EXECUTIVE OFFICE OF THE PRESIDENT COUNCIL OF ECONOMIC ADVISERS WASHINGTON D C 20500 May 15 1987 MEMORANDUM FOR RALPH BLEDSOE FROM THOMAS G MOORE SUBJECT J -r --e OZONE BACKGROUND PAPER CEA strongly believes that a paragraph discussing the economic benefits and costs of the CFC control options currently under discussion should be included in the background paper our suggested draft of such a paragraph is as follows Given the current model projections of ozone depletion and estimates of the health consequences of increased ultraviolet radiation assuming no behavioral changes it is possible to calculate a lower bound on the economic benefits of the CFC control protocol presently under discussion EPA's risk assessment indicates that the freeze 201 cutback will avoid approximately 992 900 deaths in the U S from skin cancer among people alive today and those born through 2075 An additional 301 cutback will save an additional 78 700 lives The economic benefit of saving these lives under standard assumptions for valuation of statistical lives saved and discounting of future values is very large Action Freeze automatic 201 reduction Additional 301 reduction Economic benefit 1987 dollars $_ 328 billion $106 billion c --- These benefits which do not include non-health benefits or benefits from avoidance of non-fatal skin cancers and cataracts are much larger than the costs of control estimated by industry or EPA Industry has estimated that the cost of a freeze to the U S would be ' about $1 billJ Q_n cumulatively be een now and the Year 2000 EPA has estima tthe cost of a 30% reduction in the controlled ubstances would be about -$4 billion cumulatively between now and C he year 2000 Taking the higher of the EPA estimates the total discounted cost of a freeze plus 201 reduction would not be higher than $13 billion and could be much less if substitutes for CFCs are cheaper than presently anticipated Thus the benefit-cost ratio of the freeze automatic 201 reduction is approximately 100 to 1 An additional 301 reduction in CFCs also appears to be economically justified on the basis ot current knowledge although the benefit-cost ratio is much smaller However estimates of the cost of substitutes will be much better after more experience has been gained and the additional 301 reduction step will not be taken until after further scientific technical and economic review