clearing the air of ozone

48 / SOCIETY �9 MARCH / APRIL 1989

These important limitations to the BLS and GAO studies need to be acknowledged if policymakers are to avoid the pleas of special interests to intervene in labor-management relations. The irony is that many of the advocates of more federal involvement have ignored the inevitable trade-off involved in providing specified termination benefits to workers. It is naive to continue to believe that there is a "free lunch" available to employees or firms.

With the current emphasis on "competitiveness" of United States industry and the importance of labor and management cooperation to compete effectively in the international marketplace, it seems oddly out of step to place further legislative restrictions on how these parties

may interact. Many policymakers and opinion leaders who are supposedly most interested in the welfare of working men and women are advocating a labor policy agenda that would hamstring the response of our relatively free labor markets to meet this challenge. []

Richard McKenzie is professor of economics at Clemson Univer- sity, senior fellow at the Heritage Foundation, and adjunct scholar at the Cato Institute. A subsequent version of this article appears in his new book, The American Job Machine, published by Universe Books. His other books include The Fairness of Markets and, with Gordon Tullock, The New World of Economics.

Clearing the Air of Ozone

Melinda Warren and Kenneth Chilton

T his article takes a hard look at the ozone pollution problem. Ozone, a major component of smog, is

formed through a chemical reaction between emissions from automobiles and stationary sources in combination with sunlight. The Environmental Protection Agency (EPA) has set the ozone standard at 0.12 parts per million, not to be exceeded more than one hour a year. The deadline for compliance with this standard was originally De- cember 31, 1987. As many as seventy metropolitan areas were out of compliance at that time and were facing construction bans and loss of federal funds. On December 22, Congress passed a continuing budget resolution that in- cluded a provision extending the deadline to August 31, 1988. That deadline has come and gone with only Los Angeles and its env i rons penal ized for lack of compliance.

Cities not meeting the current ozone standard face the loss of federal highway, transit, and sewage treatment funds and bans on any new construction that would be- come major contributors to ozone pollution. In light of the potentially serious consequences of not meeting the ozone standard, we raise and attempt to answer five basic questions:

�9 What are the causes of ozone and what does it mean to say that more than seventy metropolitan areas are "out of compliance"?

�9 What are the health risks of ozone? �9 How do the overall benefits to society compare to the

costs of compliance with the current ozone standard?

�9 What specific solutions have been proposed to meet the ozone standard and how cost effective are they?

�9 What revisions to the ozone provisions in the Clean Air Act would help protect public health without wasting taxpayer and consumer dollars?

Causes of Ozone Pollution An understanding of the nature of ozone formation is

basic to analyzing the regulatory regime. Ozone, a major component of photochemical smog, is not emitted directly into the air; it is formed through complex chemical reactions between emissions of volatile organic compounds (VOCs) such as hydrocarbons and nitrogen oxides in the presence of sunlight. Both hydrocarbons and nitrogen oxides are emitted by transportation and industrial sources. According to an EPA report on emissions, in 1985 the sources of VOCs were: (1) industrial processes (comprising 8.6 million metric tons or 40 percent of emissions); (2) transportation (7.2 million metric tons or 34 percent of emissions); (3) solid wastes and miscellaneous sources (2.9 million metric tons or 14 percent of emissions); and (4) fuel combustion (2.6 million metric tons or 12 percent of emissions). Reductions in ozone are achieved by decreasing the emission of the VOCs through controls on automobile exhaust, petroleum refinery emissions, dry cleaner emissions, and so on. Photochemical smog is also directly associated with specific meteorological conditions, especially during periods of warm, above normal temperatures. Certain weather conditions

are favorable to both higher temperatures and the formation of ozone.

Ozone formation follows several distinct patterns. Since the formation of ozone at the earth's surface re- quires sunlight, there is a minimum level around sunrise (near zero in most urban areas), a maximum level in the early afternoon, and minimal levels again in the evening. Another pattern that occurs is seasonal. During the late spring and summer, when sunlight is most intense and stagnant meteorological conditions are present, conditions are ripe for the formation and accumulation of ozone. The spring and summer months are called the "ozone season" for most of the country. Certain areas of the country are more susceptible to ozone formation than others. The three sectors of the United States most severely affected are the Northeast, the Gulf Coast area, and the West Coast. This results in part from wind speed and direction, local weather conditions, and irregular atmospheric motion.

Many causes of high ozone levels are beyond human control . For example, relatively high ozone concentrations can occur for short periods (from a few min- utes to a few hours) over local areas because of inter- actions between the earth's atmosphere and the stratosphere beyond it. In these circumstances, air from the ozone layer of the stratosphere moves down to the earth's atmosphere bringing large concentrations of ozone. Ozone also occurs naturally from solar-powered chemical reactions involving emissions from trees and plants. Many investigators believe that these are the dominant contributors to atmospheric ozone levels. Other researchers contend that as much as two-thirds of the ozone results from photochemical reactions. This would still mean that one-third or more of the ozone in ambient air is naturally produced and beyond the scope of EPA control.

Ozone Can be transported hundreds of miles from the place of origin. For example, researchers found that VOCs from the Los Angeles basin were transported over the coastal Pacific Ocean, producing elevated oxidant concentrations in San Diego County the following day. Be- cause of ozone's tendency to move with air masses, sometimes ozone levels are higher in suburban or rural areas than urban areas. These levels also can persist longer in outlying areas because of the absence of nitrogen oxide for chemical "scavenging?' In fact, nitrogen oxide acts as both a precursor and a scavenger of ozone. As a scavenger, it breaks down the photochemical smog forma- tions and improves visibility. Under some circumstances, reductions in nitrogen oxide concentrations in the ambient air can reduce its scavenger role and actually increase the formation of photochemical smog.

