Planning Report 02-4

The Economic Impact

of the Gas-Mixture 

NIST-Traceable Reference

Materials Program

Prepared by:

RTI International

for

National Institute of

Standards & Technology

Program Office

Strategic Planning and

Economic Analysis Group

August 2002

U.S Department of Commerce

Technology Administration
RTI Project Number 

07007.015 

The Economic Impact of the GasMixture NIST-Traceable Reference 

Materials Program

Final Report

August 2002

Prepared for 

National Institute of Standards and Technology 

100 Bureau Drive 

Gaithersburg, MD 20899 

Prepared by 

Michael P. Gallaher, Ph.D. 

Alan C. O’Connor, B.A. 

William W. White, Ph.D. 

Robert S. Wright, Ph.D. 

RTI 

Health, Social, and Economics Research 

Research Triangle Park, NC 27709-2194 
iii 

Contents 

 Executive Summary ES-1

 1. Introduction 1-1 

1.1 Trends in Environmental Regulation................................... 1-2

1.2 Measurement Accuracy and NIST Traceability ................... 1-4

1.3 Summary of Analytical Approach and Organization........... 1-5

 2. Overview of the Reference Gas Supply Chain 2-1

2.1 Introduction to The NTRM Program................................... 2-1

2.1.1 Technological and Economic History of the 

NTRM Program...................................................... 2-1

2.1.2 CSTL/NTRM Program Activities.............................. 2-4

2.2 Analytical Traceabilty and Uncertainty .............................. 2-6

2.2.1 Federally Mandated Traceability Requirements....... 2-6

2.2.2 Pathways for Establishing Traceability .................. 2-15

2.3 The Reference Gas Supply Chain..................................... 2-16

2.3.1 SGCs................................................................... 2-18

2.3.2 NIST-Traceable Reference Gases.......................... 2-20

2.4 Reference Gas End Use ................................................... 2-26

2.4.1 End Use by Industry............................................. 2-28

2.4.2 End Use by Analytical Accuracy Demanded......... 2-32

 3. Methodology 3-1 

3.1 Economic Rationale for NIST Involvement ......................... 3-1

3.1.1 Effect of Constraints ............................................... 3-2

3.1.2 Role of the NTRM Program .................................... 3-4

3.1.3 Potential Market Failures........................................ 3-4
iv 

3.1.4 Additional Economic Benefits from the NTRM 

Program................................................................. 3-6

3.2 Counterfactual World without NTRMs............................... 3-7

3.2.1 Specifying the Counterfactual................................. 3-8

3.2.2 Supply-Side Considerations.................................... 3-9

3.2.3 Demand-Side Considerations............................... 3-12

3.2.4 Dynamic Issues.................................................... 3-15

3.3 Technical and Economic Impact Metrics.......................... 3-18

3.3.1 Impact Hypotheses .............................................. 3-18

3.3.2 Impact Metrics..................................................... 3-18

3.4 Benefits and Costs Estimation .......................................... 3-19

3.4.1 Data Requirements .............................................. 3-20

3.4.2 Determination of Annual Economic Benefits ........ 3-21

3.4.3 Calculating Measures of Net Social Benefits ......... 3-21

 4. Primary Data Collection 4-1

4.1 Specialty Gas Companies .................................................. 4-1

4.1.1 SGC Scoping Interviews......................................... 4-3

4.1.2 SGC Survey ........................................................... 4-3

4.2 End-User Survey................................................................ 4-4

4.2.1 End-User Population.............................................. 4-5

4.2.2 End-User Survey Topics......................................... 4-5

 5. Results 5-1 

5.1 SRM Production and Consumption under the 

Counterfactual Scenario .................................................... 5-2

5.1.1 Maximum SRM Production .................................... 5-2

5.1.2 NIST-Certified Reference Material 

Consumption......................................................... 5-2

5.2 Specialty Gas Companies .................................................. 5-5

5.2.1 Cost Impact of the Counterfactual Scenario on 

the Traceability Chain............................................ 5-7

5.2.2 Impact of the Counterfactual on NTG 

Production........................................................... 5-10

5.2.3 Impact of the Counterfactual on SGC 

Production Costs.................................................. 5-12

5.3 Impact on Participants in Emissions Trading Programs...... 5-13
v 

5.3.1 Impact of the Counterfactual on End Users’ 

Operations and Maintenance Costs...................... 5-15

5.3.2 Impact of the Counterfactual on Retirement of 

Emissions Allowances.......................................... 5-20

5.4 Impact on Automotive Emissions Testing ......................... 5-29

5.4.1 Post-Consumer Emissions Testing......................... 5-29

5.4.2 Automotive Design Emissions Testing................... 5-29

5.5 Other Impacted Parties.................................................... 5-30

5.6 Social Costs of the NTRM Program .................................. 5-31

5.7 Calculating Measures of Social Return ............................. 5-32

5.7.1 Time Series of Aggregate Costs and Benefits of 

the NTRM Program.............................................. 5-33

5.7.2 Measures of the Net Benefits of the NTRM 

Program............................................................... 5-36

 References R-1

 Appendixes 

A Interview Guides...............................................................A-1 
vi 

Figures 

 Figure 1-1 Overview of Approach............................................................... 1-6 

 Figure 2-1 Simplified Example of Traceability Chain to NIST Primary 

Standards................................................................................. 2-17

 Figure 2-2 NIST-Traceable Gas-Mixture Supply Chain............................... 2-18

 Figure 3-1 Illustration of Potential Supply Impact of NTRM Program............ 3-4

 Figure 3-2 Conceptual Approach for Estimating Economic Impacts of 

the NTRM Program .................................................................... 3-9

 Figure 3-3 Supply and Demand for SRM Production by NIST .................... 3-13

 Figure 3-4 Current Market for Directly Traceable and Indirectly 

Traceable Protocol Gases......................................................... 3-15

 Figure 3-5 Counterfactual Without NTRM Program ................................... 3-16

 Figure 4-1 Overview of Data Collection...................................................... 4-2
vii 

Tables 

 Table 2-1 SO2 Emissions Trading Activity ................................................ 2-11 

 Table 2-2 SGC Participating in the NTRM Program .................................. 2-19

 Table 2-3 Calibration Standards............................................................... 2-20

 Table 2-4 The Number of NTRM Batches................................................. 2-22

 Table 2-5 The Number of NTRM Cylinders Certified ................................ 2-23

 Table 2-6 Number of SRM Cylinders Sold ................................................ 2-24

 Table 2-7 Principal End-Use Markets for NTGs ........................................ 2-28

 Table 2-8 Examples of Metropolitan Areas Conducting Post-Consumer 

Emissions Testing..................................................................... 2-31

 Table 3-1 Three Major Market Failures Addressed by the NTRM 

Program..................................................................................... 3-5

 Table 3-2 Technical and Economic Impact Metrics .................................. 3-19

 Table 4-1 Interviewed End Users’ Backgrounds.......................................... 4-5

 Table 5-1 Economic Impact of NTRM Program from 1990 estimated 

through 2007 (NPV $2001) ........................................................ 5-1

 Table 5-2 Current and Counterfactual Demand for SRMs ........................... 5-4

 Table 5-3 Current and Counterfactual NIST-Traceable Gas-Mixture 

Standards Production (cylinders) ................................................ 5-6

 Table 5-4 Cost of Certifying NTGs Using Different Methods....................... 5-8

 Table 5-5 Difference in Certification Costs Under the Counterfactual 

Scenario .................................................................................. 5-14

 Table 5-6 Number of Units Participating in Emissions Trading 

Programs ................................................................................. 5-19

 Table 5-7 Estimated Operations and Maintenance Costs Under the 

Counterfactual Scenario ($) ...................................................... 5-20
viii 

 Table 5-8 Allowances Retired Under Existing Emissions Trading 

Systems ................................................................................... 5-23

 Table 5-9 Avoided Early Retirement of Allowances by Units in Existing 

Emissions Trading Programs ..................................................... 5-25

 Table 5-10 Market Prices for Emissions Allowances for Existing 

Emissions Trading Programs ..................................................... 5-26

 Table 5-11 Value of Avoided Early Retirement of Allowances ($)................ 5-27

 Table 5-12 Summary of Economic Benefits to Participants in Existing 

Emissions Trading Programs ($) ................................................ 5-28

 Table 5-13 NIST Certification Fees ($)........................................................ 5-32

 Table 5-14 NIST and Industry Certification Costs ($)................................... 5-33

 Table 5-15 Time Series of Quantified Benefits and Costs ($) ....................... 5-34

 Table 5-16 Economic Impact of NIST NTRM Program................................ 5-37
ix 

List of Acronyms 

B/C Benefit-to-cost ratio 

BACT Best Available Control Technology 

CAAA 1990 Clean Air Act Amendments 

CEM Continuous emission monitoring 

CRM Certified Reference Material 

CSTL Chemical Science and Technology Laboratory 

DT Directly traceable 

EPA U.S. Environmental Protection Agency 

GMIS Gas manufacturers’ intermediate standard 

IRR Internal rate of return 

IT Indirectly traceable 

LAER Lowest Achievable Emission Rate 

MACT Maximum Achievable Control Technology 

NAAQS National Ambient Air Quality Standards 

NAM National Air Monitoring Station 

NBS National Bureau of Standards 

NESHAP National emissions standards for hazardous air pollutants 

NIST National Institute of Standards and Technology 

NMi Nederlands Meetinstituut 

NPV Net present value 

NSPS New source performance standard 

NSR New source review 

NTG NIST-Traceable Gas 
x 

NTRM NIST-Traceable Reference Materials 

OEM Original equipment manufacturer 

OTC Ozone Transport Commission 

PAM Photochemical Air Monitoring Station 

PRM Primary Reference Material 

RATA Relative Accuracy Test Audit 

RECLAIM South Coast Air Quality Management District’s Regional Clean Air 

Incentives Market 

RFF Resources for the Future 

RGM Reference gas mixture 

SGC Specialty gas company 

SIP State Implementation Plan 

SLAM State and Local Air Monitoring Station 

SRM Standard Reference Material 

SRMP Standard Reference Materials Program 

WTP Willingness to pay 
ES-1 

 

 Executive Summary 

The gas mixture NIST-Traceable Reference Materials (NTRM) 

program was jointly created by the National Institute of Standards 

and Technology (NIST), the U.S. Environmental Protection Agency 

(EPA) and specialty gas companies (SGCs) to increase the 

availability of NIST-certified gas-mixture reference materials. Under 

the program, SGCs manufacture gas-mixture standard reference 

material (SRM) equivalents under NIST’s technical specifications 

and submit these gas mixtures to NIST for certification. 

The NTRM program is integral to the supply of highly accurate 

reference standards that are used by industry to support compliance 

with environmental regulations. Environmental regulation has 

become increasingly sophisticated over time and often requires 

facilities and monitoring organizations to supply real-time 

information on the pollutants that they are emitting to the 

environment. To meet these regulations’ data acquisition and 

accuracy needs, regulated establishments are required to calibrate 

pollution monitoring equipment with reference standards traceable 

to NIST. 

The objective of this study is to conduct a microeconomic impact 

assessment of the NTRM program to estimate its impact on U.S. 

industry and determine its economic return. Economic impacts are 

measured relative to a counterfactual scenario that describes the 

reference material supply chain in the absence of the NTRM 

program. The counterfactual scenario specifies the behavior 

changes that SGCs and users of reference materials (referred to as 

end users) would likely need to make if NTRMs were not available 

to produce NIST-Traceable Gases (NTGs). 

The NTRM program was 

created by NIST in 

collaboration with the U.S. 

Environmental Protection 

Agency (EPA) and specialty 

gas companies (SGCs) to 

increase the availability of 

NIST-certified reference 

materials. 
The Economic Impact of the Gas-Mixture NIST-Traceable Reference Materials Program 

ES-2 

Based on interviews with SGCs, NIST, and reference gas end users, 

we projected that the net present value (NPV) of the NTRM program 

through 2007 is between $49.0 million and $63.1 million. 

However, the program’s benefits may increase significantly as 

participation in emission trading programs increases and credits are 

retired under advanced phases of cap and trade programs. 

Table ES-1 presents an overview of the economic impacts of the 

NTRM program from 1990 to 2007. 

Table ES-1. Economic Impact of the NIST NTRM Program 

Economic impacts reflect benefits and costs from 1990 projected through 2007.a

Measure of Economic Returnb Lower Bound Upper Bound 

Benefit-to-cost ratio 21.4 27.2 

Net benefits (NPV $2001) $49,015,977 $63,092,986 

Social rate of return 221% 228% 

aThe NTRM program began operation in 1992. However, NIST incurred program development costs beginning in 1990. 

bBased on a 7 percent inflation-adjusted social discount rate. 

 ES.1 THE ROLE OF THE NTRM PROGRAM IN THE 

REFERENCE GAS SUPPLY CHAIN 

In many ways, the use of SRMs and NTRMs in the reference gas 

supply chain is essential in that it provides a well-defined 

traceability to existing primary standards for chemical 

measurements. To ensure the consistency and accuracy of 

continuous emissions monitoring, EPA developed procedures and 

protocols that specify the frequency, accuracy, and traceability of 

measurement systems. Calibration gases must be linked to NIST 

primary standards via a traceability chain. Analysts and regulators 

want to keep the chain as short as possible to reduce the uncertainty 

of the certified concentration of the reference standards. 

EPA recognized the expertise and scientific stature of NIST by 

writing traceability requirements into most of their current 

regulations for stationary source, mobile source, and ambient air 

monitoring. As a result, NIST’s provision of SRMs and certification 

of NTRMs now represent an important component in the supply 

chain infrastructure of many U.S. industries and some governmental 

organizations. In return, the EPA regulations created an 
Executive Summary 

ES-3 

unprecedented demand on NIST’s laboratory to provide gas 

mixtures to support end users’ needs for traceability. 

 ES.2 THE COUNTERFACTUAL WORLD WITHOUT 

THE NTRM PROGRAM 

In the absence of the NTRM program, traceability would need to be 

achieved primarily though the use of SRMs. However, because of 

NIST’s limited capacity to supply SRMs, SGCs would likely increase 

their reliance on intermediate standards to maintain traceability to 

NIST. 

A conceptual diagram of the current and counterfactual traceability 

supply chains is shown in Figure ES-1. NIST currently certifies two 

types of low-uncertainty (approximately 1%) reference materials: 

SRMs that they characterize and market in-house and NTRMs that 

are produced and characterized by an SGC, then analyzed and 

certified by NIST. Either SRMs or NTRMs can be used to certify 

directly traceable reference gases or gas manufacturers’ intermediate 

standards (GMISs). GMISs are used in the production of indirectly 

traceable gases that have higher uncertainty than directly traceable 

gases do because of the additional step in their traceability chain. 

In the absence of NTRMs, SRMs would be the only materials 

certified by and traceable to NIST. Directly traceable gases would 

need to be certified via an SRM, while indirectly traceable gases 

could be characterized with reference to a parent SRM. As the 

diagram illustrates, SRMs would emerge as a major bottleneck in the 

infrastructure supply chain. In addition, SRM cylinders are 

substantially more expensive than NTRMs and the volume of gas in 

an SRM cylinder is one-fifth of that in NTRMs. As a result, whereas 

the majority of calibration gases currently are directly traceable, 

under the counterfactual, most reference gases used by industry 

would be indirectly traceable. 

This counterfactual would have three key impacts on SGCs and 

their customers: 
The Economic Impact of the Gas-Mixture NIST-Traceable Reference Materials Program 

ES-4 

Figure ES-1. Conceptual Approach for Estimating Economic Impacts of the NTRM Program 

Current Traceability

Chain

NIST Primary

Standards

Protocol

Gas

DT

SRM

Reference

Gases

Purchased

by Industry

Protocol

Gas

IT

Counterfactual Without

NTRM Program

NIST Primary

Standards

SRMs NTRMs

GMISs

SRMs

GMISs

Protocol

Gas

DT

SRM Protocol

Gas

IT

Note: DT: directly traceable. 

IT: indirectly traceable. 

1. SGCs’ calibration gas production costs would increase due 

to the constricted supply of SRMs and the need to produce 

large numbers of GMISs to increase the certification capacity 

of each SRM. 

2. Some end users would be forced to begin consuming 

indirectly traceable gases. These users would incur higher 

operations and maintenance expenses because of their 

lowered confidence in their calibration gas resulting from 

the increase in uncertainty. 

3. These end users’ participation in emissions allowance 

markets would be adversely affected because of the need to 

ensure the addition of a proportional number of allowances 

to mitigate that increase in uncertainty and avoid the 

increased possibility of regulatory penalties. 

Elimination of these counterfactual costs are the current benefit of 

the NTRM program to society. To quantify these benefits, we 
Executive Summary 

ES-5 

collected data from end users (i.e., electric utilities, monitoring 

organizations); SGCs; and several federal and local environmental 

agencies and coupled them with published statistics. 

The NPV of benefits from the NTRM program through 2007 is 

presented in Table ES-2. Upper and lower bounds of benefits are 

calculated that reflect the range of incremental uncertainty values 

provided by SGCs associated with moving from directly traceable 

gases to indirectly traceable gases. Benefits estimates range from 

$51.4 million to $65.5 million. 

 Lower Bound Upper Bound 

Costs of NIST NTRM Program –2,407,897 –2,407,897 

Benefits 51,423,874 65,500,883 

SGCs 5,398,420 5,398,420 

Users 46,025,454 60,102,463 

Net Benefits 49,015,977 63,092,986 

Notes: Social costs are presented as negative numbers. 

The upper and lower bound reflect a range for the increased analytical 

uncertainty for indirectly traceable gases. 

To accurately characterize the net benefit of the program, however, 

we must also estimate social costs. NIST incurred the initial start-up 

costs for the program and is reimbursed by SGCs though NTRM 

certification fees. Through 2007, the total social cost of the 

program is estimated to be $2.4 million, which reduces the NPV of 

net benefits of the program to between $49.0 million and $63.1 

million. 

Table ES-2. Economic 

Impact of NTRM Program 

from 1990 Estimated 

through 2007 (NPV 

$2001) 

1-1 

 1 Introduction 

Environmental regulation has become increasingly sophisticated 

over time. A suite of federal, state, and local environmental 

regulatory initiatives—including the Acid Rain Program, the 

National Ambient Air Quality Standards, and the Ozone Transport 

Commission—require air quality monitoring stations, electric 

utilities, and heavy industrial facilities to supply real-time 

information on the pollutants they are emitting to the environment 

or are tasked with monitoring. To meet these regulations’ data 

acquisition and accuracy needs, regulated establishments are 

required to properly calibrate pollution monitoring equipment with 

reference standards traceable to the National Institute of Standards 

and Technology (NIST). However, as these initiatives were being 

promulgated, the gas-mixture reference standards available directly 

from NIST, standard reference materials (SRMs), were not available 

in sufficient quantities to meet the anticipated future demand for 

highly accurate NIST-traceable reference standards. 

The solution was the NIST-Traceable Reference Materials (NTRM) 

program. The NTRM program was created by NIST in collaboration 

with the U.S. Environmental Protection Agency (EPA) and specialty 

gas companies (SGCs) to increase the availability of NIST-certified 

materials. Under the program, SGCs follow NIST technical 

guidance to manufacture SRM-equivalent standards and submit 

these standards to NIST for certification. Once certified, the NTRMs 

are the functional equivalent of SRMs and are used to assay the 

large volume of secondary reference standards demanded by 

consumers to meet their compliance obligations. Since the 

program’s inception in 1992, it has become an integral component 

of the high-accuracy reference gas supply chain. 
The Economic Impact of the Gas-Mixture NIST-Traceable Reference Materials Program 

1-2 

The objective of this study is to conduct a microeconomic impact 

assessment of the NTRM program to estimate its impact on social 

welfare. Economic impacts are measured relative to a 

counterfactual scenario that describes the reference material supply 

chain in the absence of the NTRM program. The counterfactual 

scenario specifies the behavior changes that SGCs and users of 

reference materials (referred to as end users) would likely make if 

NTRMs were not available to produce NIST-Traceable Gases 

(NTGs). 

This section discusses trends in environmental regulation, describes 

the NTRM program’s role in the supply of reference materials, and 

provides an overview of the analytical approach used to estimate 

the economic impact of the NTRM program. 

 1.1 TRENDS IN ENVIRONMENTAL REGULATION 

The availability of high-quality reference materials with linkages to 

well defined national standards is essential for supporting the 

objectives of U.S. environmental policy. In response to the 1990 

Clean Air Act Amendments (CAAA), the EPA developed regulations 

that require monitoring systems used to measure emissions to be 

calibrated with standards traceable to NIST. The NTRM program 

was created to help meet the increasing demand for NTRMs that 

results from EPA’s regulations. 

The EPA regulates air emissions from a variety of sources to reduce 

adverse health and environmental effects. Under the CAAA, EPA 

developed national emissions standards for 186 hazardous 

chemicals, including SO2 and NOx. National emissions standards 

for hazardous air pollutants (NESHAP) regulations specify an 

emissions limit based on what is achievable with a specific control 

technology and the chemical content of the inputs to the production 

process. 

In addition to these technology-based performance standards, 

emission sources may also be subject to other local or regional 

environmental regulations. 
Section 1 — Introduction 

1-3 

Z National Ambient Air Quality Standards (NAAQS) do not 

directly affect industry because they are not applied to 

individual sources. Rather, these standards are applied to 

the ambient air in a particular area. For example, electricity 

generators in nonattainment areas may be targeted for more 

stringent controls implemented through local operating 

permits. 

Z The Acid Rain Program was authorized by the CAAA to 

reduce the adverse effects of acidic deposition on natural 

resources, ecosystems, materials, visibility, and public 

health. The principal sources of acidic compounds are 

emissions of SO2 and NOx from the combustion of fossil 

fuels. 

Z the South Coast Air Quality Management District’s Regional 

Clean Air Incentives Market (RECLAIM) and the Ozone 

Transport Commission (OTC) NOx Budget program were 

implemented by state and local air quality organizations in 

California and the northeastern states, respectively, to help 

their respective areas improve compliance with ambient air 

quality standards and other environmental standards. 

The latter two bullet points are programs that include emissions 

trading. Emissions trading is an innovative approach to 

environmental regulation that exploits the potential efficiency gain 

from equating the marginal cost of abatement (pollution reduction) 

for individual sources within a facility and across companies in a 

trading region (RFF, 1996). All units are allocated a number of 

emissions allowances, where each allowance is equivalent to one 

ton of emissions. Units are allowed to buy, sell, or bank allowances 

based on their forecasted emissions. 

For example, a primary goal of the Acid Rain Program is to reduce 

annual SO2 emissions by 10 million tons below 1980 levels. To 

achieve these reductions, Sec. 401 (b) of the CAAA requires a twophase tightening of the restrictions placed on fossil-fuel-fired power 

plants. Phase I began in 1995 and affects 445 units in total at 110 

coal-burning electric utility plants located in 21 Eastern and 

Midwestern states.1 Emissions data indicate that SO2 emissions at 

these units nationwide were reduced by almost 40 percent (5.3 

million-ton emissions) below their required level (8.7 million-ton 

allowable emissions), and by approximately 35 percent (5.4 millionton emissions) below 1996 allowable levels (8.3 million-ton 

 

1The 445 total units include 263 units that were required by law to begin 

monitoring and reporting actual emissions in 1995 and undergo annual 

reconciliation processes in 1996. The remaining units are either substitution 

units or units that opted to begin early participation in the program. 
The Economic Impact of the Gas-Mixture NIST-Traceable Reference Materials Program 

1-4 

allowable emissions). Phase II, started in 2000, tightens the annual 

emissions limitation imposed on Phase I plants and also sets 

restrictions on smaller, cleaner plants fired by coal, oil, and gas. 

The total number of units participating in the program in 2002 is 

estimated by RTI to number over 2,300. 

Early predictions of the potential annual social benefits associated 

the SO2 emissions trading ranged up to $3.1 billion in decreased 

abatement costs. However, a recent study by Resources for the 

Future (RFF) estimates annual social benefits of approximately $780 

million (RFF, 2000). The RFF authors attribute the reduction in 

realized benefits to factors such as the deregulation of the railroad 

industry, which increases the availability of low-sulfur coal and 

unforeseen advances in abatement technologies. In general, 

however, most industry experts agree that the SO2 emissions trading 

program has made a significant contribution to social welfare by 

lowering total national abatement costs. 

 1.2 MEASUREMENT ACCURACY AND NIST 

TRACEABILITY 

Before the CAAA, many stationary-source air regulations required 

an initial source test, which was followed by other tests only if there 

was reason to believe the source was no longer in compliance. The 

CAAA shifted emphasis to continuous monitoring or repeated 

testing to ensure that sources maintained compliance at all times. 

The enforcement arm of EPA was given expanded capabilities for 

obtaining records of all monitoring and testing of products, 

equipment, and emissions at any regulated facility. 

To support the mandated reductions in SO2 and NOx, EPA issued 

regulations requiring affected facilities to install continuous 

emission monitoring (CEM) systems. To ensure the consistency and 

accuracy of emissions monitoring, the EPA developed regulations 

that required the measurement systems used to be calibrated with 

standards from NIST or standards traceable to NIST and have, at 

most, ±2 percent measurement accuracy. However, the expanded 

need for traceability to NIST could not be met solely with the gasmixture SRMs. In response, EPA issued new rules specifying how 

SGCs could produce EPA protocol gases that could be used in place 

of SRMs to perform calibrations on measurement systems used for 

air pollution monitoring. 
Section 1 — Introduction 

1-5 

The pending SO2 emissions trading under the Acid Rain Program 

and other programs (RECLAIM, OTC NOx Budget) and growth in 

demand for SRMs and EPA protocol gases would have outstripped 

the supply of the these standards. To ensure a ready supply of 

standards, EPA, NIST, and SGCs created the NTRM program 

between 1990 and 1992. 

The NTRM program, jointly administered by the NIST Analytical 

Chemistry Division (a division of the Chemical Science and 

Technology Laboratory) and the NIST Standard Reference Materials 

Program, produces gas mixtures (NTRMs) to supplement the supply 

of existing gaseous SRMs and to be used where SRMs have been 

used in the past. The NTRM program addressed the issues associated 

with the increasing demand for high-quality NIST-traceable reference 

materials. Under this program, NIST works with SGCs to provide the 

same traceability as SRMs. The NTRM program provides the 

infrastructure for SGCs to use a gas-mixture NTRM to produce an 

EPA protocol gas that can then be used to calibrate emissions 

monitoring instruments. The program has resulted in an increase in 

the range and number of standards available to end users. In 

general, they can be acquired faster and at lower cost (NIST, 2000). 

This study will quantitatively and qualitatively assess the NTRM 

program’s impact on social welfare. 

 1.3 SUMMARY OF ANALYTICAL APPROACH AND 

ORGANIZATION 

The organization of this report mimics the analytical process 

through which the economic benefit of the NTRM program is 

determined. Each section walks the reader through a different stage 

in the analytical process, from providing background information to 

determining the economic methodology to data collection and 

finally to the calculation of economic benefits. Figure 1-1 provides 

an overview of the steps in the analytical process undertaken in this 

report and serves as a map for the section-by-section overview of 

the report provided below. 

Whereas the preceding introduction served to introduce the reader 

to the trends that led to the inception of the NTRM program, 

Section 2 of this report, “Overview of the Reference Gas Supply 

Chain,” presents background information on the operation and 

institutional structure of the program itself. This section also 
The Economic Impact of the Gas-Mixture NIST-Traceable Reference Materials Program 

1-6 

Figure 1-1. Overview of Approach 

Review of NTRM Program

• Past and current contributions

Develop Technical Counterfactual

• Impact on the cost and availability of NTGs

Quantify Behavioral Changes

• Changes in NIST SRM program activities

• Changes in SGC production activities

• Changes in electric utilities’/industrial users’ operations

Estimate Change in Social Welfare

• Changes in the production costs of reference gases

• Change in abatement costs

• Change in environmental compliance

Surveys

of SGCs

Interviews

with Utilities and

Other Users

includes a discussion of the regulatory requirements that stipulate 

the use of reference standards supported by the program and the 

companies and entities that both produce and/or consume these 

gases. The information in Section 2 supports the development of 

our estimation techniques by providing the context within which 

vested parties alter their behavior under the counterfactual. 

Section 3 explores the technical metrics and the economic 

methodology that will be used to estimate benefits of the program. 

A significant portion of this section is devoted to the definition and 

explanation of the counterfactual scenario through which the 

economic benefit of the program will be determined. Section 4, 

“Primary Data Collection,” outlines the process through which we 

collected from stakeholders the data needed to inform our analysis. 

Finally, the results section, Section 5, provides a step-by-step walkthrough of the quantification of economic benefits, explaining the 

impact that the counterfactual scenario would have on stakeholders. 

We evaluate the costs of developing and creating the program and 
Section 1 — Introduction 

1-7 

compare them to the benefit the program has had to both reference 

gas producers and consumers. We also calculate and present three 

measures of economic return: the net present value of the program, 

the benefit to cost ratio, and the social rate of return. 

2-1 

 Overview of the 

 Reference Gas 2 Supply Chain 

The NTRM program currently provides the cornerstone for the 

production of most NIST-Traceable Gases (NTGs) used for 

environmental compliance and other emission testing activities. 

Under the program, SGCs manufacture SRM equivalents under 

NIST’s technical guidance. This section provides an overview of the 

reference gas supply chain, beginning with the history and 

description of the NTRM program. This is followed by a discussion 

of traceability issues and an overview of SGCs and users of 

reference materials. 

 2.1 INTRODUCTION TO THE NTRM PROGRAM 

The NTRM program was created by NIST, in collaboration with EPA 

and SGCs, to increase the availability of NIST-certified gas-mixture 

reference materials. The text below discusses the technical and 

economic history of the NTRM program and the requirements that 

SGCs must meet to participate. 

