The Clean Air Act and EPA’s New Ozone Standard: How Much Will It Cost?

The Clean Air Act, amended by Congress in 1990, requires that the U.S. Environmental Protection Agency (EPA) review each of its six important health-based standards every five years to make sure that the standard is set at a level that protects public health based on credible new scientific studies. The Clean Air Act does not require that EPA change the standards as a result of that review. The EPA plans to propose a new ozone standard in December 2014. The current standard is set at 75 parts per billion (ppb). EPA staff has recommended that a new ozone standard be set at a lower level within the range of 60-70ppb.

EPA has not calculated the cost of implementing and achieving the new ozone standards. However, that does not mean that there will be no costs to consumers, business and industry—new technology for businesses, pollution control equipment for industry, and lifestyle changes for citizens will all be needed to meet this new, much lower ozone standard.

Estimating compliance costs is challenging. This is in part because to date, the EPA has only identified one-third of the emissions controls needed to meet the possible new standard; the other two-thirds must come from controls the EPA has not identified.

To calculate the potential costs to fill the gap, the National Association of Manufacturers (NAM) commissioned NERA Economic Consulting to look at the types of regulations, controls and actions that might be required. This study found that they will be much more expensive than controls already in place or identified. This is because they are likely to include the shutting down of some powerplants and factories, costly modifications to others, and changes to how cars, trucks and other engines operate.

The study found that a stricter new ozone regulation could:

  • Reduce U.S. GDP by $270 billion per year and $3.4 trillion from 2017 to 2040;
  • Result in 2.9 million fewer job equivalents per year on average through 2040;
  • Cost the average U.S. household $1,570 per year in the form of lost consumption; and
  • Increase natural gas and electricity costs for manufacturers and households across the country.

In brief, such a rule could place tremendous cost and compliance burdens on individuals, states and businesses.

To learn more about how NERA calculated these costs and other impacts to the economy, click here.