An area is considered to be in compliance with EPNs ozone standard if it does not exceed a concentration of 0.12 parts per million (ppm) for more than one hour once a year. Actually, the computation involved in determining noncompliance is a bit more complicated than this. To provide some perspective, 0.12 ppm amounts to a closet

PRIVATE BUSINESS AND PUBLIC INTERESTS / 49

(3 feet by 4 feet by 10 feet) full of ozone in a building as tall as the Empire State Building and one thousand feet square.

Of the seventy-three cities that were out of compliance with the ozone standard in 1983, twelve were in Califor- nia, fourteen were in the Gulf Coast States, and eleven were in the Northeast. Southern California has by far the worst problem with ozone pollution in the United States; three of the top seven cities are located in California. The level of ozone in Los Angeles is three times the Environ- mental Protection Agency's standard of 0.12 ppm.

Houston, Texas, is another city that seems to have an intractable problem with ozone pollution. In 1979 Houston city officials were instrumental in convincing Congress to change the standard from 0.08 ppm to 0.12 ppm. Lately, city officials have been lobbying EPA again. Dallas Evans, chief of the Houston Air Quality Control Bureau stated: "We have done everything EPA told us to do to control the sources of ozone, but we are not going to get there. Not this year, not next yea r and maybe never."

The data also show that sixty of the seventy-three metropolitan areas that were out of compliance in 1985 were less than 50 percent over the desired level. Nearly two- thirds of the cities (forty-six) exceeded the standard by 25 percent or less.

Reducing Air Pollution Air pollution has not been eradicated by any means. In

1985, 48 million people were living in counties with measured air quality levels that violated the National Am- bient Air Quality Standards (NAAQS) for total suspended particulate (TSP), 40 million in counties out of compliance for carbon monoxide (CO), 8 million in areas with too high nitrogen dioxide (NO2) levels, 4 million in counties not meeting lead (Pb) standards, and 2 million people in areas out of compliance for sulfur dioxide (SO2). In contrast, 76 million people were living in counties where ozone (03) levels were higher than the NAAQS.

Nonetheless, significant progress has been made in reducing the levels of the five air pollutants other than ozone for which the EPA has set NAAQS. Ozone was the only criteria air pollutant with a composite average reading for 183 monitoring sites nationwide that exceeded the NAAQS in 1985. From 1976 to 1985, there was a 24 percent reduction in total suspended particulates, a 42 percent reduction in sulfur dioxide; carbon monoxide levels were decreased 36 percent; nitrogen dioxide levels were reduced 11 percent; and lead levels were reduced by an impressive 79 percent.

Progress has also been made in reducing ozone concentrations. The composite average reading decreased 19 percent between 1976 and 1985. The significance of this change is complicated by the fact that there was a calibration change in the monitoring systems in 1978-79. A major drop was recorded between 1978 and 1979, largely because of that change in measurement. This means that, on average, the ozone level has not been reduced as much as the figures show. A different measure, the number of


exceedances of the standard, decreased 38 percent between 1979 and 1985. None of this decrease can be at- tributed to the calibration change.

Ozone data also show that the 1983 values were higher than those in 1981, 1982, 1984, and 1985. Between 1982 and 1983, the national average ozone level increased sharply, by 12 percent. This is thought to be due to the combination of an increase in volatile organic compound (VOC) emissions (up 3 percent) and meterological conditions conducive to ozone formation. What this implies is that reported ozone exceedances often are an imprecise measure of the progress made to reduce ozone precursors.

Another study suggests that the ozone problem is much less serious than generally thought. Researchers at the American Petroleum Institute in Washington, D.C., analyzed the scope of the ozone nonattainment problem using Environmental Protection Agency data. The study was critical of the EPA/s method of measuring attainment. First, the EPA uses the monitor with the highest readings to determine if an area meets the standard. In most cases, the average reading for all monitors was closer to the readings for the lowest monitor rather than the highest. Sec- ond, one year's data, which can be significantly affected by unusual climatic conditions, can, in turn, affect the measurement of attainment over a three-year period. An "exceedance" occurs if ozone levels are above the 0.12 ppm standard for one hour or longer during a 24-hour period. An area then is classified as nonattainment if ozone levels recorded at the highest monitor result in more than three exceedances over a consecutive three- year period.

This method of determining noncompliance ignores the fact that the ozone levels in "n0nattainment" areas meet the standard most of the time. A much different picture emerges if average readings from all the monitors in an area are examined. The EPA should look at the exposure levels for the vast majority of the citizens in a "nonattainment" area.

With the exception of Los Angeles, using an average of all monitor readings in an area, the "out-of-compliance" cities are actually within the ozone standard 99.47 percent of the time or better. The well-known purity standard for Ivory soap is only 99 and 44/100 percent! Even Los Angeles is below the 0.12 ppm level 97 percent of the time on average. The highest monitor measured air quality to be below the standard more than 94 percent of the time. Thus, people in the worst nonattainment areas are not exposed on a regular basis to ozone levels above what is considered "safe?'

Health Effects Given the obvious difficulty in meeting the ozone

standard and the severity of the sanctions for not doing so, it is necessary to examine the nature of the health problem that it generates. Two methods have been used to measure the effects of ozone on h u m a n s - - e p i - demiological studies and clinical studies. Epidemiological studies use statistical techniques to determine the rela-

tionship between ozone levels in an area and symptoms reported by a monitored group.

A study by D.I. Hammer in the early 1960s exemplifies the problems encountered with such "uncontrolled experiments?' Hammer asked a group of Los Angeles stu- dent nurses to keep daily symptom diaries. The symptoms reported and corresponding ozone levels were analyzed statistically. The group was not informed that they were being studied for effects of pollutants. However, no validation techniques were used to make sure that the levels of pollutants where the nurses lived were the same as at the monitoring station. Statistics on smoking habits, although available, were not used in conjunction with the results reported. Hammer found that the students reported higher incidences of coughing and chest congestion at ozone levels of 0.30 to 0.39 ppm.

