Copyright © 2009 Pearson Addison-Wesley. All rights reserved. Chapter 16 Stationary-Source Local Air Pollution

Copyright © 2009 Pearson Addison-Wesley. All rights reserved Introduction This chapter discusses policy responses to stationary sources of air pollution. This chapter gives a historical assessment of problems and policy approaches, especially cost-effective pollution control policy, to dealing with air pollution.

Copyright © 2009 Pearson Addison-Wesley. All rights reserved Objectives Present a brief history of the Clean Air Act and its amendments. Provide definitions for the categories of pollutants and types of standards. Outline and characterize some of the recent policy innovations. Characterize the level of potential efficiency for each of these programs. Give examples of each of these programs. Discuss successes and failures.

Copyright © 2009 Pearson Addison-Wesley. All rights reserved Conventional Pollutants The Command-and-Control Policy Framework Conventional or “criteria” pollutants are common substances such as sulfur oxides, particulates, carbon monoxide, ozone, nitrogen dioxide and lead. They are thought to be dangerous only at high concentrations. The historical approach to air pollution control has been known as command-and-control approach based on emissions standards.

Copyright © 2009 Pearson Addison-Wesley. All rights reserved For conventional pollutants, the first step is typically to establish ambient air quality standards. In the United States there are two defined ambient standards.  All pollutants have a primary standard that is designed to protect human health.  A secondary standard is set to protect aesthetics, physical objects and vegetation.

Copyright © 2009 Pearson Addison-Wesley. All rights reserved TABLE 16.1 National Ambient Air- Quality Standards (1 of 2)

Copyright © 2009 Pearson Addison-Wesley. All rights reserved TABLE 16.1 National Ambient Air- Quality Standards (2 of 2)

Copyright © 2009 Pearson Addison-Wesley. All rights reserved TABLE 16.1 National Ambient Air-Quality Standards

Copyright © 2009 Pearson Addison-Wesley. All rights reserved The state governments are responsible for ensuring the standards are met. States must design state implementation plans (SIPs) that must be approved by the EPA. The EPA has also established national uniform emission standards for new sources of criteria pollutants. Standards governing new and modified sources of criteria pollutants are called the New Source Performance Standards (NSPS). These serve as minimum standards.

Copyright © 2009 Pearson Addison-Wesley. All rights reserved The Efficiency of the Command-and Control Approach The threshold concept suggests that the standard is set using a health threshold. The level of the ambient standard is set by some other basis. Standards tend to be uniform across all of the country. The timing of emission flows is important since concentrations are important for criteria pollutants. Most standards are defined in terms of pollutant concentration, but typically health effects are more closely related to exposure.

Copyright © 2009 Pearson Addison-Wesley. All rights reserved Cost-Effectiveness of the Command-and-Control Approach Command and control is typically not cost-effective. The ratio of CAC cost to least cost is presented in Table 16.2 and suggests widely varying differences in cost-effectiveness of CAC policies. CAC will be close to cost-effective only if a high degree of control is necessary such that all sources are forced to abate as much as is economically feasible. While inefficient, CAC policies have resulted in better air quality in developed countries. Developing countries, however, need to find cost-effective ways to improve air quality.

Copyright © 2009 Pearson Addison-Wesley. All rights reserved TABLE 16.2 Empirical Studies of Air Pollution Control

Copyright © 2009 Pearson Addison-Wesley. All rights reserved TABLE 16.3 Trends in U.S. Emissions and Air Quality (1 of 2)

Copyright © 2009 Pearson Addison-Wesley. All rights reserved TABLE 16.3 Trends in U.S. Emissions and Air Quality (2 of 2)

Copyright © 2009 Pearson Addison-Wesley. All rights reserved TABLE 16.3 Trends in U.S. Emissions and Air Quality

Copyright © 2009 Pearson Addison-Wesley. All rights reserved Innovative Approaches The Offset Program This program is acquired when a source controls emission to a higher degree than legally required. The policy allows qualified new or expanding sources to emit pollution in a nonattainment area, provided they acquire sufficient emission reduction credits from existing sources.

Copyright © 2009 Pearson Addison-Wesley. All rights reserved The Effectiveness of This Early Application The emissions trading program has substantially reduced the cost of complying with the Clean Air Act. Transaction cost has also increased. The initial allocation of permits has an effect on the potential for price-setting behavior.

Copyright © 2009 Pearson Addison-Wesley. All rights reserved Smog Trading State initiatives have also resulted in innovative programs such as California’s Regional Clean Air Incentives Market (RECLAIM). The 400 participating industry polluters under RECLAIM receive an annual pollution limit, which decreases by 5–8% annually for the next ten years. Polluters are allowed to use flexible approaches such as purchasing credits from other firms.

Copyright © 2009 Pearson Addison-Wesley. All rights reserved Emission Charges Economists usually suggest one of two types of emissions charges.  An efficiency charge is set up to achieve an efficient outcome by forcing the polluter to compensate completely for all damage.  A cost-effective charge is designed to achieve an ambient standard at the lowest possible cost. Emissions charges must be set by an administrative process.

Copyright © 2009 Pearson Addison-Wesley. All rights reserved Hazardous Pollutants The Clean Air Act requires the EPA to frequently identify hazardous pollutants. Once a substance is listed, the EPA has 180 days to regulate emissions. This requires setting a national standard for the pollutant. The EPA has incorporated risk assessment and benefit-cost analysis into their decisions.

Copyright © 2009 Pearson Addison-Wesley. All rights reserved TABLE 16.4 Net Benefits ($Million/Year) of Alternative Strategies for a Value of Life Saved of $1 Million