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Cost-Effective NOx Control in the Eastern United States

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  • Krupnick, Alan

    ()
    (Resources for the Future)

  • McConnell, Virginia

    ()
    (Resources for the Future)

  • Stoessell, Terrell
  • Cannon, Matthew
  • Batz, Michael

    ()
    (Resources for the Future)

Abstract

Reducing nitrogen oxide (NOx) emissions in the eastern United States has become the focus of efforts to meet ozone air quality goals and will be useful for reducing particulate matter (PM) concentrations in the future. This paper addresses many aspects of the debate over the appropriate approach for obtaining reductions in NOx emissions from point sources beyond those called for in the Clean Air Act Amendments of 1990. Data on NOx control technologies and their associated costs, spatial models linking NOx emissions and air quality, and benefit estimates of the health effects of changes in ozone and PM concentrations are combined to allow an analysis of alternative policies in thirteen states in the eastern United States. The first part of the study examines the cost and other consequences of a command-and-control approach embodied in the Environmental Protection Agency’s (EPA) NOx SIP call, which envisions large reductions in NOx from electric utilities and other point sources. These results are compared to the alternative policy of ton-for-ton NOx emissions trading, similar to that proposed by the EPA for utilities. We find that emission reduction targets can be met at roughly 50% cost savings under a trading program when there are no transaction costs. The paper examines a number of alternative economic incentive policies that have the potential to improve upon the utility NOx trading plan proposed by EPA, including incorporation of other point sources in the trading program, incorporation of ancillary PM benefits to ozone reductions in the trading program, and trading on the basis of ozone exposures that incorporates the spatial impact of emissions on ozone levels. For the latter analysis, we examine spatially differentiated permit systems for reducing ozone exposures under different and uncertain meteorological conditions, including an empirical analysis of the trade-off between the reliability (or degree of certainty) of meeting ozone exposure reduction targets and the cost of NOx control. Finally, several policies that combine costs and health benefits from both ozone and PM reductions are compared to command-and-control and single-pollutant trading policies. The first of these is a full multipollutant trading system that achieves a health benefit goal, with the interpollutant trading ratios governed by the ratio of unit health benefits of ozone and PM. Then, a model that maximizes aggregate benefits from both ozone and PM exposure reductions net of the costs of NOx controls is estimated. EPA’s program appears to be reasonably cost-effective compared to all of the other more complex trading programs we examined. It may even be considered an optimal policy that maximizes net aggregate benefits if the high estimate of benefits is used in which mortality risk is linked to ozone exposure. Without this controversial assumption, however, we find that EPA’s NOx reduction target is far too large.

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Bibliographic Info

Paper provided by Resources For the Future in its series Discussion Papers with number dp-00-18.

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Date of creation: 01 Apr 2000
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Handle: RePEc:rff:dpaper:dp-00-18

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  1. Jones-Lee, M W & Hammerton, M & Philips, P R, 1985. "The Value of Safety: Results of a National Sample Survey," Economic Journal, Royal Economic Society, vol. 95(377), pages 49-72, March.
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Cited by:
  1. Krupnick, Alan & Shih, Jhih-Shyang & Bergin, S. & Russell, Armistead, 2004. "Source-Receptor Relationships for Ozone and Fine Particulates in the Eastern United States," Discussion Papers dp-04-25, Resources For the Future.
  2. Werner Antweiler & Sumeet Gulati, 2013. "Market-Based Policies for Green Motoring in Canada," Canadian Public Policy, University of Toronto Press, vol. 39(s2), pages 81-94, August.
  3. Meredith Fowlie, 2010. "Emissions Trading, Electricity Restructuring, and Investment in Pollution Abatement," American Economic Review, American Economic Association, vol. 100(3), pages 837-69, June.
  4. Stavins, Robert & Newell, Richard, 2000. "Abatement-Cost Heterogeneity and Anticipated Savings from Market-Based Environmental Policies," Working Paper Series rwp00-006, Harvard University, John F. Kennedy School of Government.
  5. Fowlie, Meredith, 2005. "Emissions Trading, Electricity Industry Restructuring and Investment in Pollution Abatement," 2005 Annual meeting, July 24-27, Providence, RI 19265, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  6. Douglas A. Carr, 2011. "The Intergovernmental Fiscal Effects of the Clean Air Act," Public Finance Review, , vol. 39(6), pages 810-830, November.
  7. Rezek, Jon P. & Campbell, Randall C., 2007. "Cost estimates for multiple pollutants: A maximum entropy approach," Energy Economics, Elsevier, vol. 29(3), pages 503-519, May.
  8. Chao-Ning Liao, 2009. "Technology adoption decisions under a mixed regulatory system of tradable permits and air pollution fees for the control of Total Suspended Particulates in Taiwan," Journal of Regulatory Economics, Springer, vol. 35(2), pages 135-153, April.
  9. Newell, Richard G & Stavins, Robert N, 2003. "Cost Heterogeneity and the Potential Savings from Market-Based Policies," Journal of Regulatory Economics, Springer, vol. 23(1), pages 43-59, January.
  10. Liao, Chao-Ning, 2007. "Modelling a mixed system of air pollution fee and tradable permits for controlling nitrogen oxide: a case study of Taiwan," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 51(4), December.
  11. Burtraw, Dallas & Evans, David, 2003. "The Evolution of NOx Control Policy for Coal-Fired Power Plants in the United States," Discussion Papers dp-03-23, Resources For the Future.
  12. Burtraw, Dallas & Bharvirkar, Ranjit & McGuinness, Meghan, 2002. "Uncertainty and the Cost-Effectiveness of Regional NOx Emissions Reductions from Electricity Generation," Discussion Papers dp-02-01-, Resources For the Future.
  13. Joshua Linn, 2006. "Stock Prices and the Cost of Environmental Regulation," Working Papers 0611, Massachusetts Institute of Technology, Center for Energy and Environmental Policy Research.
  14. Krupnick, Alan & Shih, Jhih-Shyang & Bergin, S. & Russell, Armistead, 2003. "Controlling Ozone and Fine Particulates: Cost Benefit Analysis with Meteorological Variability," Discussion Papers dp-03-55, Resources For the Future.
  15. Burtraw, Dallas & Palmer, Karen & Bharvirkar, Ranjit & Paul, Anthony, 2001. "Cost-Effective Reduction of NOx Emissions from Electricity Generation," Discussion Papers dp-00-55-rev, Resources For the Future.

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