zyxwvutsrqponmlkjihgfedcbaYXWVUTSRQPONMLKJIHGFEDCBA Benefits of - - PowerPoint PPT Presentation

zyxwvutsrqponmlkjihgfedcbaYXWVUTSRQPONMLKJIHGFEDCBA Benefits of Reduced Air Pollution in the United States

Dallas Burtraw Resources for the Future Presentation to EMEP Conference October 8, 2003

Background materials at

http://www.rff.org/rff/news/features/making­sense­of­multipollutant­legislation.cfm

Roadmap

• Integrated Assessment Approach
• 1990 CAAA
• NOx SIP Call
• Multi-pollutant legislation

− Efficient Emission Fees for SO2, NOx − Proposal Targets, Benefits − Errors and Uncertainties in Benefit Estimates − Guidelines for Hg − Architecture for Carbon

Benefits of Reduced Air Pollution

Integrated Assessment: Meaning and Method

• Integration of full­form models with “internal”

validity

• Emphasis on “external” integrity
• Account for correlated uncertainty
• Include assessment
• Value of additional information

NYSERDA played a path­breaking role in the application of integrated assessment in the early 1990s with co­sponsorship of the ESEERCO externality study.

Benefits of Reduced Air Pollution

$1990 per Affected Person per Year

$1 $ 00.00 10.0 $1. $0.10 00 2030

“Integrated Assessment” (NAPAP, 97) and “Benefits and Costs of Title IV” (CEP, 98)

TAF Findings: Benefits and Costs of Title IV

1995 2000 2005 2010 2015 2020 2025

Projections to 2030

Mort alit y Resid. Visibilit y Co Cost sts s Rec. Visibilit y Morbidit y

• Rec. Lake

Fishing

Benefits of Reduced Air Pollution

The Weak Links

Expect ed Short-Term Value Benefit :

• f Addition

al Information:

Health: Mortality Health: Morbidity Visibility Materials and Cultural Resources Nonuse Values: Ecosystem Health Aquatics: Recreation Forests: Recreation Ag / Commercial Forestry Radiative Forcing

Benefits of Reduced Air Pollution

Spatial Effects of Trading

• In 1993, the NY AG sued EPA to restrict allowance

sales.

• NY Assembly, later Senate, voted to constrain trades.
• 1998 agreement with Long Island Lighting Company

(LILCO).

• 1998 Senator D’Amato likened long-range transport of

acid rain to “airborne terrorism.”

• 2000 Governor Pataki signed into law legislation to

monitor and control sale of SO2 allowances.

• 2003 Appeals court strikes down NY law.

Benefits of Reduced Air Pollution

Percent Change in Emissions <-25

• 25 to -10
• 10 to -0.01

0.01 to 10 10 to 25 >25

“Regional Analysis of SO2 Allowance Trading” (EST, 99)

Effect of Tradin g on Emissions

Percent Change in Title IV Baseline Utility Emissions Attributable to Trading for 2005

Benefits of Reduced Air Pollution

Percent Change in Benefits <-15

• 15 to -10
• 10 to -0.01

0.01 to 10 10 to 15 >15

Benefits of Reduced Air Pollution

Effect of Tradin g on Health

Percent Change in Title IVBaseline Benefits Attributable to Trading for 2005

Percent Change in Deposition <-8

• 8 to -4
• 4 to -2
• 2 to -0.01

0.01 to 2 2 to 4 4 to 8 >8

Effect of Tradin g on Deposition

Percent Change in Title IV Baseline Sulfur Deposition Attributable to Trading for 2005

Swift, in preparation, 2003

Benefits of Reduced Air Pollution

Baseline Emissions, with Phase I Allocations and Emissions of SO2 by Region

1,000,000 2,000,000 3,000,000 4,000,000 5,000,000 6,000,000 SO2 (tons) 1980 Emissions Phase I Allowances Annualized Phase I Emissions Annualized Midwest Southeast Northeast

Allowances Allocated and Emissions of NOx Under OTC Program

20,000 40,000 60,000 80,000 100,000 120,000

1999-2002 Allocations Annualized 1999-2002 Emissions Annualized

Maryland and Delaware P ennsylvania New J ersey New York Connecticut Rhode Island Massachusett s New DC Hampshire

