$848
$200 to $2,800
Pellet stove
$1,279
$300 to $3,500
Biomass stove
$1,403
$350 to $4,000
Wood fireplaces
$450
$150 to $5,000
Outdoor fireplaces
$755
$250 to $6,000
Masonry heaters
$9,041
$4,000 to $15,000
Hydronic central heating systems
$7,433
$5,000 to $35,000
Source:	Frost & Sullivan. 2010. Market Research Report on North American Residential Wood Heaters, Fireplaces, and Hearth Heating Products Markets, Figure 2.6. Prepared for Ec/R Inc.
Given the specialized skills and materials required to construct a masonry heater, it is not surprising that this product has the highest average market price. Hydronic heaters are the second most expensive product partly because of the additional material requirements. The price of freestanding stoves and fireplace inserts varies depending on the fuel it burns. Biomass stoves are almost twice as expensive as cord wood-burning stoves because biomass stoves are more similar in construction to pellet stoves. Although no price data exist on coal-burning stoves, costs are comparable to traditional cord wood stoves. Coal stove prices for 2010 collected for this profile averaged $1,338 and ranged between $500 and $3,000 depending on the size and manufacturer.
International Competition
The U.S. market for wood-fueled heating products has been concentrated on the local scale in recent years. Manufacturers concentrate production where wood heat is in demand, which is in the Northeast and Northwest. Some regions of the country have specific emissions requirements on wood burning, so consumers may be restricted to buying stoves and heaters that can cater to local regulations (Frost & Sullivan, 2010). Domestic producers have traditionally faced some competition from European manufacturers in certain wood heat markets, but Asian manufacturers have been gaining market share, especially in the EPA-certified wood stove and currently exempt single-burn-rate stove markets (Frost & Sullivan, 2010).
Asian-based companies, especially those in China, have the advantage of relatively low overhead and labor costs compared with other companies worldwide (Frost & Sullivan, 2010). Although the products coming from these producers are lower in price, they are also lower in quality (Frost & Sullivan, 2010). However, money-conscious consumers have been willing to settle for lower quality stoves as the economy remains uncertain (Frost & Sullivan, 2010). Companies from all over the world have been moving some manufacturing operations to China in an attempt to compete with Asian producers through low-cost production (Frost & Sullivan, 2010). Still, U.S. manufacturers are likely to see increased competition from Asia in the future.
The masonry heater industry is one in which foreign manufacturers play a substantial role. Over two-thirds of masonry heaters installed in the United States are manufactured outside of the country, principally by one manufacturer (Seaton, 2010). Most United States companies build around  15 masonry heaters per year, typically constructed onsite by masons. Canadian and European producers sell masonry products through U.S. distributors, but most of these companies do not manufacture within the United States (Seaton, 2010). Some stove companies perform research and development, as well as assembly of wood stoves in the United States, but import cast parts and components from Europe and China (HPBA, 2010a). The pellet stove industry has seen increasing foreign competition in recent years. Many of the foreign manufacturers have made the business decision to sell products through American-owned businesses and thus the costs of EPA certification are sometimes passed on to the American seller/importer/licensee.
Future Market Trends
While there has been a steady decline in the residential markets for wood heaters, fireplaces, and hearth products, increases in oil and gas prices have led to substitution back to wood as a source of heat in 2007, in which a growth rate of 16.4% between 2007 and 2008 took place in these markets. However, demand for these products fell victim to the recession in 2009 (Frost & Sullivan, 2010). A weak residential construction market coupled with a tight credit market decreased overall demand in the market for wood heating products, leading analysts to project a 2009 growth rate of −36.1% (Frost & Sullivan, 2010). The growth forecast for 2010 is expected to improve relative to 2009 to a rate of −4.1%, due in part to the residual effects of the severe 2009 winter temperatures and the financial incentive provided by the federal energy efficient tax credit (Frost & Sullivan, 2010).
As the economy continues to recover beyond 2010, demand should trend upward as consumers look to cut heating costs with wood and biomass (Frost & Sullivan, 2010). New home construction and increased credit availability will further foster demand, which is expected to grow at a compound annual rate of 4.1% from 2009 to 2015 (Frost & Sullivan, 2010). The current regional demand patterns are expected to continue, with the Northeast and Northwest regions of the country driving wood fuel combustion demand, but analysts anticipate that the wood heat product market will be embraced in other areas of the country in which wood and biomass are viable and inexpensive fuel sources (Frost & Sullivan, 2010).
Although the overall residential wood heat market is expected to grow, there may be variation in demand between individual product segments. Pellet and biomass stoves are expected to lead the way in demand as consumers look for options with sustainable fuel sources and cleaner-burning technologies (Frost & Sullivan, 2010). Outdoor wood boilers (hydronic heaters) saw a surge in demand throughout the 1990s and mid-2000s, a trend that is projected to continue (Northeast States for Coordinated Air Use Management, 2006). Future demand for primary and secondary wood-burning heating devices will be somewhat dependent on the price of wood fuel relative to electric and gas heat, as well as consumer preferences. Since fireplaces and masonry fireplaces typically are not effective heaters and purchases are based on the aesthetic value rather than function, future demand will likely stay in line with consumer preferences.

Section 1

Baseline Emissions and Emission Reductions
Introduction
This section presents the baseline emissions for the pollutants emitted by affected units and also the resulting emissions after imposition of the two options considered for the proposed NSPS. We present the baseline emissions and emission reductions for PM2.5 and also for other pollutants from affected units such as volatile organic compounds (VOCs) and carbon monoxide (CO). Baseline emissions were calculated using a 2008 base inventory and were then projected to future years beyond the promulgation of the rule in 2014 to 2022 and beyond, using emissions factors specific to the category of the affected unit (e.g., certified wood stove, pellet stove). These emissions factors are listed in the emissions memorandum for this proposed rule (Ec/R, 2013). Emission reductions were calculated from the baseline emissions based on the considered emissions limits for each appliance type affected for each option analyzed, and the emission reductions were used as inputs to the benefits analysis presented in Section 7.
Background to Emissions Estimates

      We used the EPA Residential Wood Combustion (RWC) emission estimation tool, which is an Access[TM] database that compiles nationwide RWC emissions using county level, process specific data and calculations. We summed the nationwide number of appliances and total tons of wood burned for each of the relevant product categories in the inventory.
Table 4-1.	RWC Emission Inventory Categories Used
Woodstove: fireplace inserts; EPA certified; non-catalytic
Woodstove: fireplace inserts; EPA certified; catalytic
Woodstove: freestanding, EPA certified, non-catalytic
Woodstove: freestanding, EPA certified, catalytic
Woodstove: pellet-fired, general
Woodstove: freestanding, non-EPA certified
Hydronic heater: outdoor
Furnaces: indoor, cordwood

We then made some adjustments/assumptions to the baseline RWC inventory. First, we deleted data in the RWC for non-certified stoves and inserts, as these cannot be sold. With the exception of wood stoves, we applied the PM2.5 emission factors for each class to the total tons of wood burned and calculated an average emission rate/appliance/category. In the case of wood stoves, the RWC used an average of all PM10 AP-42 emission factors for wood stoves. The RWC assumes that PM10 and PM2.5 factors are identical. At a minimum, we believe that all new wood stoves meet the AP-42 PM10 emission factors for "Phase II" stoves (the current NSPS). As described below, we went a step further and assumed that all new shipments will meet the current Washington State limits, which are approximately 40% less than the current NSPS.
Second, we assumed that outdoor hydronic heaters and indoor hydronic heaters have the same emission profile.
Single burn rate stoves are not included in the RWC as separate identifiable units. We assumed that they would have the same baseline emission factor as freestanding non-certified woodstoves, i.e., 30.6 lb/ton of wood burned. We used the average tons burned per appliance factor as representative of these stoves as well.
Masonry heaters are not included in the RWC database, and we were unable to identify a surrogate emission factor which could be used to estimate tons/appliance emissions. Therefore, we were not able to estimate emissions from these appliances for the purpose of this analysis.
We used this subset of the RWC database to calculate a baseline average emission rate/appliance/category, including an adjustment of the RWC emission factor to the current Washington State limits where warranted. We multiplied the total tons of wood burned for the appliance by the RWC emission factor (adjusted as appropriate) to calculate the total tons of PM2.5 emissions. We divided this value by the number of appliances in the category to calculate the baseline average PM2.5 emissions per individual appliance, and these results are shown in Table 4-2.
Table 4-2.	PM2.5 Tons per Appliance Estimate (Baseline)
Emission Inventory Category
Pollutant
Baseline Emission factor (lb/ton)
Emissions (tons)
Tons per appliance/yr
Woodstove: fireplace inserts; EPA certified; non-catalytic
                                 Primary PM2.5
8.76
5,371
0.0041
Woodstove: fireplace inserts; EPA certified; catalytic
                                 Primary PM2.5
9.72
2,023
0.0047
Woodstove: freestanding, EPA certified, non-catalytic
                                 Primary PM2.5
8.76
6,745
0.0077
Woodstove: freestanding, EPA certified, catalytic
                                 Primary PM2.5
9.72
3,769
0.0101
Woodstove: pellet-fired, general
                                 Primary PM2.5
3.06
1,798
0.0021
Hydronic heater: outdoor/indoor
                                 Primary PM2.5
27.6
50,427
0.1383
 Woodstove: freestanding, non-EPA certified[a]
                                 Primary PM2.5
30.6
71,424
0.0324
Furnace: indoor, cordwood
                                 Primary PM2.5
27.6
2,471
0.0582

