Report Title Here

The Economic Impact of Proposed 

PVC MACT Rule on Resin Producers, 

Processors and the U.S. Economy

Prepared For:

The Vinyl Institute

December 2011

A B O U T I H S G L O B A L I N S IG H T

IHS Global Insight is widely recognized as the most consistently accurate 

economic forecasting firm in the world. With over 600 economists, 

statisticians, and industry specialists in 25 offices worldwide, IHS Global 

Insight has a well-established track record for providing rigorous, objective 

forecast analysis and data to governments and businesses around the world.

Among our areas of expertise are the economic impact, tax implications, and 

job-creation dynamics within multiple sectors core to national, state and local 

economies. In this capacity, we help governments and companies at all levels 

interpret the impact of proposed investments, policies, programs, and

projects.

IHS Global Insight was formed by the merger of DRI and WEFA. Still active in 

an advisory capacity to the firm is the original founder of WEFA, Lawrence R. 

Klein, the 1980 winner of the Nobel Prize in Economics.

IHS (NYSE: IHS) is a leading source of information and insight in pivotal 

areas that shape today’s business landscape: energy, economics, geopolitical 

risk, sustainability and supply chain management.

F O R M O R E I N F O R M A T I O N

Shane Norton

(781) 301-9071

shane.norton@ihsglobalinsight.com

Brendan O’Neil

(202) 481-9239

brendan.oneil@ihsglobalinsight.com

IHS Global Insight

1150 Connecticut Avenue NW

Suite 200

Washington, DC 20036
The Economic Impact of Proposed PVC

MACT Rule on Resin Producers,

Processors, and the U.S. Economy 

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Table of Contents

Executive Summary .......................................................................................................... 7

Introduction ..................................................................................................................... 12

Impact to U.S. Economy of PVC MACT Driven Cost Increases ..................................... 15

Economic Impact of the Resulting Closure of Dispersion Resin Production Plants........ 19

Economic Benefits from Increased PVC Producer Spending......................................... 21

Impact of Constrained PVC Capacity on Global Marketplace and U.S. Economy ......... 24

Appendix A: Compliance Cost Review ........................................................................... 27

Appendix B: The IMPLAN Model .................................................................................... 28
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Definitions for IHS Global Insight Report

The Economic Impact of Proposed 

PVC MACT Rule on Resin Producers, Processors and the U.S. Economy

PVC Resin Producer – a company that polymerizes vinyl chloride monomer into PVC resin

PVC Dispersion Resin Producer – makes dispersion, blending, copolymer, and other specialty 

suspension types of resin using specialized equipment for each process. There are 6 plants in 

the U.S. practicing this technology. 

PVC Suspenstion Resin Producer – makes various suspension grade resins using specialized 

equipment for this process. There are 12 plants in the U.S. practicing this technology. 

PVC Bulk Resin Producer – makes resin using bulk polymerization process and equipment. 

There is 1 plant in the U.S. practicing this technology.

PVC Processor – a company that uses PVC resins to make compounds or one that processes 

compounds using a process such as extrusion, molding, calendaring, or other heat process to 

make a part or a product. 

Upstream Provider – a supplier of raw materials such as vinyl chloride to PVC resin producers. 

The Chlor-alkali chain typically starts with chlorine production from salt, conversion of chlorine to 

ethylene dichloride, and further processing to vinyl chloride monomer.

Supply Chain – those companies that supply goods and services other than raw materials to the 

PVC industry, for example, ingredient and additive suppliers, utilities, contract services, etc. 

PVC Products – intermediate components or finished parts or products made all or in part with 

PVC resins and compounds.

Economic Value Added – economic contribution to the economy, analogous to GDP. The four 

sub-components for value added are Employee Compensation; Proprietary Income; Other 

Property Type Income; and Indirect Business Taxes

Economic Output – Revenue or sales generated by affected industries

Direct Effects – Employment and economic activity generated by those industries directly 

impacted by the industry change.

Indirect Effects – Employment and economic activity generated by the supply chain of the 

industries directly impacted by the industry change.
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Induced Effects – Employment and economic activity generated by the spending of the direct 

and indirect employees impacted by the industry change.
The Economic Impact of Proposed PVC

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Executive Summary

Implementation of the PVC MACT as proposed May 20, 2011 would have 

the following effects on the U.S. PVC industry and the broader U.S. 

economy:

• $134 million in capital costs to retrofit PVC resin plants

• $39 million annual operating costs increase on PVC resin producers 

• Hundreds of millions of dollars in write-down costs for shuttered 

dispersion resin operations

• Hundreds of jobs lost initially to closed facilities and thousands 

more over the next several years as the impact of the MACT ripples 

through the economy

• $300 million lost revenue in areas affected by plant closings

• Replacement of U.S. resin by imports from foreign suppliers that do 

not conform to U.S. emissions standards 

• $43 million to $118 million initial recertification costs and $92 million 

annually for reformulated PVC products

• $680 million cost impact on U.S. GDP in first 7 years of rule from 

rising costs

• Lost revenue opportunity of $4 billion in 2020 and cumulatively over 

$16 billion from 2015 to 2020 as regulations restrict capacity and 

prevent construction of new plants 

In May 2011, the U.S. Environmental Protection Agency (EPA) proposed new maximum 

achievable control technology (MACT) standards for polyvinyl chloride (PVC) and copolymer 

production facilities commonly known as the PVC MACT. Affected production units would be 

required to comply with the proposed emission limitations, operating requirements and work 

practice standards no later than three years after publication of the final rule. 

In response to the proposed MACT, the PVC MACT Working Group of the Vinyl Institute

(Working Group), a trade association that represents companies involved in PVC production, 

undertook an analysis of the cost of compliance. The Working Group determined that the initial 
The Economic Impact of Proposed PVC

MACT Rule on Resin Producers,

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estimates from the EPA of the cost of compliance are neither adequate nor comprehensive. In 

addition to the technical concerns submitted to EPA,1 the Working Group concluded that2:

PVC suspension resin producers will be required to invest over $134 million in capital 

costs to retrofit existing facilities

PVC processors will be required to expend $43 million in order to begin working with 

the resulting resins, and a potential additional $75 million if FDA medical device 

recertification is required

PVC suspension resin producers will be required to incur $39 million in new total 

annual operating costs, including amortized capital investments, to comply with the 

proposed MACT

PVC processors will incur an additional $92 million in annual operating costs to utilize 

the new resins

PVC dispersion resin producers will be forced to cease operations as a result of an 

inability to meet the new standards, resulting in the closure of four facilities, loss of 

500 employees and corresponding write down of hundreds of $millions of assets

Domestic resin production will be capped at existing levels, excluding the loss of 

dispersion resin production, while global demand will continue to grow

The Working Group commissioned IHS Global Insight to analyze these costs and identify the 

economic impacts to the industry and the U.S. economy as a whole. This report examines 

impacts to the PVC industry areas as follows:

Impact of higher costs to make PVC resin, higher ingredient costs for PVC 

compounds, and how the U.S. economy will be impacted if these added costs make 

their way into finished products

Economic impact of closing four dispersion plants on the U.S. economy 

Economic impact of PVC resin producers’ increased capital costs on the supplier 

industries over the three year implementation period of the proposed MACT, as well 

as the economic impact of the increased ongoing annual costs

Analysis of the economic opportunity that may be put at risk if the proposed PVC 

MACT constrains U.S. resin production capacity at 2011 levels while the global 

demand continues to increase

Combined, the estimated increased operating expenses to PVC suspension resin producers and 

added ingredient costs borne by PVC processors developed by the PVC MACT Working Group 

 

1 See Comments of the Vinyl Institute, Inc. PVC MACT Working Group, Docket Document no. EPA-HQ-OAR-2002-0037-

0146.

