Power and Pollution

8/14/2019 Power and Pollution

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POWER & POLLUTIONA SUCCESSOR TO THE CLEAN AIR ACT

RESEARCH PAPER

PHILIP ADOLWA PAUS 8531
http://www.ucsusa.org/clean_energy/coalvswind/c02c.html##


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SUMMARY

Electrical power generation through coal fired plants accounts for 55% ofthe total electricity consumed in the United States. (DOE 2004) This processof electrical power generation also produces significant amounts of pollutionwhich result in both health and environmental damages to society. Thesecosts are not accounted for in the price of electricity.

In 2002, President George W. Bush proposed the Clear Skies Initiative(CSI). This legislative framework was intended to provide a platform forachieving significant health and environmental benefits through pollutionreduction and provide the energy sector with predictability in pollutionabatement costs and requirements. The initiatives outcomes would be betterhealth and environment, cheaper electricity, and a sustained diverse fuel mixin electricity production. (White House, 2002). The CSI is one of the pendinglegislations that attempt to replace the Clean Air Act Amendments of 1990,which are widely viewed by both the environmental community and theenergy industry as successful. The Clean Air Act introduced the use ofmarket based instruments in power plant pollution control.

The Clear Skies Initiative provides excellent legislative framework forenhanced market efficiency, that will minimize the legal challenges topollution regulation and agency action currently experienced, but theproposed legislation falls short on the pollution reduction targets proposed.

The pollution caps are set to be lower than the goals under the existing law.The role back in emission reduction targets will not be viewed favorably bythe environmental community. This challenge to the proposed lawsenvironmental benefits will hinder its chances of adoption.

This paper provides an analysis of the viability of Clear Skies Initiative as asuccessor to the. Clean Air Act Amendments of 1990. The analysis states theobjectives of CSI, describes the cap and trade market based mechanism andthe multi pollutant approach proposed in the CSI. The analysis also willhighlight the major deficiencies of the CSI, as put forward by its critics. Theanalysis provides a definition to the power plant pollution problem describingthe scope and impacts of power plant pollutants. The analysis proposesefficiency, cost effectiveness environmental performance, equitabledistribution and the political feasibility as evaluation criteria for CSI. CSI isevaluated against the existing legislative framework to determine if it will bean improvement in power plant pollution control.


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INTRODUCTION

Under current technology, electricity is critical to economic development,

security, education, health, entertainment and almost all other facets of life -as we know it today. While electricity powers economic growth, unintendedresults from the preferred means of power generation can have undesirableeffects to health and the environment. According to the Department ofEnergy more than 5000 coal-fired power plants are responsible for ensuringreliable and sufficient power supply. (DOE, 2005) These power plants emitsignificant amounts of air pollution: 67 percent of all sulfur dioxide (SO2)emissions, 40 percent of carbon dioxide, 37 percent of mercury (Hg)emissions and 25 percent of all nitrogen oxide (NOx) emissions. (EPA, 2004)

These pollutants significantly contribute to fine particle and ozone pollutionassociated with a variety of environmental problems, such as smog, acid rain,nitrogen deposition and visibility impairment. An American Cancer Society

study (Pope et al, 2002) has linked respiratory and cardiovascular mortality tothe fine particulate (PM25) levels.1 These pollutants have been associatedwith reduction in air quality, global warming, public health concerns andenvironmental and infrastructure degradation.

Coal provides a cheap source of energy. The U.S has a quarter of theworlds coal reserves and at current extraction and usage rates coal will lastfor centuries. The burning of fossil fuel is the predominant method of powergeneration in the U.S. Coal burning generates 55% of the electricity in theU.S. About 10% of electricity currently comes from natural gas, which pollutesthe air at far lower levels than coal. Oil provides only about 2% of electricityin the U.S.2 (DOE, 2004). The rest of the electricity demand is met mainly

through nuclear power generation and green alternatives like wind and solarpower. (DOE, 2004) The total costs including damage to the environment andhuman health are borne by society, but are not reflected in the cost ofelectricity. These costs are paid for in other ways: higher health insurancepremiums, long-term depletion of resources and infrastructure. Reducing theextent of theses external impacts or incorporating these external costs intothe price of electricity to give consumers accurate information on the truecosts of electricity is one of the most important challenges in creating anefficient market and sustainable energy future.

On 14 February 2002, President George W Bush proposed the Clear SkiesInitiative (CSI). This initiative is meant to provide a platform for achieving 70

percent cuts below year 2000 emission levels in power plants more quickly,and in a more cost-effective manner, than the current Clean Air Act programs.

