The other major air quality sector in which the Federal Government has set national standards is for mobile sources. The Committee Report specifically discusses the possible detriments of national rather than localized auto emissions standards. EPA feels strongly that it is infeasible to effectively implement the "two-car strategy" which is referenced in the Committee Report. This view is developed fully in Chapter VI.

The data presented in this report is an estimate of the economic and energy impacts expected from the nationwide standards which have been proposed or promulgated to date. They are not estimates of the difference in cost between national standards and local or State standards. A comparison of this nature is impossible because of the difficulty in estimating what localized standards would be, particularly in the face of a "fishable/swimmable" water quality goal for 1983. Moreover, there is no opportunity to observe for comparison sake, what localized standards would evolve, since most of the governing legislation prohibits any deviation from nationwide standards. Specifically :

BPT and BAT standards under the Federal Water Pollution Control Act must be technology-based standards limited by what the industry involved can afford, but not by any EPA determination of what is needed. Consequently, EPA can set less expensive standards for sectors of an industry which for some reason (age, process, geography) cannot meet the standards imposed on other sectors (standards for more than 200 subcategories have been included in the first 30 industry regulations promulgated under the FWPCA); but EPA cannot tailor the standards to environmental need. In fact, plant-by-plant standard determination is prohibited by the law, except where State water quality standards dictate more (not less) control.

New Source Performance Standards (NSPS) under both the air and water legislation are specifically limited to the most stringent level of control demonstrated to be economically feasible.

Passenger car emission standards are determined by the Clean Air Act. EPA has no discretion concerning them beyond the decision as to whether or not to grant one-year suspensions on new levels of control. EPA has discretion on all other mobile source emission standards.

Ambient air quality standards. They are to be based solely on the atmospheric concentration of pollutants at which damages to health or welfare

occur.

EPA has accomplished one study which assesses the costs of not having control over local standards. In reviewing the availability of low sulfur fuel and sulfur oxide control technology, EPA learned that States which set sulfur oxide emissions limits more stringent than needed to meet the national primary air quality standards have created an excess demand of about 185 million tons of low sulfur coal. This "overkill", unless eliminated by the States, will delay the attainment of the primary standards, to the extent that fuel-burning sources in clean areas bid away low sulfur fuel from other sources which need it to meet the primary standard. EPA is trying to get the States involved to delay or eliminate the "overkill" portion of their regulations, and roughly 25% of this problem has been eliminated.

C. Economics and Energy in the EPA Standard-Setting Process

It is now EPA policy to require an economic and energy impact assessment as part of the development of each major standard. Where appropriate, these assessments are incorporated into the standard-setting process: but in many cases (as detailed in the previous section), the use of economic and energy considerations are limited by the governing legislation. In such cases EPA feels that it must, as a responsible government agency, he aware of the economic and energy impacts, even if those data are not allowed to influence the standardsetting process.

The specific mechanism for accomplishing the assessment of both the economic and energy impacts of proposed standards and regulations is defined in EPA Order No. 1000.6. This order requires that an economic and energy review will be accomplished through working groun review and through review of the proposed standards by the Agency's Steering Committee for Standards and Regulations. D. Major Findings of the Report

Subsequent chanters of this report discuss in detail the economic and energy impacts associated with EPA's major standards, regulations, and programs. The following summarizes the major points addressed, and the principal findings associated with each.

Economic Impacts

Total Costs.-The combined capital costs and operating and maintenance costs required to meet Federal environmental regulations over the decade 1973-1982 are estimated to be $194.8 billion. This figure includes about $133 billion for air pollution control and about $51 billion for water pollution control. Approximately $81 billion in capital for pollution control facilities and equipment will be required during this period.

Costs-Air.-By major area, the costs for air pollution control are divided (using 1979 as a sample year) among mobile sources (44%), fossil fuel combustion (36%), and industrial processes (20%). As a percentage of total capital expenditures, mobile source control (primarily emissions controls for automobiles) will increase in the second half of the decade to 60% of the annual total. The industries (other than automotive) which will be required to make the largest investment (as a percent of the total pollution control investment required) are steam electric power (16%), iron and steel (4.3%), feed mills (2.9%), and primary aluminum (2.2%).

