Economic Analysis of the Response of the Markets for Platinum Group Metals to a Change in Automobile Emissions Standards

For the U.S. Environmental Protection Agency (EPA), ICF employed simultaneous equation econometric techniques to estimate individual elasticities of supply and demand for platinum, palladium, and rhodium. ICF then used these elasticities to project the price impacts of proposals to tighten tailpipe standards.

Econometric Estimation of Labor Costs:
The Effect of Hours-of-Service Rules

For proposed hours-of-service (HOS) rules for truck drivers, ICF estimated an earnings relationship for truck drivers using standard econometric analysis. ICF constructed a large dataset on truck driver wages, hours worked, and other demographic information. This dataset of more than 11,000 observations was based on multiple years of data from the Current Population Survey (CPS), published by the Bureau of Labor Statistics (BLS), U.S. Department of Labor. ICF used regression analyses to estimate a wage equation for drivers, which was then used to determine the labor costs of various HOS regulatory options. Learn more about ICF's transportation policy and strategy services.

Valuation of Climate-Related Amenities in Property Markets

For the U.S. Environmental Protection Agency's Office of Research and Development, ICF International developed an empirical model to quantify the relationship between specific climate attributes and property values, using the hedonic modeling framework. The purpose of this exercise was to better understand how climate change affects human behavior by quantifying how much people value climate amenities in their living decisions. ICF conducted an extensive literature review of the hedonic literature in general, and, hedonic models on climate amenities in particular. ICF also developed a national-level hedonic model using micro-level Census data, combined with other data sources. For climate attributes, ICF used detailed grid-based North American Regional Reanalysis (NARR) climate model data that uses some of the most sophisticated climate modeling. The goal in this exercise was to develop a “baseline” for quantifying the impacts that climate amenities have on people’s location decisions. At a later stage, this framework can then be used for projecting the economic impacts of climate change using climate model predictions for how global warming can affect different regions in the United States.

The Economic Cost of the Blackout—
An Issue Paper on the U.S. Northeastern Blackout of August 2003

ICF estimated the economic cost of the 2003 Northeast Blackout that affected over 50 million people in the United States and Canada. ICF used the concept of the Value of Lost Load (VoLL) to measure consumers' willingness-to-pay for a reliable electricity supply. VoLL measures the value to customers of reliable service. ICF estimated the impacts of the blackout on different customer classes using the established survey literature on VoLL. This information, coupled with data on the outage scenario, enabled ICF to estimate the total cost of the blackout. The findings from this research have been cited in the electricity reliability literature. Learn more about ICF's analysis of the blackout or download the issue paper (PDF).

Upgrading the Outer Continental Shelf (OCS)—
Economic Impact Models (EIM) for the Gulf of Mexico and the Alaska OCS

ICF developed a model of the regional economic impacts of offshore oil and gas exploration and drilling for the U.S. Department of Interior Minerals Management Service (MMS). The model needed to be applicable to all the offshore regions in the country, with emphasis on its applicability for the Gulf of Mexico (GOM) and the Alaska Outer Continental Shelves (OCS)—a challenge because of the significant differences in the offshore activities in these two regions, driven in part by weather conditions. The model developed by ICF can estimate the direct effects of any exploration and development (E&D) scenario. It then interacts with the commercially available IMPLAN model to estimate the multiplier impacts of these activities (i.e., their indirect and induced impacts) on both the regional and the national economy.

Measuring the Economic Costs of Potential Terrorist Attacks on Vulnerable Sectors

ICF modeled the economic changes resulting from two hypothetical terrorist attack scenarios on potentially vulnerable economic sectors. Under the first scenario, ICF analyzed the impacts of a coordinated attack on the electricity transmission grid in California. The other scenario assumed that terrorists deliberately spread the virus that causes Foot and Mouth Disease (FMD) in a predominantly agricultural state such as Iowa. The modeling focused on the economic damages resulting from these attacks. ICF examined the scenarios to estimate direct costs on affected industries, and collaborated with the Regional Economic Models, Inc., (REMI) to calculate the ripple effects on other industries and the economy as a whole. The analysis revealed the magnitude of the losses, with significant economic damages resulting not only to the sectors directly affected by the terror attacks, but also on other sectors of the regional economy because of the inter-linkages between sectors in our integrated economy. The study also analyzed the best strategies for policymakers to harden the economy in preparation for such eventualities and also on how to mitigate damages once such events occur. Download the study (PDF).