                                 Primary PM2.5
30.6

[a]	Non-EPA certified wood stove emission factor and tons/appliance were used to represent single burn rate stoves.
Emissions Factors
      The next step in the analysis was to develop emission factors representing potential NSPS options to reduce emissions. The following is a summary of the NSPS options considered in the proposal for each appliance type and examined in detail in Section 2. The NSPS options examined in this analysis ("Proposal" and "Alternative") are based on phased-in compliance dates, or "steps," for subcategories of appliances. Proposed Subpart AAA will regulate "room heaters" and includes adjustable burn rate stoves, single burn rate stoves, and pellet stoves. Proposed Subpart QQQQ will regulate "central heaters" and includes outdoor and indoor hydronic heaters and forced air furnaces. Proposed Subpart RRRR will regulate masonry heaters. Following is a summary of the current NSPS implementation assumptions for appliances within the subcategories under both the Proposed and the Alternative options. As mentioned in Section 2, the Proposed option is a 2-step standard with compliance dates of effective date  and 5 years after the effective date for different appliances. For the purposes of our Proposed option analyses, we used 2014 and 2019, respectively. The Alternative option is a 3-step standard with compliance dates of effective date, 3 years after the effective date, and 8 years after the effective date. For the purposes of our Alternative option analyses, we used 2014, 2017, and 2022, respectively.
Subpart AAA ("room heaters"):
These are adjustable burn rate, single burn rate, and pellet stoves: Proposal: Step 1 limit of 4.5 g/hr upon promulgation in 2014; and Step 2 limit of 1.3 g/hr five years after promulgation in 2019. Alternative: Step 1 limit of 4.5 g/hr upon promulgation in 2014; Step 2 limit of 2.5 g/hr three years after promulgation in 2017; and Step 3 limit of 1.3 g/hr eight years after promulgation in 2022. Note: The Step 1 limit is the 1995 Washington State standard for non-catalytic stoves; the Alternative Step 2 limit is the 1995 Washington State standard for catalytic stoves; and the proposed Step 2 (Alternative Step 3) limit is already met by the top performing catalytic, non-catalytic and pellet stove models, according to industry data. Although previously unregulated and a less developed technology than adjustable burn rate stoves, single burn rate stove designs have been undergoing R&D in anticipation of the proposed NSPS and cleaner designs are nearly market-ready.
Subpart QQQQ ("central heaters"):
These are hydronic heaters (both outdoor and indoor): Proposal: Step 1 limit of 0.32 lb/mm BTU heat output upon promulgation in 2014; and Step 2 limit of 0.06 lb/mm BTU heat output five years after promulgation in 2019. Alternative: Step 1 limit of 0.32 lb/mm BTU heat output upon promulgation in 2014; Step 2 limit of 0.15 lb/mm BTU heat output three years after promulgation in 2017; and Step 3 limit of 0.06 lb/mm BTU heat output eight years after promulgation in 2022. Note: The Step 1 limit is the EPA "Phase 2 " voluntary program limit already met by 36 hydronic heater models (27 cord wood and 9 pellet models) built by 17 U.S. manufacturers; the Alternative Step 2 limit is already met by 11 hydronic heater models (6 cord wood and 5 pellet models) built by 6 U.S. manufacturers; and the proposed Step 2 (Alternative Step 3) limit is already met by 4 hydronic heater models (2 cord wood and 2 pellet models) built by 2 U.S. manufacturers, as well as over 100 European manufacturers per test method EN 303-05.
Forced Air Furnaces: Proposal: Step 1 limit of 0.93 lb/mm BTU heat output upon promulgation in 2014; and Step 2 limit of 0.06 lb/mm BTU heat output five years after promulgation in 2019. Alternative: Step 1 limit of 0.93 lb/mm BTU heat output upon promulgation in 2014; Step 2 limit of 0.15 lb/mm BTU heat output three years after promulgation in 2017; and Step 3 limit of 0.06 lb/mm BTU heat output eight years after promulgation in 2022. Note: The Step 1 limit is based on test data from development of Canadian standard B415.1-10 and conversation with industry regarding cleaner forced air furnace models currently being tested in R&D. Forced air furnace designs able to meet the Alternative Step 2 and proposed Step 2 (Alternative Step 3) limits may be based on technology transferred from hydronic heater designs.
Subpart RRRR including masonry heaters:
Masonry Heaters: Proposal / Alternative (same): Step 1 limit of 0.32 lb/mm BTU heat output upon promulgation in 2014 for large manufacturers (defined as manufacturers constructing >= 15 masonry heaters per year), with a 5-year (2019) small volume manufacturer compliance extension (for companies constructing < 15 units/year). No other phased-in limits are being proposed. Note: Based on data submitted by the Masonry Heater Association, over 10 models already meet this limit.
We developed adjusted emission factors to reflect the NSPS options discussed above, which were then used to calculate new average tons of emissions per appliance for each RWC appliance type. Reasonable adjustments were assumed for NSPS emission factors (as noted below) in order to not overstate emission reductions under the NSPS options; actual emission reductions may be somewhat greater than reductions resulting from our emission factor adjustments for the purpose of this analysis. Following is a description of how the RWC factors were adjusted:
Woodstove: all EPA certified. We determined the ratio of emissions between the existing NSPS limits compared to the Washington state standards, for they are tighter than the existing NSPS and have been in existence since 1995. For both catalytic and non-catalytic devices, the Washington standard is 60% of the NSPS. We assumed this same ratio would apply to the emissions factors and multiplied the RWC emission factor by 60%. We used these adjusted RWC emission factors (shown in Table 4-2) as both baseline and Step 1 emission factors for catalytic and non-catalytic stoves. We made the reasonable assumption (in terms of estimating potential emission reductions) that the Step 1 emission factor was the same as the baseline emission factor, because nearly all current wood stove models already meet the Step 1 limit according to industry data. We also reasonably assumed that the Alternative Step 2 emission factor for catalytic stoves was the same as the baseline and Step 1 emission factor because approximately 90% of the current catalytic models already meet the Alternative Step 2 limit, according to industry data.[10] For the Alternative Step 2 emission factor for non-catalytic models, we scaled the Step 1 emission factor by the ratio of the Alternative Step 2 standard to the Step 1 standard (or 2.5/4.5 = 0.55). Likewise, for the proposed Step 2 (Alternative Step 3) emission factor for both catalytic and non-catalytic models, we scaled the Alternative Step 2 emission factor by the ratio of the proposed Step 2 (Alternative Step 3) standard to the Alternative Step 2 standard (or 1.3/2.5 = 0.52). For consistency with our shipment data and because the RWC database provides four separate emission factors for catalytic and non-catalytic, freestanding models and fireplace inserts, we used the weighted average value for all four wood stove types to represent the total population of adjustable burn rate woodstoves. Finally, we multiplied the resulting emission factors by the total tons burned for the appliance type (provided by the RWC database) and then divided that by the appliance population (also provided by the RWC database) to derive the tons/appliance of PM2.5 emissions. The emission factors and tons/appliance are shown in the green rows in Table 4-3.
Woodstove: pellet fired, general. We used the RWC emission factor shown in Table 4-2 as both the baseline and Step 1 emission factor for pellet stoves because nearly all current pellet stove models already meet the Step 1 standard according to industry data. The RWC emission factor for pellet stoves is quite low compared to other appliances, which leaves little room to adjust the factor. For the Alternative Step 2 emission factor, we reduced the Baseline/Step 1 emission factor by only 10%, an adjustment based on industry data[11] that most pellet models (80%) already meet the Alternative Step 2 level. For the proposed Step 2 (Alternative Step 3) emission factor, we scaled the Alternative Step 2 emission factor by the ratio of the proposed Step 2 (Alternative Step 3) standard to the Alternative Step 2 standard (or 1.3/2.5 = 0.52). We multiplied the resulting emission factors by the total tons burned for pellet stoves and then divided that by the pellet stove appliance population to derive the tons/appliance of PM2.5 emissions. The emission factors and tons/appliance are shown in the orange row in Table 4-3.
Woodstove: freestanding, non-EPA certified (single burn rate stoves). As described above, we assumed that the freestanding non-EPA certified woodstove emission inventory category includes the population of single burn rate stoves. We therefore used the RWC emission factor for freestanding non-EPA certified woodstoves (30.6 lb/ton) as the baseline emission factor for single burn rate stoves. For the Step 1 emission factor, we used the same emission factor as a certified non-catalytic stove meeting the Washington state standards (i.e., 8.76 lb/ton) because the same standard is being proposed for single burn rate stoves as for adjustable burn rate stoves. Likewise, we used the same emission factors used for non-catalytic stoves for the Alternative Step 2 and proposed Step 2 (Alternative Step 3) emission factors. We multiplied the resulting emission factors by the total tons burned for this appliance category and then divided that by the appliance population to derive the tons/appliance of PM2.5 emissions. The emission factors and tons/appliance are shown in the grey row in Table 4-3.
Hydronic Heater: Outdoor/Indoor.
As noted above, we assumed that indoor hydronic heaters (a minority of the hydronic heater population) have the same emission profile as the outdoor hydronic heater appliance category provided in the RWC. According to the EPA voluntary hydronic heater program, the "phase 2" heaters that are presumed to represent the Level I NSPS option are 90% cleaner than older unqualified units. We assume  as described in our emissions memorandum that the majority of the existing inventory is represented by these unqualified units, and applied a 90% reduction to the RWC baseline emission factor shown in Table 4-2 (27.6 lb/ton) to derive the Step 1 emission factor (2.76 lb/ton). For the Alternative Step 2 emission factor, we assumed a 50% reduction in the Step 1 emission factor since the Alternative Step 2 limit is approximately 50% of the Step 1 limit. Likewise, for the proposed Step 2 (Alternative Step 3) emission factor, we scaled the Alternative Step 2 emission factor by the ratio of the proposed Step 2 (Alternative Step 3) standard to the Alternative Step 2 standard (or 0.06/0.15 = 0.40). We multiplied the resulting emission factors by the total tons burned for the hydronic heater RWC appliance category and then divided that by the hydronic heater appliance population to derive the tons/appliance of PM2.5 emissions. The emission factors and tons/appliance are shown in the blue row in Table 4-3.
Furnace: Indoor, Cordwood
We used the RWC emission factor shown in Table 4-2 (27.6 lb/ton) as the baseline emission factor. For Step 1, we scaled the baseline emission factor by 75% (to 6.9 lb/ton) because background material provided in the CSA standards review process stated that the emission limit associated with this method would result in an approximately 75% reduction in emissions compared to a non-qualifying furnace. The Alternative Step 2 and proposed Step 2 (Alternative Step 3) limits of 0.15 lb/mmBTU and 0.06 lb/mmBTU, respectively, are the same as the hydronic heater limits. The baseline emission factors for each appliance category are also the same. Therefore we used the same Alternative Step 2 and proposed Step 2 (Alternative Step 3) emission factors used for hydronic heaters (1.38 lb/ton and 0.55 lb/ton, respectively). We multiplied the emission factors by the total tons burned for the cordwood furnace RWC appliance category and then divided that by the furnace appliance population to derive the tons/appliance of PM2.5 emissions. The emission factors and tons/appliance are shown in the lavender row in Table 4-3. See Table 4-3 for a summary of the emission factors and resulting tons/appliance values for the baseline and NSPS options analyzed. Table 4-3 presents the baseline, Step 1, Alternative Step 2, and proposed Step 2 (Alternative Step 3) emission factors for each appliance type resulting from our assumptions and adjustments described above. We used the appropriate tons/appliance with annual shipment data to estimate annual PM2.5 emissions based on the Proposed and Alternative phased-in implementation dates.

Table 4-3.	NSPS Adjusted Factors for PM2.5
Emission Inventory Category
Baseline Emission Factor (lb/ton)
Baseline Emissions/
Appliance
(tons)
Tons/
Appl/yr
Step 1 Emission
Factor
Tons/
Appl/yr
Alt. Step 2 Emission Factor lb/ton
Alt. Step 2 Tons/appl
Step 2
(Alt. Step 3) Emission Factor lb/ton
Step 2
(Alt. Step 3) Tons/appl
Woodstove: fireplace inserts; EPA certified; non-catalytic
8.76
5,371
0.0041
8.76
0.0041
                                     4.82
                                    0.0023
                                     2.51
                                    0.0012
Woodstove: fireplace inserts; EPA certified; catalytic
9.72
2,023
0.0047
9.72
0.0047
                                     9.72
                                    0.0047
                                     5.05
                                    0.0025
Woodstove: freestanding, EPA certified, noncatalytic
8.76
6,745
0.0077
8.76
0.0077
                                     4.82
                                    0.0042
                                     2.51
                                    0.0022
Woodstove: freestanding, EPA certified, catalytic
9.72
3,769
0.0101
9.72
0.0101
                                     9.72
                                    0.0101
                                     5.05
                                    0.0052
Woodstove: pellet-fired, general
3.06
1,798
0.0021
3.06
0.0021
                                     2.75
                                    0.0019
                                     1.43
                                    0.0010
Hydronic heater: outdoor
27.6
5,043
0.1383
                                     2.76
                                    0.0138
                                     1.38
                                    0.0069
                                     0.55
                                    0.0028
Furnace: indoor, cordwood
27.6
9,053
0.1032
6.9
0.0258
                                     1.38
                                    0.0052
                                     0.55
                                    0.0021
Single Burn Rate Stoves (freestanding, non-EPA certified)
30.6
20,447
0.0324
8.76
0.0093
                                     4.82
                                    0.0051
                                     2.51
                                    0.0027

Voluntary Programs
Within these emissions projections are the effects not only of rules but also of various voluntary programs managed by EPA and states. Studies have shown that fine particle (PM2.5) concentrations in proximity to a typical outdoor wood boiler are likely to exceed the 24-hour National Ambient Air Quality Standards (NAAQS).18 Thus, the EPA developed a hydronic heater voluntary program to encourage manufacturers to reduce impacts on air quality through developing and distributing cleaner, more efficient hydronic heaters. We developed the voluntary program because it could bring cleaner models to market faster than the traditional federal regulatory process. Phase 119 emission level (0.60 pounds per million British Thermal Unit (lb/MMBTU) heat input) qualifying20 units are approximately 70% cleaner than typical unqualified units. After March 31, 2010, units that only meet the Phase 1 emission level are no longer considered "qualified models" under the voluntary program. Phase 2 emission level (0.32 lb/MMBTU heat output) qualifying units are approximately 90% cleaner than typical unqualified units. Typically, qualified models have improved insulation, secondary combustion, separation of the firebox from the water jacket, and the addition of improved heat exchangers.
In addition to the voluntary program, the EPA provided technical and financial support for the Northeast States for Coordinated Air Use Management (NESCAUM) to develop a model rule which several states have adopted to regulate hydronic heaters. The model rule is a starting point for local regulatory authorities to consider, and they may need to also adopt additional actions due to site-specific concerns, e.g., local terrain, meteorology, proximity of neighbors and other exposed individuals. Thus, some regulatory authorities have instituted additional requirements, including bans on hydronic heaters in some areas.
The EPA also developed a similar voluntary partnership program for low-mass fireplaces (engineered, pre-fabricated fireplaces) and site-built masonry fireplaces. The original partnership agreements were dated February 19, 2009, and pertained to low-mass fireplaces. On July 4, 2009, the program was expanded to other fireplaces, e.g., masonry fireplaces. Under this program, cleaner burning fireplaces are ones that qualify for the Phase 1 emissions level of 7.3 g of particles emitted per kg of fuel burned (approximately 57% cleaner than unqualified models) or the Phase 2 emissions level of 5.1 g/kg (approximately 70% cleaner than unqualified models). So far, 11 models have qualified under this voluntary program at the Phase 2 level. Typically, qualified models have improved insulation and added secondary combustion and/or a catalyst to reduce emissions. Some manufacturers have added closed doors to reduce the excess air and thus improve combustion. Some state and local agencies have needed to reduce emissions further and thus some have no-burn days and some have adopted bans of new fireplaces in some areas in order to attain the PM2.5 NAAQS.
Shipment Data Used to Estimate Baseline Emissions
We used data in the Frost & Sullivan Market (F&S) report21 on 2008 shipments by product category, and F&S revenue forecasts which incorporated the weak economy in years 2009 and 2010, to calculate the reduced number of shipments in years 2009 and 2010. Forced air furnaces were outside the scope of the F&S report. Instead, we used manufacturer estimates of total industry sales in 200822 and applied the F&S market factors to estimate shipments through 2010. The F&S wood stove numbers included both certified and non-certified stoves, so we estimated numbers of non-certified stove shipments out of the total reported wood stove category. 23 These shipments were deleted from the total wood stove category shipments. We expanded the 2008 single burn rate estimate using the F&S factors. Our estimates of annual shipments, truncated to 2022, are shown in Table 4-4.  The full set of annual shipments data can be found in the emissions memo for this proposal.
For years 2011 through 2038 (for the proposed NSPS) and 2011 through 2041 (for the alternative approach) estimated shipments are based on a forecasted revenue growth rate of 2.0%, in keeping with the average annual growth in real GDP predicted by the Conference Board.24 There is not a perfect correlation between shipments and revenue (for example, because of their higher unit cost, pellet stoves generate more absolute revenue than wood stoves), but as stated in our emissions memorandum, we think the overall trend in the projection is reasonable in the absence of specific shipment projections.
Table 4-4.	Estimated Annual Shipments by Category, 2008-2022

