MEMORANDUM

To: Gil Wood, US EPA 

David Cole, US EPA

From: Glenn Meganck, EC/R Inc.

Jill Mozier, EC/R Inc. 

Date: March 7, 2013 

Subject: Notes from the February 28, 2013, US EPA Meeting with Industry regarding 

the Cost Effectiveness of Revisions to the Wood Heaters NSPS – RTP, NC

Purpose: The meeting was arranged as a platform for the US EPA and industry to share 

information on the upcoming proposed revision of the 1988 wood heaters NSPS that might prove 

useful in the drafting of the revised regulations. 

Participants & Observers

Participants Organization

Amanda Aldridge US EPA

John Crouch HPBA

Bob Ferguson Ferguson, Andors & Company (consultant to HPBA) 

Andrew Foss NERA

David Harrison NERA

David Menotti Crowell & Moring (counsel to HPBA) 

Larry Sorrels US EPA

Gil Wood US EPA

Observers Organization

Glenn Meganck EC/R Inc 

Jill Mozier EC/R Inc 

Discussion Highlights:

John Crouch initiated discussion by pointing out how difficult it is, in his belief, for small 

businesses to understand and adapt to the new rules that govern their industry. He stated that in 

many cases, these “micro” businesses may not do business in the normal ways that other, larger, 

more experienced businesses do. Often, he added, they do not even have a clear idea of their own 

profitability or costs of doing business.

David Menotti noted that NERA’s presentation does not take into account a “tier 3” more 

stringent standard because HPBA was not aware that was under consideration when they asked 

NERA to do the analysis. (Note: Therefore, no analysis was presented regarding using a limit of

1.3 g/hr; and furthermore the NERA/HBPA analysis used a limit of 3.0 g/hr rather than 2.5 g/hr.) 

Page 1 of 4
The major portion of the meeting revolved around a presentation by Dr. David Harrison of 

NERA, an economic consulting firm, contracted by HBPA to provide an analysis of the cost 

effectiveness of the proposed NSPS revisions to wood stoves. Dr. Harrison narrated a Power 

PointTM presentation entitled “Cost-Effectiveness of Alternative Wood Stove New Source 

Performance Standards” (see Attachment A). This presentation laid out step-by-step the analysis 

that NERA conducted concerning the costs to business of complying with proposed new 

emissions standards that would lower the particulate emission standards from 7.5 g/hr to 4.5 g/hr, 

and then to 3.0 g/hr.

This analysis was performed solely on freestanding, noncatalytic wood heaters; catalytic wood 

heaters and single burn rate wood heaters were not included in the analysis. The analysis (in 

2013$) assumed a 10-year amortization of costs at a 7% interest rate. The study relied heavily on 

previous work by James Houck and on a recent analysis and survey by Bob Ferguson and 

Charlie Page (e.g., see Attachment B “Description of the Woodstove Cost Modeling and Expert 

Panel Review Process” and Attachment C “HPBA Wood Stove Pricing Survey Methodology 

Summary”).

Gil Wood asked what formula was used to derive the tons/year emissions estimates. Bob 

Ferguson explained that it was a complex formula based on the AP-42 standard, which also 

looked at the amount of fuel burned.

Gil Wood raised the question of whether it was “efficiency” or “looks” that drives wood heater 

sales. Bob Ferguson replied that better emissions ratings do not drive sales, and that aesthetics 

and cost are more important factors to buyers. Gil Wood agreed, noting that, oftentimes, wood 

heaters are sold as furniture.

There was some discussion over the cost of manufacture and the (~40%) margins that 

manufacturers, distributors and retail establishments require to sustain their businesses. John 

Crouch noted that wood heater sales are generally a one-time event, that is, unlike automobiles, 

for instance, there are no secondary, peripheral sales to be made to customers, such as 

automobile accessories or parts to buyers of automobiles.

Bob Ferguson added that he felt that it would also be important at a later date to discuss with the 

US EPA the impact to the industry of online sales, which greatly affects profitability margins.

Larry Sorrels stated that it is difficult to find good price “elasticity” data for the category due to 

the nature of the industry and the number of small manufacturers and retailers. Dr. David 

Harrison and Bob Ferguson agreed. Bob Ferguson stated that as prices of wood heaters 

increase, sales decrease. He said he had an anecdotal indication that a 10% increase in price

leads to a 16% decrease in sales, but no hard data. Dr. Harrison stated that the -1.6 price 

elasticity value they used in their study was taken from the RIA done by the EPA for the 1988 

wood heaters NSPS (value developed in 1986). Several present believe that there is not enough 

data to question the -1.6 price elasticity assumption.

David Harrison stated that, according to the NERA study, the 4.5 g/hr standard would not result 

in a demand effect, since most models already meet this standard. However, according to the 

Page 2 of 4
study, NERA claims that further revising the standard from 4.5 g/hr to 3.0 g/hr would have a 

demand effect approximating a 15% reduction in wood heater sales.

Dr. Harrison also described the “scrappage effect” wherein some potential wood heater 

purchasers will choose to keep their existing, less efficient wood heater, rather than pay a greater 

amount for a new stove even though it may be more efficient in the long-term. He argued that 

this would, therefore, increase overall annual emissions (compared to emission reduction 

estimations which do not include the scrappage effect) as older wood heaters remain in 

operation.

Based on a 3.0 g/hr standard, NERA estimated a 22% decline in particulate emissions (tons) 

from baseline when taking into account combined demand and scrappage effects. Dr. Harrison 

further argued that incremental ratcheting down of the standard results in higher costs with noncommensurate benefits. NERA’s study concluded that “relative to 4.5 g/hr, the 3.0 g/hr standard 

would impose almost 7x more costs but only about 3x more emission reductions (because of 

more emissions from existing stoves due to scrappage effect)”.

In discussing the methodology that Bob Ferguson used in his analyses, which were then provided 

to NERA for their study, Mr. Ferguson explained that he only looked at noncatalytic wood 

heaters, as this was the category with the clearest and most readily available data; though he did 

look at the costs of noncatalytic wood heaters going to catalytic converter wood heaters. It was 

his professional opinion, he added, that the impacts of costs for catalytic converter wood heaters 

would be similar to those for noncatalytic wood heaters.

Bob Ferguson once again stated that small firms often do not have a good understanding of

their own level of profitability and described the difficulties faced in trying to survey the

industry for precise information.