An epidemiological study by Shoettlin and Landau looked at the relationship between asthma attacks and photochemical oxidants in Los Angeles. No significant difference was found in the average number of patients having attacks on days measuring above or below the me- dian (0.13 ppm in this study) oxidant level. The authors stated that "all correlations led to the conclusion that there was relatively little association between oxidant levels and attacks of asthma?'

Kagawa and Toyoma conducted a study on the pulmonary function of twenty children in an elementary school in Tokyo. The results show that pulmonary function tests were significantly correlated with temperature far more than with any other environmental factor.

Clinical studies provide the other source of information on the effects of ozone levels on humans. These studies have been criticized because they typically use small numbers of subjects that have not been randomly se- lected. For example, Delucia and Adams researched the effects of ozone,on six healthy nonsmoking males at rest and with steady exercise at ozone levels ranging from zero ppm to 0.30 ppm. Significant decreases in pulmonary function were observed only under conditions of steady exercise at the 0.30 ppm level.

In order to look at the effects on the more sensitive population, Hackney studied a group of thirteen adult male residents of Los Angeles. Of the thirteen, two had a history of asthma and four had histories of allergies. The healthy participants failed to show decreases in basic pulmonary measurements at 0.50 ppm, but the sensitive subjects developed marked respiratory symptoms at 0.37- 0.50 ppm.

It would be impossible to summarize the results of the myriad of studies conducted, but there are a few general points that can be made about most of these. First, not all symptoms commonly associated with ozone exposure-- eye irritation, decreases in pulmonary function (which includes coughing, chest pain upon deep inhalation and decreased lung volume), aggravation of chronic lung diseases, increased breathing problems for asthmatics, and headaches--are actually attributable to ozone. For example, ozone, in and of itself, does not cause eye irritation.

In clinical studies in which the concentration of ozone is several times higher than any likely to be encountered in ambient air, no eye irritation was experienced. Re- searchers in this field believe that it is more likely that this problem is caused by formaldehyde, acrolein, or perox- yacetyl nitrate.

Ozone's effects on pulmonary function appear to in- volve an adaptation mechanism. Results from studies show that, with repeated exposure to 03, reductions in

Many causes of high ozone levels are beyond human control.

pulmonary function are greatest on the second day. On each succeeding day, the reductions are less than the day before. On the fifth exposure day small reductions or no changes are observed. Following a sequence of repeated daily "exposures, pulmonary function returns to that prior to repeated exposure. This helps to explain why, in a study of equal exposures to ozone by Canadians and by people from Los Angeles, Canadians were more severely affected than people from Los Angeles.

A survey of clinical studies by Christopher Marraro leads to the general conclusion that small physiological responses occur in the sensitive populations when exposed to ambient air pollution containing about 0.22 ppm of ozone. Another survey of ozone studies by Law- rence White concludes that pure ozone does not seem to affect people at concentrations below 0.30 ppm unless they are exercising so strenuously that the symptoms could be due to the exercise itself.

Many of the concerns about ozone's effects on persons suffering from lung disease also lack substantiation. There have been no consistent findings of symptom aggravation or changes in lung function in patients with chronic lung diseases other than asthma. Also, according to available evidence, people with preexisting lung disease respond to ozone exposure in a manner similar to normal, healthy subjects. There is also evidence that smokers are less responsive to ozone than nonsmokers.

Even the effects on asthmatics appear less severe than thought to be when the NAAQS was first established for ozone. One recent study showed no decrease in pulmonary function in adult asthmatics either at rest or with light exercise at ozone levels of 0.25 ppm. Adolescent asthmatics were observed for one hour at exposures of 0.12 ppm, and no change in pulmonary function was found. Several other studies have shown that the increase in reported symptoms for asthmatics is statistically insig- nificant. The results of laboratory tests are by no means definitive; but, in general, it appears that asthmatics react basically the same way to ozone exposure as nonasth- matics.


There also has been some concern that ozone could have a mutagenic effect on humans. Although alterations in chromosones have been observed in hamsters exposed to 0.20 ppm ozone, no consistent changes have been demonstrated in human subjects at concentrations as high as 0.60 ppm.

In general, epidemiological and clinical studies conducted since the ozone standard was changed in 1979 seem to reinforce the conclusions reached by Lawrence White, a senior staff economist with the Council of Eco- nomic Advisers at that time, in Reforming Regulation: Processes and Problems:

The ozone-related health effects under discussion were short term and reversible. They involved wheezing, coughing and chest-tightening. They meant temporary discomfort, with complete recovery of an individual's previous state of health shortly after the exposure to ozone ended. Thus far, ozone exposure has not been demonstrated to have long-term debilitating consequences in humans.

Agricultural Effects Ozone pollution has been identified as a potential cause

of crop damage. Because of its requirement to regulate pollutants that could adversely affect human welfare, the EPA has authorized a number of studies to assess the crop losses from current concentrations of ozone. Impacts of ozone range from reduced plant growth to decreased yield to changes in crop quality. Effects on growth and yield have occurred when average ozone levels exceed a concentration of 0.05 ppm for at least two weeks.

Most agricultural studies of ozone's effects have used longer exposure times and a greater frequency of higher ozone levels than normally occur in ambient air. This makes the results of these experiments somewhat suspect. None of the studies compared the estimated crop loss value with compliance costs of effecting changes in ozone concentrations in ambient air. Indeed, there is no reliable method to translate the effects of air pollution standards imposed on urban areas to ozone concentrations in rural areas. There are few air pollution monitors in rural areas, and statistical extrapolations from urban to rural areas are likely to incorporate errors of unknown magnitude.

