Retrospective Evaluation of the Costs of Complying with Light-Duty Vehicle Surface Coating Requirements

Abstract

This paper compares the U.S. Environmental Protection Agency’s (EPA) ex ante compliance cost estimates for the 2004 Automobile and Light-Duty Truck Surface Coating National Emission Standards for Hazardous Air Pollutants to ex post evidence on the actual costs of compliance based on ex post cost data gathered from a subset of the industry via pilot survey and follow-up interviews. Unlike many prior retrospective studies on the cost of regulatory compliance, we use this newly gathered information to identify the key drivers of any differences between the ex ante and ex post estimates. We find that the U.S. EPA overestimated the cost of compliance for the plants in our sample and that overestimation was driven primarily by differences in the method of compliance rather than differences in the per-unit cost associated with a given compliance approach. In particular, the U.S. EPA expected facilities to install pollution abatement control technologies in their paint shops to reduce emissions of hazardous air pollutants, but instead these plants complied by reformulating coatings.