### 8

- 1

CHAPTER 8 : COMPARISON OF COSTS AND BENEFITS

Overview
The EPA has performed an illustrative analysis to estimate the costs and human health benefits of nationally attaining alternative ozone standards. The EPA Administrator is proposing to revise the level of the primary ozone standard to within a range of 65 to 70 ppb and is soliciting comment on alternative standard levels below 65 ppb, as low as 60 ppb. Per Executive Order 12866 and the guidelines of OMB Circular A

- 4, this Regulatory Impact Analysis (RIA) presents the analyses of the following alternative standard levels

-- 60 ppb, 65 ppb, and 70 ppb. This chapter summarizes these results and discusses the implications of the analysis. The cost and benefit estimates below are calculated incremental to a 2025 baseline assuming attainment of the existing ozo ne standard of 75 ppb and incorporating air quality improvements achieved through the projected implementation of existing regulations.

8.1 Results In this RIA we present the primary costs and benefits estimates for full attainment in
2025. For analytic al purposes, we assume that almost all areas of the country will meet each alternative standard level in 2025 through the adoption of technologies at least as effective as the control strategies used in this illustration. It is expected that some costs an d benefits will begin occurring earlier, as states begin implementing control measures to attain earlier or to show progress towards attainment. For California, we provide estimates of the costs and benefits of attaining the standard in a post

- 2025 time fr ame.
In estimating the incremental costs and benefits of potential alternative standard levels, we recognize that there are several areas that are not required to meet the existing ozone standard by 2025. The Clean Air Act allows areas with more signifi cant air quality problems to take additional time to reach the existing standard. Several areas in California are not required to meet the existing standard by 2025, and depending on how areas are ultimately designated for a revised standard, many areas m ay not be required to meet a revised standard until sometime between 2032 and 2038. We were not able to project emissions and air quality beyond 2025 for California; however, we adjusted baseline air quality to reflect mobile source emissions
reductions f

or California that would occur between 2025 and 2030; these emissions reductions

### 8

- 2

were the result of mobile source regulations expected to be fully implemented by 2030. While there is uncertainty about the precise timing of emissions reductions and related costs for California, we assume costs occur through 2038. In addition, we model benefits for California using projected population demographics for 2038.

Because of the different timing for incurring costs and accruing benefits and for ease of
discussi on throughout the analyses, we refer to the different time periods for potential attainment as 2025 and post

- 2025 to reflect that (1) we did not project emissions and air quality for any year other than 2025; (2) for California, emissions controls and asso ciated costs are assumed to occur through 2038; and (3) for California benefits are modeled using population demographics in 2038. It is not straightforward to discount the post

- 2025 results for California to compare with
or add to the 2025 results for th e rest of the U.S. While we estimate benefits using 2038 information, we do not have good information on precisely when the costs of controls will be incurred. Because of these differences in timing related to California attaining a revised standard, the supplemental separate costs and benefits estimates for post

- 2025 should not be added to the primary estimates for 2025.

By the 2030s, various mobile source rules, such as the onroad and nonroad diesel rules are expected to be fully implemented. Because Ca lifornia will likely not have all of its areas in attainment with a revised standard until sometime after its attainment date for the existing standard, it is important to reflect the impact these mobile source rules might have on the
emissions that affect ozone nonattainment. To reflect the emissions reductions that are expected from these rules, we subtract those from the estimates of the emissions reductions that might be needed for California to fully attain in 2025, making our analysis more consistent with full attainment later than 2025. The EPA did the analysis this way to be consistent with the requirements in the Clean Air Act and because forcing full attainment in California in an earlier year would likely lead to overstating costs due to (1) ben efits those areas might enjoy from existing federal or state programs implemented between 2025 and the future potential attainment year, (2) the likelihood that energy efficiency and cleaner technologies will be further implemented, and/or (3) the potentia l decline in costs of existing technologies due to economies of scale or improvements in the efficiency of installing and operating controls (‘learning by doing’).

### 8

- 3

Tables 8

- 1 and 8

- 2 summarize the costs and benefits of the three potential alternative
stand ard levels analyzed and shows the net benefits for each of the levels across a range of modeling assumptions related to the calculation of costs and benefits. Table s 8

- 3 and 8

- 4 provide information on the costs by geographic region for the U.S., except Ca lifornia in 2025
and on the costs for California for post

- 2025

. Table s 8

- 5 and 8

- 6 provide a regional breakdown
of benefits for 2025 and a regional breakdown of benefits for post

- 2025.

The esti mates for benefits reflect the variability in the functions available for estimating the largest source of benefits

– avoided premature mortality associated with simulated reductions
in ozone and PM 2.5 

### (as a co

- benefit). The low end of the range of net benefits is constructed by subtracting the cost from the lowes t benefit, while the high end of the range is constructed by subtracting the cost from the highest benefit. Following these tables is a discussion of the implications of these estimates, as well as the uncertainties and limitations that should be
consider ed in interpreting the estimates.