Gil Wood raised the question of the large number of wood heater models available and 

asked what answer he could give to states and environmental organizations who believe that 

manufacturers have too many models. Mr. Ferguson asserted that the number of new models 

coming to market has been decreasing, and he himself has been a strong advocate for further 

reducing the number of models to help a company’s profitability.

Mr. Wood stated that the cost effectiveness becomes reasonable if you consider the model design 

life of the wood heater as extending out 20 years. He furthermore pointed out that industry 

members had stated that there are many older stoves in homes now that have been in place for

20-plus years. David Harrison noted that NERA did a similar annualized analysis for OTAQ 

which took into consideration the lifespan of consumer appliances such as lawnmowers. Mr. 

Ferguson agreed with Mr. Wood’s point that some model designs (i.e., the “guts” of the stove) 

have not changed since the 1988 NSPS, and added that manufacturers would like to make 

changes but have not felt able to take the financial risk of extensive R&D.

David Menotti further agreed that consumers do not have the same motivation to replace wood 

heaters as they do cars, for example, which must be replaced when they no longer serve the

function of transportation. Wood heaters generally serve the purpose of producing heat for long

Page 3 of 4
periods of time, regardless of their emissions and efficiency, and therefore are not replaced as 

often as they probably should be.

John Crouch expressed a concern regarding the forced-air furnace industry and asked whether 

the proposal would include a 1-year exemption for such appliances. Mr. Wood stated that there is 

currently no such exemption for these appliances in the proposed revision to the NSPS. Industry 

members and US EPA discussed the use of CSA Standard 415.1 for efficiency testing. Mr. 

Ferguson stated that there has been a poor learning curve, thus far, regarding this standard. The 

point was made that many Canadian firms make forced air furnaces that are dual-fuel using (e.g., 

wood and oil), which poses another issue in terms of understanding and employment of the 

standard. Further, Mr. Ferguson pointed out that many “micro” manufacturers are producing 

forced air furnaces that are essentially “built to order” and, therefore, lab testing is impracticable.

In answer to industry’s question regarding when the proposed rule would be released, Mr. Wood 

summarized the currently projected schedule for review of the draft rule by various agencies, 

including publication of the proposed rule in late summer 2013. The US EPA and industry 

representatives expressed their mutual interest in working together and maintaining an open 

dialogue as the proposed revisions to the wood heaters NSPS moves forward through the 

regulatory process.

Page 4 of 4
ATTACHMENT A 
Cost-Effectiveness of Alternative Wood Stove 

New Source Performance Standards 

David Harrison, Jr., Ph.D. 

Andrew Foss 

Prepared on behalf of the Hearth, Patio and Barbecue Association 

Presentation to the U.S. Environmental Protection Agency 

February 28, 2013 

Preliminary Analysis • Do Not Distribute
1 Preliminary Results · Do Not Distribute 

Contents

 Overview of Objective and Methodology

 Compliance Cost Estimates

 Baseline Sales Estimates

 Baseline Emissions Estimates

 Price and Elasticity Estimates

 Emissions Reductions and Costs of 4.5 g/h Standard

 Emissions Reductions and Costs of 3.0 g/h Standard

 Cost-Effectiveness of 4.5 and 3.0 g/h Standards

 Appendix

– Range of Compliance Cost Estimates

– Sensitivity Analyses of Compliance Cost Estimates and Scrappage Parameter
2 Preliminary Results · Do Not Distribute 

Overview of Objective and 

Methodology

Objective: Develop preliminary analysis of the cost-effectiveness ($/ton) of potential wood 

stove new source performance standard (NSPS) of 4.5 or 3.0 grams of particulate matter 

(PM) per hour (g/h) based on estimated total compliance costs and total emission reductions

Methodology

 Analyzed illustrative future year (2018)

 Estimated compliance costs

– Ferguson (2013) provides ranges of compliance costs per model for modifying stove models

– Estimated compliance costs per unit based on sales assumption per model

 Estimated price and demand effects

– Ferguson and Page (2013) provide survey results on baseline prices

– Used estimates of retail price markup and price elasticity of demand for new wood stoves

 Estimated emissions and scrappage effects

– Used Houck (2011) to estimate baseline emissions from new stoves sold in 2018

– Also estimated emission changes for existing stoves in 2018 due to demand (price) impact on 

scrappage rates

 Developed estimates of cost-effectiveness of alternative NSPS

 Developed sensitivity analyses (in appendix) for ranges of compliance costs from 

Ferguson (2013) and alternative scrappage parameters
3 Preliminary Results · Do Not Distribute 

Compliance Cost Estimates:

Averages by Cost Category

Average compliance costs for modifying 7.5 or 4.5 g/h stove models to comply 

with 4.5 and 3.0 g/h standard (2013$)

Source: Ferguson (2013)

See appendix for range of compliance costs 7.5 to 4.5 7.5 to 3.0 4.5 to 3.0

R&D / engineering $75,000 $94,250 $82,750

Tooling

Steel $20,450 $31,050 $23,250

Cast iron $46,500 $64,950 $62,100

Average $33,475 $48,000 $42,675

Purchasing $4,000 $5,750 $4,000

Testing $6,000 $8,000 $8,000

Equip and integration $2,500 $5,000 $2,500

Certification $22,400 $31,125 $22,900

Roll-out $120,350 $175,000 $122,850

Total costs per model $263,725 $367,125 $285,675

Variable costs per unit $57 $133 $91
4 Preliminary Results · Do Not Distribute 

Compliance Cost Estimates: 

Total Per Unit 

 Table shows total compliance costs per unit

– Assumed capital and other “model” costs annualized over 10 years using 7% real

annual discount rate

– Assumed 1,000 units sold per model per year on average

 Source: Based on sales data in Houck (2011) and estimated total number of models from EPA model

certification data (see next slide)

– Assumed 35% indirect costs for costs anywhere in supply chain that were not

directly estimated by Ferguson (2013)

 Indirect cost estimates used in EPA analyses (e.g., motor vehicle emission standards)

7.5 to 4.5 7.5 to 3.0 4.5 to 3.0

Total costs per model $263,725 $367,125 $285,675

Annualized (10 years) $37,549 $52,270 $40,674

Per unit (1000 units) $38 $52 $41

Variable costs per unit $57 $133 $91

Subtotal per unit $95 $185 $131

Indirect costs (35%) $33 $65 $46

Total costs per unit $128 $250 $177
5 Preliminary Results · Do Not Distribute 

Baseline Sales Estimates:

