[Senate Hearing 106-611]
[From the U.S. Government Publishing Office]
S. Hrg. 106-611
CLEAN AIR ACT: REVIEW AND OVERSIGHT
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HEARING
BEFORE THE
SUBCOMMITTEE ON CLEAN AIR, WETLANDS,
PRIVATE PROPERTY, AND NUCLEAR SAFETY
COMMITTEE ON
ENVIRONMENT AND PUBLIC WORKS
UNITED STATES SENATE
ONE HUNDRED SIXTH CONGRESS
FIRST SESSION
__________
OCTOBER 14, 1999
__________
Printed for the use of the Committee on Environment and Public Works
_______________________________________________________________________
For sale by the U.S. Government Printing Office
Superintendent of Documents, Congressional Sales Office, Washington, DC
20402
?
COMMITTEE ON ENVIRONMENT AND PUBLIC WORKS
ONE HUNDRED SIXTH CONGRESS
JOHN H. CHAFEE, Rhode Island, Chairman
JOHN W. WARNER, Virginia MAX BAUCUS, Montana
ROBERT SMITH, New Hampshire DANIEL PATRICK MOYNIHAN, New York
JAMES M. INHOFE, Oklahoma FRANK R. LAUTENBERG, New Jersey
CRAIG THOMAS, Wyoming HARRY REID, Nevada
CHRISTOPHER S. BOND, Missouri BOB GRAHAM, Florida
GEORGE V. VOINOVICH, Ohio JOSEPH I. LIEBERMAN, Connecticut
MICHAEL D. CRAPO, Idaho BARBARA BOXER, California
ROBERT F. BENNETT, Utah RON WYDEN, Oregon
KAY BAILEY HUTCHISON, Texas
Jimmie Powell, Staff Director
J. Thomas Sliter, Minority Staff Director
------
Subcommittee on Clean Air, Wetlands, Private Property, and Nuclear
Safety
JAMES M. INHOFE, Oklahoma, Chairman
GEORGE V. VOINOVICH, Ohio
ROBERT F. BENNETT, Utah BOB GRAHAM, Florida
KAY BAILEY HUTCHISON, Texas JOSEPH I. LIEBERMAN, Connecticut
BARBARA BOXER, California
(ii)
C O N T E N T S
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Page
OCTOBER 14, 1999
OPENING STATEMENTS
Baucus, Hon. Max, U.S. Senator from the State of Montana......... 5
Boxer, Hon. Barbara, U.S. Senator from the State of California... 47
Crapo, Hon. Michael, U.S. Senator from the State of Idaho........ 2
Graham, Hon. Bob, U.S. Senator from the State of Florida......... 46
Inhofe, Hon. James M., U.S. Senator from the State of Oklahoma... 1
Lieberman, Hon. Joseph I., U.S. Senator from the State of
Connecticut.................................................... 7
Moynihan, Hon. Daniel Patrick, U.S. Senator from the State of New
York........................................................... 46
Thomas, Hon. Craig, U.S. Senator from the State of Wyoming....... 45
Voinovich, Hon. George V., U.S. Senator from the State of Ohio... 3
WITNESSES
Benoit, Michel R., executive director, Cement Kiln Recycling
Coalition...................................................... 37
Draft, EPA rulemaking.......................................198-204
Letters, MACT Rules.........................................170-197
Prepared statement........................................... 156
Statement, Cement Kiln Recycling Coalition................... 164
Graham, John D., director, Center for Risk Analysis, Harvard
School of Public Health, Boston, MA............................ 23
Prepared statement........................................... 85
Responses to additional questions from Senator Baucus........ 90
Kerester, Alison, University of Texas School of Public Health,
Mickey Leland National Urban Air Toxic Research Center,
Houston, TX.................................................... 21
Prepared statement........................................... 76
Responses to additional questions from:
Senator Baucus........................................... 84
Senator Moynihan......................................... 85
Melewski, Bernard C., counsel and legislative director,
Adirondack Council, Albany, NY................................. 33
Brochure, Acid Rain, A Continuing National Tragedy........... 205
Prepared statement........................................... 145
Response to additional question from Senator Baucus.......... 150
Perciasepe, Robert, Assistant Administrator, Office of Air and
Radiation, U.S. Environmental Protection Agency................ 9
Prepared statement........................................... 52
Responses to additional questions from:
Senator Graham........................................... 74
Senator Lieberman........................................ 64
Senator Moynihan......................................... 63
Senator Thomas........................................... 61
Senator Baucus........................................... 68
Revesz, Richard L., director, program on environmental
regulation, New York University School of Law, New York, NY.... 24
Article, Environmental Regulation, Cost-Benefit Analysis, and
the Discounting of Human Lives, Columbia Law Review.......100-145
Prepared statement........................................... 94
Responses to additional questions from:
Senator Baucus........................................... 99
Senator Lieberman........................................ 100
Tyndall, William F., vice president of environmental services,
Cinergy Corporation, Cincinnati, OH, on behalf of Edison
Electric Institute............................................. 35
Prepared statement........................................... 151
ADDITIONAL MATERIAL
Letter, Gov. George Pataki....................................... 48
Statement, Gov. George Pataki.................................... 49
CLEAN AIR ACT: REVIEW AND OVERSIGHT
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THURSDAY, OCTOBER 14, 1999
U.S. Senate,
Committee on Environment and Public Works, Subcommittee on
Clean Air, Wetlands, Private Property, and Nuclear Safety,
Washington, DC.
The subcommittee met, pursuant to notice, at 9:03 a.m., in
room 406, Senate Dirksen Building, Hon. James Inhofe (chairman
of the subcommittee) presiding.
Present: Senators Inhofe, Crapo, Voinovich, Lieberman, and
Baucus [ex officio].
OPENING STATEMENT OF HON. JAMES M. INHOFE,
U.S. SENATOR FROM THE STATE OF OKLAHOMA
Senator Inhofe. The meeting will come to order.
Today marks the first Clean Air Act reauthorization
hearing. It is part of what I hope will be a 4-year process
that we will be able to get through to reauthorize. Last time,
I understand it took about 10 years, but we shouldn't have any
problem doing it in a shorter period of time. I don't
anticipate a complete rewrite, as we went through in 1990, but
instead more of a fine tuning of the process.
The Clean Air Act has had many successes, but it has had
its share of failures, too. No law is perfect, and every law
could benefit with some reforms and changes. Of course, the
hard part is going to be agreeing on what those reforms will
look like. As the Chairman of the Clean Air Subcommittee, I am
not proposing a complete rewrite of the law; instead of using a
club, we will use a surgical scalpel.
What I would like to do at this point is highlight a few of
the Clean Air Act's notable successes and failures.
First, the air pollution is down. In almost every category,
the amounts of pollutants have decreased substantially and, in
general, people are breathing healthier air than they were 10
or 20 years ago. But I am not sure that they realize that.
Second, the 1990 amendments incorporating market-based
approaches have worked. These approaches need to be expanded to
other statutes and other sections of the Clean Air Act.
Third, the 1990 amendments provided a framework for State
decisionmaking ability. We need to make sure that this trend
continues.
In the area of failures:
First, risk tradeoffs. The act of chasing after pennies of
benefits for dollars in costs through its failure to identify
the most cost-effective risks we face as a Nation.
Second, sound science policy judgment calls have been
confused with statements of fact regarding the science. As a
result, the EPA has lost credibility. We need to find ways to
involve outside panels of scientists, such as CASAC. During our
ambient air efforts, we did not really utilize the Clean Air
Science Advisory Committee as I think it was intended to be
used, and I would like to see us expand the use of the talent
that we have available to us.
Third, exposure. Proving a chemical is toxic alone is not
enough to justify a massive regulatory program. We have to
understand what the human and environmental exposure routes are
before we regulate, not just proving it is toxic.
Fourth, we need to open up the decisionmaking process. Too
many of the EPA's decisions have been negotiated behind closed
doors and through settlements. The American public deserves to
know more about this process. I think we know about the consent
decrees and these are the things that we would like to address.
These broad issues will be discussed during the second
panel. The third panel will cover specific issues such as the
MACT process, the acid rain program, and the effect of the
multiple regulations addressing the same pollutant.
These are just a few observations. I hope today's hearing
will begin a public dialog on what the next version of the
Clean Air Act will look like. I intend to followup this hearing
with additional reauthorization hearings next year, with at
least one hearing focusing on States and local governments.
Senator Baucus?
Senator Baucus. I'm not ready yet.
Senator Inhofe. All right. Senator Crapo?
OPENING STATEMENT OF HON. MICHAEL D. CRAPO,
U.S. SENATOR FROM THE STATE OF IDAHO
Senator Crapo. Thank you very much, Mr. Chairman. I
appreciate your allowing me to sit with the committee today.
These hearings hold very important consequences for my State,
as they do all States, and we have had a number of important
issues in Idaho that directly involve the Clean Air Act and the
implementation of the Act. I would like to welcome Mr.
Perciasepe here today. He has been very helpful in working with
me and our State in trying to help us get through some of the
problems that we have faced in the implementation of the Act.
I look forward to these hearings and hope to work very
closely with you as we work to see if we can't get better risk
assessment and cost-benefit analysis into the law in a way that
will help to reach that balance between making sure that we
protect the environment adequately yet make sure that the
burden on industry and on the American public in other ways is
not excessive. Thank you.
Senator Inhofe. Thank you, Senator.
Senator Voinovich?
OPENING STATEMENT OF HON. GEORGE V. VOINOVICH,
U.S. SENATOR FROM THE STATE OF OHIO
Senator Voinovich. Thank you, Mr. Chairman. First of all, I
would like to thank you for conducting this very important
hearing today on the Clean Air Act reauthorization.
I would also like to extend a welcome to Bill Tyndall, vice
president of environmental services at Cinergy Corporation in
Cincinnati, Ohio. Cinergy is one of our most responsible
citizens in the environmental area and I am pleased that Mr.
Tyndall will join us today. In addition, I would like to
welcome John Graham from the Harvard Center for Risk Analysis.
John and I have worked together on efforts to pass regulatory
reform legislation, and John was a guest speaker before the
Natural Resources Committee when I was Chairman of the National
Governors Association.
Mr. Chairman, I know that you want us to keep our remarks
short, and I was going to go into Ohio's great environmental
record before my remarks. But in brief, I just want to say, as
a former commissioner, mayor, Governor, Ohio has been very
responsible in the environmental area. I am proud of the fact
that while I was Governor we made up our mind that we were
going to get all of our urban areas into attainment on our
ozone standard, and by the time I left office, all of them were
in attainment except one, Cincinnati, and they are now waiting
for the EPA to approve them.
I have been concerned a long time about the fact that the
Environmental Protection Agency was not taking into
consideration risks, costs, benefits, and sound science during
their rulemaking process. And I was particularly concerned
about their ozone and particulate standards and the NOx SIPP
call.
I spent over one hundred hours, in fact, trying to convince
the Environmental Protection Agency, the Clinton
Administration, and Members of Congress and members of this
committee that the cost of the new standards in this country
far outweigh the benefits to public health and the environment.
In fact, according to EPA's own estimates, the costs for
implementing the NAAQS standard for ozone exceeded the
benefits. The President's own Council of Economic Advisers
predicted that the benefits would be small while the cost of
reaching full attainment could total some $60 billion.
I would like to note that Senator Inhofe provided
significant help to the States by amending TEA-21 to help
provide more reasonable timelines to implement ozone and
particulate matter requirements. We really appreciated that
concern on your part, Senator.
Federal agencies should not be in a position to force
governments, businesses, and consumers to throw billions of
dollars at a problem without knowing if they are hitting the
right target. So often we forget that some of these regulations
force governments to spend money that is badly needed for other
areas of responsibility. I will never forget when Administrator
Browner, prior to the final NAAQS standard, told me that her
hands were tied, that statutorily she could not use risk
assessment and cost-benefit analysis in her consideration for
final regulation. I think it is time that we gave her that
authority.
I am going to introduce a bill soon that will require EPA
to conduct an analysis of cost and benefits while providing the
Agency with flexibility in making final regulatory decisions.
In fact, the bill I am about to introduce mirrors the risk
assessment and cost-benefit analysis provisions that are in the
Safe Drinking Water Act, which had strong bipartisan support
and was signed into law by President Clinton in 1996. I merely
state the obvious. If that provision was good enough for the
Safe Drinking Water Act, it ought to be good enough for the air
that we breathe.
I have no doubt that using risk assessment and cost-benefit
analysis will help ensure that reasonable and cost-effective
rules are being set. I also believe that these analyses will
help ensure that the air regulations, ones that are based on
sound science, will actually be implemented in a more timely
manner because they won't be tied up in lawsuits. We could be
so much further along if we had just used risk assessment and
cost-benefit analysis.
This is really about letting the public know how
regulations are made. We need to make the Federal Government
more accountable to the people it serves. When EPA is setting
clean air standards, they should answer several simple, but
vital, questions. What science is needed to help make good
decisions? What is the nature of the risk being considered?
What are the benefits of the proposed regulation? How much will
it cost? Are there better, less burdensome ways to achieve the
same goals? Thank you, Mr. Chairman.
[The opening statement of Senator Voinovich follows:]
Statement of Hon. George V. Voinovich, U.S. Senator from the State of
Ohio
Mr. Chairman, I want to thank you for conducting this very
important hearing today on the subject of Clean Air Act
Reauthorization.
As a father and grandfather, I understand the importance of
ensuring a clean environment for our future generations. Throughout my
33 years of public service, I have demonstrated a commitment to
preserving our environment and the health and well-being of all
Ohioans. I sponsored legislation to create the Ohio Environmental
Protection Agency when I served in the State legislature, and I fought
to end oil and gas drilling in the Lake Erie bed. As Governor, I
increased funding for environmental protection by over 60 percent.
While in the Ohio House of Representatives, I was responsible for
creating the Environment and Natural Resources Committee and was
honored to serve as vice chairman of that committee.
In addition, the State of Ohio realized significant improvements in
air quality in recent years. When I first entered office as Governor in
1991, most of Ohio's urban areas were not attaining the 1-hour ozone
standard. By the time I left office in 1998, all cities had attained
the standard, except one. However, Cincinnati is now meeting the
standard an is awaiting action by the EPA.
Overall, the ozone level in Ohio has gone down by 25 percent and in
many urban areas, it has gone done by more than 50 percent in the past
20 years. Ohio is doing its part to provide cleaner air. Nevertheless,
over the years, I have become more and more concerned that just in
order to comply with Federal laws and regulations, our citizens,
businesses and State and local governments must pay costs that can be
inordinately burdensome or totally unnecessary.
In the 104th Congress, I worked closely with a coalition of State
and local government officials and members of the House and Senate to
pass effective safe drinking water reforms. The results of our efforts
culminated in the Safe Drinking Water Act Amendments, legislation which
was enacted with broad bipartisan support in 1996. In addition, the
bill had the support of environmental organizations and I was pleased
to attend the President's bill-signing ceremony when these reforms were
signed into law. This cooperative effort is notable because it showed
that a law could include common-sense reforms that make the government
more accountable based on public awareness of risks, costs and
benefits. I believe it set a key precedent for reform of environmental
regulations.
I specifically mention the drinking water program because it
includes risk assessment and cost benefit analysis provisions that I
strongly believe should be part of the Clean Air Act. In fact, I am
about to introduce a bill that would do just that. Under my bill, the
EPA would be required to conduct an analysis of incremental costs and
benefits of alternative standards, while providing the agency with
flexibility in making final regulatory decisions.
My bill is a common-sense approach that merely addresses the
obvious: if it's good enough to protect the water that we drink, then
it should be good enough to protect the air that we breath. It will
also help us avoid some of the legal and legislative wrangling that has
occurred with respect to how we achieve clean air.
When I was Governor of Ohio, I became more and more concerned that
the EPA was not taking into consideration sound science, costs and
benefits during the rulemaking process. I was particularly concerned
about the standards for ozone and particulate matter and the NOx SIP
call. In fact, I spent over 100 hours trying to convince the EPA, the
Clinton Administration, Members of Congress and members of this
committee that the costs to this country to implement the new National
Ambient Air Quality Standards (NAAQS) far outweighed the benefits to
public health and the environment.
In fact, according to EPA's own estimates, the costs for
implementing the NAAQS standard for ozone exceeded the benefits. The
President's own Council of Economic Advisors predicted that the
benefits would be small, while the costs of reaching full attainment
could total $60 billion.
Just this spring, a U.S. appeals court remanded EPA's ozone and
PM2.5 standards, ruling that EPA did not justify its
decision with sound scientific evidence. Ohio was a party to this
lawsuit, which began when I was Governor. The court didn't say that EPA
couldn't regulate at these levels, but that EPA didn't give
justification for doing so.
That has been my point all along. I have argued that the NAAQS
standards and NOx SIP call were going to be costly and that we didn't
even know if making those investments was going to make a difference.
Federal agencies should not be in the position to force businesses
and consumers to throw billions of dollars at a problem without knowing
if they're hitting the right target. Yet, the EPA is asking all of
America to pay for these new regulations simply because the EPA said it
is the right thing to do. However, they have failed to adequately
determine the effects of changing the ozone and particulate matter
standards.
In an effort to make my case with Administrator Browner regarding
the new NAAQS standards, I told her the facts were inadequate to make
the case for these standards. Instead of improving public health, they
would divert resources from programs that make a real difference in
protecting human health and the environment. However, she told me that
her hands were tied, that statutorily she could not use risk assessment
and cost-benefit analysis in her consideration of final regulations. At
that point I realized it was essential to provide EPA the authority to
take costs, benefits and risk into consideration during the rulemaking
process. And it is important that the public know what information has
been used in finalizing the rules that affect our air quality.
I have no doubt that using risk assessment and cost-benefit
analysis will help ensure that reasonable and cost-effective rules are
being set, and which have the science to back them up.
The challenge facing public officials today is determining how best
to protect the health of our citizens and our environment with limited
resources. We need to do a much better job ensuring that regulations'
costs bear a reasonable relationship with their benefits, and we need
to do a better job of setting priorities and spending our resources
wisely.
We need to make the Federal Government more accountable to the
people it serves. When EPA is setting Clean Air standards, they should
answer several simple, but vital questions:
What science is needed to help us make good decisions?
What is the nature of the risk being considered?
What are the benefits of the proposed regulation?
How much will it cost?
And, are there better, less burdensome ways to achieve the same
goals?
Thank you Mr. Chairman, I look forward to hearing today's
testimony.
Senator Inhofe. Thank you, Senator Voinovich.
Senator Baucus?
OPENING STATEMENT OF HON. MAX BAUCUS,
U.S. SENATOR FROM THE STATE OF MONTANA
Senator Baucus. Thank you. Mr. Chairman, I very much
appreciate your holding these hearings. The Clean Air Act has
served this country very well, but it is always good to take
stock and look to see where we are. This is a very important
hearing. I understand you will be holding a series of them
overseeing the Clean Air Act.
Mr. Chairman, as you know, it takes a long time to make a
good product; it just doesn't happen overnight. But overall, I
think we did a pretty good job with the amendments of 1990. We
worked hard, very hard, this committee did with the full Senate
and the House. It is not perfect, but it is good. We can't let
perfection be the enemy of the good, and that certainly applies
to the Clean Air Act. It is a good Act. It has worked. There
are some problems with it, but basically it worked.
The air we all breathe today is considerably cleaner than
it was prior to the Act. Total emissions of major pollutants
have been cut by a third since 1970. At the same time, our
economy has prospered. Gross Domestic Product has more than
doubled. The population increased by nearly a third. We have
proved that we can meet stringent air quality standards and
have a vibrant, growing economy at the same time.
One of the issues our witnesses will discuss is the use of
cost-benefit analysis. I am not adverse to applying cost-
benefit or risk-benefit analysis when it makes sense. We
applied it, as has been mentioned, to the Safe Drinking Water
Act standards-setting process in 1996. In that case, drinking
water systems are clearly defined and costs, risks, and
benefits are easier to calculate. But developing clean air
standards does not lend itself easily to cost-benefit analysis.
Calculating exposure and risk are significantly more
complicated. Furthermore, I challenge anyone to put a dollars
and cents value on a child's reduced IQ due to exposure to
lead.
The right way to go about setting clean air standards is to
figure out what the scientists, what the doctors, what the
experts say are the levels needed to protect public health.
Then we can figure out how to cost-effectively implement them.
That formula has been working well since 1970. I have not seen
compelling evidence that we should break the success.
There are many issues that need to be addressed in the next
authorization. For example, how well does the Act facilitate
regional cooperation in dealing with pollutants. We should also
examine EPA's and the States' flexibility to fashion the most
cost-effective programs to meet air quality standards. We could
probably also do a better job of monitoring and determining
exposure than we have in the past. There are plenty of other
challenges that also need attention, not the least of which is
that almost half the population lives in an ozone nonattainment
area, breathing unhealthy air. And despite new controls, more
than 8 million tons--8 million--of toxic air pollutants are
still being emitted each year.
I hope we will be able to pursue these and other issues in
the coming hearings. I again thank you, Mr. Chairman, for
holding this hearing. One other view about sound science. We
all talk about sound science. Everybody wants sound science. Of
course, we want sound science. But I must remind us that sound
science is not the answer; it is only the beginning, because
sound science will tell us what the level of certain
contaminants might be, what the level of certain pollutants
will be, but the final decision has to be made right here as to
whether that is the acceptable level or not. The policy
decision is what to do after we find out what sound science
determines.
So whenever we use the term ``sound science,'' I hope
everyone realizes and remembers that it is passing the buck
because it is not going to solve the question. The question is
going to have to still be solved by Congress as to what to do
after we get the data from sound science, what is the right
public policy after we get the sound science. I just again
remind us all that we set the policy standards. The scientists
give us the data but we, again, set the standards.
Senator Inhofe. Senator Baucus, I don't disagree with that.
I think the statement that you make that the policy is made
after we hear the sound science, I want to make sure that is
plugged in someplace along the way.
Senator Baucus. Oh, sure it is. As I said, Mr. Chairman, I
think we should first listen to the scientists, listen to the
doctors, listen to the experts as to what the health
consequences will be, what the standards should be to protect
public health, and then we figure out what the best cost-
benefit analysis way is to finding a way to achieve that
standard. I ask the question again, what dollars and cents
values and with a cost-benefit are you going to put on a child
who has reduced IQ due to lead exposure?
Senator Inhofe. Senator Lieberman?
OPENING STATEMENT OF HON. JOSEPH I. LIEBERMAN,
U.S. SENATOR FROM THE STATE OF CONNECTICUT
Senator Lieberman. Thanks, Mr. Chairman. I appreciate very
much that this morning we are meeting for the first of what I
understand will be a series of hearings leading up to the
reauthorization of the Clean Air Act.
Personally, passing the Clean Air Act Amendments of 1990
was one of the most significant legislative efforts I have been
involved in since I came to the Senate in 1989. I strongly
supported those amendments and am very proud of the way we
worked across party lines on this committee and with the Bush
Administration to make changes, that is the George Bush,
Senior, Administration, to make changes in the Act that
improved the quality of our Nation's air. I think that we can
all look back at the Clean Air Act Amendments of 1990 as one of
this decade's biggest environmental success stories, and I
believe, along with the Clean Water Act, one of the best things
Government has done in the last three or four decades.
Most places in America today have cleaner air than they did
in 1990, including some of our cities, many of our cities.
Concentrations of pollutants like lead, carbon monoxide, sulfur
dioxide, and ozone have declined significantly. Clearly, there
is much to be proud of and I applaud EPA for its work
implementing the requirements of the Act. I would like to make
particular mention of the Agency's effort to develop a regional
smog strategy and to take Federal actions to enforce emissions
controls for sources that contribute to regional pollution,
which mean a lot to us in a State like Connecticut.
But certainly there remains much more to be done. The fact
is that 117 million Americans live in areas today where it
continues to be unsafe to breathe the air because of ozone and
smog pollution. Asthma rates among children are up by 75
percent since 1990, that's a fact, making them significantly
more vulnerable to smog pollution. Transported pollution still
causes tremendous problems, in some instances it has been
measured at levels that exceed the public health standard by 80
percent.
There are several areas of the Clean Air Act that I think
warrant consideration as part of the reauthorization dialog
that we are beginning this morning. For example, a series of
requirements in the 1970 and 1977 amendments required that
utility plants meet new source performance standards for
pollutants, like nitrogen oxides and sulfur dioxides. These
standards were only imposed on new plants since it was thought
that the older plants would be retired in the near future. Yet,
of the 1,000 power plants operating in our country today, 500
were actually built before the regulations of the 1970's were
enacted. So as we consider our responsibility in reauthorizing
the Clean Air Act, it seems to me that it is essential that we
close this loophole. Simply requiring the Nation's older power
plants to meet the same standards that apply to new facilities
would reduce utility emissions by 75 percent.
Since the 1990 amendments, evidence of the impacts of
global climate change has continued to mount. Greenhouse gas
concentrations have continued to increase despite our
international commitment to stabilize them at 1990 levels. As
power plants and other major sources make changes to reduce
nitrogen oxide, sulfur dioxide, and mercury, reduction of
carbon dioxide emissions must also be considered as part of the
equation so that the utilities can respond in the most cost-
effective fashion.
Regarding acid deposition, clearly identified now as an
issue of national not only regional concern, which is was when
we considered it in 1990. While we have made progress in
reducing the emissions of sulfur dioxide, I look forward to
hearing from today's witness from the Adirondack Council about
where more may be required if we are to slow down the
degradation of our Nation's environment and ecosystems.
Continued action to reduce the sulfur content of fuels and
reduce mobile sources of air pollution is certainly one way to
address that issue. While average emissions per vehicle have
declined, vehicle miles travelled have continued to rise
significantly. In addition, as we all know, the size of the
average car has increased in recent years. We didn't envision
growth in this way when we looked at mobile sources of
pollution in 1990. And I continue to believe that we need to
examine additional emission controls on vehicles because they
can be, and are, technologically feasible and certainly can be
cost-effective.
Finally, Mr. Chairman, I would like to offer, in some ways
joining with my colleague from Montana, some words of caution
on the issue of applying cost-benefit analysis to the Clean Air
Act. All of us seek to apply the most cost-effective policies
and technologies to address environmental problems. We would be
irresponsible if we didn't do that. The challenge that we face,
however, is full of uncertainty. Anticipating the innovations
of tomorrow requires the kind of foresight that most of us
don't have, particularly with the extraordinary pace of
technological innovation and progress.
Because of that uncertainty, expectation from the cost of
meeting clean air objectives has, in fact, been way off the
mark as we look back. For example, in 1990, the utility
industry predicted that acid rain controls would cost $1,500
per ton of clean up and the leading industry trade group
estimated that the law would cost about $100 billion each year.
In fact, acid rain is being cleaned up at prices 94 percent
less than was anticipated for chlorofluorocarbons, CFCs. Cost
of compliance fell by 30 percent despite an accelerated
timetable that was imposed for phase-out of the chemical. Both
technology development and market system innovations have,
therefore, significantly reduced the costs of meeting these
environmental challenges. It is another example of the
extraordinary resourcefulness and resilience of the American
people, and American industry particularly, when faced with a
challenge.
While it is one thing to identify a clean air goal based on
a public health objective and to say that the cost-effective
implementation requires a long timeframe, it is quite another
to say to the public that we can't let them know whether the
air is clean enough to breathe because the standard doesn't
meet a cost-benefit test.
So, Mr. Chairman, I thank the witnesses for coming here
today. The challenge of reauthorizing the Clean Air Act takes
us now along a path which will be long and it will have many
turns, and the input from stakeholders, like those here today,
will be an essential part of the journey we embark on. I thank
you very much, Mr. Chairman, for beginning this effort today
with this hearing.
Senator Inhofe. Thank you, Senator Lieberman.
Since we have three panels today and seven witnesses, we
are going to adhere to the 5-minute rule on the opening
statements with the exception of Mr. Perciasepe. Since he is
the only witness from the Administration, we will give him 10
minutes. But we will try to restrict our questioning time to 5
minute rounds in order to accommodate our schedule in getting
out.
We are all familiar with Bob Perciasepe, the assistant
administrator, Office of Air and Radiation, in the U.S.
Environmental Protection Agency.
Mr. Perciasepe?
STATEMENT OF ROBERT PERCIASEPE, ASSISTANT ADMINISTRATOR, OFFICE
OF AIR AND RADIATION, U.S. ENVIRONMENTAL PROTECTION AGENCY
Mr. Perciasepe. Thank you, Mr. Chairman, Senators, it is a
pleasure to be here today with you to talk about the Clean Air
Act. I will try to do this within 10 minutes, but I appreciate
the indulgence of the Chair.
I think it has already been said several times but it
stands repeating. The 1990 amendments passed with overwhelming
support in both the Senate and the House of Representatives and
were, of course, signed by President Bush, as was mentioned. It
was strong bipartisan legislation and it was designed to
achieve results. Air pollution at that time was damaging
aquatic life with acid rain, smog exceeded health standards in
98 cities, carbon monoxide was a problem in dozens of cities,
and no progress was being made on hazardous air pollution, just
to name a few issues that were facing the Congress in 1990.
But we have made tremendous progress. You see on my chart
here--I've given each one of you a copy too--that we have made
a lot of progress. Some of these have been mentioned, but let
me put a little point on some of these that are also in my
written testimony.
Reducing acid rain. We have already reduced 5 million tons,
and we are on track to the 10 million ton goal that Congress
had set. Acidity in precipitation has been cut in some areas by
25 percent.
Decreasing smog and soot. Back in 1990 we had 98 areas that
were nonattainment for ozone, and 62 of those areas now have
air quality meeting that standard. We had 41 areas in
nonattainment for carbon monoxide, 35 of those areas have come
into attainment. And for the course particle soot standard we
had 85 areas in nonattainment, 71 of those areas have achieved
air quality meeting the standards.
On industrial air toxic emissions. Forty-three standards
have been put out and 70 industrial categories are included.
This will result in 1.5 million tons of toxic reductions and
also VOC and particulate reductions.
Often overlooked in our discussion of the Clean Air Act is
that there was a strong commitment to protect the stratospheric
ozone layer in that law, to phaseout things like
chlorofluorocarbons. And since 1990, as you can see from this
chart, the most damaging chemicals, including CFCs, have been
phased out. Our projection is that this will reduce skin cancer
occurrences over the next century by 295 million.
Cleaning up cars, buses, trucks, and fuels was another
important part of the Clean Air Act. The first tier tailpipe
standards in the Act that went into effect in 1994 reduced
emissions by 40 percent. A negotiated national low emission
vehicle program that is taking effect this year in the
Northeast and in the rest of the country in 2001 reduces NOx by
50 percent. The reformulated gasoline program reduced VOC and
toxics by 15 percent. In the RFG areas, we are measuring over a
40 percent reduction of ambient benzene in the air.
Let's take a look at some of the specific numbers again
that have been mentioned several times. Lead down, this is
going back to 1970, lead emissions down 98 percent, and you can
see the numbers there and I won't go into them in detail. I
will note that nitrogen oxides emissions have increased since
1970, although in the last decade they have started to come
down. And you have these charts. I am going fast here to try
to----
Senator Inhofe. We appreciate that. Thank you.
Mr. Perciasepe. This hasn't happened without the strong
support of a statute passed, as I mentioned, with strong
bipartisan support, strong support in both the Senate and the
House that was designed for success. I think, Mr. Chairman, you
mentioned some of these innovative things that were spurred by
the Act, the trading programs. The acid rain program for
SO2 has been a big success and continues to be a
success, although at the end of my remarks I will get to what
more might need to be done there. In the Northeast we are
working with the States on a nitrogen oxide trading program
which is a unique partnership between the States and EPA. And
there have been plenty of innovations at the local level with
market mechanisms and trading, like the RECLAIM Program in
California.
We have had multiple stakeholder processes. I mentioned the
National Low Emission Vehicle Program. This was a process with
the States and with the automobile industry to look at
delivering improved performance of motor vehicles on a national
level, and all the participants in that stand to be
congratulated because that is happening today. The Acid Rain
Advisory Committee was set up early in the 1990's to work with
all the stakeholders to set up the acid rain program. The Ozone
Transport Assessment Group (OTAG) for 37 States in the Eastern
part of the country was established to look at state-of-the-art
modelling of nitrogen oxide across the entire Eastern part of
the country.
Also compliance assistance--we often lose sight of the work
that has been going on in this area. In the 1990 amendments,
small business technical assistance programs were established,
an ombudsmen for small business for every State, just to give
you an example. In 1997, there were 78,500 assistances provided
to small businesses, 6,000 onsite consultations. These are
examples of the kinds of things that are going on out there on
a day-to-day basis. A Texas furniture company was able to
invest $8,000 in a new coating technique for painting and
coating furniture that dropped VOC emissions almost in half and
saved tens of thousands of dollars on an annual basis. Also the
Great Printers Program in the Midwest around the Great Lakes
area and the printers association, strong work with them; metal
finishers, strong work with the metal finishers. With the
automobile industry, we have worked on a revised approach to
compliance assurance called CAP 2000 which we just implemented
that will save the automobile industry $55 million a year in
compliance costs for all their certification programs.
This next chart brings together some of the points I think
that have been made in the opening comments and that I would
like to concentrate on for just a moment. The green line at the
bottom of the chart shows the aggregate emissions from 1970 to
just a couple years ago, pretty much present time. I think it
has already been mentioned the criteria pollutants have been
reduced by 30 percent from a 1970 baseline. During that time,
population has gone up, Gross Domestic Product has gone up, and
another indicator of our activity in national economic
activity, vehicle miles travelled, more people moving around,
has gone up.
While this has been happening, according to our
retrospective study on public health, under section 812 of the
Clean Air Act, is 184,000 premature mortalities have been
avoided, 10 million IQ points have been preserved, 8 million
acute bronchitis cases have been avoided, 39,000 heart failures
have been avoided, 130 million instances of acute respiratory
symptoms, and I could go on. That is just a summary of the
health benefits that are accruing from our retrospective study.
What this has not meant to the economy? Some of the
predictions we have heard already. For example, it was
predicted that the acid rain program would cost up to $7
billion. Recent EPA and General Accounting Office estimates, $1
to $2 billion. Reformulated gasoline--there was testimony that
it would cost 16 cents a gallon. The true cost is 3 to 5 cents
a gallon. The refrigeration industry said reducing CFCs was
just not feasible. CFCs are gone, substitutes are there, a
whole new industry has come up. The automobile company
testified in 1980 ``We just don't have the technology to do
this.'' Today, 10 years later, they are providing technology
beyond what Congress was even contemplating 10 years ago.
How did this happen? How did we have this economic growth
and this reduction in pollution at the same time? We had it
because we had a Clean Air Act that was designed for action,
and we had it because of the innovation of American business.
We continually underestimate their ability to innovate and
achieve our goals in this country. That is one of the problems
that I will get to in a moment when we talk about cost-benefit
analysis, because we don't know what the cost is going to be
because it is always cheaper than we estimate today when we
actually do it tomorrow.
This is the last chart. You see this is the summary chart.
[Laughter.]
Mr. Perciasepe. I try to be succinct. We still have, as you
heard, 100 million people still living in areas that don't meet
the air quality standards. Several opening statements talked
about the new standards that we have issued. Congress required
EPA to look every 5 years to update standards. We did that in
1997. Implementation has been delayed by a court remand and we
are appealing that.
I want to point out a couple of things because I really do
disagree respectfully with the comments that science was not
used in setting those standards or that independent analysis
was not provided. There has been no impartial body that has
disputed the scientific basis of those standards. The courts'
decisions were not based on the science. They were remanded for
other reasons. We can probably get into this in the questions
and answers because I know I am getting near the end of my
time, but we need to move forward with implementing those
standards. We will continue to work with the court and the
judicial system to move forward on that. We will continue to do
the reassessment of some of the science that we did commit to.
But while that goes forward, there is some remaining
unfinished business that we need to do. We still need regional
nitrogen oxides reductions. The National Academy of Sciences
told us that almost 10 years ago now and we are still fooling
around with it. The next generation of tailpipe and gasoline
standards, you saw that VMT chart I had up there before, there
is no projection that it is going to go the other way. So, as a
great philosopher once said, Will Rogers, even if you're on the
right track for tailpipe emissions, he didn't have tailpipe
emissions in there--you'll get run over if you just sit there.
And that is what is going to happen with VMT. That is why we
need to continually improve automobile and fuel technology.
Heavy duty engines and diesel fuel, local measures for the 1-
hour ozone standard in the severe and serious nonattainment
area. Air toxics, we need to move that program into the risk-
based part of it, and we need to facilitate more regional
planning.
Mr. Chairman, we are prepared to work with the committee on
the process that you are initiating today to review the Clean
Air Act. We want to work with you to evaluate whether
reauthorization is needed or whether it will be disruptive. We
think the process that you have in place to review different
parts of it will be helpful to us and to you for making that
decision. There are some ideas that I will throw out right here
that are worth considering as we go through that process:
Additional authority for multiple State cap and trade programs
for any pollutant; indoor air quality is not included in the
Clean Air Act; address all utility emissions including
greenhouse gases; and a new generation of fuels, and more
flexibility in our authority on oxygenates so that we can deal
with that.
So, in closing, I appreciate the opportunity to be before
you today to talk about this. You can see that there have been
successes, and you can see that it has been done in an
innovative way, and you can see that there are still challenges
before us. So I stand here ready to answer your questions.
Senator Inhofe. Thank you, Mr. Perciasepe. I am sorry we
had to be so hard on the time but it is necessary. I am going
ask you a couple of questions and then I am going to excuse
myself for just a few minutes because we have the Senate Armed
Services Committee with Secretary Cohen. I know that Senator
Lieberman has the same problem. I have to run down there just
to get a couple of statements in and then I will come right
back up.
Mr. Perciasepe, did you read the testimony of Dr. Graham
and Ms. Kerester? Did you have a chance to read that testimony
they submitted?
Mr. Perciasepe. I am afraid I haven't.
Senator Inhofe. Let me read a couple of paragraphs here and
just kind of get your reaction. This is from Dr. Graham. He
said, ``Measuring success by the number of industries regulated
is not very meaningful to public health. The big unknown in the
toxics arena is whether the public health benefits of reduced
human exposures to air toxics have been significant enough to
justify the significant expenditures of Agency and industrial
resources that has taken place.''
And then Ms. Kerester states in her written testimony,
which she will elaborate on in a few minutes, ``The Clean Air
Act Amendments of 1990 rely solely on the assumption that
outdoor levels are determinative of an individual's exposure,
and hence risk. Merely reducing the ambient emissions level may
not result in improved public health.''
In your testimony, you downplay the need to renew this Act.
I think you said ``Let me stress that once this review process
is completed, we must assess whether reopening the Act would be
more helpful or more disruptive on the whole.'' I guess you
mean we should just continue on the same path, that's my
interpretation anyway. And based on these two witnesses, I
would question whether or not that is the right goal. Would you
like to respond to that? Can you say that the current
regulatory programs are the most cost-effective way to
improving public health and what people are actually exposed
to?
Mr. Perciasepe. I think those comments that you just read
to me from those other testimonies relate to a very specific
part of the Clean Air Act related to stationary source toxic
emissions, which were not dealt with very well, if at all,
before the 1990 amendments. Congress envisioned a two-step
process when they set that up. First, that in all these
different industrial categories, people ought to perform on the
toxic emissions profile to the best performers in that class.
These maximum available control technology standards are
designed to find the top performing percentage of the class,
and then have everybody move into that performance level. Then
after that, look to see if there is any residual risk. The
second step gets into exactly what you're talking about and
what I am assuming the testimony gets into, and that is: What
are the remaining risks, if any, after you make those
improvements.
So Congress envisioned a two-step process. We are prepared
to go to that second step to look at what residual risk is out
there in the environment in the ambient air from toxics and
attack only those risks that are meaningful from a public
health perspective. I would agree that we need to move on to
that level of analysis and work. We are moving to that point
now at the Agency. It seems to me that is what the Act had set
up the process to do.
Senator Inhofe. Let me just read to you another statement
from Dr. Graham. I know Dr. Graham and Ms. Kerester are here
and we might ask them to listen to the response.
Dr. Graham said that ``The EPA has not modernized its
cancer risk assessment guidelines to account for advances in
biological understanding of the mechanisms of cancer
induction.'' And he goes on to discuss specific examples of
where the EPA has been lax on science issues. I am very
concerned that you are starting down a major regulatory
program, the Air Toxins program, without first completing the
necessary guidelines or paying attention to the most recent
science. Dr. Graham asked Congress to pay attention to this
issue, and I am. I would just like to get your response to
that, and then my time has expired and I will have to excuse
myself.
Mr. Perciasepe. Well, I agree with the comment about the
cancer guidelines. We are pushing hard in the Agency to get
those cancer guidelines updated. We are ready to use the
updated guidelines when we're finished with the process review.
We are doing that now.
Senator Inhofe. Thank you, Mr. Perciasepe.
Senator Baucus?
Senator Baucus. Thank you, Mr. Chairman.
Mr. Perciasepe, as you kind of stand back a little bit and
think about the Act, I wonder if you could just embellish a
little bit on your presentation; namely, where has it really
worked, where, as you're driving to and from work and think
about all these things, do you think we should perhaps
concentrate a little bit. But just your overall assessment of
all of this, just standing back a little bit for maybe some
perspective, and just flesh out a little more on what you just
said.
Mr. Perciasepe. Any of these environmental statutes--and,
as you know, I have had some experience on the Safe Drinking
Water Act and the Clean Water Act side as well--all of these
work best when everybody works together toward a common goal.
That was the hallmark of the enactment of the Clean Air Act
early on in this decade. The Clean Air Act processes that
attacked pollution by fostering emerging technology. For
example, the Act addressed air pollution caused by the
automobile by looking at fuels and cars as a system and by
working with both the oil and automobile industries together.
The Act has set up those processes. Another example is our
working with the utilities on market approaches and putting a
goal in place, a declining cap to allow market mechanisms----
Senator Baucus. Where in the Act has working together
worked best, and where in the Act, or maybe not in the Act, has
there been not enough working together?
Mr. Perciasepe. Well, I guess I would fall back on the
examples I used, Senator. Clearly, working together on the acid
rain program has worked. It is not just the natural resource
managers who are concerned about acid precipitation, not just
the utilities, not just EPA, not just the States, but also the
commodities markets in Chicago who have been involved. So, it
is a really broad-based involvement toward a common goal.
I think we have an effective system there. It is time to
evaluate whether or not the goal that Congress set of a 10
million ton reduction is adequate to achieve the objectives
that the Act set out for actually preserving the natural
resources and the parks of the country that are severely
impacted by acid rains. I think you will have some more
testimony about that. But you can use existing mechanisms to
allow that process to continue.
Senator Baucus. You made a very good point that we always
over-estimate the costs. Could you give us some examples of
that and flesh out a little more as to why that happens. I
think that is a very valid point, one I agree with. For
example, I recall that years ago when Congress asked the auto
industry to come up with a catalytic converter they said
``That's impossible. It can't be done.'' We told the industry
to do it anyway. Well, guess what? They did it. Not only did
they do it, they did it in a way in redesigning their emission
systems so that it is much more cost-effective and they made
money on the deal. But if you could just give us some examples
of just where we really overshot the costs and how the
innovation, ingenuity of America's business people have found
through developments in new technologies lot cheaper ways of
doing things.
Mr. Perciasepe. I think the example you give is a very good
one, the automobile. I want to say this right up front, that
progress and improvement would not have happened without the
tenacity of the automobile industry to do the engineering and
the innovation that needed to take place. At first, there is
often resistance to change, but once you're there, the
innovation comes. And that is what we see every time.
Reductions in automobile emissions are a classic example of
this.
I remember in the early 1990's when I was working in the
State of Maryland trying to opt in to the California low
emission standards. I needed lower emission vehicles in
Maryland; they were being delivered in California and I wanted
them too. This was an opportunity that the Congress provided in
the Act. The debates I had were how many thousands of dollars
this was going to cost per car. I testified in the Maryland
General Assembly alongside my colleagues in the automobile
industry, I'm saying hundreds of dollars, they're saying
thousands of dollars, and we know what the true cost was. I
have personal experience with such resistance.
I don't want to make it sound like the industry doesn't
step up to the plate. They do, and they did, and that is what
makes some of this very difficult to deal with in terms of
projecting into the future what these costs might be. It is not
only achieving the goal at a cheaper cost, sometimes we find
out we can do better on the goal at the same cost. So, both of
those come into play when you look at the innovation that takes
place.
To the automobile industry's credit also, and the oil
industry's credit, they have come forward and said we need to
look at these two things more as a system and we can even get
more forward. So we take that next step. We said how does this
work together----
Senator Baucus. My time has expired, but if you would
indulge me just one followup question. Any advice you have as
to how to get the players together earlier to better work
together so we would have less problems trying to cross that
threshold? I agree with you. Once the industry starts, they do
a bang up job. They're great. But it's that point of realizing
that we have got to go this next step. Any thoughts as to how
we get the industries, the EPA, and folks together earlier on
in the process to say, hey, yes, this is good for business,
this is good for the environment, this is good for our company,
let's figure out a way to do this?
Mr. Perciasepe. Human nature is that when you are faced
with a challenge you rise to the challenge. That has been what
makes this country great. People do it. What end up tangling
ourselves in these arguments over whether the cost worth it or
not. That shouldn't be the argument. The argument should be how
do we innovate to achieve it. One example of the difficulties
associated with evaluating public health is using cost benefits
to ozone. If you use a cost-benefit analysis between 0.09 parts
per billion of ozone and 0.07 parts per billion, or 0.08 parts
per billion, you will soon recognize the limits of the tool.
With the tools we have, that is like using a sledgehammer to do
a staple job.
The tools we have on cost-benefit analysis cannot give you
any information as a decisionmaker between 0.09 parts per
billion and 0.08 parts per billion. The sensitivity does not
exist. We don't know how much we will be able to reduce the
costs in the future when innovation takes place. It is just a
futile exercise in setting an air quality health standard. It
is not a futile exercise to consider cost in determining how
you would implement that goal. In implementing, we must look at
costs, we must figure out how we distribute that in the
economy, and what timeframes are provided to allow that
innovation to take place.
Senator Baucus. My time has expired. I want to thank you
very much.
Senator Voinovich [presiding]. Senator Lieberman?
Senator Lieberman. Thanks, Mr. Chairman.
Very briefly, some of the testimony today suggests that
EPA's commitment to cost-benefit varies widely and that the
Agency sometimes estimates regulatory costs but does not
quantify benefits in health or economic terms. I wonder if you
could describe briefly how EPA considers costs and benefits in
setting standards, and how it considers costs and benefits in
implementing them.
Mr. Perciasepe. Some of that, as you say, does vary from
statute to statute, and from parts of the statute to parts of
the statute. When we look at setting health-based goals and
standards, we want to use science to tell us the polluting
level associated with the health effect from which we're trying
to protect the general population, or for that matter,
susceptible populations or concentrations of populations in
urban areas. The cost-effectiveness kind of analysis you would
do in considering, for instance, nitrogen oxide reductions from
power plants, can be a much more refined cost and effective
analysis. You can look at specific technologies that are in
existence now, you can make some judgments about where those
technologies might be in the near term, and you can do a good
analysis.
So, we have executive orders that tell us to calculate
these costs and the benefits. We do the retrospective study in
the Clean Air Act that Congress has requested under section
812, and we are in the process of doing the prospective study
which we hope to have out later this fall. So these tools are
useful and they can help inform everybody of where we're going.
But when looking at the health-based standards, we're
telling the American public what the level of pollutants are in
the air that are going to be healthy for them. If then you say,
``Unfortunately, our current ability to do cost-benefit
analysis tells us that we're not going to make it at that
level.''--I don't think that is what Congress had in mind.
We have had 25 years of the Clean Air Act where we have set
standards without doing that. We have had six different
presidents, we have had 15 different Congresses, and we have
never considered costs in trying to tell the American public--
which I think was a covenant that Congress made with the
American public when they enacted the Clean Air Act--that this
is what healthy air is.
When the science gives us more information about that, we
reset the standard. The time limit to achieve the standard, to
allow the innovation to take place, the diversity of methods,
whether it be trading or technology-based standards, all of
that needs to be looked at in how you can most optimally
achieve those health standards. I am sorry I have gone on so
long.
Senator Lieberman. No. I agree. I enjoy your passion. Let
me ask one more question just to delve a little bit more into
perhaps the other side of the cost-benefit analysis, and it
goes back to something I said in my opening statement. What are
the current ways that the Agency tries to quantify and predict
technological innovation and market trends when evaluating the
costs of a given air quality objective?
Mr. Perciasepe. We do it through a number of ways. First,
and foremost, we are increasing our relationships with the
business community that is out there doing the innovation. I
could have put a chart up here, which I didn't, on the amount
of the GDP that is related to pollution control work--the
amount of innovation and business activity involved with
innovating in pollution control and pollution prevention. I
believe that product design is going on at a more robust level
in the United States than I think it ever has in the past. The
pollution control and preservation industry is out there for us
to engage with and get their views on where they see some of
the innovation going.
We also do our own research and development. We have an
Office of Research and Development that looks at technology for
different areas, and their work helps inform us on the future.
Many parts of the Clean Air Act and some of the other statutes,
when we're looking at specific technology-based standards for a
particular class of sources, require us to look at feasibility.
In some cases, we actually will develop a prototype ourselves.
In our Ann Arbor, MI, lab where we test all the motor vehicles,
we actually will take a sport utility vehicle. We will work
with catalyst manufacturers, engine control technology,
software folks and we will develop an optimized emission
control system on that vehicle to see if it is feasible to
achieve certain pollution levels. So, sometimes we actually
will do the research ourselves.
Senator Lieberman. Do you think we are in a better position
today than we were in 1990 to fit into our cost-benefit
analysis the cost of technological innovation than we were
then? I cited some of the estimates, and most of the estimates
were over-stated, or a lot of them were.
Mr. Perciasepe. Only on a near term. It is hard to get too
far out. Again, just 9 years ago we were thinking some of the
things we can do with automobiles now would be thousands of
dollars per vehicle compared to hundreds of dollars per
vehicle. On a coal-fire power plant, we thought getting the
kind of nitrogen oxide reductions that are technologically
feasible and cost-effective now were not even feasible or will
in some infant level of discovery. Innovation is happening at a
rapid pace. It is hard to predict. Oftentimes, once the air
quality standards are in place, a lot of innovation occurs on
how to achieve it more cheaply. Predictions for costs further
out in the future become less certain.
Senator Lieberman. Thanks, Mr. Perciasepe. And thank you,
Mr. Chairman.
Senator Voinovich. You're welcome.
Mr. Perciasepe, first of all, I think that the record of
achievement is very impressive. I would like to add, and I am
glad you mentioned it, a great deal of it is attributable to
the aggressiveness of many of the industries and political
subdivisions in this country that are interested in having
clean air. I know in our State, we have about 160 of our worst
polluters agreeing to reduce their 17 worst toxics and have
made some real progress there. Every year we honored
individuals that had done a good job in the area of air
pollution. It also showed that by doing it, it was not only
good for the air, but good for business. So there is a lot of
good things going on there.
A couple of things I would just like to comment on and
maybe get your reaction. As you know, I am particularly
concerned about the NOx SIP call. You were saying that the
Agency likes to involve people in the decisionmaking, a
partnership. I just want to point out that the OTAG
organization, when they were talking about complying with that
SIP call, fundamentally said that they felt that the States
should try to work out a reasonable way of complying with this.
And, as you recall, it was 85 percent or 65 percent. Your
Agency just ignored the OTAG recommendations and put an 85
percent requirement on our utilities when the Midwest Governors
and the Southern Governors had indicated that going to a
smaller amount could get the job done, and, in some instances,
would have gotten it done before the 85 percent requirement
that your Agency put on them.
I just wonder, you talk about cooperation and working with
people, what is your reaction to that?
Mr. Perciasepe. First of all, I appreciate those comments.
There were some tough decisions that had to be made in that
process. But let me address the things that we did agree on,
and then I'll get to your point at the end.
Senator Voinovich. And by the way, that was all meant to
try and reach the new 8 hour ozone standard.
Mr. Perciasepe. I'll mention that too at the end. The OTAG
process was precipitated by many things. One of the things that
precipitated it--and it was going on before the 8-hour
standard--was the realization in the scientific community that
for levels of nitrogen oxides, regional reductions are going to
be almost as important as some of the local VOC reductions to
meet the ground-level ozone standard. And so a lot of work was
done on that in the early 1990's which then facilitated this
37-State Ozone Transport Assessment Group to look at the most
up-to-date modelling.
I think it is important to note that I believe all 37
States agreed that significant regional reductions in nitrogen
oxide were appropriate for the benefit of all, and that they
agreed on a range of what it ought to be. And you are right, we
picked the more exemplary end of that range. And we all agreed
that in implementing whatever that budget would be for each
State, that the proper approach would be to give the State the
flexibility on how to achieve the budget. So we set up a
process where each State would have a budget, similar what we
have tried to do in the acid rain program. We would have
banking and trading, early credits, and all of the market
mechanisms in place to reduce the cost of the rule. Then the
State would have some flexibility in its own planning processes
to figure out the best way to achieve the targets. We
identified an approach we thought would be very cost-effective.
One of the things that started to evolve there, Senator,
was, again, these very different cost estimates; how much is
this going to cost to achieve these reductions. We had a set of
cost estimates for measures that we think are very cost-
effective and there were others who had different cost
estimates. This became a tug of war of the cost estimates.
Senator Voinovich. I understand that. All I am saying is
there was an agreement that we would have flexibility and we
didn't have it. And that bothers me.
The other thing is that you talk about good science and
that that is taken into consideration and how you measure that.
The fact is, when you went with the new PM standards, from 10
to 2.5, you still don't know the real impact of what 2.5 means
as compared to 10 in terms of public health. When you proposed
that new rule, at the same time you proposed it the Agency
asked for I think $37 million from Congress to do research work
on the PM standard. Last year, it was some $60 million, and I
think you are asking for more this year.
The question I have is, instead of moving forward with that
new standard in PM, and by the way, that is being held up in
court today, why didn't the Agency first do their homework and
get the science before they went forward with that new
standard?
Another example is we were one of the States that really
took on the emissions testing program. And I, you have heard me
say this before, I caught all kinds of hell from my people as a
result of doing that. People said it doesn't do any good, and I
said yes, it does do good, and we are given credit for it and
it is helping us meet the required ambient air standards so we
can come into compliance with the standard. But when I went
back to the Agency to ask them can you tell us just how these
emissions testings help clean up the air, we could not get an
authoritative answer from you. As a matter of fact, we had to
go to Congress. Dave Hobson I think asked for $350,000 to do a
study in terms of whether or not this emission testing was,
indeed, making any difference in terms of reducing the
pollutants. I don't know where that study is today, maybe you
do. Where are we on that?
Mr. Perciasepe. Let me do the PM first. We went through a
vigorous scientific process with our Clean Air Act Scientific
Advisory Committee to look at fine particles. I know of no
scientific disagreement that the smaller particles are more
important for public health protection than we had thought in
the past and that regulating a smaller-sized particle is
appropriate.
Senator Voinovich. The fact of the matter is that smaller
is better. In terms of real impacts on public health or impacts
on the costs to comply with the standard, which are
significant, it was just said, ``Well, it is going to make
things better. How much better we don't know; we know it is
going to make it better, although some scientists have some
questions about that.'' It just seems that when it comes time
for decisionmaking in the Agency, instead of using what I call
common sense, it always falls on the side of: ``Let's go ahead
and do it, we're not really sure about it, but, sure, it's
going to be better.''
Mr. Chairman, just one last thing. I'll never forget this
as long as I live. Lorain, Ohio, this is before the Clinton
Administration, Lorain, Ohio, U.S.S. Colby wants to put on a
brand new blast furnace and shut down an old blast furnace. The
Environmental Protection Agency said they couldn't do it
because the new standard that they had set--and, by the way,
the new standard they had set for the ambient air standards in
Lorain had been set when that steel plant was almost out of
business. So now they're coming back, they want to put on a new
blast furnace, take down another one, clean up the air, and the
Agency says you can't do it. I had to go to Dan Quayle, who I
think was head of the Cabinet Council or something like that,
to finally get that thing worked out.
What I am saying is that it is the common sense, it is the
balance that just doesn't seem to be present. I think, and this
is just a recommendation in terms of using risk assessment in
the air standard that basically is in the Safe Drinking Water
Act, that kind of thing is necessary in order for the Agency to
function in a reasonable fashion and encourage people to spend
money where it is going to make a difference and not get them
involved in things where they are going to spend money and not
get a return on their investment and don't make a difference in
terms of a public health.
Mr. Perciasepe. I will just say something generally.
Chairman Inhofe [reclaiming the chair]. And make it fairly
brief because we are going to have to move on to the next
panel.
Mr. Perciasepe. I just want to say for the record that with
all the possible respect I can muster up here, which is a lot
for both of you, I disagree with your characterization of how
the Agency makes decisions. I strongly disagree with them. The
Agency went through a very deliberative process. We didn't just
sit there and say, ``Well, what the hell, it will be better if
the particle size is smaller.'' That is just disingenuous. We
thoroughly reviewed the available science. It went on for
years. We have committed to reverifying the standard before it
gets implemented and that reverification process is underway.
We committed to have a very robust monitoring program in place,
which is why we are asking for the funding.
Senator Voinovich. But you put the standard out and you are
going to say to the communities that you haven't met the new
ozone standards, you haven't met the new particulate standard,
and you place this designation on an area. You have no idea of
the impact that has in terms of keeping businesses in the area
and getting them to expand and of businesses coming to the
area. One of the reasons why I wanted to obtain ambient air
standards in Ohio was to get that negative off communities,
because businesses around the country told me that if they
aren't reaching their ambient air standards, we are not going
there, we're going someplace else because we don't want the
headaches. A couple of businesses were talking about leaving
the Toledo area, Cooper Tire was one, because of the fact they
had not reached the ambient air standards and they were told if
you don't reach it is going to cost you a whole lot more money
if you're going to expand.
So when you start giving these designations in communities
around the country, those designations have tremendous impact
on the economic vitality of those communities. So I think it is
important that we're careful about going forward with some of
that.
Senator Inhofe. I am going to have to exercise the
prerogative of the chair and regain control.
[Laughter.]
Mr. Perciasepe. We can continue after the hearing.
Senator Inhofe. We thank you very much, Mr. Perciasepe. I
am sure you will want to answer some things for the record, and
you certainly may do that. So we will excuse you now.
Senator Inhofe. We would ask for our next panel to come
forward. We have Professor John Graham, Harvard Center of Risk
Analysis; Professor Richard Revesz, New York University School
of Law; and Ms. Alison Kerester, University of Texas School of
Public Health, Mickey Leland National Urban Air Toxic Research
Center. We welcome you all to this committee. We will ask that
you watch our little stop/change/go lights and comply with that
since we are under some time constraints here.
Let's go ahead and start with you, Ms. Kerester.
STATEMENT OF ALISON KERESTER, UNIVERSITY OF TEXAS SCHOOL OF
PUBLIC HEALTH, MICKEY LELAND NATIONAL URBAN AIR TOXICS RESEARCH
CENTER, HOUSTON, TX
Ms. Kerester. Thank you very much. Good morning. I am
Alison Kerester. I am the executive director of the Mickey
Leland National Urban Air Toxics Research Center. The Leland
Center was established by Congress under Section 112 of the
Clean Air Act as a public/private partnership to sponsor
research on the public health impacts of air toxics. Congress
created the Leland Center to generate the critical information
needed to make air toxics health risk assessments more
realistic.
In keeping with our congressional mandate, the Center
identified two critical information gaps: One, personal
exposure to air toxics, and two, the non-cancer effects of
these exposures. The Center chose to focus its initial efforts
on personal exposure, and that is what I am going to talk about
this morning.
Exposure is defined as the contact of a chemical,
biological, or physical agent with the boundary of the body
over a period of time. People may be exposed through inhaling a
chemical, through ingesting it through food or water, or having
it absorbed on the skin. For air pollutants, inhalation is the
primary route of exposure.
What people are exposed to is a function of where they
spend their time, how much time they spend there, and the
activities they engage in. People move through a series of
locations or microenvironments during the course of the day.
This room is a microenvironment, my time in the plane last
night is a microenvironment. Studies have now shown that
Americans spend the majority of their time inside, and in some
cities, such as Houston, that amounts to almost 90 percent
because of climatic conditions.
Scientific research has demonstrated that indoor sources
may often be the dominant source of air toxics exposures to
people. While outside sources can penetrate inside through
ventilation systems and open windows, air toxics may be emitted
directly from sources in the home or building through
carpeting, building materials, consumer products such as room
deodorizers. In addition, the simple activity of cooking or
even taking a shower may generate air toxics. In some
instances, outdoor air sources may be the primary source. For
example, carbon tetrachloride has been banned from consumer
use; however, it still exists in the ambient air. Thus, the
source of exposure to this chemical would be an outside source.
In addition, some emissions in a person's breathing zone
may contribute significantly to personal exposure while
contributing a minimal amount to ambient levels. Smoking is an
example of this. Smoking accounts for the largest percentage of
a personal exposure to benzene, yet that activity contributes a
minimal amount to ambient levels. Thus, it is important to take
into account all sources of potential exposure and to
understand the relationship among outdoor, indoor, and personal
exposures. There are a number of scientific studies underway
investigating this relationship.
Exposure assessment is the science of measuring people's
exposure. It can be done by a variety of methods. The more
accurate the method means it is closer to the body. So breath
samples, and the use of a personal monitor, which is being used
in several studies, attached to the lapel, picks up chemicals
within a person's breathing zone. Exposure assessments are used
in epidemiological studies, they are used in risk assessments,
in trends analysis, and in risk management decisions.
The protection of public health under the Clean Air Act is
at the core of the Act. However, the traditional approach under
the Act is to equate ambient air concentrations with adverse
health effects. However, it is actual exposure, and not air
concentrations, that is the critical factor in determining
potential adverse health effects. Exposure is the link between
ambient concentrations and human health impacts. If we focus on
exposure rather than just on ambient numbers, we will gain a
much greater and more accurate picture of public health
impacts. Continued reliance solely on ambient numbers may not
produce a corresponding benefit to public health.
So we believe it is important to continue our exposure
research, and the Leland Center will continue to pursue this
area. Thank you.
Senator Inhofe. Thank you, Ms. Kerester. I think you all
understand that your entire statement will be made a part of
the record.
Ms. Kerester. Yes.
Senator Inhofe. Dr. Graham.
STATEMENT OF JOHN D. GRAHAM, DIRECTOR, CENTER FOR RISK
ANALYSIS, HARVARD SCHOOL OF PUBLIC HEALTH, BOSTON, MA
Mr. Graham. Thank you, Mr. Chairman. It was about 10 years
ago that I first testified before this committee on President
Bush's proposal to amend the Clean Air Act, a proposal that was
expanded into what we now call the 1990 amendments to the Clean
Air Act. We have learned a great deal during that process. You
have heard some of the good news.
First, the total benefits of the 1990 amendments appear to
be greater than the total costs. But it is important to
remember that virtually all those benefits are packed into just
two of the provisions of the Act, the sulfur trading program,
and the chlorofluorocarbons parts of the Act. A lot of the rest
of the Act flunks a cost-benefit test by the kinds of numbers
that the Agency is producing.
Second, that grand experiment with incentive-based
programs, the sulfur trading, that explains why a lot of the
cost estimates that were originally made were so far off,
because we have given strong incentives in the market economy
for people to trade and find the least-cost ways of achieving
these results. It is very important to keep that in mind
because a lot of people were opposed to those market-based
instruments, said they would never work, would never clean up
the air, and those incentive-based programs have, in fact, been
quite effective.
I would like to focus my testimony on five problem areas in
the Act that I want to encourage the committee to investigate
further during this process of reauthorization.
Problem 1. Some provisions of the Clean Air Act are
unworkable because they do not require or permit EPA to weigh
risk, costs, and benefits. A concrete example, as Senator
Voinovich has given, is the primary ambient air quality
standards. The basic idea was to set this level of pollution in
the air so that it would protect public health with an adequate
margin of safety.
The problem is scientific information alone cannot identify
such a level for many of these pollutants. Indeed, the only
safe level of exposure to many of these pollutants, fine
particulates and lead, given current science, would really be
zero. As a result, the only logical conclusion would be to set
the standards at zero. However, obviously, it is not realistic
or feasible to set them at zero. So EPA, therefore, is forced
to construct imaginative, spurious explanations for what
numbers they come up with to define the safe level of
concentration in the air. This dishonest process contributes to
an atmosphere of arbitrariness, mistrust, and litigation that
we have already discussed this morning.
It seems to me Congress could make a constructive step in
this process by either authorizing or requiring EPA to consider
whether the incremental costs of an air quality standard are
grossly disproportionate to the anticipated benefits of the
proposed standard.
Problem 2. Although Clean Air regulations are intended to
reduce risk to public health, they sometimes cause unintended
dangers to public health because the risks of the regulation
are not analyzed carefully by Congress and EPA when policies
are made. A good example that we're all aware of right now is
the requirement in the 1990 amendments to increase the
oxygenated content of gasoline. It was done without preparing a
careful risk-benefit analysis. I am not talking about the cost
side; I am talking about the human health and ecological
implications of this requirement. The most important chemical
used to comply, MTBE, is now showing up in surface and ground
water, and questions are being raised about whether it was such
a good idea in the first place after all.
This is a good example of where Congress should insist that
both itself and EPA take the hippocratic oath that physicians
take. We should make sure that we have enough science behind a
decision to, in fact, be assured that we are doing more good
than harm with a clean air regulation.
Problem 3. Congress and EPA sometimes pursue clean air
goals without taking account of national objectives, such as
energy policy. In my written testimony, I give you the example
of the diesel engine which is being encouraged in Europe today
and discouraged in the United States, with difference
consequences for global warming.
Finally, I make detailed comments, that several Senators
have also quoted, on the lack of public health science behind a
variety of these regulations. And I look forward to the
comments and questions.
Senator Inhofe. Thank you, Dr. Graham.
Professor Revesz?
STATEMENT OF RICHARD L. REVESZ, DIRECTOR, PROGRAM ON
ENVIRONMENTAL REGULATION, NEW YORK UNIVERSITY SCHOOL OF LAW,
NEW YORK, NY
Mr. Revesz. Thank you, Mr. Chairman. I would like to
discuss a number of issues concerning the possible use of cost-
benefit analysis under the Clean Air Act.
As you know, the primary benefit of many environmental
statutes is the number of human lives that are saved as a
result of environmental regulation. There is general agreement
that the starting point for obtaining a value for life for
cost-benefit purposes is by reference to the wage premiums that
workers obtain in jobs that entail a risk of instantaneous
death in industrial accidents. Though the value of life figures
that are obtained in this manner need to be adjusted upward to
obtain a meaningful valuation of the benefit to environmental
regulation, for several reasons.
The first reason is that the risk assumed by individuals
who subject themselves to possible industrial accidents is a
risk that is assumed voluntarily. In contrast, the risk of
exposure to environmental contaminants like air pollutants is
assumed involuntarily. There is an extensive literature showing
that individuals assign greater value to avoiding risks that
are thrust upon them involuntarily than to risks that they
incur voluntarily.
On a related matter, valuations derived from the study of
risky jobs are the valuations of a relative small subgroup of
the population with a disproportionate tolerance for risk,
because these are the people who fill the jobs at the smallest
wage differentials. But for environmental policy, what matters
is the valuation of the median individual and not the valuation
of an individual with a disproportionate tolerance for risk.
A second set of upward adjustments is necessary is because
individuals who take risky jobs generally have lower than
average income. And there is also consensus among economists
that the valuation for life that derives from these techniques
is essentially a function of income. Given the median incomes
of workers in risky occupations and the population as a whole,
an upward adjustment in the value of life is necessary if one
makes regulation for the population as a whole.
A third point is that with respect to some contaminants,
like carcinogens regulated under section 112, an upward
adjustment needs to account for the dreaded nature of the harm
as opposed to the case of simple instantaneous death, because
in addition to the loss of life itself, one needs to value two
other components: the very painful and often extended period of
morbidity that precedes the death, and the dread aspects of
cancer itself.
Some policy analysts have suggested a downward adjustment
to the value of life obtained in workplace studies must be
performed in certain instances to account for the fact that the
beneficiaries of certain environmental programs are older
individuals who have shorter life expectancies and that these
individuals sometimes are not in good health. These analysts
argue that the remaining life expectancy of older individuals
should be multiplied by a value for a life year, and they
obtain a value for life years by assuming that workers who take
risky jobs and are relatively young value each of the remaining
years the same amount.
This methodology assumes that the value of a life year is
the same regardless of one's remaining life expectancy. Thus,
it overlooks a critical aspect that scarcity plays in
determining economic value, which implies that individuals will
value life years more highly when they have fewer life years
left.
The use of values for quality-adjusted life years is also
generally inappropriate. The measure of benefits in cost-
benefit analysis is derived from the aggregation of the
willingness to pay of all of the individuals affected by a
policy. The QALY technique, the quality-adjusted life year
technique, in contrast, relies heavily on the assessment of
third parties, sometimes health individuals and medical
professionals, of how undesirable a life in poor physical
condition is relative to a healthy life. As a result, the QALY
rankings generally have no connection to individual willingness
to pay and, therefore, cannot properly be incorporated into
cost-benefit analyses.
For many environmental contaminants the harm does not occur
contemporaneously with the exposure. And for such latent harms,
it has been the policy of the Office of Management and Budget,
in its review of Agency regulations under Executive Order
12866, to apply a discount rate to reflect the fact that the
benefit of regulation does not accrue until the future.
OMB currently uses a discount rate of 7 percent. As
explained in more detail in my written testimony, there is a
general consensus among economists that this rate is too high
and that an appropriate rate is somewhere in the 2 to 3 percent
range. In fact, the 2 to 3 percent rate is the rate used by
both the General Accounting Office and the Congressional Budget
Office in running their projections. The OMB approach leads to
substantial undervaluation of the benefits of human life. So
environmental benefits that OMB determines to be $100 million,
if they involve a harm that has a latency period of 20 years,
should, in fact, be $236 million. They are off by more than a
factor of two.
And last, let me mention that in the past, and in OMB's
administration of cost-benefit analysis, this technique has
been coupled with procedural devices that have often turned
into an anti-regulatory tool or threatened to turn into an
anti-regulatory tool as opposed to a tool designed to make
regulation more rational. I will just list four devices.
First, cost-benefit analysis is typically invoked only to
justify the adoption of regulations, not to justify the repeal
of regulations or to justify the failure to adopt more
stringent regulations. Second, in OMB's administration of this
technique, there is often limited disclosure of communications
between the public and OMB. Third, some of the cost-benefit
bills that have been introduced in Congress since 1985 contain
judicial review provisions that provide for review prior to the
promulgation of regulations, which would have been, I believe,
a recipe for paralysis in the regulatory process. And fourth,
some of these bills contained a petition process coupled with
judicial review under which previously enacted regulations
could be challenged. And this also, if it is not done
carefully, will be a recipe for regulatory paralysis. Thank you
very much.
Senator Inhofe. Thank you, Professor. Let me just pursue
that a little bit. You raise some interesting points regarding
the calculating of benefits based on what people are willing to
pay. An example you used in your written testimony is radon gas
versus pesticides, not really the best example when you think
that it's an invisible gas as opposed to something that people
eat.
I think there are additional limitations that you don't
mention. First, people say that they will pay more to protect
the environment, and yet when given the choices after extensive
advertising campaigns on using premium gas for environmental
purposes, they always opt out to buy regular unleaded almost
every time. Second, when people feel removed from the costs of
these things, they assume that somehow big business is paying
for this, not realizing that is passed on to the ultimate
consumers. I think that these new standards probably would have
had the effect in Oklahoma, we calculated on the ozone and PM
standards, to raise the utility rates in Oklahoma by about one-
third. Since we don't have unlimited resources, wouldn't it
make more sense to prioritize our regulatory decisions basing
them more on exposure than a risk-risk analysis?
Mr. Revesz. Well, my suggestions went to how cost-benefit
analysis should be conducted appropriately. I was not here to
advocate the cost-benefit analysis be conducted or to oppose
that. It seems to me that the unit for cost-benefit analysis is
an individual willingness to pay. Unfortunately, we can't
measure directly what we would like to know. So we have to deal
with proxies, and we generally agree that the proxy to start
with is by reference to the wage premiums individuals take in
these risky jobs. Then the question is, how do you adjust that
to make it relevant for what we are trying to regulate?
Now, I certainly agree with you that contingent valuation
studies where individuals are asked how much would you be
willing to pay to do this or that are not ideal, and that is
why economists generally prefer to do revealed preference
studies where they actually look at what people do in the
marketplace. For example, what wage do you demand to take these
risky jobs, and then from that derive an implicit valuation.
But, unfortunately, there are some areas in which
contingent valuations are the only way to go because there is
no other way to measure what we want to measure. I think, like
everything else, there are better contingent valuation studies
and there are worse contingent valuation studies. And,
obviously, if we are going to base a regulatory program on
these sorts of valuations, we have to do the better ones.
A number of years ago NOAA empaneled a blue ribbon panel of
economists, chaired by Kenneth Arrow, who is a Nobel Prize
winner, to help NOAA decide whether contingent valuation
studies could be used in the context of natural resource
damages. The panel was somewhat skeptical, but, in the end,
gave contingent valuation a cautious endorsement, saying it was
the best we could do at this point, and we should do it as well
as possible. And it had some blue prints for how to do it
better. That is what I believe we should be doing.
Senator Inhofe. All right. Thank you.
Ms. Kerester, when Senator Lieberman was making his opening
statement, he was talking about the asthma rates are up due to
smog. Now you referred to the indoor air. During the
PM2.5 debate, the effective indoor air was raised by
scientists but it seems to me it was ignored by the EPA. When
you state that indoor exposures are important, are you just
referring to chemical exposures, or particles as well? I think
they were talking about dust and cockroach droppings and a
number of other things, too. What is your feeling about that?
Ms. Kerester. Well, both indoor and outdoor sources are
important for both air toxics and for----
Senator Inhofe. I mean, what percentage of time does the
average person spend indoors as opposed to outdoors?
Ms. Kerester. Almost 90 percent in many cases. People spend
the majority of their time in the inside locations.
Senator Inhofe. Did you agree with my statement that it
appears to me, from going through this thing, that the EPA was
almost entirely concerned with outdoor as opposed to indoor?
Ms. Kerester. That is my understanding, yes.
Senator Inhofe. And real quickly, Dr. Graham, you heard the
responses to some of the quotes that I hope I was accurately
quoting you from your written testimony. Do you have any
comments to make about that?