1 An American Cancer Society study by Pope et al in 1995 established asignificant correlation between exposure to fine particulate matter at PM25with mortality. This study formed the basis for the mortality reductionbenefits under Clear Skies Act.2 See Energy Information Administration, Official Energy Statistics from the USGovernment available at http://www.eia.doe.gov/fuelelectric.html

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The Clean Air Act is widely viewed as successful by both the environmentalcommunity and the energy industry. The Environmental Protection Agency(EPA) and the White House describe CSI as by far, the most aggressiveaction ever proposed by any President to reduce emissions from powerplants The outcomes of the new proposal would be, improve air qualitythroughout the country, using a proven market-based approach that will save

American consumers millions of dollars, spur economic growth and preservea diverse fuel mix. This evaluation will use the impacts on market efficiency,cost effectiveness, environmental performance and political feasibility toevaluate this proposal against the existing legislation that this proposal seeksto replace.

BACKGROUND AND PROBLEM DEFINITION

The air we breathe contains many impurities that are produced throughindustrial, agricultural and transport processes. These impurities affecthuman health, damage fragile ecosystems, reduce visibility, and even

damage property. There is also evidence though disputed that theseanthropogenic additives to air have profound impacts on global climate.(Jones et al, 1986)

The earths atmosphere consists mostly of nitrogen (78%) and oxygen(21%), has always contained many trace chemicals and particles.3 Naturalprocesses have always had an impact on the composition of our atmosphere,volcanoes release large amounts of ash and sulfur dioxide into the air andlakes produce green-house gases such as methane and carbon dioxide4, windand other natural processes raise dust into the atmosphere, and even thenatural botanical and zoological growth processes emit small amounts ofchemicals into the atmosphere. (USGS, 2004)

But when the word pollution, is used, it generally applies to human-related emissions that degrade the environment or cause harm to humans.

These human activities include agricultural, industrial, commercial,transportation and residential processes. The common and most significantair pollutants include:

Mercury

Mercury moves through the environment as a result of both natural andhuman activates and the highest emitting source for anthropogenic mercuryis the burning of coal by electrical utilities. This group accounts for at least

3 See Introduction to the Atmosphere, Atmospheric compositionPhysicalgeography.net available athttp://www.physicalgeography.net/fundamentals/7a.html4 See U.S. Geological Survey Fact Sheet 002-97:What Are Volcano Hazards?Available at http://pubs.usgs.gov/fs/fs002-97/ , Last modified: October 13,2004

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40% of the human generated emissions of mercury in the U.S.5 (EPA, 2006)Typically, the air concentrations of mercury is low, but through deposition inwater and a process known as bioaccumulation in aquatic life, mercury canreach toxic levels. Human exposure to mercury primarily occurs thorougheating contaminated fish. Exposure to mercury contamination has beenassociated with neurological and developmental disorders ranging from

subtle loss of sensory or cognitive ability to convulsions and death. (USGS,2002)

Nitrogen oxide

Nitrogen oxides (NOx), are mixture of gases that contain nitrogen andoxygen in varying amounts. Nitrogen oxides are released to the air from theexhaust fumes of cars, the burning of coal, oil, or natural gas, and duringvarious industrial processes. The main pollution sources of NOx are transportemissions and electric utilities. According to the EPA, electrical utilitiesaccount for 22 percent of the NOx emissions. Negative impacts of NOx rangefrom health and environmental to visibility impairment causing accidents on

roads in large cities (smog). Smog has been associated with asthma inchildren.6 Individuals with extended outdoor activity susceptible negativeeffects such as damage to lung tissue and reduction in lung function. (ATSDR-CDC, 2002) Other impacts from ozone include damaged vegetation andreduced crop yields. NOx and sulfur dioxide react with other substances inthe air to form acids which fall to earth as acid rain. Acid rain causesdeterioration of cars, buildings and historical monuments; and causes lakesand streams to become acidic and unsuitable for many fish.7

Sulfur dioxide

Sulfur dioxide is a colorless gas, which is odorless in low concentrations,

but pungent at high levels.8 (ATSDR-CDC, 1998) On a global scale, most ofthe sulfur dioxide (SO2)is produced by natural sources, mainly volcanoes anddecaying organic material. This natural sulfur dioxide is mainly emitted highinto the atmosphere or far from populated centers; therefore concentration ofgas in ground level air is quite small. 9Sulfur is prevalent in many rawmaterials, including crude oil, coal, and ore that contains common metals.

