1. Improving Air Quality: Controlling Stationary Sources Chapter 12

2. 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 SO 2 and NO x 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

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4. 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

5. (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

6. 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

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8. (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

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10. 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

11. (3) Acid Rain Program: SO 2 Emissions Allowance Trading ________ of the 1990 CAAA established a two- phase acid rain initiative, establishing: – a reduction plan for NO X emissions – a cap and trade allowance program for SO 2 emissions Phase I for the 1995–1999 period; phase II for the 2000–2009 period 11

12. Cap and Trade Program for SO 2 National SO 2 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 SO 2 Emissions Allowance Program – EPA issues tradeable emission allowances: each allowance permits the release of ______ of SO 2 – Total number issued sets the national limit Auctions also are held for direct sale of allowances – Administered by the Chicago Board of Trade 12

13. (4) Ozone Control: NO X Trading Programs Established under CAAA 1990, the Ozone Transport Commission (OTC) developed the OTC NO X Budget Program In 1998, a new initiative, the NO X 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 NO X Budget Trading Program (NBP) in 2003 as successor to the original OTC program – Goal is to reduce NO X emissions by _________ _____ per year 13

14. 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

15. (2) New Source Bias Dual 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

16. (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

17. Polluter’s Abatement Decision Example: SO 2 Abatement $ SO 2 Abatement (millions of tons) P of 1-ton allowance MAC A0A0 0 Up to A 0, cheaper for firm to abate; MAC < P Beyond A 0, cheaper for firm to buy allowances; P < MAC 17

18. 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