The Benefits of Air Pollutant Emissions Reductions in Maryland: Results from the Maryland Externalities Screening and Valuation Model

This paper reports the results of policy simulations of environmental and human health externalities arising from the production of electricity. The primary purpose of this paper is to illustrate the Maryland Externalities Screening and Valuation Model, developed for the State of Maryland’s Department of Natural Resources. A secondary purpose is to estimate likely Maryland benefits from Title IV emissions reductions at electric power generation facilities. Sources and scope of benefits, and the potential of policy to achieve specific environmental and human health goals, are suggested by the results. The authors find that expected health benefits from reductions in power plant emissions dominate the estimated benefits of improved recreational visibility and residential visibility. The latter are the only environmental benefits the model is currently equipped to estimate, because of gaps in the science-to-economics literature. The model fully accounts for all significant environmental pathways, so future parameter estimates can be inserted as they are developed. The authors estimate that in 2010 Maryland health benefits will be about $0.7 billion, while recreational visibility benefits (in Shenandoah National Park) will be approximately$21 million (to residents of Virginia and Maryland), and residential visibility benefits, for inhabitants of a city of the size of Washington, DC and similarly affected by reduced urban visibility, will be about $1.2 million. This integrated-assessment model is designed to estimate and report also the tremendous uncertainties in measuring and valuing these effects.

Cost-Effective NOx Control in the Eastern United States

Reducing nitrogen oxide (NOx) emissions in the eastern United States has become the focus of efforts to meet ozone air quality goals and will be useful for reducing particulate matter (PM) concentrations in the future. This paper addresses many aspects of the debate over the appropriate approach for obtaining reductions in NOx emissions from point sources beyond those called for in the Clean Air Act Amendments of 1990. Data on NOx control technologies and their associated costs, spatial models linking NOx emissions and air quality, and benefit estimates of the health effects of changes in ozone and PM concentrations are combined to allow an analysis of alternative policies in thirteen states in the eastern United States. The first part of the study examines the cost and other consequences of a command-and-control approach embodied in the Environmental Protection Agency’s (EPA) NOx SIP call, which envisions large reductions in NOx from electric utilities and other point sources. These results are compared to the alternative policy of ton-for-ton NOx emissions trading, similar to that proposed by the EPA for utilities. We find that emission reduction targets can be met at roughly 50% cost savings under a trading program when there are no transaction costs. The paper examines a number of alternative economic incentive policies that have the potential to improve upon the utility NOx trading plan proposed by EPA, including incorporation of other point sources in the trading program, incorporation of ancillary PM benefits to ozone reductions in the trading program, and trading on the basis of ozone exposures that incorporates the spatial impact of emissions on ozone levels. For the latter analysis, we examine spatially differentiated permit systems for reducing ozone exposures under different and uncertain meteorological conditions, including an empirical analysis of the trade-off between the reliability (or degree of certainty) of meeting ozone exposure reduction targets and the cost of NOx control. Finally, several policies that combine costs and health benefits from both ozone and PM reductions are compared to command-and-control and single-pollutant trading policies. The first of these is a full multipollutant trading system that achieves a health benefit goal, with the interpollutant trading ratios governed by the ratio of unit health benefits of ozone and PM. Then, a model that maximizes aggregate benefits from both ozone and PM exposure reductions net of the costs of NOx controls is estimated. EPA’s program appears to be reasonably cost-effective compared to all of the other more complex trading programs we examined. It may even be considered an optimal policy that maximizes net aggregate benefits if the high estimate of benefits is used in which mortality risk is linked to ozone exposure. Without this controversial assumption, however, we find that EPA’s NOx reduction target is far too large.

