Transcript Controlling Point & Nonpoint Sources

Chapter 15
Improving Water Quality:
Controlling Point and Nonpoint Sources
1.Point Source Controls
Technology-Based Effluent Limits
• End-of-pipe limits that differ by various groups,
such as direct dischargers and indirect dischargers
– Within any group, the limits are applied
______________
• For direct industrial dischargers, the standards are
industry-specific and vary by facility age (new
versus existing) and type of contaminant released
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Direct dischargers release
pollution directly to surface
waters.
Indirect dischargers release
effluents to publicly owned
treatment works which treat
wastewaters through sewer
systems.
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• Limits are based on technological capability, but
polluters can choose the method to achieve them
– Therefore, the limits are ______________________
____________
– Policy intent is to lower limits over time until the
________ discharge goal is met
• Limits are conveyed through a permit system called the
National Pollutant Discharge Elimination System
(NPDES)
– NPDES prohibits any discharges into navigable waters
without a permit
– Each permit states what the effluent limits are and
the monitoring and reporting requirements
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Individual homes that are
connected to a municipal system,
use a septic system, or do not
have a surface discharge do not
need an NPDES permit; however,
industrial, municipal, and other
facilities must obtain permits if
their discharges go directly to
surface waters.
FYI
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2. Analysis of the Effluent Limits:
Major Problems
Imprecise Statutory Definitions
• Limits are based on what is technologically achievable
instead of what is needed to achieve water quality
• As a result, _______________________ (TMDLs) had to
be established for all polluting sources if water quality
goals were not being met, even if the technology-based
limits were being satisfied
– TMDLs are the maximum amount of pollution a water
body can receive without violating the standards
Arizona currently has 102 waterbodies on the 303(d) list
(impaired water identification).
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Cost-Ineffectiveness
FYI
• Cost-effectiveness requires that firms abate to the point
where their associated MACs are equal
• Since the limits are applied uniformly, this criterion
would not be achieved unless firms were identical
• Empirical evidence suggests that the command-andcontrol (CAC) approach used is more costly than using
economic incentives
– Various studies estimate the ratio CAC policy cost to
that of a least-cost, market-based approach
• O’Neil (1980):
2.29 to1
• Faeth (2000):
5.9 to 1
• Johnson (1967):
3.13 to 1
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3. Nonpoint Source Controls
Nonpoint Source Management Program:
Water Quality Act of 1987
•
•
3-stage, _________________________ plan
1. Report on waters not achieving standards
2. Develop ___________________________(BMP)
to reduce pollution
• BMP: strategies other than effluent limits
3. Implement the programs
Federal grants are available to support plans
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Examples of BMP in agriculture include
practices for the management of pests;
vegetative and tillage practices, such as
contour farming, cropping sequence…
Contour farming is the farming practice of
plowing across a slope following its elevation
contour lines. The rows formed slow water
run-off during rainstorms to prevent soil
erosion and allow the water time to settle into
the soil.
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4. Analysis of Nonpoint Source Controls
• Advantages of state control
– better knowledge of local water bodies,
precipitation, runoff, etc.
– nonpoint pollution is linked to land use practices,
which is controlled locally
Such as
agriculture,
• Disadvantages of state control
mining, forestry,
– lack of good data
and urban
– inadequate monitoring systems development.
– controls are not consistent across states; can cause
problems if contamination flows across state borders
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At the federal level:
Insufficient resource allocation to nonpoint controls
relative to point source controls
Program
1987
1995
2000
Point
$66,087 $92,918 $111,196
97.7%
98.1%
98.3%
Nonpoint
$1,531
2.3%
$1,754
1.9%
$1,884
1.7%
US Spending: Point vs. Nonpoint ($2008 millions)
Source: U.S. EPA, Office of Policy, Planning, and Evaluation (December 1990), p. 3-3, Table 3-3.
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5. Market-Based Solutions
(1) Pollution Charges
a. Effluent Fees on Point Sources
• These can be ______________ or ______________
• Some states in the U.S. are using these fees as well as
other nations—France, Germany, China……
• Usage can lead to cost-effectiveness
– If government sets a per-unit marginal effluent fee
(MEF), each polluter would abate as long as their
marginal abatement cost (MAC) is less than MEF and
continue until MAC = MEF
– So all polluters abate to the point where their MACs
are equal, which indicates a cost-effective result 12
Modeling an Effluent Fee
$
$
MACX
MACY
MEF
unit fee
AX
Polluter X
A
AY
A
Polluter Y
Notice that both firms are abating at levels where their
respective MACs are equal to the MEF, which means they
are equal to each other—a cost-effective result.