Mr. Graham. Yes. First, I was pleased to hear the agreement
with the concern that was raised about where the Agency is in
updating the scientific content of its cancer guidelines. This
was a process that began in 1988 and there are repeated
assurances that we're working on it, we're continuing to look
into it. But it is a process that has been I think very
unfortunate, because it sent a signal in the scientific
community that the Agency isn't necessarily that interested in
modernizing their scientific cancer risk assessment guidelines.
A concrete example of that is occurring right now with the
chemical chloroform, where though this chemical causes tumors
in animals at very high doses, there is good biological science
suggesting that at very low doses of human exposure those
tumors would not occur. EPA scientists recommended this science
be used, but then that was overturned, and it now looks like we
are, in fact, not going to have that biological information
included in EPA's process.
So I think it is very important for this committee to put
heat on the Agency to make sure they incorporate science into
their risk assessment processes.
Senator Inhofe. You heard Senator Baucus when he talking
about that, and I agree with that. I do want to see that there
is a place for science. One of the things that I have wanted to
do, and I have talked to Senator Voinovich and others about
this, we have in place in our statutes CASAC, the Clean Air
Science Advisory Committee, and then we have others dealing
with things other than air, and I would like to see them more
involved in the initial process, prior to the time that a rule
comes out, so that we have the benefit at that very early point
of the science that is involved in the suggested rules. What
are your thoughts about that? Any of you.
Mr. Graham. I certainly agree with the general principle
that you want to get scientific peer review involved early in
the process of an agency's deliberations. One of the points
Professor Revesz made, which I think is a good one, is that
having an agency like OMB very late in the game trying to do
review, oftentimes with only economic expertise and with no
biological or chemistry expertise, you are not setting up a
very effective peer review process for agency risk assessment
and for agency decisionmaking. So more peer review by the
scientific community, and scientists with different
disciplines, early in the process I think is much more likely
to produce sensible regulation than counting on OMB to pull
fixes at the last minute.
Senator Inhofe. Any other comments?
[No response.]
Senator Inhofe. Senator Voinovich.
Senator Voinovich. Ms. Kerester, I testified before this
committee when they were considering the ozone and particulate
standards, and there was a mayor of a Texas city that was there
and she was asthmatic and talking about the fact that the stuff
inside of her house had more of an impact on her asthma than
the air outside. Is there any way that you think, if we said
the reason why we have these goals and these standards is to
protect public health, that you could work in some provision
that says that if we conclude that the problem is more internal
than external, and of course we have more control over the
external because we can do that on a national level, but of
making recommendations to local political subdivisions. For
example, and I am not being facetious, but we concluded that we
might be able to do more about asthma in some of our inner-
cities by strict code enforcement, and even some suggested
buying air conditions, than we could going to new standards
that would require enormous expenditure by businesses and
political subdivisions.
Ms. Kerester. There may be some just relatively minor steps
or recommendations that EPA could make to the public. For
example, airing out clothes that you bring home from the dry
cleaner, letting those air outside before you bring them into
the home; venting out the home, opening the windows and
bringing in some fresh air. Those are kinds of relatively minor
examples. For children with asthma, it may be using a
particular kind of vacuum cleaner or altering the products that
are used in the home.
Senator Voinovich. It seems to be that part of it is being
ignored and it seems that perhaps that ought to be taken into
consideration when they are dealing with a problem that is of
concern to all of us, to make some rather practical
recommendations that might do a whole lot more to help
asthmatic people than their proposed ozone and particulate
standards.
Dr. Graham, critics of risk assessment and cost-benefit
analysis contend that such analysis would elevate cost in a way
that would value dollars over lives and the health of citizens.
I would like you to respond to that. We keep hearing that those
of us that are interested in good science and risk assessment
are less concerned about human life than those that aren't.
Mr. Graham. Senator Voinovich, I think it is a good issue
to raise. The first point I think we should keep in mind is
that the economic welfare of a family, the income of that
family and its wealth position, the employment status of the
mother and father in that family, they have a powerful impact
on the human health of both the parents and children in that
family. We should not underestimate the importance of the
material well-being of the household in influencing their
health.
The examples that you gave in the State of Ohio, when a
region of a State is declared to be in nonattainment and
businesses don't expand or come into that community, that is
not only an economic issue, that is a public health issue for
the parents and children in those families. So I think we
should not draw this sharp separation that public health is
over here and economics is over here. The two are, in fact,
very intimately tied. So I think we do have to bring some
discussion of the economics into the Clean Air Act.
Senator Voinovich. I will never forget running into a woman
in Steubenville, Ohio, she was an immigrant, and she said I
remember when the air was dirty and I put the clothes out and
they got soot on them. And she said now the air is cleaner and
nobody has a job. Some of those considerations, that is an
extreme example, but the fact is that if your economic
condition is lessened in a community and people are unable to
have a job and are not able to buy health insurance, for
example, or they don't have a job that provides health
insurance, that has I would think a more substantial impact on
their well-being than does the standards for ozone and safer
particulate matter.
Mr. Graham. Senator Voinovich, I think the example you are
giving is not just hypothetical or anecdotal. In my written
testimony, I describe one of the examples of the regulations
under the Clean Air Act that deals with a part of the steel
industry called coke production. The basic idea in the 1990
amendments was that we were going to force innovative
technology on this industry so they would clean up all of their
pollution. In fact, what my testimony indicates is that in a
number of cases what steelmakers have done is simply shut down
their cokemaking operations and are now importing coke from
Eastern Europe, and from China. I think any careful
environmental analysis of what is going on in that industry
would indicate that we are having less economic productivity in
this country and we are having more air pollution in other
countries.
Senator Voinovich. I will just finish up with this. We have
heard criticism of risk assessment and cost-benefit. They say
it will slow down the rulemaking process. I recall in testimony
before the Governmental Affairs Committee, and you testified
regarding Senators Levin and Thompson's Regulatory Improvement
Act, we heard testimony that risk assessment and cost benefit
analysis may actually speed up the process on implementing
sound scientific regulations because it allows everyone to know
up front what information was used during the decisionmaking
process. I would like you to comment on that.
Mr. Graham. Yes. I think a good example of this is the
primary ambient air quality standards, where the law says you
shall not consider the cost of these standards. But everybody
in this town knows that you have got lobbyists running all
around talking about costs all the time, you have got
administrators who are making public statements about cost, yet
supposedly we are not considering costs at all.
I think a far better idea would be to allow costs to be
talked about explicitly and let the claims about costs be
scrutinized. In many cases, those claims will be scrutinized
and shown to be exaggerated, which will result in more
consensus about in fact what the policy should be. So by
driving the whole cost-benefit discussion underground and by
making it secret, we don't make the process any more
trustworthy, and we don't make the process any quicker.
Senator Inhofe. Yes, I think that is significant. I was
just discussing it with Andrew here, that back during the
ambient air debate, EPA was saying the cost of the change in
those standards would be approximately $6 billion, then the
President's Economic Advisory Council came out with about $60
billion, and then of course the group that was out in
California came up with $120 billion. I think your idea of
scrutinizing these variances is very good and very significant
because they are going to talk about costs and they are going
to talk about it in a very emotional way that is not being
scrutinized and evaluated. When you have a variance from $6
billion to $120 billion a year, you need to talk about it.
Mr. Graham. Right. And you need scientific peer review of
the economic projections, the technological and engineering
projections that underlie those types of cost estimates.
We heard this morning from the gentleman from the
Environmental Protection Agency that they don't consider costs
when they do primary ambient air quality standards, yet the
White House was, the Council of Economic Advisors was, the
Treasury Department was. EPA was probably the only place in
town that was saying publicly we don't consider costs, yet even
they issued a cost-benefit analysis of that regulation.
So one has to have a certain cynicism about this process
where we say we are setting this number just to protect the
public health without regard to cost and everybody is doing
cost analyses. I think we ought to bring it out in the open,
make it more rigorous, and build it systematically into the
process.
I think one of the points that was made by Senator
Lieberman and Senator Baucus, which I think is a good one, is
the nature of the cost-benefit test at the stage of an air
quality standard should be different than the nature of a cost-
benefit test at the final source or emissions standard. I think
you have to be much more lenient and flexible in the cost-
benefit test because you are asking the Agency to forecast
costs to the entire industrial economy. When you have a
specific source standard or emission standard, I think you can
be more strict in the kind of cost-benefit test you insist
upon.
Senator Voinovich. Mr. Chairman, may I?
Senator Inhofe. Yes. Take all the time that you want.
Senator Voinovich. I was thinking, and you I recall
testifying when I was with the National Governors Association,
we had a hearing on the question of where do you invest your
dollars. So often the public's perception of what an
environmental problem is is not connected with the real
problem. In other words, because an issue comes up and people
get excited about it and the Agency starts to deal with it, if
you sit back and you look at what are the real problems,
something else may be even a much more severe threat to public
health than, say, some other problem.
I wonder if there were some way, and I would be interested
in your reaction, as part of the amendments to the Act, to get
the Agency, and maybe they have done this, but to sit down and
really do an analysis of what are the real severe problems that
are confronting the country and what have the largest impact on
public health and direct their attention to those, rather than
to go off maybe in some other direction where they get people
to spend a lot of money and where we could be utilizing the
dollars that are available in a much more effective way. There
is X number of dollars available at the local level, political
subdivisions, State government, business. The issue is how do
you get them to use the dollars that are available, in terms of
environmental, in the most cost-effective way to get a real
return on your investment. Is there some way that could be
done?
Mr. Graham. Senator Voinovich, I think that there is, in
fact, a strong usefulness of cost-effectiveness methodology to
identify where we can save the most lives, do the most for
public health for a given amount of expenditure. You heard
already good testimony from Ms. Kerester about indoor air
pollution. I think any fair analysis is going to show that
additional investments are likely to give big gains in indoor
air pollution control compared to outdoor air pollution
control. I think they will also show that investments in
outdoor particulate control are going to give you more benefits
than investments in more air toxics control. The problem is the
Clean Air Act was broken up into these pieces and nobody has
responsibility for identifying where we can save the most lives
with our clean air dollars.
Senator Voinovich. That might be a good idea.
Senator Inhofe. Well, I only have one last thing. We are
taking a little longer here because we are down to two
Senators. Maybe that will encourage better attendance.
I heard Mr. Perciasepe say right before I had to excuse
myself and testify at the Senate Armed Services Committee that
when the D.C. Circuit Court made their decision they did not
consider science. Yet, in their remanding statement, they did
refer to the negative UV effects on people. Now, isn't that
science? Do you have any comments about that particular
decision?
Mr. Revesz. Let me address that, Senator.
Senator Inhofe. Yes.
Mr. Revesz. There were references to scientific issues in
the decision, but the rationale for sending the standards back
to the Agency was that the court felt that the statute had not
appropriately constrained the discretion of the Agency in
setting the standards, and that the Agency itself had not
appropriately constrained its own discretion and had not
appropriately explained why it had gone down to where it had
gone down and not had gone down further, because, after all,
going down further, as Professor Graham explained, would have
saved more lives, done more good. As I read that case, I think
that was the primary rationale of the D.C. Circuit and they
sent the regulation back to the Agency for the Agency to try to
articulate some standards that were going to guide it in the
future I guess in promulgating National Ambient Air Quality
Standards for these pollutants.
So it was not primarily a scientific decision. It was an
invocation of the nondelegation doctrine that primarily made
these standards go back to EPA.
Mr. Graham. Mr. Chairman, my understanding was they ruled
as a unanimous part of that court's opinion that dealt with the
smog and the ozone standards, and they did indicate that the
Agency had not in any way considered the scientific evidence
that ultraviolet radiation can cause skin cancer, cataracts,
and that should be balanced against the ozone control benefits
in the standard. That's the kind of hippocratic oath provision
that the court is trying to bring into the law that I think
Congress should just cut short and put it right into the
statute itself.
Senator Inhofe. I see. That is a very good point.
Do you have anything else, Senator Voinovich?
Senator Voinovich. No, I haven't.
Senator Inhofe. Thank you very much. And by the way, all of
the members are represented by staff here. You will be
receiving questions for the record. So there are more people
here than you are looking at right now. We appreciate it very
much.
Senator Inhofe. I would hope, while the next panel is
coming up, if we can get science introduced into this at an
earlier stage, that we will have less emotional approaches. I
can remember, Senator Voinovich, the very first hearing we had
on the proposed changes in the ambient air standards on ozone
and PM. They brought in all these kids with white masks from
some hospital. It makes great for TV and all that, but it
really does not help in getting to the truth and what we are
trying to accomplish here. In fact, I can remember asking those
kids how many of them use CFCs in their inhalers, and they all
said they did, and I asked if they were aware that it was my
understanding that the EPA and the FDA were working on programs
to ban CFCs from their inhalers. So that kind of changed their
attitude toward this thing.
We now have the third panel, which includes Mr. Michel
Benoit, executive director of the Cement Kiln Recycling
Coalition; Mr. Bernard Melewski, counsel of the Adirondack
Council; and Mr. Bill Tyndall, who has been here before, vice
president of the environmental services, Cinergy Corporation,
on behalf of Edison Electric Institute.
It is nice to have you back again, Bill. Why don't we just
go ahead and start with you since you are the experienced one
at this table.
Mr. Tyndall. I believe Mr. Melewski was there the same day,
so we are sort of tied.
Senator Inhofe. Oh. Well, let's start with Mr. Melewski
then. You're on.
[Laughter.]
Mr. Melewski. All right. That was neatly done.
STATEMENT OF BERNARD C. MELEWSKI, COUNSEL AND LEGISLATIVE
DIRECTOR, ADIRONDACK COUNCIL, ALBANY, NY
Mr. Melewski. With respect to the long involvement of the
Adirondack Council, a not-for-profit organization formed 25
years ago to protect the Adirondack Park in New York--the
largest park of any kind in the lower 48 States, a six million
acre park of public and private land--our involvement in the
protection of the park and acid rain is very well documented in
our written testimony. I want to go directly to a couple of
main points.
One of the features that we have found useful, informative,
and wise on the part of Congress in the 1990 Clean Air Act
Amendments was the requirement that EPA, and then NAPAP, the
National Acid Precipitation Assessment Program, which is
comprised of multiple agencies in the administration, should
report to Congress progress of the Clean Air Act Amendments,
particularly the sulfur cap and trade program. Congress can
make an assessment of the success or problems of that program.
There have been two reports: one by EPA in 1995, and just
recently a report was made available by NAPAP. I would like to
address the two major conclusions which we think are fair to
make from those two reports.
First of all, the market-based mechanism--the cap and trade
mechanism--is an overwhelming success. The Adirondack Council
has been hawking this process. In fact, we took the Agency to
court and I am happy to report that was resolved only just 2
weeks ago. We agree that the mechanism is an overwhelming
success. It is extremely cost-effective. There is 100 percent
participation, which is outstanding and almost a minor miracle.
And it is accomplishing its primary task, which is to reach a
particular cap in tonnage of SO2, probably in
advance of the schedule set by Congress.
Unfortunately, the second finding of these two reports is
that the primary goal of the 1990 Clean Air Act Amendments,
Title IV, which was to solve the acid rain problem and protect
sensitive resource areas, is not being accomplished. In New
York, it is particularly hard to accept that these report find
that without additional reductions, we will lose over half the
lakes of the Adirondack Park. And we have seen extensive damage
in the Adirondacks, not just limited to the impacts of acid
rain directly to the forests and the fish and wildlife of the
park, but also it is extensively documented now that there is a
public health impact. The document that I have included in our
testimony discusses these issues.
For example, in the last year and a half, the Public Health
Department of New York has issued fish consumption warnings for
15 lakes in the Adirondack Park and for three of the high
elevation reservoirs for the New York City water supply because
of mercury contamination via bioaccumulation in the fish. And
the source is acid rain, both directly and indirectly.
The other major conclusion of these reports is that the
problem is not just isolated to the Adirondack Park. It is an
extensive problem that reaches from Maine to Georgia. In fact,
all high elevation areas throughout the country, including
Colorado and California, are now seeing the impacts of nitrogen
saturation and soil acidification. Also our coastal estuaries,
from Narragansett Bay to Long Island Sound to Chesapeake Bay
and Tampa Bay, are seeing impacts from nitrogen loading.
So the problem is not limited just to New York; the problem
is most severe in New York and we are in danger of losing the
resources of our park. We were very pleased to have our
organization, which is a small regional organization, joined by
many organizations in an open letter to the public just
recently, which I have up there, called ``Your Best Chance to
Stop Acid Rain Once and Forever,'' alarmed by the findings of
the NAPAP report, and joining in the consensus that something
more has to be done. The impacts of acid rain are felt here in
the Capital as well. What is perhaps forgotten about acid rain,
it has a severe impact on our monuments throughout the Capital
and, in fact, our Civil War cemeteries in Gettysburg and
Vicksburg. It is, unfortunately, very well documented by a
publication of the U.S. Department of the Interior called
``Acid Rain on our Nation's Capital: A Guide to Effects on
Buildings and Monuments.'' It is actually a walking tour, that
I urge you to take, demonstrating the damage to monuments such
as the Lincoln Memorial, the Jefferson Memorial, and the
Capitol Building itself.
We make two recommendations, quite briefly, and that is
that we go back to the 1990 Amendments and Title IV and we make
further reductions in sulfur, along the lines recommended in
the reports; and that you also consider a national cap and
trade program for nitrogen, because the reports also indicate
that nitrogen is a big factor in acid rain. We know in New York
that as the snow pack builds in winter, and nitrogen and the
acidity of the snow pack builds, and an acid shock occurs to
lakes and streams with the melt in the spring.
In conclusion, I would like to advise you that just in a
matter of hours the Republican Governor of New York, George
Pataki, will announce that he is directing his commissioner to
develop regulations along the lines recommended by these two
reports to make cuts in both sulfur and nitrogen to address
acid rain in the next several years. Thank you.
Senator Inhofe. Thank you. I am glad you clarified that. I
thought you were going to say he was going to announce for
president.
[Laughter.]
Senator Inhofe. Mr. Tyndall.
STATEMENT OF WILLIAM F. TYNDALL, VICE PRESIDENT OF
ENVIRONMENTAL SERVICES, CINERGY CORPORATION, CINCINNATI, OHIO,
ON BEHALF OF EDISON ELECTRIC INSTITUTE
Mr. Tyndall. Thank you, Mr. Chairman. My name is Bill
Tyndall. Since August 1998, I have served as the vice president
of environmental services for Cinergy Corporation, an electric
utility based in Cincinnati, Ohio that provides 1.4 million
electricity customers and 470,000 gas customers with service in
Ohio, Indiana, and Kentucky.
Prior to joining Cinergy, I served Congressman Dingell as a
minority counsel to the House Commerce Committee where I worked
on Clean Air Act issues. I also worked on the Safe Drinking
Water bill and represented Mr. Dingell and the Commerce
Committee Democrats on that bill from subcommittee markup to
signing by the President. I am very familiar with the
standards-setting provisions and think there is a lot of
overlap between the two bills and the cost-benefit provisions
that were unanimously agreed to in that bill.
Still earlier, I was at EPA where I served as a policy
advisor in the office of Air and Radiation. And I also was in
the General Counsel's office, where, I should add, I was in the
early 1990's peacefully minding my own business when I received
a phone call regarding a situation in Lorain, Ohio and an
expansion by Colby Steel of a facility there, and I actually
came in and helped negotiate a settlement of that issue that I
think resolved both EPA's concerns and allowed the project to
go forward and lifted the stop work order.
But, in short, I am speaking to you as someone who has
spent nearly 10 years addressing air policy issues from a
variety of perspectives. I am today, as was said, appearing on
behalf of Edison Electric Institute.
I would like to start by echoing what other witnesses have
said. The Clean Air Act is working. We are seeing reductions.
There have been dramatic reductions across the board from
industrial categories. From the utility industry we have seen
reductions in all the major pollutants. With full
implementation of the acid rain program, for instance, which we
are just in Phase I of, Phase II will start and will drive
reductions in the next 10 years, we will see a total 7.5
million tons being removed from the air. We have had a
particulate emission decline of 1.8 million tons, almost an
order of magnitude since 1970. And has also been pointed out by
other witnesses, these reductions have occurred in the electric
utility industry against a background of growth that has
matched the line that EPA put up on the board of the GNP.
Utility growth in terms of sales has increased between 1970
and 1996 120 percent, or some 13 billion kilowatt hours. So
against a background of steady increase over 30 years, there
has been steady declining of emissions. Of course, these
emission reductions have had a price. Based on data filed by
utilities, over $32 billion has been spent on controls alone.
As we look to the challenges of the next 10 years, to talk
a little bit about what the committee is interested in in
looking at the Clean Air Act and the structure of the Clean Air
Act, it is obvious to anyone such as myself who must plan for
additional compliance that powerplants are facing a myriad of
uncoordinated, overlapping, and inconsistent regulatory
requirements. In large part, the structure of the Act itself is
responsible for this. The multiple programs under the Act all
are driven by separate statutory requirements which, in fact,
are aimed at the same pollutants from the same sources.
I have put up here for the committee two charts that show
for NOx controls and then for SO2 controls all the
various programs that are coming at us along with a guesstimate
of when they might hit. Of course, as you sit there and try to
do planning, I have to both guess as to when it is going to hit
and what the level of reductions will be. There also are a lot
of different questions about the stringency or the flexibility
of the program. To give one example that Mr. Melewski's
testimony brings up, if you look at NOx controls from the point
of view of the NOx SIPP call, it asked us to do seasonal NOx
reductions. Seasonal NOx reductions means during the ozone
season, during the summer we are going to make reductions in
NOx. That is a hundred day period. The technology that may be
most cost-effective, depending on your plant, may be SNCR,
which is an injection into your boiler which doesn't require
high capital costs up front but has very high overhead and
maintenance costs. But if you turn around and tell me 3 years
later that I am going to have to do year round controls, then I
have just made the wrong decision because for year round
controls the SCR technology, where we essentially hang a filter
20 stories up on a plant and filter the emissions coming out of
the boiler, is the better technology because while the initial
capital costs are higher, the O&M is lower. So if I have to run
it year round, that becomes a better technology.
EPA, of course, is putting us on this mad rush for 2003 to
meet the 0.15 for the seasonal reductions and is setting up a
compliance requirement that is basically going to then put us
in a position where, if we are asked to make year round
reductions, we have made some wrong decisions about compliance.
So then we will either have wasted money and have go back and
make changes, or there will be a lot of companies that will say
wait a second, forget it, we already invested, we put on these
controls and we are not doing anything more. And the issues
that he legitimately brings forward will face that kind of
opposition that it didn't need to if you can line up the
requirements.
So I would close with the following observation. I think
the utility industry is unique in facing this level of
regulatory complexity because of the various programs. In that
sense, it may be, and it is certainly Cinergy's view, that
there may need to be a comprehensive approach for utilities
that establish us with long lead times, with flexibility, with
phase-ins, with early reduction credits, the kinds of things we
know reduce costs, but sets up requirements so that we can do
planning and understand what we are going to be required to
meet. And with that, I think you can have a situation where
both of us can come in and testify in favor of the same
provision. And with that, I will conclude.
Senator Inhofe. Thank you.
Mr. Benoit?
STATEMENT OF MICHEL R. BENOIT, EXECUTIVE DIRECTOR, CEMENT KILN
RECYCLING COALITION
Mr. Benoit. Thank you, Mr. Chairman, Senator Voinovich.
Good morning. Thank you for inviting me to testify today. I am
the executive director of the Cement Kiln Recycling Coalition.
CKRC represents cement producers that recover energy from
hazardous waste and their kilns. In the United States there are
118 cement plants located in 37 States; 17 of those recover
energy from over one million tons per year of regulated
hazardous waste which they use as a one-for-one substitute for
coal. That's enough energy to provide the power needs of the
city of Tulsa for about 8 months. And if I could suggest only
one change to the Clean Air Act, it is that we believe it
should accommodate and encourage energy recovery technologies
that reduce pollution.
I would like to offer a little bit of background first.
This is a diagram of a cement kiln. Perhaps you have seen them.
Cement kilns are very, very large industrial furnaces. They
produce portland cement. They can be up to or over five hundred
feet long, they can be over 20 feet in diameter. In other
words, big enough to drive a tractor trailer through them. They
are very hot. This is a picture of the inside of a cement kiln,
an operating kiln. They operate at temperatures over 3,000
degrees fahrenheit, and they are among the largest industrial
users of energy. What you see in that picture at the top is a
coal burner, you see a burner feeding hazardous waste fuel, you
see the product discharging at the bottom left.
Since the late 1970's, cement kilns have safely used
hazardous waste as fuel. These are wastes like paint solvents,
cleaning solvents, adhesives, printing inks; the kinds of
materials that need to be managed properly, the kind of
materials, frankly, that we do not want to see wind up in our
environment. The critical point to keep in mind here is that
EPA regulations mandate that these types of waste cannot be
land disposed. They must be burned in either industrial
furnaces, boilers, or incinerators, and there is no alternative
treatment for these types of energy-bearing wastes. Recovering
energy in cement kilns yields many environmental benefits--
fossil fuel energy resources are conserved, air pollution is
significantly decreased, greenhouse gas emissions are reduced,
and the waste materials are put to a productive use.
EPA has very recently promulgated the Hazardous Waste
Combustors MACT rule under the Clean Air Act. Since 1994, CKRC
has been working very closely with EPA on the development of
this rule. And as you know, section 112 of the Clean Air Act
instructs EPA to evaluate the emissions control performance of
industrial sources of hazardous air pollutants. Section 112
requires EPA to assess the various control technologies and set
emissions standards at a level of performance of the best 12
percent. This is known as the MACT floor level.
Unfortunately, the final Hazardous Waste Combustor MACT
rule reflects a misuse of the Clean Air Act regulatory process,
and we do not believe it is consistent with the intent of
Congress. I have examples that I think bear this out in three
areas; in the area of economic impact, risk reduction, and the
use of science and technology.
In the area of economic impact, the Clean Air Act
authorizes EPA to set MACT standards that are more stringent
than the floor level that I mentioned. Section 112 instructs
the administrator, however, to consider cost and other factors
before setting such standards. In EPA's past MACT rules, the
Agency has generally found acceptable cost-effectiveness levels
for its decisions in the range of about $5,000 to $14,000 per
ton of pollutant removed, an average of about $8,500 per ton of
pollutant removed. In the Hazardous Waste Combustor MACT rule,
EPA accepted a cost-effectiveness level of $500,000 per ton of
pollutant removed, 60 times higher than the average in all
previous MACT rules.
Now, you would expect that at that at high cost levels
there would be some environmental or public health benefit
gained. However, in letters to Senators Graham and Hutchison
responding to some oversight inquiries, EPA addressed the risk
reduction in the Hazardous Waste Combustor rule and said, ``We
do not project a reduction in numbers of children with blood
levels that exceed the Centers for Disease Control intervention
level.'' Specifically, in the final rule, EPA says that the
benefit to children's health is a decrease in an incidence of
elevated blood lead levels of 0.4, four-tenths of a case per
year out of the entire U.S. population of over 250 million
people, and we are not sure really how they measured that.
Third, in the area of science and technology, as you know,
Congress intended the Clean Air Act in section 112 to be
technology-forcing. However, in setting the standards for metal
emissions in the Hazardous Waste Combustor rule, EPA said that
reducing the amount of waste burned in hazardous waste
combustors is a control technology. So even though EPA has said
in other regulations that these wastes have to be burned, there
are no alternative technologies, EPA concluded in the
rulemaking that the way to control emissions from these wastes
is not to burn them at all, or not to burn them in the first
place.
The practical effect of this is to force cement kilns to
burn less waste, to reduce their level of energy recovery, and
to burn more coal. We don't think that makes sense. In fact, if
this type of logic is fully extended to a manufacturing
process, such as an oil refinery, for example, it means that
the best performing oil refinery will be the one that feeds no
crude oil to the process.
Now there are several ways to fix these problems. One, of
course, is through litigation. CKRC will be filing a petition
for review on this rule in the D.C. Circuit. Another way, which
we are here to talk about today, is for Congress to reauthorize
and amend the Clean Air Act. Our recent experience with the
MACT program indicates that Congress should be concerned about
three important points. First, Congress should specify the
findings necessary to go beyond the MACT floor in setting
emission standards. Second, Congress should make clear that
reducing feed to a process is not a control technology.
Finally, Congress should ensure that the Clean Air Act
accommodates and encourages energy recovery technologies that
reduce air pollution. Thank you, and I look forward to
answering any questions you may have.
Senator Inhofe. Thank you, Mr. Benoit. The last of your
statement answered the major question I had to ask you.
Senator Voinovich?
Senator Voinovich. I was interested in Mr. Melewski's
comments. I would be very interested to have the utilities that
are represented here respond to what you think is a solution to
the problem. I just want to make two comments about it. One is,
I am glad you promoted the allowances and credits early on
because they were used. But you are probably not aware of the
fact that the Government did everything in their power not to
allow us to use the allowances. When they initiated the
process, they went to a cue and it was going to be triggered by
telephone calls to I guess one of the departments, the
Department of Energy, EPA.
When I came in as Governor, Mr. Chairman, we got all the
utilities together in the United States that were interested in
going after the credits and allowances and got them all in a
room, it took a lot of work, and got them all to agree that
they would share the credits and that it wasn't going to be a
first come, first serve situation. Because the way it was set
up was that the first ones would have gotten the credits and
the rest of them wouldn't have gotten anything. So there was a
real attempt at that time, I will never forget it, to really
preclude us from sharing these allowances and allowing
utilities more time to do some of the things that were
necessary for them to continue to burn, in some cases, high
sulfur coal or make other alternatives.
Second, I followed the acid rain provisions from the
beginning and was down here as a mayor. One of the things that
always puzzled me was President Reagan undertook a big study,
that everybody applauded in the beginning, and, as you may
recall, the result was they said that the acid rain coming from
the utilities perhaps wasn't as serious a problem as what
people made it out to be, but, in the end, those
recommendations were ignored and they went ahead with those
provisions. There were very few Senators that voted against
that legislation. Senator Glenn from Ohio was one of those that
did because he was concerned about that.
The question I am asking you is, are you really sure that
the problems that you are experiencing in terms of the lakes
and the soil and the fish are caused by the emissions from
these utilities?
Mr. Melewski. We are absolutely certain. The report that
you were referring to in the 1980's was the start of this
scientific inquiry that has now culminated in not only the
reports back to Congress, which I said were wise to require,
but also numerous other studies, including some that have just
come out last week that continue to verify this correlation
between the transport of pollution and the subsequent problems.
Keep in mind also, and I too hope the utilities will react,
and very favorably. What we are recommending is not changing
the mechanism, which is working very, very well, especially to
keep costs down. It provides any particular utility the
flexibility to come into compliance in the most cost-effective
manner, and over a long time span that is conducive to business
planning. The reports do clarify very well that there is a
direct correlation between the reductions and the deposition in
sulfur.
So we know we are doing the right thing to get at the right
pollutant. The results, the monitoring on the ground which have
been going on in the Adirondacks since the 1970's on a
continuous, daily basis of at least 52 lakes in the park,
document these changes quite well, as well as other studies
throughout the Northeast. So I think we are on absolutely the
right track. If you will, what we are proposing is not to
change policy, but to reaffirm the policy and commitment that
the Nation made in 1990, which was to adopt a market-based
program that would solve the problem.
Senator Voinovich. I am going to be anxious to read that
report. I will be interested to see what the reaction is to it.
One last comment, and that is, Mr. Tyndall, you are
involved in the issue I talked to Mr. Perciasepe about, and
that was the NOx standards, the call that they have put out in
terms of reducing 85 percent of your emissions. Do you want to
comment on that in terms of your moving forward with trying to
be a responsible corporate citizen and cleaning up the air, and
dealing with some of the problems they have particularly in
Pennsylvania and a little bit in the other Eastern States?
Mr. Tyndall. There are several things to say about it. One
is I would second what you observed earlier, that there was a
real attempt to put something substantial on the table by
Midwest and Southern States that was well within the range of
reductions that the OTAG, the technical group, said was
necessary. That was essentially rejected, nor were there even
any attempts to try and see if there could be an accommodation
between the views of the Northeast and the views of the Midwest
and the South. We still continue with the war going on between
the two regions, which I don't think is productive for anybody
and I don't think it is productive for cleaning the air.
Of course, that leaves us trying to guess at what our
responsibilities are going to be. The State of Ohio, first
under your leadership and under your successor's leadership, is
moving ahead on putting the kinds of reductions on the table
that they said they would. I think the modelling that the State
of Ohio has, the modelling the State of Indiana has shows that
level of reductions, the level represented by a 0.25 reduction,
should resolve issues. But there is also continued working and
trying to find a compromise that is acceptable, and the State
of Ohio has been very active on that.
The other part of it, however, is that we have NOx that is
in front of us right now, but there are any number of issues,
including the issue being raised today, where what we do on NOx
could be totally inconsistent with what another part of EPA is
pushing us to do. Yet, under the statute, under the way the Act
is being implemented, there is no attempt to try and coordinate
these or look at these. So we are going to make investment
decisions and, if we make investment decisions that make it
difficult for us to move to annual emissions, we will certainly
bring that out.
We have tried to talk to the Agency about this, we have
said to the Agency why don't you try and coordinate all these
things. And while they won't directly say this because it is
their view they don't want to reopen the Clean Air Act, the
truth of the matter is they can't. There are independent
statutory provisions that drive forward requirements that give
us that long list and that have reduction programs or reduction
targets under consideration that are inconsistent, that have
more or less flexibility, that are unit by unit, that are
system, all sorts of different mixes and matches that makes it
difficult for Cinergy to set a course and say over the next 10
years here is what we will do for NOx, here is what we will do
for SO2, here is--there are other issues on the
table. It makes time to draw that roadmap impossible.
And so I do think there is a better way of doing it. I do
think, however, that it is going to lay the problem in the
committee's collective lap, that it is not going to be done by
the Agency or the Administration.
Senator Voinovich. I would just like to comment that we are
talking about responsible amendments to the Clean Air Act. The
Chairman is going to be having hearings. We certainly would
welcome recommendations from the environmental and from the
business community and from State and local governments about
how we can do a better job of utilizing our resources.
I think what you are suggesting is that the left hand ought
to know what the right hand is doing; that there ought to be
some place where people come together and say these are the
goals that we would like to set dealing with the Adirondacks,
with this goal, with that goal, how do you put a plan together
that you will commit to over a long period of time that says to
you that if you make these investments, that next year someone
won't come back and say I'm sorry, it is not enough and you
have to go beyond, or I'm sorry, what you are doing is causing
other problems and you are going to have to deal with that
problem. It just is not the way to get things done. I don't
think it helps the environment and I don't think it really
helps our competitiveness in terms of our businesses in this
country.
Mr. Chairman, that is one of the other sides of this thing
that nobody is concerned about, and that is that we are in an
international marketplace. Our environmental policies not only
have to do with the environment, but they also have to do with
our competitive position in that global marketplace. We need to
be darn careful about the investments to make sure that we are
getting a return on those investments in terms of our air and
water.
Mr. Melewski. If I could, I would comment on Mr. Tyndall's
point about the need for Congress to take a look at these
programs, just from a slightly different perspective. He was
concerned about the conflict between perhaps summer ozone
controls and year round controls. The announcement that
Governor Pataki is making today that New York is going to
unilaterally do these severe reductions in SO2 and
in NOx year round in New York gives New York clean hands, so to
speak, and will provide us some health benefits, but it is
really just giving us some extra time in the Adirondacks and
perhaps the Catskills before we lose those parks. New York
cannot unilaterally solve its problem, and it certainly cannot
unilaterally get consensus to do year round controls. The
change in the SO2 program and the possibility of
year round controls in NOx will have to come back here.
Senator Voinovich. Well, I want to say that I congratulate
Governor Pataki, and I say finally, because Governor Pataki and
I have had differences of opinion on this issue for a long
time. I have said to him ``You're asking us to solve your
problem. What are you doing in your State to be a good
citizen.'' And I think this is a positive step on his part. And
you're right, I think it puts him in a much better position in
terms of when he is at the table with some of us who have said
it's your problem and not ours, and have said you're not doing
anything in your own State. I will be anxious to read about
what he is doing and how it is going to be worked out. Thank
you.
Senator Inhofe. Thank you, Senator Voinovich.
I think almost everything I was going to ask has been
discussed. I would think though, Mr. Tyndall, and I don't mean
to make this sound unkind or unfair to the Administration, but
I have often said that one of the things a lot of them have in
common is they have never had a job in the real world and,
consequently, have an insensitivity to the impositions that are
imposed on people. I say that because I am somewhat prejudiced
since I spent 35 years on your side of the table instead of on
this side.
When you have these changes that take place and you are
expected to reach certain levels and then next year they change
and they change the rules, there is a tremendous cost in
corporate planning to prepare for these things. We have talked
around this, but it would be interesting to try to quantify
these costs. Let us say we made a decision today that would
take care of the next 5 years as opposed to doing it today and
then coming back next year, it would be a very difficult thing
to do but it would be helpful to us to know, as Senator
Voinovich brought out, there is a global component to this,
what the cost is compared to doing the same thing in another
country.
Mr. Tyndall. I think it is possible to get some idea of the
cost-savings involved both in coordinating and in making sure
that things are done with adequate lead times and with
flexibility. I know internally that we looked at the NOx SIP
call, the 0.15 pound per million BTU, and our own economic
forecasters, the same people we use to predict the price of
electricity, so the people we rely on for financial decisions
looked at this and they basically noted that you take the same
requirement, instead of having this mad rush to comply over,
from our point of view, essentially seven seasons of when we
can have outages to install the controls, instead of having
this mad rush to comply, if you allowed a phase-in, if you
allowed the accumulation of early reduction credits, the same
sorts of things that are used in the SO2 program,
you could end up at the same point for half the amount of
expenditures.
When I joined Cinergy they brought me the budget for trying
to comply with the 0.15 and it was, and this is a number we
have made public so I can say it, it was over $700 million,
which was, by the way, twice what EPA estimated our compliance
would cost. And I did say, because I know from being outside
that industry tends to exaggerate these costs, right, so what
is the real number. But, no, this is what the engineers and the
consultants and everyone who is putting this together said.
There's the construction crews, the cranes, the sheet metal
workers, and all the stuff that goes into putting in place the
huge number of controls required under EPA SIPP call. We were
doing projects at every single plant. When we looked at that,
we ended up at a number double what EPA said we were going to
do.
And I, of course, am friends with the person who does a lot
of the EPA modelling, and I called him up and said ``Our
numbers are double, we have the double the SCR you are
predicting.'' And he said, ``Well, you are clearly wrong.'' And
I said, ``Well, this is our business. We are writing
contracts.'' Their refusal to say--we have programmed that
those are the numbers, sorry. In fact, for the NOx SIPP call it
is a very different price than the SO2 system
because they did not build in the flexibilities that they built
into the SO2 compliance.
Senator Inhofe. I think you have answered that question.
Mr. Melewski, I think during the debate in 1990, you
originally did not support the acid rain trading system and now
you do; is that accurate?
Mr. Melewski. I think we were very skeptical about the
trading system at that time. We certainly preferred an overall
mandatory reduction. And some of our concerns have been borne
out. We were very concerned about target level. Those have been
borne out, that's why we are here today. But we were also
concerned about the compliance record and whether trading would
allow concentration of allowances in certain regions and how
that would play out. And we have looked at alternatives to that
system, at the time a regional trading system, regional
controls. But it is quite clear now that the system is working
very effectively. The kinks have been ironed out over the last
few years.
Senator Inhofe. In your opening statement, I think at the
very last you even suggested expanding that the pollutant of
NOx. There are problems here. Around the country, the cost of a
ton of NOx reduction varies so widely from one part to another
part, same as the benefits. That would be very difficult to
address, but I am sure you have thought that through. Do you
have any comments about that?
Mr. Melewski. I think that the mechanism that is in place
for the SO2 allowances provides that kind of
flexibility. You can buy allowances, you can install controls,
you can tailor make your own strategy to come into compliance.
The reason we are advocating for a national cap and trade
program for nitrogen is also the economic benefits. The areas
outside those 22 States are going to see benefits from the
reductions in nitrogen, and in a bigger market costs will go
down.
Senator Inhofe. Any reaction to that or comments?
Mr. Tyndall. We do agree that if you have a broader market
and more participants, and if you have a control level that
allows over control, which, again, is a problem with the NOx
level, that you then will have an active market and it will
allow the market to even out control costs. But you have to
have a system that allows the development of that market, you
have to have a control level that allows the generation of
allowances, and all of those things, and not to pick on the NOx
SIPP call, but all of those things were reasons why we had
serious concerns about whether the NOx allowance market would
have functioned the way EPA wanted it to function. It doesn't
mean that one can't be designed that would provide the same
equalization of compliance costs as occurs with SO2.
Senator Inhofe. All right. First of all, let me thank all
of you, and not just this panel but previous panels, for being
in attendance today. This is very significant to have this as
the first hearing. We appreciate your time very much.
Is there any last comment that you are just dying to say
that you didn't get an opportunity to say, Mr. Benoit, Mr.
Tyndall, or Mr. Melewski?
Mr. Melewski. Well, I will take a shot at that. I think
that Governor Pataki's actions today reflect the knowledge of
the mercury contamination in New York, the stories of lead
poisoning as a result of acid rain that are contained in our
documents, that New Yorkers are extremely concerned about this
issue. I think we all should be concerned about the prospective
loss of one of our greatest parks. While I respect the need for
due diligence and deliberate speed in Congress, I think that
prompt attention to Title IV would be appropriate, and the
sooner the better.
Senator Inhofe. All right.
Mr. Tyndall?
Mr. Tyndall. I would just add one thing. Having worked for
4 years with someone who I think still swears that he will
never stand for the Clean Air Act to be reauthorized, my former
boss, Mr. Dingell, I think it may be that one thing the
committee should consider is whether it makes sense to take
some issues that everyone knows need to be addressed and
address them in a more individual series of bills, such as you
did with your amendment to the transportation bill, in which we
accomplish something but with not trying to take on every issue
in the Clean Air Act. I think trying to move individual bills
as opposed to putting them all together in an omnibus Clean Air
Act reauthorization, no one is going to have a personal life
for a year, bill is maybe a better approach. I don't want to be
a Monday morning quarterback, because you have excellent staff,
but just some advice.
[Laughter.]
Senator Inhofe. All right.
Mr. Benoit?
Mr. Benoit. If I could make one final point, Mr. Chairman.
We heard a fair amount today about the importance of cost and
benefits, risk reduction, the use of sound science. And I was
struck by Mr. Perciasepe's remarks about the ability of U.S.
industry to innovate in response to statutory, and regulatory
objectives. I would like to point out that I think a fine
example of industry innovating is the ability of existing
industries to use waste materials, put them to work to reduce
the use of fossil fuels, reduce the use of virgin materials,
and in almost all instances doing that in a way that reduces
emissions and reduces pollution. I truly hope that the Clean
Air Act can be tailored to specifically accommodate and
encourage that type of activity.
Senator Inhofe. Sometimes a compliment on the innovation
and the abilities of industry to respond is another way of
saying we are going to make the decisions, you figure out how
to make them work.
[Laughter.]
Senator Inhofe. Thank you very much. I appreciate all of
you being here.
The hearing is adjourned.
[Whereupon, at 11:37 a.m., the subcommittee was adjourned,
to reconvene at the call of the Chair.]
[Additional statements submitted for the record follow:]
Statement of Hon. Craig Thomas, U.S. Senator from the State of Wyoming
Thank you, Mr. Chairman, for holding this hearing today to lay the
groundwork for eventual reauthorization of the Clean Air Act. This
issue is of great importance to the entire nation, but particularly to
the West and my State of Wyoming where we have some of the nation's
cleanest air and world class reserves of coal and natural gas, as well
as wind resources. I am especially interested in the issue of cost/
benefit analysis and look forward to the discussion in today's hearing.
Far too often, environmental regulations adversely impact the economy
while offering minimal environmental benefits. We must move carefully
and thoughtfully as we think about reopening the Clean Air Act.
Since enactmentment of the 1990 Clean Air Act amendments, the
Clinton Administration has tried various ways to implement even
stricter standards. I, along with many others including State and local
governments, and many of the nation's Governors--vocalized our
opposition to the EPA's rule on Particulate Matter (PM) and Ozone. One
of the most troubling aspects of the process is EPA's rush to implement
standards without sound scientific data. In May, the U.S. Court of
Appeals for the DC Circuit held that EPA had overstepped its authority
in proposing the revision of the ozone standard. Yet despite this
action, EPA continues to move forward with a new NOx regulation.
It is paramount that principles of sound science be applied. I
remember clearly the debate we had several years ago over EPA's rule
for Particulate Matter and Ozone. Here in this committee, Dr. George
Wolff, the Chairman of EPAs's Clean Air Scientific Advisory Committee
at that time, stated that the court ordered deadline did not allow
enough time for its members to adequately examine that complex issue.
Ultimately, there was no scientific consensus. And despite the
ambiguity and lack of scientific data which was documented by the
experts who testified, EPA went on to set new standards for PM and
ozone--an action based on a judgment call rather than sound scientific
evidence. We need to be careful about going down any regulatory road
before we have good science to support any measure.
My point Mr. Chairman, is this: what we are seeing from this
Administration is one extreme proposition after another. American
businesses and industries have made great strides to improve air
quality. America's air is much cleaner than it was 25 years ago.
Nevertheless, the EPA continues to add layer upon layer of regulatory
requirements on the backs of States and industry. It's critical that we
keep the issues of cost benefit analysis and sound science in the
forefront as we begin the discussions to reauthorize the Clean Air Act.
Thank you and I look forward to hearing from our distinguished
panel of witnesses.
__________
Statement of Hon. Daniel Patrick Moynihan, U.S. Senator from the State
of New York
Good morning, Mr. Chairman. Thank you for holding this hearing on
the reauthorization of the Clean Air Act. It is clear that the Clean
Air Act and the 1990 amendments to the bill have resulted in a
significant improvement in air quality, and a better understanding of
the science of monitoring, measuring and controlling air pollution. The
regulatory flexibility of a ``cap and trade'' program, exemplified by
the S02 Allowance Program, has been successful because of the
flexibility it allows affected utilities. It promotes innovation and
competition in emissions reduction technologies and has produced
tremendous cost savings. Since 1990, studies have estimated that the
cost savings due to emissions trading, compared to the traditional
command-and-control approach, have been between $230 million and $600
million per year. These successes are encouraging but our work is not
yet done.
I testified before this committee last year about the pioneering
scientists at Cornell University, Carl Schofield, Eugene Likens, and
Charles Driscoll who were among the scientists responsible for
establishing a strong link between acid deposition--primarily caused by
upwind utilities--and the diminished ability of lakes to sustain
healthy fish populations. We have made tremendous progress in
understanding the causes and effects of acid deposition and ways to
control it, but we still have a long way to go to mitigate these
problems. We have learned, for instance, that the S02 emissions
reductions required under the Clean Air Act Amendments of 1990 are
insufficient to prevent the continued acidification of many lakes and
further damage to sensitive ecosystems.
Perhaps most importantly, since the 1990 Amendments were enacted,
we have learned that nitrogen oxides, which were largely ignored 8
years ago, play a significant roll in acid deposition. And we have
learned that acid deposition does not cause environmental degradation
just in remote, high-elevation forests and lakes in the Adirondacks and
northern New England. Rather, it poses a continuing and significant
threat to the environmental quality of lakes, streams, forests, bays,
and estuaries throughout the country. The Southern Appalachians, the
Front Range of Colorado, and the San Bernardino Mountains in California
are greatly affected by acidification and nitrogen saturation.
Eutrophication is adversely affecting coastal waters throughout the
eastern seaboard, including the Chesapeake Bay, Long Island Sound, and
the Gulf of Mexico.
Achieving cleaner air has a twofold solution: identify and control
both mobile and stationary sources of pollution. The transportation
sector accounts for nearly half of national NOx emissions. A large
portion of these emissions are in the form of tailpipe exhaust from our
national vehicle fleet. In recent years, advances in vehicle technology
have produced Low Emission Vehicles (LEVs)--vehicles designed to reduce
vehicle emissions by 90 percent. These vehicles were first sold in New
York beginning with the 1998 model year. Unfortunately, New York can
not see the full air quality benefits of these vehicles because New
Yorkers do not have access to the low sulfur gasoline these vehicles
have been designed to use. The problem is not limited to LEVs, although
these vehicles are especially sensitive to gasoline sulfur. All
vehicles in the national fleet with catalytic converters--virtually all
vehicles--produce higher levels of emissions because of the high levels
of sulfur in the gasoline they burn. Once the catalytic converter is
damaged, it permanently loses its ability to filter pollutants.
In conclusion, I want to say that the success of the 1990 Clean Air
Act Amendments cannot be questioned. The S02 Allowance Program
established by that legislation has achieved extraordinary benefits at
program compliance costs less than half of initial projections. The
efficacy of the approach is proven. The current science indicates,
however, that we did not go far enough in 1990 in setting our emissions
reduction targets. We must buildupon our accomplishments thus far, and
to begin the work which remains to be done. Thank you.
__________
Statement of Hon. Bob Graham, U.S. Senator from the State of Florida
Thank you Mr. Chairman, for the opportunity to speak at this
important hearing. I want to thank all of the distinguished witnesses
who are here to testify today.
The Clean Air Act has been a resounding success. A recent
Congressional Research Service report notes that `` the Clean Air Act
and its 1990 amendments appear to have contributed to a marked
improvement in air quality nationwide.'' Since passage of the 1990
amendments, more than one-half of the areas not meeting air quality
standards for ozone in 1990 now meet those standards. 33 of 42 areas
not in attainment for carbon monoxide in 1990 now meet the standard.
At the present time, my State can boast attainment of all national
ambient air quality standards. Unfortunately, this status will change
with the new millennium. As we enter a new century and a new
millennium, beautiful Tampa Bay and Pensacola, with its sugar-white
sand beaches, will both be redesignated as non-attainment areas for
ozone.
I asked the Florida Department of Environmental Quality the
following question: What measures would provide the most improvement in
air quality for Florida? The answer was 1) the Tier II automobile
emissions standards, including the low sulfur standard, and 2) phasing
out the so-called ``grandfathered facilities.'' These facilities are
the older fossil-fuel fired power plants that were not required to meet
the New Source Performance Standards (NSPS) in the Clean Air Act.
I would like to briefly discuss both of these measures, and get
feedback from today's witnesses, especially as they pertain to Florida.
As we are all aware, sulfur in gasoline interferes with the performance
of cars' emission control equipment. Some have advocated regional
standards for sulfur, based on regional air quality. I disagree.
Florida attracts 45 million tourists per year to our beautiful shores
and attractions. Many of these vacationers bring their cars. As you
drive down I-95 or I-75 in Florida, you can spot license plates from
just about every State. These cars travel through and across many
regions to reach our shores and attractions. Differing regional sulfur
standards would significantly reduce the efficacy of the emissions
control equipment.
In those regions of Florida that will be in non-attainment in 2000,
specifically Pensacola and Tampa Bay, power plant emissions are the
major contributing factor. When the Clean Air Act was crafted, older
power plants were not required to meet the new source performance
standards because it was thought that the remaining lifetime of the
plants would be short. Requiring costly upgrades to plants that would
not have time to amortize these capital expenses seemed unfair. As it
turned out, most of these older plants continue to operate today,
emitting far more than their fair share of pollutants. In a
restructured electricity market, it has been estimated that allowing
these older plants to continue to operate without complying to the new
source performance standards amounts to approximately a 2 cents/kWh
subsidy.
I am very interested in examining steps that could be taken to
bring these older plants into compliance with the new source
performance standards in a way that is fair to all involved. These
steps would provide a significant benefit of the environment as well as
a way to level the playing field in electricity competition. Thank you.
__________
Statement of Hon. Barbara Boxer, U.S. Senator from the State of
California
Good morning, Mr. Chairman. Thank you for holding this hearing
today to consider the progress we have made toward bringing Americans
cleaner, healthier air under the Clean Air Act.
I believe that the considerable progress we have made toward
achieving cleaner air is owed in large measure to one basic principle
embodied in that law. That principle is that when it comes to setting
the standards designed to protect the air our children breathe, we
should consider only how to best protect public health.
What kind of progress have we made under the law since it was
amended in 1990?
Since that time, we have reduced ground-level ozone, particulate
matter and carbon monoxide pollution, we have reduced the levels of
acid rain producing sulfur emissions, we have reduced the levels of
stratospheric ozone depleting chemicals, and we have reduced the amount
of toxics in our air.
In California, we have also made great progress on these fronts--
reducing the levels of soot and smog that lead to health problems
ranging from asthma to decreased lung function.
Between 1980 and 1997, for example, statewide ozone levels have
decreased 49 percent. Statewide levels of particulate matter (PM10)
have decreased 31 percent between 1987 and 1997. At the same time,
California's population and motor vehicle miles traveled increased 16
and 26 percent, respectively.
It is well worth noting that the advances brought by the Clean Air
Act have been achieved at much lower costs than predicted by critics of
the law. For example, a study prepared by critics in 1989 predicted
that the acid rain program would cost between $4.1 billion and $7.4
billion. Other industry estimates were much higher. The General
Accounting Office's most recent cost estimate for this program is
approximately $2 billion; independent economists place the cost at only
$1 billion.
Another industry study prepared in 1993 predicted that the law's
reformulated gasoline program would add 16 cents to the price of each
gallon of reformulated gas made. Actual costs of the program, however,
are today estimated at between 3 to 5 cents per gallon.
While these and other doomsday cost predictions have not been borne
out by experience, we have witnessed the law spur the development of
new, innovative technologies.
Since the early 1970 amendments to the law, vehicle emission
control technologies have been developed that reduce emissions from
cars by 99 percent. Control technologies for stationary sources have
also been revolutionized. For example, Selective Catalytic Reduction
technology can reduce the emissions of nitrogen oxides from utilities,
refineries, and manufacturing by up to 90 percent.
Would we have seen these technological advances without a tough law
on the books? I don't think so.
But much more remains to be done.
California still suffers from some of the most serious air quality
problems in the nation. Approximately 30 million Californian's live in
counties that don't meet the law's health-based air standards.
Although air quality in the Los Angeles area has shown improvement
for the first time this year, it still has among the worst air quality
in the nation. We know that the smog and soot that plagues the L.A.
area may have serious health consequences for the approximately 15
million people that live there.
A recent study, for example, found that air pollution in that
region may impair children's long-term breathing capacity, leaving them
vulnerable to respiratory disease and underdeveloped lungs. Asthma,
which is exacerbated by air pollution, is also on the rise.
In 1997, EPA finalized rules that would have helped us reduce those
health risks. Unfortunately, those new rules were thrown into doubt by
a May 14, 1999 Federal appeals court ruling. In the case, the court
resurrected a discredited 1950's legal doctrine to call those rules
into question. Even very conservative legal scholars find the court's
ruling puzzling.
So, while EPA and the Department of Justice appeal that ruling, the
cleaner air that American's deserve is on hold.
The ruling, however, offers this committee guidance in what it did
not find.
The court did not find that EPA relied upon bad science in
establishing those new clean air rules. The court did not find that EPA
acted beyond its authority in excluding a consideration of costs in
setting those new standards.
The last thing we need to do in this committee is to buy into the
argument that the science used by the EPA in its air program is flawed,
or that costs should be considered in setting our air standards.
I look forward to hearing the testimony of the witnesses here
today.
Thank you, Mr. Chairman.
__________
Office of the Governor, State of New York,
October 27, 1999
Hon. James Inhofe, Chairman,
Subcommittee on Clean Air, Wetlands, Private Property, and Nuclear
Safety,
United States Senate,
Washington, DC 20510
Dear Chairman Inhofe: Thank you for providing me with the opportunity
to submit to you my testimony on New York State's important new acid
rain reduction initiative. I believe this innovative proposal not only
demonstrates my strong commitment to protecting the quality of New
York's air resources, but also provides the U.S. Congress and other
States with compelling documentation of the need for and application of
stringent reductions in air pollutants with respect to costs and
environmental and public health benefits.
The reductions that will be made to New York State's electric
generation facilities will have real and perceivable benefits upon the
areas of the State that are most sensitive to acid rain Moreover, the
actions we have repeatedly requested, and will continue to request from
other States, are no greater than the demands that we place upon our
own facilities.
I urge you to give the enclosed comments careful consideration as
you review the Clean Air Act and consider amendments to it. In
particular, T urge your strong support for S. 172, Senator Moynihan's
insightful legislation, which if enacted, would greatly assist the
environmental quality of New York State and many other areas of our
Nation that are sensitive to acid rain. This bipartisan legislation has
also been introduced in the House of Representatives by New York
Representatives Boehlert and Sweeney.
Thank you for your consideration of our initiative. I look forward
to discussions with you and your colleagues as you debate the future of
the Clean Air Act.
Very truly yours,
George Pataki,
Governor, New York.
__________
Statement of Hon. George E. Pataki, Governor of New York
Mr. Chairman, I want to thank you and the other members of the
Senate Environment and Public Works Subcommittee on Clean Air,
Wetlands, Private Property and Nuclear Safety, for providing me with
this opportunity to share with you the details of an historic
initiative by the State of New York, one which I believe will further
demonstrate our commitment in the fight to protect and preserve New
York's water bodies, natural resources, and citizens from the
devastation of acid rain and smog.
New Yorkers care deeply about the quality of their environment. As
the Governor of New York State, my Administration consistently has
recognized and responded to this high priority of our citizens. I have
repeatedly taken actions to preserve, protect and improve the quality
of the State's environment and natural resource base for now and
generations to come.
These actions have taken form, through full funding for the State's
Environmental Protection Fund, and through the approval by the voters
of New York State of the $1.75 billion Clean Water/Clean Air Bond Act
of 1996. We are preserving the quality of drinking water for nine
million New Yorkers, thanks to an historic 1997 agreement to protect
New York City's Watershed. We have developed, and are implementing,
management plans for critical water bodies throughout New York State,
including Lake Champlain, Onondaga Lake, Long Island Sound and the
Hudson River. And we have preserved over 250,000 acres of open space--
the shoreline of Lake Erie; the Whitney and Champion properties in the
Adirondack Park; Sterling Forest in Hudson Valley; the Albany Pine
Bush; Mount Loretto in New York City; and the fragile Pine Barrens of
Long Island.
Under my direction, we also are meeting State recycling goals,
closing the Fresh Kills Landfill, and cleaning up brownfields which
would otherwise remain as abandoned and unusable. But some of my
greatest concerns continue to be over the need to improve air quality
for all New Yorkers.
On October 14, 1999, I announced a significant new clean air
initiative that will have important environmental and public health
benefits, and that will reaffirm New York's leadership in the fight
against air pollution. This announcement complements the many efforts
which New York State has taken to demonstrate our national leadership
in the fight for reductions in the emissions of air pollutants that
cause acid rain and ozone (also known as smog) both inside and outside
of our borders.
Let me briefly explain to you the history of the acid rain issue,
as it impacts New York State, and why this recent Clean Air initiative
is so important to us.
The State of New York created the Adirondack Park, and the people
of the State invested it with special, ``forever wild'' constitutional
protections, more than a century ago. Measuring about six million
acres--about equal to the size of the State of Vermont--it is the
largest park of its kind in the United States, covering one fifth of
the land area of the State and containing the largest assemblage of Old
Growth forest east of the Mississippi. It is a glorious, perpetual and
pristine wilderness.
During the early 1980's, there were projections and evidence of
widespread destruction of lakes in the Adirondack area as a result of
acid precipitation. Although the New York State Department of
Environmental Conservation (NYSDEC) had been gathering data since 1977
on lakes believed to be sensitive to acidification, a review of the
chemistry and biology of these waters presented an incomplete picture
of past and existing conditions. As a result, it was apparent that a
more standardized, detailed and comprehensive survey was needed to
determine the extent and magnitude of acidification of waters in New
York State. In order to gather the information that would serve as a
baseline for evaluating future environmental changes, and to provide a
basis for decisions relating to reductions in pollutants, the
Adirondack Lakes Survey Corporation (ALSC), a not-for-profit
corporation, was formed.
From 1984 to 1987, field investigators focused on the collection of
detailed chemical, physical and biological data from 1,469 Adirondack
lakes and ponds. These data showed that 352 water bodies had pH values
of 5.0 or less, and fish were not captured in 346 of the waters
surveyed. Fishless waters were characterized as having low pH, limited
ability to neutralize acid, low calcium concentrations, and high
aluminum values.
Since 1984, nearly $13 million in research projects have been
completed or are ongoing under the auspices of the ALSC. The ALSC
continues to be a cornerstone for cooperative scientific investigation
with the U.S. Environmental Protection Agency (EPA), universities,
NYSDEC, the Adirondack Park Agency, and other State and local
organizations. Its careful studies have documented the continuing loss
of Adirondack lakes to acid rain, and the need to address this problem
at its source--the facilities where the emissions occur.
The many studies of the ALSC have demonstrated their worth. In
1990, when Congress approved the Clean Air Act Amendments (CAAA), the
documentation that we provided to Senator Moynihan and others who were
instrumental in the development of this legislation, provided the
justification to statutorily protect the Adirondacks, the Hudson
Highlands, Long Island Sound and other sensitive receptor areas--
regions which are sensitive to acid rain--through Title IV of the 1990
Act.
Through this Congressional action, an innovative ``cap and trade''
program was created as a free market based approach to reduce the
emissions of acid rain precursors. This program provided utilities with
the flexibility to make compliance strategies part of their long-term
business planning.
After court challenges and many debates, this program is now at
work, making cost-effective air pollution controls a reality.
In crafting the CAAA of 1990, Congress also wisely called for
studies to demonstrate the effectiveness of Title IV on protecting
sensitive receptor areas. These recently published reports, EPA's
Report to Congress, the Acid Deposition Standard Feasibility Study
(1999) and the National Acid Deposition Precipitation Assessment
Program's (NAPAP) Biennial Report to Congress An Integrated Assessment
(1998), came to the unfortunate conclusion that the current and future
emission reductions required by the CAAA are insufficient to protect
sensitive water bodies in the Adirondacks from acidic deposition, or
acid rain.
By U.S. EPA's own admission, the CAAA have been unable to
satisfactorily resolve New York's great concerns with acid deposition.
Given the growing body of evidence--resulting from the studies required
by this Act--that the impacts of acid rain on New York's sensitive
receptor areas become more devastating every day, I decided to take
strong actions, ones that go well beyond the air pollution restrictions
already imposed on New York State by the Clean Air Act.
The studies that I mentioned earlier--EPA's Report to Congress and
the NAPAP study--provide all the evidence necessary for the Federal
Government to act aggressively to curb the emissions of these
pollutants far more than had been envisioned by previous regulatory
actions. I am dismayed at the Federal inertia which, even with this
tremendous documentation that our lakes are dead or dying at an
alarmingly fast rate, continues to allow us to be ravaged by these
pollutants.
Chairman Inhofe, I believe you share my philosophy that Federal
intervention in the activities of the States should be limited to only
those areas where the States, on their own, cannot fully address a
specific issue. The interstate transport of air pollutants is one of
those issues where the Federal Government must be a partner with the
States to reduce pollution and to establish a level playing field.
The evidence of the reports required by the CAAA show as well that
some electric generation facilities in New York State are responsible
for a portion of the air pollution which damages our lakes, ecosystems,
buildings, and public health. Although the pollutants emitted by New
York utilities are limited--only about 20 percent of the total harmful
emissions of air pollutants that result in acid rain in New York
State--I was determined to act upon this information.
Since Federal action to significantly decrease air pollution in all
the States which have facilities responsible for interstate transport
has not been forthcoming, here in New York we will take the lead. That
is why I have directed NYSDEC Commissioner Cahill to promulgate
regulations that will require fossil-fueled electric generators in New
York to further reduce their acid rain-causing emissions. In doing so,
I am requiring utilities in New York State to reduce sulfur dioxide
emissions an additional 50 percent below Federal CAAA standards, and to
extend summertime nitrogen oxide controls to year round controls.
My proposal is a regulatory initiative. It will reduce airborne
emissions that result in acid rain from New York's electric generators.
It will require reductions in emissions of sulfur dioxide by 50 percent
beyond what will be required by Phase II of Title IV of the Federal
CAAA. These additional reductions will be phased in between 2003 and
2007.
Furthermore, in addition to the tremendous natural and structural
losses from acid rain, millions of our residents are harmed by levels
of ozone--smog--that impair human health. There are too many summer
days when we have to warn our most sensitive residents--the young, the
elderly, the infirm--that they shouldn't go outside and breathe the
air, or that they should limit their activities. Our asthma rates, to
which ozone contributes, are among the highest in the nation. Clearly
this situation is unacceptable. For this reason, New York already has
agreed to reduce emissions of nitrogen oxides from electric generators
to 0.15 pounds of nitrogen oxides per million BTU heat input during the
summer months (May through September). New York's new proposal will
require this emission rate to be achieved year round.
We envision allowing statewide emissions averaging, which will
encourage regulated entities to trade among themselves to achieve
compliance. My proposal also will supplement the sulfur dioxide
reduction program required by Federal law.
The percentages of reductions described above will translate to
additional sulfur dioxide reductions of 130,000 tons per year, while
the additional nitrogen oxide reductions will total 20,000 tons per
year.
New York State will encourage and assist other States across the
Nation to follow our lead on these innovative programs to generate
additional reductions. I expect that other States will begin to follow
New York's example very soon.
The annualization of the nitrogen oxide emissions rate will begin
in 2003. Reductions in sulfur dioxide will begin in 2003 and will be
fully implemented by January 1, 2007. Regulations must be drafted and
promulgated for both pollutants. This process, which will include full
involvement by the public, is expected to take at least a year.
In taking this unprecedented step, I am joined by environmental
organizations across the State--including several national
environmental groups--in sending a strong message to the Clinton
Administration and other States: In New York, we will do all we can to
clean up our air while we continue to fight for stronger clean air
requirements on the national level. The League of Conservation Voters,
the Natural Resources Defense Council, the National Audubon Society,
the Adirondack Council, the Environmental Defense Fund, and Scenic
Hudson all have endorsed this initiative.
New York's citizens deserve no less.
This is not the first time that New York's early initiative on acid
rain has led the way for Federal action. In 1984, New York enacted the
Acid Deposition Control Act, the first acid rain law in the country to
require emission reductions. This State law identified both sulfur
dioxide and nitrogen oxide as precursors to acid rain; sought limits on
total emissions from utilities sited within the State; and proposed the
innovative trading mechanism, mentioned earlier, which Congress would
later adopt nationwide in the Clean Air Act Amendments of 1990.
The initiative which I announced earlier this month is embodied in
legislation which is before your Subcommittee for review. S. 172,
introduced in the Senate by Senator Moynihan, and in the House of
Representatives by Representatives Boehlert and Sweeney, is intelligent
and effective legislation that would require national reductions in
acid rain-causing emissions. The commitment made by New York State,
which I describe above, will have the same effect in our State as the
Moynihan-Boehlert-Sweeney bill would have on the Nation.
I would like to point out that our entire New York Delegation is
being joined by Members of Congress from other States in support for
the Moynihan-Boehlert-Sweeney bill. As a result of the EPA and NAPAP
studies, these other members of the Senate and House have recognized
that the interstate transport of air pollutants damages the
environmental quality and public health of their States as well. The
tragedy that we already have seen in New York is simply the harbinger
for other sensitive receptor areas across this Nation--such as
Chesapeake Bay, Narrangansett Bay and Tampa Bay.
Just as the citizens of New York deserve no less than the best
possible protection from acid rain, through strict emissions limits, I
believe that the citizens of our Nation deserve no less. Acid rain is
not just a New York problem--it is a national problem which deserves a
national solution.
Experience in complying with the acid rain provisions of the CAAA
has demonstrated that these reductions can be achieved far less
expensively than previously thought. Modern control technology has
dramatically reduced the cost of compliance. For instance, the drafters
of the 1990 CAAA estimated that it would cost approximately $1,500 to
reduce one ton of sulfur dioxide. Today, that cost is actually less
than $200 a ton.
Chairman Inhofe, I cannot emphasize to you enough the urgency of
this proposal to New Yorkers. The sources and impacts of acid rain on
New York's sensitive ecosystems have been well documented. Without
serious action such as this initiative, on both the State and national
level, we in New York realistically fear the loss of some of our most
precious national resources. We hope, by implementing these dramatic
reductions in sulfur dioxide and nitrogen oxide emissions, to
demonstrate to the Administration and Congress the importance of
approving the Moynihan-Boehlert-Sweeney legislation. Through our
actions, we know that we have made New York the leader in the fight
against acid rain and the devastation that it causes. We hope that we
also are making New York an example of how cost effective and
beneficial reductions in sulfur dioxide and nitrogen oxides can be.
__________
Statement of Robert Perciasepe, Assistant Administrator, Office of Air
and Radiation, Environmental Protection Agency
Mr. Chairman and Members of the Subcommittee, I welcome the
opportunity today to testify on our nation's progress under the Clean
Air Act (the Act) toward achieving clean, healthy air for all
Americans. My remarks reflect the perspective I have gained during my
time at the U.S. Environmental Protection Agency (EPA), and also my
experience as the Secretary of the Environment in Maryland, and as the
first State chair of the Ozone Transport Commission.
It is important to remember that the Clean Air Act Amendments of
1990 (the 1990 Amendments) passed with overwhelming support in both the
House and Senate and set ambitious air pollution reduction goals. This
bipartisan legislation was designed to achieve real results--and it has
done so. I am pleased to report that this nation has substantially cut
air pollution over the past 9 years. We have made great strides in
combating urban air pollution, toxic air pollution, depletion of the
stratospheric ozone layer, and acid rain. But we still have a long way
to reach our goal: clean air for every American.
I will start today by describing the substantial progress we've
made since 1990 in reducing air pollution. I will then reflect on what
we've learned about effective and efficient ways to achieve our goals--
including the benefits of stakeholder involvement, market-based
policies, flexible, common-sense implementation, and the value of
publicly available information. We also have learned that many
predictions of high costs and infeasibility have not come to pass. In
fact, for many air pollution problems, reductions have been made faster
and at less cost than we ever expected. Finally, I want to bring you up
to date on some of our key current efforts and talk briefly about
whether the Clean Air Act should be reopened at this time.
progress toward clean air
To appreciate how far we have come in reducing air pollution, it is
instructive to remember where we were before the 1990 amendments. There
was growing concern about the increasing damage to the stratospheric
ozone layer, which, among other things, protects us from skin cancer
and cataracts. Acid rain essentially was unchecked, causing damage to
aquatic life, forests, buildings and monuments, as well as visibility
degradation and health risks from sulfate and nitrate particles. In
1990, photochemical smog, which can impair lung function, cause chest
pain and cough, and worsen respiratory diseases and asthma, exceeded
healthy levels in 98 metropolitan areas. Many cities did not meet the
national air quality standards for the pollutant carbon monoxide, which
can aggravate angina (heart pain), and also for particulate matter,
which is linked to premature death, aggravation of pre-existing
respiratory ailments, and reductions in lung capacity. The millions of
tons of hazardous air pollutants emitted annually in the United States
were largely unregulated at the Federal level. Many of these pollutants
have the potential to cause cancer or other serious health effects such
as nervous system damage, miscarriages or birth defects.
Since then, the 1990 Amendments enabled us to substantially reduce
each of the major air pollution problems that faced the United States:
Annual sulfur dioxide emissions, which react to form acid rain,
have been cut by more than 5 million tons, and rainfall in the eastern
United States is as much as 25 percent less acidic.
Production of the most harmful ozone-depleting chemicals has ceased
in the United States and--provided the United States and the world
community maintain the commitment to planned protection efforts--the
stratospheric ozone layer is projected to recover by the mid 21st
century.
Ground-level ozone pollution, particulate matter, and carbon
monoxide pollution have all been reduced significantly, producing
dramatic decreases since 1991 in the number of areas in nonattainment.
Rules issued since 1990 are expected to reduce toxic emissions from
industry by 1.5 million tons a year--eight times the reductions
achieved in the previous 20 years.
These results have been achieved through a combination of rules,
voluntary measures, market mechanisms, State partnerships, and
stakeholder negotiations. Between 1990 and 1997, we reduced annual
emissions of all criteria pollutants by 10 million tons. By 2010, rules
already in place will have reduced these annual emissions by more than
30 million tons from the 1990 level.
reducing acid rain
To combat acid rain, the 1990 Amendments called for a 10 million
ton reduction in sulfur emissions, relative to a 1980 baseline. Much of
that was to be achieved from utility power plants through an innovative
market-based pollution allowance trading system. The results have been
dramatic. So far, national sulfur dioxide emissions have been cut by
more than 5 million tons, mostly through this program--and at lower
cost than predicted. As a result, rainfall in the eastern United States
is up to 25 percent less acidic, and some ecosystems in New England are
showing signs of recovery. Separate requirements for nitrogen oxides
controls for utilities already have begun reducing those emissions, and
will achieve a 2-million ton NOx reduction beginning next year.
Annual costs of the sulfur emissions program are now estimated to
be less than half of what we projected in 1990 ($4 billion in 1990, $1
to $2 billion now). Trading has allowed the utility industry to
minimize compliance costs, and has spurred competition in other sectors
of the economy such as freight, coal, and scrubbers--all of which has
resulted in lower costs. The rest of the 10 million ton reduction in
SO2 will be achieved by 2010 through the second phase of the
acid rain program. Recent research indicates that further reductions in
SO2 and NOx emissions beyond those required by the acid rain
program would be necessary for full recovery of the most sensitive
ecosystems. The controls to achieve such reductions also would provide
significant health benefits by reducing fine particulates.
protecting the stratospheric ozone layer
The global phase-out of chlorofluorocarbons (CFCs) and other ozone-
depleting chemicals is an unparalleled triumph of the soundest science,
economics, and diplomacy. It rests on an overwhelming consensus within
the world science community. One hundred and sixty-eight nations have
become parties to the Montreal Protocol, the treaty through which the
phase-out policy is being implemented worldwide. The United States and
the world have made significant progress to date in addressing the
erosion of the earth's protective ozone layer by eliminating many
manmade ozone-depleting chemicals. Production of the fire-extinguishing
halons was virtually eliminated by the world's developed countries in
1994 and at the beginning of 1996, developed country production of
CFCs, methyl chloroform, and carbon tetrachloride ended, thus avoiding
emissions of 400,000 metric tons of ozone-depleting substances. As a
consequence of these prudent international actions, the rate of
increase of atmospheric concentrations of ozone-depleting chemicals has
slowed, and in some cases, declined. In 1998, more than 100 scientists
worldwide collaborated in a scientific assessment of the state of the
ozone layer. These scientists concluded that the Montreal Protocol is
working. Reductions in concentrations of ozone-depleting compounds
already have been measured in the atmosphere, and scientists predict
the gradual recovery of the ozone layer by the mid-21st century.
