In this report, prepared for the National Association of Manufacturers, a NERA team led by Environment Practice Co-Chairs Dr. David Harrison and Dr. Anne E. Smith demonstrates analysis methods to assess the potential costs and impacts on the US economy of a more stringent national ambient air quality standard (NAAQS) for ozone. The report also provides estimates of the potential costs and economic impacts if the US Environmental Protection Agency (EPA) were to set an ozone standard of 60 parts per billion (ppb), and develops recommendations for additional and updated information and analyses EPA should provide in its regulatory impact analysis (RIA) of a proposed rule, so that such assessments can be more fully evidence-based.

NERA’s analysis is based on using the best available information from EPA and other sources on the emission reductions needed to attain a 60 ppb standard and the costs of those reductions. Employing NERA’s integrated energy economic model (NewERA), the team estimates that the potential emissions control costs would reduce US Gross Domestic Product (GDP) by $270 billion per year on average over the period from 2017 through 2040 and by more than $3 trillion over that period in present value terms. The potential labor market impacts represent an average annual loss in income equivalent to 2.9 million jobs.

The NERA team concludes that these large potential impacts and the limited information now available to estimate them provide compelling arguments that EPA needs to provide more complete data and analysis as part of its forthcoming proposal to revise the ozone NAAQS, so that there can be better understanding of the economic impacts of the range of alternative ozone NAAQS levels. In particular, EPA needs to make a concerted effort to specify the full set of controls needed to achieve attainment of various ozone standards. A concerted effort is needed because currently EPA’s “known” controls represent only one-third of the estimated reductions needed to achieve a 60 ppb standard, with the remaining two-thirds consisting of unspecified (“unknown”) controls.

Assessing Economic Impacts of a Stricter National Ambient Air Quality Standard for Ozone was co-authored by NERA Vice Presidents Dr. Paul Bernstein, Scott Bloomberg, and Dr. Sugandha Tuladhar, and Associate Analyst Andrew Stuntz et. al.