Benefits of Reduced Air Pollution

Bene Krupnick et al. in preparation, 2003 fits of Reduced Air Pollution

8­hour Ozone change and state shares for 30% NOx Reduction

Annual vs. Seasonal NOx Controls” (JAWMA 01; Land 03)

Benefits of Reduced Air Pollution

The Second Grand Experiment: NOx SIP Call

• NOx emissions contribute to multiple problems:

– ozone, particulates, nitrogen deposition, visibility

• Nonattainment of ozone standard provides

regulatory handle for EPA NOx SIP Call

• Policy aimed at ozone, a seasonal problem
• But, other NOx­related effects are realized

throughout the year

• Costs of NOx control are largely fixed and capital

costs.

Question: What is the most cost-effective way to achieve NOx reductions given full set

• f NOx related problems?

Three NOx reduction scenarios: – Summer cap in 19 state SIP Call region – Annual cap in the same SIP Call region – National Annual cap

Benefits of Reduced Air Pollution

Major Uncertainties

• Market Structure
• Epidemiology / Mortality
• Valuation / Mortality

Benefits of Reduced Air Pollution

RFF “Haiku” Electricity Model

• Intra­regional market modeling

– Market equilibrium in 13 regions – Demand: 3 customer classes, 4 time periods, 3 seasons – Supply constructed using model plants

• Defined by technology, fuel type, vintage
• Investment and retirement
• Emission compliance
• Fuel market prices adjust
• Inter­regional power trading

– Equilibrates regional prices, transmission constraints

Benefits of Reduced Air Pollution

Net Benefits (1997 Billion $)

5 4 3 2 1 ­1 ­2 ­3 6 ­4

Net Benefits for the Nation, 2008

Combinations of assumptions in scenario analysis characterizing market structure, epidemiology and valuation.

SIP Seasonal National Annual SIP Annual

HLL HLM LLL HML HLH LLM LML LLH HMM LMM HHL LHL HMH LMH HHM LHM LHH HHH

Benefits of Reduced Air Pollution

Main Findings Favor Annual NOx Controls

• Under all scenarios SIP Annual policy yields greater net

benefits than current policy; Ohio Valley included.

• National annual policy is slightly less cost­effective than

current under preferred assumptions …but it is more cost­effective under majority of scenarios.

• SIP region always realizes greatest net benefits under

National Annual policy.

• Omitted benefits do not change ranking for SIP Annual

Benefits of Reduced Air Pollution

State Actions in SIP Call region

Connecticut, Massachusetts, New Hampshire, North Carolina and New Yo rk have moved to annual contro ls on NOx and SO2. State actions amplify the challenges to resource planning for electricity generators.

Benefits of Reduced Air Pollution

The Clean Air Act’s Requirements

NSR Permits for new sources & modifications that increa

se emissions

Note: Dott ed lines indicate a range of possible dat es.

Ozone

Designate 1-hr Severe Marg- 8-hr Assess Moderate

1 Further action on oz

• ne would be considered

b ased

areas for Area inal 8-hr Ozone Effectiveness 8-hr

• n the 2007 assessment.

8-hr Ozone Attainment Ozone Attain-

• f Regional

Ozone

2 The SIP-submittal and attainment dates are keyed off

1-hr Seriou s

the dat e of designation; fo r example, if PM or ozone ar e

Area Attainme nt NAAQS Date NAAQS ment Oz

• ne

NAAQS

designat ed in 2004, the first attainment dat e is 2009

Date Attain- Demon- Strategies Attainment ment stratio n Date

EPA is required to update the new source performance standar ds (NSPS) for boilers and turbi nes ever y 8 years

Date SIPs due Possible OT C NOx Regional NO NO

x x

NO SI Ps

x

Reductions ? Serious 8-hr Ozone Trading SIP Due (SIP call II)1 NAAQS attainment Call Date Mercury Proposed Final Compliance Compliance for Compliance fo r BA RT Determination Utility Utility with Utilit y BART Sources sources unde r the MACT MACT MACT Trading Program Phase II Designate Areas New Fine P M NAAQS Latest attainment Second Regional Acid Rain for Fine PM NAAQS Implementation Plans date for Fine PM Haze SIPs due Compliance NAAQ S 3 Interstate Transport Rule to Address Regional Haz e SIPs due

In developing the timeline of current CAA requirement s,

SO2/ NOx Emissions fo r Fine P M

it w as necessary fo r EPA to make assumpti

• ns ab
• ut

rulemakings that ha ve not been completed or , in some

NAAQS and Region al Haze

case, not even started. EPA’s rulemakings will be

Acid Rain, PM , Haze, Toxics

conducted through t he usual notice-and-comm ent

2.5

process, and the conclusions may vary from t hese assumptions.