Costs Water.-From $5.3 billion to $7.1 billion in capital investment will be required to meet the first 30 1977 Effluent Guideline regulations for specific industries. By industry, the largest expenditures (as a percent of total estimated capital requirements) are projected for chemicals and allied products (15%), primary metals (11%), paper and allied products (11%), petroleum refining and related industries (11%), and food and kindred products (9%).

Inflation. The study completed by Chase Econometrics in 1973 indicates that increased inflation (as measured by the implicit GNP deflator) resulting from all pollution control programs will average about 0.2% per annum for the period 1972-1980. The entire environmental prorgam is estimated to have been responsible for less than 0.5% of the 17% increase in the Wholesale Price Index which occurred during the year ending in March 1974.

GNP.-The Chase Econometrics Study of 1973 also shows that as a direct result of pollution control programs, constant dollar GNP would be $6.5 billion lower in 1973, $5.8 billion lower in 1977, and $15 billion lower in 1980 than it would have otherwise been. These impacts average out to a decline in the estimated annual GNP growth rate of about 0.1% through 1980.

Employment.-Over the period 1972 through 1980, the Chase Econometrics Study projects unemployment to increase at an average annual increment of 0.1% as a direct result of pollution control programs. EPA is currently aware of 12,000 job losses which have allegedly occurred as a result of pollution control requirements, and most of these have been associated with enforcement of State and local regulations rather than Federal regulations. The plants which have threatened to close under existing and proposed Federal regulations could account for another 44,000 workers. Eighty-one percent of these jobs are concentrated in the pulp and paper, primary metals, and chemicals industries. The single industry which could be most affected in terms of unemployment is the steel industry. EPA currently has underway a special study to determine the extent of potential adverse economic impact in that industry.

Plant Closures.-Since January 1971, EPA has learned of 69 plant closings for which pollution control was alleged to be a significant factor, but only 14 of these closings involved any Federal enforcement. EPA has learned through its Economic Dislocation Early Warning System that 81 plants are threatened with closure as a result of existing environmental regulations. However, in most of these cases the plants appear to be marginal operations, unlikely to survive even in the absence of environmental requirements. Longer term projections for the decade 1973 through 1982 indicate 300 to 500 possible plant closures from the 1977 requirements for Best Practicable Control Technology Currently Available (BPCTCA). This forecast may be high to the extent that plants can adopt process changes which are less expensive than the end-of-pipe treatment assumed in the EPA studies.

Capital Availability.-Research by EPA and the Council on Environmental Quality has indicated that the total capital requirements for pollution control, including compliance with both State and Federal regulations, over the next decade are expected to equal 2-3% of gross private domestic investment and about 6% of private investment in plant and equipment. As such, these investments should not significantly effect the availability of capital. However, EPA currently has underway a major study on capital availability to insure that it has a comprehensive assessment of this impact.

Agriculture.-Restrictions to date on the use of pesticide products have had only minimal impacts on food and fiber production. For the vast majority of cancelled uses, alternative pest control methods have been available, and the initiation of scouting programs and the use of integrated pest management techniques may defray costs associated with use of more expensive alternatives. A recent study by the U.S. Department of Agriculture estimates that the costs due to suspension of aldrin and dieldrin (assuming the unavailability of heptachlor and chlordane) on corn production are at most $25 million based on 1971 production data and an assumed loss of 0.4% in yield. The actual costs of that suspension may be much less than $25 million due to savings to farmers from elimination of uneconomic uses. Effluent limitations on the fertilizer industry may be somewhat more significant, though the exact magnitude of impact has not yet been determined. Estimates for loss in phosphate fertilizer production range between 5% and 22%, though the high end of the range is unlikely and closures which may result would probably include some outdated plants which can no longer compete with modern technology.

Automobiles.-The auto industry has expended $2 billion for emissions control development. 1975 auto prices will include approximately $165 more of pollution control costs than do 1974 models; however, better gasoline mileage and lower resulting maintenance costs will more than offset the increased purchase price.

Net Foreign Balance.-The 1973 Chase Econometrics Study indicates that as a direct result of compliance with both State and Federal pollution control requirements, the net foreign balance position of the U.S. is estimated to be $3.8 billion worse in 1976 and $1.1 billion worse in 1980.

