Ch. 17 Regional and Global Air Pollutants: Ch. 17 Regional and Global Air Pollutants: Acid Rain and Atmospheric Modification Acid Rain and Atmospheric Modification

Regional PollutantsRegional Pollutants Regional pollutants cause damage significant Regional pollutants cause damage significant

distances away from source.distances away from source. Some substances can be both local and regional Some substances can be both local and regional

pollutants: sulfur oxides, nitrogen oxides, and pollutants: sulfur oxides, nitrogen oxides, and ozone.ozone.– e.g. sulfur emissions (acid rain) have been know to travel e.g. sulfur emissions (acid rain) have been know to travel

200-600 miles and can be transformed into sulfuric and 200-600 miles and can be transformed into sulfuric and nitric acidsnitric acids

– e.g. nitrogen oxides and volatile organic compounds can e.g. nitrogen oxides and volatile organic compounds can combine in presence of sunlight to form ozone.combine in presence of sunlight to form ozone.

Acid RainAcid Rain Acid rain is misnomer: actually acidic substances can be Acid rain is misnomer: actually acidic substances can be

deposited as dry particlesdeposited as dry particles Precipitation is normally mildly acidic, (around pH of Precipitation is normally mildly acidic, (around pH of

5.0). Remember pH (power of Hydrogen) is a log (base 5.0). Remember pH (power of Hydrogen) is a log (base 10) scale: below 7.0 is acid and above 7.0 is alkaline.10) scale: below 7.0 is acid and above 7.0 is alkaline.

Industrialized areas often receive rain with pH below 5.0 Industrialized areas often receive rain with pH below 5.0 (east U.S. averages 4.4 pH).(east U.S. averages 4.4 pH).

Wheeling, West Virginia once received acid rain with Wheeling, West Virginia once received acid rain with pH of 1.5. (Car battery is 1.0 pH.)pH of 1.5. (Car battery is 1.0 pH.)

Evidence clearly shows that anthropogenic sources are Evidence clearly shows that anthropogenic sources are the primary cause.the primary cause.

National Acid Rain Precipitation Assessment Program National Acid Rain Precipitation Assessment Program (1980 10 yr. study funded by Congress) : Findings(1980 10 yr. study funded by Congress) : Findings

1) most sport fish can tolerate pH above 5.5 but not below 5.01) most sport fish can tolerate pH above 5.5 but not below 5.0 2) worst spots: 14% of Adirondack lakes in New York and 23% in 2) worst spots: 14% of Adirondack lakes in New York and 23% in

Florida are acidified.Florida are acidified. 3) in many national parks visibility is reduced due to SO3) in many national parks visibility is reduced due to SO22 (50%- (50%-

60% in East Shenandoah and Great Smoky Mountain National 60% in East Shenandoah and Great Smoky Mountain National Parks)Parks)

4) No significant effect on crop growth at 10 times current acidity 4) No significant effect on crop growth at 10 times current acidity levels.levels.

5) hurts red spruce at eastern mountain tops5) hurts red spruce at eastern mountain tops 6) can increase rate of deterioration of galvanized steel, bronze, 6) can increase rate of deterioration of galvanized steel, bronze,

carbonate stone, etc.carbonate stone, etc.

Acid Rain (cont.)Acid Rain (cont.) U.S. findings were less dire than expected. Sweden has 4000 U.S. findings were less dire than expected. Sweden has 4000

acidified lakes. 13,000 sq. km of lakes in Norway have no fish. acidified lakes. 13,000 sq. km of lakes in Norway have no fish. Germany, Scotland & Canada have problems.Germany, Scotland & Canada have problems.

In early days, the motto was “dilution is the solution.” Taller In early days, the motto was “dilution is the solution.” Taller smokestacks were built.smokestacks were built.

National Coal Model (1986) analyzes the economic and political National Coal Model (1986) analyzes the economic and political effects of various strategies designed to achieve reductions of effects of various strategies designed to achieve reductions of SOSO22 from 8 to 12 million tons below 1980 levels. from 8 to 12 million tons below 1980 levels.

First, we will compare CAC to emissions chargesFirst, we will compare CAC to emissions charges Second, we will consider political issues.Second, we will consider political issues.

National Coal ModelNational Coal Model CAC strategy requires each state to reduce their share of CAC strategy requires each state to reduce their share of

“excess emissions” e.g. 8, 10, 12 million tons.“excess emissions” e.g. 8, 10, 12 million tons. Emission charge is $600 per ton, figured to reduce Emission charge is $600 per ton, figured to reduce

emissions about 10 million tons.emissions about 10 million tons. Findings:Findings:

– 1) MC of additional control rises rapidly, particularly after 10 1) MC of additional control rises rapidly, particularly after 10 million tons.million tons.

