My understanding of the health and welfare risks of the proposed ozone NAAQS is based on an analysis of the proposed rule and its accompanying regulatory impact analysis (RIA) that I conducted for the Regulatory Analysis Program (RAP), a research and educational program at the Center for Study of Public Choice at George Mason University. RAP is dedicated to advancing knowledge of regulations and their impact. As part of its mission, the program produces careful and independent analysis of agency rulemaking proposals from the perspective of the public interest. I am grateful to Dr. Wendy Lee Gramm, the director of RAP, for her intellectual and financial support in the preparation of the comments submitted to EPA. RAP's comments on the proposed ozone NAAQS, and its accompanying comments on the particulate matter NAAQS\1\ are available on Economist Incorporated's web site: http://www.ei.com.
\1\ Thomas D. Hopkins, Ph.D, Arthur J. Gosnell Professor of Economics, Rochester Institute of Technology prepared RAP's comments on the PM NAAQS.
This morning, I would like to highlight some of our most important concerns with the risk assessment underlying EPA's ozone proposal.
1. There is little scientific basis for the selection of the standard.
EPA recognizes that the selection of the standard was a policy decision, rather than a scientific decision. EPA's science panel did not find the proposed standard to be significantly more protective of public health than the current standard, and most members who expressed an opinion preferred a level less stringent than that which EPA has proposed.
2. EPA's preamble and RIA suggest that the health and welfare benefits expected from implementation of the proposal are small and highly uncertain.
The effects of ozone on the general population appear to be transient, reversible, and generally asymptomatic. Even for the population at the greatest risk, those with pre-existing respiratory conditions, the expected impact of the proposed change in ozone levels is small. With full implementation of the rule, EPA predicts a 0.6% decrease in hospital respiratory admissions for asthmatics. Furthermore, EPA's evidence from chronic animal studies suggests that long-term exposure to ozone does not affect lung function.
3. As a result of EPA's narrow interpretation of its mandate to protect public health, this proposal may actually harm public health and welfare.
EPA appears to focus on the impact of ozone on at-risk populations, particularly children with existing respiratory conditions such as asthma. While asthma is a disturbing health problem, particularly since (a) reported cases have been increasing in recent years (45 percent in the last decade), (b) one-third of its victims are children, and (c) it is most severe among the urban poor, this trend cannot be explained by ozone levels; air quality has been improving over the last decade and ozone levels in particular declined 6 percent between 1986 and 1995.\2\ Recently, the National Institute of Allergy and Infectious Diseases funded a study that revealed that "the leading cause of asthma by far was ... proteins in the droppings and carcasses of the German cockroach."\3\ The American Thoracic Society concluded:
\2\ USEPA, National Air Quality and Emissions Trends Report, 1995.
\3\ Chemically Speaking, July 1996.
Poverty may be the number one risk factor for asthma. ... As with many of the health problems facing society today, education and prevention are the keys to controlling asthma in the inner city.\4\
\4\ American Thoracic Society, 1996 Conference Articles.
Thus, even if asthma were the only public health issue of concern, the proposal may have a perverse effect on health. The potential impact on those afflicted with the disease is very small, and the costs of the rule will drain society's resources from more effective remedies.
Perhaps even more disturbing is EPA's analysis (not presented as part of this rulemaking) that suggests that the proposed standard would increase health and welfare risks from ultra-violet radiation. Ground-level ozone has the same beneficial screening effects on ultraviolet radiation as stratospheric ozone. Based on EPA analysis used to support earlier rulemakings to protect stratospheric ozone, it appears that the proposed 10 ppb change in the ozone standard could result in 25 to 50 new melanoma-caused fatalities, 130 to 260 incidents of cutaneous melanoma, 2,000 to 11,000 new cases of nonmelanoma skin cancer, and 13,000 to 28,000 new incidents of cataracts each year. These negative health effects of the proposal could vastly outweigh the positive health effects attributed to it in the RIA. By converting all health effects into a dollar metric, we estimate that attainment of the proposed standard could actually increase health risks by over $280 million per year.
When the costs of the proposal are considered, the negative impact on public health is even more dramatic. If, as recent studies suggest, poverty is a more important risk factor for asthma than air quality, the rule may well increase the very disease it is purportedly targeted at improving. Moreover, studies linking income and mortality suggest that the cost of this proposal would, by lowering incomes alone, result in an increase in 4,250 to 5,667 deaths per year.
