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EO12866_NSPSResidentialWoodHeaters_2060 - AP93_NPRM_RIA_20130613 .docx



# Regulatory Impact Analysis (RIA) for Proposed Residential Wood Heaters NSPS Revision Draft Report to OMB* * * E.O. 12866 Review - Draft

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_________________________________ RTI International is a trade name of Research Triangle Institute . 

### June **201 3**  

# Regulatory Impact Analysis (RIA) **for Proposed**  **Residential Wood**

**Heaters NSPS Revision** 

**Draft Report**  **for OMB**

Prepared for **Larry Sorrels** U.S. Environmental Protection Agency Office of Air Quality Planning and Standards (OAQPS) Air Economics Group (AEG)

(MD - C439 - 02) Research Triangle Park, NC 27711 Prepared by **Jeffrey Petrusa Stephanie Norris**  **Brooks Depro** RTI International 3040 Cornwallis Road Research Triangle Park, NC 27709 Contract No. EP - D - 06 - 003 Wo rk Assignment No. 4 - 84 RTI Project Number 0212979.001.002* * * E.O. 12866 Review - Draft

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_________________________________ RTI International is a trade name of Research Triangle Institute .

Contract No. EP - D - 06 - 003 Wo rk Assignment No. 4 - 84 RTI Project Number 0212979.001.002 

# Regulatory Impact Analysis (RIA) **for Proposed**  **Residential Wood**

**Heaters NSPS Revision** 

**Draft Report**  **for OMB**

**June 2013**  Prepared for **Larry Sorrels** U.S. Environmental Protection Agency Office of Air Quality Planning and Standards (OAQPS) Air Economics Group (AEG)

(MD - C439 - 02) Research Triangle Park, NC 27711 Prepared by **Jeffrey Petrusa Stephanie Norris**  **Brooks Depro** RTI International 3040 Cornwallis Road Research Triangle Park, NC 27709* * * E.O. 12866 Review - Draft

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iii **CONTENTS Section**  **Page** Section 1 Executive Summ ary ................................ ................................ ............................... 1 - 1 1.1 Analy sis Summary ................................ ................................ ............................... 1 - 2 1.2 Organization of this Report ................................ ................................ .................. 1 - 4 Section 2 Introduction ................................ ................................ ................................ ............ 2 - 1 2.1 Background for Proposed Rule ................................ ................................ ............ 2 - 1 2.2 Room Heaters ................................ ................................ ................................ ....... 2 - 1 2.3 Central Heaters: Hydronic Heaters and Forced - Air Furnaces ............................. 2 - 9 2.4 New Residential Masonry Heaters ................................ ................................ ..... 2 - 15 Section 3 Industry

Profile ................................ ................................ ................................ ...... 3 - 1 3.1 Supply

Side ................................ ................................ ................................ .......... 3 - 1 3.1.1 Production Process ................................ ................................ ................... 3 - 1 3.1.2 Product Ty

pes ................................ ................................ .......................... 3 - 2 3.1.3 Co sts of Production ................................ ................................ .................. 3 - 5 3.2 Demand Side ................................ ................................ ................................ ........ 3 - 7 3.2.1 End - Use Consumer Segments ................................ ................................ .. 3 - 9 3.2.2 Regional Variation in Residential Demand ................................ ............. 3 - 9 3.2.3 National Home Heating Trends ................................ ............................. 3 - 12 3.2.4 Substitution Possibilities ................................ ................................ ........ 3 - 14 3.2.5 Price Elasticity

of Demand ................................ ................................ .... 3 - 14 3.3 Industry

Organization ................................ ................................ ........................ 3 - 15 3.3.1 Market Structure ................................ ................................ .................... 3 - 16 3.3.2 Manufacturing Plants ................................ ................................ ............. 3 - 17 3.3.3 Location ................................ ................................ ................................ . 3 - 19 3.3.4 Company Sales and Employment ................................ .......................... 3 - 20* * * E.O. 12866 Review - Draft

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iv 3.4 Residential Wood Heater Market ................................ ................................ ....... 3 - 22 3.4.1 Market Prices ................................ ................................ ......................... 3 - 23 3.4.2 International Competition ................................ ................................ ...... 3 - 24 3.4.3 Future Market Trends ................................ ................................ ............ 3 - 25 Section 4 Baseline Emissions and Emission Reductions ................................ ....................... 4 - 1 4.1 Introduction ................................ ................................ ................................ .......... 4 - 1 4.2 Background to Emissions Estimates ................................ ................................ .... 4 - 1 4.2.1 Emissions Factors ................................ ................................ .................... 4 - 3 4.2. 2 Voluntary

Programs ................................ ................................ ............... 4 - 10 4.2.3 Shipment Data Used to Estimate Baseline Emissions ........................... 4 - 11 4.3 Estimated PM 2.5 Emissions from Shipments of New Appliances ..................... 4 - 12 4.4 Methodology

for Estimating V OC Emissions from New Units ........................ 4 - 16 4.5 Methodology

for Estimating CO Emissions from New Units ........................... 4 - 21 Section 5 Cost Analy sis, Energy Impacts, and Executive Order Anal ys es ........................... 5 - 1 5.1 Background for Compliance Costs ................................ ................................ ...... 5 - 1 5.1.1 Estimated Research and Development (R&D) C osts .............................. 5 - 1 5.1.2 Masonry

Heaters ................................ ................................ ...................... 5 - 4 5.1.3 General Approach and Assumptions for Costs to Manufacturers ........... 5 - 5 5.1.4 General Approach and Assumptions for Costs to Masonry Heater Manufacturers ................................ ................................ .......................... 5 - 8 5.1.5 General Approach and Assumptions for All Appliances ......................... 5 - 9 5.2 Compliance Costs of the Proposed Rule ................................ ............................ 5 - 14 5.3 How Might People and Firms Respond? A Qualitative Partial Equilibrium Analy sis ................................ ................................ ................................ .............. 5 - 18 5.3.1 Changes in Market Prices and Quantities ................................ .............. 5 - 18 5.3.2 Partial Equilibrium Measures of Social Cost: Changes in Consumer and Producer Surplus ................................ ............................ 5 - 20 5.4 Social Cost Estimate ................................ ................................ .......................... 5 - 21 5.5 Energy

Impacts ................................ ................................ ................................ .. 5 - 21 5.6 Unfunded Mandates Reform Act (UMRA) ................................ ....................... 5 - 22* * * E.O. 12866 Review - Draft

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v 5.6.1 Future and Disproportionate Costs ................................ ........................ 5 - 22 5.6.2 Effects on the National Economy ................................ .......................... 5 - 22 5.6.3 Executive Order 13045: Protection of Children from Environmental Health Risks and Safety Risks ................................ ...... 5 - 23 5.6.4 Executive Order 12898: Federal Actions to Address Environmental Justice in Minority

Populations and L ow - In come Populations ............. 5 - 24 5.7 Employ

ment Impacts ................................ ................................ ........................ 5 - 24 5. 7.1 Employ

ment Impacts from Pollution Control Requirements ................ 5 - 25 5.7.2 Employ

ment Impacts within the Regulated Industry ............................. 5 - 26 Section 6 Small Entity

Screening Anal ys is ................................ ................................ ........... 6 - 1 6.1 Small Entity

Data Set ................................ ................................ ........................... 6 - 1 6. 2 Small Entity

Economic Impact Measures ................................ ............................ 6 - 2 6.2.1 Establishment Employ ment and Receipts ................................ ................ 6 - 2 6.2.2 Establishment Compliance Cost ................................ .............................. 6 - 3 6.3 Initial Regulatory

Flexibility

Anal ys is ................................ ............................... 6 - 13 6.3.1 Reasons Why

Action Is Being Considered ................................ ............ 6 - 13 6.3.2 Statement of Objectives and Legal Basis of Proposed Rule .................. 6 - 13 6.3.3 Description and Estimate of the Number of Small Entities ................... 6 - 14 6.3.4 Description and Compliance Costs ................................ ........................ 6 - 14 6.3.5 Panel Reco mmendations for Small Business Flexibilities ..................... 6 - 15 Section 7 Human Health Benefits of Emissions Reductions ................................ ................. 7 - 1 7.1 Sy nopsis ................................ ................................ ................................ ............... 7 - 1 7.2 PM 2.5 - Related Human Health Benefits ................................ ................................ 7 - 1 7.2.1 Health Impact Assessment ................................ ................................ ....... 7 - 2 7.2.2 Economic Valuation ................................ ................................ ................. 7 - 5 7.2.3 Benefit - per - ton Estimates ................................ ................................ ........ 7 - 7 7.2.4 PM 2.5 Benefits Results ................................ ................................ .............. 7 - 8 7.2.5 Characterization of Uncertainty in the Monetized PM 2.5 Benefits ......... 7 - 10 7.3 Unquantified Benefits ................................ ................................ ........................ 7 - 15 7.3.1 HAP Benefits ................................ ................................ ......................... 7 - 16 7.3.2 Carbon Monoxide Co - Benefits ................................ .............................. 7 - 26* * * E.O. 12866 Review - Draft

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vi 7.3.3 Black Carbon (BC) Benefits ................................ ................................ .. 7 - 27 7.3.4 VOCs as a PM 2.5 Precursor ................................ ................................ .... 7 - 29 7.3.5 VOCs as an Ozone Precursor ................................ ................................ . 7 - 29 7.3.6 Visibility

Impairment Co - Benefits ................................ ........................ 7 - 30 7.4 References ................................ ................................ ................................ .......... 7 - 30 Section 8 Comparison of Monetized Benefits and Costs ................................ ....................... 8 - 1 8.1 Summary ................................ ................................ ................................ .............. 8 - 1 Section 9 References ................................ ................................ ................................ .............. 9 - 1* * * E.O. 12866 Review - Draft

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vii **LIST OF FIGURES Number**  **Page** 3 - 1. Census Regions and Divisions of the United States ................................ ................... 3 - 12 3 - 2. Declining Trend in U.S. Housing Units Using Wood Fuel: 1989

–2005 .................... 3 - 13 3 - 3. Annual Plant Capacity Utilization for Heating Equipment Manufacturers (NAICS 333414): 2002

–2006 ................................ ................................ ..................... 3 - 17 5 - 1. Projected Annual Shipments by Product Ty

pe: 2012

–2018 ................................ ....... 5 - 16 5 - 2. Market Demand and Supply Model: With an d Without Regulation .......................... 5 - 19 6 - 1. Population of Firebox Models and Average Models per Establishment by Product Ty

pe ................................ ................................ ................................ ................. 6 - 7 6 - 2. Distribution of National Compliance Costs by Product Ty

pe in 2014 to 2022 ............ 6 - 8 7 - 1. Total Monetized PM 2.5 Benefits of the Proposed Residential Wood Heaters NSPS in the 2014

–2022 Time Frame ................................ ................................ ......... 7 - 11 7 - 2. Breakdown of Total Monetized PM 2.5 Benefits of Proposed Residential Wood Heaters NSPS by

Category ................................ ................................ ......................... 7 - 11 7 - 3. Percentage of Adult Population by Annual Mean PM 2.5 Exposure in the Baseline ................................ ................................ ................................ ....................... 7 - 16 7 - 4. Cumulative Distribution of Adult Population by Annual Mean PM 2.5 Exposure in the Baseline ................................ ................................ ................................ ............. 7 - 17 7 - 5. Estimated Census Tract Carcinogenic Risk from HAP Exposure from Outdoor Sources (2005 NAT A) ................................ ................................ ................................ 7 - 19 7 - 6. Estimated Chronic Census Tract Noncancer (Respiratory) Risk from HAP Exposure from Outdoor Sources (2005 NATA) ................................ ......................... 7 - 20 8 - 1. Net Annual Benefits Range in 2014

–2022 Time F rame for PM 2.5 Reductions for the Proposed Option ................................ ................................ ................................ ...... 8 - 3 8 - 2. Net Annual Benefits Range in 2014

–2022 Time F rame for PM 2.5 Reductions for the Alternative Option ................................ ................................ ................................ ... 8 - 4* * * E.O. 12866 Review - Draft

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viii **LIST OF TABLES Number**  **Page** 1 - 1. Summary

of the Monetized Benefits, Social Costs, and Net Benefits for the Proposed Residential Wood Heaters NSPS in the 2014

–2022 Time F rame ($2010 millions) ................................ ................................ ................................ ............ 1 - 5 2 - 1. Proposed Approach Subpart AAA Compliance Deadlines and PM Emissions Limits ................................ ................................ ................................ ............................ 2 - 4 2 - 2. Alternative Approach Subpart AAA Compliance Deadlines and PM Emissions Limits ................................ ................................ ................................ ............................ 2 - 4 2 - 3. Proposed Approach Subpart QQQQ Compliance Dates and PM Emissions Standards ................................ ................................ ................................ ..................... 2 - 11 2 - 4. Alternative Approach Subpart QQQQ Compliance Dates and PM Emissions Standards ................................ ................................ ................................ ..................... 2 - 11 3 - 1. Costs for L abor and Materials for U.S. Heating Equipment and Hardware Manufacturing: 2011 ................................ ................................ ................................ ..... 3 - 6 3 - 2. Costs for U.S. Masonry Contractors and Single - Family Home Contractors: 2007 ...... 3 - 8 3 - 3. Costs for U.S. Plumbing and Heating Equipment Supplies Wholesalers: 2007 ........... 3 - 8 3 - 4. Costs for U.S. Specialized Home Furnishing Stores: 2007 ................................ .......... 3 - 8 3 - 5. Wood as Primary

Fuel Source for Home Heating in the United States: 2006

– 2008 ................................ ................................ ................................ ............................. 3 - 10 3 - 6. Wood as Secondary Heat Source by

Census Division, 2009 (millions of households) ................................ ................................ ................................ ................. 3 - 11 3 - 7. Number of U.S. Companies by Business Ty

pe ................................ ........................... 3 - 18 3 - 8. U.S. Wood Heat Equipment Industry by Geographic L ocation ................................ . 3 - 20 3 - 9. U.S. Sales and Employ ment Statistics by

Business Ty

pe ................................ ........... 3 - 21 3 - 10. Profit Margins for NAICS 333414, 238140, and 423720: 2008 ................................ . 3 - 22 3 - 11. Unit Shipments and Percentage of Total Units by Product Ty

pe: 2008 ..................... 3 - 23 3 - 12. Installation Costs for Average S ys tem by Product Ty

pe (North America): 2008 ...... 3 - 23 3 - 13. Manufacturers’ Price b y Product Ty pe (North America): 2008 ................................ . 3 - 24 4 - 1. RWC Emission Inventory Categories Used ................................ ................................ .. 4 - 1 4 - 2. PM 2.5 Tons per Appliance Estimate (Baseline) ................................ ............................ 4 - 3 4 - 3. NSPS Adjusted Factors for PM 2.5 ................................ ................................ ................. 4 - 9 4 - 4. Estimated PM 2.5 Emissions (Tons): Baseline ................................ ............................. 4 - 14 4 - 5. Estimated PM 2.5 Emissions (Tons): Proposed Option ................................ ................ 4 - 14 4 - 6. Estimated PM 2.5 Emissions (Tons): Alternative Option ................................ ............. 4 - 15* * * E.O. 12866 Review - Draft

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ix 4 - 7. NSPS VOC Emission Factors ................................ ................................ ..................... 4 - 17 4 - 8. Estimated VOC Emissions (Tons): Baseline ................................ .............................. 4 - 19 4 - 9. Estimated VOC Emissions (Tons): Proposed Option ................................ ................. 4 - 19 4 - 10. Estimated VOC Emissions (Tons): Alternative Option ................................ .............. 4 - 20 4 - 11. NSPS CO Emission Factors ................................ ................................ ........................ 4 - 22 4 - 12. Estimated CO Emissions (Tons): Baseline ................................ ................................ . 4 - 24 4 - 13. Estimated CO Emissions (Tons): Proposed Option ................................ .................... 4 - 24 4 - 14. Estimated CO Emissions (Tons): Alternative Option ................................ ................. 4 - 25 5 - 1. Example of Manufacturers’ Estimates of Costs to Develop Model Line (4 Fireboxes) ................................ ................................ ................................ ..................... 5 - 2 5 - 2. Annual Cost Summary : Development of 4 Model Fireboxes ................................ ....... 5 - 3 5 - 3 . Labor - based Employ ment Estimates for Certification, Quality Assurance, Reporting, Recordkeeping, and Accreditation Requirements for the Proposed NSPS Option . 5 - 10 5 - 4 . Summary

of Average Annualized Nationwide Costs for 2014

–2022 Time F rame Under the Proposal and Alternative Options ................................ .............................. 5 - 15 5 - 5 a.Indus try

L evel - Annualized Compliance Costs (2010 dollars) as a Fraction of Total Industry

Revenue by

Pro duct Ty

pe in the 2014

–2022 Time F rame— Proposal Option ................................ ................................ ................................ .......... 5 - 17 5 - 5 b. Industry

L evel - Annualized Compliance Costs (2010 dollars) as a Fraction of Total Industry

Revenue by

Product Ty

pe in 2014

–2022 Time F rame— Alternative Option ................................ ................................ ................................ ...... 5 - 17 5 - 6 . Hy pothetical Price Increases for a 1% Increase in Unit Costs ................................ .... 5 - 20 5 - 7 . Hy pothetical Consumption Decreases for a 1% Increase in Unit Costs ..................... 5 - 20 5 - 8. Percent of Abatement Expenditures on Changes in Production Processes ................. 5 - 29 6 - 1. Revised NSPS P roposal for Residential Wood Heating Devices: Affected Sectors and SBA Small Business Size Standards ................................ ......................... 6 - 3 6 - 2. Average Receipts fo r Affected Industry by Enterprise Employ

ment Size: 2007 ($2010 million/establishment) ................................ ................................ ...................... 6 - 4 6 - 3. Average Receipts for Affected Industry by Enterprise Receipt Range: 2007 ($2010 million/establishment) ................................ ................................ ...................... 6 - 4 6 - 4. Per - Entity

Annualized Compliance Costs by Produ ct Ty

pe—Proposed Option ($2010 millions) ................................ ................................ ................................ ............ 6 - 5 6 - 5. Per - Entity

Annualized Compliance Costs by Product Ty

pe— Alternative Option ($201 0 millions) ................................ ................................ ................................ ............ 6 - 6 6 - 6. Representative Establishment Costs Used for Small Entity Analy sis ($2010) ............. 6 - 6 6 - 7. Cost - to - Receipt Ratio Results for the Proposal Option by NAI CS Code ..................... 6 - 9 6 - 8. Cost - to - Receipt Ratio Results for the Alternative Option by NAI CS Code ............... 6 - 10 6 - 9. Total Annual Cost (TAC) per Appliance Model

– for Varying Annualized R&D Cycle Lifespans ...........................................................6 - 12* * * E.O. 12866 Review - Draft

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x 6 - 10. Cost - to - Sales Ratio Sensitivity Anal ys is Results Reflecting Different R&D Cycle Lifespans for the Proposed Option by NAICS Code..............................6 - 13 7 - 1. Human Health Effects of Ambient PM 2.5 ................................ ................................ ..... 7 - 3 7 - 2. Summary

of Monetized PM 2.5 - Related Health Benefits Estimates for the Proposed Residential Wood Heaters NSPS in the 2014

–2022 Time F rame (2010$) ................................ ................................ ................................ .......................... 7 - 9 7 - 3. Summary

of Reductions in Health Incidences from PM 2.5 - Related Benefits for the Proposed Residential Wood Heaters NSPS in the 2014 - 2022 Time F rame ......... 7 - 10 7 - 4. All PM 2.5 Benefits Estimates for the Proposed Residential Wood Heaters NSPS at Discount Rates of 3% and 7% for the 2014 to 2022 Time F rame ($2010 million s) ................................ ................................ ................................ ...................... 7 - 12 7 - 5. Population Exposure in the Baseline Above and Below Various Concentration Benchmarks in the Underlying Epidemiology S tudies ................................ ............... 7 - 15 8 - 1. Summary

of the Monetized Benefits, Social Costs, and Net Benefits for the Proposed Residential Wood Heater NSPS in the 2014

–2022 Time F rame ($2010 millions) ................................ ................................ ................................ ........................ 8 - 2* * * E.O. 12866 Review - Draft

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1 - 1 **SECTION 1 EXECUTIVE SUMMARY**  The U.S. Environmental Protection Agency (EPA) is proposin g to revise new source performance standards (NS P S ) for residential wood stoves, and to issue NSPS for pellet stoves, furnaces, h ydronic heaters, and masonry heaters. The EPA is proposing this revision under the authority of section 111 of the Clean Air Act ( CAA ) , “ Standards of Performance for New Stationary

Sources, ” under which the EPA establish es federal standards of performance for new sources within source categories which caus e or contribute significantl y to air pollution, which may reasonably

be anticipated to endanger public health or welfare . W e are proposing to amend 40 CFR part 60, subpart AAA, Standards of Performance for New Residential Wood Heaters. The current regulati on (subpart AAA) applies to affected facilities manufactured since 1988. Except as discussed in this propos al , the current requirements would remain in effect for the heaters /stoves and model lines manufactured before this proposal. We also propose to broaden the applicability

of the wood heaters regulation beyond adjustable burn rate heaters ( stoves, the focus of the original regulation) to specificall y include single burn rate heaters, hydronic heaters, and pellet stoves. Heaters/stoves and model lines manufactured after the compliance dates would be required to meet particulate matter (PM) standards . Compliance upon the effective date of the final rule is the intention in section 111 of the CAA. We concur with numerous stakeholders that the current body of evidence justifies revision of the current residential wood heaters NSPS to capture the improvements in performance of such units and to expand the applicability of this NSPS to include additional wood - burning residential heating devices. The proposed changes are expected to achieve several objectives, including the application of updated emission limits reflecting the best industry emission reduction sy stems; eliminati on of exemptions over a broad suite of residential wood combustion devices; the stren gthening of test methods as appropriate; and the streamlining of the certification process. These proposed revisions address the health impacts of particle pollution, of which wood smoke is a contributing factor in many areas. Wood smoke contains a mixture of fine particles and toxic air pollutants ( e.g. , benzene and formaldehyde) that can cause burning eyes, runny nose, and bronchitis. Exposure to fine particles has been associated with a range of health effects, including aggravation of heart or re spiratory problems, changes in lung function and increased respiratory

s ymptoms, as well as premature death. Populations that are at greater risk for experiencing health effects related to fine particle exposures include older adults, children and individu als with pre - existing heart or lung disease. Each ye ar smoke from wood heaters and* * * E.O. 12866 Review - Draft

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1 - 2 fireplaces contributes hundreds of thousands of tons of fine particles throughout the country

— mostly during the winter months. For more information on the health impacts fro m exposure to fine particles, please refer to Section 7 of this RIA. Nationally , residential wood combustion accounts for 44 % of total stationary and mobile polycyclic organic matter (POM) emissions and 62 % of the 7 - pol yc yclic aromatic hydrocarbons (PAH), which are probable human carcinogens and are of great concern to the EPA. Several areas with wood smoke problems either exceed the EPA ’ s annual or dail y health - based national ambient air quality standards (NAAQS) for fine particles or are close to exceedin g those standards. This is an economicall y s ignificant rule as defined by Executive Order 12866 and Executive Order 13563. Therefore , EPA is required to develop a regulatory impact anal ys is (RIA) as part of the regulatory process . The RIA includes an eco n omic impact anal ys is (EIA), a small entity

impacts analy sis , an engineering cost anal ys is, and a benefits analy sis along with documentation for the methods and results. We provide annualized average results for the time frame from 2014 to 2022 inclusive for two options : the Proposed o ption and an Alternative o ption . While the Proposed Option represents EPA’s preferred option, the Alternative Option is still under consideration. These options are described in detail in Section 2 and summarized in Section 4. The options vary in part by their respective dates of implementation, all of which are captured by the range of dates included in the anal ys es. The variability of annual impacts provides an appropriate rationale for presenting impacts averaged over this time frame. All results in this RIA are presented in 2010 dollars. Estimates of benefits and costs are discounted to the anal ys is year using both a 7% and 3% discount rates following Circular A - 4, “Regulatory Anal ys is,” which provides guidance to Federal agencies on the development of regulatory anal ys es required b y Executive Order 12866. 1 In addition, this proposal cannot be certified as not having a significant economic impact on a substantial number of small entities (SI S NOSE) according to the provisions of the Small Business Regulatory

Enforcement Fairness Act (SBREFA). Therefore, small entity impacts anal ys is presented in Section 6 is an Initial Regulatory Flexibility

Anal ys is (IRFA) . Section 6 also contains a summary of the proceedings and conclusions of a panel called to find way s to mitigate small entity

impacts associated with this rule under the authority of the SBREFA. **1.1 Analysis**  **Summary** The key results of the RIA are as follows: 1 Circular A - 4 is available at: http://www.whitehouse.gov/omb/circulars_a 004_a - 4* * * E.O. 12866 Review - Draft

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1 - 3  **Engineering Cost Analysis:** EPA esti mates the revised NSPS ’ s tot al annualized cost to affected manufacture r s on average in the 2014

–2022 time frame will be $ 15.7 m illion ( $2010 ) for the P roposed option and $28.3 million (2010$) for the Alternative option, respectivel y, with the total annuali zed cost estimate at a 7% discount rate . At a 3% discount rate, the total annualized cost will be $14.8 million for the Proposed option and $26.9 million for the Alternative option.

 **Economic Impact Analysis:** The metric for economic impacts for industries affected by this Proposed option are industry- level average annualized compliance costs to receipts (or sales) ratios. This metric is calculated as a n average in the 2014

–2022 time fram e , and the estimates ranged from 4.3% for industries that produce wood stoves to as much as 6 . 4 % for single burn rate stoves . For the Alternative option, the range is between 4.0% for forced air furnaces and 10 . 7 % for single burn rate stoves. These results approximate the maximum price increas e needed for a producer to full y recover the annual compliance costs and, therefore, do not presume any pass through of impacts to consumers. With pass through to consumers, these impact estimates will decline proportionate ly to the degree of pass through.

 **Social Cost Analysis:** For this RIA, the Agency assumes that the social cost is equal to the annualized cost to m anufacturers. Therefore, the estimated average annual social cost of the P roposed and Alternative option s in the 2014 - 2022 timeframe are expected to be $ 15.7 million and $14.8 million respectivel y when discounted at 7% , and $ 28 . 3 million and $26.9 million when discounted at 3%. See Section 5 of this RIA for more detail on the estimated social cost .

 **Small Entity**  **Analyses:** EPA performed a scre ening anal ys is for impacts on small entities by

comparing compliance costs to sales/revenues (e.g., sales and revenue tests). EPA ’ s anal ys is showed the tests were higher than 1% for small entities included in the screening an al ys is ; the 1% test estimate is often an indicator for significant impacts to small firms . For these industries, almost all (more than 90%) affected entities are small firms. We concluded that we could not certify that there would not be a significant econ omic impact on a substantial number of small entities (SI SNOSE) for either option considered in this RIA. Pursuant to section 603 of the RFA, EPA prepared an initial regulatory flexibility

analysis (IRFA) for the proposed rule and convened a Small Business Advocacy Review Panel to obtain advice and recommendations of representatives of the regulated small entities. A detailed discussion of the Panel ’ s advice and recommendations is found in the final Panel Report (Docket ID No. EPA - HQ - OAR - 2009 - 0734 . A summary of the Panel ’ s recommendations is also presented in the preamble to the propos al . In the p ropos al , EPA included provisions consistent with several of the Panel ’ s recommendations.

 **Benefits Analysis** :

– M onetized benefits in this RIA include those from reducing particulate matter ( PM ). These benefits reflect reductions of nearly 4,800 tons annually

of fine particulate matter (PM 2.5 ) on average during the 2014

–2022 time frame under each of the two options. A ll monetized benefits reported reflect improvements in* * * E.O. 12866 Review - Draft

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1 - 4 ambient PM 2.5 concentrations due to emission reductions of direct PM 2.5 . As a result, the monetized benefits likely underestimate the total benefits, however, the extent of the underestimate is unclear. Monetized benefits reflect those associat ed with reductions in premature mortality due to lower ambient PM 2.5 concentrations resulting from implementation of the NSPS. Other benefits categories from PM 2.5 reductions, such as changes in visibility, are assessed qualitatively in this analy sis.

– Usi ng a 3% discount rate, we estimate d the total monetized benefits of the P roposed and Alternative options to be $ 1.8 billion to $ 4.2 billion and $1.9 billion to $4.2 billion, respectively based on estimates by

Krewski and Lepeule, in the 2014

–2022 time fram e . Using a 7% discount rate, we estimate the total monetized benefits of the P roposed option to be $ 1.7 billion to $ 3.8 billion and $1.7 billion to $3.8 billion for the A lternative option in the 2014

–20 22 time frame . The benefits are almost identical for both options anal yzed. Using alternativ e relationships between PM 2.5 and premature mortality supplied by

experts, higher and lower benefits estimates are plausible, but most of the expert - based estimates fall between these estimates.

– The benefits from reducing some air pollutants have not been monetized in this anal ys is due to data and resource constraints , including reducing 33,0 00 tons of carbon monoxide (CO) , over 3,200 tons of volatile organic compounds (VOCs), an d undetermined amounts of black carbon and HAP emissions under each option anal yz ed. Data, resource s , and methodological limitations prevented EPA from mone tizing the benefits from these important benefit categories . We assess ed the benefits of these emiss ion reductions qualitatively in this RIA .

 **Net Benefits:** For the residential wood heater NSPS, the net benefits (benefits minus the costs) are $1.8 billion to $4.1 billion ( $ 20 10 ) at a 3% discount rate and $1.7 billion to $3.7 billion ( $ 20 10 ) at a 7% disco unt rate for the P roposed option and $1.8 billion to $4.2 b illion ( $ 20 10 ) at a 3% discount rate and $1.7 billion to $3.8 billion ( $ 20 10 ) at a 7% discount rate for the Alternative option in the 2014

–2022 time frame . All net benefits are in 2010 dollars ($2010). **1.2 Organization of this Report**  The remainder of this report supports and details the meth odology and the results of the RIA :

 Section 2 de scribes the proposed regulation.

 Section 3 presents the profile of the affected industries .

 Section 4 describes the baseline emissions and emission reductions for the alternatives analyzed in this propos al .

 Section 5 describes the engineering costs, economic impacts, anal ys es to comply with Executive Orders , and employ ment impacts .* * * E.O. 12866 Review - Draft

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1 - 5  Section 6 desc ribes the small entity impact anal ys es and the Initial Regulatory Flexibility

Anal ys is ( IRFA ) prepared b y EPA.

 Section 7 presents the benefits estimates.

 Section 8 presents the net benefits (benefits minus costs) for the alternatives anal yz ed in this propo sal. **Table 1 -**  **1. Summary of the Monetized Benefits, Social Costs,**  **and Net Benefits for the**

**Proposed Residential Wood Heaters NSPS in the 2014 –** **2022 Time F**  **rame ($2010 millions**  **) a**  **3% Discount Rate 7% Discount Rate**  Proposed Option Total Monetized Benefits b $ 1,800 To $4,200 $1,7 00 to $3,700 Total Social Costs c $1 5 $16 Net Benefits $1,8 00 To $4,1 00 $1,7 00 To $3,7 00 Nonmonetized Benefits 32,7 00 tons of CO 3,200 tons of VOC Reduced exposure to HAPs, including formaldehyde, benzene, and polycyclic organic matter Reduced Climate effects due to reduced black carbon emissions Ecosystem effects Reduced v isibility impairment

**Alternative Option** Total Monetized Benefits b $ 1,900 To $ 4,200 $ 1,700 To $ 3,800 Total Social Costs c $ 2 7 $28 Net Benefits $1,800 To $4, 2 00 $1 ,7 00 to $ 3,8 00 Nonmonetized Benefits 33,0 00 tons of CO 3,200 tons of VOC Reduced exposure to HAPs, including formaldehyde, benzene, and polycyclic organic matter Reduced Climate effects due to reduced black carbon emissions Ecosystem effects Reduced v isibility impairment a All estimates reflect average annual estimates for the time frame from 2014 to 2022 inclusive, and are rounded to two significant figures. These results include appliance s anticipated to come online and the lowest cost disposal assumption . Total annualized costs are estimated at a 7% and at a 3% interest rate.* * * E.O. 12866 Review - Draft

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1 - 6 b The total monetized benefits reflect the human health benefits associated with reducing exposure to PM 2.5 through reductions of directly emi tted PM 2.5 . It is important to note that the monetized benefits include many but not all health effects associated with PM 2.5 exposure. Benefits are shown as a range from Kreuski et al. (200 9 ) to Lapeule et al. (20 12 ) . These models assume that all fine particles, regardless of their chemical composition, are equally potent in causing premature mortality because the scientific evidence is not yet sufficient to allow differentiation of effect estimates by particle type. Because these estimates were generated using benefit - per - ton estimates, we do not break dow

n the total monetized benefits into specific components here. See Figure 7 - 1 for an illustration of the breakdown, or the RIA for the final Cross - States Air Pollution Rule (EPA, 2011) for more information. c The annualized social costs are $14.8 million for the Proposed option at a 3% discount rate and $26.9 million for the Alternative option when calculated at a 7 % interest rate.* * * E.O. 12866 Review - Draft

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2 - 1 **SECTION 2 INTRODUCTION**  **2.1 Background for Proposed Rule**  EPA is considering amending the New Source Performance Standard (NSPS) for new residential wood heaters. EPA promulgated the original NSPS for new residential wood heaters including wood stoves in 1988. Based on a review of the NSPS in 2009, EPA noted significant technological improvements that allow emissions from these sources to be better controlled than the current standard . Residential Wood remains one of the five largest categories of PM emissions according to the 2008 National Emissions Inventory . 2 Inlight of the recent findings, EPA is proposing to revise the current NSPS standards to improve regulation of wood heaters and broaden the new regulation to cover other residential devices. Specifically , EPA is proposing to amend subpart AAA, Standards of Performance for New Residential Wood Heaters. We are also proposing two new subparts to address additional ty pes of wood heating appliances

— subpart QQQQ, Standards of Performance for New Residential Hydronic Heaters and Forced - Air Furnaces , and subpart RRRR, Standards of Performance for New Masonry Furnaces. The following sections describe the major proposed provisions of each subpart. Full details on the proposed provisions in each of these subparts can be found in the preamble for this proposal. **2.2 Room Heaters**  The current wood heaters regulation ( s ubpart AAA) applies to adjustable burn rate wood heaters and stoves manufactured since 1988. We propose to broaden the applicability of the wood heaters regulation beyond adjustable burn rate wood heaters ( stoves being the focus of the original regulation) to also specificall y include single burn rate wood heaters, and pellet stoves . These and any other affected appliance would be covered in subpart AAA as a “room heater.” We believe this “room heater” categorization better describes the appli ances potentially affected under subpart AAA and included in this proposal. Except as discussed in this propos al the current requirements under subpart AAA would remain in effect for the heaters /stoves and model lines manufactured before the effective date of the final rule . . The proposed subpart AAA exempts new residential hydronic heaters, new residential forced - air furnaces, and new residential masonry

heaters because they

would be subject to their own subparts. The proposed subpart AAA retains the exemp tion for fireplaces, strengthens the definition for “ cookstoves, ” and adds definitions for “ camp stoves ” and “ traditional Native American bake ovens ” to clarify that they would not be subject to the standard other than a requirement for appropriate labeling 2 U.S. EPA, 2008 National Emissions Inventory. Accessed on Sept. 11, 2012.* * * E.O. 12866 Review - Draft

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2 - 2 for cookstoves and camp stoves. Finally , the propos al clarifies that the emission limits would only appl y to wood - burning devices ( i.e., not to devices that sole ly burn fuels other than wood , e.g., gas or oil or coal or other biomass ). NSPS determinations of the best sy stem of emission reductions ( BSER), formerly referred to as best demonstrated technology (BDT), must consider costs (see section II of the preamble for more detail) . The fact that this rule applies to consumer products manufactured for sale results in cost considerations that are different from most NSPS. Specifically , the cost of potential lost revenues if production and sales had to be suspended while designing and certifying cleaner models would be significant and neces sitates reasonable lead times for compliance with proposed emission limitations. This was true in 1988 and is still true today . Thus, we propose having a transition period so that stoves with currentl y effective EPA certification can continue to be manufac tured until the current certification expires (5 years from date of certification) or is revoked b y the Administrator, whichever date is earlier. R enewal of these certifications would not be permitted . That is, i n the near term , we are proposing to retain the current 1990 PM emission limits for adjustable burn rate wood heaters and pellet stoves with a current EPA certification issued prior to the effective date of the final rule . 3 While EPAs top priorities are to ensure that emission reductions occur in a timely manner and that there is no backsliding from the improvements that many manufacturers have already made, we have also sought to avoid unreasonable economic impacts on those manufacturers (mostly small businesses) who need additional time to develop a full range of cleaner models and to avoid potential “ logjams ” at laboratories conducting certification testing. We ask for specific comments on the length of th is proposed transition and the degree to which there would be any critical economic impacts on manufacturers who have heaters with current certifications if we were to not allow up to the full 5 - year certification period for units manufactured after the publication of the final rule. We are proposing a two - step compliance approach (referred to her ein as the “ Proposed Approach ” ) that would apply to all new adjustable burn rate wood heaters, single burn rate wood heaters and pellet stoves required to compl y with the “ 2014 ” emission limits specified in the final rule. Under today ’ s Proposed Approach, the Proposed Step 1 compliance dates for these sources would appl y to each source manufactured on or after the date of publication of the final rule in the Federal Register or sold at retail on or after the date 6 months from publication of the

3 For simplicity, we are using “ 2014 ” as shorthand for the expected actual date of the final rule . If the expected date of publication of the final rule changes from 2014 , we will adjust the compliance date accordingly.* * * E.O. 12866 Review - Draft

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2 - 3 final rule in the Federal Register . Proposed Step 2 compliance dates for these sources would apply to each adjustable rate wood heater , single burn rate wood heater and pellet stove manufactured or sold on or after the date 5 years after publication of the final rule in the Federal Register . We ask for specific comments on the Proposed Approach and the degree to which these dates could be sooner. We are also asking for comments on an alternative three - step compliance approach (referred to herein as the “ Al ternative Approach ” ) for all adjustable rate wood heater s, single burn rate wood heaters and pellet stove s required to comply with the “ 2014 ” emission limits as specified in the final rule. Under this Alternative Approach, Alternative Step 1 compliance dat es for these sources would apply to each source manufactured on or after the date of publication of the final rule in the Federal Register or sold at retail on or after the date 6 months from publication of the final rule in the Federal Register . Alternati ve Step 2 compliance dates for these sources would apply to each source manufactured or sold on or after the date 3 years after publication of the final rule in the Federal Register . Alternative Step 3 compliance dates for these sources would apply to each source manufactured or sold on or after the date 8 years after publication of the final rule in the Federal Register . We ask for specific comments on this Alternative Approach and the degree to which these dates could be sooner. While the 1988 promulgated subpart AAA (53 FR 5860, February 26, 1988) included an additional 1 - ye ar compliance extension for low volume manufacturers , i.e., companies that manufacture (or export to the U.S.) fewer than 2,000 heaters per ye ar , this proposal does not include such a compliance extension. We are not proposing to extend this delay to adjustable burn rate wood heaters or pellet stoves, because the majority of these appliances should already comply with the proposed Step 1 standards. See s ection V.C. of the preamble for more discussion of this topic. However, we are requesting comments on the possible need for such a compliance extension for single burn rate wood heaters, which are not subject to the current subpart AAA requirements. Table 2 - 1 summarizes the compliance dates and PM emissions standards that would apply to each wood heater appliance under the Proposed Approach . Table 2 - 2 summarizes the compliance dates and PM emissions standards that would apply to each wood heater appliance under the Alternative Approach . We are proposing to have a single determination of BSER for both catal ytic and noncatal ytic heater s ys tems . The EPA again considered requiring cataly st replacement on a regular schedule but determined that enforcement of suc h a requirement would be difficult. As* * * E.O. 12866 Review - Draft

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2 - 4 before, we are proposing to require manufacturers to provide 2 - year unconditional warranties on the catal ys ts and prohibit the operation of catal ytic stoves without a catal ys t. In addition, we **Table 2 -**  **1. Proposed App**  **roach Subpart AAA Compliance Deadlines and PM Emissions**

**Limits Appliance**  **Compliance Deadlines a**  **PM Emissions Limit**  Adjustable Rate Wood Heaters or Pellet Stoves with Current EPA Certification Issued Prior to Publication of Final Rule Transition period from 1988 rule through the later of publication of final revised rule or expiration of current certification (maximum of 5 years certification and no renewal) 4.1 g/hr for catalytic stoves and 7.5 g/hr for noncatalytic stoves All Other Adjustable Rate Wood He aters , Single Burn Rate Wood Heaters or Pellet Stoves (includes currently certified heaters after the certification expires , catalytic and noncatalytic ) Step 1: 2014 (upon publication of final rule) Step 2: 2019 (5 years after publication of final rule) 4 .5 g/hr 1.3 g/hr

a Com pliance deadlines are based on estimated publication of final rule in 2014 . If the publications date changes, the EPA will change the compliance dates based on the actual date of publication. **Table 2 -**  **2. Alternative Approach**  **Subpart AAA Compliance Deadlines and PM Emissions**

**Limits Appliance**  **Compliance Deadlines a**  **PM Emissions Limit**  Adjustable Rate Wood Heaters or Pellet Stoves with Current EPA Certification Issued Prior to Publication of Final Rule Transition period from 1988 rule through the later of publication of final revised rule or expiration of current certification (maximum of 5 years certification and no renewal) 4.1 g/hr for catalytic stoves and 7.5 g/hr for noncatalytic stoves All Other Adjustable Rate Wood Heaters, Single Burn Rate Wood Heaters or Pellet Stoves (includes currently certified heaters after the certification expires, catalytic and noncatalytic) Step 1: 2014 (upon publication of final rule) Step 2: 2017 (3 years after publication of final rule) Step 3: 2022 (8 years after publication of final rule) 4.5 g/hr 2.5 g/hr 1.3 g/hr

a Com pliance deadlines are based on estimated publication of final rule in 2014 . If the publications date changes, the EPA will change the compliance dates based on the actua l date of publication. are proposing to require warranties for noncatal yt ic stoves. W e are not propos ing efficiency standards at this time, however, we are proposing to require testing and reporting of these data.* * * E.O. 12866 Review - Draft

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2 - 5 We are also proposing to require emission testing and reporting based on both crib wood and cordwood for Step 1, while allowing manufacturers to choose whether to certify with crib wood or cordwood for Step 1. For Step 2, we are requiring certifying with cordwood only . “Crib wood” is a specified configuration and quality of dimensional lumber and spacers that was intended to improve the repeatability of the test method required in the current Residential Wood Heaters NSPS promulgated in 1988. “Cord wood” is a different specified configuration and quality of wood that is intended today to more closely

resemble what a typical homeowner would use. O ur current data for CO emissions performance and methods of control are not sufficiently

robust to support strong CO emission limits, and it would delay the NSPS if we were to seek additional data elsewhere at this time to support strong CO emission limits. Although we lack sufficient data to propose a separate CO emissions standard at this time, we propose to require that the manufacturer determine CO emissions during the compliance test and report those results to the EPA. We specificall y request emission and cost data for systems that reduce CO emissions. I f those sy stems warrant inclusion in the determination of BS ER, we would consider doing so. Also, we ask for specific comments on whether we should require indoor CO monitors as a critical safety component for heaters installed in occupied buildings or other buildings or enclosures in which the operator would enter to add fuel to the heater or conduct other normal operation and maintenance of the heater . Like the current subpart, the EPA is using its authority under Section 114 of the CAA to require each manufacturer to submit certifications of compliance with this rule for all models and all units. As in the 1988 rule, provided that the certifications are timel y, complete, and accurate, the EPA will allow certification of compliance with the PM emissions standards to be determined based on testing of a representativ e unit within the model line. As in 1988, the cost of testing each unit would be an order of magnitude greater than the cost of a wood stove and would be economically

prohibitive. Also, as in 1988, the testing of each unit could create a “ logjam ” that woul d sty

mie the certification of cleaner model lines. W e recognize there is some concern that testing laboratories may not be able to meet the demand for certification tests in the first few ye ars. However, we believe that the availability of additional I SO - a ccredited labs, the advance notice that industry

has had concerning the NSPS prior to this proposal, and the time between thi s proposal and the proposed compliance date of the final rule, should ensure that adequate compliance certification resources are available. In addition, to further response to the concern regarding testing laboratories, the proposed subpart expands the definition of “ Accredited Test Laboratory , ” from just EPA - accredited laboratories to allow laboratories accredited b y a* * * E.O. 12866 Review - Draft

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2 - 6 nationally r ecognized accrediting body to perform testing for each of the test methods specified in this NSPS under I SO - IEC 4 Standard 17025, to conduct the certification testing. The laboratories would have to register their credentials with the EPA and report any changes in their accreditation and any deficiencies found under ISO 17025 . The EPA would review that information to approve (or deny or revoke) the accreditation for the purpose of the determining compliance with the NSPS prior to the lab conducting any certi fication testing or related work used as a basis for compliance with this rule . To ensure a practical, orderly transition, the propos al retains the current “ Administrator Approval Process ” to review the certification application, including test results, for the first year following publication of the final rule. At that point or earlier if chosen b y manufacturers, the revised subpart would implement a “ Certifying - Body- Based Certification Process. ” Under this process, after testing is complete, a certification of conformity with the PM emissions standards must be issued by

a certifyingbody

with whom the manufacturer has entered into contract for certification services. Similar to the lab, the certification body would have to be accredited under ISO - IEC Standard 17065 and register their credentials with EPA and report any changes in their accreditation and any deficiencies found under ISO 17065 . The EPA would review that information to appro ve (or deny or revoke) the accreditation for the purpose of the determining compliance with the NSPS prior to the lab conducting any certification testing or related work used as a basis for compliance with this rule . Upon review of the test report and quality control plan submitted by

the manufacturer, the approved certifying body may certify compliance and submit the required documentation to the EPA ’ s Office of Enforcement and Compliance Assurance for review, approval and listing of the certified applian ce. As in the current 1988 NSPS, each affected unit would be required to have an applicable permanent label and have an owner ’ s manual that contains specified information. We are proposing that permanent labels be required for each affected unit effective on the date of publication of the final rule. We are proposing that temporary labels ( “hangtags ” ) be required for each affected unit at Proposed Step 2, that is, 5 years after the date of publication of the final rule. This is a change from the existing 19 88 NSPS, which requires that all certified models be equipped with hangtags. The intent of this hangtag requirement is to highlight onl y models that meet the strongest EPA standards. The proposal would clarify that the permanent label must be installed so that it is readily visible once the unit is installed. This clarification is needed to

4 ISO, the International Organization for Standardization, and IEC, the International Electrotechnical Commission, prepare and publish international standards.* * * E.O. 12866 Review - Draft

