IEc
DRAFT:
May
2005
5­
1
SOCIAL
COST
AND
ECONOMIC
IMPACT
ANALYSIS
CHAPTER
5
_________________________________________________________________________________

This
chapter
analyzes
the
social
costs
and
economic
impacts
of
the
hazardous
waste
combustion
(
HWC)
MACT
replacement
standards.
While
Chapter
4
is
limited
to
the
modeling
of
facility
compliance
costs
and
government
administrative
costs,
this
chapter
examines
the
responses
of
the
regulated
community.
To
characterize
the
economics
of
hazardous
waste
combustion
and
model
market
adjustments
in
response
to
the
HWC
MACT
replacement
standards,
we
use
baseline
cost,
waste
quantity,
and
pricing
data,
as
well
as
compliance
cost
data
presented
in
Chapter
4.
Our
modeling
of
the
hazardous
waste
combustion
market
allows
us
to
estimate
how
increased
compliance
costs
will
affect
incentives
for
hazardous
waste
combustion
facilities
to
continue
burning
waste
and
the
competitive
balance
in
different
segments
of
the
combustion
market.
We
organize
this
chapter
into
five
sections:

°
Overview
of
Results
­­
We
first
present
a
summary
of
results
from
the
social
cost
and
economic
impact
analyses
presented
in
this
chapter.

°
Social
Cost
Methodological
Framework
­­
This
section
presents
the
economic
theory
used
for
analyzing
social
costs.
The
social
costs
of
the
rule
describe
the
total
value
of
resources
used
to
comply
with
the
standards
and
the
total
value
of
lost
output
resulting
from
the
standards.


Modeling
Market
Dynamics
­­
This
section
introduces
the
approach
we
used
to
model
market
dynamics
and
calculate
social
costs
and
economic
impacts.


Social
Cost
Results
­­
This
section
presents
detailed
results
from
the
social
cost
analysis,
which
include
private
economic
welfare
losses
and
government
costs.
IEc
DRAFT:
May
2005
1
In
developing
the
HWC
MACT
replacement
standards,
EPA
also
considered
an
Option
B
Floor
and
several
other
options;
however,
the
Agency
has
opted
not
to
present
results
associated
with
the
Option
B
Floor
in
this
document.

5­
2

Economic
Impact
Measures
­­
Finally,
we
describe
estimates
of
several
economic
impact
measures:
market
exits,
the
quantity
of
waste
reallocated
from
combustion
systems
that
stop
burning
hazardous
waste,
employment
impacts,
potential
combustion
price
increases,
and
other
industry
impacts,
including
potential
changes
in
the
cost
structure
of
the
hazardous
waste
combustion
market
and
in
the
profits
for
hazardous
waste
combustion
facilities.
The
economic
impact
measures
are
distinct
from
the
social
cost
estimates
in
that
they
provide
insights
into
the
distributional
effects
of
the
rule,
and
address
impacts
that
may
not
represent
net
costs
to
society.

As
described
in
Chapter
1,
we
examine
four
options
in
this
assessment:
the
Agency
Preferred
Approach,
the
Option
A
Floor,
the
Option
C
Floor,
and
the
Option
D
Floor.
1
OVERVIEW
OF
RESULTS
This
chapter
presents
social
cost
and
economic
impact
results,
as
well
as
a
detailed
explanation
of
the
approach
supporting
these
results.
Key
results
presented
later
in
this
chapter
are
summarized
as
follows:

Social
Cost
Results
°
Our
best
estimate
of
the
annual
social
costs
associated
with
the
Agency
Preferred
Approach
is
$
27.5
million.
Our
upper
bound
estimate,
which
is
consistent
with
the
engineering
costs
presented
in
Chapter
4,
is
approximately
$
43.5
million.

°
Market­
adjusted
compliance
costs,
which
reflect
price
increases,
system
closures,
and
waste
consolidation,
are
37
percent
lower
than
total
engineering
costs,
which
assume
that
all
facilities
upgrade
without
any
market
adjustments
that
would
minimize
system
compliance
costs.
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DRAFT:
May
2005
2
Liquid
boilers
include
process
heaters.

5­
3
°
The
difference
between
engineering
costs
and
market­
adjusted
costs
is
greatest
for
commercial
combustion
systems.
When
the
HWC
MACT
economic
model
simulates
market
adjustments,
commercial
systems
experience
an
increase
in
revenues
from
on­
site
systems
that
stop
burning
hazardous
waste
and
send
their
waste
to
commercial
systems
in
response
to
the
standards.
In
contrast,
to
estimate
engineering
costs,
the
model
assumes
that
all
facilities
comply
with
the
standards
and
that
no
additional
waste
is
sent
to
commercial
facilities.

°
When
allowing
for
market
adjustments,
a
significant
portion
of
boiler
and
onsite
incinerator
costs
are
offset
by
revenue
gains
at
commercial
facilities.
Approximately
$
9.7
million
of
on­
site
incinerator
costs
and
$
0.8
million
of
liquid
boiler
costs
represent
a
transfer
to
commercial
facilities.

Economic
Impact
Measure
Results
°
Market
exits.
Under
the
Agency
Preferred
Approach,
the
following
market
exits
are
anticipated:
two
commercial
incinerator
systems
(
but
not
entire
facilities),
23
to
24
on­
site
incinerator
systems,
and
11
liquid
boilers
will
stop
burning
hazardous
waste
entirely,
rather
than
implement
emission
control
measures
to
comply
with
the
standards.
2
We
do
not
expect
any
cement
kilns,
LWAKs,
coal
boilers,
or
HCl
production
furnaces
to
exit
the
waste­
burning
market
as
a
direct
result
of
the
HWC
MACT
replacement
standards.

°
Hazardous
waste
reallocated.
Market
exit
and
waste
consolidation
activity
is
expected
to
result
in
the
reallocation
of
between
47,100
and
53,200
tons
of
waste
from
combustion
systems
that
stop
burning
hazardous
waste
under
the
Agency
Preferred
Approach.
Adequate
capacity
currently
exists
in
the
hazardous
waste
combustion
industry
to
absorb
this
quantity
of
waste,
which
corresponds
to
approximately
1.2
to
1.4
percent
of
the
hazardous
waste
combusted
in
the
U.
S.
in
2001.

°
Employment
impacts.
At
facilities
that
consolidate
waste
burning
or
stop
waste
burning
altogether
under
the
Agency
Preferred
Approach,
employment
dislocations
of
between
265
and
272
full­
time
equivalent
employees
are
expected.
At
the
same
time,
employment
gains
of
104
full­
time
equivalent
employees
are
expected
in
the
pollution
control
industry,
and
gains
of
approximately
246
full­
time
equivalent
employees
are
expected
at
combustion
facilities
as
they
invest
in
new
pollution
control
equipment.
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DRAFT:
May
2005
3
These
expenditures
do
not
account
for
energy
savings
or
revenues
associated
with
new
waste
that
cement
kilns
might
receive
because
of
the
HWC
MACT
replacement
standards.

4
We
do
not
present
a
corresponding
estimate
for
other
combustion
sectors
because
we
lack
data
on
their
total
pollution
control
expenditures.

5­
4
°
Combustion
price
changes.
Prices
may
increase
by
0.4
percent
under
the
Agency
Preferred
Approach
as
combustion
facilities
face
increased
costs.

°
Other
industry
impacts.
We
compare
expenditures
related
to
the
HWC
MACT
replacement
standards
to
total
pollution
control
expenditures
and
the
cost
of
burning
hazardous
waste.
Incremental
pollution
control
expenditures
associated
with
the
Agency
Preferred
Approach
represent
approximately
7.0
percent
of
current
pollution
control
expenditures
(
i.
e.,
all
expenditures
associated
with
limiting
releases
to
air,
land,
and
water)
for
cement
kilns.
3,4
Compliance
costs
associated
with
the
HWC
MACT
replacement
standards
are
expected
to
increase
the
total
costs
of
burning
hazardous
waste
by
approximately
5.1
percent
for
cement
kilns,
1.2
percent
for
LWAKs,
and
0.9
percent
for
commercial
incinerators.
Although
costs
for
commercial
systems
will
increase
under
the
HWC
MACT
replacement
standards,
we
expect
that
profits
will
actually
increase
by
roughly
6.7
percent
for
commercial
incinerators
and
0.4
percent
for
LWAKs.
The
percentage
change
in
cement
kiln
waste­
burning
profits,
however,
is
close
to
zero.

SOCIAL
COST
METHODOLOGICAL
FRAMEWORK
The
social
costs
of
the
HWC
MACT
replacement
standards
include
the
value
of
resources
used
by
the
private
sector
to
comply
with
the
standards,
the
value
of
government
resources
used
to
administer
the
standards,
and
the
value
of
output
lost
due
to
shifts
of
resources
to
less
productive
uses.
To
evaluate
these
shifts
in
resources
and
changes
in
output,
we
must
predict
changes
in
the
behavior
of
all
affected
parties
in
response
to
the
regulation,
including
responses
of
directly­
affected
entities
(
combustion
facilities)
as
well
as
indirectly
affected
private
parties
(
e.
g.,
hazardous
waste
generators
who
experience
potential
changes
in
combustion
service
availability
or
prices).
We
group
these
components
of
social
costs
into
two
basic
elements:


Economic
welfare
changes,
which
include
shifts
in
consumer
and
producer
surplus,
and

Government
administrative
costs.

Below,
we
discuss
the
market
structure
we
assume
for
our
social
cost
and
economic
modeling
of
the
rule.
We
then
present
our
approach
to
analyzing
economic
welfare
changes
and
government
costs
associated
with
the
rule.
IEc
DRAFT:
May
2005
5
Note
that
while
the
Portland
cement
manufacturing
market
itself
might
be
characterized
as
oligopolistic,
our
analysis
focuses
on
the
hazardous
waste­
burning
component
of
cement
manufacturing
operations.

6
"
Hazardous
Waste:
A
Segment
Under
Pressure."
Environmental
Business
Journal.
June
1996,
4,
as
cited
in
U.
S.
EPA.
Assessment
of
the
Potential
Costs,
Benefits,
and
Other
Impacts
of
the
Hazardous
Waste
Combustion
MACT
Standards:
Final
Rule,
Office
of
Solid
Waste,
July
1999.

5­
5
Combustion
Market
Structure
Used
for
Modeling
We
assume
a
competitive
market
structure
for
modeling
cost
and
economic
impacts
associated
with
the
HWC
MACT
replacement
standards.
While
the
hazardous
waste
combustion
market
is
not
purely
competitive
(
e.
g.,
individual
firms
act
as
price
takers),
given
the
extremely
competitive
nature
of
the
industry
(
see
Chapter
2),
we
believe
this
assumption
better
reflects
the
true
nature
of
the
market
than
other
market
structures
(
e.
g.,
oligopolistic).
5
One
of
the
best
indicators
of
the
competitiveness
of
this
market
is
the
closure
of
several
commercial
combustion
facilities
during
the
past
several
years.
In
2001
alone,
three
commercial
incineration
facilities
exited
the
market:
Safety
Kleen's
incinerators
in
Bridgeport,
New
Jersey
and
Coffeyville,
Kansas
and
the
WRR
incinerator
in
Eau
Claire,
Wisconsin.
Six
other
commercial
incinerators
have
also
closed
since
1995.
In
addition,
since
the
early
1990s,
cement
kilns
have
become
established
in
the
market
for
waste
combustion
services,
which
has
intensified
competition
among
commercial
combustion
facilities,
as
noted
in
a
June
1996
Environmental
Business
Journal
article:
"[
i]
ncinerators
continue
to
face
competition
from
cement
kilns
that
burn
hazardous
waste
derived
fuel."
6
Given
the
competitive
nature
of
the
hazardous
waste
management
market,
particularly
for
wastes
that
can
be
burned
by
both
kilns
and
incinerators,
we
have
adopted
the
competitive
market
structure
for
our
modeling.
We
believe
that
this
approach
provides
the
most
supportable
framework
for
assessing
the
impacts
of
the
rule.

To
determine
the
market
structure
for
the
industry,
we
also
assessed
whether
barriers
to
entry
(
due
to
logistical
and
regulatory
challenges
faced
by
waste
management
facilities)
would
tend
to
make
this
industry
less
competitive.
While
capital
costs
are
fairly
high,
barriers
to
entry
do
not
appear
to
be
a
significant
factor,
as
demonstrated
by
the
number
of
players
that
entered
the
market
in
the
1980s
when
waste
incineration
prices
were
high.
In
addition,
industries
considering
entry
into,
or
expanding
their
presence
in
the
hazardous
waste
burning
market
are
well
financed
and
highly
sophisticated
in
their
understanding
of
regulatory
issues.
As
a
result,
we
do
not
view
barriers
to
entry
as
playing
a
major
role
in
reducing
the
competitiveness
of
the
industry.
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DRAFT:
May
2005
7
These
regions
attempt
to
address
the
concentration
of
facilities
and
potential
localized
capacity
constraints
in
the
Gulf
region.
The
1999
Assessment
assumed
that
waste
generators
exiting
the
market
would
send
their
waste
to
facilities
no
further
than
200
miles
away.
However,
information
from
BRS
and
the
comments
of
Fred
Sigg
(
Von
Roll
WTI,
December
2002)
suggest
that
long­
distance
transport
of
waste
is
common.