2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
 2020
2021
2022
Wood stoves
126,527
80,851
77,617
79,169
80,752
82,367
84,015
85,695
87,409
89,157
90,940
92,759
94,614
96,507
98,437
Single burn rate stoves
40,000
25,560
24,538
25,028
25,529
26,039
26,560
27,091
27.633
28,186
28,750
29,325
29.911
30,509
31,120
Pellet stoves
130,381
83,313
79,981
81,581
83,212
84,876
86,574
88,305
90,072
91,873
93,710
95,585
97,496
99,446
101,435
Furnace: indoor, cordwood
41,000
26,199
25,151
25,654
26,167
26,690
27,224
27,769
28,324
28,891
29,468
30,058
30,659
31,272
31,898
Hydronic heating systems
13,385
8,553
8,211
8,375
8,543
8,713
8,888
9,065
9,247
9,432
9,620
9,813
10,009
10,209
10,413

Our cost effectiveness analysis (CE)25 assumes a 20-year model design lifespan as well as a 20-year use/emitting appliance lifespan. These assumptions were made to best characterize the actual model design and use lifespans given that many models developed for the 1988 NSPS are still being sold (after 25 years), many "new" models still have the same internal working parts with merely exterior cosmetic changes, and most stoves in consumer homes emit for at least 20 years and often much longer. Therefore our CE analysis tracks shipments through year 2038 for the proposed NSPS and through year 2041 for the alternative approach (i.e., assuming a 20 year design life for a model meeting the Step 2 limit in year 2019 under the proposed NSPS, and for a model meeting the Alternative Step 3 limit in year 2022 under the alternative approach). A truncated summary of our actual shipment data which extended through years 2038 for the proposed NSPS and 2041 for the alternative approach can be found in the emissions memo for this proposal. See the CE analysis spreadsheets that are in the public docket for the complete shipment data.
Estimated PM2.5 Emissions from Shipments of New Appliances
As described above, we calculated the average emissions per appliance type using the emission factor for each category multiplied by the inventory value of total tons of wood burned divided by the number of appliances in the inventory population. This value was then multiplied by the number of shipments to calculate total emissions from each category per year under baseline conditions (i.e., in the absence of an NSPS). More information on these calculations is available in the emissions memorandum in the docket for this rulemaking.26
Table 4-5 on the next page shows a truncated summary of the estimated PM2.5 emissions (in tons) under baseline conditions through year 2022. We then estimated emissions under the proposed NSPS (Table 4-6) and under the alternative approach (Table 4-7) based on the respective assumptions and phase-in timelines for each. Under the proposed NSPS, the Step 1 limit becomes effective in 2014 and the Step 2 limit in 2019; while under the alternative approach, the Step 1 limit becomes effective in 2014, the Step 2 limit in 2017, and the Step 3 limit in 2022. (Note that the proposed Step 2 limit is the same as the alternative Step 3 limit, although the compliance dates differ.) The emission estimates assume that the total number of shipped units meet the standard in the year the standard is implemented.
Tables 4-5, 4-6, and 4-7 show emission estimates out to year 2022 for comparison. These are truncated summaries. Our CE analysis tracks emission reductions out through 2057 for the proposed NSPS and through 2060 for the alternative approach, assuming a 20 year design life for a model meeting each phased-in limit, and best assumption that stoves shipped in the 20[th] year will be emitting in homes for another 20 years. See the cost-effectiveness analysis spreadsheets27 for all years of emission data, both baseline and under each NSPS option considered. These spreadsheets are available in the public docket for this rulemaking.
Note: No emission tables are provided for Subpart RRRR regulating masonry heaters because emission estimates are not available for these appliances as explained earlier in this RIA section.

Table 4-5.	Estimated PM2.5 Emissions (Tons): Baseline

2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
 2020
2021
2022
Wood stoves
761
486
467
476
486
495
505
515
526
536
547
558
569
580
592
Single burn rate stoves
1,295
827
794
810
826
843
860
877
895
912
931
949
968
988
1,007
Pellet stoves
277
177
170
173
177
180
184
187
191
195
199
203
207
211
215
Furnace: indoor, cordwood
4,230
2,703
2,595
2,647
2,699
2,753
2,809
2,865
2,922
2,980
3,040
3,101
3,163
3,226
3,291
Hydronic heating systems
1,851
1,183
1,136
1,158
1,182
1,205
1,229
1,254
1,279
1,305
1,331
1,357
1,384
1,412
1,440
Total
8,414
5,376
5,161
5,265
5,370
5,477
5,587
5,699
5,812
5,929
6,047
6,168
6,292
6,417
6,546

Table 4-6.	Estimated PM2.5 Emissions (Tons): Proposed Option

2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Wood stoves
761
486
467
476
486
495
505
515
526
536
547
202
206
210
214
Single burn rate stoves
1,295
827
794
810
826
843
246
251
256
261
266
78
79
81
82
Pellet stoves
277
177
170
173
177
180
184
187
191
195
199
95
97
99
101
Furnace: indoor, cordwood
4,230
2,703
2,595
2,647
2,699
2,753
702
716
731
745
760
62
63
65
66
Hydronic heating systems
1,851
1,183
1,136
1,158
1,182
1,205
123
125
128
130
133
27
28
28
29
Total
8,414
5,376
5,161
5,265
5,370
5,477
1,760
1,795
1,831
1,868
1,905
464
473
482
492

Table 4-7.	Estimated PM2.5 Emissions (Tons): Alternative Option

2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Wood stoves
761
486
467
476
486
495
505
515
526
373
380
388
396
404
214
Single burn rate stoves
1,295
827
794
810
826
843
246
251
256
144
147
149
152
155
82
Pellet stoves
277
177
170
173
177
180
184
187
191
176
179
183
186
190
101
Furnace: indoor, cordwood
4,230
2,703
2,595
2,647
2,699
2,753
702
716
731
149
152
155
158
161
66
Hydronic heating systems
1,851
1,183
1,136
1,158
1,182
1,205
123
125
128
65
 67
68
69
71
29
Total
8,414
5,376
5,161
5,265
5,370
5,477
1,760
1,795
1,831
906
925
943
962
981
492

From the tables above, we see that the PM2.5 emission reductions in 2022 are the same at 6,054 tons. The average of the annual emission reductions between the year of rule promulgation, 2014, and the year that both options are fully implemented (2022) is 4,825 tons for the Proposed option and 4,878 tons for the Alternative option.
Methodology for Estimating VOC Emissions from New Units
We used the same methodology described in Section 4.3 to develop emission estimates for VOC emissions. Using the RWC database, we developed an estimate of VOC emissions per appliance using baseline emission factors. Then, using the same NSPS phase-in assumptions and anticipated emission reductions (i.e., that VOC reductions are comparable to PM2.5 reductions), we developed emission factors to be used in analyzing the NSPS options. Table 4-8 provides the VOC emission factors.

Table 4-8.	NSPS VOC Emission Factors
Emission Inventory Category
Baseline Emission Factor
(lb/ton)
Emissions (tons)
Tons/
Appl/Yr
Step 1
Emission Factor
(lb/ton)
Step 1 Tons/
Appl/Yr
Alt. Step 2 Emission Factor (lb/ton)
Alt. Step 2 Tons/
Appl/Yr
Step 2
(Alt. Step 3) Emission Factor (lb/ton)
Step 2
(Alt. Step 3) Tons/
Appl./Yr
Woodstove: fireplace inserts; EPA certified; non-catalytic
12
7,357
0.0056
12
0.0056
6.6
0.0031
3.432
0.0016
Woodstove: fireplace inserts; EPA certified; catalytic
15
3,121
0.0073
15
0.0073
15
0.0073
7.800
0.0038
Woodstove: freestanding, EPA certified, non-catalytic
12
9,240
0.0106
12
0.0106
6.6
0.0058
3.432
0.0030
Woodstove: freestanding, EPA certified, catalytic
15
5,817
0.0155
15
0.0155
15
0.0155
7.800
0.0081
Woodstove: pellet-fired, general
0.041
24
0.00030
0.041
0.00003
0.037
0.00003
0.019
0.00001
Hydronic heater: outdoor
11.7
2,138
0.0586
1.17
0.0059
0.59
0.0028
0.234
0.0012
Furnace: indoor, cordwood
11.7
3,838
0.0437
2.925
0.0109
0.59
0.0022
0.234
0.0009
Single burn rate stoves (freestanding, non-EPA certified)
53
21,288
0.0561
12
 0.0127
6.6
0.0070
3.432
0.0036

Using the same assumptions as we used for PM2.5, we calculated VOC emissions at baseline and under each NSPS option based on a 20-year model design lifespan for appliance shipments as well as a 20-year appliance life. Tables 4-9 through 4-11 provide the time series of VOC annual emissions estimates between 2008 and 2022 for the baseline, and the NSPS options considered under the proposed NSPS revision.

Table 4-9.	Estimated VOC Emissions (Tons): Baseline

2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Wood stoves
1,085
693
666
679
692
706
720
735
750
765
780
795
811
828
844
Single burn rate stoves
2,243
1,433
1,376
1,403
1,431
1,460
1,489
1,519
1,549
1,580
1,612
1,644
1,677
1,711
1,745
Pellet stoves
4
2
2
2
2
2
2
3
3
3
3
3
3
3
3
Furnace: indoor, cordwood
1,793
1,146
1,100
1,122
1,144
1,167
1,191
1,214
1,239
1,263
1,289
1,315
1,341
1,368
1,395
Hydronic heating systems
785
502
481
491
501
511
521
532
542
553
564
 575
587
599
611
Total
5,909
3,776
3,625
3,697
3,771
3,847
3,924
4,002
4,082
4,164
4,247
4,332
4,419
4,507
4,597

Table 4-10.	Estimated VOC Emissions (Tons): Proposed Option

2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Wood stoves
1,085
693
666
679
692
706
720
735
750
765
780
293
298
304
311
Single burn rate stoves
2,243
1,433
1,376
1,403
1,431
1,460
337
344
351
358
365
106
109
111
113
Pellet stoves
4
2
2
2
2
2
2
3
3
3
3
1
1
1
1
Furnace: indoor, cordwood
1,793
1,146
1,100
1,122
1,144
1,167
298
304
310
316
322
26
27
27
28
Hydronic heating systems
785
502
481
491
501
511
52
53
54
55
56
12
12
12
12
Total
5,909
3,776
3,625
3,697
3,771
3,847
1,410
1,438
1,467
1,496
1,526
438
447
456
465

Table 4-11.	Estimated VOC Emissions (Tons): Alternative Option

2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Wood stoves
1,085
693
666
679
692
706
720
735
750
541
552
563
574
586
311
Single burn rate stoves
2,243
1,433
1,376
1,403
1,431
1,460
337
344
351
197
201
205
209
213
113
Pellet stoves
4
2
2
2
2
2
2
3
3
2
2
2
2
3
1
Furnace: indoor, cordwood
1,793
1,146
1,100
1,122
1,144
1,167
298
304
310
63
64
66
67
68
28
Hydronic heating systems
785
502
481
491
501
511
52
53
54
28
28
29
29
30
12
Total
5,909
3,776
3,625
3,697
3,771
3,847
1,410
1,438
1,467
831
848
864
882
899
465

From the tables above, we can show that the VOC emission reductions in 2022 are the same for each option at 4,132 tons. The average of the annual emission reductions between the year of rule promulgation, 2014, and the year that both options are fully implemented (2022) is 3,237 tons for the Proposed option and 3,241 tons for the Alternative option.
Methodology for Estimating CO Emissions from New Units
We used the same methodology described in Section 4.3 to develop estimates for CO emissions. Using the RWC database, we developed an estimate of CO emissions per appliance using baseline emission factors. Then, using the same NSPS phase-in assumptions and anticipated emission reductions (i.e., that CO reductions are comparable to PM2.5 reductions), we developed emission factors to be used in analyzing the changes in emissions from applying the NSPS options. Table 4-12 presents the CO emission factors.

