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Ex ante and ex post cost estimates of the Cluster Rule and MACT II Rule

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  • Morgan, Cynthia
  • Pasurka, Carl
  • Shadbegian, Ron

Abstract

This paper compares EPA’s ex ante cost analysis of the Cluster Rule, EPA’s first integrated, multi-media regulation, and MACT II Rule to an ex post cost assessment. The goal of this assessment is to determine if actual costs diverged from ex ante costs and, if so, what factors caused this divergence. We find the EPA ex ante costs overestimated the ex post capital costs for the Cluster Rule by 30 to 100%. Contributing factors appear to be use of cleaner technology, flexible compliance options, site-specific rules, shutdowns and consolidations. Ex ante estimates for the MACT II Rule are found to be overestimated by 25% for capital costs and 200 or more percent for annual costs. The primary reason for the overestimate is the use of the bubble compliance strategy that required fewer paper mills to install pollution abatement equipment than anticipated by EPA.

Suggested Citation

  • Morgan, Cynthia & Pasurka, Carl & Shadbegian, Ron, 2014. "Ex ante and ex post cost estimates of the Cluster Rule and MACT II Rule," Journal of Benefit-Cost Analysis, Cambridge University Press, vol. 5(2), pages 195-224, June.
    • Handle: RePEc:cup:jbcoan:v:5:y:2014:i:02:p:195-224_00
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    References listed on IDEAS

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    1. Powell, Mark R., 1997. "Control of Dioxins (and other Organochlorines) from the Pulp and Paper Industry under the Clean Water Act and Lead in Soil at Superfund Mining Sites: Two Case Studies in EPA's Use of Science," Discussion Papers 10610, Resources for the Future.
    2. Lori D. Snyder & Nolan H. Miller & Robert N. Stavins, 2003. "The Effects of Environmental Regulation on Technology Diffusion: The Case of Chlorine Manufacturing," American Economic Review, American Economic Association, vol. 93(2), pages 431-435, May.
    3. Powell, Mark, 1997. "Control of Dioxins From the Pulp and Paper Industry Under the Clean Water Act and Lead in Soil at Superfund Mining Sites: Two Case Studies in EPA's Use of Science," RFF Working Paper Series dp-97-08-rev, Resources for the Future.
    4. Leigh J. Maynard & James S. Shortle, 2001. "Determinants of Cleaner Technology Investments in the U.S. Bleached Kraft Pulp Industry," Land Economics, University of Wisconsin Press, vol. 77(4), pages 561-576.
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    2. Morgan, Cynthia & Pasurka, Carl & Shadbegian, Ron & Belova, Anna & Casey, Brendan, 2023. "Estimating the cost of environmental regulations and technological change with limited information," Ecological Economics, Elsevier, vol. 204(PA).
    3. Elrod, Aaron A. & Malik, Arun S., 2017. "The effect of environmental regulation on plant-level product mix: A study of EPA's Cluster Rule," Journal of Environmental Economics and Management, Elsevier, vol. 83(C), pages 164-184.
    4. Marc St‐Pierre & Aaron A. Elrod, 2022. "The perverse effect of environmental regulation on emissions: The role of product‐mix changes," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 24(1), pages 197-235, February.
    5. Gray, Wayne B. & Shadbegian, Ronald J., 2015. "Multimedia Pollution Regulation and Environmental Performance: EPA’s Cluster Rule," RFF Working Paper Series dp-15-26, Resources for the Future.
    6. Fraas, Arthur G. & Kopits, Elizabeth & Wolverton, Ann, 2021. "A Retrospective Review of Retrospective Cost Analyses," RFF Working Paper Series 21-29, Resources for the Future.

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