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2 - 7 document the use of complying heaters required by state and local rules and/or to determine the unit ’ s applicability

to any future changeout programs. We also request sp ecific comments on how to best assure that manufacturers and retailers and online marketers of wood heaters onl y use valid certification test data . We also propose to revise the format of the hangtags to reflect the current state of computer graphics and to present the required information in a more consumer - friendly format. We propose to add requirements that the efficiency of the device as measured during the compliance test must be included on the hangtag. We request specific comments on ways to improve the delivery

of information on the hangtag and in the owner ’ s manual and on whether different information might be useful to the consumer and to the regulatory authorities. We also request specific comments on what information and format might be most use ful for the EPA to include on the EPA Burn wise website , EPA’s web portal for information on residential wood smoke emissions and way s to reduce them, and wood burning appliances . In addition to the PM emissions standards , certification and labeling requir ements , we are proposing to continue to require the proper burn practices that currently apply to the owner or operator of a wood heating appliance. That is, the current standards already include the requirement that the owner or operator must operate the heater consistent with the owner ’ s manual and not burn improper fuels. The proposed revision clarifies that the current requirement to operate according to the owner ’ s manual must continue to include a list of prohibited fuel ty pes that create poor or even hazardous combustion conditions and must include the direction that pellet fuel appliances can be safel y operat ed only with pellet fuels used in the certification tests . We propose that pellets for the certification tests be only those that have been prod uced under a licensing agreement with the Pellet Fuels Institute (PFI) , or equivalent ( after request and subsequent approval by

the EPA), to meet certain minimum requirements and procedures for a quality assurance process. 5 We believe that these provisions are necessary to ensure that the appliances operate properly such that emissions are reduced as intended. We ask for specific comments on whether we should include other requirements of best burn practices or adjustments to help ensure proper operation, e .g. , chimney height and draft specifications, moisture content of wood, and limits on visible emissions. The proposed subpart still contains the crucial quality assurance provisions in the current 1988 NSPS . The current requirements for manufacturer quality assurance program s would be

5 Details of the PFI program are available at http://pelletheat.org/pfi - standards/pfi - standards -program/ .* * * E.O. 12866 Review - Draft

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2 - 8 maintained for 1 ye ar following publication of the final rule. At that point, the manufacturer would adopt a Certifying - Body- Based Quality Assurance program. The Certifying Body would conduct regular, unannounced audits to ensure that the manufacturer ’ s Quality Control Plan is being implemented properly . The concepts of the EPA selective enforcement and random audit testing programs of the current 1988 NSPS will be re tained under the P roposed rule , although they will be s treamlined and simplified to better en sure compliance and to clarify that selective enforcement audits can be based on any information the EPA has available and do not have to be random. Also, we clarify that the EPA and states are allowed to be present during the audits and that states may provide the EPA with information to help the EPA enforcement and compliance assurance efforts . EPA is proposing a number of revisions to certification testing for various appliances. The EPA is proposing that Method 28 , a sampling and anal ys is method to analyze wood stove emissions , be used for all of the appliances in this rulemaking. The EPA developed Method 28 in 1987 and 1988 as part of our efforts on the current1988 NSPS. The manufacturers, laboratories, states, an d the EPA have now had over 2 5 ye ars of experience with Method 28 and it has been very useful for certifying hundreds of model lines of wood stoves. We asked the manufacturers, EPA - accredited laboratories, and states for their insights on Method 28. Many s takeholders agree that changes should be made to improve the reproducibility and repeatability

of the test procedures and to address concerns about how to best ensure protection across the entire U.S. when various operating scenarios are used and various w ood species and densities are used. For example, to address some of these concerns, ASTM , formerl y known as the American Society for Testing and Materials, has used a “ consensus - based ” process to develop E2515 - 10 “ Standard Method for Determination of Parti culate Matter Emissions in a Dilution Tunnel. ” As with all test methods, there are opportunities for continual improvement , and the EPA requests specific comments and supporting data for additional potential improvements to E2515 - 10. A number of states have expressed concern about ASTM ’ s Intellectual Property Policy which requires all participants to give their intellectual property rights to ASTM so that , in turn , ASTM can control distribution of the drafts and final test methods and sell the final test m ethods to potential users. Attorney s General for several states have indicated that state employees in their states cannot give to ASTM the property rights for property that their states paid for via the employee salaries and other expenditures and thus cannot participate in ASTM ’ s “ consensus based ” process. For this rulemaking, ASTM is allowing public review, for no charge, of the ASTM test methods and draft work products relevant to this proposed rule at www.astm.or g/epa . The EPA requests specific comments and supporting data on the substance of all of the test* * * E.O. 12866 Review - Draft

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2 - 9 methods relevant to this rulemaking and specific comments on the ASTM process and way s to ameliorate the process concerns. ASTM methods E2779 - 10 “ Standard Test Method for Determining Particulate Emissions from Pellet Heaters ” and E2780 - 10 “ Standard Test Method for Determining Particulate Emissions from Wood Heaters ” , which are test methods used to determine average emissions rates and average emissions facto rs for pellet heaters and wood heaters, respectivel y, could potentially

replace the wood heater fueling and operation requirements in Method 28 for each of these ty pe of heaters . Note that ASTM intends to use the same E2515 - 10 for the sampling and anal ys is portion for all the appliances and then separate methods per appliance types for the fueling and operation portions of these methods. The EPA believes that E2779 - 10 is a sound method for measuring emissions from pellet stoves and includes reasonable measures to reduce testing costs for continuously- fed appliances and today we are proposing its use . However, because , as noted earlier, some states were not able to participate in the ASTM method development process, we specificall y request comments and suppor ting data of all aspects of not only this test method but also all the proposed methods as part of the comments on today ’ s proposed rule. Similarly, the EPA believes that ASTM Method E2780 - 10 includes improvements for testing adjustable and single burn rate wood heaters , and we are proposing many of them. For example, we are proposing the use of the E2780 - 10 appendix for testing single burn rate appliances. However, we, and some states, do not agree with all the changes that ASTM has made for adjustable burn rate wood heaters , and some provisions are not as protective as we, and some states, now believe they need to be. As noted above, several states are concerned about how to best ensure that the methods are protective for the entire U.S., considering diff erences in wood species, density, and homeowner operation. The EPA and the states are particularl y concerned about scenarios in which stoves will have higher emissions in homes than the emissions measured in the laboratories. For example, the states and th e EPA are concerned about the ASTM changes on burn rate categories, i.e. , easing or eliminating the lowest burn rates that often occur in home operations and are typically the dirtiest and least efficient. The EPA is asking for specific comments on these i ssues and recommendations and supporting data for other changes **2.3 Central Heaters: Hydronic**  **Heaters and Forced -** **Air Furnaces** Th e proposed subpart QQQQ would appl y to new wood - fired residential hydronic heaters and forced - air furnaces and any other affected ap pliance as defined in proposed subpart QQQQ* * * E.O. 12866 Review - Draft

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2 - 10 as a “ central heater .” These appliances are described in more detail in Section 3 of this RIA. We believe this “ central heater” categorization will ensure that all appliances potentially affected under the propo sed subpart QQQQ are properl y i ncluded. The proposed provisions of subpart QQQQ would appl y to each affected unit that is manufactured or sold on or after 60 day s after publication of the final rule in the Federal Register. These proposals do not include any requirements for heaters that are fueled solel y b y gas or oil or coal or non - wood biomass . The Proposed Approach (or Option) would appl y to new residential hydronic heaters and forced - air furnaces. Under the Proposed Approach, the Proposed Step 1 compli ance date for residential h ydronic heaters and forced air heaters would be upon publication of the final rule in the Federal Register, expected to be in 2014. The Proposed Step 2 compliance date for residential h ydronic heaters and forced air heaters would be 5 years after publication of the final rule in the Federal Register . We ask for specific comments on the Proposed Approach and the degree to which these dates could be sooner. We also considered an alternative three - step approach (Alternative Approach or Option) for residential h ydronic heaters and forced air heaters. As in the Proposed Approach, under this Alternative Approach, the Alternative Step 1 compliance date for residential hydronic heaters and forced air heaters would be upon publication of th e final rule in the Federal Register, expected to be in 2014. The Alternative Step 2 compliance date for residential hydronic heaters and forced air heaters would be 3 years after publication of the final rule in the Federal Register . This serves as an “interim” step on the way to the tighter emissions limits included in Alternative Step 3. The Alternative Step 3 compliance date for residential hydronic heaters and forced air heaters would be 8 years after publication of the final rule in the Federal Register . We ask for specific comments on th is Alternative Approach and the degree to which these dates could be sooner. Table 2 - 3 summarizes the proposed BSER compliance dates and PM emissions standards that would apply under the Proposed Approach . Table 2 - 4 summarizes the BSER compliance dates and PM emissions standards that would apply under the Alternative Approach. Similar to subpart AAA, we are not proposing a standard for CO or efficiency , but are proposing to require manufacturers to collect and report CO emissions and efficiency data during certification tests.* * * E.O. 12866 Review - Draft

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2 - 11 **Table 2 -**  **3. Proposed Approach Subpart QQQQ Compliance Dates and PM Emissions** 

**Standards Appliance**  **Compliance Date a**  **Particulate Matter Em issions Limits**  Residential Hydronic Heater Step 1:2014 (upon publication of the final rule) Step 2: 2019 (5 years after publication of final rule) 0.32 lb/MMBtu heat output and a cap of 7.5 g/hr for individual test runs 0.06 lb/MMBtu Forced - Air Furnace Step 1: 2014 (upon publication of the final rule) Step 2: 2019 (5 years after publication of final rule) 0.93 lb/MMBtu 0.06 lb/MMBtu

a Based on estimated publication of final rule in 201 4 . If the publication date changes, the EPA will change the compl iance dates based on the actual date of publication. **Table 2 -**  **4. Alternative Approach Subpart QQQQ Compliance Dates and PM Emissions** 

**Standards Appliance**  **Compliance Date a**  **Particulate Matter Em issions Limits**  Residential Hydronic Heater Step 1:2014 (upon publication of the final rule) Step 2: 2017 (3 years after publication of final rule) Step 3: 2022 (8 years after publication of the final rule) 0.32 lb/MMBtu heat output and a cap of 7.5 g/hr for individual test runs 0.15 lb/MMBt 0 .06 lb/MMBtu Forced - Air Furnace Step 1: 2014 (upon publication of the final rule) Step 2: 2017 (3 years after publication of final rule) Step 3: 2022 (8 years after publication of final rule) 0.93 lb/MMBtu 0.15 lb/MMBtu 0.06 lb/MMBtu

a Based on estimated publication of final rule in 2014. If the publication date changes, the EPA will change the compliance dates based on the actual date of publication. Unlike the subpart AAA requirements, the subpart QQQQ requirements would not provide an additional time period for the sale of unsold units manufactured before the* * * E.O. 12866 Review - Draft

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2 - 12 compliance date nor do they include a small volume manufacturer compliance extension. 6 We ask for comments on the timing for implementation. As in the current subpart AAA for wood stoves, we are proposing a list of prohibited fuels because their use would cause poor combustion or even hazardous conditions. We request comment on these requirements and data to support additional requirements, if warranted. Also, as in the current sub part AAA for wood stoves, we are proposing that the owner or operator must not operate the h ydronic heater or forced - air furnace in a manner that is inconsistent with the owner ’ s manual. For pellet - fueled appliances, th e proposal makes it clear that operation according to the owner ’ s manual includes operation only with pellet fuels that have been used in the certification test and have been graded and marked under a licensing agreement with the PFI, or equivalent (after request and subsequent approval by th e EPA), to meet certain minimum requirements and procedures for a quality assurance process. Details of the PFI program are available at http://pelletheat.org/pfi - standards/pfi - stan dards - program/ . We believe that these provisions are necessary

to ensure that the appliances operate properl y such that emissions are reduced as intended. We ask for specific comments on the use of the PFI program and the PFI specifications, especiall y the degree to which the PFI program will adequately ensure the absence of construction and demolition waste (and associated toxic contaminants) in pellets. The proposed labeling requirements and owner ’ s manual requirements are similar to the guidelines in th e EPA ’ s current voluntary hydronic heater program with some improvements. We provide information on the number of manufacturing that currently meet the limits in the voluntary hydronic heater program in Section 4. We request specific comments on ways to i mprove the delivery

of information on the permanent and temporary labels and in the owner ’ s manual and whether different information might be useful to the consumer and to the regulatory authorities. The structure of the rest of the proposed subpart QQQQ is similar to the proposed subpart AAA certification and quality assurance process. We request specific comments on changes or improvements to that process that might be needed to address any special concerns related to the certification of hydronic heater s and forced - air furnaces. The EPA developed Method 28 OWHH (outdoor wood hydronic heaters) , in 2006 , as part of our efforts for voluntary qualification of cleaner hydronic heaters. We received input at that time from manufacturers, laboratories, and some states in order to quickly develop a mostly 6 See section V.C. of the preamble for more discussion of this topic.* * * E.O. 12866 Review - Draft

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2 - 13 consensus - based method that we incorporated into the program partnership agreements. We used Method 28 for wood stoves as the foundation , and thus , Method 28 OWHH has many aspects similar to Method 28. Three significant differences are (1) Method 28 OWHH uses larger cribs because h ydronic heater fireboxes are typically much larger than wood heater fireboxes, (2) Method 28 OWHH uses red oak instead of Douglas fir because red oak is the more common fuel in the U.S., and (3) Method 28 OWHH includes procedures for determining 8 - hour heat output and efficiency . The manufacturers, laboratories, states, and the EPA have now had over 7 ye ars of experience with Method 28 OWHH and its successor Method 28 WHH (wood h ydronic h eaters, improved and expanded to include indoor heaters, not just outdoor heaters) . All the stakeholders that have provided input on the test methods agree that the methods should be thoroughl y vetted and change d a s necessary to improve the method ’ s accura cy and precision and to address concerns about how to best ensure protection across the entire U.S. when various operating scenarios and wood species and densities are used. ASTM has developed E2618 - 09 , a test method that applies to wood - fired hydronic heaters, to address some of these concerns , and the EPA believes that E2618 - 09 does include some improvements . However, as with the wood stove methods, we and some states do not agree with all the changes that ASTM has made. For example, the states of Washington and Oregon are very concerned that Method 28 WHH and ASTM E2618 - 09 do not specify fueling with Douglas fir, which is used in EPA Method 28 for wood stoves and which the se states require in their regulations for residential wood heaters, includin g hydronic heaters. They are concerned that hydronic heaters tested with red oak will have higher emissions when fueled with Douglas fir and other less dense species ty pical in their states. Also, a number of states and the EPA are concerned about the ASTM changes to the burn rate categories, i.e. , easing or eliminating testing at the lowest burn rates which often occur in home operations and are typically the dirtiest and least efficient. For several ye ar s , we have been communicating with European certific ation laboratories to learn how they conduct their tests under EN 303 - 5 , a European Union test protocol for wood - burning appliances, and to consider if incorporating some of their testing procedures might improve our test methods. More recentl y, because of initial concerns about some surprisingl y high laboratory test efficiencies for a couple of the EPA voluntary program Phase 2 qualified partial heat storage models, the EPA, the Northeast states that regulate hydronic heaters, laboratories (including EPA - a ccredited laboratories and Brookhaven National Laboratory), and manufacturers have conducted an exhaustive review of voluntary program qualifying test reports. All of the stakeholders that provided input on the test methods agree that we need a change in the test* * * E.O. 12866 Review - Draft

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2 - 14 method for testing of non - integral partial heat storage models ( i.e. , models that have separate heat storage but the storage does not have the capacity to safel y handle all the heat generated b y a full load of fuel) . ASTM has been leading an effort to develop an Appendix X2 , which is additional guidance as support, to the test method for such models but has not completed that effort as of today ’ s proposal. Brookhaven National L aboratory has recommended a method to the New York State Department of Environmental Conservation (NYSDEC) and NYSDEC has proposed that method be used for certification of such models in their states. EPA is proposing that method be used for certification of the NSPS for hydronic heaters equipped with a heat storage unit. 7 Further, we are proposing revisions to Method 28 WHH that would require that all affected non - pellet hydronic heaters, subject to new subpart QQQQ, conduct and report certification testing using both crib wood and cordwood for the 2014 emission limits and the n choose which they

want to use for compliance. For other than pellet - fueled heaters, the compliance tests would be solely cordwood for the 2019 emission limits. W e are asking for specific comments on whether the EPA should use (1) one or more of the draf t versions of Appendix X2 being considered as part of ASTM work product WK26581 , which is a revision to the existing E2618 - 09 test method for measuring emissions from outdoor hydronic heaters ; (2) the European Union test method EN 303 - 05 as the Maine Department of Environmental Protection has recently approved for certification of hydronic heaters in their state as equivalent to the EPA Method 28 WHH ; (3) the use of the proposed new partial thermal storage test method; and/or (4) some other test method . For use of any of the test methods , the EPA would require that the amount of heat storage for the actual sale and install ation of the hydronic heaters be no less than the amount used for the certification tests. Because EN303 - 05 does not currently utilize heat storage during the certification test, if the EPA were to use EN303 - 05 test results, the EPA would require the installed heater to have heat storage that can safel y handle at least 60 % of the maximum heat output of the heater or a greater level if the manufacturer specifies a greater level . The EPA is asking for specific comments on the appropriateness of this heat storage level or other levels. The EPA will consider any or all of these options as the preferred reference test methods or as acceptable emis sion testing alternatives. (ASTM previously developed an Appendix X1 , an additional part to the test protocol, for testing of models that have “ full ” heat storage that can safel y accept the heat from

7 See footnote 19.* * * E.O. 12866 Review - Draft

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2 - 15 the full load of fuel.) We request comments on all aspects of heater testing and are especially interested in emission test data that compare the results for testing b y these different methods. The exhaustive review discussed above found a number of areas in the methods to improve the quality

of the data and reduce anomalies. In June 2011, the voluntary program stakeholders agreed to a number of changes to Method 28 OWHH , and we are proposing the revised method today

as EPA Reference Method 28 WHH. The EPA is asking for specific comments on this method and recommendations and supporting data for other changes or acceptable alternatives. Additional information on the EPA methods is available at www.epa.gov/burnwise and the ASTM methods and draft work products are available at www.astm.org/epa . The EPA is proposing to rely on the test method B415.1 - 10 that has been developed b y the Canadian Standards Association ( CSA ) for forced - air furnaces. All CSA standards are developed through a consensus development process approved b y the Standards Council of Canada This process brings together volunteers representing varied viewpoints and interests to achieve consensus and develop a standard. CSA worked for years on development of this t est method that has its roots in earlier U.S. efforts on wood stoves. The current version of CSA B415.1 - 10 was published in March 2010, and it includes not only the forced - air furnace test method but also new Canadian emission performance specification s fo r indoor and outdoor central heating appliances. Although the CSA B415.1 - 10 technical committee included 32 individuals, including numerous U.S. manufacturers and laboratories, it did not include any states or environmental groups, and the EPA participatio n was minimal. Nevertheless, we are satisfied that this CSA method warrants proposal for this rulemaking and we request specific comments and supporting data. We ask for specific comments on the appropriateness of using the CSA test method in its entirety , including the use of cordwood instead of cribs that are used in current versions of Method 28 and Method 28 WHH. To review the CSA test method, please go to www.csa.ca . **2.4 New Residential Masonry Heaters**  Th e proposed subpart RRRR would apply to new residential masonry heaters. A masonry heater is a site - built or site - assembled, solid - fueled heating device constructed mainly of masonry materials in which the heat from intermittent fires burned rapidl y i n its firebox is stored in its massive structure for slow release to the building. It has an interior construction consisting of a firebox and heat exchange channels built from refractory components.* * * E.O. 12866 Review - Draft

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2 - 16 The provisions apply

to each affected unit that is manufactured on or after 60 day s after publication of the final rule in the Federal Register. We are proposing that, as of the date of publication of the final rule in the Federal Register , no person would manufacture, on or after the date of publication of the final rule in the Federal Register , or sell a residential masonry heater that does not meet the proposed emission limit of 0.32 lb of PM per MMB tu heat output. We are also proposing a 5 - ye ar small volume manufacturer compliance extension that would apply to companies that c onstruct fewer than 15 masonry heaters per year. See section V.C. of the preamble for more discussion of compliance date related issues. We request specific comments on the degree to which these dates can be sooner. As in the case of the other proposed standards, we are proposing requirements that would apply to the operator of the masonry heater, including a provision to operate the unit in compliance with the owner ’ s manual; a prohibition on use of certain fuels; and a requirement to use licensed wood pel lets or equivalent, if applicable. We are not proposing efficiency

standards for new residential masonry heaters at this time because data are not yet available to support the basis for such standards. The EPA is proposing to rely on ASTM method E2817 - 11 , which is a standard emissions test method for masonry

heaters. The laboratories, some states, and masonry heater industry worked for years on drafts of this method that has its roots in earlier regulatory efforts in Colorado. The EPA has participated in the discussions from time to time over the ye ars and has provided comments and suggestions. There have been a number of variations of similar methods over the ye ars. The current ASTM drafts are ASTM E2817 - 11 “ Standard Test Method for Test Fueling Masonry

He aters ” and ASTM WK26558 “ Specification for Calculation Method for Custom Designed, Site - built Masonry Heaters. ” ( see http://www.astm.org/DATABASE.CART/WORKITEMS/WK26558.htm for method). We are encouraged b y the progress shown by development of these current draft ASTM methods and propose that they

be used for this rulemaking. We request specific comments on these draft methods and any changes that should be considered and supporting data for those changes. We request specific comments and supporting emission test data on the use of “ Annex A1. Cordwood Fuel ” and “ Annex A2. Cribwood Fueling. ” ASTM is allowing public review, for no charge, of the ASTM test methods and draft work products r elevant to this rule at www.astm.org/epa . As an alternative to testing, we are proposing that manufacturers of masonry heaters submit a computer model simulation program, such as ASTM WK 26558 noted above for the EPA ’ s review and approval.* * * E.O. 12866 Review - Draft

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2 - 17 The structure of the rest of the proposed subpart RRRR is similar to the proposed subpart AAA certification and quality assurance process and contains similar requirements for labels, owner ’ s manual, etc. One difference, however, i s that, for small custom unit manufacturers, we are requiring less stringent QA procedures. Specifically , we are proposing that the initial certification for these custom units is sufficient and that no further QA is necessary since each unit is a unique m odel and subject to certification. We request comment on changes or improvements that might be needed to address special concerns related to certification of masonry heaters.* * * E.O. 12866 Review - Draft

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3 - 1 **SECTION 3 INDUSTRY PROFILE**  The proposed revision s to the NSPS for residential wood heaters would cover a number of devices that include wood stoves, pellet stoves, other solid biomass stoves; masonry heaters; indoor and outdoor h ydronic heaters and forced - air furnaces. EPA has developed this industry pro file to provide the reader with a general understanding of the technical and economic aspects of the industries that would be directl y affected b y potential revis ions to the NSPS regulation for new residential wood heaters and to offer information relevant to preparing an economic impact anal ys is (EIA) for this proposed revision to the NSPS. We begin by outlining the suppl y side b y discussing the production process for wood heater s and the associated costs and follow this with an overview of the demand side of the market for residential wood heaters as a primary or secondary home heating sy stem. We then address the characteristics that define the residential wood heating market and profile the companies that produce wood heating sy stems. Although the wood he ating equipment industry includes multiple product markets, there is little published information about the intricacies of each individual market. For this profile, we anal yz ed the wood heating market primarily on an aggregated level and provide detailed i nformation for specific product markets when such information is available. **3.1 Supply Side**  Wood heating devices embody a variety of products that provide heat and/or aesthetic ambiance for residential consumers both indoors and outdoors by burning wood or oth er solid biomass fuel. Indoor wood - burning devices provide space heating for a single room or area of a residential home. Indoor heating devices include freestanding wood stoves, pellet stoves, masonry heaters, fireplace inserts, and forced - air furnaces. O utdoor wood heating devices, also known as outdoor wood boilers, or water stoves, are ty picall y located adjacent to the home they heat in small sheds with short smoke stacks. Other products considered in the development of potential proposed revisions of this NSPS include low - mass fireplaces, open masonry fireplaces, fireplaces, fire pits, chimineas, cook stoves, and pizza ovens. This section provides a general description of the residential wood heater manufacturing processes. We then provide more detailed definitions of the indoor and outdoor wood heater products co nsidered and the wood fuels used in their operation. **3.1.1 Production Process**  The manufacturing process for residential wood heaters varies depending on the product ty pe being produced. Generall y, the manufacturing process entails the assembly of several* * * E.O. 12866 Review - Draft

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3 - 2 prefabricated metal components. Major inputs include cast iron, metal products, heat - proof glass, fireproof fabric insulation, refractory brick, and heat - tolerant enamels or coatings. Wood heating devices are ty pically categorized by emissions and efficiency ratings. The emissions ratings ty

pically use EPA, ASTM, CSA, or EN (European Union) test methods. The efficiency ratings are based on tests that measure the amount of heating value transferred from a full load of wood or other biomass fuel (fuel ty pe varies based on the product being tested) to the living space. Efficiency

tests e valuate two performance metrics that include combustion and heat transfer efficiency . Combustion efficiency determines how effective the fire box design is at burning the fuel and extracting its heating value. Heat transfer efficiency tests are potentiall y conducted in calorimeter rooms equipped with temperature sensors to measure the degree changes in the heated living space and the flue exhaust to determine how much heat from the fire is delivered to the living space compared with the heat lost up the flu e (EPA, 2009 c ). Thermal output, ty

pically expressed in British thermal units per hour ( BTU/hr) in the United S tates , is the heat output measure that tells the amount of heat produced each hour. A higher BTU/hr rate suggests that a st ove will produce more heat per hour than a stove with a lower rating. Depending on design and size characteristics, a space heating device heat output rating ranges between 8,000 and 90,000 BTU/hr. Larger heating s ys tems designed to provide whole home heating have heat output ratings that range from 100,000 to greater than one million BTU/hr. **3.1.2 Product Types**  3.1.2.1 Wood and Coal Stoves EPA - certified wood stoves are enclosed combustion devices that provide direct space heating for a specific room or area of a home. 8 Cataly tic and noncatal ytic wood stoves are two general types of wood stoves available in the United States. This designation refers to the design of the combustion sy stem. Noncatal ytic combustion sy stems rel y on high temperatures ( > 1,000°F) within the fire box to fully combust the chemical compounds (combustible gases and particles) in the wood smoke. In cataly tic combustion sy stems, the presence of the catal ytic element lowers the temperature at which wood smoke chemical compounds combust. Cataly tic elements or combustion sy stem designs in noncataly tic combustion sy stems are used in existing stoves to meet EPA emission standards.

8 EPA - certified wood stoves are those wood stoves that meet the requirements under the current residential wood heater NSPS.* * * E.O. 12866 Review - Draft

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3 - 3 Coal stoves are similar in structure and appearance to wood stoves. Most coal stoves are designed to burn hard anthracite coal in stead of soft bituminous coal (Houck, 2009 ), but different varieties of coal have been used in coal stoves over time . Stoves that solely burn coal are not affected b y the proposed revisions to the NSPS. 3.1.2.2 Wood Pellet Stoves and Biomass Stoves Wood pellet and other biomass stoves are similar in application to wood stoves but generate heat through pellet combustion. Wood pellet stoves use tightly compacted pellets of wood as fuel, whereas other biomass stoves can use a variety of pellet type s, including corn, fruit pits, and cotton seed (EPA, 2009 c ). A load of pellets is poured into the stove ’ s hopper; then the user sets a thermostat that controls a feed device within the stove. The feed device regulates the amount of fuel that is released from the hopper into the heating chamber, which is where the combustion takes place (EPA, 2009 c ). Pellet stoves are ty pically more efficient in terms of combustion and heating than standard wood stoves but requi re electricity to operate the fans, controls, and pellet feeders (EPA, 2009 c ). Stoves that solely burn non - wood biomass are not affected b y the proposed revisions to the NSPS. 3.1.2.3 Masonry Heaters A masonry

heater is a solid - fueled heatin g device that is pre - manufactured or constructed on site using mainly

masonry or ceramic materials (Masonry Heater Association of North America, 1998 ). Though masonry heaters and traditional firepla ces are similar in appearance, masonry heaters are used primarily to generate heat, whereas fireplaces ty pically serve a more aesthetic purpose. The heater itself is made up of an interior construction unit consisting of a firebox and a set of heat exchang e channels (Chernov, 2008 ). The hot gas produced during rapid combustion of fuel within the firebox passes through the heat exchange channels, which run throughout the structure and saturate the masonry mass with heat (Chernov, 2008 ). Most masonry heaters weigh over 800 kg. After the masonry walls are saturated, the masonry heater radiates the heat into the area for 12 to 15 hours (Chernov, 2008 ). Masonry heaters can heat a home all day

witho ut having to burn continuousl y and are often used in areas where other fuel sources are unavailable (Chernov, 2008 ). However, there is a significant lag time between the initial burn and the time that the masonry structure releases su fficient heat to warm a living space (U.S. Department of Energy [DOE], 2010 ). 3.1.2.4 Fireplace Inserts A fireplace insert is a typ e of stove that is designed to fit inside the firebox of an existing wood - burning firep lace (Wood Heat Organization, 2010 ). EPA - certified fireplace inserts are* * * E.O. 12866 Review - Draft

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3 - 4 essentially

wood stoves without legs or pedestals. An insert is made of steel or cast iron and is ty picall y installed in masonry fireplaces or tra ditional fireplaces to enhance a fireplace ’ s efficiency (Hearth, Patio, and Barbeque Association [HPBA], 2010b ). As an insulated closed door sy stem, a fireplace insert enhances combustion by slowing down the fire and increasing the fire ’ s temperature (HPBA, 2010b ). In addition to wood - fueled fireplace inserts , other inserts can be fueled with natural gas, propane, pellet s , or coal (HPBA, 2010b ). 3.1.2.5 Forced Air Furnaces A forced - air furnace is a ty pe of central heating s ystem that ty picall y burns cordwood or pellets. A forced - air furnace is typicall y located inside a house and provide s controlled heat throughout a home using a network of air ducts (EPA, 2009 c ). This is a primary he ating s ys tem that requires electricity t o operate and is much more common currentl y in the US compared to hydronic heaters. 3.1.2.6 Outdoor W

ood Heaters An outdoor wood heater, also called a wood - fired boiler, is a ty pe of hydronic heater that is designed to be the home ’ s primary heating sy stem. Wood boilers are ty pically located outdoors and have the appearance of a small shed with a smokestack (EPA, 2009 c ). Hydronic heaters burn wood to heat a working liquid contained in a closed - loop sy stem. The heated liquid is then circulated to the house to provide heat and hot water (EPA, 2009 ). Hydronic heaters are ty picall y sold in rural areas with cold climates where wood may be the most readily available fuel source (EPA, 2009 c ). Inaddition to outdoor hydronic heaters, there is an emerging market for indoor h ydronic heaters. Currentl y, the indoor hydronic heater market is approximately 10% of the hydronic heater market. 3.1.2.7 Indoor and Outdoor Fireplaces Fireplaces are typicall y not primary heating sources and are ty picall y considered more of an aesthetic feature than a functional device. The common low - mass fireplace is a fireplace and attached chimney

that can be weighed on a platform scale (EPA, 2009 c ). Not to be confused with masonry heaters, masonry

fireplaces are traditional , aesthetic fireplaces constructed of brick, stone, or other masonry

materials with a chimney like a traditional fireplace and do not have the extensive he at channels that define masonry heaters (Fireplaces & Woodstoves, 2010 ). Fireplaces are also used to enhance the outdoor area of a house. A portable grated cylinder style has a bottom basin surrounded by open grating f

or a fire, a cooking grate, and a lid (EPA, 2009 c ). A permanent outdoor fireplace is similar to one that would be found indoors. They can be freestanding or attached to the outside of the house (EPA, 2009 c ).* * * E.O. 12866 Review - Draft

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3 - 5 Indoor and outdoor fireplaces are not affected by the proposed revisions to the NSPS. 3.1.2.8 Fire Pits, Chimineas, Cook Stoves, and Pizza Ovens Several outdoor appliances involve using wood fuel for cooking or heating. A fire pit is a round outdoor hearth applianc e that is designed to replicate the ambiance of a campfire by radiating heat in 360 degrees around the pit (HPBA, 2010c ). A chiminea is ty picall y constructed out of cast iron, terra cotta, or clay and burns firewood inside the internal oven. As the fire burns, the walls of the oven absorb heat. After the dome chamber reaches the desired temperature, the fire can be allowed to die down (EPA, 2009 c ). Wood cook stoves are made of cast iron to withstand the high temperatures produced b y the fire (EPA, 2009 c ). They are similar in appearance to a conventional stove, complete with an oven and cooking ranges, but are larger in order to accommodate the wood fuel (EPA, 2009 c ). North American traditional cook stoves have defined dimensions and cooking performance characteristics. Native American bake ovens have defined cultural and cooking functions. Pizza ovens are made out of a masonry material, such as clay adobe or refractory

bricks, which can endure high temperatures for an extended period of time (EPA, 2009 c ). These appliances are not covered b y the revisions to the NSPS. **3.1.3 Costs of Production**  Because of the variety

of products covered under the wood heat s ource category , different manufacturers use a wide range of materials and have varying labor requirements. Since there is significant diversity

in output between the producers in this category , as well as the broader industries in which they

may be classif

ied for data purposes, this section highlights the production costs associated with several of the North American Industry Classification Sy stem (NAICS) codes under which a significant number of the wood heating equipment manufacturing facilities in our database are included. Table 3 - 1 display s costs for the heating equipment and hardware manufacturing industries. The production of devices like wood stoves, hydronic heaters, and fireplace inserts is included under the heating equipment category (NAI CS 333414). In 20 11 , the total cost of materials used for production represented roughl y 4 7 % of the industry ’ s total value of shipments,* * * E.O. 12866 Review - Draft

– Do Not Cite, Quote or Release During Review ***3-6 **Table 3 -**  **1. Costs for Labor and Materials for U.S. Heating Equipment and Hardware Manufacturing: 20**  **11**

**NAICS**   ** Based** **Code Me**  **aning of**

**NAICS -**  **Based Code**  **Year Number of** 

**Employees Annual** 

**Payroll ($1,000)**  **Production**

**Workers Average per**  **Year Total C**  **ost**

**of Materials**  **($1,000) Materials,** 

**Parts, Containers,**  **Packaging, etc.**  **, Used**  **($1,000) Cost of** 

**Purchased Fuels**  **($1,000) Cost of** 

**Purchased Electricity**  **($1,000) Total** 

**Value of Shipments**  **($1,000)** 333414 Heating

Equipment (except warm air furnace) 20 11 15,925 803 ,254 9,497 1,968,956 1,639,894 1 0 , 84 0 41,594 4,153,470 332510 Hardware

Manufacturing 20 11 24,406 1, 175,743 16,956 3,362,268 2,731,577 21,592 52,530 6,256,338 Source: U.S. Census Bureau. 201 1 a . American Fact Finder. Sector 31: Annual Survey of Manufactures: General Statistics: Statistics for Industry Groups and Industries: 20 11 and 20 10 . http://factfinder.census.gov . Accessed on February 2 1 , 201 3 .* * * E.O. 12866 Review - Draft

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3 - 7 while labor costs (represented as annual pay roll estimates) only represented 1 9 %. The hardware manufacturing industry

(NAI CS 332510) had similar statistics: materials used and annual pay roll accounted for 54 % and 1 9 % of the total value of shipments, respectivel y. Masonry fireplace construction and other site - assembled fireplace construction are covered under the two industries displayed in Table 3 - 2. The new single - family construction general contractors industry (NAICS 236115) covers a broad spectrum of constructi on activities beyond masonry

and fireplace construction. Like heating equipment and hardware manufacturing, this industry is highly capital intensive; 42% of the value of the construction work is attributed to the cost of materials. Labor accounts for onl y 12%. For the masonry contractor industry , however, pay roll costs represent over 30% of the value of construction work suggesting that masonry

contracting requires a special skill set and a specific degree of craftsmanship. The 2007 production costs for plumbing and heating equipment wholesalers (NAICS 423720), which are the most recent available from the Census Bureau, are outlined in Table 3 - 3. This category , which includes the merchant wholesale production of cooking and heating stoves and hydronic heaters, made over $50 billion in sales in 2007. Table 3 - 4 display s the costs for certain home furnishing stores, including those that sell wood stoves at retail prices. The costs for these industries may

be more indicative of the wholesale and retail exchanges of wood heating equipment rather than the actual production process. **3.2 Demand Side**  The subject w ood - fired heaters are sold explicitly for use in residential homes. These devices can be included in the original construction of a new home or installed later in the life of the home. Demand for residential wood heating devices is driven b y several key factors that include size, price, efficiency , aesthetics, and fuel ty pe (e.g., cord wood, pellet wood, or other biomass fuels). However , consumer demand for any on e product discussed in Section 3.1 is driven primaril y b y the intended end - use heating application. This section defines the three major consumer segments that drive demand based on the end - use application. Following this discussion, we present some nation al statistics on the variation in residential wood heat consumers in the United States. We conclude our discussion of the demand side by characterizing some of the substitutes for residential wood - burning devices.* * * E.O. 12866 Review - Draft

– Do Not Cite, Quote or Release During Review ***3-8 **T able 3**  **- 2.**  **Costs for U.S. Masonry Contractors and Single -**  **Fa mily Home Contractors: 2007** 

**NAICS -**  **Based Code**  **Me aning of NAICS**  **- Based** 

**Code Year**  **Number of Employees Total Payroll ($1,000)**  **Cost of Materials, Components, and**  **Supplies ($1,000) Total Value of**  **Construction Work ($1,000)**  236115 New

single - family general contractors 2007 259,905 10,834,064 37,676,878 89,282,708 238140 Masonry contractors 2007 232,315 8,250,581 8,594,565 26,984,381 Source: U.S. Census Bureau. 2010b. American Fact Finder. Sector 23 : EC0723SG01: Construction: Summary Series: General Summary: Detailed Statistics for Establishments: 2007. Released May 18, 2010. http://factfinder.census.gov . **Table 3 -**  **3. Costs for U.S. Plumbing and Heating Equipment Supplies Wholesalers: 2007**  **NAICS -**  **Based Code**  **Me aning of NAICS**  **- Based Code**  **Year Number of**  **Employees Annual Payroll** 

**($1,000) Operating Expenses** 

**($1,000) Sales** 

**($1, 000)**  423720 Plumbing and heating equipment

supplies (hydronics) merchant wholesalers 2007 87,907 4,542,337 8,311,462 50,316,133 Source: U.S. Census Bureau, 2010c . American Fact Finder. Sector 42 : EC0742A1: Wholesale Trade: Geographic Area Series: Summary Statistics for the United States, States, Metro Areas, Counties, and Places: 2007. Released July 23, 2010. http://factfinder.census.gov . **Table 3 -**  **4. Costs for U.S. Specialized Home Furnishing Stores: 2007**  **NAICS -**  **Based Code**  **Me aning of NAICS**  **- Based Code**  **Year Number of**  **Employees Annual Payroll**  **($1,000) Sales**  **($1,000)** 442299 All other home furnishing stores 2007 19,057 3,427,682 27,326,976 Source: U.S. Census Bureau, 2010d. American Fact Finder. Sector 44 : EC0744A1: Retail Trade: Geographic Area Series: Summary Statistics for the United States, States, Metro Areas, Counties, and Places: 2007. Released July 23, 2010. http://factfinder.census.gov .* * * E.O. 12866 Review - Draft

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3 - 9 **3.2.1 End** 

**- Use Consumer Segments**  The intended end - use heating application is a primary driver of demand for residential heating devices. The U.S. Annual Housing Survey (HUD, 2008 ) provides a starting point for classifying the various types of residential consumer of heating equipment. For the purposes of this profile we grouped consumers into three major segments based on their desired heating needs : whole - house heating, secondary or zone heating, and recreational outdoor heating applications. The primary , or whole - house heating segment , includes homes with no other central heating s ys tem that can provide heating service in or outside the house. In smaller homes, a large stove or masonry

heater may

be suffici ent to provide heat to the entire house. However, larger homes ty picall y require, either individually or in some combination thereof, an outdoor wood boiler, a h ydronic heater, or a pellet - burning forced - air furnace, to meet the consumers ’ heating needs. The secondary , or zone heating segment , includes consumers that desire supplemental heat from a wood - burning device in homes with an existing central heating sy stem that serves as the home ’ s primary

heat source. Cordwood and wood pellet - burning stoves are ideal for heating a single room or zone within a home. Smaller masonry heaters are also well suited for zone heating needs. Finally , a third component of demand is represented by consumers who desire a wood burning device for recreational aesthetic heating applications. Outdoor fireplaces, chimineas, outdoor ovens, and pizza stoves are some examples of the wood - burning devices designed for recreational heating applications. The products that address the needs of this consumer segment are primarily

intended to enhance the aesthetics or landscape outside the home. Fireplaces are one typ e of heating equipment that stretches across multiple consumer demand segments. Although the primary functional purpose of an indoor fireplace is to provide room heat, only

about 9% of wood fireplaces are used for heat generation. The remaining fireplaces serve an aesthetic or recreational purpose only (HPBA, 2010a). **3.2.2 Regional Variation in Residential Demand**  In 2010, 2.1% of total occupied homes in the United S tates relied on wood heat as the primary fuel source for home heating. The demand for wood heat is concentrated in the Northeast, the Northwest, and the northern Midwest regions of the United States. Table 3 - 5* * * E.O. 12866 Review - Draft

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3 - 10 **Table 3 -**  **5. Wood as Primary Fuel Source for Ho**  **me Heating in the United States: 2006 –** 

**2008 State**  **Percentage of State Owner**  

** Occupied Houses** **Percentage of National Owner**  **- Occupied Houses**  **Count** California 2% 9% 165,440 New York 3% 6% 103,740 Pennsylvania 3% 6% 100,355 Washington 6% 5% 92,664 Michigan 3% 5% 85,712 Wisconsin 5% 5% 83,040 Oregon 8% 4% 79,637 Ohio 2% 4% 67,665 Virginia 3% 3% 60,579 North Carolina 2% 3% 58,397 Minnesota 3% 2% 43,234 Maine 10% 2% 41,509 Indiana 2% 2% 38,550 West Virginia 7% 2% 38,142 Idaho 8% 2% 32,817 Colorado 2% 2% 28,668 Vermont 15% 1% 26,601 Massachusetts 2% 1% 25,870 Montana 9% 1% 24,355 New Hampshire 7% 1% 24,071 Top 20 total 68% 1,221,046 National total 100% 1,792,741 Source: U.S. Census Bureau. 2009. American Community Survey: 2006

–2008 . Available at: http://factfinder.census.gov/servlet/DatasetMainPageS ervlet?_program=ACS&_submenuId=&_lang=en&_ ts= . illustrates this regional concentration b y listing the 20 states that represent the highest percentage of households that use wood heat based on Census data from 2006

–2008 . The second column shows the number of wood - heat users as a percentage of the total homes in the state, while the third column shows the number of wood - heated homes as a percentage of the total users in the United States. These 20 states account for over two - thirds of the total primary U.S. residential wood heat demand.* * * E.O. 12866 Review - Draft

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3 - 11 About 10

– 12% of American households use wood when secondary wood heat demand is counted, according to the Census and the Energy Information Administration (EIA). Table 3 - 6 illustrates the regional breakdown of secondary wood h eat demand b y U.S. Census divisions in 200 9 , which is the most recent ye ar for which these data are available . Roughl y 8% of the American households use wood as a secondary heat source. **Table 3 -**  **6. Wood as Secondary Heat Source by Census Division, 200**  **9 (mil lions of** 

**households)**

**Census Division Number of Households**  **Percentage of U.S.**  **Households using Wood as Secondary**  **Heat Source Percentage of Total**  **U.S. Households** South Atlantic 1.6 18 % 1 % Pacific 1.7 1 9 % 1 % East North Central 1.2 1 4 % 1 % West North Central 0.8 9 % 1 % West South Central 0.7 8 % 1% Mountain 0.8 9% 1% Middle Atlantic 1.0 11 % 1% East South Central 0.4 4 % 1 % New England 0.7 8 % 0% Grand total 8.8 100% 8 % Total U.S. households 11 3.6 Source: U.S. Energy Information Administration, 20 11 . Residential Energy Consumption Survey: 200 9 . Available at http://www.eia.gov/consumption/residential/data/2009/#undefined . Figure 3 - 1 shows which states fall into which Census divisions. More households rel y on wood fuel as a supplemental heat source rather than as a primary source. Roughl y 1 2 % of American households used wood fuel for a secondary heat source in 200 9 , whereas 3% of households relied on wood for their primary heat source in the same year. The proportion of the population using primary wood heat was relativel y consistent between 2005 data presented in Table 3 - 6 and the 2006 to 2008 period , as shown in Table 3 - 5. 4 One interesting note about

4 Although the total occupied households between the Department of Energy’s Residential Energy Consumption Survey [RECS] and the Census Bureau’s American Community Survey [ACS] differ, the proportion of total occupied households using wood fuel as their primary home heating fuel is consistent. The survey data sources used in Table 3 - 6 assumes 111 million occupied homes in 2009 while Figure 2 - 2 assumes 109 million fo r the same year.* * * E.O. 12866 Review - Draft

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3 - 12 **Figure 3 -**  **1. Census Regions and Divisions of the U**  **nited States** Source: U.S. Census Bureau, 2010e. Census Regions and Divisions of the United States. Available at http://www.census.gov/geo/www/us_regdiv.pdf . secondary wood fuel use is that it does not appear prevalent in the Middle Atlantic or New England states, which account for only 1 9 % of the total sec ondary use. This fact is in contrast to the primary

use data in Table 3 - 5, which shows households in Vermont, New Hampshire, Maine, Pennsylvania, Massachusetts, and New York accounting for 17% of the total national primary demand. Within the wood heat demand constituency, there is also regional demand variation for different wood - fueled appliances. For example, the demand for wood - fired forced - air furnaces is concentrated primaril y in the Great Lakes region of the country and, to a lesser extent, the Midwes t (HPBA, 2010a ). These two regions account for 82% of the 30,000 to 35,000 furnaces sold annually

in the United States (HPBA, 2010a ). Demand for wood - fueled cook stoves is c oncentrat ed i n the Amish and Mennonite comm unities in the Midwest (HPBA, 2010a ). **3.2.3 National Home Heating Trends**  Residential demand for wood fuel has been declining steadily throughout the United States over a fairl y long period of time . Figure 3 - 2 illustrates the number of households from 1989 to 200 5 that reported using wood fuel for heating, cooking, or heating water. In 1989,* * * E.O. 12866 Review - Draft

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3 - 13 **Figure 3 -**  **2. Declining Trend in U.S. Housing Units Using Wood Fuel: 1989** **– 2005**  Source: U.S. Housing and Urban Development [HUD]. 2008. American Housing Survey for the United States. Multiple Years. Table 3 - 5. Available at http://www.censu s.gov/hhes/www/housing/ahs/nationaldata.html . roughl y 15% of all occupied housing units used wood fuel. The proportion of wood - fuel users has declined relativel y steadil y throughout the past 20 years. By 2005, fewer than 9% of the total 109 million occup ied households in the United States used wood fuel for heating, cooking, or heating water. The indoor fireplace market illustrates the continuing decline in wood fuel use over the past decade (HPBA, 2010a). As discussed in the next sect ion, consumers are trending toward gas fireplaces instead of wood - fueled fireplaces. Fireplace manufacturers report that shipments of wood - fired factory- built fireplaces have been declining over the past decade as a result of the weakening new home constru ction market and the shift in consumer preferences toward gas fireplaces in the new homes that are being built (HPBA, 2010a). Of new home fireplaces, onl y 35% burn wood, whereas 65% are fueled b y gas (HPBA, 2010a). It should be noted, however, that this trend has been arrested to some degree in recent times as the cost of wood heating has come in line with the cost of oil and gas heating, and trends show an increase in wood heating in households as shown in the unit c ost memo prepared for this proposed rule . 9

9 U.S. EPA. Memorandum. Unit Cost Estimates of Residential Wood Heating Appliances. February 21, 2013. Prepared by EC/R, Inc.

