NOx Abatement, REP Experience in Sweden Political Economy Comparison w Norway Interaction Climate policy Techn Innovation/Diffusion SEPA June 2013 T Sterner, J Coria Thomas Sterner
Swedish Acid Policy Sweden (+Norway...) most affected Sensitivity of ecosystems extreme Highest Sulfur taxes in the World AMBITIOUS NOX POLICTY TOO
Technicalities of NOx Not like SOx, NOx hard to estimate. Formed by N 2 and O 2 in air. Reaction nonlinear in T which varies in furnace.
Abatement of Nox Humidity EGR Air flow & Temp Fuel distribution Fuel Choice SCR, SNCR Ammonia
The role of measurement Engineers try measures Finetuning crucial Measurement necessary for plant engineers
REP mechani sm
REP Each company pays 5 /kg Money refunded to same industries Don t get back what you paid! Refund= output share in total fees like a tax: Tax has 4 effects: Techn./ Price/ Budgetary (and tax interaction)
Economics of REPs (comp. Tax) Pq i c i (q i, a i ) Te i (q i, a i ) + σ i T[ i e i (q i, a i )] q output, c prod cost, a abat. Te charge, σ share and σt e is the refund. c a = Te a (1 σ i ) P = c q + Te q (1 σ i ) T(E/Q)(1 σ i )
Conclusions Abat. Incentives same Average payment 0 --> no output effect nor revenue recycling effect. No effect on competitivity, targetting of subsectors easier. Inoptimal because marginal firms are not driven out of business However Acceptability higher --> Fee T higher
PROPERTIES OF REP Useful when output effect not wanted Small open economy Targetting of only some industries Compact lobby of powerful polluters Oiligopoly (se Requate and Gersbach)
Political Economy arguments Fredrikson & Sterner (Econ Letters) clean firms lobby for higher tax Lobby for lower taxes weakened
Kgs NOx / GWh Lower emission coefficients 0,45 0,4 0,35 0,3 0,25 0,2 0,15 0,1 0,05 0 1990 1992 1994 1996 1998 2000 2002 Year average median 190
Some Conclusions Importance of Monitoring + High Price Signal Targetting of subsets of plants Refunding (or free permits). Sacrifice output and revenue effects but get abatement incentives & acceptability. Also dynamic effects on techn.
Synergies and Trade-offs between Climate and Local Air Pollution Policies in Sweden. Jorge Bonilla, Jessica Coria and Thomas Sterner University of Gothenburg
Introduction Multi-level climate governance and interactions with local air pollution governance. What is the combined effect of CO2 Tax, EU ETS and NOx REP on? Technical progress Substitution; CO2 and NOx. Shadow prices of CO2 and NOx.
Methodology We model pollution technology as a non-separable production process in which CO2, NOx and heat and power generation are treated as joint outputs. We compute: The elasticities of substitution between output and emissions and between pollutants. The relative shadow price of CO2/NOx. We assess if substitution and shadow prices changed between (2001-2004) and (2006-2009).
Conclusions In CHP generation CO2 and NOx are substitutes. Substitution increases after the introduction of the EU ETS due to technological development. CO2 is more sensitive to prices that NOx: to encourage a large reduction in NOx emissions, the charge must be increased to a much larger level than its current value. Need for policy coordination to avoid unintended effects of one policy over other policies
Emission Intensity (kg NOx/MWh) Emission histograms 1,8 1,6 1,4 1,2 1 0,8 0,6 0,4 0,2 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 0 0 20 40 60 80 Cumulative Yearly Output (TWh/yr)
Innovation and Diffusion 0,8 0,7 0,6 0,5 0,4 0,3 0,2 0,1 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 0 0 20 40 60 80 Cumulative Yearly Output (TWh/yr)
kg NOx/MWh 0,18 Innov/Diffusion 0,16 0,14 0,12 0,1 Intercept Slope*10^7 0,08 0,06 0,04 0,02 0 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Individual plant behaviour e2005 (kg/mwh) 1,8 1,6 e 2005 = 1/2 x e 1992 e 2005 = 2/3 x e 1992 e 2005 = e 1992 1,4 1,2 1 0,8 0,6 0,4 worsening improvement e 2005 = 3/2 x e 1992 e 2005 = 2 x e 1992 e 2005 = 4 x e 1992 Series1 Series2 Series3 Series4 Series5 Series6 Series7 Linear )Series2( Linear )Series3( 0,2 0 0 0,2 0,4 0,6 0,8 1 1,2 1,4 1,6 1,8 e1992 (kg/mwh)
Number of NOx patents per million inhabitant Patents / Mcap. 1.1 1 0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 AUST DENM FINL GERM JAPA SWIT SWED
Diffusion of NOx abatement technologies in Sweden Jorge Bonilla, Jessica Coria, Kristina Mohlin and Thomas Sterner University of Gothenburg
Introduction NOx emissions from large combustion plants in Sweden are regulated by the refunded charge and individual emission standards We study the effect of these policies on the propensity/timing of adoption of NOx abatement technology, Combustion, Post-Combustion and Energy efficiency improving technology.