Table 4-12.	NSPS CO Emission Factors
Emission Inventory Category
Baseline Emission Factor
(lb/ton)
Baseline Emissions (tons)
Tons/
Appl/Yr
Step 1 Emission Factor
(lb/ton)
Step 1 Tons/
Appl/Yr
Alternative Step 2 Emission Factor (lb/ton)
Alternative Step 2 Tons/
Appl./Year
Alternative Step 3 Emission Factor (lb/ton)
Alternative Step 3
Tons/Appl./Year
Woodstove: fireplace inserts; EPA certified; non-catalytic
140.8
86,323
                                    0.0662
140.8
                                    0.0662
77.4
                                    0.0364
40.269
                                    0.0189
Woodstove: fireplace inserts; EPA certified; catalytic
104.4
21,725
                                    0.0509
104.4
                                    0.0509
104.4
                                    0.0509
54.288
                                    0.0264
Woodstove: freestanding, EPA certified, non-catalytic
140.8
108,418
                                    0.1241
140.8
                                    0.1241
77.4
                                    0.0683
40.269
                                    0.0355
Woodstove: freestanding, EPA certified, catalytic
104.4
40,486
                                    0.1082
104.4
                                    0.1082
104.4
                                    0.1082
54.288
                                    0.0563
Woodstove: pellet-fired, general
15.9
9,344
                                    0.0110
15.9
                                    0.0110
14.31
                                    0.0099
7.441
                                    0.0052
Single burn rate stoves (freestanding, non-EPA-certified)
230.8
249,785
                                    0.2442
140.8
                                    0.1489
77.4
                                    0.0819
40.269
                                    0.0426
Hydronic heater: outdoor
184
33,618
                                    0.0922
18.4
                                    0.0922
9.2
                                    0.0461
3.680
                                    0.0184
Furnace: indoor, cordwood
184
60,355
                                    0.6878
46
                                    0.1719
9.2
                                    0.0344
3.680
                                    0.0138

Using the same assumptions as we used for PM2.5, we calculated CO emissions at baseline and for the two NSPS options we are considering. Table 4-13 shows the annual baseline emissions for CO for 2008 to 2022, and Tables 4-14 and 4-15 show the CO emissions under the Proposed and Alternative options.

Table 4-13.	Estimated CO Emissions (Tons): Baseline

2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Wood stoves
10,918
6,976
6,697
6,831
6,968
7,107
7,249
7,394
7,542
7,693
7,847
8,004
8.164
8,327
8,494
Single burn rate stoves
9,766
6,241
5,991
6,111
6,233
6,358
6,485
6,614
6,747
6,882
7.019
7,160
7,303
7,449
7,598
Pellet stoves
1,438
919
882
900
918
936
955
974
994
1,014
1,034
1,055
1,076
1,097
1,119
Furnace: indoor, cordwood
28,198
18,019
17,298
17,644
17,997
18,357
18,724
19,098
19,480
19,870
20,267,
20,672
21,086
21,508
21,938
Hydronic heating systems
12,343
7,887
7,572
7,723
7,878
8,035
8,196
8,360
8,527
8,698
8,872
 9,049
9,230
9,415
9,603
Total
62,663
40,042
38,440
39,209
39,993
40,793
41,609
42,441
43,290
44,156
45,039
45,940
46,858
47,796
48,751

Table 4-14.	Estimated CO Emissions (Tons): Proposed Option

2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Wood stoves
10,918
6,976
6,697
6,831
6,968
7,107
7,249
7,394
7,542
7,693
7,847
2,743
2,797
2,853
2,910
Single burn rate stoves
9,766
6,241
5,991
6,111
6,233
6,358
3,956
4,035
4,116
4,198
4,282
1,249
1,274
1,300
1,326
Pellet stoves
1,438
919
882
900
918
936
955
974
994
1,014
1,034
494
503
513
524
Furnace: indoor, cordwood
28,198
18,019
17,298
17,644
17,997
18,357
4,681
4,775
4,870
4,967
5,067
413
422
430
439
Hydronic heating systems
12,343
7,887
7,572
7,723
7,878
8,035
820
836
853
870
 887
 181
185
188
 192
Total
62,663
40,042
38,440
39,209
39,993
40,793
17,661
18,014
18,375
18,742
19,117
5,080
5,181
5,285
5,391

Table 4-15.	Estimated CO Emissions (Tons): Alternative Option

2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Wood stoves
10,918
6,976
6,697
6,831
6,968
7,107
7,249
7,394
7,542
5,069
5,171
5,274
5,380
5,487
2,910
Single burn rate stoves
9,766
6,241
5,991
6,111
6,233
6,358
3,956
4,035
4,116
2,309
2,355
2,402
2,450
2,499
1,326
Pellet stoves
1,438
919
882
900
918
936
955
974
994
912
930
949
968
987
524
Furnace: indoor, cordwood
28,198
18,019
17,298
17,644
17,997
18,357
4,681
4,775
4,870
993
1,013
1,034
1,054
1,075
439
Hydronic heating systems
12,343
7,887
7,572
7,723
7,878
8,035
820
836
853
435
444
 452
461
471
192
Total
62,663
40,042
38,440
39,209
39,993
40,793
17,661
18,014
18,375
9,719
9,913
10,112
10,314
10,520
5,391

From the tables above, we can show that the CO emission reductions in 2022 are the same for each option at 43,360 tons. The average of the annual CO emission reductions between the year of rule promulgation, 2014, and the year that both options are fully implemented (2022) is 32,559 tons for the Proposed option and 32,873 tons for the Alternative option.

Cost Analysis, Energy Impacts, and Executive Order Analyses
In this section, we provide the estimates of total compliance costs and background behind their estimation. In addition, we provide a qualitative economic impact analysis of the proposed rule's impact on consumer and producer decisions, a qualitative discussion on unfunded mandates that may occur as a result of this final rule, and a partial analysis of the impacts of this proposal on employment. We used the direct annual compliance costs as an approximate measure of total social costs.
Given these constraints, several economic frameworks can be used to estimate the economic impacts and social costs of regulations; however, OAQPS has traditionally relied on partial equilibrium market models. Previous NSPS economic impact analyses for the residential wood stove market were prepared reflecting such a model standpoint. However, the current data do not provide sufficient details to develop a market model; the data that are available have little or no sector/firm detail and are reported at the national level. In addition, some sectors have unique market characteristics that make developing partial equilibrium models difficult. Therefore, we have prepared the economic impact analysis using a qualitative partial equilibrium framework.
Background for Compliance Costs
 Estimated Research and Development (R&D) Costs
Residential Wood Heaters (except for masonry heaters)
EPA has received various estimates of the costs to bring a wood heater from concept to completion, from $300,000 for a single model to $1,360,000 for a 4-firebox model line. A recent Hearth and Home article estimated the total cost to bring a model from conception to market as $645,000 to $750,000 for steel stoves and over $1 million for cast-iron, enameled wood stoves. The authors indicated that costs would decrease for separate models in the same line by up to 25%. Based on this information, we estimate that a 4-model steel line would cost up to $328,125 per model to develop. These costs include marketing, design, developing first generation, second generation and prototype units; NSPS and safety testing, equipment tooling, etc. The manufacturer supplying these figures for the article estimated that the NSPS and safety testing component of these costs would constitute $40,000 per model. This manufacturer said that development time is 12 to 14 months for non-catalytic heaters and 10 to 12 months for catalytic heaters.
Another manufacturer estimated costs of new product development, including design, prototype development, testing, tooling equipment and other manufacturing changes, marketing support, materials, training, and education to be in excess of $300,000 over an 8- to 12-month schedule for a relatively uncomplicated product. Costs will increase for products that have more sophisticated controls.  One other manufacturer estimated that their typical model development costs are around $200,000/model.
Two manufacturers suggested a 14- to 18-month time frame is required to develop a new firebox, but added that it will take from 5 to 6 years of intensive engineering and R&D efforts to have a model line consisting of 4 boxes ready for manufacture. They agreed that knowledge of the process obtained during each firebox development will shorten (somewhat) the time necessary, but not enough to consider within a guiding framework. These manufacturers also provided estimated development costs for a 4-box model line, presented in Table 5-1 below.
Table 5-1.	Example of Manufacturers' Estimates of Costs to Develop Model Line (4 Fireboxes)
Cost Component
Estimated Costs
Notes
Salaries
$850,000
Using 2-full time experimented employees to bring the products to market, salaries and benefits are estimated at $160,000 per year for at least 5.3 years. Tasks include design, prototyping, testing, production-line integration, and marketing.
Laboratory Equipment
$50,000
In order to accelerate R&D and avoid validating each result with independent testing labs (too costly for most manufacturers), new testing equipment will need to be purchased in order to sample flue gases, measure test load weight loss, record data automatically, and analyze flue gases composition.
Prototypes
$25,000
Numerous prototypes will be needed until the final product can be approved. For each firebox, estimate that 8 prototypes will be needed, at a cost of $700 each. Numerous samples of various components will also have to be purchased from vendors.
Test Fuel[a]
$45,000
Each test costs at least $50 in fuel (assuming cribs are used), including waste. An estimated 150 tests will have to be conducted for each firebox, for a total of $7,500, or $30,000 for a 4-firebox model line based on crib testing.
                                                                    (continued)
Table 5-1.	Example of Manufacturers' Estimates of Costs to Develop Model Line (4 Fireboxes) (continued)
Cost Component
Estimated Costs
Notes
Testing Services[a]
$150,000
Testing services for emissions, efficiency, and safety are estimated to last approximately 3 weeks for each firebox. At an average of $1,500 per day plus travel expenses, this amounts to approximately $25,000 for each firebox, or $100,000 for a 4-firebox model line based on crib testing.
Outside Consultants
$160,000
The average manufacturer will need outside help for design and testing. Testing equipment, knowledge of the test standard, and general guidance is normally offered by outside consultants (not necessarily certified EPA test labs). The average manufacturer will need approximately 300 hours of consulting services per year ($40,000) for 4 years.
Re-tooling
$120,000
For each firebox, new molds and jigs will need to be purchased or produced. Estimate that re-tooling charges will reach at least $30,000 per firebox, or $120,000 for a 4-firebox model line.
Marketing
$25,000
New pictures will need to be taken and all the current marketing material, including web sites and owner's manuals, will have to be updated.
Total
$1,360,000
Equal to $340,000/model
[a]	Note: As described in our unit cost memo, the costs originally provided by industry for this table were presumed to be based on crib wood testing, not both crib wood and cord wood testing. Therefore we increased the industry-based "Test Fuel" cost by 50% (to the $45,000 shown above) as well as the industry-based "Testing Services" cost by 50% (to the $150,000 shown above) in order to estimate the additional cost to test with both crib wood and cord wood.
For this analysis, we used the costs provided in the Table 5-1 example, scaled to a single model and spread over a 6-year model development time frame. We prepared an annualized R&D cost estimate by separating cost elements into direct annual costs (salaries) vs. indirect annual costs (laboratory equipment, retooling and other capital costs). We estimated annual capital costs during the amortized R&D cost period as the fraction that the indirect costs (IAC) are of the Total Annual Cost, approximately 34% annually. Ongoing costs such as taxes, overhead, and other routine expenses would be incurred regardless of the NSPS standard, and are not included in this analysis. Table 5-2 shows the estimated annualized cost of $63,850 per model, assuming an amortization period of 6 years and an interest rate of 7%.
Table 5-2.	Annual Cost Summary: Development of 4 Model Fireboxes[a][,b]
Direct Annual Costs (DAC)
 Operator labor
$141,667
Annual salary cost from Table 1, spread over 6 years."
 Outside Consultants
$26,667
Annual outside consultant cost from Table 1, spread over 6 years."
Total Direct Costs (DC)
$168,333

                                                                    (continued)
Table 5-2. Annual Cost Summary: Development of 4 Model Fireboxes[a][,b] (continued)
Indirect Annual Costs (IAC)
 Laboratory Equipment[a]
$10,490
The laboratory equipment cost of $50,000 was amortized over 6 years at an interest rate of 7%.
 Re-tooling[b]
$25,175
The re-tooling cost of $120,000 was amortized over 6 years at an interest rate of 7%.
 Other Capital Costs[b]
$51,400
Other capital costs include costs for prototypes ($25,000), test fuel ($45,000), testing services ($150,000), and marketing ($25,000) and were amortized over 6 years at an interest rate of 7%.
Total Indirect Costs (IAC)
$87,065