 2.1.1 Technological and Economic History of the NTRM 

Program 

Congress passed the Clean Air Act in 1970, which had the effect of 

setting maximum allowable pollution levels in many areas. 

Included in these areas were limits of certain pollutants in the 

atmosphere and limits of pollutant levels that could be emitted by 

automobiles and smokestacks. To ensure regulatory compliance, 

the pollutant levels from these sources had to be monitored. 

Monitoring was accomplished using measurement instrumentation 
The Economic Impact of the Gas-Mixture NIST-Traceable Reference Materials Program 

2-2 

that had to be calibrated with known gas mixtures to ensure 

correctness of the indicated pollution level. 

One of the large concerns in the early days of air pollution 

monitoring was uncertainty regarding the compressed gas 

calibration standards that were used to calibrate the monitoring 

instruments. Such standards had been prepared mostly by industrial 

gas companies and there was no specific procedure to follow for 

preparing and verifying such standards. Anecdotal stories were 

frequent about producer-certified standards with concentrations that 

were inaccurate or standards in which the composition was 

incorrect (e.g., containing methane when ethane was specified). 

For example, one paper from the 1970s reported a 25 percent error 

on a carbon monoxide standard (Mage, 1973). Another paper 

discussed the cylinder-related concentration instability of up to –

65 percent over 1 year and the need for a central authority to 

maintain a set of primary standards to which all other standards 

would be referenced (Wechter and Grieco, 1976). Problems 

concerning producer-certified standards of uncertain pedigree 

continued into the early 1980s (Decker et al., 1981). 

In response to this problem, the National Bureau of Standards 

(NBS), predecessor to NIST, and EPA began working together in 

1972 to develop gaseous SRMs having well-characterized certified 

concentrations with small uncertainties (e.g., ±1 percent) and little 

instability (Hughes, 1975; Hughes, 1976; Paulsell, 1976). These 

SRMs would be available for sale to the public and would have the 

reputation of NBS standing behind their certified concentrations. 

They were well received in the monitoring community, and demand 

for SRMs soon far exceeded the ability of NBS to produce them. 

Both NBS and EPA viewed the chronic out-of-stock situation that 

developed as critical. 

EPA and specialty gas producers jointly developed an analytical 

protocol by which the producers could prepare commercially 

available standards with certified concentrations that are traceable 

to NBS SRMs (Scott Environmental Technology, Inc., 1977). These 

EPA protocol gases would be prepared one-by-one by the producers 

and would be analyzed using SRMs or gas manufacturers’ 

intermediate standards (GMISs) as the analytical reference 

standards. The GMISs were analyzed using the published protocol, 

which required analysis using NBS SRMs. These GMIS mixtures 

“SRMs are materials 

certified for their chemical 

composition or physical 

properties. SRMs help 

users verify the accuracy of 

measurement methods or 

calibrate measurement 

systems by linking their 

measurements to NIST.... A 

NIST-certified SRM carries 

with it the full weight and 

authority of NIST and the 

U.S. Department of 

Commerce” (Martin, 

Gallaher, and O’Connor, 

2000). 

Before NIST’s 

involvement, 

anecdotal stories 

were frequent about 

producer-certified 

standards with 

concentrations that 

were inaccurate or 

standards in which 

the composition was 

incorrect. 
Section 2 — Overview of the Reference Gas Supply Chain 

2-3 

were subsequently used as analytical reference standards for 

analyzing protocol gases or other standards. The protocol’s 

definition of NBS traceability allowed for only one intermediate 

standard to exist in the calibration chain between the SRMs and the 

EPA protocol gases. Because an SRM can calibrate an instrument 

that is used to analyze many more EPA protocol gases, the number 

of NIST-traceable standards available for the monitoring community 

increased greatly. 

Although the availability of EPA protocol gases benefited the 

monitoring community, the continuing lack of SRMs caused 

problems for the specialty gas producers. To increase the supply of 

high-accuracy standards that producers could use in the place of 

SRMs, NBS and EPA jointly developed the Certified Reference 

Materials (CRMs) Program (Hughes and Mandel, 1981; Hughes, 

1982). Producers would prepare these standards in batches of 10 or 

more cylinders and analyze them using SRMs as reference 

standards. One characteristic of CRMs is that their certified 

concentrations are very close (±1 percent) to those for SRMs. After 

the producer had completed its analyses of the batch and was 

satisfied that the batch was homogeneous and stable, an EPAfunded third-party auditor would select two cylinders for an 

independent analysis without knowledge of the producer’s results. 

The producer and the auditor then sent their results to NBS, which 

made the final determination about whether the batch was stable, 

homogeneous, and accurately analyzed. If the batch met NBS’s 

requirements, the CRMs were certified. This supply of CRMs could 

be used for compliance measurements and for the production of 

EPA protocol gases. 

However, by the late 1980s EPA believed that the CRM program 

was not serving the purpose for which it was implemented and 

stopped supporting the program. SGC participation was low and it 

became increasingly difficult to justify the level of financial and 

technical support needed to maintain the program. Additionally, 

only one SGC was active in the program at this time and was 

making CRMs whose gaseous compositions did not address the 

interests of continuous emissions monitoring. 

At this same time, Congress began working on amendments to the 

Clean Air Act. The effect of the amendments would require much 

more pollutant monitoring and much more frequent calibration of 

NBS and EPA jointly 

developed the CRM 

program to supply “SRMquality” gases to specialty 

gas companies. EPA 

protocol gases must be 

NBS- (NIST-) traceable, 

allowing a maximum of 

one intermediate standard 

to exist in the traceability 

chain. 
The Economic Impact of the Gas-Mixture NIST-Traceable Reference Materials Program 

2-4 

monitoring equipment. In anticipation of the new legislation, NIST 

(the successor institution to NBS) and EPA worked on developing a 

new program to provide more NIST-traceable standards. The 

program would have to be acceptable not only to NIST and EPA but 

also to the specialty gas industry and ultimately to the community 

doing compliance monitoring. The CAAA were passed in 1990 and 

began to be phased in starting in November 1992. By this time, the 

newly developed standards program called the NTRM program was 

in place and operating. 

The NTRM program differed from the CRM Program in five 

significant ways: 

Z The concentration of a candidate NTRM would not have to 

be identical to that of a NIST SRM. 

Z The analyst did not have to match an SRM if NIST had 

primary standards for the analyses. 

Z The producer of the candidate NTRM would pay NIST to 

analyze the candidate NTRM’s concentration; EPA funds 

were not involved. 

Z NIST would certify the NTRM’s concentration based on its 

analysis. 

Z The NTRM would not have to be sold to third parties 

because no public funds were used in the certification 

(Guenther et al., 1996; Mitchell and May, 1993). 

Z The uncertainty of the NTRM would be approximately the 

same as that of an SRM because both are analyzed using 

NIST primary standards as the analytical reference standards. 

By allowing SGCs to manufacture SRM equivalent reference 

standards, NIST dramatically increases the amount of NIST-certified 

and analyzed gaseous reference material available. NIST 

concentrates on its strength to accurately characterize and name 

standards. 

 2.1.2 CSTL/NTRM Program Activities 

The Standard Reference Materials Program (SRMP) provides over 

1,300 internationally accepted SRMs for use in materials 

production, environmental analysis, health measurement, and basic 

science and metrology. Its mission is “to provide reference 

materials that are the definitive physical sources of measurement 

traceability in the United States” (NIST, 2000). The Chemical 

Science and Technology Laboratory (CSTL) provides technical 
Section 2 — Overview of the Reference Gas Supply Chain 

2-5 

leadership for most of the chemical and composition standards 

produced by NIST. 

The Analytical Chemistry Division, part of CSTL, operates the 

NTRM program that manages the testing and certification of gas 

mixtures produced by SGCs. Under this program, a specialty gas 

firm produces a batch of a gas mixture that matches NIST primary 

standards. The batch is prepared using the same specifications for 

homogeneity and purity that are used for SRMs. Samples from this 

batch are selected by NIST and sent to the Analytical Chemistry 

division for evaluation against primary reference material. Once 

NIST has approved the batch, it is certified as “NIST-traceable 

reference material” and is considered equivalent to an SRM for all 

subsequent uses. 

Producers must meet three minimum requirements to participate in 

the NTRM program (Guenther et al., 1996): 

1. The producer must have in place a documented quality 

system that conforms to international or national guidelines. 

2. The producer must have the necessary facilities, equipment, 

and personnel to produce and analyze the gas mixture in the 

manner specified by NIST. 

3. The producer must agree to one or more of the following 

requirements: it must make NTRMs available for sale to 

U.S. customers, it must demonstrate that traceable standards 

produced from NTRMs will be made available to U.S. 

customers, or the NTRMs must be used to make EPA 

protocol gases. 

The following list summarizes the procedures that producers must 

follow to prepare NTRMs (Guenther et al., 1996): 

Z Before an NTRM batch is prepared, the producer must 

submit to NIST for approval a plan describing the analytical 

procedures to be used. 

Z Each NTRM batch must consist of a batch of a least 10 

cylinders. 

Z The producer must use NIST-certified standards to determine 

the concentration relationship among all of the cylinders in 

the batch (batch homogeneity), to establish the average 

concentration of the batch, and to establish a baseline from 

which to compare future analyses performed to evaluate 

batch stability. 

Z The initial analysis of the NTRM batch should be performed 

2 or more days after the batch preparation, and the second 

Participants in the NTRM 

program must meet a set of 

minimum requirements and 

follow specific 

manufacturing procedures 

to ensure quality. 
The Economic Impact of the Gas-Mixture NIST-Traceable Reference Materials Program 

2-6 

analysis should be performed 30 or more days after the first 

analysis. 

Z The producer must perform a preliminary data analysis to 

determine the batch characteristics, particularly the stability 

and homogeneity of the batch. 

Z The producer must submit to NIST all the data generated 

from the two analyses. 

Z After NIST has reviewed these data and has determined that 

the batch meets their specifications, NIST will select at least 

two cylinders from the batch for an independent analysis for 

concentration and impurities using NIST primary standards 

as the analytical reference standards. 

Z NIST will assign a certified concentration and uncertainty for 

the entire batch based on the producer’s and NIST’s 

measured concentrations. 

Z NIST must be compensated directly by the producer for the 

certification of the batch. 

In addition to the financial resources used in preparing a batch of 

NTRMs, it may take as long as 12 to 18 months to prepare, test, and 

certify a batch. 

 2.2 ANALYTICAL TRACEABILTY AND 

UNCERTAINTY 

As described in the previous section, the mission of the NTRM 

program is to increase the availability of high quality NIST-traceable 

gas-mixture reference standards. Most of these standards are used 

in compliance with environmental regulations. This section 

presents the principal pieces of federal legislation that require the 

use of these standards. This section also includes a discussion of 

traceability requirements and a description of the different pathways 

through which the NIST traceability chain can be established. 

 2.2.1 Federally Mandated Traceability Requirements 

EPA regulates air emissions from a variety of sources to reduce 

adverse health and environmental effects. Under the CAAA of 

1990, EPA developed national emissions standards for 186 

hazardous chemicals, including SO2 and NOx. Before the CAAA of 

1990, many stationary source air regulations required an initial 

source test followed by other tests only if there was reason to 

believe that the source was no longer in compliance. The CAAA of 

1990 shifted emphasis to continuous monitoring or repeated testing 

to ensure that sources maintained compliance at all times. 
Section 2 — Overview of the Reference Gas Supply Chain 

2-7 

To ensure the consistency and accuracy of emissions monitoring, 

EPA developed procedures and protocols that specify the frequency, 

accuracy, and traceability of measurement systems. In many 

instances, the regulation requires the measurement systems used to 

be calibrated with standards from NIST or standards traceable to 

NIST. 

The NTRM program supports the traceability of gas-mixture 

reference standards to NIST to meet regulatory obligations detailed 

in a myriad of federal statutes. However, different parts of the 

CAAA of 1990 have different calibration requirements. This section 

discusses the three major categories of CAAA regulations and 

highlights their calibration requirements as they relate to the use of 

NIST-traceable gas mixtures. These categories are as follows: 

Z technology-based performance standards, 

Z NAAQS, and 

Z Acid Rain Program and other emissions trading programs. 

Technology-Based Performance Standards 

NESHAP regulations specify an emissions limit based on what is 

achievable with a specific control technology and the chemical 

content of the inputs to the production process. These regulations 

are frequently referred to as Maximum Achievable Control 

Technology (MACT) or Best Available Control Technology (BACT) 

and are based on a review of the top-performing technologies 

currently available. 

Criteria pollutants are also regulated under new source review (NSR) 

and new source performance standards (NSPSs). NSR requirements 

are typically conducted by state agencies. This program applies to 

new facilities or expansion of existing facilities or process 

modifications and requires facilities to meet Lowest Achievable 

Emission Rate (LAER) standards as compared to existing (unchanged) 

facilities. Many criteria pollutants, such as SO2, also fall under 

NAAQS and the Acid Rain Program. 

Monitoring and calibration requirements can be grouped by source 

types: existing stationary sources, new stationary sources, and 

mobile sources. 

Existing Stationary Sources. 40CFR Part 63 (NESHAP) specifies 

continuous monitoring for existing stationary sources associated 

All measurements are 

subject to some 

uncertainties. The 

measured value of a 

variable is a function of 

both its true value and the 

measurement system. The 

measurement system 

contains a number of 

elements that contribute to 

uncertainty in 

measurement (Taylor, 

1997; Bentley, 1983). 

NESHAP regulations 

specify an emissions limit 

based on what is 

achievable with a specific 

control technology and the 

chemical content of the 

inputs to the production 

process. 
The Economic Impact of the Gas-Mixture NIST-Traceable Reference Materials Program 

2-8 

with selected production processes. Many of the NESHAP 

regulations require CEM. Examples of the types of facilities for 

which CEM is required include coke ovens—opacity only; 

sterilization units—ethylene oxide; phosphoric acid production—

stack gas temperature; petroleum and natural gas production—

outlet temperature and methane (method 21); pharmaceutical 

production—HCl (method 25A); and Portland cement kilns—total 

hydrocarbon. Typically, NTGs are required for bias and Relative 

Accuracy Test Audits (RATA), which occur at least quarterly. In 

addition, some daily calibration checks require NIST traceability. 

New Stationary Sources. 40CFR Part 60 covers new stationary 

sources. Part 60 has a number of requirements for allowable 

pollution levels and the methods used to determine them. Many of 

the methods specified in Appendix A of Part 60 are also referred to 

by other parts of 40CFR. For example, the NESHAP required for 

calibration gas certification are frequently based on new source 

regulations in Part 60. New sources of all types covered by the 

regulations in the subparts of Part 60 are required to demonstrate 

emissions below allowable levels during actual and planned 

operation. An initial performance test is required and NISTtraceable gas mixtures are specified in most cases. Many of these 

new sources are also required to perform CEM. In general, this 

subpart requires NIST-traceable materials for initial testing upon 

installation, for RATA, and for quarterly accuracy checks of various 

types. 

Mobile Sources. Mobile source testing is covered under a series of 

parts in 40CFR. The regulations in Part 86 cover new road vehicles, 

Part 89 covers nonroad compression engines, Part 90 covers 

nonroad spark engines, Part 91 covers marine engines, and Part 92 

covers locomotives. All have essentially the same calibration 

requirements. Calibration gases must be analyzed to ±1 percent vs. 

NIST-traceable gas standards, span gases to ±2 percent vs. NISTtraceable gas standards, and blended gases to ±1.5 percent vs. NISTtraceable gas standards. Part 92 indicates that the 1.5 percent can 

only be obtained if the pure gas components of the blends are 

“named” ±1 percent to NTRM. In most cases, the exhaust tests are 

only required during the design stage of the new mobile source. 

Uncertainties of analytical 

measurements must be 

quantified so that decision 

makers can understand the 

degree of reliability of the 

result. ASTM International, 

formerly known as the 

American Society for 

Testing and Materials, 

defines the sources of 

variability of a 

measurement method, each 

of which belongs to one of 

the following categories: 

Z the operator 

Z the apparatus 

Z the environment 

Z the sample 

Z time 
Section 2 — Overview of the Reference Gas Supply Chain 

2-9 

NAAQS 

NAAQS do not “directly” affect industry because they specify 

regional air quality objectives. However, these standards indirectly 

affect sources through local regulations targeted at ambient air 

quality objectives in particular areas. For example, electricity 

generators in nonattainment areas may be targeted for more 

stringent controls implemented through local operating permits. In 

these instances, monitoring and calibration requirements are likely 

to be similar to NESHAP requirements and hence account for some 

protocol gas use. 

A substantial number of NTGs are used in the calibration of the 

testing equipment that is used to monitor ambient air quality. 

40CFR Part 58 indicates that states are required (through state or 

local air quality agencies) to ensure the conduct of ambient air 

quality tests. States may delegate or assign this responsibility to 

local agencies or State and Local Air Monitoring Stations (SLAMs), 

National Air Monitoring Stations (NAMs), and Photochemical Air 

Monitoring Stations (PAMs). Representatives from SGCs indicated 

that SLAMs and NAMs are nontrivial consumers of protocol gases. 

40CFR Part 58 specifies that monitoring requirements should be 

traceable to NIST: “Gaseous pollutant concentration standards 

(permeation devices or cylinders...) used to obtain test 

concentrations of CO, SO2, NO, and NO2 must be NIST-traceable.” 

However, 40CFR Part 53, which describes ambient air reference 

methods, is less stringent and states that state or local organizations 

should “...use NBS-certified standards whenever possible” for CO2, 

CO, C2H6, C2H4, CH4, and xylene.1

Acid Rain Program and Other Emissions Trading 

Programs 

The Acid Rain Program was authorized by the CAAA of 1990 to 

reduce the adverse effects of acidic deposition on natural resources, 

ecosystems, materials, visibility, and public health. The principal 

sources of acidic compounds are emissions of SO2 and NOx from 

the combustion of fossil fuels. The EPA designed the Acid Rain 

Program to achieve significant environmental and public health 

benefits by reducing emissions of SO2 and NOx, the primary causes 

 

1The National Bureau of Standards (NBS) was the predecessor to the National 

Institute for Standards and Technology (NIST). 

Ambient air monitoring 

data is collected by 

approximately 5,000 

samples which make up 

the SLAM network. “Data 

collected are used by EPA 

to aid in planning the 

Nation’s air pollution 

control strategy and to 

measure achievement 

toward meeting NAAQs.” 

(Musick, 1996) 
The Economic Impact of the Gas-Mixture NIST-Traceable Reference Materials Program 

2-10 

of acid rain. The program employs both traditional and innovative 

market-based approaches for controlling air pollution. It also 

encourages energy efficiency and pollution prevention. 

Allowance trading programs are integral to several environmental 

regulatory initiatives, including the Acid Rain Program. Allowance 

trading (also referred to as “emissions trading”) is a system included 

in the CAAA of 1990 intended to reduce the costs of compliance 

while meeting the same (or improved) environmental objectives. 

The approach provides a firm with the flexibility to find the most 

cost-effective way of achieving compliance through the trading of 

emissions allowances (EPA, 1999). 

SO2 Emissions Trading. The market-based SO2 emissions trading 

program began in 1995 and allows utilities to adopt the most costeffective strategy to reduce SO2 emissions at units in their systems. 

Under emissions trading, participants, mostly electric utilities, are 

allocated a fixed number of allowances and are required to hold 

one allowance for each ton of SO2 they emit. Participants may 

transfer or sell allowances between one another or bank them for 

use in future years. The system gives participants flexibility in 

making purchase decisions for pollution control equipment; they 

may either invest in pollution control or purchase allowances to 

cover SO2 emissions. Regardless of the compliance strategy 

chosen, participants must not exceed EPA-determined emissions 

ceilings. The market for SO2 allowances is also open to all other 

enterprises, groups, and individuals via an “opt-in” component. 

The primary goal, set by Title IV of the Clean Air Act, is the 

reduction of annual SO2 emissions by 10 million tons below 1980 

levels. 

The Acid Rain Program allows sources to use other methods to 

create their own compliance strategy. For example, to reduce SO2, 

an affected source may repower its units, use cleaner burning fuel, 

or reassign some of its energy production capacity from dirtier units 

to cleaner ones. Sources may also decide to reduce electricity 

generation by adopting conservation or efficiency measures. Some 

of the options afford the unit special treatment, such as a 

compliance extension or extra allowances. Most options, like fuel 

switching, require no special prior approval, allowing the source to 

respond quickly to market conditions without needing government 

approval. 

The market-based 

SO2 emissions 

trading component 

allows regulated 

entities to adopt the 

most cost-effective 

strategy to reduce 

SO2 emissions at 

units in their 

systems. 
Section 2 — Overview of the Reference Gas Supply Chain 

2-11 

Participants are required to install systems that continuously monitor 

emissions in order to track progress, ensure compliance, and 

provide credibility to the program’s trading component. In any year 

that compliance is not achieved, excess emissions penalties will 

apply and sources will either have allowances deducted 

immediately from their accounts or may submit a plan to EPA that 

specifies how the excess SO2 emissions will be offset (EPA, 1997b). 

EPA regulations require CEM for SO2, NOx, and CO2 at all powergenerating facilities over 25MW capacity. During Phase I of the 

Acid Rain Program, the electric utility sources with the highest SO2

emissions levels were required to reduce their SO2 emissions to 

5.7 million tons/year. Within this overall cap, facilities are allowed 

to trade emissions allowances with other affected and nonaffected 

facilities. The CEM and trading provisions have dramatically 

increased the demand for flow and concentration monitors, and 

thus for the reference gases needed for calibrating these instruments. 

The CAAA of 1990 and the 1993 Acid Rain rules have specifically 

required these gas mixtures to be NIST-traceable, which led to a 

large increase in the need for EPA protocol gases. Phase II, which 

begins in the year 2000, tightens the annual emissions limits 

imposed on these large, higher-emitting plants and also sets 

restrictions on smaller, cleaner plants fired by coal, oil, and gas, 

encompassing over 2,000 units in all (Table 2-1). 

Table 2-1. SO2 Emissions Trading Activity 

Year 

Number of Allowances 

(Millions) Average Price (weighted) Number of Transactions 

1994 9.2 $159 215 

1995 16.7 $132 613 

1996 8.2 $68 1,074 

1997 15.2 $110 1,429 

1998 13.5 $117 1,584 

1999 18.7 $207 2,832 

Total 81.5 7,747 

Source: U.S. Environmental Protection Agency (EPA). 2000a. “Cumulative Activity Trading Table.” 

<http://www.epa.gov/acidrain/ats/cumchart.html>. As accessed on December 1, 2000. 

The CEM and trading 

provisions have 

dramatically increased the 

demand for flow and 

concentration monitors, 

and thus for the reference 

gases needed for 

calibrating these 

instruments. 
The Economic Impact of the Gas-Mixture NIST-Traceable Reference Materials Program 

2-12 

The marginal cost of reducing a ton of SO2 from the utility sector 

should be reflected in the price of an allowance. The cost of 

reductions continues to be lower than anticipated when the CAAA 

were enacted, which is reflected in the price of allowances. The 

cost of compliance was initially estimated at $400 to $1,000/ton, 

but declined from over $200 in early 1999 to less than $150 by the 

end of 1999. The price was $131/ton at the 2000 allowance 

auction, and prices have remained in the $130 to $140 range since 

January 2000. Some market observers believe that the lower than 

expected allowance prices during the first several years of the 

program were due primarily to lower than expected compliance 

costs and larger than expected emission reductions, which have 

increased the supply of allowances and put downward pressure on 

prices (EPA, 2000b). 

Benefits of SO2 Emissions Trading. The Acid Rain Program is a new 

method for tackling emerging environmental issues. The allowance 

trading system leverages market forces to reduce SO2 emissions in 

the most cost-effective manner possible. The permitting program 

allows sources the flexibility to tailor and update their compliance 

strategy based on individual circumstances. Because firms can 

transfer allowances among themselves, those operating at high 

pollution abatement costs have alternatives to installing extensive 

pollution control equipment. The emissions trading program allows 

these firms to purchase allowances from firms operating at low 

marginal abatement costs, lowering their cost of compliance 

(Burtraw, 1998). These costs savings are directly experienced by 

electricity generators in terms of capital and operating cost savings. 

Power consumers also benefit because the pollution control capital 

and operating costs would otherwise have been passed along to 

them in the form of higher prices for electricity. 

The CEM and reporting systems provide the accurate accounting of 

emissions necessary to make the program work, and the excess 

emissions penalties provide strong incentives for self-enforcement. 

The General Accounting Office recently confirmed the benefits of 

this approach, projecting that the allowance trading system could 

save industry as much as $3 billion per year (a 50 percent reduction 

in abatement costs) compared with a command and control 

approach typical of previous environmental protection programs 

(EPA, 2000b). 
Section 2 — Overview of the Reference Gas Supply Chain 

2-13 

EPA’s NOx Budget Trading Program. The CAAA of 1990 set a goal 

of reducing NOx by 2 million tons from 1980 levels. The Acid Rain 

Program initially focuses on one set of sources that emit NOx, coalfired electric utility boilers. The NOx program embodies many of 

the same principles of the SO2 trading program in its design. The 

program is results-oriented, flexible in the method used to achieve 

emission reductions, and maintains stringent emissions 

measurement requirements. Like the SO2 emission reduction 

requirements, the NOx program is implemented in two phases that 

began in 1996 and 2000. However, it does not “cap” NOx

emissions as the SO2 program does, nor does it utilize an allowance 

trading system (EPA, 1997b). Rather, the program uses NOx

emissions limitations. 

Emission limitations for the NOx boilers provide flexibility for 

utilities by focusing on the emission rate to be achieved (expressed 

in pounds of NOx per million Btu of heat input) (EPA, 1997b). Two 

options for compliance with the emission limitations are provided: 

compliance with an individual emission rate for a boiler or 

averaging emission rates over two or more units to meet an overall 

emission rate limitation. With the latter option, units must have the 

same owner or operator. These options give utilities flexibility to 

meet the emission limitations in the most cost-effective way and 

allow for the further development of technologies to reduce the cost 

of compliance. 

Interviews with EPA staff (Nichols, 2000) indicate that the NOx SIP 

Call (for 22 states) and the Section 126 Program (for 16 states) will 

increase the number of CEM systems when they are implemented in 

2002. In October 1998, EPA finalized the “Finding of Significant 

Contribution and Rulemaking for Certain States in the Ozone 

Transport Assessment Group Region for Purposes of Reducing 

Regional Transport of Ozone” (commonly called the NOx State 

Implementation Plan [SIP] Call). The NOx SIP Call was designed to 

mitigate significant transport of NOx, one of the precursors of 

ozone. For states opting to meet the obligations of the NOx SIP Call 

through a cap and trade program, EPA included a model NOx

Budget Trading Program rule (Part 96). This trading program was 

developed to facilitate cost-effective NOx emissions reductions from 

large stationary sources. Part 96 provides sources with a complete 

trading program, including provisions for applicability, allocations, 

Interviews with EPA 

staff (Nichols, 2000) 

indicate that the 

NOx SIP Call (for 22 

states) and the 

Section 126 

Program (for 16 

states) will increase 

the number of CEM 

systems when they 

are implemented in 

2002. 
The Economic Impact of the Gas-Mixture NIST-Traceable Reference Materials Program 

2-14 

monitoring, banking, penalties, trading protocols, and program 

administration. States choosing to participate in the NOx Budget 

Trading Program have the flexibility to modify certain provisions 

within the model rule (see www.epa.gov). 

Under Section 126 of the Clean Air Act, states may petition EPA to 

take action to mitigate the significant transport of NOx, one of the 

main precursors of ozone. Eleven states (CT, DE, MA, MD, ME, 

NH, NJ, NY, PA, RI, and VT) and the District of Columbia have 

petitioned EPA to find that certain major stationary sources in 

upwind states emit NOx emissions in violation of the CAAA. They 

believe that these sources exceed amounts of emissions that 

contribute significantly to ozone nonattainment or maintenance 

problems in the petitioning state. 

In May 1999, EPA established the Federal NOx Budget Trading 

Program as the general control remedy for sources that will be 

subject to any future finding under Section 126 petitions. On 

December 17, 1999, EPA finalized findings under the original eight 

petitions (CT, MA, ME, NH, NY, PA, RI, and VT) and the details of 

the Federal NOx Budget Trading Program, including unit 

allocations, for sources affected by the original eight petitions. EPA 

also expects to propose action on the petitions from DC, DE, MD, 

and NJ in the near future. 

Other Emissions Trading Programs. In addition to the Acid Rain 

Program, several other emissions trading systems are in operation 

around the country or are slated to begin operation within the near 

term. Functioning in the same manner, these programs are regional 

rather than national. They include the OTC NOx Budget program 

(consisting of the New England and Mid-Atlantic states as well as 

the District of Colombia and portions of northern Virginia), the 

South Coast Air Quality Management District’s RECLAIM program 

in greater Los Angeles, and the NOx SIP Call for the eastern portion 

of the country, among other programs. Similar to the Acid Rain 

Program, these regional programs are cap and trade systems where 

aggregate emissions for the program are capped at some level, 

polluting sources are provided allowances, and sources are allowed 

to freely trade those allowances to provide better flexibility in 

meeting compliance obligations. RECLAIM was the first such 

system and began operation in 1994 (Coy et al., 2001). 
Section 2 — Overview of the Reference Gas Supply Chain 

2-15 

 2.2.2 Pathways for Establishing Traceability 

EPA protocol gases and other NTGs must be linked to NIST primary 

standards via a traceability chain in which each step is an analysis 

of a gas mixture that is conducted using an analytical reference 

standard that was analyzed in the preceding step. Analysts and 

regulators want to keep the chain as short as possible to reduce the 

uncertainty of the certified concentration of the reference standards. 