**0% 2%**  **4% 6%**  **8% 10%**  **12% 14%**  **16%**

**1989 1991**  **1993 1995**  **1997 1999**  **2001 2003**  **2005 %** **o f** **T o** **t a** **l O** **c c** **u p** **i e** **d H** **o u** **s i** **n g** **U n** **i t** **s**

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3 - 14 **3.2.4 Substitution Possibilities**  The availability

of close substitutes for wood heating equipment is largely contingent on two key factors: (1) the consumer ’ s heating needs and preferences and (2) the price and availab ility

of an alternative heating source. As discussed in Section 3 .2.1, consumers tend to fall into one of three demand segments depending on their desired end use for their heating device. Each consumer group display s varying degrees of substitutability . The relative price of alternatives is also an important aspect of product substitution, which includes the cost of the heating equipment itself and the price and availability of the fuel it requires. For most consumers looking for whole - house heat or single - room heat, gas or electric heat provides a common substitute for wood fuel. Electricity can power central heating s ys tems for whole - house heat and smaller space heaters for single rooms. Since the majority of American households have eas y access to electric power, these home heating options are often a convenient and low - cost alternative to wood heat. Gas - powered central furnaces and room heaters and oil powered central heating sy stems are also on the market for residential use (DOE, 2009 ). Although most consumers have homes equipped for gas or electric power, more rural areas of the country have limited access to reliable utilities. In these regions, electric or gas heat may not be an available or cost - efficient choice relative to wo od heat. Recreational or aesthetic wood - fired appliances have fewer direct substitutes. Traditional indoor fireplaces and masonry fireplaces can be outfitted for burning natural gas rather than wood. Consumers may

have a preference for one over the other. Wood fuel can be mess y and somewhat difficult to store, whereas natural gas can be more convenient. Outdoor recreational appliances may

be difficult to substitute directly because many

consumers desire the aesthetic effect created b y a wood - burning fire pit or chim inea. Outdoor charcoal or gas grills provide an alternative for outdoor wood - fired cooking appliances, but consumers may not consider these a direct substitute. Itshould be noted that outdoor recreational wood - burning appliances such as fire pits, chimine a, and grills are not covered in this proposal. **3.2.5 Price Elasticity of Demand**  Price elasticity of demand is a concept in economic theory . It is a numeric measure of the sensitivity

of demand following an increase or decrease in the product ’ s price. The level of sensitivity

is determined by

a number of factors that include the availability and price of substitutes (e.g., other types of heating equipment, gas or electric space heaters and furnaces) and the price of complement s (wood fuels).* * * E.O. 12866 Review - Draft

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3 - 15 In preparing this profile, we searched for, but were unable to identify , any empirical estimates of the price elasticity of demand for residential wood heating equipment in recent times. An estimate of

− 1.6 was derived for use in the RIA for the current Residential Wood Combustion NSPS (EPA, 1986). Although numerous articles estimat e the elasticity of demand for residential energy

and heating fuels, these estimates focus almost exclusively on electricity, natural gas, and fuel oil. These estimates find that residential energ y and heating fuel demand is relativel y inelastic (i.e., there are onl y very small changes in demand in response to an increase in energy or fuel prices). A recent RAND report suggests that in the short term, demand for electricity and natural gas in resid ential markets is relativel y inelastic (Bernstein and Griffin, 2005 ). However, the authors of the report also note that sustained higher energy prices in the long term may

result in demand for energy becoming more elasti c as consumers have time to identify more energy- efficient options. In the absence of empirical estimates, we offer a qualitative discussion of the key determinant s of the price elasticity of demand to provide a general sense of whether consumer demand is elastic or inelastic. As mentioned earlier, the determinants of elasticity include the degree of substitutability, product necessity , and duration of the price increase. There are a number of close substitutes for residential wood heating devices that include electric and gas furnaces and space heaters. The extent to which consumers are able to substitute between these options is likely to vary depending on geographic location. Overall, the presence of good substitutes will increase the elasticity of demand for wood heating equipment. In contrast, sustained higher prices for heating fuel (i.e., electricity , natural gas, and fuel oil) may make switching away

from wood heating equipment less likely and, ultimately , make demand for wood heating equipment more inelastic . Also, the elasticity may depend on whether the fuel in question is a secondary source of fuel instead of a primary fuel source. Finally , the magnitude of the cost for residential wood heating equipment may also increase the elasticity of demand. Consumer demand tends to be more elastic when the price of the good represents a large proportion of consumer income (Bernstein and Griffin, 2005 ). In other words, consumers become more sensitive to small price changes when considering the purchase of a large household appliance (e.g., refrigerator, oven range, or heating s ys tem). **3.3 Industry Organization**  A review and description of market characteristics (i.e., geography, product differentiation, product transportation, entry barriers, and degree of concentration) can enhance our understanding of the mechanisms underl yi ng the wood heating equipment industry . These* * * E.O. 12866 Review - Draft

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3 - 16 characteristics provide indicators of a firm ’ s ability to influence market prices by varying the quantity of product it sells. For example, in markets with large numbers of sellers and identical products, firms are unlikely to be able to influence market prices via their production decisions (i.e., they are “price takers ” and operate in highly competitive markets). However, in markets with few firms, significant barriers to entry (e.g., licenses, legal restrictions, or high fixed costs), or products that are similar but can be differentiated, a firm may have some degree of market power (i.e., to set or significantly influence market prices). In addition, if a product is difficult to transport over long distance (due to weight or hazardous nature), then the market size may be more restricted than one might expect, all other things being equal. **3.3.1 Market Structure**  Market structure characterizes the level of competition and determines the extent to which producers and sellers can influence market prices. Economic market structure typicall y focuses on the number of producers and consumers, the barriers to market entry , and p roduct substitutability . The residential wood heater market contains a number of large producers selling a number of differentiated products along with a large number of small producers. These characteristics suggest a quasi - monopolistic competitive market (i.e., somewhere between highl y competitive and less competitive) for large producers who will have some influence over market prices. For small producers, the market will be highly competitive in nature. In addition, existing regulatory

requirements for product testing and certifications represent a barrier to market entry for new producers of wood heating devices. Competition in this market may be further constrained b y transportation costs due to the weight of these products. A similar assessment was de termined in the 1986 study by the American Enterprise Institute (AEI) and Brookings Institution Joint Center for Regulatory Studies. The AEI - Brookings report also identified several key factors that influence manufacturers ’ pric ing decisions. These factors included production prices, prices of similar products sold by

competitors, transportation costs, combustion technology and efficiency , and consumers ’ ability to differentiate products based on brand name and efficiency. Price elasticity of suppl y is a numeric measure of the industry ’ s response to a small percentage increase in the product price (Landsburg, 2005 ). The law of supply suggests producers suppl y greater quantities at higher prices as a result of increasing marginal returns for each additional unit produced as the average cost per unit of output declines. As a result, the elasticity of suppl y for most industries is positive. Determinants of suppl y elasticity are* * * E.O. 12866 Review - Draft

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3 - 17 flexibility of sellers to adjust production and the time period being considered in estimating the elasticity . Most manufactured goods have an elastic supply , meaning that sellers can adjust production quickly

in response to a change in prices (Mankiw, 1998 ). Industri es with excess plant capacity

are likel y t o have elastic suppl y as sellers can ramp up production in a relativel y short time frame. Based on 2006 plant capacity utilization data as shown in Figure 3 - 3, the heating equipment manufacturing industry averaged 60% utilization, growing from 59% in 2002 to a maximum utilization of 65% in 2005 and then falling to 54% in 2006 (U.S. Census Bureau, 2007 ). Similar statistics are not available for more recent ye ars because this survey wa s discontinu ed after 2006. The available data suggest that there is ample existing capacity to increase production in the short and long term s , assuming an increase in price of residential wood - burning heating equipment.

**Figure 3 -**  **3. Annual Plant Capacity**  **Utilization for Heating Equipment Manufacturers (NAICS 333414): 2002**  **– 2006**  Source: U.S. Census Bureau. 2007. Survey of Plant Capacity: 2006. “ Table 1a. Full Capacity Utilization Rates by Industry Fourth Quarter 2002

–2006. ” Census Bureau, Washington DC. Rep ort No. MQ - C1(06) . **3.3.2 Manufacturing Plants**  Since 1988, the change in the number of residential wood - fired heater producers is unclear. The U.S. Economic Census reports that between 1992 and 2007 the number of establishments (places of business) in the industry has remained unchanged. Alternativel y, the 59% 59% 62% 65% 54%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

2002 2003 2004 2005 2006**P l** **a n** **t C** **a p** **a c** **i t** **y U** **t i** **l i** **z a** **t i** **o n** 

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3 - 18 industry association (HPBA ) has suggested that the number of manufacturers of wood - fired heaters fell by

80% following the 1988 NSPS, down from approximately 500 to roughl y 120 manufacturers today

(Houck and Tiegs, 2009 ). The difference between the 2 estimates is thought to be due to the large number of “backyard welders ” in 1988 who built handmade stoves in their backyard as a sideline rather than their main source of income and chose not to attempt to develop competitive designs for the marketplace after the 1988 NSPS was promulgated. For this anal ys is, we were able to identify 635 firms in the residential wood heating equipment industry

in the United States. RTI developed this estimate leveraging a number of different s ources that included EPA ’ s official list of certified wood heater manufacturers, Dun & Bradstreet ’ s online company database, and a number of industry association membership lists. The estimate includes the manufacturers listed on EPA ’ s official certificati on lists (~120 manufacturers). We then expanded this list to include manufacturers of masonry heaters and outdoor wood boilers and manufacturers of non - heating devices, such as cook stoves, outdoor fireplaces, and bake ovens. Table 3 - 7 reports the count of U.S. - based companies in the industry by major business type. **Table 3 -**  **7. Number of U.S. Companies by Business Type**  **Business Type Number of Companies**  **Reported Sales 2008 ($1,000s)**  **U.S. Market Share (% of Net Sales)**  Manufacturers 577 $1,285,800 96.60% Masonry contractors 24 $7,200 0.54% Wholesalers, distributors 19 $34,200 2.57% Residential construction 10 $3,200 0.24% Retailers 5 $600 0.05% **U.S. Totals 635**  **$1,331,000 100%**  Source s : Dun & Bradstreet Marketplace , a company database . RTI International calculations. Residential wood heater m anufacturers account for over 90% of the firms in the industry and span 14 different NAICS codes, of which 560 are categorized as NAI CS 333414, as establishments primarily

engaged in manufacturing heating equipment (except electric and warm air furnaces), such as heating boilers, heating stoves, floor and wall furnaces, and wall and baseboard heating units (Census Bureau, 2010f ) . An average manufacturer may produce any where from one to five technically different products (HPBA, 2010a). Manufacturers dominate the market, accounting for over 96% of sales for the industry in 2008.* * * E.O. 12866 Review - Draft

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3 - 19 Maso nry contractors are the second largest group of businesses, accounting for 5% of the companies, and almost all masonry contractors are classified as NAI CS 238140 establishments primarily engaged in masonry

work, stone setting, brick laying, and other stone work for new construction, additions, alterations, maintenance, and repairs (U.S. Census Bureau, 2010f ). Masonry contractors account for less than 1% of the industry sales. The remaining 5% of businesses are classified as residential construction contractors, wholesalers, distributors, and retailers. Residential construction contractors are primarily associated with design construction and installation of masonry heaters, outdoor fireplaces, and hydronic heaters. Companies classified as wholesalers, distributors, and retailers do not manufacture products but may be tied exclusively

to a single brand or manufacturer, while others distribute and sell multiple products and brands. **3.3.3 Location**  The industry

is, for the most part, c o - located in areas of the country with the largest demand for winter heating. Over 50% of U.S. - owned companies are located in 10 states in the northern half of the country . The largest number of companies is located in California, with additional concentrations in the Northwest, Northeast, the upper Midwest, and Central Plains. Table 3 - 8 reports the number of U.S. companies for the top 10 states. Additionally, approximately

104 foreign - based companies operate in the United States, two - thirds of which are Canadian - based companies.* * * E.O. 12866 Review - Draft

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3 - 20 **Table 3 -**  **8. U.S. Wood Heat Equipment Industry by Geographic Location** 

**Location Business Count**  **% of Total U.S. Industry** California 63 10% Pennsylvania 36 6% Minnesota 35 6% New York 33 5% Washington 31 5% Ohio 29 5% Texas 29 5% Wisconsin 26 4% Michigan 25 4% Illinois 21 3% **U.S. Total 635**  **86%** Canada 67 9% Other foreign 37 5% **Industry Total 739**  **100%** Source s : Dun & Bradstreet Marketplace , a company database. RTI International calculations. **3.3.4 Company Sales and Employment**  Overall sales for the residential wood heating industry totaled more than $1.3 billion in 2008. Based on company data obtained for this profile, the industry employs approximately 17,000 workers annuall y. Previous anal ys is suggests that the industry relies on seasonal labor, ramping up production in months leading up to winter and reducing employ ment and production during the warmer parts of the year (AEI, 1986 ). Table 3 - 9 presents median sales and employ ment for the industry

by business type.* * * E.O. 12866 Review - Draft

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3 - 21 **Table 3 -**  **9. U.S. Sales and Employment Statistics by Business Type**  **Business Type Number of Companies**  **Median Sales 20 10**  **($1,000s) Median Em** **ploym ent** 

**per Company** Manufacturers 577 $204 4 Masonry contractors 24 $102 3 Wholesalers, distributors 19 $510 5 Residential construction 10 $102 2 Retailers 5 $102 2 U.S. Totals 635 $204 4 Source s : Dun & Bradstreet Marketplace , a company database. RTI International calculations. Median sales estimates are escalated to 2010 from 2008 using the GDP implicit price deflator. The resulting escalation ratio for these years is 1.022. Firms manufacturing heating equipment (except electric and warm air furnaces), such as heating boilers, heating stoves, floor and wall furnaces, and wall and baseboard heating units (NAICS 333414), are classified as small by the Small Business Administration (SBA, 20 13 ) if they have fewer than 500 employees. Looking across the 14 manu facturing - related NAICS codes in our anal ys is, we find that approximately 90% of manufacturers are considered small businesses based on their reported employ ment compared with the SBA threshold. SBA classifies wholesalers and distributors as small if their employ ment is fewer than 100 workers. Approximately

68% of the industry ’ s wholesalers and distributors are considered small based on the employ

ment data obtained for this anal ys is. SBA thresholds for masonry , construction, and retail firms are based on annual sales. SBA standards for NA IC S codes under these business ty pes range between $ 14 and $33 million in annual revenue. As reported in Table 3 - 9, median sales in these business categories are far below the range of SBA standards. As one would expect, our anal ys is finds that all 39 firms are considered small based on their reported annual sales compared with the SBA standards for their respective NAICS code classifications. 3.3.4.1 Profits of Affected Entities Table 3 - 10 reports profit margins for manufacturers, m asonry contractors, and wholesalers and distributors. The profit margin represents an average of reported profit per unit sales across the industry

classified by

the 6 - digit NAI CS code.* * * E.O. 12866 Review - Draft

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3 - 22 **Table 3 -**  **10. Profit Margins for NAICS 333414, 238140, and 423720: 2008**  **NAICS Code**  **NAICS Description Profit**  **Margin Industry** 

**Sales ($10**  **6 )**  333414 Heating Equipment Manufacturers 4.3% $70,965 238140 Masonry Contractors 4.7% $9,676 423720 Plumbing and Heating Equipment Supplies (Hydronics) Merchant Wholesalers 3.4% $58,907 Source: The Risk Management Association. 2008. Annual Statement Studies, Financial Ratio Benchmarks 2008

– 2009. Risk Management Association, Philadelphia: 2008 . **3.4 Residential Wood Heater Market**  Residential wood heating device shipments in the United States were relatively consistent from year to year between 1998 and 2005, according to the HPBA ’ s reported hearth industry shipment data (2009). Since 2005, total industry shipments on average have declined annuall y b y 24%. Industry

experts attribute this decline in large part to the broader economic downturn and poor housing market. Renewable energy t ax rebates offered in 2008 provided some relief for pellet - fueled devices, resulting in a 1 - ye ar increase in shipments of 161%, only to steepl y decline again in 2009. This reflects the impact that the renewable energy tax rebates can have on wood burning appliances depending on the size and duration of the rebates. Table 3 - 11 presents shipment volumes by

product ty

pe in 2008. Outdoor wood boilers (or hydronic heaters) are a relatively new product in the market since 1990. Previous studies have reported annu al growth in sales of between 30 and 128%, with over 155,000 outdoor wood boilers in use in the United States in 2006 (NESCAUM, 2006 ). Sales have been regionall y focused in the Northeast (especiall y the Great Lakes region) and Midwest ern states. The NESCAUM report predict ed that over 500,000 outdoor wood boilers will be in use before the end of 2010 if trends in annual sales continue to follow growth rates observed between 1990 and 2006. Market data for coal - burning stoves are very lim ited. However, anecdotal evidence suggests that coal stove use is limited to major coal states, including Penns ylvania, West Virginia, and Indiana, where coal is abundant and cheap relative to other heating fuels (Dagan,* * * E.O. 12866 Review - Draft

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3 - 23 **Table 3 -**  **11. Unit Shipments and Perc**  **entage of Total Units by Product Type: 2008 Product Type**  **Units % of Total Units**  Wood stove 166,527 33% Pellet stove 130,381 26% Biomass stove 6,819 1% Wood fireplaces a 180,966 36% Outdoor fireplaces 6,302 1% Masonry heaters 730 0% Hydronic central heating systems 13,385 3% **Total 505,110**  **100%** a Wood fireplaces in this table include both factory - built and site - built models. Source: Frost & Sullivan. 2010. Market Research Report on North American Residential Wood Heaters, Fireplaces, and Hearth Heating Products Markets. Prepared for EC/R Inc . 2005 ). Most of th e major stove manufacturers feature at least one coal - burning stove model. However, at the time of writing this profile, we were unable to locate any reliable estimate of shipments in the United States for coal stoves. **3.4.1 Market Prices**  Residential wood heater prices range from $200 to $50,000 depending on the product ty pe and characteristics. Consumers who purchase these products must also consider the costs of installation, which range between $300 and $6,000 on average. Tables 3 - 12 and 3 - 13 report the averag e cost of installation and purchase price for residential wood heating appliances. **Table 3 -**  **12. Installation Costs for Average System by Product Type (North America): 2008**  **Product Type Installation Cost**  Wood stove $500 Pellet stove $300 Biomass stove $300 Wood fireplaces $600 Outdoor fireplaces $350 Masonry heaters $6,000 Hydronic central heating systems $2,000 Source: Frost & Sullivan. 2010. Market Research Report on North American Residential Wood Heaters, Fireplaces, and Hearth Heating Products Markets. Prepared for EC/R Inc.* * * E.O. 12866 Review - Draft

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3 - 24 **Table 3 -**  **13. Manufacturers**  **’ Price by Product Type (North America): 2008** 

**Product Type Average Price**  **Price Range** Wood stove $848 $200 to $2,800 Pellet stove $1,279 $300 to $3,500 Biomass stove $1,403 $350 to $4,000 Wood fireplaces $450 $150 to $5,000 Outdoor fireplaces $755 $250 to $6,000 Masonry heaters $9,041 $4,000 to $15,000 Hydronic central heating systems $7,433 $5,000 to $35,000 Source: Frost & Sullivan. 2010. Market Research Report on North American Residential Wood Heaters, Fireplaces, and Hearth Heating Products Markets, Figure 2.6. Prepared for E c /R Inc. Given the specialized skills and materials required to construct a masonry heater, it is not surprising that this product has the highest average market price. Hydronic heaters are the second most expensive product partly because of the additional material requirements. The price of freestanding stoves and fireplace inserts varies depending on the fuel it burns. Biomass stoves are almost twice as expensive as cord wood - burning stoves because biomass stoves are more similar in construction to pellet stoves. Although no price data exist on coal - burning stoves, costs are comparabl e to traditional cord wood stoves. Coal stove prices for 2010 collected for this profile averaged $1,338 and ranged between $500 and $3,000 depending on the size and manufacturer. **3.4.2 International Competition**  The U.S. market for wood - fueled heating products h as been concentrated on the local scale in recent ye ars. Manufacturers concentrate production where wood heat is in demand, which is in the Northeast and Northwest. Some regions of the country have specific emissions requirements on wood burning, so consum ers may be restricted to buyi ng stoves and heaters that can cater to local regulations (Frost & Sullivan, 2010 ). Domestic producers have traditionall y faced some competition from European manufacturers in certain wood heat markets, but Asian manufacturers have been gaining market share, especiall y in the EPA - certified wood stove and currentl y exempt single - burn - rate stove market s (Frost & Sullivan, 2010 ). Asian - based companies, especiall y those i n China, have the advantage of relatively low overhead and labor costs compared with other companies worldwide (Frost & Sullivan, 2010 ). Although the products coming from these producers are lower in price, they are also lower in quality (Frost & Sullivan, 2010 ). However, money - conscious consumers have been willing to* * * E.O. 12866 Review - Draft

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3 - 25 settle for lower quality

stoves as the economy

remains uncertain (Frost & Sullivan, 2010 ). Comp anies from all over the world have been moving some manufacturing operations to China in an attempt to compete with Asian producers through low - cost production (Frost & Sullivan, 2010 ). Still, U.S. manufacturers are likel y to see increased competition from Asia in the future. The masonry

heater industry

is one in which foreign manufacturers play a substantial role. Over two - thirds of masonry heaters installed in the United States are manufactured outside of the country

(Seaton , 2010 ). Canadian and European producers sell masonry products through U.S. distributors, but most of these companies do not manufacture within the United States (Seaton, 2010 ). Some stove companies perform researc h and development, as well as assembl y of wood stoves in the United States, but import cast parts and components from Europe and China (HPBA, 2010a). The pellet stove industry has seen increasing foreign competition in recent ye ars. M any of the foreign manufacturers have made the business decision to sell products through American - owned businesses and thus the costs of EPA certification are sometimes passed on to the American seller /importer/licensee . **3.4.3 Future Market Trends**  While there has been a steady decline in the residential markets for wood heaters, fireplaces, and hearth products, increases in oil and gas prices have led to substitution back to wood as a source of heat in 2007, in which a growth rate of 16.4% between 2007 and 2008 to ok place in the se market s. However, demand for these products fell victim to the recession in 2009 (Frost & Sullivan, 2010 ). A weak residential construction market coupled with a tight credit market decreased overall demand in the market for wood heating products, leading anal ys ts to project a 2009 growth rate of −36.1% (Frost & Sullivan, 2010 ). The growth forecast for 2010 is expected to improve relative to 2009 to a rate of −4.1%, due in part t o the residual effects of the severe 2009 winter temperatures and the financial incentive provided b y the federal energy efficient tax credit (Frost & Sullivan, 2010 ). As the econom y continues to recover beyond 2010, demand s hould trend upward as consumers look to cut heating costs with wood and biomass (Frost & Sullivan, 2010 ). New home construction and increased credit availability will further foster demand, which is expected to grow at a comp ound annual rate of 4.1% from 2009 to 2015 (Frost & Sullivan, 2010 ). The current regional demand patterns are expected to continue, with the Northeast and Northwest regions of the country

driving wood fuel combustion demand, but anal ys ts anticipate that the wood heat product market will be embraced in other areas of the country in which wood and biomass are viable and inexpensive fuel sources (Frost & Sullivan, 2010 ).* * * E.O. 12866 Review - Draft

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3 - 26 Although the overall residential wood heat market is expected to grow, there may be variation in demand between individual product segments. Pellet and biomass stoves are expected to lead the way

in demand as consumers look for options with sustainable fuel sources and cleaner - burnin g technologies (Frost & Sullivan, 2010 ). Outdoor wood boilers (h ydronic heaters) saw a surge in demand throughout the 1990s and mid - 2000s, a trend that is projected to continue (Northeast States for Coordinated Air Use Management, 2006 ). Future demand for primary and secondary

wood - burning heating devices will be somewhat dependent on the price of wood fuel relative to electric and gas heat , as well as consumer preferences. Since fireplaces and masonry

fireplaces purchases are based on the added aesthetic value rather than function, future demand will likely stay in line with consumer preferences.* * * E.O. 12866 Review - Draft

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4 - 1 **SECTION 4 BASELINE EMISSIONS A** **ND EMISSION REDUCTIO NS**  **4.1 Introduction**  This section presents the baseline emissions for the pollutants emitted by affected units and also the resulting emissions after imposition of the two options considered for the proposed NSPS. We present the baseline emissions and emission reductions for P M 2.5 and also for other pollutants from affected units such as volatile organic compounds (VOCs) and carbon monoxide (CO). Baseline emissions were calculated using a 2008 base inventory and were then projected to future years beyond the promulgation of the rule in 2014 to 2022 and beyond, using emissions factors specific to the category of the affected unit (e.g., certified wood stove, pellet stove). These emissions factors are listed in the emissions memorandum for this proposed rule (Ec/R, 2013). Emission reductions were calculated from the baseline emissions based on the considered emissions limits for each appliance type affected for each option anal yz ed, and the emission reductions were used as inputs to the benefits analysis presented in Section 7. **4.2 Bac**  **kground to Emissions Estimates** We used the EPA Residential Wood Combustion (RWC) emission estimation tool , 11 which is an Access TM database that compiles nationwide RWC emissions using county level, process specific data and calculations. We summed the nationwide number of appliances and total tons of wood burned for each of the relevant product categories in the inventory . **Table 4 -**  **1. RWC**  **Emission Inventory Categor ies Used**  Woodstove: fireplace inserts; EPA certified; non - catalytic Woodstove: fireplace inserts; EPA certified; catalytic Woodstove: freestanding, EPA certified, non - catalytic Woodstove: freestanding, EPA certified, cat aly tic Woodstove: pellet - fired, general Woodstove: freestanding, non - EPA certified Hydronic heater: outdoor Furnaces: indoor, cordwood

11 rwc_2008_tToolv4.1_feb09_2010.zip.* * * E.O. 12866 Review - Draft

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4 - 2 We then made some adjustments/assumptions to the baseline RWC inventory . First, we deleted data in the RWC for non - certified stoves and inserts, as these cannot be sold. With the exception of wood stoves, we applied the PM 2.5 emission factors for each clas s to the total tons of wood burned and calculated an average emission rate/appliance/category . In the case of wood stoves, the RWC used an average of all PM 10 AP - 42 emission factors for wood stoves. 12 The RWC assumes that PM 10 and PM 2.5 factors are identical. At a minimum, we believe that all new wood stoves meet the AP - 42 PM 10 emission factors for “ Phase II ” stoves (the current NSPS). As described below, we went a step further and assumed that all new shipments will meet the current Was hington State limits, which are approximately 40 % less than the current NSPS. Second, we assumed that outdoor hydronic heaters and indoor hydronic heaters have the same emission profile. Single burn rate stoves are not included in the RWC as separate identifiable units. We assumed that they

would have the same baseline emission factor as freestanding non - certified woodstoves, i.e., 30.6 lb/ton of wood burned. We used the average tons burned per appliance factor as representative of these stoves as well. Ma sonry heaters are not included in the RWC database, and we were unable to identify a surrogate emission factor which could be used to estimate tons/appliance emissions. Therefore, we were not able to estimate emissions from these appliances for the purpose of this anal ys is. We used this subset of the RWC database to calculate a baseline average emission rate/appliance/category , including an adjustment of the RWC emission factor to the current Washington State limits where warranted. We multiplied the total tons of wood burned for the appliance by

the RWC emission factor (adjusted as appropriate) to calculate the total tons of PM 2.5 emissions. We divided this value by the number of appliances in the category to calculate the baseline average PM 2.5 emissions p er individual appliance, and these results are shown in Table 4 - 2.

12 AP - 42, Chapter 1.10, Residential Wood Stoves, Table 1.10 - 1 . See: http://www.epa.gov/ttnchie1/ap42/ch01/final/c01s10.pdf .* * * E.O. 12866 Review - Draft

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4 - 3 **Table 4**  **- 2**  **. PM**  **2.5 Tons**  **p er Appliance**  **Estimate (Baseline) Emission Inventory Category**  **Pollutant Baseline**  **Emission factor (lb/ton)**  **Emissions**

**(tons) Tons per** 

**appliance /**  **yr** Woodstove: fireplace inserts; EPA certified; non - catalytic Primary PM 2.5 8.76 5,371 0.0041 Woodstove: fireplace inserts; EPA certified; catalytic Primary PM 2.5 9.72 2,023 0.0047 Woodstove: freestanding, EPA certified, non - catalytic Primary PM 2.5 8.76 6,745 0.0077 Woodstove: freestanding, EPA certified, catalytic Primary PM 2.5 9.72 3,769 0.0101 Woodstove: pellet - fired, general Primary PM 2.5 3.06 1,798 0.0021 Hydronic heater: outdoor/indoor Primary PM 2.5 27.6 50,427 0.1383 Woodstove: freestanding, non - EPA certified a Primary PM 2.5 30.6 71,424 0.0324 Furnace: indoor, cordwood Primary PM 2.5 27.6 2,471 0.0582 Primary PM 2.5 30.6

a Non - EPA

certified wood stove emission factor and tons/appliance were used to represent single burn rate stoves . **4.2.1 Emissions**  **Factors** The next step in the analysis was to develop emission factors representing potential NSPS options to reduce emissions . The f ollowing is a summary

of the NSPS options considered in the proposal for each appliance type and examined in detail in Secti on 2. The NSPS options examined in this analy sis ( “ P roposal ” and “ A lternative ” ) are based on phased - in compliance dates, or “ steps ,” for subcategories of appliances. Proposed Subpart AAA will regulate “room heaters ” and includes adjustable burn rate stoves , single burn rate stoves, and pellet stoves. Proposed Subpart QQQQ will regulate “ central heaters ” and includes outdoor and indoor hydronic heaters and forced air furnaces. Proposed Subpart RRRR will regulate masonry heaters. Following is a summary

of the current NSPS implementation assumptions for appliances within the subcategories under both the P roposed and the A lternative options. As mentioned in Section 2, the P roposed option is a 2 - step standard with compliance dates of 2014 and 2019 for different appliances. The A lternative option is a 3 - step standard with compliance dates of 2014, 2017, and 2022 for different appliances. Subpart AAA ( “ room heaters ” ):

 These are a djus table burn rate , single burn rate, and pellet stoves : **Proposal** : Step 1 limit of 4.5 g/hr upon promulgation in 2014; and Step 2 limit of 1.3 g/hr five years* * * E.O. 12866 Review - Draft

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4 - 4 after promulgation in 2019. **Alternative** : Step 1 limit of 4.5 g/hr upon promulgation in 2014; Step 2 limit of 2.5 g/hr three ye ars after promulgation in 2017; and Step 3 limit of 1.3 g/hr eight years after promulgation in 2022. **Note** : The Step 1 limit is the 1995 Washington State standard for non - catal ytic stoves; the Alternative Step 2 limit is the 1995 W ashington State standard for catal yt ic stoves; and the proposed Step 2 (Alternative Step 3) limit is already met by the top performing catal ytic, non - catal ytic and pellet stove models , according to industry data . 13 Although previously unregulated and a less developed technology than adjustable burn rate stoves, single burn rate stove designs have been undergoing R&D in anticipation of the proposed NSPS and cleaner designs are nearl y market - ready. 14 Subpart QQQQ ( “ central heaters ” ):

 These are h ydronic heaters (both outdoor and indoor) : **Proposal** : Step 1 limit of 0.32 lb/mm BTU heat output upon promulgation in 2014; and Step 2 limit of 0. 06 lb/mm BTU heat output five years after promulgation in 2019. **Alternative** : Step 1 limit of 0.32 lb/mm BTU heat output upon promulgation in 2014; Step 2 limit of 0. 15 lb/mm BTU heat output three ye ars after promulgation in 2017; and Step 3 limit of 0.06 lb/mm BTU heat output eight ye ars after promulgation in 2022. **Note** : The Step 1 limit is the EPA “ Phase 2 “ voluntary program limit already met b y 36 h ydronic heater models (27 cord wood and 9 pellet models) built by 17 U.S. manufacturers ; the Alternative Step 2 limit is already met b y 11 h ydronic heater models (6 cord wood and 5 pellet models) built by 6 U.S. manufacturers ; and the proposed Step 2 (Alternative Step 3) limit is already met by 4 hydronic heater models (2 cord wood and 2 pellet models) built by 2 U.S. manufacturers 15 , as well as over 100 European manufacturers per test method EN 303 - 05 . 16

 Forced Air Furnac es : **Proposal** : Step 1 limit of 0. 93 lb/mm BTU heat output upon promulgation in 2014 ; and Step 2 limit of 0. 06 lb/mm BTU heat output five years after promulgation in 2019. **Alternative** : Step 1 limit of 0.93 lb/mm BTU heat output upon promulgation in 2014 ; Step 2 limit of 0. 15 lb/mm BTU heat output three ye ars after promulgation in 2017; and Step 3 limit of 0.06 lb/mm BTU heat output eight ye ars after promulgation in 2022. **Note** : The Step 1 limit is based on test data from development of Canadian standard B415.1 - 10 17 and conversation with industry regarding cleaner forced air furnace models currently being tested in R&D 18 . Forced air furnace designs able to meet the Alternative Step 2 and proposed Step 2

13 Final HPBA Heater Database version 2/25/10, EC/R received from Bob Ferguson for HPBA on 4/26/10 14 2/ 8/13 telephone discussion betwe en Gil Wood, USEPA, and a manufacturer of single burn rate stoves. 15 See list of cleaner hydronic heaters participating in EPA ’ s voluntary program at http://www.epa.gov/burnwise/owhhlist.html 16 European Wood - Heating Technology Survey: An Overview of Combustion Principles and the Energy and Emissions Performance Characteristics of Commercially Available Systems in Austria, Germany, Denmark, Norway , and Sweden; Final Report; Prepared for the New York State Energy Research and Development Authority; NYSERDA Report 10

– 01; April 2010. 17 CSA B415.1 - 10, Performance Testing of Solid - Fuel - Burning Heating Appliances. Appendix D. March 2010. 18 2/ 8/13 telephone discussion between Gil Wood, USEPA, and a manufacturer of forced air furnaces .* * * E.O. 12866 Review - Draft

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4 - 5 (Alternative Step 3) limits may be based on technology transferred from hydronic heater designs. Subpart RRRR including masonry heaters:

 Masonry

Heaters: **Proposal /**  **Alternative** (same): Step 1 limit of 0.32 lb/mm BTU heat output upon promulgation in 2014 for large manufacturers (defined as manufacturers constr

ucting ≥ 15 masonry

heaters per year), with a 5 - year (2019) small volume manufacturer compliance extension (for companies constructing < 15 units/year). No other phased - in limits are being proposed. **Note** : Based on data submitted by

the Masonry

Heater Assoc iation 19 , over 10 models already meet this limit. We developed adjusted emission factors to reflect the NSPS options discussed above, which were then used to calculate new average tons of emissions per appliance for each RWC appliance type. Conservative adjustments were assumed for NSPS emission factors (as noted below) in order to not overstate emission reductions under the NSPS options; actual emission reductions may

be greater than reductions resulting from our emission factor adjustments for the purpo se of this anal ys is. Following is a description of how the RWC factors were adjusted:

 Woodstove: all EPA certified . We determined the ratio of emissions between the existing NSPS limits compared to the Washington state standards , for they are tighter than the existing NSPS and have been in existence since 1995 . For both cataly tic and non - catal ytic devices, the Washington standard is 60% of the NSPS. We assumed this same ratio would appl y t o the emissions factors and multiplied the RWC emission factor b y 60% . We used these adjusted RWC emission factors (shown in Table 4 - 2) as both baseline and Step 1 emission factors for cataly tic and non - cataly

tic stoves. We made the conservative assumption (in terms of estimating potential emission reductions) that the Step 1 emission factor was the same as the baseline emission factor, because nearl y all current wood stove models already m eet the Step 1 limit according to industry

data. 20 We also conservatively assumed that the Alternative Step 2 emission factor for catal yti c stoves was the same as the baseline and Step 1 emission factor because approximately 90% of the current cataly tic models already meet the Alternative Step 2 limit, according to industry data. 10 For the Alternative Step 2 emission factor for non - cataly tic models, we scaled the Step 1 emission factor by the ratio of the Alternative Step 2 standard to the Step 1 standard (or 2.5/4.5 = 0.55). L ikewise, for the proposed Step 2 (Alternative Step 3) emission factor for both catal ytic and non - catal ytic models, we scaled the Alternative Step 2 emission factor by the ratio of the proposed Step 2 (Alternative Step 3) standard to the Alternative Step 2 standard (or 1.3/2.5 = 0.52). For consistency with our shipment data and

19 Attachment to 3/25/2011 e - mail from Timothy Seaton of Timely Construction to Gil Wood and Mike Toney of USEPA . 20 Final HPBA Heater Database version 2/25/10, EC/R received from Bob Ferguson for HPBA on 4/26/10 .* * * E.O. 12866 Review - Draft

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4 - 6 because the RWC database provides four separ ate emission factors for cataly tic and non - catal ytic, freestanding models and fireplace inserts, we used the weighted average value for all four wood stove ty pes to represent the total population of adjustable burn rate woodstoves. Finally , we multiplied the resulting emission factors by the total tons burned for the appliance ty pe (provided by

the RWC database) and then divided that by

the appliance population (also provided by the RWC database) to derive the tons/appliance of PM 2.5 emissions. The emission factors and tons/appliance are shown in the green rows in Table 4 - 3.

 Woodstove: pellet fired, general . We used the RWC emission factor shown in Table 4 - 2 as both the baseline and Step 1 emission factor for pellet stoves because nearl y all current pellet s tove models already meet the Step 1 standard according to industry data. 21 The RWC emission factor for pellet stoves is quite low compared to other appliances, which leaves little room to adjust the factor. For the Alternative Step 2 emission factor, we reduced the Baseline/Step 1 emission factor by onl y 10%, an adjustment based on industry data 11 that most pellet models (80%) already meet the Alternative Step 2 level. For the proposed Step 2 (Alternative Step 3) emission factor, we scaled the Alternative Step 2 emission factor by the ratio of the proposed Step 2 (Alternative Step 3) standard to the Alternative Step 2 standard (or 1.3/2.5 = 0.52). We multiplied the resulting emission factors b y the total tons burned for pellet stoves and then divided that b y the pellet stove appliance population to derive the tons/appliance of PM 2 .5 emissions. The emission factors and tons/appliance are shown in the orange row in Table 4 - 3.

 Woodstove: freestanding, non - EPA certified (single burn rate stoves) . As described above, we assumed that the freestanding non - EPA certified woodstove emission inventory category include s the population of single burn rate stoves. We therefore used the RWC emission factor for freestanding non - EPA certified woodstoves (30.6 lb/ton) as the baseline emission factor for single burn rate stoves. For the Step 1 emissi on factor, we used the same emission factor as a certified non - catal ytic stove meeting the Washington state standards (i.e., 8.76 lb/ton) because the same standard is being proposed for single burn rate stoves as for adjustable burn rate stoves. Likewise, we used the same emission factors used for non - catal ytic stoves for the Alternative Step 2 and proposed Step 2 (Alternative Step 3) emission factors. We multiplied the resulting emission factors by the total tons burned for this appliance category and then divided that by

the appliance population to derive the tons/appliance of PM 2.5 emissions. The emission factors and tons/appliance are shown in the grey

row in Table 4 - 3. 4.2.1.1 Hydronic Heater: Outdoor/Indoor. As noted above, we assumed that indoor hydronic heaters (a minority of the hydronic heater population) have the same emission profile as the outdoor hydronic heater appliance category provided in the RWC. According to the EPA voluntary hydronic heater program, the 21 Final HPBA H eater Database version 2/25/10, EC/R received from Bob Ferguson for HPBA on 4/26/10* * * E.O. 12866 Review - Draft

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4 - 7 “phase 2 ” heaters that are presumed to rep resent the Level I NSPS option are 90% cleaner than older unqualified units. 22 We assume as described in our emissions memorandum that the majority o f the existing inventory is represented by

these unqualified units, and applied a 90% reduction to the RWC baseline emission factor shown in Table 4 - 2 (27.6 lb/ton) to derive the Step 1 emission factor (2.76 lb/ton). For the Alternative Step 2 emission factor, w e assumed a 50 % reduction in the Step 1 emission factor since the Alternative Step 2 limit is approximately 50% of the Step 1 limit. Likewise, for the proposed Step 2 (Alternative Step 3) emission factor, we scaled the Alternative Step 2 emission factor by the ratio of the proposed Step 2 (Alternative Step 3) standard to the Alternative Step 2 standard (o r 0.06/0.15 = 0.40). We multiplied the resulting emission factors by the total tons burned for the h ydronic heater RWC appliance category and then divided that by the hydronic heater appliance population to derive the tons/appliance of PM 2.5 emissions. The emission factors and tons/appliance are shown in the blue row in Table 4 - 3. 4.2.1.2 Furnace: Indoor, Cordwood We used the RWC emission factor shown in Table 4 - 2 (27.6 lb/ton) as the baseline emission factor. For Step 1, we scaled the baseline emission factor b y 75% (to 6.9 lb/ton) because b ackground material provided in the CSA standards review process stated that the emission limit associated with this method wo uld result in an approximately 75 % reduction in emissions compared to a non - qualifying furnace. 23 The Alternative Step 2 and proposed Step 2 (Alternative Step 3) limits of 0.15 lb/mmBTU and 0.06 lb/mmBTU, respectively , are the same as the hydronic heater li mits. The baseline emission factors for each appliance category are also the same. Therefore we used the same Alternative Step 2 and proposed Step 2 (Alternative Step 3) emission factors used for hydronic heaters (1.38 lb/ton and 0.55 lb/ton, respectivel y) . We multiplied the emission factors b y the total tons burned for the cordwood furnace RWC appliance category and then divided that by the furnace appliance population to derive the tons/appliance of PM 2.5 emissions. The emission factors and tons/appliance are shown in the lavender row in Table 4 - 3 . See Table 4 - 3 for a summary of the emission factors and resulting tons/appliance values for the baseline and NSPS options analy zed. Table 4 - 3 presents the baseline, Step 1, Alternative Step 2, and proposed Step 2 (Alternative Step 3) emission factors for each appliance type resulting from our assumptions and adjustments described above. We

22 See the EPA Burnwise Website: http://www.epa.gov/burnwise/participation.html . 23 Review draft of CSA B415.1 - 10, Performance Testing of Solid - Fuel - Burning Heating Appliances . Appendix C . March 2010.* * * E.O. 12866 Review - Draft

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4 - 8 used the appropriate tons/appliance with annual shipment data to estimate annual PM 2.5 emissions based on the P roposed and A l ternative phased - in compliance dates.* * * E.O. 12866 Review - Draft

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**Em ission Inventory Category**  **Baseline Emiss**  **ion Factor**  **(lb/ton) Baseline** 

**Emiss ions/**  **Appliance (tons)**  **Tons/**

**Appl/yr Step 1** 

**Emiss ion**  **Factor Tons/** 

**Appl/yr Alt. Step 2** 

**Emission Factor**  **lb/ton Alt. Step 2** 

**Tons/appl Step 2** 

**(Alt. Step 3) Emission**  **Factor lb/ton**  **Step 2**

**(Alt. Step 3) Tons/appl**  Woodstove: fireplace inserts; EPA certified; non - catalytic 8.76 5,371 0.0041 8.76 0.0041 4.82 0.0023 2.51 0.0012 Woodstove: fireplace inserts; EPA certified; catalytic 9.72 2,023 0.0047 9.72 0.0047 9.72 0.0047 5.05 0.0025 Woodstove: freestanding, EPA certified, noncatalytic 8.76 6,745 0.0077 8.76 0.0077 4.82 0.0042 2.51 0.0022 Woodstove: freestanding, EPA certified, catalytic 9.72 3,769 0.0101 9.72 0.0101 9.72 0.0101 5.05 0.0052 Woodstove: pellet - fired, general 3.06 1,798 0.0021 3.06 0.0021 2.75 0.0019 1.43 0.0010 Hydronic heater: outdoor 27 . 6 5,043 0.138 3 2.76 0.0138 1 . 3 8 0.00 69 0 .5 5 0.00 2 8 Furnace: indoor, cordwood 27 . 6 9,053 0. 1032 6.9 0.0258 1.38 0.00 52 0.55 0.002 1 Single Burn Rate Stoves (freestanding, non - EPA certified) 30 .6 20,447 0.0 324 8.76 0.0093 4 .8 2 0.005 1 2.51 0.002 7* * * E.O. 12866 Review - Draft

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4 - 10 **4.2.2 Voluntary**  **Programs** Within these emissions projections are the effects not only of rules but also of various voluntary programs managed by

EPA and states. Studies have shown that fine particle (PM 2.5 ) concentrations in proximity to a typical outdoor wood boiler are l ikel y to exceed the 24 - hour National Ambient Air Quality Standards (NAAQS) . 18 Thus, the EPA developed a hydronic heater voluntary program to encourage manufacturers to reduce impacts on air quality through developing and distributing cleaner, more efficient hydronic heaters. We developed the voluntary program because it could bring cleaner models to market faster than the traditional federal regulatory

process. Phase 1 19 emission level (0.60 pounds per million British Thermal Unit (lb/MMBTU) heat input) qualifying 20 units are approximately 70 % cleaner than ty

pical unqualified units. After March 31, 2010, units that only meet the Phase 1 emission level are no longer considered “ qualified models ” under the voluntary program. Phase 2 emission level (0.32 lb/MMB TU heat output) qualifying units are approximately 90 % cleaner than ty

pical unqualified units. Ty picall y, qualified models have improved insulation, secondary combustion, separation of the firebox from the water jacket, and the addition of improved heat ex changers. In addition to the voluntary program, the EPA provided technical and financial support for the Northeast States for Coordinated Air Use Management (NESCAUM) to develop a model rule which several states have adopted to regulate hydronic heaters. The model rule is a starting point for local regulatory authorities to consider, and additional actions may be needed due to site - specific concerns, e.g. , local terrain, meteorology , proximity of neighbors and other exposed individuals. Thus, some regulatory authorities have instituted additional requirements, including bans on hydronic heaters in some areas. The EPA also developed a similar voluntary partn ership program for low - mass fireplaces (engineered, pre - fabricated fireplaces) and site - built masonry fireplaces. The original partnership agreements were dated February 19, 2009, and pertained to low - mass fireplaces. On July 4, 2009, the program was expan ded to other fireplaces, e.g. , masonry fireplaces. Under this

18 For more information on wood smoke health effects, See: “ Smoke Gets in Your Lungs: Outdoor Wood Boilers in New York State, ” prepared by Judith Schrieber, Ph .D., et al., for the Office of the Attorney General of New York. August 2005. See also: “ Assessment of Outdoor Wood - fired Boilers, ” prepared by NESCAUM, March 2006 (revised June 2006). 19 Phase 1 ” and “ Phase 2 ” emission levels refer to levels established i n EPA voluntary programs. The earlier use of the term “ Phase II ” (with a Roman numeral) standard refers to standards established in the current subpart AAA for residential wood heaters. 20 The terms “ qualified ” and “ unqualified, ” or other similar terms, re fer to models that meet the voluntary program performance levels. Later use of the terms “ certified ” and “ uncertified, ” or other similar terms, refers to models that are deemed to be in compliance with the NSPS emission limits.* * * E.O. 12866 Review - Draft

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4 - 11 program, cleaner burning fireplaces are ones that qualify for the Phase 1 emissions level of 7.3 g of particles emitted per kg of fuel burned (approximately 57 % cleaner than unqualified models) or the Phase 2 emissions level of 5.1 g/kg (approximately 70 % cleaner than unqualified models). So far, 11 models have qualified under this voluntary program at the Phase 2 level. Ty picall y, qualified models have improved insulation and added secondary combustion and/or a catal ys t to reduce emissions. Some manufacturers have added closed doors to reduce the excess air and thus improve combustion. After the EPA considers the comments on today ’ s proposal, the EPA will consider tighten ing the Phase 2 voluntary qualifying level as an additional tool for state and local agencies that need to reduce emissions further in order to attain the PM 2.5 NAAQS. **4.2.3 Shipment Data Used to Estimate Baseline Emissions**  We used data in the Frost & Sullivan Market (F&S) report21 on 2 008 shipments by product category , and F&S revenue forecasts which incorporated the weak econom y in years 2009 and 2010, to c alculate the reduced number of shipments in years 2009 and 2010. Forced air furnaces were outside the scope of the F&S report . In st ead, we use d manufacturer estimates of total industry

sales in 2008 22 and applied the F&S market factors to estimate shipments through 2010. The F&S wood stove numbers included both certified and non - certified stoves, so we estimated numbers of non - certifi ed stove shipments out of the total reported wood stove category . 23 These shipments were deleted from the total wood stove category shipments . We expanded the 2008 single burn rate estimate using the F&S factors . For ye ars 2011 through 2038 (for the prop osed NSPS) and 2011 through 2041 (for the alternative approach) e stimated shipments are based on a forecasted revenue growth rate of 2.0%, in keeping with the average annual growth in real GDP predicted b y the Conference Board . 24 There is not a perfect correlation between shipments and revenue (for example, because of their higher unit cost, pellet stoves generate more absolute revenue than wood stoves), but as stated in our emissions memorandum, we think the overall trend in the projection is reasonable in the absence of specific shipment projections.