8
To
reflect
the
typical
waste
stream
characteristics
at
different
facilities,
we
assume
that
on­
site
incinerators
send
waste
to
commercial
incinerators
and
that
boilers
and
industrial
furnaces
send
their
waste
to
a
commercial
kiln.

9
In
simplest
terms,
producer
surplus
refers
to
the
amount
of
income
individuals
receive
in
excess
of
what
they
would
require
in
order
to
supply
a
given
number
of
units
of
a
product
or
service.
Consumer
surplus
is
the
benefit
consumers
receive
from
consumption
of
a
product
or
service
in
excess
of
what
they
pay
for
it
(
e.
g.,
the
difference
between
what
a
consumer
is
willing
to
pay
and
what
a
consumer
pays
for
a
given
product
or
service).

5­
6
Our
economic
model
divides
the
hazardous
waste
combustion
market
into
two
regions:
one
comprised
of
states
in
the
Gulf
of
Mexico
region
and
one
made
up
of
all
other
states.
7
In
the
model,
on­
site
incinerators,
boilers,
and
industrial
furnaces
that
must
decide
between
compliance
with
the
HWC
MACT
replacement
standards
and
off­
site
disposal
compare
upgrade
costs
with
off­
site
disposal
costs
within
the
region.
If
these
facilities
choose
to
send
waste
off
site,
the
waste
goes
to
the
nearest
commercial
facility
in
each
region,
subject
to
capacity
and
waste
compatibility
constraints.
8
Our
analysis
of
the
hazardous
waste
combustion
market
also
reflects
the
interdependence
among
markets
for
different
forms
of
waste.
Our
economic
model
assumes
that
waste
generators
typically
choose
between
treating
all
of
their
waste
on
site
or
sending
their
waste
to
an
off­
site
facility.
For
each
generator,
this
choice
depends
on
both
the
composition
of
its
waste
and
the
price
of
disposal,
which
varies
significantly
across
different
waste
forms.
Therefore,
a
facility
that
generates
several
tons
of
waste
that
is
inexpensive
to
dispose
of
may
choose
to
treat
all
of
its
waste
on
site
if
it
also
generates
a
small
amount
of
highly
contaminated
waste
that
is
expensive
to
send
off
site.

Economic
Welfare
Changes
This
Assessment
uses
a
simplified
partial
equilibrium
analysis
to
estimate
social
costs.
In
the
analysis,
changes
in
economic
welfare
are
measured
by
summing
the
changes
in
consumer
and
producer
surplus.
9
To
measure
the
magnitude
of
these
welfare
changes,
economists
typically
use
econometric
techniques
that
rely
on
historical
price
and
output
information
to
estimate
supply
and
demand
functions.
However,
because
hazardous
waste
combustion
markets
have
changed
rapidly
over
the
last
several
years,
historical
data
do
not
accurately
reflect
current
market
conditions.
In
IEc
DRAFT:
May
2005
5­
7
addition,
the
hazardous
waste
combustion
market
is
somewhat
segmented,
with
different
sectors
providing
different
types
of
combustion
services.
Therefore,
available
data
are
not
adequate
to
support
econometric
analysis
at
this
level
of
complexity.

As
an
alternative
to
an
econometric
model,
we
have
developed
a
simplified
approach
designed
to
bracket
the
welfare
loss
attributable
to
the
HWC
MACT
replacement
standards.
This
approach
bounds
potential
economic
welfare
losses
associated
with
the
rule
by
considering
two
scenarios:
an
upper
bound
static
scenario
based
on
engineering
cost
estimates,
and
a
dynamic
market­
adjusted
scenario
that
incorporates
changes
in
producer
and
consumer
waste
management
practices
and
pricing.

Engineering
Cost
Scenario
(
upper
bound)

In
this
scenario,
we
calculate
an
upper
bound
estimate
of
economic
welfare
losses
by
assuming
that
all
combustion
facilities
(
commercial
and
on­
site)
continue
to
operate
at
current
output
levels
and
prices
and
that
all
facilities
comply
with
the
HWC
MACT
replacement
standards
by
implementing
engineering
or
process
upgrades
as
outlined
in
Chapter
4.
This
approach
generates
an
upper
bound
estimate
of
costs
because
it
does
not
allow
facilities
to
select
less
costly
waste
management
options
such
as
offsite
disposal
or
intra­
facility
consolidation.

Market­
adjusted
Scenario
In
this
scenario,
we
provide
an
estimate
of
market­
adjusted
private
costs
that
accounts
for
potential
price
increases,
market
exits,
and
limited
intra­
facility
waste
consolidation
in
response
to
the
HWC
MACT
replacement
standards.
This
scenario
reflects
regulated
facilities'
selection
of
the
least­
cost
option
for
waste
management
and
compliance
and
potential
changes
in
combustion
prices
and
demand.
Under
this
scenario,
we
analyze
two
different
sides
of
the
hazardous
waste
combustion
market:
on­
site
combustion
and
commercial
combustion.

°
On­
site
Combustion.
In
the
market
for
on­
site
waste
combustion
(
e.
g.,
onsite
treatment
of
waste
generated
on
site),
the
market­
adjusted
scenario
reflects
the
fact
that
compliance
costs
shift
the
market
supply
curve
upward
to
S
1,
as
illustrated
in
Exhibit
5­
1.
As
a
result,
some
generators
will
select
the
lower
cost
option
of
exiting
the
on­
site
market
and
sending
waste
to
facilities
in
the
commercial
market,
bringing
the
on­
site
market
to
a
new
equilibrium
of
Q
1.
Because
of
this
response,
market­
adjusted
compliance
costs
in
the
on­
site
market
(
e.
g.,
compliance
costs
for
those
facilities
that
choose
to
upgrade
their
combustion
systems
to
comply
with
the
replacement
standards),
represented
IEc
DRAFT:
May
2005
10
Although
Exhibit
5­
1
shows
that
facilities
exiting
the
on­
site
market
do
not
pay
upgrade
costs,
the
exhibit
does
not
illustrate
O&
M
cost
savings
for
these
systems
(
i.
e.,
the
foregone
costs
of
on­
site
waste
management).
Our
estimate
of
social
costs
presented
later
in
this
chapter
incorporates
these
savings
for
on­
site
incinerators.
Several
boilers
and
industrial
furnaces
will
stop
treating
hazardous
waste,
but
these
units
are
not
expected
to
experience
O&
M
savings
since
they
will
not
shut
down.
Instead,
these
systems
are
expected
to
switch
to
alternative
fuel
sources.

11The
total
consumer
and
producer
surplus
loss
in
the
on­
site
market
is
represented
by
A+
B+
C+
D
in
Exhibit
5­
1.
Areas
C
and
D
represent
lost
surplus
value
associated
with
a
shift
in
waste
from
the
on­
site
to
commercial
market.
Some
of
this
lost
surplus
is
regained
in
the
commercial
market
(
see
Exhibit
5­
2).

5­
8
Exhibit
5­
1
Analytical
Framework
for
Onsite
Waste
Market
Quantity
(
tons)
Price
($/
ton)

S0
S1
D
Q0
Q1
P0
P1
A
B
D
C
Engineering
Costs
=
A
+
B+
C
+
D
+
E
Dynamic
compliance
costs
=
A
+
B
E
by
the
sum
of
areas
A
and
B
in
Exhibit
5­
1,
are
less
than
upgrade
costs
under
the
engineering
cost
scenario
(
A+
B+
C+
D+
E).
10,11
°
Commercial
Combustion.
The
market­
adjusted
scenario
accounts
for
shifts
in
both
supply
and
demand
in
the
commercial
market.
Similar
to
on­
site
combustion,
the
supply
function
for
commercial
combustion
shifts
upward
as
a
result
of
compliance
costs
associated
with
the
HWC
MACT
replacement
standards.
However,
because
of
systems
exiting
the
on­
site
market,
demand
in
the
commercial
market
also
increases,
as
illustrated
by
the
shift
from
D
0
to
IEc
DRAFT:
May
2005
12
This
shift
reflects
the
transfer
of
waste
from
the
on­
site
market
to
the
commercial
market,
as
represented
by
areas
C
and
D
in
Exhibit
5­
1.

13
In
this
illustration,
we
do
not
refer
to
these
consumer
costs
as
consumer
surplus
losses,
because
consumer
surplus
is
currently
zero,
in
the
face
of
assumed
perfectly
inelastic
demand
(
e.
g.,
a
vertical
demand
function).

14
Exhibit
5­
2
is
a
simplified
market
depiction
and
does
not
reflect
transportation
costs
for
waste
generators
that
decide
to
send
waste
off
site.
Our
estimate
of
total
social
costs
accounts
for
this
additional
cost.

15
Also,
since
market
demand
in
Exhibit
5­
2
is
portrayed
as
perfectly
inelastic,
total
deadweight
loss
is
zero.
Available
combustion
demand
data
indicate
that
demand
is
highly
inelastic.
To
the
extent
that
demand
is
not
perfectly
inelastic,
Exhibit
5­
2
fails
to
capture
any
deadweight
losses
resulting
from
the
HWC
MACT
replacement
standards.
Appendix
F
contains
additional
information
on
demand
elasticity
in
the
hazardous
waste
combustion
market.

16
The
net
welfare
loss
for
these
facilities
is
the
difference
between
C+
E+
F
and
the
cost
to
these
facilities
of
treating
their
own
waste
on
site
in
the
baseline.
To
simplify
our
graphical
illustration
in
this
section,
we
assume
that
baseline
waste
burning
costs
for
these
systems
are
zero,
in
which
case
C+
E+
F
represents
the
incremental
cost
to
these
facilities
of
treating
their
own
waste
under
the
HWC
MACT
replacement
standards.

17
Similarly,
the
consumer
loss
represented
by
area
F
is
also
transferred
to
producers,
but
as
recovery
of
producer
costs
rather
than
as
producer
surplus.
Area
F
represents
a
net
cost
resulting
from
the
HWC
MACT
replacement
standards
only
to
the
extent
that
it
exceeds
baseline
hazardous
waste
management
costs
for
on­
site
systems
that
stop
burning
hazardous
waste
as
a
result
of
the
replacement
standards.
To
simplify
the
graphical
illustration
in
this
section,
we
assume
that
baseline
waste
management
costs
for
these
systems
is
zero,
in
which
case
F
represents
the
total
resource
cost
of
shifting
waste
from
the
on­
site
to
commercial
market.

5­
9
D
1
shown
in
Exhibit
5­
2.12
These
shifts
in
supply
and
demand
lead
to
changes
in
consumer
welfare
and
producer
surplus.
13
The
change
in
producer
surplus
(
B+
C­
A)
reflects
changes
in
waste
volumes,
prices,
and
costs
at
commercial
incinerators.
Changes
in
consumer
welfare
are
split
between
two
groups:
waste
generators
that
currently
send
waste
off
site
and
on­
site
systems
that
stop
burning
hazardous
waste
in
response
to
the
HWC
MACT
replacement
standards.
The
former
face
an
increase
in
costs
in
the
form
of
higher
prices
for
commercial
combustion
services,
as
represented
by
areas
B
and
D
in
Exhibit
5­
2.
Systems
that
exit
the
on­
site
combustion
market
must
pay
disposal
costs
represented
by
the
sum
of
areas
C,
E,
and
F
in
Exhibit
5­
2.14,
15,

16
The
total
consumer
welfare
loss
is
represented
by
the
sum
of
areas
B,
D,
C,
E,
and
F.
The
consumer
losses
represented
by
areas
B
and
C
are
offset
by
producer
surplus
gains
of
B+
C.
17
Therefore,
the
total
welfare
loss
is
expressed
as
follows:
IEc
DRAFT:
May
2005
5­
10
Welfare
Loss
comm.
market
=
A+
D+
E+
F
This
estimate
represents
the
cost
of
commercial
system
upgrades
plus
the
real
resource
costs
of
combusting
waste
transferred
from
the
on­
site
combustion
market.

Government
Costs
The
HWC
MACT
replacement
standards
also
result
in
costs
to
government
entities
which
administer
and
enforce
the
new
emission
standards.
The
costs
for
EPA
and
state
environmental
agencies
to
review
permit
modification
applications
and
other
industry
documents
and
to
implement
modifications
to
their
programs
and
practices
in
response
to
the
HWC
MACT
replacement
standards
form
the
basis
of
our
government
cost
estimates.
Chapter
4
presented
upper
bound
estimates
of
government
costs,
as
the
analysis
assumed
that
all
combustion
systems
would
choose
to
comply
with
the
replacement
standards.
These
results
represent
government
costs
under
the
engineering
cost
scenario.
However,
when
markets
adjust
to
the
standards,
several
systems
choose
to
send
waste
off
site,
which
reduces
the
number
of
systems
that
governments
must
regulate.
Under
these
conditions,
IEc
DRAFT:
May
2005
5­
11
government
costs
are
lower
than
under
the
engineering­
cost
scenario.
Based
on
our
estimates
of
market
exits,
we
anticipate
annual
government
costs
of
approximately
$
447,000­$
459,000
under
the
Agency
Preferred
Approach.
Under
the
engineering
cost
scenario,
annual
government
costs
are
approximately
$
503,000.
A
detailed
description
of
the
specific
components
of
government
costs
is
provided
in
Chapter
4,
Exhibit
4­
7.