The Chesapeake Bay and the Control of NOx Emissions: A Policy Analysis

Nitrogen oxide emissions not only affect air quality but have recently been found to be an important source of nitrate pollution in the Chesapeake Bay. This analysis examines the costs, emissions, source-specific and location-specific allocations of NOX emissions reductions and the ancillary ozone related health benefits under a range of policy scenarios. The paper includes analysis of three separate policies. The first is a detailed analysis of the effect on nitrate loadings to the Bay of command and control policies specified in the Clean Air Act and as part of the OTAG process. The second is a comparison of alternative scenarios for reducing NOX emissions that meet nitrate loading goals, with or without concern for reducing ozone concentrations and the health effects they cause. The third is a comparison of alternative approaches to allocate NOX emissions to meet NOX reduction and ozone exposure goals while capturing the ancillary effect on nitrate loadings. This last analysis focuses on the stake the Bay jurisdictions have in the outcome of negotiations over NOX trading programs being developed by EPA for reducing ozone in the Eastern U.S. With the primary focus on the Chesapeake Bay jurisdiction, all three analyses integrate the ancillary ozone benefits of policies to reduce nitrate pollution, including examination of how these ancillary benefits change under alternative meteorological episodes, and explore lower cost alternatives to current regulatory programs in both qualitative and quantitative terms. We find that the Chesapeake Bay benefits from efforts to reduce NOX emissions to meet the ambient air quality standard for ozone. Airborne NOX emission reductions slated to occur under the Clean Air Act in the Bay airshed will reduce nitrate loadings to the Bay by about 27 percent of the baseline airborne levels. The additional controls of NOX contemplated in what we term the OTAG scenario is estimated to result in an additional 20 percent reduction from this baseline. However, the paper's analysis of possible least cost options shows that the costs of obtaining such reductions can be significantly reduced by rearranging the allocation of emissions reductions to take advantage of source-type and locational considerations. In addition, we find that adding consideration of ancillary ozone-related health benefits to the picture does not alter any qualitative conclusions. Quantitatively, unless a link between ozone and mortality risk is assumed, the benefits are too small to affect the cost-saving allocations of NOX reductions. If the case for such a link can be made, the results change dramatically, with large overall increases in NOX reductions and a relative shift in controls to non-Bay states and utility sources. These specific effects are sensitive to the source-receptor coefficients linking NOX to ozone, however. Our analyses also suggest that the Bay jurisdictions have a stake in the outcome of the NOX trading debate -- that some trading designs can lead to better outcomes for these jurisdictions than others. Nevertheless, a common feature of cost-savings policies is that they both rearrange emissions reductions and, in the aggregate, reduce emissions less than a command and control system. Thus, some trading regimes result in significantly smaller loadings reductions (up to 25 percent smaller) than the command and control approach.

The Benefits of Air Pollutant Emissions Reductions in Maryland: Results from the Maryland Externalities Screening and Valuation Model

This paper reports the results of policy simulations of environmental and human health externalities arising from the production of electricity. The primary purpose of this paper is to illustrate the Maryland Externalities Screening and Valuation Model, developed for the State of Maryland's Department of Natural Resources. A secondary purpose is to estimate likely Maryland benefits from Title IV emissions reductions at electric power generation facilities. Sources and scope of benefits, and the potential of policy to achieve specific environmental and human health goals, are suggested by the results. We find that expected health benefits from reductions in power plant emissions dominate the estimated benefits of improved recreational visibility and residential visibility. The latter are the only environmental benefits the model is currently equipped to estimate, because of gaps in the science-to-economics literature. The model fully accounts for all significant environmental pathways, so future parameter estimates can be inserted as they are developed. We estimate that in 2010 Maryland health benefits will be about $0.7 billion, while recreational visibility benefits (in Shenandoah National Park) will be approximately$21 million (to residents of Virginia and Maryland), and residential visibility benefits, for inhabitants of a city of the size of Washington, DC and similarly affected by reduced urban visibility, will be about $1.2 million. This integrated-assessment model is designed to estimate and report also the tremendous uncertainties in measuring and valuing these effects

