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The Clean Air Act, the primary federal statute controlling air pollution in the United States, was last amended in 1977. Recently, a comprehensive set of amendments was approved by the Senate Subcommittee on Environmental Protection. The five titles of the proposed bill would address compliance with the national ambient air quality standards for ozone; limit emissions of pollutants causing acid rain; impose new controls on mobile sources of air pollution; redefine units of measurement for the national ambient air quality standards; and limit routine and accidental emissions of air toxics.

This staff working paper considers the potential economic effects of Title V of the proposed amendments, designed to control routine and accidental emissions of toxic air pollutants. This paper was prepared at the request of Senators Bingaman, Boren, Byrd, Cochran, Conrad, Dixon, Ford, Gam, Gramm, Hatch, Heflin, Helms, Lugar, McConnell, Murkowski, Nickles, Pressler, Pryor, Quayle, Rockefeller, Sanford, Shelby, Simpson, Stevens, Symms, Trible, Wallop, and Warner. In keeping with the mandate of the Congressional Budget Office (CBO) to provide objective analysis, the report makes no recommendations.

Sharon H. Stahl of CBO's Natural Resources and Commerce Division wrote the report under the supervision of Roger C. Dower and Everett M. Ehrlich. Bob Friedman of the Office of Technology Assessment, Jim McCarthy of the Congressional Research Service, and Michael Shapiro of the Environmental Protection Agency provided valuable assistance and comments. The paper was edited by Francis S. Pierce, and the manuscript was typed and prepared for publication by Patricia Z. Joy.

Edward M. Gramlich
Acting Director
October 1987
 
 

SUMMARY

Title V of the proposed Senate bill to amend the Clean Air Act establishes a regulatory program to control routine and accidental emissions of toxic air pollutants from a wide variety of industrial and mobile sources. Whether these provisions can achieve cost-effective health and environmental improvements is uncertain. Thus, the Congress faces a fundamental (and increasingly common) trade-off concerning the control of toxic air pollutants in evaluating this bill. On one hand, it can act now to reduce perceived health and environmental risks, but at some risk of misallocating health and environmental resources. On the other hand, delays in imposing federal controls on these emissions may result in continued threats to health and the environment.

The purpose of this preliminary assessment is to identify and evaluate the major characteristics of the air toxics problem that would appear to determine the economic trade-offs associated with selected provisions of Title V. The paucity of reliable data on emissions of air toxics and the costs of the abatement activities required by the bill, coupled with wide possible variations in health and environmental risk reductions, limit the degree to which a definitive assessment can now be conducted. It is possible, however, to highlight those aspects of the proposed bill that are likely to be most important in terms of the ultimate level of costs and benefits.

Emission Reductions and Benefits

The benefits of the proposed bill are a function of the reduction in emissions of air toxics resulting from the bill's implementation. The lack of a data base containing current emissions of air toxics makes it difficult to estimate the emissions reductions resulting from Title V. In this study, volatile organic compounds (VOC) emissions--some of which are a subset of all air toxic emissions--are considered rough proxies for emissions of air toxics. It is estimated that approximately 1.4 million tons emitted by major point sources and 3 to 6 million tons emitted by area sources may be controlled as a result of the bill's technology-based standard and area source reduction requirements. These estimates depend, however, on several factors. For example, since small point or area sources contribute approximately 87 percent of all VOC emissions, Title V's area source provisions might be expected to result in greater emissions reductions. But area source reductions of VOCs would also occur in response to Titles I and En of the bill, independently of Title V. In addition, further emission reductions can also be expected from both point and area sources as a result of other existing and proposed federal and state programs. The result of these and other features of air toxic control is to complicate the estimation of potential emissions abatement associated with the the bill's control provisions and, therefore, the resulting benefits.

Control Costs

Uncertainty also characterizes the estimation of costs. Some VOC (and other air toxics) control technology is already in place as a result of other federal and state regulations, although the degree of control varies from state to state and from industry to industry. Without detailed information on current plant-level controls, compliance costs for Title V can only be crudely approximated over a rather large range.