Benefits of Reduced Air Pollution

99 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 00 18

EIA forecasts over time for 2010

104 106 108 110 112 114 116 118 1997 1998 1999 2000 2001 2002 2003 Energy Consumption (QBtu) 3500 3600 3700 3800 3900 4000 4100 4200 Electricity Sales (BkWh) Total Energy Quadrillion Btu Electricity BkWh

Benefits of Reduced Air Pollution

zyxvutsrponmljihgfedcbaYWVTSRPONMHGFECBA Coal Gas Toda y 54% 15% Forecast for 2020 48% 25% 20% 106% Growth

Percent of Total Generation in the Baseline

Benefits of Reduced Air Pollution

Old generating units have highest emission rates…

Average NOx Emission Rates for Coal-Fired Boilers by Vintage

8. 8.0 00 7. 7.0 00 6. 6.0 00 5. 5.0 00 4. 4.0

Wh Wh

3. 3.0

s./M s./M

2. 2.0

x lb x lb NO NO

1. 1.0 00 0. 0.0 00

7.44 7.44

pre pre-

• 19

195 50 1 1950- 950-195 1959 9 1960 1960-19

• 196

69 9 1 1970 970-197

• 1979

9 198 1980-1 0-1989 989 1 1990- 990-1999 1999

Vinta Vintag ge e

5.97 5.95 5.37 4.09 3.55 5.97 5.95 5.37 4.09 3.55 Benefits of Reduced Air Pollution

But just a small share of emissions

Benefits of Reduced Air Pollution

Benefits of Reduced Air Pollution

Legislative Comparison of Multipollutant Proposals:

• S. 366, S. 485, and S. 843.

Legislative

• S. 366
• S. 485
• S. 843

Proposal Jeffords (108th) Clear Skies (108th) Carper (108th) National Annual Allowa nce Allocatio n Ca ps Sulf ur 2.25 in 2009. 4.5 in 2010. 4.5 in 2008. Dioxide Two regions. 3.0 in 2018. 3.5 in 2013. (SO2) 2.25 i n 2016 . Million Tons Nitroge n 1.5 1 in 2009. 2.1 in 2008. 1.87 i n 2009. Oxides 1.7 i n 2018. 1.7 in 2013. (NOx) Two regions. Million Tons Mercury 5 in 2008. 26 in 2010. 24 in 2009. (H g) Facility specif ic. 15 in 2018. 5 to 16 in 2013. Tons Non­tradable. Facility specific. Carbo n 2.0 5 in 2009. No CO2 policy. 2.57+ in 2009 . Dioxide 2.47+ in 2013 . (CO2) + Sequestration Billion Ton s increases CO2 cap.

Efficient Emission Levels for SO2 and NOx

Scenario and Key Assumptions

• PM­health modeled only; no ozone benefits
• Examine SO2 and NOx emission fees
• No CO2 or mercury requirements
• Results for 2010
• Title IV SO2, SIP Call NOx baseline
• Pope et al. (1995) for sulfates
• Nitrates as ordinary PM10
• VSL=$2.25 million (Mrozek and Taylor, 2001)

“Efficient Emission Fees” (PUF 03; in submission at REE) Benefits of Reduced Air Pollution

7500 Marginal Benefits MB--Upper Bound MB--Lower Bound Marginal Costs 6000 4500 3000 1500 0.0 2.0 4.0 6.0 8.0 9.2 Millions of Tons SO2 Abatement

Benefits of Reduced Air Pollution

Marginal Benefits and Costs: SO2

Dollars

Benefits of Reduced Air Pollution

Value of SO2 Emission Reductions by State

BAU Title IV SIP Call CSI Carper Jeffords Efficient BAU Title IV CSI Carper Jeffords Efficient Fees Fees

Pollution Policy

2 4 6 8 10 12 14 16 18 20

Emissions ( Million Tons )

NOX & SO2 Electricity Sector Emissions in 2020

Source: Banzhaf, Burtraw and Palmer, 2002. Public Utilities Fortnightly Benefits of Reduced Air Pollution

Major Research Issues and Uncertainties in Valuat ion of Health-Related Benefits

Emissions Modeling

• Source apportionment:

Who is to blame (location and types of sources)?