21 Market Research and Report on North American Residential Wood Heaters, Fireplaces, and Hearth Heating Products Market . Prepared by Frost & Sullivan . April 26, 2010. pp . 31 - 32. 22 NSPS Revie w and Comments . Confidential Business Information submitted by manufacturer. September 2010. 23 Memo to Gil Wood, USEPA, from EC/R, Inc. Draft Estimated Emissions from Wood Heaters. February 15, 2013. 24 2013 Global Outlook projections prepared by the Conference Board in November 2012; http://www.conference board.org/data/globaloutlook.cfm* * * E.O. 12866 Review - Draft

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4 - 12 Our cost effectiveness analy sis (CE) 25 assumes a 20 - ye ar model design lifespan as well as a 20 - year use/emitting appliance lifespan. These assumptions were made to conservativel y characterize the actual model design and use lifespans given that many models developed for the 1988 NSPS are still being sold (after 25 ye ars), many “new ” models still have the same internal working parts with merely exterior cosmetic changes, and most stove s in consumer homes emit for at least 20 ye ars and often much longer . Therefore our CE anal ys is tracks shipments through ye ar 2038 for the proposed NSPS and through year 2041 for the alternative approach (i.e., assuming a 20 ye ar design life for a model me eting the Step 2 limit in year 2019 under the proposed NSPS, and for a model meeting the Alternative Step 3 limit in year 2022 under the alternative approach) . A truncated summary of our actual shipment data which extended through ye ars 2038 for the propos ed NSPS and 2041 for the alternative approach can be found in the emissions memo for this proposal . S ee the CE analy sis spreadsheets that are in the public docket for the complete shipment data. **4.3 Estimated**  **PM 2.5**  **Emissions from Shipments of New Appliances**  A s described above, w e calculated the average emissions per appliance typ e using the emission factor for each category multiplied by

the inventory

value of total tons of wood burned divided by

the number of appliances in the inventory population. This value was then multiplied by the number of shipments to calculate total emissions from each category per year under baseline conditions ( i.e., in the absence of an NSPS ) . More information on these calculations is available in the emissions memorandum in the doc ket for this rulemaking. 26 Table 4 - 5 on the next page shows a truncated summary of the estimated PM 2.5 emissions (in tons) under baseline conditions through year 2022. We then estimated emissions under the proposed NSPS (Table 4 - 6) and under the alternati ve approach (Table 4 - 7) based on the respective assumptions and phase - in timelines for each. Under the proposed NSPS, the Step 1 limit becomes effective in 2014 and the Step 2 limit in 2019; while under the alternative approach, the Step 1 limit becomes ef fective in 2014, the Step 2 limit in 2017, and the Step 3 limit in 2022. (Note that the proposed Step 2 limit is the same as the alternative Step 3 limit, although the compliance dates differ.) The emission estimates assume that the total number of shipped units meet the standard in the ye ar the standard is implemented.

25 See cost effective (CE) spreadsheets including for PM 2.5 the 2019 Step 2 Wood Heater NSPS PM25 CE 7% Feb14_2013.xls for the CE analysis supporting the proposed NSPS, and the 3 Ste p Wood Heater NSPS PM25 CE 7% Feb14_2013.xls for the alternative approach . All of these spreadsheets are found in the public docket for this rulemaking. 26 Memo to Gil Wood, USEPA, from EC/R, Inc. Draft Estimated Emissions from Wood Heaters. February 15, 2 013.* * * E.O. 12866 Review - Draft

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4 - 13 Tables 4 - 4 , 4 - 5 , and 4 - 6 show emission estimates out to year 202 2 for comparison . These are truncated summaries . O ur CE anal ys is tracks emission reductions out through 2057 for the proposed NSPS and through 2060 for the alternative approach, assuming a 20 year design life for a model meeting each phased - in limit, and conservatively assuming that stoves shipped in the 20 th ye ar of design life will be emitting in homes for another 20 ye ars. See the cost - effectiveness anal ys is spreadsheets 27 for all years of emission data , both baseline and under each NSPS option considered . These spreadsheets are available in the public docket for this rulemaking. Note: No emission tables are provided for Su bpart RRRR regulating masonry heaters because emission estimates are not available for these appl iances as explained earlier in this RIA section .

27 See cost effective (CE) spreadsheets including for PM 2.5 the 2019 Step 2 Wood Heater NSPS PM25 CE 7% Feb14_2013.xls for the CE analysis supporting the proposed NSPS, and the 3 Step Wood Heater NSPS PM25 CE 7% Feb14_2013.xls for the Alternative app roach.* * * E.O. 12866 Review - Draft

– Do Not Cite, Quote or Release During Review ***4-14 **Table 4 -**  **4. Estimated**  **PM 2.5**  **Emissions (Tons) :**  **Baseline 2008**  **2009 2010**  **2011 2012**  **2013 2014**  **2015 2016**  **2017 2018**  **2019 2020**  **2021 2022**  Wood stoves 761 486 467 4 76 486 495 5 05 5 1 5 5 2 6 53 6 547 558 5 69 580 592 Single burn rate stoves 1,295 827 794 8 1 0 82 6 843 860 877 8 9 5 912 931 949 968 988 1 ,007 Pellet stoves 277 177 170 17 3 1 77 180 1 8 4 187 191 195 199 2 03 2 07 2 11 2 15 Furnace: indoor, cordwood 4,230 2,703 2,595 2,6 47 2, 699 2,75 3 2,809 , 2,865 2,922 2,980 3, 040 3, 101 3, 163 3, 226 3,2 9 1 H ydronic heating systems 1, 851 1, 183 1, 136 1, 1 5 8 1,1 82 1,20 5 1,2 2 9 1, 2 5 4 1, 279 1, 305 1, 331 1,357 1,384 1,412 1,440 **Total 8,414**  **5,376 5,161**  **5,26 5**  **5, 37**  **0 5**  **, 477**  **5 ,5**  **87 5**  **, 699**  **5 ,**  **8 12**  **5,929 6,047**  **6 ,**  **168 6,292**  **6,417 6,546**  **Table 4 -**  **5. Estimated**  **PM 2.5**  **Emissions (Tons) :**  **Proposed Option**

**2008 2009**  **2010 2011**  **2012 2013**  **2014 2015**  **2016 2017**  **2018 2019**  **2020 2021**  **2022** Wood stoves 761 486 467 4 76 486 495 5 05 5 1 5 5 2 6 53 6 547 202 20 6 210 214 Single burn rate stoves 1,295 827 794 8 1 0 82 6 843 246 251 256 261 266 78 79 81 82 Pellet stoves 277 177 170 17 3 1 77 180 1 8 4 187 191 195 199 95 97 99 101 Furnace: indoor, cordwood 4,230 2,703 2,595 2,6 47 2, 699 2,75 3 702 716 731 745 760 62 63 65 66 H ydronic heating systems 1, 851 1, 183 1, 136 1, 1 5 8 1,1 82 1,20 5 12 3 1 2 5 1 28 1 30 1 33 27 28 28 29 **Total 8,414**  **5,376 5,161**  **5,26 5**  **5, 37**  **0 5**  **, 477**  **1,760 1**  **, 795**  **1 ,**  **831 1,868**  **1,905 464**  **473 482**  **492*** * * E.O. 12866 Review - Draft

– Do Not Cite, Quote or Release During Review ***4-15 **Table 4 -**  **6. Estimated**  **PM 2.5**  **Emissions (Tons) : Alternative Option**  **2008 2009**  **2010 2011**  **2012 2013**  **2014 2015**  **2016 2017**  **2018 2019**  **2020 2021**  **2022** Wood stoves 761 486 467 4 76 486 495 5 05 5 1 5 5 2 6 373 380 388 39 6 404 214 Single burn rate stoves 1,295 827 794 8 1 0 82 6 843 246 251 256 144 147 149 152 155 8 2 Pellet stoves 277 177 170 17 3 1 77 180 1 8 4 187 191 176 179 183 186 190 101 Furnace: indoor, cordwood 4,230 2,703 2,595 2,6 47 2, 699 2,75 3 702 716 731 149 152 155 158 161 66 H ydronic heating systems 1, 851 1, 183 1, 136 1, 1 5 8 1,1 82 1,20 5 12 3 1 2 5 1 28 65 67 68 69 71 29 **Total 8,414**  **5,376 5,161**  **5,26 5**  **5, 37**  **0 5**  **, 477**  **1,760 1**  **, 795**  **1 ,**  **831 906**  **925 943**  **962 981**  **492*** * * E.O. 12866 Review - Draft

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4 - 16 From the tables above, we see that the PM 2.5 emission reductions in 2022 are the same at 6,054 tons. The average of the annual emission reductions between the ye ar of rule promulgation, 2014, and the year that both options are full y implemented (2022) is 4, 8 25 tons for the Proposed option and 4,8 7 8 tons for the Alternative option. **4.4 Methodology**  **for Estimating VOC Emissions from New Units** We used the same methodology described in Se ction 4.3 to develop emission estimates for VOC emissions . Using the RWC database, we developed an estimate of VOC emissions per appliance using baseline emission factors. Then, using the same NSPS phase - in assumptions and anticipated emission reductions (i.e., that VOC reductions are comparable to PM 2.5 reducti ons), we developed emission factors to be used in anal yzing the NSPS options. Table 4 - 7 provides the VOC emission factors .* * * E.O. 12866 Review - Draft

– Do Not Cite, Quote or Release During Review ***4-17 **Table 4 -**  **7 .**  **NSPS VOC Emission Factors**

**Emission Inventory Category Baseline**  **Emission Factor**  **(lb/ton) Emissions** 

**(tons) Tons/** 

**Appl/Yr Step 1** 

**Emission Factor**  **(lb/ton) Step 1** 

**Tons/ Appl/Yr**  **Alt. Step 2**

**Emission Factor**  **(lb/ton) Alt. Step 2** 

**Tons/ Appl/Yr**  **Step 2**

**(Alt. Step 3) Emission**  **Factor (lb/ton)**  **Step 2**

**(Alt. Step 3) Tons/**  **Appl./Yr** Woodstove: fireplace inserts; EPA certified; non - catalytic 12 7,357 0.0056 12 0.0056 6.6 0.0031 3.432 0.0016 Woodstove: fireplace inserts; EPA certified; catalytic 15 3,121 0.0073 15 0.0073 15 0.0073 7.800 0.0038 Woodstove: freestanding, EPA certified, non - catalytic 12 9,240 0.0106 12 0.0106 6.6 0.0058 3.432 0.0030 Woodstove: freestanding, EPA certified, catalytic 15 5,817 0.0155 15 0.0155 15 0.0155 7.800 0.0081 Woodstove: pellet - fired, general 0.041 24 0.000 30 0.041 0.00003 0.037 0.00003 0.019 0.00001 Hydronic heater: outdoor 11 . 7 2,138 0.05 86 1 . 17 0.0059 0. 5 9 0.0028 0.234 0.0012 Furnace: indoor, cordwood 11 . 7 3,838 0.0 437 2.925 0.0109 0.59 0.0022 0.234 0.0009 Single burn rate stoves (freestanding, non - EPA

certified) 53 21,288 0.0 56 1 12 0.0127 6.6 0.0070 3.432 0.0036* * * E.O. 12866 Review - Draft

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4 - 18 Using the same assumptions as we used for PM 2.5 , we calculated VOC emissions at baseline and under each NSPS option based on a 20 - ye ar model design lifespan for appliance shipments as well as a 20 - ye ar appliance life. Tables 4 - 8 through 4 - 10 provide the time series of VOC annual emissions estimates between 2008 and 2022 for baseline, and the NSPS options considered under the proposed NSPS revision.* * * E.O. 12866 Review - Draft

– Do Not Cite, Quote or Release During Review ***4-19 **Table 4 -**  **8. Estimated VOC Emissions (Tons)**  **: Baseline**  **2008 2009**  **2010 2011**  **2012 2013**  **2014 2015**  **2016 2017**  **2018 2019**  **2020 2021**  **2022** Wood stoves 1 ,085 6 93 6 6 6 679 692 706 720 735 750 7 6 5 780 795 811 828 844 Single burn rate stoves 2 ,2 43 1,433 1,3 7 6 1,403 1,431 1,460 1,489 1,519 1,549 1,580 1,612 1,644 1,677 1,711 1 ,745 Pellet stoves 4 2 2 2 2 2 2 3 3 3 3 3 3 3 3 Furnace: indoor, cordwood 1 , 79 3 1 , 146 1 , 100 1 , 122 1 , 144 1,167 1,191 1,214 1,239 1,263 1 , 289 1 , 315 1,341 1 , 368 1,3 9 5 H ydronic heating systems 785 502 481 491 50 1 511 52 1 5 32 542 553 564 575 587 599 611 **Total 5**  **, 909**  **3 ,**  **7 7**  **6 3**  **,6 25**  **3 ,6**  **97 3,771**  **3 ,**  **847 3**  **, 924**  **4,002 4**  **, 08**  **2 4,164**  **4,247 4**  **, 332**  **4,419 4,507**  **4,597 Table**  **4 -**  **9. Estimated VOC Emissions (Tons)**  **: Proposed Option**

**2008 2009**  **2010 2011**  **2012 2013**  **2014 2015**  **2016 2017**  **2018 2019**  **2020 2021**  **2022** Wood stoves 1,085 693 666 679 692 706 720 735 750 765 780 293 298 304 311 Single burn rate stoves 2,243 1,433 1,376 1,403 1,431 1,460 337 344 351 358 365 106 109 111 113 Pellet stoves 4 2 2 2 2 2 2 3 3 3 3 1 1 1 1 Furnace: indoor, cordwood 1,793 1,146 1,100 1,122 1,144 1,167 298 304 310 316 322 26 27 27 28 H ydronic heating systems 785 502 481 491 501 511 52 53 54 55 56 12 12 12 12 **Total 5,909**  **3,776 3,625**  **3,697 3,771**  **3,847 1,410**  **1,438 1,467**  **1,496 1,526**  **438 447**  **456 465** * * * E.O. 12866 Review - Draft

– Do Not Cite, Quote or Release During Review ***4-20 **Table 4 -**  **10. Estimated VOC Emissions (Tons)**  **: Alternative Option 2008**  **2009 2010**  **2011 2012**  **2013 2014**  **2015 2016**  **2017 2018**  **2019 2020**  **2021 2022**  Wood stoves 1,085 693 666 679 692 706 720 735 750 541 552 563 574 586 311 Single burn rate stoves 2,243 1,433 1,376 1,403 1,431 1,460 337 344 351 197 201 205 209 213 113 Pellet stoves 4 2 2 2 2 2 2 3 3 2 2 2 2 3 1 Furnace: indoor, cordwood 1,793 1,146 1,100 1,122 1,144 1,167 298 304 310 63 64 66 67 68 28 H ydronic heating systems 785 502 481 491 501 511 52 53 54 28 28 29 29 30 12 **Total 5,909**  **3,776 3,625**  **3,697 3,771**  **3,847 1,410**  **1,438 1,467**  **831 848**  **864 882**  **899 465** * * * E.O. 12866 Review - Draft

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4 - 21 From the tables above, we can show that the VOC emission reductions in 2022 are the same for each option at 4,132 tons. The average of the annual emission reductions between the ye ar of rule promulgation, 2014, and the year that both options are fully impl emented (2022) is 3,237 tons for the Proposed option and 3,241 tons for the Alternative option. **4.5 Methodology for Estimating CO Emissions from New Units**  We used the same me thodology described in Section 4.3 to develop estimates for CO emissions. Using the RWC database, we developed an estimate of CO emissions per appliance using baseline emission factors. Then, using the same NSPS phase - in assumptions and anticipated emission reductions (i.e., that CO reductions are comparable to PM 2.5 reductions), we develo ped emission factors to be used in anal yz ing the changes in emissions from appl yi ng the NSPS options. Table 4 - 11 presents the CO emission factors .* * * E.O. 12866 Review - Draft

– Do Not Cite, Quote or Release During Review ***4-22 **Table 4 -**  **11 .**  **NSPS CO Emission Factors**

**Emission Inventory Category Ba**  **seline Emission**  **Factor (lb/ton)**  **Baseline**

**Emissions (tons)**  **Tons/**

**Appl/Yr Step 1** 

**Emission Factor**  **(lb/ton) Step 1** 

**Tons/ Appl/Yr**  **Alternative**

**Step 2 Emission**  **Factor (lb/ton)**  **Alternative**

**Step 2 Tons/**  **Appl./Year Alternative** 

**Step 3 Emission**  **Factor (lb/ton)**  **Alterna tive** 

**Step 3 Tons/Appl./**  **Year** Woodstove: fireplace inserts; EPA certified; non - catalytic 140.8 86,323 0.0662 140.8 0.0662 77.4 0.0364 40.269 0.0189 Woodstove: fireplace inserts; EPA certified; catalytic 104.4 21,725 0.0509 104.4 0.0509 104.4 0.0509 54.288 0.0264 Woodstove: freestanding, EPA certified, non - catalytic 140.8 108,418 0.1241 140.8 0.1241 77.4 0.0683 40.269 0.0355 Woodstove: freestanding, EPA certified, catalytic 104.4 40,486 0.1082 104.4 0.1082 104.4 0.1082 54.288 0.0563 Woodstove: pellet - fired, general 15.9 9,344 0.0110 15.9 0.0110 14.31 0.0099 7.441 0.0052 Single burn rate stoves (freestanding, non - EPA - certified) 23 0.8 249,785 0. 2442 140.8 0.1489 77.4 0.0819 40.269 0.0426 Hydronic heater: outdoor 184 33,618 0.0922 18.4 0.0922 9.2 0.0461 3.680 0.0184 Furnace: indoor, cordwood 18 4 60,355 0. 6878 46 0.1719 9.2 0.0344 3.680 0.0138* * * E.O. 12866 Review - Draft

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4 - 23 Using the same assumptions as we used for PM 2.5 , we calculated CO emissions at baseline and for the two NSPS options we are considering. Table 4 - 12 shows the annual baseline emissions for CO for 2008 to 2022, and Tables 4 - 13 and 4 - 14 show the CO emissions under the Proposed and Alternative options.* * * E.O. 12866 Review - Draft

– Do Not Cite, Quote or Release During Review ***4-24 **Table 4**  **- 12.**  **Estim ated CO Emissions (Tons)**  **: Baseline**  **2008 2009**  **2010 2011**  **2012 2013**  **2014 2015**  **2016 2017**  **2018 2019**  **2020 2021**  **2022** Wood stoves 1 0,918 6,97 6 6 ,69 7 6,831 6,968 7,107 7,249 7,394 7,54 2 7, 6 93 7,847 8,004 8.1 6 4 8,327 8,494 Single burn rate stoves 9,766 6,241 5,991 6,111 6 ,233 6,358 6,485 6,614 6,747 6,882 7.019 7,160 7,303 7,449 7,598 Pellet stoves 1,438 919 882 900 918 936 955 974 994 1,014 1,034 1,055 1,076 1,097 1,119 Furnace: indoor, cordwood 28,198 18 , 019 17 , 298 17 ,6 44 17 , 997 18,357 18,724 19,098 19,480 19,870 20,267 , 20 , 672 21 , 086 21,508 21, 9 38 H ydronic heating systems 1 2 , 343 7 , 887 7 , 572 7 , 723 7 , 878 8, 0 35 8 , 1 9 6 8 , 360 8 , 527 8,698 8,872 9,049 9,230 9,415 9,603 **Total 62**  **, 663**  **40 ,**  **042 38**  **, 440**  **39 ,2**  **09 39**  **, 993**  **40 ,**  **793 41**  **, 609**  **42 ,**  **441 43,290**  **44,156 45,039**  **45 ,**  **940 46,858**  **47,796 4**  **8 ,7**  **51 Table 4**  **- 13.**  **Estimated CO Emissions (Tons) : Proposed Option** 

**2008 2009**  **2010 2011**  **2012 2013**  **2014 2015**  **2016 2017**  **2018 2019**  **2020 2021**  **2022** Wood stoves 1 0,918 6,97 6 6 ,69 7 6,831 6,968 7,107 7,249 7,394 7,54 2 7, 6 93 7,847 2,743 2,797 2,853 2,910 Single burn rate stoves 9,766 6,241 5,991 6,111 6 ,233 6,358 3,956 4,035 4,116 4,198 4,282 1,249 1,274 1,300 1,326 Pellet stoves 1,438 919 882 900 918 936 955 974 994 1,014 1,034 494 503 513 524 Furnace: indoor, cordwood 28,198 18 , 019 17 , 298 17 ,6 44 17 , 997 18,357 4,681 4,775 4,870 4,967 5,067 413 422 430 43 9 H ydronic heating systems 1 2 , 343 7 , 887 7 , 572 7 , 723 7 , 878 8, 0 35 820 836 853 870 887 181 185 188 192 **Total 62,663**  **40,042 38,440**  **39,209 39,993**  **40,793 17,661**  **18,014 18,375**  **18,742 19,117**  **5,080 5,181**  **5,285 5,391** * * * E.O. 12866 Review - Draft

– Do Not Cite, Quote or Release During Review ***4-25 **Table 4 -**  **14. Estimated CO Emissions (Tons)**  **: Alternative Option 2008**  **2009 2010**  **2011 2012**  **2013 2014**  **2015 2016**  **2017 2018**  **2019 2020**  **2021 2022**  Wood stoves 10,918 6,976 6,697 6,831 6,968 7,107 7,249 7,394 7,542 5,069 5,171 5,274 5,380 5,487 2,910 Single burn rate stoves 9,766 6,241 5,991 6,111 6,233 6,358 3,956 4,035 4,116 2,309 2,355 2,402 2,450 2,499 1,326 Pellet stoves 1,438 919 882 900 918 936 955 974 994 912 930 949 968 987 524 Furnace: indoor, cordwood 28,198 18,019 17,298 17,644 17,997 18,357 4,681 4,775 4,870 993 1,013 1,034 1,054 1,075 439 H ydronic heating systems 12,343 7,887 7,572 7,723 7,878 8,035 820 836 853 435 444 452 461 471 192 **Total 62,663**  **40,042 38,440**  **39,209 39,993**  **40,793 17,661**  **18,014 18,375**  **9,719 9,913**  **10,112 10,314**  **10,520 5,391** * * * E.O. 12866 Review - Draft

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4 - 26 From the tables above, we can show that the C O emission reductions in 2022 are the same for each option at 4 3 ,3 6 0 tons. The average of the annual CO emission reductions between the year of rule promulgation, 2014, and the year that both options are fully implemented (2022) is 32, 559 tons for the P roposed o ption and 32, 8 7 3 tons for the Alternative o ption .* * * E.O. 12866 Review - Draft

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5 - 1 **SECTION 5 COST ANALYSIS, ENERG** **Y IMPACTS, AND EXECUTIVE ORDER ANAL**  **YSES** In this section, we provide the estimates of total compliance costs and background behind their estimation. Inaddition, we provide a qualitative economic impact analy sis of the proposed rule ’ s impact on consumer and producer decis ions, a qualitative discussion on unfunded mandates that may

occur as a result of this final rule, and a partial anal ys is of the impacts of this proposal on employ

ment. W e used the direct annual compliance costs as an approximate measure of total social co sts. Given these constraints, s everal economic frameworks can be used to estimate the economic impacts and social costs of regulations ; however, OAQPS has traditionally relied on partial equilibrium market models. Previous NSPS economic impact analy ses for the residential wood stove market were prepared reflecting such a model standpoint. However, the current data do not provide sufficient details to develop a market model; the data that are available have little or no sector/firm detail and are reported at the national level. In addition, some sectors have unique market characteristics that make developing partial equilibrium models difficult. Therefore, we have prepared the economic impact anal ys is using a qualitative partial equilibrium framework. **5.1 Backgro**  **und for Compliance Costs 5.1.1**  **E stimated Research and Development (R&D)**  **Costs** 5.1.1.1 Residential W

ood Heaters (except for masonry heaters) EPA has received various estimates of the costs to bring a wood heater from concept to completion , from $300,000 for a single mod el to $1,360,000 for a 4 - firebox model line. A recent Hearth and Home article estimated the total cost to bring a model from conception to market as $645,000 to $750,000 for steel stoves and over $1 million for cast - iron, enameled wood stoves . The authors indicated that c osts would decrease for separate models in the same line by up to 25% . Based on this information, we estimate that a 4 - model steel line would cost up to $328,125 per model to develop. These costs include marketing, design, developing first generation, second generation and prototy

pe units; NSPS and safety testing, equipment tooling, etc. The manufacturer suppl yi ng these figures for the article estimate d that the NSPS and safety testing component of these costs would constitute $40,000 per model. This manufacturer said that* * * E.O. 12866 Review - Draft

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5 - 2 development time is 12 to 14 months for non - cataly ti c heaters and 10 to 12 months for catal ytic heaters. 34 Anoth er manufacturer estimated costs of new product development, including design, prototy pe development, testing, tooling equipment and other manufacturing changes, marketing support, materials, training, and education to be in excess of $300,000 over an 8 - to 12 - month schedule for a relativel y uncomplicated product. Costs will increase for products that have more sophisticated controls. 35 One other manufacturer estimated that their ty pical model devel opment costs are around $200,000/model. 36 Two manufacturers suggested a 14 - to 18 - month time frame is required to develop a new firebox, but added that it will take from 5 to 6 years of intensive engineering and R&D efforts to have a model line consisting o f 4 boxes ready for manufacture. They agreed that knowledge of the process obtained during each firebox development will shorten (somewhat) the time necessary , but not enough to consider within a guiding framework. These manufacturers also provided estimat ed development costs for a 4 - box model line, presented in Table 5 - 1 below. 37 **Table 5**  **- 1**  **. Example of**  **Manufacturer s**  **’ Estimate**  **s of Costs to Develop Model Line (4** 

**Fireboxes) Cost**  **Component Estimated** 

**Costs Notes**  Salaries $850,000 Using 2 - full time experimented employees to bring the products to market, salaries and benefits are estimated at $160,000 per year for at least 5.3 years. Tasks include design, prototyping, testing, production - line integration, and marketing. Laboratory Equipment $50,000 In order to accelerate R&D and avoid validating each result with independent testing labs (too costly for most manufacturers), new testing equipment will need to be purchased in order to sample flue gases, measure test load weight loss, record data automatically, and analyze flue gases composition. Prototypes $25,000 Numerous prototypes will be needed until the final product can be approved. For each firebox, estimate that 8 prototypes will be needed, at a cost of $700 each. Numerous samples of various components will also have to be purchased from vendors. Test Fuel a $45,000 Each test costs at least $50 in fuel (assuming cribs are used), including waste. An estimated 150 tests will have to be conducted for each firebox, for a total of $7,500, or $30,000 for a 4 - firebox model line based on crib testing. (continued) 34 James E. Houck and Paul Tiegs . There ’ s a Freight Train Comin ’ . Hearth and Home . December 2009. 35 Comments from United States Stove Company, Small Entity Representative . July 13, 2010. 36 Confidential Business Information. 37 NSPS Review/Revision, and Im pact on Our Companies: A Manufacturer ’ s Position Statement . Prepared by Stove Builder International and United States Stove Company . June 2010.* * * E.O. 12866 Review - Draft

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5 - 3 **Table 5**  **- 1**  **. Example of**  **Manufacturer s**  **’ Estimate**  **s of Costs to Develop Model Line (4** 

**Fireboxes) (continued)**  **Cost Component**  **Estimated**

**Costs Notes**  Testing Services a $150,000 Testing services for emissions, efficiency, and safety are estimated to last approximately 3 weeks for each firebox. At an average of $1,500 per day plus travel expenses, this amounts to approximately $25,000 for each firebox, or $100,000 for a 4 - firebox model line based on crib testing. Outside Consultants $160,000 The average manufacturer will need outside help for design and testing. Testing equipment, knowledge of the test standard, and general guidance is normally offered by outside consultants (not necessarily certified EPA test labs). The average manufacturer will need approximately 300 hours of consulting services per year ($40,000) for 4 years. Re - tooling $120,000 For each firebox, new molds and jigs will need to be purchased or produced. Estimate that re - tooling charges will reach at least $30,000 per firebox, or $120,000 for a 4 - firebox model line. Marketing $25,000 New pictures will need to be taken and all the current marketing material, including web sites and owner ’ s manuals, will have to be updated. Total $1,360,000 Equal to $340,000/model

a Note: As described in our unit cost memo, the costs originally provided by industry for this table were presumed to be based on crib wood testing, not both crib wood and cord wood testing. Therefore we increased the industry based “ Test Fuel ” cost by 50% (to the $45,000 shown above) as well as the industry - based “ Testing Services ” cost by 50% (to the $150,000 shown above) in order to conservatively estimate the additional cost to test with both crib wood and cord wood. For this anal ys is, we used the costs provided in the Table 5 - 1 example, scaled to a single model and spread over a 6 - ye ar model development time frame . We prepared an annualized R&D cost estimate b y separating cost elements into direct annual costs (salaries) vs. indirect annual costs (laboratory

equipment, retooling and other capital costs). We conservativel y estimated annual capital costs during the amortized R&D cost period as the fraction that the indirect costs (IAC) are of the Total Annual Cost, approximately 34% annually . Ongoing costs such as taxes, overhead, and other routine e xpenses would be incurred regardless of the NSPS standard, and are not included in this analy sis. Table 5 - 2 shows the estimated annualized cost of $63,850 per model, assuming an amortization period of 6 years and an interest rate of 7%. **Table 5 -**  **2. Annual C**  **ost Summary : Development of 4 Model Fireboxes**  **a,b Direct Annual Costs (DAC)**  Operator labor $141,667 Annual salary cost from Table 1 , spread over 6 years. ” Outside Consultants $26,667 Annual outside consultant cost from Table 1 , spread over 6 years. ” **Total Direct Costs (DC)** $168,333 (continued)* * * E.O. 12866 Review - Draft

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5 - 4 **Table 5 -**  **2. Annual Cost Summary**  **: Development of 4 Model Fireboxes a,b**  **(continued) Indirect Annual Costs (IAC)**  Laboratory Equipment a $ 10,490 The laboratory equipment cost of $50,000 was amortized over 6 years at an interest rate of 7%. Re - tooling b $25,175 The re - tooling cost of $120,000 was amortized over 6 years at an interest rate of 7%. Other Capital Costs b $ 51 , 400 Other capital costs include costs for prototypes ($25,000), test fuel ($ 45 ,000), testing services ($1 5 0,000), and marketing ($25,000) and were amortized over 6 years at an interest rate of 7%. **Total Indirect Costs (IAC)** $ 8 7, 065 **Total Annual Cost** $2 55 ,39 9 Annual cost for development of 4 model fireboxes. **Total Annual Cost** $ 63 , 850 Average annual cost per firebox model.

a An amortization period of 6 years for laboratory equipment, retooling and other capital costs was chosen based on industry ’ s estimate that approximately 5 to 6 years of R&D are required to bring a product to market. b As described in the unit cost memo, t o conservatively estimate the additional cost to test with both cord wood and crib wood, the test fuel industry estimate of $30,000 based on crib only was increased by $15,000 and the testing services industry estimate of $100,000 based on crib only (which covered not only emissions testing but also efficiency and safety testing) was increased by $50,000. **5.1.2 Masonry Heaters**  Masonry heaters manufacturing cost impacts vary by the type of producer and the type of certification method. According to one manufacturer , 38 the masonry heater industry

in the U.S. is dominated by

the Finnish firm Tulikivi, which manufactures and imports about half of the U.S. masonry heater units installed yearl y through its network of install ing distributors . The same manufacturer said that the second largest producer is a Canadian firm, Temp - Cast . The remainder of the industry is made up of “ dozens ” of small producers, with probably fewer than 100 (or at least fewer than 200) generating any m asonry revenue at all . Some commercial operations sell core units and/or design kits based on their own design, and other sell units they license from other U.S. or foreign companies . Finally , some units are custom built . Based on this information, we assumed that 50 % of masonry heat ers sold per ye ar in the U.S. are Tulikivi models and 35 % are sold by other manufacturers . The remaining 15 % of units are sold by independent contractors . There are three major cost components to consider in evaluating the pote ntial cost impacts of the proposed NSPS: research and development (R&D), certification testing, and licensing fees for use of a computer software package approved for use in certifying a model 38 Comments: Residential Solid Fuel Burning Appliance SBREFA Process . Product Category: Masonry Heaters . July 13, 2010 . Timothy

Seaton, Timely Construction, Inc . p. 5.* * * E.O. 12866 Review - Draft

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5 - 5 design. According to information provided by one manufacturer, capital R&D costs for a masonry heater may

be estimated at $250,000 . 39 Inorder to be conservative in our anal ys is and in the absence of more specific data regarding R&D costs for masonry heaters , we assumed R&D costs were the same as for other wood heater appliances

—that is, $63,850 annually for a 6 - ye ar R&D amortization period. For facilities conducting R&D, these costs include the costs for certification testing . We estimate that the cost of testing a heater design in an EPA accredited lab to be approximately

$10,000. 40 This cost analy sis also makes use of a unique software package based on a European masonry heater design standard . This standard has been verified in the laboratory and under field conditions to produce masonry heaters that would meet the proposed NSPS emission limits . The software produces for printout a certification for a given design application and the design definition documents as well as operating instructions customized to the given design, so that the software verification and cer tification record is created for and attached to the design . The resulting documents can be submitted as part of the certification application . The cost of this software to the user is approximately 1,000 Euros (approximately $1,500) for the package with a 300 Euro (approximately $450) annual fee that commences in the second year following purchase. 41 **5.1.3 General Approach and Assumptions for Costs to Manufacturers**  Manufacturers have told us that it takes several ye ars to develop new models , and this is document ed in the manufacturer’s cost memo . 42 We have spread the annualized R&D costs (shown in Table 5 - 2) over 6 years to conservatively represent the time and funds needed to develop the compl yi ng models . For the purposes of our cost estimate, we have assumed that when the NSPS revisions are proposed, all manufacturers will begin serious efforts to develop complying models, although for many manufacturers we also know that they have been involved in intensive R&D efforts in anticipation of the proposed rule.

39 Comments: Residential Solid Fuel Burning Appliance SBREFA Process . Product Category: Masonry Heaters . July 13, 2010 . Timothy

Seaton, Timely Construction, Inc . p. 14. 40 Letter to Lucinda Power, EPA, from Brian Klipfel, Fire Works Masonry . September 10, 2010. 41 E - mail from Timothy Seaton, Timely Construction Company, to Gil Wood, USEPA . April 21, 2011. 42 42 Memo to Gil Wood, USEPA, from Jill Mozier, EC/R, Inc . Estimated Wood Heater Manufacturer Cost Impacts. February 22 , 2013.* * * E.O. 12866 Review - Draft

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5 - 6 We e stimated both the average annual cost to manufacturers of each appliance type and then extended those costs to nationwide total annual costs. The basic components to each manufacturer ’ s estimated annual cost are:

 Annualized R&D cost;

 Ongoing annual Certifi cation cost; and

 Ongoing annual Reporting and Record Keeping cost. The Annualized R&D costs (shown in Table 5 - 2, and based on the Table 5 - 1 costs ) are by far the largest cost component and we have applied these costs to most models in our cost anal ys is

— especiall y to models in previously unregulated appliance categories

—in order to present a conservative over - stated cost estimate given uncertainty over the precision of available estimate of the R&D cycle lifespan . For example, as noted above, instead of e stimating the number of h ydronic heater models that already m eet a specific limit and will therefore merel y need to certify

their emissions rather than undergo R&D, we instead assumed that 100% of hydronic heater models will undergo R&D beginning in 2013. We made similar conservative assumptions for single burn rate stoves and forced air furnaces. Under the Proposal scenario, one round of R&D is assumed

— beginning in 2013 and ending in 2018

—in order to meet the proposed Step 2 limit. Under the Alternative op tion, two rounds of R&D are assumed for all appliances except masonry heaters (for which there is onl y one standard with no additional phased - in standards to meet). Under the Alternative option, the first R&D round begins in 2013 and the second round begin s in 2017 (which causes overlapping R&D costs in years 2017 and 2018 in this analysis)

—in order to meet the interim Alternative Step 2 limit in 2017 and the Alternative Step 3 limit in 2022. We also conservatively assumed that of the models undergoing the first round of R&D costs, 80% of these models undergo and assume the second round of R&D costs in the Alternative scenario (i.e., we conservativel y assumed that only

20% of models achieve the strictest limit in the first round of R&D). Furthermore, for app liances like single burn rate stoves and forced air furnaces, which were previousl y unregulated (and also were not pushed technologicall y b y a voluntary program, as hydronic heaters were), we have conservativel y doubled R&D costs during ye ars 2013 and 2014 . This doubling of R&D cost estimates is to represent an intensification of the R&D efforts* * * E.O. 12866 Review - Draft

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5 - 7 to meet the Step 1 limit and begin development of models to meet the stricter stepped limits

— R&D efforts which industry has indicated are already ongoing. 43 Note that all manufacturers, except for wood stoves that are subject to the current 1988 NSPS, will face ongoing certification costs above baseline conditions . However, in the 2013 to 2018 time frame under the Proposal option and in the 2013 to 2022 time frame und er the Alternative option , we have incorporated these costs as part of the overall R&D expenditures . After 2018 under the Proposal option and after 2022 under the Alternative option , the ongoing certification costs will be the only NSPS related costs faced by manufacturers besides ongoing reporting and recordkeeping costs. Regarding certification costs, we have assumed a cost of $10,000 per model for pellet stoves, single burn rate stoves and masonry heaters; and we have assumed a cost of $20,000 per model for h ydronic heaters and forced air furnaces. 44 We have spread these costs out over the 5 ye ar certification life, assuming annual certification costs for one - fifth of the models. For example, p ellet stoves will incur certification costs in advance of complying with more stringent limits . As explained in the manufacturer ’ s cost memo , 45 approximately 30 % of existing pellet stove models are expected to comply with the proposed Step 2 and Alternative Step 3 standard . However, in order to be sold, these stov e models would now be required to demonstrate compliance with an emissions limit, incurring an upfront cost of $10,000 per model to become certified. The same cost memo also discusses our assumption that one fifth of the pellet stove models will certify in any given ye ar. We based reporting and recordkeeping (R&R) costs on the annual average costs derived from development of the Information Collection Request (ICR) supporting statements . 46 These are conservative annual estimates of the ongoing R&R burden to manufacturers associated with the Proposal and Alternative scenarios. (We do not expect the R&R burden to differ substantially between the two scenarios.)

43 2/8/13 telephone discussion between Gil Wood, USEPA, and a manufacturer of forced air furnaces and single burn rate stoves. 44 Conversation with Dennis Brazier, Central Boiler . August 9, 2010. 45 Memo to Gil Wood, USEPA, f rom Jill Mozier, EC/R, Inc . Estimated Wood Heater Manufacturer Cost Impacts. February 22 , 2013. 46 ICR Supporting Statements for the Proposed NSPS Subparts have not been finalized as of the date of this memo.* * * E.O. 12866 Review - Draft

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5 - 8 The certification and reporting and recordkeeping costs were estimated to be incurred b y manufactur ers for the full 20 - ye ar model design lifespan. 47 Under the Proposal, we estimated costs from 2013 through 2038

—that is, 20 years after the 2019 compliance year marking the beginning of the model lifespan designed to meet the Proposal Step 2 limit. Under th e Alternative, we estimated costs from 2013 through 2041

—that is, 20 years after the 2022 compliance ye ar marking the beginning of the model lifespan designed to meet the Alternative Step 3 limit. We provide these costs in the manufacturer ’ s cost memo. **5.1.4 Gen**  **eral Approach and Assumptions for Costs to Masonry Heater**  **Manufacturers** As noted above, we addressed masonry heaters in a way

which segmented the costs in keeping with the masonry heater market. There are three scenarios for potential cost impacts for larg e masonry

heater manufacturers . In the case of Tulikivi and some U.S. firms, e.g., Timely Construction, these companies have already invested in R&D in order to gain access to U.S. markets which restrict sales (e.g., Colorado) of uncertified units . These c ompanies will face testing costs only , with an assumed total of nine tests conducted prior to the proposed compliance date (i.e., to certify a total of nine model lines) . For purposes of our cost anal ys is, we assumed as shown in the unit cost memo that two additional companies will conduct R&D to develop two new models each to meet the proposed NSPS . 48 Finally , we have been told that Tulikivi will use the software certification approach to certify up to eight additional models . We also project as presented i n the unit cost memo that the remaining 15 % of custom built units will use the software certification approach to certify compliance with the proposed NSPS starting in 201 3 (estimated date of the proposed standards) and that they will continue to renew their license in the following ye ars. As explained in the unit cost memo , w e used data in the Frost & Sullivan Market (F&S) report 49 on 2008 masonry heater shipments by

product category

and F&S revenue foreca sts which incorporated the weak economy in years 2009 and 2010, to calculate the reduced number of shipments in years 2009 and 2010. For ye ars 2011 through 2038 (for the Proposal option) and 2011 through 2041 (for the Alternative option) estimated shipment s are based on a forecasted revenue growth rate of 2.0%, in keeping with the average annual growth in real GDP predicted

47 Memo to Gil Wood, USEPA, from Jill Mozier, EC/R, Inc . Unit Cost Estimates of Residential Wood Heating Appliances . February 21, 2013. 48 U.S. EPA. Memorandum. Unit Cost Estimates of Wood Heating Appliances. February 21, 2013. Prepared by EC/R, Inc. 49 Market Research and Report on North American Res idential Wood Heaters, Fireplaces, and Hearth Heating Products Market . Prepared by Frost & Sullivan . April 26, 2010. P. 31 - 32.* * * E.O. 12866 Review - Draft

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5 - 9 by th e Conference Board . 50 For masonry heaters, o ur estimate of the number of custom built models is based on the average number of mode ls sold per year in the 15 % model category (i.e., 85 per year) . We assumed each custom manufacturer would sell 2 models per year, for a total of 42 manufacturers participating in the software certification option. Under both the Proposal and Alternative op tions, most sales - weighted masonry heater units face a 2014 Step 1 compliance date with no other phased - in limits. However, under both the Proposal and Alternative options, companies that sell fewer than 15 units per year have until 201 9 to come into compl iance . We have assumed that the large manufacturers will comply by 201 4 for the units that only require testing and/or software certification, with those expenditures incurred annuall y starting in 2013. We also assumed that the 15 % of custom built units wi ll comply by 201 9 , but will begin certifying their units using the software certification approach as earl y as 2013, as noted above, as a selling point for their services . For those companies that start R&D when the NSPS is proposed in 2013 , we have assume d that they will spread these costs over the 6 - ye ar period from 2013 through 2018 for the four models affected, under both the Proposal and Alternative options. **5.1.5 General Approach and Assump**  **tions for All Appliances** Below is a list of approach and assumptions for estimating costs for each category of appliances affected b y this proposal , as taken from the manufacturer cost memo : 51 1. Nationwide Annual Cost assumes R&D investment is amortized over 6 years (2013 through 2018). Ongoing certification costs are incurred through 2038 (based on a model brought to market in 2019 with a lifespan of 20 years), except for woodstoves which already incur certification costs under the existing NSPS. 2. Since certification is required every 5 years (except for the software cer tification option for masonry

heaters), it is assumed that certification costs will be spread out so that 1/5 of the models certify each ye ar. 3. This analy sis considers additional costs resulting from the proposed NSPS. For wood stoves, the anal ys is conse rvatively assumes that 5% meet Step 2 already so that 95% of the models will undergo re - design to meet the Step 2 level. The costs modeled for ye ars 2020 through 2038 exclude the ongoing certification costs and ongoing reporting and recordkeeping costs incurred by wood stove manufacturers who already had to certify

and report under the existing NSPS.