HAZARDOUS
WASTE
COMBUSTION
MARKET
MODELING
To
depict
the
two
scenarios
described
above,
we
constructed
a
model
that
incorporates
numerous
baseline
input
parameters
and
compliance
cost
estimates
specific
to
each
combustion
system
included
in
the
HWC
MACT
universe.
The
economic
model
estimates
total
compliance
costs
as
well
as
several
other
economic
impact
measures.

This
section
describes
the
economic
model
in
more
detail.
We
first
explain
how
we
estimate
total
costs
under
the
engineering
cost
scenario.
Following
this
discussion,
we
describe
how
we
model
market
dynamics
by
accounting
for
potential
price
increases,
waste
consolidation
among
systems
at
the
same
facility,
and
system
closure.
We
then
explain
how
we
estimate
total
compliance
costs
for
the
market­
adjusted
scenario.
We
end
the
section
with
a
brief
summary
of
both
approaches.

Total
Compliance
Costs
Under
The
Engineering
Cost
Scenario
Our
upper
bound
estimate
of
costs
assumes
that
all
facilities
affected
by
the
HWC
MACT
replacement
standards
comply
with
the
standards.
We
estimate
total
compliance
costs
under
this
scenario
as
follows:

1.
Assign
replacement
MACT
compliance
costs
to
each
combustion
system
in
the
universe.
Some
uncertainty
exists
about
the
number
of
systems
in
the
combustion
universe
that
are
actually
operating.
For
instance,
systems
may
be
included
in
the
analysis
that
are
still
permitted
but
that
have
actually
ceased
operation,
causing
us
to
overstate
the
costs
of
the
HWC
MACT
replacement
standards.
EPA
has,
however,
taken
several
steps
to
verify
the
operating
status
of
all
systems
included
in
the
economic
model
at
the
time
of
this
analysis.

2.
Sum
compliance
costs
across
all
systems
for
each
combustion
sector
(
e.
g.,
cement
kilns).

3.
Add
government
costs
to
system
compliance
costs.

The
result
of
these
calculations
represents
an
upper
bound
estimate
of
total
economic
welfare
losses
because
this
scenario
assumes
that
all
facilities
decide
to
upgrade
and
continue
burning
waste
after
implementation
of
the
HWC
MACT
replacement
standards,
even
if
lower
cost
options
exist.
The
engineering
cost
assumptions
that
underlie
this
scenario
are
detailed
in
Chapter
4.
IEc
DRAFT:
May
2005
18
Baseline
costs
include
estimated
compliance
costs
associated
with
the
2002
Interim
Standards.
As
discussed
in
Chapter
3,
we
conclude
that
all
combustion
systems
will
continue
to
treat
hazardous
waste
in
the
baseline.
While
our
analysis
revealed
that
two
commercial
incinerator
systems
are
marginally
unprofitable
in
the
baseline,
we
assume
that
these
two
systems
will
remain
open
in
the
baseline
because
of
uncertainty
related
to
our
system­
level
waste
quantity
estimates.

19
This
analysis
does
not
consider
the
waste
quantity
reductions
associated
with
source
reduction
activities
and
long­
term
process
improvements.
While
waste
management
costs
are
a
factor
in
these
efforts,
overall,
the
rate
of
source
reduction
is
not
expected
to
be
sensitive
to
short­
term
fluctuation
in
prices.

20
We
assume
that
fuel
blenders
will
not
have
a
separate
impact
on
combustion
pricing,
although
changes
in
hazardous
waste
combustion
prices
are
likely
to
affect
prices
for
blending
services.

5­
12
Modeling
Market
Dynamics
While
the
engineering
cost
scenario
estimates
total
compliance
costs
for
upgrading
all
existing
combustion
facilities,
the
actual
social
costs
associated
with
government
regulation
depend
on
the
incentives
and
reactions
of
the
regulated
community
and
its
customers.
In
the
case
of
the
HWC
MACT
replacement
standards,
increased
compliance
costs
affect
both
the
incentives
for
combustion
facilities
to
continue
burning
and,
as
a
result,
the
competitive
balance
within
different
combustion
sectors
(
e.
g.,
commercial
incinerators).
Commercial
combustion
facilities
may
try
to
recover
these
increased
costs
by
charging
higher
prices
to
generators
and
fuel
blenders.
To
characterize
post­
MACT
market­
adjusted
impacts
accurately,
we
first
evaluate
the
profitability
of
each
combustion
system
in
the
absence
of
the
HWC
MACT
replacement
standards
(
e.
g.,
baseline
profitability).
18
We
then
evaluate
the
post­
MACT
economic
viability
of
systems
profitable
in
the
baseline
by
introducing
two
dynamic
market
elements
to
the
economic
model.
First,
the
model
allows
commercial
combustion
facilities
to
pass
on
at
least
a
portion
of
their
compliance
costs
to
generators
in
the
form
of
higher
prices.
Second,
we
allow
combustion
facilities
to
close
individual
combustion
systems
and
to
consolidate
waste
among
multiple
combustion
systems
at
the
same
facility.
19
We
discuss
these
dynamic
elements
below.

Combustion
Price
Increases
All
commercial
combustion
facilities
that
remain
in
operation
will
experience
increased
costs
under
the
HWC
MACT
replacement
standards.
20
To
protect
their
profits,
commercial
combustion
facilities
will
have
an
incentive
to
pass
these
increased
costs
on
to
their
customers
in
the
form
of
higher
combustion
prices.
Price
increases
will
be
capped
by
the
availability
of
substitutes
for
combustion
(
e.
g.,
waste
minimization
and
non­
combustion
treatment
alternatives).
Characterizing
the
availability
of
waste
minimization
options
allows
us
to
assess
the
elasticity
of
demand
for
combustion
services.
That
is,
if
lower
cost
waste
minimization
options
are
readily
available
for
large
quantities
of
combusted
waste,
commercial
combustion
facilities
will
be
less
able
to
pass
compliance
costs
along
to
generators
in
the
form
of
higher
combustion
prices.
Price
increases
may
also
be
effectively
limited
by
competition
from
other
combustors,
including
facilities
in
other
countries
that
may
have
different
cost
structures.
IEc
DRAFT:
May
2005
21
The
report
is
included
as
Appendix
F:
Allen
White
and
David
Miller,
Tellus
Institute,
"
Economic
Analysis
of
Waste
Minimization
Alternatives
to
Hazardous
Waste
Combustion,"
July
24,
1997.

22
We
also
examined
a
scenario
under
which
the
increase
in
commercial
hazardous
waste
combustion
prices
depends
on
the
total
average
costs
of
the
marginal
commercial
combustion
system
(
e.
g.,
the
system
with
the
highest
average
costs
after
implementing
controls
to
comply
with
the
standards).
Under
this
scenario,
commercial
combustion
systems'
incremental
revenues
greatly
exceed
their
incremental
compliance
costs
because
even
low­
cost
operations
will
increase
prices
to
match
the
price
of
the
marginal
combustion
system.

23
We
also
analyzed
a
scenario
where
combustion
prices
do
not
change
but
where
commercial
systems
charge
a
halogen
premium
that
is
proportional
to
the
halogen
content
of
the
waste
they
receive.
As
explained
in
Chapter
3,
public
comments
submitted
to
EPA
by
CKRC
in
1996
suggest
that
the
halogen
content
of
waste
managed
by
commercial
kilns
is
11.9
percent
of
the
halogen
content
of
waste
managed
by
commercial
incinerators.
For
this
sensitivity
analysis,
we
therefore
assume
that
the
halogen
premium
for
commercial
kilns
is
approximately
11.9
percent
of
that
charged
by
commercial
incinerators.
The
results
of
this
analysis
were
the
same
as
those
of
the
sensitivity
analysis
presented
in
the
main
text
because
the
modification
to
our
pricing
assumptions
did
not
affect
any
of
the
waste
that
our
model
predicted
would
be
diverted
to
commercial
facilities.

5­
13
For
the
1999
Assessment,
EPA
conducted
a
waste
minimization
analysis
to
assess
the
potential
recycling
and
source
reduction
implications
of
changes
in
combustion
pricing
associated
with
the
1999
Standards.
21
The
analysis
considered
in­
process
recycling,
out­
of­
process
recycling,
and
source
reduction
as
alternatives
to
hazardous
waste
combustion.
As
illustrated
in
Exhibit
5­
3,
the
analysis
showed
that
waste
minimization
is
not
sensitive
to
changes
in
combustion
pricing
when
prices
exceed
$
165
per
ton.
This
indicates
that
demand
for
hazardous
waste
combustion
is
likely
to
be
inelastic
when
combustion
prices
exceed
$
165
per
ton.
At
prices
above
$
165
per
ton,
the
only
facilities
burning
hazardous
waste
are
those
for
which
a
relatively
inexpensive
alternative
to
combustion
is
unavailable.
Therefore,
such
facilities
are
likely
to
continue
burning
hazardous
waste
even
if
prices
increase
significantly.
Because
hazardous
waste
prices
currently
exceed
$
165
per
ton,
we
conclude
that
demand
in
the
hazardous
waste
combustion
market
is
inelastic.

Due
to
the
potential
variance
of
price
elasticity
across
different
waste
types
and
the
uncertainties
and
limitations
of
the
waste
management
alternatives
analysis,
we
address
the
impacts
of
potential
price
increases
on
total
social
costs
by
conducting
two
analyses
with
different
pricing
assumptions:

$
Principal
Analysis:
Our
principal
analysis
assumes
a
100
percent
cost
passthough
(
e.
g.,
no
waste
management
alternatives
are
economically
available
for
current
customers
of
commercial
facilities,
making
their
demand
for
hazardous
waste
incineration
completely
inelastic).
Commercial
facilities
increase
prices
so
that
the
additional
revenues
from
their
current
customers
offset
total
compliance
costs.
22
$
Sensitivity
Analysis:
Our
sensitivity
analysis
assumes
that
combustion
prices
do
not
change
(
e.
g.,
a
zero
percent
cost
pass­
through
in
which
demand
for
hazardous
waste
incineration
is
completely
elastic).
23
IEc
DRAFT:
May
2005
5­
14
Exhibit
5­
3
DEMAND
FOR
COMBUSTION
ALTERNATIVES
Notes:
1.
Graph
excludes
potential
source
reduction
activities
because
the
rate
of
source
reduction
is
not
expected
to
be
sensitive
to
changes
in
combustion
prices.
2.
See
Appendix
F
for
more
information
on
source
reduction
and
waste
minimization
alternatives.

Source:
White,
Allen
and
David
Miller.
Economic
Analysis
of
Waste
Minimization
Alternatives
to
Hazardous
Waste
Combustion.
Tellus
Institute.
July
24,
1997,
as
cited
in
U.
S.
EPA,
Assessment
of
the
Potential
Costs,
Benefits,
and
Other
Impacts
of
the
Hazardous
Waste
Combustion
MACT
Standards:
Final
Rule,
Office
of
Solid
Waste,
July
1999.
IEc
DRAFT:
May
2005
24
BRS
reports
waste
quantities
for
facilities,
rather
than
for
systems.
We
estimate
a
system's
waste
quantity
as
the
product
of
facility
waste
tonnage
and
the
system­
to­
facility
ratio
of
permitted
waste
feedrates.

25
To
simplify
the
consolidation
routine,
we
examine
the
consolidation
potential
of
a
system
only
if
its
offsite
disposal
costs
exceed
its
compliance
costs.

26
Avoided
O&
M
costs
only
apply
to
on­
site
incinerators
because
boilers
will
continue
to
operate
regardless
of
whether
they
continue
to
burn
hazardous
waste.

5­
15
Waste
Consolidation
In
a
further
attempt
to
model
industry
behavior
more
accurately,
we
allow
facilities
with
onsite
incinerators
to
consolidate
waste
burning
across
several
systems.
Many
hazardous
waste
combustion
facilities
have
more
than
one
permitted
combustion
system
at
the
same
site.
Each
system
may
burn
too
little
waste
to
cover
MACT
compliance
costs.
However,
the
facility
may
be
able
to
consolidate
waste
among
systems,
thereby
reducing
facility
compliance
expenditures.
24
As
shown
in
Exhibit
5­
4,
the
consolidation
routine
closes
individual
systems
at
multi­
system
facilities
and
distributes
the
waste
from
the
closed
systems
to
on­
site
incinerators
that
remain
open.
25
The
model
shifts
waste
to
another
system
at
the
same
facility
only
if
adequate
capacity
is
available.
In
addition,
the
consolidation
routine
allows
waste
to
be
consolidated
to
on­
site
incinerators
(
from
other
on­
site
incinerators
or
boiler
systems)
but
not
to
boilers
because
incinerators
can
burn
most
forms
of
waste.
In
contrast,
boilers
and
HCl
production
furnaces
can
only
burn
high­
Btu
waste.
Moreover,
since
many
boilers
and
industrial
furnaces
are
physically
connected
to
plant
production
systems,
re­
routing
waste
to
these
systems
from
other
parts
of
the
facility
may
be
costly.