Epidemiology

• Long­term exposures and disease.
• Which particulates matter?

Valuation

• Valuation of children and elderly and other vulnerable
• groups. Evidence suggests:

9 Parents value childrens’ health > own health. 9 Seniors value selves < younger adults… But far greater than Life­Year­Lost approach suggests.

Benefits of Reduced Air Pollution

Acidification Benefits

• Acidification played a leading role in 1990

Clean Air Act Amendments.

• Thin literature on value of improvements in

acid­sensitive ecosystems.

• NAPAP/TAF developed limited estimate of

recreation benefits, but value of information assessment suggested nonuse values were more important.

Benefits of Reduced Air Pollution

Ongoing Study of Adirondacks

Motivation: Nonuse values are implicitly zero in B/C analysis until a study shows they are larger. Information on the size of values could guide further policy initiatives. Purpose of Study: Elicit total Willingness to Pay for ecological improvements in the Adirondack State Park region consistent with scenarios for emissions reductions. Goals: ƒ Laymen’s Summary of the Science Report. ƒ CVM estimates consistent with the science and state of the art in economics.

Benefits of Reduced Air Pollution

Screen Shot Example

Benefits of Reduced Air Pollution

Status

• Numerous focus groups and peer reviewed

instrument design.

• Instrument in field currently.
• Mode of administration includes internet

and mail. Approximately 2300 responses anticipated.

No results yet… Of responses we can share qualitative result that 44% feel problem is very important, 46% feel problem is somewhat important.

Benefits of Reduced Air Pollution

Main Points on Criteria Pollutants

• SO2 and NOx caps for all of the proposals

appear justified... there is room for more SO2 reductions; NOx reductions about right.

– Efficient SO2 fee ($4,700 ­ $1,800 per ton) would yield 0.9 – 3.1 million tons. – Efficient NOX fee ($1,200 ­ $700 per ton) would yield 1.0 – 2.8 million tons.

• Evidence supporting regional caps.
• Ancillary CO2 reductions.

Benefits of Reduced Air Pollution

Benefits of Reducing Mercury Emissions

• Estimates linking health benefits to mercury

emission reductions are needed.

• One study used Chesapeake Bay angler

population to account for:

– Change in averting behavior among anglers under fish consumption advisory implies a change in mercury exposure. – Commercial market behavior. – Using epidemiological and economic literature, estimate changes in health endpoints and value where possible.

Paul Jakus, Meghan McGuinness, and Alan Krupnick, 2002

Benefits of Reduced Air Pollution

Results

• Health benefits of Fish Consumption Advisories:

$0­$13­$71million

• Utility loss to recreation from FCA: $9 million
• Commercial fisheries loss: $0.5 million

⇒ These results apply to a narrow population. General results for benefit­cost analysis are still needed.

Benefits of Reduced Air Pollution

Mercury

Target: What does benefit literature say? MACT~7.4 tons/yr to Ancillary~28 tons/yr

(current levels in coal burned for electricity: ~75 tons/yr)

Design: Trading enables tougher goals. Perhaps with…

• Maximum emission rate constraint

(not minimum emission rate reduction), and

• State opt out of trading for local protection

Benefits of Reduced Air Pollution

yxwvutsrponmlkjihgfedcbaYXWVUTSRQPONMLKJIHGFEDCBA

Key Ingredie nts to Multipollutant Policy

ƒ SO2 and NOX caps are justified on benefit­cost. ƒ Mercury trading, with constraints, can lower costs; benefits not well quantified. ƒ Architecture is very important for carbon policy.

9 Start soon rather than start large. 9 Auction is less costly to society, and preserves asset values better than output­based allocation. 9 The auction institution is expandable beyond electricity. 9 A hybrid allocation approach to balance compensation and efficiency.

Benefits of Reduced Air Pollution