5 See Environmental Protection Agency, Mercury, Basic Information availableat http://www.epa.gov/mercury/about.htm Last updated on Friday, March 3rd,2006

6 See LA Times Article by Miguel Bastillo; Smog harms childrens lungs for life.

Available at http://healthandcleanair.org/resources/latimesarticle.pdf7 See Clean the Air, The National Campaign Against Dirty Power, SulfurDioxide and the Environment. Available athttp://www.cleartheair.org/relatives/18780.pdf

8 See Agency for Toxic Substances and Disease Registry (ATSDR). 1998: U.S.Department of Health and Human Services, Public Health Service available athttp://www.atsdr.cdc.gov/toxprofiles/tp116.html

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http://www.epa.gov/mercury/about.htmhttp://healthandcleanair.org/resources/latimesarticle.pdfhttp://www.cleartheair.org/relatives/18780.pdfhttp://www.atsdr.cdc.gov/toxprofiles/tp116.htmlhttp://www.epa.gov/mercury/about.htmhttp://healthandcleanair.org/resources/latimesarticle.pdfhttp://www.cleartheair.org/relatives/18780.pdfhttp://www.atsdr.cdc.gov/toxprofiles/tp116.html


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Sulfurous gases are formed when fuel-containing sulfur, such as coal and oil,is burned, and when gasoline is extracted from oil or metals are extractedfrom ore. sulfur dioxide dissolves in water vapor to form acid, and interactswith other gases and particles in the air to form sulfates and other productsthat can be harmful to people and their environment. The mainanthropogenic source of sulfur dioxide in the United States of America is the

combustion of coal. Coal contains 1 to 9% sulfur, depending on thegeographic region from which it was mined. 10According to the EnvironmentalProtection Agency over 65% of sulfur dioxide released to the air, or more than13 million tons per year, comes from electric utilities, especially those thatburn coal. (EPA, 2003)

According to the Center for Disease Control (CDC), the major healthconcerns associated with exposure to high concentrations of sulfur dioxideinclude effects on breathing, respiratory illness, and aggravation of existingcardiovascular disease. Children, the elderly, and people with asthma,cardiovascular disease or chronic lung disease, are most vulnerable toadverse health effects linked with exposure to sulfur dioxide. (CDC Public

Health Statement, 2004)

Additionally, there are a varieties of environmental concerns associatedwith high concentrations of sulfur dioxide. Because sulfur dioxide, along withNOx, are the major components of acid rain it contributes to the acidificationof soils, lakes, and streams and the resulting impacts on soil and waterorganisms and ecosystems. Sulfur dioxide exposure to vegetation canincrease leaf injury, decrease plant growth, and yield, and decrease thenumber and variety of plant species in a given community.11 (EPA, 2006)

Particulate matter,

Not all air pollutants are gases. Particulate matter is a collective term usedfor very small solid and/or liquid particles found in the atmosphere. The EPAdefines Particle pollution as the term for a mixture of solid particles andliquid droplets found in the air. (EPA, 2006) One of the major characteristicsof particulate matter is particle size. Particles can range in size from 0.005 -500 micrometers or microns (um), which is equal to one-millionth (10 -6) of ameter. Particles less than 2.5 microns in diameter are known as "fine"particles; those larger than 2.5 microns are known as "coarse" particles.12

9 See U.S. Department of the Interior, U.S. Geological Survey, Menlo Park,California, USA http://volcanoes.usgs.gov/Hazards/What/VolGas/volgas.htmlContact: VHP WWW Team Last modification: 10 January 2006

10 See the US Department of Energy, Energy Information Administration, USCoal Reserves: An Update by heat and sulfur content., Feburary 2003.Available at http://tonto.eia.doe.gov/FTPROOT/coal/052992.pdf11 See Environmental Protection Agency, Sulfur dioxide, Basic Informationavailable at http://www.epa.gov/air/urbanair/so2/chf1.html Last updated on

Thursday, March 2nd, 200612 See Environmental Protection Agency, Fine Particulate Matter, Basicinformation: Available at http://www.epa.gov/air/particlepollution/basic.html

