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 • Washington, 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 Not 

Exceed The Costs

EPA's Estimated Annual Benefits and Costs for Ozone Primary NAAQS Alternatives*

(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 $11 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 PM2.5. 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 EPA'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
Lower NAAQS are Broadly Unattainable

Thousand Tons of NOx Illinois Thousand Tons of NOx Ohio

• EPA made optimistic assumptions in estimating 2020 baseline emissions

• EPA then applied “all known controls” across wide geographic areas

• EPA’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 EPA

• Attainment will require reductions far beyond “all known controls”

739

379

111 229 39

0 100 200 300 400 500 600 700 800

2005 Historical

2020 Baseline

2020 for 60 ppb

Thousand Tons of NOx

Emissions EPA "Unknown" Controls EPA "Known" Controls

Illinois

805

384

149 184 51

0 100 200 300 400 500 600 700 800 900

2005 Historical

2020 Baseline

2020 for 60 ppb

Thousand Tons of NOx

Emissions EPA "Unknown" Controls EPA "Known" Controls

677

343

119 164 61

0 100 200 300 400 500 600 700 800

2005 Historical

2020 Baseline

2020 for 60 ppb

Thousand Tons of NOx

Emissions EPA "Unknown" Controls EPA "Known" Controls

Ohio

Pennsylvania

291

146

96 29 22

0 50 100 150 200 250 300 350

2005 Historical

2020 Baseline

2020 for 60 ppb

Thousand Tons of NOx

Emissions EPA "Unknown" Controls EPA "Known" Controls

West Virginia

Source: NERA analysis of EPA data in Docket No. EPA-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 DATA1

Yosemite 

Yellowstone 

Rocky Mt. 

Acadia 

Blackwater 

Kane National

Forest

Lassen

Volcano 

8

1VValues are three-Year Average of Fourth Highest Daily Maximum 8-Hour Average Ozone Concentrations (ppb)

in various National Parks for 2006–2008

Yosemite 

Great Smokey

Big Bend Mammoth Cave 

Petrified Forest

Grand Canyon 

Sequoia 

Joshua Tree 

Konza Prairie
CBSA1 and Rural Counties that Violate an

Ozone Standard of 70 ppb based on 2008-2010 Data2

9

1 Core Based Statistical Area (CBSA) refers collectively to both metropolitan statistical areas (MSA) and micropolitan areas

2 1053 counties violate a 70 ppb standard (three times the number of counties that violate the 2008 (75 ppb) standard)

2
CBSA1 and Rural Counties that Violate an

Ozone Standard of 65 ppb based on 2008-2010 Data2

10

10

1 Core Based Statistical Area (CBSA) refers collectively to both metropolitan 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
CBSA1 and Rural Counties that Violate an

Ozone Standard of 60 ppb based on 2008-2010 Data2

11

11

1 Core Based Statistical Area (CBSA) refers collectively to both metropolitan statistical areas (MSA) and micropolitan areas

2 2795 counties violate a 65 ppb standard (eight times the number of counties that violate the 2008 (75 ppb) standard)

2