From a public policy perspective, another key issue is how to evaluate the value of crop losses in a market characterized by price supports and land set-aside pay- ments. As Kopp and Krupnick state in Agricultural Policy and the Benefits of Ozone Control:

Conspicuously absent from this literature (on the benefits to agriculture of ozone reduction) is recog- nition of the fact that agricultural markets are not free and that, in the second-best policy-dominated world of agriculture and a world currently awash in costly crop surpluses, a restrictive ozone control policy that reduces crop damages may not increase

52 / SOCIETY * MARCH / APRIL 1989

social welfare. Further, since the size of crop surpluses depends on the agricultural policy in effect, estimates of the social benefits of alternative ozone control policies depend on assumptions made about agricultural policies.

to December 21, 1987. With the passage of the eight month extension on December 22, 1987, the deadline was pushed back once again. Currently, Congress appears to be ignoring their own deadline in favor of another attempt at revising the entire Clean Air Act.

Uncertainty regarding the seriousness of the health and other effects of ozone has been reflected in the various changes that Congress has made to the standard. The Clean Air Act of 1970 directed the administrator of the Environmental Protection Agency to publish national primary and secondary ambient air standards. Primary ambient air standards define levels of air quality which the EPA judges necessary to protect the public health. Secondary standards define levels of air quality necessary

Refineries have increased the volatility of gasoline by adding lightweight

additives.

to protect public welfare from any known or anticipated adverse effects of an air pollutant. Primary and secondary standards have been set for six pollutants--particulate matter, sulfur dioxide, carbon monoxide, photochemical oxidants (ozone), nitrogen dioxide, and lead.

The first ambient air standards were published in Janu- ary 1971. The national primary and secondary standard for photochemical oxidants was set at 125 micrograms per cubic meter (0.0625 ppm) with maximum one-hour concentrations not to be exceeded more than once a year. Oxidants are strongly oxidizing compounds which are the primary constituents of photochemical smog. The oxidant found in the largest amounts is ozone (03). Orig- inally, no separate standard was set for ozone. In 1979, the EPA changed the standard from photochemical oxidants to ozone alone.

Since January 1971, the ozone standard has been eased twice. In November 1971, the primary and secondary standard was changed to 160 micrograms per cubic meter (0.08 ppm) with the maximum one-hour concentration not to be exceeded more than once per year. In February, 1979, the standard was loosened to 0.12 ppm (235 micrograms per cubic meter). This revision came as a result of new studies that demonstrated no significant adverse human health effects at or below 0.25 ppm for two-hour exposures. At that time, the EPA stated that no studies had linked ozone exposure with an increase in human mortality.

The appropriate standard for photochemical oxidants has, thus, been a subject of continuing debate. Within an eight-year period, the standard was changed two times. Dates for meeting the standard have also been revised twice--from December 31, 1975, to December 31, 1982,

Proposed Legislation A variety of legislative changes have been proposed.

One of the foremost is S.1894, the Senate Environment and Public Works Committee bill. If this bill, or something akin to it, becomes law, it would set different deadlines for noncompliance areas depending on the severity of the ozone problem.

For areas with current ozone readings of less than 0.14 ppm (for the fourth highest one-hour concentration during a consecutive three-year period) the date for compliance with the EPA standard would be December 31, 1990. If the area currently has ozone measurements of greater than 0.14 but less than 0.18 ppm (again, for the fourth highest one hour concentration over three years), the deadline would be set at December 31, 1992. Areas with more serious problems (0.18 to 0.27 ppm) would have until December 31, 1997. Areas with ozone levels currently above 0.27 ppm would have until December 31, 2002 to meet the standard.

The bill would require several steps to be taken. Areas whose fourth highest daily maximum one-hour concentration over a three-year period is less than 0.14 ppm can choose one of the first three required actions listed below; areas above O. 14 must comply with the first three and more:

�9 A vehicle emission control inspection and maintenance program.

�9 Operation of systems for gasoline vapor recovery of hydrocarbon emissions emanating from the fueling of motor vehicles, in photochemical oxidant (ozone) nonattainment areas required to have vehicle emission control inspection.

�9 A schedule for requiring use of alternative fuels or power sources with lower emission characteristics for all centrally fueled fleets of fifty or more vehicles oper- ating in the nonattainment area. This schedule must include light- and heavy-duty vehicles.

�9 Adoption of"reasonably available control technology" for hydrocarbons and oxides of nitrogen for ozone nonattainment areas.

�9 Reductions in emissions for existing sources may not be met through reductions in emissions at other sources. (This provision implies that neither offsets nor the "bubble" concept would be allowed.)

�9 New and modified existing major stationary sources must meet "lowest achievable emission rate" A "major stationary source" is defined to be a "discrete operation producing 25 tons or more of a pollutant a year (ex- cluding resource recovery facilities burning solid waste or'refuse-derived fuel)?' (Currently, to qualify as a "ma-

jor source" an operation has to produce 100 tons of pollutant a year.)

�9 "Reasonably available control technology" must be adopted for categories identified by a regional commis- sion established for "ozone transport regions?'

�9 Adoption of enforceable contingency measures to be immediately implemented in the case of a waiver or delay by the administrator. This requirement includes a provision that each source that produces ten tons or more of a pollutant shall be deemed a major stationary source in the case of a waiver by the administrator.

�9 "Such other measures as may be necessary to provide for attainment of the applicable national primary ambient air quality standard not later than December 31, 19927'

Areas experiencing the most serious problems with ozone pollution will have to meet the following schedule of incremental reductions--33 percent by 1991, 50 percent by 1994, 65 percent by 1995, 80 percent by 1998, and 95 percent by 2001. They will also need to consider, at a minimum, these additional items to offset any growth in vehicle miles traveled:


1, 19877' Nonetheless, the need for an additional standard is far from evident and the EPNs ability to promulgate a "consistent" standard may also prove problematic.

By allowing different compliance strategies for differing degrees of nonattainment, the Senate Environment and Public Works Committee has taken a step in the right direction. They have at least acknowledged that all air pollution problems, and hence air pollution solutions, are not created equal.