This unprecedented international success story also will contribute
substantially to the health of all Americans. EPA estimated in 1992
that the phase-out would reduce U.S. incidences of non-melanoma skin
cancer by 295 million during the period 1989 through 2075, as well as
protect people from eye damage leading to cataracts, and immune system
suppression .
The phase-out used a market trading approach developed by EPA that
has served as a model for programs in other countries. Because of
strong partnerships with industry and the flexible market approach, the
phase-out was much less expensive than was predicted at the time the
1990 Clean Air Act Amendments were passed. In 1988, EPA estimated that
a 50 percent reduction of CFCs by 1998 would cost $3.55 per kilogram.
In 1993 the cost for a 100 percent phase-out by 1996 was down to $2.45
per kilogram.
healthier air in more cities
The air in our nation's cities is substantially cleaner than in
1990. Nationally, the 1997 average air quality levels were the best on
record for all six common pollutants (lead, NO2,
SO2, PM10, CO and ozone) subject to air quality
standards. The 1998 levels were as good or better for all pollutants
except ozone. These improvements have occurred along with growing
population, strong economic growth and continued growth in vehicle
miles traveled. From 1970 to 1997, U.S. Gross Domestic Product has
grown by 114 percent, the U.S. population has grown by 31 percent, and
the number of miles traveled by on-road vehicles (VMT) has increased by
127 percent.
Since 1993, an unprecedented number of cities have met the health-
based national ambient air quality standards. For example, of the 42
carbon monoxide areas designated as nonattainment in 1991, only 6 areas
continue to experience unhealthy levels of CO (based on 1996 -1998
data). Much of the progress on CO can be attributed to the Clean Air
Act's wintertime oxygenated fuels program, which began in 1992 in 30
cities.
Although we continue to experience unhealthy levels of ozone and
particulate matter, we have made substantial progress even with those
pollutants. The 1996 to 1998 data for particulates indicates that 71 of
the original 85 nonattainment areas have air quality meeting the
PM10 standard. Average particulate levels (PM10)
dropped 25 percent from 1989 to 1998. Because we now believe that the
finer particles pose the greatest health concern, we are working with
States to get monitoring systems in place for fine particulate matter
(PM2.5). In the case of ground-level ozone, based on 1996 to
1998 data, 62 of the original 98 ozone nonattainment areas have air
quality levels meeting the 1-hour ozone standard.
For the other three criteria pollutants, few areas remain in
nonattainment. The remaining lead and sulfur dioxide nonattainment
areas in the country are the result of localized point sources for
which action on an individual basis is being taken. The nitrogen
dioxide standard is now met nationwide. The last nitrogen dioxide
nonattainment area, Los Angeles, met the standard in 1992 (and was
redesignated to attainment in 1998).
cleaner cars, cleaner fuels
A key reason for the air quality improvements we are seeing is that
the 1990 Amendments called for cleaner motor vehicles and cleaner
fuels, in recognition of the important role that motor vehicle
emissions play in affecting air quality.
Today, the average new car (meeting Tier I standards in the 1990
Amendments) is 40 percent cleaner than the average new car was in model
year 1990. Cars now have onboard canisters to control refueling vapors,
and onboard diagnostic computers to identify emission control problems.
In 1997, EPA mediated an agreement among the States, U.S. auto
companies, and other stakeholders that calls for automakers to produce
cars 50 percent cleaner than today's Tier I cars, which began in eight
Northeastern States in model year 1999. In addition to covering
passenger cars, the agreement covers the majority of sport utility
vehicles, minivans, and light-duty trucks, which have higher emissions
than cars. Automakers voluntarily agreed to meet the tighter standards
on an enforceable basis. The agreement benefits car companies by
avoiding a potential patchwork of differing State emissions
requirements. It benefits States and the public by delivering cleaner
cars 5 years sooner than EPA could otherwise have required. These
vehicles will be available nationwide in model year 2001.
While requiring cleaner cars, the 1990 Amendments also required
cleaner gasoline. To reduce smog-forming VOCs and toxics, the 1990
Amendments required cleaner, reformulated gasoline in the worst ozone
areas, and allowed additional areas to join the program. Today, 30
percent of the country's gasoline consumption, in 18 States, consists
of reformulated gasoline, or RFG. Overall, refiners have gone beyond
the 15 percent reduction in VOCs and toxics required by the Act
beginning in 1995. Refiners' data now tell us that VOC reductions are 8
percent greater than required on average, and toxic reductions almost
twice the required amount. In those RFG areas where we measured, levels
of benzene in the air were down 43 percent from 1994 to 1995. This is
exciting progress since benzene is a known human carcinogen that has
been linked to leukemia. One of the attractive features of this program
is that reductions of pollutants are immediate because cleaner fuels
can be used in any car on the road today. Phase II of the RFG Program
will begin in January 2000.
Buses and trucks also are getting cleaner. Diesel-powered urban
transit buses being built today release almost 90 percent fewer
particulate emissions than buses built in 1990. As a result of EPA
emissions standards for new buses, smoke-belching buses will disappear
as old buses are retired from service. Emissions control will be
required for older urban buses that have their engines replaced or
rebuilt. Under rules issued in 1997, NOx emissions from heavy-duty
diesel engines used in trucks and buses will be cut in half by 2004,
assisting with efforts to reduce smog and particulates. In addition,
substantial emissions reductions are being achieved for the first time
through a set of standards for a variety of engines not used in highway
vehicles--including locomotives, bulldozers, commercial and
recreational marine vessels and lawn and garden equipment.
In addition to the very substantial reductions in ozone precursors,
all of the programs put in place since 1990 to control emissions from
motor vehicles will reduce total vehicular air toxics emissions by
approximately 40 percent.
cutting industrial air toxics
Since 1992, EPA has issued 43 pollution standards affecting 70
industrial categories such as chemical plants, dry cleaners, coke
ovens, and petroleum refineries. When fully implemented, these
standards will eliminate over 1.5 million tons of air toxics and over
2.5 million tons of particulate matter and smog-causing volatile
organic compounds.
By contrast, in the preceding 20 years only seven hazardous air
pollutant standards, eliminating 125,000 tons of toxics, had been put
in place. One of the main reasons was that the toxics provisions of the
1970 Act triggered contentious debates and litigation over risk
assessments and ``how safe is safe.'' Congress resolved this in 1990 by
directing EPA to issue technology- and performance-based standards on a
source category basis to ensure that major sources of air toxics are
well controlled. These standards create a level playing field by
requiring all major sources, in essence, to achieve the level of
control already being achieved by the better performing sources in each
category.
The result is that we are reducing the large quantities of toxic
air pollutants released into our air, in the aggregate and around
industrial sources in populated areas. We will achieve additional
reductions as we complete standards for more categories of major
pollution sources. We are now in the early stages of implementing the
second phase of the air toxics program outlined by the 1990 Amendments,
targeting particular problems such as elevated risks in urban areas,
deposition of air toxics into the Great Lakes, mercury emissions, and
residual risks from already controlled sources.
improving visibility in our national parks and wilderness areas
In July, EPA published a new rule calling for long-term protection
of and improvement in visibility in 156 national parks and wilderness
areas across the country. These areas include many of our best known
and most treasured natural areas, such as the Grand Canyon, Yosemite,
Yellowstone, Mount Rainier, Shenandoah, the Great Smokies, Acadia, and
the Everglades. Regional haze, created by fine particles and other
pollutants, degrades vistas in these parks and regionally across the
nation. For example, on some days air pollution reduces visibility to
less than 10 miles in our eastern parks.
The regional haze program is designed to improve air quality in the
parks, particularly on these poor visibility days. Because haze is a
regional problem, EPA is encouraging States to work together in multi-
State planning organizations to develop potential regional strategies
for the future. EPA will be working closely with these multi-State
organizations, to provide guidance during this process, just as it did
with the many States and Tribes involved in the Grand Canyon Visibility
Transport Commission.
During the period 2003-2008, States are required to establish goals
for improving visibility in each of these 156 areas and adopt emission
reduction strategies for the period extending to 2018. States have
flexibility to set these goals based upon certain factors, but as part
of the process, they must consider the rate of progress needed to reach
natural visibility conditions in 60 years. To assist in evaluating
regional strategies and tracking progress over time, we are working
with the States and Federal land managers to expand our visibility and
fine particle monitoring network to 110 of these areas over the next
several months.
what we've learned: innovative strategies and stakeholder involvement
These impressive results have come about through involving
stakeholders from the outset, using innovative and flexible
environmental protection strategies, and adjusting when programs need
improvement.
Since 1990, the Agency has dramatically expanded its interaction
with stakeholders. Consensus is not always attainable, of course. But
the time and effort we put into communication and consensus-building
pays off in better rules, and often in smoother implementation.
One of the first examples of stakeholder involvement was the Acid
Rain Advisory Committee, an intensive 7-month effort with stakeholders
immediately after the 1990 Amendments that helped shape the rules for
the successful acid rain program. This positive experience led to
establishment of the Clean Air Act Advisory Committee, a standing group
of several dozen experts from industry, the environmental community,
States, academia and elsewhere. We seek the advisory committee's
insights frequently.
Two large stakeholder involvement efforts were the Ozone Transport
Assessment Group (OTAG) process and the National Ambient Air quality
Standards (NAAQS) implementation advisory committee process. OTAG,
which involved 37 States, EPA, and many stakeholders, conducted state-
of-the-art modeling to improve understanding of the interstate ozone
transport problem in the East, and laid the groundwork for our ongoing
efforts to institute regional controls on NOx emissions. EPA supported
OTAG, which was led by the Environmental Council of States, with
significant technical and financial assistance. The NAAQS Federal
Advisory Committee Act (FACA) process, convened by EPA, provided us
with insights on ways to implement the 1997 ozone and PM NAAQS even
before those standards were promulgated.
Since 1990, we typically have involved stakeholders earlier in
rulemaking efforts than we did before that time. In the case of air
toxics standards, for example, we realized that working with
stakeholders early in the process would be a necessity if we were to
meet the Act's requirement to produce standards for the long list of
industrial source categories. We developed a ``MACT partnering''
process that allows EPA, State and local air quality agencies to work
cooperatively with industry and local organizations to collect
information on emissions and controls, and to develop a draft
determination of the level of control. Similarly, we have engaged
stakeholders in substantive discussions prior to developing proposed
mobile source rules--for example, in developing rules to control
emissions from heavy-duty trucks and buses. The National Low Emission
Vehicle Program is another example of what can be achieved through
consensus building with stakeholders when incentives for agreement
exist.
Since 1990 we have emphasized using new approaches to achieve more
environmental protection at less cost. We have made increasing use of
market-based approaches to cut compliance costs, promote technology
development and achieve extra environmental benefits. We also have
looked for other ways to provide flexibility on the means of achieving
emissions reductions, while ensuring accountability. We are making use
of new information technologies to improve public information on air
quality, and are providing compliance assistance to small businesses.
Emissions averaging and trading are frequently used as standard
tools of the air program. Beyond the stratospheric ozone and acid rain
programs, we have provided trading opportunities in many national air
rules for vehicle manufacturers and fuel refiners. The most recent
example is the proposed Tier II/gasoline sulfur rule, which would allow
averaging, banking and trading to provide additional flexibility to
vehicle manufacturers and fuel providers. Emissions averaging is
permitted by national air toxics emissions standards for refineries,
chemical plants, aluminum production, wood furniture and other sectors
that use coatings. We also have used other methods, including multiple
compliance options, to help provide flexibility in air toxics rules.
In addition to providing flexibility in national rules through
trading and other means, EPA is working with States to promote market-
based approaches to help achieve national air quality standards for
smog, particulates and other criteria pollutants. EPA has issued
guidance to assist States in designing trading and other economic
incentive programs to reduce criteria pollutants, and will soon update
that guidance. EPA also has assisted States in setting up trading
programs, such as California's RECLAIM program for reducing sulfur
dioxide and nitrogen oxide emissions and the Ozone Transport
Commission's program for controlling nitrogen oxide emissions among
States in the Northeast. Through a unique State-EPA partnership, we are
jointly implementing this NOx budget system for the Northeast.
In issuing NOx budgets for 22 States and the District of Columbia
to reduce the problem of transported ozone pollution in the East, we
provided a model cap-and-trade rule for utilities and large industrial
sources. The experiences of the acid rain program and the OTC effort
show that this approach holds the potential to achieve regional NOx
reductions in an efficient and highly cost-effective manner.
The air program is striving to provide flexibility and create
incentives for reducing emissions in a variety of ways. A number of air
toxics rules--including those addressing polymers and resins, primary
aluminum, and pharmaceuticals manufacturing--provide companies the
opportunity to reduce reporting requirements if they achieve consistent
good performance. We have issued guidance to allow States to count
voluntary measures to reduce emissions from transportation sources--
such as ridesharing programs and ozone action days--toward their State
planning requirements under the Act.
This is the information age, and we are finding ways to use the new
information technologies to provide citizens with environmental
information they can use. Here are three examples:
The Ozone Mapping Project, or AIRNOW, provides the public
for the first time with real-time information about smog levels in
their communities via color-coded maps and animations. These maps are
made available on an Internet website and for local TV weather reports.
E-GRID, the Emissions & Generation Resource Integrated
Data base, is a right-to-know tool for anyone interested in emissions
or fuel mix of any portion of the nation's electric power grid. It
combines in one data base information from EPA and the Energy
Information Administration on power generation, fuel information and
measured emissions.
The EPA funded SUNWISE Schools Program is building a
national UV monitoring and education network within U.S. elementary
schools. Using the Internet, students report the UV Index, a daily
forecast of UV radiation levels people might experience, and
recommended UV-protective behaviors. This innovative approach to
sharing real-time environmental information with the public is a
helpful tool in protecting the health of our children from overexposure
to UV radiation while the ozone layer recovers.
Another information-related development during the 1990's is the
establishment of Clean Air Act small business technical assistance
programs and small business ombudsmen in every State. These programs
help small businesses comply with the Clean Air Act by providing free
technical assistance. In 1997, State programs directly assisted over
78,500 businesses and conducted almost 6,000 onsite consultations for a
wide variety of industry sectors. To cite one success story: One Texas
furniture company, after consulting with the State, invested $8,000 in
more efficient, high-volume, low-pressure spray guns and related
equipment and trained employees in their proper use. These guns spray
more of the paint onto the product and less onto the floor and into the
air. As a result, the firm's smog-forming VOC emissions dropped from
just under 25 tons in 1996 to 16 tons in 1998, while its annual
spending on paint and coatings fell from $69,000 to $35,000.
In addition to these efforts, we have worked to continually refine
and improve our implementation programs. The following examples show
our willingness to make adjustments when programs need improvement.
We recently overhauled our long-established process for evaluating
whether new cars and light-duty trucks meet emissions standards. The
revised rules will save auto manufacturers an estimated $55 million
annually, while providing better information on whether cars on the
road are continuing to meet the standards. The vehicle emission
Compliance Assurance Program, or CAP 2000, redirects the focus of EPA
and automakers from pre-production laboratory demonstrations to
verification of actual in-use performance. This reduces paperwork by 50
percent, as well as saving valuable pre-production time. In exchange,
industry will conduct extensive emissions testing of vehicles ``in
use'' on a broader scale than the government could conduct. This will
give automakers substantial incentives to ensure that their vehicles
meet the standards in actual use.
We are moving forward in our efforts to improve the new source
review permitting program. This program ensures that pollution from the
addition of major new and modified sources does not significantly
degrade the air quality in clean air areas, and that the national
ambient air quality standards in non-attainment areas can be achieved.
A key objective of our efforts is to streamline permitting without
sacrificing environmental and other benefits of the current program.
The new source review reform package will provide options for sources
and States to adopt more flexible approaches to meet new source review
requirements so that companies can plan and implement anticipated
changes at their facilities with a greater degree of regulatory
certainty. Concurrently, some of the reform measures will enhance
environmental protection in some of the nation's most sensitive Class I
areas, which include many of our national parks. We are nearing
completion of an intensive set of stakeholder meetings that we expect
will be very helpful when finalizing the reform package. Our schedule
for finalizing the rule has been reset for spring 2000 to allow us to
evaluate what we have learned from recent interactions with
stakeholders.
To address concerns raised about the Title V operating permits
program, we issued two guidance documents that streamlined and
simplified permit applications and helped with the large job of issuing
initial permits to all covered facilities. We also continue to work
toward finalizing a proposed permit revisions rule, where we are
working closely with stakeholders to avoid unnecessary permit revision
delays for industry while addressing citizens' interest in public
review of significant changes.
We continue to develop and test innovative ways to allow companies
to adjust quickly to market demands without experiencing permitting
delays. To date, we have worked with companies and States on
approximately a dozen permits designed to provide operational
flexibility and promote pollution prevention. Three permits have been
issued to date and eight more are in progress.
For example, working in conjunction with EPA and other
stakeholders, the Intel Corporation was able to develop a flexible
permit that allowed the company to receive advance approval for several
types of operational changes at its facility in Oregon. As a result,
Intel was able to avoid permitting delays and significant staff time.
Additionally, Intel cut its air emissions in half while doubling
production onsite. We are also planning to document the lessons learned
from these permits so that successful flexible permitting approaches
can be replicated throughout the country.
what we've learned: predictions about infeasibility and cost
Throughout the history of the Act, some critics have made dire
predictions about the infeasibility of proposed controls or the
negative impact that the Clean Air Act would have on industries, jobs
and the U.S. economy. Nearly 9 years after the 1990 amendments, we have
achieved progress in cleaning the air without the severe dislocations
predicted by some critics. Experience shows that progress toward clean
air and economic growth can go hand in hand. For example, data from the
Bureau of Economic Analysis shows that between 1990 and 1995, there was
a net gain of 2.2 million jobs in ozone nonattainment areas (a few were
excluded due to data constraints).
reviewing the record
Costs of the 1990 Amendments are proving to be far less than
initial industry estimates. For example:
The Clean Air Working Group, a key industry lobbying
group during the 1990 reauthorization effort, estimated in August 1990
that compliance costs would total $51 billion to $91 billion annually.
Today, with the benefit of the added information from several years of
implementation, EPA estimates the annual cost at $26.8 billion upon
full implementation of the law in 2010.
An industry study in 1989 predicted the cost of fully
implementing an acid rain program at $4.1 billion to $7.4 billion. More
recent estimates by EPA and the U.S. General Accounting Office were
approximately $2 billion, and estimates from independent economists and
industry researchers range as low as $1 billion.
In 1993, industry estimated that meeting the Act's
requirements for reformulated gasoline would add 16 cents to the price
of a gallon of gas. In 1995, the year the program took effect, an
Energy Information Administration survey found the actual cost was 3
cents to 5 cents per gallon.
Another concern of industry representatives during the 1990
reauthorization was that it would be technologically infeasible to
comply with some requirements. For example, a chemical company
spokesman testified that accelerating the phase-out of ozone-depleting
CFCs to January 1996 would cause severe economic and social disruption.
At the same hearing, a refrigeration industry representative testified,
``We will see shutdowns of refrigeration equipment in supermarkets. . .
.We will see shutdowns of chiller machines, which cool our large office
buildings, our hotels, and hospitals.'' In fact, the phase-out of CFC
production was accomplished without such disruptions. Chemical
companies helped make this possible by rapidly developing alternatives
to CFCs.
Similarly, a major American auto company representative in 1989
testified that ``we just do not have the technology to comply'' with
the initial Tier I tightening of tailpipe standards that became part of
the 1990 amendments. Nonetheless, the auto industry was able to begin
producing vehicles meeting the standards in 1993. More recently, as
previously mentioned, the auto industry entered into a voluntary
agreement with EPA and States to produce even cleaner, low emission
vehicles that are already being sold in some areas.
As these examples begin to illustrate, Clean Air Act requirements
have created market opportunities and pressures for technology
breakthroughs and performance improvements. Over and over again,
industry has responded with great success, producing breakthroughs such
as alternatives to ozone-depleting chemicals and new super-performing
catalysts for automobile emissions. The result has been affordable
improvements in air quality across the country, in conjunction with
continued economic and population growth. There are many examples of
technologies that were not commercially available 10 years ago, but
that now are important parts of pollution control programs. Some of
these include reformulated gasoline, selective catalytic reduction for
NOx emissions from power plants, and cleaner-burning wood stoves. This
pattern of technological progress is continuing today. EPA has
identified a number of emerging technologies--ranging from fuel cells
to ozone-destroying catalysts to new coating technologies--that may
hold promise for achieving additional cost effective reductions of VOC,
NOx and particulate matter.
benefits v. costs
Some have charged that the costs of the Act exceed its benefits.
But the most exhaustive study of this issue to date, an EPA study
required by Congress, finds otherwise.
Under section 812 of the 1990 amendments, we are required to assess
the costs and benefits of the Act, first retrospectively and then with
an ongoing series of prospective studies. The retrospective study,
published in October 1997, included estimates of the number of
incidences of health effects avoided in 1 year--1990--due to Clean Air
Act pollution reductions. Here are estimates for a partial list of the
avoided health effects:
184,000 incidences of premature mortality and 8,700,000
incidences of acute bronchitis related to particulates;
10,400,000 lost IQ points and 12,600,000 incidences of
hypertension related to lead;
68,000,000 incidence-days of shortness of breath, 850,000
incidences of asthma attacks, and 130,000,000 incidences of 19 acute
respiratory-related symptoms related to particulates and ozone;
39,000 incidences of congestive heart failure related to
particulates and carbon monoxide; and
22,600,000 lost work days related to particulates, and
125,000,000 days with restricted activity due to particulates and
ozone.
The section 812 retrospective study found that the 1970 and 1977
Clean Air Acts yielded human health, welfare and environmental benefits
that exceeded costs by more than 40 to 1 ($22.2 trillion versus $523
billion). Even at the low end of our range of estimates, monetized
benefits exceeded costs by a margin of 11 to 1. EPA is now nearing
completion of the first prospective study examining the incremental
value of the 1990 amendments. Separately, EPA completed a cost/benefit
assessment of the acid rain program in 1995, and found the health
benefits alone far exceeded annual costs.
It is important to note that the section 812 and acid rain studies
determined that monetized benefits substantially exceeded costs even
though many benefits could not be translated into dollars. Even with
continuing progress in scientific and economic research, more than half
of the known adverse effects of air pollution still cannot be expressed
in economic terms. For ozone, some of the examples cited in the 812
study include lung inflammation, chronic respiratory diseases, immune
system changes, forest and ecological effects, and materials damage.
Given this problem, it is important not to judge the value of
additional environmental and public health protections solely on the
basis of monetized costs and benefits.
This is one reason for EPA's consistent position that cost-benefit
analysis should not be the basis for our air quality standards. We
continue to believe that our national air quality standards represent
important health-based goals for the nation, and a benchmark for
citizens interested in whether their air is safe to breathe. Although
air quality standards are set solely on the basis of protecting health,
we of course agree that cost is important to consider in devising
environmental protection strategies. Costs are taken into account in
implementation of the standards, as States and EPA make decisions on
how to reach the goal.
where we stand today: unfinished business
As you know, we received an adverse Federal court decision in May
that has stalled implementation of the new, more protective health
standards EPA established in 1997 for ozone and fine particulate
matter. A three-judge panel of the U.S. Court of Appeals for the
District of Columbia Circuit remanded EPA's action on the two
standards, challenging EPA's legal rationale as well as EPA's authority
to enforce any new ozone standard under the 1990 amendments. The court
did not challenge the underlying science. In light of the executive
branch's strong disagreement with the ruling, the Department of Justice
filed a petition for rehearing by the full court on June 28, 1999. We
await the court's decision on whether to rehear the case. We continue
to believe these standards are essential for protection of public
health, and ultimately will be implemented. We recognize, however, that
it will take some time for the legal issues to play out.
In the meantime, the Administrator and I are determined to keep
emission reduction efforts on track and to reduce health threats from
smog and particulate matter. We are concerned that progress on the smog
problem appears to have slowed or stopped in a number of areas in the
last couple of years--and in some areas, we are in danger of
backsliding. The national average ozone level increased 5 percent in
1998. Also, in recent summers we have seen increases in the number of
times air quality exceeded national standards in certain cities and
national parks, particularly in the East. Partly because of this
concern, this Administration, in partnership with States, is taking
several actions to ensure that we continue making progress.
Specifically:
Tier II/Gasoline Sulfur. We are on track to issue more stringent
Tier II emissions standards for cars and light-duty trucks along with
rules to cut levels of sulfur in gasoline. Many metropolitan areas need
the emissions reductions from these rules to achieve healthy air. These
rules will cut emissions that contribute to ground-level ozone
pollution and particulate matter, acid rain, crop damage and reduced
visibility.
Regional NOx Reductions. We will soon take final action on
petitions from eight northeastern States calling upon EPA to impose NOx
controls on power plants and large industrial combustion sources in 12
upwind States. This action would reduce long-range transport of NOx and
ozone pollution that is contributing to nonattainment problems
downwind, as well as reducing pollution in States where the sources are
located. EPA also will propose action on four petitions it has recently
received from Delaware, Maryland, New Jersey and the District of
Columbia.
Last October, EPA issued the NOx State Implementation Plan (SIP)
call rule requiring 22 eastern States and the District of Columbia to
cut NOx emissions to reduce transported ozone pollution that is
contributing to nonattainment problems throughout that region. States
have relied on those reductions in devising their attainment plans for
serious and severe ozone areas. However, shortly after issuing its
NAAQS opinion, the court of appeals for the D.C. Circuit stayed the
deadline for States to submit plans for complying with the NOx SIP call
pending further order of the court. Oral arguments in the litigation
are set for November 9.
Ozone Attainment SIPs. For 10 serious and severe ozone
nonattainment areas, EPA currently is assessing State plans for
demonstrating attainment of the 1-hour ozone standard. It appears that
many of these areas will need to commit to additional emissions control
measures and/or make other improvements in their plans before these
plans are approvable. EPA tentatively plans to propose action on these
plans in late November.
Heavy Trucks and Buses/Diesel Sulfur. Just last week Administrator
Carol Browner announced a strategy to reduce by more than 90 percent
harmful levels of smog-causing NOx and particulate matter, or soot,
from heavy duty trucks and the very largest sport utility vehicles. The
strategy includes a plan to produce cleaner diesel fuel.
In addition, we are seriously considering reinstating the old 1-
hour ozone standard nationwide. Since issuing the more protective 8-
hour ozone standard, EPA has revoked the 1-hour standard in much of the
country (wherever ozone levels met the old standard). But the court
opinion now leaves much of the Nation without an adequately enforceable
standard for ground-level ozone pollution to guard against
deterioration in air quality. We are concerned about that possibility
in light of recent air quality data.
Looking more broadly to the future, we see implementing the 1997
fine particulate standard as an integrating strategy that is key to
making progress on multiple pollution problems. From a health
standpoint, particulate matter is a priority because of its serious
health effects. But there are other benefits to controlling pollutants
that react in the atmosphere to form particulate matter--specifically,
sulfur dioxide and nitrogen oxides. These measures also will reduce
ozone pollution, air toxics, acid rain, regional haze and visibility
impairment in our national parks, and nitrogen eutrophication of
coastal waters. In contrast to other pollutant trends, NOx emissions
are higher than in 1970. Given the important contribution NOx makes to
multiple environmental problems, we need to bring these emissions down.
In the air toxics arena, we are looking ahead to working with
States and localities to implement the new Integrated Urban Air Toxics
Strategy, issued in July. This strategy provides a framework for
addressing the multiple sources of air toxics that together emit a
combination of pollutants into our urban air. As you know, EPA has and
will continue to develop national standards for stationary and mobile
sources that improve air quality in both urban and rural areas. This
new component of the national air toxics program includes plans for
further reductions in toxic air emissions in urban areas, targeting 33
pollutants that pose the greatest health threat in those areas. Also
included are assessment activities to improve our understanding of the
health and environmental risks posed by toxics in urban areas.
Regarding the question whether it is time to re-open the Clean Air
Act, it is important to ask if the law is still on target given today's
air quality needs. We believe the law is still on target. Because the
1990 Amendments were so forward-thinking and comprehensive in scope, it
established this country's air pollution agenda for well into the next
century.
Because the Act is still relevant for today's needs, and because we
are at a critical stage in implementation on a number of issues, we
should carefully consider the implications of reopening the Act at this
time. History shows that reauthorization of the Clean Air Act is a long
and difficult task. The last time around, reauthorization efforts first
began in 1981, and did not culminate until 1990. This reflects the fact
that many parts of our society have a strong stake in the Act, and it
can take intensive efforts to find common ground on a large number of
issues. There is no guarantee that a reauthorization effort could be
limited to a few issues. Many groups would promote proposals they
believe should be a high priority. Although the Subcommittee would be
pressed by some interests to pare back the requirements of the Act to
cut costs, we can also be sure there there will be efforts to
strengthen the Act and broaden its authorities, to ensure that we
deliver on the promise of clean air for every American.
We are prepared to work with the Subcommittee on a process of
reviewing the Clean Air Act to consider where it might benefit from
improvements. An example of an issue that this process could examine is
whether the Act should provide EPA with direct authority to establish
multi-State cap-and-trade programs and other incentive-based programs
to address regional problems for any pollutant. This would avoid the
need for each State separately to enact compatible trading programs.
Let me stress that once this review process is completed, we must
assess whether reopening the Act would be more helpful or more
disruptive on the whole.
It is imperative to continue the work that already is in motion.
The best way to do that is to stay focused on the goal and work with
everyone affected by the Act. This has and will continue to
dramatically improve our ability to find sensible, cost-effective
solutions to implementation hurdles and minimize the need for statutory
changes. This approach takes time and patience, and sometimes the
process is frustrating, but it has proven to pay off with sensible
policies and environmental results.
Thank you. I would be happy to answer any questions that you may
have.
______
Responses by Robert Perciasepe to Additional Questions from Senator
Thomas
Question 1. The Clean Air Act Amendments of 1990 created the Title
V Operating Permit Program. The Operating Permit Program purportedly
was not to establish any new requirements. However, in Wyoming, this
new program has added significantly to the amount of time it takes to
get a permit. The first step is to obtain a State-issued construction
permit, which requires public notice and comment. The permittee must
then request a modification of the Title V Operating Permit, and once
again go through public notice (for the exact same thing!) Once that
step is taken, EPA then has 45 days to review and have the opportunity
to veto the permit. It appears that this process is being overseen by
the Department of Redundancy Department. What are the opportunities for
streamlining the process, while maintaining State primacy for the
review and issuance of the permits (i.e., EPA doesn't take over the
whole process)?
Response. Your question references two separate State permitting
programs required by the Clean Air Act--preconstruction permit
programs, also known as ``new source review'' (NSR) programs, and
operating permit programs under Title V.
EPA believes it is possible for States to merge the required EPA
and public review periods (for sources subject to both programs), as
long as the merged review is adequate to meet the goals of both NSR and
Title V. The EPA has encouraged States to do so, and has approved
merged programs under the current title V regulations. However in
keeping with principles of State primacy, the EPA does not require
States to merge review. In practice, some States have merged programs
while others have not. We would welcome working with Wyoming on such a
merger.
Preconstruction permit programs and Title V operating permit
programs have different purposes. An NSR preconstruction permit
establishes control requirements for a source that is being built or
modified. A Title V operating permit consolidates in one place all of
the air pollution requirements (including NSR requirements) that apply
to a large facility, and specifies how compliance will be demonstrated.
This clarifies for the regulated facility and the public the air
pollution requirements that apply to the facility, encouraging improved
compliance.
Question 2A. There are a number of routine repair and replacement
upgrades that utilities can undertake to improve their efficiency
thereby resulting in lower NOx emissions per unit of electricity
generated and substantially reducing global warming gases like
CO2. Unfortunately, it is my understanding that EPA's
interpretations of its current regulations, and the EPA's failure to
finalize its position on these issues for its new regulations on new
source review, are discouraging utilities from undertaking these
improvements that are good for the economics of the utility and the
environment. It seems counterproductive to discourage these efficiency
improvements while the EPA is working through its rulemaking process.
Does EPA believe that utilities must replace parts with the exact
original technology that was installed in a turbine or boiler at the
time that the unit was manufactured or are these plants allowed to use
the advancements in technology that every industry has seen over the
past several years?
Response. Projects that involve routine repair and replacements are
exempt from major new source review (NSR). This has been a longstanding
provision of the NSR rules, and there are no proposals to change this
exemption. In addition, under the current major NSR regulations, a
utility may make any type of change to an existing unit, including new
technology that improves efficiency, to the extent that the change does
not increase actual tons-per-year emissions by a significant amount
over the baseline period established in the regulations. Finally, the
utility may still make the improvement and increase emissions, as long
as it installs the best currently available pollution control
technology at the time.
The Clean Air Act recognizes that if a unit is undergoing
modifications that will generate more air pollution, then that is the
best time to install new pollution control equipment.
The Clean Air Act Amendments of 1977 did not require updated
pollution controls for many aging utility facilities. Many of these old
boilers have not been retired. So while other sources reduced air
emissions over the past 20 years, some utilities continued to operate
using pollution control equipment from the 1950's and 1960's.
In the more than two decades of the NSR program, the EPA has worked
with the States and industry to reduce air pollution from existing
facilities at the time it is most cost-effective to do so when a
modification that will increase emissions is occurring. EPA, States,
and other groups are available to answer questions or clarify
regulations if a source is uncertain about whether a specific project
would fall under the NSR program.
Question 2B. What do you plan to do to solve this problem under the
current regulations and how will your new regulations address these
much-needed efficiency improvements?
Response. As noted above, the current regulations already allow
utilities to upgrade their equipment without review, including making
efficiency improvements, as long as the upgrade does not significantly
increase actual tons-per-year emissions.
Question 2C. If you cannot solve this problem through your
regulations, do you think that legislative action would be appropriate
to provide EPA with flexibility to address these concerns?
Response. The EPA does not believe that legislative action is
needed at this time to address concerns about efficiency improvements.
The current regulations do not prevent a utility from making efficiency
improvements . They simply ensure that where any type of change
significantly increases actual tons-per-year emissions, appropriate
control technology is applied.
Question 3. What is EPA's schedule for acting on the section 126
petition targeting NOx sources? Isn't it true that the factual basis
for EPA's NOx SIP call and for the section 126 petitions that EPA has
received targeting specific sources of NOx are essentially the same?
Why then does EPA not await judicial review of the SIP call prior to
acting on the section 126 petitions?
Response. EPA generally granted the petitions from Connecticut,
Massachusetts, New York, and Pennsylvania on December 17, 1999, and
established control requirements for certain NOx sources in upwind
States. In that final rule, EPA made section 126 findings based on the
1-hour ozone standard and stayed the portion of the rule based on the
8-hour ozone standard.
The EPA denied petitions for the 1-hour ozone standard filed by
Maine, New Hampshire, Rhode Island and Vermont in April 1999 because
these States no longer had areas that were not attaining the 1-hour
standard. The EPA is reviewing section 126 petitions submitted in 1999
by New Jersey, Delaware, the District of Columbia, and Maryland. When
the review is complete, the Agency intends to issue a proposed response
to these petitions.
On March 3, 2000, the U.S. Court of Appeals for the District Of
Columbia Circuit issued a decision largely upholding the NOx SIP call.
EPA is analyzing the effects of that decision.
The EPA did not await a judicial decision on the NOx SIP call
because, under section 126 of the Clean Air Act, the petitioning States
had the right to a decision from EPA. Thus, regardless of pending
litigation on the NOx SIP call, EPA had a statutory obligation to take
timely action on the section 126 petitions and the Agency has acted
accordingly. Also note that on October 29, 1999, the D.C. Circuit Court
of Appeals denied a motion for a stay of the section 126 rule pending
resolution of the NOx SIP call litigation. EPA discussed the
relationship between the NOx SIP call and the section 126 rule in
detail in the December 17, 1999 final rule and response to comments
document.
Question 4A. What is your rulemaking schedule regarding the NSR
modification rule?
Response. Over the last year, we have been holding extensive
meetings with various stakeholder groups working on NSR reform.
Additional meetings with these groups are scheduled. We will evaluate
all of the input and make a decision on whether we should proceed to
issue final decisions on some parts of NSR Reform and potentially to
propose for comment other changes to NSR. If we decide to proceed this
way, the earliest that these final and proposed decisions would be
published would be in Spring 2000.
Question 4B. Where do you stand in the stakeholder consultation
process?
Response. Consultation with stakeholders is ongoing. In addition to
the public comment period and public hearing associated with the NSR
Reform proposal, EPA has had ongoing meetings with stakeholders. For
example, a large meeting was held in February 1999 to discuss new ideas
from stakeholders, and followup meetings have been occurring regularly
since then. Most recently, over the last 3 months, EPA has been having,
on average, three or four meetings each month with stakeholder groups,
including State agencies, environmental groups, and several different
industry groups. Additional meetings are scheduled.
EPA has conducted a longstanding dialog with external stakeholders
on the new source review program. Under the auspices of a Clean Air Act
Advisory Committee (CAAAC) subcommittee dedicated to this subject, as
well as through less formal means, there have been dozens of
opportunities for exchanges of views. These discussions have been
productive in helping the Agency develop approaches that can provide
additional flexibility for affected industries while continuing to
protect the environment.
Question 4C. Do you plan to make any revisions to the proposed rule
based on those consultations?
Response. The EPA continues to evaluate the issues raised by the
NSR Reform proposal, and intends to consider all comments made during
stakeholder meetings and during the public comment period. We expect
the final NSR Reform rule to differ from the proposal based on comments
received, but have not yet finalized our decisions on all the issues
raised.
Question 4D. Do you believe that any project that improves
productivity requires an NSR permit?
Response. Whether or not projects require NSR permits depends on
whether they are non-exempt changes that increase total emissions on a
tons per year basis. A project intended to improve productivity will
not necessarily increase emissions. However, the ones that do result in
significant emissions increases are subject to review.
______
Responses by Robert Perciasepe to Additional Questions from Senator
Moynihan
Question 1. Please comment on the current sulfur dioxide cap and
trade program and whether you believe it could serve as a template for
a program targeted at nitrogen oxides.
Response. The current Acid Rain sulfur dioxide cap and trade
program has been highly successful. The economic incentives created to
encourage emission reductions have resulted in significant, low cost,
early reductions resulting in benefits to health and the environment.
For the first time under the Clean Air Act, in 1994, EPA began
collecting actual hourly emissions data (SO2, NOx,
CO2) from large power generating sources through Continuous
Emissions Monitoring systems (CEMs). There has been 100 percent
compliance with the SO2 emissions reduction requirements for
this section of the Clean Air Act. Beginning in 1995, there have been
significant, cost-effective SO2 reductions. Utility
SO2 emissions have dropped by over 4 million tons annually
relative to the 1980 baseline. The first 4 years of the program have
produced SO2 reductions beyond the legal limit in almost
every affected State, with major reductions in the highest emitting
areas (Midwest). Full implementation will achieve a 10 million ton
reduction from utility and industrial sources, approximately 40 percent
below 1980 levels.
During Phase I of the SO2 allowance trading program
(1995-1999), allowance market activity steadily increased both between
and within private organizations. The annual cost of complying with the
Acid Rain Program, originally estimated by EPA at more than $4 billion,
is now estimated at approximately $2 billion upon full implementation
(EPA's Section 812 study of Clean Air Act costs and benefits, published
in November 1999). The estimate has changed because more utilities than
expected have utilized coal switching, because both coal switching and
SO2 scrubbing have proved less expensive than expected for
multiple reasons, and because the trading system has proven to be
efficient and accepted by the utility industry.
Such impressive results achieved under this program have resulted
in expressed interest in cap and trade as a successful model for
implementing other pollutant reduction programs. A similar, ongoing
program modeled on the SO2 program already provides a
template for a program targeted at nitrogen oxides. The Ozone Transport
Commission (OTC), composed of 12 Northeastern States and the District
of Columbia, is implementing a cap and trade program to reduce
summertime nitrogen oxide (NOx) emissions during the ozone season. EPA
has accepted the request of the OTC to administer the NOx cap and trade
program, using the SO2 cap and trade program as a model.
Preliminary results from 1999 (the first summer of operation) indicate
that the NOx Budget Program is achieving its goal of reducing ozone
season NOx emissions. There has been a 55 percent reduction since 1990
by the eight States currently participating in the program. When the
program is fully implemented in 2003, summertime NOx emissions in the
Northeast will be reduced by 70 percent (from 1990 levels), which is
expected to result in lower ozone levels and improved health for
Northeast residents.
The OTC NOx Program demonstrates that emissions cap and trading
mechanisms can achieve significant NOx emission reductions and improve
air quality in the United States at a lower cost than traditional
command and control approaches. Emissions were reduced 20 percent below
required levels and NOx allowance costs are well below early estimates.
In fact, the acid rain and OTC programs have proven so successful
that we developed a cap and trade program to implement the regional NOx
reductions called for under the 22-State NOx SIP call rule and the
section 126 regional NOx rule.
Question 2. On October 14, New York Governor George Pataki
announced a plan to significantly reduce emissions of sulfur dioxide
and nitrogen oxides from utilities in New York State. What effect will
this proposal have in New York? Do you think it will have any
implications in other States? Do you think it will have any effect on
initiatives to mitigate interstate air pollution?
Response. New York State's proposed emissions restrictions will
lead to lower emissions and will likely improve air and environmental
quality in New York and in areas downwind of New York , the
implications of which depend on the approach taken by New York. If New
York develops a cap and trade program, the additional reductions likely
will be achieved more cost effectively than through a command and
control approach. The smaller trading market of sources in New York
only will likely lead to fewer trading and cost saving opportunities
for New York utilities. However, if the health and environmental
benefits can be achieved cost-effectively, other States may consider
implementing similar programs to reduce pollution in their States, as
well as to mitigate interstate air pollution.
______
Responses by Robert Perciasepe to Additional Questions from Senator
Lieberman
Question 1. Could you describe briefly how EPA considers costs and
benefits in setting and implementing air quality standards?
Response. For three decades through 6 different Administrations and
15 Congresses this nation has adhered to the principle that air quality
standards should protect public health, including the health of
sensitive populations like asthmatics, the elderly, and people with
heart and lung disease. We continue to believe that our national air
quality standards represent the goals we are striving to achieve, and a
benchmark for citizens interested in whether their air is safe to
breathe. Under the Clean Air Act, costs are not considered in setting
these health-based standards. (See response to question 6 from Senator
Baucus for a fuller discussion of this point.)
However, costs are--and should be--a central consideration as State
and local air agencies, EPA and Congress determine control strategies
and the length of time areas have to meet air quality standards. The
Clean Air Act generally provides more time for highly polluted areas to
attain air quality standards, and less time for less polluted areas to
attain. For example, Los Angeles--which has generally had the worst
ground-level ozone problem in the country--is provided with more time
to achieve the standards than areas with less severe ozone problems.
This provides time to develop less costly technologies and strategies
to reduce air pollution, and to implement them. States consider costs
in deciding the control requirements to include in State Implementation
Plans. EPA considers costs in developing emissions control rules and
guidance at the Federal level. For example, in developing guidelines
for States on ``reasonably available control technology''--required by
the act for certain sources in nonattainment areas--EPA considers costs
in determining what is ``reasonably available.'' (See response to
question #2.B. from Senator Lieberman for more on consideration of
costs.)
Question 2. In order to clarify the extent to which the scientific
peer review is incorporated into the agency's rulemaking and standard-
setting procedures, it would be helpful to use an example of
rulemaking, such as the revision of the NAAQS or the Tier II tailpipe
standards, to illustrate the process.
A. Please provide a chart detailing the extent and timing of
scientific input, dialog, and peer review for setting air quality
standards.
Response. The attached chart lays out the process for EPA's review
of the NAAQS, beginning with the publication of scientific studies in
peer-reviewed journals through the public comment period and concluding
with EPA's publication of its final decision. All studies on which EPA
relies are first published in peer-reviewed journals. (E.g., EPA
reviewed thousands of peer-reviewed studies when revising the ozone
standard.)
EPA then prepares a ``criteria document'' that identifies and
synthesizes the relevant studies. Each draft chapter of the document
undergoes further external peer review--it is reviewed by
representatives of the scientific community, industry, public interest
groups, and the public as well as the Clean Air Scientific Advisory
Committee (CASAC), a Congressionally mandated group of independent
scientific and technical experts.
EPA revises the criteria document in light of the comments received
and, as appropriate, seeks further CASAC and public review to assure
that the document represents a comprehensive and accurate summary of
the most recent available science.
EPA also prepares a ``staff paper'' that makes policy
recommendations about the standards based on the criteria document. The
staff paper is then subjected to a similar round of public and CASAC
scientific peer review.
EPA then goes through an extensive public notice and comment
process before making any decisions to retain or revise an ambient air
quality standard and provides CASAC an opportunity to review EPA's
proposed decisions before making final decisions. During the last
revision of the NAAQS, CASAC held a series of public meetings over 3
years.
It should be noted that one additional opportunity for scientific
review not shown on this chart is provided at the time EPA publishes
its proposed decision in the Federal Register, when the Clean Air
Scientific Advisory Committee is provided with a copy of EPA's proposal
for review. In past reviews, CASAC has typically declined the
opportunity to conduct a formal review at this stage.
Question 2B. Please provide the same type of chart detailing how
cost considerations are brought into agency considerations of
implementation of a regulation, whether through the SBREFA process,
industry consultation, or other agency analysis.
Response. Cost is a key consideration as States, EPA and Congress
consider strategies for achieving national ambient air quality
standards (NAAQS). This factor helps determine which pollution sources
should reduce emissions, by how much, and on what timetable.
This question focuses on how EPA considers cost in Federal rules
requiring pollution sources to reduce emissions, which complement State
strategies for attaining air quality standards. Attached is a chart
providing a general overview of the cost analysis process for EPA
rules. These cost analyses range from general assessments of cost
effectiveness and impacts of a draft rule, to more specific analyses of
whether rules would create unfunded mandates for State and local
governments, or have substantial small business impacts.
The Agency consults with stakeholders to develop rules that reduce
air pollution at reasonable cost. EPA spends extensive time and effort
to involve various stakeholders through its Clean Air Act Advisory
Committee, public meetings, regulatory negotiations, stakeholder groups
under the Regulatory Flexibility Act (as amended by the Small Business
Regulatory Enforcement Fairness Act or SBREFA), and informal meetings
and discussions. EPA often voluntarily conducts outreach to small
business and other industry groups on cost and other rulemaking issues.
In the case of the Tier 2 rule requiring cleaner vehicles and low
sulfur in gasoline to enable effective vehicle emission controls, EPA
conducted the cost analyses referenced in the attached chart--and also
conducted a special statutorily required study prior to the rulemaking
on several issues including cost. The Clean Air Act required EPA to
study ``whether or not further reductions in emissions from light-duty
vehicles and light-duty trucks should be required'' beginning between
the 2004 and 2006 model years. Specifically, the study and subsequent
rulemaking examined:
the need for further reductions in emissions in order to
attain or maintain the national ambient air quality standards
the availability of technology to meet more stringent
standards, taking cost, lead time, safety, and energy impacts into
consideration the need for, and cost effectiveness of, such standards,
including consideration of alternative methods of attaining or
maintaining the national ambient air quality standards.
Throughout the assessment of the Tier 2 program, extensive cost
analyses were conducted and provided to the public for review and
comment. For the vehicle program, for example, EPA developed
information based on discussions with automakers, emission control
manufacturers, in-house testing and research, and the California Air
Resources Board. That information was utilized to develop detailed
manufacturer costs for each vehicle class, including: increases in
emission control hardware costs (detailed sub-analyses); assembly
costs; research and development; tooling; certification; markup
(overhead/profit); and projected short- and long-term cost trends.
EPA promulgated the Tier 2 standards on December 21, 1999, based on
criteria laid out in the Act. Cost analyses for the final rule showed,
for example, that:
the annual benefits of the program when fully phased-in
far exceed the costs
the Tier 2 vehicle standards and low sulfur gasoline is a
cost effective program
Based on consultation with stakeholders, EPA included flexible
compliance provisions in the rule that will reduce the overall cost of
compliance to regulated parties. These provisions include averaging,
banking and trading; phase-in of vehicle standards; regional phase-in
of low sulfur gasoline; and, hardship provisions for qualifying
refiners, including a phase-in of the standards for small refiners
based on information developed during the SBREFA process.
It is important to note that States have principal responsibility
under the Clean Air Act for developing strategies to achieve the
national ambient air quality standards (NAAQS). The Act provides
substantial flexibility in the States' development of implementation
plans to consider costs and mitigate potential impacts on businesses.
The Act requires that cost considerations be included in determining
levels of control required by the Act such as ``reasonably available
control technology'' (RACT) and ``best available control technology''
(BACT), and this is reflected in EPA guidance to States. Additional
opportunities for mitigating impacts on businesses include phase-in of
controls on existing sources, use of regional control strategies, and
use of flexible strategies such as emissions trading and other economic
incentives. The Act and EPA guidance provide for use of trading and
economic incentive strategies.
The Act allows significant time to identify and implement cost
effective strategies for attaining the NAAQS. For certain NAAQS,
Congress in the 1990 amendments categorized areas according to the
severity of pollution, and provided the more polluted areas with more
time to attain. For other NAAQS, the Act can provide up to 12 years for
areas designated nonattainment to attain. Since at least 2 years
generally elapse before areas are designated nonattainment and longer
in the case of the 1997 ozone and PM NAAQS revisions due to the need to
gather than analyze air quality data the Act provides States with
substantial time for development of cost effective attainment
strategies.
In developing guidance for States on implementation of air quality
standards, EPA has consulted heavily with representatives of private
industry, the environmental community and State, local and other
Federal agencies For example, in the case of the 1997 ozone and
particulate matter NAAQS, EPA convened an advisory committee under the
provisions of the Federal Advisory Committee Act which advised EPA over
a 2-year period. EPA also consulted with small business representatives
to obtain recommendations on how States could mitigate adverse impacts
on small businesses as they develop and implement their State
Implementation Plans.
Question 3. Some confusion emerged during the hearing regarding my
statement that the dramatic increases in asthma cases among children
has made them more vulnerable to smog pollution. Am I correct in
understanding that while the cause of asthma is not attributed to a
single pollutant, smog and soot can exacerbate their health problems?
Response. You are correct. Available scientific information does
not currently demonstrate that air pollution actually causes asthma,
but numerous scientific and medical studies have shown an association
between high pollution levels and increased hospital admissions for
treatment of asthma and other respiratory illnesses. There is concern
that repeated exposures and responses to air pollution adversely
affects people with asthma and respiratory illnesses, requiring
increased use of medication, medical treatment, and/or emergency room
visits and hospitalization. This is of special concern in light of the
growing number of people with asthma, particularly children.
Question 4. Some suggested that we should look more closely at the
problem of indoor air pollution as a cause of asthma and other health
problems. What current statutory authority does EPA have to regulate
indoor air? Would the agency be willing to provide recommendations to
Congress on how to establish authority to reduce pollution from indoor
sources?
Response. EPA does not currently have statutory authority to
regulate indoor air. Under Title IV of the Superfund Amendments and
Reauthorization Act of 1986, the ``Radon Gas and Indoor Air Quality
Research Act of 1986,'' EPA is authorized to establish a research
program with respect to indoor air quality, demonstrate methods for
reducing or eliminating indoor air pollution, and disseminate
information to assure the public availability of any findings.
The Agency is willing to work with the committee to review the
Clean Air Act and indoor air issues. As we go through the hearing
process with the Committee, we will have a better feel for whether
reopening the Act would be more beneficial or disruptive on the whole.
One topic that would be worth evaluating as part of the hearing process
is whether EPA should be given additional authority to encourage States
and industry to take actions that reduce risks from indoor air
pollution.
Question 5. Numerous allegations about the relationship between job
loss in nonattainment areas were made during the hearings. Is it true
that the number of jobs in nonattainment areas is declining?
Response. In fact, the number of jobs in non-attainment areas has
been increasing. There were 294 counties in non-attainment status in
1997. From 1990 to 1997, the number of jobs in these counties increased
by more than 5.8 million, from 66.8 million to 72.6 million. Data are
from the Regional Economic Information System produced by the Bureau of
Economic Analysis, U.S. Department of Commerce.
Question 6. Are there reasons that cost considerations should be
treated differently in setting and implementing standards under the
Clean Air Act than under the Safe Drinking Water Act?
Response. There are important similarities in the way that costs
are considered under the Safe Drinking Water Act (SDWA) and the Clean
Air Act. First, both laws establish health-based goals . Second, under
both Acts, costs are considered at the implementation stage, when
control requirements for an industry are being established .
As your question indicates, there are differences as well as
similarities in standard-setting under the two statutes. Under the
Clean Air Act, EPA develops national ambient air quality standards to
protect public health, without consideration of costs. Costs and
benefits are considered (by States, EPA, and in some cases, Congress)
in determining which pollution sources should reduce emissions, and how
quickly the reductions must be achieved.
Under the drinking water act, EPA establishes health protection
goals for drinking water quality without regard to cost, and then sets
regulatory standards for public water systems, considering costs and
technological availability. The 1996 SDWA amendments expanded the
existing authority to consider costs in setting these regulatory
standards by requiring EPA to develop a health risk reduction and cost
analysis and by giving EPA conditional discretion, based on the
analysis, to set a regulatory standard that maximizes health risk
reduction benefits at a cost that is justified by the benefits.
Differences in the two laws stem from differences in the tasks of
reducing air pollution and cleaning up drinking water:
A drinking water standard establishes the requirements for a
particular industry (public water systems). By contrast, under the
Clean Air Act, requirements for particular industries or sources are
established after the air quality standard is set, providing
considerable opportunity to consider costs at this second stage.
Setting an air quality standard triggers an implementation process
in which choices must be made concerning which types of pollution
sources should reduce emissions, in which areas, to what degree, by
what deadline. This process includes, for example, development of
enforceable State Implementation Plans and national rules such as motor
vehicle standards. Costs are a central factor in determining reasonable
emission reduction requirements.
Estimates of the cost of achieving a national ambient air quality
standard are subject to much more uncertainty than estimates of the
cost of meeting a drinking water standard, for several reasons.
Standards for drinking water quality constitute specific,
technology-based requirements for one industry--public water systems.
There are identified types of facilities and corresponding technologies
that serve as benchmarks that engineers use to calculate costs of those
requirements. So cost estimates are based on a known set of
requirements for one industry.
By contrast, when EPA sets a National Ambient Air Quality Standard,
it is unclear at that time which sources will be regulated and/or to
what degree they may be regulated, and over what geographic area. There
is a large universe of pollution sources and potential emission
reduction strategies. So although cost estimates for NAAQS can be
developed, they are subject to additional categories of uncertainty not
involved with cost estimates for drinking water standards: (1)
uncertainties regarding which types of pollution sources will be
regulated, in which geographic areas, (2) uncertainties regarding the
nature and stringency of requirements to be set for those sources, (3)
the additional uncertainty resulting from conducting cost estimates for
numerous industries, rather than for one industry, (4) uncertainty
arising from the modeling of complex atmospheric chemistry and
meteorology to estimate effects of precursor emission reductions on
ambient levels of a NAAQS pollutant. As a result, uncertainties
regarding the cost of achieving a NAAQS typically are much greater than
those regarding the cost of meeting a drinking water standard.
In addition, most drinking water standards are required to be
achieved within a relatively short time period, typically from three to
5 years. By contrast, Congress has provided longer time periods (in the
case of the 1-hour ozone standard, up to 20 years, depending on the
severity of an area's pollution) for the Nation as a whole to attain
air quality standards. As a result, technology advances can reduce
costs and make it possible to achieve reductions that were once thought
infeasible. The history of the Clean Air Act provides many examples of
this phenomenon (see response to question #2 from Senator Baucus). This
technology innovation factor further adds to the uncertainty of
estimating the cost of achieving a NAAQS.
To recap, both laws establish health-based goals, and then consider
costs at the implementation stage, when control requirements for an
industry are being established.
______
Responses by Robert Perciasepe to Additional Questions submitted by
Senator Baucus
Question 1. Did EPA or other Federal agencies cutoff the
distribution or allocation of acid rain allowances prematurely or
provide them on a first come/first served basis? Please comment on the
distribution process.
Response. All of the SO2 allowances were distributed by
EPA as authorized by the Clean Air Act. The vast majority (about 90
percent) of the Phase I allowances either were distributed to the
sources listed in Table A of section 404 of the Act or were allocated
according to the formulas provided in section 404. The rest were
distributed through an auction authorized by section 416 of the Act.
Except for the auction, Phase II allowances were allocated to all
eligible units according to the formulas provided in section 405 of the
Act and then, as required by the Act, were decreased (approximately 10
percent) to achieve the 8.95 million ton emissions cap.
Your question concerning ``premature'' or ``first-come, first
served'' allowance allocations seems to refer to the allocation of
allowances in the Phase I Extension Reserve. This reserve, which
represented a small portion (about 10 percent) of total Phase I
allowance allocations was distributed on a first-come, first-served
basis, again according to the statute. Section 404 of the Act provided
that designated representatives who commit to install technologies
achieving 90 percent reduction of units' SO2 emissions could
request a 2-year extension of the deadline for meeting Phase I emission
reduction requirements by applying for additional allowances from a
special allowance reserve. Section 404 required EPA to process
extension requests ``in order of receipt''. Since the reserve might be
oversubscribed, EPA determined, after taking public comment, that
distributing the Phase I extension allowances using a lottery system
was consistent with the statutory language and the least burdensome and
most expeditious method for ranking Phase I extension applications. The
full amount of reserve allowances was distributed, according to a
lottery system, to the eligible units. However, some utilities
preferred a pro rata method of distribution because they were concerned
that they might not be awarded any allowances in the lottery. These
utilities entered into and implemented a private agreement under which
the allowances awarded through the lottery were re-distributed to all
eligible units on a pro rata basis.
The Clean Air Act provided for some other special reserves of
allowances, e.g., for conservation and renewable energy and for small
diesel refiners. These reserves contained enough allowances for all
eligible participants to receive the full amount of allowances to which
they were entitled under the Act.
Question 2. How does EPA estimate the ability of the regulated
community to innovate and thereby meet more stringent standards?
Response. EPA works closely with regulated communities to obtain
information on currently available technologies and their estimated
costs, and on emerging technologies. Nonetheless, as is the case for
technology generally, air pollution control technology is developing so
rapidly that it is difficult to predict very far into the future. Over
short time horizons for a particular industry, however, it is possible
to make some educated judgments regarding feasibility and likely cost
of emerging technologies.
Regarding air quality standards, we know based on experience that
technological advances over the longer term will provide substantial
help in meeting our clean air goals. But it is inherently difficult to
estimate the amount of emissions reductions and cost savings that will
be provided five, 10 or 15 years from now by technological advances in
numerous industries--including advances that are entirely unforeseen
today.
Our experience over the past 30 years, and the promise of cleaner
technologies emerging today, strongly suggest that technological
innovation will continue to produce new, cleaner processes and
performance improvements that reduce air pollution at reasonable cost.
The Clean Air Act has helped lead to technology innovation and
performance improvements. Over and over again, innovative companies
have responded to the challenges of the Act with great success,
producing breakthroughs such as alternatives to ozone-depleting
chemicals and new super-performing catalysts for automobile emissions.
Technological innovation has enabled the regulated community to
achieve emissions reductions some critics had thought simply
infeasible, and to reduce anticipated compliance costs. Two examples of
this phenomenon are the Tier I tailpipe standards for cars and light-
duty trucks, and the phaseout of CFCs. (See written testimony by
Assistant Administrator Bob Perciasepe.) Another example in which
technological advances have reduced costs is sulfur dioxide scrubbers
for power plant emissions. Scrubber efficiency has improved from
average reductions of around 80 percent in the early 1980's to over 90
percent reduction in the 1990's while capital costs decreased
substantially.
There are many examples of technologies that were not commercially
available in the United States a dozen years ago, but that now are
important parts of pollution control programs. These include:
Selective Catalytic Reduction (SCR) for NOx emissions
from coal-fired power plants;
Fuel lean or advanced gas reburn technology for NOx;
Scrubbers which achieve 95 percent SO2 control
on utility boilers (available but not achieved by utilities in the
United States a dozen years ago);
Sophisticated new valve seals and detection equipment to
control leaks;
Water and powder-based coatings to replace petroleum-
based formulations;
Reformulated gasoline;
LEVs (Low-Emitting Vehicles) that are far cleaner than
had been believed possible in the late 1980's (an additional 95 percent
reduction over the 1975 controls);
Reformulated lower VOC paints and consumer products;
Safer, cleaner burning, wood stoves;
Dry cleaning equipment which recycles perchlorethylene;
and
CFC-free air conditioners, refrigerators and solvents.
This pattern of technological progress is continuing today. In the
regulatory impact statement for the 1997 ozone and PM NAAQS, EPA
identified a number of emerging technologies--ranging from fuel cells
to ozone-destroying catalysts to new coating technologies--that may
hold promise for achieving additional cost effective reductions of VOC,
NOx and particulate matter. Similarly, the University of California-
Riverside's Center for Environmental Research & Technology has
identified a long list of new and emerging technologies that may help
achieve cleaner air in the 21st century (see attached document).
Based on this, EPA believes it is clear that technological advances
will continue to help us make progress toward healthful air. We can
continue to promote innovation by maintaining air quality standards
stringent enough to protect health, thereby challenging the Nation to
continue to develop new cleaner technologies. In addition, we can
promote emission reduction strategies that provide flexibility on the
means of reducing emissions (e.g., market-based strategies) to allow
use of innovative emission reduction methods.
Question 3. Please provide some more examples, relative to The
Clean Air Act Amendments of 1990, of the costs of compliance estimated
by the regulated community prior to passage of that Act versus the
actual costs experienced today.
Response. My written testimony provided five examples in which the
regulated community (1) over-estimated costs of the 1990 amendments, or
(2) incorrectly predicted that proposed requirements were simply
infeasible. The cost examples involved the overall cost of the 1990
amendments, the cost of the acid rain program, and the price of
reformulated gasoline. The feasibility examples involved the CFC
phaseout and the Tier I auto tailpipe standards.
EPA anticipates being able to provide you with more examples in the
near future.
Question 4. A utility witness suggested that EPA is in a ``mad
rush'' to have NOx SIP Call controls in place by 2003. How long has it
been recognized that regional NOx reductions would be necessary to
address ozone transport problems? How long has EPA been discussing
regional NOx controls with States and the utility industry?
Response. Since the late 1980's it has been recognized that
regional NOx reductions are necessary to address ozone transport
problems. EPA and States have been working for years to determine how
best to reduce smog-causing emissions from power plants and other
sources, and have been discussing regional NOx controls with utilities
for nearly a decade, beginning in the northeastern States.
The provision in the 1990 Clean Air Act Amendments establishing the
Ozone Transport Commission explicitly recognizes the issue of ozone
transport. Furthermore, in 1991, the National Academy of Sciences
issued a report (``Rethinking the Ozone Problem in Urban and Regional
Areas'') that stated that in many parts of the country controlling NOx
emissions would be necessary to reduce ozone. Since 1993, States have
been expressing concern to EPA that emissions from ``upwind'' areas
need to be addressed so that the States can meet the Clean Air Act's
requirements for demonstrating attainment. After lengthy analysis and
discussions, the 12 Northeast States and the District of Columbia,
which participate in the Ozone Transport Commission, signed an
agreement in 1994 that established a phased program leading to
substantial NOx controls on major sources in that region.
In May 1995, EPA, the 37 States in the eastern half of the United
States, and other stakeholders, including utility and environmental
representatives, convened the Ozone Transport Assessment Group (OTAG)
to analyze regional ozone transport in the East. This group modeled and
analyzed ozone pollution in the East for 2 years. In June, 1997, OTAG
concluded that ozone is transported and that regional NOx reductions
are effective in producing ozone benefits. OTAG recommended a range of
utility and non-utility NOx control levels to address the ozone
transport phenomenon. EPA proposed the NOx SIP call for regional NOx
reductions in October 1997 , and continued to discuss regional NOx
controls with States and the utility industry throughout the rulemaking
process and following issuance of the final rule in September 1998.
EPA's NOx SIP Call allowed almost 5 years from the 1998 date for
compliance with emission reduction requirements. The NOx SIP requires
compliance by May 1, 2003, providing 55 months between finalizing the
rule and the compliance deadline. EPA evaluated the technical and
economic feasibility of installing sufficient pollution controls to
achieve the emissions reductions required by the NOx SIP call and
concluded that even with multiple installations of SCR and SNCR at the
same plant, the longest it would take to install all needed controls
would be 34 months. Even if States took the full 12 months allowed to
complete their SIPs, sources would have 43 months to comply.
EPA also examined the impact on power plant availability and thus
electric reliability. The Agency concluded that outages would be of
short duration and could take place during the Spring and Fall seasons
when electric demand is lower, and that these outages would not cause
reliability problems. In addition, recent experience installing SCR has
suggested shorter installation times than EPA used in its analysis and,
therefore, the Agency believes that the analysis upon which the rule
was based is conservative.
EPA also provided a ``compliance supplement pool'' of NOx emission
reduction credits that States could allocate to sources who, in good
faith, needed more time to achieve compliance with the control
requirements. This pool of credits would enable the industry to delay
up to one-third of the control technology installations if unforeseen
problems should occur in obtaining and installing control equipment.
On March 3, 2000, the U.S. Court of Appeals for the District Of
Columbia Circuit issued a decision largely upholding the NOx SIP call.
EPA is analyzing the effects of that decision.
Question 5. Although strong enforcement is one component of making
sure we achieve our air quality goals, there are a lot of good
corporate citizens that want to comply with their environmental
obligations, but can't always determine what they are supposed to do.
Please describe EPA's efforts to help small businesses and others
comply with the Act.
Response.
Office of Air and Radiation Activities
The CAA required States to develop a Small Business Stationary
Source Technical and Environmental Compliance Assistance Program to aid
small businesses impacted by air regulations. This program:
Is funded by permit fees;
Directly reaches more than 1,000,000 small businesses a
year through: toll-free hotlines; fact sheets; brochures; seminars and
meetings; websites; and
Has resulted in more than 14,000 onsite consultations
conducted each year.
The EPA provides information and support to the State Small
Business Assistance Programs to assist in their compliance assistance
activities; small businesses can also access this information directly
through:
the EPA Small Business Assistance Program website, which
includes: State and EPA contact listings; Small business materials and
programs developed by States and EPA; Links to other EPA and State
sites; ``Plain-English'' guidance materials to explain new air
regulations, such as guidebooks on the standards for architectural
coatings and wood furniture manufacturing.
Satellite downlink seminars to educate small businesses
on new air regulations (five industry-specific seminars have been held
since 1994 reaching an average of approximately 2,000 participants
each).
Office of Enforcement and Compliance Assurance (OECA) Activities
EPA reorganized its enforcement and compliance programs in June
1994. This reorganization was based on the principle that EPA needed to
complement its enforcement program with innovative new tools to better
protect public health and the environment by improving compliance with
environmental laws. OECA continues to develop new approaches to
compliance assistance and incentives policies.
EPA is committed to broadening its compliance assistance programs
as a result of a recent mid-course review of our program. As stated in
its recently released ``Action Plan for Innovation,'' EPA is committed
to expanding the use of integrated strategies that combine compliance
assistance, compliance incentives, compliance monitoring, and
enforcement activities. EPA's experience has shown that this approach
can be very effective in addressing significant environmental risks.
Compliance Assistance
EPA's compliance assistance program--a complement to EPA's strong
base enforcement program--is directed toward the special needs of small
businesses, small communities, and local governments. In fiscal year
1999, compliance assistance activities and tools--seminars, onsite
assistance, mailings, and handouts--reached approximately 330,000
entities.
Compliance Assistance Centers--Four new ``on line'' National
Compliance Assistance Centers were opened for the paints and coatings,
transportation, and small and medium sized chemical manufacturing
sectors, and local governments, bringing the total number to nine
centers in operation by the end of fiscal year 1999. These Internet-
based centers provide compliance information and pollution prevention
techniques for certain industry sectors, such as paints and coatings,
metal finishers, and automotive. Currently the centers are being
visited over 700 times a day.
Preliminary results from a survey of users of OECA's GreenLink
Compliance Assistance Center, a web-based center for auto shops, show
that compliance improves when facilities are given assistance. The
results show that over a 2-year period, the number of facilities in
substantial compliance jumped from 25 percent to 51 percent.
Sector Notebooks--EPA to date has developed 30 sector notebooks for
major industries. These sector notebooks provide information on the
regulatory requirements and pollution prevention approaches needed to
maintain and enhance compliance. To date over 450,000 notebooks have
been distributed, and they remain one of OECA's most popular products.
Regional Compliance Assistance Activities--All regions have
compliance assistance activities and identified national priority
areas. In addition, EPA's regions work with States to identify other
regional or State-specific compliance assistance priorities.
Region I Compliance Assistance for Printers: In Region One,
printing continued to be a compliance assistance priority. A Fit To
Print guide was sent to over 1400 printers throughout the Region. Of
those who responded to an evaluation of the guide, 70 percent said that
they had undertaken ``improved environmental practices'' such as
equipment changes/modifications, material substitution, recycling,
training, institution of environmental management policies or
procedures, and improved disposal methods as a result of compliance
assistance efforts. These facilities also said that they took action to
apply for appropriate permits or identification numbers, or file
reports as necessary to comply with Federal, State or local
environmental regulations.
Region Two Outreach Efforts to Dry Cleaners: EPA's Region II
office, in coordination with New York State agencies, has focused
compliance assistance efforts on dry cleaners in New York and New
Jersey. Their outreach efforts included onsite visits and the
distribution of easy-to-understand guides to Clean Air Act
requirements. In addition, the Region developed a web site for
compliance assistance information and held 8 seminars on equipment
maintenance and new technologies for approximately 500 owners/
operators. This effort has resulted in a reduction of 11.9 tons of PCE
from urban air.
Compliance Incentives
Recognizing that effective incentives promote compliance, EPA has
worked with State and local partners and small business groups over the
past several years to develop policies with real incentives for
industry and others to voluntarily identify and correct their own
environmental violations. The Agency relies on a wide array of
traditional and innovative compliance incentives tools, such as EPA's
Audit Policy, to encourage companies that want to do the right thing by
discovering and disclosing their violations.
Self-Disclosure (Audit) Policy--EPA's Audit Policy establishes a
system under which companies who discover environmental violations
through a self-auditing system can receive reduced penalties if certain
conditions are met. Since inception of the policy in 1996,
approximately 670 companies have disclosed potential violations at over
2700 facilities; approximately 270 companies have been granted penalty
relief and corrected violations at over 1300 facilities.
In fiscal year 1999, a record 260 companies had disclosed
violations at close to 1000 facilities. EPA settled with 106 companies
at 624 facilities, a significant increase over previous years.
A major audit settlement with American Airlines (AMR Corporation)
is expected to eliminate nearly 700 tons of air pollutants annually. A
settlement with GTE, which involved 600 violations at over 300
facilities, led to ten other telecommunications companies voluntarily
disclosing and correcting 1,300 environmental violations at more than
400 facilities.
Seventy-six small businesses disclosed and corrected violations
under the provisions of the small business self-disclosure policy, a
sevenfold increase from the previous year.
Compliance Audit Programs (CAP)--CAP programs are voluntary
compliance programs, focused on a specific industry sector, which
provide incentives to facilities to conduct environmental audits.
Facilities which conduct an audit, and promptly disclose and correct
any violations found, have the opportunity for waived, reduced or
capped penalties.
Question 6. In testimony, Professor Graham suggested taking a two-
tiered approach to Clean Air Act standards. First, a lenient and
flexible cost-benefit analysis, one that does not require high degrees
of precision, would be used to set the actual ambient standard. Second,
a more stringent cost-benefit analysis would be performed to determine
whether or not to apply controls to specific sources. What views, if
any, do you have on such an approach?
Response. EPA opposes the two-tier approach suggested by Professor
Graham. This approach calls for setting air quality standards based on
cost-benefit analysis, rather than on protection of public health. For
three decades through 6 different Administrations and 15 Congresses
this nation has adhered to the principle that national air quality
standards should protect public health, including the health of
sensitive populations like asthmatics, the elderly, and people with
heart and lung diseases. This approach recognizes that all Americans
deserve to breathe clean air. EPA continues to support this equitable
goal.
EPA of course agrees that costs are relevant in considering
environmental policy. But costs are not--and should not--be considered
in setting public health standards for air quality. Rather, costs are--
and should be considered in the implementation of air quality
standards, as decisions are made concerning how to reach the health-
based goal (E.g., the relative pollution reduction contributions of
different sources, in different geographic areas). There is substantial
opportunity to consider costs as States, EPA and Congress decide which
pollution sources should reduce emissions, by how much, and on what
timetable. Moreover, the Act provides impetus for our nation to
identify economically acceptable ways to attain clean air, through
ingenuity and technology advances. (See responses to Senator Baucus
questions #8 and #2.)
Using this approach, the Clean Air Act over the past 30 years has
been successful in achieving substantial improvements in air quality
while the Nation also enjoyed strong economic growth and enhanced
productivity.
Question 7. During the hearing, the utility industry witness
indicated that EPA has not been interested in holding a dialog with
that industry on coordinating the regulatory requirements facing that
industry because independent statutory provisions drive these
requirements and EPA cannot coordinate them without a change in law.
Please comment.
Response. It would be inaccurate to characterize EPA as being
reluctant to hold a dialog with industry on coordinating regulatory
requirements with the utility industry. Indeed, EPA initiated and
encouraged the industry and others to participate in such discussions 5
years ago. Following consultation with industry and other stakeholders,
EPA undertook the development of the Clean Air Power Initiative (CAPI)
in 1995. The goal of CAPI was to develop an integrated strategy for
achieving the goals of the Clean Air Act with respect to the power
generating industry. EPA recognized that there are numerous CAA
requirements that affect the power generating industry, and that they
involve complex, costly and sometimes uncertain regulatory processes.
EPA also recognized the economic uncertainty created by restructuring
within the power generation industry. CAPI highlighted the multiple
public health and environmental concerns associated with emissions from
power generation, including ozone, fine particles, toxics,
acidification, eutrophication, visibility/regional haze, and materials
damage. CAPI outlined an approach that would translate health and
environmental goals into emissions targets, employ a market-based cap
and trade mechanism, provide more regulatory certainty, flexibility and
cost savings, and serve to coordinate the number of regulatory
requirements affecting the industry. At the request of industry
participants, analyses undertaken for CAPI focused on SO2
and NOx and did not include mercury and carbon dioxide. Several
implementation paths were considered, such as the current path using
separate programs and requirements to address each pollutant and
problem, the use of cap-and-trade mechanisms, and the establishment of
voluntary incentive programs including early reductions. Industry
positions varied among companies, and no common position or consensus
was reached.