Cost-Effective NOx Control in the Eastern United States

Reducing nitrogen oxide (NOx) emissions in the eastern United States has become the focus of efforts to meet ozone air quality goals and will be useful for reducing particulate matter (PM) concentrations in the future. This paper addresses many aspects of the debate over the appropriate approach for obtaining reductions in NOx emissions from point sources beyond those called for in the Clean Air Act Amendments of 1990. Data on NOx control technologies and their associated costs, spatial models linking NOx emissions and air quality, and benefit estimates of the health effects of changes in ozone and PM concentrations are combined to allow an analysis of alternative policies in thirteen states in the eastern United States. The first part of the study examines the cost and other consequences of a command-and-control approach embodied in the Environmental Protection Agency's (EPA) NOx SIP call, which envisions large reductions in NOx from electric utilities and other point sources. These results are compared to the alternative policy of ton-for-ton NOx emissions trading, similar to that proposed by the EPA for utilities. We find that emission reduction targets can be met at roughly 50% cost savings under a trading program when there are no transaction costs. The paper examines a number of alternative economic incentive policies that have the potential to improve upon the utility NOx trading plan proposed by EPA, including incorporation of other point sources in the trading program, incorporation of ancillary PM benefits to ozone reductions in the trading program, and trading on the basis of ozone exposures that incorporates the spatial impact of emissions on ozone levels. For the latter analysis, we examine spatially differentiated permit systems for reducing ozone exposures under different and uncertain meteorological conditions, including an empirical analysis of the trade-off between the reliability (or degree of certainty) of meeting ozone exposure reduction targets and the cost of NOx control. Finally, several policies that combine costs and health benefits from both ozone and PM reductions are compared to command-and-control and single-pollutant trading policies. The first of these is a full multipollutant trading system that achieves a health benefit goal, with the interpollutant trading ratios governed by the ratio of unit health benefits of ozone and PM. Then, a model that maximizes aggregate benefits from both ozone and PM exposure reductions net of the costs of NOx controls is estimated. EPA's program appears to be reasonably cost-effective compared to all of the other more complex trading programs we examined. It may even be considered an optimal policy that maximizes net aggregate benefits if the high estimate of benefits is used in which mortality risk is linked to ozone exposure. Without this controversial assumption, however, we find that EPA's NOx reduction target is far too large

The Chesapeake Bay and the Control of NOx Emissions: A Policy Analysis

Nitrogen oxide emissions not only affect air quality but have recently been found to be an important source of nitrate pollution in the Chesapeake Bay. This analysis examines the costs, emissions, source specific and location-specific allocations of NOx emissions reductions and the ancillary ozone related health benefits under a range of policy scenarios. The paper includes analysis of three separate policies. The first is a detailed analysis of the effect on nitrate loadings to the Bay of command and control policies specified in the Clean Air Act and as part of the OTAG process. The second is a comparison of alternative scenarios for reducing NOx emissions that meet nitrate loading goals, with or without concern for reducing ozone concentrations and the health effects they cause. The third is a comparison of alternative approaches to allocate NOx emissions to meet NOx reduction and ozone exposure goals while capturing the ancillary effect on nitrate loadings. This last analysis focuses on the stake the Bay jurisdictions have in the outcome of negotiations over NOx trading programs being developed by EPA for reducing ozone in the Eastern U.S. With the primary focus on the Chesapeake Bay jurisdiction, all three analyses integrate the ancillary ozone benefits of policies to reduce nitrate pollution, including examination of how these ancillary benefits change under alternative meteorological episodes, and explore lower cost alternatives to current regulatory programs in both qualitative and quantitative terms. We find that the Chesapeake Bay benefits from efforts to reduce NOx emissions to meet the ambient air quality standard for ozone. Airborne NOx emission reductions slated to occur under the Clean Air Act in the Bay airshed will reduce nitrate loadings to the Bay by about 27 percent of the baseline airborne levels. The additional controls of NOx contemplated in what we term the OTAG scenario is estimated to result in an additional 20 percent reduction from this baseline. However, the paper's analysis of possible least cost options shows that the costs of obtaining such reductions can be significantly reduced by rearranging the allocation of emissions reductions to take advantage of source-type and locational considerations. In addition, we find that adding consideration of ancillary ozone-related health benefits to the picture does not alter any qualitative conclusions. Quantitatively, unless a link between ozone and mortality risk is assumed, the benefits are too small to affect the cost-saving allocations of NOx reductions. If the case for such a link can be made, the results change dramatically, with large overall increases in NOx reductions and a relative shift in controls to non-Bay states and utility sources. These specific effects are sensitive to the source-receptor coefficients linking NOx to ozone, however. Our analyses also suggest that the Bay jurisdictions have a stake in the outcome of the NOx trading debate -- that some trading designs can lead to better outcomes for these jurisdictions than others. Nevertheless, a common feature of cost-savings policies is that they both rearrange emissions reductions and, in the aggregate, reduce emissions less than a command and control system. Thus, some trading regimes result in significantly smaller loadings reductions (up to 25 percent smaller) than the command and control approach