Total
Compliance
Costs
Under
Market­
adjusted
Assumptions
We
use
three
different
approaches
for
estimating
compliance
costs
under
the
market­
adjusted
scenario:
one
approach
for
on­
site
systems
that
currently
treat
their
own
waste
on
site,
a
separate
approach
fo
generators
that
currently
send
waste
to
commercial
facilities,
and
a
third
approach
for
commercial
systems.
For
on­
site
systems,
we
assess
the
potential
responses
of
individual
systems
(
i.
e.,
implementation
of
additional
pollution
controls;
sending
waste
offsite
to
a
commercial
facility;
and,
where
applicable,
consolidation)
and
estimate
costs
based
on
the
least
costly
option.
This
approach
accounts
for
potential
price
increases,
potential
fuel
replacement
costs
for
boilers,
costs
associated
with
transporting
waste
to
commercial
facilities,
and
potential
O&
M
savings
for
on­
site
incinerators.
26
IEc
DRAFT:
May
2005
5­
16
START
Are
compliance
costs
+
baseline
O&
M
costs
for
system
i
at
Facility
X
>
offsite
treatment
costs?
System
keeps
burning;
complies
with
regulat
ions.
No
Exhibit
5­
4
Combustion
System
Consolidation
Methodology
Are
any
onsite
incinerators
staying
open
at
Facility
X.
Yes
No
System
i
stops
burning
hazardous
waste.
The
system's
waste
is
sent
to
a
commercial
facility.

Yes
Is
the
quantity
of
waste
at
i
<
the
excess
capacity
of
onsite
incinerators
staying
open
at
Facility
X.
System
i
stops
burning
hazardous
waste.
The
system's
waste
is
sent
to
a
commercial
facility.

System
i
stops
burning
hazardous
waste.
Its
waste
is
consolidated
to
on­
site
incinerator(
s)
at
the
facility.
No
Yes
IEc
DRAFT:
May
2005
27
For
additional
information
on
breakeven
analyses,
see
Eugene
Brigham
and
Louis
Gapenski,
Financial
Management
Theory
and
Practice,
6th
Edition,
1991,
The
Dryden
Press,
Chicago,
483;
or
Leopold
Bernstein,
Financial
Statement
Analysis:
Theory,
Application
and
Interpretation,
1983,
Irwin,
Howewood,
IL,
640­
652,
both
of
which
are
cited
in
U.
S.
EPA,
Assessment
of
the
Potential
Costs,
Benefits,
and
Other
Impacts
of
the
Hazardous
Waste
Combustion
MACT
Standards:
Final
Rule,
Office
of
Solid
Waste,
July
1999.

28
As
noted
in
Chapter
3,
some
firms
could
decide
to
operate
their
combustion
systems
at
a
loss.
We
assume,
however,
that
facilities
will
stop
burning
hazardous
waste
if
doing
so
is
unprofitable.

5­
17
Generators
that
currently
send
waste
to
commercial
facilities
will
experience
an
increase
in
their
annual
disposal
costs
if
combustion
prices
increase
in
response
to
the
HWC
MACT
replacement
standards.
The
incremental
cost
to
these
facilities
depends
on
the
quantity
and
type
of
waste
that
they
generate
and
the
magnitude
of
increases
in
combustion
prices.
Costs
incurred
by
these
facilities
as
a
result
of
the
standards
are
transferred
to
commercial
facilities
in
the
form
of
additional
revenues.

To
assess
commercial
system
compliance
costs,
we
estimate
changes
in
waste
burning
profits,
using
the
same
approach
for
assessing
profitability
as
in
the
baseline
(
see
Chapter
3).
Unlike
baseline
profits,
post­
MACT
profits
for
commercial
systems
reflect
compliance
costs
associated
with
the
replacement
standards
and
additional
revenues
and
energy
savings
(
kilns
only)
associated
with
waste
received
from
on­
site
systems
that
stop
burning
hazardous
waste
in
response
to
the
HWC
MACT
replacement
standards.
Changes
in
commercial
system
profitability
will
also
reflect
increases
in
prices
for
waste
incineration.

Breakeven
Quantity
Analysis
In
the
1999
Assessment,
EPA
conducted
a
breakeven
quantity
(
BEQ)
analysis
to
evaluate
profitability.
Based
on
cost
and
pricing
data
available
at
the
time,
the
BEQ
analysis
measured
the
quantity
of
waste
that
a
combustion
system
would
have
to
burn
for
prices
to
cover
the
costs
of
operation.
27
EPA
used
these
BEQ
estimates
to
assess
the
likelihood
that
combustion
facilities
will
stop
burning
waste
in
the
face
of
increased
compliance
costs.

The
1999
Assessment
examined
both
short­
run
and
long­
run
impacts
and
estimated
both
short­
run
and
long­
run
BEQs
for
each
facility.
The
short­
run
BEQ
is
the
quantity
at
which
combustion
facilities
generate
enough
revenue
to
cover
their
variable
and
fixed
O&
M
costs.
In
contrast,
the
long­
run
BEQ
is
the
quantity
of
waste
combustion
facilities
require
to
cover
their
fixed
capital
costs,
as
well
as
their
O&
M
costs.
In
both
the
long
and
short
run,
EPA
assumed
a
facility
would
not
choose
to
invest
in
new
capital
(
e.
g.,
pollution
control
equipment)
unless
it
was
confident
that
it
could
burn
enough
waste
to
cover
the
cost
of
the
equipment.
28
The
main
benefit
of
conducting
the
BEQ
analysis
in
the
1999
Assessment
was
that
it
provided
useful
information
for
identifying
which
systems
were
likely
to
continue
burning
waste
in
the
baseline
and
after
implementation
of
the
1999
Standards.
Because
several
combustion
facilities
were
experiencing
financial
difficulties
in
1999,
EPA
expected
that
several
might
close
in
response
to
the
IEc
DRAFT:
May
2005
29
Since
boilers
and
industrial
furnaces
are
not
regulated
by
the
1999
Standards
or
by
the
2002
Interim
Standards,
we
expect
that
several
of
these
systems
might
close
in
response
to
the
HWC
MACT
replacement
standards.
However,
since
we
lack
baseline
hazardous
waste
treatment
costs
for
boilers
and
industrial
furnaces,
we
do
not
conduct
a
BEQ
analysis
for
these
systems.
Moreover,
because
these
systems
do
not
typically
treat
waste
commercially
and
also
provide
energy
for
manufacturing
processes,
accurately
assessing
costs
specific
to
hazardous
waste
combustion
for
these
systems
is
difficult.

30
The
model
can
endogenously
calculate
changes
in
prices
in
circumstances
where
demand
for
commercial
combustion
exceeds
capacity.
In
this
analysis,
however,
capacity
constraints
are
not
an
issue
and
price
changes
reflect
an
externally
determined
price
pass
through
scenario.

5­
18
1999
Standards,
but
the
time
horizon
and
possibility
of
closure
for
several
facilities
was
uncertain.
Some
facilities
that
were
expected
to
close
in
the
short
run
might
have
continued
burning
waste
for
a
short
time
if
demand
had
increased
enough
for
them
to
cover
their
O&
M
costs.
Similarly,
a
facility
predicted
to
close
in
the
long
run
might
have
remained
open
if
it
had
been
able
to
attract
more
customers.
By
comparing
actual
waste
quantities
to
BEQs,
EPA
identified
those
facilities
that
might
have
responded
differently
than
predicted
if
market
conditions
had
slightly
changed.

Although
useful
for
the
1999
Assessment,
we
have
chosen
not
to
conduct
a
BEQ
analysis
for
this
assessment
since
many
of
the
facilities
experiencing
financial
problems
in
1999
have
exited
the
market.
29
The
vast
majority
of
the
commercial
combustion
systems
operating
today
generate
enough
profits
to
offset
the
incremental
costs
of
the
HWC
MACT
replacement
standards.
Therefore,
we
do
not
require
the
extra
precision
associated
with
the
BEQ
profitability
indicator.

Summary
of
Modeling
Approach
We
analyze
two
separate
scenarios
for
this
analysis:
In
the
engineering
cost
scenario,
our
model
assumes
that
all
combustion
systems
comply
with
the
HWC
MACT
replacement
standards
and
the
model
predicts
a
high­
end
cost
estimate
consistent
with
the
methodology
described
in
Chapter
4.
In
contrast,
the
market­
adjusted
scenario
calculates
the
following:

°
Market
exits
of
commercial
systems
due
to
increased
costs
(
based
on
profitability
analysis),

°
Price
changes
for
combustion
services,
30
°
Market
exit
of
on­
site
systems
for
which
offsite
disposal
is
the
least­
cost
option,

°
Intra­
facility
consolidation
at
facilities
with
at
least
one
on­
site
incinerator,
IEc
DRAFT:
May
2005
31
We
assume
that
commercial
systems
will
incur
capital
costs
associated
with
the
HWC
MACT
replacement
standards.
We
expect
that
commercial
systems
will
initially
compete
for
additional
waste
as
on­
site
incinerators
and
boilers
stop
treating
waste
on
site.
As
the
market
for
hazardous
waste
incineration
changes
in
response
to
the
HWC
MACT
replacement
standards,
we
do
not
expect
that
commercial
facilities
will
be
able
to
determine
ex
ante
whether
they
will
be
able
to
succeed
in
the
new
market
climate.

32
We
expect
that
our
market­
adjusted
compliance
cost
estimate
represents
a
closer
approximation
of
total
economic
welfare
losses
than
the
engineering
cost
estimate
because
it
reflects
reasonable
cost­
minimizing
responses
by
affected
facilities.

33
Economic
welfare
losses
include
changes
in
consumer
and
producer
surplus;
we
do
not,
however,
estimate
these
changes
independently.

5­
19
°
Additional
commercial
system
income
associated
with
the
closure
of
noncommercial
systems,
and
In
the
market­
adjusted
scenario,
most
systems
do
not
incur
any
compliance
costs
if
they
exit
the
hazardous
waste
combustion
market.
31
Total
compliance
costs
under
the
market­
adjusted
scenario
are
therefore
less
than
total
compliance
costs
under
the
engineering
cost
scenario
and
provide
a
lower
estimate
of
welfare
losses.
32
SOCIAL
COST
RESULTS
As
described
in
the
methodological
framework
section,
social
costs
are
comprised
of
economic
welfare
losses
and
government
costs.
33
We
bound
the
economic
welfare
loss
estimates
by
estimating
total
compliance
costs
under
the
two
market
scenarios
described
above
(
e.
g.,
engineering
cost
and
market­
adjusted
scenarios).
Below,
we
present
compliance
cost
results
for
the
engineering
cost
and
market­
adjusted
scenarios.
We
then
present
social
cost
results
that
also
incorporate
estimates
of
government
costs.

Summary
We
develop
total
social
cost
estimates
by
adding
government
cost
estimates
to
private
economic
welfare
loss
estimates.
Exhibit
5­
5
provides
a
side­
by­
side
comparison
of
cost
estimates
under
the
engineering
cost
scenario
and
results
from
our
market­
adjusted,
principal
analysis,
which
reflects
a
100
percent
pass­
through
of
commercial
system
costs,
consistent
with
the
inelasticity
of
demand
for
hazardous
waste
combustion.
Separate
results
for
the
engineering
cost
and
marketadjusted
scenarios
are
presented
in
Exhibits
5­
6
and
5­
7
respectively.
As
Exhibit
5­
5
indicates,
our
best
estimate
of
total
social
costs
(
including
incremental
government
costs)
under
the
Agency
Preferred
Approach
is
approximately
$
27.5
million
per
year.
Liquid
boilers
bear
the
most
significant
IEc
DRAFT:
May
2005
34
As
described
above,
the
engineering
cost
scenario
reflects
our
upper
bound
cost
estimates
since
all
systems
are
assumed
to
upgrade
under
this
scenario.

35
Costs
for
process
heaters
are
included
in
liquid
boiler
cost
estimates
since
the
HWC
MACT
replacement
standards
regulate
process
heaters
as
liquid
boilers.

5­
20
portion
of
this
burden,
with
costs
of
$
31.1
million.
Liquid
boiler
costs
are
likely
to
exceed
the
total
costs
of
the
rule
because
the
standards
may
yield
welfare
gains
for
commercial
facilities
receiving
waste
from
on­
site
facilities
that
stop
burning
hazardous
waste
themselves
and
send
it
offsite
as
a
result
of
the
rule.
Net
savings
for
commercial
incinerators
under
the
Agency
Preferred
Approach
would
be
approximately
$
12.7
million
per
year,
and
net
benefits
for
cement
kilns
and
LWAKS
would
be
approximately
$
300,000
and
$
200,000
per
year
respectively.

