1. The U.S. Practice of Regulatory Review Practical Exercise: Formaldehyde Standards for Composite Wood Products Act
Shannon Joyce and Christine Kymn
White House Office of Information and Regulatory Affairs
U.S./Colombia RIA and GRP Workshop
Bogota, Colombia
April 13, 2018
Any views expressed here are solely those of the presenter, and do not necessarily reflect the position of the Office of Management and Budget or the Executive Office of the President.

2. Formaldehyde Standards for Composite Wood Products Act
Composite Wood Products – found in manufactured homes, furniture, cabinets, other architectural components
Formaldehyde – colorless, flammable gas that has a strong odor at room temperature. Found in resins used in the manufacture of composite wood products, as well as other household products (soap, carpet, fabric softener, plastics and paper coatings), cigarette smoke and is also a natural by-product of human metabolism (endogenous levels in the body).

3. Formaldehyde Standards for Composite Wood Products Act
Half-life of Formaldehyde – 1.5 years
Health impacts of Formaldehyde Emissions – subject to exposure and concentrations, can be a human carcinogen; irritant of eyes, nose, throat. Possible fertility and respiratory effects.

4. Identify need to Regulate
What is the market failure?
Negative externalities from formaldehyde emissions
Information asymmetries – knowledge of risks from formaldehyde emissions
What is the justification for regulating at a federal level?
Interstate commerce
Lack of property rights for externalities

5. What is in the baseline?
Hurricane Katrina (2005), Manufactured Homes inspires
Airborne Toxics Control Measure to reduce formaldehyde emissions in composite products (California Air Resources Board (CARB) 2008).
Other? Consider other sources of formaldehyde emissions.

6. Potential Regulated Entities
Stock Panel Producers – manufacturers of hardwood plywood (CARB ATCM)
Wood Veneer Laminated Producers – glue wood veneer to particle board (CARB ATCM labeling but not emissions or certifications)
Fabricators – use composite wood to produce parts or finished goods such as furniture (must use CARB ACTM certified parts and labeling)
Wholesalers and Retailers – sellers of composite wood products (CARB ACTM labeling only)
Construction Firms – (CARB ACTM fabricators and retailers)
Third Party Certifiers (TPCs) – audit and review emissions tests and quality (CARB ACTM)

7. Regulated Entities

8. Consideration of Alternatives
Legislatively required: Title VI of the Toxic Substances Control Act (TSCA), also known as the Formaldehyde Standards for Composite Wood Products Act, established emissions standards mirroring the CARB ACTM. (SBREFA panel rec)
Policy discretion: Title VI also provided the Environmental Protection Agency (EPA) with the discretion to add additional requirements.

9. Consideration of Alternatives

10. Consideration of Alternatives and Trade Offs
At the proposed rule stage, EPA considered significantly exceeding the requirements under CARB ACTM. More stringent recordkeeping requirements (3 yrs v. 2yrs). Recall 1.5 yr half-life
Increased requirements for laminates (adds 7k-14k firms, mostly small businesses)
No De Minimis Exceptions for custom pieces, finished products, raised panels
Include construction as fabricators
SBREFA Panel recommended:
De Minimis exemptions based on volume or percent
Performance standards met with low emission resins
Other alternatives?
The following were adopted in final rule
Delay compliance for certain groups or overall (e.g. 7 yrs for laminators)
Change scope of definitions to exclude laminates, construction

11. Costs Familiarization with regulations Recordkeeping
Incorporate and set up labeling of products
Changes to raw materials and production
Product testing and certification
Cost to change resins

12. Data for Costs
Affected entities – US Census data for industries (industry, product lines, firm size); industry surveys
Certification fees – industry associations (Composite Panel Associates (CPA); Hardwood Plywood and Veneer Association (HPVA)
Other compliance costs – agency technical papers, wage rates by industry (BLS)

13. Assessing Costs
Determine which costs are incremental to this regulation. Entities already in compliance with CARB ACTM will be in the baseline.
Generally determine per entity costs and the number of entities with new compliance requirements as a result of the EPA rule. Multiply and aggregate
In other instances, cost calculation can involve more complicated modeling (e.g. EPA air rules)

14. Costs

15. Benefits
Reduced Mortality Risk/Cancer Risk – changes and variations in exposure over a 30 yr period
Reduced/Avoided Eye Irritation – in home exposure (30-60min)
Reduced/Avoided Respiratory Effects – including lung irritation, asthma
Increased Female Fertility

16. Data for Benefits
Cancer Risk – several studies (National Academies of Science, EPA IRIS program) provide risk and exposure data; EPA VSL methodology for monetizing reduced mortality
Eye Irritation – questionnaire including WTP responses
Respiratory Effects – “suggestive evidence” occupational exposure data
Female Fertility – occupational data but mode of action in reproductive outcome unknown and insufficient information on the relationship to fertility

17. Benefits Which benefits should be quantified and monetized?
Cancer Risk
Eye Irritation
Which benefits should be unquantified (left to qualitative description)?
Respiratory Effects
Female Fertility

19. Benefits

20. Summary of Net Benefits

21. Summary of Net Benefits

22. Summary of Net Benefits

23. Summary Table
Summary table in published final rule. 81 FR 8977 (December 12, 2016).

24. Thank you!
Questions?