Economic Impact of Allowance Allocations in Multi-Pollutant Utility Regulations

ICF developed and used a market simulation model to assess the options for allocating tradable emission allowances. These allowances were to be distributed to participants in a multi-pollutant cap-and-trade program for electric utilities, termed the Clear Skies Act. The pollutants to be controlled in this market-based program included NO_x, SO₂, and mercury. ICF's analysis explored how auctioning, grandfathering, and updating based on inputs and outputs would affect both economic efficiency and the distribution of regulatory costs. ICF's analytical approach started with basic theory on the effects of subsidies on market equilibria, including both the creation of dead-weight losses and the magnitudes of tax interaction effects. The magnitudes of these effects were tested and illustrated through a detailed simulation model of electricity generation under emissions constraints, in which dynamic emission allocations can distort electricity markets.

Greenhouse Gas (GHG) Allocations in Ireland under the Kyoto Accords

Under the Kyoto Accords, each member of the European Union is required to develop a National Allocation Plan (NAP) for dividing a limited allocation of greenhouse gas (GHG) emissions between industrial sectors that will engage in emissions trading and those parts of the economy for which trading would be too cumbersome to implement. To help Ireland make this division, ICF collected data on the sources of Irish GHG emissions and projected changes by sector, and made recommendations on the division of Ireland’s allocation between its trading and non-trading sector. Criteria included equity, competitiveness, and economic efficiency. Our analytical methodology included modeling of national and international electricity markets to determine responses to carbon allowance pricing; construction or adaptation of marginal abatement cost curves for use in finding the economically efficient levels of emissions; and supervision of macroeconomic impact modeling. Download the report (PDF).

Support for Implementation of the EU Emission Trading Scheme (EU ETS)—National Allocation Plans (NAP)

ICF was engaged by the European Commission (EC) to design a methodology and analytical tools for reviewing and analyzing the Member States' NAPs for the pilot trading phase, 2005-2007. One of the tools developed enabled the EC to compare the relevant data (e.g., industry growth rates, utilization) by industry and by country across different data sources, thus helping indicate the uncertainties in meeting the Kyoto target associated with the choice of data used by the Member States. The approach and tools developed by ICF helped the EC assess the NAPs' compliance with the EU Emissions Trading Directive, as well as the validity of assumptions and quality of data that were used to forecast CO₂ emissions from the sectors included in the EU ETS. ICF also used the methodology and the analytical tools to provide detailed analysis of individual NAPs for the EC policy makers. To help the EC assess the implications of the Member States' allocation methodologies on the Trading Scheme, ICF prepared short studies on the issues central for the effective implementation of the EU ETS, including treatment of new entrants and implementation of closure rules.

Contributions of Market-Based Regulations to Reducing Carbon Emissions from Transportation

ICF conducted a study of the potential contribution of emission credit trading to carbon reduction policies in the Canadian transportation sector. This project started with the development of potential carbon reduction policies incorporating emission trading components, and scoring them for potential savings, administrative costs, and impacts. ICF then focused on the effects of opening Canada's car and light truck fuel economy standards to inter-firm trading. To estimate the impacts of this potential policy, ICF developed marginal cost curves for reducing fuel consumption for each foreign and North American manufacturer's fleets, and built an interactive linear programming model to calculate and display the benefits of trading. This model was able to incorporate the effects of transaction costs on both the volume of trading and the resources that could be saved.

Analysis of the Acid Deposition and Ozone Control Act (S. 172)

ICF produced a comprehensive report on the costs, benefits, and other impacts of a multi-pollutant utility emissions control program, synthesizing the results of its own analyses and input from subcontractors and other agencies. The proposed program would have cut utility emissions of SO₂ and NO_x well below the levels provided for under the 1990 Acid Rain program, using an extension of the cap-and-trade mechanism introduced by that program. ICF analyzed the emissions and cost effects of the caps that S. 172 would impose using IPM®, ICF's linear programming model of the electric utility sector. ICF also analyzed the effects of these emission changes on air concentrations using a combination of air quality models, and then supervised the translation of these air quality changes into benefits. Then the results of these analyses were presented in a clear and highly accessible written report, using full-color diagrams and maps to explain the effects of changing emissions on air quality. The report was aimed at making the issues and analyses clear to nonspecialists, while including more technical material in boxes and appendices to ensure that the report would convey authority.

Costs and Benefits of Environmental Infrastructure Improvements

In this project for the Mexican environmental agency and the World Bank, ICF conducted a wide-ranging study of the relative costs and benefits of projects to alleviate environmental problems near the delta of the Coatzacoalcos River in Southern Mexico. The projects examined included the conversion of vehicles to natural gas, expansions of sewer systems, wastewater treatment plants, potable water systems, storage facilities for hazardous wastes, pipeline safety programs, and municipal waste collection and disposal systems. For each project, ICF contrasted an estimate of the potential reduction in risks to human health with the costs of implementation.