2 Vinyl Institute Estimate of Direct Economic Impact on PVC Industry from EPA’s Proposed PVC MACT, Letter to EPA 

dated October 27, 2011.
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would be expected to raise the effective price of PVC products by nearly 2.5 percent on a resin 

cost basis. This basis is used for simplifying the analysis and allocates all added costs to a basis 

of per pound of PVC resin produced. The projected increase was then simulated within the IHS 

Global Insight U.S. Macroeconomic Forecasting Model. While the overall size of the U.S. 

economy will allow it to absorb these price increases over the long term, the following negative 

economic impacts will occur during the first seven years after implementation of the new 

standards:

As a result of the added costs to PVC products, the U.S. economy will see a decline 

of 4,825 jobs during the first seven years

Overall economic activity will decline by over $680 million during this time period

In the context of the broader U.S. economy, increases in the costs of PVC products should not 

cause a dramatic disruption and should be absorbed by the economy over time. Impacts at the 

local level, however, are likely to be felt more strongly. The proposed rule will affect each of the 

over 100 types of resins and their respective downstream products differently. Some resins may 

be impacted more than others and those users of resins more highly impacted will suffer more 

economic harm. 

Increased costs due to the proposed MACT, exclusive of any impact on resin properties and 

performance, will adversely affect the ability of individual resin manufacturers to compete in a 

global market. IHS Chemicals estimates that over 45 percent of U.S. PVC suspension resin 

production currently is exported, a rate that is forecast to remain stable over the next five years. 

As international competitors will not be subjected to similar regulatory constraints and related cost 

increases, the domestic market will be adversely affected. 

Dispersion resin facilities will be forced to cease operations as they would not be able to meet the 

proposed residual vinyl chloride limits according to the PVC MACT Working Group’s analyses.

3

The four impacted plants employ 500 workers4 and provide significant economic activity to their

respective communities and states. Hundreds of millions of dollars of assets will need to be 

written down, burdening the facilities owners with unnecessary costs. Following a cessation of 

dispersion operations, however, the adverse economic impacts will not be limited to these 500 

employees and their related economic activity, but rather will encompass all the companies that 

depend on these facilities for part or all of their business. Many but not all downstream PVC 

dispersion and blending resin processors will be able to import their resins from the overseas

market and reformulate. However, such reformulation can result in additional cost because each 

 

3 Comments of the Vinyl Institute, Inc. PVC MACT Working Group, Docket Document no. EPA-HQ-OAR-2002-0037-

0146, at p.3, 24-25 (8/2/2011).

4 Facility Submissions to EPA in Response to Clean Air Act (CAA) Section 114 Request, Docket Document No. EPA-HQOAR-2002-0037-107, at Tab A2 (4/28/2011).
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resin has unique characteristics that govern the ingredient formulations. Every formulation must 

be evaluated to ensure it meets the performance requirement of the end application and has the 

proper amounts of ingredients for successful processing in the existing equipment utilized to 

make the end products. Once this is done, many products must be listed by certifying agencies 

that assure the product will perform in its intended application. This process can take 6 months to 

2 years to complete and could disrupt their operations until recertification is completed. Those 

that now use a unique dispersion or blending resin will be forced to find an alternative or failing 

that, eliminate the product made with that unique resin.

In addition to the many challenges that processors face in attempting to find and work with

alternative resins and suppliers, those companies that make up the supply chain for these 

shuttered plants face equally daunting circumstances. The indirect economic activity generated 

from this supply chain is nearly as large as the impact from the plants themselves. Unlike some of 

the resin processors, equipment manufacturers, suppliers of maintenance materials, engineering 

consultants and an array of other providers will not have ready access to international markets to 

make up their lost revenue once these plants close down. In addition to the 500 plant employees, 

the nearly 700 jobs supported by the indirect supply-chain of these plants provide further 

economic benefits to their state economies through their expenditures. This induced economic 

impact results in an additional 843 employees who are dependent on the spending of the 

employees along the PVC manufacturing value chain. The summary of these economic impacts 

is provided below.

Figure	1:	Combined	Economic	Impact	of	the	4	Idled	Dispersion	Resin	Plants	

Impact	Type Reduced	

Employment

Lost	Labor	

Income

Lost	Economic	

Value	Added Output

Direct	Effect	 																			500	 									79,267,907	 							128,478,700	 										555,171,072	

Indirect	Effect	 																			698	 									60,531,107	 							108,763,360	 										319,001,688	

Induced	Effect	 																			843	 									39,520,364	 									72,186,730	 										123,100,044	

Total	Effect	 															2,041	 						179,319,380	 							309,428,810	 										997,272,816	

The Vinyl Institute has estimated the cost of complying with the proposed PVC MACT from both 

an initial capital investment and the higher on-going annual operating costs. These added 

expenditures and costs will create some corresponding positive economic impacts on the U.S. 

economy, partially offsetting some of the previously discussed negative impacts. 

The initial total capital costs of $134 million would primarily stem from the need for additional 

equipment necessary to meet the proposed standards. While a negative impact to resin 

producers, contractors and equipment manufacturers will see a benefit when resin producers are 

forced to retrofit their facilities. The implementation of these capital costs will occur over a threeyear period and result in the following economic impacts to the overall U.S. economy.

Figure	2:	Positive	Economic	Impact Resulting	from	Capital	Investments	Over	the	3-Year	Time	Period

Impact	Type Employment Labor	Income Value	Added Output

Direct	Effect	 																	639	 $45,614,712	 $54,121,830	 $134,602,928	

Indirect	Effect	 																	540	 $35,986,736	 $57,044,290	 $121,825,200	
The Economic Impact of Proposed PVC

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Induced	Effect	 																	856	 $42,042,012	 $74,448,120	 $139,914,480	

Total	Effect	 2,035															 $123,643,456	 $185,614,200	 $396,342,592	

In addition to the initial total capital investment (TCI), the facilities will also be forced to incur 

additional on-going annual operating costs as a result of changes to the production processes. 

These operating costs will result in additional spending in utilities, maintenance materials, 

consumables, equipment purchases, and testing costs without any corresponding increase in 

productivity or output. While an annual burden to resin producers, as in the case with the TCI, a 

different set of contractors, test labs, and peripheral suppliers will see an ongoing economic 

benefit due to the plants having to incur these additional costs. Excluding the amortized cost of 

the TCI, the facilities will incur increased annual operating costs of nearly $26 million. The 

economic impact of these on-going annual operating cost increases are summarized below. 

Figure	3:	Positive	Economic	Impact	Resulting	from	Additional	Annual	Operating	Costs

Impact	Type Employment Labor	Income Value	Added Output

Direct	Effect 107 $10,750,667 $17,076,820 $25,823,880

Indirect	Effect 71 $4,702,590 $7,003,941 $13,988,354

Induced	Effect 162 $7,929,599 $14,042,080 $26,381,518

Total	Effect 339 $23,382,856 $38,122,840 $66,193,752

The capital costs and the changes to the operational aspects of each plant are not the only costs 

to be incurred by the plants due to the proposed MACT. Additional labor will in most cases be 

required to handle the new operating and monitoring requirements of the proposed MACT. The 

PVC MACT Working Group has determined that, without any increase in facility output, the plants 

impacted will be forced to hire an additional 20 workers in total to deal with the changes needed 

to meet the new requirements. In total, the TCI will result in a temporary employment increase of 

2,035 jobs, while the on-going operating cost increases and plant hiring will result in an additional 

359 jobs supported each year. 