As EPA’s traceability protocol was being developed, the shortage of 

SRMs for use as analytical reference standards was a problem for the 

specialty gas producers. The solution was to allow gas 

manufacturers’ intermediate standards (GIMSs) as reference 

standards in the analysis of candidate EPA protocol gases. GMISs 

are intermediate, NIST-traceable reference standards manufactured 

by SGCs that have themselves been certified by SRMs or NTRMs. 

GMISs differ from NTRMs in that they are not certified by NIST staff 

and they are not SRM equivalents. However, once prepared and 

analyzed, they may be used in the same manner as SRMs and 

NTRMs. This option, in addition to NIST SRMs and NTRMs, further 

increases the SGC’s flexibility in establishing traceability. 

However, the use of GMISs in the traceability chain increases the 

amount of analysis required because it introduces an additional 

step. In addition, the analytical procedures for GMISs are more 

rigorous than those for EPA protocol gases. The current version of 

the protocol (EPA, 1997a) sets additional requirements for GMISs: 

Z A candidate GMIS must be analyzed on at least three 

separate dates that are uniformly spaced over at least a 

3-month period. 

Z For each analysis, the 95-percent uncertainty of the 

concentration for the candidate must be less than or equal to 

1.0 percent of the mean concentration. 

Z The analyst must calculate the overall mean estimated 

concentration and the 95-percent uncertainty using the 

protocol’s statistical analysis procedures or equivalent 

statistical procedures. 

Z If the 95-percent confidence intervals for the analyses 

overlap, the candidate GMIS can be considered to be stable. 

Z A GMIS must be recertified every 2 years. 

Z Each GMIS candidate cylinder must be certified; unlike 

NTRMs, they are not assumed to be homogenous as a batch. 

EPA’s traceability protocol 

documents dictate the 

methods and requirements 

needed to establish NIST 

traceability. 
The Economic Impact of the Gas-Mixture NIST-Traceable Reference Materials Program 

2-16 

The use of GMISs for the analysis of EPA protocol gases was 

recognized explicitly by EPA’s Acid Rain Program (EPA, 1993): 

...The EPA regulations define a ‘traceable’ standard 

as one which ‘has been compared and certified, 

either directly or via not more than one intermediate 

standard, to a primary standard such as a ... NBS 

[gaseous] SRM or... [NTRM]. Certification of a 

working standard directly to a SRM or [NTRM] 

primary standard is, of course, preferred and 

recommended because of the lower error. However, 

an intermediate reference standard is permitted, if 

necessary. In particular, a Gas Manufacturer’s 

Intermediate Standard ... that has been referenced 

directly to a SRM or a [NTRM] ... is an acceptable 

intermediate standard and could be used as the 

reference standard on that basis... 

Although specialty gas producers may use GMISs to analyze 

candidate standards, the use of these intermediate standards adds to 

the overall uncertainty of EPA protocol gases. When an SRM, 

NTRM or, rarely, an SRM-equivalent Nederlands Meetinstituut 

(NMi) Primary Reference Material (PRM) is used to analyze a 

candidate, uncertainty arises from the analytical reference standard, 

from the analyzer’s multipoint calibration curve, and from the 

measurement of the candidate. Figure 2-1 presents a simplified 

example of establishing traceability. The Acid Rain Program 

requires EPA protocol gases to have an uncertainty of ±2 percent; 

SRMs, NTRMs, and PRMs generally have an uncertainty of ±1 

percent or less. If a producer elects to use GMISs, it must use much 

more rigorous analytical procedures to reduce the uncertainty of 

each of the two analytical steps in the traceability chain from NIST 

to the candidate gas mixture. However, because of the additional 

step in the traceability chain, gases certified using GMISs have 

greater uncertainty as compared to that of gases certified using 

NTRMs or SRMs. 

 2.3 THE REFERENCE GAS SUPPLY CHAIN 

Figure 2-2 illustrates the NIST-traceable reference gas supply chain 

implied in the previous two sections of this section. The supply 

chain includes NIST, SGCs, and a wide variety of governmental and 

industrial end users. For the discussions in this section, NISTAlthough specialty 

gas producers may 

use GMISs to 

analyze candidate 

EPA protocol gases, 

the use of these 

standards adds 

uncertainty to the 

overall uncertainty 

of EPA protocol 

gases. 
Section 2 — Overview of the Reference Gas Supply Chain 

2-17 

Figure 2-1. Simplified Example of Traceability Chain to NIST Primary Standards 

Because NTRMs are compared directly to the NIST primary standards, their accuracy is comparable to that of an SRM. 

GMISs add an additional step into the production of NTGs. 

NIST

Primary

Standards

SRMs

±1%

NTRMs

±1%

PRMs

±1%

uncertainty

GMISs

NIST-Traceable

EPA Protocol

and Nonprotocol

Gases ±2%

traceable gas mixtures for consumer end uses are segmented into 

two general categories: EPA protocol gases that are required to be 

NIST traceable and nonprotocol gases that are also NIST traceable. 

This section completes the overview of the NTRM program by 

quantitatively investigating how the NTRM program increases the 

supply of NIST-certified standards and characterizes the demand for 

NTGs in terms of end-use applications and consumer preferences. 

The following background information has two purposes. The first 

is to demonstrate how the NTRM program supports SGC’s current 

NTG production. Second, this information forms much of the 

foundation used to inform the counterfactual scenario of the 

absence of the NTRM program to be presented in the next section. 
The Economic Impact of the Gas-Mixture NIST-Traceable Reference Materials Program 

2-18 

Figure 2-2. NIST-Traceable Gas-Mixture Supply Chaina

NIST

SRM

Program

SRMs

NTRM

Program

• Environmental Compliance

• Product Design

• Process Control

End Users

EPA

Regulations

SGCs

NIST-Traceable

Protocol Gases

NIST-Traceable

Nonprotocol Gases

NTRMs

GMISs

NTRM

Production

aNot illustrated in Figure 2-2 are the number of SRMs and small number of NTRMs that are sold directly to end users or 

the sale of NTRMs between SGCs. 

 2.3.1 SGCs 

Gas-mixture reference gases are a segment of the specialty gas 

market, which is part of the larger industrial gas industry. Specialty 

gases are distinguished from industrial-grade gases by the more 

meticulous blending and testing processes used in their production, 

certification, and analysis. Producers expend resources to verify 

and certify the raw materials used in producing the gas and to 

analyze the gas’s storage medium. Among specialty gases, gasmixture NTRMs are considered high-end because of rigorous testing 

conducted by SGCs on the NTRM both in-house and at NIST. As 

discussed earlier, once certified by NIST, NTRMs are the functional 

equivalents of SRMs. 
Section 2 — Overview of the Reference Gas Supply Chain 

2-19 

In this study, the term “SGCs” refers primarily to the nine firms 

actively participating in NIST’s NTRM program. These firms are 

listed in Table 2-2 along with the total sales and employment figures 

for each entity. It is important to note that the EPA protocol gases, 

NIST-traceable nonprotocol gases, or other NTRM-supported 

products may be a small percentage of the total annual revenues for 

some of these firms. SGCs also produce a broad spectrum of 

certified reference gas mixtures that are not NIST-traceable. 

However, their other specialty-gas operations benefit from the 

breadth of professional experience and financial resources that 

accompany being a division of a large corporation. For example, 

industry experts acknowledge that the technical expertise and strict 

analytical requirements associated with participation in the NTRM 

program create knowledge and quality spillovers that enhance 

SGCs’ other gas-mixture product lines. 

Table 2-2. SGC Participating in the NTRM Program 

Nine SGCs actively participate in the NIST NTRM program. 

SGC Parent Employment 

Parent Sales 

(millions) 

AGA Gas, Inc., a unit of Linde AG (Germany) 46,400 $7,900 

Air Liquide America Corp., a unit of L’Air Liquide S.A. (France) 30,300 $7,626 

Air Products and Chemicals, Inc. 17,800 $5,717 

Airgas, Inc. 7,600 $1,629 

BOC Gases, Inc., a unit of The BOC Group plc (U.K.) 43,171 $5,556 

Praxair, Inc. 24,271 $5,158 

Matheson Tri-Gas, Inc., a unit of Nippon Sanso Ltd. (Japan) 1,638 $181 

Scott Specialty Gases, Inc. 600 $100 

Spectra Gases, Inc. 132 $25 

Sources: Hoovers, Inc. 2002. [Online computer file.] Available at <www.hoovers.com>. 

American Business Corporation (ABI). 2002. American Business. [Computer file.] 

The market for EPA protocol gas mixtures is very competitive 

because of the stringent analytical requirements all firms must meet 

to confirm that their products are NIST traceable. Consequently, 

product differentiation is minimal, and substitutes for one firm’s 

NIST-traceable product are readily available from other SGCs. 

According to SGCs, end-user consumption decisions are therefore 

typically based on established business relationships or previous 

experience with a supplier. Timeliness of delivery and availability 

Gas-mixture reference 

gases are a segment of the 

specialty gas market, which 

is part of the larger 

industrial gas industry. 

Most industrial gases are 

produced in large volumes 

and undergo only the 

quality assurance needed 

to ensure compliance with 

quality specifications 

and/or legal requirements. 

Examples of industrial 

gases include acetylene for 

welding and medical 

breathing oxygen. 
The Economic Impact of the Gas-Mixture NIST-Traceable Reference Materials Program 

2-20 

are the key product characteristics that distinguish suppliers of 

NIST-traceable gas mixtures. 

 2.3.2 NIST-Traceable Reference Gases 

For this study, we group gas-mixture reference standards that are 

supported by the NTRM program into four categories: 

Z NTRMs, 

Z GMISs, 

Z EPA protocol gases, and 

Z other NTGs. 

Table 2-3 compares some general characteristics of the four 

available types of calibration standards. It is not intended to present 

all significant differences among the standards. However, it does 

depict the differences between commercially available standards. 

In general, standards with lesser uncertainty are more expensive and 

more difficult to obtain than are standards with greater uncertainty. 

Table 2-3. Calibration Standards 

In the market for NIST-traceable gas-mixture calibration standards, cost and uncertainty are inversely related. 

Characteristics of 

Calibration Standard Vendor 

Certification 

by 

Traceability 

to 

Batch 

Size 

Uncertainty 

(%) Availability Cost 

SRM NIST NIST NIST 50+ ±1 Very limited Highest 

NTRM Producer NIST NIST 10+ ±1 Limited High 

EPA Protocol Gas Producer Producer NIST Varies ±1 to 5+ Good Moderate 

Producer-Certified 

Standard (GMIS, 

other NIST traceables) 

Producer Producer Producer Varies ±1 to 10+ Good Lowest 

NTRM Production Levels 

Section 2.1 provided an overview of the NTRM program, including 

the requirements that SGCs must meet for submitting NTRM batches 

to NIST and NIST’s NTRM certification process. This discussion 

reviews NTRM use and provides historical production statistics. To 

illustrate the program’s role in increasing the supply of NISTcertified reference material, SRM sales statistics for the same period 

are also presented. 
Section 2 — Overview of the Reference Gas Supply Chain 

2-21 

SGCs primarily use NTRMs in two ways: to produce EPA protocol 

gases and other NTGs and to generate revenue by offering them for 

sale on the open market. Although some are sold, about 95 percent 

of the NTRMs are used in-house to produce EPA protocol gases, 

GMISs, and other NTGs. The actual “market” for NTRMs is 

negligible. NTRMs are used to generate the calibration curves that 

are needed in the naming of EPA protocol gases, GMISs, and other 

NTGs. 

When SGCs do sell NTRMs, it is usually to other SGCs, under very 

specific terms and usage agreements. Several of the SGCs that are 

affiliated with the NTRM program do not produce all of the species 

of NTRMs that they use in their analyses. In those instances where 

they do not manufacture but wish to obtain one or more NTRMs, 

they do so via contract with other SGCs. Similarly, some gas 

companies purchase NTRMs to manufacture their own protocol 

gases, opting not to directly participate in the NTRM program. 

SGCs began submitting candidate NTRM batches for NIST review 

and certification in 1993. From 1993 through 2001, 402 batches of 

NTRMs were analyzed and certified by NIST, accounting for a total 

of 9,277 cylinders (see Tables 2-4 and 2-5). The most popular 

species were carbon monoxide, carbon dioxide, nitrogen oxide, and 

sulfur dioxide, species that correspond to testing and monitoring 

requirements in several EPA regulations. 

To illustrate the importance of NIST-certified reference gases made 

available by the NTRM program, Table 2-6 lists the SRM unit sales 

for the same period. From 1993 through 2001, NIST’s SRM 

Program sold 2,155 gas-mixture SRM cylinders. Because SRMs 

contain one-fifth the gaseous volume of NTRMs, NIST would have 

had to produce approximately 46,000 additional SRMs to meet the 

demand for NIST reference materials. NIST’s capacity, however, is 

only about 500 gas-mixture SRM cylinders a year, or 4,500 over the 

9-year period. 

NTRMs are used mostly as 

a captive supply of 

reference standards: they 

are rarely sold on the 

commercial market but are 

instead used in-house to 

produce other products. 

When NTRMs have been 

sold, the average price is 

approximately $3,500. At 

that price, all the NTRMs 

that SGCs have produced 

since 1992 have a 

commercial value of $32.5 

million. 
The Economic Impact of the Gas-Mixture NIST-Traceable Reference Materials Program 

2-22 Table 2-4. The Number of NTRM Batches 

Since the inception of the NTRM program, SGCs have submitted 402 batches of NTRMs for NIST certification. 

NTRM Species 1993 1994 1995 1996 1997 1998 1999 2000 2001 Total 

C3H8 1 1 6 3 10 12 5 38 CH4 2 1 1 1 6 2 13 

CO 3 2 6 8 14 17 12 11 2 75 CO2 3 6 2 19 4 8 11 3 56 

EtOH 5 5 H2S 4 3 7 

Natural gas 1 1 2 NO 3 3 23 9 4 13 10 10 9 84 NO2 2 2 

NOx 2 2 

O2 6 2 20 5 5 2 40 

SO2 7 1 18 11 11 13 2 8 7 78 

Total 19 8 59 34 61 71 57 62 31 402 

Source: NIST NTRM program. 
2-23

Section 2 — Overview of the Reference Gas Supply Chain

Table 2-5. The Number of NTRM Cylinders Certified Between 1993 and 2001, 9,277 NTRM cylinders were certified. 

NTRM Species 1993 1994 1995 1996 1997 1998 1999 2000 2001 Total 

C3H8 15 19 122 44 184 246 105 735 CH4 50 30 23 16 134 49 302 

CO 71 60 94 137 296 395 432 262 52 1,799 CO2 75 210 35 380 48 181 280 84 1,293 

EtOH 69 69 H2S 57 33 90 

Natural gas 12 21 33 NO 77 77 588 229 129 245 464 170 211 2,190 NO2 79 79 

NOx 35 35 

O2 134 20 363 114 84 40 755 

SO2 163 35 371 300 262 277 94 260 135 1,897 

Total 451 221 1,397 800 1,293 1,388 1,660 1,370 697 9,277 

Source: NIST NTRM program. 
The Economic Impact of the Gas-Mixture NIST-Traceable Reference Materials Program 

2-24Table 2-6. Number of SRM Cylinders Sold 

During the NTRM programs operation, the SRM program sold 2,155 SRM cylinders. 

SRM Species 1993 1994 1995 1996 1997 1998 1999 2000 2001 Total 

C3H8 22 23 5 22 11 13 1 13 110 CH4 20 9 1 11 14 5 6 6 72 

CO 27 1 36 13 15 7 99 CO2 31 42 18 9 14 11 14 6 145 

H2S 25 24 28 17 14 26 134 

NO 136 165 93 122 83 90 63 148 175 1,075 NOx 5 18 2 7 8 40 

SO2 85 36 94 49 76 21 37 40 42 480 

Total 326 293 238 232 214 178 146 245 283 2,155 

Source: NIST NTRM program. 
Section 2 — Overview of the Reference Gas Supply Chain 

2-25 

GMISs 

GMISs are used as an in-house standard to increase the number of 

NIST-traceable standards that can be produced using one NTRM. 

By certifying a batch of GMISs against an NTRM, the SGC 

significantly increases the number of protocol gases it can produce 

while lowering its costs. For example, suppose an SGC can certify 

150 EPA protocol gases using one NTRM cylinder, and it can get 

half as many GMISs using that same cylinder because of different 

analytical requirements. Because the cylinder sizes and analytical 

requirements for producing protocols from NTRMs and GMISs are 

the same, the SGC can produce the same number of EPA protocol 

gas cylinders (150) from the GMIS as from the NTRM. Thus, by 

introducing the GMIS method into the traceability chain, the SGC 

can reap as many as 11,250 protocol gas cylinders from one NTRM, 

as opposed to 150 if the protocol gases were analyzed directly using 

NTRMs. 

However, the GMIS method increases the uncertainty of the EPA 

protocol gases and increases the end-users’ “distance” from the 

NIST primary standard. Also, because NTRMs are assumed to be 

homogenous as a batch, and GMISs are not, protocol gases certified 

by GMISs are subject to the disparate data issues that accompany 

each cylinder. Exact production data on the number of GMIS 

cylinders produced annually are unavailable. 

EPA Protocol Gases 

This analysis refers to two classes of EPA protocol gases. The first 

class consists of those EPA protocol gases that have been certified 

directly against an NTRM or another NIST-certified standard 

following a written EPA protocol method. These gases are called 

“directly traceable” EPA protocol gases. They are one step away 

from the primary standard. In some instances, SRMs may be used to 

assay these gases should NTRMs not be available; however, it is 

rare. Directly traceable EPA protocol gases often have analytical 

uncertainty of about ±1 percent. 

The second class is “indirectly traceable” EPA protocol gases that 

are traceable to NIST; however, they have been assayed via GMISs. 

They are, therefore, two steps away from the primary standard. As 

described during the discussion of GMISs, these gases are often less 

costly and are of higher analytical uncertainty because of the 

By using GMISs, the 

number of protocol gases 

produced from a single 

NTRM can be increased by 

a factor of about 100. 

However, the additional 

GMIS step increases the 

uncertainty of the protocol 

gas. 

Directly traceable gases are 

one step away from the 

NIST primary standard and 

are typically assayed using 

NTRMs. 

Indirectly traceable gases 

are two steps away from 

the NIST primary standard 

and are typically assayed 

using GMISs. 
The Economic Impact of the Gas-Mixture NIST-Traceable Reference Materials Program 

2-26 

insertion of the GMIS intermediate step in the gas analysis chain. 

Indirectly traceable EPA protocol gases often have analytical 

uncertainty of ±2 percent, but it is possible that they may be 

categorized as ±1 percent if the SGC minimizes the uncertainty from 

the GMIS using rigorous analysis techniques. 

Other NTGs 

SGCs also produce nonprotocol but NIST-traceable calibration 

gases for the automotive emissions testing, ambient air quality, and 

other specialty markets. Although these gases are not assayed using 

the EPA protocol, they still meet performance standards and 

specifications defined by their end use. Examples include standards 

for automotive emissions testing, air quality testing, and custom 

applications. 

 2.4 REFERENCE GAS END USE 

Specialty gas applications fall into one of four general areas: 

environmental, process control, manufacturing, and analytical 

laboratory (Gittler and Denyszyn, 2000). Some of these 

applications do not require NIST traceability. Users generally do 

not use NTGs unless legally required to do so, because the 

additional analytical certification increases their price. However, 

there are certain process and laboratory applications in which the 

increased accuracy of NTGs is desirable and economical. 

The calibration of environmental monitoring equipment is currently 

the primary application for reference gases. Equipment used to 

assess the chemical composition of air, water, soil, and other 

samples must be properly calibrated using materials of known or 

certified values. In some cases, regulations stipulate the type, use, 

and quality of the reference gas and the method by which the gas is 

used and the machine is calibrated. Calibration ensures that the 

equipment is functioning properly, providing users with readings 

that are as accurate as possible, given an amount of uncertainty. 

Applications in this category include mobile source testing (i.e., 

cars, planes); stationary source testing (e.g., utilities, combustion 

boilers and turbines, chemical processes); and ambient monitoring 

(e.g., soil, water, and air analysis). 
Section 2 — Overview of the Reference Gas Supply Chain 

2-27 

Process control applications to calibrate sensitive production 

equipment are also a major use of reference and other specialty 

gases. Petroleum refineries and chemical plants use expensive and 

sensitive catalysts during the production process. These facilities 

use specialty gases to calibrate the equipment, which tracks input 

and end products as well as the level of impurities in the production 

streams. Monitoring helps protect end products’ chemical 

composition and ensures that expensive inputs are handled properly 

and not needlessly wasted. A process control example is industrial 

boilers at oil refineries. Oxygen and carbon monoxide sensors are 

used to check the quality of the steam used as process heat during 

the manufacturing process. 

In manufacturing applications, specialty gases are used during the 

production process as catalysts or protectants, or they may become 

part of the final product. In semiconductor manufacturing, gases 

are used to build the layers and circuitry contained on a microchip. 

The food and beverage industry uses specialty gases to prolong the 

shelf life of processed foods, and specially designed gas mixtures 

are used to inhibit bacterial growth and improve product 

appearance. 

Finally, specialty gases are used at analytical laboratories as support 

and calibration gases for scientific experiments, research, and 

analysis. In this context, they serve as support gases (such as 

carriers and fuel) for gas chromatography, optical spectrometry, 

spectroscopy, and other instruments and techniques (Gittler and 

Denyszyn, 2000). Calibration gases are used for quality control and 

quality assurance. The type of gas used is not generally mandated 

by law but by the requirements of the end user. 

NIST-Traceable Applications. NTGs supported by the NTRM 

program are most frequently used in environmental monitoring and 

analytical laboratory applications. Of these, industry experts 

estimate that at least 70 percent are used for environmental 

applications. Manufacturing and process control applications tend 

to incorporate producer-certified gases because the acceptable 

range of uncertainty may be wider. They are also not required by 

law to use more expensive NTGs. Environmental and analytical 

laboratory applications, on the other hand, often follow regulatory 

guidelines established by federal, state, and local agencies. 

Specialty gas applications 

generally fall into the 

following areas: 

Z environmental, 

Z process control, 

Z manufacturing, and 

Z analytical laboratory 

(Gittler and Denyszyn, 

2000). 
The Economic Impact of the Gas-Mixture NIST-Traceable Reference Materials Program 

2-28 

Decisions about which gases to use in process control and 

manufacturing applications are independent business decisions. 

Where there is no legal mandate, plants and laboratories must 

balance economic, scientific, and quality motives (quality/grade vs. 

price) when selecting the appropriate gas (Gittler and Denyszyn, 

2000). 

 2.4.1 End Use by Industry 

End users of NTGs fall into four major consumer groups: electric 

utilities, petrochemical firms, transportation equipment firms, and 

government agencies and independent organizations. Although 

firms that do not fit into these groups may purchase NTGs from time 

to time, the members of these consumer groups are the principal 

buyers. Table 2-7 provides an overview of the various applications 

that NTGs are used for by different consumer groups. 

Table 2-7. Principal End-Use Markets for NTGs 

Electric 

Utilities 

Petrochemical 

Firms 

Transportation 

Equipment 

Firms 

Other 

Firms 

Government 

Agencies and 

Independent 

Organizations 

Stationary source monitoring 

 CEMS calibration (regulated) X 

 CEMS calibration (voluntary) X X X 

Ambient monitoring 

 Ambient air, soil, and/or 

water monitoring 

X X X 

Mobile source monitoring 

 Emissions testing equipment 

calibration (autos)

 X X 

Product development and 

testing 

 

 Product design and 

development 

 X X 

 Product testing X X X 

Process control 

 Production monitoring X X 

 Equipment monitoring X X 

 Verify accuracy of third-party 

standards 

X X X X X 

 Verify equipment calibration X X X X X 
Section 2 — Overview of the Reference Gas Supply Chain 

2-29 

Electric Utilities 

The electric utility industry is one of the largest consumers of EPA 

protocol gases and other NTGs. Pursuant to regulations laid out 

under the EPA’s Acid Rain Program, electric utilities conduct daily 

calibrations of their CEM systems using EPA protocol gases. 

CEM systems are used to monitor the chemical composition of 

exhaust gases and other waste streams that are emitted to the 

environment during electricity generation. Nearly all electricity in 

the U.S. is generated through the combustion of fossil fuels, which 

release nitrogen oxides, sulfur oxides, and other pollutants when 

burned. These pollutants are the catalysts for acid rain and other 

forms of environmental degradation. The electric utility industry 

accounts for a large portion of sulfur oxides released into the 

environment. 

Calibrating CEM systems allows utilities to accurately compile data 

and to monitor emissions. Accurate measurements facilitate 

regulatory compliance and participation in the emissions trading 

program. Preliminary discussions with SGCs suggest that more 

accurate measurements allow utilities to sell more emissions credits 

on the open market than they would otherwise sell, all else held the 

same. 

The calibration materials and methods are explicitly detailed in the 

laws governing emissions monitoring at electricity generation plants. 

Many laws dictate the use of EPA protocol gases. Furthermore, if 

the plant is required by local or state agencies to conduct ambient 

air, soil, or water monitoring, it may be required to do so using 

NTGs. The following sections in this report present further 

discussion of electric utilities’ and other firms’ obligations under the 

Acid Rain Program and other environmental programs and the role 

NTGs play in those programs. 

Petrochemical Firms 

Like the electric utility industry, petrochemical firms use NTGs to 

calibrate CEM and ambient monitoring systems; they also use them 

to monitor delicate production processes and equipment. Oil 

refineries and chemical plants must comply with a suite of 

environmental regulations, many of which require measurements 

that are traceable to NIST. Furthermore, research and development 

divisions conduct sensitive analyses during product development, 

End users of NTGs fall into 

four major user groups: 

Z electric utilities, 

Z petrochemical firms, 

Z transportation 

equipment firms, and 

Z government agencies 

and independent 

organizations. 
The Economic Impact of the Gas-Mixture NIST-Traceable Reference Materials Program 

2-30 

and enhanced measurement accuracy aids in the analysis of 

product testing. Online analyzers monitoring input streams may be 

calibrated with NTGs to more effectively track impurities and verify 

product quality. Petrochemical firms use both EPA protocol gases 

and nonprotocol gases. They may also purchase NTGs to verify the 

quality of third-party standards. 

Transportation Equipment Firms 

Transportation equipment firms use NTGs in the engine design and 

development process. Original equipment manufacturers (e.g., 

Ford, General Motors, DaimlerChrysler) and suppliers (e.g., Dana, 

Johnson Controls, Delphi, TRW) use these gases to verify that the 

engines they are designing meet both product and environmental 

emissions standards. These firms are not required to use EPA 

protocol gases, but commonly use both SRMs and NTRMs to verify 

engine functions. 

Government Agencies and Independent Organizations 

Government agencies and independent organizations, such as 

auditors and nonprofit research organizations, purchase NTGs to 

calibrate environmental monitoring equipment, to verify calibration, 

and to check the quality of third-party standards. 

State, local, and federal agencies maintain ambient air, soil, and 

water or emissions monitoring systems, among others, to protect the 

public health and the environment. Independent organizations may 

operate monitoring systems in a watchdog capacity or as part of an 

environmental audit or research. As with utility and petrochemical 

monitoring systems, these systems must be properly calibrated for 

readings to be credible. In particular, NIST traceability may be 

required if monitoring is used to identify environmental law 

violations and support litigation. 

Calibration of automotive emissions testing equipment is another 

example of government applications. Many regulatory authorities 

require automobile emissions testing, both during the mobile source 

design phase and during post-consumer operation, such as IM240 

and BAR90 (see Table 2-8). In the post-consumer area, auditors 

may use NTGs to verify that the emissions testers are functioning 

properly. They also may be using those gases to verify that a thirdparty gas they are using for calibration is sufficiently accurate. 
Section 2 — Overview of the Reference Gas Supply Chain 

2-31 

Table 2-8. Examples of Metropolitan Areas Conducting Post-Consumer Emissions Testing 

This list was produced as of 2000 and is not intended to be exhaustive. 

State Metropolitan Areas 

Alaska Anchorage and Fairbanks 

Arizona Phoenix and Tucson 

California Statewide 

Colorado Denver-Boulder and Ft. Collins-Colorado Springs 

Connecticut Statewide 

Delaware Statewide 

District of Columbia Citywide 

Georgia Atlanta 

Idaho Boise 

Illinois Chicago and East Saint Louis 

Indiana Chicago and Louisville 

Kentucky Louisville 

Maryland Baltimore and D.C. area 

Massachusetts Statewide 

Missouri Saint Louis 

Nevada Reno and Las Vegas 

New Jersey Statewide 

New Mexico Albuquerque 

New York Statewide 

North Carolina Charlotte, Raleigh-Durham, and Greensboro-Winston-Salem 

Ohio Cleveland-Akron and Dayton-Springfield 

Oregon Portland 

Pennsylvania Philadelphia and Pittsburgh 

Rhode Island Statewide 

Tennessee Memphis and Nashville 

Texas Dallas-Ft. Worth, El Paso, and Houston 

Utah Salt Lake City, Provo, and Ogden 

Vermont Statewide 

Virginia D.C. area 

Washington Seattle, Tacoma, Spokane, and Vancouver 

Wisconsin Milwaukee and Sheboygan 
The Economic Impact of the Gas-Mixture NIST-Traceable Reference Materials Program 

2-32 

 2.4.2 End Use by Analytical Accuracy Demanded 

A second important dimension of the market for reference gases is 

the level of compositional uncertainty, which is reflected in the 

stated or guaranteed certification accuracy. This section describes 

the demand for NIST-traceable standards by the level of accuracy 

demanded and NIST traceability. 

Current SRM Users (Ultrahigh Accuracy Demanders) 

The customers with the highest need for calibration accuracy in 

reference gases typically purchase gas and gas-mixture SRMs 

directly from NIST to ensure that they are obtaining the best 

possible accuracy. These organizations benefit indirectly from the 

current NTRM system because of faster turnaround and easier 

availability of SRM cylinders due to decreased demand for SRMs. 