Total Annual Cost
$255,399
Annual cost for development of 4 model fireboxes.
Total Annual Cost
$63,850
Average annual cost per firebox model.
[a]	An amortization period of 6 years for laboratory equipment, retooling and other capital costs was chosen based on industry's estimate that approximately 5 to 6 years of R&D are required to bring a product to market.
[b]	As described in the unit cost memo, to estimate the additional cost to test with both cord wood and crib wood, the test fuel industry estimate of $30,000 based on crib only was increased by $15,000 and the testing services industry estimate of $100,000 based on crib only (which covered not only emissions testing but also efficiency and safety testing) was increased by $50,000.
Masonry Heaters
Masonry heaters manufacturing cost impacts vary by the type of producer and the type of certification method. According to one manufacturer, the masonry heater industry in the U.S. is dominated by the Finnish firm Tulikivi, which manufactures and imports about half of the U.S. masonry heater units installed yearly through its network of installing distributors. The same manufacturer said that the second largest producer is a Canadian firm, Temp-Cast. The remainder of the industry is made up of "dozens" of small producers, with probably fewer than 100 (or at least fewer than 200) generating any masonry revenue at all. Some commercial operations sell core units and/or design kits based on their own design, and other sell units they license from other U.S. or foreign companies. Finally, some units are custom built. Based on this information, we assumed that 50% of masonry heaters sold per year in the U.S. are Tulikivi models and 35% are sold by other manufacturers. The remaining 15% of units are sold by independent contractors.
There are three major cost components to consider in evaluating the potential cost impacts of the proposed NSPS: research and development (R&D), certification testing, and licensing fees for use of a computer software package approved for use in certifying a model design. According to information provided by one manufacturer, capital R&D costs for a masonry heater may be estimated at $250,000. In the absence of more specific data regarding R&D costs for masonry heaters, we assumed R&D costs were the same as for other wood heater appliances -- that is, $63,850 annually for a 6-year R&D amortization period. For facilities conducting R&D, these costs include the costs for certification testing. We estimate that the cost of testing a heater design in an EPA accredited lab to be approximately $10,000.
This cost analysis also makes use of a unique software package based on a European masonry heater design standard. This standard has been verified in the laboratory and under field conditions to produce masonry heaters that would meet the proposed NSPS emission limits. The software produces for printout a certification for a given design application and the design definition documents as well as operating instructions customized to the given design, so that the software verification and certification record is created for and attached to the design. The resulting documents can be submitted as part of the certification application. The cost of this software to the user is approximately 1,000 Euros (approximately $1,500) for the package with a 300 Euro (approximately $450) annual fee that commences in the second year following purchase.
General Approach and Assumptions for Costs to Manufacturers
Manufacturers have told us that it takes several years to develop new models, and this is documented in the manufacturer's cost memo. We have spread the annualized R&D costs (shown in Table 5-2) over 6 years to best represent the time and funds needed to develop the complying models. For the purposes of our cost estimate, we have assumed that when the NSPS revisions are proposed, all manufacturers will begin serious efforts to develop complying models, although for some manufacturers we also know that they have been involved in intensive R&D efforts in anticipation of the proposed rule.
We estimated both the average annual cost to manufacturers of each appliance type and then extended those costs to nationwide total annual costs. The basic components to each manufacturer's estimated annual cost are:
Annualized R&D cost;
Ongoing annual Certification cost; and
Ongoing annual Reporting and Record Keeping cost.
The Annualized R&D costs (shown in Table 5-2, and based on the Table 5-1 costs) are by far the largest cost component and we have applied these costs to most models in our cost analysis -- especially to models in previously unregulated appliance categories -- in order to present a reasonable estimate of the costs given uncertainty over the precision of available estimate of the R&D cycle lifespan. For example, as noted above, instead of estimating the number of hydronic heater models that already meet a specific limit and will therefore merely need to certify their emissions rather than undergo R&D, we instead assumed that 100% of hydronic heater models will undergo R&D beginning in 2013. We made similar reasonable assumptions for single burn rate stoves and forced air furnaces.
Under the Proposal scenario, one round of R&D is assumed -- beginning in 2013 and ending in 2018 -- in order to meet the proposed Step 2 limit. Under the Alternative option, two rounds of R&D are assumed for all appliances except masonry heaters (for which there is only one standard with no additional phased-in standards to meet). Under the Alternative option, the first R&D round begins in 2013 and the second round begins in 2017 (which causes overlapping R&D costs in years 2017 and 2018 in this analysis) -- in order to meet the interim Alternative Step 2 limit in 2017 and the Alternative Step 3 limit in 2022. We also reasonably assumed that of the models undergoing the first round of R&D costs, 80% of these models undergo and assume the second round of R&D costs in the Alternative scenario (i.e., we reasonably assumed that only 20% of models achieve the strictest limit in the first round of R&D).
Furthermore, for appliances like single burn rate stoves and forced air furnaces, which were previously unregulated (and also were not pushed technologically by a voluntary program, as hydronic heaters were), we have reasonably doubled R&D costs during years 2013 and 2014. This doubling of R&D cost estimates is to represent an intensification of the R&D efforts to meet the Step 1 limit and begin development of models to meet the stricter stepped limits -- R&D efforts which industry has indicated are already ongoing.
Note that all manufacturers, except for wood stoves that are subject to the current 1988 NSPS, will face ongoing certification costs above baseline conditions. However, in the 2013 to 2018 time frame under the Proposal option and in the 2013 to 2022 time frame under the Alternative option, we have incorporated these costs as part of the overall R&D expenditures. After 2018 under the Proposal option and after 2022 under the Alternative option, the ongoing certification costs will be the only NSPS related costs faced by manufacturers besides ongoing reporting and recordkeeping costs.
Regarding certification costs, we have assumed a cost of $10,000 per model for pellet stoves, single burn rate stoves and masonry heaters; and we have assumed a cost of $20,000 per model for hydronic heaters and forced air furnaces. We have spread these costs out over the 5 year certification life, assuming annual certification costs for one-fifth of the models.
For example, pellet stoves will incur certification costs in advance of complying with more stringent limits. As explained in the manufacturer's cost memo, approximately 30% of existing pellet stove models are expected to comply with the proposed Step 2 and Alternative Step 3 standard. However, in order to be sold, these stove models would now be required to demonstrate compliance with an emissions limit, incurring an upfront cost of $10,000 per model to become certified. The same cost memo also discusses our assumption that one fifth of the pellet stove models will certify in any given year.
We based reporting and recordkeeping (R&R) costs on the annual average costs derived from development of the Information Collection Request (ICR) supporting statements. These are reasonable annual estimates of the ongoing R&R burden to manufacturers associated with the Proposal and Alternative scenarios. (We do not expect the R&R burden to differ substantially between the two scenarios.)
The certification and reporting and recordkeeping costs were estimated to be incurred by manufacturers for the full 20-year model design lifespan. Under the Proposal, we estimated costs from 2013 through 2038 -- that is, 20 years after the 2019 compliance year marking the beginning of the model lifespan designed to meet the Proposal Step 2 limit. Under the Alternative, we estimated costs from 2013 through 2041 -- that is, 20 years after the 2022 compliance year marking the beginning of the model lifespan designed to meet the Alternative Step 3 limit. We provide these costs in the manufacturer's cost memo.
General Approach and Assumptions for Costs to Masonry Heater Manufacturers
As noted above, we addressed masonry heaters in a way which segmented the costs in keeping with the masonry heater market. There are three scenarios for potential cost impacts for large masonry heater manufacturers. In the case of Tulikivi and some U.S. firms, e.g., Timely Construction, these companies have already invested in R&D in order to gain access to U.S. markets which restrict sales (e.g., Colorado) of uncertified units. These companies will face testing costs only, with an assumed total of nine tests conducted prior to the proposed compliance date (i.e., to certify a total of nine model lines). For purposes of our cost analysis, we assumed as shown in the unit cost memo that two additional companies will conduct R&D to develop two new models each to meet the proposed NSPS. Finally, we have been told that Tulikivi will use the software certification approach to certify up to eight additional models. We also project as presented in the unit cost memo that the remaining 15% of custom built units will use the software certification approach to certify compliance with the proposed NSPS starting in 2013 (estimated date of the proposed standards) and that they will continue to renew their license in the following years.
As explained in the unit cost memo, we used data in the Frost & Sullivan Market (F&S) report on 2008 masonry heater shipments by product category and F&S revenue forecasts which incorporated the weak economy in years 2009 and 2010, to calculate the reduced number of shipments in years 2009 and 2010. For years 2011 through 2038 (for the Proposal option) and 2011 through 2041 (for the Alternative option) estimated shipments are based on a forecasted revenue growth rate of 2.0%, in keeping with the average annual growth in real GDP predicted by the Conference Board. For masonry heaters, our estimate of the number of custom built models is based on the average number of models sold per year in the 15% model category (i.e., 85 per year). We assumed each custom manufacturer would sell 2 models per year, for a total of 42 manufacturers participating in the software certification option.
Under both the Proposal and Alternative options, most sales-weighted masonry heater units face a 2014 Step 1 compliance date with no other phased-in limits. However, under both the Proposal and Alternative options, companies that sell fewer than 15 units per year have until 2019 to come into compliance. We have assumed that the large manufacturers will comply by 2014 for the units that only require testing and/or software certification, with those expenditures incurred annually starting in 2013. We also assumed that the 15% of custom built units will comply by 2019, but will begin certifying their units using the software certification approach as early as 2013, as noted above, as a selling point for their services. For those companies that start R&D when the NSPS is proposed in 2013, we have assumed that they will spread these costs over the 6-year period from 2013 through 2018 for the four models affected, under both the Proposal and Alternative options.
General Approach and Assumptions for All Appliances
Below is a list of approach and assumptions for estimating costs for each category of appliances affected by this proposal, as taken from the manufacturer cost memo:
1.	Nationwide Annual Cost assumes R&D investment is amortized over 6 years (2013 through 2018). Ongoing certification costs are incurred through 2038 (based on a model brought to market in 2019 with a lifespan of 20 years), except for woodstoves which already incur certification costs under the existing NSPS.
2.	Since certification is required every 5 years (except for the software certification option for masonry heaters), it is assumed that certification costs will be spread out so that 1/5 of the models certify each year.
3.	This analysis considers additional costs resulting from the proposed NSPS. For wood stoves, the analysis assumes that 5% meet Step 2 already so that 95% of the models will undergo re-design to meet the Step 2 level. The costs modeled for years 2020 through 2038 exclude the ongoing certification costs and ongoing reporting and recordkeeping costs incurred by wood stove manufacturers who already had to certify and report under the existing NSPS.
4.	For pellet stoves, the analysis assumes that 30% meet Step 2 already so that 70% of models undergo R&D re-design to meet Step 2. The R&D budget includes certification costs. The analysis also assumes that the 30% of the pellet stove models which already meet Step 2 will certify in an ongoing basis starting in 2013. The analysis reflects the certification costs beginning in 2013 for the 30% of models meeting Step 2, and beginning in 2019 for the remaining 70% of models which underwent R&D re-design.
5.	Based on conversations with industry in February 2013, single burn rate stoves and forced air furnaces have been undergoing R&D prior to 2013 to develop cleaner models. Because these devices were previously unregulated and may need to transfer technology from adjustable burn rate stoves and hydronic heaters respectively, this analysis assumes that these efforts will intensify in 2013 and 2014. Therefore estimated R&D costs are doubled in 2013 and 2014 in order to meet the 2014 Step 1 standard while also beginning R&D to develop models to meet the more stringent 2019 Step 2 standard.
6.	For single burn rate stoves, forced air furnaces, and hydronic heating systems, the analysis assumes that only a small percentage meet Step 2 so that approximately 100% of the models undergo R&D re-design to meet Step 2. The R&D budget includes certification costs. Ongoing certification costs for the re-designed models are reflected in this analysis beginning in 2019.
7.	For masonry heaters, the cost analysis assumes one round of R&D to meet 0.32 lb/mmBTU standard (no additional stepped standards, although large manufacturers will be required to meet the limit in 2014, while small volume manufacturers will be given a 5 year extension until 2019 to meet the limit). For masonry heater manufacturers using software certification, the analysis assumes the purchased software will be used for certifying all models developed by that manufacturer.
8.	Reporting and recordkeeping costs (R&R) [for all appliances but masonry heaters] are based on the annual average costs derived from the ICR and are estimates of the ongoing R&R burden to manufacturers associated with the proposed NSPS. The annual average nationwide R&R burden estimated to manufacturers for Subpart AAA is $440,443, and for Subpart QQQQ is $119,249. These R&R costs do not include the R&R burden to laboratories; the annual average nationwide R&R burden incurred by laboratories subject to requirements under Subpart AAA is estimated to be $75,745, and incurred by laboratories subject to requirements under Subpart QQQQ is estimated to be $50,496.
9.	For Masonry Heaters, Reporting and recordkeeping costs (R&R) are based on the annual average costs derived from the ICR and are estimates of the ongoing R&R burden to manufacturers associated with the proposed NSPS. The annual average nationwide R&R burden estimated to manufacturers for Subpart RRRR is $98,788 for small/custom masonry heater manufacturers and $25,929 for large masonry heater manufacturers. These R&R costs do not include the R&R burden to laboratories; the annual average nationwide R&R burden incurred by laboratories subject to requirements under Subpart RRRR is estimated to be $37,872.
For the Alternative option for all appliances, here are the assumptions for cost estimations where they differ from those in the Proposed option:
1.	Nationwide Annual Cost assumes R&D investment is amortized over 6 years (round one from 2013 through 2018 and round two from 2017 through 2022). Ongoing certification costs are incurred through 2041 (based on a model brought to market in 2022 with a lifespan of 20 years), except for woodstoves which already incur certification costs under the existing NSPS.
2.	(Same as above)
3.	This analysis considers additional costs resulting from the proposed NSPS. For wood stoves, the analysis assumes that 5% meet Step 3 already so that 95% of the models will undergo re-design in round one, and 80% of those 95% will require another round of R&D to meet the Step 3 level. The costs exclude the ongoing certification costs and ongoing reporting and recordkeeping costs incurred by wood stove manufacturers who already had to certify and report under the existing NSPS.
4.	For pellet stoves, the analysis assumes that 30% meet Step 3 already so that 70% of models undergo re-design in round one, and 80% of those 70% require another round of R&D to meet Step 3. The R&D budget includes certification costs. The analysis also assumes that the 30% of the pellet stove models which already meet Step 3 will certify in an ongoing basis starting in 2013.
5.	Based on conversations with industry in February 2013, single burn rate stoves and forced air furnaces have been undergoing R&D prior to 2013 to develop cleaner models. Because these devices were previously unregulated and may need to transfer technology from adjustable burn rate stoves and hydronic heaters respectively, this analysis assumes that these efforts will intensify in 2013 and 2014. Therefore estimated R&D costs are doubled in 2013 and 2014 in order to meet the 2014 Step 1 standard while also beginning R&D to develop models to meet the more stringent 2017 Step 2 and 2022 Step 3 standards.
6.	For single burn rate stoves, forced air furnaces, and hydronic heating systems, the analysis assumes that only a small percentage meet Step 3 so that approximately 100% of the models undergo re-design in round one, and 80% require another round of R&D to meet Step 3. The R&D budget includes certification costs.
5.1.6	Labor Requirements for Monitoring, Recordkeeping and Reporting
The focus of this part of the analysis is on labor requirements related to the compliance actions of the affected entities within the affected sector. This analysis estimates the labor requirements associated with new reporting and recordkeeping requirements.
The labor changes may either be required as part of an initial effort to comply with the new regulation or required as a continuous or annual effort to maintain compliance. We estimate up-front and continual, annual labor requirements by estimating hours of labor required for the monitoring, recordkeeping, and reporting efforts to maintain compliance.
The results of this analysis are presented in Table 5-3 for the Proposed NSPS option. The table breaks down the certification, quality assurance, reporting and recordkeeping burden and labor estimates by appliance type for each of the proposed subparts and for the test labs to obtain and maintain testing accreditation. These estimates are presented in terms of the estimated hours required. These estimates are consistent with estimates EPA submitted as part of the Information Collection Requests (ICRs) that are in the Supporting Statements for the proposed rules.
We note that certification testing (once every 5 years unless a waiver is granted) costs of approximately $10,000 ($20,000 for hydronic heaters and forced air furnaces) per model line in 2022 result in labor hours spent at the test lab, which are not included in this labor rate analysis. In addition, each model that is developed (i.e., number of affected units) will face an annual estimated cost of $160,000 for the salaries of two full-time experimental employees for 5 years. This estimate should be regarded as a partial labor estimate, with other possible labor associated with new model development (such as re-tooling) left as unquantified and described qualitatively in the manufacturer cost and unit cost impact memos.
Ongoing labor requirements are estimated at about 9,900 hours for the Proposed option. The labor estimate for the Alternative option will not be substantially different to that for the proposed option since there are no additional labor requirements for administrative matters under the Alternative option compared to the Proposed option. These ongoing labor requirements can be viewed as average sustained labor requirements required for affected entities to continuously comply with the new regulations from 2019 and beyond.
Table 5-3.	Estimates of Labor Requirements for Certification, Quality Assurance, Reporting, Recordkeeping, and Accreditation Requirements for the Proposed NSPS Option[a]
Source/Emissions Point
Projected No. of Affected Units
Per-Unit
One-Time Labor Estimate (Hours)
Total
One-Time Labor Estimate (Hours)
Total Annual Labor Estimate (Hours)
Adjustable burn rate stoves not needing certification testing
125
                                       0
0
1,784
Single burn rate stoves
20
                                       0
0
283
Pellet stoves
125
                                       0
0
1,779
Test Labs
6
                                       0
0
597
Removable Label