The final impact of the proposed MACT analyzed in this report is the overall economic opportunity 

put at risk if dispersion resin production is shuttered and other resin capacity is capped at existing 

levels. The most recent IHS forecast shows global PVC resin demand increasing at a compound 

annual growth rate (CAGR) of 3.4% from 2011 through 2020. Supporting that 1/3 increase in 

demand is an expectation that production within the United States will increase at an even faster 

rate, with a 4.3% CAGR in the forecast. The result is that production by 2020 will increase by over 

45% from current levels based on the current forecast of unimpeded operations. 

The PVC MACT Working Group comments indicated that no existing facility can comply with the 

proposed new source standards and no technology is available to do so.5 This means that no 

 

5 Comments of the Vinyl Institute, Inc. PVC MACT Working Group, Document no. EPA-HQ-OAR-2002-0037-0146, at

p.100 (8/2/2011).
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new facilities will be constructed, and existing facilities will not be able to modify production 

capacity significantly. This effectively caps domestic production capacity at 2011 levels for 

suspension resins. Dispersion resin production will cease. Market share of U.S. produced PVC 

will drop to 13% by 2020, down from the forecast expectation of 19.4%. The impact of this lost 

economic opportunity is $4.4 billion by 2020. 

Introduction

The U.S. Environmental Protection Agency (EPA) issued a proposed rule for polyvinyl chloride 

(PVC) and copolymer production sources under Section 112 of the Clean Air Act. The following 

introduction will briefly review the EPA proposal and the PVC MACT Working Group comments.

EPA Position 

The proposed PVC MACT rule6 would establish new emission standards for hazardous air 

pollutants from polyvinyl chloride and copolymers production located at major and area sources. 

The proposed rule includes requirements to demonstrate initial and continuous compliance with 

the proposed emission standards. EPA is proposing standards that would apply at all times, 

including during periods of startup, shutdown, and malfunctions. The proposed standards also 

include continuous monitoring provisions and recordkeeping and reporting requirements.

The proposed emission limitations and work practice standards have introduced new 

requirements for various procedures and equipments involved in the PVC production process, 

including Storage Vessels and Handling Operations, Leak Detection and Repair, Heat Exchange 

Systems, Process Vents, Resin Stripping, Wastewater Treatment, etc. According to the proposed 

rule, existing affected production units would be required to comply with the proposed standard 

no later than 3 years after publication of the final rule. 

PVC MACT Working Group Overview and Position

Founded in 1982, the Vinyl Institute (VI) is a U.S. trade association representing the leading 

manufacturers of vinyl resin, vinyl chloride monomer, vinyl additives and modifiers, and vinyl 

packaging materials. In addition to VI members Formosa Plastics Corporation, U.S.A., Occidental 

Chemical Corporation/Oxy Vinyls, LP, PolyOne Corporation, Shintech Inc., and Westlake 

Chemical Corporation, the PVC MACT Working Group includes non-VI members Dow Chemical 

Company and Georgia Gulf Corporation. As such, the Working Group’s members will be directly 

impacted by the proposed PVC MACT. There are 19 facilities in the U.S. that can produce PVC 

resin or copolymers. Six of these facilities specialize in dispersion, blending, copolymer, and 

other specialty resins which comprise about 5% of all resins produced. Twelve of these facilities 

specialize in suspension resins, which comprise about 95% of all resins produced.

 

6 National Emission Standards for Hazardous Air Pollutants for Polyvinyl Chloride and Copolymers Production; 

PROPOSED RULE, Docket Document No.EPA-HQ-OAR-2002-0037-0035
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Over one hundred grades and types of PVC resin are produced for a myriad of building, medical, 

consumer, industrial, and transportation applications. PVC is widely used in the building and 

construction industry for pipe, windows, doors, siding, electrical wiring, receptacles and switches, 

flooring, wallcoverings and upholstery. PVC is also a critical component for medical applications 

such as blood bags and IV tubing sets. In all, there are thousands of PVC applications which 

begin with the many specialized resins produced by the industry. Any change in resin quality will 

require reformulation and recertification by downstream users, that will entail relisting their 

products to conform to product performance standards. 

The Working Group is focused on ensuring that the PVC MACT rule is consistent with the Clean 

Air Act and related legal precedents; that it allows the PVC and copolymer industry to continue to 

produce the mix of products upon which its customers depend; and that it allows for U.S.

manufacturers to grow their business and compete in a global market.

In its comments on the proposed rule, the PVC MACT Working Group points out that some 

measures result in far more aggressive changes than EPA has intended. The Working Group

concludes that these standards, such as the multiple limits for dioxin/furans, the application of the 

Part 61 NESHAP on top of the PVC MACT, are hardly attainable technically. In addition, Working 

Group comments indicate that these standards, even if achievable, will not only impose stringent 

limits on the development of the PVC manufacturing sector, but also lead to considerable spillover impacts on its upstream and downstream industries.7 Noting that the narrow focus EPA 

based its cost analyses on may not be the most appropriate, the VI compiled field data from PVC 

resin producers and processors and recalculated the costs entailed by these standards that are 

most close to real case scenarios.

In a letter dated October 27, 20118, the PVC MACT Working Group supplemented its original 

comments to EPA with additional information on the economic impact of the proposed rule, and in 

particular, EPA’s proposal to restrict HAP concentrations in stripped resin. The October 27 

submission focused solely on a preliminary assessment of direct cost impacts from the proposed 

rule. The Vinyl Institute commissioned IHS Global Insight to analyze the economic impacts of the 

proposed rule. In order to systematically quantify the economic impacts in the context of pricesensitive downstream industries and competitive global PVC manufacturing market, this study 

examines the proposed standards from the following standpoints:

The impacts of MACT-driven resin cost increases on the financial stability of U.S. 

PVC manufacturers and on the U.S. economy as these cost increases are absorbed

and propagate through downstream industries. The October 27 supplemental 

comments to EPA indicate that the proposed rule will cause an increase in PVC 

 

7 Comments of the Vinyl Institute, Inc. PVC MACT Working Group, Document no. EPA-HQ-OAR-2002-0037-0146, at

p.11, and Attachment 1 (8/2/2011) and Vinyl Institute Estimate of Direct Economic Impact on PVC Industry from EPA’s 

Proposed PVC MACT Letter to EPA dated October, 27, 2011

8 Vinyl Institute Estimate of Direct Economic Impact on PVC Industry from EPA’s Proposed PVC MACT Letter to EPA 

dated October, 27, 2011.
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manufacturing costs. These increases either will cut into the already thin margins of 

U.S. PVC resin manufacturers, or will be passed on to a wide range of downstream 

commodity manufacturing industries, such as plastic production and chemical 

manufacturing. In this section of the study, we examine the extent to which resin and 

downstream commodity price increases will reverberate throughout the economy,

and to what extent such impacts will trigger readjustments of the economy to cushion 

the shocks.

The PVC MACT Working Group contends that the stripped resin limits proposed by 

EPA effectively would end the manufacture of dispersion resin products in the United 

States if the rule is promulgated as proposed. Four facilities employing nearly 500 

people would be forced to close because there is no known technology that can 

achieve EPA’s proposed limits. The report examines the impact to the local economy 

if these plants are closed and their upstream demand is no longer required. 