Energy Impacts

Total Energy Impacts.-The energy impact of EPA regulations and programs is estimated to be about the equivalent of 525,000 barrels of oil per day (525 MBD) in 1980, or about 1.1% of forecasted total national consumption of energy. A summary of these energy impacts is shown in Table 1-1. To facilitate comparisons, all energy is reported in units of thousands of barrels of crude oil per day, regardless of the fuel source. Energy savings are presented in parentheses. TABLE I-1-Summary of energy impacts of EPA's program in 1980

1 Energy benefits from solid waste programs have not been included in the total because they primarily result indirectly from EPA's research and educational programs rather than from direct regulations. If included this potential energy savings of 100,000 barrels per day would result in a net energy penalty of 425,000 barrels per day.

NOTE.) represent positive impacts.

We believe these estimates are conservative-i.e., for the most part they are close to the upper bound of the range of estimates which EPA and outside consultants have calculated. The following paragraphs discuss in more detail the energy impacts shown on the summary table.

Energy Impacts on Stationary Sources.-Steam electric power plants are estimated to incur total energy requirements of up to the equivalent of 145,000 barrels per day of crude oil (145 MBD) to meet air quality standards. Flue gas desulfurization in 1980 is estimated to require up to 110 MBD of crude oil if scrubbers are installed on 90,000 MW of coal-fired capacity (20% of total fossil-fuel fired capacity). Scrubbers are either being installed or are planned for at least 35,000 MW of capacity at this time. Other requirements, such as particulate removal and desulfurization of fuel oils, are estimated at about 15 MBD and 20 MBD of crude oil respectively.

All other industries are estimated to require about 80 MBD to meet air quality standards. Of this, 25 MBD would be due to new source performance standards for specific emissions, and 55 MBD is due to desulfurization of fuel oil in order to comply with State Implementation Plans.

The residential and commercial sectors of the economy are estimated to require 45 MBD for desulfurization of fuel oil to comply with these State Implementation Plans. Almost all of these regulations have been in effect for several years.

Mobile Source Energy Requirements to Comply with Statutory Standards.— Current data indicates that 1975 model year automobiles will be substantially more efficient than 1974 autos, and at least as efficient as autos built before any emission controls were installed (i.e., pre-1968). Future emission control systems should not degrade engine efficiency below 1975 levels. This was reached in a joint DOT-EPA Report to Congress on October 24, 1974. Furthermore, the DOT-EPA Report predicted that by 1980 autos could average between 15 and 27 mpg, depending on vehicle weight.

In 1973, the total fuel penalty due to emission controls for all cars on the road totalled 270 MBD. This energy penalty is expected to decline to 160 MBD in 1980 as cars currently in use are gradually phased out.

These estimates assume that future controls will be applied to autos with the same weights, engine sizes, and sales mix as autos sold during 1973. In reality, both the technology and sales mix of automobiles are changing very rapidly, and the changes taking place tend to improve fuel economy beyond that assumed in this study.

It should be noted that the joint EPA-DOT study on fuel economy stated that "achievement of the statutory emission standards for hydrocarbons and carbon monoxide with substantial fuel economy improvement is feasible in the new car fleet of 1980 compared to 1974." However, the study was unable to determine the amount of the fuel economy impact associated with meeting the statutory nitrogen oxide standard. The fuel economy penalties due to emission controls which have been computed in this paper assume that the statutory NOx standard is met in 1978, and that technologies to meet it which have been recently developed will be available in 1978 in sufficient quantities such that no fuel penalty results. EPA's lead regulations affect energy use by changing the mix of products which any given refinery can produce. The refinery compensates by operating some equipment more intensively. This requires additional energy. Consultants for EPA estimate that this penalty in 1980 will be no greater than 95 MBD. As new equipment is installed, this penalty should decrease substantially.

