The Section 812 BenefitCost Analyses of the Clean Air Act

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The Section 812 Benefit-Cost Analyses of the
Clean Air Act

• Jim DeMocker
• Office of Air and Radiation

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Presentation

• Section 812 Studies
• Retrospective
• First Prospective
• Second Prospective
• Peer Review Recommendations
• Three Selected Issues
• Disaggregation
• Cessation Lags
• Uncertainty Analysis

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1990 Clean Air Act, Section 812

• EPA shall conduct a comprehensive analysis of
  the impact of this Act on the public health,
  economy, and environment of the United States.
• Retrospective biennial Prospectives
• Review by outside experts
• Advisory Council on Clean Air Compliance Analysis

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Council (Retrospective)

• Morton Lippmann
• William Nordhaus
• Paul Portney
• Kip Viscusi
• A. Myrick Freeman
• Maureen Cropper
• Ronald Cummings
• Daniel Dudek
• Robert Mendelsohn
• Wayne Kachel
• William Cooper
• Thomas Tietenberg
• Paul Lioy
• Roger McClellan
• Richard Conway
• Wallace Oates
• David V. Bates
• Gardner Brown, Jr.
• Timothy Larson

Richard Schmalensee, Chair
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812 Scenarios -- Schematic
Retrospective
Pre-CAA
B
A
A
Emissions
Post-CAA
1970
1980
2000
2010
2020
1990
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No Clean Air Act Case Very High PM in U.S.
Cities by 1990

• 60 worse than Moscow
• 7 worse than Bangkok
• 6 worse than Bombay
• 2 worse than Manila
• 1 worse than Delhi

Delhi
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1990 Monetized Benefits Costs -- Retrospective
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Key factors PM mortality CRF (Pope
1995) Mortality valuation (4.8M/life) Severity
of No-CAA Scenario
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Council Closure Letter Retrospective

• "The Council finds that the Retrospective Study
  is a serious, careful study and employs sound
  methods along with the best data available.
• While we do not necessarily endorse all details
  of this study's findings, we believe that as a
  general matter that they are consistent with the
  weight of available evidence."
• Recommendations for First Prospective
• Investigate PM Causality
• Age-specific Mortality Risk
• Age-specific Mortality Valuation
• Disaggregate by Provision

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Council (Prospective I)

• A. Myrick Freeman
• Gardner Brown, Jr.
• Paul Lioy
• Lawrence H. Goulder
• Don Fullerton
• Jane Hall
• Charles Kolstad
• Lester Lave
• Alan Krupnick
• William Smith
• Morton Lippmann
• George Wolff
• Timothy Larson
• Joseph Meyer
• Robert Rowe
• George Taylor
• Michael Kleinman
• Carl Shy
• Philip Hopke

Maureen Cropper, Chair
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812 Scenarios -- Schematic
First Prospective
Retrospective
Retrospective
Pre-CAA
Pre-CAA
Pre-CAAA
B
B
A
A
Emissions
D
C
Post-CAA
Post-CAA
Post-CAAA
1970
1980
2000
2010
2020
1990
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2010 Monetized Benefits First Prospective
Titles I through V Only
Key factors PM mortality CRF (Pope
1995) Mortality valuation (4.8M/life)
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Council Closure Letter First Prospective

• "The Council believes that the Prospective
  Study is a serious, careful study that, in
  general, employs sound methods and data.
• While we do not endorse all details of the
  study, we believe that the studys conclusions
  are generally consistent with the weight of
  available evidence.
• Recommendations for Second Prospective
• Disaggregate Benefits and Costs by Title or
  Provision
• Cost Uncertainty
• Revise Mortality Risk Valuation Estimates
• Increase Set of Ecosystem Benefits Valued
• Estimate Exposure and Effects of Air Toxics

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Council (Prospective II)