Cost-Benefit Analysis of the Hours-of-Service Rule

For a critical rulemaking regarding the limits on the hours truck drivers are allowed to work and drive, ICF conducted an extensive cost-benefit analysis of options aimed at reducing driver fatigue, and the subsequent impacts of these options on carriers of different sizes. For estimating the social costs of the options, ICF constructed and used econometric and spreadsheet models to estimate the labor and non-labor costs. ICF also estimated the benefits of these options using models that relate sleep and work patterns to fatigue-related accidents involving trucks. This analysis enabled ICF to determine the reductions in crashes that can be expected under the different options. Estimating costs and benefits also allowed ICF to analyze impacts on carriers, including small independent owner operators. Learn more about ICF's transportation policy and strategy services.

Evaluation of Employee Benefits Security Administration (EBSA) Regulatory Review Program

EBSA’s mission is to protect and foster employee pension, health, and other benefit plans in the private sector through education, enforcement, and compliance assistance. As a result of its recent Performance Assessment Rating Tool assessment, EBSA developed a regulatory review program that included a commitment to develop ways to quantify and reduce the burdens imposed on employers by its regulations. EBSA selected ICF to conduct a Cost-Benefit Analysis (CBA) on three regulations selected by EBSA for its regulatory review program, including development of a CBA methodology and associated protocols appropriate to EBSA regulations. ICF is working closely with EBSA to examine the economic factors, quantify them using CBA, and provide recommendations to EBSA to “quantify and reduce the burden imposed by its regulations.” ICF’s ASPIRE® for Program Evaluation model will be used to ensure that all aspects of the agency and program are addressed, including mission and goals, people and human resources, stakeholders, processes, and outcomes.

Using Monte Carlo Analysis to Assess Uncertainty in Predicting the Costs of Multi-Pollutant Programs

ICF used Monte Carlo analysis to assess uncertainty over the costs of multi-pollutant trading programs. Using a complex macro-driven spreadsheet model that has supported several EPA rulemakings, ICF identified the most important variables determining the cost of trading programs, constructed reasonable distributions around the variables, and performed Monte Carlo analysis to find the distribution of costs projections. This analysis was used to meet requirements (as set forth in Circular A-4 from the Office of Management and Budget) that agencies conduct a formal, quantitative analysis of the uncertainty in the costs and benefits of rules with an anticipated cost of more than US$1 billion per year.

How Much Do We Learn from Experience?
Estimating the Impact of Learning-by-Doing on Regulatory Costs

ICF has explored the effect of learning-by-doing on the costs of pollution control technologies and the multipollutant trading programs to which they contribute. Studies have shown that ex-ante estimates of the costs of regulatory programs are typically overstated, and uncertainty surrounding the effects of learning-by-doing is one reason. ICF has identified the rate of learning and its distribution for SO₂ scrubbers, incorporated the effect of learning-by-doing into the cost estimation of multipollutant trading programs, and performed a Monte Carlo analysis to construct a distribution of projected program costs.

Analysis of the Mortgage Market and Affordable Housing Goal

The U.S. Department of Housing and Urban Development (HUD) requires Government Sponsored Enterprises (GSE) to ensure that a specified share of their mortgage purchases benefit low- and moderate-income households and residents of underserved areas. ICF was engaged by the Federal Home Loan Mortgage Corporation (Freddie Mac) to provide an independent assessment of HUD's proposed affordable housing goals for the period 2005-2008, and to estimate the past and project the future size of the conventional conforming mortgage market meeting the affordable housing goals. ICF economists devised a method for characterizing the U.S. housing markets in terms of the characteristics of the loans issued and for estimating market shares meeting the affordable housing goals. ICF employed statistical techniques to analyze datasets containing more than 100 million observations in order to help Freddie Mac better understand the uncertainties in estimating the affordable housing goals resulting from data quality and underlying assumptions about the U.S. housing markets.

The Economics of Suboptimal Hazardous Waste Recycling—
U.S. Environmental Protection Agency (EPA), Office of Solid Waste (OSW)

In a study for EPA's Office of Solid Waste, ICF economists explained how and why hazardous waste recycling may result in suboptimal outcomes. Using standard economic tools for analyzing firm behavior, ICF laid out the cost and revenue structures of three distinct types of hazardous waste recyclers, showed how they may react to different market forces, and explained how their choices may lead to unintended environmental damage. The study examined both easily observable market forces such as price volatility and those that are less observable, such as information asymmetry and negative externalities. Although the analysis was done in the context of microeconomic models of firm behavior, it was written in a language suitable for nontechnical audiences.