Houck Data and Cat/Non-Cat

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

180,000

19871990 1995 2000 2005 2010 20152018

Total Wood Stove Sales

Source: Houck (2011, p. 28) and 

NERA extrapolation

 Figure shows Houck’s (2011) historical 1987-2010 data for total wood stove sales 

(catalytic and non-catalytic) and trendline extending to 2018 (1% annual growth)

 Of the projected 110,000 wood stove sales in 2018, assumed 2/3 are non-cat 

(included in this analysis) and 1/3 are cat (not included in this analysis)

– Thus, 75,000 new non-cat stoves in 2018

– Based on EPA model certification data by model count 

(http://www.epa.gov/compliance/resources/publications/monitoring/caa/woodstoves/certifiedwood.pdf)

– Broadly consistent with 2010 stock data in Houck (2011, pp. 30 and 33):

406,000 cat stoves in use [24%] and 1,286,000 non-cat stoves in use [76%]
6 Preliminary Results · Do Not Distribute 

Baseline Sales Estimates:

Non-Catalytic by Emission Rate

 Table shows projections of non-cat wood stove sales in 2018 under baseline 

conditions (without new EPA NSPS)

 Used survey results from Ferguson and Page (2013) to estimate sales 

percentages for 7.5, 4.5, and 3.0 stoves

7.5 g/h 4.5 g/h 3.0 g/h Total

Percentage of sales 11% 48% 41% 100%

Sales units 8,000 36,000 31,000 75,000

Sales models 8 36 31 75

Source: Ferguson and Page (2013) for sales percentages and NERA calculations
7 Preliminary Results · Do Not Distribute 

Baseline Emissions Estimates: 

Annual Emission Rates 

 Houck (2011, p. 33) provides the following information on the stock of in-use

certified non-catalytic and in-use non-certified wood stoves in 2010

Certified

('87/'90 Onward)

Non-certified

(Pre '87/'90)

Total

Existing

Units 1,286,000 4,344,000 5,630,000

Emissions (tons) 15,000 135,000 150,000

Emissions (tons/unit) 0.012 0.031 0.027

Note: EPA certification 

requirements were phased 

in between 1987 and 1990. 

 Based on annual emissions per unit for certified stoves (0.012 tons/unit), table

below shows estimated annual emissions per unit for 7.5, 4.5, and 3.0 stoves

− Weighted average emission rate (using assumed percentages of sales): 4.2 g/h 

− Example: 7.5 g/h is 1.79 times the weighted average emission rate, so its annual emissions 

estimate is 1.79 times the certified stove average (0.012 tons/unit), hence 0.021 tons/units 

− Note: If actual emission rates all differed from tested emission rates by the same proportion for 

all three groups, the annual emission estimates in the table below would still apply 

7.5 g/h 4.5 g/h 3.0 g/h Average All Existing

Percentage of sales 11% 48% 41%

Weighted average emission rate (g/h) 4.2

Emission rate relative to weighted average 1.79 1.07 0.71

Weighted avg annual emissions (tons/unit) 0.012

Annual emissions (tons/unit) 0.021 0.012 0.008 0.027
8 Preliminary Results · Do Not Distribute 

Baseline Emissions Estimates:

Total Emissions

 Table shows baseline emission estimates for new non-cat wood stoves in 

2018 based on the sales and emission rate estimates above

7.5 g/h 4.5 g/h 3.0 g/h Total

Units 8,000 36,000 31,000 75,000

Annual emission rate (tons/unit) 0.021 0.012 0.008 0.012

Annual emissions (tons) 167 450 258 875
9 Preliminary Results · Do Not Distribute 

Baseline Average Price Estimate 

 Ferguson and Page (2013) performed survey of stove manufacturers on

model prices and emission rates

– Survey indicated that high-emission-rate stoves tend to have relatively low prices

and low-emission-rate stoves tend to have relatively high prices

 Table shows baseline price estimates for new non-cat stoves based on

Ferguson and Page (2013) survey results

– Stove categorization

 All stoves with emission rates up to 3.0 g/h are categorized as 3.0 g/h

 All stoves with emission rates greater than 3.0 g/h up to 4.5 g/h are categorized as 4.5 g/h

 All stoves with emission rates greater than 4.5 g/h are categorized as 7.5 g/h

 “Rounded up” because actual emission rates tend to be higher than lab-tested rates

– Prices are average of all stove models within each category (not weighted by sales)

7.5 g/h 4.5 g/h 3.0 g/h Total

Baseline price $1,300 $2,000 $2,200

Baseline sales 8,000 36,000 31,000

Weighted average price $2,008
10 Preliminary Results · Do Not Distribute 

Compliance Retail Price and 

Elasticity Estimates

 Assumed that retail price impact would include 67% retail markup on 

wholesale compliance cost

– Source: Industry estimate that retailers generally price units for a 40% gross 

margin (equivalent to 67% retail markup)

– Example: If total wholesale cost for a unit is $1200, retailer sells it at $2000 (a 40% 

gross margin [$800/$2000] and 67% retail markup [$800/$1200])

 Assumed -1.6 price elasticity of demand for new wood stoves (i.e., 10% 

increase in price leads to 16% decrease in sales quantity)

– Source: EPA (1986) regulatory impact analysis (demand for wood heat)
11 Preliminary Results · Do Not Distribute 

4.5 g/h Standard: Price Increase 

for 4.5 g/h Compliant Stoves

 If EPA set a new standard of 4.5 g/h, stoves with baseline rates of 7.5 

g/h would have to be modified to 4.5 g/h, and the modification costs 

would lead to higher prices

 Table shows new average price of 4.5 g/h stoves with modification of 7.5 

g/h models

Baseline

Sales

Compliance 

Costs

Retail 

Markup

Price 

Increase

Original

Price

NSPS

Price

Baseline 4.5 36,000 N/A N/A N/A $2,000 $2,000

Modification of 7.5 models 8,000 $128 + $86 = $213 $1,300 $1,513

Total 4.5 (including modified) 44,000 N/A N/A N/A N/A $1,911
12 Preliminary Results · Do Not Distribute 