In addition to SGCs, important examples of this type of purchaser 

are the Big-Three automakers, whose automobile and light truck 

designs must meet EPA tailpipe emission standards. A failure of an 

engine to meet the required standards could force a redesign that 

would cost hundreds of millions of dollars. Likewise, design 

allowances to cover avoidable uncertainties in the concentration of 

reference standards would create cost and performance penalties in 

the vehicle, which would also be prohibitively costly. 

In the absence of the NTRM program, the automotive industry would 

continue to demand SRMs, and their high willingness to pay (WTP) 

means that they would likely obtain SRMs in any likely allocation 

scheme, either by entering the queue quickly and repeatedly or by 

repurchasing SRMs bought by those at the front of the queue. From a 

methodological standpoint, we therefore consider all end users now 

purchasing SRMs directly from NIST to be these high demanders. We 

will net out their purchases from the total capacity in determining 

counterfactual market equilibrium (as described in Section 3). 

Purchasers of High-Accuracy Gases 

In the current NTRM program, SGCs produce a large number of 

gases and gas mixtures that they certify to have ±1 percent relative 

accuracy. These are produced primarily from NTRMs. Included in 

this category are most of the products sold as “EPA Protocol” and 

“EPA Methods” gases. As the names suggest, the purchasers of 

these products are primarily firms that are required to show NIST 

Users currently purchasing 

SRMs for design activities 

would continue to 

purchase them in the 

absence of the NTRM 

program. 
Section 2 — Overview of the Reference Gas Supply Chain 

2-33 

traceability for emissions monitoring. They may demand the high 

accuracy to support emissions trading, to allow operation as close 

as possible to optimal conditions, or to inspire maximum 

confidence in their calibration results. For the remainder of this 

study, we will refer to high-precision, low uncertainty gases 

produced by SGCs using NTRMs as directly traceable gases. 

Users of directly traceable gases would be most affected in the 

absence of the NTRM program. As we explain in Section 3, the 

reduced supply of these gases would mean that they would have to 

switch to indirectly traceable gases; their counterfactual behavior is 

of the most interest for this study. 

Lower-Accuracy Gas Users 

A third class of reference gas users, less demanding than the first 

two, requires a lower level of certified compositional accuracy. The 

SGCs make a variety of products for these users, certified to have no 

more than 2 percent relative uncertainty; we call these indirectly 

traceable gases. For example, BOC sells a line of this type of gas 

that they call “CEM Calibration Standards” (BOC, 2000). In most 

cases, these products are certified with reference to GMISs rather 

than from NTRMs; if the GMIS is named to an SRM or NTRM, the 

gases are still NIST traceable. 

Examples of these users include petrochemical firms as well as 

electric utilities that are not trading SO2 allowances. As detailed 

below in the counterfactual scenario described in Section 3, the 

supply of these calibration gases would be relatively unaffected in 

the absence of the NTRM program. 

3-1 

 3 Methodology 

This section presents the economic and analytical methodology for 

determining the benefits of the NIST Gas-Mixture NTRM program. 

This document provides the conceptual foundation and identifies 

the data needs for surveys of SGCs and selected end users. 

Section 3.1 details the economic rationale for the NTRM program, 

focusing on economic benefits generated by government 

involvement. In Section 3.2, the counterfactual is specified that 

represents the likely state of the market for high-accuracy calibration 

gases in the absence of NIST involvement. This counterfactual 

forms the basis for technical and economic impact metrics that are 

presented in Section 3.3. Details of our estimation approach are 

presented in the last section. 

 3.1 ECONOMIC RATIONALE FOR NIST 

INVOLVEMENT 

In many ways, the use of SRMs and NTRMs in the reference gas 

supply chain is essential in that it provides a well defined 

traceability to existing primary standards for chemical 

measurements. EPA recognized the expertise and scientific stature 

of NIST by writing traceability requirements into most of their 

current regulations for stationary source, mobile source, and 

ambient air monitoring. As a result, NIST’s provision of SRMs and 

certification of NTRMs now represents an important component in 

the supply chain infrastructure of many U.S. industries and some 

governmental organizations. In return, the EPA regulations created 

an unprecedented demand on NIST’s laboratory to produce gas 

mixtures to support end users’ needs for traceability. 
The Economic Impact of the Gas-Mixture NIST-Traceable Reference Materials Program 

3-2 

This produces a fundamental difference between the NTRM 

program and many other NIST activities, which are aimed at 

providing standards infrastructures and other public goods. The 

value of these initiatives lies primarily in eliminating market failures 

or increasing spillovers and other positive externalities. In the 

NTRM case, however, the benefits provided by NIST’s activities are 

subsumed in the supply chains of the purchasing organizations. 

If the NIST program that certifies traceable standards was a private 

enterprise, it would set prices sufficiently high to maximize profits 

given the development and production costs. A great deal of end 

users’ WTP could be appropriated by the producer of the SRMs. An 

economic analysis of the NTRM program would not be necessary to 

establish its social value (although such a study could capture 

spillovers not appropriated by NIST). The mere existence of each 

reference gas product would be a strong indication that private (and 

thus social) benefits exceed the costs. If this were not the case, the 

reference gas in question would not be offered for sale. 

But NIST is not a profit-maximizing firm and sets prices to cover 

only its development and operating costs. Thus, this study 

undertakes the task of valuing the contribution of one step in a 

supply chain, albeit one of unusual importance in affecting the 

quality of the final products. The use of a counterfactual will allow 

us to isolate these evident and quantifiable benefits by comparing 

the current state of the world to a hypothetical one in which the 

NTRM program does not exist. In this counterfactual world, we 

would observe higher costs and excess demands that would appear 

to be market failures. 

 3.1.1 Effect of Constraints 

EPA regulations are the most important factor driving the demand 

for NTGs. The analysis supporting EPA’s requirements for NIST 

traceability are not available to us, but we must assume that they 

show a net benefit for social welfare in the U.S. By implication, we 

also assume that these benefits outweigh any negative 

consequences from the large increase in the demand for NISTtraceable reference gases created by the regulations. We therefore 

consider the regulatory demand as an exogenous, binding constraint

on the markets for calibration gases. Given this exogenous demand, 

NIST’s actions can help avoid market failures by reducing 

This study 

undertakes the task 

of valuing the 

contribution of one 

step in a supply 

chain, albeit one of 

unusual importance 

in affecting the 

quality of the final 

products. 
Section 3 — Methodology 

3-3 

equilibrium costs in this constrained system and allowing markets to 

clear by providing for expanded supply. 

For this analysis, market failures are viewed as factors leading to the 

inefficient allocation of resources within a fixed set of constraints. 

In this context, constraints are exogenous factors over which market 

participants have no influence, at least in the short run. The main 

constraints influencing the market for EPA protocol gases and other 

NTGs are categorized as follows: 

Z resource constraints (availability of SRMs) 

Z production technology constraints (technology determining 

the process for converting SRMs into EPA protocol gases) 

Z regulatory constraints influencing demand (EPA mandates 

traceability to NIST primary standards) 

The resource constraints are primarily those within NIST itself. The 

Gas Metrology and Classical Methods group in the CSTL has 

extensive expertise in measurement technology and analytical 

methods, but it is not a manufacturing operation. Their primary 

mission to advance the science of metrology becomes strained by 

the need to certify SRMs for industry use. Increasing demands on 

their capacity, such as those created by the emissions trading 

provisions of the Acid Rain program, would threaten their ability to 

perform their core function. As a result, the gas metrology group 

has indicated to RTI that their supply would be limited to 500 SRM 

cylinders per year without the NTRM program. 

Production technology constraints relate to the process by which 

SGCs produce directly traceable EPA protocol gases. To certify the 

composition and relative accuracy of a batch of gas-mixture 

cylinders, the producing firms must analyze samples of candidate 

cylinders alongside an SRM or NTRM of known uncertainty. 

Because this consumes a portion of the standard mixture, the 

number of cylinders that can be certified in this way is limited. One 

of the objectives of the SGC interviews will be to determine the 

severity of this production constraint, which will be an important 

factor in our estimate of counterfactual supply. 

Regulatory-demand constraints established by the EPA and other 

government agencies have been discussed above and are 

incorporated into our economic analysis in several different ways, 

particularly in determining the demand for the various reference 
The Economic Impact of the Gas-Mixture NIST-Traceable Reference Materials Program 

3-4 

gases. As mentioned before, we will maintain the assumption that 

the requirements by EPA for NIST traceability would not be relaxed 

in the absence of the NTRM program. 

 3.1.2 Role of the NTRM Program 

In light of the constraints discussed above, the primary role of the 

NTRM program is to facilitate the supply of directly traceable EPA 

protocol gases, given fixed SRM production and EPA regulations. 

The NTRM program does this by working with SGCs to create the 

infrastructure needed to lower the cost and increase the production 

capacity of NIST-traceable reference materials. As shown in 

Figure 3-1, the NTRM program shifts out the supply curve 

representing the technology production function for NTGs. 

Figure 3-1. Illustration of Potential Supply Impact of NTRM Program 

Marginal Cost

of Production

Quantity Available

NIST Capacity Constraint

Supply of SRMs + NTRMs

Supply of SRMs

 3.1.3 Potential Market Failures 

The potential market failures being addressed by the NTRM program 

are directly associated with the production of EPA protocol gases 

from SRMs. Table 3-1 lists the three major market failures 

addressed by the NTRM program. 

It is assumed that 

the requirements by 

EPA for NIST 

traceability would 

not be relaxed in the 

absence of the 

NTRM program. 
Section 3 — Methodology 

3-5 

Table 3-1. Three Major Market Failures Addressed by the NTRM Program 

Potential Market Failure Role of NTRM Program 

Supply limitations on NIST-traceable reference gases 

force demanders of high-accuracy calibration gases 

(directly traceable gases) to accept lower accuracy 

products (indirectly traceable gases) 

NTRM program allows SGCs to produce high 

volumes of directly traceable gas from certified 

NTRM batches 

R&D needed to develop new EPA protocol gas 

production technology exceeds resources of 

individual SGCs and returns may not be appropriated 

by individual firm 

NIST’s unique position to provide low-cost, highly 

technical solutions to the problem of mass 

production of directly traceable gases 

A small group of companies monopolizes a scarce 

resource (SRMs) and becomes the oligopolistic 

suppliers of EPA protocol gases 

NTRM program counterbalances SRM resource 

constraints by increasing production capacity and 

flattening marginal cost curves, thus eliminating 

market power for individual firms 

1. Capacity constraints within NIST limit the number of SRM 

batches that can be prepared and certified within a given 

period of time. By allowing SGCs to produce batches of the 

gas mixtures and restricting NIST’s necessary role to that of 

interpreting analytical results and testing a small number of 

cylinders, the NTRM program significantly expands supply 

of high quality (accuracy < ±1 percent relative) reference 

gases. These, in turn, can be used to meet end users’ 

demand for directly traceable calibration gases. 

2. The private sector may not have the resources or incentives 

to provide the infrastructure or technologies needed to 

enhance the production process linking SRMs to EPA 

protocol gases. Through NIST’s unique expertise and 

certification capabilities, the cost of providing directly 

traceable materials is greatly reduced. Whereas 

enhancements to other production processes (such as 

improving the quality of indirectly traceable gases) are the 

potential alternative to the NTRM program, it is unlikely that 

an individual SGC would have the resources to develop 

alternative technologies. In addition, technology spillovers 

may affect their returns to innovation, further limiting the 

probability of investment in these areas. Similarly, several 

experts have expressed reservations about whether new 

processes for significantly expanding the number of directly 

traceable gases that can be produced from a single SRM are 

technically feasible in the near future. Thus, this may be an 

area in which the public sector has a technological 

advantage leading to a lower production cost. 

3. The market for EPA protocol gases and its competitive 

structure have also been changed by the NTRM program. 

The absence of the NTRM program would increase the 

potential for imperfect markets where SGCs could exploit 
The Economic Impact of the Gas-Mixture NIST-Traceable Reference Materials Program 

3-6 

the limited supply of SRMs. Given the constraints, there is a 

strong potential that a small group of companies 

monopolizing the scarce resource (SRMs) could become 

oligopolistic suppliers of EPA protocol gases. This could 

result in substantial economic inefficiencies in a market 

characterized by highly inelastic demand due to regulatory 

mandates. 

 3.1.4 Additional Economic Benefits from the NTRM 

Program 

We anticipate that a large part of the economic benefit of the NTRM 

program will come from preventing market failure and eliminating 

negative market impacts from the constraints discussed above. 

However, we also qualitatively examine in our surveys additional 

benefits conferred by NIST. These are a result of the valuable 

technical skills possessed by the scientists in the Gas Metrology and 

Classical Methods laboratory of NIST’s CSTL and the freedom to 

apply these skills brought about by the NTRM program’s 

“outsourcing” of reference material production and 

characterization. Two of these potential benefits are briefly 

discussed below. 

Timely Development of New Methods and Products 

The scientists in the gas metrology group at NIST stay at the 

forefront of research into gas metrology, analytical methods 

development, storage stability, and a number of other critical 

technology areas. They also maintain strong working relationships 

with regulators at EPA and other government agencies whose rule 

making and compliance assessment depend on the accuracy of 

calibration and reference gases. As a result, these NIST resources 

often develop knowledge about reference gas products that will be 

needed by end users in the future. They are therefore able to lead 

the process to develop new SRMs or NTRMs in a timely manner. 

An example is the low-level NO standards soon to be required in 

large volumes by utilities and other regulated end users. The 

reactivity of NO with a wide variety of metals creates instability in 

storage and thus degradation over time. NIST scientists have been 

working with SGCs to develop a robust system of formulation and 

storage that will allow the necessary uncertainty levels to be 

certified by the producers. These complications have added to the 

already considerable lead times required to create a new NTRM (or 

SRM); without the early involvement of NIST, it is unlikely that 
Section 3 — Methodology 

3-7 

suitable reference materials would have been created on the 

timeline required by EPA’s regulations. 

Provision of Low-Demand Species of Reference 

Gases 

As a not-for-profit organization within NIST, the gas metrology 

group is free to develop and produce products that they consider 

important, even if there is low current demand. These products 

would not be requested by the SGCs in the absence of the NTRM 

program and could not be developed if the NIST group were forced 

to produce SRMs at maximum capacity. Nonetheless, these species 

are important in supporting other work within NIST, research 

requests from outside laboratories, and anticipated future metrology 

needs. Whereas it is beyond the scope of this study to quantify 

benefits from this type of work, these low-demand species 

supporting basic research may yield significant economic benefits in 

the future. 

 3.2 COUNTERFACTUAL WORLD WITHOUT 

NTRMS 

To quantify the economic benefit of the gas-mixture NTRM 

program, we will compare the actual situation of producers and 

customers of NTGs to a hypothetical scenario in which the NTRM 

program does not exist. In the absence of the NTRM program, 

SRMs would be the only reference gases produced in coordination 

with and certified by NIST. Any SGC that wished to produce NISTtraceable calibration gases would need to certify them against SRMs 

purchased from NIST. This section develops this detailed 

counterfactual world and describes supply, demand, and 

equilibrium conditions that would arise. 

Admittedly, the construction of a counterfactual scenario is a 

synthetic exercise; it is difficult or impossible to fully describe a 

situation that does not exist with a high degree of confidence. 

Nevertheless, with the large amount of data that we will collect and 

by using sound economic theory and logic, we can assemble a 

hypothetical scenario that should seem reasonable to most 

observers. The issue of the usefulness of counterfactual analysis, 

although debated extensively throughout the 1960s and 1970s 

following Robert Fogel’s (1979) work on railroads, was largely 
The Economic Impact of the Gas-Mixture NIST-Traceable Reference Materials Program 

3-8 

settled following Fogel’s 1979 address to the Economic History 

Association. 

 3.2.1 Specifying the Counterfactual 

Specifying the counterfactual scenario is essential to determining 

the information that will be needed to estimate the social benefits of 

the NTRM program. We will need to characterize the supply and 

demand of all the major categories of reference gases, propose 

market structures and mechanisms, and examine changes over time. 

A key part of this characterization is an understanding of changes to 

the supply chain that would occur in the absence of the NIST 

program. A conceptual diagram of the current and counterfactual 

supply chains is shown in Figure 3-2. Since the inception of the 

gas-mixture NTRM program, NIST has certified two types of lowuncertainty reference materials: SRMs that they characterize and 

market in-house and NTRMs that are produced and characterized 

by an SGC, then analyzed and certified by NIST. Either SRMs or 

NTRMs can be used to certify GMISs for use in the production of 

indirectly traceable gases, while NTRMs are used to directly 

characterize gases. 

In the absence of NTRMs, SRMs would be the only materials 

certified by and traceable to NIST. To meet the low-uncertainty 

requirements, directly traceable gases would need to be certified 

directly to an SRM, while indirectly traceable gases could be made 

from a GMIS as before. The GMIS, in turn, would have to be 

characterized with reference to a parent SRM. As the diagram 

illustrates, SRMs would emerge as a major bottleneck in the 

infrastructure supply chain. This general proposition was shared 

with SGC representatives at the 2001 Pittcon meetings in New 

Orleans, and it was agreed that this was a fair assessment of the 

situation that would emerge without the NTRM program. The 

remainder of this section sets out the economic implications of this 

counterfactual supply chain modification. 
Section 3 — Methodology 

3-9 

Figure 3-2. Conceptual Approach for Estimating Economic Impacts of the NTRM Program 

Current Traceability

Chain

NIST Primary

Standards

Protocol

Gas

DT

SRM

Reference

Gases

Purchased

by Industry

Protocol

Gas

IT

Counterfactual Without

NTRM Program

NIST Primary

Standards

SRMs NTRMs

GMISs

SRMs

GMISs

Protocol

Gas

DT

SRM Protocol

Gas

IT

Note: DT: directly traceable. 

IT: indirectly traceable. 

 3.2.2 Supply-Side Considerations 

Supply of SRMs 

NIST representatives have told us that they could produce and 

certify up to 500 gas-mixture SRM cylinders per year, a quantity in 

excess of current and historical totals but within their current total 

certification capacity. 

The analysis does not consider the substitution of equivalent 

standard materials from other countries. The activities required in 

establishing such a linked certification would likely require an 

amount of effort similar to that invested in the NTRM program, and 

the available certification capacity would not likely be greatly 

different from that of NIST. 
The Economic Impact of the Gas-Mixture NIST-Traceable Reference Materials Program 

3-10 

Also, the method of selling and distributing SRMs should have no 

impact on the resulting equilibrium. After a period of adjustment, 

the resulting production of reference gas standards would be 

sequenced in decreasing order of end users’ WTP, whether priority 

was established by a queuing system such as that used now or by 

some type of market mechanism. High demanders with the highest 

WTP would most likely saturate the queue with requests for SRMs to 

ensure that they receive them. 

Supply of Indirectly Traceable Reference Gases 

In the absence of the NTRM program, the supply function for 

indirectly traceable gases would be minimally affected. GMISs 

would still be used as the reference standards to produce indirectly 

traceable gases; the only difference would be that GMISs would be 

assayed using SRMs rather than NTRMs. As discussed in Section 5, 

the use of SRMs in the production of GMISs slightly increases the 

cost of indirectly traceable gases. 

Based on discussion with SGCs, the supply of indirectly traceable 

gases with or without the NTRM program is “virtually unlimited.” 

Thus, under the counterfactual, there would be no shortage of 

indirectly traceable EPA protocol gases available for compliance 

with environmental regulations. This is because the number of 

indirectly traceable cylinders that can be certified from each GMIS 

is large enough that the entire market could be served with a small 

number of SRMs. 

In order to verify/quantify the economic impacts of the 

counterfactual scenario for the production of indirectly traceable 

gases, the SGC surveys are used to 

Z Confirm that GMISs can be certified against SRMs as easily 

as they can against NTRMs and that distributional issues 

would not hinder production of indirectly traceable gases. 

Z Determine how many cylinders of indirectly traceable gas 

can be made from one GMIS and investigate the related 

question of how many GMISs can be made from an SRM. 

Supply of Directly Traceable Reference Gases 

Because our conceptual approach and preliminary interviews 

suggest that the directly traceable gases would be most affected by 

the absence of the NTRM program, the surveys with SGCs and end 

users concentrate on these products. The total supply quantity of all 
Section 3 — Methodology 

3-11 

species of directly traceable gases under the counterfactual is 

determined by the production constraints imposed by the limited 

availability of SRMs. The quantities of each specific species of 

reference gas available would be determined by demand from end 

users, based on their WTP for each product. This demand-side 

rationing of the market is described below in Section 3.2.3. 

We have assumed throughout this conceptual process that directly 

traceable gases could only be made from SRMs in the absence of 

the NTRM program. We have no evidence that an overseas 

organization or technological breakthrough could or would provide 

comparable SRMs within this time frame. 

In addition, specialty gas producers said that there is little they 

could do to adjust their operations in order to increase the 

productivity of a single SRM. They said that, at least in the near 

future, it was not possible to modify their production processes to 

allow more cylinders of calibration gas to be produced with a single 

SRM cylinder. 

Several options for increasing the productivity of SRMs were 

investigated. For example, 

Z Currently, computer-operated gas analysis systems can be 

implemented for the sequential analysis of up to 20 

candidate standards and 1 reference standard (Hughes and 

Suddueth, no date). It is not impossible, on a technical 

basis, that this technology could be extended to the 

sequential analysis of larger numbers of candidate standards. 

Z The volumetric quantity of EPA protocol gases and SRMs 

could also be increased by increasing the volume of the 

compressed gas cylinders. The most common cylinder size 

for EPA protocol gases is the Luxfer N155 aluminum 

cylinder, which holds 142 cubic feet of nitrogen. Gaseous 

SRMs come in aluminum cylinders that contain 

approximately 26 cubic feet of useable mixture. Luxfer also 

sells a N265 aluminum cylinder, which holds 244 cubic feet 

of nitrogen. If the larger Luxfer aluminum cylinders were 

used for both EPA protocol gas production and SRM 

production, the volume of available EPA protocol gas using 

only SRMs as reference standards could be increased by a 

factor of approximately 16 times more than the current 

cylinder capacities. 

Z The volumetric quantity of reference standard needed to 

analyze candidate standards could be reduced by 

redesigning the sampling and analytical apparatus. If the 

volumetric flow rate demands and dead-space volumes of 

the analytical instrumentation could be reduced, then the 
The Economic Impact of the Gas-Mixture NIST-Traceable Reference Materials Program 

3-12 

quantity of gas needed for an analysis could be reduced. A 

similar redesign could be used for the field instruments that 

use the EPA protocol gases for calibration purposes. NIST’s 

Bill Dorko points out that current instrumentation is 

designed for high volumetric throughput and fast response 

times and that the redesign effort would require considerable 

research and development resources. 

However, SGCs indicated that none of these alternatives were 

feasible in the foreseeable future and that, in the absence of the 

NTRM program, they would most likely increase the use of GMISs 

to meet the demand for NTGs. 

 3.2.3 Demand-Side Considerations 

Demand for SRMs 

The elimination of NTRMs for producing EPA protocol gases would 

induce a significant increase in the demand for SRMs in comparison 

to the current state. In addition to the mostly inelastic requirements 

from automobile firms, SGCs would want to procure more SRMs for 

their internal use. As we discuss above, very little of this demand 

could be accommodated because of the production constraints at 

NIST. We anticipate that there would be increases in requests for 

all species of reference gas mixtures for which NTRMs are currently 

produced. 

Figure 3-3 illustrates this demand shift, along with the supply 

situation described earlier. Current demand is shown with a 

minimum quantity of Z, the quantity required by those end users 

with a near-infinite WTP. At higher quantities, there is a progressive 

increase in elasticity, representing the presence of substitutes for 

most end uses. Counterfactual demand is shown with higher WTP 

for each quantity, as the availability of directly traceable substitutes 

is eliminated for many end uses. NIST’s supply curve is depicted as 

following a near-constant average cost, perhaps with an increase as 

the capacity limit is approached. The SRM supply curve is 

unaffected by the absence of the NTRM program; the NTRM 

program only affects the demand because it supports the production 

of substitutes for SRMs. 

Note that in the absence of the NTRM program, the WTP for SRMs 

increases and, if NIST was a profit-maximizing organization, it 

would be able to significantly increase the price of SRMs under the 

counterfactual scenario. However, changes in price reflect only 
Section 3 — Methodology 

3-13 

Figure 3-3. Supply and Demand for SRM Production by NIST 

Price/

Cost

Quantity of SRMs

NIST Capacity Constraint

D′: (Counterfactual Demand)

S: Supply of SRMs

Z 500

D0: (Actual Demand)

transfer payments between entities and do not affect the total 

economic impact on society. For this reason, changes in the price 

of SRMs (as well as directly and indirectly traceable gases) are not 

modeled as part of the analysis. In addition, because NIST sets its 

prices for reference gases based on a cost recovery formula, the 

price NIST charges for NTRMs would not change. 

Our analysis assumes that some other mechanism (nonprice) would 

allocate SRMs to their highest value use. For example, firms with 

the highest WTP for SRMs would be willing to bear the highest 

transaction costs to obtain SRMs. Note that if available SRMs do 

not go to firms with the highest WTP, this creates an additional 

market inefficiency (failure) and would increase the economic 

impact of removing the NTRM program. 

Demand for Directly and Indirectly Traceable 

Calibration Gases 

Our analysis makes the important distinction between directly 

traceable and indirectly traceable calibration gases. Under the 

counterfactual, directly traceable gases would need to be calibrated 
The Economic Impact of the Gas-Mixture NIST-Traceable Reference Materials Program 

3-14 

against SRMs and indirectly traceable gases would be calibrated 

against GMISs. To quantify the impact of the NTRM program, we 

need a description of the demand for these gases for the major 

classes of end users. One of the principal goals of the SGC surveys 

was to identify specific end users’ current consumption of these 

gases and then use the end-user surveys to estimate the WTP for 

directly and indirectly traceable gases that underlies the industry 

demand curves. 

Figure 3-4 is a simplified diagram of demand for these two products. 

The end users are aggregated and positioned based on their WTP for 

the two types of protocol gases. For clarity of exposition, the 

marginal cost of production is used in place of selling price; this 

implicitly assumes that the SGCs lack market power and that fixed 

costs are negligible. Those whose WTP for the directly traceable 

gas exceeds the marginal cost purchase the higher accuracy 

products; the volume demanded equals Q1. The less demanding 

end users purchase Q2 units of the indirectly traceable reference 

gases. Those whose WTP falls below the marginal production cost 

of the lower accuracy product do not enter the market. 

The main impact of the counterfactual scenario is depicted in 

Figure 3-5. The marginal cost (supply) curve for directly traceable 

gas is now shown as vertical beyond quantity Q1′, resulting from the 

binding constraints on SRM production. This situation allows only 

those end users with the highest valuation to purchase directly 

traceable reference gases. A large number of customers are forced 

to accept the lower relative accuracy of indirectly traceable 

products. Their reduction in consumer surplus, represented by the 

difference between their WTP for the two product classes, is the 

largest component of the social benefit lost in the counterfactual 

scenario and thus an approximation of the value of the NTRM 

program for these demanders.3 

 

3The other major economic impact component quantified as part of the study is the 

increased cost of producing directly and indirectly traceable gases due to the 

elimination of NTRMs. However, as will be shown in Section 5, the impact on 

end users is between 11 and 15 times greater than the impact from increased 

NTG production costs. 
Section 3 — Methodology 

3-15 

Figure 3-4. Current Market for Directly Traceable and Indirectly Traceable Protocol Gases 

Marginal

Benefit

(or WTP)

Q1 DT

Q2 IT

Marginal

Cost MC DT

MC IT

WTP for DT

WTP for IT

Note: DT: directly traceable. 

IT: indirectly traceable. 

 3.2.4 Dynamic Issues 

Up to this point, the counterfactual scenario has been described in a 

static sense, without consideration of changes over time. However, 

one of the objectives of the study is to estimate a time series of 

economic impacts beginning at the inception of the NTRM program 

and projected through the year 2007. For this reason, several 

dynamic issues will be important and are discussed below. 

Changes in Regulatory Requirements 

The requirements for using NIST-traceable materials have changed 

considerably over the 10+ years since the passage of the CAAA (see 

Section 2). Some of these changes were written into the legislation 

itself, while many more emerged as EPA issued rules designed to 

carry out the law’s mandates. These evolving requirements led, in 

turn, to changes in demand for EPA protocol gases and NTRMs. 
The Economic Impact of the Gas-Mixture NIST-Traceable Reference Materials Program 

3-16 

Figure 3-5. Counterfactual Without NTRM Program 

Marginal

Benefit

(or WTP)

Q1′ DT

Q2′ IT

Marginal

Cost

MC DT

MC IT

Economic Impact

to Industry

(∆WTP)

Note: DT: directly traceable. 

IT: indirectly traceable. 

For example, the first phase of the Acid Rain Program required the 

263 “dirtiest” electric utility operations to continuously monitor, 

report, and reduce their emissions of NOx and SO2. Between 1994 

and 2000, other facilities were permitted to opt in to the Acid Rain 

Program to buy or sell SO2 credits, in which case they would be 

subject to the same monitoring requirements. In 2000, Phase II 

brought all remaining power generators into the program and further 

reduced allowable SO2 emissions. The cap and trade provisions of 

the NOx SIP Call will increase demand for NO reference standards 

when it becomes effective in 2002. The demands for SO2 and NO 

standards will continue to change (most likely to grow) at least until 

the final limits become effective in 2010. 

The same sort of progression has occurred in stationary source, 

mobile source, and ambient air regulations. Over the past 5 years, 

there has been a steady release of rules covering various categories 
Section 3 — Methodology 

3-17 

of new and existing stationary sources, almost all of which require 

calibration with NIST-traceable reference gases. This has affected 

requirements for monitoring all acid rain and criteria pollutants, 

including SO2, NO2, NOx, CO, hydrocarbons, and other species. 

