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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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    Cited by:

    1. 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.
    2. 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.
    3. Simon, Daniel H. & Zirogiannis, Nikolaos & Hollingsworth, Alex, "undated". "Estimating Co-pollutant Benefits from Climate Change Policies in the Electricity Sector: An Empirical Approach," 2017 Annual Meeting, July 30-August 1, Chicago, Illinois 259116, Agricultural and Applied Economics Association.
    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. 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.
    6. 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).

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