Transcript Tietenberg 8e ppt16 final

Chapter 16
Stationary-Source
Local Air Pollution
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Introduction
• This chapter discusses policy responses to
stationary sources of air pollution.
• This chapter gives a historical assessment of
problems and policy approaches, especially
cost-effective pollution control policy, to
dealing with air pollution.
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Objectives
• Present a brief history of the Clean Air Act and its
amendments.
• Provide definitions for the categories of pollutants
and types of standards.
• Outline and characterize some of the recent policy
innovations.
• Characterize the level of potential efficiency for each
of these programs.
• Give examples of each of these programs. Discuss
successes and failures.
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Conventional Pollutants
The Command-and-Control Policy Framework
• Conventional or “criteria” pollutants are common
substances such as sulfur oxides, particulates,
carbon monoxide, ozone, nitrogen dioxide and
lead. They are thought to be dangerous only at
high concentrations.
• The historical approach to air pollution control has
been known as command-and-control approach
based on emissions standards.
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• For conventional pollutants, the first step is
typically to establish ambient air quality
standards.
• In the United States there are two defined
ambient standards.

All pollutants have a primary standard that is
designed to protect human health.

A secondary standard is set to protect aesthetics,
physical objects and vegetation.
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TABLE 16.1 National Ambient AirQuality Standards (1 of 2)
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TABLE 16.1 National Ambient AirQuality Standards (2 of 2)
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TABLE 16.1
National Ambient
Air-Quality
Standards
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• The state governments are responsible for
ensuring the standards are met. States must
design state implementation plans (SIPs) that
must be approved by the EPA.
• The EPA has also established national uniform
emission standards for new sources of criteria
pollutants. Standards governing new and
modified sources of criteria pollutants are
called the New Source Performance Standards
(NSPS). These serve as minimum standards.
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The Efficiency of the Command-and Control Approach
• The threshold concept suggests that the standard is
set using a health threshold.
• The level of the ambient standard is set by some
other basis.
• Standards tend to be uniform across all of the
country.
• The timing of emission flows is important since
concentrations are important for criteria pollutants.
• Most standards are defined in terms of pollutant
concentration, but typically health effects are more
closely related to exposure.
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Cost-Effectiveness of the Command-and-Control
Approach
• Command and control is typically not cost-effective.
The ratio of CAC cost to least cost is presented in
Table 16.2 and suggests widely varying differences in
cost-effectiveness of CAC policies.
• CAC will be close to cost-effective only if a high
degree of control is necessary such that all sources
are forced to abate as much as is economically
feasible.
• While inefficient, CAC policies have resulted in better
air quality in developed countries. Developing
countries, however, need to find cost-effective ways to
improve air quality.
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TABLE 16.2
Empirical Studies of Air Pollution Control
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TABLE 16.3 Trends in U.S. Emissions
and Air Quality (1 of 2)
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TABLE 16.3 Trends in U.S. Emissions
and Air Quality (2 of 2)
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TABLE 16.3
Trends in
U.S.
Emissions
and Air
Quality
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Innovative Approaches
The Offset Program
• This program is acquired when a source
controls emission to a higher degree than
legally required.
• The policy allows qualified new or expanding
sources to emit pollution in a nonattainment
area, provided they acquire sufficient
emission reduction credits from existing
sources.
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The Effectiveness of This Early Application
• The emissions trading program has
substantially reduced the cost of complying
with the Clean Air Act. Transaction cost has
also increased.
• The initial allocation of permits has an effect
on the potential for price-setting behavior.
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Smog Trading
• State initiatives have also resulted in innovative
programs such as California’s Regional Clean Air
Incentives Market (RECLAIM).
• The 400 participating industry polluters under
RECLAIM receive an annual pollution limit, which
decreases by 5–8% annually for the next ten years.
Polluters are allowed to use flexible approaches
such as purchasing credits from other firms.
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Emission Charges
• Economists usually suggest one of two types
of emissions charges.


An efficiency charge is set up to achieve an
efficient outcome by forcing the polluter to
compensate completely for all damage.
A cost-effective charge is designed to achieve
an ambient standard at the lowest possible cost.
• Emissions charges must be set by an
administrative process.
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Hazardous Pollutants
• The Clean Air Act requires the EPA to
frequently identify hazardous pollutants.
Once a substance is listed, the EPA has 180
days to regulate emissions. This requires
setting a national standard for the pollutant.
• The EPA has incorporated risk assessment
and benefit-cost analysis into their decisions.
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TABLE 16.4 Net Benefits ($Million/Year)
of Alternative Strategies for a Value of
Life Saved of $1 Million
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