In spite of the precise language of the bill, the specific prescriptions required, and the exact deadlines and penalties to be meted out for failure to comply, the Senate Environment and Public Works Committee has not pub- licized any estimates of the effectiveness of its requirements. The question still remains, "Can Los Angeles, Houston, and New York meet the ozone standard if they follow all of the bill's requirements?" A second, perhaps more relevant question, is, "Is it in the public interest to require these areas to bear the heavy burden required in attempting to achieve the ozone standard?" This last question leads to the subject that has been neglected during much of the debate on the ozone standards--the costs to be borne and the benefits to be achieved.

�9 Programs to limit vehicle use downtown, particularly during periods of peak use.

�9 Limiting roads or lanes to common carriers or high occupancy vehicles.

�9 Programs for improved public transit. �9 Requirements for major employer participation in pro-

grams to encourage use of public transit and multiple occupancy vehicles.

�9 Requirements for conversion of fleet vehicles to cleaner engines or fuels.

�9 Traffic flow improvements. �9 Programs for area wide ridesharing.

The bill would also establish a fee of not less than $100 per ton of hydrocarbons, oxides of nitrogen or carbon monoxide emitted by each source (major or minor), subject to "reasonably available control technology" for sta- t i ona ry sources. Banning c o n s t r u c t i o n of m a j o r stationary sources and withholding federal funds once again are specified if the new deadlines are missed. The bill also provides for an "excess emissions" penalty of at least $5,000 per ton for any major source not complying with the law.

One section of the bill specifies that, not later than thirty-six months after enactment, the EPA shall promulgate an additional national primary ambient air quality standard for ozone. The added standard must be consistent with the pr imary standard, but based on concentrations averaged over a period of not less than six hours or more than twelve hours. This provision is more reasonable than the draft legislation which required that the new standard be "more protective of public health and more stringent in effect than the national primary ambient air quality standard for ozone in effect as of June

Benefits and Costs Let us first document some of the efforts to quantify

the benefits of reduced ozone levels. Researchers have tried several different methods to determine benefits. Epi- demiological studies are used to determine physical responses to various levels of ozone. In a study conducted by Portney and Mullahy for the EPA in 1983, Health Interview Survey (HIS) information and air pollution rec- ords from the EPA were used to develop a data base. A computer program compared individual HIS responses with the nearest air-pollution monitor data. From a possible 110,000 people in the HIS survey, 14,500 adults and 15,700 children were chosen for the data base.

The researchers tried to identify relationships between ozone levels and four primary dependent variables--restricted-activity days, work loss days, bed disability days, and chronic respiratory disease. For the first three, the relationship with ozone was almost always positive and, in some cases, statistically significant. The relationship between ozone and chronic respiratory disease was in- conclusive; in fact the relationship was negative, but not statistically significant. If it had been significant, the analysis would have been indicating that ozone helps reduce the incidence of chronic respiratory disease.

If the results are taken at face value, (overlooking the anomaly of an incorrect sign for the effect of ozone on chronic respiratory disease), each 0.01 ppm reduction in average levels of ozone, would reduce the average annual number of restricted activity days by 0.65 days per person per year. If extrapolated to the entire United States adult population, the Portney and MuUahy study would predict 70 million fewer restricted activity days for the country. Portney and Mullahy did not try to assign a dollar value to these benefits. They did point out that, if individuals


would be willing to pay just $10 to avoid restricting their activities for a day, the net national benefit of a 0.01 ppm reduction in average ozone levels would be $700 million a year.

A 1986 study by Alan Krupnick of Resources for the Future provides preliminary dollar estimates of the range of possible benefits from reducing ozone levels. Krupnick also identifies a host of problems with computing these estimates from existing sources of information. The cal- culations require data on physical responses to varying ozone levels and benefit estimates based on surveys where individuals express a "willingness to pay" to avoid typical ozone-related symptoms. While many epidemiological studies have been conducted, their results are not always consistent with one another because of different methodologies.

Krupnick particularly wrestles with the issue of how to account for inconsistencies in estimates of "restricted activity days" (cutting down on activities but not missing work or school) and the number of days that symptoms are reported in the health surveys. The inconsistency is caused because reported restricted activity days (RADs) resulting from respiratory problems exceed reported symptom days. Krupnick had more confidence in RAD estimates than symptom estimates. Using a direct estimate of RADs provides a more optimistic evaluation of the benefits derived from ozone reduction than other methods.

Deadlines and sanctions for ozone compliance should be removed from

the Clean Air Act.

Krupnick's report is justifiably cautious about blind ac- ceptance of its benefit estimates. Variance in the findings of different health response studies and willingness to pay studies and difficulties in matching the health effects from both makes benefit calculation something less than an exact science. Nonetheless, Krupnick does provide some ballpark benefit estimates that can be compared to overall costs.

For example, if daily ozone levels could be reduced by a fixed percentage to achieve a maximum one-hour concentration of 0.14 ppm, Krupnick estimates a benefit of $2.0 billion a year using his favored method for specifying reduced activity days. However, the benefit is less than $0.5 billion if RADs are set to the smallest number of adult symptom days for any respiratory symptom type.

There is a wide variation in benefit estimates possible for varying ozone reduction methods and targets. Krup- nick's upper and lower bounds use the high and low willingness to pay estimates and the upper and lower 95 percent confidence limits for the concentration response.

His figures are calculated using direct estimates of restricted activity days, thus providing a bias toward higher benefit estimates.

Two alternative rules for achieving the one-hour concentration standard are design value rollback and truncation. For example, the point estimate for the value of reduced acute health effects in 1987 brought about by achieving a 0.14 ppm level by "rolling back" all other daily concentrations by an equal percentage is approximately $2.0 billion (in 1987 dollars). If only con- cent ra t ions above 0.14 ppm are e l iminated (the truncation approach), best estimates of the benefits of achieving this level would be only $0.3 billion.