• Dallas Burtraw
• David T. Allen
• Lauraine Chestnut
• Charles T. Driscoll
• Wayne Gray
• James K. Hammitt
• F. Reed Johnson
• Katherine Kiel
• Nino Kuenzli
• Virginia McConnell
• V. Kerry Smith
• Chris Walcek
• John Fintan Hurley
• Patrick Kinney
• Michael Kleinman
• Morton Lippmann
• Bart Ostro
• David Chock
• D. Alan Hansen

Trudy Cameron, Chair
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812 Scenarios -- Schematic
Second Prospective
First Prospective
Retrospective
Pre-CAA
Pre-CAAA
F
B
E
A
Emissions
D
C
Post-CAA
Post-CAAA
1970
1980
2000
2010
2020
1990
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Council Letter Second Prospective Blueprint

• Recommendations for Second Prospective
• Implement Learning Laboratories
• Disaggregation by Major Emitting Sector
• Air Toxics Case Study
• CGE Modeling
• Discounting (inc. cessation lags)
• Revise Mortality Risk Valuation Estimates
• Expand Uncertainty Analysis, per NAS (2002)
• Ecological Effects Case Study
• Consider Role of QALYs, but outside of BCA

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Specific Issue Disaggregation
RSM Domain
CMAQ Domain
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Specific Issue Cessation Lag
Avoided Deaths from a Permanent 1 ug/m3 Decrease
in PM2.5 in 2010
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Cessation Lag Effect
NPV of 2010 to 2030 Cumulative Avoided Incidences
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Specific Issue Uncertainty Analysis First
Prospective 2010 Costs Benefits
270
260
95th
210
160
110
Estimates Not in 812 Study
63
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5th
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Conclusion

• 812 studies are ongoing
• Analytical system is state of the art
• Rigorous external peer review by dedicated panels
• Always looking for help and new ideas
• Method for cessation lags
• Uncertainty analysis
• Process for adoption of new data and methods
• How BCA should and shouldnt be used for policy
• www.epa.gov/oar/sect812

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BACKUPs
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First Prospective 2010 Reductions
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NAS Recommendations

• 34 recommendations
• Scenario definition
• Exposure estimation
• Health effects estimation
• Uncertainty analysis
• Mostly, expand uncertainty analysis
• Multi-factor SA
• Cost uncertainty
• Emissions uncertainty
• Alt threshold models
• Alt cessation lag models
• Mortality CRF SA
• More probabilistic treatments
• Move probabilistic to primary
• Expert opinion where data limited

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Specific Issue Learning Labs

• management of changes and improvements in
  methods should be institutionalized by an ongoing
  process of formal evaluation of proposed
  enhancements.
• develop a public and expert process to
  carefully review new data and methods for the 812
  studies
• distinguish three separate classes of Agency
  activities
• Formal Review and Discussion engage research
  community with workshops and working papers to
  develop candidates for new methods
• Satellite or Experimental Evaluations new
  methods are tested, documented, and published as
  exploratory work for review and criticism
• Policy Evaluations use only vetted methods for
  primary analyses
• changes in methodology require full disclosure
  and discussion of the implications of new
  methods

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Council Letter Second Prospective Blueprint

• The Council strongly advocates that the Agency
  continue to conduct these important benefit-cost
  assessments
• These analyses provide a rigorous example for
  other regulatory impact assessments and serve an
  important educational role for the Agency.
• Information requirements identified in the 812
  Analysis stimulate important research both inside
  and outside the Agency.
• The Council emphasizes that the 812 Analyses are
  not merely a perfunctory accounting exercise, but
  an ambitious and difficult enterprise that pushes
  the Agency to the frontiers of science in many
  different disciplines.

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Scenario Development
Sector Modeling
Supplemental Analyses HAP case study Eco case
study Title VI reanalysis CGE modeling
Direct Cost
Emissions
Air Quality Modeling
Physical Effects
Economic Valuation
Benefits and Costs
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Scenario Development
Direct Cost
Macroeconomic Modeling
Supplemental Analyses Lead (Pb) Air Toxics
Emissions
Air Quality Modeling
Physical Effects
Economic Valuation
Benefits and Costs