Ex ante and ex post cost estimates of the Cluster Rule and MACT II Rule

This paper compares EPA’s ex ante cost analysis of the Cluster Rule, EPA’s first integrated, multi-media regulation, and MACT II Rule to an ex post cost assessment. The goal of this assessment is to determine if actual costs diverged from ex ante costs and, if so, what factors caused this divergence. We find the EPA ex ante costs overestimated the ex post capital costs for the Cluster Rule by 30 to 100%. Contributing factors appear to be use of cleaner technology, flexible compliance options, site-specific rules, shutdowns and consolidations. Ex ante estimates for the MACT II Rule are found to be overestimated by 25% for capital costs and 200 or more percent for annual costs. The primary reason for the overestimate is the use of the bubble compliance strategy that required fewer paper mills to install pollution abatement equipment than anticipated by EPA.