4.5 g/h Standard: Average Price 

Increase for All Stoves 

 If EPA set a new standard of 4.5 g/h:

– Sales of 7.5 g/h stoves would be eliminated;

– Average price of 4.5 g/h stoves would be different (because of averaging in

modified 7.5 g/h stoves); and

– Sales of 3.0 g/h stoves would be unchanged

 Table shows changes in sales and average price across new stoves

 Average price of new stoves estimated to rise by $23 due to eliminating

the low-price 7.5 g/h stoves and modifying them to 4.5 g/h

7.5 g/h 4.5 g/h 3.0 g/h Total

Baseline sales 8,000 36,000 31,000 75,000

NSPS sales without demand effect 0 44,000 31,000 75,000

NSPS price N/A $1,911 $2,200

Baseline weighted average price $2,008

NSPS weighted average price $2,031

Impact from baseline ($) +$23

Impact from baseline (%) +1.1%
13 Preliminary Results · Do Not Distribute 

4.5 g/h Standard: Demand Effect 

Explained

 Higher prices lead to lower sales

 Figures show market for new wood stoves (all emission rates combined)

– Figures are not drawn to scale

Baseline

Sales

Price

Demand

$2,008

75k

New 4.5 Standard

Sales

Price

Demand

$2,008

75k

+$23 (+1.1%)

-1,359

(-1.8%)
14 Preliminary Results · Do Not Distribute 

4.5 g/h Standard: Scrappage Effect 

Explained 

 Some of the 2018 sales loss due to higher prices is from

consumers who would have bought a new stove and scrapped the

old stove but now keep the old stove

– The increase in emissions from existing stoves is termed a

“scrappage effect” and is included in EPA/CARB analyses (e.g.,

new motor vehicle emission standards)

 Assumed scrappage parameter of 50% (i.e., sales reduction of X

stoves would lead to 0.5X more existing stoves that otherwise

would have been scrapped/replaced)

– Also performed sensitivity analysis with 0% and 100% parameters

 Increase in emissions from the existing stoves that would have

been scrapped partly offsets the emission decrease from new

stoves
15 Preliminary Results · Do Not Distribute 

4.5 g/h Standard: Emissions Impacts With 

Demand and Scrappage Effects

 Table shows impacts with demand and scrappage effects (50%)

– Calculations use annual emission rate (tons/unit) from above (including existing 

stove average annual emission rate of 0.027 tons/unit)

 The new standard would decrease total emissions, but the reduced 

scrappage of existing stoves would lead to more emissions from existing 

stoves (which have higher emission rates than new stoves) 7.5 g/h 4.5 g/h 3.0 g/h Existing Total

Baseline sales 8,000 36,000 31,000 N/A 75,000

NSPS sales without demand effect 0 44,000 31,000 N/A 75,000

Demand and scrappage effects N/A -1,359 N/A 679

NSPS sales with demand effect 0 42,641 31,000 N/A 73,641

Annual emission rate (tons/unit) 0.021 0.012 0.008 0.027

Annual emissions (tons) 0 533 258 18

Baseline total annual emissions (tons) 875

NSPS total annual emissions (tons) 809

Impact from baseline (tons) -66

Impact from baseline (%) -7.5%
16 Preliminary Results · Do Not Distribute 

4.5 g/h Standard: Compliance Costs 

with Demand Effect

 Table shows estimated total compliance costs for new 4.5 g/h standard 

based on modifying 7.5 g/h stoves and accounting for the reduced 

number of stoves sold due to the price increase

Units Cost/Unit Cost

Modify 7.5 without demand effect 8,000 $128 $1,021,124

Modify 7.5 with demand effect 6,641 $128 $847,688
17 Preliminary Results · Do Not Distribute 

3.0 g/h Standard: Price for 3.0 g/h 

Compliant (All) Stoves 

 If EPA set a new standard of 3.0 g/h, stoves with baseline rates of 7.5 or

4.5 g/h would have to be modified to 3.0 g/h, and the modification costs

would lead to higher prices

 Table shows new average price of 3.0 g/h compliant stoves with

modification of 7.5 and 4.5 g/h models

Baseline

Sales

Compliance 

Costs

Retail 

Markup

Price 

Increase

Original

Price

NSPS

Price

Baseline 3.0 31,000 N/A N/A N/A $2,200 $2,200

Modification of 7.5 models 8,000 $250 + $168 = $418 $1,300 $1,718

Modification of 4.5 models 36,000 $177 + $119 = $296 $2,000 $2,296

Total 3.0 (including modified) 75,000 N/A N/A N/A N/A $2,195
18 Preliminary Results · Do Not Distribute 

3.0 g/h Standard: Average Price 

Increase for All Stoves

 If EPA set a new standard of 3.0 g/h:

– Sales of 7.5 g/h and 4/5 stoves would be eliminated; and

– Average price of 3.0 g/h stoves would be different (because of averaging in 

modified 7.5 and 4.5 g/h stoves)

 Table shows changes in sales and average price across new stoves 

 Average price of new stoves would rise by $187 due to eliminating the 

7.5 and 4.5 g/h stoves and modifying them to 3.0 g/h 7.5 g/h 4.5 g/h 3.0 g/h Total

Baseline sales 8,000 36,000 31,000 75,000

NSPS sales without demand effect 0 0 75,000 75,000

NSPS price N/A N/A $2,195

Baseline weighted average price $2,008

NSPS weighted average price $2,195

Impact from baseline ($) +$187

Impact from baseline (%) +9.3%
19 Preliminary Results · Do Not Distribute 

3.0 g/h Standard: Demand Effect 

Explained 

 Higher prices lead to lower sales

 Figures show market for new wood stoves (all emission rates combined)

– Figures are not drawn to scale

Baseline 

Sales 

Price 

Demand

$2,008 

75k

New 3.0 Standard 

Sales 

Price 

Demand

$2,008 

75k

+$187 

(+9.3%) 

-11,146 

(-14.9%) 
20 Preliminary Results · Do Not Distribute 

3.0 g/h Standard: Emissions Impacts with 

Demand and Scrappage Effects

 Assumed that reduced sales of new stoves (3.0 g/h) would lead to 

reduced scrappage of existing stoves

 Table shows impacts with demand and scrappage effects

– Calculations use annual emission rate (tons/unit) from above

 The new standard would decrease total emissions, but the reduced 

scrappage of existing stoves would lead to more emissions from existing 

stoves (which have higher emission rates than new stoves)