In th e RIA we provide estimates of costs of emissions reductions to attain the proposed standards in three regions

-- California, the rest of the western U.S., and the eastern U.S. In addition, we provide estimates of t he benefits that accrue to each of these three regions resulting from (i) control strategies applied within the region, (ii) reductions in transport of ozone associated with emissions reductions in other regions, and (iii) the control strategies for which the regional cost estimates are generated. These benefits are not directly comparable to the costs of control strategies in a region because the benefits include benefits not associated with those control strategies.

The net benefits of emissions reduct ions strategies in a specific region would be the benefits of the emissions reductions occurring both within and outside of the region minus the
costs of the emissions reductions. Because the air quality modeling is done the national level, we
do not esti mate separately the nationwide benefits associated with the emissions reductions occurring in any specific region. 1 

### As a result, we are only able to provide net benefits estimates
at the national level. The difference between the costs for a specific reg ion and the benefits

1 For California, we provide separate estimates of the costs and nationwide estimates of benefits, so it is appropriate to calculate net benefits. As such, we provide net benefits for the post

- 2025 California analysis.

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- 4

accruing to that region is not an estimate of net benefits of the emissions reductions in that region.

Table 8

- 1. Total Costs, Total Monetized Benefits, and Net Benefits in 2025 for U.S., except

California (billions of 2011$) a

Total Costs Monetized Benefits Net Benefits a

7% Discount Rate 3%

Discount Rate 7%

Discount Rate 3%

Discount Rate 7%

Discount Rate Proposed Alternative Standard Levels 70 $3.9 $6.9 to $14 $6.4 to $13 $3.0 to $10.1 $2.5 to $9.1 65 $15 $20 to $41 $19 to $38 $5 to $26 $4 to $23 Alternative Standard Level 60 $39 $37 to $75 $34 to $70 ($2) to $36 ($5) to $31

a We do not have a comprehensive data set to be able to calculate engineering costs at a 3% discount rate. See Chapter 7, Section 7.1.2 for additional details on the data limitations. As a result, the net benefit calculations at 3% were computed by subtracting the costs at 7% from the monetized benefits at 3%.

a EPA believes that providing comparisons of soci al costs and social benefits at 3 and 7 percent is appropriate. Estimating multiple years of costs and benefits is not possible for this RIA due to data and resource limitations. As a result, we provide a snapshot of costs and benefits in 2025, using the best available information to approximate social costs and social benefits recognizing uncertainties and limitations in those estimates.



### Table 8

- 2. Total Costs, Total Monetized Benefits, and Net Benefits of Control Strategies

Applied in California , Post

- 2 025 for California (billions of 2011$) a

Total Costs Monetized Benefits Net Benefits a

7% Discount Rate 3%

Discount Rate 7%

Discount Rate 3%

Discount Rate 7%

Discount Rate Proposed Alternative Standard Levels 70 $0.80 $1.1 to $2 $1.1 to $2 $0.3 to $1.2 $0.3 to $1.2 65 $1.6 $2.3 to $4.2 $2.2 to $4.1 $0.7 to $2.6 $0.6 to $2.5 Alternative Standard Level 60 $2.2 $3.4 to $6.2 $3.2 to $5.9 $1.2 to $4 $1 to $3.7

a We do not have a comprehensive data set to be able to calculate engineering costs at a 3% discount rate. See Chapter 7, Section 7.1.2 for additional details on the data limitations. As a result, the net benefit calculations at 3% were computed by subtract ing the costs at 7% from the monetized benefits at 3%.

a EPA believes that providing comparisons of social costs and social benefits at 3 and 7 percent is appropriate. Estimating multiple years of costs and benefits is not possible for this RIA due to data and resource limitations. As a result, we provide a snapshot of costs and benefits in 2025, using the best available information to approximate social costs and social benefits recognizing uncertainties and limitations in those estimates.



### EPA believes t hat providing comparisons of social costs and social benefits at 3 and 7 percent is appropriate. Ideally, streams of social costs and social benefits over time would be estimated and the net present values of each would be compared to determine net benefi ts of the Formatted: Superscript
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illustrative attainment strategies. The three different uses of discounting in the RIA

– (i) construction of annualized engineering costs, (ii) adjusting the value of mortality risk for lags in mortality risk decreases, and (iii) adjusting the c ost of illness for non

- fatal heart attacks to adjust for lags in follow up costs

-- are all appropriate. Our estimates of net benefits are the approximations of the net value (in 2025) of benefits attributable to emissions reductions needed to attain just for the year 2025.

