Estimating the Benefits of EPA s Air Pollution Regulations

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1 Estimating the Benefits of EPA s Air Pollution Regulations Amy Lamson U.S. Environmental Protection Agency Office of Air Quality Planning and Standards Presented at NC BREATHE Conference Breakout Session: Economics of Clean Air Policy Making Charlotte, NC April 8, 2016

2 2 Presentation Overview Background on benefit-cost analysis at EPA Categories of benefits that EPA quantifies for air pollution regulations Tools and methods for quantifying health benefits Example collaboration with South Carolina

3 3 Air Pollution in the U.S. Declines while the Economy Grows Source: www3.epa.gov/airtrends

4 4 Why Estimate Costs and Benefits? Executive Orders and direct EPA to quantify the benefits and costs of economically significant regulations Benefits and costs assessed in Regulatory Impact Analyses (RIAs) To the extent permitted by law, benefits information can inform the regulatory decision and help justify the costs Unquantified benefits are important considerations Assessment should be as comprehensive and transparent to the public as feasible Guidance for developing EPA s benefit-cost analyses OMB s Circular A-4 (2003) EPA s Guidelines for Preparing Economic Analyses (2010)

5 5 Role of Benefit-Cost Analyses in EPA s Air Pollution Regulations Clean Air Act does not allow consideration of economic information for some decisions, including Setting the level for National Ambient Air Quality Standards (NAAQS) (health-based) Setting a MACT floor for National Emission Standards for Hazardous Air Pollutants (NESHAP) (technology-based) Clean Air Act explicitly encourages consideration of economic information for some decisions, including New Source Performance Standards (NSPS) Regulating beyond the MACT floor for NESHAP

6 Steps in Conducting a Cost-Benefit Analysis for an Air Pollution Regulation Identify Baseline 6 Identify Actions Needed to Meet New Requirements Estimate Costs Estimate Changes in Pollution Exposure and Associated Benefits Compare Costs and Benefits

7 Steps in Conducting a Cost-Benefit Analysis for an Air Pollution Regulation Identify Baseline 7 Economic Estimate impactscosts Social costs, price and quantity changes, trade changes, impacts on small businesses Identify Actions Needed to Meet New Requirements Estimate Costs Engineering costs Equipment, labor, recordkeeping Estimate Changes in Pollution Exposure and Associated Benefits Employment Compare Costs and Benefits

8 8 Typical Categories of Benefits for Air Pollution Regulations Health Benefits based on epidemiology studies showing relationship between pollution exposure and health effects (generally quantified using BenMAP-CE) Climate Benefits based on damages estimated by climate models per ton of CO 2 avoided (quantified using social cost of carbon (SC-CO2)) Visibility Benefits based on value of reducing light extinction from air pollution Ecosystem Benefits based on changes in recreation or economic value of ecosystem products

9 9 How Can Air Pollution Affect Health? Industrial emissions Fine particles (PM 2.5 ) Human health impacts

10 10 The environmental Benefits Mapping and Analysis Program--Community Edition The principal tool that EPA uses to quantify the benefits of reducing criteria air pollutants An open-source PC-based and graphic user interface-driven software program Uses health impact functions to estimate the incidence and economic value of adverse health outcomes Training available Download program at Questions:

11 11 BenMAP-CE Approach Health Impact Function: Y = Y o (1-e ß PM ) * Pop Pollutant change ( PM) Population (Pop) Baseline incidence (Y o ) Effect estimate (ß) Health impact ( Y) Avoided Deaths per Year

12 A Pyramid of Effects from Air Pollution Severity of effects > 90% of the monetized benefits Hundreds 12 Magnitude of impacts Thousands Tens of Thousands Millions Proportion of population affected

13 13 Assign Economic Value ($) to Health Effects Cost of Illness (COI) Medical expenses for treatment of illness Captures the money savings to society of reducing a health effect Ignores the value of reduced pain and suffering Willingness To Pay (WTP) Lost wages, avoided pain and suffering, loss of satisfaction, loss of leisure time, etc. Measures the complete value of avoiding a health outcome Mortality valuation ($9.7 million in 2013$ and income) Based on 26 U.S. studies (5 stated preference, 21 wage-risk) EPA is currently reviewing mortality risk valuation to reflect more recent science

14 14 Health Endpoints in EPA s Core Benefits Estimates for Air Pollution Regulations Category Health Endpoint PM 2.5 Ozone WTP COI Mortality Premature mortality * Cardiovascular Nonfatal heart attacks effects Hospital admissions, cardio Respiratory effects Hospital admissions, resp Asthma emergency dept visits Acute respiratory symptoms Asthma attacks Acute bronchitis Work loss days School absence days * Avoided premature deaths for PM 2.5 are assumed to follow a 20-year cessation lag (i.e., 30% in first year, 50% over years 2 to 5, and 20% over the years 6 to 20). The cessation lag affects economic valuation.

15 15 Example Collaboration with South Carolina Collaboration on a multi-pollutant, riskbased air quality management strategy for the 10-county upstate region Part of voluntary Ozone Advance Program EPA provides assistance to areas to avoid future NAAQS violations by helping to identify and implement pollution reduction strategies OAQPS Region 4 Using BenMAP-CE to estimate PM 2.5 and ozone-related health impacts from implementation of different pollution control strategies New gas stoves, anti-idling, open burning curtailment

16 Questions? Contact information: Amy Lamson (919)