# Reconsideration of the 2008 **Ozone NAAQS July 28, 2011** 

1

# Goals To present: 1) NERA review of the benefits estimation contained in the RIA; 2) alternative cost & attainment data

1220 L Street, NW • W ashington, DC 20005 -4070 • www.api.org 2 

## 2) alternative cost & attainment data

– NERA

– Manufacturers Alliance 3) Implications of the proposed standards for non - attainment

# RIA indicates that Benefits May**N ot** 

**Exceed The Costs**  **EP A'**  **s Estimated**  **An nual Benefits**  **and Costs for Ozone Primary NA**  **AQS A lternatives** * (in billions of 2006$ per year in 2020)



### Alternative Standards **0.075 ppm**  **0.070 ppm** 

**Proposed -**  **Hi 0.065**  **ppm 0.060**  **ppm Proposed**  **- Lo**  **0.055 ppm**  Benefits $6.4 to $15 $1 1 to $31 $19 to $53 $30 to $87 $45 to $140 Costs $7.6 to $8.8 $19 to $25 $32 to $44 $52 to $90 $78 to $130 Net Benefits $ -2.4 to $7.4 $ - 14 to $12 $ -25 to $20 $ - 60 to $35 $ - 85 to $62

3 

### Wide ranges of uncertainty in EPA estimates of benefits, costs and net benefits • **We believe that**  **the Benefits**  **are overestimated** • **We believe that**  **the Costs are underestimated**  Net Benefits $ -2.4 to $7.4 $ - 14 to $12 $ -25 to $20 $ - 60 to $35 $ - 85 to $62 * At 7%/yr discount rate. Benefits range reflects 6 ozone mortality studies and 2 for PM 2.5 . Cost range reflects 2 approaches.

# EPA Costs **Underestimated**

0.075 ppm 0.070 ppm

Proposed - Hi 0.065 ppm 0.060 ppm Proposed - Lo 0.055 ppm 1. Modeled costs for known controls $2.5 $3.3 $4.5 $4.5 $5.1 2. Extrapolated costs for unknown controls $5.1 to $6.3 $16 to $22 $27 to $39 $47 to $85 $73 to $122 Total National Costs (excluding So CA)* $7.6 to $8.8 $19 to $25 $32 to $44 $52 to $90 $78 to $130 * Southern California will not attain any of these alternative NAAQS by 2020 and is omitted from EP A's analysis (In billions of 2006$ per year in 2020) Alternative Standards

4 

### Use of “all known controls” will reduce precursor emissions by 820,000 TPY

– 1.4 million additional TPY needed for 0.070; 4.2 million TPY needed for 0.060 EPA assumes controls will be developed, cost- effective and deployed by 2020

- “Fixed cost” method assumes unlimited new controls at $15,000 per ton

- “Hybrid” method assumes marginal costs increase slowly above $15,000/ton NERA/Sierra identified additional controls ranging from $4,000 to $300,000+ per ton

- Total costs 5 to 10 times EPA estimates via “fixed cost” and “hybrid” methods Cost of NOx offsets has often been $15,000 - $150,000/ton in Houston/LA

- Suggests EPA has significantly underestimated costs for additional controls in other areas

# Low**er NAAQS are Broadly** **U nattainable** 

Thousand Tons of NOx **Illinois** Th ousand Tons of N Ox **Ohio** 

### • EP A made optimistic assumptions in estimating 2020 baseline emissions • EP A then applied “all known controls” across wide geographic areas • EP A’ s results are still broad nonattainment in 2020 for any tighter NAAQS. Of 661 counties with monitors: 99 would not attain 0.070 ppm and 451 would not attain 0.060. • Many major metropolitan areas will require an “Extreme” classification to avoid economic and business sanctions for failure to submit an approvable SIP to EP A • Attainment will require reductions far beyond “all known controls”
739 379 111 229 39 0 100 200 300 400 500 600 700 800 2005 H istorical 2020 B aseline 2020 for 60 ppb