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http://volcanoes.usgs.gov/Hazards/What/VolGas/volgas.htmlmailto:[email protected]://tonto.eia.doe.gov/FTPROOT/coal/052992.pdfhttp://www.epa.gov/air/urbanair/so2/chf1.htmlhttp://www.epa.gov/air/particlepollution/basic.htmlhttp://volcanoes.usgs.gov/Hazards/What/VolGas/volgas.htmlmailto:[email protected]://tonto.eia.doe.gov/FTPROOT/coal/052992.pdfhttp://www.epa.gov/air/urbanair/so2/chf1.htmlhttp://www.epa.gov/air/particlepollution/basic.html


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Particulate matter impact both heath and visibility. Power productionsignificantly contributes to the production of both primary and secondaryparticles. As mentioned previously both NOx and SO2 play critical roles in thedevelopment of particulate matter and the study by America Cancer Societyestablished correlations between fine particulate pollution (less than 2.5microns) and mortality. (Pope, et al, 1995)

Carbon dioxide

The EPA originally viewed carbon dioxide as a product of "perfect"combustion, but now views CO2 as a pollution concern. Carbon dioxide doesnot directly impair human health, but it is a greenhouse gas that traps theearth's heat and contributes to the potential for global warming. (EPA, 2002)Most of these emissions, about 82%, are from burning fossil fuels to generateelectricity and power our cars.13 Rising global temperatures are expected toraise sea level, and change precipitation and other local climate conditions.Changing regional climate could alter forests, crop yields, and water supplies.It could also affect human health, animals, and many types of ecosystems.

Unfortunately, many of the potentially most important impacts can not bereliably projected for specific areas.14

Challenges to the Impacts of power plant pollution

A significant number of related, unintended negative impacts arising frompollution have been sited in the process of electricity generation using fossilfuels. The EPA tracks the emission sources and the amount of thesepollutants through established national emission monitoring and inventory.

Therefore the quantities of the pollution produces are not challenged. Thecommon challenge is on the impact of the pollution levels and placingmonetary value on these impacts. The energy industry contends that the

impact of these pollutants on health and environment has not beenscientifically established. The George W. Bush administration has madeattempts to uncouple carbon dioxide and global warming and challenge thescience behind global warming.15 (PBS, 2004) With no regulation for CO2 therehas been an increase in the quantity of CO2 emitted, according to the EPA theannual CO2 emissions from power plants increased by 9 percent nationwidefrom 1995 to 2003, with an increase at 59 percent for the nations dirtiestpower plants.16 (EPA, 2003) The EPA highlights the uncertainty relating tothe impact of green-house gases on the earths complex systems.

(Last updated on Thursday, March 2nd, 2006)13 See Environmental Protection Agency, In Brief; Greenhouse Gas Inventory.

Available athttp://yosemite.epa.gov/oar/globalwarming.nsf/UniqueKeyLookup/RAMR5CZKVE/$File/ghgbrochure.pdf14 See Environmental Protection Agency, Global Warming, Climate,Uncertainties. Available athttp://yosemite.epa.gov/oar/globalwarming.nsf/content/ClimateUncertainties.html Modified on Friday, January 7th, 200015 See PBS, Newshour: Environmental Reversal, March 14, 2004 Available athttp://www.pbs.org/newshour/bb/environment/jan-june01/co2_3-14.html

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http://yosemite.epa.gov/oar/globalwarming.nsf/UniqueKeyLookup/RAMR5CZKVE/$File/ghgbrochure.pdfhttp://yosemite.epa.gov/oar/globalwarming.nsf/UniqueKeyLookup/RAMR5CZKVE/$File/ghgbrochure.pdfhttp://yosemite.epa.gov/oar/globalwarming.nsf/content/ClimateUncertainties.htmlhttp://yosemite.epa.gov/oar/globalwarming.nsf/content/ClimateUncertainties.htmlhttp://www.pbs.org/newshour/bb/environment/jan-june01/co2_3-14.htmlhttp://yosemite.epa.gov/oar/globalwarming.nsf/UniqueKeyLookup/RAMR5CZKVE/$File/ghgbrochure.pdfhttp://yosemite.epa.gov/oar/globalwarming.nsf/UniqueKeyLookup/RAMR5CZKVE/$File/ghgbrochure.pdfhttp://yosemite.epa.gov/oar/globalwarming.nsf/content/ClimateUncertainties.htmlhttp://yosemite.epa.gov/oar/globalwarming.nsf/content/ClimateUncertainties.htmlhttp://www.pbs.org/newshour/bb/environment/jan-june01/co2_3-14.html


