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3.1. Clean Air Act

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The Clean Air Act (CAA) of 1970, as amended in 1977 and in 1990, established a federal-state partnershiop for air pollution control, under which states develop and implement plans to meet air quality goals set by the federal government. Depending on the source and pollutant, the Act places different requirements on the rulemaking process. For some regulations, such as the primary National Ambient Air Quality Standards (NAAQS), the statute explicitly speaks only of effects of the regulation upon public health. For others, such as most emission standards for motor vehicles and aircraft, the CAA calls for analysis of the cost of compliance. For regulations governing motor vehicle fuels, the CAA specifically requires a benefit-cost analysis whenever the regulation is intended to protect the effectiveness of emission control systems.

The Clean Air Act is divided into six Titles:
Title I. Air Pollution Prevention and Control
Title II. Emission Standards for Moving Sources
Title III. General
Title IV. Acid Deposition Control
Title V. Permits
Title VI. Stratospheric Ozone Protection

Title I confers upon EPA the authority to set national ambient air quality standards, to determine available control technologies for stationary sources, to prevent significant deterioration in air quality in clean air regions, and to review state plans for attaining air quality standards. Ambient air quality standards are governed by public health and welfare considerations. EPA must base primary NAAQS upon air quality criteria and provide an “adequate margin of safety ...to protect the public health.”109 (B)(2)(b)(1) Subsequent litigation (API v Costle, 667 F.2d 1176; and Lead Industries v. EPA, 647 F.2d 1131) determined that economic cost and technical feasibility could not be considered in setting these standards.

The language for the secondary NAAQS allows the consideration of a broader range of effects. EPA must establish the secondary NAAQS “to protect the public welfare from any known or anticipated adverse effects.” 109(b)(2)(b)(2) Effects on welfare are defined in the Act as including, but not being limited to, effects on soils, water, crops, vegetation, man-made materials, animals, wildlife, weather, visibility, and climate, damage to and deterioration of property, and hazards to transportation, as well as effects on economic values and on personal comfort and well-being.

The National Emission Standards for Hazardous Air Pollutants (NESHAP) must require the maximum degree of emission reduction that EPA determines is achievable at each source category taking into consideration the cost of achieving the emission reductions and other than air quality health and environmental impacts and energy requirements.(Sec.112). Maximum achievable reductions are determined by the performance of the best controlled facilities within each source category.

In establishing the performance standards for new stationary sources of pollution, EPA is required to consider costs. EPA must choose a standard that reflects “the degree of emission reduction achievable through the application of the best system of continuous emission reduction which (taking into consideration the cost of achieving such emission reduction, and any non-air quality health and environmental impact and energy requirements)…has been adequately demonstrated …” This language explicitly calls for the consideration of costs, but omits any reference to air quality benefits. Consequently, EPA considers costs, cost-effectiveness and economic impacts in setting these standards, but not air-quality-related benefits, when setting these standards.

Title II deals with vehicle and fuel standards, inspection and maintenance programs, aircraft emission standards, and clean fuel vehicles. When establishing emission standards for motor vehicles, EPA generally must consider costs. For example, certain heavy duty motor vehicle standards are to “reflect the greatest degree of emission reductions achievable…giving appropriate consideration to the cost of applying such technology within the period of time available…and to noise, energy, and safety factors associated with the application of such technology.” Certain other heavy-duty standards may be revised, if they “cannot be achieved…without increasing cost or decreasing fuel economy to an excessive and unreasonable degree…” If these standards are revised, EPA must submit an “analysis of the cost-effectiveness of other strategies for attaining and maintaining national ambient air quality standards…in relation to the cost-effectiveness for such purposes of standards which, but for such revision, would apply.” This language permits the consideration of cost-effectiveness and economic feasibility. Sec. 202

EPA is authorized to develop aircraft emission standards for any pollutant that “may reasonably be anticipated to endanger the public health or welfare.” In developing these standards, EPA must give “appropriate consideration to the cost of compliance.” Sec. 131

For another type of regulation, the CAA specifically calls for benefit-cost analysis. When controlling or prohibiting motor vehicle fuels or fuel additives for the purpose of preventing significant impairment of emission controls, EPA must consider “available scientific and economic data, including a cost-benefit analysis comparing emission control devices or systems which are or will be in general use and require the proposed control or prohibition with…[those that]…do not…” sec. 202

The part of Title III most relevant to benefit and cost analysis is Section 312 (Section 812 in the 1990 Amendments), which requires that EPA conduct a comprehensive analysis of the impact of the Clean Air Act on the public health, economy and environment of the United States. The study must consider costs, benefits and other effects associated with compliance with standards for criteria air pollutants, emission limits for hazardous air pollutants, mobile source emission limits, limitations for sulfur oxides or nitrogen oxides, limitations on production of ozone depleting substances and impacts from any other section of the act from the date of enactment of the Clean Air Act in 1970 to the date of the 1990 Clean Air Act Amendments. EPA completed this study in 1997 as The Benefits and Costs of the Clean Air Act, 1970 to 1990. The entire study may be downloaded from the Environmental Economics Report Manager database. Section 312 also calls for a prospective study of costs and benefits of the 1990 Clean Air Act Amendments. EPA currently is preparing that report.

EPA's retrospective examination of costs and benefits estimated that total costs (discounted 1990 value of all costs incurred from 1970 to 1990 in 1990 dollars) was $523 billion. Emissions of key pollutants had been reduced substantially relative to the business as usual baseline: SO2 by 40%, NOx by 30%, VOC by 45%, CO by 50%, primary particulates by 75%, and lead by 99%. The central estimate of health and welfare benefits resulting from the reductions in emissions was $22.2 trillion, with a 95% confidence interval of $5.6 trillion to $49.4 trillion.

Title IV, which deals with acid rain control, establishes a market-based program in allowances to emit sulfur dioxide; however, the basic features of the program are established by statute and not determined by EPA through consideration of costs or benefits.

Title VI, stratospheric ozone depletion, contains some provisions that arguably involve consideration of costs and/or benefits. For example, in determining whether products containing chlorofluorocarbons should be banned as nonessential, EPA can take into account safety, health, and other relevant factors. In deciding whether an accelerated phaseout schedule for chlorofluorocarbons would be more appropriate than set forth in sections 604 and 605 of the Act, EPA shall take into account technological achievability, safety, and other relevant factors

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