Although most of the national emissions standards for hazardous air 

pollutants (NESHAPs) have now been written, demand will continue 

to evolve as new sources come online and others are shut down. In 

the mobile source arena, Tier-2 automobile tailpipe standards will 

be implemented beginning in 2003, and many nonautomotive and 

off-road regulations have been completed and are in the process of 

being adopted. 

The effect that these changes have on our counterfactual analysis is 

straightforward. Because we are treating the EPA regulations as 

exogenous constraints, the derived demand for reference gases in 

each year will be assumed to be the same in the actual and 

counterfactual cases. Thus, historical changes in regulatory 

requirements will be captured through past consumption of EPA 

protocol gases. Knowledge of upcoming regulations will allow us 

to project future demand. 

Development of New NIST-Traceable Species 

A second time-dependent consideration is that of the types of 

reference gas products available in the market in each year. To 

ensure the quality and stability of new standards materials, NIST 

must be involved in the initial release of SRMs and NTRMs, either 

by producing them in-house or by testing and characterizing them. 

It appears that the NTRM program, in freeing up resources in the gas 

metrology group, has significantly accelerated its release of new 

mixtures and different concentration ranges of existing mixtures. 

The “production pressure” on NIST under the counterfactual would 

likely prevent the creation of most new SRMs and slow the 

development of difficult species, such as the low-level NO 

standards. The variety of EPA protocol gases could be reduced 

substantially and lead times for additional products from the SGCs 

would increase. It is even possible that major EPA initiatives, such 

as NOx regulations, CO2 reporting, and Tier-2 tailpipe standards 

could be negatively affected. 
The Economic Impact of the Gas-Mixture NIST-Traceable Reference Materials Program 

3-18 

 3.3 TECHNICAL AND ECONOMIC IMPACT 

METRICS 

The detailed counterfactual scenario above provides several 

hypotheses about how affected agents would change their behavior 

in the absence of the NTRM program. In this section, we discuss 

these hypotheses and present related technical and economic 

impact metrics, which are used to inform the data collection surveys 

of SGCs and end users. Data collection activities are described in 

Section 4 and the survey findings are presented in Section 5. 

 3.3.1 Impact Hypotheses 

We hypothesize that all of the agents in the reference gas supply 

chain receive benefits from the NTRM program and thus would be 

affected negatively by its absence. As discussed in the 

counterfactual, the absence of NTRMs would lead to the following: 

Z Manufacturing companies currently purchasing SRMs would 

continue to do so, paying any higher costs passed on by 

NIST. 

Z SGCs’ production costs would moderately increase because 

of the increased use of SRMs to produce directly traceable 

gases and GMISs. 

Z End users currently purchasing directly traceable reference 

materials would be the most seriously affected by limited 

production capacity for these products; some species might 

not be available as directly traceable gases, while others 

would be costly and difficult to find. 

Z Many end users would be forced to change their operations 

to allow the use of indirectly traceable gases, with attendant 

economic costs. These costs could include more 

complicated compliance procedures, greater allowances in 

operating conditions to prevent out-of-compliance 

operations, and reduced trading of emissions permits. 

Z The development of new species of reference gases would 

be slowed, and future regulatory or operating benefits would 

be delayed. 

 3.3.2 Impact Metrics 

The impact hypotheses listed above lead naturally to a set of impact 

metrics, which are summarized in Table 3-2. The technical impact 

metrics describe the changes in production and business operations 

under the counterfactual, and the economic impact metrics describe 

the method for valuing these changes. For example, the main 

technical impact for end users is that they are forced to increase 
Section 3 — Methodology 

3-19 

Table 3-2. Technical and Economic Impact Metrics 

Segment 

Affected Technical Impact Metrics Economic Impact Metrics 

End users Decreased supply of directly 

traceable gases leads to 

increased use of indirectly 

traceable gases and an increase 

in reference gases’ uncertainty 

Increased labor and material cost associated with 

calibration activities 

 And 

Market value of additional emissions allowances 

retired 

SGCs Increased use of SRMs to replace 

NTRMs 

Changes in production process 

to “stretch” supply of SRMs 

Increased production cost 

NIST Increased production of SRMs Changes in production costs 

Lost opportunity costs 

EPA Delays in new rule making due 

to increased time required to 

develop new reference materials 

Postponing attainment of social benefits from new 

regulations 

their use of indirectly traceable reference gases. This in turn leads 

to changes in business operation, such as more frequent calibrations 

and changes in the number of emission credits they choose to retire. 

The economic impact of these changes in business operations is 

quantified in terms of the increased labor and materials for 

calibration and the value of additional emission credits that the firm 

may need to purchase due to the increased uncertainty of the 

indirectly traceable gases as compared to that of the directly 

traceable gases. 

Information to quantify these impacts is gathered during the SGC 

and end-user surveys for the first three categories. Valuing the 

fourth category, the social cost from postponing environmental 

regulations, is a complex and controversial task and is beyond the 

scope of this project. 

 3.4 BENEFITS AND COSTS ESTIMATION 

The information to support the benefits and cost calculations are 

collected from NIST, the SGCs, and representative end users. The 

benefits from the NTRM program are equivalent to the negative 

economic impacts quantified by the metrics described in 

Section 3.3.2, because the prevention of these impacts constitutes 
The Economic Impact of the Gas-Mixture NIST-Traceable Reference Materials Program 

3-20 

the benefits delivered. Dollar benefits in each year will be summed, 

as will the annual development and operating costs for the NTRM 

program. We will then calculate a series of measures of net social 

benefits, including benefit-to-cost ratio (B/C), internal rate of return 

(IRR), and net present value (NPV). In this section, we summarize 

data-collection needs, outline the process for determining annual 

benefits, and conclude with a description of the net benefits 

measures. 

 3.4.1 Data Requirements 

Specific information collected from NIST include 

Z their annual expenditures for developing the NTRM 

program; 

Z a confirmation of their SRM-producing capacity (we have 

been told it is 500 cylinders per year); 

Z the number and species of SRMs purchased each year 

directly by end users and the identity of these purchasers, if 

available; 

Z current per-unit cost incurred for producing SRMs; and 

Z an estimate of any changes (if any) in per-unit costs for SRMs 

if production was increased to the maximum level. 

From the SGCs, the following information is needed: 

Z their annual production of NTRMs, GMISs, and directly 

traceable and indirectly traceable gases; 

Z description of their most important customer types, 

including the end use of NTGs and an estimate of how these 

customers’ choices and costs would change if they were 

forced to accept lower-accuracy calibration gases; 

Z expandability information about their standards (i.e., how 

many cylinders can they certify with each GMIS, NTRM, 

and SRM cylinder); 

Z an assessment of the possibility of “stretching” the use of 

SRM material in the absence of the NTRM program, and the 

additional unit costs the SGCs would incur; and 

Z their developmental costs for supporting the NTRM program 

by year. 

Our end-user interviews will gather the following data: 

Z actions that would be taken if directly traceable gases now 

purchased were to become unavailable; 

Z changes in operating costs that would be incurred if 

indirectly traceable gases were substituted for the 1-percent 

products now used; and 
Section 3 — Methodology 

3-21 

Z for firms participating in emissions trading programs, the 

likely or potential changes in trading activities and the 

retirement of allowances due to the increased use of 

indirectly traceable gases. 

 3.4.2 Determination of Annual Economic Benefits 

Based on the information from the data-collection effort, dollar 

benefits estimates are generated for the various impact areas 

described above. This includes a complete time series of net 

expenditures by NIST to develop and operate the NTRM program, 

as well as the benefits of the NTRM program to SGCs and end users 

in terms of avoided costs. For each time period (t), the benefits and 

costs can be depicted as follows: 

benefitst = ∆ end-user operating costst + 

∆ end-user emission allotment costst + 

 ∆ SGC operating costst 

costst = NIST program development costst + 

Σ NIST net operating costst . (3.1) 

 3.4.3 Calculating Measures of Net Social Benefits 

A time series of benefits and costs for the NTRM program is 

estimated from its inception in 1992 to the present using historical 

data and from 2002 to 2007 using projected demand for NTGs. 

The time series of benefits and costs will be used to develop three 

summary measures of the net benefits from NIST’s contributions: 

the benefit-cost ratio, the NPV, and the internal rate of return. If Bt

is the incremental net benefits accrued to all beneficiaries (net of 

any non-NIST development and adoption costs) in year t, and Ct is 

the cost to NIST of the program in year t, then the benefit-cost ratio 

for the program is given by 

 (B/C) = 

∑

i=0

n B(t+i)

(1+r)i

∑

i=0

n C(t+i)

(1+r)i

 (3.2) 

where t is the first year in which benefits or NIST costs occur, n is 

the number of years in which the benefits or costs occur, and r is 

the social rate of discount. Because benefits and program costs may 
The Economic Impact of the Gas-Mixture NIST-Traceable Reference Materials Program 

3-22 

occur at different time periods, both are expressed in present-value 

terms before the ratio is calculated. 

The NPV of NIST’s contributions through the NTRM program is 

 NPV = ∑

i=0

n









 B(t+i  )

(1+r)i

 – Ct+i

(1+r)i . (3.3) 

The internal rate of return is the value of r that sets NPV equal to 0 

in Eq. (3.3). 
4-1 

 Primary Data 4 Collection 

To estimate the net benefits of the NTRM program hypothesized in 

Section 3, we collected primary and secondary data throughout the 

gas-mixture reference material supply chain. The data-collection 

activities focused on SGCs and their customers, gas-mixture 

reference material end users. Figure 4-1 provides a conceptual 

overview of the primary and secondary data-collection activities 

undertaken to support this study. 

This section discusses the primary data-collection methods and 

goals for SGCs and end users of NIST-traceable reference materials. 

 4.1 SPECIALTY GAS COMPANIES 

The SGC interviews served several purposes. The first goal was to 

learn how the NTRM program supports the supply of NIST-traceable 

reference gases used to meet the environmental compliance 

obligations of end users. The second goal was to learn how those 

operations would differ in the absence of the program; specifically, 

what processes SGCs would use to maintain the supply of NISTtraceable reference materials if NTRMs were not available. 

RTI conducted two rounds of interviews with the SGCs’ 

representatives. The first round of discussions consisted of informal 

scoping interviews to learn about the market for NIST-traceable 

reference gases, their applications, and the extent to which NTRMs 

are involved in their production. This was followed by a second 

round of more formal interviews aimed at understanding how SGCs’ 

operations would change in the absence of the NTRM program and 

collecting the data needed to quantify these impacts. 
The Economic Impact of the Gas-Mixture NIST-Traceable Reference Materials Program 

4-2 

Figure 4-1. Overview of Data Collection 

All the major parties involved in the NIST-traceable reference gas supply chain participated in this study, including NIST, 

SGCs, and end users (e.g., electric utilities and automotive emissions testers). 

Secondary Data Sources

NIST

SGCs

Reference Gas End

Users

• NIST research publications

• NIST databases

• SRM certificates of analysis

• Professional and technical

literature

• Certificates of analysis

• Product catalogs

• Professional and technical

literature

• Government web sites and

databases

Participants’ Position

in the Supply Chain

Primary Data-Collection

Methods and Goals

Methods

• Interviews with NIST staff

Data Sought

• NIST expenditures

• Information on NIST’s activities

Methods

• Scoping interviews

• SGC survey

Data Sought

• Inform counterfactual scenario

• Production information

• Role of NIST/NTRM Program

Methods

• Telephone interviews

Data Sought

• Emissions trading

• CEM systems operating strategies

• Reference gas usage

The SGC interviews were also used to obtain information about the 

characteristics of NIST-traceable reference gas end users. SGCs 

explained in detail who the consumers of NIST-traceable reference 

gases were and the applications in which these reference gases were 

used. This information was then used to prepare and conduct the 

end-user survey. 

RTI also made a presentation at a NTRM/SGC meeting held at the 

PITTCON 2001 meetings, an annual conference on analytical 

chemistry and spectroscopy held in New Orleans. This presentation 

provided an overview of the counterfactual scenario (described in 
Section 4 — Primary Data Collection 

4-3 

Section 3) to SGCs to confirm that the GMIS method of production 

would be the most likely scenario in the absence of the NTRM 

program. 

 4.1.1 SGC Scoping Interviews 

Early in the project, we conducted a series of informal scoping 

interviews with four of the nine SGCs active in the NTRM program. 

Each of the four scoping interviews consisted of one to two 30- to 

45-minute telephone conversations. 

The purpose of the scoping interviews was to understand the SGCs’ 

operations (and the role that NTRMs play within them) early in the 

project to help develop the impact metrics that we used to estimate 

economic impacts. SGCs provided early insights into how NTRMs 

were used, the NIST traceability chain, and the end users of gases 

certified against NTRMs. These insights were later explored more 

formally through the SGC survey and the end-user survey. 

 4.1.2 SGC Survey 

Using the list of NTRM program participants as the survey 

population, RTI conducted a confidential survey of the specialty gas 

industry. Seven of the nine SGCs that regularly submit NTRM 

batches to NIST for certification and testing participated in the 

survey, yielding an overall response rate of 78 percent. These seven 

companies represented 95 percent of NTRM production in 2000. 

Survey Method 

The SGC interviews were conducted over a 4-week period, as 

participants’ schedules permitted. Before the actual conversation 

took place, participants were provided with a copy of the interview 

guide and a memorandum outlining the project’s goals. In most 

instances, participants chose to first complete the survey instrument 

and then discuss their responses on the telephone. Following each 

initial interview, respondents were recontacted for further 

clarification about any particular comment or issue raised. 

Although not all the SGCs chose to participate in the survey effort, 

the firms that appear to be most active in the program did. The 

combined market share for protocol gases of survey participants is 

estimated to exceed the survey response rate. In the empirical 

analysis, the average participants’ responses were used to 

approximate those of nonparticipants. 

Seven of the nine SGCs that 

regularly submit NTRM 

batches to NIST for 

certification and testing 

participated in the survey, 

yielding an overall 

response rate of 78 percent. 

These seven companies 

represented 95 percent of 

NTRM production in 2000. 
The Economic Impact of the Gas-Mixture NIST-Traceable Reference Materials Program 

4-4 

Survey Topics 

RTI asked SGCs to reflect on the role that the NTRM program plays 

in their production processes and how those processes may change 

in its absence. The survey consisted of four sections, each 

containing a series of short answer and table-format questions. 

Appendix A contains a copy of the survey. The first section asked 

for some background information from the responding employee 

concerning his or her function within the SGC. The remaining 

sections asked the following: 

Z Production of NTGs. The questionnaire asked basic 

questions about SGCs’ production of EPA protocol gases and 

other gases supported by the NTRM program. This section 

also asked about NTRM program-related expenses. 

Z Counterfactual scenario. This section asked SGCs how their 

operations would change in the absence of the NTRM 

program. Questions focused on bottlenecks, investment 

decisions, and changes in their cost structure. 

Z End users. The final section asked SGCs to characterize gas 

end users by industry and by species. 

The survey instrument contained in Appendix A was used primarily 

as a discussion guide. It was shared with respondents prior to the 

interviews and served as the general structure for the discussion. 

However, in many cases it was the unanticipated information and 

comments obtained during the interviews that proved most 

insightful. 

The individual surveys completed by the SGCs contain confidential, 

business proprietary information. The main condition under which 

the SGCs agreed to participate was that individually identifiable 

information be excluded from the final report. As such, only 

aggregate impacts or comments are presented throughout this 

report. At no time is any comment attributable to a particular SGC. 

 4.2 END-USER SURVEY 

The second component of the primary data collection effort was a 

survey of end users. The end-user survey was designed to gather 

information about how end users used the NTGs supported by the 

NTRM program. They were also asked about the importance of the 

traceability chain in their consumption decisions and what effect 

increased analytical uncertainty of reference gases would have on 

their business operations. 

RTI asked SGCs to 

reflect on the role 

that the NTRM 

program plays in 

their production 

processes and how 

those processes may 

change in its 

absence. 
Section 4 — Primary Data Collection 

4-5 

 4.2.1 End-User Population 

The SGC survey was used to investigate the impact of the analytical 

uncertainty of EPA protocol gases on end users. To evaluate how 

the counterfactual scenario would affect end users of NTGs, RTI 

spoke with four electric utilities and four regulatory agencies about 

how an increase in the analytical uncertainty of the reference gases 

they consume would affect their operations and costs. As shown in 

Table 4-1, respondents’ backgrounds ranged from environmental 

engineering to laboratory management. 

Table 4-1. Interviewed End Users’ Backgrounds 

End User Industry Background 

End User 1 Electric utility Environmental engineers 

End User 2 Electric utility Emissions testing group 

End User 3 Electric utility CEM systems supervisor 

End User 4 Electric utility Environmental engineer 

End User 5 Ambient air monitoring organization Standards laboratory 

End User 6 Mobile source emissions testing organization Testing laboratory manager 

End User 7 Mobile source emissions testing organization Technical manager 

End User 8 Air quality policy commission Technical manager 

The electric utilities were used to represent the CEM systems 

calibration market, and the regulatory agencies provided 

information for the automotive emissions testing market. SGCs 

identified these two market segments as the ones that benefited the 

most from the NTRM program. End users were contacted by 

telephone and asked to participate in a 30-minute telephone 

conversation. 

 4.2.2 End-User Survey Topics 

The end-user survey asked respondents to reflect on their current 

use of EPA protocol gases and other NTRM gases and the role that 

these gases play in their operations. They were also asked how 

their business operations and costs would change under the 

counterfactual scenario. 
The Economic Impact of the Gas-Mixture NIST-Traceable Reference Materials Program 

4-6 

Appendix A contains a copy of the survey instrument. The first 

section asked for some background information about the 

respondent and the company’s background. Other sections asked 

the following: 

Z Current NTG use. End users were asked to describe the 

applications in which they use NTGs and how many 

cylinders of these gases they consume annually. 

Z NTG use under the counterfactual scenario. End users were 

asked how their operations would change if the gases they 

typically use had higher analytical uncertainty or if some 

gases were unavailable for purchase. 

Z Comments. This last section was open-ended and provided 

end users with the opportunity to discuss issues relating to 

their NTG consumption that were not specifically identified 

in the survey instrument. 

As with the SGC survey, the instrument supplied in Appendix A was 

used primarily as a discussion guide. It was shared with 

respondents prior to the interviews and served as the general 

structure for the discussion. All company-specific information 

collected through the interviews remained confidential. 

End users were 

asked how their 

business operations 

and costs would 

change under the 

counterfactual 

scenario. 
5-1 

 5 Results 

This section quantifies the economic benefits and costs associated 

with the NTRM program and presents the flow of net benefits over 

time. Benefits include the increased labor and capital expenditures 

that SGCs and reference material users would insure in the absence 

of the NTRM program. Costs are the NTRM certification 

expenditures by NIST and SGCs. 

Table 5-1 presents an overview of the economic impacts of the 

NTRM program from 1990 to 2007. The projected NPV through 

2007 was calculated for the NTRM program; the time series was 

extended into the future because the benefits of the NTRM program 

are projected to increase significantly as participation in emission 

trading programs increases and credits are retired under advanced 

phases of cap and trade programs. The NPV through 2007 is 

estimated to be between $49.0 million and $63.0 million. The 

benefit-cost ratio was between 21.4 and 27.2. 

 Lower Bound Upper Bound 

Costs of NIST NTRM Program –2,407,897 –2,407,897 

Benefits 51,423,874 63,092,986 

SGCs 5,398,420 5,398,420 

Users 46,025,454 60,102,463 

Net Benefits 49,015,977 63,092,986 

Note: Social costs are presented as negative numbers. 

Note: The upper and lower bound reflect a range for the increased analytical 

uncertainty for indirectly traceable gases. 

Table 5-1. Economic 

Impact of NTRM Program 

from 1990 Estimated 

through 2007 (NPV 

$2001) 
The Economic Impact of the Gas-Mixture NIST-Traceable Reference Materials Program 

5-2 

Reference material users are the primary benefactors of the NTRM 

program, accounting for between 92 and 94 percent of the benefit, 

which represents avoided operations and maintenance costs and 

emissions credit expenditures. 

This section begins with a discussion of SRM production and 

consumption under the counterfactual scenario (in the absence of 

the NTRM program). This is followed by several sections that 

describe the impact of SGCs’ and users’ reference materials. The 

section concludes with a summary of NIST’s expenditures to 

support the NTRM program and the calculation of measures of 

economic return from the NTRM program. 

 5.1 SRM PRODUCTION AND CONSUMPTION 

UNDER THE COUNTERFACTUAL SCENARIO 

In the counterfactual scenario, the NTRM program would not be 

available to support the production of directly traceable gases. As a 

result, we hypothesize that the demand for SRMs would greatly 

exceed NIST’s capacity to certify them. (Candidate SRMs are 

produced under contract to NIST and, once prepared, are certified 

by NIST CSTL’s Analytical Chemistry Division.) Even if contract 

producers were in a position to increase SRM production, NIST’s 

resource constraints for certification would limit the number of 

SRMs that would be available each year for SGCs and other 

industries. 

 5.1.1 Maximum SRM Production 

According to NIST technical representatives, the Analytical 

Chemistry Division has a total annual certification capacity of 

approximately 500 gas-mixture SRMs. Without significant increases 

in current funding levels, there are no process changes that could 

feasibly increase certification capacity. Therefore, for this analysis, 

the maximum supply of SRMs is assumed to be 500 per year. This 

implies that the supply curve in a standard supply and demand 

curve graph becomes vertical at a quantity of 500; for any given 

price, the supply of SRMs can not exceed 500. 

 5.1.2 NIST-Certified Reference Material Consumption 

The primary impact of the NTRM program is that it increases the 

availability of NIST-certified reference material. In the absence of 

the program, the only NIST-certified material would be SRMs. SGCs 

For this analysis, the 

maximum supply of SRMs 

is assumed to be 500 per 

year. 
Section 5 — Results 

5-3 

have produced over 9,000 NTRM cylinders over the past nine years, 

or approximately 1,000 cylinders a year. Because each NTRM 

cylinder contains five times as much gas as an SRM cylinder (29.5 L 

vs. 5.9 L), the 1,000 NTRMs are equivalent to 5,000 SRMs. This 

illustrates that the current annual consumption of NIST-certified 

materials far exceeds the feasible supply that could be provided by 

SRMs. 

As a result, under the counterfactual, there will be a shortage of 

NIST-certified reference materials, which will lead to changes in 

SGCs’ and other industries’ behavior. Applications/users with the 

highest WTP will likely still obtain SRMs. However, other 

applications/users with lower WTP will be forced to switch to 

alterative production methods and/or reference materials under the 

counterfactual scenario. 

SRM demanders include SGCs and other domestic consumers.1 

Table 5-2 shows the distribution of consumption of SRMs from 1993 

to 2001. Under the counterfactual scenario, it is assumed that 

current non-SGC consumers of SRMs, such as government research 

laboratories and automobile design divisions, have the highest WTP 

for SRMs and hence will continue to consume them in the absence 

of the NTRM. These non-SGC consumers indicated during 

interviews that their operations are extremely sensitive to 

uncertainty in calibration reference materials and that the use of 

SRMs is essential to their operations. This is reinforced by the fact 

that they are currently using SRMs when less expensive NTRMs are 

available. 

As a result, SRMs available for purchase by SGCs under the 

counterfactual scenario would be equal to NIST’s certification 

capacity (500) less the quantity purchased by non-SGC consumers. 

 

1We assume that increasing the use of Primary Reference Materials (PRMs) from 

Nederlands Meetinstituut (NMi) would not be an option to alleviate the supply 

shortage for SRMs. Currently, some domestic SGCs purchase SRM-equivalent 

PRMs from NMi in the Netherlands, and some foreign consumers purchase 

NIST SRMs to establish NIST traceability. This analysis assumes that, in the 

counterfactual scenario, current foreign SRM consumers would switch to PRMs 

from NMi or other national standards laboratories because of the unavailability 

of NIST SRMs, and that foreign consumers will completely consume foreign 

supply so that SGCs cannot import foreign standards. As a result, foreign 

producers and consumers of NIST-certified (or equivalent) reference materials 

have no net impact on the SRM market and are excluded from the analysis. 

Applications/uses 

with lower WTP will 

be forced to switch 

to alterative 

production methods 

and/or reference 

materials under the 

counterfactual 

scenario. 
The Economic Impact of the Gas-Mixture NIST-Traceable Reference Materials Program 

5-4 

Table 5-2. Current and Counterfactual Demand for SRMs 

 1993 1994 1995 1996 1997 1998 1999 2000 2001 Total 

Current 

Domestic 

Consumption 

249 248 188 202 186 159 121 212 248 1,813 

SGCs 172 179 132 151 127 106 66 150 175 1,258 

Regulatory agencies 

and independent 

testing, monitoring, 

and research 

organizations 

44 37 38 32 27 34 44 39 61 356 

Transportation 

equipment 

manufacturers 

23 22 13 13 26 8 8 12 6 131 

Electric utilities and 

nonutilities 

2 2 

Other consumers 10 8 5 6 6 11 3 11 6 66 

Foreign consumption 77 45 50 30 28 19 25 33 35 342 

Total 326 293 238 232 214 178 146 245 283 2,155 

Counterfactual 

NIST maximum 

certification 

500 500 500 500 500 500 500 500 500 4,500 

SGCs 423 431 444 449 441 447 445 438 427 3,945 

All other consumers 77 69 56 51 59 53 55 62 73 555 

Source: NIST’s Standards Reference Materials Program and RTI estimates. 

Table 5-2 presents the distribution of counterfactual SRM 

consumption from 1993 to 2001. As an example, in 2000 NIST 

sold 245 SRMs, of which 33 were to foreign consumers and 150 

were to SGCs. That means that 60 SRMs were sold to domestic 

non-SGC consumers. Under the counterfactual scenario, those 

same non-SGC consumers would still have access to the 60 SRMs 

and SGCs would purchase all remaining units. Thus in 2000, SGCs 

would have had 438 NIST-certified reference materials available to 

them without the NTRM program. We use this method to estimate 

the counterfactual sale of SRMs from the introduction of the NTRM 

program to the present. 
Section 5 — Results 

5-5 

SGCs would then use their available supply of SRMs to produce 

either directly traceable reference materials or GMISs to produce 

indirectly traceable reference materials. The limited availability of 

SRMs and its implication for the production processes used by SGCs 

to make available NTGs is discussed in the following sections. 

 5.2 SPECIALTY GAS COMPANIES 

The previous section discussed the impact that the absence of the 

NTRM program would have on the availability of NIST-certified 

materials and the number of SRMs available to SGCs to certify NIST 

traceability for their products. The limited availability of SRMs has 

implications for the production processes used by SGCs to produce 

and certify NTGs, such as EPA protocol gases.2 

A key assumption is that SGCs will still supply the same number of 

NTGs to users—what will change is that there will be fewer directly 

traceable reference materials available and many users will be 

forced to switch from directly traceable to indirectly traceable 

reference materials. Table 5-3 shows the calculated distribution of 

directly and indirectly traceable NTGs under the counterfactual 

scenario. 

As shown in Table 5-3, most NTGs produced from 1993 to 2001 

were directly traceable. However, it is estimated that the limited 

availability of SRMs would shift the majority of NTG production 

from directly traceable gases to indirectly traceable gases under the 

counterfactual scenario. 

The data used to estimate the shift in production from directly to 

indirectly traceable gases were developed from responses to the 

SGC survey. Responses from all participating SGCs were 

aggregated to model the market as a single product and thereby 

gauge industry response to the counterfactual as opposed to an 

individual company’s response by species. 

 

2Note that when the term NIST-traceable gas (NTG) is used, we are referring to a 

commercially-available NIST-traceable gas-mixture reference standard 

produced by SGCs that has been assayed using NIST-certified material and is 

stored in the industry standard cylinder, a 29.5-L aluminum cylinder. We do 

not use NTG to refer to NIST SRMs, NTRMs, or in-house GMISs. 

SGCs will still supply the 

same number of NTGs to 

users—what will change is 

that there will be fewer 

directly traceable reference 

materials available and 

many users will be forced 

to switch from directly 

traceable to indirectly 

traceable reference 

materials. 
The Economic Impact of the Gas-Mixture NIST-Traceable Reference Materials Program 

5-6 

Table 5-3. Current and Counterfactual NIST-Traceable Gas-Mixture Standards Production 

(cylinders) 

 1993 1994 1995 1996 1997 1998 1999 2000 2001 

Current production 

Directly traceable 

NTGs 53,782 55,282 84,394 84,374 83,914 85,895 85,795 91,517 92,557 

Indirectly traceable 

NTGs 9,166 9,421 14,383 14,379 14,301 14,638 14,621 15,597 15,774 

Total NTGs 62,947 64,704 98,777 98,753 98,215 100,533 100,416 107,114 108,331 

Counterfactual production 

Available SRMs 423 431 444 449 441 447 445 438 427 

Directly traceable 

NTGs 11,571 11,783 11,756 11,902 11,675 11,822 11,766 11,482 11,147 

SRMs used 402 409 408 414 406 411 409 399 387 

Indirectly traceable 

NTGs 51,376 52,921 87,021 86,851 86,539 88,711 88,650 95,632 97,183 

SRM useda 21 22 36 35 35 36 36 39 40 

GMISs used 357 368 605 603 601 616 616 664 675 

Total NTGs 62,947 64,704 98,777 98,753 98,215 100,533 100,416 107,114 108,331 

aFor production of GMISs. 

Source: Confidential SGC questionnaires and RTI estimates. 

The market demand for NIST-traceable products is assumed to be 

fixed in this analysis; in large part it is driven by regulated 

environmental compliance calibration activities. This means that 

regardless of the standards used to certify NTGs, there are customers 

that will need to buy them. For example, under the counterfactual 

scenario, it is assumed that the Acid Rain Program would still be in 

effect and electric utilities would still need to calibrate their 

monitoring equipment with NIST-traceable EPA protocol gases to 

ensure conformity with environmental regulations. Therefore, in the 

counterfactual environment, SGCs would maintain their current 

production levels to meet market demand. 

