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(RIA) for Proposed Residential Wood Heaters NSPS Revisions Regulatory Impact Analysis (RIA) for Proposed Residential Wood Heaters NSPS Revision Final Report January 2014 EPA-452/R-13-004 U.S. Environmental Protection Agency Office of Air and Regulation Office of Air Quality Planning and Standards Health and Environmental Impacts Division The EPA wishes to acknowledge the contributions of the Research Triangle Institute (RTI) International in the preparation of the industry profile and economic impact analysis, and EC/R, Inc. in the preparation of the emissions and cost estimates included in this report. CONTENTS Section Page Section 1 Executive Summary ............................................................................................... 1-1 1.1 Analysis Summary ............................................................................................... 1-3 1.2 Organization of this Report .................................................................................. 1-5 Section 2 Introduction ............................................................................................................ 2-1 2.1 Background for Proposed Rule ............................................................................ 2-1 2.2 Room Heaters....................................................................................................... 2-1 2.3 Central Heaters: Hydronic Heaters and Forced-Air Furnaces ........................... 2-10 2.4 New Residential Masonry Heaters ..................................................................... 2-16 Section 3 Industry Profile ...................................................................................................... 3-1 3.1 Supply Side .......................................................................................................... 3-1 3.1.1 Production Process ................................................................................... 3-2 3.1.2 Product Types .......................................................................................... 3-2 3.1.3 Costs of Production .................................................................................. 3-5 3.2 Demand Side ........................................................................................................ 3-8 3.2.1 End-Use Consumer Segments................................................................ 3-10 3.2.2 Regional Variation in Residential Demand ........................................... 3-10 3.2.3 National Home Heating Trends ............................................................. 3-13 3.2.4 Substitution Possibilities ........................................................................ 3-15 3.2.5 Price Elasticity of Demand .................................................................... 3-15 3.3 Industry Organization ........................................................................................ 3-16 3.3.1 Market Structure .................................................................................... 3-17 3.3.2 Manufacturing Plants ............................................................................. 3-18 3.3.3 Location ................................................................................................. 3-20 3.3.4 Company Sales and Employment .......................................................... 3-21 iii 3.4 Residential Wood Heater Market....................................................................... 3-23 3.4.1 Market Prices ......................................................................................... 3-24 3.4.2 International Competition ...................................................................... 3-25 3.4.3 Future Market Trends ............................................................................ 3-26 Section 4 Baseline Emissions and Emission Reductions ....................................................... 4-1 4.1 Introduction .......................................................................................................... 4-1 4.2 Background to Emissions Estimates .................................................................... 4-1 4.2.1 Emissions Factors .................................................................................... 4-3 4.2.2 Voluntary Programs ............................................................................... 4-10 4.2.3 Shipment Data Used to Estimate Baseline Emissions ........................... 4-11 4.3 Estimated PM2.5 Emissions from Shipments of New Appliances ..................... 4-12 4.4 Methodology for Estimating VOC Emissions from New Units ........................ 4-16 4.5 Methodology for Estimating CO Emissions from New Units ........................... 4-21 Section 5 Cost Analysis, Energy Impacts, and Executive Order Analyses ........................... 5-1 5.1 Background for Compliance Costs ...................................................................... 5-1 5.1.1 Estimated Research and Development (R&D) Costs .............................. 5-1 5.1.2 Masonry Heaters ...................................................................................... 5-4 5.1.3 General Approach and Assumptions for Costs to Manufacturers ........... 5-5 5.1.4 General Approach and Assumptions for Costs to Masonry Heater Manufacturers .......................................................................................... 5-8 5.1.5 General Approach and Assumptions for All Appliances ......................... 5-9 5.2 Compliance Costs of the Proposed Rule ............................................................ 5-14 5.3 How Might People and Firms Respond? A Qualitative Partial Equilibrium Analysis.............................................................................................................. 5-17 5.3.1 Changes in Market Prices and Quantities .............................................. 5-17 5.3.2 Partial Equilibrium Measures of Social Cost: Changes in Consumer and Producer Surplus ............................................................ 5-20 5.4 Social Cost Estimate .......................................................................................... 5-21 5.5 Energy Impacts .................................................................................................. 5-21 5.6 Unfunded Mandates Reform Act (UMRA) ....................................................... 5-22 iv 5.6.1 Future and Disproportionate Costs ........................................................ 5-22 5.6.2 Effects on the National Economy .......................................................... 5-22 5.6.3 Executive Order 13045: Protection of Children from Environmental Health Risks and Safety Risks ...................................... 5-23 5.6.4 Executive Order 12898: Federal Actions to Address Environmental Justice in Minority Populations and Low-Income Populations ............. 5-24 5.7 Employment Impacts ......................................................................................... 5-24 5.7.1 Employment Impacts within the Regulated Industry............................. 5-27 Section 6 Small Entity Screening Analysis ........................................................................... 6-1 6.1 Small Entity Data Set ........................................................................................... 6-1 6.2 Small Entity Economic Impact Measures ............................................................ 6-2 6.2.1 Establishment Employment and Receipts ................................................ 6-2 6.2.2 Establishment Compliance Cost .............................................................. 6-3 6.3 Initial Regulatory Flexibility Analysis............................................................... 6-13 6.3.1 Reasons Why Action Is Being Considered ............................................ 6-13 6.3.2 Statement of Objectives and Legal Basis of Proposed Rule .................. 6-13 6.3.3 Description and Estimate of the Number of Small Entities ................... 6-14 6.3.4 Description and Compliance Costs ........................................................ 6-14 6.3.5 Panel Recommendations for Small Business Flexibilities..................... 6-16 Section 7 Human Health Benefits of Emissions Reductions ................................................. 7-1 7.1 Synopsis ............................................................................................................... 7-1 7.2 PM2.5-Related Human Health Benefits ................................................................ 7-1 7.2.1 Health Impact Assessment ....................................................................... 7-2 7.2.2 Economic Valuation................................................................................. 7-6 7.2.3 Benefit-per-ton Estimates ........................................................................ 7-7 7.2.4 PM2.5 Benefits Results .............................................................................. 7-8 7.2.5 Characterization of Uncertainty in the Monetized PM2.5 Benefits ......... 7-11 7.3 Unquantified Benefits ........................................................................................ 7-16 7.3.1 HAP Benefits ......................................................................................... 7-17 7.3.2 Carbon Monoxide Co-Benefits .............................................................. 7-27 7.3.3 Black Carbon (BC) Benefits .................................................................. 7-28 v 7.3.4 VOCs as a PM2.5 Precursor ...................................................................
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