50 2013 Global Outlook projections prepared by the Conference Board in November 2012; http://www.conference board.org/data/globaloutlook.cfm . 51 U.S. EPA. Memorandum. Estimated Residential Wood Heater Manufacturer Cost Impacts . February 22, 2013. Prepared by EC/R, Inc.* * * E.O. 12866 Review - Draft

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5 - 10 4. For pellet stoves, the analy sis assumes that 30% meet Step 2 already so that 70% of models undergo R&D re - design to meet Step 2. The R&D budget includes certification costs. The analy sis also assumes that the 30% of the pellet stove models which already meet Step 2 will certify in an ongoing basis starting in 2013 . The anal ys is reflects the certification costs beginning in 2013 for the 30% of models meetin g Step 2, and beginning in 2019 for the remaining 70% of models which underwent R&D re - design. 5. Based o n conversations with industry in February 2013 , single burn rate stoves and forced air furnaces have been undergoing R&D prior to 2013 to develop clean er models. Because these devices were previousl y unregulated and may need to transfer technology

from adjustable burn rate stoves and hydronic heaters respectively , this anal ys is conservatively

assumes that these efforts will intensify in 2013 and 2014. Th erefore estimated R&D costs are doubled in 2013 and 2014 in order to meet the 2014 Step 1 standard while also beginning R&D to develop models to meet the more stringent 2019 Step 2 standard. 6. For single burn rate stoves, forced air furnaces, and hydronic heating s ys tems, the anal ys is conservatively

assumes that only

a small percentage meet Step 2 so that approximately

100% of the models undergo R&D re - design to meet Step 2. The R&D budget includes certification costs. Ongoing certification costs for the r e - designed models are reflected in this analy sis beginning in 2019. 7. For masonry

heaters, the cost anal ys is assumes one round of R&D to meet 0.32 lb/mmBTU standard (no additional stepped standards, although large manufacturers will be required to meet th e limit in 2014, while small volume manufacturers will be given a 5 year extension until 2019 to meet the limit). For masonry heater manufacturers using software certification, the analy sis assumes the purchased software will be used for certifying all mod els developed by that manufacturer. 8. Reporting and recordkeeping costs (R&R) [for all appliances but masonry heaters] are based on the annual average costs derived from the I CR and are conservative estimates of the ongoing R&R burden to manufacturers ass ociated with the proposed NSPS. The annual average nationwide R&R burden estimated to manufacturers for Subpart AAA is $440,443, and for Subpart QQQQ is $119,249. These R&R costs do not include the R&R burden to laboratories; the annual average nationwide R&R burden incurred b y laboratories subject to requirements under Subpart AAA is estimated to be $75,745, and incurred b y laboratories subject to requirements under Subpart QQQQ is estimated to be $50,496. 9. For Masonry

Heaters, Reporting and recordkeepin g costs (R&R) are based on the annual average costs derived from the ICR and are conservative estimates of the ongoing R&R burden to manufacturers associated with the proposed NSPS. The annual average nationwide R&R burden estimated to manufacturers for Subpart RRRR is $98,788 for small/custom masonry heater manufacturers and $25,929 for large masonry

heater manufacturers. These R&R costs do not include the R&R* * * E.O. 12866 Review - Draft

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5 - 11 burden to laboratories; the annual average nationwide R&R burden incurred by laboratories subject to requirements under Subpart RRRR is estimated to be $37,872. For the Alternative option for all appliances , here are the assumptions for cost estimations where they

differ from those in the Proposed option : 1. Nationwide Annual Cost assumes R&D investment is amortized over 6 years (round one from 2013 through 2018 and round two from 2017 through 2022). Ongoing certification costs are incurred through 2041 (based on a model brought to market in 2022 with a lifespan of 20 years), except for woodstoves whic h already incur certification costs under the existing NSPS. 2. (Same as above) 3. This analy sis considers additional costs resulting from the proposed NSPS. For wood stoves, the anal ys is conservatively assumes that 5% meet Step 3 already so that 95% of the models will undergo re - design in round one, and 80% of those 95% will require another round of R&D to meet the Step 3 level. The costs exclude the ongoing certification costs and ongoing reporting and recordkeeping costs incurred by wood stove manufacturers who already had to certify and report under the existing NSPS. 4. For pellet stoves, the analy sis conservativel y assumes that 30% meet Step 3 already so that 70% of models undergo re - design in round one, and 80% of those 70% require another round of R&D to meet Step 3. The R&D budget includes certification costs. The anal ys is also assumes that the 30% of the pellet stove models which already meet Step 3 will certify

in an ongoing basis starting in 2013. 5. Based o n conversations with industry in Febru ary 2013 , single burn rate stoves and forced air furnaces have been undergoing R&D prior to 2013 to develop cleaner models. Because these devices were previousl y unregulated and may need to transfer technology

from adjustable burn rate stoves and hydronic heaters respectively , this anal ys is conservatively

assumes that these efforts will intensify in 2013 and 2014. Therefore estimated R&D costs are doubled in 2013 and 2014 in order to meet the 2014 Step 1 standard while also beginning R&D to develop models t o meet the more stringent 2017 Step 2 and 2022 Step 3 standards. 6. For single burn rate stoves, forced air furnaces, and hydronic heating s ys tems, the anal ys is conservatively

assumes that only

a small percentage meet Step 3 so that approximately

100% of the models undergo re - design in round one, and 80% require another round of R&D to meet Step 3. The R&D budget includes certification costs. 5.1.6 Labor Requirements for Monitoring, Recordkeeping and Reporting The focus of this part of the anal ys is is on la bor requirements related to the compliance actions of the affected entities within the affected sector. This an al ys is estimates the labor requirements associated with new reporting and recordkeeping requirements.* * * E.O. 12866 Review - Draft

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5 - 12 The labor changes may

either be required a s part of an initial effort to comply with the new regulation or required as a continuous or annual effort to maintain compliance. We estimate up - front and continual, annual labor requirements by estimating hours of labor required for the monitoring, recordkeeping, and reporting efforts to maintain compliance . The results of this anal ys is are presented in Table 5 - 3 for the P roposed NSPS option. The table breaks down the certification, quality assurance, reporting and recordkeeping burden and labor estimates by

appliance type for each of the proposed subparts and for the test labs to obtain and maintain testing accreditation. These estimates are presented in terms of the estimated hours required. These estimates are consistent with estimates EPA submitted as part of the Information Collection Requests (I CRs) that are in the Supporting Statements for the proposed rules. We note that certification testing (once every 5 years unless a waiver is granted) costs of approximately

$10,000 ($20,000 for hydronic heaters and forced air furnaces) per model line in 2022 result in labor hours spent at the test lab, which are not included in this labor rate anal ys is. In addition, each model that is developed (i.e., number of affected units) will face an annual estimated cost of $160,000 for the salaries of two full - time experimental employees for 5 ye ars. This estimate should be regarded as a partial labor estimate, with other possible labor associated with new model development (such as re - tooling) left as unquantified and de scribed qualitatively in the manufacturer cost and unit cost impact memos. Ongoing labor requirements are estimated at about 9,900 hours for the P roposed option. The labor estimate for the Alternative option will not be substantially different to that for the proposed option since there are no additional labor requirements for administrative matters under the Alternative option compared to the P roposed option. 52 These ongoing labor requirements can be viewed as average sustained labor requirements required f or affected entities to continuously comply with the new regulations from 2019 and beyond.

52 Memo to Gil Wood, USEPA, from EC/R, Inc . Residential Wood Heating Cost Effectiveness Analysis. February 26, 2013.* * * E.O. 12866 Review - Draft

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5 - 13 **Table 5**  **- 3.**  **Estimates of Labor Requirements**  **for C ertification, Quality Assurance,** 

**Reporting, Recordkeeping, and Accreditation Requirements for**  **the Proposed**  **NSPS Opti**  **on a** 

**Source/Emissions Point Projected No.**  **of Affected Units**  **Per -**  **Unit**

**One -**  **Time Labor**  **Estimate (Hours)**  **Total**

**One -**  **Time Labor**  **Estimate (Hours)**  **Total Annual Labor**

**Estimate (Hours)** Adjustable burn rate stoves not needing certification testing 125 0 0 1 ,7 8 4 Single burn rate stoves 20 0 0 283 Pellet stoves 125 0 0 1,779 Test Labs 6 0 0 597 Removable Label 1,017 Hydronic heaters

—mo del development 9 0 0 0 1,29 0 Forced air furnaces

—mo del development 38 0 0 5 3 9 Test Labs 4 0 0 398 Removable Label 332 Existing models at large manufacturers certified via testing 13 0 0 1 87 Existing models at large manufacturers certified via computer simulation 8 0 0 1 13 Existing models at small manufacturers certified via computer simulation 85 0 0 1,27 5 Test Labs 3 0 0 298.5 Removable Label 4.46 **Total for Industry 517**  **0 0**  **9,893** a T he labor requirements for the Alternative option are not substantially different than those for the Proposed option. Note: Totals may not sum due to independent rounding . The Agency assumes in its cost analysis of monitoring, recordkeeping, reporting, and testing requirements in the Information Collection Request (ICR) that only half of the currently available models for all appliance types would be certified and sold.* * * E.O. 12866 Review - Draft

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5 - 14 **5.2 Compliance Costs of the**  **Proposed Rule**  EPA ’ s engineering cost analy sis estimates that the total annualized cost of the proposed rule option to manufacturers for the P roposed option is $15.7 million, calculated as an average of the annualized costs incurre d from 2014 to 2022. For the alternative option, the total annualized cost is $28.3 million (all costs are reported in 2010 dollars) ( EC/R, December 2011 ) Annualized costs are estimated at a 7% interest rate. 53 We calculate the costs in this way in order to provide an average of annualized costs for these options from the time of rule promulgation in 2014 to the time of full implementation of both options, which occurs in 2022. Having an average annualized calculation for the costs allows for a reasonable me asure of the costs to be incurred by manufacturers given the changes in costs year by year between 2014 and 2022 as shown in the manufacturer ’ s cost memo for this proposal. The total annualized cost s for each year and for each option are in Table 5 - 4 . With total annualized costs estimated at a 3% interest rate, the total annualized cost of the proposal option is $ 14.8 million , and $ 26.9 million for the alternative option (in 2010 dollars). More detailed information on the costs at a 3% interest rate can be found in the cost memorandum for this proposal. Under the proposed NSPS option , the costs in the 2014 - 2022 time frame fall most heavily on manufacturer s of h ydronic heating sy stems ( 29 %), followed b y wood stoves (27%), then b y pellet stoves (22%). The re maining 22 % of the costs are distributed to forced - air furnace manufacturers ( 14 %) , manufacturers of single burn rate stoves ( 6 %), and masonry heaters ( 2 %) .

53 EC/R, Inc. to U.S. EPA, Draft Memorandum. Estimated Residential Wood Heater Manufacturer Cost Impacts. February 22, 2013.* * * E.O. 12866 Review - Draft

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5 - 15 **Table 5 -**  **4 .**  **Summary of Average Annualized Nationwide Costs for 2014 –** **2022 Time**

**F rame Under**  **the Proposal and Alternative Options Appliance Type**  **Proposed Option Alternative Option**  Wood Heaters $4,212,303 $ 8,090,026 Single Burn Rate Heaters $901,732 $ 1,540,600 Pellet Stoves $3,460,489 $ 6,2 55 , 536 Forced - Air Furnaces $2,252,284 $ 3,81 3 ,898 Hydronic Heating Systems $4,554,152 $ 8,302,026 Masonry Heaters $ 307,511 $ 307,511 Total Average Annual Cost fo r 2014

–2022 Time F rame $15,6 88 , 471 $ 28,30 9 , 597 For the alternative option, the annualized costs fall most heavily of manufacturers of hydronic heaters (29%) and wood stoves (29%), followed by pellet stoves ( 22 %). The remaining 20 % of the costs are distributed to manufacturers of forced air heaters (13%), single burn rate stoves ( 5 %), and masonry heaters ( 2 %) . The revised rule , as proposed would affect an estimated 2 .7 million new residential wood heating devices between 201 4 and 20 22 assuming an average of ~296 ,000 new shipments annually as presented in the emissions memo for the proposal . 54 As shown in Figure 5 - 1 and using information from the emissions memo for the proposal , annual shipments are forecasted to increase for all product types over the same time period. To assess the size of the compliance costs relative to the value of shipments to end - use consumers , we compare d industry- level compliance costs relative to projected sales for 2018 since this is year between 2014 and 2022 and is a representative year suitable for this anal ys is . In this case, cost - to - receipts ratios approximate the maximum price increase needed for a producer to fully recover the annual compliance costs associated with a regulation. These industry- level cost - to - receipts ratios can be interpreted as an ave rage impact on potentially affected firms in these industries all other things equal, and where ratios less than 1% suggest the rule will not have a significant impact using EPA’s SBREFA guidance as a basis . Results for affected industries for the 2014

–202 2 time frame can be found in Table s 5 - 4a and 5 - 4b .

54 U.S. EPA. Memorandum. Estimated Emissions from Wood Heaters. February 15, 2013. Prepared by EC/R, Inc.* * * E.O. 12866 Review - Draft

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5 - 16 **Figure 5 -**  **1 .**  **Projected Annual Shipments by Product Type: 2012**  **– 20**  **18** Under the NSPS proposal option , none of the six affected product types would have an annualized cost - to - receipts ratio of less than 1%. In the 2014 - 2022 time frame for this option, c ost - to - receipts ratios range from 2.3 % for pellet stoves to 6.4 % for single burn rate stoves as shown in Table 5 - 5 a . For the alternative option, c ost - t o - receipts ratios range from 4.0% for forced air furnaces to 10.7% for single burn rate stoves as shown in Table 5 - 5 b.* * * E.O. 12866 Review - Draft

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5 - 17 **Table 5 -**  **5 a.**  **Industry Level -** **Annualized Compliance Costs (2010 dollars)**  **as a Fraction of**

**Total Industry Revenue by Product Type in the 201**  **4 –** **20 22 Time**  **F rame** **— Proposal Option**  **Product Type Total Annualized Costs**  **($ m illions)**  **Product Sales in 201 8**  **($ m illions)**  **a Cost**  **- to**  **- Receipts**  **Ratio** Wood stoves $4.2 $98.1 4.3% Single burn rate stoves $0.9 $14.0 6.4% Pellet stoves $3.5 $152.8 2.3% Forced - air furnaces $2.3 $96.6 2.4% Masonry heaters $0.3 $6.3 4.8% Hydronic heating systems $4.5 $134.4 3.3%

a Sales based on projected product shipments and average unit costs estimates. We use annual sales in 2018 to approximate annual sales for years from 2014 to 2022. Total annualized costs in this table are estimated at a 7% interest rate. Sources: Masonry Heater Compliance Costs from Masonry Heater NSPS Annual Cost 12 8 11.xls . Recei ved from EPA on December 16, 201 1. Unit Costs and Shipment Projections from Unit Cost Memo. Received by EPA in February, 2013. Industry Compliance Costs from Wood Stove NSPS Annual Costs . Received by EPA February, 201 3 . **Table 5 -**  **5 b**  **. Industry Level**  **- Annualiz**  **ed Compliance Costs (2010 dollars)**  **as a Fraction of**

**Total Industry Revenue by Product Type in 201 4**  **– 2022 Time**  **F rame** **— Alternative Option**  **Product Type Total Annualized Costs**  **($ m illions)**  **Product Sales in 201 8**  **($ m illions)**  **a Cost**  **- to**  **- Receipts**  **Ratio** Wood stoves $8.1 $98.1 8.3% Single burn rate stoves $1.5 $14.0 10.7% Pellet stoves $6.2 $152.8 4.1% Forced - air furnaces $3.8 $96.6 4.0% Masonry heaters $0.3 $6.3 4.8% Hydronic heating systems $8.3 $134.4 6.1%

a Sales based on projected product shipments and average unit costs estimates. We use annual sales in 2018 to approximate annual sales for years from 2014 to 2022. Total annualized costs are estimated at a 7% interest rate. Sources: Masonry Heater Compliance Costs from Masonry Heater NSPS Annual Cost 12 8 11.xls . Received from EPA on December 16, 201 1. Unit Costs and Shipment Projections from Unit Cost Memo. Received by EPA in February , 2013. Industry Compliance Costs from Wood Stove NSPS Annual Costs . Received by EPA February, 201 3 .* * * E.O. 12866 Review - Draft

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5 - 18 **5.3 How Might People**  **and Firms Respond? A Qualitative**  **Pa rtial Equilibrium Analysis**  Markets are composed of people as consumers and producers acting as economic agents to maximize utility

or profits, respectivel y. One way economists illustrate behavioral responses to pollution control costs is by using market supply and demand diagrams. The market suppl y curve describes how much of a good or service firms are willing and able to sell to people at a particular price; we often draw this curve as upward sloping because some production resources are fixed. As a result, the cost of producing an additional unit ty picall y rises as more units are made. The market demand curve describes how much of a good or service consumers are willing and able to buy at some price. Holding other factor s constant, the quantity demand ed is assumed to fall when prices rise. In a perfectl y competitive market, equilibrium price (P 0 ) and quantity (Q 0 ) are determined by

the intersection of the supply and demand curves (see Figure 5 - 2 ). **5.3.1 Changes in Market Prices**  **and Quantities** To qualitatively

assess how the regulation may influence the equilibrium price and quantity in the affected markets, we assumed the market supply function shifts up by

the additional cost of producing the good or service; the unit cost increase is typically calculated b y dividing the annual compliance cost estimate b y the baseline quantity (Q 0 ) (see Figure 5 - 2 ). As shown, this model makes two predictions: the price of the affected goods and services are likel y to rise and the consumption/pro duction levels are likely to fall. The size of these changes depends on two factors: the size of the unit cost increase (supply shift) and differences in how each side of the market (suppl y and demand) responds to changes in price. Economists measure respo nses using the concept of price elasticity , which represents the percentage change in quantity divided by the percentage change in price. This dependence has been expressed in the following formula: 55



##   Demand) of Elasticity Price - Supply of Elasticity Price Supply of Elasticity Price unit er- Share of p 

cost As a general rule, a higher share of the per - unit cost increases will be passed on to consumers in markets where

 goods and services are necessities and people do not have good substitutes that they can switch to easil y (demand is inelastic) and

55 For examples of similar mathematical models in the public finance literature, see Nicholson (1998 ), pages 444

– 447, or Fullerton and Metcalf (2002 ).* * * E.O. 12866 Review - Draft

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5 - 19  suppliers have excess capacity and can easil y adjust production levels at minimal costs, or the time period of anal ys is is long enough that suppliers can change their fixed resources; suppl y is more elastic over longer periods.

consumer surplus = – [fghd + dhc] producer surplus = [fghd − aehb] − bdc total surplus = consumer surplus + producer surplus = −[aehb + dhc + bdc] **Figure 5 -**  **2 .**  **Market Demand and Supply Model: With and Without Regulation** Short - run demand elasticities for energy goods (electricity and natural gas), agricultural products, and construction are often inelastic. Specific estimates of short - run demand elasticities for these products can be obtained from existing literature. For the short - run demand of energy products, the National Energy Modeling Sy stem (NEMS) buildings module u ses values between 0.1 and 0.3; a 1% increase in price leads to a 0.1 to 0.3% decrease in energy demand (Wade, 2003 ). For the short - run demand of agriculture and construction, EPA has estimated elasticities to be 0.2 for agriculture and approximately 1 for construction (EPA , 2004 ). As a result, a 1% increase in the prices of agriculture products would lead to a 0.2% decrease in demand for those products, while a 1% increase in construction prices would lead to appro ximately a 1% decrease in demand for construction. Given these demand elasticity scenarios (shaded in gray), approximately

a 1% increase in unit costs would result in a price increase of 0.1 to 1% (Table 5 - 6 ). As a result, 10 to 100% of the unit cost incre ase could be passed on to consumers in the form of higher goods/services prices. This price increase would correspond to a 0.1 to 0.8% decline in consumption in these markets (Table 5 - 7 ).* * * E.O. 12866 Review - Draft

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5 - 20 **Table 5 -**  **6 .**  **Hypothetical Price Increases for a 1% Increase in Unit Co sts**  **Market Demand Elasticity**  **Market Supply Elasticity**

**0.1 0.3**  **0.5 0.7**  **1 1.5**  **3** −0.1 **0.5%** 0.8% 0.8% 0.9% 0.9% 0.9% 1.0% −0.3 0.3% **0.5%** 0.6% 0.7% 0.8% 0.8% 0.9% −0.5 0.2% 0.4% **0.5%** 0.6% 0.7% 0.8% 0.9% −0.7 0.1% 0.3% 0.4% **0.5%** 0.6% 0.7% 0.8% −1.0 0.1% 0.2% 0.3% 0.4% **0.5%** 0.6% 0.8%

− 1.5 0.1% 0.2% 0.3% 0.3% 0.4% **0.5%** 0.7%

− 3.0 0.0% 0.1% 0.1% 0.2% 0.3% 0.3% **0.5% Table 5**  **- 7**  **. Hypothetical Consumption Decreases for a 1% Increase in Unit Costs**  **Market Demand Elasticity**  **Market Supply Elasticity**

**0.1 0.3**  **0.5 0.7**  **1 1.5**  **3** −0.1 **−0.1%** −0.1% −0.1% −0.1% −0.1% −0.1% −0.1% −0.3 −0.1% **−0.2%** −0.2% −0.2% −0.2% −0.3% −0.3% −0.5 −0.1% −0.2% **−0.3%** −0.3% −0.3% −0.4% −0.4% −0.7 −0.1% −0.2% −0.3% **−0.4%** −0.4% −0.5% −0.6% −1.0 −0.1% −0.2% −0.3% −0.4% **−0.5%** −0.6% −0.8% −1.5 −0.1% −0.3% −0.4% −0.5% −0.6% **−0.8%** −1.0% −3.0 −0.1% −0.3% −0.4% −0.6% −0.8% −1.0% **−1.5% 5.3.2**  **Partial Equilibrium Measures of Social Cost: Changes in Consumer and Producer Surplus**  In partial equilibrium analy sis, the social costs are estimated by measuring the changes in consumer and producer surplus, and these values can be determined using the market suppl y and demand model ( as shown in Figure 5 - 2 ). Assuming linear market supply and demand curves as shown in Figure 5 - 2, the change in consumer sur plus (CS) is measured as follows:  CS = − [  Q 1 ×  p ] + [0.5 × 

Q ×  p ]. (5.1) where a coefficient of 0.5 is multiplied to the change in Q and P resulting from the shock to the markets bas ed on the assumption of linear demand and suppl y curves in the diagram* * * E.O. 12866 Review - Draft

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5 - 21 above and applying principles of basic geometry . Higher market prices and lower quantities lead to consumer welfare losses. Similarly , the change in producer surplus (PS) is measured as follows: 

PS = [  Q 1 ×  p ] − [  Q 1 × t] − [0.5 × 

Q × (  p − t)]. (5.2) Higher unit costs and lower production level s reduce producer surplus because the net price change ( p − t) is negative. However, these losses are mitigated because market prices tend to rise. **5.4 Social Cost Estimate**  As shown in Table s 5 - 5a and 5 - 5 b , th e social cost as approximated by the annual compliance costs as a percent of sales represent a fraction of the affected product value that is greater than 1% for each of the product categories; this suggests that the shift of the supply curve may be relati vel y large for some product types and result in larger changes in market prices and consumption. EPA believes the national annualized compliance cost estimates provide a reasonable approximation of the social cost of this proposed rule . EPA believes this a pproximation is better for industries whose markets are well characterized as perfectl y competitive. However, given the data limitation s noted earlier, EPA believes the accounting for annual compliance cost s is a reasonable approximation to inform policy discussion in this rulemaking. We were not able to prepare a full economic anal ys is of the impacts of this proposal on supply and demand, or the effects of such impacts on emissions (e.g. feedback effect on emissions). Most of the affected industries can be characterized as having a high degree of competitive market behavior. To shed more light on th e level of market behavior , EPA ran hy pothetical economic impact anal ys es and the results are in Tables 5 - 6 and 5 - 7 . **5.5 Energy Impacts**  Executive Order 13211 (66 FR 28355, May 22, 2001) provides that agencies will prepare and submit to the Administrator of the Office of Information and Regulatory Affairs, Office of Management and Budget, a Statement of Energy Effects for certain actions id entified as “ significant energy

actions. ” Section 4(b) of Executive Order 13211 defines “ significant energy actions ” as any action b y an agency (normall y published in the Federal Register) that promulgates or is expected to lead to the promulgation of a final rule or regulation, including notices of inquiry , advance notices of proposed rulemaking, and notices of proposed rulemaking: (1) (i) that is a significant regulatory action under Executive Order 12866 or any successor order, and (ii) is likely

to have a significant adverse effect on the supply , distribution, or use of energy ;* * * E.O. 12866 Review - Draft

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5 - 22 or (2) that is designated by the Administrator of the Office of Information and Regulatory Affairs as a significant energy

action. This rule is not a significant energy action as designated by

the Administrator of the Office of Information and Regulatory Affairs because it is not likely to have a significant adverse impact on the supply , distribution, or use of energy . In general, we expect the NSPS to improve technology ,. By

makin g the use of wood fuel less polluting and more efficient, we might see an increase in the use of wood fuel, which would relieve pressure on traditional coal - or petroleum based energy

sources. However, it is difficult to determine the precise energy impact s that might result from this rule because wood - fueled appliances compete with other biomass forms as well as more traditional oil, electricity, and natural gas. We have not determined the potential conversion to other types of fuels and their associated a ppliances if the consumer costs of wood fueled appliances increase and at what level that increase would drive consumer choice. **5.6 Unfunded Mandates**  **Reform Act (UMRA) 5.6.1**  **Future and Disproportionate Costs** The UMRA requires that we estimate, where accurate estimation is reasonably feasible, future compliance costs imposed by the rule and any

disproportionate budgetary effects. Our estimates of the future compliance costs of the proposed rule are discussed previously in this RIA. The nationwide annualized average compliance cost of this proposed rule for directly affected appliances is $ 15.7 million in the 2014 - 2022 time frame (2010 dollars). Therefore, this proposed rule would not be subject to the requirements of Sections 202 or 205 of the UMRA. This proposed rule would also not be subject to the requirements of Section 203 of UMRA because it contains no regulatory requirements that might significantly or uniquel y affect small governments. The proposed rule w ould not apply to such governments and would impose no obligations upon them . We do not believe that there will be any disproportionate budgetary effects of the proposed rule on any particular areas of the country, s tate or local governments, ty pes of communities (e.g., urban, rural), or particular industry segments. **5.6.2 Effects on the National Economy**  The UMRA requires that we estimate the effect of the proposed rule on the national econom y. To the extent feasible, we must estimate the effect on productivity, economic growth, full employ

ment, creation of productive jobs, and international competitiveness of U.S. goods and services if we determine that accurate estimates are reasonabl y feasible and that such effect is relevant and material. The nationwide economic impact of the proposed rule is presented* * * E.O. 12866 Review - Draft

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5 - 23 earlier in this RIA chapter. This anal ys is provides estimates of the effect of the proposed rule on most of the categories mentioned above, and these estimates are presented earlier in this RIA chapter. The natur e of this rule is such that it is not practical for us to use existing approaches, such as the Morgenstern et al. approach , 56 to estimate the impact on employment to the regulated entities and others from this proposed rule . We explain why this is true, and provide impacts associated with the monitoring, recordkeeping, and reporting requirements to provide some understanding of what impacts this proposal will have on emplo ym ent for affected firms in section 5. 7 below. **5.6.3 Executive Order 13045: Protection of Chi**  **ldren from Environmental Health Risks and Safety Risks**  Executive Order 13045, “ Protection of Children from Environmental Health Risks and Safety Risks ” (62 FR 19885, April 23, 1997), applies to any rule that (1) is determined to be “ economically

significant, ” as defined under Executive Order 12866, and (2) concerns an environmental health or safety risk that EPA has reason to believe may have a disproportionate effect on children. If the regulatory action meets both criteria, EPA must evaluate the environmental health or safety effects of the planned rule on children and explain why the planned regulation is preferable to other potentially effective and reasonably feasible alternatives considered b y the Agency. This proposed rule is not subject to Executive Order 13045 (62 FR 19885, April 23, 1997) because the Agency does not believe the environmental health risks or safety risks addressed b y this action present a disproportionate risk to children. The report, Anal ys is of Exposure to Residential Wood Combusti on Emissions for Different Socio - Economic Groups, shows that on a nationwide basis, cancer risks due to residential wood smoke emissions among disadvantaged population groups generally are lower than the risks for the general population due to residential wood smoke emissions **.** One of the demographic variables examined for this report was that of children 18 years and younger. This proposed rule is expected to reduce environmental impacts for everyone, including children. This action proposes emissions limit s at the levels based on the best sy stem of emissions reduction ( B SER) , as required b y the Clean Air Act. Based on our anal ys is, we believe that this proposed rule would not have a disproportionate impact on children.

56 Morgenstern, R. D., W. A. Pizer, and J. S. Shih. 2002. “ Jobs versus the Environment: An Industry - Level Perspective. ” Journal of Environmental Economics and Management 43(3):412 - 436 .* * * E.O. 12866 Review - Draft

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5 - 24 The public is invited to submit comments or identify peer - reviewed studies and data that assess effects of earl y- life exposure to smoke from residential wood heaters. **5.6.4 Executive Order 12898: Federal Actions to Address Environmental Justice in Minority**  **Populations and Low -** 

**Income Populations** Executive Order 12898 (59 FR 7629 (Feb. 16, 1994) ) e stablishes federal executive policy on environmental justice. Its main provision directs federal agencies, to the greatest extent practicable and permitted by law, to make environmental justice part of their mission by identifying and addressing, as appropriate, disproportionately high and adverse human health or environmental effects of their programs, policies, and activities on minority populations and low income populations in the United States. EPA has de termined that this proposed rule would not have disproportionately high and adverse human health or environmental effects on minority , low - income or indigenous populations because it increases the level of environmental protection for all affected populati ons without having any disproportionately high and adverse human health or environmental effects on any population, including any minority , low - income or indigenous populatio n. Th is proposed rule would establish national standards that would reduce primari ly PM emissions from new residential wood heaters and, thus, would decrease the level of emissions to which all affected populations are exposed. The EPA defines “ Environmental Justice ” to include meaning involvement of all people regardless of race, color, national origin, or income with respect to the development, implementation, and enforcement of environmental laws, regulations, and polices. The EPA maintains an ongoing commitment to ensure environmental justice for all people, regardless of race, color, national origin, or income. Ensuring environmental justice means not only protecting human health and the environment for everyone, but also ensuring that all people are treated fairl y and are given th e opportunity to participate meaningfully in the development, implementation, and enforcement of environmental laws, regulations, and policies. **5.7 Employment Impacts**  In addition to addressing the cos ts and benefits of the proposed rule , EPA has anal yz ed the impacts of this rulemaking on employ ment , which are presented in this section . While a standalone anal ys is of employ ment impacts is not included in a standard cost - benefit anal ys is, such an anal ys is is of particular concern in the current economic climate of sustained high unemploy ment. Executive Order 13563, states, “ Our regulatory s ys tem must protect public health, welfare, safety, and our environment while promoting economic growth, innovation,* * * E.O. 12866 Review - Draft

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5 - 25 competitiveness, and job creation ” (emphasis added). Theref ore, we seek to inform the discussion of labor demand and job impacts by providing an estimate of the employ ment impacts of the proposed regulation using labor requirements for the installation, operation, and maintenance of control requirements, as well a s reporting and recordkeeping requirements. Unlike several recent RIAs, however, we do not provide employ ment impacts estimates based on the study by Morgenstern et al. (2002); we discuss this decision after presenting estimates of the labor requirements a ssociated with reporting and recordkeeping and the installation, operation, and maintenance of control requirements. We have not quantified the rule ’ s effects on labor , or the effects induced by changes in workers ’ incomes. What follows is an overview of the various way s that environmental regulation can affect employ ment. EPA continues to explore the relevant theoretical and empirical literature and to seek public comments in order to ensure that such estimates are as accurate, useful and informative as p ossible. From an economic perspective labor is an input into producing goods and services; if regulation requires that more labor be used to produce a given amount of output, that additional labor is reflected in an increase in the cost of production. Moreover, when the econom y is at full employ ment, we would not expect an environmental regulation to have an impact on overall employ ment because labor is being shifted from one sector to another. On the other hand, in periods of high unemployment, employ ment effects (both positive and negative) are possible. For example, an increase in labor demand due to regulation may result in a short - term net increase in overall employment due to the potential hiring of previously unemployed workers b y the regulated secto r to help meet new requirements (e.g., to install new equipment) or by the environmental protection sector to produce new abatement capital. Wh en significant numbers of workers are unemployed, the opportunity costs associated with displacing jobs in oth er sectors are likel y to be smaller . And, in general, if a regulation imposes high costs and does not increase the demand for labor, it may lead to a decrease in employ ment. To provide a partial picture of the employ ment consequences of this rule, EPA consid ers the methodology of Morgenstern, Pizer, and Shih (2002) in describ ing the effects of the regulation on the regulated industry . This approach has been used b y EPA previously in Regulatory

Impact Analyses prepared recentl yEmploy ment Impacts from Pollution Control Requirements Regulations set in motion new orders for pollution control equipment and services. New categories of emplo ym ent have been created in the process of implementing environmental* * * E.O. 12866 Review - Draft

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5 - 26 regulations. When a regulation is promulgated, one ty pical response of industry is to order pollution control equipment and services in order to comply with the regulation when it becomes effective, while closure or plants or facilities that choose not to comply occurs after the compliance date. Environmental regulation may increase revenue and employ ment in the environmental technology industry . While these increases represent gains for that industry , they are costs to the regulated industries required to install the equipment. As with any pool of labor, the gross size of the labor pool does not reflect the net impact on overall employ ment after adjusting for shifts in other sectors. Regulated firms hire workers to design and build pollution controls . Once the equipment is installed, regulated firms hire workers t o operate and maintain the pollution control equipment

— much like they

hire workers to produce more output. Morgenstern et al. estimated the effects of pollution abatement expenditures on net employ ment in four highl y polluting/regulated sectors (pulp and paper, plastics, steel, and petroleum refining) . They conclude that increased abatement expenditures generall y have not caused a significant change in net employ

ment in those sectors. Environmental regulations support employ ment in many

basic industries. In addition to the increase in employ ment in the environmental protection industry (via increased orders for pollution control equipment), environmental regulations also support employ ment in industries that provide intermediate goods to the environmental p rotection industry . The equipment manufacturers, in turn, order steel, tanks, vessels, blowers, pumps, and chemicals to manufacture and install the equipment. Currently in most cases there is no scientifically

defensible way

to estimate the employ

ment impa cts in these intermediate goods sectors. **5.7.1 Employment Impacts within the Regulated Industry**  In recent RIAs we have applied estimates from a study by Morgenstern , Pizer and Shih (2002) 57 to derive the employ ment effects of new regulations within the regulated industry . (See, for example, the Regulatory Impact Analy ses for the recently released final MATS and CSAPR regulations). Determining the direction of emplo yment effects in the regulated industry is also challenging due to competing effects. Complying with the new or more stringent regulation requires additional inputs, including labor, and may alter the relative proportions of labor and capital used b y regulated firms in their production processes . Morgenstern et al. (2002)

57 Morgenstern, R . D., W. A. Pizer, and J. S. Shih. 2002. Jobs versus the Environment: An Industry - Level Perspective. ‖ Journal of Environmental Economics and Management 43 (3):412 - 436.* * * E.O. 12866 Review - Draft

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5 - 27 demonstrate that environmental regulations can be understood as requiring regulated firms to add a new output (environmental quality) to their product mixes . Although legally compelled to satisfy this new demand, regulated firms have to finance this additional production with the proceed s of sales of their other (market) products. Satisfying this new demand requires additional inputs, including labor, and may alter the relative proportions of labor and capital used by regulated firms in their production processes. More specificall y, Morg enstern, Pizer, and Shih (2002) decompose the effect of regulation on net emplo yment in the regulated sector into the following three subcomponents:

 The Demand Effect : higher production costs from complying with the regulation will raise market prices, reducing consumption (and production), thereb y reducing demand for labor within the regulated industry . The “ extent of this effect depends on the cost increase passed on to consumers as well as the demand elasticity of industry output. ” (p. 416)

 The Cost Effect : Assuming that the capital/labor ratio in the production process is held fixed, a s “production costs rise, more inputs, including labor, are used to produce the same amount of output, ” (p. 416). For example, to reduce pollutant emissions while holding output levels constant, regulated firms may require additional labor.

 The Factor- Shift Effect : Regulated firms ’ production technologies may be more or less labor intensive after complying with the regulation (i.e., more/less labor is required relative to capital per dollar of output). “ Environmental activities may be more labor intensive than conventional production, ” meaning that “ the amount of labor per dollar of o utput will rise. ” However, activities may , instead, be less labor intensive because “ cleaner operations could involve automation and less employ ment, for example. ” (p. 416) The demand effect is expected to have a n unambiguously negative effect on employ ment, the cost effect to have an unambiguousl y positive effect on emplo ym ent, and the factor - shift effect to have an ambiguous effect on employ ment . Without more information with respect to the magnitudes of these competing effects, it is not possible to predict the total effect environmental regulation will have on overall employ ment levels in the regulated sector . Morgenstern et al. estimated the effects of pollution abatement expenditures on net employ ment in four highly

polluting/regulated sectors (pulp an d paper, plastics, steel, and petroleum refining) . They conclude that increased abatement expenditures generall y have not caused a significant change in net employ ment in those sectors. While the specific sectors Morgenstern et al. examined are different than the sectors considered here, the methodology that* * * E.O. 12866 Review - Draft

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5 - 28 Morgenstern et al. developed is still an informative way to qualitatively

assess the effects of this rulemaking on employ

ment in the regulated sector. While the theoretical framework laid out by Morgens tern et al. still holds for the industries affected under this proposed NSPS, important differences in the markets and regulatory

settings anal yzed in their study and the setting presented here lead us to conclude that it is inappropriate to utilize their quantitative estimates to estimate the employ ment impacts from this proposal. The differences between the underl ying regulations motivating the abatement expenditures studied in Morgenstern et al. are potentially too many to allow for the direct transfer o f their quantitative estimates to the proposed NSPS amendments. There are important differences between the affected industries and the four manufacturing industries studied by Morgenstern et al. In addition to important differences between the regulated s ectors, the pollution control strategies that form the basis of the cost inputs in the Morgenstern et al. anal ys is are primarily

add - on or end - of

- line pollution controls, in general covering more than 70% of the abatement expenditures in most years and ind ustries anal yz ed, as may

be seen in Table 5 - 8. However, the control strategies anal yz ed for this RIA mostl y include process and design changes to reduce emissions during the production of affected heaters, and not after these heaters are in operation. 58 For instance, use of a cataly st combustor is common in wood stoves in order to reduce emissions and also improve heat efficiency . Retrofits are uncommon because replacing the wood stove is often a more economical alternative. For these reasons we conclude there are too many uncertainties as to the comparability of the Morgenstern et al. study to appl y their estimates to quantify the employ ment impacts within the regulated sectors for this proposed regulation.

58 More detail on how

emission reductions expected from compliance with this rule can be o btained can be found in Section 4 of this RIA.* * * E.O. 12866 Review - Draft

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5 - 29 **Table 5**  **- 8.**  **Percent of Abatement Expenditures on Ch anges in Production Processes**  **59 Industry**  **1979 1983**  **1988 1991**  Pulp and Paper 16% 20% 39% 53% Plastics 15% 12% 25% 33% Petroleum Refining 28% 43% 37% 39% Iron and Steel 4% 7% 6% 8%

59 U.S. Bureau of the Census. Pollution Abatement Costs and Expenditures . Washington, DC: U.S. Government Printing Office, various years . The pulp and paper industry is defined by SIC 2611 & 2621, plastics by SICE 282, petroleum refining by SIC 2911, and iron and steel by SIC 332. For pulp and paper and iron and steel industries in 1983 the data is partially estimated based on non reported data due to disclosure reasons. The 1984 (1989) data for plastics (pulp and paper) is used instead of 1983 (1988) due to a lack of reported data in the original year.* * * E.O. 12866 Review - Draft

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6 - 1 **SECTION 6 SMALL ENTITY SCREENI**  **NG ANALYSIS** The Regulatory

Flexibility

Act as amended by

the Small Business Regulatory Enforcement Fairness Act (SBREFA) generally requires an agency

to prepare a regulatory flexibility anal ys is of any rule subject to notice and comment rulemaking requirements under the Administrative Procedure Act or any other statute, unless the agency certifies that the rule will not have a significant economic impact on a substantial number of small entities. Small entities include small businesses, small governmental jurisdictions, and small not - for - profit enterprises. After considering the economic impact of the proposed rule on small entities, the screening anal ys is indicates that we can not conclude that this proposed rule may not have a significant economic impact on a substantial number of small entities (or “ SISNOSE ” ) for certain residential wood heating products covered under the revised NSPS proposal . For this anal ys is EP A considered sales and revenue tests for establishments owned by representative small entities that manufacture or construct residential wood heating devices. **6.1 Small Entity Data Set**  The industry

sectors covered b y the proposed rule were identified during th e development of the cost anal ys is (see Sections 3 and 5). The Statistics of U.S. Businesses ( SUSB ) provides national information on the distribution of economic variables b y industry and enterprise size (U.S. Census, 2008a, 2008b ). The Census Bureau and the Office of Advocacy of the Small Business Administration ( SBA ) supported and developed these files for use in a broad range of economic analy ses. 60 Statistics include the total number of establishments and receipts for al l entities in an industry ; however, many of these entities may not necessaril y be covered b y the final rule. SUSB also provides statistics by enterprise employ

ment and receipt size. The Census Bureau ’ s definitions used in the SUSB are as follows:

 Establish ment : An establishment is a single phys ical location where business is conducted or where services or industrial operations are performed.

 Receipts : Receipts (net of taxes) are defined as the revenue for goods produced, distributed, or services provided, i ncluding revenue earned from premiums, commissions and fees, rents, interest, dividends, and royalties. Receipts exclude all revenue collected for local, state, and federal taxes.