– 2) CAC costs more ($360/ton) vs. emission charge strategy 2) CAC costs more ($360/ton) vs. emission charge strategy ($327/ton)($327/ton)

– 3) magnitude of cost effectiveness is not large in this particular 3) magnitude of cost effectiveness is not large in this particular context. context.

National Coal ModelNational Coal Model Total programTotal program Annual CostAnnual Cost Key stateKey state Cost Cost

costcost to utilitiesto utilities employ. changeemploy. changeeffectivenesseffectiveness

StrategyStrategy ($ billions)($ billions) ($billions)($billions) (# of jobs lost)(# of jobs lost) ($/ton)($/ton) --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

-- 8 8 million tonmillion ton $20.4$20.4 $1.9$1.9 14,10014,100 $270$270 10 10 million tonmillion ton $34.5$34.5 $3.2$3.2 21,90021,900 $360$360 12 12 million tonmillion ton $93.6$93.6 $8.8$8.8 13,40013,400 $779$779 emission chargeemission charge $37.5$37.5 $7.7$7.7 17,90017,900 $327 $327

Coal and Politics -- don’t mix!Coal and Politics -- don’t mix! It took until 1990 to enact acid rain It took until 1990 to enact acid rain

legislation because of politics -- many coal legislation because of politics -- many coal jobs in many states.jobs in many states.

Coal switching is a cost saving strategy -- Coal switching is a cost saving strategy -- switch to low sulfur to reduce emissionsswitch to low sulfur to reduce emissions

But Illinois, Indiana, Ohio and But Illinois, Indiana, Ohio and Pennsylvania are high-sulfur states.Pennsylvania are high-sulfur states.

Largest electricity rate increases would Largest electricity rate increases would occur in Midwestern and Appalachian states occur in Midwestern and Appalachian states that have largest excess emissions, but their that have largest excess emissions, but their rates would still be below average for U.S.rates would still be below average for U.S.

Coal and Politics -- don’t mix!Coal and Politics -- don’t mix! Firms don’t like emissions charges ($7.7b) Firms don’t like emissions charges ($7.7b)

because they cost more than CAC( $3.2b)because they cost more than CAC( $3.2b) Emission permit program can achieve same Emission permit program can achieve same

cost effectiveness and reduce cost to cost effectiveness and reduce cost to utilities.utilities.

They are traded on Chicago Board of Trade They are traded on Chicago Board of Trade and individually. See Ex. 17.2.and individually. See Ex. 17.2.

The Sulfur Allowance ProgramThe Sulfur Allowance Program ““Cap and trade” program was adopted as part of the Clean Cap and trade” program was adopted as part of the Clean

Air Act Amendment of 1990.Air Act Amendment of 1990. Substantial change from previous CAC approach.Substantial change from previous CAC approach. Anyone can buy the allowance. Environmental groups have Anyone can buy the allowance. Environmental groups have

retired them. Student organizations have.retired them. Student organizations have. By 2005 reduced SOBy 2005 reduced SO22 by 41% from 1980 levels. by 41% from 1980 levels. NY, PA, WI, MI, WV ¼ less surface water was acidicNY, PA, WI, MI, WV ¼ less surface water was acidic VA, New England no change; but there were health benefitsVA, New England no change; but there were health benefits Ellerman et al. (2000) finds Phase I cost savings of from Ellerman et al. (2000) finds Phase I cost savings of from

33% to 67% over non trading alternatives. Primarily due to 33% to 67% over non trading alternatives. Primarily due to switching to low sulfur coal, falling prices of low-sulfur coal switching to low sulfur coal, falling prices of low-sulfur coal (lower rail costs) and lower costs of scrubbers.(lower rail costs) and lower costs of scrubbers.

It is politically difficult under traditional system to get MC It is politically difficult under traditional system to get MC of control equal. Some utilities would be forced to reduce of control equal. Some utilities would be forced to reduce more.more.

But allowance trading program voluntarily solves this But allowance trading program voluntarily solves this problem.problem.

Global Pollutants: Global Pollutants: Ozone DepletionOzone Depletion

Ozone DepletionOzone Depletion In troposphere (closest to earth) ozone OIn troposphere (closest to earth) ozone O3 3 is pollutant.is pollutant.