7.5 g/h 4.5 g/h 3.0 g/h Existing Total

Baseline sales 8,000 36,000 31,000 N/A 75,000

NSPS sales without demand effect 0 0 75,000 N/A 75,000

Demand and scrappage effects N/A N/A -11,146 +5,573

NSPS sales with demand effect 0 0 63,854 N/A 63,854

Annual emission rate (tons/unit) 0.021 0.012 0.008 0.027

Annual emissions (tons) 0 0 532 148

Baseline total annual emissions (tons) 875

NSPS total annual emissions (tons) 680

Impact from baseline (tons) -194

Impact from baseline (%) -22.2%
21 Preliminary Results · Do Not Distribute 

3.0 g/h Standard: Compliance Costs

 Table shows estimated total compliance costs for new 3.0 g/h standard 

based on modifying 7.5 and 4.5 g/h stoves and accounting for reduced 

need to modify due to reduced sales

Units Cost/Unit Cost

Modify 7.5 without demand effect 8,000 $250 $2,000,920

Modify 7.5 with demand effect 0 $250 $0

Modify 4.5 without demand effect 36,000 $177 $6,375,041

Modify 4.5 with demand effect 32,854 $177 $5,817,987

Total without demand effect 44,000 N/A $8,375,961

Total with demand effect 32,854 N/A $5,817,987
22 Preliminary Results · Do Not Distribute 

Cost-Effectiveness of 4.5 and 3.0 

g/h Standards 

 Relative to 4.5 g/h, the 3.0 g/h standard would impose almost 7x more

costs but only about 3x more emission reductions (because of more

emissions from existing stoves due to scrappage effect)

4.5 g/h 3.0 g/h

3.0 incremental 

to 4.5

Total compliance cost $848,000 $5,818,000 $4,970,000

Total emission reductions (tons) 66 194 129

Cost per ton $13,000 $30,000 $39,000

$13,000

$30,000

$39,000

$,000

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

$40,000

$45,000

4.5 g/h 3.0 g/h 3.0 incremental

to 4.5

Cost per ton
Appendix
24 Preliminary Results · Do Not Distribute 

Compliance Cost Estimates: 

Ranges 

Source: Ferguson (2013) and NERA calculation of averages (midpoints) 

Min Avg Max Min Avg Max Min Avg Max

R&D / engineering $59,000 $75,000 $91,000 $74,500 $94,250 $114,000 $65,000 $82,750 $100,500

Tooling

Steel $9,700 $20,450 $31,200 $18,700 $31,050 $43,400 $12,000 $23,250 $34,500

Cast iron $31,000 $46,500 $62,000 $44,500 $64,950 $85,400 $43,800 $62,100 $80,400

Average $20,350 $33,475 $46,600 $31,600 $48,000 $64,400 $27,900 42675 57450

Purchasing $2,000 $4,000 $6,000 $3,300 $5,750 $8,200 $2,000 $4,000 $6,000

Testing $4,000 $6,000 $8,000 $6,000 $8,000 $10,000 $6,000 $8,000 $10,000

Equip and integration $2,000 $2,500 $3,000 $4,000 $5,000 $6,000 $2,000 $2,500 $3,000

Certification $18,800 $22,400 $26,000 $27,000 $31,125 $35,250 $19,300 $22,900 $26,500

Roll-out $56,200 $120,350 $184,500 $91,500 $175,000 $258,500 $58,700 $122,850 $187,000

Total costs per model $162,350 $263,725 $365,100 $237,900 $367,125 $496,350 $180,900 $285,675 $390,450

Variable costs per unit $38 $57 $76 $86 $133 $180 $64 $91 $117

7.5 to 4.5 7.5 to 3.0 4.5 to 3.0

 Table shows minimum and maximum compliance cost estimates

from Ferguson (2013)

 NERA calculated averages as the midpoints between these minimum

and maximum values
25 Preliminary Results · Do Not Distribute 

Sensitivity Analysis:

Alternative Compliance Costs

 Table shows the effects of alternative compliance costs 

(minimum, average, or maximum from Ferguson (2013)) on total 

emission reductions and cost per ton using 50% scrappage 

parameter

4.5 g/h 3.0 g/h

3.0 incremental 

to 4.5

Total compliance cost

Min costs $588,000 $4,439,000 $3,851,000

Avg costs $848,000 $5,818,000 $4,970,000

Max costs $1,064,000 $6,812,000 $5,747,000

Total emission reductions (tons)

Min costs 66 212 146

Avg costs 66 194 129

Max costs 65 176 111

Cost per ton

Min costs $9,000 $21,000 $26,000

Avg costs $13,000 $30,000 $39,000

Max costs $16,000 $39,000 $52,000
26 Preliminary Results · Do Not Distribute 

Sensitivity Analysis: 

Alternative Scrappage Parameters 

 Table shows the effects of alternative scrappage parameters (0%,

50% and 100%) on total emission reductions and cost per ton

using average (midpoint) compliance costs from Ferguson (2013)

– 0%: None of the lost sales would have been replacement stoves

– 100%: All of the lost sales would have been replacement stoves

Note: (a) Incremental cost per ton is not calculated for 100% scrappage parameter 

because the incremental gains are negative (i.e., emissions would be higher with 

3.0 g/h than with 4.5 g/h). 

4.5 g/h 3.0 g/h

3.0 incremental 

to 4.5

Total compliance cost $848,000 $5,818,000 $4,970,000

Total emission reductions (tons)

0% scrappage parameter 84 343 259

50% scrappage parameter 66 194 129

100% scrappage parameter 47 46 -2

Cost per ton

0% scrappage parameter $10,000 $17,000 $19,000

50% scrappage parameter $13,000 $30,000 $39,000

100% scrappage parameter $18,000 $127,000 (a)
David Harrison, Jr., Ph.D. 

Senior Vice President 

NERA Economic Consulting

Boston

617 927 4512 

david.harrison@nera.com 

© Copyright 2013 

National Economic Research Associates, Inc. 

All rights reserved. 

Andrew Foss 

Consultant 

NERA Economic Consulting 

Boston 

617 927 4582 

andrew.foss@nera.com 
ATTACHMENT B 
2/26/2013

1

Description of the Woodstove Cost 

Modeling and Expert Panel Review 

Process.