A significant component of the cost increases to PVC resin manufacturers will come 

from the need to purchase additional equipment, consumables for that equipment,

and overall higher operating expenses due to required workflow changes. While the 

increased manufacturing costs could drive up the prices of resin, and other 

downstream products, it can also provide opportunities for some suppliers of 

equipment and utilities to the PVC manufacturers. This study also addresses any

stimulus effects to the supply chain from the additional costs in PVC manufacturing.

Having examined the impacts on the upstream and downstream components of the 

PVC manufacturing sector, this study then examines the effects on the 

competitiveness of the domestic PVC industry in the global PVC market. As the 

global demand for PVC continues to rise, a significant opportunity will be put at risk if 

production capacity of suspension resins is capped at current levels, and dispersion 

resin production ceases.
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Impact to U.S. Economy of PVC MACT Driven Cost 

Increases

If promulgated as proposed, the PVC MACT will affect the U.S. economy by imposing changes 

along the plastic and other commodity chains. In general, we could expect the price of PVC resin 

and products to increase in reaction to the MACT-driven changes in resin manufacturing costs. 

These increases, in turn, will trigger a series of shocks to plastic manufacturing and other 

downstream industries, upstream commodity prices, and therefore the whole U.S. economy. To 

evaluate this kind of impact, the study first examines the increased resin manufacturing costs 

entailed by the proposed PVC MACT. 

The EPA has proposed increased regulatory requirements on various components of the PVC 

resin manufacturing process, including storage, handing operations, equipment leak detection, 

heat exchange, process vents, resin stripping, wastewater treatment, etc. Building off of the cost 

analysis provided by the PVC MACT Working Group in its comments to EPA9, this study focuses 

on four affected areas that contribute to cost increases---those involved in the stages of using

converted process vent, resin stripping, waste water treatment, and monitoring and testing. Also, 

to comply with the proposed rule, the PVC resin producers need to increase their non-labor

manufacturing input---materials and services that they will have to purchase from other industries-

--while bringing in additional employees into their own manufacturing units. But when looking at 

the impacts on resin price, we only take into consideration the non-labor costs, assuming that all 

the increased labor cost can be completely absorbed by the PVC resin producers based on the 

plant level employment additions as estimated for this study by the PVC MACT Working Group. 

There are two types of non-labor spending included in each of the above-mentioned four affected 

areas. The first type is the one-time capital investments on equipment purchasing and conversion. 

The other type of spending relates to the costs associated with new capital equipment, such as 

increased utilities, maintenance, supplies, etc that are needed for operating the new equipment to 

meet proposed PVC emission limits. The sum of the amortized capital investment and the annual 

recurring cost is the total annual cost. Figure 4 shows the increase in total annual costs for the 

industry at the selected four affected areas.

 

9 Comments of the Vinyl Institute, Inc. PVC MACT Working Group, Document no. EPA-HQ-OAR-2002-0037-0146, at

p.20, and Attachment 6 (8/2/2011).
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			Figure	4:	Total	Annual	Operating	Cost	Increases	by	Component*

Wastewater	

Treatment

Monitoring	

and	Testing

Resin	

Stripping

Process	

Vents

Total

Additional	

Annual	Costs

$			4,002,737 $		1,744,088 $		32,669,277 $				4,525,405 $			42,941,506

* Costs for dispersion plants are excluded from the impact assessments as these plants will not be able 

to meet the standards of the PVC MACT as proposed and will have to cease operations.

Source: Docket ID No. EPA-HQ-OAR-2002-0037-0146, Attachment 6

If these costs cannot be absorbed by the manufacturers, we estimate that resin prices could rise 

by an aggregated industry average of 0.7%. This is based on the 2011 average spot export price 

of 45.15 cents/pound10, and the 2011 production volume of just over 6.6 million metric tons11. 

The following analysis assumes that the average impact of a 0.7% increase in resin price will be 

passed on to the processors.

Additionally, the Working Group’s analysis concludes that PVC processors face a $92 million 

increase in their own operating costs stemming from increased use of existing or new ingredients 

to offset a decrease in resin quality, as well as annual costs to import replacements for 

discontinued resins. Increased processor costs, in combination with the earlier price increase, will 

result in an effective increase of 2.35% on a resin price basis. 

This could be driven up even further if medical grade PVC resins are affected. The PVC MACT 

working group estimates some $75 million additional cost to recertify medical devices made with 

PVC. It could be additive to the range of the previously stated $43 million one-time cost required 

by PVC processors to reformulate and recertify their compounds. For purposes of this analysis, it 

is not considered in the economic impact not knowing whether the changes in resins will already 

fall into variation limits determined acceptable to the FDA.

PVC resins are obviously used by a wide variety of compounders, processors and finished goods 

manufacturers. Therefore, quantifying the impact of rising material costs into these markets can 

be difficult. For purpose of our analysis, we used the 2.35% price increase in our macroeconomic 

model of the U.S. economy. Given the size and diversity of the U.S. economy, we would expect 

steady price changes to be absorbed, and any effects to dissipate, over time. In the short term, 

however, there will be noticeable impacts to the economy as illustrated in the following two charts. 

 

10 Based on IHS Chemicals data on U.S. average contract prices and spot export prices

11 IHS Chemicals PVC Supply/Demand forecast
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Figure	5:	U.S. Real	GDP	Impact	by	Price	Increase	($M)

Figure	6:	U.S. Employment	Impact	by	Price	Increase	(Jobs)

Source: IHS

As the charts above show, the impact of the resin and products price increase, which will occur at 

the level described for the ten year period chosen for amortizing the TCI, will only have a negative 

economic impact for the first seven years after implementation, which for the model simulation 

was chosen to occur in 2015. Throughout the seven-year window, U.S. real GDP will be reduced 

by $680 million dollars. On the employment side, these price increases will result in 4,835 jobs 

being lost from the economy during the first seven years after implementation. While these results 

will not change the overall employment picture in the nation, which currently has around 14 

(180)

(160)

(140)

(120)

(100)

(80)

(60)

(40)

(20)

-

(1,400)

(1,200)

(1,000)

(800)

(600)

(400)

(200)

-
The Economic Impact of Proposed PVC

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million people unemployed and more who have left the work force all together, it does highlight 

that even minor cost increases that get passed on to consumers have a negative impact on jobs 

and the economy overall. 
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Economic Impact of the Resulting Closure of 

Dispersion Resin Production Plants

The Working Group comments state that a PVC MACT promulgated as proposed would result in 

the closure of all plants making dispersion, blending and specialty resins due to the inability of 

known technology to meet the proposed stripped resin limits12. There are currently four plants that 

will be impacted by the proposed MACT and forced to cease operations. These plants are located 

in four separate states, and directly employ a combined 500 employees in operational, 

administrative and contract maintenance and services13. The owners of these facilities will be 

forced to take hundreds of millions of dollars in asset write-downs, and bear the costs associated 

with shuttering manufacturing facilities.

As discussed earlier, many but not all of the customer base for these facilities may be able to 

source their displaced resins from foreign producers, but the same cannot be said for those 

companies that make up the supply chain for these plants. The indirect economic activity 

generated from this supply chain is nearly as large as the impact from the plants themselves, as 

equipment manufacturers, suppliers of maintenance materials, professional services firms such 

as lawyers, accountants and consultants and an array of other providers will not have those same 

international options for their business once these plants close down. The 500 employees directly 

employed by these plants, and the additional employees supported by their supply chain 

activities, live and spend and create economic activity within the local economy. This induced 

economic impact is also a critical component of the overall economic activity tied to these 

production plants.

