1. AGEC/FNR 406 LECTURE 19

2. Acid Rain Name derives from a chemical reaction between SO 2 (sulfur dioxide) NO 2 (nitrogen dioxide) and H 2 O (water)

3. Reaction leads to... Creation of sulfuric and nitric acid, which fall in the form of acidified rain (or snow or sleet). There are actually two forms of acid deposition: 1.wet deposition 2.dry deposition http://www.epa.gov/airtrends/sulfur.html

4. http://www.epa.gov/acidrain/what/index.html Electric power generation that relies on burning fossil fuels like coal:  2/3 of sulfur dioxide emissions  1/4 of nitrogen oxides emissions

5. Sources Both natural and anthropogenic sources (90-95% man-made) Rain is naturally a bit acidic (pH 5.6) due to atmospheric CO2. U.S. - Electricity generating plants burning high-sulfur content coal and oil Canada - Ore smelters Europe - Electricity

6. US Sources

7. http://www.state.in.us/idem/programs/air/emissionreporting/emissionsdata/

8. North America (1998 data) SO 2 US: 17.7 million MT (67% from elec utilities) Canada: 2.7million MT (74% from industry) About 4 million MT of SO 2 crosses the border annually.

10. http://www.epa.gov/air/emissions/so2.htm

11. Acid Deposition (Acid Rain) Regional Pollutant –Effects felt over a broad geographic area. –Location important: Effects felt downwind of source. Transboundary pollutant –Emitted in one country and transported across a national border to another country.  U.S. sulfur dioxide emissions responsible for 50-75% of acid deposition over most of eastern Canada.  Canada sulfur dioxide emissions responsible for < 5% of acid deposition in the U.S.

12. Acid rain impacts 1. Aquatic systems (-) 2. Forests (-) 3. Human health (-) 4. Visibility (-) 5. Agriculture (- /+) 6. Building materials (-)

13. Critical load The total amount of acid deposition that can be received without damage to an ecosystem. Aquatic plants: pH 7.0-9.2 Freshwater shrimp: pH 6 Bottom-dwelling bacteria: pH 5.5 Fish: pH 4.5 Frogs and insects: pH 4.5

14. Example: NY state lakes Acidification of lakes and streams reduces value of recreational fishing.

15. Example continued $250 50 Travel Cost P = 250 -5Q 0 Number of visits 0 Damage = Loss in consumer surplus. $200 P = 200 -5Q 40

16. Damage and cost assessment Main issues: 1. Market and non-market effects 2. Chemical synergies + metals 3. “Common metric” problem Measurement and quantification of MAC is difficult due to interdependencies. Who benefits? Who should pay?

17. Actual policy in U.S. 1970-1990 - uncertainty prevailed - Reagan administration stalled - EPA regulations focused on local effects which may have exacerbated problem 1990-present - Clean Air Act: marketable permits (1990) - NO X excluded, 1-1 trading ignores location - SO 2 falling but NO 2 increasing

18. Why so long? Political concern regarding job losses in coal-producing states (IN, IL, MI, OH) Local losses in high-sulfur coal states would be balanced by gains in low-sulfur coal states Costs of electricity would rise

19. Marketable Permits: Allowances Emission standard set and number of permits determined. Permits issued to polluters based on some allocation system. Polluters allowed to trade permits. Market should develop…

20. Why does trading work? 1. If firm can cleanup at a price lower than the permit price, it will. Low MAC firms sell permits 2. If cleanup is costly then a firm will choose to buy a permit High MAC firms buy permits 3. Anyone who wants to can buy a permit.

21. Acid Rain Program Allowances allocated each year – one allowance allows utility/source to emit one ton of SO 2. –Phase I: Allowances to 110 highest emitting coal-fired power plants (>100 megawatts) –Phase II: All power plants > 25 megawatts must participate. Sources that exceed their allowances fined ($2,000/ton) and allowances reduced by the excess the next year. Compliance has been 100% thus far.

22. EPA Allowance Auctions Allowances offered at auctions –1998-99 Spot auction: 150,000 allowances. –1998-99 Advance auction: 125,000 allowances –2000 and after: 125,000 for each auction. These allowances can be bought and sold once purchased. Allowances sold starting with the highest bid and continuing until allowances sold or bids exhausted.

23. Experience with trading # of permits traded has been rising market clearing price has been increasing http://www.epa.gov/airmarkt/trading/auction.html

24. Have SO2 emission levels fallen? Eastern Canada (regulation) by 1999 emissions had fallen 58% from 1980 level United States (regulation + trading) by late 90s emission had fallen 39% from 1970 level

27. SO 2 Emissions under the Acid Rain Program Sources have started using banked allowances.

28. SO 2 Emissions and the Allowance Bank Banked allowances

29. Comparison of Ambient Sulfur Dioxide Concentrations in the Eastern United States from CASTNet Monitoring Data