1. Economic Strategies to Reduce Acid Deposition Ecological Economic Theory Fall 2003

2. Externalities of Fossil Fuel Consumption Exploration & Harvesting Processing & Refining Transportation & Distribution Conversion & Market Use Land degradation, accidental spills, CO 2, CH 4, CO, HCs, PM, trace metals, thermal pollution, SO 2, NO X

3. Acid Deposition Rain, snow, fog, dew, dry particles SO 2 + H 2 0  H 2 SO 4 NO X + H 2 0  HNO 3 Unpolluted precipitation – pH 5.6 Average Vermont precipitation – pH 4.3 – 4.6 From U.S. Environmental Protection Agency’s Clean Air Markets Report http://www.epa.gov/airmarkets/acidrain

4. Effects of Acid Deposition Lakes and Streams –Habitat loss –Eutrophication (N only) –Acid toxicity –Al toxicity Forests –Soil acidification –Foliar Ca leaching –Al mobilization –Increased vulnerability to environmental stressors Human health –Inhalation / Respiratory problems –Ozone formation (N only) Aesthetics –Visibility Built capital –Paints –Construction materials –Historical monuments

5. Acid Deposition Policy Issues Regional Scale Non-localized Crosses borders Multiple sources Uncertainties Destruction vs. Resilience

6. Economic Strategies that Address Externalities Command and Control Ecological Taxes Tradable permits

7. Command and Control Set Standards –Emissions –Abatement Impose fines for violations Examples –Japan –China JapanChina Ambient limits sulfur dioxide (ppm) 0.040.06 - 0.10 Ambient limits nitrogen oxides 0.02N/A % non-compliance (1999) < 5%33% Value of human life (US $) >>270270 CAC components: Japan vs. China

8. Environmental Taxes Pigouvian taxes Polluter Pays Double-dividend Income tax  “Green” tax Examples: –Germany –Sweden –Netherlands TaxEvidence of Effectiveness Motor fuelsFuel substitution; increased use economy vehicles; reduced fuel consumption Electricity production Fuel substitution; renewable energy production Motor vehicle use No evidence of effects Industrial emissions Recycling of funds into abatement technologies; incentives for new technologies Summary of European Green taxes

9. Tradable Permits Set total emissions standard Act within market system Purchase, sell, bank permits Example: United States – 1990 Clean Air Act Amendments Year SO2 emission cap (million tons) NOX emission cap (million tons) Estimated permit cost ($/ton) 20008.94.1250-350 20104.52.1500-700 201831.7???????? Key components of U.S. cap-and-trade policy

10. Ecological Economics Perspective: Cap-and-Trade Sustainable Scale ??? Equitable Distribution NO Efficient Allocation YES

11. Recommendations Sustainable Scale Ecological + Human Health Basis Ecological Monitoring Adaptive Management Equitable Distribution Caps on individual permits Regional distribution of impacts No exemptions

12. QUESTIONS???