Compliance
Cost
Results
for
the
Engineering
Cost
Scenario
Annualized
compliance
costs
under
the
engineering
cost
scenario,
in
which
all
combustion
systems
viable
in
the
baseline
comply
with
the
MACT
standards,
range
from
$
42.3
million
under
the
Option
A
Floor
to
$
70.5
million
under
the
Option
D
Floor.
34
The
upper
bound
estimate
of
annualized
compliance
costs
under
the
Agency
Preferred
Approach,
$
43.5
million,
is
about
2.8
percent
greater
than
our
estimate
of
costs
under
the
Option
A
Floor.
Annualized
costs
associated
with
the
Option
C
Floor
and
the
Option
D
Floor
are
15
percent
and
62
percent
higher,
respectively,
than
costs
under
the
Agency
Preferred
Approach.

As
shown
in
Exhibit
5­
6,
the
HWC
MACT
replacement
standards
under
the
engineering
cost
scenario
will
introduce
aggregate
cost
impacts
that
differ
greatly
across
combustion
sectors
and
across
regulatory
options.
At
an
aggregate
level,
costs
for
liquid
boilers
are
higher
than
costs
for
all
other
combustion
sources,
ranging
from
$
32.9
million
under
the
Option
C
Floor
to
$
45.0
million
under
the
Option
D
Floor.
35
In
contrast,
annual
costs
for
LWAKs
do
not
reach
$
1
million
under
any
of
the
regulatory
options.
However,
LWAK
costs
are
eight
times
as
great
under
the
Option
D
Floor
than
under
the
other
regulatory
options.
This
sharp
cost
increase
reflects
the
more
stringent
mercury
standard
for
LWAKs
under
the
Option
D
Floor.
Similarly,
coal
boiler
costs
nearly
double
between
the
Option
A
Floor
and
the
Agency
Preferred
Approach,
reflecting
tighter
particulate
matter
controls
under
the
Agency
Preferred
Approach.
IEc
DRAFT:
May
2005
5­
21
Exhibit
5­
5
SUMMARY
OF
SOCIAL
COST
ESTIMATES
(
millions
of
2002
dollars)

Cement
Kilns
LWAKs
Commercial
Incinerators
On­
site
Incinerators
Liquid
Boilers
Coal
Boilers
HCl
Production
Furnaces
Generators
that
currently
send
waste
to
commercial
facilities
TOTALa
Option
A
Floor
Market­
adjusted
Estimate
($
0.3)
($
0.2)
($
12.7)
$
1.8
$
31.0
$
1.4
$
0.6
$
4.2
$
26.3
Engineering
Costs
$
3.1
$
0.1
$
1.0
$
2.3
$
33.2
$
1.4
$
0.6
NA
$
42.3
Agency
Preferred
Approach
Market­
adjusted
Estimate
($
0.3)
($
0.2)
($
12.7)
$
1.8
$
31.1
$
2.6
$
0.6
$
4.2
$
27.5
Engineering
Costs
$
3.1
$
0.1
$
1.0
$
2.3
$
33.2
$
2.6
$
0.6
NA
$
43.5
Option
C
Floor
Market­
adjusted
Estimate
$
0.0
($
0.5)
($
12.8)
$
4.4
$
30.7
$
1.4
$
0.6
$
9.0
$
33.3
Engineering
Costs
$
6.6
$
0.1
$
2.3
$
5.6
$
32.9
$
1.4
$
0.6
NA
$
50.0
Option
D
Floor
Market­
adjusted
Estimate
$
1.9
($
0.4)
($
15.4)
$
4.0
$
41.4
$
1.4
$
0.8
$
17.9
$
52.0
Engineering
Costs
$
14.9
$
0.8
$
2.3
$
4.8
$
45.0
$
1.4
$
0.8
NA
$
70.5
NOTES:

a.
Government
administrative
costs
are
included
in
estimates
of
total
social
costs
and
engineering
costs.
Government
costs
for
our
best
estimate
are
approximately
$
459,000
per
year.
For
the
upper
bound
estimate,
under
which
all
systems
upgrade,
annual
government
costs
are
approximately
$
503,000.
IEc
DRAFT:
May
2005
5­
22
Exhibit
5­
6
TOTAL
ANNUAL
COMPLIANCE
COSTS:
ENGINEERING
COST
SCENARIO
(
millions
of
2002
dollars)
(
Excludes
baseline
non­
viable
systems,
no
system
consolidation
or
market
exits)

MACT
Options
Cement
Kilns
LWAKs
Commercial
Incinerators
On­
Site
Incinerators
Liquid
Boilers
Coal
Boilers
HCl
Production
Furnaces
TOTALa
Option
A
Floor
$
3.1
$
0.1
$
1.0
$
2.3
$
33.2
$
1.4
$
0.6
$
42.3
Agency
Preferred
Approach
$
3.1
$
0.1
$
1.0
$
2.3
$
33.2
$
2.6
$
0.6
$
43.5
Option
C
Floor
$
6.6
$
0.1
$
2.3
$
5.6
$
32.9
$
1.4
$
0.6
$
50.0
Option
D
Floor
$
14.9
$
0.8
$
2.3
$
4.8
$
45.0
$
1.4
$
0.8
$
70.5
Notes:
a.
Government
costs
of
approximately
$
503,000
are
included
in
estimates
of
total
costs.
IEc
DRAFT:
May
2005
36
This
range
reflects
the
two
analyses
conducted
for
the
market­
adjusted
scenario:
the
principal
analysis
reflecting
a
100
percent
cost
pass­
through
and
the
sensitivity
analysis
reflecting
zero
cost
pass­
through,
as
described
above.

37
As
explained
in
footnote
33,
we
assume
that
commercial
systems
will
incur
capital
costs
associated
with
MACT
compliance,
regardless
of
whether
they
eventually
exit
the
market.

38
In
this
analysis
we
assume
that
commercial
facilities
are
not
able
to
increase
waste
disposal
prices
to
offset
costs.

39
We
also
conducted
a
sensitivity
analysis
where
combustion
prices
increase,
based
on
the
costs
of
the
marginal
commercial
system
(
e.
g.,
the
system
with
the
highest
costs
per
ton).
Under
this
scenario,
commercial
facilities
experience
even
more
significant
net
savings,
largely
because
of
increased
revenues
from
existing
customers.

5­
23
Compliance
Cost
Results
for
the
Market­
adjusted
Scenario
Total
annualized
compliance
costs
under
the
market­
adjusted
scenario,
for
which
market
exits,
pricing
increases,
and
waste
consolidation
are
incorporated
into
the
economic
model,
are
between
26
and
38
percent
lower
than
total
compliance
costs
under
the
engineering
cost
scenario.
36
This
change
in
total
costs
results
from
market
exits
attributed
to
the
HWC
MACT
replacement
standards.
Systems
that
exit
the
market
will
not
incur
MACT­
related
costs,
thus
reducing
total
compliance
cost
estimates.
37
Under
the
market­
adjusted
scenario,
total
annual
compliance
costs
range
from
$
26.3
million
under
the
Option
A
Floor
to
$
51.9
­
$
52.0
million
for
the
Option
D
Floor.
The
lower
end
of
the
range
for
the
Option
D
Floor
reflects
the
sensitivity
analysis
outlined
in
the
"
Combustion
Price
Increases"
section
above.
38
As
Exhibit
5­
7
shows,
if
commercial
facilities
are
able
to
increase
prices
to
offset
compliance
costs
under
the
Agency
Preferred
Approach,
they
are
likely
to
experience
welfare
gains
associated
with
both
new
revenues
from
systems
that
exit
the
market
and
additional
revenues
from
price
increases
to
current
customers.
39
Waste
generators
that
already
send
their
waste
to
commercial
facilities
may
incur
significant
costs
as
a
result
of
the
standards.
As
described
above,
our
best
social
cost
estimate
in
this
assessment
assumes
that
demand
for
incineration
is
highly
inelastic
and
that
commercial
facilities
can
pass
compliance
costs
on
to
their
customers
in
the
form
of
higher
prices.
IEc
DRAFT:
May
2005
5­
24
Exhibit
5­
7
TOTAL
ANNUAL
COMPLIANCE
COSTS:
MARKET­
ADJUSTED
SCENARIO
AFTER
COMBUSTION
SYSTEM
CONSOLIDATIONS
(
millions
of
2002
dollars)
a
MACT
Options
Cement
Kilns
LWAKs
Commercial
Incinerators
On­
Site
Incinerator
s
Liquid
Boilers
Coal
Boilers
HCl
Productio
n
Furnaces
Generators
that
currently
send
waste
to
commercial
facilitiese
TOTALf,
g
Option
A
Floorb,
c,
d
$
2.3
­
($
0.3)
$
0.0
­
($
0.2)
($
11.4)
­

($
12.7)
$
1.8
$
31.0
$
1.4
$
0.6
$
0
­
$
4.2
$
26.3
Agency
Preferred
Approachb,
c,
d
$
2.3
­
($
0.3)
$
0.0
­
($
0.2)
($
11.4)
­

($
12.7)
$
1.8
$
31.1
$
2.6
$
0.6
$
0
­
$
4.2
$
27.5
Option
C
Floorb,
c,
d
$
5.8
­
$
0
$
0.0
­
($
0.5)
($
10.1)
­

($
12.8)
$
4.4
$
30.7
$
1.4
$
0.6
$
0
­
$
9.0
$
33.3
Option
D
Floorb,
c,
d
$
13.4
­
$
1.9
$
0.6
­
($
0.4)
($
10.1)
­

($
15.4)
$
3.9
­
$
4.0
$
41.4
$
1.4
$
0.8
$
0
­
$
17.9
$
51.9
­
$
52.0
Notes:

a.
"
Consolidation"
among
on­
site
systems
allows
for
non­
viable
private
combustion
systems
(
e.
g.,
boilers,
industrial
furnaces,
and
on­
site
incinerators)
to
consolidate
waste
flows
with
on­
site
incinerators
at
the
same
facility.

b.
Numbers
in
parentheses
indicate
a
net
welfare
gain.

c.
Ranges
reflect
differences
in
pricing
assumptions
between
the
two
market­
adjusted
analyses.
The
left
number
in
each
range
represents
the
sensitivity
analysis
of
the
market­
adjusted
scenario
(
i.
e.,
zero
cost
pass­
through
of
commercial
system
costs),
and
the
right
number
represents
the
principal
analysis
(
i.
e.,
100
percent
cost
pass­
through).

d.
Compliance
costs
also
include
costs
for
on­
site
combustion
systems
that
decide
to
stop
burning
wastes
on
site.
These
costs
include
shipping,
disposal,
and
alternative
energy
costs.

e.
Variation
in
impacts
for
generators
that
already
send
waste
to
commercial
facilities
reflects
how
potential
changes
in
hazardous
waste
combustion
prices
might
affect
this
group.

f.
Total
costs
include
government
costs.

g.
Totals
may
not
add
due
to
rounding.
IEc
DRAFT:
May
2005
40
Facilities
may
seek
alternative
waste
management
options.
However,
as
suggested
in
the
results
of
our
elasticity
analysis,
we
expect
very
few
facilities
to
pursue
alternative
options.

5­
25
ECONOMIC
IMPACT
MEASURES
In
addition
to
providing
compliance
cost
estimates,
the
HWC
MACT
economic
model
also
calculates
several
economic
impact
measures
which
describe
at
a
more
detailed
level
how
market
responses
change
the
shape
of
the
combustion
industry
and
affect
the
APCD
industry.
This
section
describes
the
approach
and
findings
for
each
of
the
following
economic
impact
measures:


Market
exits.
When
the
HWC
MACT
replacement
standards
are
implemented,
total
costs
of
combustion
will
increase,
making
it
uneconomical
for
some
facilities
to
continue
burning
hazardous
waste.
In
this
section,
we
estimate
the
incremental
number
of
systems
that
may
stop
burning
hazardous
waste
as
a
direct
result
of
the
MACT
standards.


Hazardous
waste
reallocated.
As
combustion
systems
exit
the
market,
waste
will
either
be
consolidated
to
other
systems
at
the
same
facility
or
transported
to
other
combustion
facilities.
40
In
this
section,
we
estimate
the
quantity
of
hazardous
waste
reallocated
under
the
HWC
MACT
replacement
standards.


Employment
impacts.
As
combustion
facilities
find
that
it
is
no
longer
economically
feasible
for
them
to
continue
burning
hazardous
waste,
workers
at
these
locations
may
be
displaced.
However,
the
replacement
standards
will
also
result
in
employment
gains
as
new
purchases
of
pollution
control
equipment
stimulate
additional
hiring
in
the
pollution
control
manufacturing
sector
and
as
additional
staff
are
required
at
combustion
facilities
for
various
compliance
activities.
In
this
section,
we
project
employment
changes
across
these
sectors.


Combustion
price
changes.
Combustion
prices
may
increase
with
the
higher
costs
of
waste
burning.
In
this
section,
we
estimate
price
increases
under
the
HWC
MACT
replacement
alternatives.