The issue then becomes how SGCs would meet market demand for 

NTGs when the availability of NIST-certified material was 

significantly smaller. All the SGCs indicated during their interviews 
Section 5 — Results 

5-7 

that they would significantly increase use of GMISs in their 

production of NTGs. 

 5.2.1 Cost Impact of the Counterfactual Scenario on the 

Traceability Chain 

Whereas the majority of NTGs are currently directly traceable, SGCs 

indicate that in the absence of the NTRM program, they would be 

forced to certify a large percentage of their NTG products via 

GMISs. Most gases would therefore shift from being directly 

traceable to indirectly traceable.3 The use of GMISs to establish the 

traceability chain would result in a slightly lower per-unit costs but 

would increase uncertainty compared to currently available NTGs 

certified using NTRMs. An additional impact under the 

counterfactual scenario is that any directly traceable gases would 

need to be certified using SRMs. This would increase their cost, 

while not affecting the level of uncertainty. This section estimates 

the change in per-unit SGC production costs. 

To introduce the calculation of SGC production cost impacts, we 

discuss the current cost structure of producing NTGs from SRMs, 

NTRMs, and GMISs. The main impact on NTG production costs is 

related to the use of SRMs, NTRMs, and GMISs in the certification 

process. Labor, equipment, and materials costs for producing NTGs 

are the same regardless of whether SRMs, NTRMs, or GMISs are 

used. The impact comes from the cost difference between certifying 

NTGs using SRMs, NTRMs, and GMISs. 

Table 5-4 summarizes these cost differences. It costs approximately 

$57 per cylinder to certify an NTG using an SRM. The cost of 

certification using NTRMs or GMISs is significantly lower. 

Certification using a NTRM costs $6; certification using a GMIS 

costs $5.50. However, an important difference is that certification 

using a GMIS yields indirectly traceable gas with higher uncertainty 

compared to a directly traceable gas certified with an SRM or an 

NTRM. The supporting data and methodology for calculating the 

costs shown in Table 5-4 is discussed below. 

 

3SGCs indicate that end users would alter their behavior if they used indirectly 

traceable gas instead of directly traceable gas. This response is not discussed 

here, but rather in the sections devoted to the impact of the counterfactual 

scenario on end users. 

The use of GMISs to 

establish the traceability 

chain would result in a 

slightly lower per-unit costs 

compared to the use of 

NTRMs, but would 

increase uncertainty. 

The use of SRMs for 

certification of directly 

traceable gases is close to 

10 times more costly 

compared to the use of 

NTRMs. 
The Economic Impact of the Gas-Mixture NIST-Traceable Reference Materials Program 

5-8 

Table 5-4. Cost of Certifying NTGs Using Different Methods 

SRM (5.9 L) NTRM (29.5 L) GMIS (29.5 L) 

Cost per cylinder $1,645.00 $550.00 $797.00 

NTGs per cylindera 29 144 144 

Certification costs 

Cost Per NTG $56.72 $3.82 $5.53 

SRM cost componentb — $27 $97 

aAssumes that same volume of gas is needed to certify NTG. Difference in the number of NTGs per cylinder is due to 

the size of the cylinder (5.9 L for SRM and 29.5 L for NTRM and GMIS). 

bThe SRM cost component is the dollar value of the quantity of SRM consumed to certify one NTRM and GMIS cylinder. 

Cost of Certifying Using an SRM 

The weighted average cost of the various gas-mixture SRMs sold by 

NIST is about $1,645 per cylinder. According to SGCs, each SRM 

cylinder is capable of certifying an average of 29 NTGs. Each NTG 

cylinder therefore consumes about $57 worth of SRM during the 

certification process. 

Cost of Certifying Using an NTRM 

The average batch of NTRMs produced by an SGC consists of 22 

cylinders and has a total production cost of $12,100, yielding an 

average cost of $550 per NTRM. The production cost includes 

labor and materials expenses as well as transportation costs to and 

from NIST for NIST-selected candidate cylinders (usually two or 

three cylinders). The $550 also includes the cost of SRMs 

consumed during the preparation of the NTRM batch, 

approximately 5 percent ($27) of the cost.4 

As part of the survey process, we also asked SGCs how many NTGs 

they can produce using one NTRM. This piece of information is 

important because it is needed to estimate the NTRM costs per 

NTG. Responses to this question ranged from 75 to 300 cylinders. 

However, by weighting individual responses by the number of 

cylinders the SGC is producing relative to industry cylinder 

production, we estimated that the weighted average number of NTG 

cylinders produced from one NTRM (or by default, one GMIS) is 

about 144. 

 

4An SRM can certify on average 60 NTRMs, resulting in an SRM cost per NTRM of 

approximately $27 ($1,645/60). 
Section 5 — Results 

5-9 

Based on the above information, with SGCs producing 144 NTGs 

from one NTRM, the NTRM cost per NTG is about $3.82 

($550/144). 

Cost of Certifying Using a GMIS 

GMISs are more costly to certify than NTRMs because the testing 

requirements outlined in the EPA protocol require that each GMIS 

be certified individually. NTRMs are tested on two separate 

occasions for homogeneity and stability, and not all NTRMs in a 

batch must be tested.5 In contrast, GMISs must be tested 

individually on three separate occasions (EPA, 1997a). This 

certification process represents the primary cost difference between 

the two standards because the production apparatus, quantity and 

quality of materials, and cylinder sizes are the same for producing 

NTRMs and GMISs. 

SGCs estimate that it costs on average $700 to produce a GMIS, 

excluding the cost of the SRM. The $700 per GMIS accounts for the 

labor costs incurred for setting up the production apparatus, 

connecting candidate GMIS cylinders, analyzing the cylinders, and 

accomplishing record keeping requirements. It also accounts for 

having to test all of the GMIS cylinders up to three times as outlined 

in the EPA protocol. 

According to SGCs, one SRM yields about 17 GMISs.6 Using the 

weighted average cost of SRMs of $1,645, the SRM cost per GMIS 

cylinder is about $97 (1,645/17). This yields a total cost of a GMIS 

of about $797. 

Once certified, a GMIS may be used in the same fashion as an 

NTRM. Using a GMIS increases the number of steps away from 

NIST, and thereby the uncertainty of the final reference standard, 

but it allows the SGC to manufacture as many NTGs as it can with 

one NTRM. 

 

5Although SGCs are not required to conduct testing of each NTRM cylinder 

because the batch is assumed to be homogenous, most SGCs admit that they do 

test most if not all cylinders. Because NIST selects which cylinders will be 

tested, SGCs test more cylinders than required to ensure that the batch will pass 

NIST’s certification process. Testing a larger number of cylinders provides 

SGCs with increased confidence that the batch is in fact homogenous. 

6By comparison, SGCs estimated that they can prepare about 60 NTRMs from one 

SRM because of the different testing requirements. 

NTG production costs 

differ depending on 

whether SRMs, NTRMs, or 

GMISs are used in the 

certification process. The 

total cost per cylinder using 

Z SRMs is $1,645; 

Z NTRMs is $550; and 

Z GMISs is $797. 
The Economic Impact of the Gas-Mixture NIST-Traceable Reference Materials Program 

5-10 

Per-Unit Cost Implication of the Counterfactual 

Scenario 

In summary, under the counterfactual scenario there are two 

primary per-unit cost impacts: 

1. Directly traceable gases are certified with SRMs instead of 

NTRMs. This results in an increase of $52.90 ($56.72 – 

$3.82) per unit for directly traceable gases. 

2. Many users that currently purchase directly traceable gases 

will be forced to switch to indirectly traceable gases due to 

limited SRM availability. The indirectly traceable gases will 

have a slightly higher per-unit cost and have higher 

uncertainty. 7 The per-unit cost decrease of NTGs produced 

using GMISs versus NTRMs is $1.71 ($3.82 – $5.53) 

 5.2.2 Impact of the Counterfactual on NTG Production 

NTG production shifts from mostly directly traceable to mostly 

indirectly traceable gases when the NTRM program is removed from 

the traceability chain and SGCs are left with only NIST SRMs to 

certify NTGs. SGCs react by producing GMISs in sufficient quantity 

to maintain current NTG output levels. 

Determining the Counterfactual Production Mix 

Between Directly and Indirectly Traceable NTGs 

Directly traceable NTGs would still be produced under the 

counterfactual scenario; however, these numbers would be 

significantly smaller than current or historical production. For 

example, if SGCs were to use all of the SRMs available to them to 

manufacture NTGs, the supply of directly traceable gases would not 

be sufficient to meet NTG demand. Conversely, If SGCs were to 

use all of their allotment of SRMs solely to produce GMISs, and in 

turn use those GMISs to produce NTGs, the supply of indirectly 

traceable gases would exceed NTG demand. As a result, under the 

counterfactual, some combination of directly traceable gases 

certified by SRMs and some indirectly traceable gases certified by 

GMISs would be produced. 

The approach to calculating the counterfactual production mix 

between directly and indirectly traceable gases is described below. 

A key assumption is that the total production of NTGs remains 

unchanged because total demand is exogenously driven by 

 

7The cost to end users due to the increased uncertainty of indirectly versus directly 

traceable gases is discussed in Section 5.3. 
Section 5 — Results 

5-11 

compliance with environmental regulation. To maximize profits, 

SGCs will want to produce as many directly traceable gases as 

possible while still meeting the constraint of supplying end users 

with all the NTGs (directly + indirectly traceable) needed to comply 

with environmental regulations.8 

Based on survey results discussed in Section 5.2.2, one SRM can be 

used to directly assay about 29 NTGs. Alternatively, one SRM can 

be used to assay 17 GMISs, which in turn would be used to produce 

144 NTGs, yielding a total of 2,477 NTGs per SRM (17 GMISs/SRM 

x 144 NTGs/GMIS). 

To mathematically solve for the equilibrium mix between directly 

traceable and indirectly traceable NTGs, let 

SRM = the number of SRMs available to SGCs (exogenous), 

NTG = the number of directly and indirectly traceable NTGs 

needed by users to comply with environmental 

regulations (exogenous), 

DSRM = the number of SRMs used to certify directly traceable 

gases in the counterfactual (endogenous), and 

ISRM = the number of SRMs used to produce GMISs, which 

in turn are used to certify indirectly traceable gases in 

the counterfactual (endogenous). 

The two unknowns can be solved for by the following system of 

equations: 

NTG = (29 * DSRM) + (2477 * ISRM) 

SRM = DSRM + ISRM . 

For example, if 400 SRMs are available to SGCs and 100,000 NTGs 

are needed by end users, under the counterfactual scenario, 11,600 

and 88,400 directly and indirectly traceable gases would be 

produced. 

 

8We do not explicitly model end users’ demand for directly traceable and 

indirectly traceable gases. However, as will be shown in the following sections, 

users’ incremental WTP for directly traceable gases far exceeds the incremental 

cost of producing them. Hence, to maximize profits, SGCs would produce as 

many directly traceable gases as possible given the constraints of (a) the number 

of SRMs available and (b) the total number of NTGs needed to meet 

environmental regulations. 
The Economic Impact of the Gas-Mixture NIST-Traceable Reference Materials Program 

5-12 

Current and Counterfactual NTG Production 

Estimates 

SGCs produced approximately 108,000 NTGs in 2001, nearly 

85 percent of which were directly traceable to an NTRM. This 

estimate was derived from data collected by the SGC survey 

instrument as well as historical NTRM production data. Historical 

production levels to 1993 were then estimated by relating 

participation in the Acid Rain Program as well as NTRM production 

and SRM sales to the current production level to estimate growth 

over time. Table 5-3 presents the NTG production statistics 

estimated for the period 1993 to 2001, the first full years since the 

inception of the NTRM program. Table 5-3 also compares these 

production values with our estimated counterfactual production 

estimates. (Table 5-3 is located on page 5-6.) 

In 2001, if SGCs only had 427 SRMs available to them under the 

counterfactual, they would manufacture about 11,200 directly 

traceable NTGs instead of the more than 92,500 that they actually 

did produce. The balance of the production needed to equate the 

current and counterfactual scenarios was produced using the GMIS 

method discussed at several points in this report. The number of 

directly traceable NTGs produced was significantly smaller under 

the counterfactual scenario. Directly traceable production ranges 

between approximately 12 and 13 percent of all NTGs throughout 

most of the years of the NTRM program. 

 5.2.3 Impact of the Counterfactual on SGC Production 

Costs 

The incremental change in the SGC production cost from 

production with the NTRM program to production without the 

program is the difference in costs from producing NTGs with 

NTRMs and producing NTGs with SRMs and GMISs. Using the unit 

cost estimates and the traceability chain developed earlier in this 

chapter, we calculate the change in the SGC costs. This 

incremental change is the economic benefit of the NTRM program 

to SGCs. 

SRMs are the most costly reference standard in the traceability chain 

at a weighted average cost of approximately $1,645 per 5.9-L 

cylinder. NTRMs cost approximately $550 for a 29.5-L cylinder, 

including all SGC inputs and NIST certification fees. GMISs cost 

Without NTRMs, the 

available supply of directly 

traceable NTGs in 2001 

would have decreased from 

92,500 to 11,000. 
Section 5 — Results 

5-13 

$797 for a 29.5-L cylinder, including the cost of the SRM used in its 

certification. These cost estimates reflect the total cost to society 

and include all labor, equipment, materials, and administrative 

expenses used to produce the SRM, NTRM, or GMIS. 

Cost impacts due to the hypothetical removal of the NTRM program 

are estimated by comparing current resources expended to certify 

NTGs to resources required under the counterfactual to certify the 

same number of NTGs. The resulting increase in certification costs 

under the counterfactual scenario is the cost component of the 

economic impact of the NTRM program. However, this cost 

component does not capture the economic impact of the change in 

quality (increased uncertainty) on end users as large numbers of 

indirectly traceable gases are consumed under the counterfactual; 

this is quantified in Section 5.3. 

Table 5-5 shows the cost impact under the counterfactual scenario 

from 1993 to 2001 and estimated through 2007. Since 1993, the 

NTRM program has yielded between $687,000 and $753,000 in 

production benefit annually for society. The aggregate benefit for 

the years included in Table 5-5 is $10.9 million. 

 5.3 IMPACT ON PARTICIPANTS IN EMISSIONS 

TRADING PROGRAMS 

The previous section calculated the benefits that the NTRM program 

provides to the production of NTGs. The following three sections 

complete our analysis of the economic impact by quantifying (to the 

extent possible) the impact that the NTRM program has on end 

users of gas-mixture reference gases. Specifically we focus on the 

impact of increased uncertainty resulting from the increased use of 

indirectly traceable reference materials in the absence of the NTRM 

program. 

This analysis assumes that because of their greater WTP, automotive 

end users who perform emissions testing during the testing and 

design phases of their products would be furnished with all of the 

estimated directly traceable NTGs. This topic will be further 

explored in the subsequent section; however, it is important to 

preface the discussion in this section because the analysis assumes 

that entities performing CEM calibration to support emissions 

trading would be switching to indirectly traceable NTGs. 
The Economic Impact of the Gas-Mixture NIST-Traceable Reference Materials Program 

5-14Table 5-5. Difference in Certification Costs Under the Counterfactual Scenario 

 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Historical and Projected Production of NTGsDirectly Traceable NTGs 53,782 55,282 84,394 84,374 83,914 85,895 85,795 91,517 92,557 93,974 95,434 96,939 98,490 100,089 101,736 Certification Cost Using NTRMs $205,416 $211,148 $322,338 $322,262 $320,504 $328,070 $327,688 $349,544 $353,518 $358,929 $364,506 $370,254 $376,178 $382,283 $388,575 Indirectly Traceable NTGs 9,166 9,421 14,383 14,379 14,301 14,638 14,621 15,597 15,774 16,015 16,264 16,521 16,785 17,057 17,338 Certification Cost Using GMISs $41,640 $42,802 $65,342 $65,327 $64,970 $66,504 $66,426 $70,857 $71,662 $72,759 $73,890 $75,055 $76,256 $77,494 $78,769 Total NTGs 62,947 64,704 98,777 98,753 98,215 100,533 100,416 107,114 108,331 109,990 111,699 113,460 115,275 117,146 119,074 Total Cost $247,057 $253,950 $387,680 $387,588 $385,474 $394,574 $394,114 $420,401 $425,180 $431,688 $438,396 $445,309 $452,434 $459,777 $467,344 

Counterfactual and Projected Production of NTGsDirectly Traceable NTGs 11,571 11,783 11,756 11,902 11,675 11,822 11,766 11,482 11,147 11,457 11,437 11,416 11,394 11,372 11,349 Certification Cost Using SRMs $661,472 $673,597 $672,054 $680,395 $667,441 $675,853 $672,603 $656,389 $637,246 $654,987 $653,824 $652,626 $651,390 $650,117 $648,805 

Indirectly Traceable NTGs 51,376 52,921 87,021 86,851 86,539 88,711 88,650 95,632 97,183 98,533 100,262 102,044 103,880 105,774 107,725 Certification Cost Using GMISs $266,593 $274,613 $451,558 $450,676 $449,061 $460,327 $460,013 $496,242 $504,294 $511,297 $520,266 $529,515 $539,044 $548,870 $558,993 Total NTGs 62,947 64,704 98,777 98,753 98,215 100,533 100,416 107,114 108,331 109,990 111,699 113,460 115,275 117,146 119,074 Total Cost $928,065 $948,209 $1,123,612 $1,131,071 $1,116,502 $1,136,180 $1,132,616 $1,152,632 $1,141,540 $1,166,283 $1,174,090 $1,182,140 $1,190,434 $1,198,987 $1,207,798 Difference $681,009 $694,259 $735,931 $743,483 $731,027 $741,607 $738,502 $732,231 $716,360 $734,595 $735,694 $736,831 $738,000 $739,210 $740,454 

Source: Confidential end-user questionnaires and RTI estimates. 
Section 5 — Results 

5-15 

As a result, the absence of the NTRM program would increase the 

analytical uncertainty of the EPA protocol gases that electric utilities 

and other facilities use to calibrate CEM systems as required by 

federal, state, and local regulatory programs. The increased 

analytical uncertainty would have several potential effects on firms 

regulated under programs that include emissions trading.9 End 

users that currently use directly traceable EPA protocol gases 

indicated that an increase in the analytical uncertainty could result 

in the following impacts on their operations: 

Z over- or under-reporting of emissions for SO2 and NOx; 

Z over- or under-reporting of unit operating data for CO2 and 

heat input; 

Z increased calibration costs and checks; 

Z cost of annual review of calibration gases; 

Z operational status of marginal units; 

Z economic dispatch of units; and 

Z fuel mix. 

Upon further reflection, end users believed that the majority of the 

economic impact would be associated with the first four items listed 

above. These four items are combined into two categories: 

Z increases in operations and maintenance costs; and 

Z over-reporting of emissions. 

 5.3.1 Impact of the Counterfactual on End Users’ 

Operations and Maintenance Costs 

This section calculates the incremental operation and maintenance 

costs associated with the counterfactual. The per-unit costs are then 

applied to the population of units participating in emissions trading 

programs that currently use directly traceable EPA protocol gases 

and would be forced to switch to indirectly traceable gases. 

Description of Operations and Maintenance Costs 

End users who purchase directly traceable NTGs do so because they 

value not having an intermediate step between the standards they 

are using to calibrate their CEM systems and NIST-certified 

standards. According to the electric utilities and other firms 

interviewed for this analysis, shifting to indirectly traceable gas 

 

9Programs include the South Coast Air Quality Management District’s RECLAIM, 

U.S. EPA’s Acid Rain Program, and OTC’s NOx Budget. 

According to the electric 

utilities and other firms 

interviewed for this 

analysis, shifting to 

indirectly traceable gas 

would cause an increase in 

operation and maintenance 

costs; these costs primarily 

include annual 

reevaluation of calibration 

gases and more frequent 

calibration and calibration 

checks. 
The Economic Impact of the Gas-Mixture NIST-Traceable Reference Materials Program 

5-16 

would cause an increase in operation and maintenance costs; these 

costs primarily include the annual reevaluation of calibration gases 

and more frequent calibration and calibration checks. 

Uncertainty refers to the variability in a the certified value of a gas. 

Uncertainty in EPA protocol gases impacts the confidence that 

environmental engineers have in the quality of CEM systems 

calibration. Under the protocol, the GMISs are analyzed 

individually and the uncertainty of their certified concentrations do 

not accrue the statistical benefit derived from the analysis of 

multiple, homogenous cylinders. Additionally, the increased 

uncertainty is passed along the traceability chain to EPA protocol 

gases certified using this method. End users are also simply more 

confident in standards that have been assayed directly against NISTcertified standards. End users said that the additional step used in 

the GMIS method reduces their confidence in the standard. 

The economic consequence of failing a RATA or a linearity check is 

significant. Failures could cause a plant to incur penalties, declare 

a unit out of control, and/or shut down a unit. By using EPA 

protocol gases that are directly traceable to NIST, the plant is more 

certain that the certified values are those that are printed on the 

accompanying certificates. 

It should be noted that some end users currently using indirectly 

traceable standards believe that the EPA protocol gases certified via 

the GMIS method are equivalent in data quality to that of directly 

traceable gases. These end users believe that the quality control 

and assurance programs implemented by SGCs ensure that the EPA 

protocol gases they purchase are well characterized. They also 

believe that the incremental uncertainty associated with these 

standards is incidental and not large enough to have any economic 

impact on their operations. Therefore, in this analysis below, the 

units currently using indirectly traceable gases are not impacted by 

the counterfactual and therefore are subtracted from the affected 

population.10 

 

10These units might be indirectly affected through the increased price of indirectly 

traceable gases. However, to avoid double counting, this component of the 

economic impact is captured in the changes in production costs and not 

quantified for users. 

End users are also 

simply more 

confident in 

standards that have 

been assayed 

directly against 

NIST-certified 

standards. 
Section 5 — Results 

5-17 

Quantifying Operations and Maintenance Costs 

Under the counterfactual scenario, end users said that they would 

conduct more frequent calibration checks or calibrations as a 

precautionary measure and would annually reevaluate the EPA 

protocol gases they use to ensure that the information included on 

the certificates is accurate. Most electric utilities and large industrial 

establishments have on-staff environmental compliance teams that 

perform these activities. These teams may consist of one or more 

individuals and either be located on site or, as is the case with many 

utilities, based at a central location and travel among plants. 

In addition to more frequent calibrations and calibration checks, 

under the counterfactual scenario of using indirectly traceable 

gases, the EPA protocol gases would annually be subjected to 

internal round-robin testing by the compliance team. This process 

would entail testing standards against more rigorous standards, 

standards from other SGCs, or would use more advanced 

techniques. The team would undertake this process every year to 

maintain their confidence in the standards that they are purchasing 

from the vendor. 

Users estimate that under the counterfactual scenario of using 

indirectly traceable reference gases, the incremental operations and 

maintenance costs associated with monitoring an individual unit 

would be approximately $2,940 a year.11 The estimate is 

calculated on a per-unit basis to facilitate extrapolation to the total 

number of units that participate in emissions trading programs and 

are estimated to currently use directly traceable EPA protocol 

gases.12 End users interviewed indicated that the level of effort 

involved in that process would be directly related to the number of 

units under management. The per-unit estimate covers all 

operations and maintenance costs, including annual reevaluation of 

indirectly traceable gases. 

 

11The operations and maintenance cost estimate of $2,941 was developed using 

information from an internal study conducted by an electric utility. The utility’s 

estimated annual savings from using directly traceable EPA protocol gas was 

divided by the number of units located with the fleet involved in the analysis. 

These calculations are not disclosed herein to maintain the utility’s 

confidentiality. 

12Although it is possible for more than one unit to share a stack, and therefore a 

CEM system, these instances are negligible. 

Users estimate that under 

the counterfactual scenario 

of using indirectly traceable 

reference gases, the 

incremental operations and 

maintenance costs 

associated with monitoring 

an individual unit would be 

approximately $2,940 a 

year. 
The Economic Impact of the Gas-Mixture NIST-Traceable Reference Materials Program 

5-18 

Estimated Unit Population 

The population of affected electric utility and industrial units, such 

as large utility and industrial boilers, was gathered from annual 

compliance reports for the three emissions trading systems included 

in this analysis: Acid Rain Program, OTC NOx Budget, and 

RECLAIM. These unit populations were projected through 2007 

using the average annual growth rate of the period for which data 

was available (see Table 5-6). The total unit population for 2001 

was 2,795; for the year 2007, the population is projected to be 

3,301, an increase of 19 percent.13 All of these units are required to 

maintain CEM systems that must be calibrated using EPA protocol 

gases. To avoid double counting units, we subtracted from the unit 

population total instances in which a unit participated in more than 

one program. 

As stated earlier, not all units are currently using directly traceable 

EPA protocol gases. These “unaffected” units are subtracted from 

the population because they would experience no change in 

operations and maintenance costs. Using confidential sales data 

obtained during the SGC interviews, we estimate that approximately 

419 of the 2,313 estimated units involved in the SO2 allowance 

trading program of the Acid Rain Program in 2001 used EPA 

protocols certified via the GMIS method. This represents 

approximately 18 percent of the utility and industrial units. Based 

on this information, 18 percent of the units were removed from the 

entire time series. The same estimation methodology was applied to 

units involved in other programs to remove the number that already 

purchase indirectly traceable EPA protocol gases. 

Table 5-7 shows the total estimated operations and maintenance 

cost for the population of units. To calculate the annual impacts, 

the number of units in each year was multiplied by the $2,940 

estimated operations and maintenance cost estimate. The 

operations and maintenance cost savings for units in these programs 

is estimated to be $6.7 million for 2001 and will increase to $7.9 

million in 2007. 

 

13Data for RECLAIM is collected by facility, not by unit. As such, we use the 

number of facilities participating in RECLAIM as an estimate of the number of 

units. 
Section 5 — Results 

5-19 

Table 5-6. Number of Units Participating in Emissions Trading Programs 

Year Acid Rain Program OTC NOx Budget RECLAIMa Total 

Total population 

1993 

1994 263 394 657 

1995 1,905 386 2,291 

1996 1,904 378 2,282 

1997 1,881 370 2,251 

1998 1,980 362 2,342 

1999 1,975 135 354 2,464 

2000 2,261 139 335 2,735 

2001 2,313 144 338 2,795 

2002 2,384 149 341 2,873 

2003 2,457 153 344 2,954 

2004 2,532 158 347 3,037 

2005 2,610 163 350 3,122 

2006 2,689 168 353 3,210 

2007 2,772 173 356 3,301 

Number using directly traceable NTGs 

1994 263 323 586 

1995 1,552 316 1,868 

1996 1,551 309 1,860 

1997 1,528 303 1,831 

1998 1,631 296 1,927 

1999 1,608 111 290 2,008 

2000 1,895 114 274 2,283 

2001 1,894 118 277 2,288 

2002 1,952 122 279 2,352 

2003 2,011 125 282 2,418 

2004 2,073 129 284 2,486 

2005 2,136 133 287 2,556 

2006 2,202 138 289 2,628 

2007 2,269 142 291 2,703 

aData is collected by facility in RECLAIM, not by unit. As unit data was unavailable, facilities counts are used as 

estimates. 

Sources: U.S. Environmental Protection Agency. 2002b. “EPA’s Clean Air Market Programs: Compliance Reports 

[various years].” <http://www.epa.gov/airmarkets/cmprpt/>. As obtained on May 9, 2002. 

South Coast Air Quality Management District. 2002. “Annual RECLAIM Audit Report for 2000 Compliance Year.” 

Diamond Bar, California: South Coast Air Quality Management Board. March 1. 
The Economic Impact of the Gas-Mixture NIST-Traceable Reference Materials Program 

5-20 

Table 5-7. Estimated Operations and Maintenance Costs Under the Counterfactual Scenario ($) 

Year Acid Rain Program OTC NOx Budget RECLAIM Total 

1994 773,529 948,728 1,722,257 

1995 4,563,761 929,464 5,493,225 

1996 4,560,820 910,201 5,471,021 

1997 4,493,718 890,937 5,384,656 

1998 4,797,441 871,674 5,669,115 

1999 4,728,731 326,010 852,410 5,907,151 

2000 5,572,635 334,947 806,659 6,714,241 

2001 5,569,562 346,743 813,883 6,730,189 

2002 5,740,074 357,602 821,107 6,918,783 

2003 5,915,807 368,800 828,331 7,112,938 

2004 6,096,919 380,349 835,555 7,312,823 

2005 6,283,576 392,260 842,779 7,518,615 

2006 6,475,948 404,544 850,002 7,730,494 

2007 6,674,209 417,212 857,226 7,948,648 

Source: Confidential end-user questionnaires and RTI estimates. 

 5.3.2 Impact of the Counterfactual on Retirement of 

Emissions Allowances 

The increase in analytical uncertainty associated with switching 

from directly to indirectly traceable EPA protocol gases certified via 

the GMIS method would increase the number of emissions 

allowances retired by trading program participants each year. To 

maintain compliance with environmental regulations, affected units 

must submit monitoring data to regulatory bodies and perform 

accuracy assessments. Units undergo an annual reconciliation 

process during which emissions allowances are retired in sufficient 

quantities to cover the actual volume of emissions from the 

preceding year. As such, the accuracy with which the data are 

reported impacts the number of allowances retired. 

Units undergo an annual 

reconciliation process 

during which emissions 

allowances are retired in 

sufficient quantities to 

cover the actual volume of 

emissions from the 

preceding year. As such, 

the accuracy with which 

the data are reported 

impacts the number of 

allowances retired. 
Section 5 — Results 

5-21 

Estimating the Increase in Analytical Uncertainty 

In Sections 2 and 3, we discussed how and why the certification of 

EPA protocol gases and other NTGs via the GMIS method results in 

larger analytical uncertainty. During the interviews, several SGCs 

said that some gases that currently have ±1 percent uncertainty 

would have ±2 percent, but not all. Other SGCs said that the 

distribution of their products between ±1 percent and ±2 percent 

uncertainty would not change. And still more SGCs indicated that 

all their products would have ±2 percent uncertainty under the 

counterfactual scenario. 

