Emissions standards and ambient environmental quality standards with stochastic environmental services

Many important environmental policies involve some combination of emission controls and ambient environmental quality standards, for instance SO₂ emissions are capped under Title IV of the U.S. Clean Air Act Amendments while ambient SO₂ concentrations are limited under National Ambient Air Quality Standards (NAAQS). This paper examines the relative performance of emissions standards and ambient standards when the natural environment provides stochastic environmental services for assimilating pollution. For receiving media characterized by greater dispersion in the distribution of environmental services, the optimal emissions policy becomes more stringent, whereas the optimal ambient policy generally becomes more lax. In terms of economic performance, emissions policies are superior to ambient policies for relatively non-toxic pollutants, whereas ambient standards welfare dominate emissions standards for sufficiently toxic pollutants. In the case of combined policies that jointly implement emissions standards and ambient standards, we show that the optimal level of each standard relaxes relative to its counterpart in a unilateral policy, allowing for greater emissions levels and higher pollution concentrations in the environmental medium.     

An Empirical Analysis of Exposure-Based Regulation to Abate Toxic Air Pollution

Title III of the 1990 Clean Air Act Amendments requires the Environmental Protection Agency to regulate 189 air toxics, including emissions from by-product coke ovens. Economists criticize the inefficiency of uniform standards, but Title III makes no provision for flexible regulatory instruments. Environmental health scientists suggest that population exposure, not necessarily ambient air quality, should motivate environmental air pollution policies. Using an engineering-economic model of the United States steel industry, we estimate that an exposure-based policy can achieve the same level of public health as coke oven emissions standards and can reduce compliance costs by up to 60.0%.     

Double-dipping in environmental markets

There is an increasing tendency to use markets to induce the provision of environmental services. As such markets increase in scope, potential market participants might sell multiple environmental services. The question we consider here is whether participants in such markets should be allowed to sell credits in more than one market simultaneously. Some have argued in favor of such “double-dipping”, because it would make the provision of environmental services more profitable. In practice however, most programs do not allow double-dipping. We show that if the optimal level of pollution abatement is sought, then double-dipping maximizes societal net benefits. However, if pollution policies are set in a piecemeal fashion, then the caps for each market are unlikely to be optimal and, in this second-best setting, a policy prohibiting double-dipping can lead to greater social net benefits. We explore conditions under which a single-market policy is preferred, or equivalently, where piecemeal policies are likely to yield particularly inefficient outcomes.     

Plant vintages, grandfathering, and environmental policy

Environmental regulations that grandfather existing plants, by not holding them to the same strict standards as new plants, may have the unintended consequence of retarding new investment. If new plants are cleaner, then this effect may increase pollution in the short run. I develop a dynamic model of a facility’s decisions over scrapping and abatement, which depend on capital depreciation, profitability shocks, and environmental policy. Using data from fossil fuel fired boilers at electric power plants, I estimate the structural parameters of the model and assess the impact of grandfathering in the Clean Air Act on sulfur dioxide emissions. Counterfactual policy simulations show that an increase in the stringency of performance standards would have led to a decrease in investment in new boilers. However, this does not lead to increased emissions, since there is less investment in dirtier coal boilers as compared to relatively cleaner oil or natural gas boilers.     

Air quality improvement in Los Angeles—perspectives for developing cities

Air quality improvement in Los Angeles can inform air quality policies in developing cities. Emission control efforts, their results, costs and health benefits are briefly summarized. Today's developing cities face new challenges including regional pollution. Air quality issues in Beijing are briefly compared and contrasted with Los Angeles. Opportunities for co-benefits for climate and air quality improvement are identified. Air quality improvement in Los Angeles, California is reviewed with an emphasis on aspects that may inform air quality policy formulation in developing cities. In the mid-twentieth century the air quality in Los Angeles was degraded to an extent comparable to the worst found in developing cities today; ozone exceeded 600 ppb and annual average particulate matter <10 mm reached ~150 mg·m⁻³. Today's air quality is much better due to very effective emission controls; e.g., modern automobiles emit about 1% of the hydrocarbons and carbon monoxide emitted by vehicles of 50 years ago. An overview is given of the emission control efforts in Los Angeles and their impact on ambient concentrations of primary and secondary pollutants; the costs and health benefits of these controls are briefly summarized. Today's developing cities have new challenges that are discussed: the effects of regional pollution transport are much greater in countries with very high population densities; often very large current populations must be supplied with goods and services even while economic development and air quality concerns are addressed; and many of currently developing cities are located in or close to the tropics where photochemical processing of pollution is expected to be more rapid than at higher latitudes. The air quality issues of Beijing are briefly compared and contrasted with those of Los Angeles, and the opportunities for co-benefits for climate and air quality improvement are pointed out.     

