Economic Impact Assessment of a Chlorofluorocarbon Production Cap

by Adele Palmer, Timothy H. Quinn

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To assist federal rulemaking, the study projects economic costs of a regulatory "cap" restricting annual chlorofluorocarbon (CFC) production to the 1980 level. It examines costs generated by industry and consumer response to the regulation in several alternative scenarios. It concludes that between 1980-1990 the cap could cost the U.S. economy up to $342 million if industries and consumers adjust slowly to higher prices caused by restricted CFC supplies. If they exploit CFC-saving opportunities earlier in the decade, costs could accumulate to only $275 million. However, the cap would cause wealth transfers, from CFC-using industries and their customers to other parts of the economy, up to 12 times higher than those estimates. Although most CFC-using firms should cope with higher costs, some firms using CFC for foam packaging materials could go out of business if rising prices caused customers to buy alternative materials. Resulting layoffs could reach 2,000 nationwide.

This report is part of the RAND Corporation note series. The note was a product of the RAND Corporation from 1979 to 1993 that reported other outputs of sponsored research for general distribution.

The RAND Corporation is a nonprofit institution that helps improve policy and decisionmaking through research and analysis. RAND's publications do not necessarily reflect the opinions of its research clients and sponsors.