To some degree, the truncation approach reflects the concept of a threshold level--a concentration below which no health effects occur. As Krupnick points out, "Justification for the existence of thresholds is based on the lack of clinical evidence supporting any acute human health responses to ozone concentrations below 0.12 ppm for several hours"

Cost estimates for reductions in ozone levels are also hard to obtain. When the Clean Air Amendments were being debated in 1979, both the EPA and the Regulatory Analysis Review Group (RARG) provided estimates of the costs to reduce ozone levels. Two different methods of estimating costs were used by EPA and RARG. The linear rollback model assumes a linear relationship between VOC emission reductions and ozone reduction. The Em- pirical Kinetic Modeling Approach (EKMA) looks at the occurrence or frequency of ozone as a function of initial nonmethane hydrocarbon emissions and oxides of nitrogen concentratons and as an implicit function of a number of emissions and meteorological characteristics.

Marginal costs of reducing ozone levels from 0.18 ppm to 0.12 ppm range between $2.2 billion and $3.1 billion annually using the EPA figures and between $4.6 billion and $6.6 billion annually using RARG numbers. The major targets for reduction used in the estimates were motor vehicles, petroleum refineries and others in the petroleum products distribution chain, and producers and users of solvents and other petroleum-based products. According to White, the EPA numbers in the table were underestimated. The costs of the emission controls on new automobiles were too low, hardware costs were underestimated, and fuel penalties, extra maintenance and inconvenience costs had been neglected. The costs of emission controls on new trucks and motorcycles were ignored. Costs of inspection and maintenance programs were too low for automobiles and neglected for trucks and motorcycles. Unidentified sources of reductions were as- sessed at the same level as identified costs; emission reductions that could not be readily identified are likely to be more difficult and more expensive to obtain.

The RARG report focused on the underestimates of the costs of motor vehicle emissions controls to correct the problems in the EPA report. These changes led to total and marginal cost estimates that approximately doubled EPNs projections.

The estimated cost of reducing design value ozone levels from 0.14 to 0.10 ppm ranges between $2.8 billion and $8.8 billion. On the benefit side,the health-related benefits range between $0.3 billion and $1.5 billion to go from 0.14 to 0.10 ppm design levels. These are crude estimates, but they provide some idea of the relative high dollar costs and the lower estimated dollar benefits from tightening the ozone standard.

The pertinent question still is, "Do the benefits of specific ozone-reducing strategies outweigh their costs?" What follows is an analysis of the costs and benefits (where available) of a number of the proposals in the Senate's 1987 clean air bill.

Limiting Fuel Volatility One proposal to help reduce the amount of ozone in

the air is to control the volatility of gasoline during summer months. Autos are currently equipped with control systems (canisters) to capture evaporative emissions. But refineries have increased the volatility of gasoline by adding lightweight additives, such as butane, to enhance octane and make up for the loss of lead as an additive. Current onboard systems are inadequate to capture the increased emissions.

Urvan Sternfels, the president of the National Pe- troleum Refiners Association, states that "the volatility cap would increase the amount of crude oil required to make gasoline, boosting costs for small refiners who already are struggling to stay in business." EPA estimates increased refinery costs to total $490 million a year. The cost to consumers is projected to be only $200 million a year, primarily because of improved recovery of fuel that would otherwise be evaporating. On the other hand, the American Petroleum Institute estimates refinery costs to increase by $970 million a year and the cost to consumers to be $650 million annually.

The EPA estimates that the average current fuel volatility in motor vehicles is 11.6 pounds per square inch (psi). If the fuel volatility was reduced to 9.0 psi, nonmethane hydrocarbon emissions would be reduced by over 2 million metric tons a year. This is equivalent to about a 10 percent reduction in VOCs.

The EPA estimates that by 1995 the ozone level will be 8 percent lower than 1983 levels just from VOC reduction programs currently in place. Some examples include the Federal Motor Vehicle Control Program and controls on stationary sources. According to the EPA, by adding fuel volatility controls to programs already in existence, an 11 percent reduction from 1983 ozone levels could be achieved by 1995 rather than an 8 percent reduction. In effect, the EPA is saying that a 10 percent reduction in VOCs is roughly equivalent to a 3 percent improvement in ozone levels.

Another proposal to reduce ozone concentrations is to increase the size of charcoal canisters currently required on autos and trucks to capture fumes that build up in the fuel tank and escape during refueling. The estimated cost of the proposal for the enlarged automobile refueling can-


isters ranges from $190 million a year (according to the EPA) to $300 million a year (according to the auto- makers). A serious limitation of auto and truck canister regulations is that at most 7 percent of the automobiles and trucks in operation are replaced annually. Thus, it would take fourteen years (the EPA estimates twenty years) and $2.7-$4.3 billion (ignoring inflation or dis- counting factors) to realize the full benefits of this proposal.

EPA estimates that, as onboard-equipped vehicles com- prise an increasing percentage of the motor vehicle fleet over time, reductions in the nonmethane hydrocarbon inventory due solely to refueling controls change from 105,000 tons (about 1.5 percent) in 1995 to 179,000 tons (about 2.1 percent) in 2010.

Special nozzles and pumps at gasoline stations are also an option that could be required to capture hydrocarbon vapors that escape in refueling. Industry officials estimate that the special equipment would cost each service station $12,000-$15,000 to install and an additional $2,000 a year to maintain. The annual reduction in VOCs in urban nonattainment areas from the use of this equipment has been estimated by the EPA to be between 35,000 and 70,000 metric tons a year if installed in the twenty-seven worst nonattainment areas or 160,000 to 230,000 metric tons a year nationwide. In most cases, the EPA is reluc- tant to estimate the percentage of ozone reduction associ- a ted with dec reases in VOCs or n o n m e t h a n e hydrocarbons.

The VOC reductions for canisters, volatility caps, and service station capture systems are not additive. Larger canisters are not needed to control refueling emissions if service station controls are used. But larger on-board canisters are the prime equipment changes needed to both capture refueling and evaporative emissions. On the costs of these proposals, there is considerable disagreement between the regulators and the industries to be regulated. The impact on VOCs and, hence, ozone levels are likely to be quite modest.