Presented by Bob Ferguson

For the Hearth, Patio & Barbecue Association

1

• A comprehensive economic impact analysis is an

important component for the determination of

any new passing grades for wood heaters.

• In order to provide technically sound inputs to

these economic analyses, HPBA developed

information on the potential costs of meeting

alternative particulate matter (PM) standards

using an engineering modeling approach.

– It is important to note that the modeling did not

consider the impacts of adding other allowables to

the regulatory landscape (notably overall efficiency or

carbon monoxide standards).

2
2/26/2013

2

• The HPBA economic modeling addresses woodstove

models that meet current PM requirements but will require

modification if more stringent PM standards are

promulgated.

• Modification of current model designs to comply with

tighter standards implicates a variety of capital and fixed

cost investments.

• Adding or modifying technology also implicates cost

increases to the product itself including:

– materials,

– direct labor and

– warranty exposure.

• The costs presented in the models should be considered as

incremental cost increases that are attributable directly to

increases in regulatory stringency.

3

• The woodstove economic modeling was

limited to non-catalytic stoves only.

– Non-catalytic models represent by far the largest

category of certified stove models produced and

sold.

– Catalytic stove models can also be expected to

incur similar incremental costs depending on the

stringency of the promulgated standards.

4
2/26/2013

3

• The first step was the development of initial modeling

within an Excel® workbook.

• For purposes of the modeling, a mid-size base stove model

was used as the basis.

– The base model was considered to be a model that includes all

components that comprise a fully-functional stove model but

without any enhancements, options or upgrades.

• The various cost sections were built from the bottom up

considering the various components that comprise the

different categories of cost:

– Capital Costs (development, engineering, manufacturing,

purchasing, equipment and integration, and facilities impacts),

– Fixed Costs (testing, certification and product roll-out) and

– Variable Costs (materials, machining, assembly labor, etc.)

associated with modifying model lines to meet two target

emission levels.

5

• The modeling further delineated between steel

and cast iron construction because of the

significant differences in capital cost

requirements between the two materials.

– Other materials – specifically soapstone or other

stone materials- were not modeled.

• It should be noted, however, that models that employ those

natural materials in their aesthetic/functional designs are

generally at the high end of the retail price range even

without consideration for technology improvements beyond

today’s norm.

• The modeling was approached at a fairly granular

level to allow reviewers to understand what was

specifically included.

6
2/26/2013

4

• Each cost section was treated like a part of a

product development budget. The only

difference is that the question being evaluated

was “what are the incremental costs specifically

attributable to new regulations?" In other words,

if a model needs to be redesigned and recertified for no other reason than to meet new

regulatory requirements, what are the costs?

• Each cell in the spreadsheet was then populated

with a range of values, based on the expert

judgment of the engineering consultant including

advice from other industry experts.

7

• In the variable cost section, the costs again reflect

incremental costs.

– These are direct costs attributable to the added

complexity and additional labor needed to build a

stove with improved or additional technology added.

– Labor costs include employee benefits.

– No indirect costs are included in the variable cost

modeling sections. Those indirect costs (G & A,

overhead, etc.) are absorbed in the manufacturer’s

margin which is reflected in the cost to the next entity

in the distribution chain and ultimately in the MSRP.

8
2/26/2013

5

• A total of three cost scenarios were modeled.

– These address situations where existing stove models are

technologically modified to improve the emission

performance while leaving the other features and design

elements generally unchanged.

• Scenario 1

– an “EPA-only” model, ≤ 7.5 g/h but > 4.5g/hr) is modified

to meet the current Washington State limit.

• Scenario 2

– modifying a stove model that currently meets the current

Washington State limit (≤ 4.5 g/hr), to meet a new lower

limit (≤3.0 g/hr).

• Scenario 3

– modifying an EPA-only stove model to meet the ≤ 3.0 g/hr

emission limit (≤ 7.5 g/h to ≤3.0 g/hr).

9

• The second step in the process was the review of

the initial modeling spreadsheet by a broader

group of industry experts − the “Experts Panel”.

• Each Expert Panelist was individually briefed

about the review process including:

– what was expected of the panelists in detail

– answering any questions

– how to provide and

– the form used to document the panelists’

backgrounds as industry experts.

10
2/26/2013

6

• Panelists were asked to evaluate the cost ranges in the

models from the perspective of whether they pass the

“reasonableness” test for a typical free-standing wood

stove, based on their experience in the industry.

– The panelists were asked to first consider the “macro”

ranges presented for each of the main cost categories, and

then consider each item in the more detailed breakdown

within each cost category.

– Feedback from individual panelists was compiled.

• Revisions were made to the modeling where the

engineering consultant felt they were appropriate

based on the aggregated feedback.

• Please note that this generic modeling approach is intended to

develop estimates of typical costs for typical manufacturers for a

typical mid-sized non-cat base stove model as verified by the

cumulative weight of the expertise of the Expert Panel. Some

outlier cost suggestions were disregarded as the final modeling

was prepared.

11
ATTACHMENT C 
HPBA Wood Stove Pricing Surv

Methodology Summary

Presented by Bob Ferguson

For the Hearth, Patio & Barbecue Association
• The survey was done by Charlie Page,

HomeWarmth, Inc. in conjunction withFerguson, Andors & Company. Charlie has 35 years of industry experience in pdevelopment, sales and marketing for vhearth industry manufacturers.

• The purpose of the survey was to ident

2012 retail pricing of woodstoves sold bdominant manufacturers in the hearthindustry.
• The pricing spread sheet was developed from 

manufacturers’ price lists. 

– These were obtained by on-line searches or by co

and interviewing retailers and distributors or the manufacturers themselves. 

– Other information relating to typical discounts, fr

costs and industry practices came from interviewindustry experts in key stove selling areas. 

• All information obtained was logged in spreads

manufacturer and model. A summary of the dcollected was tabulated with manufacturers anmodels masked. 

• For the purposes of the survey, the Base List Pr

considered the same as the Manufacturer’s SuRetail Price (MSRP) for their base models.
• The retail pricing used is that for specia

retailers with nationally distributed majbrands and where retail pricing was ablobtained during the surveying.