Recently, in 1998, the EPA was invited by industry representatives
to discussions related to an integrated strategy, specifically aimed at
integrating new source review (NSR) with other regulatory requirements.
EPA and industry shared views of future potential regulatory scenarios
and possibilities for integration. The discussions were constructive,
and EPA intends to consider these discussions as it evaluates future
changes to the NSR program.
Question 8. At the hearing, Professor Graham stated, ``I think any
careful environmental analysis of what is going on here would indicate
that we are having less economic productivity in this country and we
are having more air pollution in other countries.'' Please comment.
Response. We would make two points:
First, EPA believes that economic growth and a clean environment
can go hand in hand. From 1970 to 1997, the U.S. Gross Domestic Product
(GDP) grew by 114 percent, and population grew 31 percent. Between 1973
and 1995, productivity (nonfarm business sector) grew at an annual rate
of 1.4 percent. From 1995 through 1999, productivity grew at a much
more robust 2.9 percent per year. This economic growth and enhanced
productivity occurred while the Nation also enjoyed substantial
improvements in air quality. In 1997, national average air quality
levels were the best on record for the six air pollutants for which EPA
has established national ambient air quality standards (lead,
NO2, SO2, PM10, CO, and ozone).
While having strong environmental protection programs, the United
States is one of the most economically productive countries in the
world. A list of the manufacturing output per hour for 14 countries
from the Bureau of Labor Statistics compares the economic productivity
of the United States relative to other developed countries. The data
show that the average output per hour in manufacturing for the United
States over the years 1990 to 1998 was 109.8 units of output. The
United States was surpassed only by Sweden whose average was 114.5
units of output and the Netherlands with 113.6 units of output. The
average annual growth rates of productivity between 1990 and 1998 were
also calculated for the 14 countries using the Bureau of Labor
Statistics data and they show that U.S. productivity has grown at an
average annual rate of 3.34 percent between 1990 and 1998. Sweden,
France, and the Netherlands were the only three countries with higher
average annual productivity rates for the same time period. Their
average annual growth rates were 4.67 percent, 3.98 percent, and 3.85
percent, respectively.
Another commonly relied upon measure of economic growth and
productivity is per capita gross domestic product (GDP). A list of the
1997 per capita GDP for 204 countries from the Statistics Division of
the United Nations Secretariat and International Labor Office compares
the value of goods and services produced by United Statesand other
countries. The data show that the United States had the eight highest
per capita GDP measure in 1997 at $28,789. Only Luxembourg, Bermuda,
Switzerland, Liechtenstein, Norway, Japan, and Denmark had higher 1997
per capita GDP measures.
Second, many countries like the United States have made significant
efforts to improve their air quality to protect public health and the
environment. For example, a number of European countries between 1980
and 1997 saw large percentage decreases in emissions of sulfur and
nitrogen oxides. Of course, it is also true that many countries such as
China, India, Thailand, Russia, and Mexico have far worse air quality
than the United States. The fact that these countries have these issues
is not a reason to have more pollution in the United States; it is a
call for us to work with those countries both in terms of their
economic well being and their environmental health.
______
Responses by Robert Perciasepe to Additional Questions from Senator
Graham
Question 1. According to your testimony, air emissions of nitrogen
oxides have been increasing. What is causing this trend? What do you
believe would be the most effective steps the Federal Government could
take to reverse this trend?
Response. Air emissions of nitrogen oxides have increased since
1970 due primarily to 1) increases in emissions from coal-fired power
plants and 2) increases in emissions from certain mobile sources,
including on-road and non-road diesel engines and light-duty trucks.
From 1970 to 1997, U.S. Gross Domestic Product grew by 114 percent, the
U. S. population grew by 31 percent, the number of miles traveled by
on-road vehicles (VMT) increased by 127 percent, and from 1970 to 1998,
electricity production increased by 136 percent. Despite these
increases, the Nation recorded decreases in emissions of certain
pollutants due to programs implemented under the Clean Air Act. For
example, emissions of sulfur dioxides from coal-fired power plants
dropped over this time period, as did emissions of volatile organic
compounds and nitrogen oxides from passenger vehicles and many other
sources. However, the same cannot be said for emissions of nitrogen
oxides from power plants, diesel engines and other sources. Awareness
of the need to control NOx from power plants and some of these other
sources has grown over the past several years.
Emissions of NOx result primarily from fuel combustion at high
temperature. Fuel and biomass combustion in mobile and stationary
sources accounts for about 95 percent of NOx emissions. As noted below,
EPA, in partnership with State and local agencies and other
stakeholders, have a number of programs in place as well as new
initiatives in progress to decrease NOx emissions. Successful
implementation of these Federal activities, together with local, State
and regional efforts including measures in local nonattainment plans
(e.g. vehicle inspection and maintenance programs), and strategies to
reduce regional levels of NOx are cost-effective steps that will lead
to important decreases in NOx emissions across the country.
Mobile Sources
Since the 1970's EPA has required motor vehicle manufacturers to
decrease significantly emissions of NOx from light duty on-road
vehicles. New Tier 1 light duty vehicle requirements were phased-in
over the 1994-96 model years. The EPA has continued to work with State
officials, auto manufacturers, oil industry and others to develop even
cleaner cars, including the National Low Emission Vehicles program and
the recently announced Tier 2/sulfur program. Vehicle miles traveled
increased 25 percent nationally during the past 10 years. Despite the
increase in vehicle miles traveled, total on-road vehicle emissions
have been decreasing and will continue to decline through 2020 as new,
Tier 2 cars and light trucks replace older, more polluting cars.
Reduction in NOx emission levels from heavy-duty vehicles is
expected from lower tailpipe standards for engines produced after 1991
and further reductions are expected as 1998 and 2004 model year engines
meeting tighter emission standards are phased into use. In addition,
the Agency will soon propose more stringent emission standards for
diesel engines used in large trucks and buses, as well as requirements
for low-sulfur diesel fuel. The EPA is also working to implement
several non-road programs to decrease NOx emissions from large marine,
aircraft, locomotive, and engines used in agriculture, construction,
and general industrial equipment.
Stationary Sources
To help control acid deposition, the Clean Air Act established a
two phased program to reduce emissions of NOx from coal-fired electric
utility generation units. Electric utility NOx emissions are expected
to decline as the Phase II acid deposition NOx emission rate limits
become effective.
Further reducing utility NOx emissions using a cap-and-trade system
is a highly cost effective way to reduce regional NOx emissions. To
help cut ground-level ozone levels across the Eastern United States,
EPA worked with the States to develop the NOx SIP call rule to further
reduce NOx emissions from power plants and/or other sources in 22
eastern States and the District of Columbia. Similar reductions are
required in 12 States and the District of Columbia as a result of EPA's
recent grant of petitions from eastern States under section 126 of the
Clean Air Act.
Continuing to implement these cost-effective programs will reverse
the long-term trend of increases in NOx emissions; more NOx was emitted
into the air in 1997 than in 1970. To sustain those reductions over
time, it may be important to consider programs like those that place a
cap or limit on total emissions.
Question 2. Can you elaborate on the changes that you believe
should be made to the Clean Air Act?
Response. We are committed to working with Congress to provide a
targeted legislative solution that maintains our air quality gains and
allows for the reduction of MTBE, while preserving the important role
of renewable fuels like ethanol.
On the broader question of reauthorization of the Clean Air Act, we
are not currently advocating changes to the Act. I am willing to work
with the committee to review the Act and consider where it might
benefit from improvements, as I stated during the hearing. As we go
through this hearing process together, we will have a better feel for
whether reopening the act would be more beneficial or disruptive on the
whole.
The following are some ideas that have been raised and would be
worth examining during the hearing process, which we understand is to
take place over the next couple of years:
Providing clearer authority for EPA to develop and directly
implement multi-State solutions, such as cap-and-trade programs, for
regional air pollution problems caused by any pollutant.
Providing additional authority for EPA to encourage States and
industry to take actions that reduce risks from indoor air pollution.
(See response to Sen. Lieberman question #4.)
Question 3. Some have argued that those older fossil fuel power
plants that are not required to meet the new source performance
standards will continue to operate indefinitely because the exemption
in effect, has created an economic advantage. Do you believe emissions
of nitrogen oxide would be more effectively and efficiently reduced by
phasing out this loophole or by allowing a cap and trade program?
Response. We are willing to discuss approaches to eliminating this
``grandfathering'' approach with a more effective solution to cap
emissions and allow trading. A cap and trade program allows companies
to make cost-effective choices on operating their units and installing
controls while still complying with the emission reduction requirement.
The cap would ensure that the desired environmental result would be
achieved, and trading would allow each facility to pursue the lowest
cost approach for its system. When designed and implemented properly,
cap and trade programs offer many advantages over traditional command
and control counterparts (such as a requirement that all power plants
meet a specific performance standard) including (1) reduced cost of
compliance, (2) creation of incentives for early reductions, (3)
creation of incentives for emissions reductions beyond those required
by regulations, (4) promotion of innovation, and (5) increased
flexibility. A market system that employs a fixed tonnage limitation
for a group of sources provides great certainty that a specified level
of emissions will be attained and maintained since a predetermined
level of reductions is ensured. A cap and trade program is a highly
effective approach for ensuring that industry has the flexibility to
grow while still managing the emissions impact of growth. With respect
to transport of pollution, an emissions cap also provides the greatest
assurance to downwind States that emissions from upwind States will be
effectively managed over time.
__________
Statement of Allison Kerester, Mickey Leland National Urban Air Toxics
Research Center
Introduction
The Mickey Leland National Urban Air Toxics Research Center (Leland
Center) was established by Congress under Title III, Section 301(p) of
the 1990 Clean Air Act Amendments. Congress created the Leland Center
as a non-profit, public/private research organization to sponsor
research on the potential human health impacts of the 188 listed air
toxics. The Leland Center is governed by a nine-member Board of
Directors, appointed by Congress and the President. A thirteen-member
Scientific Advisory Panel, composed of nationally recognized scientists
and physicians, establishes the Leland Center's peer-reviewed research
program. The Leland Center's mission is to contribute meaningful and
relevant data to the scientific literature on the potential human
health effects of air toxics. We view this contribution as a
fundamental component in the national effort to develop cost-effective
and balanced regulations to protect the public health from the
potential risks of air toxics.
After exploring the most critical public health aspects of air
toxics risks, the Leland Center's Board of Directors identified two
fundamental research data gaps: (1) the determination of the actual
human exposures to air toxics in urban environments, and (2) the non-
cancer health effects of such exposures. The Leland Center chose to
pursue personal exposure research. We were the first research
institution to develop a research program on personal exposures to air
toxics in urban populations.
Exposure
Traditionally, ambient air concentrations of air toxics have been
equated with adverse health effects. Under this approach, the larger
the airborne concentration, the larger the potential human health risk.
However, it is actual exposure, and not air concentrations, that is the
critical component needed to determine potential adverse health effects
from a pollutant emission into the environment. High airborne
concentrations of air pollutants in an area without people means there
is no exposure. Without exposure there is no human health risk.
In its March 1998 report Research Priorities for Airborne
Particulate Matter-Volume I, the National Research Council states that
the relationship among outdoor, indoor, and personal exposure is a
fundamental factor in determining potential human health effects.
Exposure is one of the two major elements (the other being the
determination of the most biologically active constituents (of a
pollutant or particle) on which other research, such as epidemiological
studies, should be based. The National Research Council named exposure
research as one of the 10 most critical research areas. Only with
exposure information can the potential public health impacts be
calculated.
Exposure Defined
Exposure is the contact of a chemical, biological or physical agent
at the boundary of the body over a specified time period. People are
exposed to chemicals through inhalation, ingested through food or
absorbed through the skin. People are exposed to air pollutants
primarily through inhalation. However, deposition onto soil, food, and
water, can result in other exposure routes. Actual human exposure is a
function of outdoor sources, indoor sources, and human activity
patterns. (NRC, 1998). Thus, what people are actually exposed to is a
result of where they spend their time and what air pollutants are
present in those areas. People do not spend their time in just one
location, but rather move through a series of locations (or
microenvironments) such as the home, car, office, outside, throughout
the day.
Exposure Assessment
Exposure assessment is the science of determining what people are
exposed to and how they come into contact with various contaminants.
Exposures can be estimated by a number of methods. See Attachment 1.
The most accurate measurements are obtained by measuring people
directly, such as through the use of personal monitors, breath, urine,
and blood samples. Exposure assessments are used in epidemiology
studies, risk assessments, analysis of trends, and risk management
decisions.
Exposure Sources
Most individuals in the United States spend the majority of their
time indoors. See Attachment 2. In some cities, such as Houston, people
spend approximately 90 percent of their time indoors. Outdoor
pollutants may be brought inside through open windows, ventilation
systems, food, water, tracked-in soil, and consumer products. These
pollutants may even undergo chemical reactions once inside a building
or home producing yet other pollutants. While ambient air toxics can
penetrate into homes, offices, and cars, many chemicals, classified as
air toxics under the Clean Air Act, are also emitted directly into the
indoor air from consumer and cleaning products and building materials.
Carpet, paint, and air deodorizers may all release chemicals into the
indoor environment. Even taking a hot shower, washing dishes or clothes
in hot water, may release chemicals, such as chloroform. (Wallace et
al., 1993).
In addition, some emissions near a person's face can contribute
significant concentrations to personal exposure, while contributing a
negligible amount to ambient concentrations. Wearing recently dry-
cleaned clothing is an example. (Wallace et al., 1993). Smoking is
another example. Smoking accounts for the largest percentage of
personal exposure to benzene, yet the activity of smoking releases
little benzene into the surrounding air.
Thus, when the contribution of outdoor sources is minimal compared
to indoor sources or the air immediately surrounding an individual,
ambient air emissions are not a good indicator of personal exposure. It
is therefore important to determine indoor air concentrations, the
sources of those concentrations and the relative contribution from
outdoor, indoor and personal sources in determining what people are
really exposed to in their daily lives.
Personal Exposure Studies
Several studies have been carried out to assess the relationship
among outdoor, indoor, and personal air to determine the sources of the
exposure to air toxics. The most comprehensive U.S. study to date has
been the Total Exposure Assessment Methodology (TEAM) study. This study
was conducted in phases from 1980-1987 (e.g., Wallace et al., 1987,
1988). In addition, Phase I of the National Human Exposure Assessment
Survey (NHEXAS), conducted from 1995-1997 (Pellizzari et al., 1995,
Sexton et al., 1995) also examined this relationship. The major purpose
of the TEAM study was to measure the personal exposures to select
chemicals in urban populations in several U.S. cities. One phase of the
TEAM study examined personal exposures of 600 people to a number of
toxic or carcinogenic chemicals in the air and drinking water. One
central hypothesis of the TEAM study was that emissions from major
industrial sources in urban areas would be the primary source of the
personal exposures to volatile organic compounds of study participants
who lived in these areas. In addition, it was further surmised that
these industrial sources would be the major source of indoor air
pollutant concentrations.
However, one of the primary findings of the TEAM study was that for
air toxics, indoor sources were the primary contributor to indoor air
concentrations and to personal exposures for the majority of air toxics
measured. See Attachment 3. Researchers determined that in many
instances, the contribution of outdoor air toxics concentrations to
personal exposure was negligible. The TEAM study concluded that it was
sources other than outdoor air, that were controlling indoor and
personal air concentrations.
The NHEXAS study was designed to determine population-base
exposures to select air toxics, PM2.5 and pesticides in
urban, suburban and rural settings. NHEXAS pilot study results were
similar to that of the TEAM Study. (The full NHEXAS study has not yet
been initiated.)
There are instances where outdoor sources may be primary source. If
compounds have minimal or no indoor sources, then penetration from
outside source contaminants can be the dominant source. For example,
carbon tetrachloride has been banned from use in consumer products, but
has a long residence time in the ambient air. Thus, outdoor air is the
source for the indoor air levels and personal exposure to this
compound. (Baek, 1997).
Outdoor sources may be a significant contributor to indoor and
personal exposures in homes immediately adjacent to ambient sources,
such as factories, parking garages, heavily trafficked streets or dry
cleaners. One current study, The Relationship Among Indoor, Outdoor,
and Personal Air (RIOPA) Study, being conducted by the Environmental
and Occupational Health Sciences Institute, is evaluating this
hypothesis. The RIOPA study is examining this relationship in 100 homes
in three urban areas (Houston, Texas; Los Angeles, California; and
Elizabeth, New Jersey). All of these homes are near major outdoor
sources of air pollutants or in heavily trafficked areas. In these
homes, researchers are placing monitors outside and inside the home to
measure concentrations of select compounds. In addition, participants
will wear a personal monitor for 48 hours and keep a diary of their
activities during this time period. The RIOPA study is measuring select
VOC, aldehydes, and PM2.5 in a 3-year study. Some of the
pilot study results are attached as Attachment 4. This study will
provide specific information on the impact of outdoor sources of air
toxics to personal exposures for residents living close to ambient
source concentrations.
Future Research Directions
Only by understanding the relationship among outdoor, indoor and
personal exposures can public health impacts be assessed. Additional
research on indoor air, including indoor air chemistry (what happens to
air pollutants in a home or building) and the sources of such
concentrations needs to be examined. Additional research on the
relationship among outdoor, indoor and personal exposure needs to be
conducted. While an exposure research program exists for particulate
matter, there is no such overall integrated program for the 188 air
toxics listed in Section 112 of the Act.
Exposure is the link between ambient air concentrations and public
health impacts. A dialog is needed about the role of ambient air toxics
monitoring in exposure research along with the role of monitoring
microenvironments and ``hot spots'' and their relationship to personal
exposure.
Conclusion
It is personal exposure to air pollutants, and not air
concentration that is the critical component in assessing the public
health impacts from air pollutants. Science has now established that
indoor air pollutants can be a major contributor to a person's overall
exposure to air pollutants. In addition, the findings from these
studies indicate that the same air pollutants subject to regulation
under the Clean Air Act are often found at much higher levels indoors.
The Clean Air Act Amendments of 1990 rely solely on the assumption that
outdoor levels are determinative of an individual's exposure and hence
risk. The Act does not address the contribution of indoor sources of
air pollution or the differences between indoor and outdoor quality.
Absent information about personal exposures, the real public health
risk of air toxics cannot be accurately assessed. Merely reducing the
ambient emission levels may not result in improved public health. By
focusing on exposure, we can determine where the greatest risk to
public health lie and tailor the solution to correct the problem. The
Leland Center will continue to focus our research on addressing the
critical area of exposure, thus allowing for a more cost-effective
approach to protecting public health under the Clean Air Act.
Attachments
references
Baek, S-O, Kim, Y-S, Perry, R (1997). Indoor air quality in homes,
offices and restaurants in Korean urban areas-indoor/outdoor
relationships. Atmospheric Environment 31:529-544.
National Research Council (1998). Research priorities for airborne
particulate matter volume I-immediate priorities and a long-range
research portfolio. National Academy Press. March 1998
Ott, W.R., Roberts J.W. (1998). Everyday exposure to toxic
pollutants. Scientific American. February 1998
Pellizzari, E, Lioy, P, Quackenboss, J, Whitmore, R, Clayton, A,
Freeman, N, Waldman, J, Thomas, C, Rodes, C, Wilcosky, T (1995).
Population-based exposure measurements in EPA region 5: A Phase I field
study in support of the National Human Exposure Assessment Survey.
Journal of Exposure Analysis and Environmental Epidemiology 5:327-358.
Sexton, K, Kleffman, DE, Callahan, MA (1995). An introduction to
the National Human Exposure Assessment Survey (NHEXAS) and related
Phase I field studies. Journal of Exposure Analysis and Environmental
Epidemiology 5:229-232.
Wallace, L (1991). Comparison of risks from outdoor and indoor
exposure to toxic chemicals. Environmental Health Perspectives 95:7-13.
Wallace, L (1996). Indoor particles: A view. Journal of Air & Waste
Management Association 46:98-126.
Wallace, LA, Pellizarri, ED, Hartwell, TD, R, W, Zelon, H, Peritt,
R, Sheldon, L (1988). The California TEAM study: breath concentrations
and personal exposure to 26 volatile compounds in air and drinking
water of 188 residents of Los Angeles, Antioch, and Pittsburgh, CA.
Atmospheric Environment 22:2141-2163.
Wallace, LA, Pellizzari, ED, Hartwell, TD, Sparacino, C, Whitmore,
R, Sheldon, L, Zelo, H, Perritt, R (1987). The TEAM study: Personal
exposures to toxic substances in air, drinking water and breath of 400
residents of New Jersey, North Carolina, and North Dakota.
Environmental Research 43:290-307.
Weisel, C. The influence of ambient air sources on exposure to air
toxics: results from the RIOPA pilot. Prepared for the Air Toxics
Session of the 1999 American Bar Association Meeting.
______
Responses by Allison Kerester to Additional Questions from Senator
Baucus
Question 1. How would the CAA need to be adjusted, if at all, to
ensure that regulatory actions are based on exposure? Please provide
any specific recommendations and comment on the data collection and
information management system and resources that would be necessary to
more comprehensively incorporate exposure considerations in regulation
development.
Response. Regulatory actions are based on risk. Risk is a function
of both exposure and hazard. Exposure is the link between ambient
concentrations and public health impacts. In considering exposure, the
relationship among outdoor, indoor and personal exposures needs to be
assessed, along with the sources of those exposures. Models that equate
ambient levels of air toxics with exposure may not accurately
characterize exposures to these substances and thus, may not result in
regulatory decisions that would produce real health benefits.
Consideration of personal exposure and the role of indoor air tonics in
developing criteria documents, exposure models, in EPA's,
implementation of the Agency's Integrated Urban Air Toxics Strategy and
Residual Risk program, and in the design of ambient monitoring networks
would help ensure that the potential health risks of air pollutants are
more adequately characterized.
Question 2. You indicated that it might be possible to reduce
indoor air pollution exposure by changing the products or systems used
in the home. What do you consider to be the products or systems in
homes of the highest concern relative to conducting more research on
their human health effects? What role, if any, would be appropriate for
the Federal Government in addressing indoor air exposure?
Response. Only by understanding the relationship among outdoor,
indoor, and personal exposures can the public health impacts of air
pollutants be assessed. Additional research on indoor air, including
indoor air chemistry, and the sources of such air pollutants is needed.
In addition, continued research on the relationship among outdoor,
indoor, and personal exposures, the sources of those exposures, and
whether those exposures actually result in adverse health effects needs
to be conducted before such recommendations could be made as to
changing products or systems used in the home. The Federal Government
can foster this needed research.
Question 3. You mentioned that studies show that Americans spend a
majority of their time indoors. Is there evidence that certain
populations--children, construction workers, athletes--spend
considerable more time outdoors that the ``average'' American? Is there
evidence of socioeconomic differences in time spend (sic) outdoors?
Response. The study indicating that the Americans spend the
majority of their time inside is the ``National Activity Pattern
Survey'' conducted by the Environmental Protection Agency. EPA/600/R-
96/148. This study broke out the activity pattern by age, starting with
the 12-17 years old category. Children younger than 12 were not
included. In addition, the California Air Resources Board (CARB) funded
a similar study, with comparable results (``Measurement of Breathing
Rate and Volume in Routinely Performed Daily Activities'',
Contract No. AO33-205, June 1993). CARB also conducted a separate
activity pattern study of children under 12. (``Study of Children's
Activity Patterns'' Final Report, Contract No. A733-149, September
1991) However, CARB has not conducted much analysis by occupation,
because of the sample size limitations. Other studies have examined
construction workers and athletes, more from an activity level
perspective. Some papers by Samoo et al has been published on
construction workers .
Question 4. You criticize the CAA for equating air concentrations
with adverse health effects, suggesting that EPA does not consider
exposure. In addition to epidemiological information, toxicological
information is critically important to relating concentrations with
adverse effects. And, inhalation studies are already a basic component
of EPA's scientific assessment of air pollution impacts. Please
comment.
Response. Traditionally, the extent to which the general population
is exposed to air tonics has been determined by monitoring programs
that utilized concentrations of the pollutant as determined by a fixed
site ambient air quality monitor. Epidemiological studies have used
this information to assess the potential health risks from air toxics
exposures to the general population. However, a number of studies
involving measurements of personal exposures to air tonics have
suggested that the correlation between outdoor concentrations and
personal exposures to these pollutants may not be adequately determined
by centrally located fixed site ambient monitors. EPA's current
exposure models are based on ambient concentration levels, not on
personal exposure data. In addition, these models have not addressed
the relationship among outdoor and indoor air quality in contributing
to personal exposures to air toxics. Thus, although EPA considers
``exposure'' in determining risk, the Agency's current approach may not
accurately characterize the real risk of air toxics and other air
pollutants to urban populations.
Question 4. Do you agree with Dr. Graham's testimony that the issue
of whether breathing air pollution is harmful is a ``spurious''
technical debate, which is unlikely to be resolved conclusively at the
low levels of air pollution now found in the USA due to the limitations
of modern scientific methods of toxicology and epidemiology?
Response. The issue of whether breathing air pollution is a
``spurious'' technical debate is best answered by Congress itself and
EPA. Science cannot always resolve issues with 100 percent certainty.
However, research continues to indicate a link between air pollution
and adverse health effects. Ongoing research, such as the personal
exposure research, will help provide useful data about the exact air
toxics urban populations are exposed to and the sources of those
exposures. This information, will in turn, provide a basis for a more
accurate assessment of the potential health effects of such exposures.
Decisions makers must determine what is the necessary level of
scientific certainty on which to base regulatory actions.
______
Response by Allison Kerester to Additional Question from Senator
Moynihan
Question: You state, on average, 90 percent of a person's time is
spent indoors. I agree that we need to improve the quality of indoor
air and that this statistic is compelling evidence of the urgency of
this issue. Do you also agree that since the air that we breathe--
indoor and outdoor--originates outside, efforts to improve ambient air
quality are also critical to improving human health?
Response. Yes, I agree that efforts should be made to improve
ambient air quality. While several scientific studies suggest that the
primary source of hazardous air pollutants (the 188 substances listed
in Section 112 of the Clean Air Act Amendments of 1990), may be from
indoor sources, the primary source for other air pollutants, such as
ozone and particulate matter, appears to be the ambient air. Thus' it
is important to understand the relationship among outdoor, indoor, and
personal exposures to air pollutants and the sources of the exposures.
Such information will help produce more accurate air pollutant risk
assessments.
__________
Statement of John D. Graham, Director, Center for Risk Analysis,
Harvard School of Public Health
My name is John Graham. I am Professor of Policy and Decision
Sciences at the Harvard School of Public Health where I teach graduate
courses on risk assessment, risk communication, and cost-benefit
analysis. I am also the founding Director of the Harvard Center for
Risk Analysis, a mission-oriented Center dedicated to promoting a more
reasoned public response to health safety, and environmental hazards.
Our Center applies formal analytic tools to the following four issues:
environmental health, automotive safety, medical technology, and food
safety. I am the author or co-author of seven books and over 100
articles published in peer-reviewed scientific journals. In 1995-96 I
served as elected President of the intonational Society for Risk
Analysis, a membership organization of 2,500 scientists and engineers
dedicated to applying formal analytic tools to the resolution of risk
issues. I am offering personal testimony today and thus my remarks do
not necessarily represent the viewpoints of the University or the
Society for Risk Analysis.
It was about 10 years ago that I first testified before this
Committee on President Bush's proposal to amend the Clean Air Act, a
proposal that Congress expanded into what became the 1990 amendments to
the Clean Air Act. We have learned a great deal during the past decade.
The Clean Air Act has produced more regulations, more public health and
economic benefits, and more costs to American businesses and households
than any other Federal program of environmental regulation. Thus, the
stakes in the reauthorization debate are large.
Let me begin with some good news.
First, the total estimated benefits of the 1990 amendments appear
to be greater than the total estimated costs of the amendments (EPA,
1999), at least if we are to believe EPA estimates of benefits and
costs (see cautionary remarks below). But some parts of the 1990
Amendments are better ``buys'' than others (Smith and Ross, 1999).
There are a significant number of clean air regulations that were
adopted without a careful analysis of their risks, costs, and benefits
(e.g., some of the MACT standards under Title III of the 1990
amendments). In many cases EPA estimates regulatory costs but does not
attempt to quantify benefits in public health or economic terms (see,
for examples EPA's regulatory impact analyses (RIAs) of the rules
governing medical waste incineration and vehicle inspection and
maintenance). Moreover, one study of 25 clean air rules adopted from
1990 to 1995 found that only ten of these rules would pass a strict
cost-benefit test (Hahn, 1995). Thus, EPA's commitment to cost-benefit
analysis varies enormously from rule to rule and the influence of cost-
benefit analysis on EPA decisionmaking is uneven (Morgenstern, 1997,
Hahn, 1999).
Second, the ``grand experiment'' with incentive-based programs
under the Act, particularly the sulphur-trading programs enacted to
address acid rain, appear to have been a qualified success (Staving,
1998). Evaluations suggest that this program has been successful
(compared to conventional ``command-and-control'' regulation) both
economically and environmentally. A case is now being made to expand
this approach to trading of nitrogen oxides as well as sulphur oxides.
Third, as predicted (Graham 1985), EPA has made greater progress in
regulation of air toxics through a technology-based approach that
targets industry sectors (``source categories'') rather than by
determining acceptable risk on a pollutant-by-pollutant basis. Yet
measuring success by the number of industries regulated is not very
meaningful to public health. The big unknown in the toxics arena is
whether the public health benefits of reduced human exposures to air
toxics have been significant enough to justify the significant
expenditure of agency and industrial resources that has taken place.
In my testimony today, I will focus on the role of risk analysis
and cost-benefit analysis under the Clean Air Act. I will identify five
problem areas that I believe are worthy of future Committee
investigation as you develop legislation to reauthorize the Clean Air
Act. In some cases I have only been able to identify a problem while in
other cases I go further and recommend some possible solutions for your
consideration.
Problem 1: Some provisions of the clean air act are dysfunctional
because they do not require or permit EPA to weigh the risks, costs,
and benefits of alternative policies.
When multi-billion dollar rulemaking decisions are made, it is
inevitable that regulators will consider the consequences of their
actions as well as the reasonableness of the relationship between
risks, benefits and costs. Yet some provisions of the Clean Air Act
erect a legal fiction that regulators may not consider risk, cost and
benefit when devising regulations. This legal fiction is dysfunctional
because it (1) reduces political accountability for value judgments and
political choices, (2) hides from public scrutiny claims that are made
about risks, benefits and costs (since such claims are driven
``underground'' in the course of regulatory deliberations), (3)
undermines EPA's credibility in the regulated community and the public
because the agency is portrayed as being disinterested in science and
economics, and (4) shifts public debate from risk-benefit and cost-
benefit issues (which is where the debate should be) to spurious
technical debates about whether breathing air pollution has been proven
to be harmful (the ``causation'' issue, which is unlikely to be
resolved conclusively at the low levels of air pollution now found in
the USA due to the limitations of modern scientific methods of
toxicology and epidemiology). Let me provide a concrete example of how
legal restrictions in the Clean Air Act create a perverse public debate
about clean air policy.
The primary ambient air quality standards for ubiquitous
(``criteria'') air pollutants are to be set at levels that are safe in
the sense that such levels protect the public health with an adequate
margin of safety. Yet such scientific information (alone) does not
typically provide an intelligible basis for He setting of safe (yet
non-zero) amounts of air pollution. Human and animal studies often find
no discernible threshold in the dose-response function, particularly as
more susceptible subpopulations are identified and more subtle health
effects are considered to be ``adverse'' within the meaning of the
Clean Air Act. The only concentration of some air pollutants (e.g. fine
particles and lead) that is really safe to breathe appears to be zero,
yet it is not economically realistic or appropriate for EPA to set air
pollution standards at zero. Thus, EPA is forced to manufacture
spurious rationales for non-zero air quality a form of dishonest
behavior that contributes to the atmosphere of arbitrariness, mistrust,
and adversarialism (including litigation) that has characterized public
debates about air quality standards.
The solution to this predicament is not necessarily to apply a
strict cost-benefit test to any new or modified primary air quality
standard. Cost-benefit analysis of primary air quality standards is
particularly speculative because air quality standards, which need to
be based primarily on public health data, are devised before the agency
has had the opportunity to study the industrial economy and collect the
kinds of engineering and cost information that identify cost-effective
ways to prevent or control pollution. When EPA or the States propose
emissions rules for specific industries or sources, it is feasible to
gather more precise cost and effectiveness information, thereby
supporting a more rigorous analysis of risks, benefits and costs.
Although it is feasible for EPA to make crude estimates of risk,
benefit, and cost when a new or modified primary air quality standard
is proposed, the cost-benefit test for decisionmaking at this stage
should be a more lenient one than is applied to Federal or State
emission standards that apply to particular technologies or industries.
For example, Congress might permit or require EPA to consider whether
the incremental costs of a tighter air quality standard are grossly
disproportionate to the anticipated benefits of the proposed standard.
Under this rather lenient cost-benefit test, EPA's recent fine particle
standard would have been quite defensible, though the proposed
modification to the ozone (smog) standard would have been vulnerable to
legal challenge.
Problem 2: Although clean air regulations are intended to reduce
risks to public health, they sometimes cause unintended dangers to
public health because the risks of regulation were not analyzed
carefully by Congress and EPA when policies were made.
Risk-tradeoff analysis (sometimes called risk-risk analysis or
risk-benefit analysis) is often easier than cost-benefit analysis
because the units of measurement in the analysis are physical rather
than monetary quantities. For example, the units used in risk-tradeoff
analysis might include the net number of lives saved, life years saved,
quality-adjusted life years saved, or even the net change in the amount
of pollution emitted into the environment, with the mass emissions of
each pollutant Freighted by their relative toxicity and/or exposure
potential. In risk-tradeoff analysis, the public health benefits and
risks of a new regulation do not have to be expressed in dollar units,
one of the more complicated and controversial steps in economic
evaluation. In order to avoid perverse situations where a well-intended
clean air regulation kills more people than it saves, Congress should
consider an amendment to the Clean Air Act Cat compels a risk-tradeoff
analysis of future regulations (Graham and Wiener, 1995).
Experience the 1990 amendments illustrates trait Congress and EPA
have not been as vigilant in conducting risk-benefit analysis as
perhaps they should have been. Here are two examples:
First, EPA's new air quality standards were overturned by a divided
appeals court that employed some novel constitutional arguments. Yet
less attention has been devoted to the fact that EPA's revised smog
standard was overturned by a unanimous court because EPA did not
perforce a risk-benefit analysis of the proposal (computing the health
benefits of smog reduction to the health risks of greater ultraviolet
radiation exposure that would result from diminished smog
concentrations in the atmosphere). Public exposure to ultraviolet
radiation is a serious public health concern since such exposures are
associated with skin cancer, cataracts, and other adverse health
effects. EPA contests whether the health risks caused by regulations
are legally relevant under the language of the Clean Air Act but
Congress should take a broad view of public health protection and
require EPA to do ``More good than harm.'' to public health in each
regulation (Warren and Marchant, 1993).
Second, Congress and EPA mandated an increase in the oxygenated
content of gasoline without performing a careful risk-benefit analysis
of the most important chemical, MTBE, that has been used to comply with
the provisions in the Clean Air Act More oxygen content in gasoline did
promise air quality benefits: less carbon monoxide and toxic air
pollution. Yet the risks of the rule were not considered carefully. Now
that MTBE, a rather persistent chemical with low acute toxicity, has
been discovered in both surface and groundwater (e.g., near leaking
underground storage tanks), questions have been raised about whether
MTBE exposures pose a risk to public health. A recent EPA stakeholder
panel chaired by Mr. Dan Greenbaum of the Health Effects Institute
recommended that EPA repeal or modify the mandate of oxygenated fuels,
yet a careful risk-benefit analysis of the issue has still not been
conducted by EPA.
Asking Congress and EPA to perform risk-benefit analysis is
equivalent to asking for adherence to the Hippocratic oath in medicine:
We should be vigilant about informing the public of the health risks
and health benefits of clean air regulations, even in cases where some
degree of risk is judged to be acceptable in light of the benefits.
Problem 3: Congress and EPA sometimes pursue clean air goals
without taking account of other national objectives such as energy
policy and international trade policy.
Although the public health objectives of the Clean Air Act are
compelling, they do need to be pursued with sensitivity to other
national policy objectives such as energy policy and international
trade policy. Two recent examples of policy conflict have caught my
attention. .
First, a recent trip to Europe, I discovered an interesting
difference between European and American policies. I was surprised to
learn that a large and growing fraction of passenger vehicles (cars and
light Uncles as well as heavy trucks and buses) in Europe are powered
by diesel engines. European vehicle manufacturers are also making major
investments in advanced diesel engine technology that will reduce
emissions of pollutants such as particulate matter and nitrogen
dioxide. Yet the European Union regulations for nitrogen dioxide
emissions may prove to be less stringent than California and USEPA
regulations for an interesting reason. Europe is developing the diesel
engine as an important element in the strategy to conserve energy and
reduce carbon dioxide emissions, as required by the Kyoto treaty on
global climate protection. Modern diesel engines are significantly more
fuel efficient than gasoline-powered engines and therefore offer
significant promise as a strategy to control carbon dioxide pollution.
Vehicle fuel efficiency in Europe also offers significant economic
benefits to consumers, since fuel prices in Europe are $3 to $5 per
gallon and diesel fuel is priced louver than conventional gasoline.
In the United States, domestic vehicle manufacturers are also under
political pressure to improve the energy efficiency of engines, but
here we have very low fuel prices and consumers have shown a remarkable
degree of interest in sport-utility vehicles (large and small), jeeps,
and light trucks. There has been some interest in the use of diesel
engine technology to power large sport-utility vehicles (in order to
increase fuel efficiency) but the strict posture clean air regulators
in the California and USEPA are discouraging use of the diesel in favor
of less energy-efficient alternatives such as compressed natural gas
and conventional gasoline. I have recently persuaded one of my doctoral
students to conduct a risk-benefit analysis of the modern diesel engine
because European and American policies toward this technology arc
currently so divergent.
Second. EPA's toxic air pollution star cards applied to the coke
production industry (so-called MACT and LAER standards) were designed
to be ``technology forcing'' but have appeared to have had some
unintended consequences in international trade. Coke is vital
ingredient in the steelmaking process. Making coke from coal is a dirty
process, though the industry has made significant progress in reducing
pollution from coke batteries. The 1990 amendments to the Clean Air Act
were designed to make greater progress by requiring 0 percent door
emissions from any new coke plants built with conventional byproduct
recovery technology. The theory was that this de facto prohibition on
the traditional method of making coke would stimulate development of
new and cleaner methods of making coke in the USA.
Preliminary experience with the 1990 amendments suggests that coke
and steel makers have not always responded to the Act by making major
new investments in clean coke-making technology (Graham and Hartwell,
1997). Although a few domestic firms have made major investments in
different coke-making technologies, a number of integrated steel makers
are instead phasing out their coke-making facilities and purchasing
coke on the open market. Some steelmakers are making arrangements to
import coke from a variety of countries in Eastern Europe and Asia
(e.g. China), where more coke plants are being built with conventional
technology and where batteries are operated with greater air emissions
gases end particles than is typical of facilities in the United States.
I recommend that the Committee follow the dynamics of this industry to
determine whether the 1990 amendments are producing the consequences
for clean air and international trade that were anticipated when the
legislative compromise was negotiated in 1990.
Problem 4: The risk analyses used by EPA to make public health
determinations are not always clear, objective, open to public
scrutiny, and rooted in the best available science.
The problems the agency faces in using public health science in
risk assessment are important to sound implementation of He Clean Air
Act but these same problems affect EPA's implementation of other
environmental laws, such as the Safe Drinking Water Act and the
Resource Conservation and Recovery Act. Here I shall cite several
examples to illustrate the general point that Congress needs to take
greater interest in the scientific integrity of EPA's public health
determinations and the technical processes of risk assessment that
support these determinations.
First, cancer-risk determinations will play a critical role in
EPA's implementation of the residual-risk provisions of CAAA-90, yet
EPA has still not modernized it's cancer risk assessment guidelines to
account for advances in biological understanding of the mechanisms of
cancer induction. These advances can have a critical impact on which
chemicals are classified as ``carcinogens'' for regulatory purposes and
what dose-response relationships are assumed in quantitative modeling
of cancer risk. EPA has proposed reforms but is moving at a slow pace
to adopt them. The agency's recent decision to ignore mechanistic
science regarding chloroform has sent a signal in the scientific
community of the agency's weakened commitment to modernize methods of
cancer risk assessment (Chloroform is a chemical shown to cause cancer
in animals at high doses that mechanistic science suggests is unlikely
to cause human cancer at low doses).
Several years ago I served on a Science Advisory Board (SAB)
Committee charged with assisting EPA in performing its reassessment of
dioxin, a chemical of clear regulatory significance that has been the
subject of extensive scientific study. EPA prepared a lengthy draft
risk assessment but, despite several years of ``talk'', has never
attempted to respond to the written comments of the SAB Committee and
has not issued a final risk assessment of dioxin. When EPA falls years
behind its published schedule to make progress in risk assessment, it
undermines the credibility of the agency as well as the agency's risk
assessment process. The Congress should look into what is happening to
cancer risk assessment at EPA.
Second, a mayor National Research Council Report (1994), Science
and Judgment in Risk Assessment, made numerous recommendations aimed at
enhancing the quality and transparency of EPA's risk assessment
process. With the exceptions of some notable improvements in human
exposure assessment, the bulk of the NRC recommendations have not yet
been implemented by EPA. EPA's recent report to Congress on plans to
implement the residual risk provisions of the Clean Air Act makes very
little use of the NRC report or of a subsequent report by the
Commission on Risk Assessment and Management appointed by Congress and
the President As Congress considers reauthorization of the air toxics
provisions of the Clean Air Act, they should examine why EPA has given
relatively little priority to improving the agency's risk assessment
and management processes.
Third, the controversy over EPA's effort to establish a new primary
air quality standard for particles illustrated how EPA may seek to use
scientific studies whose original data are not available for public
scrutiny. Two important studies of the chronic health impacts of
breathing fine particulate matter (Dockery et al, 1993; Pope et al
1995) were cited by USEPA in support of the new particle standard but
the agency has not succeeded in making the original data from these
studies available for public scrutiny. The Health Effects Institute has
played a constructive role in reviewing and reanalyzing these original
data but the goal of providing public access to original date
supporting regulatory determinations has not yet been accomplished
under the Clean Air Act. The Office of Management and Budget is
currently working on implementation of a congressional requirement to
solve this problem for future rulemakings; the success of OMB's effort
should be followed closely by the Congress.
Finally, EPA continues to publish benefit estimates for the Clean
Air Act that are based on a dubious ``value-of-statistical life'' (VSL)
method. As employed by EPA the same VSL is applied in all situations,
regardless of whether a citizen: loses 1 year of life expectancy or 40
years of life expectancy from air pollution. The VSL method also
ignores the functional quality of the life years that are lost. Better
methods are available in the field of health economics but EPA does not
yet use them.
Problem 5. Congress and EPA continue to be preoccupied with outdoor
air pollution, even though a substantial body of scientific information
suggests that indoor air pollution is a more serious public health
problem.
The legislation we are discussing today would more appropriately be
entitled the ``OUTDOOR Clean Air Act'' because the provisions of the
law and the resulting compliance expenditures made by industry and
households are devoted primarily to reducing exposure to outdoor air
pollution from outdoor sources. Controlling outdoor sources of air
pollution will have secondary benefits inside homes and offices because
outdoor air pollution is a significant cause of indoor air pollution.
Yet Tic major sources of indoor air pollution are not regulated by the
Clean Air Act (c.g., environmental tobacco smoke, naturally occurring
radon gas, and a variety of building materials, consumer products, and
cooking practices). As a country, we have made so much progress in
reducing outdoor sources of air pollution that leading scientists
believe that indoor sources of air pollution are of equal or greater
public health concern compared to the residual amounts of outdoor air
pollution (Cross, 1990; National Research Council, 1991; Samet and
Spengler (eds), 1991).
A recent conference stimulated by EPA and OSHA scientists arose out
of recognition that efforts to control outdoor air pollution could
inadvertently exacerbate levels of air pollution indoors (e.g., if the
MACT regulations governing air toxics cause factories to reduce
ventilation rates in buildings and concentrate pollutants indoors where
workers will be placed at greater risk). Yet we have only scratched the
surface ? public discussions of the indoor air quality issue because
Congress has given the greatest priority to further regulation of
outdoor sources of air pollution. The first reauthorization hearing of
the Clean Air Act is a good the to consider whether some of the
priority assigned to cleaner outdoor air could be better expended ?
efforts to enhance the quality of indoor air.
Thank you very much for the opportunity to provide this testimony.
I am certainly willing and eager to provide any additional information
that could assist the Committee's reauthorization efforts.
references
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NY, NY, 1990
Dockery DW, Pope CA, Xu X, Spengler Jay, Ware JH, Fay ME, Ferris
E3C;, Speizer FE, ``An Association Between Air Pollution and Mortality
in Six Cities,'' New England Journal of Medicine, vol. 329, December 9,
1993, pp. 1753-1759.
Environmental Protection Agency, ``The Benefits and Costs of the
Clean Air Act, 1990 to 2010,'' Washington, DC, September 1999 (draft).
Graham ID, ``Regulation of Airborne Carcinogens Under Section 112
of the Clean Air Act, 77 Duke Law Journal., 1985, pp.100-150.
Graham ID, Wiener JW (eds), Risk Versus Risk: Tradeoffs in
Protecting Health and the Environment, Harvard University Press, 1995.
Graham JD, Hartwell JK (eds), The Greening of Industry: A Risk
Management Approach, Harvard University Press, Cambridge, MA, 1991.
Hahn RW (ed), Risks, Costs, and Lives Saved: Getting Better
:Results from Regulation, Oxford University Press, NY, 1995.
Hahn RW, ``Regulatory Reform: Assessing the Government's Numbers,''
Working Paper 99-6, AEI-Brookings Joint Center for Regulatory Studies,
Washington, DC, July 1999.
Morgenstern R (ed), Economic Analyses at EPA: Assessing Regulators
Impact, Resources for the Future, Washington, DC, 1991.
National Research Council, Human Exposure Assessment for Airborne
Pollutants: Advances and Opportunities, National Academy Press,
Washington, DC, 1991.
National Research Council, Science and Judgement in Risk
Assessment, National Academy Press, Washington, DC, 1994.
Pope CA, Thun MJ, Namboodiri I, Dockery DW, Evans JS, Speizer FE,
Heath CW, ``Particulate Air Pollution as a Predictor of Mortality in a
Prospective Study of US Adults,'' Am J Respir Crit Care Medicine, vol.
151, 1995, pp. 669-674.
Samet JM, Spengler JD (eds), Indoor Air Pollution: A Health
Perspective, Johns Hopkins University Press, Baltimore, MD, 1991.
Smith AE, Ross MT, ``Benefit-Cost Ratios of the CAAA by Title,''
Charles River Associates, Washington, DC, October 1, 1999 (draft).
Stavins RN, ``What Can We Learn from the Grand Policy Experiment?
Lessons from S02 Allowance Trading,'' Journal of Economic Perspectives,
vol. 12, No 3, Summer 1998, pp. 69-82.
Warren E, Marchant G. ``More Good than Harm: A Hippocratic Oath for
Environmental Agencies and Courts,'' Ecology Law Quarterly, vol. 70,
1993, pp 379-440.
______
Responses by John Graham to Additional Questions from Senator Baucus
Question 1. In 1981, the National Commission on Air Quality stated:
In the [Clean Air Act], Congress recognized that while the levels of
air pollution at which public health is affected generally do not vary
among different locations, the costs of meeting a specific standard can
vary substantially from area to area, depending on the severity of the
pollution. Thus, if a national air quality standard were based in part
on the costs of complying with it, the high costs of meeting the
standard in a few heavily polluted areas could result in the standards
being set at a less protective level than is achievable in a
reasonable, economic fashion in other areas.
Similarly, a few costly technologies or heavily impacted industrial
sectors could skew the cost assessment of a national air quality
standard. Please discuss this issue in light of your suggestion that
cost-benefit analysis be incorporated into derivation of national air
quality standards.
Response. There is a fundamental problem with applying the same air
quality standard to all States and localities, regardless of their
degree of motorization or industrialization. Under current law, we
maintain this fiction only by granting continued exemptions or waivers
to regions of the country (e.g., Los Angeles) that are consistently out
of compliance with primary ambient air quality standards. If a State or
locality is willing to accept somewhat greater pollution levels in
their community in exchange for economic benefits (e.g., industrial
employment or greater use of automobiles), that is not necessarily an
irrational judgment. Decades ago, there was fear that allowing some
States to have weaker environmental standards than others would cause a
``race to the bottom'', with all States allowing more pollution to
attract industry. Recent research by Professor Richard Revesz of New
York University Law School has demonstrated that this ``race to the
bottom'' theory is unfounded. It turns out that Governors and Mayors
(as well as Senators) tend to care about air quality as well as
economic prosperity. Even if a uniform national standard is maintained,
it would be advisable to apply a cost-benefit test to each Federal rule
or State Implementation Plan that is proposed to implement the national
standard. Under this scheme, a strict national standard could be
maintained even though inefficient rules aimed at particular industries
or regions of the country could be rejected on cost-benefit grounds.
Question 2. Your testimony suggests that EPA does not always use
credible science (or ``sound science,'' as it is often referred to in
Congress) in implementing the Clean Air Act. How would you define
``sound science?'' How should Congress determine what is ``sound
science'' when legislating or conducting oversight? Is there a test of
``sound science'' that EPA should apply in the practice of developing
air quality standards?
Response. There is no universal definition of credible or sound
science. However, there are some important features of scientific
information that make it more likely to be sound and credible. Such
features of sound science include well-specified, a priori hypotheses,
unbiased research designs, high quality methods of data collection,
appropriate methods of data analysis, peer review, replication of key
findings by independent investigators, public availability of original
data for reanalysis (subject to reasonable confidentiality
protections), and plausibility of results in light of other scientific
knowledge (e.g., weight-of-evidence determinations). In applying these
principles to specific scientific issues, there is certainly room for
reasonable differences in scientific opinion. For a discussion of US
organizations that have played a strong role in promoting sound science
in regulatory policy, see S. Jasanoff, The Fifth Branch: Science
Advisors as Policy Makers, Harvard University Press, Cambridge, MA,
1990; J. Graham (ed), Harnessing Science for Environmental Regulation,
Praeger, Wesport, CN, 1991; M. Powell, Science at EPA: Information in
the Regulatory Process, Resources for the Future, Washington, DC, 1999.
Question 3. In the peer review of EPA's 1997 proposal on very fine
particulate matter (PM2.5), 19 of the 21 Clean Air
Scientific Advisory Committee members voted to recommend that
PM2.5 be regulated. However, the panel could not reach a
consensus on the level at which PM2.5 should be regulated;
four panelists supported specific ranges of standards at the lower end
of EPA's recommendations, seven supported specific ranges at the upper
end, two did not think that a PM2.5 standard was warranted
at all, and the remaining eight supported the concept of a standard but
declined to select a specific range or level. Generally speaking, how
should Congress ``read'' a scientific peer review outcome such as this?
How should EPA respond to such an outcome? Is there a general ``rule''
that Congress and EPA could use to judge when a regulatory body should
act or not act in response to a mixed peer review?
Response. I have no opinion on how EPA or Congress should have
reacted to the splintered peer review panel on particulate matter.
Question 4. Some argue that issues--such as principles of
precaution, equity, environmental justice, and individual rights--need
to be considered in the development of environmental standards.
However, considerations of these issues do not fit neatly into either
risk assessment or cost-benefit ``tests.'' How and at what point should
these issues be integrated into the standard setting process?
Response. Cost-benefit analysis, in its strictest form, addresses
only quantifiable matters of economic efficiency. . Yet more practical
formulations of the cost-benefit test allow for consideration of
factors such as precaution, equity, environmental justice, and
individual rights. See, for example, the cost-benefit test crafted by
Senators Fred Thompson and Carl Levin in S. 746 (The Regulatory
Improvement Act). This test, which was judged to be acceptable by the
Clinton-Gore Administration, authorizes decisionmakers to depart from
strict cost-benefit reasoning in circumstances where the decisionmaker
has compelling equity or other considerations. The Clinton
Administration's Executive Order on Regulatory Planning also employs a
practical cost-benefit test that allows consideration of values other
than economic efficiency. flaw in the Clean Air Act is that, in various
sections, it can be read to prohibit any consideration of economic
efficiency (in effect allowing these other values to completely
``trump'' economic efficiency). .
Question 5. Your testimony suggests that the Clean Air Act's
current standard-setting breaks down when it is confronted with
determining ``safe'' levels for pollutants for which no threshold for
adverse effects is discernible. However, carcinogens are commonly
regulated, but they are typically treated as non-threshold pollutants
and their ``safe'' levels are established based on health policy
conventions related to acceptable risk. Similarly, the regulatory
``safe'' level (e.g., reference dose) for many threshold non-
carcinogens is often not discernible and must be determined using
safety factors based on health policy conventions. Does the failure of
scientific data alone to define a clear ``safe'' level necessarily lead
to ``spurious rationales'' for non-zero standards? Since the
``science'' is rarely certain, should the Agency and Congress make
health-based policy judgments to estimate ``safe'' levels for
environmental pollutants?
Response. For non-threshold pollutants, you are correct that
``safe'' levels of pollution are sometimes defined by reference to
``health policy conventions'' that define acceptable or negligible
risk. Unfortunately, these conventions have no logical foundation (in
philosophy or science) and thus it should not be surprising that the
conventions are applied inconsistently in various arenas of
environmental policy. The same level of cancer risk from involuntary
exposure to pollution, for example, may be judged acceptable in one
context or unacceptable in another context, with no mitigating factors
providing an explanation for the difference. For a comprehensive review
of these health-policy conventions, including their lack of
philosophical and scientific foundation, see A. Rosenthal, G. Gray,
I.D. Graham, ``Legislating Acceptable Cancer Risk from Exposure to
Toxic Chemicals,'' Ecology Law Quarterly, vol. 19, 1992, pp. 269-362.
Health policy judgments should be based on a practical cost-benefit
test rather than on mythology about what risks are ``acceptable''.
Question 6. Your testimony proposes that EPA use a ``lenient''
cost-benefit analysis to determine whether the incremental costs of a
proposed national air quality standard are ``grossly disproportionate''
to anticipated benefits. Please define ``grossly disproportionate'' and
elaborate on why you believe the fine particulate standard would pass
this test, but the ozone standard would not.
Response. ``Grossly disproportionate'' is proposed as a more
``lenient'' standard than the ``benefits must exceed costs'' test that
informs strict cost-benefit determinations. A careful reading of the
EPA's Regulatory Impact Analysis on ozone and particulates reveals that
the ozone standard might be vulnerable to judicial challenge because
the quantifiable benefits are less than the costs, substantially so
under several reasonable scenarios. The reverse is the case for the
particulate standard, which has estimated benefits well in excess of
costs. The only factor that might ``save'' the ozone standard is the
long list of qualitative (non-quantifiable) benefits. However, there
were also some categories of cost that EPA was unable to quantify.
Question 7. At the same time you propose a cost-benefit analysis be
used to test a new or modified primary air quality standard, you state
that the harms associated with air pollution are ``unlikely to be
resolved conclusively at low levels of air pollution now found in the
USA due to the limitations of modern scientific methods of toxicology
and epidemiology.'' Please explain how a cost-benefit analysis can
effectively characterize the benefits of an air pollution standard when
faced with the difficulty presented by this ``causation'' issue.
Response. The discipline of risk assessment was developed for
circumstances where risks at low doses of pollution cannot be directly
measured by epidemiology and toxicology. See Center for Risk Analysis,
A Historical Perspective on Risk Assessment in the Federal Government,
Harvard School of Public Health, Boston, MA, March 1994. Cost-benefit
analyses commonly employ the results of risk assessments, which
extrapolate the risks observed at high doses to low doses using various
dose-response models. These estimates of risk can have large
uncertainties, which is why it is critical for the cost-benefit analyst
to be informed of these uncertainties in a quantitative manner. See
National Research Council, Science and Judgement in Risk Assessment,
National Academy Press, Washington, DC, 1994, Richard Morgenstern (ed),
Economic Analyses at EPA: Assessing Regulatory Impact, Resources for
the Future, Washington, DC, 1997.
Question 8. Some have asserted that cost-benefit analysis of
environmental and occupational safety regulations puts the benefit side
of the equation at an inherent disadvantage. This is because estimates
of compliance costs (e.g., dollar cost of installing new technologies
at affected industries) are typically easier to produce and ostensibly
``harder numbers'' than estimates of benefits (e.g., dollar value of
increased visibility or averted health harms at low levels of air
pollution). The result, as asserted, is that an uneven, ``apples and
oranges'' dynamic is created, leaving the benefit side of a cost-
benefit in an inherently weaker position in the context of regulatory,
political, and legal proceedings. Please comment on this issue.
Response. This concern has been expressed since I entered the field
in 1980 and the concern is still expressed today. However, the concerns
expressed today often do not recognize the dramatic scientific progress
that has been made in quantifying and monetizing the benefits of
health, safety, and environmental regulation. For a review of this
progress, see G. Tolley, D. Kenkel, R. Fabian, Valuing Health for
Policy: An Economic Approach, University of Chicago Press, Chicago,
Illinois, 1994; R. Kopp, W.W. Pommerehne, N. Schwarz, Determining the
Value of Non-Marketed Goods, Kluwer Academic Publishers, Boston, MA,
1997.
Question 9. Considerable concern has been expressed about the
ability of cost-benefit analysis to properly address such issues as
monetizing or quantifying positive benefits, scoping all relevant
benefit categories, and calculating discount rates for future benefits.
Cost-benefit analysis has been called a primitive art and its use is
often said to be complicated, expensive, and controversial. This
concern suggests that adding a ``particularly speculative'' cost-
benefit analysis to the standard-setting process would not necessarily
diminish, and may even add a new dimension to the atmosphere of
arbitrariness, mistrust, and adversarialism that your proposal seeks to
address. Please comment on this concern.
Response. Cost-benefit considerations are already a major part of
the regulatory process, sometimes implicitly through the information
supplied by stakeholders and sometimes explicitly through analyses
prepared by agencies (e.g., under mandate of Presidential Executive
Order). What creates mistrust and adversarialism is making decisions on
two sets of books: one for stakeholders (which clearly does account for
costs and benefits, however imperfectly and mysteriously) and one for
journalists and the lay public (which exhibits a sneaky attitude that
``costs were not a factor''). This overt dishonesty undercuts the
credibility of the regulatory process and diminishes trust in
government. (By the way, cost-benefit analysis was a primitive art in
1980 but is considerably more advanced today. It can certainly be
improved in the future.)
Question 10. Are you aware of any studies on the accuracy of direct
cost estimates related to individual Federal regulations? Do these
studies suggest that these estimates tend to under- or over-estimate
the direct costs of regulation?
Response. I believe that Richard Morgenstern of Resources for the
Future has prepared a study on the validity of regulatory cost
estimates. My recollection is that both types of errors were found but
that errors of overestimation were more frequent than errors of
underestimation.
Question 11. You indicated that, except for the acid rain and CFCs
Titles, the CAA Amendments of 1990 largely flunk the cost-benefit test.
By what margin? and what assumptions and methodology do you use to
arrive at such a statement?
Response. My conclusions are based on EPA's own retrospective cost-
benefit analysis of the 1990 Amendments to the Clean Air Act, analyses
that were mandated in the Act at the insistence of Senator Moynihan and
others. There is also a new analysis prepared by Charles River
Associates that reaches a similar conclusion.
Question 12. In your testimony, you suggested that the oxygen
content requirement for reformulated gasoline in the Clean Air Act
Amendments of 1990 should have gone through a more careful risk-benefit
analysis before being adopted by Congress. Most data suggest that that
requirement has resulted in significant overcompliance with the air
toxics emissions reductions goals, and provided carbon monoxide
emissions improvements and overall improved air quality. The
requirement did not dictate the use of MTBE. How should Congress have
acted differently before establishing this requirement to assure that
no less than the same environmental benefits would have accrued in the
same time period?
Response. Before mandating oxygenation of fuels, Congress, EPA, and
the Bush White House should have looked more carefully at the risks
that might be created by the chemicals used to oxygenate fuels.
Although Congress did not mandate MTBE per se, it was well known at the
time that MTBE was likely to have an economic advantage over other
oxygenates in several regions of the country. It was also known that
MTBE is a highly persistent chemical and that there were leaks in many
underground gasoline storage tanks throughout the country. (I do have
some sympathy with the claim that the MTBE is a blessing that has
exposed these leaks, though the full cost of plugging all these leaks
needs to be calculated). Your expression of confidence in the
environmental benefits of oxygenation is not fully supported by the
findings of a recent report by the National Research Council, the
operating arm of the National Academy of Sciences. Indeed, the original
determination that the benefits of oxygenation would exceed costs and
risks was never established by a careful, peer-reviewed analysis. You
may also be interested in reading some of the analyses of MTBE that are
now under review in the State of California, some commissioned by
private parties and some commissioned by the State of California. Based
on reading these draft analyses, I am not convinced that the oxygenates
requirement is a reasonable policy.
Question 13. Section 109 of the Clean Air Act requires the
establishment of ``. . . ambient air quality standards the attainment
and maintenance of which in the judgment of the Administrator, based on
such criteria and allowing an adequate margin of safety, are requisite
to protect the public health.'' This section seems to embody a
regulatory philosophy much closer to the Hippocratic oath (``I will
follow that system of regimen which, according to my ability and
judgment, I consider for the benefit of my patients, and abstain from
whatever is deleterious and mischievous'') than your testimony suggests
you support. You suggested that a clean air regulation should go
forward so long as ``we are doing [incrementally] more good than harm.
`` That position seems to contradict a common interpretation of the
Hippocratic oath, which is ``first, do no harm,'' not ``do more good
than harm.'' Please comment.
Response. The Hippocratic oath, as practiced in modern medicine,
clearly gives credence to concerns about the side effects of treatment
as well as the effectiveness of treatment. See J. Graham, J. Wiener,
Risk Versus Risk: Tradeoffs in Protecting Health and the Environment,
Harvard University Press, Cambridge, MA, 1995.
Question 14. At the hearing, you stated, ``I think any careful
environmental analysis of what is going on here would indicate that we
are having less economic productivity in this country and we are having
more air pollution in other countries.'' Please provide the Committee
with references to any analyses in scholarly publications supporting
this conclusion.
Response. The example I cited is the regulation of air taxies from
the coke production industry under the 1990 Amendments of the Clean Air
Act. This regulation has provided competitive economic advantage to
importers of coke who are not subject to such stringent emission
requirements and prohibitions on construction of new byproduct recovery
batteries (through zero percent door-leak limitations). See J. Graham,
J. Hartwell (ed), The Greening of Industry: A Risk Management Approach,
Harvard University Press, Cambridge, MA, 1997, pp. 137-168. In his
remarks, Senator Voinovich referred to related developments in his
State of Ohio, which he observed (and tried to prevent) as Governor.
Question 15. Conducting the comprehensive cost-benefit analyses
which you advocate as part of the regulatory process would seem to be
significantly more resource intensive than the current system. Given
that Federal discretionary funds are likely to continue to decline in
the near future, it seems logical that the bulk of the new bureaucracy
necessary to conduct these analyses would be funded through fees placed
on those seeking permits to pollute or on those desiring to expose the
public and the environment to new and potentially harmful substances.
Please comment.
Response. I have no objection to taxing pollution as a means to
fund more and higher quality analyses at agencies such as EPA. I want
to emphasize that I would support taxing pollution, not economic
production. The latter mistake was made by Congress when it designed
finances for the Superfund Program, which taxes petrochemical companies
without regard to the extent of their prior or current pollution.
__________
Statement of Richard L. Revesz, Professor of Law; Director, Program on
Environmental Regulation, New York University School of Law
Mr. Chairman and Members of the Subcommittee: Thank you for
inviting me to testify before you today. I would like to discuss a
number of issues concerning the possible use of cost-benefit analysis
under the Clean Air Act.
First, I will briefly explain the technique for valuing human lives
that is generally employed as the starting point for the determination
of the benefits of environmental regulation. This technique involves
ascertaining the wage premiums demanded by workers employed in risky
occupations who face a probability of death from industrial accidents.
Second, I will explain why valuations based on such wage premiums need
to be adjusted upward before they can be properly used in the context
of environmental regulation. Third, I will show why certain downward
adjustments of the value of life that have been advocated in certain
academic and public policy circles are in fact inconsistent with the
technique of cost-benefit analysis and should not be performed. Fourth,
I will explain why the discount rate used by the Office of Management
and Budget (OMB) in its administration of Executive Order 12,866 is a
great deal higher than rates supported by economic theory, and show
that, as a result, certain environmental benefits are severely
undervalued. Fifth, I will discuss how the Executive Order and various
legislative proposals couple cost-benefit analysis with procedural
devices designed to thwart regulation, rather than to make regulation
more rational.
The issues discussed in Parts I, II, and IV of this testimony are
discussed in more detail in an article that I recently published, which
is attached as Appendix I.
i. valuations of human life in workplace context
The primary benefit of many important environmental statutes is the
human lives that are saved. Thus, properly valuing human lives must be
an important part of any cost-benefit inquiry.
Since the 1970's, willingness-to-pay studies have become the
standard economic technique for placing a value on human life. By far
the most common method for performing such valuations focuses on the
choices that workers make in accepting risky jobs. The approach begins
by defining sets of jobs that require comparable skills and offer
comparable non-monetary amenities, except that one exposes the worker
to a higher risk than the other. Presumably, a rational worker would
not accept the riskier job unless she obtained sufficient compensation
for the additional risk. The wage differential between the riskier and
the less risky jobs is the compensation that the worker therefore is
assumed to demand for the additional probability of death that she
faces as a result of having taken the riskier job. The wage
differential divided by the additional probability of death is then
considered to be the value of life.
ii. why certain upward adjustments are necessary
The value of life figures obtained from studies of risky
occupations need to be adjusted upward to obtain a meaningful valuation
of the benefits of environmental regulation. These adjustments must
account for the generally involuntary nature of most environmental
harms, for the differences between the median income of the workers who
are the subjects of these studies and of the population as a whole, and
for the dreaded nature of certain environmental contaminants
(principally carcinogens). Not performing these necessary adjustment
can result in an undervaluation of life by as much as a factor of six
(or even more in certain contexts).
A. Involuntary Nature of the Harm
1. Valuations of Voluntary Versus Involuntary Risks
There is an extensive literature suggesting that individuals assign
greater value to avoiding risks that are thrust upon them involuntarily
than to risks that they incur voluntarily. The risk assumed by
individuals who subject themselves to possible of industrial accidents
is generally thought of as a risk assumed voluntarily. In contrast, the
risk of exposure to environmental contaminants like air pollutants, is
generally thought of as involuntary. As a result, if one takes the
willingness-to-pay to avoid voluntary harms and imports that figure
into the context of environmental regulation, there will be a
systematic undervaluation of the benefits of regulation.
Determining the extent of the undervaluation, however, is
complicated. In general, the economics profession favors ``revealed
preference'' valuations, under which the value assigned to a good can
be observed through a market transaction. Willingness-to-pay studies of
wage differentials individuals demand to accept a risk of death are a
prominent example of a revealed preference technique. In contrast,
because involuntary risks are by definition not based upon informed
market transactions, revealed preference techniques are not available
to assess the value of involuntary harms.
Thus, in order to estimate how the valuations of involuntary and
voluntary risks differ, one has to ask individuals directly the
relative value that they attach to avoiding the two types of harms. The
most comprehensive study of this type conducted a nationwide telephone
survey of 1,000 households, asking interviewees to compare, among other
pairs of risks, radon control in homes and a pesticide ban on fruits.
The respondents also were asked to assess, on a ten point scale, the
ease with which the respective risks could be avoided.
The respondents' answers revealed that they considered the radon
risk more voluntary in that it could be avoided with greater ease. When
the respondents were told that the two programs would save the same
number of lives and cost the same, 72 percent chose the pesticide ban
and only 28 percent opted for the radon control. The median respondent
viewed saving 100 lives by means of the pesticide ban as equivalent to
saving 213 lives through radon control. Thus, the median respondent
implicitly found the involuntary risk to be twice as harmful.
2. Unrepresentativeness of the Population Exposed to
Workplace Risks
Valuations of life in workplace settings are inaccurate as a
measure of the value of life for environmental programs for a second
reason. In a competitive marketplace, individuals who take relatively
risky jobs by definition have the lowest willingness-to-pay to avoid
the risk. Other things being equal, employers will pay the least
possible amount to fill the jobs, so individuals with higher valuations
will not be hired.
As a result, the willingness-to-pay valuations derived from the
study of risky jobs are the valuations of a relatively small subgroup
of the population with a disproportionate tolerance for risk. In
contrast, most environmental risks affect a far broader sector of
society. Thus, the valuations of the individual with the median
valuation of risk (not an individual with an unusually low valuation)
would be the appropriate metric to use in the valuation of life for
cost-benefit analysis of environmental regulation. As a result, an
appropriate correction needs to be made when extrapolating from the
workplace to the environmental arena. Unfortunately, at this time there
is no empirical literature that sheds light on the magnitude of such a
correction. But if cost-benefit analysis becomes part of the
decisionmaking process under the Clean Air Act, careful attention will
need to be paid to this issue.
B. Impact of Income on the Valuations of Life
It is generally recognized that willingness-to-pay valuations of
life, such as those obtained in the workplace setting, are a function
of the income of the subjects of the study. Economists have estimated,
for example, that a 10 percent increase in income leads to a 10 percent
increase in the value of life. As a result, there are at least two
problems with using the valuations from workplace studies for cost-
benefit analyses of environmental regulation.
1. Distribution of Income Across Occupations
First, individuals who take risky jobs generally have lower-than-
average income. Thus, there is a problem in extrapolating from the
willingness-to-pay studies conducted in high-risk occupations to the
broader population affected by environmental carcinogens.
The U.S. Census provides median and mean earnings for all workers
and for various occupational categories. The category including
operators, fabricators, and laborers is probably the best proxy for
workers in risky occupations who are the subjects of empirical studies
concerning the value of life. In 1996, the median and mean earnings for
this category of workers were $16,883 and $19,981, respectively. In
contrast, the corresponding figures for the population as a whole were
$20,716 and $27,366, respectively. Thus, the median earnings of the
population as a whole are 22.7 percent higher than the median for
workers in risky occupations, and the mean earnings of the population
as a whole are 37.0 percent higher. Adjustments of this magnitude
therefore need to be performed to the valuations of life from the
workplace setting.
2. Increases in Income Over Time
A second problem arises in connection with environmental risks that
have a latency period, so that the death will not occur immediately but
only after the passage of some time. Empirical studies show that
individuals value their lives as a function of their current income,
and not on the basis of projections of future income. But for latent
harms, the valuation that individuals would have at the time of their
death is what matters.
Over the last several decades, median and mean incomes in constant
dollars have been rising at a compound rate of about 1 percent per
year. Thus, for contaminants with a 20 year latency period (as is the
case with some carcinogens regulated under section 112 of the Clean Air
Act) an upward adjustment of about 22 percent would have to be made to
the valuation of life from the workplace setting to make the figure
appropriate for environmental regulation.
C. Nature of Carcinogenic Deaths
Particularly with respect to carcinogens regulated under section
112, an upward adjustment of the value of life to account for the
dreaded nature of the harm also needs to be performed. Indeed, there is
an important difference in the nature of deaths resulting from
industrial accidents on the one hand and from environmental exposures
to carcinogens on the other. The former occur instantaneously and
without warning. The latter often occur following a long and agonizing
ordeal.
In addition to the loss of the life itself, two other components
need to be valued in the case of carcinogenic harms: the very painful
and often extended period of morbidity that precedes the death and the
dread aspects of carcinogenic deaths. The leading empirical study in
this area found that the valuation of life in the case of carcinogenic
exposure is about twice as high as the corresponding valuation in the
case of an instantaneous death from an unforeseen accident.
iii. why certain downward adjustment are inappropriate
Some policy analysts have suggested that downward adjustments of
the value of life obtained in workplace studies must be performed to
account for the fact that the beneficiaries of certain environmental
programs are older individuals, and that these individuals are often
not in good health. The question of how cost-benefit analysis should
account for the particular features of the population benefited by
environmental regulation is very complex. In any event, however, the
particular downward adjustments that have been advocated are
inconsistent with a proper understanding of economic theory.
A. Treatment of Older Individuals
One important pitfall to be avoided concerns the manner in which
cost-benefit analysis deals with programs designed to benefit older
individuals, particularly individuals in their seventies and above.
Some academics and policy analysts argue that, in computing the benefit
of an environmental program designed to save the lives of such
individuals, their remaining life expectancy should be multiplied by
the value of a life year. In turn, they assert that values of life
years should be computed by assuming that workers who take risky jobs
(whose median age is about 40) value each of their remaining years the
same amount, and that their valuation of life can therefore be broken
down into a value for life years. So, for example, making just a minor
simplification, if the value of life derived from a worker with a 40-
year life expectancy is $6,000,000 (and the value of a life year is
therefore $150,000) the value of the life of an elderly individual with
only a 4-year life expectancy would be only $600,000.
This methodology is seriously flawed. It assumes that the value of
a life year is independent of the number of life years an individual
has left to live. But this approach overlooks the critical role that
scarcity plays in determining economic value. Just as individuals value
diamonds more than water (because diamonds are scarcer), so too they
are likely to value life years more highly when they have fewer life
years left. Thus, there is no principled basis for taking the valuation
of life year given by a forty-year old and assuming that a seventy-year
old would have the same valuation. Instead, the latter's valuation
should be expected to be considerably higher.
B. Quality Adjustments
Another inappropriate approach consists in using an approach
generally referred to as quality-adjusted life years (QALYs) in
performing cost-benefit analyses. The idea behind QALYs is that the
lives of sick individuals--asthmatics for example--should be assigned a
lower value than the lives of healthy individuals (for comparable life
expectancies). For example, the life of an asthmatic might be assigned
only half the value of the life of a healthy individual. In the case of
the individuals with a 4-year life expectancy discussed above, the
value would then be reduced to $300,000--one twentieth the value of the
life of a healthy individual with a 40-year life expectancy.