Table 8

- 3. Summary of Total Control Costs (Known and Extrapolated) by Alternative

Level for 2025

- U.S., except California ( m b illions of 2011$, 7% Discount Rate) a

Alternative Level Geographic Area Total Control Costs (Known and Extrapolated) 70 ppb East 3 .9 ,90 0 West

- Total $ 3 .9 ,900
65 ppb East 15 ,000 West 0. 4 00 Total $15

. ,000 60 ppb East 33 ,000 West 5

. , 8 00 Total $39 ,000

a All values are rounded to two significant figures. Extrapolated costs are based on the f average ixed

- cost methodology.



### Table 8

- 4. Summary of Total Control Costs (Known and Extrapolated) by Alternative

Level for post

- 2025

- California ( b m illions of 2011$, 7% Discount Rate) a

Alternative Level Geographic Area Total Control Costs (Known and Extrapolated) 70 ppb California $0. 8 00 65 ppb California $ 1

. , 6 00 60 ppb California $ 2

. , 2 00

a All values are rounded to two significant figures. Extrapolated costs are based on the average fixed

- cost methodology.

### 8

- 6

Table 8

- 5

. Regional Breakdown of Monetized O zone - Specific Benefits Results for the 2025

S cenario (nationwide benefits of attaining each alternative standard everywhere

in the U.S. except California)

– Full Attainment a
Region Proposed and Alterative Standards 70 ppb 65 ppb 60 ppb East b 99% 96% 92% California 0% 0% 0% Rest of West 1% 4% 7%

a Because we use benefit

- per

- ton estimates to calculate the PM 2.5 co

- benefits, a regional breakdown for the co

benefits is not available. Therefore, this table only reflects the ozone benefits. b Includes Texas and those states to the north and east. Several recent rules such as Tier 3 will have substantially reduced ozone concentrations by 2025 in the East, thus few additional controls would be needed to reach 70 ppb

. 

### Table 8

- 6

. Regional Breakdown of Monetized O zone - Specific Benefits Results for the post

2025 S cenario (nationwide benefits of attaining each alternative standard just in California)

– Full Attainment a
Region Proposed and Alterative Standards

70 ppb 65 ppb 60 ppb East 0% 0% 0% California 93% 94% 94% Rest of West 6% 6% 6%

a Because we use benefit

- per

- ton estimates to calculate the PM 2.5 co

- benefits, a regional breakdown for the co

benefits is not available. Therefore, this table only reflects the ozone benefits.



### In this RIA, we quantify an array of adverse health impacts attributable to ozone and
PM 2.5 

### . The Integrated Science Assessment for Ozone and Related Photochemical Oxidants (“Ozone ISA”) (U.S. EPA, 2013a) identifies the human health effects associated with ozone exposure, which include premature death and a variety of illnesses associated with acute (days

long) and chronic (months to years

- long) exposures. Similarly, the Integrated Science Assessment for Particulate Matter (“PM ISA”) (U.S. EPA, 2009) identifies the human health effects associated with ambient particles, which include premature death and a variety of illnesses associated with acute and chronic exposures. Air pollution can affect human health in a variety of ways, and in Table 8

- 3 7 we summarize the “categories” of effects and describe those that we could quantify in our “core” benefits estimates and those we were unable to quantify because we lacked the data, time or techniques. Formatted: Font: (Default) Times New Roman Formatted: Font: (Default) Times New Roman

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- 7

T able 8

- 7 3

. Human Health Effects of Pollut ants Potentially Affected by St rategies to

Attain the Primary O zone S tandards

Benefits Category Specific Effect Effect Has Been Quantified Effect Has

Been Monetized More

Information Improved Human Health Reduced incidence of premature mortality from exposure to ozone Premature mortality based on short

- term

exposure (all ages)   Section 5.6
Premature respiratory mortality based on long

- term exposure (age 30

– 99)  a Section 5.6

Reduced incidence of morbidity from exposure to ozone Hospital admissions

— respiratory causes

(age > 65)   Section 5.6
Emergency department visits for asthma (all ages)   Section 5.6
Asthma exacerbation (age 6

- 18)   Minor restricted

- activity days (age 18

– 65)   Section 5.6 School absence days (age 5

– 17)   Section 5.6 Decreased outdoor worker productivity (age 18

– 65) a a Section 5.6
Other respiratory effects (e.g., mediation use, pulmonary inflammation, decrements in lung functioning) — — ozone ISA c

Cardiovascular (e.g., hospital admissions, emergency department visits) — — ozone ISA c
Reproductive and developmental effects (e.g., reduced birthweight, restricted fetal growth) — — ozone ISA c

