POLLUTION CONTROL COSTS
The costs shown in table 3.1 include some pollution
control costs in recent years in the labor and electric power
inputs. Pollution control requirements, however, will be
increased during the next several years, and, consequently,
they will have a greater effect upon costs in the future than
they have had in the past. This appendi~,i5 an inquiry into
the relative impact of pollution control upon steel operating
costs in the U.S. and Japan.
Uni ted States
In the U.S., the greatest impact of pollution control
requirements on the steel industry will occur between 1977
and 1983. These standards are based on the Clean Air Act
of 1970 and the Federal Water Pollution Control Amendments
of 1972. The year s since then have been occupied with the
design and approval of Federal and State standards, court
challenges of the standards, and the development of specific
schedules for installation of pOllution control equipment.
For future years, the program calls for substantially greater
expenditures for pollution control by 1983.
According to a survey by the Commerce Department, the
U.S. steel industry's capital expenditures for pollution
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control equipment averaged 13.7 percent of its total capital
expend i tures from 1973 through 1975. II
A survey by the Census Bureau (37) indicates that the
operating costs for pollution control in the U.S. steel
industry amounted to $241.8 million in 1973, $321.9 million
in 1974, and $408.5 million in 1975. In terms of cost per
ton of steel products (after adj ustment for inventory reductions), these costs amounted to $2.52 in 1973, $3.37 in 1974,
. ..~- . -.-
and $5.40 in 1975.
Two major studies have been publ ished on the future
impact of pollution control regulations on the U. S. steel
ii See U.S. Department of Commerce (38, July 1975, p. 15;
and July 1976, p. 16). The first year covered by this survey was 1973. There are other estimates of pollution control equipment costs for earlier years, but they involve definitional
problems. The Commerce Department states that for its survey
"the types of questions asked and the definitions of what constitutes pollution abatement expenditures. . . were more precise
than those used in similar surveys conducted by trade associations and other private organizations" (38, July 1974, p. 58).
In another survey, the Census Bureau (37) reported that the
steel industry's capital expenditures for pollution control
equipment were $189.0 million in 1973, $321.9 million in 1974,
and $418.7 million in 1975. The Census Bureau attributes the
differences from the survey conducted by the Bureau of Economic
Analysis of the Commerce Department to normal sampling variations and to the use of a company basis for the Bureau of
Economic Analysis survey versus an establ ishment basis for the
Census Bureau survey.
The American Iron and Steel Institute also reports steel
industry capital expenditures for pollution control: $100.1
million in 1973, $267.2 million in 1974, and $453.1 million
in 1975. These figures total $820.4 million, whereas those from the Bureau of Economic Analysis total $871 mill ion for
the same 3 years, and those from the Census Bureau total
$929.6 million. The AISI reports total steel industry capital
expenditures of $2,189.4 million for air and water quality
control from 1967 through 1976.
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industry. The first of these was conducted by Arthur D. Little,
Inc. (ADL) (2), for the American Iron and Steel Institute. It
found that compliance with the pollution control regulations
for 1983 would increase operating costs by 9.7 percent. This
would amount to about $25- 30 per net ton of steel shipped (2,
pp. VI-8 and I-5J. The second major study was conducted by
Temple, Barker, & Sloane, Inc. (TBS) (33J, for the Environmental
Protection Agency. The TBS study concluded that operating costs
. "'~ .
would be increased by 2.8 percent beyond the pollution control
costs incurred in 1974 (33, p. 5-4 and table 3J. This increase
would amount to about $8.72 per net ton of steel shipped. ~/
Thus, the TBS study indicates that pollution control regulations
for 1983 would increase operating costs by 3.8 percent, or about
$11.66 per net ton of steel shipped.
The major differences between these two estimates are in
different assumptions for the control of fugitive emissions and
storm runoff, and for the retirement of existing facilities,
especially open hearth furnaces. The ADL study was based on
more stringent standards, and the TBS study assumed that
approximately 65 percent of existing open hearth furnaces would
2/ Obviously, estimates of pollution control operating costs
expressed interms of tons of steel shipped are affected by the
forecast made for 1983.
The forecast used here is that
contained in the TBS report, shipments of 119.2 million net
tons. When TBS compared their forecast with other recent forecasts for 1980 shipments, they found that the differences were
less than 7 percent. These forecasts were done by AISI, the
'International Iron and Steel institute, Arthur D. Little (for
AISI), Booz, Allen & Hamilton, Chase Econometrics, Data
Resources, Inc., and the Bureau of Labor Statistics. See
(33, p. 2-3J.
"..;;;'
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be closed rather than fitted with more emissions control
equipment. l/
The TBS estimates are probably closer to the actual costs
of implementing pollution control standards for the steel
industry than the AOL estimates. The TßS study is more recent
and, therefore, was able to incorporate a development in
pollution standards that occurred after the ADL report was
completed. This involved a change in the storm runoff standards .~ .
so that runoffs from the entire plant site need not be contained
anã treated, as assumed in the ADL study. The revised standard
requires containment and treatment of storm runoffs from only
the piles of coal, iron ore, and limestone on the plant site
(33, p. 3-10). Another major cause of different cost estimates
in the two studies is the different assumptions concerning
emissions control for open hearth furnaces (33, p. 4-7). Since
the basic oxygen furnace is lower-cost than the open hearth (in
both capital cost and operating cost as well as air pollution
control cost), it seems reasonable to assume that some proportion
of existing open hearth furnaces will be closed rather than
fitted with equipment to comply with more stringent emissions
standards. This assumption is based partly on the fact that
several open hearth units have been closed in recent years
rather than equipped with pollution control hoods. This assumption is also based partly on an interview with an officer of
l/ Telephone interview with EPA staff member and (33, p. 2-3).
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one U. S. steel company. He said that the deciding factor which
induced his company to build a new basic oxygen unit and close
an open hearth unit was that pollution control equipment for
the open hearths would cost $12 million compared to $4 million
for this type equipment for the basic oxygen furnaces,
even though their steelmaking capacities were comparable