Another proposal to reduce ozone levels is to change the fuel for automobiles from gasoline to methanol. The estimated cost of converting automobiles to methanol is $1,000 per auto. It would cost $200 to $300 for each new automobile coming off the assembly line. These costs might pale in comparison to other costs, such as higher fuel costs for motorists and infrastructure costs for industry--changes in service stations, transport vehicles, and production facilities. The EPA estimates that smog could be reduced 80 percent using methanol while blends of gasoline and methanol could cause a reduction of 20 to 50 percent.

Oil companies and auto manufacturers are not enthusi- astic about the push for methanol. In testimony before the House Subcommittee on Energy and Power, the director of the Environmental Sciences Division of Unocal Oil raised some serious questions about the use of methanol as an alternative to gasoline. First, methanol and its par- tial oxidation product, formaldehyde, are listed as haz-

56 / SOCIETY '* MARCH / APRIL 1989

ardous substances under the initial superfund law, and formaldehyde is listed as an extremely hazardous sub- stance under the recent superfund amendments. Second, methanol has roughly half the energy content of gasoline; therefore, nearly two gallons of methanol would have to be made, stored, transported, and marketed for each gal- lon of gasoline and diesel fuel replaced. Third, the industry disputes the EPA's estimates of the air quality benefits methanol might provide.

The ozone standard has been eased twice since 1971.

Gregory McRae and Ted Russell of Carnegie-Mellon University are working on a computer simulation for the California Resources Board that might help resolve the debate over the air quality benefits of methanol. Pre- liminary results indicated that methanol use would cut smog in half during three days of Los Angeles's worst pollution and possibly trim formaldehyde levels.

Another proposal for reducing hydrocarbons is a system of "congestion charges?' These types of controls are envisioned for metropolitan areas with the worst smog problems. Motorists would be charged a trip fee for driving in peak-hour traffic. Either a sticker system or a more costly automatic vehicle identification system, with elec- tronic transponders to record and charge for each vehicle's passage could be used.

Singapore was able to cut peak-hour traffic in its central business district by 40 percent using a simple sticker system in 1975. A dated daily or monthly sticker was sold for the equivalent of $1.40 a day which authorized the pos- sessor to drive in the central business district during rush hours. Mayor Koch of New York City said that he would support vehicle fees of $10 a day to help reduce pollution from automobiles entering southern Manhattan.

There are two issues imbedded in each of the cost/ benefit analyses we have presented. The first is: "Are we willing, as a nation, to pay these costs to achieve these marginal improvements in ozone levels?" The second in- volves the distributional issue: "Who should pay?" For instance, if on-board canisters provide more cost effective VOC reductions for evaporative and refueling problems, it still may not be equitable to ask every automobile owner in America to pay a higher price for a new car whether or not he or she lives in a nonattainment area.

What can be concluded from this analysis of the extent of the ozone health hazard and the proposed solutions to the problem of ozone nonattainment? First, it seems evident that the ozone health hazard is misrepresented by the current designation of an area as nonattainment. Every "nonattainment" area is well within the levels of ozone considered to cause no health effects--most of the

time. Even Los Angeles, the premier example of a smog- plagued city, is within the 0.12 parts per million level 97 percent of the time, Nearly all other areas of the nation considered to have "severe" nonat tainment problems meet the ozone standards more than 99 percent of the time.

Because ozone is one of the six "criteria" pollutants specified in the Clean Air Act, much of the public believes that it must be a known carcinogen or at least a highly debilitating pollutant. Yet, ozone has not been shown to be a carcinogen in humans or animals; ozone's health effects are relatively mild and temporary. Clinical studies show that ozone is not an eye irritant. The ability of people to adapt is greater than generally recognized--the pulmonary functions of Los Angeles residents are less affected by elevated ozone levels than Canadians, for example. There is no evidence that people with preexisting lung disease are affected more severely than healthy persons by high concentrations of ozone. Asthmatics appear to be unaffected by levels of ozone as high as 0.25 ppm even if performing light exercise.

The point is not that ozone pollution should be ignored but rather that its health consequences need to be kept in perspective. If levels as high as 0.30 ppm (more than two and a half times the standard) are of concern only if individuals are engaged in heavy exercise, then it seems un- reasonable to punish cities and citizens with construction bans and federal funding cutoffs for exceeding ozone levels of 0.12 ppm more than one hour per year. The "punishment" simply does not seem to fit the "crime?'

The Senate's proposed solution to this problem, as em- bodied in S.1894, released by the Senate Environment and Public Works Committee, extracts a high price for the privilege of extending the deadlines in noncompliance areas. The bill attempts to take into account how far a region needs to go to attain compliance by adjusting remedies and deadlines to match the extent of the problem. But, it does not reflect the reality that the mandated solutions would likely be insufficient to bring these areas within compliance by the new deadlines.

Not only would the federally mandated solutions likely fall short of the mark, but many of these remedies would affect the driving public in impractical ways. Mobile sources (autos, buses, and trucks) are responsible for 36 percent of emissions of hydrocarbons and nitrogen oxides, the precursors of ozone, and must be part of the solution. But the degree of coercion required to make a significant decrease in automobile use seems to be politi- cally infeasible. User road fees high enough to cut auto use appreciably would likely be about as popular as the famous interlock system that Congress mandated to force drivers to use seatbelts.

In a free country such as America, no one is being forced to live in areas that do not meet the ozone standard. Yet many of the cities experiencing difficulty in complying with the ozone requirements are growing, not contracting. The Los Angeles area grew by 2 percent a year from 1980 to 1985. Houston has grown 3 percent a

year during the same period. It seems that individual citizens are less concerned about the effects of ozone than are their elected representatives.