• Pricing information was obtained for: – 142 individual stove models representing:

• 14 Major Manufacturers• 22 Woodstove “Brands”

• This information was used to determine

baseline pricing in the broader economanalyses prepared by NERA.
Firebox EPA PM With 

Model Tech. Primary Nominal Volume Emissions List Enamel Other Upgrade $

Code Type Material Size ft3

g/hr Price Premium Upgrades Difference

L1 NC Steel L 3.1 2.6 $ 2,656 NA $ 2,796 $ 140

L2 NC Steel L 3.1 2.9 $ 1,999 NA $ 2,466 $ 467

L3 NC Steel L 3.25 4.3 $ 2,629 NA $ 3,057 $ 428

L4 NC Steel L 3.1 5.7 $ 1,579 NA

L5 NC Steel L 3.4 3.9 $ 1,989 NA

L6 NC Steel L 3.2 3.5 $ 1,869 NA $ 1,979 $ 110

L7 NC Steel L 3.1 3.2 $ 2,200

L8.1 NC Cast Iron L 3.2 2.3 $ 3,009 $ 3,559 $ 550

L14 NC Stone L 4 3.1 $ 4,349 NA

L13 NC Stone L 3.2 2.8 $ 3,329 $ 3,869 $ 540

M22 NC Steel M 1.9 4.1 $ 999 NA

M45 NC Steel M 2.15 2.7 $ 1,199 NA

M27 NC Steel M 1.6 4.4 $ 1,209 NA $ 1,323 $ 114

M24 NC Steel M 1.6 4.4 $ 1,209 NA $ 1,323 $ 114

M50 NC Steel M 1.6 5.9 $ 1,289 NA

M97 NC Steel M 1.74 5.8 $ 1,295

M7 NC Steel M 2.25 3.5 $ 1,299 NA

M2 NC Steel M 1.7 4.1 $ 1,303 NA $ 1,637 $ 334

M99 NC Steel M 2.1 3.5 $ 1,375

M51 NC Steel M 1.9 4.4 $ 1,379 NA $ 1,479 $ 100

M49 NC Steel M 2.2 6.9 $ 1,399 NA

M4 NC Steel M 2.25 3.5 $ 1,453 NA $ 1,787 $ 334

M44 NC Steel M 2.15 2.7 $ 1,489 NA

M36 NC Steel M 1.85 3.3 $ 1,489 NA $ 1,944 $ 455

M1 NC Steel M 1.7 4.1 $ 1,518 $ 1,888 $ 370

M28 NC Steel M 2.2 1.9 $ 1,561 NA $ 1,694 $ 133

M25 NC Steel M 2.2 1.9 $ 1,561 NA $ 1,694 $ 133

M46 NC Steel M 2.5 3.5 $ 1,599 NA

M37 NC Steel M 1.85 3.3 $ 1,639 NA $ 2,094 $ 455

M40 NC Steel M 2 2.5 $ 1,669 NA $ 2,232 $ 563

M3 NC Steel M 2.25 3.5 $ 1,688 $ 2,068 $ 380

M15 NC Steel M 2 1.1 $ 1,699 NA $ 1,760 $ 61

M23 NC Steel M 1.6 4.4 $ 1,717 NA $ 2,162 $ 445

M38 NC Steel M 2.5 4.5 $ 1,739 NA $ 2,206 $ 467

M29 NC Steel M 1.6 4.4 $ 1,756 NA

M39 NC Steel M 2.5 4.5 $ 1,779 NA $ 2,246 $ 467

M47 NC Steel M 2.1 7.5 $ 1,789 NA

M16 NC Steel M 2.1 3.4 $ 1,796 NA $ 2,551 $ 755

M20 NC Steel M 2.1 3.4 $ 1,842 NA $ 2,371 $ 529

M54 NC Steel M 2.1 4.2 $ 1,843 NA $ 2,550 $ 707

M48 NC Steel M 2.9 4.4 $ 1,869 NA $ 2,069 $ 200

M33 NC Steel M 2.3 3.44 $ 1,874 NA $ 2,350 $ 476

M52 NC Steel M 1.8 2.7 $ 1,889 NA $ 1,989 $ 100

M14 NC Steel M 2.4 1.1 $ 1,899 NA $ 1,896

M56 NC Steel M 2.6 4.1 $ 1,961 NA $ 2,550 $ 589

M34 NC Steel M 2.3 3.44 $ 2,016 NA $ 2,492 $ 476

M55 NC Steel M 2.3 3.6 $ 2,020 NA $ 2,507 $ 487

M30 NC Steel M 1.8 2 $ 2,021 NA $ 2,512 $ 491

HPBA Wood Stove MSRP Survey, Specialty Retailers

Dominant Manufacturers and Brands - Blinded

February 19, 2013

Woodstove Specifications Pricing

Large Non-Cat: All Mat'ls. Medium Non-Cat: Steel
M41 NC Steel

M2 2.5 $ 2,029 NA $ 2,620 $ 591

M5 NC SteelM3 2.9 $ 2,068 $ 2,438 $ 370

M42 NC SteelM2 2.5 $ 2,069 NA $ 2,660 $ 591

M17 NC SteelM3 3.6 $ 2,075 $ 2,568 $ 2,759

M43 NC SteelM2 2.5 $ 2,119 NA $ 2,282 $ 163

M19 NC SteelM 2.1 3.4 $ 2,138 $ 2,138 $ 2,510

M35 NC SteelM 2.9 4.19 $ 2,174 NA $ 2,637 $ 463

M31 NC SteelM 2.92 3.5 $ 2,199 NA

M53 NC SteelM 2.2 2.7 $ 2,219 NA $ 2,319 $ 100

M21 NC SteelM 2.1 3.4 $ 2,223 NA $ 2,464 $ 241

M32 NC SteelM 2.3 3.4 $ 2,251 $ 2,500 $ 249

M13 NC SteelM2 1.1 $ 2,287 NA $ 2,697 $ 410

M8 NC SteelM2 2.6 $ 2,299 NA

M6 NC SteelM 1.7 4.1 $ 2,368 NA

M18 NC SteelM 2.1 3.4 $ 2,436 $ 2,436 $ 2,808