1,017
Hydronic heaters -- model development
90
                                       0
0
1,290
Forced air furnaces -- model development
38
                                       0
0
539
Test Labs
4
                                       0
0
398
Removable Label

332
Existing models at large manufacturers certified via testing
13
                                       0
0
187
Existing models at large manufacturers certified via computer simulation
8
                                       0
0
113
Existing models at small manufacturers certified via computer simulation
85
                                       0
0
1,275
Test Labs
3
                                       0
0
298.5
Removable Label

4.46
Total for Industry
517
                                       0
0
9,893
[a]	The labor requirements for the Alternative option are not substantially different than  those for the Proposed option.
Note: Totals may not sum due to independent rounding. The Agency assumes in its cost analysis of monitoring, recordkeeping, reporting, and testing requirements in the Information Collection Request (ICR) that only half of the currently available models for all appliance types would be certified and sold.

Compliance Costs of the Proposed Rule
EPA's engineering cost analysis estimates that the total annualized cost of the proposed rule option to manufacturers for the Proposed option is $15.7 million, calculated as an average of the annualized costs incurred from 2014 to 2022. For the alternative option, the total annualized cost is $28.3 million (all costs are reported in 2010 dollars) (EC/R, December 2011) Annualized costs are estimated at a 7% interest rate. We calculate the costs in this way in order to provide an average of annualized costs for these options from the time of rule promulgation in 2014 to the time of full implementation of both options, which occurs in 2022. Having an average annualized calculation for the costs allows for a reasonable measure of the costs to be incurred by manufacturers given the changes in costs year by year between 2014 and 2022 as shown in the manufacturer's cost memo for this proposal. The total annualized costs for each year and for each option are in Table 5-4.
With total annualized costs estimated at a 3% interest rate, the total annualized cost of the proposal option is $14.8 million, and $26.9 million for the alternative option (in 2010 dollars). More detailed information on the costs at a 3% interest rate can be found in the cost memorandum for this proposal.
Under the proposed NSPS option, the costs in the 2014-2022 time frame fall most heavily on manufacturers of hydronic heating systems (29%), followed by wood stoves (27%), then by pellet stoves (22%). The remaining 22% of the costs are distributed to forced-air furnace manufacturers (14%), manufacturers of single burn rate stoves (6%), and masonry heaters (2%).
Table 5-4.	Summary of Average Annualized Nationwide Costs for 2014 - 2022 Time Frame Under the Proposal and Alternative Options
Appliance Type
Proposed Option
Alternative Option
Wood Heaters
$4,212,303
$8,090,026
Single Burn Rate Heaters
$901,732
$1,540,600
Pellet Stoves
$3,460,489
$6,255,536
Forced-Air Furnaces
$2,252,284
$3,813,898
Hydronic Heating Systems
$4,554,152
$8,302,026
Masonry Heaters
$307,511
$307,511
Total Average Annual Cost for 2014 - 2022 Time Frame
$15,688,471
$28,309,597

For the alternative option, the annualized costs fall most heavily of manufacturers of hydronic heaters (29%) and wood stoves (29%), followed by pellet stoves (22%). The remaining 20% of the costs are distributed to manufacturers of forced air heaters (13%), single burn rate stoves (5%), and masonry heaters (2%).
The revised rule, as proposed would affect an estimated 2.7 million new residential wood heating devices between 2014 and 2022 assuming an average of ~296,000 new shipments annually as presented in the emissions memo for the proposal. As shown previously in Table 4-4 in Section 4 , annual shipments are forecasted to increase for all product types over the same time period.
To assess the size of the compliance costs relative to the value of shipments to end-use consumers, we compared industry-level compliance costs relative to projected sales for 2018 since this is year between 2014 and 2022 and is a representative year suitable for this analysis. In this case, cost-to-receipts ratios approximate the maximum price increase needed for a producer to fully recover the annual compliance costs associated with a regulation. These industry-level cost-to-receipts ratios can be interpreted as an average impact on potentially affected firms in these industries all other things equal, and where ratios less than 1% suggest the rule will not have a significant impact using EPA's SBREFA guidance as a basis. Results for affected industries for the 2014 - 2022 time frame can be found in Tables 5-4a and 5-4b.

Under the NSPS proposal option, none of the six affected product types would have an annualized cost-to-receipts ratio of less than 1%. In the 2014-2022 time frame for this option, cost-to-receipts ratios range from 2.3% for pellet stoves to 6.4% for single burn rate stoves as shown in Table 5-5a. For the alternative option, cost-to-receipts ratios range from 4.0% for forced air furnaces to 10.7% for single burn rate stoves as shown in Table 5-5b.
Table 5-5a.	Industry Level-Annualized Compliance Costs (2010 dollars) as a Fraction of Total Industry Revenue by Product Type in the 2014 - 2022 Time Frame -- Proposal Option
Product Type
Total Annualized Costs
($ millions)
Product Sales in 2018
($ millions)[a]
Cost-to-Receipts
Ratio
Wood stoves
$4.2
$98.1
                                     4.3%
Single burn rate stoves
$0.9
$14.0
                                     6.4%
Pellet stoves
$3.5
$152.8
                                     2.3%
Forced-air furnaces
$2.3
$96.6
                                     2.4%
Masonry heaters
$0.3
$6.3
                                     4.8%
Hydronic heating systems
$4.5
$134.4
                                     3.3%
[a]	Sales based on projected product shipments and average unit costs estimates. We use annual sales in 2018 to approximate annual sales for years from 2014 to 2022. Total annualized costs in this table are estimated at a 7% interest rate.
Sources:	Masonry Heater Compliance Costs from Masonry Heater NSPS Annual Cost 12 8 11.xls. Received from EPA on December 16, 2011.
Unit Costs and Shipment Projections from Unit Cost Memo. Received by EPA in February, 2013.
Industry Compliance Costs from Wood Stove NSPS Annual Costs. Received by EPA February, 2013.
Table 5-5b.	Industry Level-Annualized Compliance Costs (2010 dollars) as a Fraction of Total Industry Revenue by Product Type in 2014 - 2022 Time Frame -- Alternative Option
Product Type
Total Annualized Costs
($ millions)
Product Sales in 2018
($ millions)[a]
Cost-to-Receipts
Ratio
Wood stoves
                                     $8.1
$98.1
8.3%
Single burn rate stoves
                                     $1.5
$14.0
10.7%
Pellet stoves
                                     $6.2
$152.8
4.1%
Forced-air furnaces
                                     $3.8
$96.6
4.0%
Masonry heaters
                                     $0.3
$6.3
4.8%
Hydronic heating systems
                                     $8.3
$134.4
6.1%
[a]	Sales based on projected product shipments and average unit costs estimates. We use annual sales in 2018 to approximate annual sales for years from 2014 to 2022. Total annualized costs are estimated at a 7% interest rate.
Sources:	Masonry Heater Compliance Costs from Masonry Heater NSPS Annual Cost 12 8 11.xls. Received from EPA on December 16, 2011.
Unit Costs and Shipment Projections from Unit Cost Memo. Received by EPA in February, 2013.
Industry Compliance Costs from Wood Stove NSPS Annual Costs. Received by EPA February, 2013.
How Might People and Firms Respond? A Qualitative Partial Equilibrium Analysis
Markets are composed of people as consumers and producers acting as economic agents to maximize utility or profits, respectively. One way economists illustrate behavioral responses to pollution control costs is by using market supply and demand diagrams. The market supply curve describes how much of a good or service firms are willing and able to sell to people at a particular price; we often draw this curve as upward sloping because some production resources are fixed. As a result, the cost of producing an additional unit typically rises as more units are made. The market demand curve describes how much of a good or service consumers are willing and able to buy at some price. Holding other factors constant, the quantity demanded is assumed to fall when prices rise. In a perfectly competitive market, equilibrium price (P0) and quantity (Q0) are determined by the intersection of the supply and demand curves (see Figure 5-2).
Changes in Market Prices and Quantities
To qualitatively assess how the regulation may influence the equilibrium price and quantity in the affected markets, we assumed the market supply function shifts up by the additional cost of producing the good or service; the unit cost increase is typically calculated by dividing the annual compliance cost estimate by the baseline quantity (Q0) (see Figure 5-2). As shown, this model makes two predictions: the price of the affected goods and services are likely to rise and the consumption/production levels are likely to fall.
The size of these changes depends on two factors: the size of the unit cost increase (supply shift) and differences in how each side of the market (supply and demand) responds to changes in price. Economists measure responses using the concept of price elasticity, which represents the percentage change in quantity divided by the percentage change in price. This dependence has been expressed in the following formula:

As a general rule, a higher share of the per-unit cost increases will be passed on to consumers in markets where
goods and services are necessities and people do not have good substitutes that they can switch to easily (demand is inelastic) and
suppliers have excess capacity and can easily adjust production levels at minimal costs, or the time period of analysis is long enough that suppliers can change their fixed resources; supply is more elastic over longer periods.

             consumer surplus =  - [fghd + dhc]
             producer surplus = [fghd − aehb] − bdc
             total surplus = consumer surplus + producer surplus = −[aehb + dhc + bdc]
Figure 5-2.	Market Demand and Supply Model: With and Without Regulation

Short-run demand elasticities for energy goods (electricity and natural gas), agricultural products, and construction are often inelastic. Specific estimates of short-run demand elasticities for these products can be obtained from existing literature. For the short-run demand of energy products, the National Energy Modeling System (NEMS) buildings module uses values between 0.1 and 0.3; a 1% increase in price leads to a 0.1 to 0.3% decrease in energy demand (Wade, 2003). For the short-run demand of agriculture and construction, EPA has estimated elasticities to be 0.2 for agriculture and approximately 1 for construction (EPA, 2004). As a result, a 1% increase in the prices of agriculture products would lead to a 0.2% decrease in demand for those products, while a 1% increase in construction prices would lead to approximately a 1% decrease in demand for construction. Given these demand elasticity scenarios (shaded in gray), approximately a 1% increase in unit costs would result in a price increase of 0.1 to 1% (Table 5-6). As a result, 10 to 100% of the unit cost increase could be passed on to consumers in the form of higher goods/services prices. This price increase would correspond to a 0.1 to 0.8% decline in consumption in these markets (Table 5-7).
Table 5-6.	Hypothetical Price Increases for a 1% Increase in Unit Costs
Market Demand Elasticity
Market Supply Elasticity