Other
industry
impacts.
The
MACT
standards
will
also
affect
the
cost
structure
of
the
combustion
industry
and
the
profits
of
hazardous
waste
combustion
facilities.
In
this
section,
we
estimate
changes
in
costs,
revenues,
and
profits
for
different
combustion
sectors
and
the
relationship
between
compliance
costs
and
current
pollution
control
expenditures.
IEc
DRAFT:
May
2005
5­
26
Economic
Impact
Summary
In
this
chapter,
we
present
analyses
of
and
results
for
several
different
economic
impacts
expected
to
result
from
the
HWC
MACT
replacement
standards.
Because
of
uncertainty
associated
with
the
data
and
methods
we
used
to
estimate
these
impacts,
our
results
represent
approximations
of
the
economic
impacts
associated
with
the
replacement
standards.
We
summarize
the
findings
in
Exhibit
5­
8
and
describe
major
results
below:


Across
MACT
options,
our
modeling
suggests
that
no
cement
kilns,
LWAKs,
coal
boilers,
or
HCl
production
furnaces
will
stop
burning
hazardous
waste.
We
expect
two
commercial
incinerator
systems
and
between
23
and
24
on­
site
incinerators
to
stop
burning
hazardous
waste
entirely,
rather
than
incur
the
rule's
compliance
costs.
In
addition,
we
estimate
that
the
Agency
Preferred
Approach
will
result
in
the
closure
of
11
liquid
boilers.


For
the
Agency
Preferred
Approach,
market
exit
and
waste
consolidation
activity
is
expected
to
result
in
47,100­
53,200
tons
of
waste
that
will
be
reallocated
from
combustion
systems
that
stop
burning,
representing
1.2­
1.4
percent
of
the
hazardous
waste
combusted
in
2001.
Under
the
Option
D
Floor,
the
quantity
of
reallocated
waste
may
increase
to
55,400
tons.
Across
HWC
MACT
replacement
options,
the
reallocated
wastes
are
likely
to
come
primarily
from
on­
site
incinerators
that
exit
the
market.
There
is
currently
adequate
capacity
available
at
commercial
facilities
to
absorb
this
extra
waste.


As
some
systems
stop
burning
hazardous
waste
and
others
invest
in
additional
pollution
control
and
monitoring
equipment,
employment
shifts
may
occur.
For
systems
that
consolidate
waste
burning
activities
or
that
stop
burning
altogether,
the
HWC
MACT
model
estimates
employment
dislocations
of
between
265
and
272
full­
time
equivalent
employees
under
the
Agency
Preferred
Approach.
More
than
60
percent
of
these
dislocations
are
expected
to
occur
among
on­
site
incinerators,
while
the
remaining
job
losses
are
expected
to
be
evenly
divided
between
commercial
incinerators
and
liquid
boilers.
We
do
not
expect
employment
dislocations
to
vary
significantly
across
different
HWC
MACT
replacement
options.
Employment
gains
of
approximately
104
full­
time
equivalent
employees
are
expected
in
the
pollution
control
industry
under
the
Agency
Preferred
Approach,
and
gains
of
approximately
246
full­
time
equivalent
employees
are
expected
at
combustion
facilities
that
continue
waste
burning
as
facilities
invest
in
new
pollution
control
equipment.
IEc
DRAFT:
May
2005
5­
27

As
commercial
combustion
facilities
incur
compliance
costs,
they
have
an
incentive
to
increase
prices
for
combustion.
Our
evaluation
of
waste
management
alternatives
suggests
that
combustion
demand
is
relatively
inelastic
and
that
prices
may
increase
by
0.4
percent
under
the
Agency
Preferred
Approach.


We
estimate
that
compliance
costs
associated
with
the
HWC
MACT
replacement
standards
will
increase
the
total
costs
of
burning
hazardous
waste
by
approximately
5.1
percent
for
cement
kilns,
1.2
percent
for
LWAKs,
and
0.9
percent
for
commercial
incinerators.
Despite
these
compliance
costs,
we
do
not
expect
most
commercial
systems
to
incur
significant
net
costs
because
of
the
rule,
since
several
generators
may
send
their
waste
to
commercial
facilities
as
a
result
of
the
standards.

Exhibit
5­
8
SUMMARY
OF
ECONOMIC
IMPACT
ANALYSIS
Economic
Impact
Measure
Replacement
MACT
Option
Option
1
Floor
Agency
Preferred
Approach
Option
2
Floor
Option
3
Floorb
Market
Exits
(
systems)

Cement
Kilns
0
0
0
0
Commercial
Incinerators
2
2
2
2
LWAKs
0
0
0
0
On­
Site
Incineratorsa
23
­
24
23­
24
23
­
24
23
­
24
Liquid
Boilers
11
11
11
14
­
16
Coal
Boilersa
0
0
0
0
HCl
Production
Furnaces
0
0
0
0
Quantity
of
Waste
Reallocateda
(
U.
S.
tons)
47,100
­
53,200
47,100
­
53,200
47,100
­
53,200
48,900
­
55,400
Employment
Impacts
Annual
Gainsa
339
350
399
555
­
559
Annual
Dislocationsa
265
­
272
265
­
272
265
­
272
278
­
295
Expected
Combustion
Price
Change
0.4%
0.4%
0.8%
1.7%

Notes:
a.
Ranges
reflect
differences
across
pricing
assumptions.
IEc
DRAFT:
May
2005
41
Net
costs
account
for
additional
revenues
facilities
receive
or
cost
savings
they
realize
because
of
the
HWC
MACT
replacement
standards.

42
Our
market
exit
estimates
are
a
function
of
several
assumptions,
including
the
following:
engineering
cost
data
characterizing
baseline
costs
of
waste
burning,
cost
estimates
for
pollution
control
devices,
prices
for
combustion
services,
and
facility­
specific
waste
quantity
data.

43In
total,
there
are
nine
LWAK
units
in
the
HWC
MACT
universe.
However,
one
LWAK
facility
has
four
LWAK
units
but
only
three
air
pollution
control
systems.
Similarly,
another
LWAK
facility
has
three
units
but
just
two
air
pollution
control
systems.

5­
28
Market
Exits
Our
market
model
uses
a
net
cost
function
to
identify
combustion
systems
that
will
stop
burning
hazardous
waste
as
a
result
of
the
HWC
MACT
replacement
standards.
41
Because
the
hazardous
waste
combustion
market
is
dynamic,
we
present
market
exit
estimates
incremental
to
any
projected
in
the
baseline.
42
Industry
consolidation
since
the
1990s,
however,
has
resulted
in
a
more
stable
combustion
market,
and
we
expect
no
further
system
closures
in
the
baseline.
The
analysis
in
Chapter
3
provides
further
information
on
our
assessment
of
baseline
viability.

For
most
combustion
sectors,
exiting
the
hazardous
waste
combustion
market
is
fundamentally
different
than
closing
a
plant.
Cement
kilns
or
LWAKs
that
stop
burning
hazardous
waste
as
fuel
do
not
stop
producing
cement
and
aggregate.
Similarly,
on­
site
incinerators
and
boilers
are
generally
located
at
large
industrial
facilities
such
as
chemical
plants
or
oil
refineries.
Production
at
these
facilities
is
likely
to
continue,
regardless
of
whether
hazardous
waste
is
treated
on
site
or
off
site.
Only
in
the
case
of
a
commercial
incinerator
would
exit
from
the
hazardous
waste
combustion
market
most
likely
signal
the
actual
closure
of
the
facility,
and
then
only
if
all
systems
close.

We
expect
a
relatively
small
percentage
of
systems
to
stop
burning
hazardous
waste
as
a
result
of
the
HWC
MACT
replacement
standards.
Some
of
these
systems
appear
to
be
marginally
viable
at
present
and
burn
low
quantities
of
hazardous
waste.
Depending
on
assumptions
about
price
increases
resulting
from
the
standards,
the
market
model
suggests
that
the
following
number
of
combustion
systems
will
cease
burning
hazardous
waste
under
the
Agency
Preferred
Approach:


Cement
Kilns
­­
zero
out
of
25
systems.


LWAKs
­­
zero
out
of
seven
systems.
43

Commercial
Incinerators
­­
two
of
15
systems.


Private
On­
Site
Incinerators
­­
23
or
24
of
92
systems.


Liquid
Boilers
 
11
of
104
systems
IEc
DRAFT:
May
2005
5­
29

Coal
Boilers
 
zero
of
12
systems

Hydrochloric
Acid
Production
Furnaces
 
zero
of
10
systems
Market
exits
are
summarized
in
Exhibit
5­
9.
As
shown
in
the
exhibit,
we
expect
the
HWC
MACT
replacement
standards
to
have
the
greatest
impact
on
on­
site
incinerators
and
liquid
boilers
(
which
include
process
heaters).
We
do
not
expect
market
exits
to
be
significant
for
any
of
the
commercial
sectors.
Our
model
predicts
that
two
commercial
incinerator
systems
may
exit
the
market.
However,
as
discussed
in
Chapter
3,
these
systems
may
be
unprofitable
in
the
baseline.
Therefore,
it
is
possible
that
these
systems
may
close
regardless
of
the
HWC
MACT
replacement
standards.

Exhibit
5­
9
SUMMARY
OF
MARKET
EXIT
IMPACTSa
System­
level
Market
Exits
by
Combustion
Sectorb
Cement
Kilns
LWAKs
Commercial
Incinerators
On­
site
Incinerators
Liquid
Boilers
Coal
Boilers
HCl
Production
Furnaces
Baseline
0
(
0%)
c
0
(
0%)
0d
(
0%)
0
(
0%)
0
(
0%)
0
(
0%)
0
(
0%)

Option
A
Floor
0
(
0%)
0
(
0%)
2
(
13%)
23
­
24
(
25%
­
26%)
11
(
11%)
0
(
0%)
0
(
0%)

Agency
Preferred
Approach
0
(
0%)
0
(
0%)
2
(
13%)
23
­
24
(
25%
­
26%)
11
(
11%)
0
(
0%)
0
(
0%)

Option
C
Floor
0
(
0%)
0
(
0%)
2
(
13%)
23
­
24
(
25%
­
26%)
11
(
11%)
0
(
0%)
0
(
0%)

Option
D
Floor
0
(
0%)
0
(
0%)
2
(
13%)
23
­
24
(
25%
­
26%)
14
­
16
(
13%
­
15%)
0
(
0%)
0
(
0%)

Notes:
a.
For
the
HWC
MACT
replacement
options,
market
exit
estimates
are
incremental
relative
to
the
baseline
and
include
only
those
systems
likely
to
stop
burning
hazardous
waste
as
a
direct
result
of
the
HWC
MACT
replacement
standards.
b.
Ranges
reflect
differences
across
pricing
assumptions.
The
lower
end
of
each
range
reflects
the
100
percent
cost
pass­
through
principal
analysis
for
the
market­
adjusted
scenario,
and
the
high
end
of
each
range
represents
the
results
of
the
no
cost­
pass
through
sensitivity
analysis.
c.
Numbers
in
parentheses
indicate
the
percentage
of
systems
in
a
given
sector
that
will
exit
the
market.
d.
Two
commercial
incinerator
systems
appear
unprofitable
in
the
baseline.
However,
because
we
estimate
relatively
small
losses
for
these
systems
and
because
our
profitability
calculations
depend
on
our
assumptions
about
the
distribution
of
waste
at
the
same
facility,
we
assume
that
these
two
systems
will
remain
open.
IEc
DRAFT:
May
2005
44
Some
waste
generators
may
choose
to
send
their
waste
to
treatment
facilities
in
other
countries.
However,
our
economic
model
assumes
that
generators
will
send
their
waste
to
domestic
disposal
facilities.
To
the
extent
that
generators
send
waste
abroad,
our
analysis
may
underestimate
costs
because
the
disposal
costs
for
these
facilities
are
not
a
transfer
to
commercial
facilities
within
the
United
States.

45
In
preparation
for
the
1999
Assessment,
we
addressed
one
concern
that
conditionally
exempt
small
quantity
generators
(
CESQGs)
may
discontinue
sending
their
hazardous
waste
to
kilns
for
use
as
fuel
post­
MACT
due
to
the
anticipated
price
increases
and
due
to
the
anticipated
exits
of
kilns
from
the
hazardous
waste­
burning
market.
Given
the
small
number
of
expected
kiln
market
exits,
and
the
relatively
inelastic
demand
for
combustion
services,
we
believe
that
CESQGs
will
continue
to
send
their
wastes
to
combustion
facilities.

5­
30
Hazardous
Waste
Reallocated
Combustion
systems
that
can
no
longer
cover
their
costs
will
stop
burning
hazardous
waste.
Waste
from
these
systems
will
be
reallocated
to
other
viable
combustion
systems
at
the
same
facility,
if
there
is
sufficient
capacity,
or
other
combustion
facilities
that
continue
burning.
44
Waste
management
alternatives
(
e.
g.,
solvent
reclamation)
may
be
an
option
for
a
few
systems.
Because
combustion
is
likely
to
remain
the
lowest
cost
option,
however,
we
expect
that
most
reallocated
waste
will
continue
to
be
managed
at
combustion
facilities.
45
In
the
combustion
market
model,
waste
from
non­
viable
systems
is
either
transported
to
off­
site
commercial
facilities
or
consolidated
to
viable
systems
at
the
same
facility.
A
system
can
consolidate
waste
on
site
only
if
an
on­
site
incinerator
at
the
same
facility
has
sufficient
capacity
available
to
accommodate
the
extra
waste.
Exhibit
5­
10
summarizes
our
approach
for
estimating
quantities
of
reallocated
wastes.

