CALIFORNIA AIR PLAN'S COSTS AND BENEFITS DISPUTED

A new study disputes claims by a California agency that the controversial southern California air quality management plan (AQMP) is cost effective.

The 20 year AQMP would impose perhaps the most sweeping regulatory changes related to environmental concerns ever seen. It involves 160 control measures for air emissions organized into three progressively more stringent tiers and envisions full compliance with federal air quality standards by 2010.

In its first year alone, the AQMP would cost the petroleum industry more than $300 million, industry officials have estimated.

Among new rules drastically affecting business and lifestyles in southern California, the AQMP includes new measures to mandate use of alternative fuels to meet federal and state air quality standards. Ultimately, say industry officials, the plan could shut down petroleum operations in the state.

The AQMP, approved by the South Coast Air Quality Management District (Scaqmd) and California Air Resources Board in 1989, is under review by the Environmental Protection Agency.

A 1989 report prepared for Scaqmd claimed that a best conservative estimate of health related benefits resulting from the plan would total $9.4 billion/year under Tier I controls for ozone and particulates. The report said benefits could total as much as $20.3 billion/year.

BENEFITS DISPUTED

A study conducted by National Economic Research Associates (NERA) for the California Council for Environmental & Economic Balance (Cceeb) took issue with Scaqmd's claims.

With the wide range of estimates, the study reflects scientific uncertainty about the health effects of air pollutants and how physical effects are valued in monetary terms, Cceeb said.

NERA also criticized the Scaqmd study's methodology, contending that almost two thirds of the benefits estimated in that report are based upon studies of health effects that have not been accepted by the Environmental Protection Agency, Congress's Clean Air Science Advisory Committee, or the majority of the scientific community.

NERA also noted that the 1989 study performed for Scaqmd estimated benefits dramatically higher than those Scaqmd itself projected less than a year earlier.

Scaqmd's 1988 projections of AQMP annual health benefits covered a low/midrange/high estimate of $200 million to $2.4 billion to $6.4 billion, close to NERA's estimates.

Scaqmd approved the AQMP in March 1989, then submitted the plan to CARB. In reporting to CARB on implementation of the plan, Scaqmd released the more recent study in June 1989.

NERA estimates the AQMP's annual health benefits at $200 million to $1.6 billion to $6.7 billion.

Adding Scaqmd's 1988 estimate of nonhealth benefits, such as improved visibility, yields a midrange estimate of total benefits of about $2.9 billion/year, or about $600/year/household in the South Coast basin, NERA said.

HIGHER COSTS

The AQMP's costs would be about $12.8 billion/year, or almost $2,700/year/household, NERA said. NERA calculated those costs by extrapolating Scaqmd cost estimates of $2.6 billion/year for achieving about one-fourth of the emissions reductions required under AQMP.

Almost 80% of the plan's cost would be paid by residents, mainly through higher prices, the study concluded.

By adopting the most cost-effective of its proposed rules, Scaqmd could achieve 80% of the overall planned benefits by spending only 40% of the projected costs, NERA said.

Cceeb also contends that the AQMP would act like a sales tax that hits the poor the hardest. Cost burden of the plan as a percentage of income would be as much as 17.7% for households earning less than $7,500/year compared with 6.1% for households making more than $75,000/year.

Cceeb is a nonprofit, nonpartisan association, headed by founding Chairman and former California Gov. Edmund G. (Pat) Brown, of labor, industry, and community leaders in Los Angeles advocating programs that benefit the environment and the economy.

NERA, Cambridge, Mass., economic consultants, conducted the study with input from the Harvard School of Public Health and Resources for the Future, a Washington, D.C., study center.