EXECUTIVE SUMMARY
The Regulatory Analysis Program offers the following conclusions and recommendations regarding EPA's proposed revision to the ozone National Ambient Air Quality Standard (NAAQS) and the accompanying Regulatory Impact Analysis (RIA).
A. The proposal will not improve public health and welfare.
EPA interprets the Clean Air Act to prohibit the consideration of costs in setting NAAQS. Even if one were to accept EPA's interpretation of its statute, EPA appears to have ignored important public health and welfare considerations.
There is little scientific basis for the selection of the standard, and the health and welfare benefits attributed to the proposal are small and highly uncertain. Moreover, EPA has chosen not to consider important risk information relevant to public health and welfare, arguing that the statute only allows it to consider the negative impacts of chemicals, not their positive impacts.
As a result, EPA's proposal may harm public health and welfare, regardless of cost For example, the potential for a change in the ozone standard to increase people's exposure to ultraviolet radiation raises serious questions about the net health and welfare effects of this proposal. Taking into consideration the beneficial screening effects of ozone on ultraviolet radiation, we estimate that the impact of attaining the proposed standard would be to increase health risks by over $280 million per year. This is particularly disturbing in light of the enormous costs full attainment of this rule would impose on every aspect of our lives.
When the costs of the proposal are considered, the negative impact on public health is even more dramatic. If, as recent studies suggest, poverty is a more important risk factor for asthma than air quality, the rule may well increase the very disease it is purportedly targeted at improving. Moreover, studies linking income and mortality suggest that the cost of this proposal would, by lowering incomes alone, result in an increase in 4,250 to 5,667 deaths per year.
EPA has a responsibility for setting NAAQS that protect public health and welfare. To fulfill that responsibility it cannot ignore important health and welfare effects which can be readily, and reliably, quantified.
B. EPA's regulatory impact analysis does not provide an adequate basis for making a sound policy judgment.
According to EPA's own RIA, the costs of the proposal will exceed the benefits. Furthermore, questionable assumptions and serious omissions in the RIA lead to an understatement of costs. EPA admits that "aggregate total costs underestimate the true cost of each alternative to such an extent that the metric's reliability must be limited." EPA estimates the cost of only partially complying with the current and proposed standards. EPA does not include the costs of regional controls in its estimates of either the current or proposed ozone NAAQS. EPA also assumes that areas that can achieve ozone concentrations that are only 64 percent of the standard will incur no costs. As a result of these deficiencies, our analysis suggests that EPA's cost estimates reflect less than 5 percent of the true full costs of attainment.
Modeling, exposure, and valuation constraints make EPA's benefit estimates very uncertain. CASAC observed that due to the compounded uncertainties in the approach to estimating welfare effects, "small differences in benefits may have no significance..." EPA places its best (i.e., most likely) estimate of the incremental health benefits of the proposed standard is at the low end of its range, between $11 million and $108 million.
According to EPA, more than 98 percent of its total estimated health benefits come from reduced mortality, not the other health benefits EPA relies on to support its proposal. However, this estimate of reduced fatalities is based on a single study that was not discussed in the criteria document or staff paper, and thus not reviewed by EPA's science advisory committee (CASAC).
C. The costs of the proposed standard are strikingly high.
Even after imposition of all feasible control measures, EPA anticipates a large degree of nonattainment Without any change in the current NAAQS, EPA estimates that between 39 million and 57 million people will live in non-attainment areas for the foreseeable future. EPA expects an additional 14 million to 32 million people would live in non-attainment areas under the proposed revised standard.
EPA estimates that partial attainment of the standard will cost billions of dollars each year and impose costs in excess of benefits on Amen-cans of between $1.1 billion and $6.2 billion each year. These net costs are over and above EPA's estimates of the annual net costs of partially complying with the existing standard, which are also considerable- EPA estimates the costs of partially meeting the current standard will exceed benefits by between $400 million and $2.2 billion per year.
The full costs of meeting this standard would be orders of magnitude higher than EPA's estimated costs of partial attainment. Our analysis suggests that the full cost of attaining the current standard will be between $22 billion and $53 billion per year. We estimate that the proposed standards will impose additional costs in the range of $54 billion to $328 billion per year (1990 dollars).
D. Recommendations
Based on our review and analysis of EPA's proposal, we offer the following recommendations.
1. EPA should not proceed with promulgation of the proposed standard.
In light of EPA's science panel's conclusion that the proposed standard (level and number of exceedances) is not significantly more protective of public health than the alternatives examined, and the very real concern that implementation of this rule will actually harm public health and welfare, EPA should not proceed with its promulgation.