As
a
result
of
the
predicted
market
exits,
we
estimate
that
between
47,100
and
53,200
tons
of
hazardous
waste
will
be
reallocated
to
other
waste
management
systems
under
the
Agency
Preferred
Approach.
This
corresponds
to
between
approximately
1.2
and
1.4
percent
of
the
hazardous
waste
combusted
in
2001.
Exhibit
5­
11
summarizes
reallocated
waste
quantity
estimates
across
replacement
MACT
options
and
combustion
sectors.
Currently
there
is
sufficient
capacity
in
the
commercial
combustion
market
to
accommodate
all
of
the
waste
we
expect
to
be
reallocated.
IEc
DRAFT:
May
2005
5­
31
START
qi
=
tons
burned
at
system
i
Are
compliance
costs
for
system
i
at
Facility
X
>
offsite
treatment
costs?
System
keeps
burning;
Waste
quantity
diverted
=
0.
No
Exhibit
5­
10
Routine
for
Calculating
the
Quantity
of
Waste
Diverted
to
The
Commercial
Sector
Are
any
onsite
incinerators
still
burning
at
Facility
X.
Yes
No
System
i
stops
burning
hazardous
waste.
Waste
Quantity
Diverted
=
qi
Yes
Is
the
quantity
of
waste
at
i
>
the
excess
capacity
of
onsite
incinerators
staying
open
at
Facility
X.
System
i
stops
burning
hazardous
waste.
System
consolidates
waste
to
remaining
onsite
incinerators.
Waste
Quantity
Diverted
=
0
System
i
stops
burning
hazardous
waste.
Waste
Quantity
Diverted
=
q
i
No
Yes
IEc
DRAFT:
May
2005
5­
32
Exhibit
5­
11
SUMMARY
OF
QUANTITY
OF
HAZARDOUS
WASTE
REALLOCATED
(
tons)
a,
b
Cement
Kilns
LWAKs
Commercial
Incinerators
On­
site
Incinerators
Liquid
Boilers
Coal
Boilers
HAPFs
Waste
Consolidatedc
TOTALd,
e
Option
A
Floorf
0
0
13,200
30,700
­
36,700
3,200
0
0
8,200
­
14,200
47,100
­
53,200
Agency
Preferred
Approachf
0
0
13,200
30,700
­
36,700
3,200
0
0
8,200
­
14,200
47,100
­
53,200
Option
C
Floorf
0
0
13,200
30,700
­
36,700
3,200
0
0
8,200
­
14,200
47,100
­
53,200
Option
D
Floorf
0
0
13,200
30,700
­
36,700
4,900
­
5,500
0
0
8,200
­
14,200
48,900
­
55,400
Notes:

a.
Figures
presented
here
include
waste
reallocated
from
systems
that
consolidate
waste
into
other
systems
at
the
same
facility.

b.
Waste
reallocated
is
incremental
to
that
resulting
from
consolidation
and
market
exit
likely
to
occur
in
the
baseline
(
e.
g.,
without
the
HWC
MACT
replacement
standards).

c.
Consolidated
waste
represents
a
subset
of
waste
reallocated
from
hazardous
waste
combustion
systems.
Therefore
quantities
of
waste
consolidated
are
not
additive
with
the
estimates
presented
for
individual
system
types.

d.
Combusted
hazardous
waste
reported
to
BRS
in
2001:
3,774,567
tons.

e.
Sector
estimates
may
not
total
due
to
rounding.

f.
Ranges
reflect
differences
in
pricing
assumptions.
IEc
DRAFT:
May
2005
46
See
Appendix
E
for
a
more
detailed
discussion
of
the
methodology
for
the
employment
impacts
analysis.

5­
33
Employment
Impacts
The
HWC
MACT
replacement
standards
are
likely
to
cause
employment
shifts
across
the
hazardous
waste
combustion
market.
As
combustion
systems
exit
the
market,
workers
at
these
locations
may
be
displaced.
At
the
same
time,
the
rule
may
result
in
employment
gains
as
new
purchases
of
pollution
control
equipment
stimulate
additional
hiring
in
the
pollution
control
manufacturing
sector
and
as
additional
staff
are
required
at
combustion
facilities
for
various
compliance
activities.
In
the
section
below,
we
describe
our
approach
for
analyzing
employment
changes.
46
We
then
describe
the
results
of
this
analysis
for
both
employment
gains
and
dislocations.

Primary
employment
dislocations
in
the
combustion
industry
are
likely
to
occur
when
combustion
systems
stop
burning
hazardous
waste.
For
each
system
that
stops
burning
waste,
employment
dislocations
include
operating
and
maintenance
labor,
as
well
as
supervisory
and
administrative
labor.
Relative
to
their
total
employment
levels,
we
expect
relatively
minor
employment
dislocations
at
recovery
systems
(
e.
g.,
kilns,
boilers,
and
industrial
furnaces)
and
on­
site
incinerators.
If
energy
recovery
systems
stop
burning
hazardous
waste,
they
will
still
continue
operating,
but
will
use
different
fuels.
In
addition,
boilers
and
on­
site
incinerators
will
need
to
maintain
hazardous
waste
management
staff
to
collect
waste
and
prepare
it
for
shipment
to
another
location.
The
only
jobs
lost
are
those
associated
with
the
operation
of
the
incinerator.
In
contrast,
if
a
commercial
incinerator
exits
the
market,
each
worker
at
that
facility
is
likely
to
lose
his
or
her
job
since
incineration
is
the
facility's
core
business.
Exhibit
5­
12
outlines
our
methodology
for
estimating
employment
dislocations.

In
addition
to
employment
dislocations,
the
HWC
MACT
replacement
standards
will
also
lead
to
job
gains
as
firms
make
investments
to
comply
with
the
requirements
of
the
replacement
standards.
Employment
gains
will
occur
in
the
pollution
control
equipment
manufacturing
industry,
which
produces
devices
that
help
systems
comply
with
the
standards.
We
also
anticipate
employment
increases
at
combustion
facilities
as
additional
operation
and
maintenance
will
be
required
for
the
new
pollution
equipment
and
staff
that
will
be
needed
for
other
compliance
activities,
such
as
new
reporting
and
record­
keeping
requirements.
Our
approach
for
estimating
these
gains
is
illustrated
in
Exhibit
5­
13.
IEc
DRAFT:
May
2005
5­
34
Exhibit
5­
12
Procedure
to
Estimate
Employment
Dislocations
System
stop
burning
hazardous
waste?
Assign
0
dislocations
to
system.
No
Yes
Is
this
the
only
system
at
the
facility?
Yes
Assign
system
and
100
percent
of
facility
employment
dislocations.

No
R
=
Ratio
of
system
capacity
to
facility
capacity.
Total
dislocations
=
system
dislocations
+
R(
possible
facility
dislocations)

We
normalize
estimates
of
both
employment
gains
and
dislocations
as
full­
time
equivalent
(
FTE)
employees
on
an
annual
basis.
That
is,
short­
term
employment
increases
may
occur
in
the
pollution
control
equipment
industry
as
combustion
facilities
make
their
initial
equipment
purchases.
We
average
these
surges
over
the
lifetime
of
the
pollution
control
equipment
so
that
estimates
of
employment
gains
and
dislocations
are
presented
in
consistent
terms.
Results
from
the
employment
impact
analysis
are
summarized
in
Exhibits
5­
14
and
5­
15.
We
also
describe
these
results
in
more
detail
below.
IEc
DRAFT:
May
2005
5­
35
Exhibit
5­
13
PROCEDURE
USED
TO
ESTIMATE
EMPLOYMENT
GAINS
Pollution
Control
Equipment
Costs
Operating
and
Maintenance
Costs
Reporting
and
Record­
Keeping
Costs
Multiply
each
cost
category
by
the
percentage
of
costs
the
industry
spends
on
labor
Divide
by
average
hourly
wage
in
that
industry
Divide
by
average
total
hours
a
full­
time
employee
in
the
pollution
control
industry
is
expected
to
work
each
year
Annual
employment
gains
estimate
by
category
IEc
DRAFT:
May
2005
5­
36
Employment
Dislocation
Results
In
general,
our
modeling
suggests
that
employment
dislocations
do
not
vary
a
great
deal
across
the
replacement
MACT
options.
We
expect
total
employment
dislocations
to
range
from
265
to
272
FTEs
under
the
Agency
Preferred
Approach.
Employment
dislocations
may
rise
to
approximately
278
to
295
FTEs
under
the
Option
D
Floor.
Among
the
different
combustion
sectors,
on­
site
incinerators
are
expected
to
be
responsible
for
more
than
60
percent
of
these
job
losses,
which
reflects
both
the
large
number
of
on­
site
incinerators
in
the
universe
as
well
as
the
relatively
numerous
exits
expected
within
this
sector.
The
remaining
employment
dislocations
are
expected
to
occur
at
liquid
boilers
and
commercial
incinerators,
both
of
which
are
expected
to
experience
18
percent
of
the
employment
losses
associated
with
the
Agency
Preferred
Approach.

Exhibit
5­
14
SUMMARY
OF
ESTIMATED
EMPLOYMENT
DISLOCATIONSa,
b
Cement
Kilns
LWAKs
Commercial
Incinerators
On­
site
Incinerators
Liquid
Boilers
Coal
Boilers
HCl
Prod.
Furnace
TOTALd
Option
A
Floorc
0
0
48
169
­
176
48
0
0
265
­
272
Agency
Preferred
Approachc
0
0
48
169
­
176
48
0
0
265
­
272
Option
C
Floorc
0
0
48
169
­
176
48
0
0
265
­
272
Option
D
Floorc
0
0
48
169
­
176
62
­
71
0
0
278
­
295
Notes:
a.
Employment
loss
estimates
are
incremental,
or
directly
attributable
to
the
HWC
MACT
replacement
standards.
b.
Employment
impacts
are
national
estimates
and
are
based
on
direct
impacts
only.
They
ignore
any
secondary
spill­
over
effects.
c.
Ranges
reflect
differences
in
pricing
assumptions.
d.
Sums
of
individual
sector
dislocations
may
not
equal
total
dislocations
because
of
rounding.
IEc
DRAFT:
May
2005
5­
37
Employment
Gain
Results
We
estimate
annual
employment
gains
of
approximately
350
FTEs
under
the
Agency
Preferred
Approach.
Of
these
gains,
59
percent
are
expected
to
occur
at
facilities
with
liquid
or
coal
boilers.
This
concentration
of
employment
gains
at
boilers
reflects
the
large
number
of
boilers
in
the
HWC
MACT
universe.
In
addition,
because
boilers
are
not
regulated
under
the
2002
Interim
Standards,
they
are
required
to
achieve
greater
emissions
reductions
under
the
replacement
standards
than
other
systems.
Achieving
these
reductions
requires
significant
personnel
time.
An
additional
30
percent
of
the
employment
gains
associated
with
the
Agency
Preferred
Approach
are
expected
to
occur
in
the
pollution
control
equipment
industry.
In
addition,
our
modeling
indicates
that
commercial
combustion
facilities
are
likely
to
be
responsible
for
just
6
percent
of
employment
gains,
reflecting
the
relatively
small
number
of
these
systems
in
the
hazardous
waste
combustion
universe.

Exhibit
5­
15
SUMMARY
OF
ESTIMATED
EMPLOYMENT
GAINSa,
b
MACT
Option
Pollution
Control
Device
Producers
Cement
Kilns
LWAKs
Commercial
Incinerators
On­
site
Incinerators
Liquid
Boilers
Coal
Boilers
HAPFs
TOTAL
Option
A
Floor
97
15
1
5
12
193
10
6
339
Agency
Preferred
Approach
104
15
1
5
12
193
14
6
350
Option
C
Floor
124
33
1
11
23
191
10
6
399
Option
D
Floorc
169
­
170
81
5
10
18
255
­
258
10
6
555
­
559
Notes:
a.
Estimates
are
sensitive
to
a
number
of
assumptions,
including
wage
rates
and
labor
intensity
in
each
combustion
sector.
b.
Estimates
are
national
and
based
on
direct
employment
impacts
only,
ignoring
any
secondary
spill­
over
effects.
Therefore,
they
do
not
account
for
job
displacement
across
sectors
as
investment
funds
are
diverted
from
other
areas
of
the
economy
and
should
not
be
interpreted
as
net
gains.
c.
Ranges
reflect
differences
in
pricing
assumptions.
IEc
DRAFT:
May
2005
47
In
fact,
other
factors
such
as
transportation
costs
will
affect
which
facilities
are
the
least
expensive
to
particular
generators.
In
addition,
the
price
of
combustion
will
vary
by
the
method
of
delivery
(
e.
g.,
bulk
versus
drum),
the
form
of
the
waste
(
e.
g.,
liquid
versus
solid),
and
the
contamination
level
(
e.
g.,
metals
or
chlorine
content).
These
factors
make
it
more
difficult
to
compare
various
waste
management
options.

