AGEC 604 Natural Resource Economics

Transcription

1 AGEC 604 Natural Resource Economics Air Pollution Historical View Great Smoky Mountains National Park Tennessee / North Carolina Good day Hazy day Photos: U.S. EPA Air Pollution Overview Sources of Pollution Stationary Sources Factories, industrial plants, power generation, etc. Mobile Sources Vehicles Why differentiate? Policies differ Historical - Stationary s Era of Increases Environmental Awareness Air pollution emphasis on smog (aesthetic) and health Began to recognize environmental costs associated with our lifestyles Command and Control Main Policy U.S. EPA in charge of defining standards, but states responsible for enforcement Primary concern emission standards Efficient? 1

2 Historical Stationary - 2 Treated Most Pollution as Local Pollutants Measured progress at local monitors set stage to make regional pollutant problems worse Looked for more indirect and less costly approaches Example Smokestacks height Exporting pollution Aspects of Emission Standard Setting Threshold Concept Standard is to be defined with a margin of safety sufficiently high that no adverse effects would be suffered by any member of the population as long as the threshold is met Assumes the damage function is zero until threshold and above threshold adverse health effects Ignores costs and benefits Level of Ambient Standard Absence of defensible health threshold use some other measure Excludes costs in defining standard Aspects Cont. Uniformity Same standards apply to all parts of the country No account of the number of people exposed, sensitivity of the local ecology, costs of compliance Timing of the Emission Flows Concentrations are important in policy Example Stagnant meteorological conditions vs. normal conditions Concentrations vs. Exposure Policy defined in concentrations, but exposure is what causes adverse health effects 2

3 Historical Mobile Sources Major Impacts of Mobility Pollution is caused by, in part, by being in the wrong place at the wrong time More difficult to tailor make emission standards Difficult to Control Mobile Sources Manufacturer instead of owner/driver responsible for emission reductions Why? less expensive Problems Factory installed emission devices deteriorate overtime Increased costs of new cars New vehicles are only a small part of the total fleet Historical Mobile - 2 Control at Point of Production Takes longer to achieve a given reduction Why? Unrealistic Standards Set standards which could not realistically be met Courts involved Slowed pollution reduction The Road Continues 3

4 AGEC 604 Natural Resource Economics Air Pollution Stationary Sources Crater Lake National Park Oregon Good day Hazy day Photos: U.S. EPA Stationary Source Pollutants Historical Command and Control Key Policies are not efficient and not cost effective But have improved air quality Current / Innovative Approaches to Air Pollution Control Emissions Trading Program Idea Sources are encouraged to change the mix of control technologies given by the standards in an attempt to improve air quality Objectives Add Flexibility to meet clean air standards Encourage technological progress Currency Emission Reduction Credit Policies Offset, bubble, netting, banking 4

5 Currency Emissions Reduction Credit Any source who decides to control more than necessary to fulfill its legal obligations can apply for credit Emission reductions most be Surplus Enforceable Permanent Quantifiable Offset Policy Policies Allows new sources to come into nonattainment areas if they can acquire a sufficient number of credits from existing sources Goal allow growth and reduce total pollution Bubble Policy Existing firm can meet its legal obligations by adopting control technology or buying emission reduction credits Goal lower costs Netting Policies Cont. A firm expanding can use credits from other areas of it plant to offset any increase in emissions from the expanded part of its plant Goal lower costs Banking Store credits to be used in the offsetting, bubble, or netting policy at at some later date Goal to encourage control even it not needed today 5

6 Effectiveness of Emissions Trading Step Forward Toward Cost Effectiveness Has Reduced the Cost of Compliance Works Better for Uniformly Mixed Pollutants Has Added Flexibility Transaction Costs Higher than Expected Smog Trading RECLAIM Example of a state program Uniqueness Cap on total emissions rather than on emissions from a each source decreases overtime Shifts burden of identifying control strategies from the government to the polluter Results Instead of traditional focus on end-of-pipe technologies, all possible control strategies can compete on a level playing field Economic incentives important Emission Charges Being Used in France and Japan France Charge is too low to have an impact Japan Charge used to compensate victims Charge not for pollution emission efficiency or cost effectiveness 6

7 The Road Continues AGEC 604 Natural Resource Economics Air Pollution Regional / Global Pollutants Shenandoah National Park Tennessee / North Carolina Good day Hazy day Photos: U.S. EPA Regional / Global Pollutants Besides Scientific Uncertainty, Issue is Compounded by Distance pollutant travels Different agencies / Governments Involved Acid Rain Example Sulfur and nitrogen oxides being transferred into sulfuric and nitric acid Slow to react loss of jobs in key states Historical policies stationary source 7