There may be adequate basis for changing the averaging time and form of the standard. However, as EPA's own analysis suggests that the current level of the standard already imposes social costs (both in terms of health and welfare) that exceed its benefits, EPA should not select a level and number of exceedances that is more stringent than the current standard.
2. More effective alternatives are available for addressing the potential ill effects of ozone.
Non-regulatory approaches are available to achieve the public health benefits targeted by this rule. As CASAC recommended in its November 30, 1995 closure letter on the primary standard, public health advisories and other targeted approaches may be an effective alternative to standard setting.
Because there is no apparent threshold for responses and no "bright line" in the risk assessment, a number of panel members recommended that an expanded air pollution warning system be initiated so that sensitive individuals can take appropriate "exposure avoidance" behavior. Since many areas of the country already have an infrastructure in place to designate "ozone action days" when voluntary emission reduction measures are put in place, this idea may be fairly easy to implement.
Furthermore, research and education are more likely to target what some public health experts regard as a more important factor behind the increasing incidence of asthma during a period in which ozone (and other pollutants) are declining-poverty and poor living conditions.
I INTRODUCTION
Ozone is a gas that occurs naturally in the earth's troposphere and stratosphere. It is also created when sunlight reacts with nitrogen oxides (NOx), and volatile organic compounds (VOCs). Tropospheric (ground-level) ozone is the primary constituent of urban smog.
Ozone levels are heavily influenced from year to year by meteorological conditions. EPA observes that the lowest national mean level of ozone was recorded in 1992, and the highest in 1988. After adjusting for meteorological effects, however, the year to year trend shows a continued improvement in ozone concentrations of about one percent a year.\1\
\1\ EPA National Air Quality and Emissions Trends Report, 1995.
Ozone is associated with respiratory problems, particularly in sensitive individuals. It is also credited with reducing the harmful effects of ultraviolet rays. Because it "may reasonably be anticipated to endanger public health and welfare," ozone has been identified under the Clean Air Act as a "criteria pollutant" The U.S. Environmental Protection Agency (EPA) must periodically review and, as necessary, revise its National Ambient Air Quality Standards (NAAQS) for criteria pollutants.
The CAA charges EPA with setting NAAQS that protect public health and welfare. In these comments,\2\ we examine whether EPA's December 1996 proposed revision to the ozone NAAQS meets this mandate.
\2\ These comments were prepared by Susan E. Dudley, Vice President and Director of Environmental Analysis at Econ~om~~ists Incorporated with support from the Regulatory Analysis Program at the Center for Study of Public Choice at George Mason University.
The rest of our comments are organized as follows.
Section II -- Review of EPA's Proposal
We review EPA's statutory obligations, its interpretation of those obligations, and the factors EPA relied on in making its policy judgment regarding the appropriate standard to protect public health and welfare. This review suggests that because EPA bases its policy judgment on a narrow set of criteria, the resulting rule is likely to result in public health and welfare outcomes contrary to EPA's expressed intent.
Section III -- Review of EPA's Regulatory Analysis
EPA's own regulatory analysis, summarized in the first part of this section, concludes that the costs of implementing the proposed standard will exceed the benefits. In the second part of this section, we identify major flaws in EPA's analysis and present revised estimates of the benefits and costs of the proposal based on our own analysis.
Appendix A -- Uncertainties in EPA's Analysis
Due to the considerable uncertainty in the science associated with both ozone modeling and the health and welfare effects of different ozone levels, EPA's analysis necessarily involves numerous assumptions. This appendix reviews key uncertainties and assumptions.
Appendix B -- Ozone's Impact on Ultraviolet Radiation
Ozone in the troposphere, like ozone in the stratosphere, has the beneficial effect of screening ultraviolet radiation, which is known to have various health and welfare effects including melanoma and non-melanoma skin cancer, cataracts, and crop and fishery damage. This appendix presents our analysis of the harmful public health and welfare impact that would be caused by the reduction in tropospheric ozone if this rule is implemented.
Appendix C -- The Full Costs of Attainment
EPA's estimates reflect only the cost of partial attainment. In this appendix, we present our analysis of the full costs based (1) on assumptions EPA uses in its analysis, and (2) on our revisions to EPA's estimates.
Appendix D -- Control Measures to Achieve Partial Attainment
This appendix reproduces EPA's Table C-1 from Appendix C of its Ozone NAAQS RIA. The table lists the control measures EPA expects to be used to achieve partial compliance with the current and proposed standards.