Thousand Tons of NOx

Emissio ns EPA "U nk nown" Cont rols EPA "Kn own" Cont rols

**Illinois** 805 384 149 184 51 0 100 200 300 400 500 600 700 800 900 2005 H istorical 2020 B aseline 2020 for 60 ppb

Th ousand Tons of N Ox

Emissio ns EPA "U nk nown" Cont rol s EPA "Kn own" Cont rols 677 343 119 164 61 0 100 200 300 400 500 600 700 800 2005 H istorical 2020 B aseline 2020 for 60 ppb

Thousand Tons of N Ox

Emissio ns EPA "U nk nown" C ont rols EPA "Kn own" Cont rols **Ohio**

**Pennsy lvania**  291 146 96 29 22 0 50 100 150 200 250 300 350 2005 H istorical 2020 B aseline 2020 for 60 ppb

Th ousand Tons of N Ox

Emissio ns EPA "U nk nown" Cont rol s EPA "Kn own" Cont rols

**We st V** **irginia**

Source: NERAanalysis of EP A data in Docket No. EP A -HQ- OAR- 2007- 0225

# Significant Negative **Economic**

**Impacts** NERA/Sierra performed economic analyses for 11 States for 0.060 ozone NAAQS

- Used EPA’s 2020 baseline, reductions needed to attain, costs for known controls Three key differences from RIA methodology: 1) Additional “known controls” were identified and applied in simulating attainment 2) More realistic approach used for estimating the costs of as -yet- unknown controls 3) Attainment costs used as input to REMI model to estimate economic effects

6 

### Aggregate Conclusions Across 11 States -- Impact of NAAQS at 0.060 ppm in 2020 **Absolute Percentage**  Employment/jobs -1,452,000 -4.1% Gross regional product (in billion $/yr) -132.4 -3.6% Disposable income (in billion $/yr) -74.9 -2.2% State tax receipts (in billion $/yr) -10.7 -1.9% **Impact of 0.060 NAAQS relative to 0.084 Measure** 

# Significant Negative **Economic**

**Impacts** Manufacturers Alliance extrapolated the 11 state results nationally

– 7.3 million jobs lost by 2020

7 

# – $1 trillion impact annually from 2020 - 2030

# Areas Affected **by a** **Lower NAAQS**

**EPA CASTNET DATA**  **1**

**Yo semite**  **Ye llow** **stone Rocky**  **Mt. Ac**  **adia Blackwater**  **Kane National Forest**  **Lassen Vo**  **lcano**

8 1VVa lues are three -Ye ar Average of Fourth Highest Daily Maximum 8 - Hour Average Ozone Concentrations (ppb) in various National Parks for 2006–2008 **Yo semite**  **Great Smokey**

**Mammoth Cave Big Bend**  **Petrified Forest Grand Cany** **on Sequoia**  **Joshua T ree**  **Konza Prairie**

## CBSA **1** 

## and Rural Counties that **Violate an** 

**Ozone Standard of 70 ppb based on 2008**  **- 2010**  **Data 2** 

9 1 Core Based Statistical Area (CBSA) refers collectively to both m etropolitan statistical areas (MSA) and micropolitan areas 2 1053 counties violate a 70 ppb standard (three tim es the num ber of counties that violate the 2008 (75 ppb) standard) 2

## CBSA **1** 

## and Rural Counties that **Vi olate**  **an**

**Ozone Standard of 65 ppb based on 2008**  **- 2010**  **Data 2** 

10 10 1 Core Based Statistical Area (CBSA) refers collectively to both m etropolitan statistical areas (MSA) and micropolitan areas 2 2217 counties violate a 65 ppb standard (six times the number of counties that violate the 2008 (75 ppb) standard) 2

## CBSA **1** 

## and Rural Counties that **Vi olate**  **an**

**Ozone Standard of 60 ppb based on 2008**  **- 2010**  **Data 2** 

11 11 1 Core Based Statistical Area (CBSA) refers collectively to both m etropolitan statistical areas (MSA) and micropolitan areas 2 2795 counties violate a 65 ppb standard (eight tim es the num ber of counties that violate the 2008 (75 ppb) standard) 2