0.1
0.3
0.5
0.7
1
1.5
3
                                    −0.1
                                     0.5%
                                     0.8%
                                     0.8%
                                     0.9%
                                     0.9%
                                     0.9%
                                     1.0%
                                    −0.3
                                     0.3%
                                     0.5%
                                     0.6%
                                     0.7%
                                     0.8%
                                     0.8%
                                     0.9%
                                    −0.5
                                     0.2%
                                     0.4%
                                     0.5%
                                     0.6%
                                     0.7%
                                     0.8%
                                     0.9%
                                    −0.7
                                     0.1%
                                     0.3%
                                     0.4%
                                     0.5%
                                     0.6%
                                     0.7%
                                     0.8%
                                    −1.0
                                     0.1%
                                     0.2%
                                     0.3%
                                     0.4%
                                     0.5%
                                     0.6%
                                     0.8%
                                    −1.5
                                     0.1%
                                     0.2%
                                     0.3%
                                     0.3%
                                     0.4%
                                     0.5%
                                     0.7%
                                    −3.0
                                     0.0%
                                     0.1%
                                     0.1%
                                     0.2%
                                     0.3%
                                     0.3%
                                     0.5%

Table 5-7.	Hypothetical Consumption Decreases for a 1% Increase in Unit Costs
Market Demand Elasticity
Market Supply Elasticity

0.1
0.3
0.5
0.7
1
1.5
3
                                    −0.1
                                    −0.1%
                                    −0.1%
                                    −0.1%
                                    −0.1%
                                    −0.1%
                                    −0.1%
                                    −0.1%
                                    −0.3
                                    −0.1%
                                    −0.2%
                                    −0.2%
                                    −0.2%
                                    −0.2%
                                    −0.3%
                                    −0.3%
                                    −0.5
                                    −0.1%
                                    −0.2%
                                    −0.3%
                                    −0.3%
                                    −0.3%
                                    −0.4%
                                    −0.4%
                                    −0.7
                                    −0.1%
                                    −0.2%
                                    −0.3%
                                    −0.4%
                                    −0.4%
                                    −0.5%
                                    −0.6%
                                    −1.0
                                    −0.1%
                                    −0.2%
                                    −0.3%
                                    −0.4%
                                    −0.5%
                                    −0.6%
                                    −0.8%
                                    −1.5
                                    −0.1%
                                    −0.3%
                                    −0.4%
                                    −0.5%
                                    −0.6%
                                    −0.8%
                                    −1.0%
                                    −3.0
                                    −0.1%
                                    −0.3%
                                    −0.4%
                                    −0.6%
                                    −0.8%
                                    −1.0%
                                    −1.5%

Partial Equilibrium Measures of Social Cost: Changes in Consumer and Producer Surplus
In partial equilibrium analysis, the social costs are estimated by measuring the changes in consumer and producer surplus, and these values can be determined using the market supply and demand model (as shown in Figure 5-2). Assuming linear market supply and demand curves as shown in Figure 5-2, the change in consumer surplus (CS) is measured as follows:
	CS = − [Q1 x p] + [0.5 x Q x p].	(5.1)
where a coefficient of 0.5 is multiplied to the change in Q and P resulting from the shock to the markets based on the assumption of  linear demand and supply curves in the diagram above and applying principles of basic geometry. Higher market prices and lower quantities lead to consumer welfare losses. Similarly, the change in producer surplus (PS) is measured as follows:
	PS = [Q1 x p] − [Q1 x t] − [0.5 x Q x (p − t)].	(5.2)
Higher unit costs and lower production levels reduce producer surplus because the net price change (p − t) is negative. However, these losses are mitigated because market prices tend to rise.
Social Cost Estimate
As shown in Tables 5-5a and 5-5b, the social cost as approximated by the annual compliance costs as a percent of sales represent a fraction of the affected product value that is greater than 1% for each of the product categories; this suggests that the shift of the supply curve may be relatively large for some product types and result in larger changes in market prices and consumption. EPA believes the national annualized compliance cost estimates provide a reasonable approximation of the social cost of this proposed rule. EPA believes this approximation is better for industries whose markets are well characterized as perfectly competitive. However, given the data limitations noted earlier, EPA believes the accounting for annual compliance costs is a reasonable approximation to inform policy discussion in this rulemaking. We were not able to prepare a full economic analysis of the impacts of this proposal on supply and demand, or the effects of such impacts on emissions (e.g. feedback effect on emissions). Most of the affected industries can be characterized as having a high degree of competitive market behavior. To shed more light on the level of market behavior, EPA ran hypothetical economic impact analyses and the results are in Tables 5-6 and 5-7.
Energy Impacts
Executive Order 13211 (66 FR 28355, May 22, 2001) provides that agencies will prepare and submit to the Administrator of the Office of Information and Regulatory Affairs, Office of Management and Budget, a Statement of Energy Effects for certain actions identified as "significant energy actions." Section 4(b) of Executive Order 13211 defines "significant energy actions" as any action by an agency (normally published in the Federal Register) that promulgates or is expected to lead to the promulgation of a final rule or regulation, including notices of inquiry, advance notices of proposed rulemaking, and notices of proposed rulemaking: (1) (i) that is a significant regulatory action under Executive Order 12866 or any successor order, and (ii) is likely to have a significant adverse effect on the supply, distribution, or use of energy; or (2) that is designated by the Administrator of the Office of Information and Regulatory Affairs as a significant energy action.
This rule is not a significant energy action as designated by the Administrator of the Office of Information and Regulatory Affairs because it is not likely to have a significant adverse impact on the supply, distribution, or use of energy. In general, we expect the NSPS to improve technology,. By making the use of wood fuel less polluting and more efficient, we might see an increase in the use of wood fuel, which would relieve pressure on traditional coal- or petroleum-based energy sources. However, it is difficult to determine the precise energy impacts that might result from this rule because wood-fueled appliances compete with other biomass forms as well as more traditional oil, electricity, and natural gas. We have not determined the potential conversion to other types of fuels and their associated appliances if the consumer costs of wood-fueled appliances increase and at what level that increase would drive consumer choice.
Unfunded Mandates Reform Act (UMRA)
Future and Disproportionate Costs
The UMRA requires that we estimate, where accurate estimation is reasonably feasible, future compliance costs imposed by the rule and any disproportionate budgetary effects. Our estimates of the future compliance costs of the proposed rule are discussed previously in this RIA. The nationwide annualized average compliance cost of this proposed rule for directly affected appliances is $15.7 million in the 2014-2022 time frame (2010 dollars). Therefore, this proposed rule would not be subject to the requirements of Sections 202 or 205 of the UMRA.
This proposed rule would also not be subject to the requirements of Section 203 of UMRA because it contains no regulatory requirements that might significantly or uniquely affect small governments. The proposed rule would not apply to such governments and would impose no obligations upon them. We do not believe that there will be any disproportionate budgetary effects of the proposed rule on any particular areas of the country, state or local governments, types of communities (e.g., urban, rural), or particular industry segments.
Effects on the National Economy
The UMRA requires that we estimate the effect of the proposed rule on the national economy. To the extent feasible, we must estimate the effect on productivity, economic growth, full employment, creation of productive jobs, and international competitiveness of U.S. goods and services if we determine that accurate estimates are reasonably feasible and that such effect is relevant and material. The nationwide economic impact of the proposed rule is presented earlier in this RIA chapter. This analysis provides estimates of the effect of the proposed rule on most of the categories mentioned above, and these estimates are presented earlier in this RIA chapter. The nature of this rule is such that it is not practical for us to use existing approaches, such as the Morgenstern et al. approach, to estimate the impact on employment to the regulated entities and others from this proposed rule. We explain why this is true, and provide impacts associated with the monitoring, recordkeeping, and reporting requirements to provide some understanding of what impacts this proposal will have on employment for affected firms in section 5.7 below.
Executive Order 13045: Protection of Children from Environmental Health Risks and Safety Risks
Executive Order 13045, "Protection of Children from Environmental Health Risks and Safety Risks" (62 FR 19885, April 23, 1997), applies to any rule that (1) is determined to be "economically significant," as defined under Executive Order 12866, and (2) concerns an environmental health or safety risk that EPA has reason to believe may have a disproportionate effect on children. If the regulatory action meets both criteria, EPA must evaluate the environmental health or safety effects of the planned rule on children and explain why the planned regulation is preferable to other potentially effective and reasonably feasible alternatives considered by the Agency.
This proposed rule is not subject to Executive Order 13045 (62 FR 19885, April 23, 1997) because the Agency does not believe the environmental health risks or safety risks addressed by this action present a disproportionate risk to children. The report, Analysis of Exposure to Residential Wood Combustion Emissions for Different Socio-Economic Groups, shows that on a nationwide basis, cancer risks due to residential wood smoke emissions among disadvantaged population groups generally are lower than the risks for the general population due to residential wood smoke emissions. One of the demographic variables examined for this report was that of children 18 years and younger.
This proposed rule is expected to reduce environmental impacts for everyone, including children. This action proposes emissions limits at the levels based on the best system of emissions reduction (BSER), as required by the Clean Air Act. Based on our analysis, we believe that this proposed rule would not have a disproportionate impact on children.
The public is invited to submit comments or identify peer-reviewed studies and data that assess effects of early-life exposure to smoke from residential wood heaters.
Executive Order 12898: Federal Actions to Address Environmental Justice in Minority Populations and Low-Income Populations
Executive Order 12898 (59 FR 7629 (Feb. 16, 1994)) establishes federal executive policy on environmental justice. Its main provision directs federal agencies, to the greatest extent practicable and permitted by law, to make environmental justice part of their mission by identifying and addressing, as appropriate, disproportionately high and adverse human health or environmental effects of their programs, policies, and activities on minority populations and low-income populations in the United States.
EPA has determined that this proposed rule would not have disproportionately high and adverse human health or environmental effects on minority, low-income or indigenous populations because it increases the level of environmental protection for all affected populations without having any disproportionately high and adverse human health or environmental effects on any population, including any minority, low-income or indigenous population. This proposed rule would establish national standards that would reduce primarily PM emissions from new residential wood heaters and, thus, would decrease the level of emissions to which all affected populations are exposed. The EPA defines "Environmental Justice" to include meaning involvement of all people regardless of race, color, national origin, or income with respect to the development, implementation, and enforcement of environmental laws, regulations, and polices.  The EPA maintains an ongoing commitment to ensure environmental justice for all people, regardless of race, color, national origin, or income. Ensuring environmental justice means not only protecting human health and the environment for everyone, but also ensuring that all people are treated fairly and are given the opportunity to participate meaningfully in the development, implementation, and enforcement of environmental laws, regulations, and policies.