Did the Clean Air Act cause the remarkable decline in sulfur dioxide concentrations?

Over the last three decades, ambient concentrations of sulfur dioxide (SO₂) air pollution have declined by approximately 80%. This paper tests whether the 1970 Clean Air Act and its subsequent amendments caused this decline. The centerpiece of this legislation is the annual assignment of all counties to SO₂ nonattainment or attainment categories. Polluters face stricter regulations in nonattainment counties. There are two primary findings. First, regulators pay little attention to the statutory selection rule in their assignment of the SO₂ nonattainment designations. Second, SO₂ nonattainment status is associated with modest reductions in SO₂ air pollution, but a null hypothesis of zero effect generally cannot be rejected. This finding holds whether the estimated effect is obtained with linear adjustment or propensity score matching. Overall, the evidence suggests that the nonattainment designation played a minor role in the dramatic reduction of SO₂ concentrations over the last 30 years.     

Economics of additionality for environmental services from agriculture

We present a model of additionality for offsets sold from agriculture to industrial sector sources regulated by cap-and-trade. We consider a potential policy where agricultural sources would not be covered by cap-and-trade requirements but would be eligible to receive offsets whenever their emissions fall below a policy-specified baseline, and would not be penalized for emissions above their baseline. Major results are: (1) The optimal baseline should be set above the average counterfactual emissions of participating farms, an unexpected result that has been missing from the literature. (2) The optimal trading ratio should be greater than one (a ton of offsets counts for less than a ton of covered emissions) even under emissions certainty. Previous research has justified such trading ratios by emissions uncertainty. (3) Emissions uncertainty does not justify a change in the baseline if the accompanying emissions model is unbiased. (4) An optimal combination of policies is to subsidize offsets and tighten the baseline relative to the no-subsidy case.     

Cost-sharing approach for air quality control implementation A case study

The objective of the study was to investigate and develop new alternative approaches to effectively meeting the federal SOx and particulate ambient air quality standards at cost savings. Since air pollution control costs would very likely be passed along to the consumer, it is in the best interests of the consumer and industry to find the least-cost alternative policies. Cost-sharing possesses advantages not shared by other control schemes, such as emissions taxes, auctioning of “pollution certificates,” or other methods. The results of this paper indicate that the cost-sharing approach is useful for particulates control in order to minimize the burden of plants already performing substantial control who may require significant added capital investment beyond their initial amount. For SO_ξ emissions control the cost-sharing analysis calculations show significant savings in nearly all situations, whether or not stack gas treatment methods were assumed available. Furthermore, the cost-sharing approach may allow further savings when the particular cost requirements of an individual firm differ substantially from the average engineering cost estimates. A cost-sharing option should thus be included in implementation plans as an option to be used by industries at their own initiative. The spatial characteristics of emissions resulting from a particular application of the cost-sharing approach are considered. A spatial airshed emissions allocation model is discussed as a useful method of evaluating cost sharing.     

An empirical analysis of economic strategies for controlling air pollution

In evaluating current environmental protection policy, economists often note that current regulations are more costly than necessary to meet environmental quality standards. While the a priori case is strong that current regulatory approaches are resulting in higher-than-necessary costs to attain environmental standards, there is relatively little empirical evidence to support this claim. The purpose of this paper is to supply some of the missing evidence by presenting the results of one study that assesses some of the potential savings associated with implementing economic, rather than command-and-control, regulatory approaches to abate one type of air pollution in one region of the country. Specifically, the paper examines the costs of meeting a prospective short-term standard for nitrogen dioxide under a range of alternative emissions control strategies for stationary sources of nitrogen oxide emissions in the Chicago Air Quality Control Region. The alternative strategies that are considered range from those that might result under current regulatory policy to those that economic policy approaches (such as emissions charges or marketable permits) are designed to implement. The analysis shows that the most efficient program of emissions controls may be more than an order of magnitude less costly than current regulatory strategies, and that economic approaches have additional advantages over more conventional regulatory approaches.     