The differences in responses are largely attributed to a marketing 

technique used by SGCs that rounds off the actual uncertainty to the 

nearest whole number to differentiate products. Generally, gases 

labeled ±1 percent are directly traceable to NIST and gases labeled 

±2 percent are indirectly traceable. However, all SGCs said that the 

average actual difference was significantly less than ±1 percent: 

i.e., ±1 percent gases have typically been rounded down and 

±2 percent gasses have typically been rounded up. 

When an NTG is consumed, however, the actual uncertainty 

printed on the cylinder’s accompanying certificate of analysis is 

input into the continuous emission monitoring (CEM) systems’ data 

acquisition systems. Although SGCs may classify NTGs as 

“1 percent” or “2 percent” for marketing purposes, consumers 

ultimately input the actual uncertainty value from the certificate into 

their data systems. 

SGCs disagreed over what the average incremental uncertainty from 

the insertion of the GMIS step is. The GMISs’ uncertainty will vary 

among SGCs depending on the equipment used, manufacturing 

tolerances, time, number of tests, and quality control techniques, 

among other factors. One SGC may add relatively little uncertainty 

whereas another may add a more significant amount. 

Because we received a mixture of qualitative and quantitative 

responses from about half of the SGCs and no measurable responses 

from the others, we decided to express the increase in uncertainty as 

a range over which the average increase is likely to exist. This 

range reflects an upper and lower bound of economic impacts. 

Because uncertainty is 

cumulative, an NTG will 

carry the uncertainty of the 

standards that precede it in 

the traceability chain in 

addition to its own. 

Because we received a 

mixture of qualitative and 

quantitative responses from 

about half of the SGCs and 

no measurable responses 

from the others, the 

increase in uncertainty is 

expressed as a range over 

which the average increase 

is likely to exist. This range 

reflects an upper and lower 

bound of economic 

impacts. 
The Economic Impact of the Gas-Mixture NIST-Traceable Reference Materials Program 

5-22 

The impact calculations assume an incremental increase of between 

0.1 and 0.3 percent uncertainty. As an example, a directly 

traceable NTG currently having an uncertainty of 1 percent would 

become an indirectly traceable gas under the counterfactual with an 

uncertainty between 1.1 and 1.3 percent. The remainder of this 

section used the lower bound of 0.1 to present the analysis 

approach for calculating impacts associated with increasing the 

number of emissions allowances retired each year. 

Any increase in uncertainty will increase the number of allowances 

that need to be retired by a firm to cover its emissions. As discussed 

in Section 3, an increase in uncertainty widens the 95 percent 

confidence interval of the calibration value. The increase in 

analytical uncertainty would increase the number of allowances 

retired each year by emissions trading program participants by the 

incremental uncertainty multiplied by the actual number of 

allowances retired. If 100 allowances were originally retired and 

then uncertainty increased 1 percentage point, then without the 

NTRM program, 101 allowances would have been retired. 

Estimating the Additional Allowances Retired due to 

Higher Analytical Uncertainty 

To estimate the value that the NTRM program has on reducing 

unnecessary or early retirement of allowances, we quantify the 

number of allowances that units avoided retiring early, net of firms 

currently using indirectly traceable EPA protocol gases. We then 

multiply the number of allowances associated with that increase by 

the market price for that vintage, or allowance year. 

Table 5-8 shows the number of allowances retired under the Acid 

Rain Program, OTC NOx Budget, and RECLAIM from the inception 

of those programs to present and estimates through 2007.14 Each 

allowance is equal to one ton of SO2 or NOx emissions. These are 

the baseline emissions from which the impact of increased 

uncertainty for end users is valued. To account for allowances 

retired by current indirectly traceable gas users, we take the average 

number of allowances per unit multiplied by the number of units 

using indirectly traceable gases and subtract these from the total 

 

14The Acid Rain Program and OTC NOx Budget Program denominate allowances 

in tons. RECLAIM denominates allowances in pounds. However, to facilitate 

comparison, RECLAIM data is presented in tons. 

Economic benefits 

are expected to 

increase with the 

commencement of 

the Section 126 

Federal NOx Budget 

Program and the 

NOx SIP Call, which 

will add hundreds of 

units to the total 

number of units 

participating in 

emissions trading 

programs. 
Section 5 — Results 

5-23 

Table 5-8. Allowances Retired Under Existing Emissions Trading Systems 

Year 

Acid Rain 

Program (SO2) 

OTC NOx

Program (NOx) 

RECLAIM 

(SO2) 

RECLAIM 

(NOx) 

For all units 

1994 7,232 25,314 

1995 5,298,429 8,064 25,764 

1996 5,433,351 6,484 24,796 

1997 5,474,440 6,464 21,786 

1998 5,298,498 6,793 20,892 

1999 4,944,676 174,843 6,378 20,775 

2000 11,201,999 174,492 6,009 20,491 

2001 11,017,475 183,283 5,412 15,403 

2002 10,835,990 177,539 4,796 13,731 

2003 10,657,495 135,000 4,184 12,228 

2004 10,481,940 135,000 4,184 12,228 

2005 10,309,277 135,000 4,184 12,228 

2006 10,139,459 135,000 4,184 12,228 

2007 9,972,437 135,000 4,184 12,228 

For units currently using directly traceable standards 

1993 

1994 5,921 20,725 

1995 4,337,820 6,602 21,093 

1996 4,448,280 5,308 20,300 

1997 4,481,920 5,292 17,836 

1998 4,337,876 5,561 17,104 

1999 4,048,202 143,144 5,222 17,008 

2000 9,171,067 142,856 4,920 16,776 

2001 9,019,998 150,054 4,430 12,610 

2002 8,871,416 145,351 3,926 11,242 

2003 8,725,283 110,524 3,426 10,011 

2004 8,581,556 110,524 3,426 10,011 

2005 8,440,197 110,524 3,426 10,011 

2006 8,301,167 110,524 3,426 10,011 

2007 8,164,426 110,524 3,426 10,011 

Sources: U.S. Environmental Protection Agency. 2002b. “EPA’s Clean Air Market Programs: Compliance Reports 

[various years].” <http://www.epa.gov/airmarkets/cmprpt/>. As obtained on May 9, 2002. 

RTI estimates. 

South Coast Air Quality Management District. 2002. “Annual RECLAIM Audit Report for 2000 Compliance Year.” 

Diamond Bar, California: South Coast Air Quality Management Board. March 1. 
The Economic Impact of the Gas-Mixture NIST-Traceable Reference Materials Program 

5-24 

number of allowances. The resulting number of allowances is the 

estimate of the number retired by directly traceable gas users. 

Table 5-9 shows the incremental impact on the number of 

allowances retired for each program for the upper and lower bound 

ranges of incremental uncertainty. These are the allowances that 

directly traceable gas users avoided retiring early by not using 

indirectly traceable gas. These credits are therefore equivalent to 

those they would have retired in the absence of the NTRM program. 

We next calculate the value of these credits. 

The market value of allowances established through the emissions 

trading programs is used to quantify the economic impact of the 

need to retire more allowances. The market value, in theory, 

reflects the marginal cost of emissions abatement. For, example, if 

Utility A needs to purchase 1 percent more allowances, then 

somewhere a similar Utility B will need to reduce its emissions 

1 percent. The cost of Utility B reducing emissions by 1 percent is 

the marginal cost of abatement and determines the market price. 

Table 5-10 includes the average market price for each vintage of 

allowance for the cap and trade programs. The price data included 

in Table 5-10 are determined by EPA auctions, from Cantor 

Fitzgerald’s Environmental Brokerage Services, or as reported by the 

South Coast Air Quality Management District. As is shown in 

Table 5-10, the allowance prices fluctuate widely. Prices depend 

on market conditions, the economic dispatch of units in operation, 

and the operating levels of units participating in the program. Prices 

have been as low as $68 per ton of SO2 in the Acid Rain Program 

and as high as $41,152 for NOx in RECLAIM. 

Multiplying the price data by the number of allowances yields the 

value of the credits (see Table 5-11). In 2001, the total value of the 

lost credits ranges between $2.2 million and $6.8 million for our 

estimated incremental uncertainty range.15 This reflects the cost to 

the user from having to retire additional allowances in order to meet 

compliance obligations due to switching from directly traceable to 

indirectly traceable. 

 

15The future value of the credits has been estimated using forward prices for credits 

as set by early auctions by EPA and market demand for credits usable in future 

compliance years. 
Section 5 — Results 

5-25 

Table 5-9. Avoided Early Retirement of Allowances by Units in Existing Emissions Trading 

Programs 

Vintage 

Acid Rain 

Program 

(SO2) 

OTC NOx

Program 

(NOx) 

RECLAIM 

(SO2) 

RECLAIM 

(NOx) 

Assuming a 0.1 increase in uncertainty 

1994 6 21 

1995 4,338 7 21 

1996 4,448 5 20 

1997 4,482 5 18 

1998 4,338 6 17 

1999 4,048 143 5 17 

2000 9,171 143 5 17 

2001 9,020 150 4 13 

2002 8,871 145 4 11 

2003 8,725 111 3 10 

2004 8,582 111 3 10 

2005 8,440 111 3 10 

2006 8,301 111 3 10 

2007 8,164 111 3 10 

Assuming a 0.3 increase in uncertainty 

1994 18 62 

1995 13,013 20 63 

1996 13,345 16 61 

1997 13,446 16 54 

1998 13,014 17 51 

1999 12,145 525 16 51 

2000 27,513 523 15 50 

2001 27,060 550 13 38 

2002 26,614 533 12 34 

2003 26,176 405 10 30 

2004 25,745 405 10 30 

2005 25,321 405 10 30 

2006 24,903 405 10 30 

2007 24,493 405 10 30 

Source: RTI estimates. 
The Economic Impact of the Gas-Mixture NIST-Traceable Reference Materials Program 

5-26 

Table 5-10. Market Prices for Emissions Allowances for Existing Emissions Trading Programs 

Vintage 

Acid Rain Program 

(SO2) 

OTC NOx Program 

(NOx) 

RECLAIM 

(SO2) 

RECLAIM 

(NOx) 

1994 $2,000.00 $678.73 

1995 $132.00 $524.25 $710.56 

1996 $68.14 $1,063.42 $786.42 

1997 $110.36 $2,304.51 $1,024.41 

1998 $116.96 $617.98 $1,372.92 

1999 $207.03 $710.00 $839.79 $2,556.91 

2000 $130.69 $676.00 $2,108.29 $21,308.32 

2001 $174.97 $712.00 $5,756.32 $41,151.74 

2002 $167.74 $827.00 $3,000.00 $4,000.00 

2003 $105.15 $4,662.00 $3,000.00 $4,000.00 

2004 $102.15 $4,817.00 $3,000.00 $4,000.00 

2005 $111.15 $3,944.00 $3,000.00 $4,000.00 

2006 $179.79 $3,944.00 $3,000.00 $4,000.00 

2007 $68.32 $3,944.00 $3,000.00 $4,000.00 

Sources: U.S. Environmental Protection Agency. 2002a. “Acid Rain Program: Allowance Auctions [Various Years].” 

<http://www.epa.gov/airmarkets/auctions/index.html>. As obtained on May 9, 2002. 

Cantor Fitzgerald Environmental Brokerage Services. 2002. “Market Prices Index [As of May 2002].” 

<http://www.emissionstrading.com/marketp.htm>. As obtained on May 9, 2002. 

South Coast Air Quality Management District. 2002. “Annual RECLAIM Audit Report for 2000 Compliance Year.” 

Diamond Bar, California: South Coast Air Quality Management Board. March 1. 

To summarize, we estimate the total benefit since the inception of 

the NTRM program, including the operations and maintenance 

costs and allowances costs, to range between $9.0 million and 

$13.5 million for emissions trading program participants in 2001 

(see Table 5-12). These economic benefits are expected to increase 

as cap and trade programs become more popular; in particular, the 

commencement of the Section 126 Federal NOx Budget Program 

and the NOx SIP Call, which will add hundreds of units to the total 

number of units participating in emissions trading programs. 

We estimate the total 

benefit since the inception 

of the NTRM program, 

including the 

administrative and 

allowances costs, to range 

between $9.0 million and 

$13.5 million for emissions 

trading program 

participants in 2001. 
Section 5 — Results 

5-27 

Table 5-11. Value of Avoided Early Retirement of Allowances ($) 

Vintage 

Acid Rain 

Program (SO2) 

OTC NOx

Program (NOx) 

RECLAIM 

(SO2) 

RECLAIM 

(NOx) Total 

Assuming a 0.1 increase in uncertainty 

1994 11,800 14,100 25,900 

1995 572,600 3,500 15,000 591,000 

1996 303,100 5,600 16,000 324,700 

1997 494,600 12,200 18,300 525,100 

1998 507,400 3,400 23,500 534,300 

1999 838,100 101,600 4,400 43,500 987,600 

2000 1,198,600 96,600 10,400 357,500 1,663,000 

2001 1,578,200 106,800 25,500 518,900 2,229,500 

2002 1,488,100 120,200 11,800 45,000 1,665,000 

2003 917,500 515,300 10,300 40,000 1,483,000 

2004 876,600 532,400 10,300 40,000 1,459,300 

2005 938,100 435,900 10,300 40,000 1,424,400 

2006 1,492,500 435,900 10,300 40,000 1,978,700 

2007 557,800 435,900 10,300 40,000 1,044,000 

Assuming a 0.3 increase in uncertainty 

1994 35,500 42,200 77,700 

1995 1,717,800 10,400 45,000 1,773,100 

1996 909,300 16,900 47,900 974,100 

1997 1,483,900 36,600 54,800 1,575,300 

1998 1,522,100 10,300 70,400 1,602,800 

1999 2,514,300 372,400 13,200 130,500 3,030,300 

2000 3,595,700 353,900 31,100 1,072,400 5,053,100 

2001 4,734,700 391,500 76,500 1,556,800 6,759,500 

2002 4,464,300 440,500 35,300 134,900 5,075,000 

2003 2,752,400 1,888,100 30,800 120,100 4,791,500 

2004 2,629,800 1,950,900 30,800 120,100 4,731,700 

2005 2,814,400 1,597,300 30,800 120,100 4,562,700 

2006 4,477,400 1,597,300 30,800 120,100 6,225,700 

2007 1,673,400 1,597,300 30,800 120,100 3,421,700 

Source: RTI estimates. 
The Economic Impact of the Gas-Mixture NIST-Traceable Reference Materials Program 

5-28 

Table 5-12. Summary of Economic Benefits to Participants in Existing Emissions Trading 

Programs ($) 

Vintage 

Acid Rain Program 

(SO2) 

OTC NOx Program 

(NOx) 

RECLAIM 

(SO2) 

RECLAIM 

(NOx) 

Assuming a 0.1 increase in uncertainty 

1994 773,500 974,600 1,748,200 

1995 5,136,400 947,900 6,084,300 

1996 4,863,900 931,800 5,795,700 

1997 4,988,300 921,400 5,909,700 

1998 5,304,800 898,600 6,203,400 

1999 5,566,800 427,600 900,300 6,894,800 

2000 6,771,200 431,500 1,174,500 8,377,200 

2001 7,147,800 453,600 1,358,300 8,959,700 

2002 7,228,200 477,800 877,900 8,583,800 

2003 6,833,300 884,100 878,700 8,596,000 

2004 6,973,500 912,700 885,900 8,772,100 

2005 7,221,700 828,200 893,100 8,943,000 

2006 7,968,400 840,500 900,300 9,709,200 

2007 7,232,000 853,100 907,500 8,992,700 

Assuming a 0.3 increase in uncertainty 

1994 773,500 1,026,500 1,800,000 

1995 6,281,500 984,800 7,266,300 

1996 5,470,100 975,000 6,445,200 

1997 5,977,600 982,300 6,959,900 

1998 6,319,500 952,400 7,271,900 

1999 7,243,000 698,400 996,000 8,937,500 

2000 9,168,300 688,800 1,910,200 11,767,300 

2001 10,304,200 738,200 2,447,200 13,489,700 

2002 10,204,300 798,100 991,300 11,993,800 

2003 8,668,200 2,256,900 979,300 11,904,400 

2004 8,726,700 2,331,200 986,500 12,044,500 

2005 9,098,000 1,989,600 993,700 12,081,300 

2006 10,953,300 2,001,900 1,001,000 13,956,200 

2007 8,347,600 2,014,500 1,008,200 11,370,300 

Source: RTI estimates. 
Section 5 — Results 

5-29 

 5.4 IMPACT ON AUTOMOTIVE EMISSIONS 

TESTING 

There are essentially two groups conducting emissions testing: 

(1) groups performing engine and automotive component design 

and testing and (2) groups performing post-consumer emissions tests 

for motor vehicles. Both groups consume NIST-traceable gas 

mixtures; however, their current consumption patterns are very 

different and are estimated to remain unchanged under the 

counterfactual scenario. 

 5.4.1 Post-Consumer Emissions Testing 

Based on nonattainment of federal air quality standards, locally 

mandated post-consumer emissions testing using BAR90, IM240, 

and other methods requires audit organizations and testing facilities 

to use NTGs to calibrate analyzers. In most instances the materials 

used to assay candidate standards are certified using specially 

prepared NIST reference gas mixtures (RGMs) in cooperation with 

state-level environmental agencies and specialty gas manufacturers. 

However, in some instances, NTRMs and SRMs are used in the 

traceability chain. But, as the candidate standards are also certified 

via the GMIS method, the counterfactual scenario would have no 

incremental uncertainty effect similar to that discussed in the 

previous section concerning indirectly traceable EPA protocol gases 

for CEM systems calibration. 

 5.4.2 Automotive Design Emissions Testing 

Emissions testing conducted by automotive equipment 

manufacturers during the design phase and by their environmental 

regulatory bodies under compliance verification programs rely 

primarily on the use of directly traceable gases and SRMs 

themselves. As shown in Table 5-2, automotive equipment firms 

purchase SRMs to be used directly in the testing of engine designs 

or subsystem designs or to certify internally prepared standards to be 

used for the same purpose. In addition, they will use NTRMs or 

directly traceable NTGs purchased from SGCs. 

According to interviewees, the economic consequences of failing to 

meet federal and state-mandated technical performance 

specifications are considerable. Automotive original equipment 

manufacturers (OEMs) and part manufacturers expend resources to 

verify that their products are in compliance with federally mandated 

Automotive 

equipment 

manufacturers are 

adverse to high 

uncertainty of 

reference standards 

and therefore have a 

higher WTP for 

directly traceable 

NTGs. 
The Economic Impact of the Gas-Mixture NIST-Traceable Reference Materials Program 

5-30 

specifications and averages. Failure to comply would invoke 

penalties and delay product development and consequently, 

product introduction, among other consequences. 

These consumers are adverse to high uncertainty of reference 

standards and therefore have a higher WTP for directly traceable 

NTGs. Several major domestic and foreign OEMs minimize risk by 

purchasing SRMs directly from NIST or, if research and 

development facilities are located outside the U.S., PRMs from NMi 

in The Netherlands, or other national standards bodies. In instances 

where manufacturers purchase NTGs from SGCs, those NTGs are 

directly traceable to SRMs and NTRMs. 

The volume of NTGs currently purchased from SGCs is 

approximately equal to the estimated number of directly traceable 

NTGs manufactured under the counterfactual scenario according to 

confidential SGC estimates. Based on discussion with industry 

experts, we believe that the automotive design firms have the 

highest WTP for directly traceable gases and would purchase 

virtually all of the NTGs certified against SRMs. As a result, they 

would not be affected by an incremental increase in uncertainty and 

would be only indirectly affected under the counterfactual due to 

the higher cost of directly traceable gases (which is captured in the 

NTG production cost analysis). 

Automotive OEMs and regulatory agencies that currently purchase 

SRMs would continue to do so under the counterfactual scenario. 

Earlier in this chapter, we discussed the number of SRMs that would 

be available to SGCs. The SRMs currently purchased by these 

consumer groups were netted out of NIST’s SRM capacity. We 

assume, therefore, that these current SRM customers would still be 

able to purchase SRMs. 

 5.5 OTHER IMPACTED PARTIES 

There are several other categories of potentially impacted end users 

besides those performing CEM and automotive emissions tests. 

These end users include ambient air quality monitoring 

organizations, petrochemical facilities, and independent testing 

organizations and laboratories, including universities. These 

organizations purchase some combination of directly and indirectly 
Section 5 — Results 

5-31 

traceable NTGs, and under the counterfactual they would be 

purchasing only indirectly traceable ones. 

With the exception of ambient air quality monitoring organizations, 

it is not known for which non-CEM-related activities these 

organizations are using NTGs. Therefore, it is not possible to 

develop any impact metrics or quantify any benefits for these 

groups. The specific applications for which these end users are 

using NTGs are as disparate as their markets and industries. The 

exclusion of these potentially affected firms leads to an 

underestimate of the benefits of the NTRM program. 

Regarding ambient air quality monitors, “in assessing the accuracy 

of an air pollution monitoring agency, measurements are made 

through the implementation of independent audits in which the 

measurements are challenged with standards... have traceability as 

directly as possible to NIST standards” (Musick, 1996). However, 

the window of accuracy for the approximately 5,000 air samplers 

around the country is ±20 percent. According to governmental 

organizations, the calibration and audit gases must be NIST 

traceable, but organizations are allotted a degree of flexibility in 

determining which “types” of NIST-traceable mixtures they use. 

Some may use directly or indirectly traceable EPA protocol gases. 

Others may use samples prepared from NTRMs, SRMs, or GMISs. 

In any event, as the accuracy is not as critical to their operation as it 

is to other end users, it is likely that increased uncertainty in the 

range of 0.1 to 0.3 would have no significant economic impacts. 

 5.6 SOCIAL COSTS OF THE NTRM PROGRAM 

The costs of operating the NTRM program consists of the initial 

program development costs incurred in the early 1990s and 

ongoing NTRM certification expenses. Although NTRM program 

start-up costs were borne by NIST, the day-to-day operations costs 

for the program are borne by SGCs. Thus, the operation of the 

NTRM program consists of both NIST and industry costs. The sum 

of these two cost categories represents the NTRM program’s social 

costs. 

NIST spent approximately $185,000 between 1990 and 1992 to 

develop and begin operating the NTRM program. NIST’s 

expenditures included $35,000 in 1990 and $75,000 in both 1991 

NIST spent approximately 

$185,000 between 1990 

and 1992 to develop and 

begin operating the NTRM 

program. From 1992 

forward, SGCs supported 

the program by paying 

NIST fees to have 

candidate NTRM batches 

certified. 
The Economic Impact of the Gas-Mixture NIST-Traceable Reference Materials Program 

5-32 

and 1992 to design, test, evaluate, and place into operation the 

NTRM program. 

As discussed in Section 2, SGCs are required to pay NIST to certify 

batches of NTRMs. The fees paid constitute the actual labor, 

materials, and depreciation costs, among other costs, incurred by 

NIST. The actual amount that SGCs pay per batch is a function of 

the number of cylinders in the batch (see Table 5-13). For example, 

SGCs pay on average $12,000 to certify between 61- and 80-

cylinder batches. 

Batch Size Fee 

Up to 20 Cylinders 6,000 

21 to 40 cylinders 8,000 

41 to 60 cylinders 10,000 

61 to 80 cylinders 12,000 

Source: NIST’s NTRM program. 

Table 5-14 summarizes both NIST’s development costs and the 

certification fees for 1990 to 2001 and projected through 2007. 

Because no reasonable guidance was available on the future 

number of NTRM batches, the fees projections for 2002 through 

2007 are the average of the annual fees paid during the historical 

period. Thus, over the life of the program presented in this analysis, 

NIST’s fees totaled $185,000 and industry’s $4.7 million. The 

combined social cost of the program is therefore about $4.9 million. 

 5.7 CALCULATING MEASURES OF SOCIAL 

RETURN 

To determine the returns from NIST’s investment in the development 

of the NTRM program, we compared the net benefits to SGCs and 

end users with the expenses NIST incurred in the early 1990s to 

develop the program. In this final section of the report, we 

summarize the quantified impacts of the NTRM program and 

calculate three summary measures of the net benefits of the 

program: the benefit-cost ratio, the NPV, and the social rate of 

return. 

Table 5-13. NIST 

Certification Fees ($) 
Section 5 — Results 

5-33 

Year NIST SGC Certification Costs 

1990 35,000 

1991 75,000 

1992 75,000 

1993 142,000 

1994 60,000 

1995 408,000 

1996 242,000 

1997 410,000 

1998 462,000 

1999 444,000 

2000 428,000 

2001 214,000 

2002 312,222 

2003 312,222 

2004 312,222 

2005 312,222 

2006 312,222 

2007 312,222 

Total 185,000 4,683,332 

 5.7.1 Time Series of Aggregate Costs and Benefits of the 

NTRM Program 

Table 5-15 assembles the time series of the costs and benefits of the 

NTRM program into one table. The SGC production benefits and 

the end-user administrative benefits form the base of the total 

benefits, about $7.5 million in 2001. The remaining benefit, enduser emissions trading, was quantified as a range because the 

precise increase in uncertainty for end users switching to indirectly 

traceable NTGs under the counterfactual scenario could not be 

obtained. SGCs disagreed about the exact increase in uncertainty of 

Table 5-14. NIST and 

Industry Certification 

Costs ($) 
The Economic Impact of the Gas-Mixture NIST-Traceable Reference Materials Program 

5-34Table 5-15. Time Series of Quantified Benefits and Costs ($) 

End-User Emissions Trading 

Benefits Total Benefits 

Year 

SGC 

Production 

Benefits 

(a) 

End-User Operations 

and Maintenance Cost 

Savings 

(b) 

Lower Bound 

(c) 

Upper Bound 

(d) 

Lower Bound 

(a+b+c) 

Upper Bound 

(a+b+d) 

NTRM Program 

Total (Social) 

Costs 

1990 35,000 1991 75,000 1992 75,000 1993 681,009 681,009 681,009 142,000 1994 694,259 1,722,257 25,908 77,724 2,442,425 2,494,241 60,000 1995 735,931 5,493,225 591,041 1,773,123 6,820,198 8,002,280 408,000 1996 743,483 5,471,021 324,716 974,147 6,539,219 7,188,650 242,000 1997 731,027 5,384,656 525,092 1,575,276 6,640,775 7,690,958 410,000 1998 741,607 5,669,115 534,278 1,602,833 6,944,999 8,013,554 462,000 1999 738,502 5,907,151 987,606 3,030,336 7,633,259 9,675,990 444,000 2000 732,231 6,714,241 1,662,977 5,053,089 9,109,449 12,499,561 428,000 2001 716,360 6,730,189 2,229,509 6,759,506 9,676,058 14,206,055 214,000 2002 734,595 6,918,783 1,665,041 5,074,983 9,318,419 12,728,361 312,222 2003 735,694 7,112,938 1,483,049 4,791,462 9,331,681 12,640,094 312,222 2004 736,831 7,312,823 1,459,322 4,731,664 9,508,977 12,781,318 312,222 2005 738,000 7,518,615 1,424,357 4,562,665 9,680,972 12,819,281 312,222 2006 739,210 7,730,494 1,978,695 6,225,682 10,448,400 14,695,386 312,222 2007 740,454 7,948,648 1,044,022 3,421,662 9,733,124 12,110,764 312,222 

Total (NPV $2001) 5,398,420 39,319,882 6,705,572 20,782,581 51,423,874 65,500,883 2,407,897 

Source: RTI estimates. 
Section 5 — Results 

5-35 

using GMISs compared to NTRMs. However, most agreed that 

between 0.1 and 0.3 percent was a reasonable range. In 2001, the 

lower bound estimate for emission trading benefits was $2.2 million 

and the upper bound was $6.8 million. Combining all benefits for 

2001 yields a total calculated benefit of between $9.7 and 

$14.2 million. 

Whereas the quantified benefits up to and including 2001 are 

assessments based on the current and past market value of 

emissions allowances, the quantified benefits for the years 2002 

through 2007 should be treated as moving estimates. Prices set in 

early auctions of emissions allowances for future compliance years 

were used to calculate emissions trading benefits in the near future. 

However, as those compliance years approach, those credits may 

become more or less valuable depending on the marginal cost of 

pollution abatement during those years and market conditions. The 

early auction prices were used because they were the best available 

estimate of the value of one future emissions allowance. The prices 

for future allowances are also affected by the market conditions 

during the time in which the auction is held. 

The quantified benefits may not fully capture the total impact 

resulting from the loss in confidence experienced by end users that 

are forced to use indirectly traceable NTGs under the counterfactual 

scenario. Although we were able to quantify the direct behavioral 

adjustment of end users given a range of increases in incremental 

uncertainty, we were not able to capture indirect effects on business 

operations due to changes in their perception of NTGs that result 

from the increase in the number of steps away from the primary 

standards at NIST. The majority of end users interviewed for this 

analysis prefer to use NTGs that are directly traceable to NIST 

standards because of their belief that their measurements and 

calibrations are more defensible and that there is less variability in 

the NTGs purchased from the vendor over time. Most SGCs agreed 

that their customers’ perceptions of their protocol gases and other 

products may be adversely affected by the introduction of the GMIS 

intermediate step. 
The Economic Impact of the Gas-Mixture NIST-Traceable Reference Materials Program 

5-36 

 5.7.2 Measures of the Net Benefits of the NTRM Program 

In this section, we calculate three measures of the net benefits of the 

NTRM program: the benefit-cost ratio, the NPV, and the social rate 

of return. 