Washington lawmakers might well consider why so little progress has been made on reducing ozone levels while significant gains have been made in improving levels of the other five criteria pollutants. It just might be that natural sources, meteorological phenomena, and the method of measuring compliance all conspire to make the ozone standard unrealistic. In view of so much uncertainty about both the mechanism of ozone production (and hence the effectiveness of controlling its precursors) and the max imum levels required to protect public health, it seems reasonable to take a more cooperative and less confrontational approach to dealing with the problem of photochemical oxidants.

The use of sanctions to force compliance is deeply en- grained in the federal regulatory process but the case of ozone pollution argues for a less adversarial relationship. In a letter to Senator George Mitchell, then chairman of the Subcommittee on Environmental Protection, Lee Thomas, administrator of the Environmental Protection Agency commented on similar detailed prescriptions contained in S.135 l, a forerunner of S.1894:

By requiring the States to implement specific emissions reduction measures , the bill [S.1351] im- plicitly precludes the States from considering unique and creative alternative approaches--approaches which have the potential for yielding greater air quality benefits. Federal prescription of these air pollution control tools impedes the ability of State and local officials to devise the most effective implementation programs.

The Clean Air Act (and the proposed revisions)re- quires that, in establishing NAAQS EPA must in effect disregard such vital considerations as cost, technical feasi- bility and social and economic disruption. Other environmental laws are more flexible and are designed to reduce health threats to acceptable levels. By requiring the NAAQS be set at levels that avoid any adverse health effects and provide for "an adequate margin of safety," the Clean Air Act in effect seeks to guarantee zero risk of any adverse health effects due to air pollutants. This goal might sound good on the political hustings, but it is an obvious impossibility. As John Quades, former deputy administrator of the EPA and chairman of the National Environmental Development Association's Clean Air Act Project, stated in testimony before the Senate Environ- mental Protection Subcommittee:

Many areas could not . . . demonstrate attainment without adopt ing a combina t ion of limits on growth, changes in lifestyles, and retrofit controls on existing industrial facilities that will be more costly and less beneficial than any controls imposed before under any environmental law . . . . The real-


ity is that the statute commands an achievement the cost and pain of which exceed its value to the public.

The question remains, "What should be done about ozone provisions of the Clean Air Act?" Clearly, imposi- tion of a construction ban on major new sources of ozone precursors and cutting off federal grants to nonattain- merit areas will generate tremendous disruptions and likely generate a backlash against the entire environmental effort. Ironically, halting federal funds to public treatment works will increase ozone levels as will preventing newer, less polluting industries from replacing older, dirt- ier facilities.

The Senate appears to favor extending the deadlines for attainment and mandating further federal controls with the threat of construction bans and fund cutoffs to back up the new deadlines. But by now, Congress should realize that the "club" of federal sanctions is meaningless. The punishment is so severe that the club can never really be used.

We recommend that deadlines and sanctions for ozone compliance be removed from the Clean Air Act. By and large, ozone is a local problem. In those areas having the worst smog problems, state and local officials will address the issue without federal coercion. To the extent that plumes of ozone can cross local and state boundaries, some federal role is justified. Determining the NAAQS levels and providing information on effective control technologies for stationary and mobile sources is best done at the national level. The current system of detailed specification of which controls are necessary to constitute an acceptable state implementation plan is too inflexible to meet local needs.

We recommend that states be allowed to present their own good faith plans for reducing ozone levels with as

There is evidence that smokers are less responsive to ozone than nonsmokers.

little federal specification as possible. Most areas are well within ozone levels considered to be safe most of the time. The most expedient way to bring the majority of the out- of-compliance metropolitan areas into compliance would be to raise the ozone standard. While there is some debate about healthful concentration levels, most health effects appear at much higher levels than .12 ppm. Nonetheless, we do not recommend changing this target level in the Clean Air Act because the suggestion simply would be too controversial. Instead, we believe that the method of measuring ozone levels should be revised.

Lastly, we recommend that compliance measurement be changed to the average levels recorded at all monitors

58 / SOCIETY " MARCH / APRIL 1989

in an area rather than the highest monitor reading, ]n short it is time that Congress recognize that something more than extending deadlines and issuing detailed man- dates and threats is required to reduce photochemical oxidants in the atmosphere. What is needed is a cooperative approach to ensure cost effective progress toward air quality goals.

The concept of requiring a zero risk environment is untenable. Acceptable risk is a concept that is more real- istic and feasible, particularly in an economic environmen t o f in te rna t iona l compet i t ion , It is foolish to overburden United States companies with regulations in a vain effort to achieve a level of air quality that is need- lesst~" restrictive.[]

READINGS SUGGESTED BY THE AUTHORS: Kneese, Allen V. Measuring the Benefits of Clean Air and Water

Washington, D.C.: Resources for the Future, 1984. Marraro, Christopher. "Revising the Ozone Standard" In Lester

B. Lave, editor. Quantitative Risk Assessment in Regulation. Washington, D.C.: Brookings Institution, 1982.

White, Lawrence J. Reforming Regulation: Processes and Problems. Englewood Cliffs, N.J,: Prentice-Hall, 1981.

Melinda E. Warren is writer~analyst at the Center for the Study of American Business at Washington University in St. Louis. She is coauthor of 1989 Federal Regulatory Budgets and Staffing: Effects of the Reagan Presidency.

Kenneth W, Chilton is acting director of the Center for the Study of American Business at Washington University in St. Louis. He is coauthor of Public Policy toward Corporate Takeovers and Labor Relations in Transition. He has written extensively on the topic of government regulation, particularly environmental regulation.

Even if you live through a stroke, you might face paralysis, loss of speech, or altered behavior. Things that can make life difficult, to say the least. Strokes occur when the blood supply is cut to part of the brain. And if you currently have high blood pressure or any form of heart disease, your risk of stroke is higher than normal. The American Heart Association urges you to control your blood pressure. By doing so, you'll reduce your chances for a stroke. And increase the

likelihood of a long, happy life.

American Heart Association

WE'RE FIGHTING FOR YOUR LIFE

clearing the air of ozone

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