To measure the relation between the loss of employment in PVC production and the resulting 

economic impact in the local economy, this study applies IMPLAN---a widely used software 

package for economic impact evaluation---to quantify the stimuli within each state where the plant 

is located in terms of the following components:

Employment: the number of jobs supported directly by the plants themselves, and 

the indirect and induced employment supported by plant activity. 

Labor Income: The employee compensation generated by the plant operation and 

the upstream impacts. 

Value Added: The economic contribution to the Gross National Product that the plant 

operations generate.

 

12 Comments of the Vinyl Institute, Inc. PVC MACT Working Group, Document no. EPA-HQ-OAR-2002-0037-0146, at

p.3, 24-25, (8/2/2011).

13 Vinyl Institute Estimate of Direct Economic Impact on PVC Industry from EPA’s Proposed PVC MACT Letter to EPA 

dated October, 27, 2011.
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Industry Output: The industry sales by the plants, their supply chain supported 

activities, and the induced impact of their operation. 

Estimated levels of employment impacted by dispersion plant closures are based on employee 

data supplied by the PVC industry in response to EPA’s Section 114 Request14. This data was 

used in the appropriate state IMPLAN model, and the aggregated results are shown below.

Figure	7:	Sum	of	all	4	Impacted	Plants	

Impact	Type	 Employment Labor	Income Value	Added Output

Direct	Effect	 																			500	 									79,267,907	 							128,478,700	 										555,171,072	

Indirect	Effect	 																			698	 									60,531,107	 							108,763,360	 										319,001,688	

Induced	Effect	 																			843	 									39,520,364	 									72,186,730	 										123,100,044	

Total	Effect	 															2,041	 						179,319,380	 							309,428,810	 										997,272,816	

In summary, the dispersion plant closures will result in the loss of between 429 and 638 

employees in each affected state (TX, DE, NJ, & IL), with a combined job loss of over 2,000. The 

total combined state-level economic contribution lost by these plant closures will be over $300 

million, based on an estimated total industry output of just under $1 billion. Included within that 

lost supply-chain activity will be the sales of vinyl chloride monomer and polymerization chemicals 

used in the PVC reactors, which will impact not only chlorine producers, but also EDC/VCM 

producers and other polymerization chemical suppliers. The four plants themselves generate an 

estimated direct output, or industry sales, of over $550 million15 and create a combined economic 

contribution of nearly $130 million annually. All of this economic activity would be lost if these four 

plants are required to shut down due to an inability to comply with the proposed PVC MACT.

 

14 Facility Submissions to EPA in Response to Clean Air Act (CAA) Section 114 Request, Docket Document No. EPAHQ-OAR-2002-0037-107, at Tab A2 (4/28/2011).

15 Industry output figure is derived from the state level IMPLAN models and represents typical output associated with the 

direct employment levels affected in each state.
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Economic Benefits from Increased PVC Producer 

Spending

As is discussed in the previous section, if the PVC MACT is promulgated as proposed, it will likely

impose increased costs on the industries downstream of the PVC production sector from rising 

resin prices and the need for additional measures to deal with the new resins. Conversely,

equipment, services and ingredient suppliers are expected to experience increased economic 

activity as PVC industry producers and processors make investments and adjustments for 

compliance with the proposed MACT. As the PVC resin producers source new equipment, utilities, 

testing services, etc from its supplying industries, the increased activity driven by the proposed 

MACT can create higher market demand for some of these supplying industries. Consequently, 

these industries should enjoy boosted production, revenue, employment, and labor income. In 

addition, to comply with the proposed rule, PVC resin producers will have to increase their labor 

input by bringing in additional employees. This section tries to gauge how much the whole 

economy can benefit from this kind of stimulus. The impacts channeled through the upstream 

industries and through the increased employment within the PVC industry are evaluated, 

respectively. It should be noted that no capital improvements nor additional operating costs or 

employees are considered for dispersion resin plants since those facilities cannot meet their 

proposed limits and are assumed shut down. 

To measure the relationship between increased PVC production costs and the stimulative effects

on the economy of upstream sectors, we used the IMPLAN model to quantify the following:

Employment: the number of jobs supported by the capital investment or the increase 

total annual costs. 

Labor Income: The employee compensation generated by the increased 

expenditures. 

Value Added: The economic contribution to the U.S. Gross Domestic Product that 

will be generated by the increased cost needed to implement the standards.

Industry Output: The industry sales created as the TCI and TAC work their way 

through the supply chain and into the economy. 

Each of the preceding stimulative effects was examined for its Direct, Indirect, and Induced 

Impacts on the economy. Taking employment as an example, the Direct Employment Impacts 

represent the increased employment within the industries that the PVC resin producers and 

processors source materials and services from, such as the manufacturers of environmental 

control devices, utility suppliers, construction companies, etc. The Indirect Employment Impact 

represents the increased employment within the upstream industries of these suppliers, such as 

the steel and concrete manufacturers, oil and gas providers, etc. The Induced Employment 

Impact is created by the spending of the direct and indirect employees, which brings benefits to a 

wide range of sectors, such as increased employment in the food, housing, medical service, and 

education sectors. Appendix B introduces the methodology and functions of the IMPLAN model.
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Since there are two components of the increased costs that will be channeled to the supply chain

sectors---the one-time upfront capital investment and the annual recurring cost---their stimulative 

effects on the economy are assessed separately. Based on cost data submitted to EPA by the 

PVC MACT Working Group, the following table has tabulated all the annual recurring costs by the 

PVC producers and by the type of cost. This table excludes the amortization of the capital 

investment, as that is analyzed on its own, and also excludes the costs of additional labor that will 

be needed at each facility. The additional labor costs are later in the report, highlighting the 

expected increased employment needed by the PVC producers to ensure compliance with the 

proposed MACT. The amortized capital investments costs and the internal labor costs represent 

the delta between the $43 million in TAC shown previously and the $28 million in costs shown 

below. 

Figure	8:	Total	Annual	Costs	Excluding	Amortization

Evaporative	

Cooler	

Water

Gasket,	

Packing,	

and	Sealing	

Devices

Insurance Facility	

Cost Electricity

Pump	and	

Pumping	

Equipment

Activated	

Carbon

Other	

Costs

Total	

Annual	

Recurring	

Cost

$20,650,778 $3,227,078 $1,433,544 $1,411,511 $519,399 $416,095 $225,950 $377,777

Matching the costs listed in the above table with their corresponding upstream supply industries,

and applying IMPLAN model of the U.S. economy, the study quantified the economic impacts of 

the increase in annual recurring production cost. The results are summarized in the table below, 

which include the Direct, Indirect, Induced, and the Total Impacts on the economy’s employment, 

labor, value added, and total output. Since these impacts are caused by the annual recurring 

costs, they are expected to take place every year if the proposed MACT is promulgated. 2012 

dollar is used here as the currency unit.

						Figure 9:	 Positive	Economic	Impact	Resulting	from	Additional	Annual	Operating	Costs	

Impact	Type	 Employment	 Labor	Income	 Value	Added	 Output	

Direct	Effect	 107 $10,750,667	 $17,076,820	 $25,823,880	

Indirect	Effect	 71 $4,702,590	 $7,003,941	 $13,988,354	

Induced	Effect	 162 $7,929,599	 $14,042,080	 $26,381,518	

Total	Effect	 339															 $23,382,856	 $38,122,840	 $66,193,752	

The other part of the increased costs that will flow into the upstream economies is the upfront 

capital investment. The Working Group estimated MACT-driven total capital investment---as 

opposed to its amortized value. The costs are organized according to the four major affected 

areas this study focuses on: Wastewater Treatment, Monitoring and Testing, Resin Stripping, and 

Process Vents. 
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Figure	10:	Total	Capital	Investment

Resin	

Stripping

Wastewater	

Treatment

Monitoring	

and	Testing

Process	

Vents Total

Total	Costs	

			

$102,605,535 $13,958,483

								

$356,000

					

$17,291,645	 $134,211,663

Estimated impacts from capital investment also were developed by matching costs with by supply 

chain spending and applying the IMPLAN model. The Direct, Indirect, Induced, and Total Impacts 

are summarized in the table below. It is worth noting that since the capital investment used for 

estimation is the upfront one-time cost, the impacts here are ‘one-time’ impacts. According to the 

proposed MACT, all the existing PVC production units are expected to finish the transforming 

process within three years, so these impacts are considered to take place within a three-year 

timeframe.