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Uncertainties in both the effects of air pollution and its valuation are aconstant issue in clean air regulation. Uncertainty comes into play intranslating emissions into ambient air quality in estimating the costs of theadverse effects on health, agriculture, and the environment. A secondchallenge is estimating the compliance costs incurred by the power plants inmeeting any standards legislated. Power plants have an incentive to

overstate the costs to comply with regulation reducing the perceived costeffectiveness of any regulatory action

GOALS AND CRITERIA

Success in pollution control within the energy industry can be measured infour ways. One is cost-effectiveness - does the policy facilitate attainment ofenvironmental standards at minimum abatement costs? The second is marketefficiency - does the policy internalize of resulting social costs of energy

production into the prevailing prices of electricity? The third being distributive does the policy unfairly distribute the environmental and health benefitswithin society or the compliance costs to the individual plants. Finally,environmental performance - does the policy facilitate acceptableenvironmental performance under current knowledge of environmental andhealth damages? Both the energy industry and the environmental communitywould provide ample challenge to any legislation that is viewed to eitherweak on environmental performance or involve high compliance costs. Theseare the criteria used in the paper to compare the two power plant pollutioncontrol alternatives.

POLICY ALTERNATIVES

Prior to the Acid Rain Programs of 1990 under the amendments of Title IVof the Clean Air Act, the regulations for electric power plants were exclusivelyprescriptive in nature, employing first an emissions-rate standard (prohibitingeach regulated generating unit from exceeding a certain uniform emissionsrate) and then a technology standard (mandating that each unit remove acertain percentage of pollution from emissions, essentially requiring an end-of-pipe abatement technology). Experience with these programs ofprescriptive regulation highlighted the limits or inability that regulators have

to prescribe source specific emission reduction. The information requirementsfor this approach are restrictive; the regulating body would need to determinethe appropriate pollution levels, the best technology to employ to reduce thepollution in addition to monitoring the compliance of each pollution source to

16 See EPA, Inventory of Greenhouse gases emissions and sinks 1990 2003;available athttp://yosemite.epa.gov/oar/globalwarming.nsf/UniqueKeyLookup/RAMR69V528/$File/05executivesummary.pdf

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ensure that these requirements are met. Experience with approach wasriddled will legislative challenges to agency action. (Winters, 2002)

Market Based Instruments

Acid Rain Program initiated an experiment in incentive-basedenvironmental regulation by tradable allowances for emission of sulfurdioxide by electric generating facilities. Under Acid Rain Program, the EPAdistributes allowances (permits) equal to the cap amount while the sources(that is the power plants) have flexibility to choose how to meet their limits by reducing their own emissions or purchasing allowances from othersources. Electricity generators must continually monitor and report theiremissions, and must have sufficient allowances to cover their emissions orsignificant automatic penalties will apply for noncompliance. The number of

allowances that are distributed are reduced over time.17 Market-basedinstruments are advocated because of their presumed lower economic cost incomparison with prescriptive regulatory instruments. (Ellerman, 2003) Theseallowances can be traded freely therefore providing an incentive forinnovation in the market. Power plants that cannot reduce emissions have theflexibility in this market framework to buy additional allowances withoutundermining air quality. Incentives for electricity generators to reduce theiremissions further and more quickly than the law requires through earlyimplementation and over-compliance are created through the bankingaspects of the trading program, where power plants will do more now as aninvestment for the future (Winters. T, 2002). There are a variety ofmechanisms for compliance under Acid Rain Program in addition to allowance

trading including intra-firm reallocation of emission allowances, fuel switchingand/or blending, installing scrubbers (flue gas de-sulfurization), retiringplants, re-powering plants, energy conservation, reduced utilization andsubstitution among facilities. (EPA, 2006) Therefore, an active allowancemarket was not a necessary condition for cost effectiveness.

Success of Clean Air Act Amendments

The Acid Rain program has been overwhelmingly successful from a marketefficiency, cost effectiveness and environmental performance perspective: avigorous trade in allowances, widespread benefits, and lower-than expectedcompliance costs. The pollution hotspots expected due to uneven distribution

in pollution reduction have not been evident therefore challenging the notionthat MBI will result in the inequitable distribution of damages. Four featuresbest described environmental effectiveness of the Acid Rain Program. A largereduction in emissions was achieved relatively quickly. Second the scheduleof emission reduction was accelerated significantly because of banking, and

17 See, Environmental Protection Agency, Air Markets; Acid Rain Programavailable at http://www.epa.gov/airmarkets/arp/overview.html Last updatedon Thursday, March 2nd, 2006

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third, no exceptions or relaxation from the programs requirements weregranted. Fourth and finally the pollution hot-spots resulting from aconcentration of allowances purchased into a region as a result from emissiontrading that were feared did not appear. (EPA, 2004), (Ellerman, 2003)

One of the four aspects of environmental performance noted above can be

attributed to a specific design feature in Acid Rain Program. The overcompliance can be attributed to the banking provision of the amendments.