Reduced incidence of premature mortality from exposure to PM 2.5 Adult premature mortality based on

cohort study estimates and expert elicitation estimates (age >25 or age >30)   Section 5.6 of PM RIA
Infant mortality (age <1)   Section 5.6 of PM RIA Reduced incidence of morbidity from exposure to PM 2.5 Non

- fatal heart attacks (age > 18)   Section 5.6 of PM RIA Hospital admissions

— respiratory (all ages)   Section 5.6 of PM RIA Hospital admissions

— cardiovascular (age >20)   Section 5.6 of PM RIA Emergency department visits for asthma (all ages)   Section 5.6 of PM RIA Acute bronchitis (age 8

– 12)   Section 5.6 of PM RIA Lower respiratory symptoms (age 7

– 14)   Section 5.6 of PM RIA Upper respiratory symptoms (asthmatics age 9

– 11)   Section 5.6 of PM RIA Asthma exacerbation (asthmatics age 6

– 18)   Section 5.6 of PM RIA Lost work days (age 18

– 65)   Section 5.6 of PM RIA Minor restricted

- activity days (age 18

– 65)   Section 5.6 of PM RIA Chronic Bronchitis (age >26)

— — Section 5.6 of PM RIA

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- 8

Benefits Category Specific Effect Effect Has Been Quantified Effect Has

Been Monetized More

Information Emergency department visits for cardiovascular effects (all ages) — — Section 5.6 of PM RIA Strokes and cerebrovascular disease (age 50

– 79) — — Section 5.6 of PM RIA Other cardiovascular effects (e.g., other ages) — — PM ISA b
Other respiratory effects (e.g., pulmonary function, non

- asthma ER visits, non

bronchitis chronic diseases, other ages and populations) — — PM ISA b

Reproductive and developmental effects (e.g., low birth weight, pre

- term births, etc.) — — PM ISA b,c

Cancer, mutagenicity, and genotoxicity effects — — PM ISA b,c

Reduced incidence of morbidity from exposure to NO 2 Asthma hospital admissions (all ages)

— — NO 2 ISA d

Chronic lung disease hospital admissions (age > 65) — — NO 2 ISA d
Respiratory emergency department visits (all ages) — — NO 2 ISA d
Asthma exacerbation (asthmatics age 4

– 18) — — NO 2 ISA d
Acute respiratory symptoms (age 7

– 14)

— — NO 2 ISA d Premature mortality

— — NO 2 ISA b,c Other respiratory effects (e.g., airway hyperresponsiveness and inflammation, lung function, other ages and populations) — — NO 2 ISA b,c

a We are in the process of considering an update to the worker productivity analysis for ozone based on more recent literature. b We assess these benefits qualitatively because we do not have sufficient confidence in available data or methods.

c We assess t hese benefits qualitatively because current evidence is only suggestive of causality or there are other significant concerns over the strength of the association. d We assess these benefits qualitatively due to time and resource limitations for this analys is.



### 8.2 Discussion of Results
The costs and benefits presented in this RIA incorporate an array of methodological and technical changes that the EPA has adopted since the previous review of the ozone standards in 2008 (U.S. EPA, 2008) and proposed recons ideration in 2010 (U.S. EPA 2010).

S everal factors contributed to lower cost estimates , including shifting the baseline year
from 2020 to 2025 allowing for more time to attain and for F ederal measures to work. T he
baseline starting point has changed fro m 84 ppb to 75 ppb , substantially reduc ing the amount of
emissions reductions need ed and the associated costs of attainment. Also, we have identified
additional known controls, which are less expensive per ton than unknown controls. Lastly,

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- 9

there are fewe r counties exceeding the alternative standards analyzed
, therefore fewer emissions reductions are needed for attainment, resulting in lower cost estimates.

While the costs presented in this analysis decreased compared to the prior analyses, the
benefits es timates remained about the same despite the baseline differences

. The main factors that affected the benefits estimates included the updated analysis year of 2025, which affects population projections, baseline mortality rates, and income growth adjustmen t. The Value of a
Statistical Life was revised, and we removed thresholds and the assumption of no causality for

ozone mortality ( which as assumed in 2008). The differences resulted in a tighter benefits range
, but the total benefits are about the same as the previous ozone RIA analyses

.

8.2.1 Relative Contribution of PM B enefits to T otal B enefit

s Because of the relatively strong relationship between PM 2.5 

### concentrations and premature mortality, PM co

- benefits resulting from reductions in NOx emissions can make up a large fraction of total monetized benefits, depending on the specific PM mortality impact function used, and on the relative magnitude of ozone benefits, which is dependent on the specific ozone mortality function assumed. PM co

- benefits based on daily average concentrations are calculated over the entire year, while ozone related benefits are calculated only during the summer ozone season. Because the control strategies evaluated in this RIA are assumed to operate year round rather than only d uring the ozone season, this means that PM benefits will accumulate during both the ozone season and the rest of the year.