The QALY technique, as generally employed, is incompatible with
cost-benefit analysis. Indeed, the measure of benefits in cost-benefit
analysis is derived from the aggregation of the individual preferences
of all the individuals affected by a policy. Specifically, each
individual has a willingness-to-pay to avoid being subjected to some
risk, and it is the aggregation of the individual willingnesses to pay
that determines what the benefit of the policy would be.
The QALY technique, in contrast, does not seek to determine what
individuals in poor health would be willing to pay to avoid a premature
death. Instead, it relies heavily on the assessment of third parties,
sometimes healthy individuals and medical professionals, of how
undesirable a life in poor physical condition is relative to a healthy
life.
Such an inquiry suffers from two fundamental flaws. First, it does
not construct the valuation by reference to the views of the affected
individuals themselves, when it is the preferences of the affected
individuals that form the fundamental units on which cost-benefit
analysis is based. Second, how much more miserable one might be in one
State rather than another is not responsive to the question of how
one's willingness to pay to avoid a premature death varies in the two
circumstances. Thus, the rankings provided by the QALY technique
typically have no connection to willingnesses to pay, and therefore
cannot properly be incorporated into cost-benefit analyses.
iv. choice of discount rate
For many environmental contaminants, such as carcinogens regulated
under section 112 of the Clean Air Act, the harm does not occur
contemporaneously with the exposure: there is instead a period of
latency. It has been the practice of the Office of Management and
Budget (OMB), in its review of agency regulations under Executive Order
12,866, to apply a discount rate in the case of latent harms to reflect
the fact that the benefit of regulation would not accrue until the
future.
OMB currently uses a discount rate of 7 percent. There is a strong
consensus in the economics profession that this rate is too high, and
that an appropriate rate would be between 2 and 3 percent. The 7
percent rate used by OMB is set by reference to the pre-tax rate of
return on private investments. This rate would be the appropriate one
to use if the United States had a closed economy, so that investments
for pollution control displaced investments in other activities and, as
a result, the government lost tax revenues.
Increasing globalization, however, has led to the integration of
capital markets and to the opening of the U.S. economy to foreign
investment. In an open economy, the level of taxable investments is
unaffected by environmental regulation because no capital projects are
displaced; the government therefore does not lose the corresponding tax
revenues. Under these conditions, the consumption rate of interest is
the appropriate discount rate. This rate is generally taken to be the
after-tax rate of return, adjusted for inflation, on relatively risk-
free financial instruments such as government bonds--a rate that
currently stands in the 2-3 percent range.
The flawed OMB approach leads to a substantial undervaluation of
the benefits of environmental regulation. Consider the difference
caused by using a 7 percent discount rate as opposed to a 2.5 percent
discount rate (the mid-point of the plausible range). For contaminants
with a 20 year latency period, the OMB approach undervalues the
environmental benefits by a factor of 2.36 (the environmental benefits
are 136 percent higher than OMB calculates them to be, so that a
benefit that OMB determines to be $100,000,000 is in fact
$236,000,000). For a 30-year latency period OMB's approach leads to an
undervaluation by a factor of 3.63 (the environmental benefits are 263
percent higher than OMB calculates them to be, so that a benefit that
OMB determines to be $100,000,000 is in fact $363,000,000).
If cost-benefit analysis were to become more prevalent as a result
of congressional action, this longstanding problem should be corrected.
It is noteworthy, moreover, that both the General Accounting Office
(GAO) and the Congressional Budget Office (CBO) correctly employ the 2-
3 percent rate range rather than the flawed 7 percent rate used by OMB.
v. procedural issues
Over the last two decades, cost-benefit analysis has acquired an
understandably bad reputation. In its administration of Executive Order
12,866 (and its predecessor, Executive Order 12,291), OMB has attached
to the use of cost-benefit analysis procedures that, at least in part,
have turned it into an anti-regulatory tool, rather than into a tool to
make regulation more rational. Similarly, several of the regulatory
reform bills that have been introduced since 1995 contained procedural
mechanisms designed to thwart rather than to improve regulation. Let me
draw your attention to these pitfalls so that the mistakes of the past
(and of the present) can be avoided.
First, the OMB mechanism and the various regulatory reform bills
use cost-benefit analysis only in the context of the adoption of a new
regulation. In contrast, satisfying a cost-benefit test is not required
for the repeal of an existing regulation, the failure to adopt a new
regulation, or the failure to make an existing regulation more
stringent. The concern for the maximization of social welfare that is
implicit in cost-benefit analysis would call for the use of the
technique in each of these contexts. The possible losses in social
welfare flowing from the repeal of a regulation, the failure to adopt a
regulation, or the failure to make a regulation more stringent can be
as detrimental--in fact, even more detrimental--than the social welfare
losses caused by the adoption of regulations that do not pass a cost-
benefit test. There is simply no plausible justification in economic
theory (or for that matter in logic) for caring about social welfare
losses in one context but not in others.
Second, at times there has been no disclosure (and at other times
only limited disclosure) of the communications between interested
parties and OMB concerning the cost-benefit analyses of environmental
regulations. It is a core requirement of administrative law, embodied
in section 4 of the Administrative Procedure Act, that any submissions
to an agency in connection with the promulgation of regulations must be
made part of the public record and available for public inspection. The
obvious purpose of this requirement is to foster openness and to make
judicial review more effective. These goals are seriously compromised
when communications concerning cost-benefit are either wholly or
partially shielded from the public, as has been the case until now in
connection with OMB's administration of Executive Orders 12,866 and
12,291.
Third, some regulatory reform bills allowed for judicial review of
the cost-benefit analysis prior to the promulgation of the regulation.
This type of challenge runs counter to another well entrenched
principle of administrative law--limiting judicial review to ``final
agency action.'' This principle, which is codified in section 10(c) of
the Administrative Procedure Act, bars piecemeal challenges. The
approach of those bills would lead to piecemeal challenges with respect
to a single regulation, seriously impairing the efficient use of
judicial resources. More importantly, such an approach would paralyze
the regulatory process during the pendency of any challenge to a cost-
benefit analysis and would have the clear effect of delaying regulation
that passes the cost-benefit test and therefore improves social
welfare.
Fourth, some regulatory reform bills contained a petition process
under which any individual or firm could ask the agency to repeal a
regulation that did not satisfy the cost-benefit test. The agency, in
turn, was required to respond promptly to such petitions and a denial
of the request was reviewable by the courts. Administering a petition
process of this sort would have the effect of paralyzing the
Environmental Protection Agency and would seriously undermine the goal
of rationalizing the regulatory process.
Conclusion
If cost-benefit analysis were to play a larger role under the Clean
Air Act, great care must be taken to ensure that it is used fairly, as
a tool to make regulation more rational, and not as a tool that is
biased against regulation. On the substantive front, it is important to
ensure that human lives are not undervalued as a result of the use of
various techniques that appear to have currency in some academic
sectors. On the procedural front, cost-benefit analysis must be woven
into the existing structure of administrative law, without either
hiding it from public scrutiny nor subjecting it to legal challenges
under rules that are different from those generally provided in the
Administrative Procedure Act.
Once again, I am grateful for the invitation to testify at this
hearing. I am pleased to answer any questions that you might have.
______
Responses by Richard Revesz to Additional Questions from Senator Baucus
Question 1. In testimony, Professor Graham suggested taking a two-
tiered approach to Clean Air Act standards. First, a lenient and
flexible cost-benefit analysis, one that does not require high degrees
of precision, would be used to set the actual ambient standard. Second,
a more stringent cost-benefit analysis would be performed to determine
whether or not to apply controls to sources. What views, if any, do you
have on such an approach?
Response. That approach is a sensible one. At the level of setting
ambient standards, the information on costs and benefits is more
speculative. For example, when evaluating an ambient standard, often it
will not be clear how the resulting pollution control burden will be
allocated among the various sources of pollution. As a result, the
estimates on the costs of pollution abatement will have to be based on
assumptions about what mix of emission standards will subsequently be
adopted to ensure that the ambient standard is met. Given the resulting
uncertainties, a flexible approach to cost-benefit analysis that does
not require undue precision is probably desirable.
Question 2. Some argue that issues--such as principles of
precaution, equity, environmental justice, and individual rights--need
to be considered in the development of environmental standards.
However, considerations of these issues do not fit neatly into either
risk assessment or cost-benefit ``tests.'' How and at what point should
these issues be integrated into the standard setting process?
Response. Public policy ought to pay attention to distributional
issues, including questions of equity and environmental justice. A
cost-benefit analysis that aggregates individual willingnesses to pay
can be used to rank various environmental projects. Other social
objectives, including distributional concerns, could be used to
generate alternative rankings. A tradeoff between the two objectives
can generate the preferred social policy. Alternatively, the cost-
benefit inquiry itself can take account of distributional concerns.
With respect to individual rights, the policy prescriptions that
emerge from cost-benefit analysis must be constrained by the need to
avoid the violation of any constitutional rights, whatever their
nature. Finally, because the precautionary principle is poorly
specified, the relationship between this principle and cost-benefit
analysis is not clear. It is not necessarily the case, however, that
the precautionary principle would yield more stringent environmental
regulation than cost-benefit analysis.
Question 3. Some have asserted that cost-benefit analysis of
environmental and occupational safety regulations puts the benefit side
of the equation at an inherent disadvantage. This is because estimates
of compliance costs (e.g., dollar cost of installing new technologies
at affected industries) are typically easier to produce and ostensibly
``harder numbers'' than estimates of benefits (e.g., dollar value of
increased visibility or averted health harms at low levels of air
pollution). The result, as asserted, is that an uneven, ``apples and
oranges'' dynamic is created, leaving the benefit side of a cost-
benefit in an inherently weaker position in the context of regulatory,
political, and legal proceedings. Please comment further on this issue.
Response. There is an academic literature suggesting that the costs
of pollution control tend to get overestimated in cost-benefit
analyses. For example, cost-benefit analyses often assume that
regulated firms will need to purchase pollution control equipment in
order to meet the environmental standards. Over time, however, these
firms choose instead to change their production processes, and as a
result are able to meet the standards more cheaply. Properly conducted
cost-benefit analyses should pay attention to such sources of
systematic bias.
______
Responses by Richard Revesz to Additional Questions from Senator
Lieberman
Question 1. What if the costs of controlling emissions from a
particular industry would exceed the monetized benefits, but a group of
low-income people near these facilities have higher cancer risks
compared with those elsewhere. Do you think we should control those
sources? If so, how would a cost-benefit test include these kinds of
social considerations?
Response. Distributional issues, including environmental justice
concerns, ought to be relevant to environmental policy. Under cost-
benefit analysis, projects are undertaken based on the aggregate
willingness to pay of the beneficiaries. Because the government
undertakes large numbers of projects and regulatory initiatives, the
losers with respect to one governmental intervention may well become
winners with respect to another. But if government regulation produce
persistent losers, as may be the case in some environmental justice
contexts, redistribution measures should be undertaken.
______
[From the Columbia Law Review, May 1999]
Environmental Regulation, Cost-Benefit Analysis, and the Discounting of
Human Lives
(By Richard L. Revesz, Professor of Law, New York University School of
Law)
Introduction
The use of cost-benefit analysis has become commonplace in
environmental and other health-and-safety regulation. Such analysis is
now mandated by Executive Order 12,866 for all major regulations, \1\
and may eventually be required by statute if Congress passes one of the
various regulatory reform bills that have been pending for some time.
\2\ The primary benefit of many important environmental statutes, as
determined by the dollar value assigned by cost-benefit analysis, is
the human lives that are saved. \3\ Thus, in determining whether a
particular regulation can be justified on cost-benefit grounds, the
central questions revolve around the value assigned to the lives that
would be saved by the program. Probably the most vexing problem
concerning these valuations has been whether to discount the value of a
life saved to account for the fact that the loss does not occur
contemporaneously with the exposure to certain contaminants.
With respect to this issue, two opposing camps have developed among
regulators, judges, and academics. A similar controversy has arisen in
connection with other regulatory programs, \4\ as well as with the
provision of medical services. \5\ Supporters of discounting argue that
the value of human life must be treated in the same manner as the value
of any other benefit or cost: because other benefits and costs are
normally discounted to present value when they occur in the future, the
value of life should be discounted as well. \6\ In contrast, opponents
of discounting claim, generally by appeals to notions of ethics and
morality, \7\ that lives saved in the future are no less valuable than
lives saved in the present. As a result, they argue that discounting is
inappropriate. \8\
The debate, which is not confined to the United States, \9\ has
taken on a relatively high profile, including discussion in the popular
press \10\ For example, the issue played a role in the Senate's
scrutiny of the unsuccessful nomination of Judge Douglas Ginsburg to
the Supreme Court of the United States in 1987, \11\ and attracted the
attention of Vice President Albert Gore during the 1992 Presidential
campaign. \12\
The discussion of the propriety of discounting human lives often
conflates two different sets of problems. \13\ In the first, the
benefits will not accrue until the future because the harm has a
latency period. For example, an individual exposed to a carcinogen
faces an increased probability of dying at some point in the future,
perhaps 20 or 30 years later. In the second, the benefits of controls
accrue primarily to future generations. Climate change caused by the
presence of anthropogenic gases in the atmosphere is a prominent
example of this phenomenon.
The question of how to value lives threatened by latent harms was
starkly posed in a regulatory proceeding that took place in the late
1980's in connection with a partial ban on the use of asbestos
promulgated by the Environmental Protection Agency (EPA). \14\ The
Office of Management and Budget (OMB), which is responsible for
reviewing regulations to ensure their consistency with cost-benefit
principles, \15\ strongly urged discounting the value of human lives
over the period of latency of the harm; under its then-existing policy
of discounting environmental benefits at a 10 percent discount rate,
the value of saving a life would have been reduced to only about
$22,000. \16\ EPA withstood OMB's pressure and published final
regulations that essentially rejected the concept of discounting. The
EPA's regulation was invalidated by the Fifth Circuit, partly for this
reason. \17\
A recent article by Lisa Heinzerling shows how much rides on
whether the value of human lives is discounted over a latency period.
\18\ She shows that many environmental and health-and-safety
regulations promulgated since the 1970's have acceptable cost-benefit
ratios if the value of lives is not discounted, but fail cost-benefit
analysis if those values are discounted. \19\
Discounting issues play an even more critical role in connection
with harms to future generations, particularly with respect to the
effects of climate change. Because of the long lag until many of the
harmful effects of excessive anthropogenic gases in the atmosphere are
felt, how much our society is willing to spend on measures to prevent
climate change may well depend on how the question of discounting is
resolved. \20\
Opponents of discounting adduce vivid statistics to illustrate what
is at stake. For example, Derek Parfit notes: ``At a discount rate of
five per cent, one death next year counts for more than a billion
deaths in 500 years.'' \21\ Even economists who do not oppose
discounting acknowledge its striking effects: ``When time horizons are
very long, all benefits are discounted to zero using any positive
discount rate, so that a death prevented in the distant future is worth
nothing at the present time.'' \22\
This Article seeks to shed light on what has become a shrill and
unproductive debate. The polar positions on both the latency and future
generations issues are analytically unsound and overlook important
components of both problems. Moreover, the latent harm and future
generation situations are analytically distinct: what one concludes
with respect to discounting in one context says little about the
appropriate treatment of discounting in the other.
Part I addresses the problem of latent harms. Because there are
essentially no empirical studies of the value of lives threatened by
latent harms, regulatory analyses must adapt valuations derived from
threats of instantaneous death in workplace settings. This Article
argues that it is necessary to discount this value, to reflect that the
years lost occur later in a person's lifetime. It also argues, however,
that such discounting must be accompanied by countervailing upward
adjustments, to account for the involuntary nature of exposure to
environmental carcinogens, the dread such exposure causes, and the
higher income levels of the victims. By not performing these
adjustments, OMB may be undervaluing lives by as much as a factor of
six, or even more for particularly long latency periods. Correcting
this undervaluation, as this Article urges, could have an important
impact on the regulatory process by allowing more stringent regulations
to satisfy the requirements of cost-benefit analysis.
Part II deals with harms to future generations. It shows that the
use of discounting in that case is ethically unjustified. As a result,
it argues that discounting approaches should not replace the principle
of sustainable development, which is used in the major international
environmental law agreements to measure our obligations to future
generations. The discussion shows, however, that the principle of
sustainable development is also problematic, and sets forth the
principal elements of an attractive theory of intergenerational
obligations. The practical implications can be enormous: the rejection
of discounting may lead to a far more stringent response to
environmental problems, such as climate change, that have long time
horizons.
The Article underscores the extent to which discounting raises
analytically distinct issues in the cases of latent harms and harms to
future generations, even though these two scenarios have generally been
treated as manifestations of the same problem. \23\ In the case of
latent harms, one needs to make intra-personal, intertemporal
comparisons of utility, whereas in the case of harms to future
generations one needs to define a metric against which to compare the
utilities of individuals living in different generations. The case of
latent harms gives rise to a problem that is primarily technocratic:
determining how an individual trades off the utility derived from
consuming resources at different times in her life. In contrast, the
case of harms to future generations raise a difficult ethical problem.
It is therefore not surprising that the appropriateness of discounting
would be resolved differently in the two contexts.
The Article does not address the role that cost-benefit analysis
should play in environmental regulation--a subject that has spawned a
large academic literature. \24\ Rather, its goal is more targeted. It
assumes, consistent with current practice, \25\ that an important set
of environmental and health-and-safety regulations will be evaluated
under principles of cost-benefit analysis, and that human lives will be
valued as part of this analysis. Given these practices, it seeks to
determine the best way to account for the fact that certain losses do
not occur contemporaneously with the exposure to a contaminant.
A central goal of this Article is to move the regulatory process to
wards a more thoughtful valuation of human lives threatened by environ
mental carcinogens, and away from OMB's deeply flawed technique of
taking valuations from the workplace setting and reducing them by an
inflated discount rate. \26\ The Article also seeks to move the
discussion of how to treat future generations beyond a focus on
discounting, which is unlikely to provide an ethically defensible
account of our obligations to future generations.
i. latent harms
The discussion begins in Section A by reviewing the central role
that the debate over discounting played in the Corrosion Proof Fittings
case and the extent to which, despite the court's resolution in that
case, the issue remains unsettled in the public policy arena. Section B
explains that the valuations of human life in the economics literature
have been conducted almost exclusively in the context of industrial
accidents, where workers face a probability of instantaneous death. In
contrast, as a result of understandable methodological complications,
there have been essentially no valuations of risks to life with a long
latency period, such as those posed by environmental carcinogens. Thus,
it is necessary to construct a second-best valuation of a life
threatened by a contaminant with a latency period, using as a starting
point the valuations from the existing empirical studies on
instantaneous deaths.
Section C begins the task of constructing a second-best valuation,
relying on temporal models that describe the value of life by reference
to a stream of utilities that individuals receive if they are alive in
particular time periods. When an individual faces a threat to life that
manifests it self only after a latency period, she loses fewer life-
years than when the threat is instantaneous. Moreover, on average, the
loss of life-years occurs further into the future. Downward adjustments
to account for these two factors are therefore appropriate.
Section D examines the plausibility of the assumptions underlying
the temporal models explored in Section C. It also shows that the
discounting of future utilities is conceptually different from the
discounting of money flows.
Section E turns its attention to three important upward adjustments
that need to be made when extrapolating from the case of instantaneous
deaths to that of carcinogenic harms. These adjustments are necessary
as a result of the relationship between an individual's income and the
value that she places on life, the involuntary nature of exposure to
environmental carcinogens, and the dread people suffer from
carcinogenic risk.
Section F focuses on the choice of an appropriate discount rate. It
shows that the emerging consensus in the economics literature calls for
the use of a rate of 3 percent or less and takes issue with OMB's
policy of prescribing a 7 percent rate.
Section G estimates the undervaluation of life that results from
OMB's approach of taking valuations from the workplace setting and,
without further adjustment, mechanically reducing them by an inflated
discount rate. Over a 20 year latency period, the OMB approach can lead
to an underestimation by a factor of about six, with a factor of about
two being attributable to the choice of discount rate.
Section H argues that discounting the value of life in the context
of latent harms does not pose significant moral or ethical dilemmas
that are distinct from those raised by cost-benefit analysis in general
and the valuation of human life in particular. It is simply one
defensible adjustment in the process of constructing a second-best
valuation, using workplace valuations as a starting point. Discounting,
however, cannot be the only such adjustment.
Before proceeding further, it is useful to underscore that Part I
focuses on harms that an individual suffers as a result of an earlier
exposure to an environmental contaminant. \27\ The term ``latent''
could be used to describe other phenomena as well: for example one
might think that an environmental exposure producing a harm to future
generations gives rise to a latent harm as well. As used throughout
this Article, however, the term ``latent'' is used to describe only
situations in which the exposure and the harm accrue to the same
individual.
A. The Debate Over Discounting
The appropriateness of discounting the value of human lives first
received sustained attention in the regulatory proceeding that led to
EPA's partial ban on the manufacture, importation, and processing of
asbestos under the Toxic Substances Control Act (TSCA), and the
challenge to this regulation in Corrosion Proof Fittings v. EPA. \28\
The question was highly controversial even before EPA's publication of
the notice of proposed rulemaking in 1986. \29\ As required by
Executive Order 12,291 (the Reagan Administration's predecessor of
Executive Order 12,866), \30\ EPA submitted the draft rule to OMB for
review before its publication in the Federal Register. In a March 1985
letter to A. James Barnes, EPA's acting Deputy Administrator, OMB
raised questions about whether the benefits of the rule exceeded its
costs. \31\ In performing a cost-benefit analysis, OMB used a value per
cancer case avoided of $1 million and discounted this amount at a rate
of 4 percent for the length of the latency period. \32\(At the time, an
OMB guidance document provided for discounting of costs and benefits at
a rate of 10 percent, \33\ but OMB instead used the rate contained in
EPA's guidance document on cost-benefit analysis.) \34\
The following month, the propriety of discounting the value of
human lives became an issue in connection with Barnes's Senate
confirmation hearings:
I have a great deal of ethical difficulty with a concept of
applying a discount factor to human life. The lives of my three
children are worth every bit as much to me 10 years from now as they
are now. I personally reject that notion. I have talked to [EPA
Administrator] Lee Thomas about it; I know that it is not one that
finds favor with him. \35\
In October 1985, a subcommittee of the U.S. House of
Representatives chastised OMB for its insistence on discounting the
value of human lives. \36\ It noted that discounting at OMB's 10
percent discount rate over a 40 year latency period would reduce the $1
million value per life saved to just over $22,000. \37\ Thus, on cost-
benefit terms, one could not justify a current expenditure of over
$22,000 to save a life 40 years in the future. Even at a 4 percent
discount rate, the $1 million value of life would be reduced to about
$208,000. \38\
The subcommittee referred to the testimony of Don Clay, Director of
EPA's Office of Toxic Substances, that EPA ``never had used discounting
over the latency period of a chronic hazard,'' and that, by reducing
the value of benefits to such an extent, OMB's approach would prevent
EPA from regulating any carcinogen with a long latency period. \39\ The
subcommittee further reported that Clay ``personally opposed the
discounting of lives in the asbestos case on ethical grounds.'' \40\ It
concluded that OMB's position with respect to the discounting of the
value of life was ``simply an outrage'' and urged EPA to ``reject the
use of discounting over the latency period of diseases caused by
chronic hazards.'' \41\
EPA published the proposed rule on the asbestos ban in January
1986. \42\ The proposal did not quantify the value of life or undertake
any discounting of this value over the length of the latency period.
\43\ EPA took a different approach, however, when it promulgated the
final rule in July 1989. \44\ It assigned a value to human lives, but
discounted it at a rate of 3 percent from the time of the promulgation
of the regulation until the time of the exposure to the carcinogen.
\45\
The use of asbestos products does not necessarily result in
immediate exposure; instead, exposure occurs when the product
containing the asbestos begins to disintegrate. For example, some
exposures occur when asbestos fibers are released into the air from the
weathering of air conditioning products. \46\ Exposure is the first
step of a process that might later lead to the incidence of cancer and
subsequently to a death from cancer. EPA did not discount the value of
human life from the time of exposure until the carcinogenic death, as
OMB had urged, or even until the first manifestation of cancer.
In its response to comments accompanying the final rule, EPA at
tempted to defend this decision. EPA noted that comments had been
written on both sides of the discounting issue:
Some commenters argued that EPA, in the proposal, improperly failed
to discount benefits to be derived from the rule, and in support of
documents for a final rule, only discounted benefits until the time of
the exposure that results in the cancer rather than until the
occurrence of the disease. Other commenters argued that EPA should not
discount benefits, stating that discounting the benefit of saving human
life is inappropriate methodology for this rulemaking. \47\
EPA's response revealed a degree of ambiguity on this question and
provided at best a lukewarm defense of its course of action. It stated:
Arguments can be made that estimating benefits without discounting
is preferable in cases like this one where the primary benefits derived
is [sic] the avoidance of human cancer cases. However, arguments also
can be articulated supporting the discounting of benefits. \48\
EPA was more categorical in defending its view that if discounting
was appropriate at all, it was appropriate only until the time of
exposure:
Since the benefit of a regulation to control a hazardous substance
occurs at the time of the reduced exposure, EPA has concluded that the
appropriate period over which to discount is until the time of exposure
reduction. This approach was used in this case after extensive review
of applicable literature and an examination of the inherent biases and
features of other approaches. \49\
This position has an important corollary for environmental problems
in which the regulation leads to an immediate decrease in the exposure
of individuals as is the case, for example, with airborne air
pollutants. For such pollutants, no discounting of the benefits of the
regulation would be performed under EPA's approach, except perhaps for
discounting from the time of the preparation of the cost-benefit
analysis to the implementation of the regulation.
Though EPA's explanation is not a model of clarity, one can surmise
that its approach was not to discount for the period between the
exposure and the death, when the harm was latent. Instead, the
discounting that was performed affected only the period before the harm
became latent.
In October 1991, the Fifth Circuit vacated the regulation and
remanded in Corrosion Proof Fittings v. EPA, \50\ in part because of
EPA's treatment of the discounting issue. The Fifth Circuit took the
position that discounting was necessary in order to provide for a fair
comparison of costs and benefits accruing at different times:
Although various commentators dispute whether it ever is
appropriate to discount benefits when they are measured in human lives,
we note that it would skew the results to discount only costs without
according similar treatment to the benefits side of the equation. . . .
Because the EPA must discount costs to perform its evaluations
properly, the EPA also should discount benefits to preserve an apples-
to-apples comparison, even if this entails discounting benefits of a
non-monetary nature. \51\
The Fifth Circuit went on to hold that EPA had used an improper
period for discounting, and that the value of human life should have
been discounted to the time of injury. \52\ It noted:
The EPA's approach implicitly assumes that the day on which the
risk of injury occurs is the same day the injury actually occurs. Such
an approach might be appropriate when the exposure and injury are one
and the same, such as when a person is exposed to an immediately fatal
poison, but is inappropriate for discounting toxins in which exposure
often is followed by a substantial lag time before manifestation of
injuries. \53\
The court did not specify, however, whether it considered the
injury to be the first manifestation of cancer or the death from
cancer. The detection of carcinogenic cells is a serious injury, but if
death does not follow it is not clear why it would be appropriate to
attach to this injury the full value of life, rather than the value of
the resulting morbidity. \54\
Finally, the Fifth Circuit upheld EPA's choice of a 3 percent
discount rate. It implicitly assumed that the correct discount rate was
the real rate of interest (the nominal rate of interest minus the rate
of inflation) and stated that, historically, this rate has fluctuated
between 2 percent and 4 percent. \55\
Despite the court's holding, the question of discounting the value
of human life has continued to be controversial. For example, the
Senate Report accompanying the Comprehensive Regulatory Reform Act of
1995, \56\ which would require the use of cost-benefit analysis in
regulatory proceedings, \57\ contains a statement by Senator Leahy
railing against such discounting:
Cost/benefit analysis assumes that benefits that occur in the
future have very little value. After determining the value of human
life, cost/benefit analysis applies a ``discount rate'' to benefits
that will occur in the future. Benefits of the lives saved in the
future by a regulation are reduced by 6-7 percent per year. . . . This
business evaluation tool does not make sense when applied to the
protection of human life. \58\
The regulatory debate over the appropriateness of discounting of
human lives, stated in conclusory terms and virtually devoid of any
sustained analysis, fails to shed light on the important issues
underlying this question. \59\ After providing a brief overview of the
economic approach to valuing human life, the remainder of Part I seeks
to fill this void.
B. Valuations of Human Life
Since the 1970's, willingness-to-pay studies have become the
standard economic technique for placing a value on human life. \60\ By
far the most common method for performing such valuations focuses on
the choices that workers make in accepting risky jobs. \61\ The
approach begins by defining sets of jobs that require comparable skills
and offer comparable non-monetary amenities, except that one exposes
the worker to a higher risk than the other. \62\ Presumably, a rational
worker would not accept the riskier job unless she obtained sufficient
compensation for the additional risk. The resulting wage differential
is the compensation that the worker obtains for the additional
probability of death that she faces as a result of having taken the
riskier job. \63\ An extrapolation, consisting of dividing the wage
differential by the additional probability of death, is then per formed
to determine the value of life. \64\
Willingness-to-pay studies of the value of human life have been
conducted almost exclusively in the context of industrial accidents,
where the worker faces a risk of being either fatally injured by a
piece of machinery and dying instantaneously, or surviving unscathed.
\65\ In any time period, there is a probability that a fatal accident
will occur. This probability is ascertained from industrial safety
statistics. \66\
One could use the same approach to determine the willingness-to-pay
to be free from risks with long latency periods. \67\ As long as
workers understood the additional probability of, say, dying of cancer
from a riskier job, and knew the length of latency period, they could
figure out how much additional compensation to demand in order to
accept the job with the higher risk. From this wage differential, one
would extrapolate to determine the value of the life. The fact that the
harm would accrue only in the future would be reflected in the wage
differential. For example, other things being equal, an individual with
a comparatively high discount rate would demand a comparatively low
wage differential. We would then have measured exactly what we wanted
to see, and there would be no need to perform any discounting.
It is likely that such studies have not been conducted for three
principal reasons. First, the industrial statistics on deaths resulting
from la tent harms are not as extensive as those for instantaneous
accidents. The Federal Government became extensively involved in the
regulation of workplace and environmental safety only in the 1970's
(and prior State efforts in these areas were relatively modest). \68\
For example, if the Federal Government began to compile statistics on
the risk of various work place settings in the mid-1970's, it would
have immediately had a data set on instantaneous accidents. In
contrast, for carcinogenic risks with a 20-year latency period,
comparable statistics on such risks would not be available until the
mid-1990's, unless retrospective studies could be per formed. Moreover,
while accidents on the job are relatively easy to track, statistics on
mortalities associated with latent harms require much more difficult
tracking of the health status of individuals after they leave their
jobs. Further, while the cause of on-the-job accidents typically is
relatively easy to identify, the causal link between occupational
exposure and future harms from carcinogens can be difficult to
establish.
Second, in order for willingness-to-pay studies to yield meaningful
results, individuals must be able to properly understand the nature of
the risk; otherwise, they cannot determine what sum of money properly
compensates them for the risk. Some commentators doubt that our
cognitive capacities are sufficiently developed to perform such
valuations in the case of future harms. \69\
Third, this problem is compounded by the fact that exposure to
carcinogens may have a differential impact depending on an individual's
characteristics, including, for example, whether she smokes. In order
to decide how to respond to a wage premium, individuals would need to
understand not only the ``pure'' carcinogenic risk of the job, but also
the magnitude of any synergistic interactions that might result from
such characteristics.
In summary, the task of directly performing a willingness-to-pay
study of the value of life in the case of latent harms is fraught with
difficulties, perhaps insurmountable ones. Instead, to obtain such a
valuation, resort to a second-best approach is necessary.
C. Discounting as a Second-Best Approach
As a result of the difficulty of obtaining a direct willingness-to-
pay measure of the value of a life threatened by a latent carcinogenic
harm, economists have devoted considerable attention to defining a
relation ship between the value of a life lost today and the value of a
life lost years from now. Such temporal models, also known as life-
cycle models, study the distribution of an individual's utility
throughout her life. \70\
The discussion that follows focuses, for illustrative purposes, on
three different valuations: first, the life of a 40-year old that is
lost today, for example, from an industrial accident; second, the life
of a 60-year old, also lost today; and third, the life of an individual
who is currently 40 years old but dies in 20 years as a result of
exposure today to a carcinogen with a 20-year latency period. \71\ For
this discussion, Vj,k denotes the value attached to the life
of an individual exposed to a harm at age j who dies at age k. Thus,
the values of the three lives described above can be expressed as
V40,40, V60,60, and V40,60,
respectively. To keep the discussion simple, it assumes that these
individuals, if not exposed to the industrial or carcinogenic risk,
would die of natural causes at age 80. \72\
The three valuations differ in two important ways. \73\ First, the
40-year old dying immediately loses 40 years of life whereas the 60-
year old dying immediately and the 40-year old dying in 20 years lose
only 20 years of life. \74\ Second, the individual exposed to the
carcinogen does not lose these 20 years of life immediately, but 20
years later. \75\ Let ul denote the utility that an
individual derives in year l from living that year. So, for example,
for the 40-year old exposed today to the latent harm, u60 is
the utility that the individual would derive in 20 years from living in
the year following her sixtieth birthday. In contrast, for the 60-year
old killed today in an industrial accident, u60 is the
utility that the individual would have derived this year if the
accident had not occurred.
If these utilities were simply monetary payments as opposed to the
well-being that comes from living, they could easily be compared with
one another by discounting the future stream of benefits by a means of
a discount rate. Discounting reflects the fact that it is more
desirable to get a payment sooner rather than later. It is important to
stress that this preference is not a function of the existence of
inflation. In comparing monetary flows occurring at different times,
the effects of inflation can be adjusted by converting all amounts to
constant dollars. But even in an inflation-free world, it is best to
get a given amount of money as soon as possible. Having the money
sooner gives one the option of either spending it immediately or saving
it for later, whereas getting it later (absent borrowing) rules out
immediate spending. The rate used to discount amounts in constant
dollars is typically known as a ``real'' discount rate. \76\
Given a discount rate of r, the present value of a payment P that
is paid t years from now is [1/(1 + r)t]P. \77\ I am not
suggesting at this point that discounting to present value the utility
that an individual derives from living for a year is equivalent to
discounting a monetary payment, and will return to this issue later.
\78\ Instead, I am showing the relation ship among the values of the
three different lives if such discounting were appropriate.
Then,
V40,40 = u40 + [1/(1 + r)]u41 + . . .
+ [1/(1 + r)38]u78 + [1/(1 +
r)39]u79
The loss for the 40-year old killed by the industrial accident is
the utility of living in the year following the individual's fortieth
birthday, plus the utility of living 1 year later discounted for 1
year, plus the utilities of living in all subsequent years until age 80
(when the individual would have died anyway), with each utility
discounted for the number of years elapsed since the present.
In turn,
V60,60 = u60 + [1/(1 + r)]u61> + . . .
+ [1/(1 + r)18]u78 + [1/(1 +
r)19]u79
Here, the loss takes the same form, except that the first year of
loss of utility is the year following the individual's sixtieth
birthday.
Finally,
V40,60 = [1/(1+r)20]u60 + [1/(1 +
r)21]u61 + . . . + [1/(1 +
r)38]u78 + [1/(1 + r)39]u79
Only years following the individual's sixtieth birthday are lost,
and these losses are discounted by the number of years from the
present.
The relationship between V[60,60] and
V[40,60] should now become apparent. The latter value is
simply the former discounted by 20 years. \79\ In other words, both
individuals lose the same years of their lives--those following their
sixtieth birthdays--but the latter individual loses them 20 years later
than the former. Thus,
V40,60 = [1/(1+r)20]V60,60
Under this approach, the value that should be attached to the life
of a 40-year old who is exposed to a carcinogen with a 20 year latency
period and who dies at age 60 is equal to the value of the life of a
60-year old who dies instantaneously in an industrial accident, with
the latter value discounted for the 20 years that elapse before the
carcinogenic victim dies.
So far, in fact, the discussion suggests that the OMB approach
actually overestimates the value of the loss resulting from exposure to
latent risks. The OMB procedure takes V40,40 and discounts
it back to present value to account for the latency period. \80\ In
fact, the correct approach would be to discount V60,60
instead, \81\ which is lower than V40,40 because of the 20
fewer years of life loss. \82\ As explained later, however, this
overvaluation is outweighed by the substantial undervaluation that
results from other elements of OMB's approach. \83\
D. Plausibility of the Model
The model presented in the previous section relies on two important
assumptions. First, it assumes that an individual's utility function
can be expressed as a sum of utilities over the various periods
comprising one's lifetime. Thus, one's enjoyment of life in one period
is not affected by the resources available for consumption in prior
periods, \84\ but only by the resources in that period. \85\ Under the
model, an individual's utility in one period is not affected by the
resources available for consumption in prior periods. \86\ So, for
example, whether an individual was able to afford a quality education
in a prior period does not affect the utility that she derives from a
given level of consumption in subsequent periods. This assumption is
clearly debatable. Indeed, John Broome, in a related con text, terms
the assumption ``dubious,'' \87\ though he acknowledges that it is
commonly made in economic analysis. \88\
Moreover, an individual facing death from cancer may focus on the
fact of the death and on its cause, without paying particular attention
to the death's timing. One's willingness-to-pay to avoid the risk may
then be relatively unaffected by the length of the latency period. A
number of studies show that individuals of different ages exhibit
different willingnesses-to-pay to avoid instantaneous deaths,
suggesting, consistent with the model, that their valuations are indeed
affected by the number of life-years that they would lose. \89\ It is
possible, however, that such behavior would not extend to carcinogenic
risks as a result of the dread associated with such deaths. \90\ As a
result of the paucity of studies of the willingness-to-pay to avoid
carcinogenic risks, \91\ it is not possible to make empirically
grounded claims concerning this hypothesis.
Second, the model uses a constant discount rate. \92\ So, for
example, the same rate would be used to discount the utility of living
20 years in the future as would be used to discount the utility of
living next year. As Donald Shepard and Richard Zeckhauser put it, the
model assumes that ``an individual's utility over lifespans of
different length can be represented as a weighted sum of period
utilities, the weights declining geometrically with time.'' \93\
Shepard and Zeckhauser label this assumption ``heroic.'' \94\
If, for example, I did not currently value at all the utility of
living beyond the year 2010, I would be applying an infinite discount
rate to the utilities that I would derive if in fact I were alive
beyond that year. The present discounted value of those utilities would
be zero. There is no mechanism by which I could transfer any life-years
beyond the year 2010 to someone with a lower discount rate, in return
for a higher present utility. In contrast, in the case of financial
flows, if I undervalued relative to the market the stream of payments
that I would receive on my Treasury bond after the year 2010, I could
increase my utility by selling that stream of payments at the market
price. \95\
There is little attempt in the literature to validate the constant
discounting feature of the model through experiment or observation.
\96\ One study of the implicit discount rates reflected in individuals'
contin gent valuation of the disutilities of various illnesses led the
authors to question whether the conventional discounting model properly
describes individual preferences. \97\
These problems with the assumptions underlying the temporal models
for the valuation of lives threatened by environmental carcinogens
should not lead to the conclusion that the models are inappropriate. At
present, such models are the state-of-the-art in economic analysis. It
is therefore proper to continue to use them, absent a further
refinement or an empirical falsification. But as the regulatory process
seeks to construct appropriate second-best valuations for lives
threatened by environmental carcinogens, it must pay further attention
to the plausibility of the assumptions underlying temporal models.
E. Necessary Adjustments
It is time now to scrutinize with more care some of the assumptions
made implicitly in the model described in Part I.C. Such scrutiny
reveals, for several reasons, that one cannot simply take an estimate
of the value of life from an industrial accident (whether
V[40,40] or V[60,60]), \98\ discount it, and
obtain a plausible estimate of the value of life from exposure to an
environmental carcinogen with a latency period. \99\ Many adjustments
need to be made for the estimate to be at all meaningful. These
adjustments all lead to assigning a higher value to the life lost.
This section examines the principal adjustments that need to be per
formed. It focuses primarily on differences between the valuations for
instantaneous and latent harms that have been the subject of empirical
examination.
1. Impact of Income on the Valuations of Life.--In the temporal
model presented in Part I.C, the utility that an individual derives in
a particular year is a function of the level of resources available for
consumption that year. Economists have estimated that the elasticity of
the value of life with respect to earnings (the percentage change in
the value of life for a 1-percent change in earnings) is approximately
one. Thus, for example, a 10 percent increase in income would lead to a
10 percent increase in the value of life. \100\ The impact of income on
the valuation of life calls into question several of the implicit
assumptions made in Part I.C.
a. Increases in Income Over Time.--That model assumes implicitly
that the valuation of a particular year of life, say the year following
one's 65th birthday, is independent of the age of the individual making
the valuation. Thus, for example, u65, the utility of living
in the year following one's 65th birthday, is the same for both a 40-
year old and a sixty-year old. The only difference related to the
valuation is that the 40-year old discounts this utility for the 25
years that it will take until this utility is realized, whereas the
sixty-year old discounts the utility for only 5 years.
A correction needs to be made, however, if income adjusted for
inflation rises over time. In comparing V[40,60] with
V[60,60], one must account for the fact that by the time the
40-year old is sixty, her income, in real terms, will be higher than
the sixty-year old's income is today.
If income rises in real terms over time, the relationship between
V[40,60] and V[60,60] becomes different than that
posited in Part I.C. \101\ Let g be the yearly increase in the
individual's real income. Then,
V[40,60] = [(1 + g)/(1 +
r)][20]V[60,60]
Thus, V[60,60] now needs to be subjected to two
adjustments. \102\ First, it is increased by a factor of (1 +
g)[20] to account for the fact that the years of lost life
will occur 20 years later for the 40-year old, and that for each of the
years of life lost, the utility lost 20 years from now to the
individual who is currently 40 years old will be (1 + g)[20]
greater than for the individual who is currently 60 years old. Second,
it is decreased by a factor of [1/(1+r)][20] to discount to
present value the utilities that the current 40-year old would enjoy 20
years later. To a first approximation, \103\ the relationship between
V[40,60] and V[60,60] simplifies as follows:
V[40,60] = [1/(1 + r--
g)][20]V[60,60]
For example, if the real discount rate is 3 percent but income is
rising at a yearly rate of 1 percent in real terms, then the effective
rate at which V[60,60] would be discounted to arrive at
V[40,60] would be 2 percent. Moreover, if r and g were
equal, then V[40,60] and V[60,60] would be equal
as well. \104\ The increase in the valuation of V[40,60] to
account for rising real incomes would exactly counteract the decrease
resulting from the time lag in the enjoyment of utilities.
Table I presents the changes between 1982 and 1996 in mean and
median incomes for workers 15 years and over. The figures are presented
in constant 1996 dollars. \105\
Table I: Median and Mean Earnings of Workers of 15 Years Old and Over
(in constant 1996 dollars)
------------------------------------------------------------------------
Median
Earnings Mean Earnings
------------------------------------------------------------------------
1996.................................... 20,716 27,366
1995.................................... 20,541 26,870
1994.................................... 19,858 26,668
1993.................................... 19,566 26,107
1992.................................... 19,521 25,124
1991.................................... 19,752 25,110
1990.................................... 20,092 25,446
1989.................................... 20,667 26,293
1988.................................... 20,475 25,755
1987.................................... 20,182 25,401
1986.................................... 19,564 25,078
1985.................................... 18,787 24,169
1984.................................... 18,366 23,428
1983.................................... 18,275 23,064
1982.................................... 18,135 22,760
------------------------------------------------------------------------
The table reveals that median and mean income grew at compound
rates of 0.95 percent and 1.01 percent per year, respectively. \106\
b. Age-Dependent Nature of the Valuation.--A different issue is
raised by life-cycle changes in levels of income. For example, Donald
Shepard and Richard Zeckhauser analyze the valuations of a typical
individual who enters the work force at age 20, sees steadily rising
income up to age 50, then experiences a small decrease in income until
age 65, and loses all income as a result of retirement at age 65. \107\
The economics literature assumes that people value their lives as a
function of their current income (and resulting consumption), not on
the basis of projections of future income. \108\ Richard Zeckhauser has
labeled this phenomenon as ``temporal myopia.'' \109\
Shifts in an individual's income across time would not make a
difference to the valuations of life if borrowing were available to
equalize the amounts available for consumption. Typically, however,
there are serious roadblocks to borrowing based on the expectation of
higher incomes in the future. \110\ And, to the extent that such
borrowing is possible, for example through credit cards, the interest
rates are prohibitively high.
Shepard and Zeckhauser calculate the impact of age on a person's
valuation of life for two different scenarios, to which they attach
``Robinson Crusoe'' and ``Perfect Markets'' labels. In both cases, the
individual supports her consumption from her own income and wealth, and
has no heirs or dependents. In the Perfect Markets scenario, the
individual can borrow in the capital markets, in order to support a
higher level of consumption earlier in life, and can purchase annuities
to insure against variability in her lifespan. In contrast, in the
Robinson Crusoe scenario, access to these two markets is unavailable.
\111\
The authors show that in the Robinson Crusoe model an individual's
valuation of life reaches its peak at age 40. A 40-year old values her
life 2.5 times as highly as a 20 year old (that is, returning to the
notation previously used, V[40,40] =
2.5V[20,20]). At first glance, this result might appear
counterintuitive. After all, the 20-year old loses 20 more years of
life than the 40-year old. The reason that the 40-year old's valuation
is higher, however, is that her income is more than three times higher,
and this effect more than counteracts the shorter remaining life. \112\
In turn, in the Robinson Crusoe world, the 40-year old values her
life almost twice as highly as a sixty-year old (V[40,40] =
1.98V[60,60]). \113\ Two different effects are at play here.
Most obviously, the sixty-year old has fewer years to live. But another
factor is depressing the sixty-year old's valuation of her life. Beyond
age 40, income continues to rise until age 50, but consumption begins
to fall. The reason is that at age 40, the individual begins to save
for retirement and therefore has fewer resources available for current
consumption. Indeed, even though income at age 60 is comparable to
income at age 40, consumption is about 25 percent lower. \114\
The situation is more straightforward under the Perfect Markets
scenario. There, the valuation of life is highest at age 20, and then
falls continuously through the life cycle. In this model, the 40-year
old's valuation is about two-thirds higher than that of the sixty-year
old. \115\ Here, the difference between V[40,40] and
V[60,60] is attributable exclusively to the different number
of years of remaining life.
To the extent that the assumptions underlying the Robinson Crusoe
model are at least partly realistic, \116\ one needs to worry about the
procedure described in Part I.C in which the sixty-year old's
willingness-to-pay to avoid an immediate death, V[60,60],
was used as a proxy (and then discounted) for a 40-year old's
willingness to pay to avoid a death 20 years later,
V[40,60]. Given the levels of income and savings analyzed by
Shepard and Zeckhauser, using V[60,60] as a proxy for
V[40,60], as was done in Section I.B, will result in an
undervaluation of the willingness to pay to avoid death of about 25
percent (as a result of the lower level of consumption at age 60).
\117\
This undervaluation, however, may have decreased over time. Shepard
and Zeckhauser relied on data from the late 1970's. \118\ Certain legal
changes since that decade, particularly the end of mandatory retirement
and the strengthening of protections against age discrimination, are
likely to have affected the impact of age on income. In particular, it
is possible that the peak income is received later in life and that the
assumption that individuals receive no income after the age of sixty-
five is now unrealistic. These changes would result in increasing the
ratio of the sixty-year old's consumption relative to that of the 40-
year old and thereby diminishing the difference in the valuations of
V[40,40] and V[60,60] in a Robinson Crusoe
economy.
In summary, the discussion in this subsection is presented only to
illustrate the underlying methodological issues that must be resolved
to obtain a plausible estimate of the value of life. More work needs to
be done to determine the plausibility of the Robinson Crusoe model and
the effects of changes in workplace patterns and legal protections
since the 1970's.
c. Distribution of Income Across Occupations.--Individuals who take
risky jobs generally have lower-than-average income. \119\ Thus, there
is a problem in extrapolating from the willingness-to-pay studies
conducted in high-risk occupations to the broader population affected
by environ mental carcinogens.
One threshold issue concerns the definition of the population
affected by the different environmental programs. In principle, for
every environmental regulation, one could attempt to determine the
identity, age profiles, and economic characteristics of the affected
population. One could then construct program-specific valuations of
life that took into account the distribution of ages and incomes of the
affected population, as well as of the latency period of the carcinogen
subject to the regulation.
There are good reasons why one might not want to undertake such an
evaluation. First, the informational requirements are likely to be
daunting. For every environmental program, in addition to estimating
the number of affected individuals, one would need to determine their
demographic and economic characteristics. \120\
Second, an effect of particularized valuations based on levels of
in come would be to justify, on cost-benefit grounds, more stringent
regulation when the affected population is wealthier. Such a policy
would be inconsistent with the central tenet of the increasingly
influential environ mental justice movement, which calls for
environmental regulation to be no less (if not more) responsive to the
needs of communities that are disproportionately poor, or
disproportionately populated by people of color than to the needs of
wealthy, white communities. \121\
As a result, it is reasonable for EPA to use uniform valuations of
life across environmental programs. These valuations would be based on
representative characteristics of the population of the United States.
\122\ Thus, to the extent that the subjects of the empirical studies
involving industrial accidents have relatively low incomes, an upward
adjustment in their valuations of life must be performed before
translating these figures to the environmental context.
The U.S. Census provides median and mean earnings for all workers
and for various occupational categories. \123\ The category including
operators, fabricators, and laborers might be a good proxy for workers
in risky occupations who are the subjects of empirical studies
concerning the value of life. In 1996, the median and mean earnings of
all workers 15 years of age and over were $20,716 and $27,366,
respectively. \124\ The corresponding figures for operators,
fabricators, and laborers were $16,883 and $19,981. \125\ Thus, the
overall median earning is 22.7 percent higher than the median for
workers in risky occupations, and the overall mean is 36.8 percent
higher.
2. Involuntary Nature of the Harm
a. Comparative Valuations of Voluntary and Involuntary Risks.--
There is an extensive literature suggesting that individuals assign
greater value to avoiding risks that are thrust upon them involuntarily
than risks that they incur voluntarily. \126\ As Richard Zeckhauser
points out, ``this tendency would introduce a downward bias in the
implicit life valuations of those who voluntarily assume risks.'' \127\
The risk assumed by individuals who take risky jobs and subject
themselves to a non-trivial possibility of industrial accidents is
generally thought of as a risk assumed voluntarily. \128\ In contrast,
the risk of exposure to environmental carcinogens, for example, as a
result of toxic air pollution, is generally thought of as involuntary.
\129\
As a result, there will be a systematic undervaluation if one takes
the willingness-to-pay to avoid voluntary harms and imports that figure
into the context of environmental regulation. Determining the extent of
the undervaluation, however, is complicated.
The economics profession strongly favors ``revealed preference''
valuations, under which the value assigned to a good can be observed
through a market transaction. Willingness-to-pay studies of wage
differentials needed to compensate individuals for accepting a risk of
death are a prominent example of a revealed preference technique. \130\
Revealed preference approaches are poorly suited for determining the
valuation of involuntary harms because they are based on the existence
of market transactions, and such transactions are generally seen as
voluntary. \131\
Thus, in order to estimate how the valuations of involuntary and
voluntary risks differ, one needs to resort to a different approach. In
recent years, a great deal of attention has been devoted to the
implicit valuations of human life derived from dividing the total cost
of an environmental program by the number of lives saved. The result,
for environmental pro grams that do not have significant other
benefits, is the implicit value that the regulatory program has
assigned to each life. The range of implicit valuations for regulatory
programs is enormous, from around $100,000 per life to a number in the
billions of dollars. \132\ To reach any worthwhile conclusions from
these implicit valuations, one would need to make the heroic assumption
that social expenditures in fact are reflective of public preferences.
Thus, a more promising alternative is to directly question
individuals about the relative value that they attach to avoiding
voluntary and involuntary harms. \133\ In the most comprehensive study
of this type, Maureen Cropper and Uma Subramanian conducted a
nationwide telephone survey of 1,000 households, asking interviewees to
compare an environmental program and a public health program designed
to address a particular risk, such as respiratory illness or cancer.
\134\ The interviewees were first told that the two programs would cost
the same amount of money and save the same number of lives, and were
asked to determine which pro gram was best for society. \135\ Then,
they were told that the program that they had found less attractive
would in fact save x times more lives than its counterpart. The authors
computed the number of lives saved by each program that made the median
respondent indifferent between the two programs.
The interviewees were also told to describe some qualitative
characteristics for the risk addressed by each of the programs, and,
for each characteristic, to place the risk on a ten-point scale. One of
these characteristics was the ease with which the risk could be
avoided, \136\ which is a measure of the risk's voluntariness. \137\ In
each case, the public health risk was deemed to be more voluntary than
the environmental risk. \138\
For the purposes of this Article, the most relevant pair examined
by the researchers was radon control in homes and a pesticide ban on
fruit. Radon control, like workplace hazards, is a paradigmatic
voluntary risk: an individual can avoid the risk by making a monetary
sacrifice. In con trast, pesticide control, like other environmental
risks, generally cannot be addressed effectively absent some level of
social coordination. For this reason, the risk should be regarded as
involuntary. \139\
The respondents were asked to assess, on a ten point scale, the
ease with which the respective risks could be avoided. The mean ratio
of the ease with which the radon risk could be avoided to the ease with
which the pesticide risk could be avoided was 1.31. \140\ When
respondents were told that the two programs would save the same number
of lives (and cost the same), 72 percent chose the pesticide ban and
only 28 percent opted for the radon control. \141\ The median
respondent was indifferent between saving 100 lives by means of the
pesticide ban and 213 lives through radon control. \142\ Thus, the
median respondent implicitly found the life saved imperiled by the
involuntary risk to be twice as ``valuable.''
More generally, the authors found, across the six pairs of risks
that they studied, a consistent, statistically significant preference
for addressing the less voluntary risk. \143\ Moreover, a significant
minority of respondents--between 20 and 30 percent--always preferred
addressing the involuntary risk, regardless of how many more lives
would be saved by transferring the resources to addressing the
voluntary risk. \144\
b. Unrepresentativeness of the Population Exposed to Workplace
Risks.--Another type of adjustment needs to be made when using
valuations of life in workplace settings as a second-best measure of
the appropriate value of life for environmental programs. Individuals
who take relatively risky jobs have a comparatively low willingness-to-
pay to avoid the risk. \145\ Indeed, individuals with higher valuations
would demand greater wage differentials to take a riskier job over an
otherwise comparable job that was less risky. The employers, however,
would not need to pay this higher premium if they could fill their jobs
with workers who had lower valuations.
This concept can be illustrated by reference to an auction. The
employer with the risky jobs offers a low wage premium and sees how
many workers are willing to take the positions. If it does not fill all
the vacancies, it offers a somewhat higher premium, and continues this
process until it is able to fill all the jobs. Any workers who place a
higher value on avoiding the risk end up not getting the job.
As a result, the willingness-to-pay valuations derived from the
study of risky jobs are not the valuations of the mean or median member
of society. Instead, they are the valuations of a relatively small
subgroup with a disproportionate tolerance for risk.
In contrast, environmental risks in general affect a far broader
sector of society. Moreover, because they are involuntary, there is no
easy mechanism for individuals to self-select for such risks based on
their lower-than-average valuations of risk. \146\ Thus, an appropriate
correction needs to be made when extrapolating from the workplace to
the environmental arena. No empirical literature, however, sheds light
on the magnitude of this correction.
3. Dread Nature of the Harm.--There is also an important difference
in the nature of deaths resulting from industrial accidents on the one
hand and from environmental exposures to carcinogens on the other. The
former occur instantaneously and without warning. The latter often
occur following a long and agonizing ordeal. As Cass Sunstein pithily
notes: ``All deaths are bad. But some deaths seem worse than others.''
\147\
A far greater level of social expenditures is devoted to combating
toxic risks like cancer than risks of instantaneous deaths. A recent,
admirably comprehensive study by Tammy Tengs and a number of co-authors
compares the cost-effectiveness of various risk reduction regulations.
\148\ The authors first determine the cost per life saved by dividing
the direct costs of the regulation by the number of lives saved. Then,
they divide this cost per life saved by ``the average number of years
of life saved when a premature death is averted'' to obtain the cost
per life-year saved. \149\
The comparison of costs per life-year saved reveals enormous
disparities. The median medical and toxin control measures cost $19,000
and $2,800,000 per life-year, respectively; the overall median is
$42,000 per life-year. \150\ The authors also found a wide disparity in
occupational in terventions depending on the nature of the death. The
median occupational intervention designed to avert a fatal injury costs
$68,000 per life-year, whereas the median occupational intervention
involving the control of toxins costs $1,400,000--more than 20 times as
much. \151\
But as in the case of the comparison between voluntary harms and
involuntary harms, one cannot draw strong conclusions from these
disparities because public expenditures may well not reflect people's
preferences. \152\ Instead, a more direct measure of the difference in
valuations is preferable.
A study by George Tolley, Donald Kenkel, and Robert Fabian at
tempts to quantify the values attached to the avoidance of unforeseen,
instantaneous deaths on the one hand and carcinogenic deaths on the
other. \153\ For each of these risks, the authors define a low
estimate, a medium estimate, and a high estimate, and present their
figures in 1991 dollars. For unforeseen, instantaneous deaths, the
respective estimates, derived from a survey of willingness-to-pay
studies, are $1 million, $2 mil lion, and $5 million, respectively.
\154\
Because, as indicated earlier, there are no willingness-to-pay
studies estimating the value of life lost from a disease with a long
latency period, \155\ the procedure used by the authors for estimating
the value of carcinogenic deaths is more complicated. As their starting
point, the authors use the estimates for instantaneous deaths. Then,
for their low estimate, they add a component for the value of the
morbidity period preceding the death. \156\ This value is derived
primarily from contingent valuation rather than revealed preference
approaches. \157\
As the authors note, this estimate is conservative for two reasons.
First, it understates the value of morbidity preceding mortality
because conditions that eventually become fatal are more serious than
nonfatal, chronic conditions. Second, it does not account for the dread
aspects of carcinogenic deaths. \158\ The authors account for these two
components in their medium and high estimates, relying primarily on a
survey of how individuals compare deaths from cancer to deaths from
other causes, \159\ and on contingent valuations of periods of severe
limitations of activity preceding death. The authors' low, medium, and
high estimates of the value attached to a life threatened by cancer are
$1.5 million, $4 million, and $9.5 million, respectively. Thus, the
medium valuation of life in the case of carcinogenic exposure is twice
as high as the corresponding valuation for an unforeseen, instantaneous
death. \160\
F. Choice of a Discount Rate
Parts of the preceding discussion have already hinted as to why the
choice of the discount rate used in connection with the valuation of
lives is more complicated than merely picking the discount rate used
for monetary flows. \161\ I can invest $100 today at a 3.5 percent
interest rate and have about $200 in 20 years. I cannot invest the
utility that I derive from living a year at present and obtain, 20
years later, the utility that I would then derive from living 2 years.
\162\ Similarly, I can sell the right to get a payment of $200 in 20
years for a present payment of about $100. I cannot engage in a
comparable transaction with respect to the utility that I would derive
from living in 20 years. As W. Kip Viscusi notes, ``One cannot trade
health . . . across time . . . . If we value our health at 45 but do
not at 25, then we cannot simply shift health status across time in the
same way that we would shift monetary resources.'' \163\
This section undertakes two separate tasks. First, it reviews
empirical evidence suggesting that, despite the conceptual difference
between the two, there is no statistically significant difference
between the discount rate that individuals apply to future health risks
and the discount rate that financial markets apply to flows of money.
Second, it criticizes OMB's approach with respect to discounting,
especially as applied to future health risks, showing that OMB employs
a rate that is inappropriately high.
1. Discounting Health Risks v. Discounting Financial Flows.--
Thoughtful analysts have recognized that the discount rates applied to
financial flows cannot be applied mechanically to the discounting of
the utility that comes from living in the future. \164\ The most
extensive empirical work in this area is that of Michael Moore and W.
Kip Viscusi, who seek to deter mine whether the rates of discount for
health risks differ from the financial rates of time preference. \165\
In their most recent article on the subject, Moore and Viscusi
estimate the implicit discount rate exhibited by workers facing a
probability of instantaneous death as a result of job risks. \166\ They
employ a temporal model that assumes that all life years are valued
equally, \167\ and attempt to determine the relationship between wage
premiums and job risks as a function of the remaining years of workers'
lives (and other relevant characteristics). \168\
For example, consider two workers who have the same life expectancy
and are otherwise also identical, but who demand different wage
premiums for undertaking a risky occupation. The worker with the higher
valuation (who therefore demands the higher wage premium) has a lower
discount rate and therefore values more highly than her counter part
the years that she will lose in the future. Alternatively, if two
workers who have different life expectancies but are otherwise
identical were to demand equal wage premiums, the worker with the
shorter life expectancy will be exhibiting a lower discount rate: she
will be valuing the future years more highly than the other individual.
On the basis of an empirical study of 1463 workers, Moore and
Viscusi calculate a real discount rate of 2 percent. \169\ The authors
note that this real rate ``accords roughly with financial market
interest rates for the period, once these nominal rates are adjusted
for inflation.'' \170\ Their results, therefore, ``provide no empirical
support for utilizing a separate rate of discount for the health
benefits of environmental policies.'' \171\
Moore and Viscusi reach this conclusion despite their earlier
studies, which had found discount rates in the 10-12 percent range.
\172\ They maintain that the confidence limits around these estimates
were sufficiently large that the results should be thought of as
``quite similar.'' \173\ The authors conclude:
In each case the confidence intervals for the discount rate
estimates overlap available market rates of return. Moreover, since the
point estimate of the discount rate falls short of the market rate in
one case and exceeds the market rate in two cases, we find no clear
evidence of systematic differences between discount rates for health
and financial rates of time preference. \174\
With respect to the control of environmental carcinogens, it is
relevant that the authors found that education has a large effect on
the discount rate. In a study that found an overall real discount rate
of 11 percent, the rates for workers with 8 years of schooling and
college-educated workers were 15 percent and 5.5 percent, respectively.
\175\ Thus, to the extent that workers in risky occupations have a
lower-than-average level of educational attainment, a downward
adjustment on the discount rate would need to be made. For
environmental carcinogens, this factor strengthens the authors'
conclusion that the discount rate exhibited by financial markets is
appropriate. \176\
To conclude, it is worth noting that the methodology used to
estimate the rate at which individuals discount future utilities may
lead to an overstatement of this rate. Recall that Moore and Viscusi
assume that all life years are valued equally. \177\ This assumption is
consistent with the standard approach in life-cycle models, in which
the utilities derived from living in particular years are a function
solely of the level of consumption available in those years. \178\ It
is plausible, however, that such utilities are affected also by one's
age, and that they fall (for a given level of consumption) with
increasing age, as a result of the deterioration of one's physical
capacity.
For example, at age 50, one might not be able to engage in the full
range of pleasurable activities that one could have undertaken at age
30. Thus, the choices on how to convert consumption resources into
utility at age 50 would be more constrained. \179\ If this were the
case, part of the lower valuation attributed to later years in one's
life would result from the lower utility derived from living during
those years, rather than from discounting to reflect the passage of
time. As a result, the discount rate estimated from a model in which
utilities are constant across time (or a function only of the magnitude
of resources available for consumption) would overestimate the actual
discount rate.
2. Selecting an Appropriate Rate.--The choice of a discount rate is
a key variable in the cost-benefit analysis of many environmental
regulations. Because the costs of regulatory programs are typically
borne around the time that the regulations go into effect but the
benefits, in the case of latent harms, do not accrue for decades into
the future, the higher the discount rate, the less desirable the
regulation will seem. Re call, for example, that in the Corrosion Proof
Fittings case, the present discounted value of the benefits would have
been approximately ten times greater under a 4 percent discount rate
than under a 10 percent discount rate. \180\
The OMB policy on discount rates does not address specifically the
issue of how to discount health risks. \181\ Thus, these risks are
discounted at the rates used in the evaluation of government projects
in general, and government regulation in particular.
Until 1992, OMB employed a discount rate of 10 percent pursuant to
a policy contained in its Circular A-4.\182\ In 1992, OMB amended this
circular to mandate a real discount rate of 7 percent. \183\ OMB
justifies this rate as ``the marginal pretax rate of return on an
average investment in the private sector in recent years.'' \184\
The OMB policy, however, uses a different discount rate for cost-
effectiveness analysis--that is, to determine which of several programs
yielding identical benefits has the lowest cost in present discounted
terms. For this purpose, OMB employs the real return on long-term
government debt--the interest rate on long-term government bonds minus
the rate of inflation. \185\ In recent years, this figure has
fluctuated between 3 percent and 4 percent. \186\
The use of different rates for cost-benefit and cost-effectiveness
analysis can produce perverse results. For example, consider two
policies that have the same benefits, which are designed to address a
future risk. Policy A costs $700,000 at present whereas Policy B costs
$1,200,000 in 10 years (the figures are in constant dollars). At a 3
percent discount rate, the present discounted value of the cost of
Policy B is higher than $700,000, and thus Policy A would be preferred
on cost-effectiveness grounds. On the other hand, at the discount rate
of 7 percent, which would apply to cost-benefit analysis, Policy B
would be more attractive.
Cost-effectiveness analysis can be used as a short-cut to cost-
benefit analysis where the benefits of two policies are the same. But
logic compels that the policy with the most attractive cost-benefit
ratio also be the most cost-effective. This consistency requirement can
be violated when the discount rates used for cost-benefit and cost-
effectiveness analysis are different. Otherwise a trivial difference,
say of one dollar, in the benefits of the two policies (so that cost-
benefit analysis rather than cost-effectiveness analysis must be used)
would alter the choice between two policies that are essentially
identical.
More fundamentally, however, there appears to be a growing
consensus in the economics literature that the appropriate real
discount rate for government projects is the real return on long-term
government debt--the interest rate on long-term government bonds minus
the rate of inflation. The underlying issues are quite complex, but can
be simplified considerably for the purposes of this discussion. \187\
When the government undertakes a regulatory project, it is trading
costs and benefits on behalf of its citizens. As Frank Arnold notes,
``it then seems reasonable to discount the future benefits to the
present using the same rate that the affected citizens would use, for
it is on their behalf that the project is undertaken.'' \188\ This
rate, often referred to in the literature as the ``consumption'' rate
of interest, \189\ is generally taken to be the after-tax rate of
return, adjusted for inflation, \190\ on relatively risk-free financial
instruments, \191\ such as government bonds. In recent years, the
economics literature has generally called for the use of a real
discount rate of 2-3 percent. \192\
There is a complication, however. Consider initially two environ
mental projects undertaken directly by the government, one financed by
taxes and the other by borrowing. In the case of the project financed
by taxes, the taxes will reduce the consumption of goods, so
discounting the benefits at the consumption rate of interest is the
appropriate procedure: individuals are simply trading off less
consumption now, as a result of the taxes, for future benefits flowing
from the project. \193\
The situation is potentially different if the government finances
the project through borrowing. In a closed economy, with no capital
flows into the country, the borrowing would displace money available
for private investment. Because the returns from this investment yield
taxes, its displacement would produce a loss to the government, equal
to the fore gone taxes. \194\
An analytically analogous situation is posed by environmental
regulation that imposes costs on firms, if these costs cannot be
shifted to con sumers. In a closed economy, such investments would
displace other private sector projects. \195\
The appropriate discount rate under these circumstances is the
marginal pre-tax rate of return on private investment--the rate used by
OMB. \196\ After this return is taxed by the government, the remaining
return must be sufficient to cover the consumption rate of interest. If
the return on the government's project was lower, social welfare would
be enhanced by not undertaking the government project and thereby not
displacing the private investment. \197\
In summary, traditionally, the literature on cost-benefit analysis
inquired as to whether the project under consideration displaced
consumption or private investment. It used the consumption rate of
interest in the former case and the rate of return on capital in the
latter. \198\
In recent years, however, the assumptions underlying this
bifurcated approach have been called into question. In particular,
increasing globalization has led to the integration of capital markets
and the opening of the U.S. economy to foreign investment. \199\ As a
result, our economy can no longer realistically be viewed as closed. In
an open economy, the level of taxable investments is unaffected by
environmental regulation because no capital projects are displaced; the
government therefore does not lose the corresponding tax revenues.
Under these conditions, the consumption rate of interest is the
appropriate discount rate. \200\
Consistent with this view, the consumption rate of interest is
currently used as the discount rate by the General Accounting Office
(GAO) and the Congressional Budget Office (CBO). \201\ Even EPA, which
must submit its proposed and final regulations to OMB for review under
Executive Order 12,866, has used a 3 percent discount rate in
connection with a proposed regulation designed to address lead-based
paint hazards. \202\ Other agencies, however, have explicitly linked
their discount rate to OMB's. \203\
G. Estimating the Undervaluation of Lives Under OMB's Policy
Section E explains the nature of the corrections that need to be
made to intelligently translate the existing valuations of life from
industrial accidents to appropriate valuations for environmental harms
in general and carcinogenic harms in particular. Section F discusses
how to choose an appropriate rate to discount the utility of life-years
saved at the end of a latency period. The purpose of this section is to
obtain a rough estimate of the underestimation of the value of human
life that results from the OMB approach of taking valuations from
workplace settings and mechanically reducing them by an inappropriately
high discount rate over the length of the latency period. Because of
OMB's role as the arbiter of regulatory analysis under Executive Order
12,866, this undervaluation has important public policy consequences.
Once again, the focus is on comparing the valuation of two
different 40-year olds: one who faces a probability of instantaneous
death in an industrial accident, V[in'40,40'], and the other who faces
a probability of death at age 60 from an environmental carcinogen with
a 20-year latency period, V[in'40,60']. Recall the two factors that
make V[in'40,60'] smaller. \204\ First, assuming for the sake of
simplicity that these individuals would otherwise die at age 80, the
number of life-years lost from the carcinogenic risk is only half.
Second, the years lost from the carcinogenic harm occur later, and
discounting is therefore appropriate; at a discount rate of 3 percent,
the discount factor is 0.55. So, using round numbers, if these two
corrections were the only relevant ones, V[in'40,60'] would be about
one-quarter of V[in'40,40'], reflecting reductions of about one-half
each on the account of the discounting and the difference in the life-
years saved, respectively.
One should not overlook, however, the corrections on the other
side, particularly those resulting from the involuntary nature of the
environmental harm compared to the voluntary nature of the workplace
harm, and the dread nature of deaths from environmental carcinogens
compared to the non-dread nature of deaths from instantaneous
industrial accidents. With respect to the first adjustment, the Cropper
and Subramanian study, which compares deaths from voluntary and
involuntary harms, suggests that an adjustment by a factor of two is
appropri ate. \205\ As to the second adjustment, the study by Tolley,
Kenkel, and Fabian finds that avoiding deaths from cancer is valued
twice as much as avoiding instantaneous deaths. \206\
There is a question about how to combine the results of these two
studies. It is not completely clear that the correction from the
Tolley, Kenkel, and Fabian study is based only on the dread nature of
the harm, and is not also affected by different degrees of
voluntariness of the harm. If the carcinogenic and non-carcinogenic
harms compared by these authors shared the same level of voluntariness,
then it would be reasonable to multiply the two factors of two, and
conclude that an adjustment by a factor of four is necessary to account
for the differences in voluntariness and dread.
In contrast, if the carcinogenic harm considered in their estimate
is less voluntary than the non-carcinogenic harm, such a correction
would be excessive. It is clear that the difference in valuations comes
in part from the morbidity that precedes carcinogenic deaths--one
component of the dread nature of cancer. \207\ Moreover, nothing in the
survey on which this study relied for the remainder of the correction
focused the attention of the respondents on differences in the level of
voluntariness. \208\ Thus, it seems unlikely that this issue would have
played a large role in the valuations. \209\
While further research on these matters is clearly needed, to a
first approximation it is reasonable in light of the designs of the two
studies to treat the two factors as multiplicative. Thus, other things
being equal, the value of avoiding a death from an involuntary,
carcinogenic risk should be estimated as four times as large as the
value of avoiding an instantaneous workplace fatality. This upward
adjustment thus cancels the two downward adjustments resulting from the
fewer number of life-years lost and the discounting for the latency
period.
Moreover, other upward adjustments are necessary as well. \210\
First, as indicated above, the median salary for all wage earners is
about 23 percent higher than the median salary for operators,
fabricators and laborers, the U.S. Census category most likely to
contain the subjects of willingness-to-pay studies in the context of
industrial accidents. \211\ Thus, the valuation of lives threatened by
environmental carcinogens should be the subject of an upward adjustment
of another 23 percent.
Second, economic growth must be accounted for. As a result, based
on the 1982-1996 period, the discount rate used in making the down ward
adjustment necessary to account for the fact that the life-years would
be lost in the future should be reduced by about 1 percent. \212\ Thus,
accounting for economic growth leads to an upward adjustment of the
valuation of life of 22 percent. \213\
As indicated above, the OMB approach is to take the valuations of
life from workplace settings and discount them for the length of the
latency period at a rate of 7 percent. \214\ While this approach does
not reduce the valuation to reflect the smaller number of life-years
saved, \215\ using a 7 percent discount rate instead of a 3 percent
rate over a 20-year latency period leads to a downward adjustment of
the valuation by a factor of about four, rather than by a factor of
about two. \216\ One would arrive at the same downward adjustment by a
factor of four, however, if one took account of the smaller number of
life-years saved and discounted at a 3 percent rate.
Moreover, the OMB approach neglects to perform any of the necessary
upward adjustments. Thus, over a 20-year latency period the approach
may undervalue human life by a factor of about six. \217\ For
contaminants with longer latency periods, the undervaluation would be
even greater. \218\
Finally, this estimate of the undervaluation that results from the
OMB approach is probably a lower bound. The true figure may well be
higher because the calculation is based only on those differences
between instantaneous deaths from workplace accidents and deaths from
environ mental carcinogens that can be quantified on the basis of
plausible empirical studies. The preceding discussion has identified
two additional possible sources of undervaluation, but the
quantification of the impact of these sources is not possible as a
result of the lack of relevant empirical analysis. First, and probably
most importantly, the population exposed to workplace accidents has a
comparatively low willingness-to-pay to avoid death, as a result of a
disproportionate tolerance for risk. \219\ Second, to the extent that,
for a given level of resources available for consumption, the utility
of being alive at a particular age falls with increasing age, the
estimates in the literature of the rate at which individuals discount
their future consumption would be higher than warranted. \220\
H. Recasting the Debate
It is now worth highlighting that this Article's approach to
discounting in an intragenerational setting does not pose significant
ethical issues that are distinct from those raised by cost-benefit
analysis in general or the valuation of human life in particular. \221\
In principle, one could directly ascertain, through willingness-to-pay
studies, the value of lives threatened by latent harms. Because
practical problems stand in the way of obtaining such valuations, a
second-best measure, constructed in part by means of discounting future
utilities, must be used instead. \222\ The use of such a proxy,
however, does not give rise to ethical issues other than those that
might exist if the measurement were done directly.