The remaining environment features-quick implementation, 100% complianceand the absence of hot spots reflect a more fundamental characteristic of theprogram namely a flexible decentralized property rights system. (Ellerman etal., 2000)

Critics of MBI argue that adoption of the incentive-based regulation suchas in the Acid Rain Program reflect a public policy experiment in aninappropriate domain - the environment. The challenges of valuingenvironmental and health benefits, the impact of uncertainty are viewed bythe environmental community as sufficient reasons to minimize pollution to

its lowest minimum possible level. The result of the cap-and-trade programunder Title IV suggests that this form of MBI is more environmentally effectivethan the prescriptive regulation is in addition to being more economicallyefficient. (EPA, 2003)

The Clear Skies Act as a Successor to the Clean Air Act

Clear Skies Initiative is meant to provide a platform for achieving 70percent cuts below year 2000 emission levels in power plants more quickly,and in a more cost-effective manner, than the current Clean Air Act programs.

The Environmental Protection Agency (EPA) and the White House describe CSIas by far, the most aggressive action ever proposed by any President to

reduce emissions from power plants. The benefits of the new proposal wouldbe, improve air quality throughout the country, using a proven market-basedapproach that will save American consumers millions of dollars, spureconomic growth and preserve a diverse fuel mix. The EPA describes fourmain approaches to achieving these objectives through CSI:

First establishing federally enforceable emissions limits (or "caps") forthree pollutants NOx, SO2 and Mercury. CSI NOx and SO2 requirementsaffect all fossil fuel-fired electric generators greater than 25 megawatts thatsell electricity. Mercury requirements affect only the subset of these unitsthat are coal-fired. The caps will be reduced in two phases by 2018. Thesecond phase reduction in 2018 will be subject to review for new scientific

technologies and cost information. Two trading zones have beenestablished based on the reduction needs. (EPA, 2003)

Secondly, a key goal of the proposed multi-pollutant legislation is toimprove on the current regulatory framework by giving industry greaterregulatory predictability and certainty about compliance requirements. Byadopting a, multi-pollutant approach as opposed to current law which tendsto address each environmental problem independently. The national

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program would take advantage of the benefits that would result fromcontrolling multiple pollutants at the same time. Whereas in the past eachpollutant was addressed through a separate regulatory program. (EPA,2003)

Thirdly, the EPA will apply the Cap and Trade mechanism used successfully

in the Clean Air Act programs. In the Acid Rain program, this approachproduced near perfect compliance (99%), early implementation and hugecost saving running up to 75% below the projected cost. The EPA distributesallowances equal to the cap amount while the sources (that is the powerplants) have flexibility to choose how to meet their limits by reducingtheir own emissions or purchasing allowances from other sources. (EPA,2003)

Lastly by setting firm caps while offering flexibility in how utilities canmeet those caps, the CSI would preserve a diverse fuel mix, more soenabling continued use of abundant domestic fuel sources coal.

Therefore providing reasonable prices energy and supporting economicgrowth. The firm caps also provide adequate lead time creating apredictable climate for long term planning and capital investment in powergeneration. (EPA, 2003)

The main criticisms of CSI focuses on the move to end the distinctionbetween old and new sources of emissions found in New Source Review andthe level of the caps placed. The existing law holds plants built after 1970had to have the best emission control technology available at the time theywere built, and old plants that were substantially upgraded would have tomeet the same standard. The goal in 1970 was that large future reductions inemissions would be made as old plants were retired and replaced by newplants. (Smock R., 2002) But two problems hindered implementation. Existingplants increased in value due to more stringent requirements on new plants.

The difficulty of setting new plants has made old plants less likely to bereplaced, coupled with dramatic technological advances have reducedmaintenance costs and made it possible to extend the life of old plants.Determining when an updated old source should have to meet new sourcestandards has also proved difficult. NSR mechanism, reviews theexpenditures on existing plants to see whether a plant has crossed the linebetween old and new. The lack of clarity on this distinction discourages powerplant owners from improving existing units for fear of triggering the newsource requirements. It has also led to lengthy litigation over what is and isn't"new." (Winters T, 2002).

