US EPA targets producers of nine toxic chemicals

The US Environmental Protection Agency (EPA) issued its Final Rule for Synthetic Organic Chemical Manufacturing Plants & Polymers & Resins. The aim of this rule is to reduce cancer and serious health effects from toxic air pollutants and smog-forming compounds. This is relevant to financial markets which are seeing externalities being converted into internal costs for corporates. Financial models may need reassessing.

What’s happened?

The US EPA has finalised its amendments to the National Emissions Standards for Hazardous Air Pollutants (NESHAP) for those parts which apply to the synthetic organic chemical manufacturing industry (SOCMI) and to equipment leaks from certain non-SOCMI processes located at chemical plants, but also for subparts that apply to polymers and resins, and new Source Performance Standards (NSPS) for emission reductions for volatile organic chemicals (VOC) from certain operations (e.g. distillation operations).ⁱ

The EPA estimates this will impact over 200 US chemical plants and provide health protections to 9.3 million people who live within 10km of these facilities.ⁱⁱ

Key Takeaways from the Final Ruleⁱⁱⁱ

1. Emission reductions: the EPA has calculated that this rule “will keep more than 6,200 tons of air toxics out of the air each year”, notably for ethylene oxide and chloroprene, resulting in an 80% reduction. Smog forming emissions (VOCs) will also be reduced (by 23,000 tons pa).
2. Human health impacts: the EPA anticipates that those harmed by living close to chemical plants, which emit these toxins, will be reduced by 96%.
3. Facility impact: chemical plants which are new or modified must comply when the rule takes effect (i.e. 60 days after it is published in the Federal Register), or they begin operations. Existing facilities have different compliance deadlines.
4. Pollutant monitoring: chemical plants that use, store, or emit ethylene oxide, chloroprene, benzene, 1,3-butadiene, ethylene dichloride or vinyl chloride will be required to monitor the air at their fence line.

Almost 53,000 tonnes of the nine main chemicals impacted by the regulation have been released to air between 2012 and 2021 by over 600 companies and 1,900 facilities across the US. See 1 for the list of chemicals and health impacts, and 1 for the annual and cumulative releases of the nine chemicals.

Table 1: Main products impacted, their main uses and health impacts

Note that in addition to the compounds listed above other toxic compounds might be affected by this rule.

Sources: EPA Health Effects Notebook for Hazardous Air Pollutants^iv

and EPA Integrated Risk Information System (IRIS) database^v

Figure 1: Releases to air of the nine chemicals listed in Table 1 between 2012 and 2021 across the US

Why did this happen?

The US EPA provides a reasoning for this tightening in emissions. It states, “Many regulations are promulgated to correct market failures, which otherwise lead to a suboptimal allocation of resources within a market. Air quality and pollution control regulations address “negative externalities” whereby the market does not internalize the full opportunity cost of production borne by society as public goods such as air quality are unpriced”.^vi

The costs of poor air quality and pollution include negative health and welfare impacts, which are often borne not by the polluter, but society as a whole. This should change.

Planet Tracker’s Toxic Footprints Dashboards

Planet Tracker’s ‘Toxic Footprints USA’, released in July 2022 along with a data dashboard, can help investors identify their exposure to toxic releases by facility. 2 shows the top three polluters for each of the chemicals impacted by this regulation and their top shareholders. In Planet Tracker’s data dashboard, you can see the locations of all the facilities emitting these chemicals, as well as over 200 other chemicals made by 76 petrochemical companies.

Table 2: Top 3 polluters of newly regulated compounds and their shareholders (Source: Planet Tracker, 2022)

Also, for investors wishing to examine corporate and facility emission exposure in Europe, they may view Planet Tracker’s ‘Toxic Footprints Europe’ and the associated dashboard.