The effect of outdoor air pollutants and greenness on allergic rhinitis incidence rates: a cross-sectional study in Seoul,Korea

Air pollution poses a serious threat to human health in Asia. This study analyzes the association of air pollutants and greenness with incidence rates of allergic rhinitis in Seoul at the administrative district level to gain insight into district-level urban policies to improve public health. A spatial regression model is constructed to investigate the correlation between allergic rhinitis incidence rates and five air pollutants measured at 128 air pollution monitoring stations around Seoul: sulfur dioxide (SO₂), particulate matter less than 10 μm (PM₁₀), ozone (O₃), nitrogen dioxide (NO₂), and carbon monoxide (CO). The allergic rhinitis incidence data are derived from the National Health Insurance Service’s database that includes the number of allergic rhinitis-related clinic visits by the patients over 20 years of age and living in Seoul. A kriging geostatistical interpolation was used to estimate average air pollution level of 423 administrative districts. To assess pollen concentrations that can affect allergic rhinitis, the average normalized difference vegetation index (NDVI) is measured based on the urban greenness. The model, controlling for built environment and socio-economic attributes, identifies the possibility of a weak association between allergic rhinitis incidence rates and carbon monoxide levels. The NDVI value is negatively correlated with allergic rhinitis incidence rates, implying a complicated aspect in relation to the effect of urban greenness.     

Is Chinese trade policy motivated by environmental concerns?

This paper analyses whether China's export VAT rebates and export taxes are driven by environmental concerns. Since China struggles to enforce environmental regulation, trade policy can be used as a second-best environmental policy. In a general equilibrium model it is possible to show that the second-best export tax increases in a product's pollution intensity. The empirical analysis investigates whether the export tax equivalent of partial VAT rebates and export taxes are higher for products which are more pollution intensive along several dimensions. The results indicate that the VAT rebate rates are set in a way that discourages exports of water pollution intensive, SO₂ intensive and energy intensive products from 2007 on. Moreover, the conservation of natural resources such as minerals, metals, wood products and precious stones seems to be a key determinant of China's export VAT rebate rates. There is little evidence that export taxes are motivated by environmental concerns.     

Air pollution-oriented ecological risk assessment in Xiamen city,China

Urban energy consumption is one of the most important causes of air pollution. Air pollution-oriented ecological risk assessment is of great significance to the promotion of urban environmental protection. This paper focuses on ecological risk in Xiamen city caused by air pollutant discharge from urban energy consumption. The Long-range Energy Alternatives Planning model was used to establish two scenarios of energy consumption in Xiamen city, and based on different scenarios, we estimated urban energy consumption and discharge quantity of air pollutant (DQAP). A box model and an expert scoring method were used to calculate the air pollution burden (APB) of SO₂, NO₂, CO, PM₁₀ and PM_2.5 and to obtain the probabilities of different air pollution loads. An ecological risk assessment model was developed and utilized to predict Xiamen city’s ecological risks in 2020. The results showed that under an energy-saving scenario, the ecological risks for PM_2.5, SO₂ and NO₂ are high, whereas the ecological risks for CO and PM₁₀ are low. Under a baseline scenario, the ecological risks for PM_2.5, SO₂ and NO₂ are moderate, whereas the ecological risks for CO and PM₁₀ are low. In addition, the APB of SO₂, NO₂, CO, and PM_2.5, but not of PM₁₀, is predicted to rise. In the simulation, energy generation from coal is the main source of air pollution. Although the DQAP from automobiles is not high, it is predicted to rise year-on-year. In summary, the ecological risk due to pollution in Xiamen city is high, and the main pollutants are SO₂, NO₂ and PM_2.5.     

Environmental policy and misallocation: The productivity effect of intensity standards

Firm-level idiosyncratic policy distortions misallocate resources between firms, lowering aggregate productivity. Many environmental policies create such distortions; in particular, output-based intensity standards (which limit firms energy use or emissions per unit of output) are easier for high-productivity firms to achieve. We investigate the productivity effect of intensity standards using a tractable general-equilibrium model featuring multiple sectors and firm-level heterogeneity. Qualitatively, we demonstrate that intensity standards are always inferior to uniform taxes, as they misallocate both dirty and clean inputs across firms and sectors, which lowers productivity. Quantitatively, we calibrate the model to US data and show that these productivity losses can be large.     

Welfare cost of pollution control

A model of joint-production of a conventional output and of pollutants is presented, within which continuous substitution between polluting fuels and nonpolluting inputs on the one hand and pollution control inputs on the other is allowed for. Using the steel industry as a case study, the welfare cost under an efficient policy to reduce particulate emissions is evaluated and compared with that under alternative inefficient policies. The results suggest that substantial cost savings can be made by following the “optimal” policy.     