For primary benefits estimates in 2025, PM 2.5 

### co

- benefits account for between 70 and 75 percent of co

- benefits, depending on the sta ndard analyzed and on the choice of ozone and PM mortality functions used. 2 

### The estimate with the lowest fraction from PM co

- benefits occurs when we model benefits for the lowest alternative standard level analyzed (60ppb) and add the
lower bound core est imates for both ozone

- related and PM 2.5 

### (co

- benefit) related mortality. The estimate with the highest fraction from PM co

- benefits results from modeling the highest

2 For the supplemen tal separate results for post

- 2025, PM 2.5 co

- benefits account for between 30 and 45 percent of total benefits, again depending on the standard level analyzed and the choice of ozone and PM mortality functions.

### 8

- 10

alternative standard level analyzed (70ppb) based on combining the high

- bound core ozone an d
PM 2.5 

### (co

- benefit) related mortality estimates.

8.2.2 Developing Future Control Strategies with Limited Data
Because of relatively higher ozone levels in several large urban areas (Southern California, Houston, and the Northeastern urban corridor, inc luding New York and Philadelphia) and because of limitations associated with the data on currently known emissions control technologies, the EPA recognized that known and reasonably anticipated emissions controls would likely not be sufficient to bring som e areas into attainment with either the existing or alternative, more stringent ozone standard levels. Therefore, we designed this analysis in two stages: the first stage focused on analyzing the air quality improvements that could be achieved through ap plication of documented, well

- characterized emissions controls, and the costs and benefits associated with those controls. The second stage took the emissions reductions beyond known controls and used an extrapolation method to estimate the costs and bene fits of these additional emissions reductions needed to bring all areas into full attainment with the alternative standard levels analyzed.

The structure of the RIA reflects this two

- stage analytical approach. Separate chapters are provided for the emis sions, air quality, and cost impacts of modeled controls. We used the information currently available to develop reasonable approximations of the costs and benefits of the extrapolated portion of the emissions reductions necessary to reach attainment. Ho wever, because of the uncertainty associated with the extrapolation of costs, we judged it appropriate to provide separate estimates of the costs and benefits for partial attainment (based on known controls) and full attainment (based on known controls and extrapolation), as well as an overall estimate for reaching full attainment. There is a single chapter on benefits, because the methodology for estimating benefits does not change between stages. However, in that chapter, we again provide separate estim ates of the benefits associated with the partial attainment and full attainment portions of the analysis.

In both stages of the analysis, it should be recognized that all estimates of future costs and
benefits are not intended to be forecasts of the actual costs and benefits of implementing potentially revised standards. Ultimately, states and local areas will be responsible for

### 8

- 11

developing and implementing emissions control programs to reach attainment with the ozone NAAQS, with the timing of attainment be ing determined by future decisions by states and the EPA. Our estimates are intended to provide information on the general magnitude of the costs and benefits of alternative standard levels rather than on precise predictions of control measures,
costs, or benefits. With these caveats, we expect that this analysis can provide a reasonable picture of the types of emissions controls that are currently available, the direct costs of those controls, the levels of emissions reductions that may be achieved with these controls, the air quality impact that can be expected to result from reducing emissions, and the public health benefits of reductions in ambient ozone levels. This analysis identifies those areas of the U.S. where our existing knowledge of control s trategies is not sufficient to allow us to model attainment, and where additional data or research may be needed to develop strategies for
attainment.

In many ways, RIAs for proposed actions are learning processes that can yield valuable
information about the technical and policy issues that are associated with a particular regulatory action. This is especially true for RIAs for proposed NAAQS, where we are required to stretch our understanding of both science and technology to develop scenarios that illus trate how certain we are about how economically feasible the attainment of these standards might be regionally. The proposed ozone NAAQS RIA provided great challenges when compared to previous RIAs primarily because as we tighten standards across multiple pollutants with overlapping precursors (e.g., the recent tightening of the PM 2.5 

### standards), we move further down the list of cost

effective known and available controls in our database. With the more stringent NAAQS, more areas will need to find new way s of reducing emissions. While we can speculate on what some of these technologies might look like based on new developments in energy efficiency and clean technology, the specific technological path in different nonattainment areas is not clear.