60 Se e http://www.census.gov/csd/susb/ and http://www.sba.gov/advo/research/data.html for ad ditional details.* * * E.O. 12866 Review - Draft

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6 - 2  Enterprise : An enterprise is a business organization consisting of one or more domestic establishments that were specified under common ownership or control. The enterprise and the establishment are the same for single - establishment firms. Each multi - establishment company forms one enterprise

—the enterprise emplo yment and annual pay

roll are summed from the associated establishments. Enterprise size designations are determined by the summed employ

ment of all associated establishments. Because the SBA ’ s business size definitions (SBA, 201 3 ) appl y to an establishment ’ s “ultimate parent company , ” we assumed in this analy sis that the “ enterprise ” definition above is consistent with the concept of ultimate parent company that is ty picall y used for SBREFA screening anal ys es and the terms are used interchangeabl y. **6.2 Small En**  **tity Economic Impact Measures** The anal ys is generated a set of establishment sales tests (represented as cost - to - receipt ratios) for NAICS codes associated with sectors listed in Table 6 - 1. Although the appropriate SBA size definition should be applied at the parent company (enterprise) level, we can only compute and compare ratios for a model establishment owned by an enterprise within an SUSB size range (emplo ym ent or receipts). Using the SUSB size range helps us account for receipt differences between est ablishments owned by large and small enterprises and also allows us to consider the variation in small business definitions across affected industries. Using establishment receipts is also a conservative approach, because an establishment ’ s parent company (the “ enterprise ” ) may have other economic resources that could be used to cover the costs of the final rule. Itshould be noted that these impacts are for the 2014

–2022 time frame ; as mentioned earlier in this RIA, the annualized costs considered in this anal ysis reflect an average of the proposal ’ s compliance costs incurred by affected sources each year from promulgation through 2022. **6.2.1 Establishment Employment and Receipts**  The sales test compares a representative establishment ’ s total annual compliance costs to the average establishment receipts for enterprises in several size categories. 61 For industries with SBA emplo ym ent size standards, we calculated average establishment receipts for each enterprise employ

ment range (Table 6 - 2). For industries with S BA receipt size standards, we calculated average establishment receipts for each enterprise receipt range (Table 6 - 3). The anal ys is assumes that the majority of affe cted entities are covered under hardware manufacturing

61 For the 1 to 20 employee category, we excluded SUSB data for enterprises with zero employees. These enterprises did not operate the entire year.* * * E.O. 12866 Review - Draft

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6 - 3 (NAICS 332510) and heating equipment manufacturing (NAICS 333414). We use establishment data from the 2007 Economic Census because that data is the most recent release of public establishment - level information for the industries impacted b y this proposal. **Table 6 -**  **1. Revised NSPS**  **Proposal fo**  **r Residential Wood Heating Devices: Affected**

**Sectors and SBA Small Business Size Standards Industry Description**  **Corresponding NAICS**  **SBA Size Standard for Businesses**

**(January 7, 2013) Type of Sm**  **all Entity**  New single - family general contractors 236115 $33.5 million in annual receipts Masonry Masonry contractors 238140 $14.0 million in annual receipts Masonry Hardware manufacturing 332510 500 employees All product ty pes Heating equipment manufacturing 333414 500 employees All product ty pes Plumbing and heating equipment wholesalers 423720 100 employees All product ty pes All other home furnishing stores 442299 $ 19 .0 million in annual receipts Business However, the revised NSPS proposal has the potential to affect small entities classified as new home construction and masonry contractors. In addition, wholesalers of imported residential heating devices may

also be affected if these establishments are required to certify imported products . **6.2.2 Establishment Compliance Cost**  Annual entity

compliance costs vary

depending on the product ty pe manufactured and the number of product model s they would need to redesign under the revised NSPS proposal as mentioned in Section 5 of this RIA . For this anal ysis compliance costs were estimated based on the average development costs defined in the engineering cost anal ys is, presented in Section 5 - 1. The anal ys is assumes that manufacturers h ave between two and seven model fireboxes that would be subject to the new NSPS. There is limited information on the actual number of model fireboxes associated with small businesses. Hence , for purposes of the small entity screening anal ys is, we assume d that smaller companies maintain fewer than three firebox models that wou ld be subject to the revised NSPS. In the absence of better data, EPA believes that between one and three firebox models is a reasonable assumption for our anal ys is of impacts to potentially

affected small businesses.* * * E.O. 12866 Review - Draft

– Do Not Cite, Quote or Release During Review ***6-4 **Table 6 -**  **2. Average Receipts for Affected Industry by Enterprise Employment Size: 2007 ($20**  **10 million/establishment)**  **SBA Size Standard**  **for Businesses (effective**  **January 7**  **, 201**  **3 )**  **Owned by Enterprises with Employm ent Ranges:** 

**NAICS NAICS Description**  **All Enterprises**  **Fewer than**

**20 Employees**  **22 to 99**

**Employees 100 to 499** 

**Employees 500 to 749** 

**Employees 750 to 999** 

**Employees 1,000 to** 

**1,500 Employees**  **1,500+**

**Employees** 332510 Hardware

manufacturing 500 employees $1 3 . 27 $1.3 3 $7. 71 $2 6 . 2 6 $7 2 . 83 $6 2 . 1 8 $37. 90 $6 2 . 27 333414 Heating equipment

manufacturing 500 employees $13. 7 8 $1.2 7 $1 1 . 17 $3 9 . 81 NA NA NA $ 8 . 0 9 423720 Plumbing and heating

equipment wholesalers 100 employees $7. 49 $2.5 8 $9. 68 $10. 79 $9. 82 NA NA $0.14 NA = Not available. SUSB did not report this data due to concern with disclosure of confidential information or other reasons . Escalation of average receipts from 2007 to 2010 is accomplished by use of the annual GDP implicit price deflator (available at http://research.stlouisfed.org/fred2/series/GDPDEF/downloaddata?cid=21 ). The escalation ratio between 2007 and 2010 is 1.045. **Table 6 -**  **3. Average Receipts for Affected In**  **dustry by Enterprise Receipt Range: 2007 ($20 10**  **million/establishment) SBA Size**  **Standard for Businesses**  **(effective January**  **7 ,**  **201 3**  **) Owned By Enterprises with Receipt Range:** 

**NAICS NAICS** 

**Description All**  **Enterprises Less than** 

**100K Receipts**  **100 to**

**499K Receipts**  **500 to**

**999K Receipts**  **1,000 to**

**4,999K Receipts**  **5,000 to**

**9,999K Receipts**  **10,000 to**

**49,999K Receipts**  **50,000 to**

**99,999K Receipts**  **100,000K +**

**Receipts** 236115 New

single - family general contractors $33.5 million in

annual receipts $1.7 7 $0.05 $0.2 9 $0.7 7 $2. 24 $ 7 .9 07 $1 9 . 34 $5 9 . 14 $26 9 . 93 238140 Masonry

Contractors $14.0 million in

annual receipts $1.0 8 $0.05 $0.2 7 $0.7 7 $2.2 32 $7. 37 $18. 6 4 $4 8 .0 3 $5 9 . 26 442299 All other home

furnishing stores $ 19 .0 million in

annual receipts $2.6 8 $0.05 $0.2 8 $0.7 8 $1.9 9 $6.1 4 NA NA $ 401 . 23 NA = Not available. SUSB did not report this data due to concern with disclosure of confidential information or other reasons . Escalation of average receipts from 2007 to 2010 is accomplished by use of the annual GDP implicit price deflator (available at http://research.stlouisfed.org/fred2/series/GDPDEF/downloaddata?cid=21 ) . The escalation ratio between 2007 and 2010 is 1.045 .* * * E.O. 12866 Review - Draft

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6 - 5 Then, we computed per- entity compliance costs for representative establishments and for manufacturing each product ty pe (see Table 6 - 4). For this anal ys is, the annualized costs as presented in Table 6 - 4 assumed the total model development costs for four model fireboxes spread over a 6 - ye ar model development time frame and scaled to a single model. Table 6 - 4 shows the estimated average annualized cost of $60,000 per model and its use in deriving the national total compliance costs for the proposed option . Table 6 - 5 presents the same costs for the alternative option. This cost was assumed to be constant for most product types. Lo wer compli ance cost for pellet stoves due to the fact that most existing models already compl y with the regulation. Lower bound on compliance cost for masonry heaters consists of a nominal licensing fee ($200) for the use of computer simulation model software to cer tify the site built units. **Table 6 -**  **4. Per**  **- Entity Annualized Compliance Costs by Product Type** **— Proposed Option** 

**($20 10**  **m illions)** 

**Product Type No.**  **Establishments Assu**  **med Affected**

**Models p**  **er Establishment**  **a Annual** 

**Compliance Cost per Model Firebox**  **($ m illions)**  **Total Industry**

**Costs —** **Proposed Option**  **($ m illions)**  Wood stoves 34 3 $0.0 4 $4.21 Single burn rate stoves 3 7 $0.0 4 $0.90 Pellet stoves 29 4 $0.03 $3.46 Forced - air furnaces 7 7 $0.0 5 $2.25 Masonry heaters b 48 2

– 8 < $0.001 to $0. 003 $0.31 Hydronic heating systems 30 4 $0.0 4 $4.55 **National Com pliance Cost**  **$ 15.7**  a Table totals may differ because of rounding. b Masonry heater establishments include 2 large and 4 medium manufacturers, and 42 small custom builders. For each case in this analysis, the number of models each representative establishment must redesign to compl y with the NSPS emission limits in the options analyzed in this RIA varies b y product type. The total annualized compliance cost per establishment is calculated b y multiplying the number of firebox models requiring redesign by the annualized cost per model ($6 3 , 85 0). Table 6 - 6 presents the assumed number of models per establishment by product ty

pe. Figures 6 - 1 and 6 - 2 illustrate the distribution of compliances costs by product ty

pe .* * * E.O. 12866 Review - Draft

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6 - 6 **Table 6 -**  **5 .**  **Per -**  **Entity Annualized Compliance Costs by Product Type —**  **Alternative Option**  **($20 10**  **m illions)** 

**Product Type No.**  **Establishments Assu**  **med Affected**

**Models p**  **er Establishment**  **a Annual** 

**Compliance Cost per Model Firebox**  **($ m illions)**  **Total Industry**

**Costs —** **P roposed**  **Option ($ m** **illions)** Wood stoves 34 3 $0.0 8 $8.09 Single burn rate stoves 3 7 $0.0 7 $1.54 Pellet stoves 29 4 $0.0 5 $6.25 Forced - air furnaces 7 7 $0.0 8 $3.81 Masonry heaters b 48 2

– 8 < $0.001 to $0. 003 $0.31 Hydronic heating systems 30 4 $0.0 8 $8.30 **National Com pliance Cost**  **$ 28.3**  a T able totals may differ because of rounding. b Masonry heater establishments include 2 large and 4 medium manufacturers, and 42 small custom builders. **Table 6 -**  **6 .**  **Representative Establishment Costs Used for Small Entity Analysis ($20**  **10 )**  **Best Estimate**  Number of models requiring redesign 2 Annual cost per model $ 63 , 850 Average annual cost per establishment $ 127,700 For the sales test, we divided the representative establishment compliance costs reported in Table 6 - 6 by

the representative establishment receipts reported in Tables 6 - 2 and 6 - 3. This is known as the cost - to - receipt (i.e., sales) ratio, or the “ sales test. ” The “ sales test ” is the impact methodology

EPA employ s in anal yz ing small entity impacts a s opposed to a “profits test, ” in which annualized compliance costs are calculated as a share of profits. In formation on annual revenues or sales is more commonly available data for entities normally affe cted b y EP A regulations, and profits data normall y m ade available are often not the true profit earned b y firms because of accounting and tax considerations. Revenues as typicall y published are usuall y correct figures and are more reliably reported when compared with profit data. The use of a “ sales test ” f or estimating small business impacts for a rulemaking such as this* * * E.O. 12866 Review - Draft

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6 - 7 **Figure 6 -**  **1. Population of Firebox Models and Average Models per Establishment by**  **Product Type** one is consistent with guidance offered b y EPA on compliance with SBREFA 62 and is consistent with guidance published by the SBA ’ s Office of Advocacy that suggests that cost as a percentage of total revenues is a metric for evaluating cost increases on small entities in relation to increases on large entities (SBA, 2003 ). 63 The annualized cost per sales for a company represents the maximum price increase in affected product needed for the company to completely recover the annualized costs imposed by the regulation .

62 The SBREFA compliance guidance to EPA rule w riters (EPA, 2006a) regarding the types of small business analysis that should be considered can be found at http://www.epa.gov/sbrefa/documents/rfaguidance11 - 00 - 06.pdf , pp. 24 - 25. 63 This compliance guide produced by SBA can be found at http://www.sba.gov/sites/default/files/rfaguide_0512_0.pdf . 3 7

4 7

4 4

0 1 2 3 4 5 6 7 8

0 20 40 60 80 100 120 140

Wo od Stove s Si ng le Burn R at e Stoves Pel letStoves For ced A ir Fur naces Maso nr y H eaters Hydr oni c Heat in g System s**A v** **e r** **a g** **e N** **o .** **o f** **F i** **r e** **b o** **x M** **o d** **e l** **s P** **e r** **E s** **t a** **b l** **i s** **h m** **e n** **t M** **o d** **e l** **F i** **r e** **b o** **x P** **o p** **u l** **a t** **i o** **n**

To ta l Model Popul at io n Aver age Model s pe r Es ta bl is hmen t* * * E.O. 12866 Review - Draft

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6 - 8 **Figure 6 -**  **2. Distribution of National Compliance Costs by P**  **roduct Type in 2014 to 2022**  For purposes of this analy sis, EPA assumes most small entities in the residential wood heating industry

are likely to manufacture fewer than three distinctive firebox models and in m any cases they

would support only

one model . We assume for this anal ysis that most small entities in this industry

will manufacture an average of two distinctive firebox models. Hence , EPA believes that the estimate in Table 6 - 6 above is the most representative establishment costs to assess impacts o n small businesses. If the cost - to - receipt ratio is less than 1%, then we consider the rule to not have a significant impact on the establishment (and, company) in question. Table 6 - 7 present s the cost - to - receipt ratios for each category of establishments (establishments with ratios that exceed 1% under each case are highlighted) for the proposal option. Table 6 - 8 present these ratios for the alternative option. Wo od Stoves 0%

Single Burn Rate Stoves

15% Pellet Stoves 2%

Forced Air Furnaces 37%

Masonry Heaters 2% Hydronic Heating Systems

44%* * * E.O. 12866 Review - Draft

– Do Not Cite, Quote or Release During Review ***6-9 **Table 6 -**  **7 .**  **Cost -**  **to -**  **Receipt Ratio Results for the Proposal Option**  **by NAICS Code a** 

**NAICS Description**  **All Establishments**  **Fewer than 20**

**Employees 22 to 99** 

**Employees 100 to 499** 

**Employees** 332510 Hardware manufacturing 3.12 % 1 9. 74 % 3 . 40 % 0. 99 % 333414 Heating equipment manufacturing 1 .8 9 % 20 . 73 % 2.34 % 0. 67 % 423720 Plumbing and heating equipment

wholesalers 3.50 % 10 . 15 % 2 . 71 % 2.43 %

**NAICS Description**  **Total Less than**  **100K Receipts**  **100 to**

**499K Receipts**  **500 to**

**999K Receipts**  **1,000 to**

**4,999K Receipts**  **5,000 to**

**9,999K Receipts**  **10,000 to**

**49,999K Receipts**  236115 New

single - family general contractors 7.18% 231.81% 43.78% 16.39% 5.62% 1.78% 0.69% 238140 Masonry contractors 11.59% 232.50% 47.70% 16.54% 5.43% 1.72% 0.74% 442299 All other home furnishing stores 7.86% 224.82% 46.00% 17.02% 7.47% 3.84% a All the cost to receipts results incorporate costs that are primarily R&D activities that firms will engage in to build appli ance models that comply with the options analyzed in this RIA. The R&D cycle is estimated at 6 years, while the appliance life for all affected categories is 20 years.* * * E.O. 12866 Review - Draft

– Do Not Cite, Quote or Release During Review ***6-10 **Table 6 -**  **8 .**  **Cost -**  **to -**  **Receipt Ratio Results for the Alternative Option**  **by NAICS Code a** 

**NAICS Description**  **All Establishments**  **Fewer than 20**

**Employees 22 to 99** 

**Employees 100 to 499** 

**Employees** 332510 Hardware manufacturing 5.22 % 33.05 % 5 . 69 % 1.66 % 333414 Heating equipment manufacturing 3.17 % 34.70 % 3.92 % 1.12 % 423720 Plumbing and heating equipment

wholesalers 5.87 % 17.00 % 4.54 % 4.07 %

**NAICS Description**  **Total Less than**  **100K Receipts**  **100 to**

**499K Receipts**  **500 to**

**999K Receipts**  **1,000 to**

**4,999K Receipts**  **5,000 to**

**9,999K Receipts**  **10,000 to**

**49,999K Receipts**  236115 New

single - family general contractors 12 . 03 % 389 . 44 % 73.55 % 27.54 % 9.44 % 2.99 % 1.16 % 238140 Masonry contractors 1 9.47 % 390.60 % 80.14 % 27.79 % 9.12 % 2.89 % 1.24 % 442299 All other home furnishing stores 13. 20 % 377.70 % 77.28 % 27.23 % 13.00 % 6.45 % a All the cost to receipts results incorporate costs that are primarily R& D activities that firms will engage in to build appliance models that comply with the options analyzed in this RIA. The R&D cycle is estimated at 6 years, while the appliance life for all affected categories is 20 years.* * * E.O. 12866 Review - Draft

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6 - 11 6.2.2.1 Analysis Results In our small entity anal ys is for the proposed option , using an annual compliance cost of $127,000 as the estimated cost borne b y affected small entities, establishments in NAI CS 332510, 333414, and 423720 with fewer than 500 employees have cost - to - receipt ratios higher than 1%. E stablishments in NAI CS 236115, 238140, and 442299 with receipts less than $10 million have cost - to - receipt ratios higher than 1% . For the alternative option, the impacts are higher than 1% for all establishments in any size class. After considering the economic impacts of this proposed rule on small entities, we cannot certify that this action will not have a significant eco nomic impact on a substantial number of small entities. This certification is based on the economic impact of this action to all affected small entities across all industries affected. Using the estimate of impacts presented earlier in this chapter, we estimate that all small entities will have annualized costs of greater than 1% of their sales in all industries with fewer than 20 emplo ye es and NAICS 236115, 238140, and 442299 with receipts less than $10 million . Those establishments in NAI CS 332510, 333414 , and 423720 with cost - to - receipt ratios higher than 1% account for more than 80 % of small entities. Establishments in NAI CS 236115, 238140, and 442299 with cost - to - receipt ratios higher than 1% account for more than 9 9 % of small entities. Small entity imp acts are higher than this for the alternative option. We thus conclude that we cannot certify that there is not a significant economic impact on a substantial number of small entities (SI SNOSE) for this rule. It should be noted that the cost to receipts an al ys is included in this RIA reflect the large majority of annualized costs that are composed of research and development (R&D) activities (nearl y 90%, based on the manufacturers ’ cost memorandum) that have a shorter life than the total life of affected app liances

— six years for an R&D cycle as mentioned in section 5 of this RIA compared to 20 years for the life of affected appliances. The impacts on small entities should be understood in the context that a large share of the estimated annualized costs reflect expenses in the earl y ye ars of the appliance life, and only a small share recurs each ye ar over the entire appliance life of 20 years. In addition, the application of these costs for the options anal yz ed in this RIA will lead to a conservative (or, over - stated) cost estimate as stated previously

in section 5.1.3. One example of this is that all hydronic heaters will undergo R&D beginning in 2013 to comply with either option analyzed; there is a small percentage of hydronic heaters that already m eet the emission limits under each option considered in the RIA. Similar assumptions are also made in the cost estimates for single burn rate stoves and forced air furnaces. Given these two considerations, the costs that are included in the cost to sales anal y ses* * * E.O. 12866 Review - Draft

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6 - 12 presented in this RIA are conservative in nature, and the cost to receipts impacts shown above should be understood in that context. A sensitivity

anal ys is showing the effect of the R&D cycle lifespan on the cost to sales estimates for each option is below. Table 6 - 9 shows how the model firebox costs that are input to the cost to sales (and small business) anal ys es will change with changes to the R&D cycle lifespan. **Table 6 -**  **9. Total Annual Cost (TAC) per Appliance Model**  **– for Varying**  **Annualiz ed R&D Cycle Lifespans**  **Annualized R&D Cycle Lifespan**  **(Years) TAC/Appliance Model (2010$)**  **TAC per Establishment** 6* $63,850 $127,700 10 40,022 80,044 20 22,418 44,836 * As mentioned in Section 5 of this RIA, six years represents the annualized R&D cycle lifespan incorporated in the cost estimates for the Proposed RWH NSPS rule options. The total annual cost per appliance model is the value of costs included in the cost to sales estimates to calculate these values. Each small entity is expected to modify

2 appliance models on average in order to comply with the proposal , an assumption we estimated earlier in this section of the RIA . We assume each small entity owns only

one establishment (or place of business). Hence, the total annual cost to each small entity is twice the cost per appliance model. The annual cost to sales in the RIA will change proportionately to a change in the TAC since the sales estimates in the analy sis will remain constant. As shown in Table 6 - 9 , with an increase in the R &D cycle lifespan from 6 to 10 years, the TAC/appliance model estimate falls to $40,022 from $63,850. The new TAC/appliance model estimate is 37% less than before. Thus, the cost to sales estimates will fall by 37% from the previous values. Finally , if the R&D cycle lifespan is reduced to 4 years, the TAC/appliance model estimate increases to $93,755 from $63,850. The new TAC/appliance model estimate is now 65 % low er than before. Thus, the cost to sales estimates will de crease by 65 % from the values that use an R&D cycle lifespan of 6 ye ars. T able 6 - 10 contains estimates of the changes in the cost to sales estimates for the Proposed option with an increase in the R&D cycle lifespan to 10 and 20 years from 6 years. The* * * E.O. 12866 Review - Draft

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6 - 13 estimates with the chang e in R&D cycle lifespan to 10 and 20 ye ars are in parentheses; the other values are those for the P roposed option . **Table 6 -**  **10. Cost -**  **to -**  **Sales Ratio Sensitivity Analysis Results**  **Reflecting Different R&D Cycle Lifespans**  **for the Proposed Option by NAICS Co de**  ***** **NAICS Industry** 

**Description All** 

**Establishments Establishments** 

**with Fewer than 20 Employees (%)**  **Establishments**

**with Between 20 and 99**  **Employees (%) Establishments** 

**with Between 100 and 499**  **Employees (%)** 332510 Hardware

manufacturing 3.12 (1.97 , 1.09 ) 19.74 (12.44 , 6.91 ) 3.40 (2.14 , 1.19 ) 0.99 (0.62 , 0.35 ) 333414 Heating

equipment manufacturing 1.89 (1.19 , 0.66 ) 20.73 (12.83 , 7.26 ) 2.34(1.47 , 0.82 ) 0.67 (0.42 , 0.23 ) 423720 Plumbing and

heating equipment wholesalers 3.50 (2.21 , 1.23 ) 10.15 (6.39 , 3.55 ) 2.71(1.71 , 0.95 ) 2.43 (1.53 , 0.85 )

* The first value in parentheses is the cost to sales estimate for a 10 year R&D cycle lifespan; the second value is the cost to sales estimates for a 20 year R&D cycle lifespan. **6.3 Initial Regulatory Flexibility**  **Analysis** An IRFA illustrates how EPA considers the proposed rule ’ s small entity effects before a rule is finalized and provides information about how the objectives of the rule were achieved while minimizing significant economic impacts on small entities. We provide a summary of IRFA elements; the preamble for this rule provides additional details. **6.3.1 Reasons Why Action Is Being Considered**  These proposals were developed following a Clean Air Act (CAA) section 111(b)(1)(B) periodic review of the existing resid ential wood heater new source performance standards (NSPS). **6.3.2 Statement of Objectives and Legal Basis of Proposed Rule**  The EPA is proposing to amend Standards of Performance for New Residential Wood Heaters, and to add two new subparts: Standards of Performance for New Residential Hydronic Heaters and Forced - Air Furnaces and Standards of Performance for New Residential Masonry Heaters. These proposals are aimed at achieving several objectives, including appl yi ng tighter emission limits that reflect today ’ s be st sy stems of emission reduction (BSER) ; eliminating* * * E.O. 12866 Review - Draft

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6 - 14 exemptions over a broad suite of residential wood combustion devices; revising test methods as appropriate; and streamlining the certification process. These proposals do not include any requirements on heaters that are solel y fired b y gas or oil. These proposals were developed following a Clean Air Act (CAA) section 111(b)(1)(B) periodic review of the existing residential wood heater new source performance standards (NSPS). We concur with numerous stakeholders that the current body of evidence justifies that the periodic review and revision of the current residential wood heaters NSPS are needed to capture the improvements in performance of such units and to expand the applicability of this NSPS to inclu de additional wood - burning residential heating devices. The changes being proposed with this action are aimed at achieving several objectives, including appl yi ng tighter emission limits that reflect today ’ s best s ys tems of emission reduction; eliminating e xemptions over a broad suite of residential wood combustion devices; revising test methods as appropriate; and streamlining the certification process. **6.3.3 Description and Estimate of the Number of Small Entities**  Small entities that EPA anticipates being affe cted by the standards would include almost all manufacturers of wood heaters listed in Section 2.2 of this document. EPA estimates that roughl y 250

– 300 U.S. companies manufacture residential wood heaters. EPA believes that approximately 90 % of these manufacturers meet the SBA small - entity definition of having fewer than 500 employees. **6.3.4 Description and Compliance Costs**  A discussion of the methodology used to estimate cost impacts is presented in Section 5 of this RIA. As required b y s ection 6 09(b) of the RFA, as amended by SBREFA, EPA has conducted outreach to small entities and convened a SBAR Panel to obtain advice and recommendation of representatives of the small entities potentially subject to the requirements of this rule. On August 4, 2 010, EPA ’ s Small Business Advocacy Chairperson convened a Panel under section 609(b) of the RFA. In addition to the Chair, the Panel consisted of representatives of the Director of the Outreach and Information Division within EPA ’ s Office of Air and Radiation, the Chief Counsel for Advocacy

of the SBA, and the Administrator of the Office of Information and Regulatory

Affairs within the Office of Management and Budget. Based on consultations with the S BA , and resulting from solicited self - nominations, we prepared a list of 30 potential small entity representatives ( SERs ) , from residential wood heating* * * E.O. 12866 Review - Draft

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6 - 15 appliance manufacturers (wood stoves, pellet stoves, hydronic heaters, forced - air furnaces, and masonry heaters), other wood burning appliance manufacturers (f ireplaces, cook stoves), equipment suppliers, chimney sweeps, test laboratories, masons, and trade associations. Once the pre - Panel process began and potential SERs were identified, EPA held an outreach meeting with the potential SERs and invited represent atives from SBA ’ s Office of Advocacy and the Office of In formation and Regulatory Affairs within the Office of Management and Budget on June 29, 2010, to solicit their feedback on the upcoming proposed rulemaking. Representatives from 26 of the 30 companie s and organizations that we selected as potential SERs for this SBREFA process participated in the meeting (in person and b y phone). At that meeting EPA solicited written comments from the potential SERs, which were later summarized and shared with the Pan el as part of the Panel convening document. After the SBAR Panel was convened, the Panel distributed additional information to the SERs on August 11 and August 19, 2010 , for their review and comment and in preparation for another outreach meeting. On Augus t 25 , 20 10 , the Panel met with the SERs to hear their comments on the information distributed via email . The Panel received written comments from the SERs in response to the discussions at this meeting and the outreach materials. The Panel asked the SERs t o evaluate how they would be affected and to provide advice and recommendations regarding earl y ideas to provide flexibility . Many of the SER s and the Panel had concerns about the breadth of th e potential options discussed for this rulemaking and the chall enges EPA would face in potentially conducting rulemaking for all of these source categories at one time and the challenges that the small businesses w ould face in having to potentiall y comply with standards for all of these source categories at one time . The Panel recommend ed that EPA should consider focusing efforts first on emissions sources that have the greatest potential to impact public health through the magnitude of emissions and population exposure. The EPA has narrowed the scope of this proposal to focus on the sources with the greatest potential impacts on public health. The Panel was sensitive to the need to carefully develop a rule that will minimize business closures, while still achieving significant emission reductions. **6.3.5 Panel Recommendation**  **s for Small Business Flexibilities** The Panel recommended that EPA consider and seek comment on an extensive range of regulatory

alternatives to mitigate the impacts of the rulemaking on small businesses, including the options listed below. The following se ction summarizes the SBAR Panel recommendations.* * * E.O. 12866 Review - Draft

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6 - 16 Consistent with the RFA/SBREFA requirements, the Panel evaluated the assembled materials and comments related to elements of the IRFA. A cop y of the Final Panel Report (including all comments received from SERs in response to the Panel ’ s outreach meetings), as well as summaries of both outreach meetings that were held with the SERs, is included in the docket for the proposed rules. The following paragraphs are a subset of the full report. The P anel encourage d EPA to consider flexibilities that will most directly minimize the small business burdens: Exemptions from the standards based on very low volume production, and delayed compliance dates for low volume production . The delayed compliance approach is predi cated on the concept that it will take a number of years for manufacturers to recover the costs of the R&D investment in order to achieve compliance. The Panel recommend ed that the EPA Administrator should consider the availability and feasibility of certi fication, testing labs, testing standards, and other requirements. The Panel recommend ed that the EPA Administrator should consider emphasizing that the NSPS will address only new units, and the EPA Administrator should consider clarifying whether exemptio ns will be considered for historic replica equipment and historic property renovations. EPA is looking at opportunities for reducing the burden on small entities of potential reporting, record keeping, and compliance requirements. For reporting and record keeping requirements in the revised NSPS, EPA is considering providing flexibilities similar to those in the 1988 NSPS . For example, the Panel recommended that EPA continue allowing manufacturers to keep records and report test results for a representativ e model appliance rather than testing and reporting results for each individual unit. Many SERs expressed concern about potential compliance requirements associated with the planned proposed standards. Specifically , SERs anticipated potential logjams at third - party testing facilities as a result of EPA ’ s regulating a broader range of product categories, which the SERs believe will slow down the certification process. In addition, many SERs are concerned about the costs associated with compliance requirements, including research and development, preliminary

testing and certification of new products and recertification of products approved under the 1988 NSPS. The Panel recommended that EPA consider ways to streamline compliance certification, in particular, identifying flexible approaches and procedures that will reduce the burden and time for manufacturers to complete the application, testing and approval process for new model lines. For example, the Panel recommended that EPA consider allowing* * * E.O. 12866 Review - Draft

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6 - 17 the use of International Standards Organization (ISO) - accredited laboratories and certifying bodies to expand the number of facilities that would be required for testing and certification of the new residential solid biomass combustion appliances. Additionally , the Pan el recommended that EPA consider different compliance time frames for different product categories to reduce the potential for logjams at test labs and the overall impact on companies that manufacture multiple categories. Flexible compliance schedules woul d also help manufacturers of additional new appliances, such as hydronic heaters and forced - air furnaces, which were not subject to the 1988 standards. Consistent with the RFA/SBREFA requirements, the Panel evaluated the assembled materials and small - entity comments on issues related to elements of the IRFA. A cop y of the Panel report is included in the docket for this proposed rule. We invite comments on all aspects of the proposal and its impacts on small entities.* * * E.O. 12866 Review - Draft

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7 - 1 **SECTION 7 HUMAN HEALTH BENEFIT**  **S OF EMISSIONS REDUC TIONS**  **7.1 Synopsis**  Implementation of emissions limit s required by the proposed residential wood heaters NSPS is expected to reduc e direct emissions of PM 2.5 . These reductions result from the imposition of tightened and new PM emissions limits for a number of emissions categories as described in Section 2 of this RIA . In this section, we quantify the monetized benefits for this rule associated with reduced exposure to ambient fine particulate matter (PM 2.5 ) resulting from the reduction of direct emissions of PM 2.5 . The total PM 2.5 reductions are the consequence of the expected design changes to the affected appliances needed in order to meet the limits in the options analy

zed in this RIA. We estimate the total monetized benefits for the proposed option to be $1.8 billion to $4.2 billion at a 3% discount rate and $1.7 bi llion to $3. 8 billion at a 7% discount rate on a ye arl y average between 2014 and 2022. For the alternative option and same time frame , we estimate that the total monetized benefits are $1.9 billion to $4.2 billion at a 3% discount rate and $1.7 billion to $3.8 billion at a 7% discount rate. All estimates are in 2010$. These estimates reflect the monetized human health benefits of reducing cases of morbidity and prem ature mortality

among populations exposed to PM 2.5 reduced by this rule. Data, resource s , and methodological limitations prevented EPA from monetizing the benefits from several important benefit categories . Includ ed among the nonmonetized benefits are those associated with reduc ed exposure to about 3,200 tons of VOCs. VOCs are also precursors to ozone formation and therefore reducing health impact due to ozone exposure. Further, this rule would reduce each year 33,000 tons of CO , black carbon emissions, several HAP emissions such as benzene, formald eh yde, and dioxin. This rule will also reduce ecos ys tem effects , and visibility

impairment due to PM emissions. **7.2 PM**  **2.5 -**  **Related Human Health Benefits** This rule is expected to reduce direct emissions of PM and emissions of VOCs , which are precursors to formation of ambient PM 2.5 . Therefore , reducing these emissions would also reduce human exposure to ambient PM 2.5 and the incidence of PM 2.5 - related health effects. In this section, we provide an overview of the PM 2.5 - related benefits. A full description of the underlying data, studies, and assumptions is provided in the PM NAAQS RIA (U.S. EPA, 2012a). In implementing this rule, emission controls may lead to reductions in ambient PM 2.5 concentrations below the National Ambient Air Quality Standards (NAAQS) for PM in some* * * E.O. 12866 Review - Draft

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7 - 2 areas and assist other areas with attaining the PM NAAQS. Because the PM NAAQS RIA (U.S. EPA, 2012a) also calculated PM benefits, there are important differences worth noting in the design and anal ytical objectives of each RIA. The NAAQS RIAs illu strate the potential costs and benefits of attaining a revised air quality standard nationwide based on an array of emission reduction strategies for different sources including known and unknown controls, incremental to implementation of existing regulati ons and controls need ed to attain the current standards. In short, NAAQS RIAs h yp othesize, but do not predict, the reduction strategies that States may choose to enact when implementing a revised NAAQS. The setting of a NAAQS does not directly result in co sts or benefits, and as such, the NAAQS RIAs are merely illustrative and the estimated costs and benefits are not intended to be added to the costs and benefits of other regulations that result in specific costs of control and emission reductions. However, it is possible that some costs and benefits associated with the required emission controls estimated in this RIA may

account for the same air quality improvements as estimated in the illustrative PM NAAQS RIA. By contrast, the emission reductions for imp lementation rules such as this rulemaking are generall y for specific, well - characterized sources. In general, EPA is more confident in the magnitude and location of the emission reductions for implementation rules. As such, emission reductions achieved und er these and other promulgated implementation rules will ultimately be reflected in the baseline of future NAAQS anal ys es, which would reduce the incremental costs and benefits associated with attaining revised future NAAQS. EPA remains forward looking tow ards the next iteration of the 5 - ye ar review cycle for the NAAQS. As a result, EPA does not re - issue NAAQS RIAs that retroactively update the baseline to account for implementation rules promulgated after a NAAQS RIA outside of the NAAQS review process. Fo r more information on the relationship between the NAAQS and rules that are not ambient standards, such as anal yz ed here, please see Section 1.3 of the PM NAAQS RIA (U.S. EPA, 2012a). **7.2.1 Health Impact Assessment**  The Integrated Science Assessment for Particulate Matter (PM I SA) (U.S. EPA, 2009) identified the human health effects associated with ambient PM 2.5, which include premature mortality and a variety of morbidity effects associated with acute and chronic exposures. Table 7 - 1 provi des the quantified and unquantified benefits captured in EPA ’ s benefits estimates for reduced exposure to ambient PM 2.5 . Although the table below does not include entries for the unquantified health effects such as exposure to ozone and NO 2 nor welfare eff ects such as ecos ys tem effects and visibility impairment, these effects are itemized in Chapters 5 and 6 of the* * * E.O. 12866 Review - Draft

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7 - 3 **Table 7 -**  **1 .**  **Human Health Effects of Ambient PM 2.5**  **Category Specific Effect**  **Effect Has Been**  **Quantified Effect Has** 

**Been Monetized**  **More**

**Inform ation**  **in PM NAAQS RIA**  **Improved Human Health** 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 Infant mortality (age <1)   Section 5.6 Reduced incidence of mo rbidity from exposure to PM 2.5 Non - fatal heart attacks (age > 18)   Section 5.6 Hospital admissions

—

respiratory (all ages)   Section 5.6 Hospital admissions

—cardiovascular (age >20)   Section 5.6 Emergency room visits for asthma (all ages)   Section 5.6 Ac ute bronchitis (age 8

– 12)   Section 5.6 Lo wer respiratory symptoms (age 7

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

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

– 18)   Section 5.6 Lost work days (age 18

– 65)   Section 5.6 Minor restricted - activity days (age 18

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

—a

—a Section 5.6 Emergency room visits for cardiovascular effects (all ages) —a

—a Section 5.6 Strokes and cerebrovascular disease (age 50

– 79) —a

—a Section 5.6 Other cardiovascular effects (e.g., other ages) — — PM ISAb Other respiratory effects (e.g., pulmonary function, non - asthma ER visits, non bronchitis chronic diseases, other ages and populations) — — PM ISAb Reproductive and developmental effects (e.g., low birth weight, pre - term births, etc . ) — — PM ISAb , c Cancer, mutagenicity, and genotoxicity effects — — PM ISAb , c

a We assess these benefits qualitatively due to time and resource limitations for this analysis. In the PM NAAQS RIA, these benefits were quantified in a sensitivity analysis, but not in the core analysis. b We assess these benefits qualitatively because we do not have sufficient confidence in available data or methods. c We assess these benefits qualitatively because current evidence is only suggestive of causality or there are other significant concerns over the strength of the association.* * * E.O. 12866 Review - Draft

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7 - 4 PM NAAQS RIA (U.S. EPA, 2012a). It is important to emphasize that the list of unquantified benefit categories is not exhaustive, nor is quantification of each effect complete. We follow a “ damage - function ” approach in calculating benefits, which estimates changes in individual health endpoints (specific effects that can be associated with changes in air quality) and assigns values to those changes assuming independence of the values for those individual end

points. Because EPA rarel y has the time or resources to perform new rese arch to measure directl y either the health outcomes or their values for regulatory analy ses, our estimates are based on the best available methods of benefits transfer, which is the sc ience and art of adapting primary

research from similar contexts to estimate benefits for the environmental quality change under analy sis. The health impact assessment (HIA) quantifies the changes in the incidence of adverse health impacts resulting from changes in human exposure to PM 2.5 or other air pollutants. We use the environmental Ben efits M apping and A nal ys is P

rogram (BenMAP) to sy stematize health impact anal ys es b y appl ying a database of key input parameters, including population projections, heal th impact functions, valuation functions (Abt Associates, 2012). For this assessment, the HIA is limited to those health effects that are directl y linked to ambient PM 2.5 concentrations. There may be other indirect health impacts associated with implementi ng emissions controls, such as occupational health exposures. Epidemiological studies generall y provide estimates of the relative risks of a particular health effect for a given increment of air pollution (often per 10 μg/m 3 for PM 2.5 ). These relative risk s can be used to develop risk coefficients that relate a unit reduction in PM 2.5 to changes in the incidence of a health effect. We refer the reader to section 5.6 of the PM NAAQS RIA for more information regarding the epidemiology

studies and risk coeffic ients applied in this analy sis (U.S. EPA, 2012a), and we briefl y elaborate on adult premature mortality below. The size of the mortality effect estimates from epidemiological studies, the serious nature of the effect itself, and the high monetary value asc ribed to prolonging life make mortality risk reduction the most significant health endpoint quantified in this analy sis. Considering a substantial body of published scientific literature, reflecting thousands of epidemiology , toxicology , and clinical studi es, the PM I SA documents the association between elevated PM 2.5 concentrations and adverse health effects, including increased premature mortality (U.S. EPA, 2009). The PM I SA, which was twice reviewed by the Clean Air Scientific Advisory Committee of EPA ’ s Science Advisory Board (SAB - CASAC) (U.S. EPA - SAB, 2009b, 2009c), concluded that there is a causal relationship between mortality and both long - term and short - term exposure to PM 2.5 based on the entire body of scientific evidence. The PM ISA also* * * E.O. 12866 Review - Draft

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7 - 5 conclude d that the scientific literature consistently finds that a no - threshold log - linear model most adequatel y portrays the PM - mortality concentration - response relationship while recognizing potential uncertainty about the exact shape of the concentration - respon se function. For mortality, we use the effect coefficients from the most recent epidemiology studies examining two large population cohorts: the American Cancer Society (ACS) cohort (Krewski et al., 2009 ) and the Harvard Six Cities cohort (Lepeule et al., 2012 ). The PM I SA (U.S. EPA, 2009) concluded that the ACS and Six Cities cohorts provide the strongest evidence of the association between long - term PM 2.5 exposure and premature mortality with support from a number of additional cohort studies. The SAB ’ s Health Effects Subcommittee (SAB - HES) also supported using these two cohorts for anal ys es of the benefits of PM reductions (U.S. EPA - SAB, 2010a). As both the ACS and Six Cities cohort studies have inherent s trengths and weaknesses, we present benefits estimates using relative risk estimates from both these cohorts (Krewski et al., 2009; L epeule et al., 2012). As a characterization of uncertainty regarding the PM 2.5 - mortality relationship, EPA graphicall y pre sents benefits derived from EPA ’ s expert elicitation study (Roman et al., 2008; IE c, 2006). The primary

goal of the 2006 study

was to elicit from a sample of health experts probabilistic distributions describing uncertainty in estimates of the reduction in mortality among the adult U.S. population resulting from reductions in ambient annual average PM 2.5 levels. In that study , twelve experts provided independent opinions of the PM 2.5 - mortality concentration response function. Because the experts relied upo n the ACS and Six Cities cohort studies to inform their concentration - response functions, the benefits estimates derived from the expert responses generall y fall between results derived from the these studies (see Figure 7 - 1). We do not combine the expert results in order to preserve the breadth and diversity of opinion on the expert panel. This presentation of the expert - derived results is generally consistent with SAB advice (U.S. EPA - SAB, 2008), which recommended that the EPA emphasize that “ scientific differences existed only

with respect to the magnitude of the effect of PM 2.5 on mortality, not whether such an effect existed ” and that the expert elicitation “ supports the conclusion that the benefits of PM 2.5 control are very likel y to be substantial . ” Although it is possible that newer scientific literature could revise the experts ’ quantitative responses if elicited again, we believe that these general conclusions are unlikely to change. **7.2.2 Economic Valuation**  After quantifying the change in adverse health impacts, we estimate the economic value of these avoided impacts. Reductions in ambient concentrations of air pollution generall y lower* * * E.O. 12866 Review - Draft

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7 - 6 the risk of future adverse health effects b y a small amount for a large population. Therefore, the appropriate economic measure is willingness to pay (WTP) for changes in risk of a health effect. For some health effects, such as hospital admissions, WTP estimates are generall y not available, so we use the cost of treating or mitigating the effect. These cost - of - illness (CO I) estimates generall y (although not necessarily in every case) understate the true value of reductions in risk of a health effect. They

tend to reflect the direct expenditures related to treatment but not the value of avoided pain and suffering from the h ealth effect. The unit values applied in this anal ys is are provided in Table 5 - 9 of the PM NAAQS RIA for each health endpoint (U.S. EPA, 2012a). Avoided premature deaths account for 98% of monetized PM - related benefits. The economics literature concerning the appropriate method for valuing reductions in premature mortality risk is still developing. The adoption of a value for the projected reduction in the risk of premature mortality

is the subject of continuing discussion within the economics and public po licy anal ys is community . Following the advice of the SAB ’ s Environmental Economics Advisory Committee (SAB - EEAC), the EPA currently uses the value of statistical life (VSL) approach in calculating estimates of mortality benefits, because we believe this calculation provides the most reasonable single estimate of an individual ’ s willingness to trade off money for reductions in mortality risk (U.S. EPA - SAB, 2000). The VSL approach is a summary measure for the value of small changes in mortality risk experienc ed b y a large number of people. EPA continues work to update its guidance on valuing mortality risk reductions, and the Agency consulted several times with the SAB - EEAC on the issue. Until updated guidance is available, the Agency

determined that a single, peer - reviewed estimate applied consistently best reflects the SAB - EEAC advice it has received. Therefore, EPA has decided to apply the VSL that was vetted and endorsed by the SAB in the Guidelines for Preparing Economic Analyses (U.S. EPA, 2000) 64 while th e Agency continues its efforts to update its guidance on this issue. This approach calculates a mean value across VSL estimates derived from 26 labor market and contingent valuation studies published between 1974 and 1991. The mean VSL across these studies is $6.3 million (2000$). 65

64 In the updated Gu idelines for Preparing Economic Analyses (U.S. EPA, 2010e), EPA retained the VSL endorsed by the SAB with the understanding that further updates to the mortality risk valuation guidance would be forthcoming in the near future. 65 In 1990$, this VSL is $4.8 million.* * * E.O. 12866 Review - Draft

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7 - 7 We then adjust this VSLto account for the currency year used in this RIA and to account for income growth from 1990 to the anal ys is year. The adjusted value for VSLis $ 8.0 million ($2010). The Agency

is committed to using scie ntificall y s ound, appropriatel y reviewed evidence in valuing mortality

risk reductions and has made significant progress in responding to the SAB EEAC ’ s specific recommendations. In the process, the Agency has identified a number of important issues to be considered in updating its mortality risk valuation estimates. These are detailed in a white paper on “ Valuing Mortality Risk Reductions in Environmental Policy , ” (U.S. EPA, 2010c) which recently underwent review by

the SAB - EEAC. A meeting with the SAB on this paper was held on March 14, 2011 and formal recommendations were transmitted on July 29, 2011 (U.S. EPA - SAB, 2011). Draft guidance responding to SAB recommendations will be developed shortly . In valuing premature mortality , we discount the value of pr emature mortality occurring in future ye ars using rates of 3% and 7% (OMB, 2003). We assume that there is a “ cessation ” lag between changes in PM exposures and the total realization of changes in health effects. Although the structure of the lag is uncertain, the EPA follows the advice of the SAB - HES to assume a segmented lag structure characterized b y 30% of mortality reductions in the first year, 50% over ye ars 2 to 5, and 20% over the years 6 to 20 after the reduction in PM 2.5 (U.S. EPA - SAB, 2004c). Chan ges in the cessation lag assumptions do not change the total number of estimated deaths but rather the timing of those deaths. **7.2.3 Benefit** 

**- per**  **- ton Estimates**  Due to anal ytical limitations, it was not possible to conduct air quality modeling for this rule. Instead, we used a “ benefit - per - ton ” approach to estimate the benefits of this rulemaking. EPA has applied this approach in several previous RIAs (e.g., U.S. EPA, 2011b, 2011d, 2012b ). These benefit - per - ton estimates provide the total monetized human health benefits (the sum of premature mortality

and premature morbidity) of reducing one ton of PM 2.5 (or PM 2.5 precursor such as NO x or SO 2 ) from a specified source. Specificall y, in this analysis, we multiplied the estimates from the “ Residential W ood Heaters ” sector 66 , 67 by the corresponding emission reductions. The method used to derive these estimates is described in the Technical Support 66 As explained in the TSD (U.S. EPA, 2013), we only have benefit -per - ton estimates for certain analysis years (i.e., 2005, 2016, 2020, 2025, and 2030). For this RIA, we selected the benefit -per - ton estimate closest to the analysis year for this RIA. 67 Data from year 2020 was used as the year closest to the full implementation year for both options analyzed in this RIA

—2019 for the Proposal option, 2022 for the Alternative option.* * * E.O. 12866 Review - Draft

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7 - 8 Document (TSD) on estimating the benefits - per - ton of reducing PM 2.5 and its precursors (U.S. EPA, 2013). One limitation of using the benefit - per - ton approach is an inability to provide estimates of the health benefits associated with exposure to HAP, CO, N O 2 or ozone. The benefit - per - ton estimates described in the TSD (U.S. EPA, 2013) were derived using the approach published in Fann et al. (2012), but they have since been updated to reflect the studies and population data in the final PM NAAQS RIA (U.S. EP A, 2012a). The approach in Fann et al. (2012) is similar to the work previously published b y Fann et al. (2009), but the newer study includes improvements that EPA believes would provide more reliable estimates of PM 2.5 - related health benefits for emission s reductions in specific sectors. Specificall y, the air quality modeling data reflect sectors that are more narrowl y defined. In addition, the updated air quality modeling data reflect more recent emissions data (2005 rather than 2001) and has higher spati al resolution (12km rather than 36 km grid cells). As noted below in the characterization of uncertainty , all benefit - per - ton estimates have inherent limitations. Specificall y, all national - average benefit - per - ton estimates reflect the geographic distribution of the modeled emissions, which may not exactly

match the emission reductions in this rulemaking, and they may not reflect local variability in population density , meteorology , exposure, baseline health incidence rates, or other local factors for any specific location. Even though we assume that all fine particles have equivalent health effects, the benefit per - ton estimates vary

between precursors depending on the location and magnitude of their impact on PM 2.5 levels, which drive population exposure . The sector - specific modeling does not provide estimates of the PM 2.5 - related benefits associated with reducing VOC emissions, but these unquantified benefits are generall y small compared to other PM 2.5 precursors (U.S. EPA, 2012a). **7.2.4 PM** 

**2.5 Benefits Results**  Table 7 - 2 summarizes the monetized PM - related health benefits b y precursor pollutant, including the emission reductions and benefit - per - ton estimates using discount rates of 3% and 7%. Benefits estimates are based on the average of annual emission reducti ons from proposed rule implementation between 2014 and 2022 (inclusive). Table 7 - 3 provides a summary of the reductions in health incidences associated with these pollution reductions. Figure 7 - 1 provides a visual representation of the range of PM 2.5 - relat ed benefits estimates using concentration response functions from Krewski et al. (2009) and L epeule et al. (2012) as well as* * * E.O. 12866 Review - Draft

– Do Not Cite, Quote or Release During Review ***7-9 **Table 7 -**  **2 .**  **Summary of Monetized PM 2.5**  **- Related Health Benefits Estimates for the**  **Proposed Residential Wood Heaters NSPS**  **in the 2014**  **– 2022**  **Time F**  **rame (2010$)**  **a**

**Pollutant Emissions** 

**Reductions (tons)**  **Benefit per**

**ton (Krewski,**  **3%) Benefit** 

**per ton (Lepeule,**  **3%) Be**  **nefit**

**per ton (Krewski,**  **7%) Benefit** 

**per ton (Lepeule,**  **7%) Total Monetized** 

**Benefits (m illions 2010$**  **at 3%) Total Monetized** 

**Benefits (m illions 2010$**  **at 7%) Proposed**  Direct PM 2.5 4,825 $373,000 $913,562 $333,435 $820,294 $1,800 to $4,200 $1,700 to $3,700 PM 2.5 Precursors VOC b 3,250

— — — — — to

— — to

— **Total $1,800**  **to $4,200**  **$1,700 to**  **$3,700 Alternative**  Direct PM 2.5 4,878 $373,000 $913,562 $333,435 $820,294 $1,900 to $4,200 $1,700 to $3,800 PM 2.5 Precursors VOC b 3,250

— — — — — to

— — to

— **Total $1,900**  **to $4,200**  **$1,700 to**  **$ 3,800** 

a All estimates reflect the average of annual emission reductions expected to occur between 2014 and 2022 (inclusive) resulting from proposed rule im plementation. All estimates are rounded to two significant figures so numbers may not sum across columns. It is important to note that the mone tized benefits do not include reduced health effects from direct exposure to NO 2 , ozone exposure, ecosystem effects, or visibility im pairment. All fine particles are assumed to have equivalent health effects, but the benefit per ton estimates vary depending on the location and magnitude of their impact on PM 2.5 levels, which drive population exposure. The monetized benefits incorporat e the conversion from precursor emissions to ambient fine particles. Confidence intervals are unavailable for this analysis because of the benefit -per - ton methodology. b Estimates of VOCs health benefits are currently not monetized and will be addressed only qualitatively .* * * E.O. 12866 Review - Draft

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7 - 10 **Table 7 -**  **3 .**  **Summary of Reductions in Health Incidences from PM 2.5**  **- Related Benefits for** 

**the Proposed Residential Wood Heaters NSPS**  **in the 2014**  **- 20**  **22 Time F**  **rame a**  **Avoided Prem ature Mortality**  **Proposal Alternative**  Krewski et al. (2009) (adult) 209 211 Lepeule et al. (2012) (adult) 472 477 **Avoided Morbidity** Emergency department visits for asthma (all ages) 106 102 Ac ute bronchitis (age 8

– 12) 321 325 Lo wer respiratory symptoms (age 7

– 14) 4 , 108 4 , 153 Upper respiratory symptoms (asthmatics age 9

– 11) 5 , 930 5 , 995 Minor restricted - activity days (age 18

– 65) 165 , 238 167 , 047 Lost work days (age 18

– 65) 27 , 941 28 , 247 Asthma exacerbation (age 6

– 18) 14 , 533 14 , 692 Hospital admissions

—

respiratory (all ages) 54 54 Hospital admissions

—cardiovascular (age > 18) 66 66 Non -Fatal Heart Attacks (age >18) Peters et al. (2001) 226 228 Pooled estimate of 4 studies 25 25 a All estimates are rounded to whole numbers with two significant figures. Confidence intervals are unavailable for this analysis because of the benefit - per - ton methodology. the 12 functions supplied by experts. Figure 7 - 2 provides a breakdown of monetized benefits by Pollutant . In Table 7 - 4 , we provide the benefits using our anchor points of Krewski et al. , and Lepeule et al. , as well as the results from the 12 expert s’ elicitation on P M mortality . **7.2.5 Characterization of Uncertainty in the Monetized PM**  **2.5 Benefits**  In any complex anal ys is using estimated parameters and inputs from numerous models, there are likel y to be many source s of uncertainty . This analy sis is no exception. This analy sis includes many

data sources as inputs, including emission inventories, air quality data from models (with their associated parameters and inputs), population data, population estimates, health e ffect estimates from epidemiology studies, economic data for monetizing benefits, and assumptions regarding the future state of the world (i.e., regulations, technology, and human behavior). Each of these inputs may be uncertain and would affect the benefi ts estimate. When the uncertainties from each stage of the anal ys is are compounded, even small uncertainties can have large effects on the total quantified benefits. Therefore, the estimates of annual benefits* * * E.O. 12866 Review - Draft

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7 - 11 **Figure 7 -**  **1 .**  **Total Monetized PM 2.5**  **Benefits of**  **the Proposed**  **Residential Wood Heaters NSPS**  **in the 2014**  **– 202**  **2 Time F**  **rame a**  a This graph shows the estimated benefits at discount rates of 3% and 7% using effect coefficients derived from the Krewski et al. study and the Lepeule et al . study, as well as 12 effect coefficients derived from EPA ’ s expert elicitation on PM mortality. The results shown are not the direct results from the studies or expert elicitation; rather, the estimates are based in part on the concentration - response function s provided in those studies.