If Bt is the total net benefits to SGCs and end users accrued to all 

beneficiaries in year t, and Ct is the cost to NIST of the program in 

year t, then the benefit-cost ratio for the program is given by 

 (B/C) = 

∑

i=0

n B(t+i)

(1+r)i

∑

i=0

n C(t+i)

(1+r)i

 (5.1) 

where t is the first year in which benefits or costs occur, n is the 

number of years the benefits or costs occur, and r is the social rate 

of discount. Because benefits and program costs may occur at 

different time periods, both are expressed in present-value terms 

before the ratio is calculated. 

The NPV of the NIST NTRM program can be computed as 

 NPV = ∑

i=0

n









 B(t+i  )

(1+r)i

 – Ct+i

(1+r)i . (5.2) 

The social rate of return is the value of r that sets NPV equal to 0 in 

Eq. (5.2). 

For the NTRM program, the following parameter values were used 

to calculate economic returns: 

t = 1990: the first year in which NIST incurred 

development costs 

n = 17: the number of years from 1990 to 2007 

r = 7 percent: the inflation-adjusted social discount rate 

recommended by the Office of Management and 

Budget. 

As shown in Table 5-15, NIST expenditures begin in 1990. 

However, benefits associated with NIST sulfur SRMs are identified 

beginning in 1993 with the first production of NTRMs. 

The three measures of economic return are provided in Table 5-16. 

The estimated net benefits to industry from the program greatly 

exceed NIST’s investment costs for both the lower and upper 

bounds of our estimate. 
Section 5 — Results 

5-37 

Table 5-16. Economic Impact of NIST NTRM Program 

Economic impacts reflect benefits and costs from 1990 projected through 2007. 

Measure of Social Returna Lower Bound Upper Bound 

Benefit-to-cost ratio 21.4 27.2 

Net benefits (NPV $2001) $49,015,977 $63,092,986 

Social rate of return 221% 228% 

aBased on a 7 percent inflation-adjusted social discount rate. 

R-1 

 

 References 

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[Computer file.] 

ASTM International. 1998. Annual Book of ASTM Standards. West 

Conshohocken, PA: ASTM International. 

Bentley, John P. 1983. Principals of Measurement Systems. 

London: Longman. 

BOC Gases. “Special Gases Product Catalog.” 

<www.boc.com/gases/products/special/ 

america/products/gases/environ/cemalib.htm>. As obtained 

on November 14, 2000. 

Burtraw, D. 1998. “Cost Savings, Market Performance, and 

Economic Benefits of the U.S. Acid Rain Program.” 

Discussion Paper 98-28-REV. Washington, DC: Resources 

for the Future. 

Cantor Fitzgerald Environmental Brokerage Services. 2002. 

“Market Prices Index [As of May 2002].” 

<http://www.emissionstrading.com/marketp.htm>. As 

obtained on May 9, 2002. 

Coy, C., P. Meuller, D. Luong, S. Tsai, D. Nguyen, and F. Chen. 

2001. “White Paper on the Stabilization of NOx RTC 

Prices.” Los Angeles, CA: South Coast Air Quality 

Management District. 

Decker, C.E., M.L. Saeger, W.C. Eaton, and D.J. von Lehmden. 

1981. “Analysis of Commercial Cylinder Gases of Nitric 

Oxide, Sulfur Dioxide, and Carbon Monoxide at Source 

Concentrations.” Continuous Emission Monitoring—Design, 

Operation and Experience, APCA Publication No. SP-43, 

Air Pollution Control Association, pp. 197-209. 
The Economic Impact of the Gas-Mixture NIST-Traceable Reference Materials Program 

R-2 

Fogel, Robert W. March 1979. “Notes on the Social Saving 

Controversy.” The Journal of Economic History 39(1):1-54. 

Gittler, William E., and Robert B. Denyszyn. 2000. “The Benefits 

of Specialty Gas Metrology for Industry.” Danbury, CT: 

Praxair, Inc. 

Guenther, F.R., W.D. Dorko, W.R. Miller, and G.C. Rhoderick. 

1996. The NIST Traceable Reference Material Program for 

Gas Standards. NIST Special Publication 260-126. 

Hoovers, Inc. 2002. [Online computer file.] Available at 

www.hoovers.com 

Hughes, E.E. 1975. “Development of Standard Reference Materials 

for Air Quality Measurement.” ISA Transactions 14(Part 

4):281-291.

Hughes, E.E. 1976. “Role of the National Bureau of Standards in 

Calibration Problems Associated with Air Pollution 

Measurement.” Calibration in Air Monitoring, ASTM STP 

598, American Society for Testing and Materials, 

pp. 223-231. 

Hughes, E.E. 1982. “Certified Reference Materials for Continuous 

Emission Monitoring.” Journal of the Air Pollution Control 

Association 32(7):708-711. 

Hughes, E.E., and J. Mandel. 1981. A Procedure for Establishing 

Traceability of Gas Mixtures to Certain National Bureau of 

Standards SRMs. EPA Publication No. EPA-600/7-81-010. 

Hughes, E.E., and J.E. Suddueth. No date. “A Computer Operated 

Gas Analysis System (COGAS0 for the Sequential Analysis of 

Multiple Samples of Compressed Gas.” Obtained in 1980. 

Mage, D.T. 1973. “Note on an Urban Diffusion Simulation Model 

for Carbon Monoxide and the Need for Accurate Span Gas 

Analysis.” Journal of the Air Pollution Control Association

23(11):970-972. 

Martin, S.A., M.P. Gallaher, and A.C. O’Connor. 2000. Economic 

Impact of Standard Reference Materials for Sulphur in Fossil 

Fuels. NIST 00-1 Planning Report. Gaithersburg, MD: 

National Institute for Standards & Technology. 

Mitchell, W.J., and W.E. May. 1993. Two New Gas Standards 

Programs at the National Institute of Standards and 

Technology. EPA Publication EPA/600/A-93/107. 
References 

R-3 

Musick, D. 1996. The Ambient Air Precision and Accuracy 

Program: 1995 Annual Report. Washington, DC: U.S. EPA. 

Office of Air Quality Planning and Standards. 

National Institute of Standards and Technology (NIST). 2000. 

<http://ts.nist.gov/ts/htdoc/230/232/mission/indexhtm>. 

Nichols, Louis, EPA’s Acid Rain Program. November 22, 2000. 

Personal communication with Bob Wright, Research 

Triangle Institute. 

Paulsell, C.D. 1976. “Use of the National Bureau of Standards 

Reference Gases in Mobile Source Emissions Testing.” 

Calibration in Air Monitoring. ASTM STP 598, American 

Society for Testing and Materials, pp. 232-245. 

Resources for the Future (RFF). November 1996. An Assessment of 

the EPA’s SO2 Emission Allowance Tracking System. 

Washington, DC: Resources for the Future. Discussion 

Paper 97-21. 

Resources for the Future (RFF). April 2000. Curtis Carlson, Dallas 

Burtraw, Maureen Cropper, and Karen Palmer. Sulfur 

Dioxide Control by Electric Utilities: What Are the Gains 

from Trade? Washington, DC: Resources for the Future. 

Discussion Paper 98-44-REV. 

Scott Environmental Technology, Inc. 1977. Protocol for 

Establishing Traceability of Calibration Gases used with 

Continuous Source Emission Monitors. Publication No. SET 

1500-05-0277. 

South Coast Air Quality Management District. 2002. “Annual 

RECLAIM Audit Report for 2000 Compliance Year.” 

Diamond Bar, California: South Coast Air Quality 

Management Board. March 1. 

Taylor, John R. 1997. An Introduction to Error Analysis. 2nd 

edition. Sausalito, CA: University Science Books. 

U.S. Environmental Protection Agency (EPA). January 1993. “Acid 

Rain Program; Final Rule.” Federal Register 58(6):3370. 

U.S. Environmental Protection Agency (EPA). 1997a. EPA 

Traceability Protocol for Assay and Certification of Gaseous 

Calibration Standards. EPA Publication No. EPA600/R-97/121. 
The Economic Impact of the Gas-Mixture NIST-Traceable Reference Materials Program 

R-4 

U.S. Environmental Protection Agency (EPA). 1997b. “Acid Rain 

Program Overview.” <http://www.epa.gov/acidrain/ 

overview.html>. As accessed on December 1, 2000. 

U.S. Environmental Protection Agency (EPA). 1999. Progress 

Report on the EPA Acid Rain Program. EPA 430-R-99-011. 

Washington, DC: U.S. EPA. 

U.S. Environmental Protection Agency (EPA). 2000a. “Cumulative 

Activity Trading Table.” 

<http://www.epa.gov/acidrain/ats/cumchart.html>. As 

accessed on December 1, 2000. 

U.S. Environmental Protection Agency (EPA). 2000b. “1999 Acid 

Rain Compliance Report.” Document EPA-430-R-00-007. 

<http://www.epa.gov/acidrain/comprpt/1999/index.html>. 

As accessed on December 1, 2000. 

U.S. Environmental Protection Agency. 2002a. “Acid Rain 

Program: Allowance Auctions [Various Years].” 

<http://www.epa.gov/airmarkets/auctions/index.html>. As 

obtained on May 9, 2002. 

U.S. Environmental Protection Agency. 2002b. “EPA’s Clean Air 

market Programs: Compliance Reports [various years].” 

<http://www.epa.gov/airmarkets/cmprpt/>. As obtained on 

May 9, 2002. 

Wechter, S.G., and H.A. Grieco. 1976. “Gas Standards, How 

Standard are They?” Calibration in Air Monitoring. ASTM 

STP 598, American Society for Testing and Materials, 

pp. 246-254. 
 Appendix A: 

 Interview Guides 
 Scoping 

 Questionnaire— 

 Specialty Gas 

 Companies 
1 

Scoping Questionnaire—Specialty Gas Companies 

Introduction 

Research Triangle Institute (RTI) is conducting a study of the NTRM Program on behalf of the 

National Institute of Standards and Technology (NIST). As part of this study, we will quantitatively 

and qualitatively assess the economic benefits of NTRMs to industry and evaluate the role of 

NIST’s Gas Mixture NTRM program in the supply of NTRMs. To accomplish this task, we will 

construct a “counterfactual scenario” describing the reference gas material supply chain in the 

absence of the gas mixture NTRM. This counterfactual scenario may describe, for example, how 

specialty gas companies would change their business practices and end users their consumption 

patterns in the absence of the NTRM program. 

Our preliminary hypothesis is that NTRMs’ primary economic impact is that they lower the costs 

and increase the availability of high-quality NIST-traceable EPA protocol gases. Availability 

includes both adequate supply and diversity of high-quality NIST-traceable gases. To test this 

hypothesis, we plan to speak with specialty gas companies, industry experts, and end users of 

reference gases. We believe that these entities are the key to understanding the benefits of NTRMs 

and describing what the world would look like without the NIST Gas Mixture NTRM program. 

RTI is a nonprofit organization and frequently cooperates with industry on economic impact 

studies of this type. As such we have established appropriate systems that respect the 

confidentiality of our private-sector participants. Any information provided to support this study 

will remain strictly confidential. Information specific to an individual organization will not be 

presented explicitly in any reports and will not be attributed to any organization. Furthermore, all 

data will be presented in the aggregate to prevent the disclosure of information about any one 

firm’s business practices or production volumes. 

At the conclusion of the study, we will produce a report summarizing industry’s current uses and 

future needs for gas mixture NTRMs. This report will be made available at no cost to all 

organizations that participate in the study. You may return this questionnaire via email to 

oconnor@rti.org or via fax at (919) 514-6683. Should you have any questions, call Alan O’Connor 

at (919) 541-7186. 
2 

1. Contact Information 

Company name: 

Contact name: 

Division and title of contact: 

Contact address: 

Contact phone: 

Contact fax: 

Contact email: 

Date and time of interview: 

2. Production of NIST-Traceable Gases 

This section requests background information on annual production volumes of NIST-traceable 

gases at your firm. This information will be used to develop a market model to examine the 

impact of the absence of the NTRM program. 

2.1 Approximately how many cylinders of 1 percent, NIST-traceable gas does your firm produce 

each year? 

Cylinders: 

2.2 Do you use reference material other than NTRMs to certify these gases? 

 No, we use only NTRMs. 

 Yes, we also use SRMs to certify approximately ____ % of production because: 

2.3 How many cylinders of gas can you currently certify using one NTRM? 

Cylinders: 
3 

2.4 Approximately how much does your firm spend annually on activities and labor to support 

its participation in the NTRM program? 

Dollars: 

2.5 Approximately how many cylinders of 2 percent, NIST-traceable gas does your firm produce 

each year? 

Cylinders: 

3. The Counterfactual World without NIST’s NTRM Program 

The World Without the NTRM Program

Current Traceability

Chain

NIST Primary

Standards

Protocol

Gas

± 1.2%

SRM

± 1%

Reference

Gases

Purchased

by Industry

Protocol

Gas

± 2%

Counterfactual Without

NTRM Program

NIST Primary

Standards

SRMs

± 1%

NTRMs

± 1%

GMISs

SRMs

± 1%

GMISs

Protocol

Gas

± 1.2%

SRM

± 1%

Protocol

Gas

± 2%
4 

3.1 It is our hypothesis that in a world without the NTRM program, your firm would use NIST 

SRMs to certify 1 percent, EPA protocol-type gases. Because NIST can certify only a small 

number of SRMs each year, the market for NIST SRMs will be tight. We hypothesize that 

manufacturers of 1 percent gases will take either or both of the following actions to increase 

the number of cylinders they can produce with one SRM: 

Z Expand operations to increase the number of cylinders that can be certified 

simultaneously, and/or 

Z Increase the average cylinder size. 

 The 2 percent NIST-traceable gas market would remain largely unaffected because they 

would be produced from GMISs certified against SRMs. The right-hand portion of the above 

illustration portrays this hypothesis. Do you believe this is a fair representation of the gas 

certification process in the absence of NIST’s NTRM program? 

 Yes 

 Partially agree—we would expand our operations but would not alter our current 

distribution of cylinder sizes. 

 Partially agree—we would not expand our operations but would alter our current 

distribution of cylinder sizes. 

 No, please explain 
5 

3.2 Under the counterfactual scenario, we hypothesize that your firm may increase the number 

of cylinders that can be certified against one SRM by expanding your operations. Doing so 

would allow more cylinders to be certified simultaneously against an SRM. Would your firm 

expand its operations? 

 Yes 

3.2.1 We would possibly expand the number of cylinders certified per SRM by 

___________ (percent or cylinders). 

3.2.2 This expansion, including labor and R&D costs as well as capital equipment, 

may cost as much as ___________ dollars. 

3.2.3 Other comments 

 No, please explain 
6 

3.3 We hypothesize that your firm may increase the volume of gas within an average cylinder by 

altering your current distribution of cylinder sizes toward larger cylinders. Would your firm 

take this action? 

 Yes 

3.3.1 This adjustment, including labor and R&D costs as well as capital equipment, 

may cost as much as ___________ dollars. 

3.3.2 Other comments 

 No, please explain 

3.4 Would your unit costs for producing 1 percent gases increase or decrease in the absence of 

the NTRM program? Would unit costs for producing 2 percent gases increase or decrease? 
7 

3.5 Would you anticipate any bottlenecks (i.e., delays and back order time) in your production 

and certification processes under this scenario? Please explain. 

 Yes No 

Please explain 

3.6 If your firm maintains multiple production facilities for NIST-traceable gases, is it likely that 

the firm may consolidate operations at fewer facilities? 

 Yes No 

Please explain 

3.7 Would your firm offer the same species of NIST-traceable gases in the absence of the NTRM 

program? 

 Yes 

 No 

 If not, why would they not be produced? What would be the approximate drop in the 

production volume (by cylinder)? 
8 

4. End Users 

4.1 As part of the market analysis portion of this project, we are analyzing the impacts of the 

NTRM program on end users, such as automotive OEMs and electric utilities. To help us 

develop a market model of NIST-traceable gas end users, please estimate the percentage of 

NIST-traceable gases consumed by industry. 

Industry 

Percent of 1% 

Market 

Percent of 2% 

Market 

Electric Utilities 

Transportation Equipment Firms 

Petrochemical Firms 

Government Agencies 

Independent Testing and Monitoring Organizations 

University and Research Laboratories 

Other (please specify) 

Other (please specify) 

4.2 Of your total sales of 1 percent reference gases, what is your approximate sales by gas type? 

Gas Percent of 1% Gas Sales Major Consuming Industries 

NO 

NOx 

O2 

SO2 

CO 

CO2 

Propane 

Methane 

Thank you for contributing to this important research effort. 
 Questionnaire— 

 Specialty Gas 

 Companies 

1 

Questionnaire—Specialty Gas Companies 

Introduction 

Research Triangle Institute (RTI) is conducting a study of the NTRM Program on behalf of the 

National Institute of Standards and Technology (NIST). As part of this study, we will quantitatively 

and qualitatively assess the economic benefits of NTRMs to industry and evaluate the role of 

NIST’s Gas Mixture NTRM program in the supply of NTRMs. To accomplish this task, we will 

construct a “counterfactual scenario” describing the reference gas material supply chain in the 

absence of the gas mixture NTRM. This counterfactual scenario may describe, for example, how 

specialty gas companies would change their business practices and end users their consumption 

patterns in the absence of the NTRM program. 

Our preliminary hypothesis is that NTRMs’ primary economic impact is that they lower the costs 

and increase the availability of high-quality NIST-traceable EPA protocol gases. Availability 

includes both adequate supply and diversity of high-quality NIST-traceable gases. To test this 

hypothesis, we plan to speak with specialty gas companies, industry experts, and end users of 

reference gases. We believe that these entities are the key to understanding the benefits of NTRMs 

and describing what the world would look like without the NIST Gas Mixture NTRM program. 

RTI is a nonprofit organization and frequently cooperates with industry on economic impact 

studies of this type. As such we have established appropriate systems that respect the 

confidentiality of our private-sector participants. Any information provided to support this study 

will remain strictly confidential. Information specific to an individual organization will not be 

presented explicitly in any reports and will not be attributed to any organization. Furthermore, all 

data will be presented in the aggregate to prevent the disclosure of information about any one 

firm’s business practices or production volumes. 

At the conclusion of the study, we will produce a report summarizing industry’s current uses and 

future needs for gas mixture NTRMs. This report will be made available at no cost to all 

organizations that participate in the study. You may return this questionnaire via email to 

oconnor@rti.org or via fax at (919) 514-6683. Should you have any questions, call Alan O’Connor 

at (919) 541-7186. 
2 

1. Contact Information 

Company name: 

Contact name: 

Division and title of contact: 

Contact address: 

Contact phone: 

Contact fax: 

Contact email: 

Date and time of interview: 

2. Production of NIST-Traceable Gases 

This section requests background information on annual production volumes of NIST-traceable 

gases at your firm. This information will be used to develop a market model to examine the 

impact of the absence of the NTRM program. 

2.1 Approximately how many cylinders of 1 percent, NIST-traceable gas does your firm produce 

each year? 

Cylinders: 

2.2 Do you use reference material other than NTRMs to certify these gases? 

 No, we use only NTRMs. 

 Yes, we also use SRMs to certify approximately ____ % of production because: 

2.3 How many cylinders of gas can you currently certify using one NTRM? 

Cylinders: 
3 

2.4 Approximately how much does your firm spend annually on activities and labor to support 

its participation in the NTRM program? 

Dollars: 

2.5 Approximately how many cylinders of 2 percent, NIST-traceable gas does your firm produce 

each year? 

Cylinders: 

3. The Counterfactual World without NIST’s NTRM Program 

The World Without the NTRM Program

Current Traceability

Chain

NIST Primary

Standards

Protocol

Gas

± 1.2%

SRM

± 1%

Reference

Gases

Purchased

by Industry

Protocol

Gas

± 2%

Counterfactual Without

NTRM Program

NIST Primary

Standards

SRMs

± 1%

NTRMs

± 1%

GMISs

SRMs

± 1%

GMISs

Protocol

Gas

± 1.2%

SRM

± 1%

Protocol

Gas

± 2%
4 

3.1 Would your unit costs for producing 1 percent gases increase or decrease in the absence of 

the NTRM program? Would unit costs for producing 2 percent gases increase or decrease? 

3.2 Would you anticipate any bottlenecks (i.e., delays and back order time) in your production 

and certification processes under this scenario? Please explain. 

 Yes No 

Please explain 

3.3 If your firm maintains multiple production facilities for NIST-traceable gases, is it likely that 

the firm may consolidate operations at fewer facilities? 

 Yes No 

Please explain 

3.4 Would your firm offer the same species of NIST-traceable gases in the absence of the NTRM 

program? 

 Yes 

 No 

 If not, why would they not be produced? What would be the approximate drop in the 

production volume (by cylinder)? 
5 

4. End Users 

4.1 As part of the market analysis portion of this project, we are analyzing the impacts of the 

NTRM program on end users, such as automotive OEMs and electric utilities. To help us 

develop a market model of NIST-traceable gas end users, please estimate the percentage of 

NIST-traceable gases consumed by industry. 

Industry 

Percent of 1% 

Market 

Percent of 2% 

Market 

Electric Utilities 

Transportation Equipment Firms 

Petrochemical Firms 

Government Agencies 

Independent Testing and Monitoring Organizations 

University and Research Laboratories 

Other (please specify) 

Other (please specify) 

4.2 Of your total sales of 1 percent reference gases, what is your approximate sales by gas type? 

Gas Percent of 1% Gas Sales Major Consuming Industries 

NO 

NOx 

O2 

SO2 

CO 

CO2 

Propane 

Methane 

Thank you for contributing to this important research effort. 

 Questionnaire— 

 End Users of NIST- 

 Traceable Gas- 

 Mixture Standards 

1 

Questionnaire—End Users of NIST-Traceable Gas Mixture Standards 

Introduction 

Research Triangle Institute (RTI) is conducting a study of the NTRM Program on behalf of the 

National Institute of Standards and Technology (NIST). As part of this study, we will quantitatively 

and qualitatively assess the economic benefits of NTRMs to industry and evaluate the role of 

NIST’s Gas Mixture NTRM program in the supply of NIST-traceable gas mixture standards. To 

accomplish this task, we will construct a counterfactual scenario describing the reference gas 

material supply chain in the absence of the gas mixture NTRM. This counterfactual scenario may 

describe, for example, how specialty gas companies would change their business practices and 

end users their consumption patterns in the absence of the NTRM program. 

Our preliminary hypothesis is that NTRMs’ primary economic impact is to lower the costs and 

increase the availability of high-quality NIST-traceable EPA protocol gases. Availability includes 

both adequate supply and diversity of high-quality NIST-traceable gases. To investigate this 

hypothesis, we are speaking with specialty gas companies, industry experts, and end users of 

reference gases. We believe that these entities are the key to understanding the benefits of NTRMs 

and describing what the world would look like without the NIST Gas Mixture NTRM program. 

RTI is a nonprofit organization and frequently cooperates with industry on economic impact 

studies of this type. As such we have established appropriate systems that respect the 

confidentiality of our private-sector participants. Any information provided to support this study 

will remain strictly confidential. Information specific to an individual organization will not be 

presented explicitly in any reports and will not be attributed to any organization. What is more, 

all data will be presented in the aggregate to prevent the disclosure of information about any one 

firm’s business practices or production volumes. 

At the conclusion of the study, we will produce a report summarizing industry’s current uses and 

future needs for gas mixture NTRMs. This report will be made available at no cost to all 

organizations that participate in the study. You may return this questionnaire via email to 

oconnor@rti.org or via fax at (919) 514-6683. Should you have any questions, call Alan O’Connor 

at (919) 541-7186. 
2 

1. Contact Information 

Company name: 

Contact name: 

Division and title of contact: 

Contact address: 

Contact phone: 

Contact fax: 

Contact email: 

Date and time of interview: 

Is your response for your plant, division, or company? 

1.1 Definitions 

This questionnaire frequently refers to “1 percent” and “2 percent” NIST-traceable gas mixture 

standards. These gases are defined by their analytical uncertainty. Therefore: 

Z 1 percent gases refers to NIST-traceable gas mixture standards, such as EPA protocol gases, 

that are certified to be + or – 1 percent relative uncertainty. These gases, produced by 

specialty gas manufacturers, are one step away from the primary standard, NIST Standard 

References Materials (SRMs) or NIST-Traceable Reference Materials (NTRMs).

Z 2 percent gases refers to NIST-traceable gas mixture standards, such as EPA protocol gases, 

that are certified to be + or – 2 percent relative uncertainty. These gases, produced by 

specialty gas manufacturers, are certified by Gas Manufacturer Intermediate Standards 

(GMISs), which are themselves certified by the primary standard, NIST SRMs or NTRMs.
3 

2. Current NIST-Traceable Gas Usage 

This section requests information about your current consumption of NIST-traceable, gas mixture 

reference and calibration standards. 

2.1 Please indicate which NIST-traceable gas mixture standards you use, by activity. You may 

select more than one type of NIST-traceable gas per row. If you are responding to this 

questionnaire electronically, double click on each check box to select it. 

 NIST-Traceable Gases 

Activity NIST SRMs 

1 percent 

NISTtraceable 

Gases 

2 percent 

NISTtraceable 

Gases 

In-house 

standards 

Continuous Emissions Monitoring Systems 

(CEMS) 

 

Daily CEMS Calibration Error Tests 

Verify Daily CEMS Calibration Error Tests 

Quarterly CEMS Calibration Linearity Checks 

Verify Quarterly CEMS Calibration Linearity 

Checks 

Verify Quality of Third-Party Standards 

Annual Relative Accuracy Assessments 

Semiannual Relative Accuracy Assessments 

Bias and Adjustment 

Ambient Air, Monitoring, and Emissions Testing 

Daily Calibration 

Verify Daily Calibration 

Quarterly Calibration 

Verify Quarterly Calibration 

Verify Quality of Third-Party Standards 

Production Management 

Input Stream Monitoring 

Product Development 

Product Testing 

Verify Quality of Third-Party Standards 
4 

2.2 Are there other applications not mentioned in Question 2.1 for which you use NISTtraceable gas mixture standards? If so, please list the application and the “type” of standard 

used. 

2.3 Approximately how many cylinders of gas mixture standards do you use each year? 

Cylinders of 1 percent gas: 

Cylinders of 2 percent gas: 

3. NIST-Traceable Gas Usage under the Counterfactual Scenario 

Without NTRMs, SGCs’ capacity to produce 1 percent NIST-traceable gases would be greatly 

reduced. However, the availability of 2 percent NIST-traceable gases would be unaffected. This 

section asks you to consider a world where 1 percent gases are expensive and difficult to obtain. 

Environmental compliance can be maintained using 2 percent gases, but firms may opt to use 1 

percent gases to decrease uncertainty of measurements and increase operating efficiencies. We 

ask you if and how substituting 2 percent standards for 1 percent standards may affect your 

operations, including operation levels of CEM systems, participation in the SO2 emissions trading 

program, and other issues. We understand that these questions are highly hypothetical; your best 

estimates are all we ask for. 

3.1 Does your firm currently use 1 percent gases? 

 Yes. Please continue. 

 No. End of questionnaire, thank you for participating. 
5 

3.2 The table below asks for activities for which you currently use NIST-traceable 1 percent 

gases voluntarily and could use 2 percent gases. The third column estimates the 

approximate percentage drop in your total 1 percent gas use the switch to 2 percent gas 

would cause. 

 NIST-Traceable Gases 

Activity 

Can Switch from 1 

Percent to 2 Percent 

Percent Reduction in 

Total 1 Percent Gas Use 

Continuous Emissions Monitoring Systems (CEMS) 

Daily CEMS Calibration Error Tests % 

Verify Daily CEMS Calibration Error Tests % 

Quarterly CEMS Calibration Linearity Checks % 

Verify Quarterly CEMS Calibration Linearity 

Checks 

 % 

Verify Quality of Third-Party Standards % 

Annual Relative Accuracy Assessments 

Semiannual Relative Accuracy Assessments % 

Bias and Adjustment % 

Ambient Air, Monitoring, and Emissions Testing % 

Daily Calibration % 

Verify Daily Calibration % 

Quarterly Calibration 

Verify Quarterly Calibration % 

Verify Quality of Third-Party Standards % 

Production Management % 

Input Stream Monitoring % 

Product Development % 

Product Testing % 

Verify Quality of Third-Party Standards % 
6 

3.3 Would using 2 percent gas to calibrate your Continuous Emissions Monitoring System(s) 

instead of 1 percent gas affect the operating levels of pollution control equipment at your 

firm? 

 Yes, operating levels would increase by ______ percent, at an estimated approximate 

annual cost of $_________ per ___________. 

 No, operating levels would not change. 

 No, we do not calibrate CEMS using 1 percent gas. 

Comments: 

3.4 Do you operate ambient air, soil, or water monitoring systems? If so, would the use of 2 

percent gas in the place of 1 percent gas affect these operations? 

 No, we do not operate ambient monitoring systems or ambient monitoring systems that 

are calibrated by gas mixture standards. 

 No, we currently use 2 percent gas to calibrate these systems. 

 No, these systems would not be affected. 

 Yes, please explain: 

3.5 Would using 2 percent gas instead of 1 percent gas affect your firm’s activities in the SO2

Emissions Trading program? Examples of changes include using credits that would otherwise 

be sold or banked or buying more credits. 

 Yes, we would buy _________ percent more credits. 

 Yes, we would reduce the number of credits sold or banked by _________ percent. 

 No, we would not change our current regimen. 

 No, we do not participate in the SO2 Emissions Trading Program. 

Comments: 
7 

3.6 Would using 2 percent gas affect the quality of the fuels selected for input into the electricity 

generation process or other production processes at your firm, such as petrochemical 

operations? 

 No, such operating decisions would not be affected. 

 Yes, please explain: 

3.7 What other business or production costs impacts would your company incur as a result of 

switching from 1 percent to 2 percent gases? 

4. Comments 

4.1 Do you have any comments about this study, the benefits of the NTRM program, or that you 

would like to submit to NIST? 

4.2 We will mail you a copy of the final report at no cost to you. Thank you for participating in 

this important research effort.