The reason for discounting in the case of latent harms is not that
a regulator or some other outsider determines that life in the future
is less valuable than life in the present. \223\ Instead, discounting
simply reflects the fact that the individual who is valuing her own
life derives less utility from living a year in the future than in the
present. \224\ Discounting is therefore necessary to provide an
accurate value of the utility that the individual loses in the present
as a result of a premature death that might occur in the future.
At the same time, however, discounting is only one of many
necessary adjustments that need to be made when valuations in the
context of industrial accidents are used as the starting point to
construct a value of human life for the purpose of regulating
environmental carcinogens. It has no greater call for legitimacy than
any of the other adjustments analyzed in Part I.E. As the various
empirical estimates show, it is not even dominant in terms of
magnitude. \225\ Thus, the failure of the regulatory process to make
other adjustments, principally as a result of OMB's approach to the
matter, leads to a substantial undervaluation of human life. \226\
The preceding discussion views discounting in this intrapersonal
situation raised by the presence of latent harms as an essentially
technocratic procedure, which must be undertaken in conjunction with
other adjustments of the value of life from instantaneous industrial
accidents, in order to obtain a second-best estimate of the value of a
human life threatened by latent environmental contaminants. This
characterization of the problem may give rise to two types of concerns.
Neither, however, calls for a reevaluation of the ethical status of
discounting in the case of latent harms.
First, one might worry that an individual's decisions today do not
sufficiently protect the person that the individual might become in
several decades. This perspective views the individual as a succession
of ``multiple selves.'' \227\ Its concern is that the individual's
current self would make decisions that undervalued the interests of the
individual's future self by choosing a discount rate that was too high.
This formulation gives rise to a typical externality problem and
converts a technocratic intrapersonal problem into an ethically laden
quasi-interpersonal one.
The objection, however, would not be confined to the role that
discounting plays as a step toward a second-best valuation of human
life threatened by latent harms. Precisely the same objection could be
lodged against an attempt to measure this value directly through
willingness-to-pay studies. One would worry in this context that the
wage premiums demanded by an individual would be too low because the
future costs would be borne not by her current self but by a future
self. The complaint would thus not be attributable to the specific role
played by discounting but, more generally, to the process of valuing
life itself. Thus, as a formal matter, the objection does not disprove
my claim that discounting in an intragenerational setting poses no
significant ethical issues that are distinct from those raised by cost-
benefit analysis in general or the valuation of human life in
particular. \228\
Moreover, such a criticism of revealed preference approaches to the
valuation of threats to human life would not be confined to latent
harms. Take, for example, an instantaneous industrial accident in which
an individual faces probabilities of both death and serious morbidity.
The individual's current self might not have sufficient empathy toward
a future self confined to a wheelchair, and might therefore demand too
low a wage premium.
More broadly, most decisions that we make have future consequences.
Every time that we borrow money, we reduce the resources that will be
available to us in the future. Similarly, every current expenditure
affects the amount that will be available for future expenditures. To
find an externality in each decision with future consequences as a
result of the presence of multiple selves would open the door to
government regulation of essentially every financial decision that we
make. Such an approach would therefore constitute a serious affront to
individual autonomy.
Interfering with individual preferences in this manner might be
appropriate in the face of fairly egregious myopia. For example, in the
somewhat analogous context of social welfare policy, Bruce Ackerman and
Anne Alstott note:
The aim of liberal policy is not to second-guess [individuals']
choices by supposing that everybody 'ought' to save a lot for
retirement if they are to maximize their happiness over their life
times. Its mission is more modest but more fundamental. It is to
protect elderly citizens against the worst consequences of their
earlier psychological myopia. The watchword is not utility maximization
but the assurance of dignified existence in old age. \229\
It would be unwarranted, however, to attack this Article's approach
to the problem of latent harms by deploying the machinery of ``multiple
selves'' analysis. Recall that the approach advocated here is to use
the after-tax return on riskless investments--a rate that currently
stands at between 2 and 3 percent. \230\ If this rate were to be
trumped as insufficiently protective of the future, one would need to
trump every decision to borrow money at market rates of interest. Then,
governmental regulation of individual choices in the face of any
decision with future consequences would become the norm, rather than a
relatively rare club to be wielded only in the face of egregious lack
of foresight.
A different type of objection might be raised to the claim that, in
the context of latent harms, discounting is a technocratic exercise
that does not give rise to difficult ethical choices. Different
individuals have different discount rates, but the social decision of
how to control latent environmental harms needs to be based on a single
rate. Thus, in choosing the rate on which to base social policy, one
needs to make some type of interpersonal comparison. Such comparisons,
which are highly value laden, are inevitable, even if they are made
implicitly by using a common rule of thumb such as basing the policy on
the median discount rate.
Because environmental quality is a public good, once the government
acts, individuals will enjoy a uniform level of quality regardless of
their individual discount rates. Thus, individuals with low discount
rates would be exposed to more latent harms than they would have
preferred, and individuals with high discount rates will be exposed to
harms that are lower than they would have preferred (and consequently,
perhaps, would have to face too high a current financial sacrifice to
fund the policy).
This objection, again, is not particular to the role played by
discounting future utilities in the case of latent harms, but can be
raised more generally against both cost-benefit analysis and the
valuation of human lives. Under cost-benefit analysis, public policy is
chosen on the basis of the aggregate valuations of the benefits. Thus,
individuals with particularly high valuations have to accept a policy
that is laxer than they would have preferred, whereas individuals with
a particularly low valuation face the opposite problem. Similarly, in
the case of public policy decisions taken to prevent even instantaneous
deaths, individuals who value their lives particularly highly (perhaps
because they are unusually wealthy or have a particularly low tolerance
for risk) will face a policy that is laxer than they would have
preferred.
In summary, to the extent that the valuation procedures discussed
in Part I give rise to ethical objections, these objections should be
leveled either against cost-benefit analysis generally or against the
valuation of life in particular. \231\ If these two techniques survive
ethical scrutiny, no substantial independent ethical argument should be
raised against the role played by discounting in an intragenerational
setting. More generally, it is not defensible to argue that the value
assigned by the regulatory process to a human life should be
independent of when an individual's life-years are lost, regardless of
how the timing affects the individual's own valuation.
ii. harms to future generations
As indicated at the outset of this Article, discounting at a rate
of re turn comparable to that earned by financial investments turns the
utilities of generations living a few hundred years from now into a
negligible present discounted value. \232\ Under such conditions,
practically no current expenditure for the benefit of relatively
distant generations could be justified within a cost-benefit framework.
Because many of the consequences of climate change will not manifest
themselves for a long time, \233\ the consequences of discounting at
the rate of return of financial instruments may well be to make any
plausible expenditure to address climate change fail a cost-benefit
test.
The emphasis of many economists on the use of constant discounting
models stands in stark contrast to the approach of international
environmental law, which has given its unqualified endorsement to an
alter native concept to guide intergenerational allocations: the
principle of sustainable development. Indeed, the concept of
sustainable development figures prominently in the most important
agreements concerning international environmental law, \234\ including
the Stockholm Declaration, \235\ the Rio Declaration, \236\ and the
Framework Convention on Climate Change. \237\
Section A shows that models of discounting harms to future
generations cannot be justified merely through appeals to logic.
Section B reviews the empirical literature concerning how individuals
would discount benefits to future generations. The results reveal a
strong intuition against the use of constant discounting models.
Section C analyzes the serious shortcomings of discounting models when
they are used in an intergenerational context. Section D discusses the
role of opportunity costs; even if future utilities are not discounted,
expenditures for environ mental projects might nonetheless be postponed
if other investments can yield higher returns. Section E analyzes the
principle of sustainable development and shows why it too suffers from
serious shortcomings. Finally, Section F presents the outlines of an
attractive theory of intergenerational obligations with respect to the
environment.
A. Discounting and Appeals to Logic
Some proponents of discounting the benefits to future generations
justify their position through appeals to logic, invoking a set of
absurd consequences that would inexorably follow if discounting was not
per formed. Their arguments in this regard are unpersuasive.
1. No Environmental Projects Will Be Undertaken Unless One
Discounts at a Market Rate.--Some commentators argue that unless
environmental benefits are discounted at the rate of return on other
investments, environmental expenditures would always be deferred into
the future and ultimately would never be undertaken. For example, Susan
Putnam and John Graham state:
If a smaller discount rate were to be applied to health than to
money, it would always make sense to postpone adoption of public health
programs that invest money now for deferred health improvements. In
short, society would continually delay risk reduction into the future
and impose the burdens on future generations. \238\
Similarly, according to Emmett Keeler and Shan Cretin:
The discounting of costs but not benefits . . . has a paralyzing
effect on a decisionmaker. . . . For any attractive program, there is
always a superior delayed program which should be funded first. The
result is that no program with a finite starting date can be selected.
\239\
The idea behind this position is that, instead of undertaking the
environ mental program, one could invest the funds in an alternative
project, watch the investment grow, and then address the environmental
problem at some time in the future. At this future time, moreover, one
would engage in the same calculus and decide to postpone the
environmental expenditure once more.
Environmentalists have traditionally favored low discount rates be
cause the costs of environmental protection generally must be borne
well before the benefits begin to accrue. \240\ Thus, a low discount
rate makes a given expenditure seem more desirable. The argument that
no environ mental programs would be undertaken absent discounting at a
market rate turns this view on its head: lack of discounting becomes
environ mentally undesirable.
There are several responses to the justification of the discounting
of environmental benefits by an appeal to a seemingly logical claim
that any alternative would lead to the indefinite postponement of
environmental expenditures. To begin, regardless of whether one
discounted the environmental benefits at the market rate, it would
always be desirable to undertake environmental investments that yielded
a market rate of re turn. So, the claim has to be somewhat more modest:
that only environ mental investments yielding at least a market rate of
return would be undertaken. Other environmental projects, in contrast,
would be delayed forever because they would always look more attractive
in the future, after the funds that would have been allocated to these
projects earned a higher rate of return elsewhere. \241\
There is then a seemingly inescapable logic to discounting environ
mental benefits at the rate of return earned by other investments. If
one used a lower discount rate for environmental benefits,
environmental remediation projects could pass a cost-benefit inquiry
even though the resources would be best spent elsewhere. The use of a
discount rate equal to the rate of return on other projects ensures
that only desirable projects pass a cost-benefit test. \242\
Even with this reformulation, however, the appeal to logic assumes
implicitly that the costs and benefits of the environmental program
will remain unchanged over time; \243\ it is because of this invariance
that delaying expenditures in order to invest at the market rate of
return seems attractive. This assumption, however, is inconsistent with
the structure of many environmental problems.
For example, in the case of the remediation of hazardous waste
sites under the Superfund program, the damages caused by the
contamination are likely to increase significantly over time if the
problem is left unattended. \244\ If addressed early, a cleanup can
take place before the hazardous waste has seeped down to an aquifer,
affecting the quality of the groundwater. At this stage, the cost of
remediation is comparatively modest and the damage from the
contamination (and therefore the benefit of undertaking a remediation)
is comparatively modest as well.
A few years or decades later, however, the pollutants may have
worked their way down to the aquifer. \245\ Then, the damage may be far
higher, since the pollutants could have destroyed important sources of
drinking water. In turn, the costs of remediation would be far higher
as well. \246\
Alternatively, certain environmental problems may become
irreversible. Once that occurs, any finite expenditure on abatement, no
matter how high, will fail to remedy the problem. The costs of
abatement will effectively have increased to infinity.
Thus, in deciding whether to undertake an environmental project
now, one cannot merely perform a static calculation of the magnitude of
costs and damages on a particular date. One needs also to look at the
problem dynamically and determine how the costs and damages would vary
over time if the problem were left unattended.
Consider the following simple example. We could remove some soil
from the site and incinerate it now at a cost of $110, \247\ and the
damage from the current contamination is $100, reflecting a small
increase in the cancer risk of certain residents in neighboring areas.
If one looked at these figures statically, one would decide, on cost-
benefit grounds, not to undertake the cleanup. If the problem is left
unattended, however, in 10 years the remediation cost would be $500, as
a result of the need to pump and treat groundwater, and damage from the
contamination would be $600. At that point, the cleanup would be
justifiable on cost-benefit grounds. For any plausible discount rate,
however, it would be better to spend the $110 upfront to remove and
incinerate the contaminated soil, thereby addressing the current $100
damage problem as well as preventing it from becoming a $600 damage
problem in the future.
Thus, the situation described above presents three policy options:
remediate now, remediate later, or do not remediate. It is desirable to
remediate now not only when the current damage is greater than the
current cost of addressing this damage, but also when the future damage
is greater than the future cost of addressing it, and the increase in
costs in the intervening period is greater than the rate of return on
other investments. \248\
These features concerning the structure of environmental benefits
and costs are no less an issue for climate change than they are for
Superfund problems. \249\ Certain climate change problems may be
irreversible, \250\ and in such cases delaying investment in the
environmental project is not an option. More generally, to make
intelligent policy choices one needs to know, for example, not only the
costs and damages at the time that carbon dioxide loadings in the
atmosphere are doubled relative to some baseline, but also how the
damage changes over time and the extent to which this damage can be
reduced by means of particular policy measures. \251\
In addition, in the case of climate change, there is the
possibility of catastrophic consequences. \252\ In the face of such
consequences, risk aversion would justify undertaking projects even if
their expected return was lower than that of other projects. \253\
Moreover, the view that before addressing environmental programs we
should exhaust higher-yielding investments in other areas overlooks
important difficulties concerning the transfer of resources across
projects. \254\ Say, for example, that initially the greatest returns
to a given investment would be to improve the educational system of
particularly poor developing countries. \255\ Over the first 20 years,
resources in vested in this manner earn a greater return than if they
had been placed in an environmental project. Moreover, over this
period, the costs of environmental remediation are increasing at a rate
lower than the return on the educational investment.
After 20 years, however, the calculus changes. The costs of the
environmental project, though less than the resulting benefits, begin
to rise at a rate higher than the rate of return to education in the
developing country. At that point, it is desirable to take the proceeds
of the educational investment and transfer them to the environmental
investment.
There is good reason to be skeptical about the feasibility of this
transfer. Part of the returns from the educational investment may have
been consumed by its beneficiaries, and may therefore no longer be
available to fund the environmental project. Other resources may be
sunk in long-term investments, such as infrastructure, from which they
could not feasibly be extricated.
The transfer of even liquid investments may raise problems. The
developing countries (or whatever interest group benefits from the
initial allocation) might object to having the resources transferred to
address a problem that they attribute to developed countries. Absent
their con sent, there might be no clear mechanism for effecting the
transfer. Of course, one could attempt to deal with this problem ex
ante by contracting between the provider of the funds and the temporary
recipient. Nonetheless, there are likely to be difficulties enforcing
the rights under such a contract.
In summary, the resort to logic must fail. Perhaps the argument
could be further recast to state that environmental expenditures should
not be undertaken if other projects have a higher return, if the costs
and damages associated with leaving the environmental problem
unattended do not rise too fast, if the potential for catastrophic
environmental consequences in the absence of immediate measures is
sufficiently low, and if the difficulties of transferring resources
across projects are not insurmountable. Then, of course, the claim made
by supporters of discounting would have lost all their bite and would
have become essentially tautological.
2. Failure to Discount Would Lead to the Impoverishment of the
Current Generation.--A different argument maintains that not
discounting the value of benefits to future generations makes it
desirable for us to impoverish ourselves down to subsistence levels for
the benefit of future generations. As Tyler Cowen and Derek Parfit
describe the argument (to which they do not subscribe):
We clearly need a discount rate for theoretical reasons. Other wise
any small increase in benefits that extends far into the future might
demand any amount of sacrifice in the present, be cause in time the
benefits would outweigh the cost. \256\
The logic is not limited to our generation. In turn, subsequent
generations face the same incentive, and they become impoverished as
well. Thus, ``failure to discount would leave all generations at a
subsistence level of existence, because benefits would be postponed
perpetually for the future.'' \257\
There are two serious problems with the argument. First, it assumes
implicitly that the objective of the decisionmaker is to maximize a
social welfare function that adds up the interests of all generations.
Then, deferring consumption now makes additional resources available
for the future, when more people are around to derive utility from
them. The question of whether it is appropriate to determine our
obligations to future generations by reference to an aggregate social
welfare function can not be resolved as a matter of logic. Instead, it
must be defended by means of an ethical theory. \258\ The argument that
all generations will be impoverished unless we discount environmental
benefits assumes away the hard ethical choice, \259\ and then notes
that an absurd conclusion would follow absent discounting.
Moreover, the argument for discounting as a way to avoid
impoverishment takes a truncated and fundamentally misleading view of
the manner in which one generation affects the welfare of subsequent
generations. One component, to be sure, is through its consumption of
renewable and nonrenewable resources. Thus, one way in which we could
attempt to impoverish ourselves is by foregoing the consumption of such
resources.
But to a large extent the standard of living of future generations
will depend on current investments in areas such as technological
knowledge, educational attainment, and productive capacity. \260\ Would
our generation make those investments if it was wholly deprived of the
resulting benefit? The answer, presumably, must be negative--that the
level of effort that we bring to the business of making investments
with long-term consequences is a function of the benefits that we can
realize from those investments.
As a result, a requirement that we impoverish ourselves to leave
more resources for future generations could actually decrease, rather
than in crease, the resources available in the future. One might
respond by saying that our generation has an obligation to provide the
level of investment that it would have provided under a regime in which
it could at least share in the fruits of its labors. That may well be a
plausible argument, but it derives from an ethical judgment. Thus, the
appeal to logic fails here as well.
In summary, the failure to discount does not inexorably lead to the
impoverishment of all generations; it does so only if one makes two
ethical judgments: that the appropriate social welfare function adds up
the utilities of all generations, and that the current generation has
an ethical obligation to invest in a stock of activities affecting
long-term well-being even if it cannot keep any of the resulting
benefits.
B. Intuitions About Discounting
Before proceeding further, it is worth reviewing some empirical
studies seeking to determine how individuals think about long-term
discount ing issues. A caveat is appropriate at the outset. If
individuals in the cur rent generation indicate that they would
discount the benefits of future generations, one should not
automatically conclude that the decision reflects an honest ethical
judgment. Instead, the judgment of these individuals might be
compromised by self-interest. On the other hand, it would be relevant
if members of the current generation, despite their self-interst to the
contrary, were prepared to make social decisions protective of future
generations. Their generosity might be indicative of an ethical in
tuition that the benefits accruing to future generations should not be
discounted very much, or perhaps not at all.
Most of the empirical studies in this area use a similar
methodology. Typical of the approach is the questionnaire prepared by
Maureen Cropper, Sema Aydede and Paul Portney, which states:
Without new programs, 100 people will die this year from pollution
and 200 people will die 50 years from now. The government has to choose
between programs that cost the same, but there is only enough money for
one . . . . Which program would you choose? \261\
In their surveys, the authors varied the number of lives that would
be saved in the future (but kept constant at 100 the number of lives
saved in the present). They also varied, between 5 years and 100 years,
the time at which the future lives would be saved. \262\ From the
responses, they computed the discount rates that the respondents
assigned to future consequences. The mean of the respondents' discount
rates was 8.6 percent, 6.8 percent, and 3.4 percent, for time horizons
of 25, 50, and 100 years, respectively. \263\ A similar study,
conducted in Sweden, calculated discount rates of about 25 percent, 12
percent, and 8 percent, for time horizons of 20, 50, and 100 years,
respectively. \264\
More strikingly, another Swedish study sought to compare the
seriousness of a leakage of spent nuclear fuel at times ranging between
one thousand and almost two million years into the future. Almost one
third of the respondents did not discount the future consequences at
all. Among those who did, the mean discount rate attached to an
accident in the year 10,000 was less than one-hundredth of 1 percent--
practically zero. \265\
The studies reveal an essentially unanimous opposition to the core
component of the traditional discounting model: that future
consequences should be discounted at a constant rate and that the rate
of discounting should be set by reference to the rate of return on
particular investments. \266\ Instead, the studies show a consistent
pattern under which the discount rate falls as the time horizon gets
longer. \267\ More over, the discount rate with respect to very long
time horizons is well under the rate of return on investments in
financial markets. \268\
C. Discounting in a Global Utilitarian Calculus
Thus, at this point the argument has established that the propriety
of discounting the benefits to future generations cannot be resolved by
appeals to logic. Moreover, empirical studies reveal a moral intuition
opposed, over the long-term, to constant discounting at a rate of
return comparable to that generated by financial markets. It is now
time to focus directly on the propriety of discounting.
Most economic formulations of discounting in an intergenerational
context posit a social welfare function that aggregates the utilities
of individuals in the different generations. \269\ For each time
period, the utility is multiplied by a rate of pure time preference,
which is a measure of the difference in importance attached to current
utility as compared to utility in the future. \270\ This rate could be
zero (the utilities of current and future generations have the equal
importance) or positive (the utilities of earlier generations are
privileged). \271\ The goal of the decisionmaker is to maximize the
aggregate utility function. \272\
In this framework, the discount rate that maximizes aggregate
utility can be written as follows:
d = [rho] + [THETA] g where d is the discount rate, [rho] is the
rate of pure time preference, [THETA] is the absolute value of the
elasticity of marginal utility (a measure of the relative effect of a
change in income on utility), and g is the growth rate of per capita
consumption. \273\
The pure rate of time preference, [rho] , reflects the fact that if
the social welfare function gives less weight to the utilities of later
generations, then those utilities must be discounted in order to make
them comparable to the utility of the current generation. The term
composed of the product of [THETA] and g has a less direct genesis.
Most economic models of discounting assume that individuals in the
future will enjoy higher rates of consumption than individuals in the
present: more specifically, the level of consumption will increase at a
rate of g. \274\ The models also assume that individuals exhibit a
declining marginal utility of consumption--that is, that a unit of
consumption has a greater effect on the utility of an individual with a
lower level of consumption than on one with a higher level of
consumption. \275\
As a result, if later generations will enjoy a higher level of
consumption as a result of economic growth, social welfare can be
increased by allocating some additional resources to earlier
generations. The [THETA] g term represents the amount of discounting
that must be performed, in order to maximize social welfare, on account
of the higher levels of consumption of later generations.
The following subsections deal specifically with each of the two
components of the discount rate.
1. Pure Rate of Time Preference.--Exemplifying the position of many
economists, Victor Fuchs and Richard Zeckhauser take a strong position
in favor of discounting at the rate of return on financial instruments.
They maintain:
Most policy planning discussions assume full altruism--future
citizens are given equal weight with present citizens--and discount
solely for the time value of money. Given this ethical premise, the
value of life years to future generations should be discounted at the
time-value-of-money rate. \276\
Terming this approach ``full altruism'' is somewhat contrived. In
fact, it privileges the interests of the current generation to a very
large extent.
Recall that, at a time-value-of-money rate of 5 percent, this
approach equates the loss of one life today with the loss of a billion
lives in 500 years. \277\ Stated somewhat differently, assume that the
population of the world remains constant at about 6 billion people over
the next 500 years. Under a model of time discounting, what would be
the maximum current expenditure that could be justified in order to
prevent the death of every living individual in 500 years? Placing a
value of life of $5 million, in constant dollars, the maximum current
amount that we could justify spending now to avert the destruction of
the human race in 500 years would be $30 million. (At the OMB rate of 7
percent, this amount would be only about $10!) More conventional
definitions of altruism would presumably call for a different result.
Indeed, the discount factors are simply the weights used to compare
the value attached to the utilities of individuals in different
generations. A pure rate of time preference of zero is equivalent to
giving the utility of persons living at different points in time the
same weight in the social welfare calculus. \278\ Any positive rate
simply reflects the preferences of a social welfare evaluator to
depreciate the utilities of future generations. \279\
The ethically compromised status of discounting for time preference
at a constant rate can perhaps be best illustrated by the following
example. Consider an exceedingly simple economy with 100 units of re
sources. Two individuals, with identical utility functions, live in
this economy: one from year 1 to year 50 and the other from year 51 to
year 100. There is no possibility for productive activity; thus, the
individuals will be able to derive utility only from the existing 100
units of resources. \280\
In the absence of discounting for time preference, each individual
would be allocated 50 units of resources. In the face of a positive
rate of time preference, however, even a relatively modest one, the
first individual would get the bulk of the resources. It would be
difficult to construct an attractive ethical theory that privileged the
first individual in this manner merely because she lived 50 years
earlier than the second individual.
The possible justifications for discounting for time preference at
a positive rate are not compelling. First, one might posit that if
discounting for time is appropriate intragenerationally, it should be
acceptable in tergenerationally as well. There is a fundamental
difference, however, between the two situations.
Intragenerational discounting affects the timing with which a
particular individual decides to expend a fixed amount of resources. It
is merely a reflection of the individual's preferences and, as
discussed in Part I.H, does not raise any significant ethical
questions. \281\ In contrast, intergenerational discounting affects the
quantity of resources available to each individual.
In an intergenerational context, one must initially decide how to
allocate resources to individuals in different generations--a societal
decision with ethical underpinnings. Then, each individual must decide
how to time the consumption of resources across her lifetime--a
personal decision with no ethical ramifications, \282\ other than a
weak concern about excessive myopia. \283\
Some economic models that purport to analyze intergenerational
problems construct their utility function by reference to an individual
who lives forever. \284\ Models of this type collapse the
intergenerational and intragenerational aspects of the optimization
across generations. \285\ Thus, they overlook an important dimension of
the problem. One simply cannot avoid making ethical judgments about
intergenerational transfers by mechanically importing to this endeavor
the intragenerational framework. \286\
The second possible justification is that time discounting does not
show lesser regard for future generations because even though it under
values the interests of a particular generation relative to an earlier
generation, it overvalues its interests relative to a later one.
According to this claim, each generation is treated in a comparable
way: somewhat worse than its predecessors and somewhat better than its
successors.
The claim is not an affirmative argument for discounting. Instead,
its ambition is far narrower: it merely responds to one possible
argument against discounting. It does not carry the day, however, even
in this limited respect. Absent economic growth, as would be the case
for example in economies with high levels of consumption, constant
discounting for time preference would lead to the progressive
impoverishment of subsequent generations. Given the choice between
consuming resources in the present and leaving them for future
generations one would choose the former because the utilities derived
from these resources by later generations would be heavily discounted.
It is true that if discounting actually threatened to impoverish
future generations additional resources would be allocated to these
generations as a result of the declining marginal utility of
consumption, which would make the poorer generations value a unit of
consumption more. This phenomenon, which is a feature of growth
discounting at a negative rate of growth, could mitigate some of the
harshness that would otherwise result. The existence of such a safety
valve, however, is hardly a ringing endorsement of discounting for the
pure rate of time preference.
Yet another argument for discounting for time preference focuses on
the greater affinity that the current generation feels for itself and
for the generations that immediately follow it. As Kenneth Arrow and
several co-authors note, the rate of time preference ``may represent
discounting for empathetic distance (because we may feel greater
affinity for generations closer to us).'' \287\ By its terms, the
statement purports to make a descriptive claim rather than a normative
judgment: it does not explain why a social welfare function that
reflects such judgments is ethically defensible. \288\
Moreover, this argument for discounting is suspect even as a
descriptive claim, as the empirical evidence discussed in Part II.B
shows quite clearly. \289\ It is plausible that we would like to favor
ourselves over future generations, and that with respect to future
generations we would like to privilege the generations of our children
and grandchildren, and per haps even great-grandchildren, over
subsequent generations. \290\ But discounting at a constant rate
implies that our decreasing regard for subsequent generations continues
forever. For example, it seems unlikely that, on this account, we would
value the loss of one billion lives 1000 years no more than the loss of
one life 500 years from now, as would be the case if we used a discount
rate of 5 percent. \291\
Other commentators justify discounting by reference to the
probability that some catastrophe in the future will result in the
destruction of human civilization. \292\ The point then is that if we
are not sure that a future generation will exist, we should allocate
more resources to earlier generations, which are more likely to be
around to enjoy the re sources. This argument could well justify
discounting at a constant rate, but it is very unlikely that the rate
would be more than infinitesimal. \293\
Also embedded in the claim is an ethical issue. To some extent, the
survival of humanity is imperiled by actions of our generation, and of
a few generations immediately preceding ours. The consequences of
nuclear war are one such example. Over the long run, climate change
itself may result in a catastrophic scenario. \294\ If we are
contributing to the probability of humanity's extinction, should we
then invoke this possible outcome as an argument to allocate more
resources to ourselves? A quite plausible principle is that the current
generation should not benefit in this manner from its externalizing
behavior.
Finally, time discounting is sometimes justified on the grounds
that over time some kind of countermeasures or cures for environmental
problems may be devised. \295\ If, indeed, there were a scientific
basis to support such an assumption, a welfarist framework would call
for reducing the harm by the probability that ultimately the harm will
not in fact accrue. To the extent that the harm was potentially a
catastrophic one, however, risk aversion would mitigate that reduction.
\296\ More fundamentally, it would be an exceedingly unusual
coincidence if the probability that an environmental problem would
self-correct just happened to equal the interest rate on financial
instruments for every problem and for every length of time. \297\ Thus,
in its general formulation, this argument for discounting must be
rejected as devoid of any factual basis. \298\
In summary, the arguments for discounting as a result of the pure
time preference are not compelling. \299\ The confusion surrounding the
issue stems, at least in part, from equating intragenerational
discounting, which ought not to be considered particularly
controversial, \300\ with in tergenerational discounting, \301\ which
raises a different set of issues. \302\ To conclude, it is worth noting
that even though discounting for time preference is a relatively
standard technique in economics, there is a long and respectable
tradition, traced to an article published in 1926 by Frank Ramsey, that
rejects such discounting in intergenerational contexts. \303\
2. Growth in Levels of Consumption Over Time.--It is time to turn
to the question of discounting as a result of the growth in levels of
consumption over time. Recall that the argument in favor of such
discounting rests on the predicted additional wealth of future
generations and the decreasing marginal utility of consumption. \304\
Given these conditions, growth discounting leads to the maximization of
the social welfare function. \305\
Before evaluating the argument for such discounting, it is worth
pausing to consider the magnitude of what is at stake. As explained
above, the discount rate for growth that maximizes social welfare is
the product of g, the growth rate of per capita consumption, and
[THETA] , the absolute value of the elasticity of marginal utility.
Arrow and his co-authors indicate that most empirical estimates of this
elasticity place it in the range between one and two; thus they use the
mid-point, 1.5, in some of their calculations. \306\ With respect to
long-term per capita growth, the central estimate of the
Intergovernmental Panel on Climate Change placed it at 1.6 percent.
\307\ Thus, the rate of discount for growth would be 2.4 percent. This
amount is far from inconsequential. It implies, for example, that we
would be indifferent between saving one life now and 10.7 lives in 100
years, or between saving one life now and 141,247 lives in 500 years.
This type of discounting gives rise to two important concerns.
First, to the extent that subsequent generations are wealthier, they
will value the benefits of environmental protection more highly. The
standard economic models calculate the environmental damage on the
basis of the valuation of the current generation: economic growth
implies that later generations will have higher valuations. \308\
Standard estimates of the benefits of climate change measures include a
reduction in the loss of lives. \309\ As shown above, the elasticity of
this valuation with respect to levels of consumption is approximately
one. \310\ Thus, this valuation should be expected to rise at the rate
of economic growth. \311\ Similarly, valuations of environmental
amenities and natural resources are closely linked to levels of income,
\312\ and will rise with rising income. \313\ If the valuation of all
the components of the damage of climate change in creased at the rate
of economic growth, this factor would either completely cancel out any
discounting as a result of greater wealth (when [THETA] is equal to
one), or greatly reduce the extent of such discounting (when [THETA] is
somewhat greater than one).
More fundamentally, the growth discounting account assumes
implicitly that the benefits of environmental activities are
distributed in the same manner as the costs. Then, because the benefits
accrue to individuals who are wealthier than those who bear the costs,
the beneficiaries have a lower marginal utility of consumption, and
discounting is necessary to maximize social welfare. This implicit
assumption is highly questionable. Most studies of the impact of
climate change show that the damages will be suffered
disproportionately by individuals in poor developing countries:
Bangladesh, for example, is likely to be particularly affected by sea
level rises. \314\ In contrast, the contribution to the global warming
problem lies to a large extent with the developed countries, and
financial responsibility for mitigation measures will be borne
primarily by these countries. \315\
Currently, the United States and Bangladesh have per capita gross
national products (GNP) of $26,980 and $240, respectively. \316\ The
figures differ by a factor of about 112. It is quite unlikely that in
100 years or so Bangladesh and the United States will have the same per
capita GNP. Thus, to the extent that the United States is paying for
the environ mental measures and Bangladesh is benefiting from them, the
kind of growth discounting contemplated in the standard economic models
is clearly inapposite. In order to maximize the social welfare
function, a lower factor would have to be used to reflect the fact that
even when the benefits of climate change measures begin to accrue,
Bangladesh will be poorer than the United States.
It is quite possible that even in a hundred years Bangladesh's per
capita GNP, in constant dollars, will be lower than the per capita GNP
in the United States is now. Then, in order to maximize the social
welfare function, one would have to apply a negative discount rate.
Such a rate would justify spending more now than the benefits in the
future because the benefits in the future would accrue to individuals
with lower levels of consumption, and hence higher marginal utilities
of consumption.
One might object to this line of argument on the grounds that
citizens of the United States have no obligation to improve the lot of
Bangladesh. Such a position is certainly debatable, but it resides
outside the domain of utilitarianism, where the concept of discounting
future utilities has its intellectual home. In the example described
above, where in constant dollars the per capita GNP in Bangladesh in
100 years is lower than the current per capita GNP in the United
States, a negative discount rate does maximize the social welfare
function and is the policy that should be chosen on utilitarian
grounds.
This discussion points to an obvious anomaly. If we are prepared to
be serious about utilitarianism in the intergenerational context, why
do we not take it seriously in the intragenerational context? Doing so
would imply a large increase in the aid from developed to developing
countries, where the marginal utility of consumption is far higher as a
result of the much lower per capita GNP.
One can, to be sure, construct a plausible ethical theory under
which greater current foreign aid is not compelled but mitigation
measures for climate change are. The depressed economic status of
developing countries might not be the direct consequence of any actions
by the developed countries, although the issue is not uncontroversial.
In contrast, any damages that might affect developing countries as a
result of climate changes are caused to a large degree by energy
consumption patterns in the developed countries. \317\ So, the
developed countries might have an obligation to mitigate a problem that
they caused and yet not have a similar obligation to reduce a level of
inequality that they did not cause.
It is difficult, however, to reconcile such an ethical theory with
welfarist approaches. Whether the lower level of per capita GNP in
developing countries is caused by climate change or not, it still
results in a higher marginal utility of consumption. If the purpose is
to transfer re sources to where they will produce the greatest increase
in utility, the cause of the inequality simply does not matter.
Moreover, the selective rejection of utilitarianism to justify the
current low levels of foreign aid would call into question its
selective invocation to justify discounting in some fashion the
benefits to future generations of environmental measures. \318\
Alternatively, one might argue that utilitarianism calls for
maximizing only the aggregate social welfare function of the relevant
polity. With respect to the analysis of foreign aid, the relevant
polity might be each individual nation. Foreign aid would then be
justified only to the extent that donors in a wealthy country derive
utility from helping recipients in a poorer country, not on the basis
of the utility derived by the recipients.
In the context of climate change, given the global nature of the
problem, it would be paradoxical to decide on a nation's obligations
merely by reference to that nation's aggregate social welfare function.
Indeed, the standard economic formulation of discounting aggregates
across a global social welfare function and no commentator that I am
aware of argues for a more constrained view. Perhaps one could
construct a defensible theory under which the relevant polity changed
with the nature of the problem, but it could not be derived solely from
utilitarian principles and would have to be grounded on some
nonconsequentialist ethical norm.
Growth discounting also inappropriately merges the decision
concerning the desirability of a project with distributional
considerations. Under cost-benefit analysis, projects are undertaken
based on the aggregate willingness-to-pay of the beneficiaries. Because
the government undertakes large numbers of projects and regulatory
initiatives, the losers with respect to one governmental intervention
may well become winners with respect to another. It therefore does not
make sense to suffer social welfare losses with respect to an
individual project simply to obtain a more desirable distribution of
resources.
After aggregating all projects, however, the set of policies that
maximizes net social welfare across the population as a whole might
impose significant net costs on a subset of the population. To the
extent that such inequities persist, the government can effect
redistribution intragenerationally through the income tax system. Such
an approach generally gives rise to fewer distortions and is therefore
more desirable than compromising the social welfare consequences of
individual projects. \319\
In contrast, under growth discounting, the amount invested in an
environmental project will be less than that justified by reference to
the aggregate willingness-to-pay of the beneficiaries. Thus, the
efficiency of each individual project would be compromised in order to
effect redistribution.
It is true, of course, that intergenerational redistribution is
more difficult to achieve than its intragenerational counterpart. For
example, if we allocate more to the current generation in order to
improve the aggregate social welfare but feel that such a policy
imposes net costs on future generations, there is no easy means to
compensate future generations. In theory, we could tax ourselves to
create a trust fund that future generations could tap into at
predetermined times, but there is a high likelihood that the money
would become an attractive target in the future for our generation, or
for intervening generations. Thus, the durability of the arrangement
over the long-term could not be assured.
A different problem would arise if social welfare were to be
maximized by allocating resources to future generations in a manner
that imposed unacceptably high net costs on the current generation--the
phenomenon that underlies the growth discounting approach. There is no
obviously desirable mechanism by which we could tax future generations
in order to compensate ourselves. \320\ While we could consume
suboptimally high levels of renewable and nonrenewable resources, such
consumption imperils social welfare in a way that is avoided by
redistribution through the tax system. A better alternative is to
finance measures that benefit the current generation through long-term
debt, the burden of which would eventually fall on future generations.
These difficulties suggest that the benefits of intragenerational
redistribution through the tax system will not be fully available
intergenerationally. Nonetheless, these difficulties do not necessarily
call for conflating the resource allocation and distribution inquiries,
as growth discounting does. Instead, one needs to ascertain, as one
typically does in the intragenerational context, whether bifurcating
the inquiry and per forming the redistribution through a different
mechanism would reduce undesirable distortions.
D. Role of Opportunity Costs
My argument should not be read to imply that discounting has no
role to play in the intergenerational context. For example, consider a
harm that could be averted either now or in the future. In this
scenario, assume that if the problem were addressed in the future,
funds could be invested now in other projects and then transferred at a
later time to avert the harm. The most that it would be worth paying to
avert the future harm now is the present discounted value, at the rate
of return generated by these alternative projects, of the amount that
would be needed if the problem were addressed in the future. Regardless
of the nature of our obligation to future generations, it makes no
sense to spend more when we can achieve the same result for less.
A similar result could attach even to an irreversible environmental
problem. Consider an environmental harm that can be remedied only
through a current expenditure: if the problem is not addressed now, it
cannot be successfully addressed in the future. Even if the objective
were to transfer resources to a future generation, it might nonetheless
be preferable to leave the problem unattended if alternative
investments would yield a higher rate of return. Then, the future
generation would have to face the environmental harm but would enjoy,
for example, the fruits of greater investments in technological
innovation. \321\
The substitutability of environmental and non-environmental
benefits can be seen most clearly from the vantage point of a
utilitarian perspective. The utilitarian objective is to deploy
society's resources in whatever way increases aggregate utility by the
largest amount, not to prevent specific environmental harms. Suppose
that aggregate utility would increase by transferring current resources
to a future generation. If a given investment of resources would yield
a larger return in a non-environmental project, the utilitarian
calculus would favor this investment over an environmental investment
yielding a lower return.
One might conclude at first glance that my disagreement with
advocates of discounting the utilities of future generations is only
semantic. It might appear, indeed, that taking account of opportunity
costs in deciding whether to undertake environmental projects for the
benefit of future generations leads to the same results as discounting
the utilities of those generations.
Indeed, consider the following two procedures. Under the first
procedure, one undertakes any project for which the current cost (in
fore gone utility for the current generation) is greater than the
present discounted value of the utilities of the future generation that
the project is intended to benefit. Under the second procedure, one
does not discount the utilities of future generations, but undertakes
the project only if the rate of return of the investment is greater
than the rate of return of alter native investments (otherwise, even if
resources are worth transferring into the future, the alternative
investments will be preferable).
As is almost self-evident, these two procedures will yield the same
results in certain cases. These procedures, however, are conceptually
different and can yield different results in other cases.
Most importantly, discounting the utilities of future generations
is a means for determining our obligations to those generations. It is
the objective function of a specific ethical theory. In contrast,
paying attention to opportunity costs does not imply the choice of any
particular theory. It is simply a way of ensuring that society furthers
its chosen theory, whatever that theory may be, in the most cost-
effective way possible.
For example, suppose that a societal goal is in fact to prevent
certain types of irreversible environmental harms, as may be the case
under formulations of the principle of sustainable development. \322\
We would still defer expenditures for environmental projects if
alternative uses of the funds could have a higher rate of return over a
given period. But at the point at which such a harm was about to become
irreversible, we would undertake the environmental expenditure to
prevent this outcome regardless of the rate of return on other
projects. Moreover, in deciding how long to delay the expenditure, one
would have to consider whether funds invested in other projects could
easily be transferred at a later time to the environmental project.
\323\ In contrast, if the social objective were to maximize a
discounted social welfare function, the expenditure would never be
undertaken if the present discounted value of the benefits was lower
than the costs.
Similarly, under a corrective justice approach, countries
responsible for environmental degradation would have an obligation to
mitigate the adverse effects of such degradation. It would nonetheless
be appropriate to delay expenditures if alternative interim investments
were to yield a higher rate of return. But, at some point, the
mitigation would have to be tackled. In contrast, the approach of
discounting the utilities of future generations could provide a
different prescription altogether.
E. Intergenerational Obligations and Sustainable Development
There is virtual agreement that the central function of the
principle of sustainable development is to guide intergenerational
allocations. \324\ Because this principle is strongly endorsed in
international environmental law agreements, \325\ it is important to
ascertain the extent to which it sets forth an attractive theory of
intergenerational obligations. \326\
Before turning to this task, however, one must at least attempt to
convert what is still quite an amorphous concept, which suffers from
the lack of a uniform definition, \327\ into a tool that can actually
guide decisions. The starting point to most discussions in this area is
the language in Our Common Future, the 1987 report of the World
Commission on Environment and Development (often referred to as the
Brundtland Re port, after its chair, the then Prime Minister of
Norway). \328\ This report defines sustainable development as
development that ``meets the needs of the present without compromising
the ability of future generations to meet their own needs.'' \329\ This
statement, however, leaves open wide room for disagreement.
Perhaps the two most influential perspectives on what obligations
to future generations are encompassed by the principle of sustainable
development are those of Edith Brown Weiss and Robert Solow, which are
rooted in the traditions of international law and of economics,
respectively. \330\
Weiss equates sustainable development with intergenerational
equity, which she defines by reference to three principles. \331\
First, the principle of conservation of options requires each
generation to preserve the natural and cultural resource bases so that
the options available to future generations are not unduly restricted.
Second, the principle of conservation of quality requires each
generation to prevent a worsening of the planet's environmental
quality. Third, the principle of conservation of access requires each
generation to provide its members with equitable rights of access to
the legacy of past generations, and to conserve this access for the
benefit of future generations. \332\
In contrast, according to Solow, sustainability requires that each
future generation have the means to be as well off as its predecessors.
He gives content to this principle by proposing a modification to the
traditional measure of a nation's economic activity. From Net National
Product (NNP)--Gross Domestic Product (GDP) minus the depreciation of
fixed capital assets--he would subtract the value of expended
nonrenewable resources and environmental assets like clean air and
water. \333\ Solow argues that each generation must use its
nonrenewable and environmental resources in a way that does not detract
from the ability of future generations to have a similar standard of
living. \334\ He admits that certain unique and irreplaceable
resources, like certain national parks, should be preserved for their
own sake, \335\ but maintains that the consumption of non-unique
natural and environmental resources ought to be permissible as long as
they are replaced by other resources such as equipment or technological
knowledge.
The two formulations share important characteristics. First, they
define the primary obligation to future generations in terms of a
constraint that specifies how much must be left to a subsequent
generation. \336\ Second, Weiss and Solow would both allow some level
of destruction of most natural resources, as long as future generations
are compensated in an other way, such as by technological development.
\337\ Third, they both regard certain natural resources as
irreplaceable and would require that such resources be protected for
subsequent generations. \338\
In essence, then, under both formulations, every generation must
provide the subsequent generation with the means to do at least as well
as it did. So, for example, sustainable development would be consistent
with the current generation seeking to maximize its own utility, as
long as this maximization is subject to a constraint resulting from the
need to leave sufficient resources to future generations.
There are, of course, daunting challenges ahead in providing
further specificity to the principle. For example, additional work
needs to be done to determine how to value the increase in knowledge or
the negative long-term environmental effects of economic activity.
\339\
Also, throughout history, there has been a progressive increase in
standards of living. Should the constraint defining one generation's
obligation to its successors thus provide for a progressive increase in
well-being, so that this pattern may continue? On what basis would that
in crease be determined? What would be the ethical underpinnings for
such a requirement?
Moreover, the link between sustainable development and population
policy is not well articulated. \340\ The population in any generation
is a function of decisions of prior generations. \341\ For example, one
might argue that if the current generation's actions were to lead to an
increase in population, it would have an obligation to provide
additional resources so as not imperil the level of well-being of an
average person in the next generation. \342\
Many commentators also believe that the concept of sustainable
development contains a precautionary principle, which prescribes that
scientific uncertainties be resolved in favor of environmental
controls. \343\ As discussed above, there is some possibility that
catastrophic events would materialize in the future if the climate
change problem is left unattended. \344\ The precautionary principle
would presumably call for avoiding such consequences. In fact, given
that technological advances may greatly contribute to the wealth of
future generations, it may be that the precautionary principle will do
most of the work in justifying climate change expenditures.
Left unanswered in the academic discussions concerning the
precautionary principle, however, are important questions about its
scope. For example, what probability of a catastrophic event is
sufficiently high to trigger the operation of the principle? Similarly,
what is a sufficiently harmful consequence? \345\ Spending the
resources needed to avoid a low-probability, catastrophic outcome might
interfere with the ability to make resources available to subsequent
generations. How should this tradeoff be resolved?
This background on the scope of the principle of sustainable
development is sufficient to permit an evaluation of the extent to
which the principle can form the basis for a desirable theory of
intergenerational obligations with respect to environmental matters. At
a very general level, the principle appropriately underscores that the
current generation, which has control of vast decisionmaking authority
concerning the resources that will be available in the future, should
not simply ignore the interests of future generations.
Beyond this level of generality, however, the principle suffers
from severe shortcomings. Most importantly, in practice it is likely to
impose too limited an obligation on the current generation. Say, for
example, that the current generation, for a comparative small
sacrifice, can prevent a very large harm to a subsequent generation.
Perhaps an expenditure of only $1 at the present would lead to averting
harm of several hundred billion dollars in 100 years. Even if the
future benefit were discounted at a high level, the present discounted
value of the benefit would greatly exceed the corresponding cost.
The principle of sustainable development, however, would not
require this expenditure if the subsequent generation would, despite
the harm, be better off than the current one. Thus, if the next hundred
years can be expected to bring sufficiently rapid technological
progress, the environmental expenditure would not need to be
undertaken. In fact, because the rate of technological progress is
currently so high, the principle of sustainable development could in
fact remove from the current generation any obligation to undertake
environmental measures for the benefit of future generations.
Conversely, while this issue is of less direct practical
importance, the principle of sustainable development could, in theory,
demand excessive sacrifice from the current generation. Say, for
example, that absent some intervention, the generation living 100 years
from now would be $1 poorer than the current generation, and that for
an expenditure of several hundred billion we could confer upon that
generation an extra $1. The principle of sustainable development would
require the expenditure, despite the obvious waste in resources. \346\
These shortcomings of the principle of sustainable development
serve to underscore the relative attractiveness of utilitarian
approaches. Consistent with such approaches, in an intragenerational
context, the social decisionmaker would seek first to undertake all
projects that have desirable cost-benefit ratios. Then, if the
resulting distribution of re sources was unattractive, the social
decisionmaker would require redistribution. In a utilitarian framework,
redistribution is justified as a result of the fact that poorer
individuals have a higher marginal utility of consumption; total
utility is therefore increased by redistributing from rich to poor.
\347\
The costs of effecting redistribution (whether in the form of
transaction costs or perverse incentives) play an important role in
determining how much redistribution is socially desirable. Indeed,
sufficiently high costs could dominate the benefits that would come
from transferring re sources from wealthier individuals, with a lower
marginal utility of consumption, to their poorer counterparts.
In an intergenerational context, the inquiry could be essentially
the same: pick projects with good cost-benefit ratios and redistribute
as guided by reference to the relative marginal utilities of
consumption and by the costs of effecting redistribution. In contrast,
the principle of sustainable development requires expenditures with
unattractive cost-benefit ratios, fails to require expenditures with
attractive cost-benefit ratios, and is oblivious to the costs of
effecting redistribution.
F. Toward a Theory of Intergenerational Obligations
The articulation of a complete theory of intergenerational
obligations with respect to environmental matters is beyond the scope
of this Article. Nonetheless, the preceding discussion can be
crystallized into a set of principles setting forth the backbone for
such a theory.
First, the mechanical importation of discounting for time
preference at the rate used intragenerationally is wholly unjustified:
how one individual decides to time her expenditure of a fixed set of
resources over her lifetime is a fundamentally different question from
how society allocates a given set of resources among individuals in
different generations. \348\ Intergenerationally, discounting for time
preference unjustifiably undervalues the interests of future
generations.
Second, discounting for economic growth is also fraught with
problems. Most importantly, the formula used in the standard economic
models ignores the fact that the primary contributors to international
environmental measures are far wealthier than the primary beneficiaries
of such measures. In fact, even in the future, when the benefits of
measures undertaken now actually accrue, these beneficiaries are likely
to be poorer than the contributors to such measures are now. Under
these circumstances, any positive discounting for economic growth would
be inappropriate. To the contrary, given the decreasing marginal
utility of consumption, a utilitarian framework would call for
environmentally protective measures even if the current costs are
somewhat greater than the future benefits. \349\
Third, a theory of intergenerational obligation must play close
attention to opportunity costs. Even though it is inappropriate to
discount the utility functions of future generations, it does not make
sense to under take environmental expenditures for the benefit of
future generations if the investment can yield higher benefits
elsewhere, and if no ethical obligations are compromised by delaying
expenditures.
Fourth, consistent with the principle of sustainable development,
\350\ an attractive theory of intergenerational obligations should seek
to prevent catastrophic harms and the destruction of unique natural
resources. Admittedly, however, the dividing line between the use of
everyday renewable and nonrenewable natural resources, and the
destruction of unique resources may be hard to draw in particular
circumstances.
Fifth, proper attention needs to be given to distributional issues.
As in the intragenerational context, one should not compromise the
efficiency of a particular environmental policy in the name of
distributional concerns, but one should be prepared to redistribute if
the aggregate effects of such policies lead to unattractive
distributional outcomes. In the intergenerational context, the
mechanisms for redistribution are more cumbersome, \351\ but the issue
nonetheless merits attention.
Sixth, an attractive theory of intergenerational obligations is
likely to contain a corrective justice component. Within a traditional
utilitarian framework, one cannot explain the moral intuition that
industrialized nations have a responsibility to mitigate the adverse
effects of climate change, but not to effect massive current
redistributions of wealth to poorer countries. \352\ To the extent that
the current pattern of expenditures and concern on the part of
industrialized countries derives from a moral intuition concerning
differential levels of responsibility for the two situations, \353\
this intuition should be an element of a theory of intergenerational
obligations.
Conclusion
This Article shows that the lack of a proper understanding of
discounting has led to bad regulatory decisions in the case of latent
harms and to an undesirable skewing of the debate in the case of harms
to future generations.
If two individuals of the same age are exposed to a latent harm
from an environmental carcinogen and to a risk of instantaneous death,
respectively, the person exposed to the carcinogen stands to lose fewer
life-years and to lose them later in life. Discounting is an
appropriate technique for taking account of the latter factor. The use
of discounting, however, will lead to misleadingly low valuations of
life unless it is coupled with significant upward adjustments to
account for the dread and involuntary nature of environmental
carcinogens, as well as for higher income levels of the victims.
Unfortunately, the regulatory regime has failed to recognize the need
for such adjustments.
With respect to harms to future generations, the Article shows that
the use of discounting is ethically unjustified. It privileges the
interests of the current generation without a defensible foundation.
The misguided approach to discounting in the two contexts may be
attributable in part to a fairly generalized failure to take proper
account of the differences between the cases of latent harms and harms
to future generations. For the former, discounting raises no
significant ethical objections that are independent of those that could
be raised against cost-benefit analysis in general and the valuation of
human lives in particular. For the latter, in contrast, discounting
gives rise to daunting ethical issues.
This Article aims to effect two important public policy changes.
With respect to latent harms, it seeks to provide an impetus for
correcting the substantial undervaluation of environmental benefits
that comes from the regulatory system's approach of mechanically taking
valuations of life from the workplace setting and discounting them at
an artificially high rate, without performing any of the necessary
upward adjustments. With respect to harms to future generations, it
seeks to move the debate away from discounting and toward more
attractive alternatives.
footnotes
1. Exec. Order No. 12,866, 3 C.F.R. 1993, p.638, reprinted in 5
U.S.C. 601 (1994). This order replaced a similar Executive Order,
promulgated by President Reagan. See Exec. Order No. 12,291, 3 C.F.R.
1981, p.127, formerly in 5 U.S.C. 601. Given its legal status, however,
it cannot displace contrary statutory provisions.
For discussion of the practice of OMB review, see Environmental
Policy Under Reagan's Executive Order: The Role of Benefit-Cost
Analysis (V. Kerry Smith ed., 1984); Thomas O. McGarity, Reinventing
Rationality: The Role of Regulatory Analysis in the Federal Bureaucracy
(1991); Richard H. Pildes & Cass R. Sunstein, Reinventing the
Regulatory State, 62 U. Chi. L. Rev. 1 (1995).
2. Currently, a bill sponsored by Senator Carl M. Levin, Democrat
of Michigan, which enjoys bipartisan co-sponsorship, is pending before
the Senate. S. 746, 106th Cong. (1999). It mandates the preparation of
a cost-benefit analysis for major rules. See id. 623(b)(2). The bill
does not preclude an agency from promulgating regulations that fail a
cost-benefit test but imposes seemingly tough hurdles to such
regulations. See id. 623(d)(2). Legislative efforts to require that
essentially all important regulations satisfy a cost-benefit test,
began in earnest with the 104th Congress ``Contract with America.'' See
Cass R. Sunstein, Congress, Constitutional Moments, and the Cost-
Benefit State, 48 Stan. L. Rev. 247 (1996); see infra text accompanying
notes 56-58 (views of Senator Leahy on S. 343). The House passed a bill
during the Congress' second month, Sunstein, supra, at 275-76, but a
companion bill in the Senate failed to move forward when cloture was
defeated, id. at 277-82.
3. For example, Richard Morgenstern explains: ``The value of
fatality risk reduction figures prominently in assessment of
environmental benefits. In the case of air pollution, the reduced risk
of death often accounts for the largest single component of the dollar
value of environmental benefits.'' Richard D. Morgenstern, Conducting
an Economic Analysis: Rationale, Issues, and Requirements, in Economic
Analyses at EPA: Assessing Regulatory Impact 25, 41-42 (Richard D.
Morgenstern, ed., 1997); see James K. Hammitt, Stratospheric-Ozone
Depletion, in id. at 131, 151-52 (value of averted skin cancer
mortality comprises 98 percent of the benefits of the regulations
implementing the Montreal Protocol). More generally, for all health-
and-safety regulations, one recent estimate is that ``about 60 percent
of the total benefits results from reduction in the risk of death,
disease, and injury.'' Robert W. Hahn, Regulatory Reform: What Do the
Government's Numbers Tell Us?, in Risks, Costs, and Lives Saved:
Getting Better Results from Regulation 208, 219 (Robert W. Hahn ed.,
1996).
Moreover, even in cases in which there are other benefits, EPA's
calculation of the magnitude of the benefits focuses on human health
effects. See Lisa Heinzerling, Reductionist Regulatory Reform, 8
Fordham Envtl. L.J. 459, 461-62 (1997). For examples, see id. at 495
(asbestos ban); Ronnie Levin, Lead in Drinking Water, in Economic
Analyses at EPA, supra, at 205, 227 (corrosion control). The same
failure to quantify benefits other than those related to human health
effects and mortality are also present with regard to agricultural
pesticides, worker protection and primary air quality standards for
ozone depletion. Louis P. True Jr., Agricultural Pesticides and Worker
Protection 303, 318. However misguided such a policy might be, it
magnifies the importance of the discounting issues analyzed in this
Article.
4. See Thomas O. McGarity & Sidney A. Shapiro, OSHA's Critics and
Regulatory Reform, 31 Wake Forest L. Rev. 587, 629 (1996) (discussing
occupational safety).
5. Compare Emmett B. Keeler & Shan Cretin, Discounting of Life-
Saving and Other Nonmonetary Effects, 29 Mgmt. Sci. 300, 303-05 (1983)
(favoring discounting), I. Steven Udvarhelyi et al., Cost-Effectiveness
and Cost-Benefit Analyses in the Medical Literature, 116 Annals
Internal Med. 238, 239 (1992) (same), and Milton C. Weinstein & William
B. Stason, Foundations of Cost-Effectiveness Analysis for Health and
Medical Practices, 296 New Engl. J. Med. 716, 719-20 (1977) (same) with
Alan L. Hillman & Myoung S. Kim, Economic Decision Making in
Healthcare: A Standard Approach to Discounting Health Outcomes, 7
PharmacoEconomics 198, 198 (1995) (rejecting automatic discounting but
arguing for ``thoughtful adjustments'' to reflect period of latency)
and Michael Parsonage & Henry Neuburger, Discounting and Health
Benefits, 1 Health Econ. 71 (1992) (opposing discounting).
For discussion of different methods for discounting the benefits of
medical interventions, see Magnus Johannesson, On the Discounting of
Gained Life-Years in Cost-Effectiveness Analysis, 8 Int'l J. Tech.
Assessment in Health Care 359 (1992).
6. See, e.g., U.S. Office of Management and Budget, Regulatory
Program of the U.S. Government, April 1, 1991-March 31, 1992, at 147-48
(1991); Susan W. Putnam & John D. Graham, Chemicals Versus Microbials
in Drinking Water: A Decision Sciences Perspective, J. Am. Water Works
Ass'n, March 1993, at 57, 60; W. Kip Viscusi, Equivalent Frames of
Reference for Judging Risk Regulation Policies, 3 N.Y.U. Envtl. L. J.
431, 436 (1995); infra notes 28-55 (discussing Corrosion Proof Fittings
case).
7. See Michael B. Gerrard, Demons and Angels in Hazardous Waste
Regulation: Are Justice, Efficiency, and Democracy Reconcilable?, 92
Nw. L. Rev. 706, 743 (1998) (``[The] protection of future generations
is not merely a matter for accountants. The Constitution was adopted in
part to 'secure the Blessings of Liberty to ourselves and our
Posterity.'''); Lisa Heinzerling, Regulatory Costs of Mythic
Proportions, 107 Yale L.J. 1981, 2044 (1998) (``the decision to
discount lives saved in the future involves a choice about values, as
to which reasonable people may disagree''); A. Dan Tarlock, Now, Think
Again About Adaptation, 9 Ariz. J. Int'l & Comp. L. 169, 173 (1992)
(``Speculation about discount rates becomes a disguised debate about
our ethical duties toward future generations.'').
8. See Gerrard, supra note 7, at 742-43 (``If a human life is
considered to be worth $8 million, and a 10 percent discount rate is
chosen, then the present value of saving a life one hundred years from
now is only $581. . . . Neither I nor anyone else uses this kind of
argument. . . .''); McGarity & Shapiro, supra note 4, at 629 (``The
practice of discounting future benefits to present value . . . biases
cost-benefit analysis against future generations. A high discount rate
clearly biases the analysis against future benefits, even though 'it is
not clear why the later-born should have to pay interest to induce
their predecessors not to exhaust [depletable resources.]''').
9. The government of the United Kingdom, for example, has rejected
the concept of discounting in connection with the health benefits of
medical interventions. See Hillman & Kim, supra note 5, at 198.
10. See What Price Posterity?, Economist, Mar. 23, 1991, at 73.
11. See John K. Horowitz & Richard T. Carson, Discounting
Statistical Lives, 3 J. Risk & Uncertainty 403, 412 n.2 (1990).
12. See Al Gore, Earth in the Balance: Ecology and the Human Spirit
190-91 (1992). Gore takes a negative view toward discounting:
The accepted formulas of conventional economic analysis contain
short-sighted and arguably illogical assumptions about what is valuable
in the future as opposed to the present; specifically, the standard
'discount rate' that assesses cost and benefit flows resulting from the
use or development of natural resources routinely assumes that all
resources belong to the present generation. . . . In the words of
Herman Daly, ``There is something fundamentally wrong in treating the
earth as if it were a business in liquidation.''
Id.
13. See, e.g., Peter S. Burton, Intertemporal Preferences and
Intergenerational Equity Considerations in Optimal Resource Harvesting,
24 J. Envtl. Econ. & Mgmt. 119, 119 (1993) (``Standard discounting
practices confuse two issues: (1) intertemporal discount rates of
members of the society and (2) intergenerational equity
considerations.''); Harold P. Green, Legal Aspects of Intergenerational
Equity Issues, in Equity Issues in Radioactive Waste Management 189,
192 (Roger E. Kasperson ed. 1983) (noting that most of the statutes
governing conservation of land and water resources and wildlife
preservation ``do not distinguish between benefits accruing in the
short-term future to members of the current generation and longer-term
benefits to future generations''); Heinzerling, supra note 7, at 2043-
56 (not distinguishing the analysis of carcinogenic risks to the
current generation and of risks to future generations); Magnus
Johannesson & Per-Olov Johansson, The Discounting of Lives Saved in
Future Generations: Some Empirical Results, 5 Health Econ. 329, 329
(1996); Putnam & Graham, supra note 6, at 60 (equating delays in the
adoption of public health problems with burdens on future generations).
14. See infra text accompanying notes 28-55 (providing more
detailed analysis of the proceedings).
15. See Exec. Order 12,866, supra note 1, 2(b), 6(b)
(responsibilities of OMB's Office of Information and Regulatory Affairs
(OIRA)).
16. See infra text accompanying notes 32-38.
17. See Corrosion Proof Fittings v. EPA, 947 F.2d 1201, 1218-19
(5th Cir. 1991).
18. See Heinzerling, supra note 7.
19. See id. at 1984-85. Heinzerling does not ultimately take a
position on the propriety of discounting. See id. at 2055-56 (``More
case-by-case attention needs to be given to the question of whether the
future benefits of health and environmental regulation should be
discounted at all, and if so, at what rate.''). In passing, however,
she makes arguments that reveal a deep animosity toward discounting.
See id. at 2043-54. The legal literature contains one other sustained
discussion on the discounting of environmental benefits. See Daniel A.
Farber & Paul A. Hemmersbaugh, The Shadow of the Future: Discount
Rates, Later Generations, and the Environment, 46 Vand. L. Rev. 267
(1993). The authors urge that, both intra-and intergenerationally,
benefits should be discounted at the long-term real rate of return on
riskless investments, which they take to be ``in the neighborhood of 1
percent.'' See id. at 280, 303-04.
20. See Christopher D. Stone, Beyond Rio: ``Insuring'' Against
Global Warming, 86 Am. J. Int'l L. 445, 476 (1992) (``Any variations in
policy that might be implied from defensible attitudes toward risk may
well be swamped by the implications of defensible discount rates, and,
indeed, of how one resolves the philosophical conundrums of valuing the
welfare of future generations.''); Tarlock, supra note 7, at 173 (``The
selection of the [discount] rate determines the strategy.'').
21. Derek Parfit, Reasons and Persons 357 (1984). For other
examples, see Gerrard, supra note 7, at 742-43 (``If a human life is
considered to be worth $8 million and a 10 percent discount rate is
chosen, then the present value of saving a life one hundred years from
now is only $581.''); McGarity & Shapiro, supra note 4, at 629 (``At a
discount rate of 10 percent, a dollar's worth of benefits 50 years from
now is worth slightly less than a penny today.'').
22. Clifford S. Russell, ``Discounting Human Life'' (Or, the
Anatomy of a Moral-Economic Issue), Resources, Winter 1986, at 8, 8;
see Frank S. Arnold, Economic Analysis of Environmental Policy and
Regulation 193 (1995) (``When the delay between the present and the
time the benefits of a regulatory action are enjoyed is very large, say
hundreds of years, using virtually any positive discount rate will
render the present value of the benefits almost nil.''); Robert C.
Lind, Reassessing the Government's Discount Rate Policy in Light of New
Theory and Data in an Economy with a High Degree of Capital Mobility,
18 J. Envtl. Econ. & Mgmt. S-8, S-20 (1990). (``The basic arithmetic of
exponential growth applied in a cost-benefit analysis implies that,
regardless of how small the cost today of preventing an environmental
catastrophe that will eventually wipe out the entire economy, it would
not be worth this cost to the present generation if the benefits in the
future are sufficiently distant.'').
23. See supra text accompanying note 13.
24. See, e.g., Environmental Policy Under Reagan's Executive Order,
supra note 1; McGarity, supra note 1, at 29-59, 174-76, 239-61; Pildes
& Sunstein, supra note 1; Sunstein, supra note 2.
25. See supra text accompanying notes 1-4.
26. See infra Part I.G.
27. A similar set of issues arises where current expenditures can
prevent future harms to individuals now alive, even though the harm is
not a latent disease. The analysis in Part I is therefore relevant to
this situation as well.
28. 947 F.2d 1201 (5th Cir. 1991); see Russell, supra note 22, at 9
(noting that before this proceeding, ``'discounting of human lives' had
not yet become an issue in the public debate''). For discussion of the
case, see Rita L. Wecker, Case Comment: A ``Hard Look'' at a Soft
Analysis, Corrosion Proof Fittings v. Environmental Protection Agency,
4 B.U. Pub. Int. L.J. 145 (1994).
29. 51 Fed. Reg. 3738 (1986).
30. See supra text accompanying notes 1-4.
31. See Letter of Robert P. Bedell, Deputy Administrator, Office of
Information and Regulatory Affairs to A. James Barnes, Acting Deputy
Administrator, Environmental Protection Agency (March 27, 1985),
reprinted in Peter S. Menell & Richard B. Stewart, Environmental Law
and Policy 104 (1994).
32. See id.
33. See infra text accompanying note 182.
34. See Letter of Robert P. Bedell, supra note 31, at 104.
35. Subcomm. on Oversight and Investigations of the House Comm. on
Energy and Commerce, EPA's Asbestos Regulations: Report on a Case Study
on OMB Interference in Agency Rulemaking, reprinted in Menell &
Stewart, supra note 31, at 111. The Barnes comment does not deal
specifically with the problem of latent harms, but it reflects a
general antipathy to discounting the valuations of human life.
36. Some Members of Congress took a strident position against
discounting. For example, Representative Bob Eckhardt noted that ``'it
was difficult to say whether that kind of approach was more callous or
more foolish''' and Representative James Florio called OMB's approach
``ghoulish[].'' See Russell, supra note 22, at 9.
37. See Subcomm. on Oversight and Investigations, supra note 35,
reprinted in Menell & Stewart, supra note 31, at 109.
38. See id.
39. See id. at 110; Sidney A. Shapiro & Thomas O. McGarity, Not So
Paradoxical: The Rationale for Technology-Based Regulation, 1991 Duke
L.J. 729, 735 (``In cases of toxic substance exposure, where the onset
of disease can be delayed by as much as 30 years, [discounting]
effectively ignores the risk altogether.'').
40. Subcomm. on Oversight and Investigations, supra note 35,
reprinted in Menell & Stewart, supra note 31, at 111.
41. Id.
42. 51 Fed. Reg. 3738, 3757-59 (1986).
43. See id. at 3748; 54 Fed. Reg. 29,460, 29,487 (1989).
44. 54 Fed. Reg. 29,460, 29,483 (1989).
45. See id. at 29,485.
46. See id.
47. Id. at 29,487.
48. Id.
49. Id.
50. 947 F.2d 1201 (5th Cir. 1991).
51. Id. at 1218. Lisa Heinzerling criticizes the Fifth Circuit's
position: ``One worries about 'preserving an apples-to-apples
comparison,' however, only if one is dealing only with apples. In the
asbestos case, the costs were dollars and the benefits were lives.
These costs and benefits are the same only if dollars and lives are the
same.'' Heinzerling, supra note 7, at 2053. Both positions overlook an
aspect of the problem. The Fifth Circuit misses the fact that the
intertemporal choices of individuals do not necessarily reflect
discounting at the rates used by financial markets (though in fact
empirical studies show no statistically significant differences). See
infra Part I.F.1. In turn, Heinzerling's rhetorical device fails to
acknowledge that the cost-benefit calculus in the case required the
valuation of the life, and that the question whether this amount should
be discounted is one that depends on how individuals compare the
utilities derived from living in the present to the utilities derived
from living in the future. See infra text accompanying notes 223-224.
52. See Corrosion Proof Fittings, 947 F.2d at 1218-19, 1229-30. The
court's analysis revealed confusion. It relied primarily on the
following example:
Suppose two workers will be exposed to asbestos in 1995, with
worker X subjected to a tiny amount of asbestos that will have no
adverse health effects, and worker Y exposed to massive amounts of
asbestos that quickly will lead to an asbestos-related disease. Under
the EPA's approach, which takes into account only the time of the
exposure rather than the time at which any injury manifests itself,
both examples would be treated the same.
Id. at 1218. In fact, if worker X would never get cancer, the
regulation would have no benefit with respect to this worker. With zero
benefits, there would be nothing to discount. What the court might have
meant is that if workers X and Y had been exposed to asbestos at the
same time, and worker Y was injured before worker X, the EPA would
treat both cases in the same way (and presumably the Fifth Circuit
would have wanted to treat them differently).
53. Id.
54. For related discussion, see infra text accompanying notes 155-
157.
55. See Corrosion Proof Fittings, 947 F.2d at 1218 n.19. For
further discussion of discount rates, see infra Part I.F.2.
56. S. 343, 104th Cong. (1995).
57. See id. at 623 (``[no] final rule . . . shall be promulgated
unless the agency finds that . . . the potential benefits from the rule
. . . justify the potential costs of the rule''); id. at 621-622
(dealing with the preparation of cost-benefit analyses); see generally
supra text accompanying notes 1-4 (discussing regulatory reform).
58. S. Rep. No. 104-90, at 153 (1995) (supplemental views of
Senator Leahy).
59. The only two sustained treatments of the question of
discounting in the legal academic literature were those of Farber &
Hemmersbaugh, supra note 19, and Heinzerling, supra note 7. See supra
note 19 (discussing their positions). While the economics literature
has focused on isolated nuances, it has not taken a broad look at the
problem or connected the various strands that are necessary to a
sophisticated analysis of the public policy choices.
60. See W. Kip Viscusi, The Valuation of Risks to Life and Health:
Guidelines for Policy Analysis, in Benefits Assessment: The State of
the Art 193, 193 (Judith D. Bentkover et al. eds., 1986) [hereinafter
Viscusi, Valuation]. For a more recent survey, see W. Kip Viscusi, The
Value of Risks to Life and Health, 31 J. Econ. Literature 1912 (1993)
[hereinafter Viscusi, Value]. The technique is generally traced to
Thomas C. Schelling, The Life You Save May Be Your Own, in Problems in
Public Expenditure Analysis 127 (Samuel B. Chase, Jr. ed., 1968), and
E.J. Mishan, Evaluation of Life and Limb: A Theoretical Approach, 79 J.
Pol. Econ. 687, 695-705 (1971).
Before the ascendancy of willingness-to-pay studies, the human
capital approach was prevalent. This approach valued life in terms of
lost earnings. See Viscusi, Valuation, supra, at 198. The technique is
subject to the obvious criticism that earnings provide that
``individual well-being goes far beyond its financial implications.''
Id.; accord W.B. Arthur, The Economics of Risks to Life, 71 Am. Econ.
Rev. 54, 54 (1981); Lewis A. Kornhauser, The Value of Life, 38 Clev.
St. L. Rev. 209, 212 (1990).
61. See Viscusi, Valuation, supra note 60, at 200.
62. See id. at 199-200.
63. Such workers might also face a higher probability of nonfatal
risks. Some studies estimate the portion of the wage differential that
is attributable to such non-fatal risks. The residual wage differential
is then attributed to fatal risks. See Viscusi, Value, supra note 60,
at 1919. Some studies, however, do not separate the wage differential
into these two components. See id.
64. For criticism of the approach, see McGarity, supra note 1, at
147-48; Steven Kelman, Cost-Benefit Analysis and Environmental, Safety,
and Health Regulation: Ethical and Philosophical Considerations, in
Cost-Benefit Analysis and Environmental Regulations: Politics, Ethics,
and Methods 137, 143-45 (Daniel Swartzman et al. eds., 1982); J. Paul
Leigh, Compensating Wages, Value of a Statistical Life, and Inter-
industry Differentials, 28 J. Envtl. Econ. & Mgmt. 83, 94-95 (1995);
McGarity & Shapiro, supra note 4, at 628-29.
An alternative methodology consists of surveying individuals and
asking them how much they would be willing to pay for a particular risk
reduction. See Viscusi, Valuation, supra note 60, at 204-05. The
disadvantage of this contingent valuation method is that the responses
are to hypothetical situations and have no economic consequences. See
V. Kerry Smith & William H. Desvousges, An Empirical Analysis of the
Economic Value of Risk Changes, 95 J. Pol. Econ. 89, 93-94 (1987).
65. See Maureen L. Cropper & Frances G. Sussman, Valuing Future
Risks to Life, 19 J. Envtl. Econ. & Mgmt. 160, 160 (1990) (``The
empirical literature on valuing risks to life has focused almost
exclusively on valuing mortality risks that occur today--the risk of
accidental death a worker faces during the coming year or the risk of
dying this month in an auto accident.''); Horowitz & Carson, supra note
11, at 405 (``Virtually all the empirical work on the value of risk
reductions has considered risks that occur entirely in the present. . .