M12 NC SteelM 2.4 1.1 $ 2,487 NA $ 2,897 $ 410

M9 NC SteelM 2.6 3.7 $ 2,499 NA

M10 NC SteelM3 1.1 $ 2,599 NA

M11 NC SteelM3 2.3 $ 2,777 NA $ 3,177 $ 400

M26 NC SteelM 2.2 1.9 $ 2,260 NA $ 2,372 $ 112

M100 NC Cast IronM 2.5 3.6 $ 2,599 $ 3,069 $ 470

M57 NC Cast IronM 1.5 3.1 $ 1,659 $ 1,999 $ 340

M58 NC Cast IronM 2.12 $ 2,099 $ 2,599 $ 500

M61 NC Cast IronM 2.3 2.32 $ 2,499 NA

M62 NC Cast IronM 1.7 2.2 $ 2,299 NA

M63 NC Cast IronM3 2.9 $ 2,599 $ 3,249 $ 650

M64 NC Cast IronM 2.4 3.44 $ 2,299 $ 2,849 $ 550

M69 NC Cast IronM 2.67 2.84 $ 2,449 NA

M70 NC Cast IronM 1.77 3.77 $ 2,099 $ 2,509 $ 410

M71 NC Cast IronM 2.543 $ 2,409 $ 2,769 $ 360

M72 NC Cast IronM 2.54 3.2 $ 2,409 NA

M73 NC Cast IronM 2.97 4.1 $ 2,769 $ 3,129 $ 360

M79 NC Cast IronM 2.8 1.3 $ 2,299 NA

M80 NC Cast IronM 1.6 1.4 $ 1,769 NA

M81 NC Cast IronM2 1.5 $ 2,009 NA

M77.2 NC Cast IronM 2.3 1.5 $ 2,699 $ 3,249 $ 550

M78 NC Cast IronM 1.7 3.4 $ 2,259 $ 2,779 $ 520

M59 NC Cast IronM 1.7 4.1 $ 1,639 $ 2,059 $ 420

M60 NC Cast Iron

M 2.25 3.5 $ 2,119 $ 2,529 $ 410

M65 NC Cast IronM 2.1 3.4 $ 2,425 $ 3,039 $ 614

M66 NC Cast IronM3 3.9 $ 2,847 NA

M74 NC Cast IronM 1.7 4.2 $ 2,289 $ 2,839 $ 550

M75 NC Cast IronM 1.85 3.3 $ 2,289 $ 2,969 $ 680

M76 NC Cast IronM 2.5 4.5 $ 2,639 $ 3,199 $ 560

M68 NC Cast IronM 2.3 2.4 $ 2,147 $ 2,550 $ 403

M67 NC Cast IronM 2.3 2.4 $ 2,216 $ 2,629 $ 413

M83 NC StoneM 2.3 2.7 $ 2,999 $ 3,499 $ 500

M84 NC StoneM 1.92 $ 2,699 $ 2,999 $ 300

M86 NC StoneM 2.2 2.4 $ 2,849 $ 3,179 $ 330

S1 NC SteelS 1.5 2.1 $ 1,499 NA $ 1,560 $ 61

S10 NC SteelS 1.3 5.3 $ 689 NA

S11 NC SteelS 1.5 4.4 $ 1,009 NA

S12 NC SteelS 1.5 6.2 $ 1,259 NA

S13 NC SteelS 1.3 5.3 $ 939 NA

S14 NC SteelS 1.46 $ 1,279 NA

Medium Non-Cat: Cast Iron Med. NC 

Stone
S15 NC Steel

S 1.5 5.7 $ 1,219 NA $ 1,319 $ 100

S16 NC SteelS 1.25 2.6 $ 3,469 NA

S17 NC SteelS 1.6 1.6 $ 1,419 NA $ 2,168 $ 749

S2 NC SteelS 1.5 2.9 $ 1,358 $ 1,714 $ 2,022

S3 NC SteelS 1.33 $ 1,719 NA $ 2,210 $ 491

S4 NC SteelS 1.43 $ 1,802 $ 1,902 $ 100

S5 NC SteelS 1.43 $ 1,412 NA $ 1,897 $ 485

S6 NC SteelS 1.15 2.5 $ 3,799 NA

S7 NC SteelS 1.5 3.76 $ 1,439 NA

S8 NC SteelS 1.3 5.3 $ 1,119 NA

S9 NC SteelS 1.5 4.4 $ 1,259 NA

S18 NC Cast IronS 1.46 5.4 $ 2,249 $ 2,699 $ 450

S19 NC Cast IronS 1.5 2.7 $ 1,999 $ 2,449 $ 450

S20 NC Cast IronS 1.5 2.9 $ 2,075 $ 2,475 $ 400

S21 NC Cast IronS 1.17 3.78 $ 1,739 $ 2,099 $ 360

S22 NC Cast IronS 0.853 $ 1,229 NA

S23 NC Cast IronS 1.47 3.5 $ 1,839 NA

S24 NC Cast IronS 0.82 5.2 $ 979 NA

S25 NC Cast IronS 1.4 3.9 $ 1,820 $ 2,185 $ 365

S26 NC Cast IronS1 4.3 $ 1,039 $ 1,419 $ 380

S29 NC StoneS 1.25 3.57 $ 4,779 NA

S28 NC StoneS 1.23 $ 1,799 $ 2,199 $ 400

L8.1C Cast IronL 3.2 1.1 $ 3,009 $ 3,559 $ 550

L10C Cast IronL 3.3 1.3 $ 2,160 NA

L11C SteelL 4.4 1.2 $ 2,500

L12C SteelL 4.32 1.76 $ 2,850

M95C SteelM 2.8 2.4 $ 2,795

M98C SteelM 2.75 1.3 $ 2,833

M96C SteelM 2.75 0.97 $ 3,084

M88C Cast IronM 1.9 1.1 $ 1,629 NA

M89C Cast IronM 2.2 1.4 $ 1,889 NA

M77.1C Cast IronM 2.3 1.2 $ 2,699 $ 3,249 $ 550

M101C Cast IronM3 0.45 $ 3,800 $ 4,400 $ 5,050 $ 600

M90C StoneM 2.2 3.5 $ 2,799

M91C StoneM 2.2 1.3 $ 2,819

M92C StoneM 1.5 1.9 $ 2,679

M93C StoneM 1.5 1.9 $ 2,599

M94C StoneM 2.8 1.3 $ 3,595 $ 3,745 $ 150

Sm C: CI S27C Cast IronS 1.3 2.1 $ 1,889 $ 2,389 $ 500

Medium Cats: All Mat'ls. Small Non-Cat: All Mat'ls. Large Cats: All Mat'ls.