Figure	11:	Positive	Economic	Impact	Resulting	from	Capital	Investments	Over	the	3-Year	

Time	Period	

Impact	Type	 Employment	 Labor	Income	 Value	Added	 Output	

Direct	Effect	 																	639	 $45,614,712	 $54,121,830	 $134,602,928	

Indirect	Effect	 																	540	 $35,986,736	 $57,044,290	 $121,825,200	

Induced	Effect	 																	856	 $42,042,012	 $74,448,120	 $139,914,480	

Total	Effect	 2,035															 $123,643,456	 $185,614,200	 $396,342,592	

In addition to its stimulative effect on upstream industries, the proposed PVC MACT will also lead 

to increased employment within the PVC manufacturing sector. To meet the proposed standards, 

many PVC producers will need to bring in additional workers. The PVC MACT Working Group

estimated that a total of 20 additional employees would be needed for the PVC producers to 

comply with the proposed rule. The affected states where these new employees will be needed 

include Texas, Louisiana, Mississippi, and New Jersey. In summary, due to the need for PVC 

industry to invest in capital equipment, as well as increased annual operating costs, PVC resin 

producers will need to hire an additional 20 employees. The capital investment will result in the 

support of over 2,000 employees during the three-year implementation phase of the MACT 

standards, and the increased annual operating expenses will result in over 350 jobs in the supply 

chain supported annually.
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Impact of Constrained PVC Capacity on Global 

Marketplace and U.S. Economy

The U.S. PVC resin producing sector has a resilient strong presence in the global market. Its 

future trajectory in the market is expected to be re-shaped by the proposed MACT regulations. 

IHS Chemicals data show that from 2007 to 2010, the U.S. PVC resin production represents

between 17.3% to 19.1% of global PVC supply, with a volume that is 108.0% to 167.9% of U.S.

domestic demand. Climbing on the back of its sizeable output volume and the competitive quality 

of its products, the U.S. PVC resin producing sector has established its role as a major player in 

the world market and one of the very few net exporting sectors of U.S. industry. The baseline 

analysis of the IHS PVC demand and production model shows that the U.S. domestic industry is 

forecast to produce 9.4 million tons of homo/copolymer PVC and 0.3 million tons of emulsion 

PVC in 2020, up from its corresponding values of 6.5 and 0.1 million tons in 2011. This is a 

compound annual growth rate of 4.3%. Accordingly, by 2020 U.S. resin producers will account for 

19.4% of global PVC resin production, and the country will see a net PVC annual export volume 

of 4.9 million tons. 

Alternatively, if the PVC MACT is implemented as proposed, the Working Group feels that 

expansion of homo/copolymer PVC productivity will be constrained at its 2011 level, while the 

emulsion PVC manufacturing will stop. Driven by this decline in U.S. PVC output and the 

expected growth of global demand, by 2020 the market share of U.S.-produced PVC resin will 

drop to 13%.

As shown in figure 12, IHS Chemicals expects 2011 net exports to be just over 2.8 million metric 

tons, with this figure forecast to grow to 4.9 million metric tons by 2020. Within this capacity 

constrained scenario, if domestic demand remains locally sourced, the net export figure will 

shrink to a level of 1.7 million tons, a reduction of 65.2%. The following graph shows the two 

scenarios of PVC net export from 2011 through 2020, with the expectation that implementation of 

the rule occurs in 2015.
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Figure	12:	U.S.	Net	Export	Changes	(000	Metric	Tons)

Based on the IHS Chemicals forecast PVC netback price in 2020 of 62.54 cents per pound, this 

lost production of nearly 3.2 million tons will equal $4.4 billion in lost economic output in 2020. 

From 2015 to 2020, the total economic output that would be lost if capacity is constrained will be 

$16.3 billion. 

The repercussions of the proposed MACT implementation are expected to unfold on multiple 

levels. The most direct impact, as has been discussed in the previous sections of our analysis, is 

the downsizing of the U.S. PVC resin producing sector. From a value-chain perspective, while 

transforming the industry to match the proposed MACT will to some extent stimulate the supply 

chain industries of equipment manufacturers and utilities, to the downstream sectors of the PVC 

industry---including a wide range of PVC plastic processors---the reduced volume and categories 

of domestic PVC resin supply will either add restrictions to their development, encourage them to 

source PVC resin from overseas, use other types of plastic resins in place of PVC, or discontinue 

the product altogether. Correspondingly, the share of PVC resin supply will partly be shifted from 

U.S. to foreign producers, including Mexico, EU, etc. In addition, an influx of lower cost finished 

PVC goods could be expected to replace either more costly or poorer performing products. It 

takes years to reformulate and recertify PVC products and foreign product manufacturers likely 

will gain a foothold with product distributors and resellers who want to satisfy market demand for 

these products.

On top of the above-mentioned impacts, the proposed PVC MACT will also shape the country’s 

Balance Of Payments (BOP). In other words, the decline in PVC net export will contribute to an 

0

1,000

2,000

3,000

4,000

5,000

6,000

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

2020	PVC	Net	Export	at	

base-line	scenario

2020	PVC	Net	

Export	if the	

proposed

MACT	is	

PVCNet	Export	at	

current	base-line	

scenario
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increase in the U.S. trade deficit. According to our forecast, a $ 4.4 billion dollar cut in net PVC 

exports resulting from the implementation of the PVC MACT as currently proposed, will drive up 

the deficit of U.S. net goods export by 1.1% in 2020. 
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Appendix A: Compliance Cost Review

1. Data for this analysis has been derived from a number of sources. In as much as was 

possible, public data sources have been utilized. The major source of information has 

been from the PVC MACT Working Group in the several documents submitted to EPA

and each specifically referenced throughout this report. Most of the submissions of the 

PVC MACT Working Group were made by The Vinyl Institute on behalf of the Working 

Group and are available at EPA’s docket portal: 

http://www.regulations.gov/#!docketDetail;dct=FR+PR+N+O+SR+PS;rpp=10;so=DESC;s

b=postedDate;po=0;D=EPA-HQ-OAR-2002-0037

2. URS Engineering was retained by the PVC MACT Working Group to prepare some 

portions of the plant cost information specifically related to capital improvements at each 

resin producing facility. URS also developed the corresponding increased operating 

costs at each facility that are necessary to meet the proposed PVC MACT limits. A 

summary of URS’ calculations can be found at: Comments of the Vinyl Institute, Inc. 

PVC MACT Working Group, Document no. EPA-HQ-OAR-2002-0037-0146, at 

Attachment 6 (8/2/2011) located on EPA’s regulations.gov portal address above.

