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Ch. 17 Regional and Global Air Pollutants: Acid Rain and Atmospheric Modification Regional Pollutants Regional pollutants cause damage significant distances away from source. Some substances can be both local and regional pollutants: sulfur oxides, nitrogen oxides, and ozone. – e.g. sulfur emissions (acid rain) have been know to travel 200-600 miles and can be transformed into sulfuric and nitric acids – e.g. nitrogen oxides and volatile organic compounds can combine in presence of sunlight to form ozone. Acid Rain Acid rain is misnomer: actually acidic substances can be deposited as dry particles Precipitation is normally mildly acidic, (around pH of 5.0). Remember pH (power of Hydrogen) is a log (base 10) scale: below 7.0 is acid and above 7.0 is alkaline. Industrialized areas often receive rain with pH below 5.0 (east U.S. averages 4.4 pH). Wheeling, West Virginia once received acid rain with pH of 1.5. (Car battery is 1.0 pH.) Evidence clearly shows that anthropogenic sources are the primary cause. National Acid Rain Precipitation Assessment Program (1980 10 yr. study funded by Congress) : Findings 1) 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 Florida are acidified. 3) in many national parks visibility is reduced due to SO2 (50%-60% in East Shenandoah and Great Smoky Mountain National Parks) 4) No significant effect on crop growth at 10 times current acidity levels. 5) hurts red spruce at eastern mountain tops 6) can increase rate of deterioration of galvanized steel, bronze, carbonate stone, etc. Acid Rain (cont.) U.S. findings were less dire than expected. Sweden has 4000 acidified lakes. 13,000 sq. km of lakes in Norway have no fish. Germany, Scotland & Canada have problems. In early days, the motto was “dilution is the solution.” Taller smokestacks were built. National Coal Model (1986) analyzes the economic and political effects of various strategies designed to achieve reductions of SO2 from 8 to 12 million tons below 1980 levels. First, we will compare CAC to emissions charges Second, we will consider political issues. National Coal Model CAC strategy requires each state to reduce their share of “excess emissions” e.g. 8, 10, 12 million tons. Emission charge is $600 per ton, figured to reduce emissions about 10 million tons. Findings: – 1) MC of additional control rises rapidly, particularly after 10 million tons. – 2) CAC costs more ($360/ton) vs. emission charge strategy ($327/ton) – 3) magnitude of cost effectiveness is not large in this particular context. National Coal Model Total program Annual Cost Key state Cost cost to utilities employ. change effectiveness Strategy ($ billions) ($billions) (# of jobs lost) ($/ton) -------------------------------------------------------------------------------------------------8 million ton $20.4 $1.9 14,100 $270 10 million ton $34.5 $3.2 21,900 $360 12 million ton $93.6 $8.8 13,400 $779 emission charge $37.5 $7.7 17,900 $327 Coal and Politics -- don’t mix! It took until 1990 to enact acid rain legislation because of politics -- many coal jobs in many states. Coal switching is a cost saving strategy -switch to low sulfur to reduce emissions But Illinois, Indiana, Ohio and Pennsylvania are high-sulfur states. Largest electricity rate increases would occur in Midwestern and Appalachian states that have largest excess emissions, but their rates would still be below average for U.S. Coal and Politics -- don’t mix! Firms don’t like emissions charges ($7.7b) because they cost more than CAC( $3.2b) Emission permit program can achieve same cost effectiveness and reduce cost to utilities. They are traded on Chicago Board of Trade and individually. See Ex. 17.2. The Sulfur Allowance Program “Cap and trade” program was adopted as part of the Clean Air Act Amendment of 1990. Substantial change from previous CAC approach. Anyone can buy the allowance. Environmental groups have retired them. Student organizations have. By 2005 reduced SO2 by 41% from 1980 levels. NY, PA, WI, MI, WV ¼ less surface water was acidic VA, New England no change; but there were health benefits Ellerman et al. (2000) finds Phase I cost savings of from 33% to 67% over non trading alternatives. Primarily due to switching to low sulfur coal, falling prices of low-sulfur coal (lower rail costs) and lower costs of scrubbers. It is politically difficult under traditional system to get MC of control equal. Some utilities would be forced to reduce more. But allowance trading program voluntarily solves this problem. Global Pollutants: Ozone Depletion Ozone Depletion In troposphere (closest to earth) ozone O3 is pollutant. In stratosphere (just above troposphere) ozone shields us from ultraviolet rays. Mnemonic tool: layers of the atmosphere (lowest to highest) That Should Make It Easy: (troposphere, stratosphere, mesosphere, ionosphere, exosphere) Cholorofluorocarbons (CFCs) may deplete the ozone shield in a complicated chemical process. CFCs have been used in cushioning, packaging, insulating