Optimal
Ozone Reduction Policy Design Using Adjoint-Based
NO<sub><i>x</i></sub> Marginal Damage Information
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Abstract
Despite substantial reductions in
nitrogen oxide (NO<sub><i>x</i></sub>) emissions in the
United States, the success of
emission control programs in optimal ozone reduction is disputable
because they do not consider the spatial and temporal differences
in health and environmental damages caused by NO<sub><i>x</i></sub> emissions. This shortcoming in the current U.S. NO<sub><i>x</i></sub> control policy is explored, and various methodologies
for identifying optimal NO<sub><i>x</i></sub> emission control
strategies are evaluated. The proposed approach combines an optimization
platform with an adjoint (or backward) sensitivity analysis model
and is able to examine the environmental performance of the current
cap-and-trade policy and two damage-based emissions-differentiated
policies. Using the proposed methodology, a 2007 case study of 218
U.S. electricity generation units participating in the NO<sub><i>x</i></sub> trading program is examined. The results indicate
that inclusion of damage information can significantly enhance public
health performance of an economic instrument. The net benefit under
the policy that minimizes the social cost (i.e., health costs plus
abatement costs) is six times larger than that of an exchange rate
cap-and-trade policy