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b. Product Charges on Nonpoint Source
Example: Tax on fertilizers
• Tax  effective Pfertilizer   quantity demanded 
– Optimal tax equals MEC at QE
• Evidence in the U.S. suggests D for fertilizer is relatively
____________ and tax rate is too low
– Result: insufficient demand response
• 46 states use this; rates tend to be < 2.5%, so the
decline in quantity demanded is negligible
• Some European nations, such as Austria and Sweden,
have used fertilizer taxes with measurable effects
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(2) Tradeable Effluent Permit Markets
• Set an abatement objective for watershed
• Issue tradeable effluent permits
– Low-cost abaters sell as long as P > their MAC
– High-cost abaters buy as long as P < their MAC
– Trading continues until MACs equal, which yields a
cost-effective abatement allocation
• Tradeable permit markets involving both point
and nonpoint sources exist in some states
– e.g., CA, CO, FL, NY, and WI
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6. Watershed Approach
• A watershed refers to all land areas draining
into a particular water body
• Focuses on the watershed instead of a specific
water body allows for
– better assessment of water quality
– better identification of polluting sources
• Underlying motivations are:
– to integrate policy initiatives, using pollution
prevention where possible
– coordinate tasks and resource use among all
stakeholders associated with the watershed
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Primary U.S. Policy Instruments
• Watershed-based NPDES permits: issued to
multiple point sources within a watershed
• Water quality trading
– U.S. policy explicitly states that all trading
activity should occur within a watershed
– Supported by economic arguments, including
cost savings, scale economies, and greater
efficiency
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Ch3-slide 18
FYI
Modeling a Negative Environmental
Externality (negative production externality)
• Define the market as refined petroleum
– Assume the market is competitive
– Supply is the marginal private cost (MPC)
– Demand is the marginal private benefit (MPB)
– Production generates pollution, modeled as a
marginal external cost (MEC) water pollution
• Problem: Producers (refineries) have no
incentive to consider the externality
• Result: Competitive solution is inefficient
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FYI
Ch3-slide 23
MSC, MPC, MPB Graph
P ($ per barrel)
42
Page 67
MSC = MPC + MEC
S =MPC
PE = 26
PC = 22
10
D = MPB = MSB
0
128 160
QE QC
Q (thousands)
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Ch5-slide 6
Modeling a Pigouvian Tax (on a
negative production externality)
tax=MEC at QE
FYI
MSC = MPC + MEC
MPCt
MPC
a
Amount of tax
b
MPB = MSB
0
QE
QC
Q of gasoline
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FYI
Consumption externalities
Production externalities
Positive
Negative
Positive
Negative
The benefits to
the rest of
society of
people being
vaccinated
before traveling
abroad
Noise
pollution
from using
car stereos
The benefits to
the environment
that arise from
the planting of
woodland by a
forestry company
Wastes
being
dumped
into a
river by a
company
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FYI
Modeling a positive production externality
subsidy = -MEC at QE
MPC
MPCs
a
MSC = MPC + MEC
b
MPB = MSB
0
QC
QE
Q of gasoline
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Ch5-slide 15
Abatement Equipment Subsidy (on a
Positive Consumption Externality)
FYI
• A payment aimed at lowering the cost of
abatement technology
• Goal is to internalize the positive externality
associated with the consumption of
abatement activities
• If the subsidy equals the marginal external
benefit (MEB) at QE, it achieves an efficient
equilibrium and is called a Pigouvian subsidy
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Ch5-slide 16
Pigouvian Subsidy
Market for Scrubbers (on a Positive
Consumption Externality)
FYI
($ millions)
MSC
K
PE = 175
Subsidy = $14 million
Subsidy=MEB at QE
PC = 170
MSB=MPB+MEB
L
PE – s = 161
MPBS
MPB
0
QC = 200
QE = 210
Q of scrubbers
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FYI
Analysis of a Positive Consumption Externality
P The market for flu shots
$50
external
benefit
40
30
Socially optimal Q
= ___
25 shots
To internalize the
externality, use
S subsidy
_______ = $10/shot.
Social value
= private value
+ external benefit
20
10
D
0
Q
0
10
20 25 30
External benefit
= $10/shot
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Analysis of a Negative Consumption Externality
Modeling a Tax on Consumption
FYI
tax= -MEB at QE
MSC
a
Amount of tax
b
0
QE
QC
MPB
MPBt
MSB = MPB + MEB
Q
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