.''); Shapiro & McGarity, supra note 39, at 734 (``most wage premium
studies . . . are based on safety hazards, not health risks''). Of
course, to the extent that there is a probability of a non-fatal
accident, the resulting morbidity risk could also be measured using a
willingness-to-pay approach.
66. See Leigh, supra note 64, at 86-87; Viscusi, Valuation, supra
note 60, at 200. Of course, in some cases, industrial accidents result
in long-term disability rather than death.
67. One ongoing attempt to derive a willingness-to-pay valuation of
human lives threatened by carcinogens is reflected in John R. Lott, Jr.
& Richard L. Manning, Have Changing Liability Rules Compensated Workers
Twice for Occupational Hazards?: Earnings Premiums and Cancer Risks
(June 28, 1998) (manuscript on file with the Columbia Law Review). For
a contingent valuation study inquiring how individuals value risk
reductions from hazardous waste sites, see Smith & Desvousges, supra
note 64.
68. Both the Occupational Safety and Health Administration (OSHA)
and EPA were established in 1970. See Sidney A. Shapiro & Thomas O.
McGarity, Reorienting OSHA: Regulatory Alternatives and Legislative
Reform, 6 Yale J. on Reg. 1, 1 n.1, 2 n.9 (1989).
69. See Cropper & Sussman, supra note 65, at 166 n.8. Moreover,
certain risks may be poorly understood even by experts. See Smith &
Desvousges, supra note 64, at 108-09.
70. See Sherwin Rosen, The Quantity and Quality of Life: A
Conceptual Framework, in George Tolley et al., Valuing Health for
Policy: An Economic Approach 221 (1994).
71. One commentator estimates that ``the average age of the
workplace accident fatality is about 41'' whereas ``the average age of
the workplace cancer victim is likely to be 55, 65, or even higher.''
John M. Mendeloff, The Dilemma of Toxic Substance Regulation: How
Overregulation Causes Underregulation at OSHA 48 (1988).
72. Additional complications are introduced when the length of the
person's life is uncertain. See Rosen, supra note 70, at 236-45. No
important insights are lost, however, as a result of this
simplification. In practice, of course, an individual who would have
died of cancer at the end of the latency period may die earlier of
other causes. See Lester B. Lave, The Strategy of Social Regulation:
Decision Frameworks for Policy 43 (1981).
73. See Maureen L. Cropper & Paul R. Portney, Discounting and the
Evaluation of Lifesaving Programs, 3 J. Risk & Uncertainty 369, 376
(1990).
74. A more complicated situation arises when an individual is
exposed to a carcinogen over a long period of time and the harm
resulting from the exposure is cumulative.
75. See Cropper & Sussman, supra note 65, at 172-73.
76. See W. Kip Viscusi, Discounting Health Effects for Medical
Decisions, in Valuing Health Care: Costs, Benefits, and Effectiveness
of Pharmaceuticals and Other Medical Technologies 125, 129 (Frank A.
Sloan ed., 1995). In contrast, a nominal rate is used to discount
current dollars. The real rate is the nominal rate minus the rate of
inflation.
77. See Edith Stokey & Richard Zeckhauser, A Primer for Policy
Analysis 161-65 (1978).
78. See infra Part I.F.1.
79. See Cropper & Sussman, supra note 65, at 165-66.
80. See supra text accompanying note 71 (hypothesizing that the
worker exposed to the risk of instantaneous death is 40-years old).
81. See Cropper & Portney, supra note 73, at 378 n.12.
82. See Cropper & Sussman, supra note 65, at 172 (``This fact . . .
is often ignored in risk-benefit analyses.'').
83. See infra Part I.G.
84. See Robert F. Bordley, Making Social Trade-Offs Among Lives,
Disabilities, and Cost, 9 J. Risk & Uncertainty 135, 138 (1994).
85. See Cropper & Portney, supra note 73, at 371-72; Rosen, supra
note 70, at 222-23.
86. A similar issue arises in the literature on QALYs, or quality-
adjusted life years, which are a means for adjusting the utility that
an individual gets in a period by the quality of her health in that
period. So, for example, an individual derives greater utility from a
year in which her health is excellent than in one in which she is
disabled. See Richard Zeckhauser & Donald Shepard, Where Now for Saving
Lives?, Law & Contemp. Probs., Autumn 1976, at 5, 12-13. In the context
of QALYs, separability implies that the utility that a person derives
from the quality of her life in a particular year is independent of the
qualities of her life in past years. See John Broome, QALYs, 50 J. Pub.
Econ. 149, 151-52 (1993).
87. Broome, supra note 86, at 151-52. Broome applies this label to
a separability model in the context of QALYs. See supra note 86.
88. See Bordley, supra note 84, at 138.
89. See infra Part I.F.1.
90. See infra Part I.E.3.
91. See supra text accompanying notes 65-69.
92. See Bordley, supra note 84, at 138; Michael J. Moore & W. Kip
Viscusi, Discounting Environmental Health Risks: New Evidence and
Policy Implications, 18 J. Envtl. Econ. & Mgmt. S-51, S-54 (1990);
Rosen, supra note 70, at 224.
93. Donald S. Shepard & Richard J. Zeckhauser, Survival Versus
Consumption, 30 Mgmt. Sci. 423, 424 (1984).
94. Id. at 424; see also Joseph Lipscomb, Time Preference for
Health in Cost-Effectiveness Analysis, 27 Med. Care S233, S237 (1989)
(asking whether individuals evaluate multiperiod health outcomes ``in
accordance with constant-rate discounting'').
95. See W. Kip Viscusi & Michael J. Moore, Rates of Time Preference
and Valuations of the Duration of Life, 38 J. Pub. Econ. 297, 297-98
(1989) (``Although money is readily transferable across time, health
status is not.''). Part I.F.1, infra, explains more generally why
discounting health risks is analytically different from discounting
financial flows.
96. There have been attempts to estimate the rate at which
individuals discount their utilities, but they have been conducted on
the basis of constant discounting models. See Moore & Viscusi, supra
note 92, at S-54. There also are empirical estimates of how discount
rates depend on the period over which the discounting is performed, but
these studies are intergenerational, or at the very least
interpersonal. See infra Part II.B.
97. See Donald A. Redelmeier & Daniel N. Heller, Time Preference in
Medical Decision Making and Cost-Effectiveness Analysis, 13 Med.
Decision Making 212, 216 (1993); id. at 214-15 (finding that rates for
temporally proximate events were larger than for more distant events);
infra Part II.B (same finding in intergenerational models).
98. See supra text accompanying notes 36-38.
99. See Cropper & Portney, supra note 73, at 377.
100. See Shepard & Zeckhauser, supra note 93, at 437 n.18; Viscusi,
supra note 76, at 130. But see Glenn Blomquist, Value of Life Saving:
Implications of Consumption Activity, 87 J. Pol. Econ. 540, 555 (1979)
(finding lower elasticity).
101. See supra text accompanying notes 78-80.
102. See Viscusi, supra note 76, at 130; Richard Zeckhauser,
Procedures for Valuing Lives, 23 Pub. Pol'y 419, 437 (1975).
103. See William D. Nordhaus, To Slow or Not to Slow: The Economics
of the Greenhouse Effect, 101 Econ. J. 920, 925-26 (1991); Viscusi,
supra note 76, at 130.
104. Farber & Hemmersbaugh, supra note 19, state that ``the
discount rate even for economic benefits cannot significantly exceed
the expected long-term rate of economic growth; otherwise, we would
discount even the destruction of most future Gross Domestic Product to
a low present value over periods of only decades.'' Id. at 296. The
authors appear to be making a pragmatic argument for keeping the
effective discount rate low. There is, however, no plausible normative
argument for linking the two rates in this manner.
105. U.S. Census Bureau, Historical Income Tables--Persons, Table
P-44 (visited June 22, 1998) .
106. Over the longer run, the rate has been higher. See William R.
Cline, The Economics of Global Warming 251 (1992) (estimating that
``real per capita income in the United States has grown at about 1.7
percent annually over the past century'').
107. See Donald S. Shepard & Richard J. Zeckhauser, Life-Cycle
Consumption and Willingness to Pay for Increased Survival, in The Value
of Life and Safety 95, 120-27 (M.W. Jones-Lee ed., 1982) [hereinafter
Shepard & Zeckhauser, Life-Cycle Consumption]; Shepard & Zeckhauser,
supra note 93, at 432-36.
108. See Zeckhauser, supra note 102, at 437.
109. Id. at 438.
110. In general, one's credit suitability for loans is evaluated on
the basis of one's present income. There are some exceptions, however,
such as student loans to finance post-secondary education.
111. See Shepard & Zeckhauser, Life-Cycle Consumption, supra note
107, at 107-15. There is potentially a logical inconsistency in
believing that individuals cannot process the fact that they will have
higher incomes in the future in order to value their lives accordingly,
but positing that individuals will borrow money in the expectation of
higher income in the future.
112. See id. at 125.
113. See id.
114. See id. at 121.
115. See Shepard & Zeckhauser, supra note 93, at 434.
116. See id. at 435 (noting that ``the real world lies somewhere in
between'' the two models).
117. See supra text accompanying note 114.
118. See Shepard & Zeckhauser, supra note 93, at 433.
119. See Viscusi, Value, supra note 60, at 1942-43 (``the
population of exposed workers . . . generally have lower incomes than
the individuals being protected by broadly based risk regulation'').
120. EPA should, however, vary its valuations of life on the basis
of the age profile of the affected population, to account for the
different numbers of life-years at stake in various regulatory
programs.
121. For discussion of environmental justice, see Vicki Been,
Coming to the Nuisance or Going to the Barrios? A Longitudinal Analysis
of Environmental Justice Claims, 24 Ecology L.Q. 1 (1997); Vicki Been,
Locally Undesirable Land Uses in Minority Neighborhoods:
Disproportionate Siting or Market Dynamics?, 103 Yale L.J. 1383 (1994);
Robert D. Bullard, Anatomy of Environmental Racism and the
Environmental Justice Movement, in Confronting Environmental Racism:
Voices from the Grassroots 15 (Robert D. Bullard ed., 1993); Richard J.
Lazarus, Pursuing ``Environmental Justice'': The Distributional Effects
of Environmental Protection, 87 Nw. U. L. Rev. 787 (1993).
122. An ethical objection to such particularization would be an
attack on cost-benefit analysis in general and to the use of a
willingness-to-pay methodology for valuing lives in particular. See
Guido Calabresi & Philip Bobbitt, Tragic Choices: The Conflicts Society
Confronts in the Allocation of Tragically Scarce Resources 32 (1978)
(referring to ``the external costs--moralisms and the affront to
values, for example--of market determinations that say or imply that
the value of a life or of some precious activity integral to life is
reducible to a money figure''). Nonetheless, using differential
valuations of life based on income levels is likely to prove
objectionable to some supporters of cost-benefit analysis, and to
magnify the objections adduced by opponents of this approach.
123. See U.S. Census Bureau, Historical Income Tables--Persons:
Table P-36: Occupation of Longest Job--Workers (Both Sexes Combined) by
Median and Mean Earnings (visited June 22, 1998) .
124. See id.
125. See id.
126. See Paul Slovic, Perception of Risk, 236 Science 280 (1987).
127. Zeckhauser, supra note 102, at 445 n.27.
128. Cass Sunstein cogently explains that ``the question whether a
risk is run voluntarily or not is often not a categorical one but
instead a matter of degree.'' Cass R. Sunstein, Bad Deaths, 14 J. Risk
& Uncertainty 259, 272 (1997). Sunstein would place risks on a
voluntariness/involuntariness continuum based on three factors: whether
the worker has adequate information about the risk; whether the worker
is compensated for the risk; and whether the compensation package does
not appear unfair, even if voluntarily chosen by the parties, as a
result of background inequality between the employer and employee. See
id.; see also Shapiro & McGarity, supra note 39, at 734
(``Unfortunately, low-paid workers in hazardous industries where there
are no (or weak) unions may act more out of desperation than
choice.'').
129. See Maureen L. Cropper & Uma Subramanian, Public Choice
Between Lifesaving Programs 6 (World Bank Policy Research Working Paper
1497, 1995). Of course, if an individual is exposed to a toxic air
pollutant, she could move somewhere else. Sunstein would nonetheless
classify the risk as involuntary because the individuals are not in a
contractual relationship with the producer of the risk and cannot avoid
the risk except at great cost, in this case by moving to another area.
See Sunstein, supra note 128, at 271.
Moreover, in many cases, individuals may lack sufficient
information about environmental risks to make informed choices. Even if
they had such information, risks that are uniformly distributed
throughout the country could obviously not be avoided by moving
elsewhere. For further discussion of the difference between voluntary
and involuntary risks, see Richard H. Pildes & Cass R. Sunstein,
Democrats and Technocrats, Journees d'Etudes Juridiques Jean Dabin
(forthcoming 2000) (manuscript on file with the Columbia Law Review).
130. See supra text accompanying notes 60-62.
131. Even studies of how the price of a house in an area with high
concentrations of this pollutant compares to the price of an otherwise
similar house in an area with better air quality do not capture the
value of involuntary risk. While such hedonic price studies are a
commonly used revealed preference tool for economic valuations, see
Ronald G. Cummings et al., General Methods for Benefits Assessment, in
Benefits Assessment, supra note 60, at 171-76, the participants in
these housing markets are individuals attempting to decide where to
live. They are making a choice about whether to live in one area rather
than another. As a result, it would be a stretch to regard their
``choice'' as involuntary. Rather, the involuntary label is better used
for individuals who have lived in an area for a long time, have strong
personal ties to the area, and lack the resources to move.
132. An extensive list of such references is provided in
Heinzerling, supra note 7, at 1983 n.1, 2. The genesis for these
studies is a table prepared in the 1980's by John Morrall, an OMB
official. See John F. Morrall III, A Review of the Record, Regulation,
Nov./Dec. 1986, at 25, 30 tbl.4. Heinzerling notes, however, that the
regulations with numbers at the high end were never promulgated.
Moreover, she argues that the remaining differences would be less stark
if Morrall had not discounted the benefits of environmental regulation
or reduced the estimates of risk prepared by the agencies. See
Heinzerling, supra note 7, at 1984-85.
133. There has been strong criticism to valuations based on survey
responses. See Richard B. Stewart, Liability for Natural Resource
Injury: Beyond Tort, in Analyzing Superfund: Economics, Science, and
Law 219, 234-38 (Richard L. Revesz & Richard B. Stewart eds., 1995).
Nonetheless, a panel of distinguished economists, co-chaired by Nobel
Prize winners Kenneth Arrow and Robert Solow, which had been empaneled
by the National Oceanic and Atmospheric Administration (NOAA), gave
qualified endorsement to the use of contingent valuation techniques.
See 58 Fed. Reg. 4601, 4610 (1993). Clearly, revealed preference
valuations would be preferable, but, as indicated above, such
valuations cannot be used for involuntary harms. See supra text
accompanying notes 130-131.
134. See Cropper & Subramanian, supra note 129, at 2.
135. See id. at 16-18.
136. See id. at 3-7.
137. The remaining characteristics were the extent to which the
affected population was to blame for the risk, the seriousness of the
risk, and whether the risks affected respondents personally. In
addition to these four risk characteristics, the respondents were also
asked to assess four program characteristics: the efficacy of the
program, the appropriateness of government intervention, the fairness
of the funding mechanism, and the time before the program begins to
save lives. See id. at 39.
138. See id. at 40.
139. A labeling program, designating food to be free of pesticide,
could work effectively if the claims were in fact truthful and adequate
information was conveyed to prospective buyers. But social coordination
would be necessary to set up the labeling program and to police its
integrity.
140. See Cropper & Subramanian, supra note 129, at 40.
141. See id. at 41.
142. See id. at 48.
143. See id. at 24, 41.
144. See id. at 4-5.
145. See McGarity, supra note 1, at 146-49; Kelman, supra note 64,
at 144; Viscusi, Value, supra note 60, at 1928.
This effect is discussed even though it has not been the focus of
empirical study, see supra text accompanying notes 99-100, because it
flows in part from the difference between the voluntary nature of
workplace harms and the involuntary nature of environmental harms.
146. Some self-selection can take place with respect to reasonably
local risks, such as those that result from proximity to hazardous
waste sites. With respect to more regional risks, such as regional air
pollution, however, such self-selection is far more difficult.
147. See Sunstein, supra note 128, at 259.
148. See Tammy O. Teng et al., Five-Hundred Life-Saving
Interventions and Their Cost-Effectiveness, 15 Risk Analysis 369
(1995).
149. See id. at 370.
150. See id. at 371.
151. See id.
152. See supra text accompanying notes 131-133.
153. George Tolley et al., State-of-the-Art Health Values, in
Tolley et al., supra note 70, at 323, 339-44.
154. See id. at 339-40.
155. See supra text accompanying notes 64-68.
156. But cf. Sunstein, supra note 128, at 269 (an extended period
before death can contain benefits, since it allows grief and
adjustment).
157. See Tolley et al., supra note 153, at 329-32, 340; supra note
133 and accompanying text.
158. See Tolley et al., supra note 153, at 340.
159. See id. at 340-41; see also Michael W. Jones-Lee et al., The
Value of Safety: Results of a National Sample Survey, Econ. J., March
1985, at 49, 58-60. For a more recent study finding a higher
willingness-to-pay to avoid carcinogenic harms, see Ian Savage, An
Empirical Investigation into the Effect of Psychological Perceptions on
the Willingness-to-Pay to Reduce Risk, 6 J. Risk & Uncertainty 75, 77,
85 (1993).
160. For intuitions supporting a higher valuation for dreaded
harms, see Mendeloff, supra note 71, at 48; Shapiro & McGarity, supra
note 39, at 734 n.29.
161. See Lave, supra note 72, at 44 (``Discounting future health
effects at the standard rate makes sense only if there is a fixed
transformation rate between dollars and health.''); John Mendeloff,
Measuring Elusive Benefits: On the Value of Health, 8 J. Health Pol.,
Pol'y & Law 554, 568 (1983) (``discount rate for health effects should
largely be based upon individuals' time preferences''); supra note 51
and accompanying text; infra Part I.F.1. But see Victor R. Fuchs &
Richard Zeckhauser, Valuing Health--A ``Priceless'' Commodity, 77 Am.
Econ. Rev. 263, 264 (1987) (suggesting that life years should be
discounted in the same manner as cash-flows).
162. See Farber & Hemmersbaugh, supra note 19, at 287.
163. Viscusi, supra note 76, at 131-32.
164. See John A. Cairns, Valuing Future Benefits, 3 Health Econ.
221, 221 (1994) (``Little is known about individual time preferences
with respect to future health, and in particular whether they differ
from preferences with respect to future wealth.''); Putnam & Graham,
supra note 6, at 60 (``Instead of choosing a standard discount rate . .
. the rate should be based on the . . . preferences of citizens.'').
165. See Moore & Viscusi, supra note 92, at S-61 (``One should also
be cognizant of the ultimate objective of our study, which is to
ascertain whether systematic differences exist between rates of time
preference for health and financial rates of return.'').
166. See id. at S-52-S-55.
167. See id. at S-53.
168. See id. at S-57. These studies follow a revealed preference
approach, which consists of observing the prices at which market
transactions take place. See supra text accompanying notes 130-131.
169. See Moore & Viscusi, supra note 92, at S-59, S-61.
170. Id. at S-59; see also supra text accompanying note 55; supra
note 76 (discussing difference between real and nominal rates).
171. Moore & Viscusi, supra note 92, at S-61; see also id. at S-52.
It is worth thinking about how the regulatory system ought to react
if, contrary to the findings by Moore and Viscusi, one found that
individuals discounted health risks at a very high rate, even when they
were well informed about these risks. In such situations, it might be
appropriate for the government to act in a paternalistic fashion and
make social policy on the basis of a lower discount rate. The rationale
would be somewhat analogous to the rationale for the usury laws, which
prohibit lending at an overly high interest rate.
The utility of an individual with an unusually high discount rate
would increase if she were allowed to borrow at a rate up to her
discount rate in order to transfer consumption from the future to the
present. The usury laws, however, prevent her from doing so because of
concern that she might later experience excessive regret. Similarly, in
deciding how stringently to regulate future environmental risks, the
government could be skeptical of discount rates for health risks that
are high compared to the rates at which money gets transferred through
the financial markets.
Empirical findings of high discount rates would at the very least
be troubling and raise difficult questions as to how social
policymakers should react. The Moore and Viscusi studies, showing an
equivalence between the rates at which individuals discount health
risks and the rates at which the market discounts flows of money, make
it unnecessary to face this issue.
172. See id. at S-61. The earlier studies are Michael J. Moore & W.
Kip Viscusi, Models for Estimating Discount Rates for Long-Term Health
Risks Using Labor Market Data, 3 J. Risk & Uncertainty 381 (1990);
Michael J. Moore & W. Kip Viscusi, The Quantity-Adjusted Value of Life,
26 Econ. Inquiry 369 (1988); Viscusi & Moore, supra note 95.
173. See Moore & Viscusi, supra note 92, at S-61.
174. Id.
175. See Viscusi & Moore, supra note 95, at 314.
176. The issue is not entirely free of doubt. For example, a more
recent study by Viscusi and a different co-author, using a similar
methodology, found real discount rates ranging from 11-17 percent, in
the context of automobile safety. See Mark K. Dreyfus & W. Kip Viscusi,
Rates of Time Preference and Consumer Valuations of Automobile Safety
and Fuel Efficiency, 38 J.L. & Econ. 79, 84, 99 (1995). The authors
note that the riskless rate of interest, which they estimate in the 2-5
percent range, is outside the confidence limit of their estimates. See
id. at 99. They note, however, that in many cases consumers face
interest rates that are far higher than the riskless rate, and that
their estimated discount rate was not statistically different, at a 95
percent confidence interval, from the real rates for the financing of
automobile purchases (8.5 percent and 11.0 percent for new and used
cars, respectively). See id. at 99-100.
Individuals also exhibit inordinately high discount rates with
respect to purchases having an effect on energy conservation. Thus,
they have not been willing to pay much of a premium on the purchase of
products such as air conditioning or heating units in return for lower
energy costs in the future. See Jeffrey A. Dubin, Will Mandatory
Conservation Promote Energy Efficiency in the Selection of Household
Appliance Stocks?, 7 Energy J. 99, 109-13 (1986); Jerry A. Hausman,
Individual Discount Rates and the Purchase and Utilization of Energy-
Using Durables, 10 Bell J. Econ. 33, 50-52 (1979); Douglas A. Houston,
Implicit Discount Rates and the Purchase of Untried, Energy-Saving
Durable Goods, 10 J. Consumer Res. 236, 236-37 (1983).
These studies, which are discussed in Dreyfus & Viscusi, supra, at
83-84, affect only financial flows and do not raise the question of how
to discount future health risks. The problem here may well be that
consumers lack clear information on energy savings benefits or cannot
properly process this information if they have it, see Wesley A. Magat
& W. Kip Viscusi, Informational Approaches to Regulation 5 (1992), or
that they violate some of the postulates of rational theory, see George
Loewenstein & Richard H. Thaler, Intertemporal Choice, 3 J. Econ.
Persp. 181, 182-83, 192 (1989).
177. See supra text accompanying note 167.
178. See Rosen, supra note 70, at 224; supra text accompanying
notes 99-100.
179. In fact, the situation may be even more complicated. Children,
for example, may increase one's utility. See Richard A. Epstein,
Justice Across Generations, 67 Tex. L. Rev. 1465, 1472 (1989). Then,
for a given level of consumption, after one has children one's utility
might be higher than before.
180. See supra text accompanying notes 36-38.
181. See Circular No. A-94, 57 Fed. Reg. 53,519 (1992).
182. See Robert C. Lind, Discounting for Time and Risk in Energy
Policy 5-6 (1982). For criticisms, see Daniel A. Farber, Risk
Regulation in Perspective: Reserve Mining Revisited, 21 Envtl. L. 1321,
1349-50 (1991); Farber & Hemmersbaugh, supra note 19, at 278 & n.43;
Viscusi, supra note 76, at 129.
183. See 57 Fed. Reg. at 53,522-23.
184. Id. at 53,523.
185. See id. at 53,520, 53,523.
186. See id. at 53,528 (3.8 percent); 61 Fed. Reg. 6397, 6397
(1996) (3.0 percent); 63 Fed. Reg. 3932, 3933 (1998) (3.8 percent).
187. For clear analyses, see Arnold, supra note 22, at 177-97;
Lind, supra note 22. For an excellent primer on discounting, see Lind,
supra note 182, at 21-94.
188. Arnold, supra note 22, at 180.
189. See id. at 181.
190. Because income taxes are due on nominal interest, the tax
adjustment must be performed first. See id. at 192 n.10.
191. See id. at 192.
192. See id. at 192; Viscusi, supra note 76, at 129, 134.
In 1998, the yield on 30-year Treasury bonds stood at 5.57 percent,
the lowest since auctions on these bonds began in 1977. See Guy Dixon &
Candace Cumberbatch, Bond Price Hit New Highs, Lifted by Concerns About
Japan and Signals of a U.S. Slowdown, Wall St. J., July 7, 1998, at
C19. An individual facing a 28 percent Federal marginal tax rate would
have an after-tax return of 4.0 percent. Subtracting the change in the
consumer price index for the twelve-month period ending in May 1998,
which is 1.7 percent, see U.S. Bureau of Labor Statistics, Consumer
Price Index Summary (visited July 8, 1998) , would result in a discount rate of 2.3
percent.
193. See Arnold, supra note 22, at 181.
194. See id. at 184-85.
195. See id. at 190.
196. See supra text accompanying notes 183-184.
197. In the case of environmental regulation, the government is not
making the investment, but is instead requiring private parties to make
it. The same analysis is applicable, however. See Arnold, supra note
22, at 189-91.
198. See id. at 180-84; Lind, supra note 22, at S-10, S-11.
The Department of Energy continues to engage in this inquiry:
Because the proposed appliance efficiency standards will primarily
affect private, rather than public, investment, the Department
continues to believe that using the average real rate of return on
private investment as the basis for the social discount rate is most
appropriate. If the primary impact of the standards were on Federal or
other public expenditures, DOE agrees that real interest rates on long
term government securities would likely be a better basis.
60 Fed. Reg. 37,388, 37,394 (1995).
199. See Arnold, supra note 22, at 184-85; Lind, supra note 22, at
S-8, S-9.
200. See Arnold, supra note 22, at 184-85, 190-91; Lind, supra note
22, at S-8, S-9.
201. See Ronald G. Cummings, Legal and Administrative Uses of
Economic Paradigms: A Critique, 31 Nat. Resources J. 463, 471 (1991);
Randolph M. Lyon, Federal Discount Rate Policy, The Shadow Price of
Capital, and Challenges for Reforms, 18 J. Envtl. Econ. & Mgmt. S-29,
S-30 (1990). For an interesting survey of the different choices of
discount rates in Federal agencies, see Edward R. Morrison, Comment,
Judicial Review of Discount Rates Used in Regulatory Cost-Benefit
Analysis, 65 U. Chi. L. Rev. 1333, 1336-37, 1364-69 (1998).
202. 59 Fed. Reg. 45,872, 45,895-97 (1994).
203. See 43 C.F.R. 11.84(e)(2) (1998) (Department of the Interior).
Ohio v. Department of the Interior, 880 F.2d 432, 464-65 (D.C. Cir.
1989), upheld the Department of the Interior's choice of a 10 percent
discount rate for natural resources damages, following OMB's pre-1992
policy, see supra text accompanying note 182.
204. See supra text accompanying notes 73-75.
205. See supra text accompanying notes 133-143.
206. See supra text accompanying notes 153-160.
207. See supra text accompanying note 156.
208. See Jones-Lee et al., supra note 159, at 55-57.
209. In contrast, in the Cropper and Subramanian study, the
respondents were asked to evaluate the ease with which each of the
risks could be avoided. See supra text accompanying notes 136-138.
210. The upward adjustment resulting from the unrepresentativeness
of the risk preferences of the population exposed to workplace risks
cannot be estimated as a result of the paucity of the empirical data,
though logic compels the conclusion that such workers will have a
lower-than-average willingness-to-pay to avoid risk. See supra Part
I.E.2.b.
211. See supra text accompanying notes 123-125.
212. See supra text accompanying notes 103-106.
213. For a 20 year lag, a discount rate of 2 percent reduces the
valuation to 67 percent of the undiscounted amount, as compared to a
reduction to 55 percent of the undiscounted amount for a 3 percent
discount rate.
214. See supra text accompanying notes 183-184.
215. See supra text accompanying notes 80-83.
216. The OMB approach, however, avoids the pitfall of using
V[in'60,60'] as the basis for estimating V[in'40,40']. Such a procedure
might lead to undervaluation because of changes over time in the income
and saving levels of individuals. See supra Part I.E.1.b.
217. The adjustments for the dread nature of the harm, the
involuntary nature of the harm, the salary differential, and the impact
of economic growth are 2, 2, 1.23, and 1.22, respectively. See supra
text accompanying notes 204-213. The calculation assumes that all the
factors are multiplicative. See supra text accompanying notes 206-210.
This assumption should be the focus of empirical study.
218. See B.T. Westerfield, Asbestos-Related Lung Disease, 85
Southern Med. J. 616 (1992). Some of the adverse consequences of
exposure to asbestos have latency periods of 30 and 40 years. See id.
at 618.
219. See supra Part I.E.2.b.
220. See supra text accompanying notes 177-179.
221. For discussion of the differences with the intergenerational
setting, see infra text accompanying notes 281-283.
222. See supra text accompanying notes 65-69.
223. See supra text accompanying note 35 (discussing Barnes's
testimony).
224. See supra Part I.F.1.
225. See supra Part I.G.
226. See supra text accompanying notes 214-218.
227. For applications of this concept in the legal literature, see
Bruce Ackerman & Anne Alstott, The Stakeholder Society (forthcoming
1999) (manuscript at 131-42, on file with the Columbia Law Review);
Christine Jolls, Contracts as Bilateral Commitments: A New Perspective
on Contract Modification, 26 J. Legal Stud. 203, 210, 219-24 (1997);
Christine Jolls et al., A Behavioral Approach to Law and Economics, 50
Stan. L. Rev. 1471, 1538-41 (1998); Deborah M. Weiss, Paternalistic
Pension Policy: Psychological Evidence and Economic Theory, 58 U. Chi.
L. Rev. 1275, 1285-86, 1300-06 (1991).
228. Intergenerationally, the situation is different because the
individual making the decision is different from the individual
affected by the decision. See infra text accompanying notes 281-283.
229. Ackerman & Alstott, supra note 227, at 141.
230. See supra note 192.
231. For critiques of cost-benefit analysis, see Steven Kelman,
Cost-Benefit Analysis: An Ethical Critique, Regulation, Jan./Feb. 1981,
at 33; Duncan Kennedy, Cost-Benefit Analysis of Entitlement Problems: A
Critique, 33 Stan. L. Rev. 387 (1981). For critiques of the techniques
for valuing human lives, see sources cited supra note 64.
232. See supra text accompanying notes 21-22.
233. See William D. Nordhaus, Managing the Global Commons: The
Economics of Climate Change 4 (1994) (``A complete analysis of the
economics of climate change must recognize the extraordinarily long
time lags involved in the reaction of the climate and economy to
greenhouse gas emissions.'').
234. For a comprehensive list, see 1 Philippe Sands, Principles of
International Environmental Law 198-213 (1995).
235. Stockholm Declaration of the United Nations Conference on the
Human Environment, June 16, 1972, 11 I.L.M. 1461.
236. United Nations Conference on Environment and Development: Rio
Declaration on Environment and Development, June 13, 1992, 31 I.L.M.
874.
237. United Nations Conference on Environment and Development:
Framework Convention on Climate Change, May 9, 1992, 31 I.L.M. 849.
238. Putnam & Graham, supra note 6, at 60.
239. Keeler & Cretin, supra note 5, at 303; see also id. at 304
(``Delaying any program . . . increases its benefit to cost ratio.'').
240. See Arnold, supra note 22, at 178.
241. See Nordhaus, supra note 233, at 125 (``If investments in
equipment or human capital yield 10 percent annually, it would be
inefficient to make investments that yielded only 3 percent.''); id. at
135.
242. See id. at 125.
243. See Hillman & Kim, supra note 5, at 200-02; Michael W. Jones-
Lee & Graham Loomes, Discounting and Safety, 47 Oxford Econ. Papers
501, 511 (1995); Lipscomb, supra note 94, at S237.
244. See Lewis A. Kornhauser & Richard L. Revesz, Evaluating the
Effects of Alternative Superfund Liability Rules, in Analyzing
Superfund, supra note 133, at 115, 118.
245. See id.
246. In some cases, in contrast, environmental remediation costs
may fall over time as a result of technological innovation.
247. Even if the cost were less than $100, a static evaluation
would counsel against investing in remediation if the funds could be
invested in an alternative project with a sufficient return.
248. In practice, the problem is more complicated because the
increase in costs and damages is likely to be continuous but the
structure of the analysis remains the same.
249. See William D. Nordhaus, Economic Approaches to Greenhouse
Warming, in Global Warming: Economic Policy Responses 33, 58 (Rudiger
Dornbusch & James M. Poterba eds., 1991) (``we are likely to be
increasingly averse to climate change as the change becomes larger'').
250. See Robert C. Lind, Intergenerational Equity, Discounting, and
the Role of Cost-Benefit Analysis in Evaluating Global Climate Policy,
23 Energy Pol'y 379, 382 (1995); David W. Pearce et al., The Social
Costs of Climate Change: Greenhouse Damage and the Benefits of Control,
in Climate Change 1995: Economic and Social Dimensions of Climate
Change 179, 184-86 (James P. Bruce et al. eds., 1996) [hereinafter
Climate Change 1995].
251. See Pearce et al., supra note 250, at 214.
252. See Lind, supra note 250, at 384.
253. See James K. Hammitt, Outcome and Value Uncertainties in
Global-Change Policy, 30 Climatic Change 125, 130 (1995).
254. See K. J. Arrow et al., Intertemporal Equity, Discounting, and
Economic Efficiency, in Climate Change 1995, supra note 250, at 125,
132 (``society cannot set aside investments over the next three
centuries, earmarking the proceeds for the eventual compensation of
those adversely affected by global warming''); Farber & Hemmersbaugh,
supra note 19, at 297 (same); Lind, supra note 250, at 381-82
(questioning society's ability to make transfers across several
generations).
255. See Nordhaus, supra note 249, at 57.
256. Tyler Cowen & Derek Parfit, Against the Social Discount Rate,
in Justice Between Age Groups and Generations 144, 148 (Peter Laslett &
James S. Fishkin eds., 1992); see Farber & Hemmersbaugh, supra note 19,
at 291; James C. Wood, Intergenerational Equity and Climate Change, 8
Geo. Int'l Envtl. L. Rev. 293, 321 (1996).
257. David W. Pearce & R. Kerry Turner, Economics of Natural
Resources and the Environment 223-24 (1990); see Morrall, supra note
132, at 28 (without discounting ``all rules yielding continuous
benefits are worth any amount of immediate costs'').
258. For further discussion, see infra Part II.C.
259. For example, Tyler Cowen and Derek Parfit note:
No generation can be morally required to make more than certain
kinds of sacrifice for the sake of future generations. And this is part
of a more general view, which has nothing to do with time. On this
view, no one is required to make great sacrifices merely to benefit
others.
Cowen & Parfit, supra note 256, at 149.
260. See Robert Solow, An Almost Practical Step Toward
Sustainability, 19 Resources Pol'y 162, 168 (1993).
261. Maureen L. Cropper et al., Rates of Preference for Saving
Lives, 80 Am. Econ. Rev. Papers & Proc. 469, 469 (1992) [hereinafter
Cropper et al., Rates of Time Preference]. For an earlier version of
the study, see Maureen L. Cropper et al., Discounting Human Lives, 3
Am. J. Agric. Econ. 1410 (1991).
262. See Cropper et al., Rates of Time Preference, supra note 261,
at 469.
263. See id. at 471 tbl.1. For studies using shorter timeframes,
see Cairns, supra note 164, at 222; John A. Cairns & Marjon M. van der
Pol, Saving Future Lives: A Comparison of Three Discounting Models, 6
Health Econ. 341, 343 (1997); Horowitz & Carson, supra note 11, at 408;
Jan Abel Olsen, Time Preferences for Health Gains: An Empirical
Investigation, 2 Health Econ. 257, 259 (1993).
264. See Johannesson & Johansson, supra note 13, at 331. For an
evaluation of the extent to which the framing of the question affects
the results, see Magnus Johannesson & Per-Olov Johansson, Saving Lives
in the Present Versus Saving Lives in the Future--Is There a Framing
Effect, 15 J. Risk & Uncertainty 167, 169 (1997) [hereinafter
Johannesson & Johansson, Risk & Uncertainty].
265. See Cropper & Portney, supra note 73, at 375. The study is Ola
Svenson & Gunnar Karlsson, Decision-Making, Time Horizons, and Risk in
the Very Long-Term Perspective, 9 Risk Analysis 385 (1989).
266. See supra text accompanying notes 92-97. As three prominent
commentators recently explained:
If one discounts present world GNP over 200 years at 5 percent per
annum, it is worth only a few hundred thousand dollars, the price of a
good apartment. On the basis of such valuations, it is clearly
irrational to be concerned about global warming, nuclear waste, species
extinction, and other long-term phenomena. Yet we are worried about
these issues, and are actively considering devoting very substantial
resources to them. There appears to be a part of our concern about the
future that is not captured by discounted utilitarianism.
Andrea Beltratti et al., Sustainable Growth and the Green Golden
Rule, in The Economics of Sustainable Development 147, 149 (Ian Goldin
& L. Alan Winters eds., 1995).
267. See Cairns, supra note 164, at 224-25 (``the further in the
future the benefit the lower the rate at which most individuals
discount it''); Cairns & van der Pol, supra note 263, at 342 (referring
to ``increasing evidence . . . that individuals do not appear to apply
a constant discounting model''); Cropper et al., Rates of Time
Preference, supra note 261, at 471 (``Discount rates are much higher
for short horizons than for long horizons.''); Johannesson & Johansson,
Risk & Uncertainty, supra note 264, at 174 (``estimated discount rates
decrease[] with the time horizon''); Olsen, supra note 263, at 262
(``The longer the time horizon, the lower are the implied [discount]
rates.''). One study found a similar result in an intragenerational
context. See Loewenstein & Thaler, supra note 176, at 184 (``discount
rates declined sharply with the length of time to be waited'').
268. See supra text accompanying notes 264-265 (discussing Svenson
& Karlsson study).
In arguing in favor of a constant discounting model, William
Nordhaus states that ``it would be unrealistic to make decisions based
on the premise that there is, in fact, no time preference given that
many social decisions are, in fact, tilted in favor of present
generations.'' Nordhaus, supra note 233, at 123. It is therefore worth
emphasizing that the studies discussed in this section reveal a strong
moral intuition against such discounting.
269. See Arrow et al., supra note 254, at 137-38; Cropper &
Sussman, supra note 65, at 162; Fuchs & Zeckhauser, supra note 161, at
265; Jones-Lee & Loomes, supra note 243, at 501; Lind, supra note 250,
at 385-86.
270. See Arrow et al., supra note 254, at 130, 134.
271. In theory, the rate could also be negative, which would imply
the privileging of the utilities of later generations.
272. See Arrow et al., supra note 254, at 134-35; Lind, supra note
250, at 385. If one adds utilities over an infinite time period, the
social welfare function will be ill-defined; to avoid this problem,
some discounting would be required. See Arrow et al., supra note 254,
at 136; Jones-Lee & Loomes, supra note 243, at 507, n.10. As Kenneth
Arrow and his coauthors explain, however, ``because even a very small
positive discount rate . . . would resolve the mathematical issue, this
objection has little practical moment.'' Arrow et al., supra note 254,
at 136.
273. Arrow et al., supra note 254, at 130; see Nordhaus, supra note
233, at 123-24; David Pearce et al., Sustainable Development: Economics
and Environment in the Third World 30 (1990). For the derivation of the
relationship, see Arrow et al., supra note 254, at 134-35.
274. See Arrow et al., supra note 254, at 130; Lind, supra note
250, at 384.
275. See Cline, supra note 106, at 249; Arrow et al., supra note
254, at 134.
276. Fuchs & Zeckhauser, supra note 161, at 265 (emphasis added).
277. See supra text accompanying notes 21-22.
278. See Robert C. Lind, Intertemporal Equity, Discounting, and
Economic Efficiency in Water Policy Evaluation, 37 Climatic Change 41,
52 (1997).
279. See Thomas C. Schelling, Intergenerational Discounting, 23
Energy Pol'y 395, 396 (1995) (``To be less interested in the welfare of
East Africans than former Yugoslavians is less like 'discounting' than,
perhaps, 'depreciating.' When we count future welfare less than our own
we are depreciating generations that are distant in time, in
familiarity, in culture, in kinship, and along other dimensions.'').
280. As a result, the issue of growth discounting is not presented
by the example.
281. Of course, taking a ``multiple selves'' analysis to its
logical conclusions, see supra text accompanying notes 227-230, would
turn any intragenerational problem into an intergenerational problem.
282. See Cowen & Parfit, supra note 256, at 155 (``Pure time
preference within a single life does not imply pure time preference
across different lives.''). As Joseph Lipscomb notes in the medical
context, with respect to future generations, ``discounting represents a
global political decision about the relative weights current
decisionmakers should attach to future population cohorts.'' Lipscomb,
supra note 94, at S246. He adds that this discount rate ``need have no
relationship to how a given population member (or a statistically
representative member) values current versus future gains in health
status.'' Id.
283. See supra text accompanying notes 227-230 (discussing
``multiple selves'').
284. See Richard Dubourg & David Pearce, Paradigms for
Environmental Choice: Sustainability versus Optimality, in Models of
Sustainable Development 21, 24 (Sylvie Faucheux et al. eds., 1996)
(``For maximizing a single utility function . . . over infinite time
cannot help but suggest that we are dealing with a single generation
which exists forever, or even a single individual.''); Lind, supra note
250, at 385 (discussing why other approaches are preferable). For
example, Kenneth Arrow and his co-authors acknowledge that the rate of
time preference ``is sometimes said to represent discounting for
impatience or myopia.'' Arrow et al., supra note 254, at 131. These are
precisely the sorts of psychological characteristics that justify
intragenerational discounting.
285. The problem is fairly pervasive. For example, Kenneth Arrow
and his co-authors note that discounting for time preference reflects
that ``one cares less about tomorrow's consumer than today's, or about
one's own welfare tomorrow than today.'' Arrow et al., supra note 254,
at 130. This formulation conflates the intergenerational and
intragenerational problems.
286. See Lipscomb, supra note 94, at 238 (constant discounting ``is
basically a political judgment about intergenerational equity'').
287. Arrow et al., supra note 254, at 131; Parfit, supra note 21,
at 485.
288. An even narrower view of the role of future generations in the
utilitarian calculus is that of Maureen Cropper and Frances Sussman.
They explain their approach:
Each generation receives utility from its own consumption and that
of its immediate descendants. Because this is true of all generations,
the current generation necessarily takes into account the utilities of
all future generations in making its consumption and bequest plans.
Cropper & Sussman, supra note 65, at 170.
This approach has been criticized as unduly privileging the
position of the current generation. See Zeckhauser, supra note 102, at
440-41 (``There is the significant issue . . . whether . . . this sort
of altruism does not substantially underrepresent the impacts that will
be truly felt.'').
289. See supra text accompanying notes 261-268.
290. See Arrow et al., supra note 254, at 137.
291. See supra text accompanying notes 21-22; Schelling, supra note
279, at 396.
292. See Arrow et al., supra note 254, at 136; Jones-Lee & Loomes,
supra note 243, at 502 n.4; George Tolley & Robert Fabian, Future
Directions for Health Value Research, in Tolley et al., supra note 70,
at 300, 311.
293. See Arrow et al., supra note 254, at 136 (``Some have argued
that the discount rate should be adjusted for the probability of
extinction. Plausible estimates of this effect would add very little to
the discount rate.'').
294. See supra text accompanying notes 252-253.
295. See Parfit, supra note 21, at 482; Jones-Lee & Loomes, supra
note 243, at 502 n.4; John F. Morrall III, Cotton Dust: An Economist's
View, in The Scientific Basis of Health and Safety Regulation 93, 107-
08 (Robert W. Crandall & Lester B. Lave eds., 1981).
296. See supra text accompanying notes 252-253.
297. See Heinzerling, supra note 7, at 2044-45.
298. It is conceivable that in some instance one could make a
particularized, factually grounded case for a probabilistic reduction
of harms.
299. John Rawls makes the following case against a pure time
preference:
There is no reason for the parties [in the original position] to
give any weight to mere position in time. They have to choose a rate of
saving for each level of civilization. If they make a distinction
between earlier and more remote periods because, say, future states of
affairs seem less important now, the present state of affairs will seem
less important in the future. Although any decision has to be made now,
there is no ground for their using today's discount of the future
rather than the future's discount of today. The situation is
symmetrical and one choice is as arbitrary as the other. Since the
persons in the original position take up the standpoint of each period,
being subject to the veil of ignorance, this symmetry is clear to them
and they will not consent to a principle that weighs nearer periods
more or less heavily.
John Rawls, A Theory of Justice 294 (1971); see also id. at 284-98
(setting forth a theory of intergenerational justice). For commentary,
see John Broome, Counting the Cost of Global Warming 31, 96-98 (1992);
B.M. Barry, Justice Between Generations, in Law, Morality, and Society:
Essays in Honour of H.L.A. Hart 268, 276-81 (P.M.S. Hacker & J. Raz
eds., 1977).
300. See supra Part I.H.
301. Some prominent economists are at the very least ambivalent
about discounting for pure time preference. For example, Robert Solow
notes:
You may wonder why I allow discounting at all. I wonder, too: no
generation 'should' be favored over any other. The usual scholarly
excuse--which relies on the idea that there is a very small fixed
probability that civilization will end during any little interval of
time--sounds far-fetched. We can think of intergenerational discounting
as a concession to human weakness or as a technical assumption of
convenience (which it is).
Solow, supra note 260, at 165; see also Cline, supra note 106, at
249 (``Impatience or 'myopia' may be a legitimate basis for a single
individual's preferring consumption earlier rather than later in his
lifetime, but from society's standpoint it is hardly a justifiable
basis for making intergenerational comparisons''); Lind, supra note 22,
at S-20 (intergenerational discounting ``would seem a highly
questionable if not immoral public policy''); Robert M. Solow,
Intergenerational Equity and Exhaustible Resources, 41 Rev. Econ. Stud.
29, 40 (1973) (expressing doubts as to whether time discounting is
appropriate). Kenneth Arrow and his co-authors do not analyze
explicitly what the rate of time preference should be, but assume at
times that it would be zero. See Arrow et al., supra note 254, at 131.
302. In practice, the distinction is not as crisp because
generations are not successive, but overlapping. The conceptual
distinction, however, remains important. For models of overlapping
generations, see Burton, supra note 13; Cropper & Sussman, supra note
65, at 169-72. When generations overlap, the current generation tends
to convey benefits on the next generation even when it is motivated
only by its self-interest. See Barry, supra note 299, at 268 (as a
result of the overlap ``prudent provision for the welfare of all those
currently alive therefore entails some considerable regard for the
future'').
303. See Geoffrey H. Heal, Discounting and Climate Change: An
Editorial Comment, 37 Climate Change 335, 335 (1997).
304. See supra text accompanying notes 273-275.
305. See Arrow et al., supra note 254, at 134-35.
306. See id. at 131-32, 141 n.10.
307. See id. at 132.
308. See supra Part I.E.1.a.
309. See Cline, supra note 106, at 116-19; Pearce et al., supra
note 250, at 195, 198.
310. See supra text accompanying note 100.
311. See Heinzerling, supra note 7, at 2051.
312. See Cline, supra note 106, at 101-06 (discussing species loss
and damage to forests).
313. See Arnold, supra note 22, at 177; Heinzerling, supra note 7,
at 2051.
314. See Cline, supra note 106, at 110-12.
315. See Schelling, supra note 279, at 399.
The 1990 Amendments to the Montreal Protocol on Substances that
Deplete the Ozone Layer marked the first time that a developing
country's adherence to the provisions of an international environmental
treaty was linked to the receipt of financial resources. See 1 Sands,
supra note 234, at 269. As Philippe Sands points out, these amendments
``introduced a radical and innovative change which has had profound
consequences on the negotiation of subsequent global environmental
treaties.'' Id. This change is evident in the provisions of the 1992
Climate Change Convention which requires developed countries to provide
financial assistance and technological assistance to developing
countries. See id. at 740-41.
316. See World Bank, GNP Per Capita (visited July 24, 1998) .
317. The differences in the patterns of per capita energy
consumption between developed and developing countries are stark. See
International Energy Agency, Climate Change Policy Initiatives 28 tbl.3
(1992). Over time, this share of the responsibility might decrease as
developing countries industrialize.
318. Perhaps, however, there is a concern that direct foreign aid
would not be spent wisely by the recipient, or could create undesirable
incentives. If these problems were sufficiently serious, long-term
environmental investments could be the most desirable way of providing
foreign assistance.
319. See Louis Kaplow, The Optimal Supply of Public Goods and the
Distortionary Cost of Taxation, 49 Nat'l Tax J. 513, 516-19 (1996);
Louis Kaplow & Steven Shavell, Property Rules Versus Liability Rules:
An Economic Analysis, 109 Harv. L. Rev. 713, 744-45 (1996). For
discussion of the distributional consequences of environmental policy,
see Richard L. Revesz, Foundations of Environmental Law and Policy 102-
03 (1997).
320. See Farber & Hemmersbaugh, supra note 19, at 300.
321. The substitutability of these future benefits is discussed
below in the context of the principle of sustainable development. See
infra Part II.E.
322. See infra text accompanying notes 343-344.
323. See supra text accompanying notes 254-256.
324. See, e.g., Gary D. Meyers & Simone C. Muller, The Ethical
Implications, Political Ramifications and Practical Limitations of
Adopting Sustainable Development as National and International Policy,
4 Buff. Envtl. L.J. 1, 10 (1996) (``The core idea of sustainability,
then, is the concept that current decisions should not impair the
prospects for maintaining or improving future living standards.'');
Edith Brown Weiss, Intergenerational Equity: A Legal Framework for
Global Environmental Change, in Environmental Change and International
Law: New Challenges and Dimensions 385, 385 (Edith Brown Weiss ed.,
1991) (``Sustainable development rests on a commitment to equity with
future generations.'').
For a strong critique of the concept of sustainable development,
see Wilfred Beckerman, Through Green-Colored Glasses: Environmentalism
Reconsidered 143-60 (1996).
325. See Dubourg & Pearce, supra note 284, at 27 (``Sustainability
has become a common policy objective of many government institutions,
international agencies, and non-governmental organisations.''); supra
text accompanying notes 234-237.
326. Some commentators link the attractiveness of sustainable
development with criticisms of discounting approaches: ``There appears
to be a part of our concern about the future that is not captured by
discounted utilitarianism. Perhaps as much as anything it is this that
is driving an interest in formalising the concept of sustainability.''
Beltratti et al., supra note 266, at 149.
327. See David Hodas, The Climate Change Convention and Evolving
Legal Models of Sustainable Development, 13 Pace Envtl. L. Rev. 75, 77
(1995); Averil Rothrock, Oregon's Goal Five: Is Ecologically
Sustainable Development Reflected?, 31 Willamette L. Rev. 449, 451
(1995); Mary Pat Williams Silveira, International Legal Instruments and
Sustainable Development: Principles, Requirements, and Restructuring,
31 Willamette L. Rev. 239, 243 (1995); Christopher D. Stone,
Deciphering ``Sustainable Development'', 69 Chi.-Kent L. Rev. 977, 978
(1994). For general discussion of the principle of sustainable
development, see 1 Sands, supra note 234, at 198-208.
One commentator has suggested that over 70 definitions of the term
exist. See Susan L. Smith, Ecologically Sustainable Development:
Integrating Economics, Ecology, and Law, 31 Willamette L. Rev. 261, 276
(1995); see also John Peezey, World Bank Environment Paper Number 2:
Sustainable Development Concepts: An Economic Analysis, app. A (1992)
(presenting an extensive list of definitions).
328. World Commission on Environment and Development, Our Common
Future (1987).
329. Id. at 43.
330. See Weiss, supra note 324, at 401-05; Solow, supra note 260,
at 162.
331. The following two paragraphs are adapted from Revesz, supra
note 319, at 307-08.
332. See Weiss, supra note 324, at 401-05; Edith Brown Weiss, In
Fairness to Future Generations: International Law, Common Patrimony,
and Intergenerational Equity 40-45 (1988).
333. See Solow, supra note 260, at 162-63.
334. See id. at 167-68.
335. See id. at 168.
336. Compare Weiss, supra note 324, at 404 (``The principle of
conservation of quality requires that we leave the quality of the
natural and cultural environments in no worse condition than we
received it.''), with Solow, supra note 260, at 167 (``If
sustainability means anything more than a vague emotional commitment,
it must require that something be conserved for the very long run.'').
337. Compare Weiss, supra note 324, at 404 (``We may exhaust more
reserves of a natural resource and cause modest levels of pollution,
but pass on a higher level of income, capital, and knowledge sufficient
to enable future generations to develop substitutes for the depleted
resource and methods for abating or removing pollutants.''), with
Solow, supra note 260, at 168 (``Most routine natural resources are
desirable for what they do, not for what they are. It is their capacity
to provide usable goods and services that we value. Once that principle
is accepted, we are in the everyday world of substitutions and
tradeoffs.'').
338. Compare Weiss, supra note 324, at 403 (we ``must proceed
extremely cautiously'' with respect to the possible destruction of a
``unique natural resource''), with Solow, supra note 260, at 168 (``It
makes perfectly good sense to insist that certain unique and
irreplaceable assets should be preserved for their own sake'').
339. See Solow, supra note 260, at 163 (``So far . . . the proper
adjustments needed to measure the stocks and flows of our natural
resources and environmental assets are not being made in the published
national accounts.'').
340. See Michael Jacobs, The Green Economy: Environment,
Sustainable Development and the Politics of the Future 84 (1991) (``The
final objection which might be made to our definition of sustainability
is that it ignores population growth.''); Michael Redclift, Sustainable
Development: Exploring the Contradictions 29 (1987) (``The concept of
'sustainability' makes little sense . . . unless we also consider the
impact of rapid population growth on the physical resource base.'');
Nafis Sadik, Population, Environment, and Sustainable Development, in
In the Aftermath of the Earth Summit 21, 23 (Andreas Gettkant ed.,
1993) (``The universal acceptance of the strong links between
sustainable development and the preservation of the environment does
not extend to the links between these two and the population
policy.''). But see President's Council on Sustainable Development,
Population and Consumption Task Force Report 13-32 (1997) (discussing
how population growth is linked to sustainability).
The link to population does not play a role in the discussions by
Weiss, supra note 324, at 401-05, and Solow, supra note 260.
341. For an exploration of the ethical consequences of this link,
see Parfit, supra note 21, at 351-441; Broome, supra note 86, at 161-
62.
342. See Jacobs, supra note 340, at 84 (``It could be argued that
what sustainability demands is not simply a constant level of
environmental capacity but a constant per capita or per person
level.''); Richard Baldwin, Does Sustainability Require Growth?, in The
Economics of Sustainable Development, supra note 266, at 51, 52 (``The
simple fact is that current population growth rates, if they were
maintained, would lead to an unsustainable world population.'').
343. See Gregory D. Fullem, The Precautionary Principle:
Environmental Protection in the Face of Scientific Uncertainty, 31
Willamette L. Rev. 495, 500-01 (1995); Alexandre Kiss, The Rights and
Interests of Future Generations and the Precautionary Principle, in The
Precautionary Principle and International Law: The Challenge of
Implementation 19, 27 (David Freestone & Ellen Hey eds., 1996); Bernard
A. Weintraub, Science, International Environmental Regulation, and the
Precautionary Principle: Setting Standards and Defining Terms, 1 N.Y.U.
Envtl. L.J. 173, 177-78 (1992). For a discussion of the status of the
precautionary principle in international environmental law, see 1
Sands, supra note 234, at 208-13.
344. See supra text accompanying notes 252-253.
345. These issues are explored briefly in Revesz, supra note 319,
at 330-31.
346. In this context, the principle of sustainable development has
the same features as the maximin principle.
347. See supra text accompanying notes 314-316.
348. See supra text accompanying notes 281-286.
349. Other objections to growth discounting are discussed at supra
text accompanying notes 308-311.
350. See supra Part II.E.
351. See supra text accompanying notes 319-320.
352. See supra text accompanying notes 316-317.
353. See supra text accompanying note 317.
__________
Statement of Bernard Melewski, Adirondack Council
Good Morning. My name is Bernard C. Melewski. I am counsel and
legislative director of the Adirondack Council. I would like to thank
the chairman, and the members of the committee for the opportunity to
be here with you this morning and to provide testimony regarding the
reauthorization of the Clean Air Act.
I would like to begin with a brief explanation of the Adirondack
Park, the role of the Adirondack Council in New York, and why we are
particularly interested in the topic of acid rain and in the Clean Air
Act.
The Adirondack Park is the largest park of any kind in the
contiguous United States. It is nearly three times the size of
Yellowstone National Park and covers one fifth of the State of New York
making it equal in size to the State of Vermont. The Adirondack Park is
roughly six-million acres of public and private land containing the
largest assemblage of Old Growth forest east of the Mississippi River.
The Adirondacks include the headwaters of five major drainage basins.
Lake Champlain and the Hudson, St. Lawrence, Mohawk and Black rivers
all draw water from the Adirondack Park. Within the Park are more than
2,800 lakes and ponds, and more than 1,500 miles of rivers fed by an
estimated 30,000 miles of brooks and streams. The Park contains 46
mountain peaks more than 4,000 feet tall. Forty-five percent of the
Park is publicly owned Forest Preserve protected as ``Forever Wild'' by
the New York State Constitution since 1895. One million acres of these
public lands are classified as Wilderness.
The Adirondack Council was founded in 1975; it is a private, not-
for-profit organization dedicated to enhancing the natural and human
communities of the Park through research, education, advocacy and legal
action. Our main offices are located within the Adirondack Park, with a
satellite office in Albany, New York, the State capitol.
The Council receives moral and financial support from its more than
18,000 members and from private foundations. The Council's national and
regional member organizations include the Natural Resources Defense
Council, The Wilderness Society, National Audubon Society, National
Parks and Conservation Association, Citizens Campaign for the
Environment and the Association for the Protection of the Adirondacks.
Our interest in The Clean Air Act and the problem of acid rain is
long held. We were active contributors to the dialogue on acid rain in
New York State in the early years of the 1980s, and helped craft the
first acid rain law in the country which was adopted in 1984. The New
York law identified both sulfur dioxide and nitrogen oxide as
precursors to acid rain, sought limits on total emissions from
utilities sited within the State and even proposed an innovative
trading mechanism that Congress would adopt nationwide in the Clean Air
Act Amendments of 1990.
The Adirondack Council was also an active participant in the
national debate that led to the adoption of the acid rain program in
Title IV of the Clean Air Act Amendments 8 years ago. Our publication,
``Beside the Stilled Waters,'' which was produced and distributed in
cooperation with our member organizations, brought the problem of acid
rain to the attention of the nation and to Congress.
The enactment of Title IV of the Clean Air Act Amendments of 1990,
known as the Acid Rain Program, were not without controversy. Congress
adopted an innovative ``cap and trade'' program, modeled after the New
York legislation, which would abandon the so-called ``command and
control'' approach to regulation, in favor of a free wheeling pollution
allowance trading program that would provide utilities with the
flexibility to make compliance strategies part of their long-term
business planning. Both the need for and the cost of the program were
hotly debated.
The Adirondack Council was among the critics. We raised concern
that the cap on total emissions might not be low enough to protect
sensitive areas. We used our membership on EPA's advisory committee to
seek changes as the agency developed regulations to implement Title
Four. Among other issues, the Adirondack Council felt that too many
credits were in the system and that EPA was not pushing to require the
most modern monitoring systems. Together with the Natural Resources
Defense Council, we reluctantly sought changes in Federal court.
(Environmental Defense Fund, et al. V. Browner, No. 93-1203 and
Consolidated Cases).
I am pleased to say that years of good-faith negotiation with the
USEPA and the affected industry resulted in very positive changes to
the program. The Adirondack Council formally withdrew our legal
challenge to the regulatory program just a few weeks ago.
Over the past year, the program of Title Four has been hailed as a
new beginning in cost-effective air regulation that puts the market to
work to the benefit of the health and welfare of millions of Americans.
Emission trading has been heralded as the solution to pollution
reduction within the United States and indeed the globe.
We are here to say that before we run to embrace trading in other
pollutants and in other markets, we need to take a hard look at the
results of the great sulfur experiment.
We remember well that day when a deputy administrator for the
Environmental Protection Agency grandly pronounced in a press release
that the regulations implementing the new Clean Air Act Amendments
would mean ``the end to acid rain in the Adirondacks.''
Certainly that was the intention of the Senate and the House. But
wisely, Congress ordered in 1990 that a series of reports be prepared
over the next few years, that would advise you of the projected results
of the acid rain program.
The wisdom of requiring these reports at that time is now apparent.
Until recently, we had some doubt that the members of the Senate would
ever see them.
The first report was due in 1993, from the Environmental Protection
Agency (ordered under sec. 404, Title IV appendix B of the 1990 CAAA)
and was entitled the Acid Deposition Standard Feasibility Study Report
to Congress. The report, dated October, 1995, was finally released in
1996, in partial settlement of the lawsuit brought by the Natural
Resources Defense Council, the Adirondack Council and the State of New
York.
The report concluded that the pollution reductions accompanying the
1990 Clean Air Act Amendments would not be sufficient to allow recovery
of certain sensitive ecosystems (including the Adirondacks) and that
many would continue to get worse. The report was particularly
compelling for New Yorkers because it revealed that despite the
reductions expected from the 1990 Amendments the loss of nearly 50
percent of its lakes and acidification of most streams in the
Adirondack Park could be expected.
The second of two reports to Congress, the report of the National
Acid Precipitation Assessment Program (NAPAP) was due in 1996, and was
finally submitted to Congress as you left for the August recess in 1998
(ordered under Sec. 901J of the 1990 CAAA). It too was released under
the threat of litigation from the State of New York. Despite its May
1998 title, the document would not be realistically available to the
public until a year later (May, 1999), almost 9 months after its
transmission to Congressional committees.
In short summary, the NAPAP report peer reviewed, confirmed and
substantially elaborated upon the findings of the earlier report to
Congress submitted by the EPA.
We believe that a fair reading of the two reports to Congress lead
to two very clear conclusions:
First, that the mechanism of a national cap in emissions coupled
with the pollution allowance trading program has been an outstanding
success. All facilities are in compliance and there is every reason to
believe that the target level of emissions will be reached. The
administrative and implementation costs of the program are less than a
traditional regulatory approach. The actual cost of the program is
substantially less than projected at the time of adoption.
According to EPA's 1998 Compliance report for the Acid Rain
Program, all 713 utility boilers and turbines affected by the
SO2 and NOx regulations met their emissions goals for 1998
as they have for every year since the program's inception. The simple,
efficient design of the program, coupled with large automatic penalties
for exceedences and the diligence of EPA administrators and the
regulated community are all factors in this success. We can look
forward to similar results when Phase II of the program, which will
include many more power plants, begins.
The administrative and implementation costs are far below those
associated with traditional regulatory approaches because in many ways
the program is self-implementing. Devices known as Continuous Emissions
Monitors (CEMS) count each ton of pollution as it is emitted from the
smokestack. At the end of each year a utility must have enough credits
(either initially allocated or purchased) to cover those emissions. The
accounting of allowance holdings and trading is in a database
maintained by EPA.
The compliance costs of the program are proving to be far below
those estimated when Title IV was adopted. EPA estimated that the fully
implemented program would cost four billion dollars a year; industry
estimates were much higher. According to the Massachusetts Institute of
Technology, compliance costs have so far been less than $1 billion per
year. Again, the design of the program helped achieve these relatively
low compliance costs. Other factors, such as rail transportation
improvements that reduced the cost of transporting low-sulfur coal were
crucial here as well. Projections (by EPA and ICF Resources) of what
new SO2 and NOx reductions would cost beyond those called
for in Title Four indicate that deep new reductions could be achieved
at or near the initial $4 billion estimate.
While we hold no special expertise in the field of the health
effects of air pollution, a brief review of the literature reveals some
interesting facts. EPA studies (Human Health Benefits from Sulfate
Reductions Under Title IV of the Clean Air Act, 1995) indicate that
every dollar spent on reducing sulfate emissions can result in tens of
dollars in savings in health care costs. With asthma cases on the rise
nationwide we need to be aware that even brief exposure to relatively
low levels of sulfur dioxide has been repeatedly shown to trigger
asthma attacks.
The market for trading allowances is improving as well. Each year
there are more trades between utilities occurring and the value of each
allowance is rising steadily. In fact, the Adirondack Council is a
market participant.
Over the past 2 years, we have acquired thousands of pollution
allowance credits, most of them donated as a community good will
gesture by utilities in New York. Unlike most other holders of
allowances, it is our intention to retire all credits we may obtain by
transferring them to a retirement account we maintain with USEPA. The
Adirondack Council has permanently retired one-ton of sulfur dioxide on
behalf of thousands of individuals around the nation, including New
York Governor George Pataki.
The Second major finding of the two reports is that despite the
success of the regulatory scheme, the overall cap in emissions is too
high to accomplish the primary goal, which was to protect sensitive
resource areas from the harmful effects of acid rain. The national cap
on emissions of sulfur-dioxide from power plants must be cut. The
reports agree that nitrogen oxide emissions are a significant
contributor to acid rain and must be addressed.
The NAPAP report also confirms that acid rain is not just an
Adirondack problem.
The damage that sulfur and nitrogen pollution causes is far from a
regional issue. It is an issue of national, even international
importance. Excess nitrogen in waters and in soils--``nitrogen
saturation''-can be found in the Northeast and in West Virginia's
Allegheny Mountains, Tennessee's Great Smoky Mountains, Colorado's
Front Range of the Rockies and even as far west as the San Bernardino
and San Gabriel Mountains of California. High levels of nitrogen
deposition are causing nitrate to leach into stream water from these
watersheds. This nitrate leaching acidifies streams and strips base
cations from soils. In snow covered areas the flush of nitric acid
stored in the snowpack is the leading cause of ``acid pulses'' which
are responsible for fish kills during spring thaws.
NAPAP found that high elevation areas in the Northeast and the
Appalachians are bathed in acidic cloud water for extended periods of
time. Sulfuric acid from sulfur dioxide emissions is the significant
cause of the widespread loss of red spruce trees in these areas. The
mechanism for the die back is the leaching of calcium from the spruce
needles and aluminum from the soils by the acidic fog which makes the
trees susceptible to frost and winter injury.
The coastal estuaries of the entire east coast suffer from airborne
inputs of nitrogen that can make up nearly 40 percent of the total
nitrogen loaded into their systems. In estuary systems such as the Long
Island Sound, Narragansett Bay, the Chesapeake Bay and Tampa Bay in
Florida, nitrogen-based pollution is overloading the water with
nutrients. This causes ``eutrophication''--an overabundance of algae.
When algae dies and decays, it depletes the water of precious oxygen
needed by all aquatic animals. This condition is known as hypoxia.
These blooms are associated with fin fish kills, shellfish kills and
human illness.
NAPAP also concluded that areas of the United States that are not
seeing damage now are likely to in the future due to an effect known as
soil acidification. Over the long term, acidic deposition is slowly
leaching away key soil nutrients like calcium and magnesium (known as
base cations) that are essential for plant growth. This nutrient
depletion is occurring in high and mid elevation forests in New
England, New York and the Southern Appalachians. NAPAP cited studies
concluded that 50 9 percent of the commercial pine forest soil in all
of the southeast has low enough reserves of these chemicals to warrant
concern.
Acid deposition, whether from sulfur or from nitrogen based
pollution, not only leads to base depletion, but also the release of
toxic compounds from soils to living things. For example, the release
of aluminum from soils rapidly accelerates when pH drops below 5. The
release of aluminum interferes with plant biochemistry. It is also the
leading cause of fish mortality in affected lakes. In other words, it
is not the acidity directly, but the aluminum toxicity that is
responsible for the damage. This effect is very wide-spread. NAPAP
cited studies conducted in the Shenendoah National Park show that fish
species richness, population density, condition, age distribution, size
and survival rate were all reduced in streams no longer able to
neutralize acidity. Another NAPAP study of streams in the Adirondacks,
Catskills and Northern Appalachians in Pennsylvania showed that
episodic acidification ``acid pulses'' had long term adverse effects on
fish populations including significant fish mortality.
Lake acidification, whether from sulfur or nitrogen is also
implicated in the increase in mercury concentrations found in fish.
Acidity leads to greater conversion of mercury from its less toxic
elemental form to methyl mercury, which is much more toxic. Fish
consumption warnings due to mercury contamination are common in many
States and are on the rise. The bio-accumulation of mercury in some
species of fish in New York has reached levels of grave concern to
human health. In the western mountains of the Adirondack Park and in
the Catskill Mountain reservoirs of New York City's water supply, the
levels of mercury in fish exceed that which is safe for human
consumption, and fishermen are urged to limit eating perch and bass.
The acid rain problem is now a public health problem.
The cost to Americans from acid rain is not just the loss of
pristine lakes in one of its greatest parks, or the almost
imperceptible die out of sensitive species of trees, or even the haze
that obscures the views of our national parks, it is also in the loss
of our great monuments.
Acid rain is also falling on the District of Columbia. Acid rain is
eating away at the marble of the Capitol building and that of many of
the great monuments on the mall. The Lincoln memorial corrodes more
every year. So it is with buildings and monuments throughout the
Capitol, so numerous and so obvious that until recently you could
obtain an illustrated walking tour guide to the acid rain damage to our
nations capitol, thoughtfully provided free of charge. (Acid Rain and
our Nation's Capital, US Dept. Of Interior / US Geological Survey.
1997)
The monuments to the fallen on the great battle sites of the Civil
War, Gettysburg and Vicksburg, lose their inscriptions and carved
features from the acid bath they endure each rainy day. The Statute of
Liberty simply slowly melts away, day by day. This is why the fight to
stop acid rain has been joined by many of the nation's prestigious
organizations dedicated to historic preservation.
. The findings of the reports to Congress have been seconded by
other studies that have found similar results; Environment Canada, in
its 1997 report ``Towards a National Acid Rain Strategy,'' said that
reducing sulfur emissions significantly beyond the current Clean Air
Act requirements in both countries would be needed for all of eastern
Canada to be protected from acid rain. In southern Canada, an area the
size of France and Britain combined continues to receive harmful levels
of acid deposition. As many as 95,000 lakes in the region will remain
damaged.
A study recently released by Trout Unlimited that was conducted by
the University of Virginia found that without deep additional
deposition reductions, up to 35 percent of Virginia trout streams would
become ``chronically acidic'' and would no longer support trout
populations. The study further estimated that thousands of trout stream
miles in the Southern Appalachians may be lost to acidification.
Just a week ago the journal Nature, perhaps the most respected
journal of its kind, published the broadest geographical study of acid
rain to date. Written by 23 scientists, all of them top acid rain
researchers, and taking samples from roughly 200 sites, the study again
confirmed and elaborated on the disturbing findings of earlier works.
How much more does Congress need to hear before it takes additional
action?
The disturbing and overwhelming evidence of the destruction of the
streams, lakes and forests on public lands protected by our State
constitution as forever wild, the contamination of fish in otherwise
pure waters and the pollution of our coastal estuaries has raised grave
concern in New York State. Our entire Congressional delegation co-
sponsors legislation introduced by Senators Moynihan and Schumer
(S.172), and in the House by Congressmen Boehlert and Sweeney (HR 25)
that seeks further emission reductions.
In the past 2 years, the Office of the Attorney General of the
State of New York has sought legal redress via other provisions of the
Clean Air Act. Most recently, Attorney General Elliot Spitzer announced
his intention in the coming weeks to bring suit against 17 utilities in
five States to redress what he considers to be violations of the Clean
Air Act that result in illegal emissions of acid rain precursors.
In our State legislature, bills have been repeatedly introduced and
passed (A.889) by the Chairman of the Environmental Conservation
Committee (Richard Brodsky, D, Scarsdale) that would discourage the
trade or sale of pollution allowances by New York utilities to upwind
sources of acid rain. In July of this year, the State Senate
unanimously passed a similar bill (S.4917) sponsored by his Senate
counterpart (Carl Marcellino, R, Oyster Bay).
The States that are most adversely affected by the damage from acid
rain need to see clear movement by Congress to adjust the sulfur
program and deal with the companion problem of the long-range transport
of nitrogen oxides. The failure of the Senate and the House to act will
result in more interstate litigation, and new efforts State-by-State to
interfere with the free-market attributes that have led to the
effectiveness of the program thus far. The better alternative is to
fulfill the original intent of Congress to solve the acid rain problem
by taking action soon.
We respectfully suggest that the Senate take prompt action to:
Build on the successful sulfur dioxide cap-and-trade
program by creating a third phase of reductions further along the
current time line. All of the advantages of the current program can be
preserved in a predictable, flexible, and cost-effective manner while
reducing sulfur-dioxide emissions by an additional 50 percent.
Create a new cap-and-trade program for nitrogen-oxide
emissions from utility smokestacks that mirrors the successful program
already in place for sulfur. This cap and trade program should reduce
nitrogen emissions from utilities nationwide by approximately 70
percent of 1990 levels, resulting in a substantial and beneficial cut
that is also reasonably achievable.
To put this recommendation in perspective, we would like to address
the subject of the ongoing battle over new air regulations issued last
September by the USEPA, which at this time is the subject of
litigation.
USEPA has proposed a 22-State voluntary utility cap and trade
program for nitrogen emissions as the preferred response for State
compliance with its new ozone program.
The EPA ozone proposal, which is only summer seasonal, will not
address in any significant way, the acid rain problem. The acid rain
dilemma is the total loading of nitrogen to sensitive areas. For high
elevation areas the main concern stems from the buildup of nitrogen in
the snow pack and the subsequent ``acidic pulse'' to aquatic systems in
the spring of the year. Year-round controls will be necessary to
address the nitrogen problem. Furthermore, only nationwide reductions
will address the problems outside of the twenty-two State region
covered by EPA's plan.