Methodology Data: SEPA reports of boilers in the NOx charge system 1992-2009: Cox proportional hazard model Dependent Variable: Adoption of technologies Independent Variables: Net NOx charge, prior technological state, biofuel usage, entry effects, rank effects, and external and internal learning. Estimations for the whole sample, sectors, and counties with stringent and lax emission standards.
Conclusions Drivers of adoption vary across technologies. The net NOx charge does not seem to encourage adoption of combustion or flue gas condensation technologies. The net NOx charge does stimulate adoption of postcombustion technologies. Standards and the charge tend to be complementary: the net charge has a larger effect for those boilers with stringent standards.
Further Research We cannot fully control for the individual stringency of the standard nor the year of implementation. We cannot rule out the possibility that more stringent standards are the result of larger past reductions due to the charge. Further research is needed to disentangle the dynamics of plant regulations.
The Norwegian NOx Fund Gbg Protocol: Norway must reduce NOx Tax 2007: 16 NOK/kg NOx from Propulsion machinery > 750 kw, motors, boilers and turbines >10 MW flares on offshore installations. 1/1 2008 NO x Fund Firms in Fund TAX-exempt
Norway s NO x Fund -11 NOK /kg NO x for offshore oil and gas industry - 4 NOK /kg NO x for other industries. Fund REFUNDS a share (75%) of NO x -reducing investments. SMALL TAX COMBINED WITH BIG SUBSIDY
Policy Options Tax versus Q Regulation MC = αa T H TAX REGUL E
If high tax needed then big tax revenues (good or bad?) MC = αa T H TAX REGUL E
A subsidy could also work MC = αa T H Subsidy REGUL E
But is expensive MC = αa T H Subsidy REGUL E
Combined Tax Subsidy MC = αa T H Subsidised MC = sαa T L A tax =ae= T/α A ref tax =ae=t/sα E
Fees used to finance subsidy MC = αa T H Subsidised MC = sαa T L A tax =ae= T/α A ref tax =ae=t/sα E
Output based Refunding (OB): p q c ( q ) A te ( q, A ) te. (1) i i i i i i i i i i i q i Q. (2) p q c ( q ) (1 s) A te ( q, A ) i i i i i i i i i, (8) problematic that s endogenous; (9) necessary for budget constraint: s te A, (9)
Thank you Extras; Distribution Admin costs
Distribution of net fees Waste combustion Food Chemical Pulp- and paper Energy -60-40 -20 0 20 40 60 1998 1997 1996 1995 1994 1993 1992
Administration REP: 0,5% r VerksamheProduktionsenhet NOX MWh FEE REFUND Net Fee Panntyp R 7 Kraft- och vpanna 3 123421 593335 4936840 5532128-595288 Brännare S 7 Kraft- och vpanna 4 411219 2338216 16448760 21801023-5352263 Brännare S 8 Massa- ochbarkpanna 103440 274082 4137600 2555482 1582118 Roster 9 Massa- ochsmw 129394 466200 5175760 4346749 829011 Brännare 10 KemiindustHeater 3 21227 54668 849080 509713 339367 Brännare 10 KemiindustÅngpanna 24292 74090 971680 690799 280881 Brännare 11 KemiindustPanna 3 37976 204991 1519040 1911292-392252 Brännare 12 Kraft- och vhvp 2844 29251 129964 1170040 1211756-41716 Roster S 12 Kraft- och vhvp 3344 19476 110656 779040 1031733-252693 CFB S 13 Avfallsförbr P1 38494 60373 1539760 562905 976855 CFB 13 Avfallsförbr P2 31262 51737 1250480 482385 768095 14 Avfallsförbr P6 41387 82562 1655480 769790 885690 Rörlig roste 19 Kraft- och vhvcb2 33628 155008 1345120 1445261-100141 Brännare 32 Avfallsförbr P1 78790 241099 3151600 2247955 903645 Rörlig rostes 32 Avfallsförbr P4 59554 416740 2382160 3885594-1503434 Rörlig rostes SUMS 5253721 47312440 48984565 0 Refund: 9,005511 SEK/MWh
1 22 43 64 85 106 127 148 169 190 211 232 253 274 295 316 337 358 NOx lbs/mwh Comparison em. Coeff Sweden/US Swedish NOx emission rates 2000 3,5 3 2,5 2 1,5 1 0,5 0 NB A possile correction factor would e 90/40 for en eff
NOX The Swedish retrofitted unit, in contrast, demonstrates that NO x levels well below the Swedish standard (and also below the German or United States standards) are achievable. The Swedish regulatory system, incorporating an economic incentive, clearly motivates [the Swedish plant] to achieve minimal NO x rates rather than just comply with the applicable emission standard. [p. 37].
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