Because of the uncertainty regarding the development of future emissions reduction strategies, a significant portion of the analysis is based on extrapolating from available data on known control technologies to generate the emissions reductions necessary to reach full attainment of an alternative ozone NAAQS and the resulting costs and benefits. Studies indicate that it is not uncommon for pre

- regulatory cost estimates to be higher than later estimates, in part because of difficulty in predicting technological ch anges. Over longer time horizons, such as the

### 8

- 12

time allowed for areas with high levels of ozone pollution to meet the ozone NAAQS, the opportunity for technical change is greater (See Chapter 7, Section 7.2 for additional discussion). Also, because of the nature of the extrapolation method for benefits (which focuses on reductions in ozone only at monitors that exceed the NAAQS), we generally understate the total benefits that would result from implementing additional emissions controls to fully attain the ozone NAAQS (i.e., assuming that the application of control strategies would result in ozone reductions both at nonattainment and attainment monitors). On the other hand, the possibility also exists that benefits are overestimated, because it is possible that new technical changes might not meet the specifications, development time lines, or cost estimates provided in this analysis.

8.3 Framing Uncertainty
This section includes a qualitative presentation of key factors that (1) could impact how air quali ty changes over time; (2) could impact the timing for meeting an alternative standard; (3) are difficult to predict and quantify; and (4) introduce additional uncertainty into this analysis. 3 

### These factors, summarized in Table 8. 4 8 below, include energy d evelopment, distribution, and use trends; land use development patterns; economic factors; energy and research and development policies; climate signal changes; and the influence of technological change. Additional factors that could have an impact on how air quality changes over time include environmental indicators other than climate change and societal preferences and attitudes toward the environment and conservation; the potential direction and magnitude of these additional
factors is less clear.

These key factors can impact the estimated baseline air quality used in the analysis, and as a result the types of control measures and associated costs needed to meet an alternative standard. In addition, some combinations of the key factors could have signif icant effects beyond the effects of any individual factor. We cannot estimate the probability that any one factor or combination of factors will occur, but we do believe that they introduce additional, broader uncertainties about future trends that provid e important context for the costs and benefits presented in this analysis.

3 OMB Circular A

- 4 indicates that qualitative d iscussions should be included in analyses whenever there is insufficient data to quantify uncertainty.

### 8

- 13

Table 8

- 8 4

. Relevant Factors and Their Potential Implications for Attainment

Individual Factors Potential Implications for NAAQS Attainment Information on Trends

Energy

-- Extraction, conversion, distribution and storage, efficiency, international energy trends Geopolitics, reserves, international and domestic demand, and technological breakthroughs in energy technologies can drive fuel prices up or down.

If more renew able sources of energy are employed and use of natural gas increases, then emissions may be lower, potentially lowering attainment costs. Recently there has been an increase in domestic production of oil and a relative decrease in imported oil, in additi on to policies and investments geared toward the development of alternative fuels and energy efficiency. 4 This is likely a result of all of these activities, which have led to a reduction of U.S. dependence on imports of foreign oil.

Several trends have emerged within the last ten years and are expected to continue, including increased natural gas production and consumption, renewable energy installations, and energy efficiency technology installations. 5

Land Use Development Patterns

– Design of urban areas, vehicle

- miles travelled A move toward denser urban settlements, slowing of growth in vehicle miles travelled (VMT) and increased use of public transit could decrease emissions, potentially lowering attainment costs. 6 Recent trends in VMT illustrate some of the uncertainty around future emissions from mobile sources 7 . In 2006, projections of VMT showed a sustained increase, 8 yet VMT growth slowed in recent years and actually declined in 2008 and 2009. 9 Between 2000 and 2010 averag e growth in VMT was 0.8%, as compared to 2.9% from the previous decade.

The Economy An increase in economic growth, investment in technologies that have high energy use, and a return of U.S. manufacturing could lead to higher emissions making attainment potentially more costly. A slowing of the economy, investments in energy efficient technologies, and a continuation of a service

- based economy could lead to lower Affluence leads to increased consumption and energy use. However, this increase may not be proportional. Energy and materials is not directly proportional to economic growth, decreasing or stabilizing over time in spite of continued economic growth. 11

4 http://energy.gov/articles/us

- domestic

- oil

- production

- exceeds

- imports

- first

- time

- 18

- years 5 http://www.eia.gov/forecasts/aeo/er/pdf/0383er%282014%29.pdf ; http://energy.gov/sites/prod/files/2014/08/f18/2013%20Wind%20Technologies%20Market%20Report%20Present ation.pdf ; http://www.eia.gov/electricity/monthly/update/archive/april2014/ ; http://www.ercot .com/content/news/presentations/2014/GCPA%20%2002%20Oct%202013%20FINAL.pdf ; http://energy.gov/eere/sunshot/photovoltaics

. 6 For example, s ee Cervero ( 199 8), the Center for Clean Air Policy’s Transportation Emissions Guidebook ( http://www.trb.org/Main/Blur bs/156164.aspx ). For ongoing research see http://apps.trb.org/cmsfeed/TRBNetProjectDisplay.asp?ProjectID=3092

. 7 For example, see the Transportation Research Board’s National Cooperative Highway Research Program (NCHRP) 2014.
8 https:// 