In stratosphere (just above troposphere) ozone shields us from In stratosphere (just above troposphere) ozone shields us from ultraviolet rays. Mnemonic tool: layers of the atmosphere (lowest to ultraviolet rays. Mnemonic tool: layers of the atmosphere (lowest to highest) highest) TThat hat SShould hould MMake ake IIt t EEasy: (troposphere, stratosphere, asy: (troposphere, stratosphere, mesosphere, ionosphere, exosphere) mesosphere, ionosphere, exosphere)

Cholorofluorocarbons (CFCs) may deplete the ozone shield in a Cholorofluorocarbons (CFCs) may deplete the ozone shield in a complicated chemical process. CFCs have been used in cushioning, complicated chemical process. CFCs have been used in cushioning, packaging, insulating foams, food freezing, industrial cleaning of packaging, insulating foams, food freezing, industrial cleaning of metals, air conditioning.metals, air conditioning.

Major known effect of increased ultraviolet radiation is increase in Major known effect of increased ultraviolet radiation is increase in nonmelanoma skin cancer. Other effects are possible.nonmelanoma skin cancer. Other effects are possible.

Ozone DepletionOzone Depletion On June 30, 1978, U.S. EPA banned the manufacture & sale of On June 30, 1978, U.S. EPA banned the manufacture & sale of

“fully halogenated chlorofluoroalkane” for aerosol propellant uses “fully halogenated chlorofluoroalkane” for aerosol propellant uses subject to Toxic Substances Control Act. But worldwide CFC-11 subject to Toxic Substances Control Act. But worldwide CFC-11 and CFC-12 continue to growand CFC-12 continue to grow

Rand Corporation studied the costs of controlling nonaerosol Rand Corporation studied the costs of controlling nonaerosol applications of CFCs.applications of CFCs.– 3 policies were considered for a 10 year period3 policies were considered for a 10 year period

» 1) emission standards forcing use of specific technologies1) emission standards forcing use of specific technologies» 2) constant emissions charge of $0.50 (real dollars) per pound emitted2) constant emissions charge of $0.50 (real dollars) per pound emitted» 3) marketable permit system3) marketable permit system

– conclusions: permit system produces same amount of reduction as mandatory conclusions: permit system produces same amount of reduction as mandatory controls at about one-half costcontrols at about one-half cost

Table 17.2 Comparisons of Alternative Policies Having Similar CumulativeEmissions Reductions

Emissions reduction Total compliance costs(millions of permit pounds) (millions of 1976 dollars)

Cumulative Cumulative

Policy design 1980 1990 1980-1990 1980 1990 1980-1990a

Mandatory controls 54.4 102.5 812.3 20.9 37.0 185.3Economic incentives

Constant chargeb 54.8 96.9 816.9 12.3 21.8 107.8 Permit systemc 36.6 119.4 806.1 5.2 35.0 94.7aPresent value of annual compliance costs, discounted at 11%.bBased on a constant tax rate of $0.50 from 1980 through 1990 (in 1976$).cBased on a permit price or emission charge rising from $0.25 in 1980 to $0.71 in 1990.Source: Palmer, Mooz, Quinn, and Wolf (p. 225, Table 4.7)

Ozone DepletionOzone Depletion Transfer costs can be enormous under emission charge program, as much Transfer costs can be enormous under emission charge program, as much

as 15 times as large as expenditures incurred in controlling emissions. as 15 times as large as expenditures incurred in controlling emissions. In September 1988 24 nations signed the Montreal Protocol to In September 1988 24 nations signed the Montreal Protocol to

completely phaseout halons & CFCs by end of 20th century. A $240 completely phaseout halons & CFCs by end of 20th century. A $240 million Multilateral Fund was established for 1991-1993 to help poorer million Multilateral Fund was established for 1991-1993 to help poorer countries switch to more expensive, but less harmful substitutes. countries switch to more expensive, but less harmful substitutes. Replenished 5 other times; most recently 2003-2005 = U.S. $474. Replenished 5 other times; most recently 2003-2005 = U.S. $474.

The U.S. has chosen to use tradable permit systemThe U.S. has chosen to use tradable permit system EPA taxes the permits to soak up rents.EPA taxes the permits to soak up rents. Ozone depletion should reach worst point soon then ozone should return Ozone depletion should reach worst point soon then ozone should return

to normal by 2050.to normal by 2050.

Climate ChangeClimate Change

Global WarmingGlobal Warming Greenhouse gases absorb the long wavelength (infrared) Greenhouse gases absorb the long wavelength (infrared)

radiation from earth’s surface and atmosphere, trapping the radiation from earth’s surface and atmosphere, trapping the heat that would otherwise radiate into space.heat that would otherwise radiate into space.

Carbon dioxide is most abundant Carbon dioxide is most abundant butbut others such as CFCs, others such as CFCs, nitrous oxide, methane, and tropospheric ozone may be more nitrous oxide, methane, and tropospheric ozone may be more important in future.important in future.