Congress can level the competitive playing field for the utility
industry by enacting national controls which will permit an expanded
allowance trading market that will be more efficient and cost
effective. The Congressional Budget Office has reached similar
conclusions. In a report on the proposed nitrogen/ozone rules this
summer. (Factors Affecting the Relative Success of EPA's NOx Cap-and-
trade Program, June 1998), the CBO identified similar benefits that
would result if Congress provided additional statutory authority to
EPA.
Finally, we respectfully recommend:
Congress should provide additional resources to the
monitoring and research networks that, on a shoe-string budget, have
provided the nation's research scientists with invaluable data on the
actual state of affairs on the ground and in the air. The level of
scientific certainty and confidence on acid rain has improved
substantially since 1990, but existing research activities should be
expanded.
The need for additional action on acid rain is not just a New York
perspective. In May of 1998, the Conference of New England Governors
and Eastern Canadian Premiers issued a joint call for action that
recommended additional reductions in utility emissions of
SO2 and NOx. Earlier this year, the Adirondack Council was
privileged to be joined by national, State and regional organizations
representing hundreds of thousands of Americans concerned about the
health of our forests, the productivity of our coastal bays, the
improvement of our fisheries and the protection of our heritage, in a
public letter to Congress asking that the acid rain program be
revisited.
Mr. Chairman, this nation committed itself to the task of ending
the destruction of acid rain almost a decade ago. We think it is time
to finish the job. Thank you again.
______
Responses by Bernard Melewski to Additional Questions from Senator
Baucus
Question 1. The Clean Air Act has been highly successful, but there
is still a lot of work to be done. Do you believe that there will be
any effects on the nation's health and the environment if we do not go
beyond the current clean air policies established in the 1990 Clean Air
Act Amendments?
Response. Yes. There have been numerous government-produced
analyses that project the trends in human and environmental health with
full implementation of the 1990 CAAA used as a baseline that the
Subcommittee has access to and has presumably examined. Most notable of
these is the 1998 NAPAP Biennial Report to Congress, The 1995 USEPA
Acid Deposition Standard Feasibility Study, and the exhaustive research
conducted by USEPA during promulgation of its update of the National
Ambient Air Quality Standards for ozone and particulates. Numerous
studies by the States and academia have also examined what the likely
impacts of failing to move beyond current clean air policies will be.
According to these sources we may look forward to the following
brief and incomplete list of consequences: A doubling of the number of
acidified lakes in the Adirondacks, a large increase in the proportion
of episodically acidified streams throughout the Appalachians, a
reduction in the growth rate and health of forests in the east from
soil nutrient depletion, an increase in the number of water bodies with
mercury contaminated fish, continuing agricultural crop loss and damage
from ozone exposure, continuing eutrophication of coastal estuaries,
continuing degradation of historic buildings and monuments.
We may experience acid rain related damage in parts of the country
that were believed to be unaffected such as the Rocky Mountains and
other western ranges, and areas currently affected may get worse due to
long term exposure to acid deposition rates that are still too high for
the environment to absorb.
In regards to human health effects, the existing record of the
Committee from its hearings on USEPA's proposed NAAQS revisions for
ozone and fine particulates amply demonstrates the disturbing effects
we can expect if we do not ``go beyond the current clean air policies''
as your question inquires. It is noteworthy, however, that the NAAQS
revisions that USEPA ultimately promulgated have been blocked in the
courts for reasons including the ruling that USEPA overextended its
congressionally delegated powers and that.Congress delegated too much
power to USEPA in the first place. I find it curious that Congress had
the opportunity to block the NAAQS revisions during its review of
USEPA's promulgation process, but did not do so, yet now Congress
allows the courts to block the NAAQS revisions through its own
inaction.
Question 2. What are the primary mobile and stationary sources
responsible for the impacts of acid rain and ozone pollution? What role
does EPA's proposed sulfur standard for gasoline have in potential
solutions?
Response. Acid rain and ozone pollution are caused by two precursor
pollutants; sulfur dioxide and oxides of nitrogen. Sulfur dioxide plays
no role in the formation of ozone but is an important source of acid
rain and fine particulate pollution. There are many anthropogenic
sources of sulfur dioxide, the principle one being fossil fuel powered
electric generating plants, which account for over two-thirds of US
emissions. The 1990 Clean Air Act Amendments have resulted in a
significant reduction in sulfur dioxide emissions from these plants,
but they remain the largest source category. If Congress decides to
make deeper cuts in emissions of sulfur dioxide, as we believe they
should, the logical source to seek reductions Tom is still electric
generators.
The principal precursor for ozone, and a significant contributor to
acid rain, are emissions of oxides of nitrogen, or NOx. About one-third
of US anthropogenic NOx emissions come from the same electric
generators that account for so much sulfur dioxide emissions. The other
primary source of NOx, accounting for more than one-third of emissions,
is the transportation sector. If Congress decides to make deeper cuts
in emissions of NOx, as we believe they should, both electric
generation and transportation sources will need to be addressed.
EPA's proposed sulfur standard for gasoline is a necessary step in
reducing NOx emissions from the transportation sector. Sulfur in
gasoline fouls the catalytic converters installed on vehicles to reduce
NOx emissions. It is important to note that in order to cut NOx
emissions by the amount that acid rain and ozone science indicates is
necessary to reduce environmental and health effects, no one action
alone will suffice. Significant reductions are needed from electric
generators and transportation sources beyond current clean air
policies.
__________
Statement of William F. Tyndall, Vice President of Environmental
Services, Cinergy Corporation
Good morning. Thank you for inviting me to testify before you on
reauthorization of the Clean Air Act.
My name is Bill Tyndall. Since August 1998, I have been Vice
President of Environmental Services for Cinergy Corporation, an
electric utility company based in Cincinnati, Ohio that provides power
to 1.4 million electricity customers and 470,000 gas customers in Ohio,
Indiana and Kentucky. Prior to joining Cinergy, I served Representative
John Dingell and other Committee Democrats as minority counsel to the
House Commerce Committee and advised them on air quality issues. Still
earlier, I was a senior policy advisor in EPA's Office of Air and
Radiation. Still prior to that, I served in EPA's Office of General
Counsel, where I worked on new source review and other stationary
source issues under the Clean Air Act.
Thus, I am speaking to you today as someone who has spent nearly 10
years addressing air policy issues from a variety of perspectives. I am
also speaking to you on behalf of the Edison Electric Institute, an
association that represents investor-owned electric utilities such as
Cinergy. I will be addressing what I see as the successes and the
problems of the Clean Air Act as amended by Congress in 1990.
The Clean Air Act has proved effective at reducing air pollution in
this country. Since the Act was adopted in 1970, emissions of the
``criteria'' air pollutants--sulfur oxides such as sulfur dioxide
(SO2), particulate matter, ozone, carbon monoxide, nitrogen
dioxide and lead and their precursors (such as nitrogen oxides (NOx))
have fallen dramatically. While emissions of these pollutants from all
industrial sectors have decreased, I will focus on those from power
plants, a source category that is the focus of a large number of
control programs under the Act. Consistent with the overall trend in
emission reductions, emissions from power plants have fallen
significantly since the Clean Air Act was adopted, and continue to
decline as a result of the Title IV program for electric utilities
adopted in 1990.
According to the Environmental Protection Agency, utility emissions
of NOx, which had been 6.7 million tons in 1990, declined to about 6.2
million tons by the year 1997. By 2000, EPA projects that power plant
NOx emissions will have declined by 2.1 million tons annually.
Between 1970 and 1997, SO2 emissions resulting from fuel
combustion by electric utilities declined by over 4 million tons a year
(from a peak in 1980 of 17.5 million tons to 13.1 million tons in
1997). Once the second phase of the Title IV program is fully
implemented, we project further significant declines in SO2
emissions, to less than 10 million tons annually.
Electric utility particulate matter emissions have also declined
substantially--by almost an order of magnitude (from 1.8 million tons
in 1970 to 0.3 million tons in 1997).3 Virtually all coal-fired boilers
in this country are now equipped with advanced particulate controls,
including electrostatic precipitators (ESPs) and baghouses.
These emission reductions are even more remarkable when one
considers that they have occurred during a period of substantial
economic growth. This economic growth triggered concomitant growth in
electricity production and use. For example, between 1970 and 1996,
electric utilities experienced a greater than 120 percent growth in
sales, from 1392 billion kilowatt-hours to 3084 billion kilowatt-hours.
Nevertheless, the utility industry implemented control programs that
substantially reduced emissions from all of their facilities--both new
and existing.
But reducing emissions has not come cheaply. Information provided
to the government by electric utilities on FERC Form No. 1 indicates
that utilities and, as a result, their customers spent over $32 billion
for air pollution control facilities between 1976 and 1996. Additional
billions of dollars are being spent as the industry implements the
second phase of the Title IV program. Utilities also bear the
substantial, additional costs of operating and maintaining these
pollution control facilities.
As even EPA recognizes, the costs associated with Clean Air Act
compliance have increased over time. EPA estimates that annual costs to
electric utilities for Clean Air Act compliance, which were $1.5
billion in 1985, had risen to $1.9 billion by 1990. The 1990 Clean Air
Act Amendments increased these costs substantially. The SO2
emission reduction program in Title IV alone has been estimated to
increase the cost to electric utilities by up to $2.1 billion annually
once it is fully implemented. There is every reason to believe that
utility costs will continue to increase. Cinergy alone faces capital
costs of up to $700 million for control of NOx emissions.
While I am on the subject of costs, let me point to one program
that has helped to keep these costs--although high--lower than they
would otherwise have been. I am referring, of course, to the market-
based approach to reducing SO2 emissions that is found in
Title IV of the Act. Title IV has been a great success, with 100
percent compliance and substantial cost savings due to the flexibility
of the program. Given the experience with Clean Air Act Title IV, I
urge Congress to consider market-based approaches, as opposed to the
traditional command-and-control approach to environmental regulation,
whenever it considers reform or refinement of Clean Air Act emission
reduction programs.
However, to call the Title IV SO2 trading program a
panacea is not correct either. Its success cannot be extrapolated to
trading of NOx under EPA's SIP call, for example. Most of the
SO2 trading cost savings have come about as a consequence of
lower prices of western low-sulfur coal and its transportation. A
similar low-cost fuels fix is not available for NOx. In addition, the
SO2 program, unlike EPA's NOx SIP call, was designed in such
a way as to maximize opportunities for trading. The SO2
program was phased in over 10 years, while the NOx SIP call controls
are due in less than 4 years. Furthermore, the SO2 program
required only a 50 percent reduction while the NOx SIP call requires an
85 percent reduction, which virtually mandates one type of emission
control technology across most of the affected facilities. To maximize
opportunities for NOx trading, the system should be modified to
alleviate these problems.
While the Clean Air Act has been successful in terms of producing
improved air quality, I would now like to focus on some aspects of the
Act that, in my opinion, have made producing that improvement more
burdensome and costly than necessary. In this regard, the Act features
many programs that are directed toward the same pollutants from the
same sources. This can result in increased administrative burdens to
States and the regulated community, reduced compliance flexibility,
greater difficulty in responding to changing market forces, and less
cost-effective control requirements.
Let me illustrate my concern by referring to the many programs that
are currently aimed at controlling NOx emissions from power plants. The
statutory bases for controlling NOx emissions include the National
Ambient Air Quality Standards (NAAQS) for ozone (of which NOx is a
precursor) (CAA Sec. 109), programs required to provide for the
``attainment and maintenance'' of the NAAQS (CAA Sec. Sec. 110, 172, &
181-185), the Title IV existing source NOx reduction program (CAA Sec.
407), the new source performance standard (``NSPS'') program for NOx
emissions from new sources (CAA Sec. Sec. 111), the visibility
improvement program (CAA Sec. Sec. 169A & 169B), the new source review
(``NSR'') program (CAA Sec. Sec. 165, 172 & 173), and a number of
other programs.
For example, the Clean Air Act requires areas that do not attain
the ozone NAAQS to implement ``reasonably available control
technology'' for NOx emissions from major sources such as power plants
(CAA Sec. 172(c)(1)), and to have an overall plan for making
reasonable, further reductions in NOx emissions in order to attain and
maintain the standard (CAA Sec. 110(a)(2)). The 1990 Clean Air Act
Amendments added a number of specific NOx emission control requirements
for power plants located in ozone nonattainment areas (CAA Sec. 182).
In addition, new power plants are required to meet new source
performance standards, and can be built only after being subjected to
either ``prevention of significant deterioration'' (in attainment
areas) (CAA Sec. 165) or nonattainment review (in nonattainment areas)
(CAA Sec. 173). The same requirements apply to existing plants that
are ``modified'' to create new capacity to emit air pollution beyond
their original capacity. Title IV of the 1990 CAAA requires revision of
the new source performance standards for NOx applicable to power plants
(CAA Sec. 407(c)).
Sections 169A and 169B of the Act require States to develop
programs, pursuant to regulatory guidance issued by EPA, to address
visibility concerns in the national parks. EPA just issued regulations
in July of this year providing criteria for these State programs. These
programs could address, among other things, NOx emissions from power
plants.
The 1990 Amendments added an important new program addressing NOx
emissions from existing power plants--the Title IV program. These new
provisions impose NOx emission limits on existing power plants covered
by the Title IV acid rain provisions (CAA Sec. 407(b)). These limits
have been imposed in two phases, the second of which must be
implemented by the year 2000.
EPA's implementation of these numerous, overlapping requirements
that address NOx emissions from new and existing power plants has added
to the complexity and cost of industry compliance efforts. For example,
in 1997, EPA used the NAAQS provisions of the Act to promulgate a new
ambient standard for ozone that was more stringent than the existing
standard--the standard that serves as the basis for the specific NOx
control programs Congress wrote into Subpart 2 of Title I of the Act in
1990. EPA has indicated that the new ozone NAAQS would be implemented
largely through NOx controls. But while Congress specified a detailed
program for reducing ozone levels in Subpart 2 of the Act--a program
that addresses NOx as well as VOC (``volatile organic compound'')
emissions--the Agency indicated that it would not rely on that program
when implementing the new NAAQS. The United States Court of Appeals for
the District of Columbia Circuit understood the problems these
inconsistencies posed and held that any new standard could not be
implemented other than through the Congressional ozone reduction
program.
At the same time that EPA has revised the ozone NAAQS, EPA has
sought to use its Clean Air Act authority to review the adequacy of
State Implementation Plans to develop a program for further NOx
reductions for power plants in 22 States throughout the Eastern United
States. This program is referred to as EPA's NOx SIP call rule. In many
cases, the power plants affected by these NOx reduction requirements
are far removed from the ozone nonattainment areas.
NOx reduction requirements could also be imposed on specific power
plants in response to petitions filed by Northeastern States under
Sec. 126 of the Act. EPA has issued a rule which includes findings
that would result in the automatic grant of these Sec. 126 petitions,
thereby triggering a 3-year compliance schedule, if States do not
respond to EPA's NOx SIP call rule by November of this year. EPA has,
however, temporarily stayed this rule while it undertakes additional
rulemaking to ``de-link'' the Sec. 126 rule from the SIP call rule,
thereby abandoning the Agency's earlier conclusion that the Sec. 126
program should proceed only after States had an opportunity to consider
additional control programs pursuant to the SIP call rule.
The utility industry is therefore confronted with numerous programs
that address the same pollutant. Each program has potentially different
implementation schedules. Each program raises different questions for a
company's compliance planning. As you can imagine, this mix of programs
and implementation schedules makes compliance planning exceedingly
difficult and compliance itself unnecessarily expensive.
One key problem is that the differing programs may demand different
technologies. A utility that invested in low NOx burners to meet its
Title IV NOx requirements, for example, may also have to add Selective
Catalytic Reduction (SCR) or Selective Non-catalytic Reduction
(``SNCR''), or even switch to an alternative fuel such as natural gas,
depending upon the schedule for and stringency of future requirements.
The choice of technology is influenced not only by the stringency of
and schedule for future requirements, but also by the nature of the
implementation scheme. For example, will trading or banking of NOx
emission credits be allowed, and under what conditions? These changing
and uncertain requirements are both frustrating and costly for
regulated industry and States.
Furthermore, because one program is not allowed to work before
another is implemented, it is unclear that all of these overlapping
programs are necessary from an environmental standpoint. For example,
the detailed Congressional ozone control program contained in Subpart 2
of Title I reduced the number of ozone nonattainment areas by 62
percent (from 100 to 38) between 1991 and 1998.1 But EPA did not permit
that program to come to fruition before adopting a new ozone NAAQS that
would be implemented through a different program--under Subpart 1
instead of Subpart 2 of the Act. It is questionable that adoption of
this new program will speed or enhance public health protection, but it
certainly complicates planning for sources possibly subject to two
NAAQS implementation programs.
Furthermore, while the previous discussion has addressed those
portions of the Clean Air Act that concern power plant NOx emissions,
the Clean Air Act contains numerous other programs addressing electric
utilities that a company must consider in formulating its overall
compliance strategy. I am providing with this testimony a chart that
illustrates the myriad of new requirements that electric utilities face
under the Clean Air Act regarding their emissions of SO2 and
NOx over the next decade. These include monitoring, reporting and
control requirements for sulfur dioxide (SO2) emissions;
additional SO2 emission reduction requirements under a
possible short-term SO2 ambient standard and a revised
PM2.5 standard; possible SO2 and NOx limitations
as part of regional haze programs; and revised new source review
requirements. Other regulatory programs that electric utilities may
face include possible regulation of mercury emissions and possible
future regulatory requirements targeting CO2 emissions.
A company must also consider the possibility that legislation to
restructure the electric utility industry could include new air quality
programs. Because the system of air quality regulation is already so
complex and burdened by a large number of programs addressing both new
and existing power plants, I simply urge that restructuring legislation
is not the place for more air quality legislation.
In sum, a company must evaluate its compliance plans in light of
all of these programs--a daunting task given the continued regulatory
uncertainty regarding many of them. The result could be commitments to
expensive control technologies today for certain substances, which
would be rendered useless during the next decade if new regulatory
requirements dictate another compliance strategy, such as a switch to
natural gas.
Finally, all of these difficulties are compounded by EPA's changing
interpretations of key provisions of the Clean Air Act. For example,
all of the regulatory programs discussed previously are being developed
or implemented at the same time that EPA has proposed to change the
Clean Air Act rule defining when an existing source is ``modified'' to
such an extent that it must meet new source requirements, including
NSPS and preconstruction permitting requirements under the PSD and
nonattainment programs.
The Clean Air Act modification rule is perhaps the most complex and
least understood of the Clean Air Act programs. EPA and the States have
issued volumes of dense and sometimes conflicting guidance regarding
the program. Indeed, EPA has recognized the confusing, cumbersome and
byzantine nature of the NSR modification rules and is working with
various stakeholders including industry and States to develop an
appropriate fix.
This effort to develop a fix to the modification rule on which all
can agree is critical, because EPA's recent efforts to reform this
program have created tremendous confusion about the nature of repairs
and activities that can be allowed at existing plants. Let me explain.
Historically, EPA has stated Congress ``did not intend to make every
activity at a source subject to new source requirements,'' and that the
Clean Air Act modification rule ``in no way intends to discourage
physical or operational changes that increase efficiency or reliability
or lower operating costs, or improve other operational characteristics
of the unit.'' By contrast, EPA explained in its July 1998 proposed
revisions to the modification rule that the proposed rule changes would
target activities undertaken ``to increase reliability, lower operating
costs, or improve operational characteristics of the unit,'' even if
doing so would not result in any increase in the unit's emission rate.
This proposed change in the modification rule would strike at the
heart of efforts to maintain the competitiveness of American industry
in an international marketplace. For the utility industry, the proposed
new approach to the modification rule would hinder the industry's
efforts to optimize the reliability, efficiency and safety of its
generating units at a time of declining electricity reserve margins. By
discouraging such efficiency gains it is contrary to the
Administration's goals of reducing greenhouse gases. Before proceeding
with this rulemaking, therefore, it is critical that EPA take time to
pursue the discussions with States, industry, and other stakeholders
and that EPA take their concerns into account. EPA must adopt a
modification rule that is clear and understandable, and that avoids
unnecessary administrative and regulatory costs.
The electric utility industry recognizes that it has a
responsibility to produce and supply the power this nation needs in an
environmentally responsible manner. Its voluntary establishment and
participation in the Climate Challenge program in partnership with the
Department of Energy is evidence of its commitment to meeting that
responsibility. This program will lead to 170 million tons of
greenhouse gas reductions in the year 2000.
There are a variety of ways to achieve emissions reduction goals
for this industry, while continuing to ensure a reliable and affordable
delivery of electricity. EEI is working to develop new innovative
approaches to dealing with these challenges. While I cannot speak for
the entire industry, Cinergy strongly believes that Congress needs to
replace the myriad of emission control programs aimed at utilities with
a comprehensive approach that establishes a single set of reasonable
reduction requirements with adequate lead times and market-based
implementation mechanisms. This can be done in a manner that is
consistent with the air quality and public health goals established in
the Clean Air Act and that is more efficient, economic and provides
more regulatory certainty than the existing piecemeal, uncoordinated
approach that I have described today. And, along with such innovative
solutions, we also need a significant increase in public/private
partnerships for research and development to identify the next
generation of technology alternatives, and create incentives that will
move us to even cleaner forms of electric generation in the future. But
this will put this issue squarely before this Committee since it cannot
be done without Congressional action.
With fair and clear environmental goals, appropriate timeframes,
and flexible implementation, utilities can best determine a future
course for their companies, be it pollution control installation or
fuel switching or a combination that will give us the environmental
solution we are striving to attain.
__________
Statement of Mike Benoit, Cement Kiln Recycling Coalition
Introduction
Chairman Inhofe, Senator Graham and Members of the Subcommittee,
good morning. Thank you for inviting me to testify at today's hearing
on reauthorization of the Clean Air Act. My name is Mike Benoit. I am
Executive Director of the Cement Kiln Recycling Coalition (CKRC), a
trade association representing cement producers that recover energy
from hazardous wastes along with companies that provide equipment and
services to cement manufacturers. As I'm sure you know, cement is the
key ingredient in concrete which is an essential building material that
is integral to our nation's infrastructure. In the United States, there
are 118 cement plants located in 37 States. 52 of those plants use
energy-bearing wastes as alternative fuels to fire their high-
temperature cement kilns. Of those 52, 17 cement plants in 10 States
recover energy from over 1,000,000 tons per year of regulated
industrial waste materials in their high-temperature kilns, resulting
in energy savings equivalent to roughly 22 trillion Btu per year, or
the equivalent of more than 6 billion kilowatt-hours.
Today, this Subcommittee undertakes the difficult task of preparing
for the reauthorization of the Clean Air Act. The statute is one of the
most complex in U.S. environmental law and surely would benefit from
some improvements. In that regard, there are some general principles
that we hope will guide the Subcommittee as it proceeds. For example,
regulatory action under the Act should:
adequately consider costs and risk reduction benefits; be derived
from sound scientific principles that advance technological
development;
be based upon consistent application and defensible interpretation
of the law; be implemented and enforced in a manner designed to ensure
predictability, fairness, and compliance; and
accommodate and encourage energy recovery technologies that reduce
air pollution.
Our industry is subject to extensive regulation pursuant to the
Clean Air Act. CKRC's member companies have very recently become
subject to EPA's National Emission Standards for Hazardous Air
Pollutants (NESHAPS): Final Rule for Hazardous Air Pollutants for
Hazardous Waste Combustors (HWCs), or as it is called, the HWC Maximum
Achievable Control Technology (MACT) rule, which was promulgated on
September 30, 1999. (64 Fed. Reg., 52827, September 30, 1999) Our 6
years of experience with the development of the HWC MACTrule is the
topic of my testimony today and is presented here as a case study that
we hope can shed some light upon possible improvements to the Act, and
to Section 112 in particular.
EPA did many strange and unprecedented things in the HWC rule.
Unfortunately, many of them were aimed at achieving regulatory outcomes
that could not be obtained by following the letter and spirit of
Section 112 of the Clean Air Act. EPA focused on and pursued objectives
that are plainly not authorized by the Clean Air Act as the Agency
inappropriately invoked its RCRA authority or simply acted arbitrarily
to go far beyond the provisions of Section 112 and its own internal
precedents in previous CAA rulemakings. For reasons that will become
clear, EPA became preoccupied with the competitive structure of the
market for hazardous waste combustion and relied upon numerous
unauthorized policy objectives which, ultimately, overwhelmed the
regulatory process and led to the extraordinary decisions found in the
final HWC rule.
Before proceeding further, however, we would particularly like to
thank you, Mr. Chairman, along with Senators Hutchison, Graham, and
Wyden for taking a particular interest in the oversight of the HWC MACT
rule.
General Background
It is important to understand the nature of energy recovery in
cement kilns and the environmental benefits that accrue. Under its RCRA
Land Disposal Restriction rules EPA has mandated that certain
categories of wastes must be burned--either in industrial furnaces
(such as cement kilns), industrial boilers, or incinerators. EPA has
also ruled that burning wastes in these types of combustion units is
Best Demonstrated Available Technology (BDAT) for reducing or
eliminating the hazards associated with those wastes. Cement kilns that
recover energy from hazardous waste use these regulated materials as
fuel--a one-for-one substitute for coal. More simply, kilns that
recover energy from wastes are taking materials that EPA has said must
be burned and converting them to productive use as a fuel in the cement
manufacturing process. This technology yields many benefits:
The nation's consumption of fossil fuel is reduced since
less coal is burned; thus we're conserving our energy resources.
Air pollution is significantly decreased because cement
kilos replace fossil fuel with waste materials that EPA says must be
burned. If cement kilns didn't or couldn't recover energy from these
wastes, they would simply have to be burned elsewhere and the kilns
would burn coal instead.
Recovering energy from wastes in cement kilns reduces the
amount of total combustion. That lowers emissions of carbon dioxide
(C02) and thus lowers emissions of greenhouse gases. Because of their
chemical make-up, the waste materials burned in cement kilns also
generate far lower emissions of sulfur oxides and nitrogen oxides (SOx
and NOx).
The waste materials are put to productive use manufacturing
Portland cement, the key ingredient in concrete, which is a critical
construction material and absolutely essential to building and
repairing our nation's infrastructure.
Air pollutants from cement kilns that recover energy from hazardous
waste have been fully regulated since 1991. The members of CKRC
recognize and accept that managing hazardous waste brings with it an
obligation to society and that the public is well-served by our
industry's excellent track record of compliance with comprehensive
regulations designed to protect health and the environment.
Waste-burning cement kilns are subject to USEPA's 1991 Boiler and
Industrial Furnace (BIF) Rule pursuant to the Resource Conservation and
Recovery Act (RCRA). The BIF rules govern all aspects of processing,
transporting, storing, and burning hazardous waste-derived fuels, and
include stringent standards governing emissions of hazardous air
pollutants. Upon promulgation in 1991, EPA lauded the BIF rule as fully
protective of human health and the environment. In early 1993, EPA
vigorously argued before the D.C. Circuit Court of Appeals that the BIF
rules are fully protective. Since that time, there has been a massive
amount testing of cement kiln emissions and extensive analysis of the
risks associated with those emissions. Our industry has spent over $180
million complying with the BIF rule. We also have invested over $25
million on scientific, EPA-approved emissions testing and conducted at
least 10 comprehensive risk assessments costing over $9 million. In
addition, EPA and several State environmental agencies have conducted
their own risk assessments. In every case, the emissions from cement
kilns (including all those substances regulated as hazardous air
pollutants (HAPs) by the HWC MACT rule) have been shown to be in
compliance with the BIF rules and to pose no unacceptable risk to the
surrounding communities. USEPA has possessed all of this data and
information for several years.
Just 2 weeks ago, on September 30, 1999, our industry became
subject to yet more EPA regulations when the Agency published the
Hazardous Waste Combustor (HWC) Maximum Achievable Control Technology
(MACT) Rule pursuant to Section 112 of the Clean Air Act (CAA). CKRC
was deeply involved in monitoring this 6-year rulemaking and we
provided extensive data and other technical information to EPA to
assist the Agency in its regulatory development process.
History of HWC MACT Rulemaking
As you are aware, before EPA issued any MACT rules, the Agency
prepared a response to the Congressional directives of Section 1 1 2(e)
of the Clean Air Act by developing its Source Category Ranking System
(SCRS) to evaluate the comparative risks posed by facilities. (58 Fed.
Reg., 63941, December 3, 1993) Congress had instructed that ``The
Administrator should regulate first those categories or subcategories
that he determines, based on the listed factors, present the greatest
threat to public health.'' (H.R. Rep. No. 101-490, at 330 (1990) In its
December 1993 schedule for promulgation of MACT rules based on its
SCRS, EPA deferred regulating HWCs until November 15, 1997 or later.
(58 Fed. Reg. at 63952-53) In contrast, EPA identified 45 other source
categories as higher-risk than HWCs and scheduled them for MACT
standard issuance by 1994.
EPA has thus concluded that HWCs, including cement kilns, are
relatively low-risk sources of HAP emissions. That's not surprising
since, as explained above, HAP emissions from cement kilns were already
regulated under fully protective comprehensive RCRA standards. Despite
this fact, the recently promulgated MACT standards for HWCs are
unnecessarily stringent, very complex, and overly burdensome. The HWC
MACT rule is about five times longer than other MACT rules. And the HWC
MACT rule holds the record for the highest cost EPA has ever justified
to meet a MACT standard. The semi-volatile metals emission standard for
cement kilns has a cost effectiveness of $500,000 per metric ton of
pollutants removed--almost 60 times higher than the average acceptable
cost effectiveness in all previous MACT rules!
These extreme outcomes beg the question ``Why did EPA do this?''
It's a long story that will be fleshed-out below; but the short answer
is that the Agency has been fixated on the competitive features of the
thermal treatment market. In fact, in statements to the press in 1996,
the Administrator explained that the HWC MACT rule would be designed to
``level the playing field for hazardous waste incinerators.'' She also
vowed to stop ``allowing the competing cement kilns to undercut the
commercial incinerators'' in pricing. (See attached Appendix H. p.34 of
CKRC's comments on the proposed HWC MACT rule, August 19, 1996.)
There obviously exists no statutory authority of any kind for EPA
to interfere in waste management markets. And Section 112 of the CAA
clearly instructs EPA to accommodate the technological differences
among various source categories in setting MACT standards, even to the
point of subcategorizing within a single source category. Nonetheless,
in the HWC MACT rule, EPA was determined to carry out the
Administrator's goals even if it had to override the clear directives
of Section 112. The best example of this is that, after EPA established
an SVM MACT floor level for incinerators of 240 micrograms/dscm, the
Agency went to extreme measures to ``justify'' setting an identical,
but relatively much more stringent 240 microgram/dscm SVM beyond the
MACT floor standard for cement kilns. Voila! The HWC rule now contains
uniform numerical standards for very different technologies and EPA has
created the so-called ``level playing field'' the Administrator called
for in 1996. As testament to the 'success' of the Agency's 'creation,'
in a July 1999 briefing for Senate staff, EPA noted that the HWC MACT
rule would leave cement kilns ``. . .worse off due to the decline in
market share and revenues, while commercial incinerators are projected
to be better off due to the increase in prices, market share, and
overall revenues.'' (See attached Overview of Hazardous Waste Combustor
NESHAP Rule for Congressional Committees, July 1999) In the process,
the intent of Congress was undermined.
As you know, Congress, including members of this Subcommittee,
became aware in early 1998 of some of EPA's novel interpretations of
Section 112 in the HWC rule and began conducting aggressive oversight
over EPA's rulemaking process. Members of this Subcommittee were
particularly concerned about the fate of energy recovery in cement
kilns and the possibility that ``if the [HWC MACT] rule is not
sufficiently flexible, it may discourage this form of recycling.''
These Senators also asked EPA ``to demonstrate that the proposed
[cement kiln semi-volatile metal] MACT standard actually reduces risk
over and above a MACT standard set at the floor.'' (See attached April
15, 1999 letter to USEPA from Senators Graham and Hutchison.) In all,
members of the Senate EPW Committee sent four detailed letters to EPA
over an eleven-month period and, in too many instances, the Agency
either declined to respond or failed to respond substantively to the
oversight inquiries (See attached letters from U.S. Senate to USEPA and
EPA responses).
The many major flaws in the HWC MACT rule may prove instructive as
this Subcommittee considers reauthorization of the CAA. CKRC believes
its experience with the HWC MACT rule is unique and we hope this
testimony may prove helpful in identifying provisions of the statute
(particularly Section 1 12) that should be considered for amendment.
Specific Issues
The HWC MACT rule suffers from several defects that have their
roots in three main areas: risk reduction/economic impact, scientific/
technological basis, and jurisdiction. Also, the rule's implementation
requirements are unduly complex and burdensome. Finally, the rule has
no provisions designed to accommodate, encourage, or even recognize the
environmentally beneficial recovery of energy from waste materials in
existing industrial processes. In fact, it actually penalizes energy
recovery technologies and seems designed to reduce the capacity of
cement kilns to recover energy from hazardous wastes.
A. Risk Reduction/Economic Impact
Section 112 of the CAA authorizes EPA to set emissions standards
that ``shall not be less stringent, and may be more stringent than. . .
the average emission limitation achieved by the best performing 12
percent of existing sources. . . '' Such ``more stringent'' standards
are called 'Beyond the MACT Floor Standards' or, simply 'Beyond the
Floor' (BTF) standards. However, unlike MACT floor standards, BTF
standards are subject to certain restrictions provided in Section
112(d)(2) wherein the Administrator must take into consideration ``the
cost of achieving such emission reduction, and any non-air quality
health and environmental impacts and energy requirements. . . '' In
establishing MACT floor standards, Congress did not obligate EPA to
consider costs and other factors. However, EPA is obligated to justify
additional stringency beyond the MACT floor level. EPA has interpreted
the provisions of Section 1 12 noted above as requiring that the Agency
make a finding that a BTF standard is ``cost effective''. In past MACT
rulemakings, EPA has been very sparing in promulgating beyond-the-floor
standards. In the HWC MACT rule, on the other hand, EPA has published
several BTF standards, some with cost effectiveness levels that exceed
what has previously passed as cost effective by a factor of almost 60!
Because it is a clear example of what we believe is an abuse of the
intent of the CAA, CKRC has been particularly concerned about the BTF
standard EPA set for emissions of semi-volatile metals (SVM) from
cement kilns. (In hazardous waste combustors, due to the nature of the
waste materials burned, a majority of SVM emissions are lead and the
balance is cadmium.) In the final rule, EPA set a MACT floor SVM
standard of 650 micrograms/dry standard cubic meter (dscm) for cement
kilns. but decided to promulgate a much more stringent BTF standard of
240 micrograms/dscm. EPA's decision to set a BTF SVM standard for
cement kilns was the subject of significant oversight by members of the
Senate EPW committee. (See attached letters.) In the final analysis,
EPA was completely unmoved by this committee's oversight and its
frequently expressed concerns about the flawed analytical process, the
lack of justification, and the possible negative consequences on energy
recovery.
As noted above, in its past rulemakings, EPA has justified the
establishment of BTF standards by finding them to be cost effective.
Logic dictates that, implicit in such a finding, there should be some
measurable environmental or public health benefit gained relative to
the incremental costs of complying with a significantly more stringent
standard. Historically, EPA has calculated the cost effectiveness of
BTF standards in terms of dollars per ton of pollutant removed. In its
previous decisions to promulgate BTF MACT standards, EPA's Of flee of
Air and Radiation (OAR) generally has found acceptable cost
effectiveness levels in the range of roughly $5,000-$14,000 per
megagram (metric ton) of pollutant removed, with an average level of
about $8,500 per metric ton. (See attached report, A Review of Economic
Factors to use in PSD BACT Economic Analysis, Iowa Department of
Natural Resources, p. 11, July 1998.) Cost effectiveness figures above
that level generally have been found by OAR to be unacceptable. But the
HWC MACT rule was not written by OAR, it was written by the Office of
Solid Waste and Emergency Response (OSWER). For the BTF SVM standard
for cement kilns in the HWC MACT rule, OSWER found acceptable a cost
effectiveness of $500,000 per metric ton! That's almost 60 times more
expensive than the average acceptable cost effectiveness levels in
previous MACT rules!
In the final rule, EPA acknowledges ``the relatively poor cost
effectiveness of this standard'' (64 Fed. Reg., 52882, September 30,
1999). The folly of EPA's acceptance of such an exorbitant economic
impact on the cement industry becomes even more egregious in light of
the complete lack of risk reduction gained by setting the more
stringent BTF SVM standard. Although EPA frequently told stakeholders
in this rulemaking that its decisions were being driven by concerns
about children's health, in a June 7, 1999 letter to Senator Hutchison,
EPA conceded that ``we do not project a reduction in the numbers of
children with blood lead levels the [sic] exceed the Centers of Disease
Control and Prevention intervention level.'' (See attached letter from
USEPA to Senator Hutchison)
Nonetheless, in the final HWC MACT rule EPA continues to claim that
the beyond-the-floor SVM standard for cement kilns ``supports our
Children's Health Initiative.'' (64 Fed. Reg., 52882, September 30,
1999) In the final rule, EPA states that its ``characterization of
risks from lead focuses on the reductions in blood levels themselves
and EPA's goal of reducing blood lead levels in children to below 10
micrograms per deciliter.'' (64 Fed. Reg., 53003, September 30, 1999)
But, later, EPA describes the results of its analysis of the ``excess
incidence of elevated blood lead'' attributable to HWCs and observes
that ``a small reduction (0.4 cases per year) is attributable to cement
kilns.'' (64 Fed. Reg., 53008, September 30, 1999)
So, while EPA claims to have made its decision to go beyond-the-
floor to improve the health of children, the Agency ultimately reveals
that the benefit to children's health produced by the cement kiln BTF
SVM standard is a decrease in the incidence of elevated blood lead
levels of 0.4 cases per year. That's 0.4 cases out of the entire US
population of over 250 million people! Surely all of us who support
investments in the health needs of children should be dismayed by EPA's
investment of 6 years in a regulation that will cost Americans millions
of dollars to produce such a paltry result. In its comments on the HWC
MACT rule, CKRC submitted a report to EPA showing that the literature
contains abundant EPA and Centers for Disease Control and Prevention
data that proves, by a wide margin, the most significant source of
elevated blood levels in children is caused by exposure to lead-based
paints in older housing. The dollars of additional cost that EPA has
imposed on our industry with its BTF SVM standard would yield much
greater public health benefits if applied to remediation of those lead-
based coatings.
Combining OSWER's outrageous cost effectiveness findings with the
results of its risk analysis reveals that the 240 microgram/dscm SVM
standard for cement kilns is the single most expensive beyond-the-floor
MACT standard ever promulgated by EPA. And the societal benefits gained
are an incredibly miniscule and practically unmeasurable decrease in
the incidence of elevated blood lead levels. By contrast, it's
interesting to note that in 1995 OAR published a final MACT rule for
secondary lead smelters. In that rule, OAR promulgated a MACT floor
emission standard for lead of 2000 micrograms/dscm, almost 10 times
higher than the cement kiln SVM standard. And, because secondary lead
smelters also are subject to regulation under RCRA, EPA examined the
risk factors and specifically concluded in the secondary lead smelter
rule that the standard of 2000 micrograms/dscm was fully protective of
human health and the environment and, therefore, the Agency's RCRA
obligations were satisfied.
These are examples of the inconsistent and extreme results that can
ensue when EPA is allowed to arbitrarily mix the authorities of
different statutes and employ unauthorized policies to arrive at
decisions that contravene Congressional intent. Clearly, the abuses
found in the HWC MACT rule demonstrate that any reauthorization of the
Clean Air Act ought to include a significant revision of Section 1 12,
especially as it relates to beyond-the-floor MACT standards. Absent
specific guidance from Congress regarding acceptable economic impacts
and risk reduction targets, and without tight limitations on the
Agency's rulemaking procedures, the spirit and intent of the Clean Air
Act can and will be undermined.
B. Science and Technology
As cited above, Section 1 12 of the Clean Air Act specifies that
emissions standards for existing sources ``. . . shall not be less
stringent, and may be more stringent than the average emission
limitation achieved by the best performing 12 percent of existing
sources. . . '' Emissions standards that are not ``less stringent'' are
generally referred to as ``MACT Floor'' standards. ``More stringent''
standards are called ``Beyond-the-Floor'' standards. In accordance with
the statute, both types of emissions standards are technology-based
standards. This is as opposed to risk-based standards that EPA is
authorized to promulgate under other statutes, such as RCRA.
In its previous MACT rulemakings for industrial source categories,
EPA has developed MACT floor standards by assessing the performance of
the various control technologies employed to control emissions of
hazardous air pollutants (HAPs). Typically, this involves assembling an
inventory of the technologies in existence followed by analysis of a
body of data that describes the performance of those technologies. As
specified by the CAA, EPA is supposed to use the analysis to determine
``the average emission limitation achieved by the best performing 12
percent of existing sources.'' For example, EPA evaluates the
performance of a control technology designed to capture emissions of a
particular HAP by analyzing data that describes the emissions capture
rate of specific air pollution control devices (APCDs) or other
technologies. By following what is supposed to be a very prescriptive
process, EPA then determines which APCDs represent the ``best
performing 12 percent'' and establishes the MACT floor emissions
standard at that level of performance. Clearly, an important part of
Congress's intent in the CAA and in Section 1 12, is to create pressure
on industry to upgrade its air pollution control systems and processes
and, thereby, advance the scientific development of more effective
technologies to reduce air pollution. Stated simply, Congress intended
the CAA to be a science-based, technology-forcing statute.
In the HWC MACT rule, EPA claims to have followed the prescribed
procedure for establishing MACT floor levels for the various HAPs at
issue in this rulemaking (dioxins/furans, mercury, metals, chlorine and
hydrogen chloride). But, in many cases, OSWER went beyond the
established procedure previously developed and implemented by OAR and
employed unprecedented and highly questionable techniques to set the
MACT floor levels for HWCs. For example, to set emissions standards for
metals, EPA identified what it refers to as ``feedrate reduction'' of
metals as a 'control technology' that is uniquely available to
hazardous waste combustors. The Agency evaluated this ``control
technology'' by lumping all units in each subcategory together, hand-
picking the individual combustion units that just happened to have the
lowest metals feedrates, and then anointing them as ``best
performers.'' Basically, EPA 'discovered' that the way to control
emissions from HWCs is to cause them to reduce the amount of waste they
can burn--even though HWC's that burn hazardous waste are playing a
critical role in managing that waste! That type of 'emissions control'
doesn't come close to advancing the scientific development of more
effective pollution control technologies and has nothing whatsoever to
do with the ``best performing'' technologies.
Some additional context is needed to fully appreciate the
implication of this decision by EPA. In several of its RCRA rules, EPA
has acknowledged that, other than combustion, there are no known
technologies to separate metals from certain combustible hazardous
waste streams. In fact, EPA mandates that these types of wastes must be
combusted in regulated HWCs. One way or another, these materials must
be burned in a regulated unit such as an incinerator, a cement kiln, or
a boiler. (Recall that, in its RCRA rules, EPA has specified combustion
as the Best Demonstrated Availability Technology for these waste
streams, in full recognition of the fact that they usually contain
metals.)
So this ``control technology'' (i.e., feedrate reduction) contrived
by OSWER amounts to little more than a device for rewarding those
facilities that burn less hazardous waste and penalizing those that
(for whatever reason) burn more waste. Thus, the practical effect of
implementing feedrate reduction as a control technology is to force
facilities to burn less waste--in the case of cement kilns, to reduce
their energy recovery capacity and burn more coal. If fully extended to
a manufacturing process such as an oil refinery, this type of logic
implies that the ``best performing'' oil refinery would be the one that
feeds no crude oil to the unit. EPA's approach would mean that the best
performing refineries are the ones out of business. There simply is no
legitimate rationale in the Clean Air Act for this type of approach to
setting MACT standards and, in fact, the approach used by OSWER in the
HWC MACT rule is wholly without precedent in other CAA MACT
rulemakings.
The real travesty here is that, by defining feedrate reduction as a
technology, EPA has shredded Congressional intent and made a mockery of
bona fide air pollution control technologies. In the HWC rule, the
Agency has ignored the intent of the CAA to promote scientific
development of air pollution control technologies by declaring that a
legitimate and proper solution to the problem of controlling air
emissions is as simple as just feeding less material into a process.
Because if you don't put it in, it won't come out. What a discovery!
What a great leap forward! Played out to its full extent, EPA's logic
in the HWC MACT rule would mean that shutting down industry could best
solve America's air pollution problems.
In the HWC MACT rule, EPA cites the provisions of Section 112
(d)(2)(A) that allow ``substitution of materials or other
modifications'' as its authority for using feedrate reduction as a
control technology. EPA argues that cement kilns can comply with the
more stringent BTF SVM standard simply by using less hazardous waste
for energy recovery and ``substituting'' it with coal--thus increasing
both the total amount of combustion and overall emissions of air
pollutants. OSWER claims this is consistent with the spirit and intent
of the CAA. But the Agency never explains why feedrate reduction has
never been used by OAR in any other CAA rule.
CKRC would like to suggest that this Subcommittee and, eventually,
Congress take steps in the reauthorization of the CAA to require that
EPA implement the Act using only legitimate scientific rationales. EPA
should be prevented from conjuring-up unprecedented techniques to
justify emissions standards that are more stringent than could ever be
derived by conventional data analysis as applied to bona fide air
pollution control technologies. In particular, Congress should ensure
that reducing inputs to processes can never be claimed as a ``control
technology,'' especially in the case of energy recovery applications
that result in a decrease in air pollution. Finally, Congress should
require that EPA not attempt to abuse its CAA authority to try to
manipulate competitive markets.
c. jurisdiction
The EPA office traditionally charged with implementing the CAA is
the Office of Air and Radiation (OAR). Aside from the Phase I and Phase
II MACT rules affecting combustion of hazardous waste, all other MACT
rulemakings promulgated by EPA (including several relating to other
types of waste combustion) have been or are being developed by OAR. The
HWC MACT rule (in its various phases) is the only one that has been or
will be developed by OSWER.
As we have seen, this jurisdictional anomaly proved instrumental in
creating a mechanism for EPA to circumvent CAA authority and the intent
of Congress and, by invoking supposed ``RCRA concerns,'' enabled the
Agency to promote its unauthorized policy objectives relating to the
hazardous waste combustion market. CKRC is convinced that the HWC MACT
rule would not suffer from its unusual defects had the regulatory
development process been in control of the more experienced Office of
Air and Radiation. It has been common knowledge that this rulemaking
produced a huge donnybrook between OAR and OSWER and that the arguments
were, in part, related to OSWER's disregard for precedent established
by OAR in implementing the CAA. Historically, in its development of
other MACT rules, OAR has at the very least exercised some restraint in
its interpretation of the statute and achieved a degree of regulatory
consistency across its CAA rulemakings. Surely we know of no cases
where OAR attempted to use the CAA to affect the competitive structure
of markets. Unfortunately, the HWC MACT rule became a vehicle for OSWER
to inject the Agency's biases into the thermal treatment market and,
apparently, the Office felt unconstrained by either the CAA or Senate
oversight in pursuing that objective.
In its reauthorization of the CAA, this subcommittee should
consider adding provisions that will prevent this kind of abuse in
EPA's implementation of the Act. Congressional intent would be better
served by the creation of some type of barrier to preclude EPA from
claiming ``joint statutory authority'' to develop CAA regulations, or
to use CAA regulations as an outlet for unauthorized policy
initiatives, particularly those that run counter to the intent of the
Act.
Implementation and Compliance
Ultimately, the efficacy of any regulatory action is tied to its
implementation. Successful implementation is the means by which
compliance with a rule is achieved and maintained and by which
environmental gains are realized.
The HWC MACT rule, as noted above, is extraordinarily complex,
almost punitively so. Its complexity is not linked to positive
environmental or public health outcomes; but only encumbers the
implementation of the rule. It is regulatory burden that has been laid-
on for its own sake. Early in the HWC rulemaking, in 1996, EPA
conducted several public meetings during which it touted the extent to
which the rule would be designed to simplify and consolidate many
requirements of the existing RCRA rules that governed hazardous waste
combustors. EPA claimed that the discomfort and expense of the
stringent standards the Agency intended to develop would be offset by
more efficient, less redundant, and simpler implementation
requirements. EPA did not fulfill its commitment. What we got instead
are much more stringent standards and much more complicated
implementation requirements.
In its deliberations about CAA reauthorization, Congress should
take into consideration that the current statute does not adequately
compel EPA to use common sense in its rulemakings. EPA apparently needs
Congressional guidance to force the Agency to more substantively bind
itself to issuing common sense, uncomplicated implementation procedures
and requirements. Congress should impress upon EPA the need to
implement CAA rules in a way that encourages and even hastens
compliance among the regulated community. Congress should let EPA know
that successful implementation, pursued by cooperative and interactive
means, would produce a higher rate of compliance at less burden and
lower cost. Congress should charge EPA with the obligation to rely much
more on assistance than on enforcement to ensure compliance and give
the Agency the tools necessary to carry out that task.
Energy Recovery
Since the mid-1980's, the US cement industry has productively used
millions of tons of hazardous waste as fuel in cement kilns. Congress
has made clear in other statutes (e.g., RCRA) that it is
environmentally preferable to recycle the value of waste materials than
to destroy or dispose of them. The benefits provided by recovering
energy from wastes in existing manufacturing processes that were
enumerated at the beginning of this testimony are real. Fossil fuels
are conserved. Air pollution is significantly decreased. And waste is
converted to a productive asset. It is clearly a win-win proposition.
But the commercial hazardous waste incinerator operators didn't see
it that way. Until the early 1990's they had enjoyed a near-monopoly in
the hazardous waste combustion market. Their reaction to what they
perceived as emerging competition from cement kilns was to aggressively
lobby EPA to increase the regulatory burden on their cement industry
competitors, thus increasing their costs and, as a hoped-for byproduct,
reducing their presence in the hazardous waste thermal treatment
market. Their mantra was ``level the playing field,'' despite the well-
known fact that cement kilns were newly subject to the BIF rules, which
were far more comprehensive than the RCRA Subpart O standards for
incinerators. The incinerator companies, primarily via their trade
association, the Environmental Technology Council (ETC), finally began
to see their lobbying efforts gain traction in the early days of the
current Administration. After several closed-door meetings with
incinerator operators early in her tenure, Administrator Browner seized
upon ETC's rhetoric and initiated her ``Hazardous Waste Combustion
Strategy'' in May 1993. That immediately resulted in EPA abandoning its
vigorous defense of the RCRA BIF rules in the D.C. Circuit and produced
an out-of-court settlement with ETC that, among other things, committed
the Agency to issue tighter regulations on cement kilns that recover
energy from hazardous waste. (See CKRC Comments on the Proposed HWC
MACT Rule, Appendix H. August 19, 1996)
In its zeal to regulate cement kilns with much tighter emissions
standards in the HWC MACT rule, EPA acted as though it was
unconstrained by the CAA from making decisions that were specifically
aimed at reducing the capacity cement kilns to recover energy from
hazardous wastes. As cited above, the Administrator set EPA upon a
course to use the HWC rule to stop ``allowing competing cement kilns to
undercut the commercial incinerators.'' And that's just what the Agency
did. It established exotically expensive beyond-the-floor standards and
then specified that cement kilns could achieve compliance with those
standards by ``feedrate reduction,'' i.e., by burning less waste for
energy recovery. (Because EPA mandates that the waste must be burned,
if cement kilns burn less waste, incinerators will burn more waste.) In
its formal comments on the proposed rule, CKRC aggressively challenged
EPA's decision and, in oversight communications, members of this
Subcommittee also emphatically objected to the Agency's approach. In
response, EPA claimed on the one hand that it was not obligated to
consider the HWC MACT rule's impact on energy recovery capacity; and,
on the other hand, that it rejected our industry's data and information
as incorrect (i.e., not in conformance with EPA's analysis).
It ought not to be so easy for EPA to completely disregard the
important environmental ramifications of recovering energy from
millions of tons of waste. We believe the CAA should be amended to
specifically support and encourage energy recovery and other recycling
activities that have been shown to directly benefit air quality and
reduce greenhouse gas emissions. EPA should be barred from taking any
regulatory action under the Clean Air Act that impairs, reduces, or
otherwise adversely affects energy recovery technologies that have
demonstrable environmental (and economic) benefits. Conversely, the CAA
should require that EPA take affirmative steps to promote and encourage
such technologies. CKRC hopes this Subcommittee will be inclined to
fill this void in the Clean Air Act.
Conclusion
The Subcommittee today has a rare opportunity to begin afresh its
analysis of the Clean Air Act as it contemplates reauthorization. Our
recent experience with the MACT program dictates that Congress should
be vigilant of several points in dealing with this section of the Act.
First, Congress should make clear the findings necessary to go beyond
the MACT floor in setting emissions standards. While CKRC believes the
law already adequately requires EPA to make cost and other findings to
justify standards more stringent than the floor, Congress should take
the opportunity of reauthorization to make the importance of cost and
risk considerations even clearer to the Agency. Second, Congress must
make clear that reducing feed to a process is not a control technology
or a gauge of the best-performing sources, that it does not amount to
an application of sound science, and that it does not promote
technological advancement in accordance with the intent of the Clean
Air Act. Third, Congress should take steps to guard against the MACT
program being used as a thinly veiled attempt to reallocate market
share or make production decisions for the regulated community. Fourth,
Congress should remind the Agency that neither the regulated community
nor the environment are served if rules are implemented in inflexible
ways. Rather, common sense in implementation makes compliance more
likely and less expensive, and better protects human health and the
environment. And finally, Congress should ensure that the CAA
accommodates and encourages proven energy recovery technologies and
prohibits EPA from actions harmful to the perpetuation or expansion of
those technologies.
Thank you again for this opportunity to testify before the
Subcommittee. I look forward to answering any questions you may have.
______
Cement Kiln Recycling Coalition (CKRC)
appendix h
CKRC's Concerns with the underlying policy choices and motivations
which give direction to the proposed rule
As these comments demonstrate, it is obvious that EPA's proposal is
based upon many legal, policy and technical choices that are
unprecedented and of questionable validity (if not plainly illegal or
invalid). At every opportunity, EPA has chosen a path that will lead to
exceedingly stringent, onerous and expensive requirements for cement
kilns that burn hazardous waste. It is apparent that this has been a
result-oriented process. That is, EPA's prime motivation has been to
impose great additional costs on cement kilns, and EPA has crafted MACT
and RCRA legal, technical and policy choices to support this pre-
ordained result.
As shown below, prior to May, 1993, EPA had steadfastly defended
the current BIF rules as fully protective of human health and the
environment and had stated several times that they are sufficiently
conservative to allay any rational concerns over ``indirect'' exposure
risks. Moreover, EPA Regions and the State of Texas have recently
confirmed these points. Also R-VII RA letter of 7/17/95 to Ms. Mary
King: ``EPA believes the requirements of the BIF rule are protective of
human health and the environment.''
Rather, two related rationales quite clearly are driving the
proposed cement kiln standards. They are in fact the only rationales
that can provide a cohesive logical explanation for what would
otherwise be irrational Agency behavior:
1. EPA is being driven from the top to make hazardous waste
combustion a more expensive and less attractive option in a misdirected
attempt to force U.S. industry to reduce its generation of hazardous
waste (``waste minimization'' or ``source reduction''); and
2. Among the competing forms of hazardous waste combustion, EPA's
leadership has most obviously favored commercial incineration interests
against cement kilns. EPA's leadership is in fact attempting to aid the
incinerators by ``leveling the playing field'' vis-a-vis cement kilns
on the pricing front.
As we will show below, these twin driving rationales are beyond
EPA's legal authority. When EPA's stated MACT and RCRA legal and policy
choices are seen in this light, it makes them all the more
fundamentally flawed and unacceptable. EPA is simply trying to achieve
its unauthorized goals of source reduction and playing-field leveling
by stretching its MACT and RCRA legal theories to unacceptable lengths.
First, we will present a brief review of EPA's development of rules
and policies. Second, we will review the evidence of EPA's favoritism
toward commercial incinerator interests. Third, we will show that the
most basic activities and policies that appear to be driving EPA's
proposal are contrary to law, and they taint all the basic MACT and
RCRA legal positions articulated by EPA in support of its proposal.
2. EPA Political Preferences for Commercial Incinerators
a. Competition Between Cement Kilns and Commercial
Incinerators
Many types of common industrial wastes are accepted and safely
treated by both cement kilns and commercial incinerators. They are in
competition for a significant amount of the same ``market share'' for
treatment of this waste. Cement kilns have an inherent market
advantage, as cement kilns use HWDF as a replacement for fossil fuel
that would otherwise have to be purchased, and cement kilns obtain most
of their revenues from their cement product that is sold in commerce. A
commercial incinerator makes no product, however, and burns hazardous
waste for purposes of destruction rather than as a valuable fuel
replacement.
Cement kilns can readily pass on the savings to their industrial
waste generating customers. For many types of industrial hazardous
waste, the industrial generator can save a significant amount on its
waste treatment costs, and the wastes will be treated equally if not
more effectively, by sending them to a cement kiln as opposed to a
commercial incinerator facility.
There are thus great benefits to the burning of hazardous waste in
cement kilns. The environment benefits because the kilns provide
capacity to safely treat many of the nation's industrial hazardous
wastes. The nation's precious and limited natural resources benefit
because fossil fuels that would otherwise be burned are replaced by the
energy-bearing HWDF. American industry benefits economically by having
an option to meet its environmental legal requirements that is far less
expensive than the commercial incineration option. Moreover, the option
of cement kilns burning waste benefits conditionally exempt small
quantity generators (CESQGs) since an economical and environmentally
safe alternative to disposal is offered.
The fact that cement kilns provide such a superior economical and
environmental alternative to commercial incinerators has led to a
situation in which cement kilns have far surpassed commercial
incinerators in capturing markets for many types of hazardous wastes in
the last few years. This has in turn caused some leading commercial
incineration companies to engage in aggressive tactics to attack cement
kilns burning hazardous waste.
b. AFRTT, ETC. and Their Allies
One such organization is the ``Association For Responsible Thermal
Treatment'' (``AFRTT''). AFRTT has hired three formerly elected
officials to serve as ``co-chairs'' to spearhead those anti-cement kiln
efforts. One of the three co-chairs, and most visibly active, is James
J. Florio, recently the Governor of New Jersey. AFRTT, its member
companies (principally Rollins Environmental Services, Inc., the
nation's largest commercial incineration company), and other
associations of commercial incinerator companies have initiated a
vicious and wholly unprincipled.war against cement kilns on many fronts
for several years, and the war has intensified greatly in the last 2
years.
Simply put, AFRTT has used the regulatory arena in which to fight
its market battles. The cement industry has burned more hazardous waste
than the commercial incineration industry in the past 2 years.
Consequently, the incinerators interests have used environmental issues
in an inaccurate manner in an attempt to re-gain market share.
The more traditional litigation arm for the commercial incinerator
companies is now known as the Environmental Technology Council
(``ETC''). This litigating association's name was changed to ETC in
1994. Before that, ETC was called the Hazardous Waste Treatment Council
(``HWTC'') for a number of years.
One tactic AFRTT, ETC/HWTC, and Rollins have long employed is to
help create and/or support so-called ``citizens groups'' to publicly
front the incinerators' competitive efforts to oppose cement kilns that
burn HWDF and to provide the incinerators' ``standing'' to sue in
Federal courts.
For instance, the American Lung Association received two AFRTT
``grants'' of $110,000 and $150,000 in 1994 and 1995. Even though
cement kilns burn hazardous waste just as safely and efficaciously as
commercial incinerators, and are more stringently regulated, the
American Lung Association (ALA) has used the AFRTT grants to direct
funds to local chapters for the purpose of opposing cement kilns
burning hazardous waste. Not surprisingly, ALA has never initiated a
similar program to oppose commercial incinerators burning hazardous
waste.
There can be no question that these ``citizen'' groups have been
formed to oppose the burning of hazardous waste in cement kilns, and
that issues of relative stringency of environmental standards are
secondary if not irrelevant concerns to these groups. A leader of one
of the most vocal of these groups--the Huron Environmental Activist
League (HEAL)--has stated in a newsletter to similar groups that HEAL
``was formed in 1991 to oppose the burning of hazardous waste at the
Lafarge cement plant in Alpena.'' Attachment 2. This HEAL leader
utilized the imagery of war and the emerging militia movement in the
United States to bolster the troops' morale:
When it crystallized for me that this cement kiln incineration war
was not going to be a short ``firelight'' but instead a protracted,
grinding and dirty conflict that would change boys into men and girls
into women in a hurry and those who wouldn't or couldn't grow up,
including myself, would be casualties upon whose forgotten bones some
other warrior someday might raise the flag of victory . . . at that
point, I promised myself that I would not become a casualty. I had
already lost much and some of what I lost is sadly irrevocable.
The war is no longer isolated local or regional ``nimby''
skirmishes. It is a civil war. Government ``for the people'' is at
stake, and we all have to survive locally to get the job done on the
national front.
In Michigan the war is raging.
(emphasis added).
This ``war'' has been a coordinated campaign by the citizens
militia and the commercial incineration interests, and the coordination
has manifested itself in national litigation and rulemaking efforts, as
well as in local campaigns. In the same document on the status of the
war, the HEAL leader further stated:
With every local battle won the entire theater of war shifts in our
favor. In the last year and a half there have been victories that would
have been unthinkable 4 years ago . . . like the eight non-compliant
BIFs losing interim status as a result of the Citizens Petition, Holnam
abandoning their plans to burn in Montana, the vacating of Tier III and
the suspension of burning in Alpena, the imminent fall of waste-burning
at National Cement in Lebec, California, the EPA Roundtables and the
CKD Report to Congress, the ARTT[AFRTT]/Lung Association grants, and on
and on.
The reference to ``BIFs losing interim status as a result of the
Citizens Petition'' refers to one such coordinated effort. On January
31, 1994, HEAL, Desert Citizens, Adans, and the commercial
incinerators' ETC (then HWTC) filed a ``Petition For Administrative
Action to Cease Hazardous Waste Burning'' with EPA against several
cement kilns that were then burning or proposing to burn HWDF. This
petition did not seek to impose any particular standards on such kilns.
Rather, as its title indicated, it was simply aimed at stopping the
kilns from burning hazardous waste.\5\ EPA granted the relief the
petitioners sought in some cases and denied it in others.
\5\ The petition did not attempt to stop kilns from applying for a
permit to burn hazardous waste under RCRA, but inasmuch as this permit
process takes many years, each location where the petition was
successful would be sure to stop hazardous waste burning for a long,
indefinite time.
The reference to the ``vacating of Tier III'' refers to the result
of litigation efforts by citizens groups and the ETC (then HWTC) in
Horsehead. In that case, the groups jointly sought review of EPA's BIF
Rules that regulate the burning of hazardous waste by cement kilns and
other types of furnaces and boilers.
The reference to the ``ARTT[AFRTT]/Lung Association grants'' refers
to the fact that the commercial hazardous waste incinerator interests
have sometimes even openly and directly funded citizens groups who will
oppose cement kilns burning hazardous waste fuel--in addition to
providing them legal representation through commercial incineration
industry staff and outside counsel.
c. Political Favoritism to Incinerators at Top Levels of
EPA
It has become obvious over the last 3 years that at the highest
political levels of EPA, there is great favoritism and access for the
commercial incinerator interests in their war against cement kilns. One
good example is EPA's process in issuing its recent ``determination''
for cement kiln dust (CKD). 60 Fed. Reg. 7366, February 7,1995. For
groups whose primary interest is simply to stop the burning of
hazardous waste in cement kilns, it is entirely logical that they would
push for full Subtitle C regulation of CKD in an uncompromising manner.
As EPA has found, the costs of such controls would be exceedingly
burdensome and oppressive, and many if not most cement kilns now
burning HWF would likely be forced to quit doing so if full Subtitle C
regulation over CKD were imposed. Id. Even if a kiln could afford to
absorb such wholly unnecessary costs, it would (to the great
satisfaction of the commercial hazardous waste incineration industry)
substantially drive up the costs of sending hazardous wastes to cement
kilns for safe and effective treatment.
When EPA originally published the CKD Report and solicited public
comment for the CKD Regulatory Determination, the agency properly held
a round of meetings between EPA personnel and various interest groups.
At the cement industry meeting with EPA, EPA personnel stated in no
uncertain terms that after the deadline for public comment--March
8,1994--EPA would have no further meeting with any interested parties
in the CKD Regulatory Determination.
This policy was breached almost immediately when EPA Assistant
Administrator Laws met with an anti-cement kiln group organized and
promoted by the commercial incinerators industry shortly after March 8.
Cement industry counsel protested this meeting in a letter to EPA
counsel on March 14, 1994. (Attachment 3). Cement industry counsel
asked whether EPA had changed its policy and said that if so, ``we
would certainly appreciate the opportunity to meet.'' To this day, EPA
has never responded to the cement industry's March 14,1994 letter.
CKRC later learned that there were two such meetings in March. The
EPA summaries of such meetings (Attachment 4) show that the cement kiln
enemies raised not only CKD issues but also lobbied hard for tough new
MACT emission standards for cement kilns at their meetings.
The AFRTT political connection with EPA leadership has continued to
alarm CKRC. On May 9,1994, former Congressman and former Governor Jim
Florio (now AFRTT co-chair) sent EPA Administrator Browner a ``Dear
Carol'' letter explaining why--in his view--a recent U.S. Supreme Court
decision required EPA to regulate CKD under RCRA Subtitle C. Attachment
5. Mr. Florio's letter was on his new law firm's letterhead and nowhere
in the letter did Mr. Florio disclose that he had recently become co-
chair of AFRTT.\6\
\6\As shown In our counsel's letter to Ms. Browner of May 11, 1994
(Attachment 6), we believe Mr. Florio's legal views were totally
incorrect.
On October 20, Mr. Florio wrote another letter to Ms. Browner.
(This time he at least made clear he was writing on behalf of AFRTT.)
He urged the Administrator to meet with him to discuss AFRTT's goal of
providing for -''more appropriate environmental regulation of the
cement kiln industry.'' (Attachment 7).
CKRC wrote Ms. Browner on November 30, 1994 to express its concern
over this new AFRTT attempt at an ex parse communication on the CKD
issue. Attachment o. CKRC reiterated that EPA personnel had stressed
there could be no more Meetings after the close of the comment period
on March 8, 1994, and asked whether she was planning to meet with Mr.
Florio. CKRC stressed that out of fairness, she should meet with the
cement industry if she met with AFRTT. Neither Ms. Browner nor anyone
else in EPA has ever responded to CKRC's November 30,1994 letter.
On December 21, 1994, CKRC obtained a copy of an AFRTT press
release. In that release, AFRTT announced that its representatives had
met with Assistant Administrator Laws on December 21,1994. The release
makes clear that AFRTT continued to press its CKD points as well as
many MACT points with Mr. Laws during flus meeting. Attachment 9.
On December 23, 1994, CKRC wrote yet another letter to Ms. Browner.
Attachment 10. CKRC expressed its disappointment that she had never
answered CKRC's November 30 letter and spoke of CKRC's ``grave
concern'' over the obvious pattern that was developing of EPA giving
preferential ex parse treatment to the commercial incinerator interests
while totally ignoring CKRC's letters and requests for meetings.
The situation portrayed in CKRC's letter to Ms. Browner of December
23 turned out to be much worse than CKRC initially realized. Not only
did Ms. Browner's staff arrange for Mr. Florio and his AFRTT people to
meet with Mr. Laws on December 23, they also arranged for two
additional ex parse to press EPA to regulate CKD from kilns that burn
HWDF under full Subtitle C on the very same day! MACT issues were also
prominent on the agenda for these meetings.
One meeting was with a group of citizens promoted (and partially
funded) by AFRTT that met with Mr. Laws. (In the war-time missive
discussed above, the HEAL leader closed by saying: ``Hope to bring back
good news from the D.C. meeting with Elliott Laws.'' Attachment 2.)
Another meeting was a contingent from Rollins Environmental Services,
Inc., a prime member of both ETC and AFRTT and unquestionably the most
vicious attacker of cement kilns that burn HWDF. Rollins met with
Deputy Administrator Hansen. The EPA summaries of such meetings are
attached at Attachment 11.
To this day, neither Ms. Browner nor anyone else at EPA has ever
responded to CKRC's letter of December 23. Thus, EPA personnel had told
CKRC representatives that after March 8, 1994 (the close of the public
comment period on the CKD determination), there would be absolutely no
more meetings with any interest groups to discuss the pending
determination. The incinerator interests nevertheless were granted at
least five separate meetings (possibly more) with high-level EPA
personnel to influence EPA to take action on CKD that was extremely
adverse to the cement industry and to conduct further MACT propaganda
activities. CKRC's letters of protest and requests for rebuttal
meetings went totally unanswered (and are unanswered to this day), and
CKRC never obtained a single meeting with EPA during this period.
Another example of this anti-cement kiln coordination between
commercial incinerators and citizen groups--and EPA's blatant
political-level favoritism toward the incinerators and their cohorts--
is the Horsehead settlement agreement described above. Even though they
lost the one major issue they actually litigated in Horsehead the
commercial incinerator interests were able to ``negotiate'' a
Settlement Agreement with EPA to resolve several issues that were
withdrawn from oral argument at the eleventh hour. Even though CKRC was
a party in Horsehead and the Settlement Agreement has a significant
detrimental effect on the cement industry, CKRC was never invited to or
even informed about the closed-door meetings leading up to the
Settlement Agreement, EPA never had similar meetings with CKRC, and EPA
never even gave CKRC the opportunity to comment on the Settlement
Agreement before it was filed with the court.
d. EPA's Assistance to AFRTT In Playing-Field Leveling
Another example of the EPA leadership's siding with the commercial
incinerators relates to the so-called ``leveling of the playing
field.'' First, through all of their dozens of political contacts and
ex parse meetings, the AFRTT forces appear to have convinced the
Administrator that commercial incinerators are more stringently
regulated than cement kilns under current EPA rules. As shown above,
nothing could be further from the truth. EPA's Director of the Office
of Solid Waste recently confirmed this in a letter to AFRTT of May
30,1996.
Yet on July 28, 1995, the Administrator appeared on the MacNeil/
Lehrer News Hour on the Public Broadcast System television network. On
that show, she stated:
Let me explain what's happened in this country. We have one set of
standards for hazardous waste incinerators. We have another, weaker set
of standards for cement kilns, boilers, industrial furnaces--which are
also burning hazardous waste. I think we should have tough standards
for both. That's exactly what my rule would do. What David sought to do
today in his amendment--which he lost would have been to prohibit me
from setting tough standards on these facilities that are burning
hazardous waste. Why should there be two different standards, a lesser
standard for some?
The Administrator was openly challenged by Congressman McIntosh
(the ``David'' referred to in her statement), but she continued to
insist that cement kilns were subject as a ``lower standard'' than
incinerators.
A well-known AFRTT slogan is that EPA should ``level the playing
field'' in the economic competition between commercial incinerators and
cement kilns. This slogan in part is used to argue (absolutely falsely)
that EPA's standards for cement kilns are not as comprehensive and
stringent as those for commercial incinerators, and that if EPA would
force even more stringent standards on cement kilns, somehow the
``playing field'' of the competition would become ``level.''
More pointedly, behind the AFRTT ``playing field'' pitch is the
desire to force greater costs upon cement kilns that burn hazardous
waste. The desired result would be that much greater costs would force
some of the AFRTT's cement kiln competitors to stop burning hazardous
waste. For those that continued to burn, the point is that greatly
increased compliance costs would translate into higher prices for
generators and work to level the market pricing playing field to
AFRTT's advantages.
EPA's Administrator has apparently been influenced by AFRTT's
pitches. As reported in news accounts, Ms. Browner explained that her
current proposal for cement kilns ``will level the playing field for
hazardous waste incinerators.'' BNA Daily Environment Reporter, March
21, 1991, at A-33. Ms. Browner also vowed to stop ``allowing the
competing cement kilns to undercut the commercial hazardous waste
incinerators'' in pricing. Id.
Another news account stated:
In a conference call with reporters, Browner said that the new
emission limits would level the playing field among hazardous waste
incinerators and hazardous waste-burning cement kilns.
BNA Daily Environmental Reporter, March 22,1996, at A-29.
Certainly AFRTT has publicly recognized and thanked EPA's
Administrator for her support. In a letter of May 23, 1996 to suppliers
and customers, the President of Rollins (AFRTT's prime member) reviewed
AFRTT's long-standing campaign to level the playing field in the market
place vis-a-vis cement kilns. (Attachment 13.) The Rollins President
made the following statements:
Thanks in part to AFRTT's issues advocacy work in Washington, D.C.
and nationwide, EPA Administrator Carol Browner recently proposed tough
new emissions standards for all hazardous waste combustion devices,
including cement kilns, under the Clinton Administration's National
Combustion Strategy. The Administrator has acknowledged AFRTT's
[AFRTT's] work as being the most important catalyst for quick issuance
of this important proposal.
The Rollins letter also mentions several ``AFRTT Accomplishments.''
Among those listed are:
Issuance of EPA's proposal for Maximum Achievable Control
Technology (MACT) standards for hazardous waste combustors; and
Building of significant credibility with EPA through
several years of meetings with EPA Administrator Browner and other
senior EPA officials coupled with AFRTT's visible support for EPA
initiatives.
Moreover, AFRTT co-chair James Florio commended the Administrator
for her close team-work with AFRTT, according to this news report:
``The EPA has done an excellent job in putting together this
proposed rule which advances environmental protection while at the same
time balancing the economic burden of regulation,'' Jim Florio, ARTT
[AFRTT] co-chair and former New Jersey Governor, said in a March 20
statement. ``Carol Browner, in particular, is to be commended for her
leadership within the administration on moving this proposal ahead.''
In prepared statements both ARTT [AFRTT] and EPA mentioned proposed
amendments to EPA's fiscal 1996 appropriations bill that would have
limited EPA' ability to implement the 1993 combustion strategy, of
which this proposed rule is one component. The riders were strongly
supported by the cement kiln industry. BNA Daily Environmental
Reporter, March 21,1996, at A-35
Another example of EPA's bias toward the commercial incinerators is
worth mentioning. CKRC filed a rulemaking petition with EPA respecting
hazardous waste fuel issues on February 10, 1994. The petition sought
EPA clarification on some issues that are very important to the cement
industry. To this days despite requirements in RCRA and EPA's own
regulations the only acknowledgment CKRC has ever received is a
``Return Receipt Requested'' green card. By contrast, the Hazardous
Waste Treatment Council (now ETC) filed an anti-cement kiln petition
with EPA 10 days earlier--on January 31, 1994. By April 4, 1994, EPA
had taken final action on that petition that gave the commercial
incinerators much of the relief (against cement kilns) that they had
requested.
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