Improving Air Quality: Controlling Stationary Sources

Chapter 12

1. Understanding Acidic Deposition

What is Acidic Deposition?• Occurs when sulfuric and nitric acids

mix with other airborne particles and fall to earth as wet or dry ____________

• These acids arise from the chemical reaction of SO2 and NOx emissions with water vapors and oxidants in atmosphere

• _____ is the more significant contributor– Major sources are fossil-fueled electricity

plants, refineries, and other users of sulfur-containing fuel

2

3

2. Controlling Stationary Sources

Overview• Stationary sources include electric power plants,

chemical plants, steel mills, etc.

• Primary controls in the U.S. are ___________ _________________with _______________

___________ added over time

• These controls vary with – Facility age (new versus existing)– Facility location (PSD versus nonattainment area)

4

(1) Technology-based Standards

Dual-Control Approach

• For new/modified stationary sources–____-administered stringent limits, New

Source Performance Standards (NSPS), are used; more stringent

• For existing stationary sources–_____-administered limits are used; less

stringent

5

Setting the Control Technologies

• PSD areas (more stringent)– New sources: limits based on best available

control technology (BACT)– Existing sources: limits based on best

available retrofit technology (BART)

• Nonattainment areas (less stringent)– New sources: limits based on lowest

achievable emissions rate (LAER)– Existing sources: limits based on reasonable

available control technology (RACT)6

7

(2) Emissions Trading

• For existing sources

– Bubble policy: plants can measure emissions of a single pollutant as an __________ of all emission points

– Emissions banking: a source can save __________________________ if it cuts emissions more than required by law and can deposit these through a banking program

8

9

• For new/modified sources

– Netting: for use in _____ areas by modified sources; any added emissions associated with a plant modification must be exactly ________ by a reduction from some where else within that same plant

– Offset plan: for use in ________________ areas; uses emissions trading to allow releases from a new/modified source to be more than countered by reductions achieved by existing sources

10

(3) Acid Rain Program: SO2 Emissions Allowance Trading

• ________ of the 1990 CAAA established a two-phase acid rain initiative, establishing:– a reduction plan for NOX emissions

– a cap and trade allowance program for SO2 emissions

• Phase I for the 1995–1999 period; phase II for the 2000–2009 period

11

Cap and Trade Program for SO2

• National SO2 emissions caps established a permanent annual cap of _____ million tons for electric power plants starting in 2000, tightened to 8.95 million tons for 2010

• SO2 Emissions Allowance Program – EPA issues tradeable emission allowances: each

allowance permits the release of ______ of SO2 – Total number issued sets the national limit

• Auctions also are held for direct sale of allowances– Administered by the Chicago Board of Trade

12

(4) Ozone Control: NOX Trading Programs • Established under CAAA 1990, the Ozone Transport

Commission (OTC) developed the OTC NOX Budget Program

• In 1998, a new initiative, the NOX SIP call, required affected states to submit revised State Implementation Plans (SIPs) to achieve certain emission limits during ozone season, starting in 2003– EPA recommended using a cap and trade program

and established the NOX Budget Trading Program (NBP) in 2003 as successor to the original OTC program

– Goal is to reduce NOX emissions by _________ _____ per year

13

3. Analyzing Stationary Source Controls

(1) Higher Cost of CAC Methods

• Standards-based approach is _____________ – The inflexibility adds to society’s costs and

gives low-cost abaters no incentive to clean up beyond the level set by law

• Most empirical studies show that the cost of using a command-and-control instrument relative to the least-cost method is _________ than 1

14

(2) New Source BiasDual Control Approach• Existing sources are controlled by states, which

have an incentive to set relatively _________ standards to avoid losing firms to other states

• In turn, firms have an incentive not to initiate new construction to avoid the more stringent and more costly NSPS

• Result is that the dual control approach perversely ____________ construction of new and presumably cleaner-running new facilities

15

(3) Cost-effectiveness of Emissions Trading Programs

• Low-cost abaters will reduce emissions and sell excess allowances (suppliers)– Will sell at any P higher than their MAC

• High-cost abaters will buy allowances rather than abate (demanders)– Will buy at any P lower than their MAC

• Trading should continue until MACs are equal, achieving a cost-effective solution

16

Polluter’s Abatement DecisionExample: SO2 Abatement

$

SO2 Abatement(millions of tons)

P of 1-ton allowance

MAC

A00

Up to A0, cheaperfor firm to abate;MAC < P

Beyond A0, cheaper forfirm to buy allowances;P < MAC

17

An emissions cap: A limit on the total amount of pollution that can be emitted (released) from all regulated sources (e.g., power plants); the cap is set lower than historical emissions in order to reduce emissions.

Allowances: An authorization to emit a fixed amount of a pollutant.

Allowance trading: Sources can buy or sell allowances on the open market. Because the total number of allowances is limited by the cap, emission reductions are assured.

18