Research Projects

Project at a Glance

Project Status: complete

Report Published August 1990:

Title: Study of economic incentives to control photochemically reactive compounds from consumer products

Principal Investigator / Author(s): Gibbs, Michael J

Contractor: ICF Consulting Associates, Incorporated

Contract Number: A732-150


Research Program Area: Economic Analysis

Topic Areas: Benefits, Chemistry & Reactivity, Impacts


Abstract:

Consumer products are an important and largely uncontrolled source of photochemical reactive organic compound (PROC) emissions in California. These emissions, also referred to as volatile organic compounds (VOCs), are precursors to tropospheric ozone formation commonly known as smog. There are hundreds of consumer products that emit PROCs. Consumer products packaged in aerosol containers emit the largest volume of PROCs among all consumer products. Aerosol products are used for a variety of purposes, including: insecticides; household cleaning and laundry; shaving cream; underarm deodorants and antiperspirants; hair care and styling; Automotive cares; and paints. Because there are numerous consumer products, it may not be practical to use conventional methods for emissions control. Economic incentives can control emissions from consumer products in a more timely and cost effective manner. This study investigates and evaluates two economic incentive systems as potential control strategies for reducing PROC emissions from consumer products. Based on a review of existing incentive systems, a range of economic incentive systems is described. Two systems, fees and quotas, are evaluated for two consumer products, hair sprays and spray paints. A fee system imposes a fee per pound of PROC that is used in a consumer product. A quota system imposes a total limit on the amount of PROCs that can be used in consumer products in the State of California. To evaluate the implementation of economic incentives for these two products we defined how the fees and quotas would be implemented. Examples of existing fee and quota systems were examined and the hair spray and spray paint markets were described in order to define fee and quota systems that would be appropriate for these two products. The fee and quota systems were then evaluated in terms of their costs and the likely emissions reduction that could be achieved. To perform this evaluation, the following information was developed: 0 based on estimates of product formulations, total sales, and product sizes, we estimated PROC emissions in California in 1987 at 14,000 tons for hair sprays and 6,000 tons for spray paints, based on reviews of the trade literature and discussions with industry experts, we identified the currently available and potential future technologies for reducing PROC emissions from the two products, including product reformulation and alternative packaging; and0 using estimates of ingredient and packaging costs and capital costs of upgrading existing product filling equipment, we estimated the costs of implementing the technologies for reducing PROC emissions. Using the above information and estimates of consumer demand, we estimated the likely reduction in PROC emissions and the costs of achieving those reductions for a range of fee levels. For a range of quota levels we estimated the likely costs of achieving the quota reductions. The results of the analysis indicate that the ability to reduce PROC emissions from hair sprays is sensitive to assumptions regarding the availability and suitability of various product reformulation, including reformulation that include partially-halogenated chlorofluorocarbon compounds (HCFCs) and mixtures of dimethyl ether (ME) and water. The ability to reduce PROC emissions from spray paints is sensitive to assumptions about the ability to improve consumer awareness about high-solids paint formulations. The marketability of such paints to "average" consumers will be improved by educating consumers on paint performance. Based on this study, we believe that economic incentives can be used to reduce PROC emissions from hair spray and spray paint products. Because cost is the principal barrier preventing the wide-spread use of most of the PROC-reducing formulations and packaging systems, an incentive fee or quota is appropriate for promoting the use of the desired formulations and packaging systems. We believe that it will be best to direct the economic incentives to product marketers and to track the performance of the program at this level. Because the expected performance of incentive fees and quotas will always be uncertain, it is preferred to implement economic incentives for a group of products, as opposed to for a single product. This approach reduces the program's reliance on the expected performance of any single emissions reducing technique and thereby limits the likelihood of inadvertently imposing large costs. The analysis of the fee and quota systems in this study indicates that fee systems can produce very large government revenues. A quota system may be preferred because it will likely result in smaller near-term impacts for a given level of emissions reduction. However, because fee systems have advantages in terms of long-term economic efficiency, additional work should include analyses of innovative fee systems that can provide adequate incentives while avoiding the generation of large revenues. Given these results we recommend that further research be undertaken to design economic incentive approaches for groups of products for which cost is the primary factor that currently limits the introduction of low-PROC product formulations.


 

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