### www .fhwa.dot.gov/po licy/2006cpr/chap9.htm#body
9 https://www.fhwa.dot.gov/policyinformation/travel_monitoring/13jantvt/page2.cfm
11 UNEP 2011, http:/ /www.unep.org/resourcepanel/decoupling/files/pdf/decoupling_report_english.pdf

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Individual Factors Potential Implications for NAAQS Attainment Information on Trends
emissions making attainment potentially less costly. 10

Policies a

– Energy efficiency, energy security, direction of research and development, renewable energy A move toward energy security and independence would mean an increased use of domestic energy sources. If this results in a fuel mix where emissions decrease, then attainment could likely be less costly. If not, attainment could likely be more costly. A move toward investments in fuel efficiency and low emissions fuels could decrease emissions and likely lower attainment costs. State and local policies related to energy efficiency, cleaner energy, energy security 12 , as well as the direction of research and development of technology can have a direct or indirect effect on emissions. Policies that result in energy efficiency, renewable energy, the use of cleaner fuels and conservation measures would likely result in decreased emissions and likely decrease attainment costs. 13 Growth in energy demand has stayed well below growth in gross domestic product, likely as a result of technological advances, federal, state and local energy efficie ncy standards and policies, and other macroeconomic factors. 14 U.S. productivity per energy expended relative to other countries suggests that additional efficiency gains are possible. 15

Intensity, Location and Outcome of the Climate Change Signal Strong climate signals that bring high temperatures could increase ozone, likely making attainment more costly. Uncertainty exists regarding how the climate signal will interact with air quality, as well as with other factors. However, research demonstr ates that in areas where there are both high levels of emissions and high temperatures, attaining an ozone standard will likely be much harder. The magnitudes of these impacts will depend on atmospheric chemical and physical processes, as well as anthropo genic activities that increase or decrease NOx and/or VOC emissions. 16

Technological Change

-- Including emissions reductions technologies and other technological developments Innovation in production and emissions control technologies, learning that lo wer costs, and breakthroughs in battery/energy storage technologies for use with renewable energy could improve air quality, reducing emissions and likely lowering attainment costs. Examples of emerging technologies include carbon capture and sequestrati on (CCS), battery technologies, emerging advanced biofuels, which could all have breakthroughs that could impact fuel use. Similarly, shifts in industrial production processes, such as a move from using primary metals to more recycling could impact energy use 17

.

a Policies refer to any policies or regulations that are not environmental regulations set by U.S. EPA, states, tribes, or local authorities.

10 For example, Bo (2011), and http://www.epa.gov/region1/airquality/nox.html for manufactures contributions to NO X emissions.
12 For example, http://www2.epa.gov/laws

- regulations/summary

- energy

- independence

- and

- security

- act

. 13 For example, see http://www.dsireusa.org/solar/solarpolicyguide/

. 14 http://bipartisanpolicy.org/sites/default/files/BPC%20SEPI%20Energy%20Report%202013_0.pdf , p. 5

. 15 http://bipartisanpolicy.org/sites/default/files/BPC%20SEPI%20Energy%20Report%202013_0.pdf , p. 69

. 16 See Jacobs (2009).
17 http://www.eia.gov/todayinenergy/de tail.cfm?id=16211

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8. 4 Key Observations from the Analysis
The following are key observations about the RIA results.

 Tightening the ozone standards can incur significant, but uncertain, costs. Our estimates of costs for a set of modeled NOx and VOC controls comprise only a small part of the estimated costs of full attainment. These estimated costs for the modeled set of controls are still uncertain, but they are based on the best available information on control technologies, and have their basis in real, tested technologies. Estimating costs of full attainment was based on a generalized relationship between emissions an d ozone levels. This introduces significant uncertainty into the calculation of the emissions reductions that might be needed to reach full attainment.

 Tightening the ozone standards can also result in significant benefits. Estimates of benefits are driven largely by projected reductions in ozone

- related short

- term mortality and co

- benefits associated with reductions in PM 2.5 

### - related long

- term mortality. Although using a benefit

- per

- ton approach in modeling PM 2.5 

### - related cobenefits ( rather than direct modeling ) has increased uncertainty , this approach is peer

- reviewed and robust . We also modeled reductions in ozone

- related long

- term respiratory mortality, however due to concerns over potential double counting of benefits and limitations in our ability t o project the lag

- structure of reductions in this mortality endpoint, we did not include these estimates as part of the core benefit estimate

. In addition to these mortality endpoints, we did quantify a wide

- range of morbidity endpoints for both ozone and PM 2.5, 

### although these contribute only minimally to total monetized benefits.



.