Because new autos with catalysts require lead-free gasoline, and because it becomes less economic to manufacture gasoline without lead at octanes over 91 (RON), many engines were redesignated in order to operate efficiently on 91 octane gasoline. This reduction in engine compression ratios caused a loss of operating efficiency of about 3%. This loss, equivalent to about 95 MBD in 1974, and 50 MBD in 1980, is included in the penalty under auto emission controls. EPA's transportation control programs are designed to reduce pollution to meet standards in certain urban areas where stationary and mobile source regulations by themselves cannot meet these national goals. Since most transportation control plans result in reduced energy consumption, they provide substantial energy benefits. These benefits are tentatively estimated to be about 105 MBD by 1980. Vapor recovery programs at service stations should yield an additional 30 MBD savings.

Energy Requirements for Water Pollution Control.-The estimated total energy demand for municipal wastewater treatment plants is about 45 MBD in 1980. Sewage plants presently consume about 20 MBD. This estimate assumes that the 1977 goal of best practicable treatment is met in 1978, that incineration

of sludge does not become the primary method of waste disposal, and that methane produced during the treatment process is not recovered or used for fuel.

Sewage treatment energy requirements are sensitive to assumptions about the degree of advanced waste treatment required to meet water quality standards. These estimates do not include energy required in the manufacturing of chemicals. Some forms of intensive or advanced treatment could require energy for chemical manufacturing which would be in excess of these estimates.

Electrical power plants require control systems to reduce chemical effluents and to cool the temperature of their discharge. Recent analyses have estimated that control of chemical discharge requires negligible amounts of energy, but that cooling of thermal discharges will require the equivalent of 50 MBD as an energy penalty in 1980.

Detailed estimates of the energy penalties associated with water effluent guidelines for other industries have not been completed, but preliminary estimates indicate that the 1980 penalty would be about 40 MBD.

Energy Benefits from Solid Waste Recovery.—Projections of the energy which can be reclaimed from municipal waste and garbage and used as fuel in power plants indicate that at least the equivalent of 65 MBD can be saved by 1980. This estimate is based on 1973 fuel prices. Current higher fuel prices are expected to accelerate construction of power generation facilities which depend in part on the use of municipal garbage.

Recycling of material will conserve energy by reducing the amount of enerby required in the manufacture of certain products-e.g., steel, aluminum, and glass. Our estimate is that about 35 MBD can be saved in 1980 by this approach. No estimate is available regarding the amount of recycling or solid waste combustion which can be attributed directly to EPA's program efforts. It is expected that a substantial proportion of this activity might occur regardless of EPA's effort.

E. Further Research

In a continuing effort to provide more comprehensive and accurate analysis of the economic and energy impacts from pollution control regulations, the following studies have been undertaken by EPA and are scheduled for completion in this fiscal year:

A fourth annual iteration of the Chase Econometrics model, using an expanded and updated data base to estimate macroeconomic impacts for several scenarios of regulation timing and economic conditions.

Individual studies of the combined economic impact of all environmental regulations on six of the most heavily impacted industries: Steel, Electric utilities, Petroleum, Chemicals, Pulp and paper, Nonferrous metals.

A study of the combined impact of all pollution control regulations on the cost and availability of investment capital.

Supporting analysis for the National Academy of Sciences study on the energy implications of the Federal pollution control regulatory program. These studies, together with the continuing series of economic impact analyses of proposed regulations on individual industries, will provide the comprehensive and coordinated analysis of economic and energy impacts which is needed and. which is not currently available from existing data.

CHAPTER II-COSTS OF POLLUTION CONTROL

This chapter presents available information on the costs of pollution control. Costs are limited where possible to the projected costs of control resulting from Federal legislation, thus excluding the costs of common industry practice or of local and State legislation not provided for by Federal legislation. These costs tend to be high estimates in that they generally are based on assumptions that pollution control equipment will be installed, whereas process changes in some bases will be less costly. These estimates are low estimates to the extent that they do not include the costs of regulations not yet promulgated and to the extent that they exclude indirect or secondary cost effects.

Information on the costs of Federal pollution control is accumulated by the Council on Environmental Quality (CEQ) for publication in its annual report. More detail is provided on air costs from the 1974 EPA Report to Congress on The Cost of Clean Air. More detail is provided on water costs from the 1973 EPA Report to Congress on The Economics of Clean Water and from the studies completed in the last year in support of the development of effluent limitations governing industrial water pollution.