The emission reduction targets set by the Clear Skies Initiative are far lessaggressive if compared to the mandates found in the current Clean Air Act.Analysis of reductions to SO2, NOx and mercury, by the Clear The Air indicatethat enforcing the Clean Air Act requirements would reduce pollutionemissions more quickly than the cap and trade plan in the Clear Skieslegislation. Current law requires that power plants reduce mercury, sulfur andnitrogen no later than 2010. Clear Skies Initiative sets new emission targetsfor pollutants, allowing five times more mercury emissions, one and a half

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times more sulfur dioxide emissions and hundreds of thousands more tons ofthe smog-forming nitrogen oxides than allowed under current law andextends the period for compliance to 2018. In eliminating the NSR the ClearSkies Legislation would allow an extra decade for the more than 400grandfathered power plants built before the Clean Air Act, to be retrofittedwith pollution controls technologies. (NRDC, 2004), (Winters, 2002)

Pollutant Cap comparison of the Clear Skies Act against theexisting programs under the Clean Air Act 18

Phase

NitrogenOxides

Sulfur Dioxide Mercury

Clean AirAct (CAA)

Existing

Programs

1.25 million toncap by 2010

2 million ton capby 2012

5 tons per yearby 2008

Clear SkiesAct (CSI)

Two stepApproach

1 2.1 millionton cap by 2008

4,5 million toncap by 2010

26 tons per yearby 2008

2 1.7 million tonsby 2018

3 million ton capby 2018

15 ton by 2018

PollutionIncreaseallowed byCSI over CAA

1 850,000 tons 2.5 million ton 21 tons

2 450,000tons

1 million 10 tons

Percentage

increase ofCSI over CAA

1 68% 125% 420%

2 36% 50% 200%

Delay inachieving theCAA levelsallowed byCSI

Up to 8 years Up to 6 years Up to 10 years

Courtesy of the Clear the Air, 2003

18 Analysis by Clear the Air A national public education campaign to combat globalwarming available at http://www.cleartheair.org/relatives/20340.pdf

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COMPARATIVE ANALYSIS MATRIX

POLICY ALTERNATIVES

Goals Impact Category Clean Air Act (Currentpolicy)

Clear Skies Act(Proposed)

Efficiency Property Rights Good

Provides a market forSO2 but hasprescriptive regulationfor NOx and Mercury

Excellent improvement

on the status quoAssigns property rightsand creates a market forNOx and Mercury

Maintains the existingSO2 market

Ease ofEnforcement

Medium Processriddles with legalchallenges againstagency action

Excellent power plantsown the right to pollutebased on permits andthe NSR requirementsslackened

Flexibility Medium Prescriptivecomponent maintainedin the control of NOx

and Mercury

Excellent - The emittersare allowed varyingpollution rates based on

the Cap established thetechnology used toabate pollution is left tothe emitters

Cost

Effectiveness Abatement Costs Medium - prescriptive

regulation will reducethe incentive forinnovation and willmaintain higherabatement cost.

Low and determined bymarket mechanisms

Environme

ntal

Performance Emission

reductionHigh - Law has beensuccessful in reducingall pollutants with theexception of CO2 whichis not regulated

Low- Caps set lowerthan those that wouldbe achieved underexisting law

Equitable

Distribution Pollution

HotspotsNo evidence of pollutionhotspots has occurredwith this legislation.

Possibility of Mercuryhot spots in plants witholder technologyexempted from the NSR

PoliticalFe

asibility Likelihood for

successfuladoption

High this is theexisting law

Medium - With thepollution cap set atlower levels than those

of the existing law thisproposal will face asteep challenge fromthe environmentalcommunity

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RECOMMENDATION AND CONCLUSION

The multi-pollutant approach and expansion of the Cap and Trade to

include NOx and Mercury under the Clear Skies Initiative provides a betterlegislative platform to achieve market efficiency, cost effectiveness and theenvironmental performance required, while avoiding the reliance on courtsfor resolution. Once the property rights for ambient air are assigned throughthe permits and rules for the rights to pollute are established through capsand a permit market is established, then market based decisions will pricethe right to pollute.

The Clear Skies Initiative maintains the status quo and signals the GeorgeW Bush Administrations approach to emission control. The proposed lawprovides greater flexibility to the energy industry in controlling pollution in acost effective way. There is little for the environmental community to support,

knowing that the elements of enforcement under the New Source Review willbe taken from the EPA. A promise to go beyond the current requirements withthe reductions in Phase Two by 2018 is a distant objective of little currentvalue. This is particularly true since many of the original deadlines for the1990 Clean Air Act have already passed by. (Winters T, 2002) Waiting another20 years to achieve the new objective is unlikely to be interpreted as themost aggressive by the environmental community.