3. IHS used facility specific data it has on file in order to determine certain economic 

impacts. IHS Global Insights is the parent company for SRI, and CMAI, both of which 

study the PVC industry on a global basis with respect to industry capacity, cost analysis, 

and periodic analysis and forecasting of resins supply and demand on a regional basis.
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Appendix B: The IMPLAN Model

IMPLAN, short for “Impact Analysis for Planning,” is a widely used commercially available model 

for input/output analysis. Minnesota IMPLAN Group, Inc., is responsible for the production of the 

IMPLAN data, model, and software. Using classic input/output analysis in combination with 

region-specific social accounting matrices and multiplier models, IMPLAN provides a highly 

accurate and adaptable model for its users. The IMPLAN database contains country, state, zip 

code, and federal economic statistics, which are specialized by region. IMPLAN accounts closely 

follow the accounting conventions used in the “Input-Output Study of the U.S. Economy” by the 

BEA and the rectangular format recommended by the United Nations. The IMPLAN system was 

designed to serve three functions:

1) Data retrieval,

2) Data reduction, model development, and

3) Impact analysis

Comprehensive and detailed data coverage of the entire United States by geography, and the 

ability to incorporate user-supplied data at each stage of the model-building process, provides a 

high degree of flexibility both in terms of geographic coverage and model formulation. There are 

two components to the IMPLAN system, the software and databases. The databases provide all 

information to create regional IMPLAN models. The software performs the calculations and 

provides an interface for the user to make final-demand changes.

The IMPLAN system consists of two major parts:

1) A national-level technology matrix and

2) Estimates of sectoral activity for final demand, final payments, industry output, 

and employment for each detailed geography in the United States along with the 

aggregate region. 

Input-output accounting describes commodity flows from producers to intermediate and final 

consumers. The total industry purchases of commodities, services, employment compensation, 

value added, and imports are equal to the value of the commodities produced.

Purchases for final use (final demand) drive the model. Industries produce goods and services for 

final demand and purchase goods and services from other producers. These other producers, in 

turn, purchase goods and services. This buying of goods and services (indirect purchases) 

continues until leakages from the region (imports and value added) stop the cycle.

These indirect and induced effects (the effects of household spending) can be mathematically 

derived. The derivation is called the Leontief inverse. The resulting sets of multipliers describe the 

change of output for each and every regional industry caused by a one dollar change in final 

demand for any given industry.
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Creating regional input-output models requires a tremendous amount of data. The costs of 

surveying industries within each region to derive a list of commodity purchases production 

functions) are prohibitive. IMPLAN was developed as a cost-effective means to develop regional 

input-output models.

IMPLAN easily allows the user to do the following: 

Develop his/her own multiplier tables;

Develop a complete set of SAM (Social Accounting Matrix) accounts; 

Change any component of the system, production functions, trade flows, or 

database; 

Generate type I, II, or any true SAM multiplier internalizing household, 

government, and/or investment activities 

Create custom impact analysis by entering final-demand changes; 

Obtain any report in the system to examine the model’s assumptions and 

calculations.

There are two components to the IMPLAN system, the software and databases. The databases 

provide all information to create regional IMPLAN models. The software performs the calculations 

and provides an interface for the user to make final-demand changes. 

IMPLAN SOFTWARE

Minnesota IMPLAN Group developed the current version of IMPLAN Professional® version 3.0 in

2009. It is a Windows-based software package that performs the calculations necessary to create 

the predictive model. The software reads the database, creates the complete set of social 

accounting matrices (SAM), the I/O accounts, and integrates all user-defined inputs to produce an 

alternative scenario.

The IMPLAN Input/Output System derives the predictive multipliers. The software also enables 

the user to make changes to the data, the trade flows, or technology. It also enables the user to 

make final-demand changes, which results in the impact assessment.

Features of IMPLAN Professional® include:

1) Windows file and printer management;

2) Economic database editor;

3) Complete Social Accounting Matrix structure;

4) A choice of trade-flow assumptions: Supply-Demand Pooling; Regional Purchase 

Coefficients; Location

5) quotients;

6) Production function editor, i.e., the tools and opportunity necessary to modify the 

“absorption”

7) and “byproducts” matrices;
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8) Libraries for production functions and impact analysis expenditures;

9) Flexible model aggregation tools;

10) Report generator; many preset reports for all stages of model building and analysis;

11) Export feature to many of the major PC file formats;

12) Flexible assumptions for induced effects;

13) Type SAM – true SAM multipliers which allow internalizing any number of institutions;

a. Type II - Based on PCE and SAM based local income relationship;

b. Type II - Based on user-specified disposable income rate;

c. Type III (CPMM) - Traditional Forest Service employment based multipliers;

14) Menu structure for easy impact analysis;

15) Event-based impact databases;

16) Built-in and editable transaction margins;

17) Built-in and editable deflators;

18) Technical support by MIG, Inc.;

19) Data in Access Database format.

DATABASE

Each database has information for these components for all 440 industrial sectors in the IMPLAN

model. This 440-sector scheme was revised in 2007 and was originally the basis for the Bureau 

of Economic Analysis’s Benchmark Input-Output Study. This scheme is nearly 6 digit NAICS for 

manufacturing, and more aggregate for service sectors. By necessity IMPLAN’s sectoring is very 

similar. However, in some cases, 6 digit NAICS code data has been aggregated for certain 

IMPLAN sectors. A full NAICS to IMPLAN mapping document can be downloaded from 

www.implan.com. 

Employment is total wage and salary and self-employed jobs in a region. In the 1985 database, 

employment was measured as full-time equivalent jobs. This meant that total employment in a 

region would generally be below most published estimates because these are generally full-time 

and parttime. In the 1990 and subsequent databases, employment includes both full-time and 

part-time workers. Employment in the 1990 and subsequent databases are measured in total 

jobs.

There are four sub-components for value added:

1) Employee Compensation;

2) Proprietary Income;

3) Other Property Type Income;

4) Indirect Business Taxes;

Employee compensation is wage and salary payments as well as benefits, including health and 

life insurance, retirement payments, and any other non-cash compensation. This provides a 

measure of income to workers who are paid by employers.
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Proprietary income consists of payments received by self-employed individuals as income. This 

would be recorded on Federal Tax Form 1040C. This includes income received by private 

business owners, doctors, lawyers, and so forth. Any income a person receives for payment of 

self-employed work is counted here.

Other property-type income consists of payments from rents royalties and dividends. This 

includes payments to individuals in the form of rents received on property, royalties from contract, 

and dividends paid by corporations. This also includes corporate profits earned by corporations.

Indirect business taxes consist primarily of excise and sales taxes paid by individuals to 

businesses. These taxes are collected during the normal operation of these businesses but do 

not include taxes on profit or income. Goods and services purchased for their ultimate use by an 

end user are called final demands. For a region, this would include exports as that is a final use 

for that product. In an input-output framework, final demands are allocated to producing industries 

with margins allocated to the service sectors (transportation, wholesale and retail trade, 

insurance) associated with providing that good to the final user.

Thus, final demands are in producer prices. There are 13 subcomponents for final demands:

1) Personal Consumption Expenditures (PCE)—nine income levels;

2) Federal Government Military Purchases;

3) Federal Government Nonmilitary Purchases;

4) Federal Government Capital Formation Purchases;

5) State and Local Government Non-Education Purchases;

6) State and Local Government Education Purchases;

7) State and Local Government Capital Formation Purchases;

8) Inventory Purchases;

9) Capital Formation;

10) Foreign Exports;

11) State and Local Government Sales;

12) Federal Government Sales;

13) Inventory Sales.