 Air qual ity modeling approach can introduce uncertainty. Based on air quality modeling sensitivity analyses, there is significant spatial variability in the relationship betwee n local and regional NOx emission reductions and ozone levels across urban areas. We performed a national scale air quality modeling analysis to estimate ozone concentrations for the future base case year of 2025. To accomplish this, we modeled multiple emissions cases for 2025, including the 2025 base case and twelve (12) 2025 emissions sensitivity simulations. The 12 emissions sensitivity simulations were used to develop ozone sensitivity factors (ppb/ton) from the modeled response of ozone to changes in NOx and VOC emissions from various sources and locations. These ozone sensitivity factors were then used to determine the amount of emissions reductions needed to reach the 2025 baseline and evaluate potential alternative standard levels of 70, 65, and 60 ppb incremental to the baseline. We used the estimated emissions reductions needed to reach each of these standard levels to analyze the costs and benefits of alternative standard levels.

 Available technologies that might achieve NOx and VOC reduct ions to attain alternative ozone NAAQS are not sufficient. In some areas of the U.S., the information we have about existing controls does not result in sufficient emissions reductions needed to meet the existing standard. After applying existing rules a nd the illustrative known

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controls across the nation (excluding California), in order to reach 70 ppb we were able to identify controls that reduce overall NOx emissions by 490,000 tons and VOC emissions by 55,000 tons. In order to reach 65 ppb we were abl e to identify controls that reduce overall NOx emissions by 1,100,000 tons and VOC emissions by 110,000 tons. After these reductions, in order to reach 70 ppb over 150,000 tons of NOx emissions remained, and in order to reach 65 ppb over 750,000 tons of NO x emissions remained.

 California costs and benefits are highly uncertain. California faces large challenges in meeting any alternative standard, but their largest challenges may be in attaining the existing standard. Because our analysis suggested that a ll available controls would be exhausted in attempting to meet the current 75 ppb standard, all of the benefits and costs of lower standards in California are based on the application of unknown controls. Both the benefits and the costs associated with th e assumed NOx and VOC reductions in California are particularly uncertain.

 Some EPA existing mobile source programs will help areas reach attainment. These programs promise to continue to help areas reduce ozone concentrations beyond 2025. In California , continued implementation of mobile source rules, including the onroad and nonroad diesel rules and the locomotive and marine engines rule, are projected to reduce NOx emissions by an additional 14,000 tons and VOC emissions by an additional 6,300 tons between 2025 and 2030

. These additional reductions will likely reduce the overall emissions reductions needed for attainment relative to what California might have needed to reduce from other sectors if attainment were to be required in 2025.

 The economi c impacts (i.e. , social costs) of the cost of these modeled controls were not included in this analysis. Incorporating the economic impact of the extrapolated portion of the costs was too uncertain to be included as part of these estimates, and it was dete rmined best to keep the modeled and extrapolated costs on the same basis.

 Costs and benefits will depend on implementation timeframes. States will ultimately select the specific timelines for implementation as part of their State Implementation Plans. T o the extent that states seek classification as extreme nonattainment areas, the timeline for implementation may be extended beyond 2025, meaning that the amount of emissions reductions that will be required in 2025 will be less, and costs and benefits in 2025 will be lower.

8.5 References

Cervero, R. (1998) The Transit Metropolis, A Global Inquiry. Island Press, Washington, D.C.
Jacob, D. J., & Winner, D. (2009). Effect of climate change on air quality. Atmospheric Environment, 43 , 51

- 63.
NCHRP (2014). Th e Effects of Socio

- Demographics on Future Travel Demand, Transportation Research Board of the National Academies, Washington, D.C. Strategic Issues Facing Transportation, Report 750, Volume 6.
U.S. Environmental Protection Agency (U.S. EPA). 2008. Final O zone NAAQS Regulatory Impact Analysis. Office of Air Quality Planning and Standards, Research Triangle Park, NC. Available at http://www.epa.gov/ttn/ecas/regdata/RIAs/452_R_08_003.pdf

.

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U.S. Environmental Pro tection Agency (U.S. EPA). 2010 . Regulatory Impact Analysis (RIA) for the Proposed Reconsideration of the ozone National Ambient Air Quality Standards (NAAQS). Office of Air Quality Planning and Standards, Research Triangle Park, NC. January. Available at <http://www.epa.gov/ttn/ecas/regdata/RIAs/s1

- supplemental_analysis_full.pdf>.

U.S. EPA. 2009. Integrated Science Assessment for Particulate Matter: Final. Research Triangle Park, NC: U.S. Environmental Protection Agency. (EPA document number EPA/600/R

- 08/139F).
U.S. EPA. 2013a. Integrated Science A ssessment for Ozone and Related Photochemical Oxidants: Final. Research Triangle Park, NC: U.S. Environmental Protection Agency. (EPA document number EPA/600/R

- 10/076F).