This analysis estimates the costs of the Section 502 technology-based standards at between $2.1 billion and $13.8 billion per year. This includes approximately $690 million to $2.8 billion in annual compliance costs to be incurred by major point sources, and $1.4 billion to $11 billion in other area source reductions. The large range is a direct function of the uncertainty concerning the unit costs of control and the current inventory of emissions. For example, the costs of the area source reduction requirements (55 percent of the national inventory of air toxic emissions over a 10-year period) are likely to be at the low end of the range (or even zero) if current and planned EPA programs achieve their anticipated reductions. On the other hand some area source reductions will probably be required under the technology-based standard requirements.

There is even greater uncertainty concerning the costs of the Section 503 health-based standards. These are intended to be more stringent than the technology standards but to apply to a much smaller set of substances and facilities. There is, however, some question as to whether these provisions would require EPA to do anything more than under its current obligations. Alternatively, one interpretation of this section would require EPA to set what have in the past been very expensive standards.

Finally, the cost to industry of conducting the hazard assessments required by Title V Section 507 can also vary, depending on the number of covered chemicals and facilities, and the number of hazard assessments expected to be performed by each facility. For example, this analysis estimates the annual cost associated with conducting the hazard assessments biennially over 10 years to range from $86 million for 20 chemicals to $1.7 billion if hazard assessments were required for all 402 chemicals potentially covered by this section.

Policy Observations

As outlined above, the annual costs of Sections 502 and 507 of Title V are estimated to range from $2.1 billion to $16.0 billion, with the high estimate based on a strict interpretation of the Title and upper-bound estimates of control costs. Uncertainty as to emissions levels, control costs, and chemical coverage complicates the estimation, as does possible assignment of costs to other proposed Titles and current programs. Without corresponding estimates of potential benefits, it is difficult to judge the reasonableness of the estimated costs. In terms of the value of shipments represented by the affected industrial sources, these costs are quite small. The estimated costs appear larger, however, compared to industrial expenditures on current air pollution control programs, which were estimated to be around $23 billion (in 1984 dollars) in 1981.

In spite of the substantial difficulty surrounding estimation of Title V costs and benefits, some general observations concerning the bill's policy trade-offs can be made:

• Insufficient information is available concerning the level and distribution of toxic air emissions to allow accurate assessment of the costs and benefits of the Title V technology-based standards provisions. Some relevant data on emissions and potential exposures are expected to be received by EPA beginning in July of 1988 as a result of Superfund requirements. This information would reduce the uncertainty surrounding the location and quantity of toxic emissions and the related effects on human health. Analysis of this data might allow the development of technology-based standards that maximize risk reduction by more closely targeting specific sources responsible for these human health risks;
  
  
• Many states have programs in place or are developing programs to address the hazards presented by emissions of air toxics. It is unclear to what degree these programs, along with current federal regulatory efforts, have already controlled hazardous releases, and to what extent they will continue to do so without additional intervention. Existing state programs contain many of the elements prescribed by the Title V provisions, however. It is possible that these programs, with EPA assistance, could achieve the reductions in toxic emissions that are called for in Section 502. An investigation of the success of these programs, and other associated federal and state efforts, in reducing toxic emissions could narrow the range of potential control costs and benefits associated with Title V;
  
  
• Area sources appear to be responsible for most of the exposures resulting from air toxics, and therefore may present the greatest potential for risk reduction. As area sources tend to be numerous and small, enforcement of area source controls would be difficult. Also, control costs vary significantly for area sources. Further analysis of releases from specific area sources and of the efficacy and cost of area source reductions might provide additional insight on cost-effective control measures;
  
  
• Small businesses and farms could bear a large share of the burden of performing hazard assessments assuming full implementation of Section 507. Although the cost of conducting one hazard assessment may be fairly small, the burden would increase with the number of covered chemicals handled at each facility. Costs could be contained by excluding farms and facilities employing fewer than 10 workers from Section 507 coverage. Under current Superfund law, local committees must plan for accidental releases. The information provided by the hazard assessments could aid these committees in their emergency preparedness activities by providing the location of potential releases and distribution of exposures. To the extent that the hazard assessment requirements overlap with the Superfund community right-to-know programs, both the costs and benefits of the emergency release provisions would be reduced.

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