Adjusting the caps to reflect more aggressive reduction in pollutionwould move closer to accounting for the existing social costs or reduceenvironmental and health damages. In its current state the Clear Skies Actwould be a step back from the Clean Air Act in terms of environmental

performance. The analysis recommends an attempt to amend the Clear SkiesAct to reflect the more aggressive reductions. In the absence on theseadjustments, adoption of this excellent framework that will have significantimpact on cost effectiveness and efficiency will be an uphill task due to itsweak environmental performance.

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REFERENCES

1. Electric Power Annual 2004: USA Department of Energy, November

2005 http://www.eia.doe.gov/cneaf/electricity/epa/epa_sum.html

2. Technical Addendum: Program elements in the Clear Skies Act of 2003,U.S. EPA, July 2003

3. Pope CA, Dockery DW. Health Effects of Particulate Air pollution: Timefor Reassessment, Environ Health Perspective 1995; 103: 472 480

4. Jones, P.D., Wigley, T.M.L. & Wright, P.B. Global temperature variationsbetween 1861 and 1984; Nature 322, 430434 (1986)

5. Office of the Press Secretary, President Announces Clear Skies &

Global Climate Change Initiatives, Feb 2002http://www.whitehouse.gov/news/releases/2002/02/clearskies.html

6. Ellerman, A. Denny. 2003. Are cap-and-trade programs moreenvironmentally effective than conventional regulation? Unpublishedmanuscript obtained from the MIT Center for Energy andEnvironmental Policy Research website.http://web.mit.edu/ceepr/www/2003-015.pdf

7. Winters Tobey, Clear Skies Initiative: New beginning or Bait and Switch,The Electricity Journal, July 2002 Vol. 15 Issue 6, page 56-63

8. Smock. Robert, Coal Revival requires lower emission caps, PowerEngineering Aug, 2002 Vol. 106 Issue 8

9. Clean Air and the Politics of Coal. By: John, Dewitt; Paddock, Lee. Issuesin Science & Technology, Winter2003/2004, Vol. 20 Issue 2, p63

10.Center for Communicable Diseases ToxFQA for Nitrogen Oxides,Agency for Toxic Substances and Disease Registry (ATSDR), Lastupdated on April 2002 http://www.atsdr.cdc.gov/tfacts175.html

11. Center for Disease Control, Agency for Toxic Substances DiseaseRegistry Public Health Statement for Sulfur Dioxide Last updated on

November 22, 2004http://www.atsdr.cdc.gov/toxprofiles/phs116.html

12.Ellerman, A. Denny. 2003. Are cap-and-trade programs moreenvironmentally effective than conventional regulation? Unpublishedmanuscript obtained from the MIT Center for Energy andEnvironmental Policy Research website.http://web.mit.edu/ceepr/www/2003-015.pdf

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13.See, Environmental Protection Agency, Air Markets; Acid Rain Programavailable at http://www.epa.gov/airmarkets/arp/overview.html Lastupdated on Thursday, March 2nd, 2006

14. Clean Air Markets: Acid Rain U.S. EPA, Last updated on Wednesday,September 22nd, 2004 URL: http://www.epa.gov/acidrain/index.html

15. Office of the Press Secretary, President Announces Clear Skies &Global Climate Change Initiatives, Feb 2002

http://www.whitehouse.gov/news/releases/2002/02/clearskies.html

16. Krewski D, Burnett R, Jerrett M, Pope CA, Rainham D, Calle EE, ThurstonG, Thun MJ. Mortality and long-term exposure to ambient air pollution:ongoing analyses based on the American Cancer Society cohort. J

Toxicol Environ Health 2005

17. US Department of Interior, US Geological Survey, Mercury in the

environment fact sheet 146-00http://www.usgs.gov/themes/factsheet/146-00/index.html Page LastModified: 26-Sep-2002

18. Agency for Toxic Substances and Disease Registry (ATSDR). 1998: U.S.Department of Health and Human Services, Public Health Service

http://www.atsdr.cdc.gov/toxprofiles/tp116.html

19. Clear the Air, Comparison of Bush administrations Clear Skies Power Plant Initiative with Existing Clean Air Act programs, Available at:

http://www.cleartheair.org/relatives/20340.pdf

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