All final demands in the original data are on a commodity basis. The distinction between 

industries and commodities is as follows from the 1972 I-O Definitions and Conventions Manual:

An input-output industry is a grouping of establishments, as classified by Standard 

Industrial Classification (SIC)16;

 

16 The IMPLAN sector scheme is now currently based on NAICS definitions and is revised as necessary after each 5-

year Economic Census is released.
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An input-output commodity consists of the characteristic products of the corresponding 

I-O industry wherever made. There are several industries that have no commodities. 

This is a result of departures from the strict SIC of industries. Also, some commodities 

have no associated industry. An example of this is noncomparable imports.

PCE consists of payments by individuals/households to industries for goods and services used 

for personal consumption. Individuals tend to buy little directly from industries other than retail 

trade. In an input-output table, though, purchases made by individuals for final consumption are 

shown as payments made directly to the industry producing the good. PCE is the largest 

component of final demand.

Federal government purchases are divided between military and nonmilitary uses and capital 

formation. Federal military purchases are those made to support the national defense. Goods 

range from food for troops to missile launchers. Nonmilitary purchases are made to supply all 

other government functions. Payments made to other governmental units are transfers and are 

not included in federal government purchases.

State and local government purchases are divided between public education and non-education 

and capital formation. Public education purchases are for elementary, high school, and higher 

education. Non-education purchases are for all other government activities. These include state 

government operations, operations including police protection and sanitation. Private-sector 

education purchases are not counted here. Private education purchases show up in IMPLAN 

sectors 495 and 496.

Inventory purchases are made when industries do not sell all output created in one year. This is 

generally the case. Each year, a portion of output goes to inventory. Inventory sales occur when 

industries sell more than they produce and need to deplete inventory. Inventory purchases and 

sales generally involve goods-producing industries (e.g., agriculture, mining, and manufacturing).

Capital formation is private expenditures made to obtain capital equipment. The dollar values in 

the IMPLAN database are expenditures made to an industrial sector producing the capital 

equipment. The values are not expenditures by the industrial sector.

Foreign exports are demands made to industries for goods for export beyond national borders. 

These represent goods and services demanded by foreign parties. Domestic exports are 

calculated during the IMPLAN model creation and are not part of the database.

The national transactions matrix is based on the most current BEA National Benchmark InputOutput Model. It is re-sectored to IMPLAN industrial sectoring. We use our IMPLAN data for the 

current year to update the most recent National Benchmark study.
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IMPLAN MULTIPLIERS

The notion of a multiplier rests upon the difference between the initial effect of a change in final 

demand and the total effects of that change. Total effects can be calculated either as direct and 

indirect effects, or as direct, indirect, and induced effects. Direct effects are production changes 

associated with the immediate effects or final-demand changes. Indirect effects are production 

changes in backward- linked industries caused by the changing input needs of directly affected 

industries (for example, additional purchases to produce additional output). Induced effects are 

the changes in regional household spending patterns caused by changes in household income 

generated from the direct and indirect effects.

Five different sets of multipliers are estimated by IMPLAN corresponding to five measures of 

regional economic activity: total industry output, personal income, total income, value added, and 

employment. For each set of multipliers, four types of multipliers are generated, Type I, Type II, 

Type SAM, and Type III.

Type I Multiplier

A Type I multiplier is the direct effect, produced by a change in final demand, plus the indirect 

effect divided by the direct effect. Increased demands are assumed to lead to increased 

employment and population with the average income level remaining constant. The Leontief 

inverse (Type I multipliers matrix) is derived by inverting the direct coefficients matrix. The result 

is a matrix of total requirement coefficients, the amount each industry must produce for the 

purchasing industry to deliver one dollar’s worth of output to final demand.

Type II Multipliers

Type II multipliers incorporate “induced” effects resulting from the household expenditures from 

new labor income. The linear relationship between labor income and household expenditure can 

be customized in the IMPLAN Professional® software: 1. The default relationship is PCE and 

total household expenditures. Each dollar of workplace-based income is spent based on the SAM 

relationship generated by IMPLAN. 2. The second possibility is a RIMS II style of Type II 

multiplier, where PCE is adjusted to represent only the spending of the disposable income portion 

of labor income. In this way, there is a direct one-to-one relationship to labor income and PCE. 

Then, a ratio which the user can specify is applied to convert total income to disposable income 

before the rounds of induced effects are calculated.

Type SAM

Type SAM multipliers are the direct, indirect, and induced effects where the induced effect is 

based on information in the social account matrix. This relationship accounts for social security 

and income tax leakage, institution savings, and commuting. It also accounts for inter-institutional 

transfers. This multiplier is flexible in that you can include any institutions you want. In other 
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words, if you want to create a model closed to households and state and local government, you 

can. If you select this option, an additional dialog box with be displayed allowing you to select the 

institutions you want to include.

Output Multipliers

This report shows the total industry output multipliers and per-capita personal consumption 

expenditures. Output multipliers can be used to gauge the interdependence of sectors; the larger 

the output multiplier, the greater the interdependence of the sector on the rest of the regional 

economy. A Type I entry represents the value of production (from direct and indirect effects) 

required from all sectors by a particular sector to deliver one dollar’s worth of output. Type II,

SAM, and III adds in the induced requirements.

Example: If a Type I multiplier for the dairy farm industry is 1.0943, for each dollar of output 

produced by the dairy farm sector, 0.0943 dollars’ worth of indirect output is generated in other 

local industries. If the Type SAM Dairy Farm multiplier is 1.3140, 0.3140 dollars of indirect and 

induced output is generated in other local industries. The induced output would be 1.3140 minus 

1.0943 or 0.2197 dollars for each dollar of output produced by the dairy farm sector.

Labor Income Multipliers

The labor income multiplier report shows the direct, indirect, and induced employee 

compensation plus proprietor income effects generated per dollar of output. The Type I personal 

income multiplier is the direct and indirect employee compensation plus proprietor income divided 

by the direct income. The Type II, Type SAM, and Type III multiplier adds the induced effects 

component.

Example: If the Type I multiplier for the dairy farm sector is 1.4761 and the Type SAM multiplier is

2.7067, then for each dollar of direct income generated by this industry, 0.4761 dollars of indirect 

and 1.2306 dollars of induced income are generated.

Employee Compensation Multipliers

Employee compensation represents all payroll costs of wage and salary workers. The Type I, 

Type SAM, Type II, or Type III total income multipliers are listed in this report along with the 

direct, indirect, and induced total income effects generated from the production of one dollar’s 

output.

Proprietor Income Multiplier

Proprietor income is the income earned by the owners of a private—non-incorporated business—

i.e., the self-employed. The Type I, Type SAM, Type II, or Type III total income multipliers are 
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MACT Rule on Resin Producers,

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December 2011 

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listed in this report along with the direct, indirect, and induced total income effects generated from 

the production of one dollar’s output.

Other Property-Type Income

Other property-type income represents corporate income, rental income, and interest. The Type I 

and Type II/Type SAM/Type III total income multipliers are listed in this report along with the 

direct, indirect, and induced total income effects generated from the production of one dollar’s 

output.

Value-Added Multipliers

Type I and Type II/Type SAM/Type III value-added multipliers are listed in this report along with 

the direct, indirect, and induced value-added effects generated from the production of one dollar 

of output. Value-added includes employee compensation, proprietary income, other property-type 

income, and indirect business taxes.

Employment Multipliers

Type I and Type II/Type SAM/Type III employment multipliers are listed in this report along with 

the direct, indirect, and induced employment effects from the production of one million dollars of 

output. Employment is in terms of full-time and part-time jobs.

Example: if a dairy farm Type I employment multiplier is 1.1158, for each job created directly by 

the dairy farm industry, 0.1158 jobs are created indirectly.