Morbidity and pollution: Model specification analysis for time-series data on hospital admissions

Time-series analysis of effects of pollutants on emergency hospital admissions indicates important synergistic interactions among pollutants and to a lesser degree nonlinearities in effects of single pollutants. Comparisons of alternative econometric specifications are made to determine the appropriateness of incorporating nonuniform pollution impacts. The data substantially support the existence of synergisms among pollutants with high levels of sulfur dioxide, SO₂ (particulates), increasing the impact of particulates (SO₂) on emergency hospital admissions. Marginal effects of either pollutant are, however, small at current ambient air quality levels. These results indicate that damage estimates were likely to be understated during the 1960's when pollution levels were high, while, at current levels of those pollutants considered here, marginal damages are lower than would be estimated in studies failing to incorporate synergistic and nonlinear impacts.     

Interactive pollutants and joint abatement costs: Achieving water quality standards with effluent charges

This paper extends earlier work on the standards and prices approach to pollution control by considering simultaneously spatial considerations, interactive pollutants, and joint abatement costs. The form of environmental constraints appropriate to water pollution problems is discussed in detail and the implications for the standards and prices approach to water pollution control are assessed. The presence of interactive pollutants and joint abatement costs is shown to have important implications for both the theoretical properties and the implementation of the standards and prices approach.     

Multiple receptor ambient monitoring and firm compliance with environmental taxes under budget and target driven regulatory missions

We analyze the potential for an environmental monitoring agency under different regulatory missions to use multiple measures of ambient pollution levels to induce firm compliance via endogenously determined probabilistic firm-level inspections of polluting activities. Departing from previous analyses, we consider a framework where the regulator has multiple, rather than a single, measures of ambient pollution in a setting where many firms are subject to a self-reported emissions tax that is not perfectly enforceable. Under a budget-driven mission, we show that a regulator can fruitfully utilize the added information from multiple ambient monitoring receptors to induce improved environmental compliance through the creation of strategic interactions among firms. Additionally, our results provide new evidence on the relative efficiency of budget- vs. target-driven environmental enforcement missions.     

Some Welfare Effects of Emission Allowance Trading in a Twice-Regulated Industry

The 1990 Clean Air Act Amendments establish a national market in emission allowances to dramatically reduce SO₂, emissions from electric utilities, who already face economic regulation. Regulatory treatment of allowances will affect the new market. We present simulation results for a simple industry in which two electric utilities face a common Averch-Johnson regulatory constraint and an emissions constraint. In this model the performance of the allowance market depends importantly upon the rate-making treatment of compliance assets by utility regulators. Compared to a command and control scheme, the allowance market substantially reduces the cost of achieving a given environmental standard.     

Determination and implementation of optimal air quality standards

This paper utilizes two least-cost emission control strategies and develops rules for structuring and implementing optimal air quality standards. A strategy typical of those currently enforced, based on the State Implementation Plans (SIP's ), is compared to two least-cost strategies: (i) ambient least cost (ALC ), which achieves required air quality at least cost; and (ii) emissions least cost (ELC ), which achieves required emissions reduction at least cost. A demonstration is given of the theoretically derived result that the ALC strategy should be utilized in cost-benefit analyses to determine air quality standards and to generate emissions taxes. Preliminary analysis of the St. Louis area indicated tentative justification for a particulate ambient standard at least as strict as the current Federal primary standard. The efficiency, equity, and administrative costs for implementation of strategies based on the least-cost concept are also examined.     

Air quality and micro-meterological monitoring of gaseous pollutants/flame emissions from burning crude petroleum in poultry house

Air quality of gaseous emissions from crude petroleum flames and fumes were monitored in a poultry house at 10 min intervals; from 10.10am–11.10am daily for 14 days. The crude petroleum burning was simulated in a metal burner, 22.86 cm high with a diameter of 17.80 cm and a thickness of 1.27 cm designed for the purpose. The micro-climate (ambient temperature, relative humidity and light intensity) of the experimental environment (poultry houses) was recorded. Results showed that the mean gaseous pollutants emitted before and during the experiments varied within the poultry house. Gases such as sulphur dioxide (SO₂), hydrogen sulphide (H₂S), methane(CH₄) and carbon monoxide (CO) were higher in the brooding than finishing phase, while volatile organic carbon (VOC) and suspended particulate matter (SPM) levels were lower at the brooding than finishing phase. The values obtained in this study for 60 min (at 10 min intervals) are far higher than the values elucidated by the Federal Environmental Protection Agency, which are outdoor air quality measurements as compared to those in this study measured indoors.