1 Regulated Sectors...............................................................................................6

10.2.2 Labor Supply Impacts.........................................................................................7

10.3 Employment Related to Installation and Maintenance of NOx Control Equipment .....8

10.3.1 Employment resulting from addition of NOx controls at EGUs........................9

10.3.2 Assessment of Employment Impacts for Industrial, Commercial, and 

Institutional (ICI) Boilers and Cement Kilns...............................................................13

10.4 References....................................................................................................................16
8