Intergovernmental Panel on Climate Change (IPCC) (2001) Intergovernmental Panel on Climate Change (IPCC) (2001) projects a doubling of COprojects a doubling of CO22 by 2100 & a rise of surface air by 2100 & a rise of surface air temperature of between 1.4temperature of between 1.4o o and 5.8 and 5.8o o C. Sea level will rise. C. Sea level will rise. Most computer models now project at the lower end of the Most computer models now project at the lower end of the temperature rise. What has been impact of humans? See:temperature rise. What has been impact of humans? See:

http://www.ipcc.ch/ipccreports/tar/vol4/english/pdf/spm.pdf

Global WarmingGlobal Warming What are consequences of temperature increases of this What are consequences of temperature increases of this

magnitude?magnitude? Most studies focus on effects on agriculture.Most studies focus on effects on agriculture. Mendelsohn, Nordhaus, Shaw (1994) estimated that Mendelsohn, Nordhaus, Shaw (1994) estimated that

damages in U.S. would be small because farmers would damages in U.S. would be small because farmers would substitute crops.substitute crops.

Rosenzweig and Parry (1994) argue that developing Rosenzweig and Parry (1994) argue that developing countries may not be able to substitute as easily.countries may not be able to substitute as easily.

Other problems: Russia may benefit from higher Other problems: Russia may benefit from higher temperatures.temperatures.

Global Warming StrategiesGlobal Warming Strategies 1) Climatic engineering: Shoot particles into 1) Climatic engineering: Shoot particles into

atmosphereatmosphere 2) Adaptation: adjust to living in hotter conditions2) Adaptation: adjust to living in hotter conditions 3) Mitigation: increase planetary capacity to absorb 3) Mitigation: increase planetary capacity to absorb

greenhouse gasesgreenhouse gases 4) Prevention: reduce emissions through fossil fuel tax 4) Prevention: reduce emissions through fossil fuel tax

or other methods. Current gasoline taxes vary greatly or other methods. Current gasoline taxes vary greatly across countries. U.S. tax in 1991 - $0.36/gal.; $1.64-across countries. U.S. tax in 1991 - $0.36/gal.; $1.64-Germany; $1.91/Britain; $2.33 - France; $3.26 - Italy.Germany; $1.91/Britain; $2.33 - France; $3.26 - Italy.

Complementary StrategiesComplementary Strategies Prototype Carbon Fund (PCF): similar to Prototype Carbon Fund (PCF): similar to

mutual fund, receive pro rata share of mutual fund, receive pro rata share of emission reductions.emission reductions.

Global Environmental Facility (GEF): funds Global Environmental Facility (GEF): funds projects that have external benefits to other projects that have external benefits to other countries so that projects that can’t be countries so that projects that can’t be justified domestically (but can be globally justified domestically (but can be globally justified) receive additional funding.justified) receive additional funding.

The Case for Emissions TradingThe Case for Emissions Trading

Emissions trading is cost effective. Emissions trading is cost effective. – Reduction in GDP of about 0.2% to 2% in 2010 Reduction in GDP of about 0.2% to 2% in 2010

w/o trading b/w Annex B countriesw/o trading b/w Annex B countries– Reduction in GDP of about 0.1% to 1.1% in 2010 Reduction in GDP of about 0.1% to 1.1% in 2010

w/ trading b/w Annex B countriesw/ trading b/w Annex B countries

Copyright © 2009 Pearson Addison-Wesley. All rights reserved.17-25

Debate 17.1Debate 17.1

Controversies, timing of policy, creating incentives Controversies, timing of policy, creating incentives for participation in climate change agreementsfor participation in climate change agreements

Controversies:Controversies:– 1) monitoring and enforcement are necessary1) monitoring and enforcement are necessary– 2) Former Soviet countries have surplus of 2) Former Soviet countries have surplus of

permits due to weak GDP of 1990s. Lowers permits due to weak GDP of 1990s. Lowers permit prices; less pollution control neededpermit prices; less pollution control needed

– French Firm Cashes In Under U.N. Warming French Firm Cashes In Under U.N. Warming Program By CHARLES FORELLE Program By CHARLES FORELLE July 23, July 23, 2008; Page A1, Wall Street Journal2008; Page A1, Wall Street Journal

» Will earn $1 billion selling pollution creditsWill earn $1 billion selling pollution credits

Controversies, timing of policy, creating incentives Controversies, timing of policy, creating incentives for participation in climate change agreementsfor participation in climate change agreements

Timing of Policy Timing of Policy – Benefit cost analysis shows that some hedging Benefit cost analysis shows that some hedging

strategy is better than “wait and see” strategy. strategy is better than “wait and see” strategy. Creating incentives for participationCreating incentives for participation

– Must deal with public goods problemMust deal with public goods problem– Game theory is neededGame theory is needed– Issue linkage can be used to allow both parties to Issue linkage can be used to allow both parties to

winwin

The EndThe End