5­
38
Employment
Impact
Conclusions
Overall,
a
more
stringent
regulatory
approach
will
lead
to
both
slightly
higher
job
dislocations,
as
more
systems
are
expected
to
stop
burning
hazardous
waste,
and
more
job
gains,
as
compliance
requirements
stimulate
additional
hiring.
While
this
analysis
may
suggest
overall
net
job
creation
under
particular
options
and
within
particular
combustion
sectors,
such
a
conclusion
is
inaccurate.
Because
the
gains
and
dislocations
occur
in
different
sectors
of
the
economy,
they
should
not
be
added
together;
doing
so
would
mask
important
distributional
effects
of
the
rule.
In
addition,
employment
gain
estimates
only
reflect
direct
impacts
and
therefore
do
not
account
for
job
displacement
across
sectors
as
investment
funds
are
diverted
to
APCD
manufacturing
from
other
areas
of
the
economy.

Combustion
Price
Increases
All
combustion
facilities
that
remain
in
operation
will
experience
increased
costs
under
the
MACT
standards.
To
protect
their
profits,
commercial
combustion
facilities
will
have
an
incentive
to
pass
these
increased
costs
on
to
their
customers
in
the
form
of
higher
combustion
prices.
Generators
potentially
will
have
to
pay
higher
prices
unless
they
can
implement
less
expensive
waste
management
alternatives.

Exhibit
5­
16
illustrates
a
hypothetical
example
of
how
price
pass­
through
would
work
in
theory.
This
exhibit
illustrates
a
number
of
important
principles
about
hazardous
waste
combustion
markets.


Waste
will
be
sent
to
the
least
expensive
alternatives
first,
all
else
being
equal.
47

Both
baseline
costs
of
hazardous
waste
combustion
and
new
compliance
costs
vary
significantly
across
combustion
systems,
even
within
the
same
sector.
Thus,
regulatory
changes
can
affect
different
systems
in
very
different
ways.


Prices
will
rise
to
the
point
at
which
all
demand
for
hazardous
waste
combustion
is
met,
which
depends
on
the
cost
of
alternatives
to
combustion.
In
the
hypothetic
example
presented
in
Exhibit
5­
16,
the
combustion
market
price
cannot
exceed
$
230
per
ton;
otherwise
generators
engage
in
the
less
IEc
DRAFT:
May
2005
48
The
$
230
per
ton
estimate
in
Exhibit
5­
16
is
presented
for
illustrative
purposes
only.
It
does
not
necessarily
reflect
the
actual
cost
of
waste
minimization.

5­
39
costly
alternative
of
waste
minimization.
48
At
a
price
of
$
230
per
ton,
facilities
with
waste
management
costs
of
less
than
$
230
per
ton
(
systems
A,
B,
and
C)
earn
a
profit
because
combustion
is
then
a
viable
alternative
to
waste
minimization.
Since
waste
generators
are
indifferent
between
paying
$
230
per
ton
for
combustion
services
and
engaging
in
waste
minimization
at
a
cost
of
$
230
per
ton,
$
230
is
the
market
clearing
price
of
combustion
services.


This
example
illustrates
the
concept
presented
earlier
in
Exhibit
5­
3
that
facilities
with
high
waste
minimization
costs
are
likely
to
have
inelastic
demand
for
commercial
combustion
services.
As
long
as
combustion
prices
do
not
exceed
their
high
waste
minimization
costs,
such
facilities
will
absorb
increases
in
combustion
pricing
rather
than
reduce
the
amount
of
waste
they
generate.

Exhibit
5­
16
SIMPLIFIED
EXAMPLE
OF
DETERMINATION
OF
NEW
MARKET
PRICE
FOR
COMBUSTION
Assume
100
Tons
Require
Management
Combustion
System
A
Combustion
System
B
Combustion
System
C
Waste
Minimization
Combustion
System
D
Treatment
Cost/
ton
$
145
$
175
$
220
$
230
$
240
Capacity
(
tons)
35
25
35
100
300
Tons
Managed
35
25
35
5
0
Remaining
tons
requiring
treatment
100­
35=
65
65­
25=
40
40­
35=
5
5­
5=
0
0
The
real
hazardous
waste
combustion
marketplace
is
much
more
complex
than
the
example
above.
Estimating
the
market
clearing
price
of
combustion
is
difficult
due
to
pricing
variations
by
region,
waste
stream,
and
individual
combustion
service
providers.
Instead,
we
have
adopted
some
simplifying
assumptions
that
should
allow
for
a
reasonable
approximation
of
price
changes
in
combustion
markets.

As
indicated
in
the
"
Modeling
Market
Dynamics"
section
above,
we
assume
that
demand
for
hazardous
waste
combustion
is
inelastic
because
of
the
relatively
high
cost
of
combustion
alternatives.
Available
economic
data
on
the
cost
of
waste
management
alternatives,
including
source
reduction
and
other
waste
minimization
options,
are
not
precise
enough
for
us
to
pinpoint
the
maximum
price
increase
that
combustors
could
pass
through
to
generators.
However,
based
on
the
analysis
of
waste
IEc
DRAFT:
May
2005
49
This
assumption
may
not
reflect
actual
changes,
as
combustion
prices
for
more
contaminated
waste
forms
may
increase
by
a
higher
percentage.

50
To
assess
the
potential
for
waste
to
be
shipped
to
commercial
incinerators
in
Canada
rather
than
the
United
States,
we
calculated
the
additional
transport
costs
required
for
on­
site
incinerators
in
the
HWC
MACT
universe
to
send
their
waste
to
a
Canadian
facility
instead
of
a
U.
S.
facility.
These
additional
transport
costs
included
mileage
costs,
waste
registration
requirements
for
waste
shipped
to
Ontario,
and
manifest
requirements
for
waste
shipped
to
Ontario.
The
results
of
this
analysis
indicate
that
no
more
than
12,000
additional
tons
of
hazardous
waste
are
likely
to
be
shipped
to
commercial
incinerators
in
Canada
under
the
Agency
Preferred
Approach.
This
tonnage
represents
approximately
1.0
percent
of
the
hazardous
waste
managed
in
U.
S.
on­
site
incinerators
in
2001.
If
this
waste
is
diverted
to
commercial
incinerators
in
Canada
instead
of
U.
S.
commercial
incinerators,
the
net
costs
of
the
rule
for
commercial
incinerators
in
the
U.
S.
will
be
higher
than
the
estimates
presented
in
this
chapter.

5­
40
management
alternatives
(
summarized
in
Chapter
6),
we
believe
that
demand
for
combustion
may
be
sufficiently
inelastic
for
commercial
combustion
facilities
to
pass
through
100
percent
of
their
compliance
costs.
However,
it
is
also
true
that
most
commercial
combustion
systems
have
available
capacity
and
that
commercial
systems
may
face
competition
from
facilities
in
other
countries.
We
therefore
conducted
a
sensitivity
analysis
where
prices
do
not
deviate
from
their
baseline
levels.

Ideally,
we
would
estimate
new
prices
based
on
the
cost
increase
of
the
marginal
combustion
system
(
e.
g.,
the
most
costly
system
required
to
meet
market
demand).
Given
the
uncertainty
associated
with
estimates
of
baseline
and
incremental
compliance
costs,
however,
we
have
decided
not
to
base
our
market­
adjusted
cost
estimate
on
data
associated
with
one
individual
system.
Instead,
we
rely
on
the
cost
estimates
of
all
commercial
combustion
systems
and
calculate
the
percent
price
increase
necessary
for
the
sector
as
a
whole
to
recover
its
compliance
costs
(
e.
g.,
the
principal
analysis
described
in
the
"
Modeling
Market
Dynamics"
section
of
this
chapter).
Under
this
scenario,
we
assume
the
same
percentage
price
increase
for
all
waste
forms.
49
Exhibit
5­
17
shows
the
increased
prices
estimated
with
a
100
percent
cost
pass­
through.
Under
the
Agency
Preferred
Approach,
our
modeling
suggests
a
price
increase
of
approximately
0.4
percent.
We
expect
the
most
significant
price
increase
(
1.7
percent)
under
the
Option
D
Floor.
International
and
regional
competition,
however,
could
mitigate
any
potential
price
increases.
In
the
face
of
higher
prices,
waste
generators
may
consider
sending
waste
to
treatment
facilities
in
Canada,
Mexico,
or
Europe.
BRS
data
show
that
some
U.
S.
waste
generators
already
do
so.
50
IEc
DRAFT:
May
2005
5­
41
Exhibit
5­
17
COMBUSTION
PRICES
PER
TON
DUE
TO
ASSUMED
COST
PASS
THROUGH
(
2002
dollars)

MACT
Options
Halogenated
Liquids
Nonhalogenated
Liquids
Gases
Halogenated
Sludge
Nonhalogenated
Sludge
Lab
Packs
Halogenated
Solids
Nonhalogenated
Solids
Baseline
Pricesa
$
1,089
$
223
$
1,786
$
964
$
603
$
3,708
$
744
$
507
Option
A
Floor
$
1,094
$
224
$
1,793
$
967
$
605
$
3,722
$
747
$
509
Agency
Preferred
Approach
$
1,094
$
224
$
1,793
$
967
$
605
$
3,722
$
747
$
509
Option
C
Floor
$
1,098
$
225
$
1,801
$
972
$
608
$
3,739
$
751
$
511
Option
D
Floor
$
1,108
$
227
$
1,816
$
980
$
613
$
3,770
$
757
$
515
Notes:

a.
Baseline
prices
from
the
Hazardous
Waste
Resource
Center,
http://
www.
etc.
org/
costsurvey8.
cfm.
Prices
adjusted
to
2002
dollars
using
the
GDP
deflator.
IEC
DRAFT:
May
2005
51
On­
site
incinerator
profitability
is
the
difference
between
the
cost
of
sending
waste
off
site,
including
disposal
fees
and
transport
costs,
and
the
cost
of
treating
waste
on
site.
Chapter
3
contains
a
detailed
description
of
our
methods
for
assessing
system
profitability.

52
Our
profitability
analysis
considers
only
operating
profits
associated
with
burning
hazardous
waste
(
e.
g.,
total
sales
minus
operating
costs).
It
does
not
examine
overall
company
performance
and
post­
tax
profits.

53
According
to
Pollution
Abatement
Costs
and
Expenditures:
1999,
the
total
pollution
expenditures
for
the
cement
industry
in
1999
were
$
301.70
million,
which
is
$
318.9
million
in
2002
dollars
using
the
GDP
implicit
price
deflator.
Because
only
12
percent
of
cement
kilns
burn
hazardous
waste,
we
attribute
$
38.3
million
to
cement
kilns
that
burn
hazardous
waste
(
0.12
*
$
318.9).
However,
costs
reported
in
PACE
do
not
reflect
the
2002
Interim
Standards,
which
require
hazardous
waste
burning
cement
kilns
in
the
current
universe
to
spend
an
additional
$
6.7
million
per
year
on
pollution
controls.

54
Adequate
data
were
not
available
to
calculate
the
percent
increase
in
total
pollution
control
expenditures
for
the
other
combustion
sectors.

55
These
estimates
do
not
account
for
energy
savings
at
cement
kilns
and
LWAKs
that
receive
additional
waste
from
boilers
that
stop
burning
hazardous
waste.

5­
42
Other
Industry
Impacts
Combustion
Profit
Changes.
Profits
for
commercial
combustion
facilities
could
increase
as
a
result
of
the
HWC
MACT
replacement
standards,
whereas
profitability
for
on­
site
systems
will
likely
fall.
51
Under
the
Agency
Preferred
Approach,
commercial
incinerator
profits
are
estimated
to
increase
by
approximately
6.7
percent.
These
additional
profits
are
due
largely
to
increased
waste
treatment
revenues
from
generators
that
decide
to
send
their
waste
off
site
in
response
to
the
HWC
MACT
replacement
standards.
In
contrast,
the
profits
of
cement
kiln
hazardous
waste
burning
operations
are
estimated
to
remain
relatively
constant,
and
LWAK
waste
burning
profits
are
expected
to
increase
by
just
0.4
percent.
Adequate
data
are
not
available
to
measure
changes
in
boiler
and
onsite
incinerator
profitability.
However,
since
these
systems
receive
no
additional
waste
because
of
the
HWC
MACT
replacement
standards,
their
profitability
will
likely
decline.
52
Cost
Structure
of
the
Combustion
Industry.
Compliance
expenditures
associated
with
the
HWC
MACT
replacement
standards
are
expected
to
increase
total
pollution
control
expenditures
(
i.
e.,
all
expenditures
associated
with
limiting
releases
to
air,
land,
and
water)
by
approximately
7.0
percent
at
cement
kilns
that
treat
hazardous
waste.
53,54
Total
costs
of
waste­
burning
increase
by
more
than
5.1
percent
for
cement
kilns
under
the
Agency
Preferred
Approach,
while
total
waste
burning
costs
increase
by
about
1.2
percent
for
LWAKs.
55
Commercial
incinerator
hazardous
waste
treatment
costs
increase
by
approximately
0.9
percent
as
a
result
of
the
HWC
MACT
replacement
standards.
However,
overall
waste
burning
costs
still
remain
significantly
low
for
hazardous
waste
burning
cement
kilns
compared
to
commercial
incinerators.