8 EPA s Acid Rain Program Market-Based Allowance Trading System for SO 2 Goal Achieve significant environmental and health benefits through reduction of SO 2 Transferable Allowances Fossil fuel power plants allocated transferable allowances Each allowance one ton of SO 2 Number of allowances reduced overtime Allowances can be used, bought, sold, or banked Acid Rain Program - 2 Supply and Auction 2.8% of allowances held by the EPA for direct sell and auction Direct sell Provide an avenue for independent power producers low # of allocated allowances Annual Auction Help send the market a price signal Furnish an additional avenue to purchase allowances Utilities can sell additional allowances at the auction Any one can participate in the direct sell and auction Acid Rain Program - 3 High Penalty if Exceed Allowances Opt-In Program Expands the program to include additional SO 2 emitting sources Allows sources not required to participate the opportunity to enter the program on a voluntary basis, reduce SO 2, and receive acid rain allowances Allowances can be sold Economic Incentives Added to Pollution Control Buying, selling, and banking allowances 8

9 Ozone Depletion Ozone Pollutant at the earth s surface Absorbs harmful radiation when in the upper atmosphere Cause Chlorofluorocarbons (CFC s) released into the air Aerosol propellants Stable pollutant Ozone Policy Approach Ban Manufacturing in 1978 in the U.S. for Aerosol Use International Agreement in 1988 Restrict production and consumption to 50% of 1986 levels by 1998 Established a fund to help poorer nations switch from ozone depleting CFC s U.S. developed a tradable permit system and taxes 1990 & 1992 Agreements Advance phase out to 1996 Why Different Approach? Problem Global Warming Gases absorb the long wavelength (infrared) radiation from the earth s surface and atmosphere trapping the heat that would otherwise radiate into space Carbon dioxide (most abundant) and others (maybe more important) Complex Issue Long-term problem Uncertainty is it occurring and impacts International problem 9

10 Climatic Engineering Global Warming - Policies Shooting particulates into the atmosphere to provide compensating cooling Adaptation Adapt strategies which will allow society to function in a warmer climate Mitigation Attempt to moderate temperature rise by strategies designed to increase planetary capacity to absorb greenhouse gases Prevention Reduce emissions of greenhouse gases GW Efficient Approaches Full Cost Principle User of a resource must pay the full costs associated with using the resource including environmental costs Currently not being followed Carbon Tax Tax on the use of carbon (fossil fuels) and other gases Global fund to receive and dispense funds Cost-effective yes Right level of pollution -? Tax rate = marginal social damage Emission Trading Between Countries GW Uncertainties Questions Is global warming occurring because of mankind? What are the effects of global warming? Does it make sense to take some action? If so, how what action? Costs of Being Wrong are Asymmetrical Control more than necessary current generation bears the costs Control less than appropriate future generation bears the costs 10

11 The Road Continues AGEC 604 Natural Resource Economics Air Pollution Mobile Sources Yosemite National Park California Good day Hazy day Photos: U.S. EPA Mobile Sources Problem Drive too much cause too much pollution Implicit Subsidies Insurance Road construction / maintenance MC of an driving an additional mile Private near zero Social > 0 Parking Free parking creates a basis towards private transportation 11

12 Mobile Sources - Externalities Externalities Pollution Road congestion $ / mile Marginal Cost Social Marginal Cost Private Demand V s V p travel miles Driver s Decisions Vehicle Used Maintenance How Many Miles Driven Where You Drive When You Drive How You Drive Current Policies Mobile Sources Past Policies Focus on Manufacturer Not the Driver Certification Programs Engine standards emission must meet specified levels Incentive for drivers Incentives for manufacturers Lead Strict regulation unleaded gasoline Incentives for drivers Incentives for manufacturer 12

13 Alternative Fuels Current Policies Cont. Reduced emissions, but cost high Incentives for drivers Incentives for manufacturer Local Strategies Subsidize mass transit Incentives for drivers Incentives for manufacturers Inspection and Maintenance Programs Required for nonattainment areas Incentives for drivers Incentives for manufacturer Why? Possible Reforms Controlling emissions at the point of production has produced major improvements in cars leaving the assembly line, but deteriorates with use More pollution control than necessary in rural areas Emission Charges Periodically check car s emission Bill = charge rate x emission amount x miles driven Incentives for driver Incentive for manufacturer Transaction costs? Retirement Strategies Possible Reforms - 2 Goal Accelerate retirement of older cars Raise the cost of older cars Incentive for drivers Incentive for manufacturers 13

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