foams, food freezing, industrial cleaning of metals, air conditioning. Major known effect of increased ultraviolet radiation is increase in nonmelanoma skin cancer. Other effects are possible. Ozone Depletion On June 30, 1978, U.S. EPA banned the manufacture & sale of “fully halogenated chlorofluoroalkane” for aerosol propellant uses subject to Toxic Substances Control Act. But worldwide CFC-11 and CFC-12 continue to grow Rand Corporation studied the costs of controlling nonaerosol applications of CFCs. – 3 policies were considered for a 10 year period » 1) emission standards forcing use of specific technologies » 2) constant emissions charge of $0.50 (real dollars) per pound emitted » 3) marketable permit system – conclusions: permit system produces same amount of reduction as mandatory controls at about one-half cost Table 17.2 Comparisons of Alternative Policies Having Similar Cumulative Emissions Reductions Emissions reduction Total compliance costs (millions of permit pounds) (millions of 1976 dollars) Cumulative Cumulative a Policy design 1980 1990 1980-1990 1980 1990 1980-1990 Mandatory controls 54.4 102.5 812.3 20.9 37.0 185.3 Economic 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 94.7 a Present value of annual compliance costs, discounted at 11%. b Based on a constant tax rate of $0.50 from 1980 through 1990 (in 1976$). c Based 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 Depletion Transfer costs can be enormous under emission charge program, as much as 15 times as large as expenditures incurred in controlling emissions. In September 1988 24 nations signed the Montreal Protocol to completely phaseout halons & CFCs by end of 20th century. A $240 million Multilateral Fund was established for 1991-1993 to help poorer countries switch to more expensive, but less harmful substitutes. Replenished 5 other times; most recently 2003-2005 = U.S. $474. The U.S. has chosen to use tradable permit system EPA taxes the permits to soak up rents. Ozone depletion should reach worst point soon then Climate Change Global Warming Greenhouse gases absorb the long wavelength (infrared) radiation from earth’s surface and atmosphere, trapping the heat that would otherwise radiate into space. Carbon dioxide is most abundant but others such as CFCs, nitrous oxide, methane, and tropospheric ozone may be more important in future. Intergovernmental Panel on Climate Change (IPCC) (2001) projects a doubling of CO2 by 2100 & a rise of surface air temperature of between 1.4o and 5.8o C. Sea level will rise. Most computer models now project at the lower end of the temperature rise. What has been impact of humans? See: http://www.ipcc.ch/ipccreports/tar/vol4/english/pdf/ spm.pdf Global Warming What are consequences of temperature increases of this magnitude? Most studies focus on effects on agriculture. Mendelsohn, Nordhaus, Shaw (1994) estimated that damages in U.S. would be small because farmers would substitute crops. Rosenzweig and Parry (1994) argue that developing countries may not be able to substitute as easily. Other problems: Russia may benefit from higher temperatures. Global Warming Strategies 1) Climatic engineering: Shoot particles into atmosphere 2) Adaptation: adjust to living in hotter conditions 3) Mitigation: increase planetary capacity to absorb greenhouse gases 4) Prevention: reduce emissions through fossil fuel tax or other methods. Current gasoline taxes vary greatly across countries. U.S. tax in 1991 - $0.36/gal.; $1.64-Germany; $1.91/Britain; $2.33 - France; $3.26 - Italy. Complementary Strategies Prototype Carbon Fund (PCF): similar to mutual fund, receive pro rata share of emission reductions. Global Environmental Facility (GEF): funds projects that have external benefits to other countries so that projects that can’t be justified domestically (but can be globally justified) receive additional funding. The Case for Emissions Trading Emissions trading is cost effective. – Reduction in GDP of about 0.2% to 2% in 2010 w/o trading b/w Annex B countries – Reduction in GDP of about 0.1% to 1.1% in 2010 w/ trading b/w Annex B countries Debate 17.1 Copyright © 2009 Pearson Addison-Wesley. All rights 17-25 reserved. Controversies, timing of policy, creating incentives for participation in climate change agreements Controversies: – 1) monitoring and enforcement are necessary – 2) Former Soviet countries have surplus of permits due to weak GDP of 1990s. Lowers permit prices; less pollution control needed – French Firm Cashes In Under U.N. Warming Program By CHARLES FORELLE July 23, 2008; Page A1, Wall Street Journal » Will earn $1 billion selling pollution credits Controversies, timing of policy, creating incentives for participation in climate change agreements Timing of Policy – Benefit cost analysis shows that some hedging strategy is better than “wait and see” strategy. Creating incentives for participation – Must deal with public goods problem – Game theory is needed – Issue linkage can be used to allow both parties to win The End