**Figure 7 -**  **2 .**  **Breakdown of Total Monetized PM 2.5**  **Benefits of Proposed**  **Residential Wood Heaters NSPS by Category** 

$0 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 $7,000**M i** **l l** **i o** **n s** **( $** **2 0** **1 0** **) Benefits Estimates from 2 epidemiology functions**  **and 12 Expert functions Proposed Option** 

3% DR 7% DR

3% 16% 1%

54% 26% 

## Monetiz **ed Benefits by Category f** **or the Pr**  **oposed Option**  **- Krewski at 3%** 

Wood Stoves Single Burn Rate Stoves Pellet Stoves Furnace: indoor, cordwood Hydronic Heating Systems* * * E.O. 12866 Review - Draft

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7 - 12 **Table 7**  **- 4.**  **All PM 2.5**  **Benefits Estimates for the Proposed**  **Residential Wood Heaters NSPS**

**at Discount Rates of 3% an d 7%**  **for the 2014 to 2022**  **Time F**  **rame ($2010**  **millions) a**  **Proposal Alternative**  **3% 7%**  **3% 7%**  **Benefit -**  **per -**  **ton Coefficients Derived from Epide**  **miology Literature** Krewski et al. $1,800 $1,700 $1,900 $1,700 Lepeule et al. $4,200 $3,700 $4,200 $3,800 **Benefit -**  **per -**  **ton Coefficients Derived from Expert Elicitation**  Expert A $4,800 $4,300 $4,800 $4,300 Expert B $3,800 $3,400 $3,900 $3,500 Expert C $3,800 $3,400 $3,800 $3,400 Expert D $2,700 $2,400 $2,700 $2,500 Expert E $6,100 $5,500 $6,200 $5,600 Expert F $3,500 $3,200 $3,600 $3,200 Expert G $2,200 $2,000 $2,200 $2,000 Expert H $2,800 $2,500 $2,800 $2,500 Expert I $3,700 $3,400 $2,800 $3,400 Expert J $3,000 $2,700 $3,000 $2,800 Expert K $440 $400 $450 $400 Expert L $2,500 $2,300 $2,500 $2,300

a All estimates are rounded to two significant figures. Estimates do not include confidence intervals because they were derived through the benefit -per - ton technique described above. The benefits estimates from the expert elicitation are provided as a reason able characterization of the uncertainty in the mortality estimates associated with the concentration - response function. Confidence intervals are unavailable for this analysis because of the benefit -per - ton methodology. should be viewed as representative of the magnitude of benefits expected, rather than the actual benefits that would occur every year. This RIA does not include the ty pe of detailed uncertainty assessment found in the PM NAAQS RIA (U.S. EPA, 2012a) because we lack the necessary air quality input and monitoring data to run the benefits model. However, the results of the uncertainty anal yses presented in the PM NAAQS RIA can provide some information regarding the uncertainty inherent in the benefits results presented in this analy sis. Sensitiv ity analy ses conducted for the PM NAAQS RIA indicate that alternate cessation lag assumptions could change the PM 2.5 - related mortality* * * E.O. 12866 Review - Draft

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7 - 13 benefits discounted at 3% by between 10% and

–27% and that alternate income growth adjustments could change the PM 2.5 - rel ated mortality benefits by

between 33% and −14%. 68 Unlike the PM NAAQS RIA, we do not have data on the specific location of the air quality changes associated with this rulemaking. As such, it is not feasible to estimate the proportion of benefits occurring in different locations, such as designated nonattainment areas. Instead, we applied benefit - per - ton estimates, which reflect specific geographic patterns of emissions reductions and specific air quality and benefits modeling assumptions. For example, thes e estimates do not reflect local variability in population density , meteorology , exposure, baseline health incidence rates, or other local factors that might lead to an over- estimate or under - estimate of the actual benefits of controlling PM precursors. Us e of these $/ton values to estimate benefits may

lead to higher or lower benefit estimates than if benefits were calculated based on direct air quality modeling. Great care should be taken in appl yi ng these estimates to emission reductions occurring in any specific location, as these are all based on national or broad regional emission reduction programs and therefore represent average benefits - per - ton over the entire United States. The benefits - per - ton for emission reductions in specific locations may be v ery different than the estimates presented here. To the extent that the geographic distributions of the emissions reductions for this rule are different than the modeled emissions, the benefits may be underestimated or overestimated. In general, there is inherently more uncertainty for new sources, which may

not be included in the emissions inventory , than existing sources. For more information, see the TSD describing the calculation of these benefit - per - ton estimates (U.S. EPA, 2013). Our estimate of the t otal benefits is based on EPA ’ s interpretation of the best available scientific literature and methods and supported by the SAB - HES and the NAS (NRC, 2002 ). Below are key

assumptions underlying the estimates for premature mortality , which a ccounts for 98% of the total monetized PM 2.5 benefits: 1. We assume that all fine particles, regardless of their chemical composition, are equally potent in causing premature mortality . This is an important assumption, because PM 2.5 varies considerabl y in composition across sources, but the scientific evidence is not yet sufficient to allow differentiation of effect estimate s by particle ty pe. The PM I SA concluded that “ many constituents of PM 2.5 can be linked with multiple health effects, and the evidence is not yet sufficient to allow differentiation of those constituents or sources that are more closely related to specific outcomes ” (U.S. EPA, 2009).

68 http://www.epa.gov/ttn/ecas/regdata/RIAs/finalria.pdf (pp 6 - 16).* * * E.O. 12866 Review - Draft

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7 - 14 2. We assume that the health impact function for fine particles is log - linear without a threshold in this analy sis. Thus, the estimates include health benefits from reducing fine particles in areas with varied concentrations of PM 2.5 , including both areas that do not meet the fine particle standard and those areas that are in attainment, down to the lowest mo deled concentrations. 3. We assume that there is a “ cessation ” lag between the change in PM exposures and the total realization of changes in mortality effects. Specificall y, we assume that some of the incidences of premature mortality related to PM 2.5 exposures occur in a distributed fashion over the 20 years following exposure based on the advice of the SAB - HES (U.S. EPA - SAB, 2004c), which affects the valuation of mortality benefits at different discount rates. In general, we are more confident in the magnitude of the risks we estimate from simulated PM 2.5 concentrations that coincide with the bulk of the observed PM concentrations in the epidemiological studies that are used to estimate the benefits. Likewise, we are less confident in the risk we estimat e from simulated PM 2.5 concentrations that fall below the bulk of the observed data in these studies. Concentration benchmark analy ses (e.g., lowest measured level [LML ] or one standard deviation below the mean of the air quality data in the study) allow readers to determine the portion of population exposed to annual mean PM 2.5 levels at or above different concentrations, which provides some insight into the level of uncertainty in the estimated PM 2.5 mortality benefits. There are uncertainties inherent in identifying any particular point at which our confidence in reported associations becomes appreciabl y less, and the scientific evidence provides no clear dividing line. However, the EPA does not view these concentration benchmarks as a concentration thres hold below which we would not quantify health benefits of air quality improvements. 69 Rather, the benefits estimates reported in this RIA are the best estimates because they reflect the full range of air quality concentrations associated with the emission reduction strategies and because the current body of scientific literature indicates that a no - threshold model provides the best estimate of PM - related long - term mortality . In other words, although we may have less confidence in the magnitude of the risk at concentrations below these benchmarks, we still have high confidence that PM 2.5 is causally associated with risk at those lower air quality concentrations. For this anal ys is, policy- specific air quality data is not available due to time or resource limitations. For these rules, we are unable to estimate the percentage of premature mortality associated with this specific rule ’ s emission reductions at each PM 2.5 level. However, we believe 69 F or a summary of the scientific review statements regarding the lack of a threshold in the PM 2.5 - mo rtality relationship, see the Technical Support Document (TSD) entitled Summary of Expert Opinions on the Existence of a Threshold in the Concentration -Response Function for PM 2.5 - related Mortality (U.S. EPA, 2010b).* * * E.O. 12866 Review - Draft

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7 - 15 that it is still important to characterize the distribution of exposure to baseline air quality levels. As a surrogate measure of mortality impacts, we provide the percentage of the population exposed at each PM 2.5 level in the baseline of the source apportionment modeling used to calculate the benefit - per - ton estimates for this sector. It is important to note that baseline exposure is only

one parameter in the health impact function, along with baseline incidence rates population, and change in air quality . In other words, the percentage of the population exposed to air pollution below the LMLis not the same as the percentage of the population experiencing health impacts as a result of a specific emission reduction policy . The most important aspect, which we are unable to quantify for rules without rule - specific air quality modeling, is the shift in exposure associated with this specific rule. Therefore, caution is warranted when interpreting the LMLassessment for this rule because these results are not consistent with results from rules that had air quality modeling. Table 7 - 5 provides the percentage of the population exposed above and below two concentration benchmarks (i.e., LMLand 1 standard deviation below the mean) in the modeled baseline. Figure 7 - 3 shows a bar chart of the percentage of the population exposed to various air quality levels in the baseline, and Figure 7 - 4 shows a cumulative distribution function of the same data. Both figures identify the LM L for each of the major cohort studies. **7.3 Unquantified Benefits**  The monetized benefits estimated in this RIA onl y reflect a subset of benefits attributable to the health effect reductions associated with ambient fine particles. Data, time, and resource limitations prevented EPA from quantifying the impacts to, or monetizing the benefits from several important benefit categories, including benefits associated with the potential exposure to ozone formation due to VOC emissions as a precursor, VOC emissions as a PM 2.5 precursor, **Table 7 -**  **5 .**  **Population Exposure in the Baseline Above and Below Various Concentration**

**Benchmarks in the Underlying Epidemiology Studies a**  **Epide miology**  **Study Below 1 Std. Dev.** 

**Below AQ Mean At or Above 1 Std.** 

**Dev. Below AQ Mean Below LML**  **At or Above LM**  **L** Krewski et al. (2009) 89 % 11 % 7 % 93 % Lepeule et al. (2012) N/A N/A 23 % 67 % a One standard deviation below the mean is equivalent to the middle of the range between the 10 th and 25 th percentile. For Krew ski, the LML is 5.8 μg/m 3 and one standard deviation below the mean is 11.0 μg/m3 . For Lepeule et al., the LML is 8 μg/m 3 and we do not have the data for one standard deviation below the mean. It is im portant to emphasize that although we have lower levels of confidence in levels below the LML for each study, the scientific evidence does not support the existence of a level below which health effects from exposure to PM 2.5 do not occur.* * * E.O. 12866 Review - Draft

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7 - 16 **Among the populations exposed to PM 2.5**  **in the baseline:**

93% are exposed to PM **2.5** levels at or above the LML of the Krewski et al. (2009) study 67% are exposed to PM 2.5 levels at or above the LML of the Lepeule et al. (2012) study **Figure 7 -**  **3 .**  **Percentage of Adult Population by Annual Mean PM 2.5**  **Exposure in the Baseline**  HAP, CO exposure, as well as ecos ys tem effects, and visibility impairment due to the absence of air quality

modeling data for these pollutants in this analy sis. This does not imply that there are no benefits associated with these emission reductions. In this section, we provide a qual itative description of these benefits. **7.3.1 HAP Benefits**  Even though emissions of air toxics from all sources in the U.S. declined by approximately

42% since 1990, the 2005 National - Scale Air Toxics Assessment (NATA) predicts that most Americans are exposed to ambient concentrations of air toxics at levels that have the potential to cause adverse health effects (U.S. EPA, 2011c). 70 The levels of air toxics to

70 The 2005 NATA is available on the Internet at http://www.epa.gov/ttn/atw/nata2005/ . 0% 5% 10% 15% 20% 25%

<1 1 - 2 2 - 3 3 - 4 4 - 5 5 - 6 6 - 7 7 - 8 8 - 9 9 - 10 10 - 11 11 - 12 12 - 13 13 - 14 14 - 15 15 - 16 16 - 17 17 - 18 18 - 19 19 - 20**P e** **r c** **e n** **t a** **g e** **o f** **P o** **p u** **l a** **t i** **o n** **E x** **p o** **s e** **d**

**Base line**  **A nnual**  **M ea**  **n PM**  **2.5 Le**  **vel (μ**  **g/m 3**  **) LM**  **L of L**  **epeule et al**  **. (2**  **012) st**  **udy LM**  **L of Kre**  **ws ki**  **et al.**  **( 2009)**  **st udy** * * * E.O. 12866 Review - Draft

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7 - 17 **Among the populations exposed to PM 2.5**  **in the baseline:**

93% are exposed to PM **2.5** levels at or above the LML of the Krewski et al. (2009) study 67% are exposed to PM 2.5 levels at or above the LML of the Lepeule et al. (2012) study **Figure 7 -**  **4 .**  **Cumulative Distribution of Adult Population by Annual Mean PM 2.5**  **Exposure in the Baseline** whic h people are exposed vary depending on where people live and work and the kinds of activities in which they

engage. In order to identify and prioritize air toxics, emission source ty pes and locations that are of greatest potential concern, U.S. EPA conducts the NATA. 71 The most recent NATA was conducted for calendar ye ar 2005 and was released in March 2011. NATA includes four steps: 1 . Compiling a national emissions inventory of air toxics emissions from outdoor sources

71 The NATA modeling framework has a number of limitations that prevent its use as the sole basis for setting regulatory standards. These limitations and uncertainties are discussed on the 2005 NATA website. Even so, this mo deling framework is very useful in identifying air toxic pollutants and sources of greatest concern, setting regulatory priorities, and informing the decision making process. U.S. EPA.(2011) . 2005 National - Scale Air Toxics Assessment. http://www.epa.gov/ttn/atw/nata2005/ 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20**C u** **m u** **l a** **t i** **v e** **p e** **r c** **e n** **t a** **g e** **o f** **p o** **p u** **l a** **t i** **o n** **e x** **p o** **s e** **d**

**Bas eline**  **Annual M**  **ea n**  **PM 2.**  **5 Le**  **ve l**  **(μ g/m**  **3 )**  **LM L**  **of Krewski et**  **al .**  **(2009) study LM**  **L of Lepeule et**  **al. (**  **2012) s tudy** * * * E.O. 12866 Review - Draft

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7 - 18 2 . Estimating ambient and expos ure concentrations of air toxics across the United States 3 . Estimating population exposures across the United States 4 . Characterizing potential public health risk due to inhalation of air toxics including both cancer and noncancer effects Based on the 20 05 NATA, EPA estimates that about 5% of census tracts nationwide have increased cancer risks greater than 100 in a million. The average national cancer risk is about 50 in a million. Nationwide, the key pollutants that contribute most to the overall cancer risks are formaldeh yde and benzene. 72 Secondary formation (e.g., formaldehyde forming from other emitted pollutants) was the largest contributor to cancer risks, while stationary , mobile and background sources contribute almost equal portions of the remaining cancer risk. Noncancer health effects can result from chronic, 73 subchronic, 74 or acute 75 inhalation exposures to air toxics, and include neurological, cardiovascular, liver, kidney, and respiratory effects as well as effects on the immune and reproductiv e sy stems. According to the 2005 NATA, about three - fourths of the U.S. population was exposed to an average chronic concentration of air toxics that has the potential for adverse noncancer respiratory health effects. Results from the 2005 NATA indicate that acrolein is the primary driver for noncancer respiratory

risk. Figures 7 - 5 and 7 - 6 depict the estimated census tract - level carcinogenic risk and noncancer respiratory

hazard from the assessment. It is important to note that l arge reductions in HAP emiss ions may

not necessarily

translate into significant reductions in health risk because toxicity varies b y pollutant, and exposures may or may not exceed levels of concern. For example, acetaldehyd e mass emissions are more than double acrolein emissions on a national basis, according to EPA ’ s 2005 National Emissions Inventory (NE I). However, the Integrated Risk Information Sy stem (IRI S) reference concentration (RfC) for acrolein is considerabl y lower

72 Details about the overall confidence of certainty ranking of the individual pieces of NATA assessments including both quantitative (e.g., model - to - mo nitor ratios) and qualit ative (e.g., quality of data, review of emission inventories) judgments can be found at http://www.epa.gov/ttn/atw/nata/roy/page16.html . 73 Chronic exposure is defined in the glossary of the Integrated Risk Information (IRIS) database ( http://www.epa.gov/iris ) as repeated exposure by the oral, dermal, or inhalation route for more than approximately 10% of the life span in humans (more than approximately 9 0 days to 2 years in typically used laboratory animal species). 74 Defined in the IRIS database as repeated exposure by the oral, dermal, or inhalation route for more than 30 days, up to approximately 10% of the life span in humans (more than 30 days up to approximately 90 days in typically used laboratory animal species). 75 Defined in the IRIS database as exposure by the oral, dermal, or inhalation route for 24 hours or less.* * * E.O. 12866 Review - Draft

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7 - 19 **Figure 7 -**  **5 .**  **Estimated Census Tract Carcinogenic Risk fr om HAP**  **Exposure from**  **Outdoor Sources (2005 NATA)**  than that for acetaldehyd e, suggesting that acrolein could be potentially more toxic than acetaldeh yde. Thus, it is important to account for the toxicity and exposure, as well as the mass of the targeted emissions. Due to methodology

limitations, we were unable to estimate the benefits associated with the hazardous air pollutants that would be reduced as a result of these rules. In a few previous anal ys es of the benefits of reductions in HAP, EPA has quantified the benefits of potential reductions in the incidences of cancer and non - cancer risk (e.g., U.S. EPA, 1995 ). In those anal ys es, EPA relied on unit risk factors (URF) developed through risk assessment procedures. 76 These URFs are designed to be conservative, and as such, are more likely to

76 The unit risk factor is a quantitative estimate of the carcinogenic potency of a pollutant, often expressed as the probability of contracting cancer from a 70 - year lifetime continuous exposure to a concentration of one μg/m 3 of a pollutant.* * * E.O. 12866 Review - Draft

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7 - 20 **Figure 7 -**  **6 .**  **Estimated Chronic Census Tract Noncancer (Respiratory) Risk from HAP Exposure**  **from Outdoor Sources**  **(2005 NATA)** represent the high end of the distribution of risk rather than a best or most likely estim ate of risk. As the purpose of a benefit analy sis is t o describe the benefits most likely to occur from a reduction in pollution, use of high - end, conservative risk estimates would overestimate the benefits of the regulation. While we used high - end risk estimates in past analy ses, advice from the EPA ’ s Scienc e Advisory Board (SAB) recommended that we avoid using high - end estimates in benefit anal ys es (U.S. EPA - SAB, 2002 ). Since this time, EPA has continued to develop better methods for anal yz ing the benefits of reductions in HAP. As part of the second prospective anal ys is of the benefits and costs of the Clean Air Act (U.S. EPA, 2011a), EPA conducted a case study analy sis of the health effects associated with reducing exposure to benzene in Houston from implementation of the Clean Air Act (IEc, 2009 ). While reviewing the draft report, EPA ’ s Advisory Council on Clean Air Compliance Anal ys is concluded that “ the challenges for assessing progress in health improvement as a result of reductions in emissions of hazardous air po llutants (HAPs) are daunting ... due to a lack of* * * E.O. 12866 Review - Draft

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7 - 21 exposure - response functions, uncertainties in emissions inventories and background levels, the difficulty of extrapolating risk estimates to low doses and the challenges of tracking health progress for diseases , such as cancer, that have long latency periods ” (U.S. EPA - SAB, 2008 ). In 2009, EPA convened a workshop to address the inherent complexities, limitations, and uncertainties in current methods to quantify the benefits of reducing HAP. Recommendations from this workshop included identifying research priorities, focusing on susceptible and vulnerable populations, and improving dose - response relationships (Gwinn et al., 2011 ). In summary , monetization of the benefits of reductions in cancer incidences requires several important inputs, including central estimates of cancer risks, estimates of exposure to carcinogenic HAP, and estimates of the value of an avoided case of cancer (fatal and non - fatal). Due to methodology

limitations, we did not attempt to monetize the health benefits of reductions in HAP in this analy sis. Instead, we provide a qualitative analy sis of the health effects associated with the HAP anticipated to be reduced b y these rules. EPA remai ns committed to improving methods for estimating HAP benefits by continuing to explore additional concepts of benefits, including changes in the distribution of risk. Below we describe the health effects associated with the HAP s that would be reduced b y this rulemaking. 7.3.1.1 Benzene The EPA ’ s IRIS database lists benzene as a known human carcinogen (causing leukemia) by all routes of exposure, and concludes that exposure is associated with additional health effects, including genetic changes in both humans and animals and increased proliferation of bone marrow cells in mice. 77 , 78 , 79 EPA states in its IRIS database that data indicate a causal relationship between benzene exposure and acute l ym phocy tic leukemia and suggest a relationship between benzene exposure and chronic non - ly mphocy tic leukemia and chronic l ym phocy tic leukemia . The IARC

77 U.S. Environmental Protection Agency (U.S. EPA). 2000. Integrated Risk Information System Fil e for Benzene. Research and Development, National Center for Environmental Assessment, Washington, DC. This material is available electronically at: http://www.epa.gov/iris/subst/0276.htm . 78 International Agency for Research on Cancer, IARC monographs on the evaluation of carcinogenic risk of chemicals to humans, Volume 29, Some industrial chemicals and dyestuffs, International Agency for Research on Cancer, World Health Organization, Lyon, Fr ance, p. 345 - 389, 1982. 79 Irons, R.D.; Stillman, W.S.; Colagiovanni, D.B.; Henry, V.A. (1992) Synergistic action of the benzene metabolite hydroquinone on myelopoietic stimulating activity of granulocyte/macrophage colony - stimulating factor in vitro, Proc . Natl. Acad. Sci. 89:3691 - 3695.* * * E.O. 12866 Review - Draft

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7 - 22 has determined that benzene is a human carcinogen and the DHHS has characterized benzene as a known human carcinogen. 80 , 81 A number of adverse noncancer health effects including bloo d disorders, such as preleukemia and aplastic anemia, have also been associated with long - term exposure to benzene. 82 , 83 7.3.1.2 Dioxins (C

hlorinated dibenzodioxins (CDDs ) 84 A number of effects have been observed in people exposed to 2,3,7,8 - TCDD levels that are at l east 10 times higher than background levels. The most obvious health effect in people exposure to relatively

large amounts of 2,3,7,8 - TCDD is Chloracne. Chloracne is a severe skin disease with acne - like lesions that occur mainl y on the face and upper body. Other skin effects noted in people exposed to high doses of 2,3,7,8 - TCDD include skin rashes, discoloration, and excessive body

hair. Changes in blood and urine that may indicate liver damage also are seen in people. Alterations in the ability of the liver to metabolize (or breakdown) hemoglobin, lipids, sugar, and protein have been reported in people exposed to relativel y high concentrations of 2,3,7,8 - TCDD. Most of the effects are considered mild and were reversible. However, in some people these effects may

last for many

years. Slight increases in the risk of diabetes and abnormal glucose tolerance have been observed in some studies of people exposed to 2,3,7,8 - TCDD. We do not have enough information to know if exposure to 2,3,7,8 - TCDD would result in reproductive or developmental effects in people, but animal studies suggest that this is a potential health concern. In certain animal species, 2,3,7,8 - TCDD is especially harmful and can cause death after a single exposure. Exposure to lower levels can caus e a variety of effects in animals, such as weight loss, liver damage, and disruption of the endocrine s ys tem. In many species of animals, 2,3,7,8 - TCDD weakens the immune sy stem and causes a decrease in the s ystem ’ s ability to fight bacteria and viruses at relatively low levels (approximately 10 times higher than human 80 International Agency for Research on Cancer (IARC). 1987. Monographs on the evaluation of carcinogenic risk of chemicals to humans, Volume 29, Supplement 7, Some industrial chemicals and dyestuffs, World Health Organization, Lyon, France. 81 U.S. Department of Health and Human Services National Toxicology Program 11th Report on Carcinogens available at: http://ntp.niehs.nih.gov/go/16183 . 82 Aksoy, M. (1989). Hematotoxicity and carcinogenicity of benzene. Environ. Health Perspect. 82: 193 - 197. 83 Goldstein, B.D. (1988). Benzene toxicity. Occupational medicine. State of the Art Reviews. 3: 541 - 554. 84 All health effects language for this section came from: Agency for Toxic Substances and Disease Registry (ATSDR). 1999. ToxFAQs for Chlorinated Dibenzo -p - dioxins (CDDs) (CAS# : 2,3,7,8 - TCDD 1746 - 01 - 6 ). Atlanta, GA: U.S. Department of Health and Human Services, Public Health S ervice. Available on the Internet at http://www.atsdr.cdc.gov/tfacts104.html .* * * E.O. 12866 Review - Draft

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7 - 23 background body burdens). In other animal studies, exposure to 2,3,7,8 - TCDD has caused reproductive damage and birth defects. Some animal species exposed to CDDs during pregnancy had miscarria ges and the offspring of animals exposed to 2,3,7,8 - TCDD during pregnancy often had severe birth defects including skeletal deformities, kidney defects, and weakened immune responses. In some studies, effects were observed at body burdens 10 times higher than human background levels. 7.3.1.3 Formaldehyde Since 1987, EPA has classified formaldeh yde as a probable human carcinogen based on evidence in humans and in rats, mice, hamsters, and monkey s. 85 Substantial additional research since that time informs current scientific understanding of the health effects associated with exposure to formaldeh yd e. These include recentl y published research conducted b y the National Cancer Institute (NCI) which found an increased risk of nasophary ngeal cancer and ly mphohematopoietic malignancies such as leukemia among workers exposed to formaldeh yde. 86 , 87 Inan analy sis of the l ymphohematopoietic cancer mortality from an extended follow - up of these workers, NCIconfirmed an association between l ymphohematopoietic cancer risk and peak formaldeh yde exposure s. 88 A recent NIOSH study of garment workers also found increased risk of death due to leukemia among workers exposed to formaldehyde. 89 Extended follow - up of a cohort of B ritish chemical workers did not find evidence of an increase in nasophary

ngeal or l ymphohematopoietic cancers, but a continuing statistically significant excess in lung cancers was reported. 90 In the past 15 years there has been substantial research on the inhalation dosimetry for formaldeh yde in rodents and primates b y the Chemical Industry Institute of Toxicology

(CIIT, now renamed the Hamner Institutes for Health Sciences), with a focus on use of rodent data for

85 U.S. EPA. 1987 . Assessment of Health Risks to Garment Workers and Certain Home Residents from Exposure to Formaldehyde, Office of Pesticides and Toxic Substances, April 1987. Docket EPA - HQ - OAR - 2010 - 0162 . 86 Hauptmann, M.; Lubin, J. H.; Stewart, P. A.; Hayes, R. B.; Blair, A . 2003 . Mortality from lymphohematopoetic malignancies among workers in formaldehyde industries . Journal of the National Cancer Institute 95: 1615 - 1623. Docket EPA - HQ - OAR - 2010 - 0162 . 87 Hauptmann, M . ; Lubin, J. H.; Stewart, P. A.; Hayes, R. B.; Blair, A . 20 04 . Mortality from solid cancers among workers in formaldehyde industries . American Journal of Epidemiology 159: 1117 - 1130. Docket EPA - HQ OAR - 2010 - 0162 . 88 Beane Freeman, L. E.; Blair, A.; Lubin, J. H.; Stewart, P. A.; Hayes, R. B.; Hoover, R. N.; Hauptmann , M. 2009. Mortality from lymphohematopoietic malignancies among workers in formaldehyde industries: The National Cancer Institute cohort. J. National Cancer Inst. 101: 751 - 761. Docket EPA - HQ - OAR - 2010 - 0162 . 89 Pinkerton, L. E . 2004 . Mortality among a cohort of garment workers exposed to formaldehyde: an update . Occup. Environ. Med. 61: 193 - 200. Docket EPA - HQ - OAR- 2010 - 0162 . 90 Coggon, D, EC Harris, J Poole, KT Palmer. 2003. Extended follow - up of a cohort of British chemical workers exposed to formaldehyde. J N ational Cancer Inst. 95:1608 - 1615. Docket EPA - HQ - OAR - 2010 - 0162 .* * * E.O. 12866 Review - Draft

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7 - 24 refinement of the quantitative cancer dose - response assessment. 91 , 92 , 93 CI IT ’ s risk assessment of formaldeh yde incorporated mechanistic and dosimetric information on formaldehyde. These data were modeled using a biologicall y- motivated two - stage clonal growth model for cancer and also a point of departure based on a Benchmark Dose approach. However, it should be noted that recent research published by EPA indicates that when two - stage modeling assumptions are varied, resulting dose - response estimates can vary by several orders of magnitude. 94 , 95 , 96 , 97 These findings are not supportive of interpreting the CIIT model results as providing a conservative (health protective) estimate o f human risk. 98 EPA research also examined the contribution of the two - stage modeling for formaldehyde towards characterizing the r elative weights of key events in the mode - of

- action of a carcinogen . For example, the model - based inference in the published CI IT study that formaldehyde ’ s direct mutagenic action is not relevant to the compound ’ s tumorigenicity was found not to hold under variations of modeling assumptions. 99 Based on the developments of the last decade, i n 2004, the working group of the IARC concluded that formaldehyde is carcinogenic to humans (Group 1), on the basis of sufficient evidence in humans and sufficient evidenc e in experimental animals

—a higher classification than previous IARC evaluations. After reviewing the currently available epidemiological evidence, the IARC (2006) characterized the human evidence for formaldehyde carcinogenicity

91 Conolly, RB, JS Kimbell, D Janszen, PM Schlosser, D Kalisak, J Preston, and FJ Miller. 2003 . Biologically mo tivated computational modeling of formaldehyde carcinogenicity in the F344 rat . Tox Sci 75: 432 - 447. Docket EPA - HQ - OAR - 2010 - 0162 . 92 Conolly, RB, JS Kimbell, D Janszen, PM Schlosser, D Kalisak, J Preston, and FJ Miller. 2004. Human respiratory tract cancer risks of inhaled formaldehyde: Dose - response predictions derived from biological ly - mo tivated computational modeling of a combined rodent and human dataset . Tox Sci 82: 279 - 296. Docket EPA - HQ - OAR2010 - 0162 . 93 Chemical Industry Institute of Toxicology (CIIT).1999. Formaldehyde: Hazard characterization and dose - response assessment for carcinogenicity by the route of inhalation . CIIT, September 28, 1999. Research Triangle Park, NC. Docket EPA - HQ - OAR - 2010 - 0162 . 94 U.S. EPA. Analysis of the Sensitivity and Uncertainty in 2 - Stage Clonal Growth Models for Formaldehyde with Relevance to Other Bi ologically - Based Dose Response (BBDR) Models. U.S. Environmental Protection Agency, Washington, D.C., EPA/600/R- 08/103, 2008. Docket EPA - HQ - OAR - 2010 - 0162 . 95 Subr amaniam, R; Chen, C; Crump, K; et al. (2008) Uncertainties in biologically - based modeling of fo rmaldehyde induced cancer risk: identification of key issues. Risk Anal 28(4):907 - 923. Docket EPA - HQ - OAR - 2010 - 0162 . 96 Subramaniam RP; Crump KS; Van Landingham C; et al. (2007) Uncertainties in the CIIT model for formaldehyde - induced carcinogenicity in the rat: A limited sensitivity analysis

–I. Risk Anal, 27: 1237

– 1254. Docket EPA - HQ - OAR - 2010 - 0162 . 97 Crump, K; Chen, C; Fox, J; et al. (2008) Sensitivity analysis of biologically motivated model for formaldehyde induced respiratory cancer in humans. Ann Occup H yg 52:481 - 495. Docket EPA - HQ - OAR- 2010 - 0162 . 98 Crump, K; Chen, C; Fox, J; et al. (2008) Sensitivity analysis of biologically motivated model for formaldehyde induced respiratory cancer in humans. Ann Occup Hyg 52:481 - 495. Docket EPA - HQ - OAR- 2010 - 0162 . 99 S ubr amaniam RP; Crump KS; Van Landingham C; et al. (2007) Uncertainties in the CIIT model for formaldehyde - induced carcinogenicity in the rat: A limited sensitivity analysis

–I. Risk Anal, 27: 1237

– 1254 . Docket EPA - HQ - OAR - 2010 - 0162 .* * * E.O. 12866 Review - Draft

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7 - 25 as “ sufficient, ” based upo n the data on nasopharyngeal cancers; the epidemiologic evidence on leukemia was characterized as “ strong. ” 100 Formaldeh yd e exposure also causes a range of noncancer health effects, including irritation of the eyes (burning and watering of the eyes), nose and throat. Effects from repeated exposure in humans include respiratory tract irritation, chronic bronchitis and nasal epithelial lesions such as metaplasia and loss of cilia. Animal studies suggest that formaldehyde may also cause airway

inflammation

—including eosinophils infiltration into the airways. There are several studies that suggest that formaldehyde may increase the risk of asthma

— particularl y in the yo ung. 101 , 102 The above - mentioned rodent and human studies, as well as mechanistic information and their anal ys es, were evaluated in EPA ’ s recent Draft Toxicological Review of Formaldehyde

— Inhalation Assessment through the Integrated Risk Information Sy stem (IRI S) program. This draft IRIS assessment was released in June 2010 for public review and comment and external peer review b y the National Research Council (NRC) . The NRC released their review report in April 2011 (http://www.nap.edu/catalog.php?record_id=13142 ) . The EPA is currentl y revising the draft assessment in response to this review. 7.3.1.4 Polycyclic Organic Matter (POM) The term pol yc yclic organic matter (POM) defines a broad class of compounds that includes the polycyclic aromatic hydrocarbon compounds (PAHs) . One of these compounds, naphthalene, is discussed separately below . POM compounds are formed primarily from combustion and are present in the atmosphere in gas and particulate form . Cancer is the major concern from exposure to POM . Epidemiologic studies have reported an increase in lung cancer in humans exposed to diesel exhaust, coke oven emissions, roofing tar emissions, and cigarette smoke ; all of these mixtures contain POM compounds 103 , 104 . Animal studies have reported

100 International Agency for Research on Cancer (2006) Formaldehyde, 2 - Butoxyethanol and 1 - tert - Butoxypropan - 2 - ol . Monographs Volume 88. World Health Organization, Lyon, France. Docket EPA - HQ - OAR- 2010 - 0162 . 101 Agency for Toxic Substances and Disease Registry (ATSDR). 1999. Toxicological profile for Formaldehyde. Atlanta, GA: U.S. Department of Health and Human Services, Public Health Service. http://www.atsdr.cdc.gov/toxprofiles/tp111.html . D ocket EPA - HQ - OAR - 2010 - 0162 . 102 WHO (2002) Concise International Chemical Assessment Document 40: Formaldehyde . Published under the joint sponsorship of the United Nations Environment Programme, the International Labour Organization, and the World Health Organization, an d produced within the framework of the Inter - Organization Programme for the Sound Management of Chemicals . Geneva. Docket EPA - HQ - OAR - 2010 - 0162 . 103 Agency for Toxic Substances and Disease Registry (ATSDR). 199 5 . T oxicological profile for Polycyclic Aromatic Hydrocarbons (PAHs) . Atlanta, GA: U.S. Department of Health and Human Services, Public Health Service . Available electronically at http://www.atsdr.cdc.gov/ToxProfiles/TP.asp?id=122& tid=25 .* * * E.O. 12866 Review - Draft

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7 - 26 respiratory

tract tumors from inhalation exposure to benzo[a]py rene and alimentary

tract and l iver tumors from oral exposure to benzo[a]py rene . EPA has classified seven PAHs (benzo[a]py

rene, benz[a]anthracene, chry sene, benzo[b]fluoranthene, benzo[k]fluoranthene, dibenz[a,h]anthracene, and indeno[1,2,3 - cd]py rene) as Group B2, probable human carcinogens. 105 Recent studies have found that maternal exposures to PAHs in a population of pregnant women were associated with several adverse birth outcomes, including low birth weight and reduced length at birth, as well as impaired cognitive development in preschool children (3 ye ars of age). 106 , 107 EPA has not yet evaluated these recent studies . 7.3.1.5 Other Air Toxics In addition to the compounds described above, other compounds would be affected b y this rule. Information regarding the health effects of these compounds can be found in EPA ’ s IRIS database. 108 **7.3.2 Carbon Monoxide Co**  **- Benefits**  Carbon monoxide in ambient air is formed primarily b y the incomplete combustion of carbon - containing fuels and photochemical reactions in the atmosphere. The amount of CO emitted from these reactions, relative to carbon dioxide (CO 2 ), is sensitive to conditions in the combustion zone, such as fuel ox ygen content, burn temperature, or mixing time. Upon inhalation, CO diffuses through the respiratory s ystem to the blood, which can cause hypoxia (reduced ox ygen availability). Carbon monoxide can elicit a broad range of effect s in multiple tissues and organ s ys tems that are dependent upon concentration and duration of exposure. The Integrated Science Assessment for Carbon Monoxide (U.S. EPA, 2010a) concluded that short term exposure to CO is “ likely to have a causal relationship ” with cardiovascular morbidity , particularl y in individuals with coronary heart disease. Epidemiologic studies associate short term CO exposure with increased risk of emergency department visits and hospital admissions. Coronary heart disease includes th ose who have angina pectoris (cardiac chest pain), as well as 104 U.S. EPA (2002). Health Assessment Document for Diesel Engine Exhaust. EPA/600/8 - 90/057F Office of Research and Development, Washington DC. Retrieved on March 17, 2009 from http://cfpub.epa.gov/ncea/cfm/recordisplay.cfm?deid=29060 . Docket EPA - HQ - OAR - 2010 - 0162 . 105 U.S. EPA (1997). Integrated Risk Information System File of indeno(1,2,3 - cd)pyrene. Research and Development, N ational Center for Environmental Assessment, Washington, DC. This material is available electronically at http://www.epa.gov/ncea/iris/subst/0457.htm . 106 Perera, F.P.; Rauh, V.; Tsai, W - Y.; et al. (2002) Effect of transplacental exposure to environmental pollutants on birth outcomes in a multiethnic population. Environ Health Perspect. 111: 201 - 205. 107 Perera, F.P.; Rauh, V.; Whyatt, R.M.; Tsai, W.Y.; Tang, D.; Diaz, D.; Hoepner, L.; Barr, D.; Tu, Y. H.; Camann, D.; Kinney, P. (2006) Effect of prenatal exposure to airborne polycyclic aromatic hydrocarbons on neurodevelopment in the first 3 years of life among inner - city children. Environ Health Perspect 114: 1287 - 1292. 108 U.S. EPA Integrated Risk Information System (IRIS) database is available at: www.epa.gov/iris .* * * E.O. 12866 Review - Draft

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7 - 27 those who have experienced a heart attack. Other subpopulations potentially at risk include individuals with diseases such as chronic obstructive pulmonary disease (COPD), anemia, or diabetes, and individuals in very early or late life stages, such as older adults or the developing yo ung. The evidence is suggestive of a causal relationship between short - term exposure to CO and respiratory

morbidity and mortality . The evidence is also suggestive o f a causal relationship for birth outcomes and developmental effects following long - term exposure to CO, and for central nervous s ys tem effects linked to short - and long - term exposure to CO. **7.3.3 Black Carbon (BC) Benefits**  In complete combustion of wood results in emissions of fine and ultrafine particles, including black carbon (BC), brown carbon (BrC), and other nonlight, absorbing organic carbon (OC) particles. BC and BrC are collectivel y considered light, absorbing carbon (LAC) with BC referring to the most s trongl y light - absorbing form of carbon per unit mass. BC impacts the earth ’ s climate because of its high capacity for light absorption. The role of BC in key atmospheric processes links it to a range of climate impacts, including increased temperatures, ac celerated ice and snow melt, and disruptions in precipitation patterns. A recent study by the UN Environment Programme (UNEP) concluded that reductions in BC and ozone will slow the rate of climate change within the first half of this century with a small number of targeted BC and ozone precursor emissions mitigation measures providing immediate protection for climate, public health, water and food security, and ecos ys tems (UNEP, 2011 ). 109 While less effective in absorbing solar radiation than BC, BrC may contribute significantl y to positive radiative forcing. At present the ability to quantify

the climate impacts of BrC is limited. OC from incomplete combustion of wood (exclusive of BrC) is generall y considered nonlight - absorbing carbon. No nlight absorbing compounds scatter rather than absorb solar radiation and, therefore, provide a net direct cooling effect on climate. Thus, particles generated b y residential wood combustion consist of components that are warming to the atmosphere (BC and BrC) and particles that are cooling (OC exclusive of BrC). Residential wood combustion contributed about 380,000 tons of PM 2.5 emissions across the United States in 2005. Of these PM 2.5 emissions, approximately 21,000 tons are estimated to

109 UN Environment Programme, World Meteorological Organization. 2011, February. Integrated Assessment of Black Carbon and Tropospheric Ozone: Summary for Decision Ma kers . Available at http://www.unep.org/gc/gc26/dow nload.asp?ID=2197 .* * * E.O. 12866 Review - Draft

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7 - 28 be elemental carbon (EC ) 110 (EPA NEI, 2005 ). 111 The EC/OC ratio is a metric sometimes used to crudely compare the warming potential of emissions from various BC sources with a ratio of less than 1 indicating that cooling potential exce eds warming. Based on the speciated 2005 NEI , the EC/OC for residential wood combustion is estimated to be less than one (~ 0.11), indicating a predominance of OC or light - scattering particles relative to light absorbing ones. Exactly how much of the OC from RWC sources is light absorbing (BrC) is not known currentl y, and the LAC may vary by fuel ty pe, combustion conditions, and operating environment. While OC emissions are generall y considered to have a cooling effect, OC emissions over areas with snow an d ice may be less reflective than OC over dark surfaces and may even have a slight warming effect (Flanner et al., 2007 ). 112 Significantl y, the vast majority of residential wood smoke emissions occur during the winter months; the highest percentage of wood stove use is in the upper Midwest (e.g., Michigan), the Northeast (e.g., Maine), and the mountainous areas of the Pacific Northwest (e.g., Washington), where snow is present a good portion of the winter months. A recent study of the effect of soot - induced snow albedo on snowpack and h ydrological cycles in the western United States concludes that radiative forcing induced b y soot deposition on snow is an important anthropogenic source affecting the global climate. The study conclu des that soot - induced snow albedo perturbations increase the surface net solar radiation flux during late winter to earl y spring, increase the surface air temperature, reduce the snow accumulation and spring snowmelt, and may alter stream flows with implic ations for water resources in the western United States (Qian, et al., 2009 ). 113 Further study is needed to better understand and quantify the impact of PM 2.5 emissions and deposition from the RWC sector on climate.

