Slide 1Slide 2Slide 3Slide 4Slide 5Slide 6Slide 7Slide 8Slide 9Slide 10Acid Deposition (Acid Rain)Slide 12Slide 13Slide 14Slide 15Slide 16Slide 17Slide 18Marketable Permits: AllowancesSlide 20Acid Rain ProgramEPA Allowance AuctionsSlide 23Slide 24Slide 25Slide 26SO2 Emissions under the Acid Rain ProgramSO2 Emissions and the Allowance BankComparison of Ambient Sulfur Dioxide Concentrations in the Eastern United States from CASTNet Monitoring DataSlide 30AGEC/FNR 406 LECTURE 19Acid Rain Name derives from a chemical reaction between SO2 (sulfur dioxide)NO2 (nitrogen dioxide)and H2O (water)Reaction leads to...Creation of sulfuric and nitric acid,which fall in the form of acidified rain(or snow or sleet).There are actually two forms of acid deposition:1. wet deposition2. dry depositionhttp://www.epa.gov/airtrends/sulfur.htmlhttp://www.epa.gov/acidrain/what/index.htmlElectric power generation that relies on burning fossil fuels like coal:2/3 of sulfur dioxide emissions1/4 of nitrogen oxides emissionsSourcesBoth natural and anthropogenic sources(90-95% man-made)•Rain is naturally a bit acidic (pH 5.6) due to atmospheric CO2.•U.S. - Electricity generating plants burning high-sulfur content coal and oil•Canada - Ore smelters•Europe - ElectricityUS Sourceshttp://www.state.in.us/idem/programs/air/emissionreporting/emissionsdata/North America (1998 data)SO2 US: 17.7 million MT(67% from elec utilities)Canada: 2.7million MT(74% from industry)About 4 million MT of SO2 crosses the border annually.http://www.epa.gov/air/emissions/so2.htmAcid Deposition (Acid Rain)•Regional Pollutant–Effects felt over a broad geographic area.–Location important: Effects felt downwind of source.•Transboundary pollutant–Emitted in one country and transported across a national border to another country.U.S. sulfur dioxide emissions responsible for 50-75% of acid deposition over most of eastern Canada.Canada sulfur dioxide emissions responsible for < 5% of acid deposition in the U.S.Acid rain impacts 1. Aquatic systems (-) 2. Forests (-) 3. Human health (-) 4. Visibility (-) 5. Agriculture (- /+) 6. Building materials (-)Critical loadThe total amount of acid deposition that can be received without damage to an ecosystem.Aquatic plants: pH 7.0-9.2Freshwater shrimp: pH 6Bottom-dwelling bacteria: pH 5.5Fish: pH 4.5Frogs and insects: pH 4.54.755.005.255.505.756.001940 1950 1960 1970 1980 1990YearpHBig MooseUpper Wallface Example: NY state lakesAcidification of lakes and streams reduces value of recreational fishing.Example continued$250 50TravelCost P = 250 -5Q 0Number of visits 0Damage = Loss in consumer surplus.$200P = 200 -5Q 40Damage and cost assessment Main issues:1. Market and non-market effects2. Chemical synergies + metals3. “Common metric” problem Measurement and quantification of MAC is difficult due to interdependencies. Who benefits? Who should pay?Actual policy in U.S. 1970-1990- uncertainty prevailed- Reagan administration stalled- EPA regulations focused on local effectswhich may have exacerbated problem 1990-present- Clean Air Act: marketable permits (1990)- NOXexcluded, 1-1 trading ignores location- SO2 falling but NO2 increasingWhy so long?Political concern regarding job lossesin coal-producing states (IN, IL, MI, OH)Local losses in high-sulfur coal stateswould be balanced by gains in low-sulfurcoal statesCosts of electricity would riseMarketable Permits: Allowances•Emission standard set and number of permits determined.•Permits issued to polluters based on some allocation system.•Polluters allowed to trade permits.•Market should develop…Why does trading work? 1. If firm can cleanup at a price lower than the permit price, it will.•Low MAC firms sell permits2. If cleanup is costly then a firm will choose to buy a permit•High MAC firms buy permits 3. Anyone who wants to can buy apermit.Acid Rain Program•Allowances allocated each year – one allowance allows utility/source to emit one ton of SO2.–Phase I: Allowances to 110 highest emitting coal-fired power plants (>100 megawatts)–Phase II: All power plants > 25 megawatts must participate. •Sources that exceed their allowances fined ($2,000/ton) and allowances reduced by the excess the next year.•Compliance has been 100% thus far.EPA Allowance Auctions•Allowances offered at auctions–1998-99 Spot auction: 150,000 allowances.–1998-99 Advance auction: 125,000 allowances–2000 and after: 125,000 for each auction.•These allowances can be bought and sold once purchased.•Allowances sold starting with the highest bid and continuing until allowances sold or bids exhausted.Experience with trading•# of permits traded has been rising•market clearing price has been increasinghttp://www.epa.gov/airmarkt/trading/auction.htmlHave SO2 emission levels fallen? Eastern Canada (regulation)by 1999 emissions had fallen 58%from 1980 levelUnited States (regulation + trading)by late 90s emission had fallen 39% from 1970 levelSO2 Emissions under the Acid Rain ProgramSources have started using banked allowances.Sources have started using banked allowances.SO2 Emissions and the Allowance BankBanked allowancesComparison of Ambient Sulfur Dioxide Concentrations in the Eastern United States from CASTNet Monitoring