Employment Impacts
[Note:  The language in Section 5.7 will be replaced by new language supplied by EPA in  a matter of a few days.]  In addition to addressing the costs and benefits of the proposed rule, EPA has analyzed the impacts of this rulemaking on employment, which are presented in this section. While a standalone analysis of employment impacts is not included in a standard cost-benefit analysis, such an analysis is of particular concern in the current economic climate of sustained high unemployment. Executive Order 13563, states, "Our regulatory system must protect public health, welfare, safety, and our environment while promoting economic growth, innovation, competitiveness, and job creation" (emphasis added). Therefore, we seek to inform the discussion of labor demand and job impacts by providing an estimate of the employment impacts of the proposed regulation using labor requirements for the installation, operation, and maintenance of control requirements, as well as reporting and recordkeeping requirements. Unlike several recent RIAs, however, we do not provide employment impacts estimates based on the study by Morgenstern et al. (2002); we discuss this decision after presenting estimates of the labor requirements associated with reporting and recordkeeping and the installation, operation, and maintenance of control requirements.
We have not quantified the rule's effects on labor, or the effects induced by changes in workers' incomes. What follows is an overview of the various ways that environmental regulation can affect employment. EPA continues to explore the relevant theoretical and empirical literature and to seek public comments in order to ensure that such estimates are as accurate, useful and informative as possible.
From an economic perspective labor is an input into producing goods and services; if regulation requires that more labor be used to produce a given amount of output, that additional labor is reflected in an increase in the cost of production.  Moreover, when the economy is at full employment, we would not expect an environmental regulation to have an impact on overall employment because labor is being shifted from one sector to another. On the other hand, in periods of high unemployment, employment effects (both positive and negative) are possible. For example, an increase in labor demand due to regulation may result in a short-term net increase in overall employment due to the potential hiring of previously unemployed workers by the regulated sector to help meet new requirements (e.g., to install new equipment) or by the environmental protection sector to produce new abatement capital. When significant numbers of workers are unemployed, the opportunity costs associated with displacing jobs in other sectors are likely to be smaller. And, in general, if a regulation imposes high costs and does not increase the demand for labor, it may lead to a decrease in employment.
To provide a partial picture of the employment consequences of this rule, EPA considers the methodology of Morgenstern, Pizer, and Shih (2002) in describing the effects of the regulation on the regulated industry. This approach has been used by EPA previously in Regulatory Impact Analyses prepared recently.
Regulations set in motion new orders for pollution control equipment and services. New categories of employment have been created in the process of implementing environmental regulations. When a regulation is promulgated, one typical response of industry is to order pollution control equipment and services in order to comply with the regulation when it becomes effective, while closure or plants or facilities that choose not to comply occurs after the compliance date. Environmental regulation may increase revenue and employment in the environmental technology industry. While these increases represent gains for that industry, they are costs to the regulated industries required to install the equipment. As with any pool of labor, the gross size of the labor pool does not reflect the net impact on overall employment after adjusting for shifts in other sectors.
Regulated firms hire workers to design and build pollution controls. Once the equipment is installed, regulated firms hire workers to operate and maintain the pollution control equipment -- much like they hire workers to produce more output.  Morgenstern et al. estimated the effects of pollution abatement expenditures on net employment in four highly polluting/regulated sectors (pulp and paper, plastics, steel, and petroleum refining). They conclude that increased abatement expenditures generally have not caused a significant change in net employment in those sectors. Environmental regulations support employment in many basic industries. In addition to the increase in employment in the environmental protection industry (via increased orders for pollution control equipment), environmental regulations also support employment in industries that provide intermediate goods to the environmental protection industry. The equipment manufacturers, in turn, order steel, tanks, vessels, blowers, pumps, and chemicals to manufacture and install the equipment. Currently in most cases there is no scientifically defensible way to estimate the employment impacts in these intermediate goods sectors.
Employment Impacts within the Regulated Industry
In recent RIAs we have applied estimates from a study by Morgenstern, Pizer and Shih (2002) to derive the employment effects of new regulations within the regulated industry. (See, for example, the Regulatory Impact Analyses for the recently released final MATS and CSAPR regulations). Determining the direction of employment effects in the regulated industry is also challenging due to competing effects. Complying with the new or more stringent regulation requires additional inputs, including labor, and may alter the relative proportions of labor and capital used by regulated firms in their production processes. Morgenstern et al. (2002) demonstrate that environmental regulations can be understood as requiring regulated firms to add a new output (environmental quality) to their product mixes. Although legally compelled to satisfy this new demand, regulated firms have to finance this additional production with the proceeds of sales of their other (market) products. Satisfying this new demand requires additional inputs, including labor, and may alter the relative proportions of labor and capital used by regulated firms in their production processes.
More specifically, Morgenstern, Pizer, and Shih (2002) decompose the effect of regulation on net employment in the regulated sector into the following three subcomponents:
The Demand Effect: higher production costs from complying with the regulation will raise market prices, reducing consumption (and production), thereby reducing demand for labor within the regulated industry. The "extent of this effect depends on the cost increase passed on to consumers as well as the demand elasticity of industry output." (p. 416)
The Cost Effect: Assuming that the capital/labor ratio in the production process is held fixed, as "production costs rise, more inputs, including labor, are used to produce the same amount of output," (p. 416). For example, to reduce pollutant emissions while holding output levels constant, regulated firms may require additional labor.
The Factor-Shift Effect: Regulated firms' production technologies may be more or less labor intensive after complying with the regulation (i.e., more/less labor is required relative to capital per dollar of output). "Environmental activities may be more labor intensive than conventional production," meaning that "the amount of labor per dollar of output will rise." However, activities may, instead, be less labor intensive because "cleaner operations could involve automation and less employment, for example." (p. 416)
The demand effect is expected to have an unambiguously negative effect on employment, the cost effect to have an unambiguously positive effect on employment, and the factor-shift effect to have an ambiguous effect on employment. Without more information with respect to the magnitudes of these competing effects, it is not possible to predict the total effect environmental regulation will have on overall employment levels in the regulated sector.
Morgenstern et al. estimated the effects of pollution abatement expenditures on net employment in four highly polluting/regulated sectors (pulp and paper, plastics, steel, and petroleum refining). They conclude that increased abatement expenditures generally have not caused a significant change in net employment in those sectors. While the specific sectors Morgenstern et al. examined are different than the sectors considered here, the methodology that Morgenstern et al. developed is still an informative way to qualitatively assess the effects of this rulemaking on employment in the regulated sector.
While the theoretical framework laid out by Morgenstern et al. still holds for the industries affected under this proposed NSPS, important differences in the markets and regulatory settings analyzed in their study and the setting presented here lead us to conclude that it is inappropriate to utilize their quantitative estimates to estimate the employment impacts from this proposal. The differences between the underlying regulations motivating the abatement expenditures studied in Morgenstern et al. are potentially too many to allow for the direct transfer of their quantitative estimates to the proposed NSPS amendments. There are important differences between the affected industries and the four manufacturing industries studied by Morgenstern et al. In addition to important differences between the regulated sectors, the pollution control strategies that form the basis of the cost inputs in the Morgenstern et al. analysis are primarily add-on or end-of-line pollution controls, in general covering more than 70% of the abatement expenditures in most years and industries analyzed, as may be seen in Table 5-8. However, the control strategies analyzed for this RIA mostly include process and design changes to reduce emissions during the production of affected heaters, and not after these heaters are in operation. For instance, use of a catalyst combustor is common in wood stoves in order to reduce emissions and also improve heat efficiency. Retrofits are uncommon because replacing the wood stove is often a more economical alternative. For these reasons we conclude there are too many uncertainties as to the comparability of the Morgenstern et al. study to apply their estimates to quantify the employment impacts within the regulated sectors for this proposed regulation.
Table 5-8.	Percent of Abatement Expenditures on Changes in Production Processes
Industry
1979
1983
1988
1991
Pulp and Paper
                                      16%
                                      20%
                                      39%
                                      53%
Plastics
                                      15%
                                      12%
                                      25%
                                      33%
Petroleum Refining
                                      28%
                                      43%
                                      37%
                                      39%
Iron and Steel
                                      4%
                                      7%
                                      6%
                                      8%

Small Entity Screening Analysis
The Regulatory Flexibility Act as amended by the Small Business Regulatory Enforcement Fairness Act (SBREFA) generally requires an agency to prepare a regulatory flexibility analysis of any rule subject to notice and comment rulemaking requirements under the Administrative Procedure Act or any other statute, unless the agency certifies that the rule will not have a significant economic impact on a substantial number of small entities. Small entities include small businesses, small governmental jurisdictions, and small not-for-profit enterprises.
After considering the economic impact of the proposed rule on small entities, the screening analysis indicates that we can not conclude that this proposed rule may not have a significant economic impact on a substantial number of small entities (or "SISNOSE") for certain residential wood heating products covered under the revised NSPS proposal. For this analysis EPA considered sales and revenue tests for establishments owned by representative small entities that manufacture or construct residential wood heating devices.
Small Entity Data Set
The industry sectors covered by the proposed rule were identified during the development of the cost analysis (see Sections 3 and 5). The Statistics of U.S. Businesses (SUSB) provides national information on the distribution of economic variables by industry and enterprise size (U.S. Census, 2008a, 2008b). The Census Bureau and the Office of Advocacy of the Small Business Administration (SBA) supported and developed these files for use in a broad range of economic analyses. Statistics include the total number of establishments and receipts for all entities in an industry; however, many of these entities may not necessarily be covered by the final rule. SUSB also provides statistics by enterprise employment and receipt size.
The Census Bureau's definitions used in the SUSB are as follows:
Establishment: An establishment is a single physical location where business is conducted or where services or industrial operations are performed.
Receipts: Receipts (net of taxes) are defined as the revenue for goods produced, distributed, or services provided, including revenue earned from premiums, commissions and fees, rents, interest, dividends, and royalties. Receipts exclude all revenue collected for local, state, and federal taxes.
Enterprise: An enterprise is a business organization consisting of one or more domestic establishments that were specified under common ownership or control. The enterprise and the establishment are the same for single-establishment firms. Each multi-establishment company forms one enterprise -- the enterprise employment and annual payroll are summed from the associated establishments. Enterprise size designations are determined by the summed employment of all associated establishments.
Because the SBA's business size definitions (SBA, 2013) apply to an establishment's "ultimate parent company," we assumed in this analysis that the "enterprise" definition above is consistent with the concept of ultimate parent company that is typically used for SBREFA screening analyses and the terms are used interchangeably.
Small Entity Economic Impact Measures
The analysis generated a set of establishment sales tests (represented as cost-to-receipt ratios) for NAICS codes associated with sectors listed in Table 6-1. Although the appropriate SBA size definition should be applied at the parent company (enterprise) level, we can only compute and compare ratios for a model establishment owned by an enterprise within an SUSB size range (employment or receipts). Using the SUSB size range helps us account for receipt differences between establishments owned by large and small enterprises and also allows us to consider the variation in small business definitions across affected industries. Using establishment receipts is also a somewhat conservative approach, because an establishment's parent company (the "enterprise") may have other economic resources that could be used to cover the costs of the final rule. It should be noted that these impacts are for the 2014 - 2022 time frame; as mentioned earlier in this RIA, the annualized costs considered in this analysis reflect an average of the proposal's compliance costs incurred by affected sources each year from promulgation through 2022.
Establishment Employment and Receipts
The sales test compares a representative establishment's total annual compliance costs to the average establishment receipts for enterprises in several size categories. For industries with SBA employment size standards, we calculated average establishment receipts for each enterprise employment range (Table 6-2). For industries with SBA receipt size standards, we calculated average establishment receipts for each enterprise receipt range (Table 6-3). The analysis assumes that the majority of affected entities are covered under hardware manufacturing (NAICS 332510) and heating equipment manufacturing (NAICS 333414). We use establishment data from the 2007 Economic Census because that data is the most recent release of public establishment-level information for the industries impacted by this proposal.
Table 6-1.	Revised NSPS Proposal for Residential Wood Heating Devices: Affected Sectors and SBA Small Business Size Standards
Industry Description
Corresponding NAICS
SBA Size Standard for Businesses
(July 22, 2013)
Type of Small Entity
New single-family general contractors
                                    236115
                       $33.5 million
in annual receipts
                                    Masonry
Masonry contractors
                                    238140
                       $14.0 million
in annual receipts
                                    Masonry
Hardware manufacturing
                                    332510
                                 500 employees
                               All product types
Heating equipment (except  warm air) manufacturing
                                    333414
                                 500 employees
                               All product types
Plumbing and heating equipment and supplies (hydronics) merchant wholesalers
                                    423720
                                 100 employees
                               All product types
All other home furnishing stores
                                    442299
                       $19.0 million
in annual receipts
                                   Business

However, the revised NSPS proposal has the potential to affect small entities classified as new home construction and masonry contractors. In addition, wholesalers of imported residential heating devices may also be affected if these establishments are required to certify imported products.
Establishment Compliance Cost
Annual entity compliance costs vary depending on the product type manufactured and the number of product models they would need to redesign under the revised NSPS proposal as mentioned in Section 5 of this RIA. For this analysis compliance costs were estimated based on the average development costs defined in the engineering cost analysis, presented in Section 5-1. The analysis assumes that manufacturers have between two and seven model fireboxes that would be subject to the new NSPS. There is limited information on the actual number of model fireboxes associated with small businesses. Hence, for purposes of the small entity screening analysis, we assumed that smaller companies maintain fewer than three firebox models that would be subject to the revised NSPS. In the absence of better data, EPA believes that between one and three firebox models is a reasonable assumption for our analysis of impacts to potentially affected small businesses.

Table 6-2.	Average Receipts for Affected Industry by Enterprise Employment Size: 2007 ($2010 million/establishment)

SBA Size Standard
for Businesses
(effective Julyy 22, 2013)
Owned by Enterprises with Employment Ranges:
NAICS
NAICS Description

All Enterprises
Fewer than 20 Employees
22 to 99 Employees
100 to 499 Employees
500 to 749 Employees
750 to 999 Employees
1,000 to 1,500 Employees
1,500+ Employees
332510
Hardware manufacturing
500 employees
$13.27
$1.33
$7.71
$26.26
$72.83
$62.18
$37.90
$62.27
333414
Heating equipment manufacturing
500 employees
$13.78
$1.27
$11.17
$39.81
                                      NA
                                      NA
                                      NA
$8.09
423720
Plumbing and heating equipment wholesalers
100 employees
$7.49
$2.58
$9.68
$10.79
$9.82
                                      NA
                                      NA
$0.14
NA = Not available. SUSB did not report this data due to concern with disclosure of confidential information or other reasons. Escalation of average receipts from 2007 to 2010 is accomplished by use of the annual GDP implicit price deflator (available at http://research.stlouisfed.org/fred2/series/GDPDEF/downloaddata?cid=21). The escalation ratio between 2007 and 2010 is 1.045.
Table 6-3.	Average Receipts for Affected Industry by Enterprise Receipt Range: 2007 ($2010 million/establishment)

SBA Size Standard
for Businesses
(effective July 22, 2013)
Owned By Enterprises with Receipt Range:
NAICS
NAICS Description

All Enterprises
Less than 100K Receipts
100 to 499K Receipts
500 to 999K Receipts
1,000 to 4,999K Receipts
5,000 to 9,999K Receipts
10,000 to 49,999K Receipts
50,000 to 99,999K Receipts
100,000K + Receipts
236115
New single-family general contractors
$33.5 million in annual receipts
$1.77
                                     $0.05
                                     $0.29
                                     $0.77
$2.24
$7.907
                                    $19.34
                                    $59.14
$269.93
238140
Masonry Contractors
$14.0 million in annual receipts