110 BC is roughly equivalent to ‘ soot carbon ’ or the portion of soot that is closest to elemental carbon. The most commonly used measurement technique, the ‘ thermal optical method ’ quantifies the portion of PM that is EC. EC is frequently used for emissions characterization and ambient measurements. The terms EC and BC are used interchangeably in this discussion. 111 U . S . EPA . 2005 . National Emissions Inventory. 2005 Modeling Inventory . Available at. http://www.epa.gov/ttn/chief/emch/index.html . 112 Flanner, M. G., Zender, C. S., Randerson, J. T. , and Rasch, P. J. 200 7. Present - day climate forcing and response from BC in snow . Journal of Geophysical Research - Atmospheres, 1 2(D11). doi:10.1029/2006JD008003 113 Qian, Y., W. I. Gustafson , L. R. Leung, and S. J. Ghan. 2009 . Effects of soot - induced snow albedo change on snowpa ck and hydrological cycle in western United States based on Weather Research and Forecasting chemistry and regional climate simulations, J. Geophys. Res. 114, D03108 . doi:10.1029/2008JD011039* * * E.O. 12866 Review - Draft

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7 - 29 **7.3.4 VOCs as a PM**  **2.5 Precursor**  This rulemaking is expected to reduce emissions of VOCs, which are a precursor to PM 2.5 . Most VOCs emitted are oxidized to carbon dioxide (CO 2 ) rather than to PM, but a portion of VOC emission contributes to ambient PM 2.5 levels as organic carbo n aerosols (U.S. EPA, 2009 c ) . Therefore, reducing these emissions would reduce PM 2.5 formation, human exposure to PM 2.5 , and the incidence of PM 2.5 - related health effects . However, we have not quantified the PM 2.5 - related benefits associated with VOC reduc tions in this analysis . Analy sis of organic carbon measurements suggest onl y a fraction of secondaril y formed organic carbon aerosols are of anthropogenic origin . The current state of the science of secondary organic carbon aerosol formation indicates that anthropogenic VOC contribution to secondary organic carbon aerosol is often lower than the biogenic (natural) contribution . Given that a fraction of secondarily formed organic carbon aerosols is from anthropogenic VOC emissions and the extremel y small amo unt of VOC emissions from this sector relative to the entire VOC inventory it is unlikely

this sector has a large contribution to ambient secondary organic carbon aerosols . Photochemical models ty picall y estimate secondary organic carbon from anthropogenic VOC emissions to be less than 0.1 μg/m 3

. Due to limited resources, we were unable to perform air quality modeling for this rule . Therefore, given the high degree of variab ility in the responsiveness of PM 2.5 formation to VOC emission reductions, we are unable to estimate the effect that reducing VOCs will have on ambient PM 2.5 levels without air quality modeling. **7.3.5 VOCs as a**  **n Ozone**  **Precursor** In the presence of sunlight, VOCs can undergo a chemical reaction in the atmosphere to form ozone . Reducing ambient ozone concentrations is associated with significant human health benefits, including mortality and respiratory

morbidity

(U.S. EPA, 2008a) . Epidemiological researchers have a ssociated ozone exposure with adverse health effects in numerous toxicological, clinical and epidemio logical studies (U.S. EPA, 2006 ) . These health effects include respiratory

morbidity

such as fewer asthma attacks, hospital and ER visits, school loss day s , as well as premature mortality . In addition to health impacts reduction, there are ecological benefits from reducing the formation of ozone and related exposure that leads to reduced net primary productivity

and visible foliar injury which are associate d with a range of ecos ys tems services .* * * E.O. 12866 Review - Draft

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7 - 30 **7.3.6 Visibility Impairment Co** **- Benefits**  Reducing secondary

formation of PM 2.5 would improve visibility l evels in the U.S. because suspended particles and gases degrade visibility by scattering and absorbing light (U.S. EPA, 2009). Fine particles with significant light - extinction efficiencies include sulfates, nitrates, organic carbon, elemental carbon, and soil (Sisler, 1996). Visibility has direct significance to people ’ s enjo ym ent of daily activities and their overall sens e of wellbeing. Good visibility increases the quality

of life where individuals live and work, and where they engage in recreational activities. Particulate sulfate is the dominant source of regional haze in the eastern U.S. and particulate nitrate is an i mportant contributor to light extinction in California and the upper Midwestern U.S., particularl y during winter (U.S. EPA, 2009). Previous analyses (U.S. EPA, 2011a) show that visibility benefits can be a significant welfare benefit category . Without air quality

modeling, we are not unable to estimate visibility related benefits, nor are we able to determine whether the emission reductions associated with this rule would be likely to have a significant impact on visibility in urban areas or Class Iareas. **7.4 References**  Abt Associates, Inc. 2012. BenMAP User ’ s Manual Appendices . Prepared for U.S. Environmental Protection Agency Office of Air Quality

Planning and Standards. Research Triangle Park, NC. September. Available on the Internet at http://www.epa.gov/air/benmap/models/BenMAPAppendicesOct2012.pdf . Fann, N., C.M. Fulcher, B.J. Hubbell. 2009. “ The influence of location, source, and emission ty pe in estimates of the human health benefits of reducing a ton of air pollution. ” Air Qual Atmos Health 2:169

– 176. Fann, N., K.R. Baker, and C.M. Fulcher. 2012. “ Characterizing the PM 2.5 - related health benefits of emission reductions for 17 industrial, area and mobile emi ssion sectors across the U.S. ” Environment International 49 41

– 151. Gwinn, M.R ., J . Craig, D.A . Axelrad, R . Cook, C . Dockins, N . Fann, R . Fegley , D.E . Guinnup, G . Helfand, B . Hubbell, S.L . Mazur, T . Palma, R.L . Smith, J . Vandenberg, and B . Sonawane. 2011. “ Meeting report: Estimating the benefits of reducing hazardous air pollutants

— summary

of 2009 workshop and future considerations. ” Environ Health Perspect . Jan; 119(1): p. 125 - 30. Industrial Economics, Inc (IEc). 2009. Section 812 Prospective Study of the Benefits and Costs of the Clean Air Act: Air Toxics Case Study

— Health Benefits of Benzene Reductions in Houston, 1990

–2020 . Final Report, July 14, 2009. Available on the Internet at http://www.epa.gov/air/sect812/dec09/812CAAA_Benzene_Houston_Final_Report_July _2009.pdf

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7 - 31 Indus trial Economics, Incorporated (IEc). 2006. Expanded Expert Judgment Assessment of the Concentration -Response Relationship Between PM 2.5 Exposure and Mortality . Prepared for: Office of Air Quality Planning and Standards, U.S. Environmental Protection Agency , Research Triangle Park, NC. September. Available on the Internet at http://www.epa.gov/ttn/ecas/regdata/Uncertainty/pm_ee_tsd_expert_interview_summarie s.pdf . Krewski D, Jerrett M, Burnett RT, Ma R, Hughes E, Shi, Y, et al. 2009. Extended follow - up and spatial analysis of the American Cancer Society study linking particulate air pollution and mortality. HEIResearch Report, 140, Health Effects Institute , Boston, MA. Lepeule J, L aden F, Dockery D, Schwartz J 2012. “ Chronic Exposure to Fine Particles and Mortality : An Extended Follow - Up of the Harvard Six Cities Study from 1974 to 2009. ” Environ Health Perspect. Jul;120(7):965 - 70. National Research Council (NRC). 2002. Estimating the Public Health Benefits of Proposed Air Pollution Regulations . Washington, DC: The National Academies Press. Office of Management and Budget (OMB). 2003. Circular A - 4: Regulatory Analysis. Washington, DC. Available on the Internet at http://www.whitehouse.gov/omb/circulars/a004/a - 4.html . Roman, Henry

A., Katherine D. Walker, Ty ra L. Walsh, Lisa Conner, Harvey M. Richmond, Bryan J. Hubbell, and Patrick L . Kinney . 2008. “ Expert Judgment Assessment of the Mortality Impact of Changes in Ambient Fine Particulate Matter in the U.S. ” Environ. Sci. Technol ., 42(7):2268 - 2274. Sisler, J.F. 1996. Spatial and seasonal patterns and long- term variability of the composi tion of the haze in the United States: an analysis of data from the IMPROVE network. CIRA Report, I SSN 0737 - 5352 - 32, Colorado State University . U.S. Census Bureau. 2008a. Firm Size Data from the Statistics of U.S. Businesses: U.S. Detail Employ ment Sizes: 2002 . <http://www2.census.gov/csd/susb/2002/ 02us_detailed%20sizes_6digitnaics.txt > U.S. Environmental Protection Agency

— Science Advisory

Board (U.S. EPA - SAB). 2002. Workshop on the Benefits of Reductions in Exposure to Hazardous Air Pollutants: Developing Best Estimates of Dose -Response Functions An SAB W orkshop Report of an EPA/SAB Workshop (Final Report). EPA - SAB - EC - WKSHP - 02 - 001. January . Available on the Internet at http://yosemite.epa.gov/sab%5CSABPRODUCT.NSF/34355712EC011A358525719A00 5BF6F6/$File/ecwkshp02001%2Bappa - g.pdf . U.S. Environmental Protection Agency (U.S. EPA). 1995. Regulatory Impact Analysis for the Petroleum Refinery NESHAP. Revised Draft for Promulgation . Office of Air Quality Planning and Standards, Research Triangle Park, N.C. Available on the Internet at http://www.reg - markets.org/admin/authorpdfs/page.php?id=705 .* * * E.O. 12866 Review - Draft

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7 - 32 U.S. Environmental Protection Agency (U.S. EPA). 2006. Air Quality Criteria for Ozone and Related Photochemical Oxidants (Final) . EPA/600/R - 05/004aF - cF. Washington, DC: U.S. EPA. February . Available on the Internet at http://cfpub.epa.gov/ncea/CFM/recordisplay .cfm?deid=149923 . U.S. Environmental Protection Agency (U.S. EPA). 2008 a . Integrated Science Assessment for Sulfur Oxides

—

Health Criteria (Final Report) . National Center for Environmental Assessment, Research Triangle Park, NC. September. Available on the Internet at http://cfpub.epa.gov/ncea/cfm/recordisplay .cfm?deid=198843 . U.S. Environmental Protection Agency (U.S. EPA). 2008c. Integrated Science Assessment for Oxides of Nitrogen

—

Health Criteria (Final Report). National Center for Environmental Assessment, Research Triangle Park, NC. July . Available at at http://cfpub.epa.gov/ncea/cfm/recordisplay .cfm?deid=194645 . U.S. Environmental Protection Agency (U.S. E PA). 2008d. Integrated Science Assessment for Oxides of Nitrogen and Sulfur

– Ecological Criteria National (Final Report). National Center for Environmental Assessment, Research Triangle Park, NC. EPA/600/R - 08/139. December. Available at http://cfpub.epa.gov/ncea/cfm/recordisplay .cfm?deid=201485 . U.S. Environmental Protection Agency (U.S. EPA). 2009. Integrated Science Assessment for Particulate Matter (Final Report) . EPA - 600 - R - 08 - 139F . National Center for Environmental Assessment

—RTP Division. December. Available on the Internet at http://cfpub.epa.gov/ncea/cfm/recordisplay .cfm?deid=216546 . U.S. Environmental Protection Agency (U.S. EPA). 2010a. Integrated Science Assessment for Carbon Monoxide. National Center for Environmental Assessment, Research Triangle Park, NC. EPA/600/R - 09/019F. January . Available at http://cfpub.epa.gov/ncea/cfm/recordisplay .cfm?deid=218686 . U.S. Environmental Protection Agency (U.S. EPA). 2010b. Technical Support Document: Summary of Expert Opinions on the Existence of a Threshold in the Concentration Response Fun ction for PM 2.5 - related Mortality. Research Triangle Park, NC. June. Available on the Internet at www.epa.gov/ttn/ecas/regdata/Benefits/thresholds tsd.pdf . U.S. Environmental Protection Agency (U.S. EPA). 2010c. Valuing Mortality Risk Reductions for Environmental Policy: A White Paper: SAB Review Draft . National Center for Environmental Economics December . Available on the Internet at http://yosemite.epa.gov/ee/epa/eerm.nsf/vwAN/EE - 0563 - 1.pdf/$file/EE - 0563 - 1.pdf . U.S. Environmental Protection Agency (U.S. EPA). 2010e. Guidelines for Preparing Economic Analyses . EPA 240 - R - 10 - 001. Nation al Center for Environmental Economics, Office of Policy Economics and Innovation. Washington, DC. December. Available on the Internet at http://yosemite.epa .gov/ee/epa/eerm.nsf/vwAN/EE - 0568 - 50.pdf/$file/EE - 0568 - 50.pdf . U.S. Environmental Protection Agency (U.S. EPA). 2011a. The Benefits and Costs of the Clean Air Act from 1990 to 2020 . Office of Air and Radiation, Washington, DC. March. http://www.epa.gov/air/sect812/feb11/fullreport.pdf . Accessed March 30, 2011.* * * E.O. 12866 Review - Draft

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7 - 33 U.S. Environmental Protection Agency (U.S. EPA). 2011b. Regulatory Impact Analysis for the Final Mercury and Air Toxics Standards. EPA - 452/R - 11 - 011. December. Available on the Internet at http://www.epa.gov/ttn/ecas/regdata/RIAs/matsriafinal.pdf . U.S. Environmental Protection Agency (U.S. EPA). 2011c. 2005 National- Scale Air Toxics Assessment

**.** Office of Air Quality

Planning and Standards, Research Triangle Park, NC. March. Available on the Internet at http://www.epa.gov/ttn/atw/nata2005/ . U.S. Environment al Protection Agency (U.S. EPA). 2011d. Regulatory Impact Analysis: National Emission Standards for Hazardous Air Pollutants for Industrial, Commercial, and Institutional Boilers and Process Heaters . February . Available on the Internet at http://www.epa.gov/ttnecas1/regdata/RIAs/boilersriafinal110221_psg.pdf . U.S. Environmental Protection Agency (U.S. EPA). 2012a. Regulatory Impact Analysis for the Final Revisions to the National Ambient Air Quality Standards for Particulate Matter . EPA - 452/R - 12 - 003. Office of Air Quality Planning and Standards, Health and Environmental Impacts Division. December. Available at http://www.epa.gov/pm/2012/finalria.pdf . U.S. Environmental Protection Agency (U.S. EPA). 2012b. Regulatory Impact Analysis: Petroleum Refineries New Source Performance Standards Ja. Office of Air Quality Planning and Standards, Health and Environmental Impacts Division. June. Available at http://www.epa.gov/ttnecas1/regdata/RIAs/refineries_nsps_ja_final_ria.pdf . U.S. Environmental Protection Agency (U.S. EPA). 2013. Techni cal Support Document: Estimating the Benefit per ton of Reducing PM 2.5 Precursors from 17 sectors . Office of Air Quality

Planning and Standards, Research Triangle Park, NC. February . U.S. Environmental Protection Agency

— Science Advisory

Board (U.S. EPA - SAB). 2008. Characterizing Uncertainty in Particulate Matter Benefits Using Expert Elicitation. EPA - COUNCIL - 08 - 002. July . Available on the Internet at http://yosemite.epa.gov/sab/sabproduct.nsf/0/43B91173651AED9E85257487004EA6CB/ $File/EPA - COUNCIL - 08 - 002 - unsigned.pdf . U.S. Environmental Protection Agency

— Science Advisory

Board (U.S. EPA - SAB). 200 0. An SAB Report on EPA ’

s Whi te Paper Valuing the Benefits of Fatal Cancer Risk Reduction. EPA - SAB - EEAC - 00 - 013. July . Available on the Internet at http://yosemite.epa.gov/s ab%5CSABPRODUCT.NSF/41334524148BCCD6852571A700 516498/$File/eeacf013.pdf . U.S. Environmental Protection Agency

— Science Advisory

Board (U.S. EPA - SAB). 20 04 c . Advisory Council on Clean Air Compliance Analysis Response to Agency Request on Cessation Lag. EPA - C OUNCIL - LTR - 05 - 001. December. Available on the Internet at <. http://yosemite.epa.gov/sab/sabproduct.nsf/0/39F44B098DB49F3C85257170005 293E0/$ File/council_ltr_05_001.pdf* * * E.O. 12866 Review - Draft

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7 - 34 U.S. Environmental Protection Agency

— Science Advisory

Board (U.S. EPA - SAB). 2008. Benefits of Reducing Benzene Emissions in Houston, 1990

–2020 . EPA - COUNCIL - 08 - 001. July . Available at http://yosemite.epa.gov/sab/sabproduct.nsf/D4D7EC9DAEDA8A548525748600728A83/ $File/EPA - COUNCIL - 08 - 001 - unsigned.pdf . U.S. Environm ental Protection Agency

— Science Advisory

Board (U.S. EPA - SAB). 2009b. Review of EPA ’

s Integrated Science Assessment for Particulate Matter (First External Review Draft, December 2008) . EPA - COUNCIL - 09 - 008. May . Available on the Internet at http://yosemite.epa.gov/sab/SABPRODUCT.NSF/81e39f4c09954fcb85256ead006be86e/ 73ACCA834AB44A10852575BD0064346B/$Fi le/EPA - CASAC - 09 - 008 - unsigned.pdf . U.S. Environmental Protection Agency

— Science Advisory

Board (U.S. EPA - SAB). 2009c. Review of Integrated Science Assessment for Particulate Matter (Second External Review Draft, July 2009) . EPA - CASAC - 10 - 001. November. Available on the Internet at http://yosemite.epa.gov/sab/SABPRODUCT.NSF/81e39f4c09954fcb85256ea d006be86e/ 151B1F83B023145585257678006836B9/$File/EPA - CASAC - 10 - 001 - unsigned.pdf . U.S. Environmental Protection Agency

— Science Advisory

Board (U.S. EPA - SAB). 20 10a. Review of EPA ’

s DRAFT Health Benefits of the Second Section 812 Prospective Study of the Clea n Air Act . EPA - COUNCIL - 10 - 001. June. Available on the Internet at http://yosemite.epa.gov/sab/sab product.nsf/9288428b8eeea4c885257242006935a3/59e06 b6c5ca66597852575e7006c5d09!OpenDocument&TableRow=2.3#2. U.S. Environmental Protection Agency

— Science Advisory

Board (U.S. EPA - SAB). 2011. Review of Valuing Mortality Risk Reductions for Environmental Polic y: A White Paper (December 10, 2010). EPA - SAB - 11 - 011 July. Available on the Internet at http://yosemite.epa.gov/sab/sabproduct.nsf/298E1F50F844BC23852578DC0059A616/$F ile/EPA - SAB - 11 - 011 - unsigned.pdf .* * * E.O. 12866 Review - Draft

– Do Not Cite, Quote or Release During Review ***

8 - 1 **SECTION 8 COMPARISON OF MONETI**  **ZED BENEFITS AND COS TS**  **8.1 Summary**  Because we ar e unable to monetize the co - benefits associat ed with reducing other pollutants such as VOCs and CO , all monetized benefits reflect improvements in ambient PM 2.5 concentrations. This results in an underestimate of the monetized benefits. Using a 3% discount rate, we estimate the total monetized benefi ts of this proposed rule to be $1.8 billion to $ 4 .2 billion in the 2014

–2022 time frame (Table 8 - 1). Using a 7% discount rate, we estimate the to tal monetized benefits to be $1.7 billion to $3.8 billion in the 2014

–2022 time frame . For the Alternative opti on, u sing a 3% discount rate, we estimate the total monetized benefits of this proposed rule to be $1.9 billion to $ 4 .2 billion in the 2014

–2022 time frame (Table 8 - 1) . Using a 7% discount rate, we estimate the total monetized benefits under the Alternative option to be $1.7 billion to $3.8 billion in the 2014

–2022 time frame . The annualized social costs are $15.7 mil lion for the P roposed rule and $28.3 million for the Alternative option in the 2014

–2022 time frame (2010 dollars), and are $14.8 m illion for the proposed rule and $26.9 million for the Alternative option, respectively , in the same time frame using a 3% interest rate . The net benefits (benefits

– costs) are therefore $1.8 billion to $4.1 billion at a 3% discount rate for the benefits and $1.7 billion to $3.7 billion at a 7% discount rate for the Proposed option and $1.8 billion to $4.2 Billion at a 3% discount rate and $1.7 billion to $3.8 billion at a 7% discount rate for the Alternative option in the 2014

–2022 time frame . The net ben efits with annualized social costs at a 3% interest rate are essentially identical to those shown above with costs at a 7% interest rate. Annual benefits were equal through all options thereafter. All estimates are in 20 10 $. The benefits from reducing othe r air pollutants have not been monetized in this anal ys is, including reducing nearl y 3 , 2 00 tons of VOC, nearl y 33,000 tons of CO , black carbon and several HAPs emissions such as formaldehyde and benzene among others e ach year. Figure 8 - 1 shows the full range of net benefits estimates (i.e., annual benefits minus annualized costs) quantified in terms of PM 2.5 benefits reflecting the average annual impact for the 2014

–2022 time frame of the analy sis under the P roposed option, and Figure 8 - 2 shows the full range of net benefits estimates for the Alternative option. The net benefits reflect a 3% discount rate for the benefits.* * * E.O. 12866 Review - Draft

– Do Not Cite, Quote or Release During Review ***

8 - 2 **Table 8 -**  **1. Summary of the Monetized Benefits, Social Costs,**  **and Net Benefits for the**

**Proposed Residential Wood Heater NSPS in the 2014**  **– 2022 Time**  **F rame**  **($2010 millions )**  **a Proposed Option**  **3% Discount Rate 7% Discount Rate**  Total Monetized Benefits b $ 1,800 to $4,200 $1,7 00 to $3,800 Total Social Costs c $1 5 $16 Net Benefits $1,8 00 to $4,1 00 $1,7 00 To $3,7 00 Nonmonetized Benefits 32,7 00 tons of CO 3,200 tons of VOC Reduced exposure to HAPs, including formaldehyde, benzene, and polycyclic organic matter Reduced Climate effects due to reductions in black carbon emissions Reduced e cosystem effects Reduced v isibility impairment

**Alternative Option** Total Monetized Benefits b $ 1,900 to $ 4,200 $ 1,700 To $ 3,800 Total Social Costs c $ 2 7 $28 Net Benefits $ 1,8 00 to $4,2 00 $1,7 00 to $3,8 00 Nonmonetized Benefits 33,0 00 tons of CO 3,200 tons of VOC Reduced exposure to HAPs, including formaldehyde, benzene, and polycyclic organic matter Reduced Climate effects due to reductions in black carbon emissions Reduced e cosystem effects Reduced visibility im

pairment a All estimates are f

or the time frame from 2014 to 2022 inclusive and are rounded to two significant figures. These results include units anticipated to come online and the lowest cost disposal assumption . Total annualized social costs are estimated at a 7% int erest rate. b The total monetized benefits reflect the human health benefits associated with reducing exposure to PM 2.5 through reductions of directly emitted PM 2.5 . It is important to note that the monetized benefits include many but not all health effects associated with PM 2.5 exposure. Benefits are shown as a range from Krewski et al. (200 9 ) to L epeule et al. (20 12 ) . These models assume that all fine particles, regardless of their chemical comp osition, are equally potent in causing premature mortality because the scientific evidence is not yet sufficient to allow differentiation of effect estimates by particle type. Because these estimates were generated using benefit -per - ton estimates, we do no t break down the total monetized benefits into specific components here. See Figure 7 - 1 in this RIA for an illustration of the breakdown, or the RIA for the final Cross - States Air Pollution Rule (EPA, 2011) for mo re information. c The annualized social co sts are $14.8 million for the Proposed Option and $26.9 million for the Alternative Option at a 3% interest rate. We assume that annual compliance costs serve as an approximation of the social costs of the proposal.* * * E.O. 12866 Review - Draft

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8 - 3 **F igure 8**  **- 1.**  **Net Annual Benefits Range**  **in 201 4**  **– 2022**  **Time F**  **rame for PM**  **2.5 Reductions**  **for the Proposed Option**

$0 $1,000,000,000 $2,000,000,000 $3,000,000,000 $4,000,000,000 $5,000,000,000 $6,000,000,000 $7,000,000,000

Krewski et al. Lepeule et al.**D o** **l l** **a r** **s (** **2 0** **1 0** **$ )** 

Cost estimate combined with total monetized benefits estimates derived from 2 epidemiology functions and 12 expert functions* * * E.O. 12866 Review - Draft

– Do Not Cite, Quote or Release During Review ***

8 - 4 **Figure 8 -**  **2 .**  **Net Annual Benefits Range**  **in 201 4**  **– 2022**  **Time F**  **rame for PM**  **2.5 Reductions**  **for the Alternative Option**

$0 $1,000,000,000 $2,000,000,000 $3,000,000,000 $4,000,000,000 $5,000,000,000 $6,000,000,000 $7,000,000,000

Krewski et al. Lepeule et al.**D o** **l l** **a r** **s (** **2 0** **1 0** **$ )** 

Cost estimate combined with total monetized benefits estimates derived from 2 epidemiology functions and 12 expert functions* * * E.O. 12866 Review - Draft

– Do Not Cite, Quote or Release During Review ***

9 - 1 **SECTION 9 REFERENCES**  Abt Associates, Inc. 2012. BenMAP User ’ s Manual Appendices . Prepared for U.S. Environmental Protection Agency Office of Air Quality

Planning and Standards. Research Triangle Park, NC. September. Available on the Internet at http://www.epa.gov/air/benmap/models/BenMAPAppendicesOct2012.pdf . Agency for Toxic Substances and Disease Registry (ATSDR). 1995. Toxic ological Profile for Polycyclic Aromatic Hydrocarbons (PAHs) . Atlanta, GA: U.S. Department of Health and Human Services, Public Health Service. Available at : http://www.atsdr.cdc.gov/ToxProfiles/TP.asp?id=122&tid=25 American Enterprise Institute (AEI) and Brookings Institution Joint Center for Regulatory Studies. 1986. NSPS for Residential W ood Heaters. Regulatory Impact Analysis. RI N: 2060 - AB68. Available at: http://reg - markets.org/admin/authorpdfs/redirect safel y.php? fname=../pdffiles/2060 - AB68.RIA.pdf Bernstein, M.A. , and J. Griffin. 2005. Regional Di fferences in the Price -Elasticity of Demand for Energy . The RAND Corporation. Available at : http://www.rand.org/pubs/technical_reports/2005/RAND_TR292.pdf . Chernov, A. 2008. Mas onry Heaters: Planning Guide for Architects, Home Designers, and builders . Stovemaster Web site . Available at: http://www.stovemaster.com/files/masonry .pdf . Dagan, D. January

7, 2005. “ Warming Up to Stoves. ” Central Penn Business Journal. Available at: http://www.allbusiness.com/sales/1033217 - 1.html Dun & Bradstreet (D&B). 2010. D& B Marketplace . A company information database search able by NAI CS code. Accessed on July 15, 2010. Fann, N., C.M. Fulcher, B.J. Hubbell. 2009. “ The influence of location, source, and emission ty pe in estimates of the human health benefits of reducing a ton of air pollution. ” Air Qual Atmos Health 2:169

– 176. Fann, N., K.R. Baker, and C.M. Fulcher. 2012. “ Characterizing the PM 2.5 - related health benefits of emission reductions for 17 industrial, area and mobile emission sectors across the U.S. ” Environment International 49 41

– 151. Gwinn, M.R ., J . Craig, D.A . Axelrad, R . Cook, C . Dockins, N . Fann, R . Fegley , D.E . Guinnup, G . Helfand, B . Hubbell, S.L . Mazur, T . Palma, R.L . Smith, J . Vandenberg, and B . Sonawane. 2011. “ Meeting report: Estimating the benefits of reducing hazardous air pollutants

— summary

of 2009 workshop and future considerations. ” Environ Health Perspect . Jan; 119(1): p. 125 - 30.* * * E.O. 12866 Review - Draft

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9 - 2 Industrial Economics, Inc (IEc). 2009. Sectio n 812 Prospective Study of the Benefits and Costs of the Clean Air Act: Air Toxics Case Study

— Health Benefits of Benzene Reductions in Houston, 1990

–2020 . Final Report, July 14, 2009. Available on the Internet at http://www.epa.gov/air/sect812/dec09/812CAAA_Benzene_Houston_Final_Report_July _2009.pdf

. Industrial Economics, Incorporated (IEc). 2006. Expanded Expert Judgment Assessment of the Concentration -R esponse Relationship Between PM 2.5 Exposure and Mortality . Prepared for: Office of Air Quality Planning and Standards, U.S. Environmental Protection Agency , Research Triangle Park, NC. September. Available on the Internet at http://www.epa.gov/ttn/ecas/regdata/Uncertainty/pm_ee_tsd_expert_interview_summarie s.pdf . Krewski D, Jerrett M, Burnett RT, Ma R, Hughes E, Shi, Y, et al . 2009. Extended follow - up and spatial analysis of the American Cancer Society study linking particulate air pollution and mortality. HEIResearch Report, 140, Health Effects Institute, Boston, MA. Lepeule J, L aden F, Dockery D, Schwartz J 2012. “ Chronic E xposure to Fine Particles and Mortality : An Extended Follow - Up of the Harvard Six Cities Study from 1974 to 2009. ” Environ Health Perspect. Jul;120(7):965 - 70. National Research Council (NRC). 2002. Estimating the Public Health Benefits of Proposed Air Pollution Regulations . Washington, DC: The National Academies Press. Office of Management and Budget (OMB). 2003. Circular A - 4: Regulatory Analysis. Washington, DC. Available on the Internet at http://www.whitehouse.gov/omb/circulars/a004/a - 4.html . Roman, Henry

A., Katherine D. Walker, Ty ra L. Walsh, Lisa Conner, Harvey M. Richmond, Bryan J. Hubbell, and Patrick L . Kinney . 2008. “ Expert Judgment Assessment of the Mortality Impact of Changes in Ambient Fine Particulate Matter in the U.S. ” Environ. Sci. Technol ., 42(7):2268 - 2274. Sisler, J.F. 1996. Spatial and seasonal patterns and long- term variability of the composition of the haze in the United States: an analysis of data from the IMPROVE ne twork. CIRA Report, I SSN 0737 - 5352 - 32, Colorado State University . U.S. Census Bureau. 2008a. Firm Size Data from the Statistics of U.S. Businesses: U.S. Detail Employ ment Sizes: 2002 . <http://www2.censu s.gov/csd/susb/2002/ 02us_detailed%20sizes_6digitnaics.txt > U.S. Environmental Protection Agency

— Science Advisory

Board (U.S. EPA - SAB). 2002. Workshop on the Benefits of Reductions in Exposure to Hazardous Air Pollutants: Developing Best Estimates of Dose -Response Functions An SAB W orkshop Report of an EPA/SAB Workshop (Final Report). EPA - SAB - EC - WKSHP - 02 - 001. January . Available on the Internet at http://yosemite.epa.gov/sab%5CSABPRODUCT.NSF/34355712EC011A358525719A00 5BF6F6/$File/ecwkshp02001%2Bappa - g.pdf .* * * E.O. 12866 Review - Draft

– Do Not Cite, Quote or Release During Review ***

9 - 3 U.S. Environmental Protection Agency (U.S. EPA). 1995. Regulatory Impact Analysis for the Petroleum Refinery NESHAP. Revised Draft for Promulgation . Office of Air Quality Planning and Standards, Research Triangle Park, N.C. Available on the Internet at http://www.reg - markets.org/admin/authorpdfs/page.php?id=705 . U.S. Environmental Protection Agency (U.S. EPA). 2006. Air Quality Criteria for Ozone and Related Photochemical Oxidants (Final) . EPA/600/R - 05/004aF - cF. Washington, DC: U.S. EPA. February . Available on the Internet at http://cfpub.epa.gov/ncea/CFM/recordisplay .cfm?deid=149923 . U.S. Environmental Prote ction Agency (U.S. EPA). 2008 a . Integrated Science Assessment for Sulfur Oxides

—

Health Criteria (Final Report) . National Center for Environmental Assessment, Research Triangle Park, NC. September. Available on the Internet at http://cfpub.epa.gov/ncea/cfm/recordisplay .cfm?deid=198843 . U.S. Environmental Protection Agency (U.S. EPA). 2008c. Integrated Science Assessment for Oxides of Nitrogen

—

Health Criteria (Final Report). National C enter for Environmental Assessment, Research Triangle Park, NC. July . Available at at http://cfpub.epa.gov/ncea/cfm/recordisplay .cfm?deid=194645 . U.S. Environmental Protection Agen cy (U.S. EPA). 2008d. Integrated Science Assessment for Oxides of Nitrogen and Sulfur

– Ecological Criteria National (Final Report). National Center for Environmental Assessment, Research Triangle Park, NC. EPA/600/R - 08/139. December. Available at http://cfpub.epa.gov/ncea/cfm/recordisplay .cfm?deid=201485 . U.S. Environmental Protection Agency (U.S. EPA). 2009. Integrated Science Assessment for Particulate Matter (Final Report) . EPA - 600 - R - 08 - 139F. National Center for Environmental Assessment

—RTP Division. December. Available on the Internet at http://cfpub.epa.gov/ncea/cfm/recordisplay .cfm?deid=216546 . U.S. Environmental Protection Agency (U.S. EPA). 2010a. Integrated Science Assessment for Carbon Monoxide. National Center for Environmental Assessment, Research Triangle Park, NC. EPA/600/R - 09/019F. January . Available at http://cfpub.epa.gov/ncea/cfm/recordisplay .cfm?deid=218686 . U.S. Environmental Protection Agency (U.S. EPA). 2010b. Technical Support Document: Summary of Expert Opinions on the Existence of a Threshold in the Concentra tion Response Function for PM 2.5 - related Mortality. Research Triangle Park, NC. June. Available on the Internet at www.epa.gov/ttn/ecas/regdata/Benefits/thresholds tsd.pdf . U.S. Environmental Protection Agency (U.S. EPA). 2010c. Valuing Mortality Risk Reductions for Environmental Policy: A White Paper: SAB Review Draft . National Center for Environmental Economics December . Available on the Internet at http://yosemite.epa.gov/ee/epa/eerm.nsf/vwAN/EE - 0563 - 1.pdf/$file/EE - 0563 - 1.pdf .* * * E.O. 12866 Review - Draft

– Do Not Cite, Quote or Release During Review ***

9 - 4 U.S. Environmental Protection Agency (U.S. EPA). 2010e. Guidelines for Preparing Economic Analyses . EPA 240 - R - 10 - 001. National Center for Environmental Economics, Office of Policy Economics and Innovation. Washington, DC. December. Available on the Internet at http://yosemite.epa.gov/ee/epa/eerm.nsf/vwAN/EE - 0568 - 50.pdf/$file/EE - 0568 - 50.pdf . U.S. Environmental Protection Agency (U.S. EPA). 2011a. The Benefits and Costs of the Clean Air Act from 1990 to 2020 . Office of Air and Radiation, Washington, DC. March. http://www.epa.gov/air/sect812/feb11/fullreport.pdf . Accessed March 30, 2011. U.S. Environmental Protection Agency (U.S. EPA). 2011b. Regulatory Impact Analysis for the Final Mercury and Air Toxics Standards. EPA - 452/R - 11 - 011. December. Available on the Internet at http://www.epa.gov/ttn/ecas/regdata/RIAs/matsriafinal.pdf . U.S. Environmental Protection Agency (U.S. EPA ). 2011c. 2005 National- Scale Air Toxics Assessment

**.** Office of Air Quality

Planning and Standards, Research Triangle Park, NC. March. Available on the Internet at http://www.epa.gov/ttn/atw/nata2005/ . U .S. Environmental Protection Agency (U.S. EPA). 2011d. Regulatory Impact Analysis: National Emission Standards for Hazardous Air Pollutants for Industrial, Commercial, and Institutional Boilers and Process Heaters . February . Available on the Internet at http://www.epa.gov/ttnecas1/regdata/RIAs/boilersriafinal110221_psg.pdf . U.S. Environmental Protection Agency (U.S. EPA). 2012a. Regulatory Impact Analysis for the Final Re visions to the National Ambient Air Quality Standards for Particulate Matter . EPA - 452/R - 12 - 003. Office of Air Quality Planning and Standards, Health and Environmental Impacts Division. December. Available at http://www.epa.gov/pm/2012/finalria.pdf . U.S. Environmental Protection Agency (U.S. EPA). 2012b. Regulatory Impact Analysis: Petroleum Refineries New Source Performance Standards Ja. Office of Air Quality Planning and Standards, Health and Environmental Impacts Division. June. Available at http://www.epa.gov/ttnecas1/regdata/RIAs/refineries_nsps_ja_final_ria.pdf . U.S. Environmental Protection Agency (U .S. EPA). 2013. Technical Support Document: Estimating the Benefit per ton of Reducing PM 2.5 Precursors from 17 sectors . Office of Air Quality

Planning and Standards, Research Triangle Park, NC. February . U.S. Environmental Protection Agency

— Science Adviso ry

Board (U.S. EPA - SAB). 2008. Characterizing Uncertainty in Particulate Matter Benefits Using Expert Elicitation. EPA - COUNCIL - 08 - 002. July . Available on the Internet at http://yosemite.epa.gov/sab/sabproduct.nsf/0/43B91173651AED9E85257487004EA6CB/ $File/EPA - COUNCIL - 08 - 002 - unsigned.pdf . U.S. Environmental Protection Agency

— Science Advisory

Board (U.S. EPA - SAB). 200 0. An SAB Repo rt on EPA ’

s White Paper Valuing the Benefits of Fatal Cancer Risk Reduction. EPA - SAB - EEAC - 00 - 013. July . Available on the Internet at http://yos emite.epa.gov/sab%5CSABPRODUCT.NSF/41334524148BCCD6852571A700 516498/$File/eeacf013.pdf .* * * E.O. 12866 Review - Draft

– Do Not Cite, Quote or Release During Review ***

9 - 5 U.S. Environmental Protection Agency

— Science Advisory

Board (U.S. EPA - SAB). 20 04 c . Advisory Council on Clean Air Compliance Analysis Response to Agency Request on Cessation Lag. EPA - COUNCIL - LTR - 05 - 001. December. Available on the Internet at <. http://yosemite.epa.gov/sab/sabproduct.nsf/0/39F44B0 98DB49F3C85257170005293E0/$ File/council_ltr_05_001.pdf U.S. Environmental Protection Agency

— Science Advisory

Board (U.S. EPA - SAB). 2008. Benefits of Reducing Benzene Emissions in Houston, 1990

–2020 . EPA - COUNCIL - 08 - 001. July . Available at http://yosemite.epa.gov/sab/sabproduct.nsf/D4D7EC9DAEDA8A548525748600728A83/ $File/EPA - COUNCIL - 08 - 001 - unsigned.pdf . U.S. Environmental Protectio n Agency

— Science Advisory

Board (U.S. EPA - SAB). 2009b. Review of EPA ’

s Integrated Science Assessment for Particulate Matter (First External Review Draft, December 2008) . EPA - COUNCIL - 09 - 008. May . Available on the Internet at http://yosemite.epa.gov/sab/SABPRODUCT.NSF/81e39f4c09954fcb85256ead006be86e/ 73ACCA834AB44A10852575BD0064346B/$File/EPA - CASAC - 09 - 008 - unsigned.pdf . U.S. Environmental Protection Agency

— Science Advisory

Board (U.S. EPA - SAB). 2009c. Review of Integrated Science Assessment for Particulate Matter (Second External Review Draft, July 2009) . EPA - CASAC - 10 - 001. November. Available on the Int ernet at http://yosemite.epa.gov/sab/SABPRODUCT.NSF/81e39f4c09954fcb85256ead006be86e/ 151B1F83B0 23145585257678006836B9/$File/EPA - CASAC - 10 - 001 - unsigned.pdf . U.S. Environmental Protection Agency

— Science Advisory

Board (U.S. EPA - SAB). 20 10a. Review of EPA ’

s DRAFT Health Benefits of the Second Section 812 Prospective Study of the Clean Air Act . EPA - COUNC IL - 10 - 001. June. Available on the Internet at http://yosemite.epa.gov/sab/sabproduct.nsf/9288428b 8eeea4c885257242006935a3/59e06 b6c5ca66597852575e7006c5d09!OpenDocument&TableRow=2.3#2. U.S. Environmental Protection Agency

— Science Advisory

Board (U.S. EPA - SAB). 2011. Review of Valuing Mortality Risk Reductions for Environmental Policy: A White Paper (December 10, 2010). EPA - SAB - 11 - 011 July. Available on the Internet at http://yosemite.epa.gov/sab/sabproduct.nsf/298E1F50F844BC23852578DC0059A616/$F ile/EPA - SAB - 11 - 011 - unsigned.pdf . Fann, N., C. M. Fulcher, and B. J. Hubbell. 2009. “ The Influence of Location, Source, and Emission Ty

pe in Estimates of the Human Health Benefits of Reducing a Ton of Air Pollution. ” Air Quality, Atmos phere, and Health 2:169 - 176. Fireplaces & Woodstoves. 2010. “ Masonry Heaters. ” http: //www.fireplacesandwoodstoves.com/indoor- fireplaces/masonry- fireplaces.aspx . Frost & Sullivan. 2010. Project: Market Research and Report on North American Residential Wood Heaters, Fireplaces, and Hearth Heating Products Market (P.O. # PO1 - IMP402 - F&S). Prepared for EC/R.* * * E.O. 12866 Review - Draft

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9 - 6 Fullerton, D., and G. Metcalf. 2002. “ Tax Incidence. ” In A. Auerbach and M. Feldstein, eds., Handbook of Public Economics, Vol. 4, Amsterdam: Elsevier. Hearth, Patio, and Barbeque Association (HPBA). 2010a. “ Comments for the Small Busines s Advocacy Review (SBAR) Panel, Regarding the Revision of New Source Performance Standards for New Residential Wood Heaters. ” Comments submitted to EPA on September 12, 2010. Gwinn, M.R., J. Craig, D.A. Axelrad, R. Cook, C. Dockins, N. Fann, R. Fegley, D.E . Guinnup, G. Helfand, B. Hubbell, S.L . Mazur, T. Palma, R.L. Smith, J. Vandenberg, and B. Sonawane. 2011. “ Meeting report: Estimating the benefits of reducing hazardous air pollutants

— summary

of 2009 workshop and future considerations. ” Environ Health Perspect. 119(1): p. 125 - 30. Hearth, Patio, and Barbeque Association (HPBA). 2010b. “ Fireplace Insert Fact Sheet. ” Available at: http://static.hpba.org/fileadmin/fac tsheets/product/FS_FireplaceInsert.pdf . Hearth, Patio, and Barbe cue Association (HPBA). 2010c. “ Outdoor Heating Options. ” Available at: http://www.hpba.org/consumers/outdo or - living/outdoor - heating - options . Houck, J. 2009. “ Let ’ s Not Forget about Coal. ” Hearth &Home . December. Available at: http://www.hearthandhome.com/articles.html . Houck, J., and P. Tiegs. 2009. “ There ’ s a Freight Train Comin ’ . ” Hearth & Home . December. Available at: http://www.hearthandhome.com/articles.html . Industrial Economics, Inc (IEc). 2006. Expanded Expert Judgment Assessment of the Concentration -Response Relationship Between PM 2.5 Exposure and Mortality . Prepared for the U.S. EPA, Office of Air Quality Planning and Standards, September. Available at: http://www.epa.gov/ttn/ecas/regdata/Uncertainty/pm_ee_report.pdf . Industrial Economics, Inc (IEc). 2009. Section 812 Prospective Study of the Benefits and Costs of the Clean Air Act: Air Toxics Case Study

— Health Benefits of Benzene Reductions in Houston, 1990

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. Accessed March 30, 2011 . Kochi, I., B. Hubbell, and R. Kramer. 2006. “ An Empirical Bayes Approach to Combining Estimates of the Value of Statistical L ife for Environmental Policy Anal ys is. ” Environmental and Resource Economics 34:385 - 406. Krewski D, Jerrett M, Burnett RT, Ma R, Hughes E, Shi, Y, et al. 2009. Extended follow - up and spatial analysis of the American Cancer Society study linking particulate air pollution and mortality . HEIResearch Report, 140, Health Effects Institute, Boston, MA.* * * E.O. 12866 Review - Draft

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9 - 7 Laden, F., J. Schwartz, F.E. Speiz er, and D.W. Dockery. 2006. Reduction in Fine Particulate Air Pollution and Mortality . American Journal of Respiratory and Critical Care Medicine. 173: 667 - 672. Landsburg, S.H. 2005. Price Theory and Applications. 6th Ed. Thomson South Western. Mason, OH. Mankiw, N.G. 1998. Principles of Economics. Orlando, Fl : Dryden Press . Masonry Heater Association of North America (MHA). 1998. MHA Masonry Heater Definition. Available at: http://mha - net.org/docs/def - mha .htm . Morgenstern, R. D., W. A. Pizer, and J. S. Shih. 2002. “ Jobs versus the Environment: An Industry- Level Perspective. ” Journal of Environmental Economics and Management 43(3):412 - 436. Available at http://ac.els - cdn.com/S009506960191191X/1 - s2.0 - S009506960191191X - main.pdf?_tid=6bc8845e - 7c56 - 11e2 - 84a7 - 00000aab0f26&acdnat=13614 72319_4fe7ef315e9b2f8fc064c0a767895205 (subscription required). Mrozek, J.R., and L .O. Taylor . 2002 . “ What Determines the Value of Life? A Meta - Analy sis. ” Journal of Policy

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ood -Fired Boilers . March, 2006 (Revised June, 2006). Available at: http://www.nescaum.org/documents/assessment - of - outdoor - wood - fired - boi lers . Office of Management and Budget (OMB). 2003. Circular A - 4: Regulatory Analysis. W ashington, DC. Available on the Internet at http://www.whitehouse.gov/omb/circulars/a004/a - 4.html . Pope, C.A., III, R.T. Burnett, M.J. Thun, E.E. Calle, D. Krewski, K. Ito, and G.D. Thurston. 2002. “ Lung Cancer, Cardiopulmonary Mortality, and L ong - term Exposure to Fine Particulate Air Pollution. ” Journal of the American Medical Association 287:1132 - 1141 . Roman, H enry A. , K atherine D. Walker, T yr a L. Walsh, Lisa Conner, H arvey M. Richmond, B ryan. J. Hubbell, and P atrick L. Kinney . 2008. “ Expert Judgment Assessment of the Mortality Impact of Changes in Ambient Fine Particulate Matter in the U.S . Environmental Science & Technology 42(7):2268 - 2274. Seaton, T. 2010. “ Masonry Heater Industry

Anal ysis: Residential Sold Fuel Burning Appliance SBREFA Process. ” Industry comments submitted to EPA on September 12, 2010.* * * E.O. 12866 Review - Draft

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