Emissions trading: A proposal to control damages rather than emissions
Research Team: Denise Mauzerall, Babar Sultan (undergrad), Namsoug Kim (programmer), David F. Bradford (late economics professor)
Within the United States, we examined environmental implications of the increasingly widely used “cap-and-trade” system to control nitrogen oxide (NOx) emissions from large stationary sources. The concept of “cap-and-trade” was initially introduced over 30 years ago. It showed that, in theory, an emissions-trading system in which rights to emit pollution are available in a limited aggregate quantity and are freely tradable would induce rational firms to reduce pollution at the least possible cost and would encourage technological innovation. Recognizing these advantages, “cap-and-trade” programs have been implemented nationally to control sulfur dioxide emissions under Title IV of the 1990 Clean Air Act Amendments and to control regional nitrogen oxide (NOx) emissions under the Ozone Transport Commission in 1999 and the NOx Budget Program in 2004 in order to reduce surface ozone concentrations during the summer ozone season (May-September).
Reducing total NOx emissions usually results in reductions in ozone concentrations. However, our research findings contradict implicit policy assumptions that controlling total emissions of NOx, while permitting free trading among emitters, reduces environmental damage in proportion to the total NOx reduced. Using a regional atmospheric chemistry transport model we show that a shift of a unit of NOx emissions from one place or time to another across the eastern United States can result in large changes in resulting premature mortalities and morbidity due to ozone formation and exposure [Mauzerall et al., 2005]. We demonstrated that within a short period in July 1995, depending on temperature, local biogenic hydrocarbon emissions, and the size of the downwind population, a difference of a factor of six in mortalities can result from an identical change in the quantity of NOx emitted. We suggest that rather than controlling total emissions, the emphasis be shifted to controlling total damages. The type of modeling used in our analysis might be used to attach externality-correcting prices to emissions. Charging emitters fees that are commensurate with the damage caused by their NOx emissions would create an incentive for emitters to reduce emissions at times and in locations where they cause the largest damage.
Publications
Mauzerall, D. L., Sultan, B., Kim, J, Bradford, D., “NOx Emissions: Variability in Ozone Production, Resulting Health Damages and Economic Costs,” Atmospheric Environment, Volume 39: No. 16, pp. 2851-2866, May 2005.
Mauzerall, DL, Sultan, B., Kim, N., Bradford, D.F., “Charging NOx Emitters for Health Damages: An Exploratory Analysis”, Center for Economic Studies ifo Working Paper 1442, Munich, Germany, April 2005.
Mauzerall, DL, Sultan, B., Kim, N., Bradford, D.F., “Charging NOx Emitters for Health Damages: An Exploratory Analysis”, NBER working paper series, Working paper #10824, http://www.nber.org/papers/w10824, Cambridge, MA, 2004.
U.S. State-level source: receptor relationships between NOx emissions and downwind ozone concentrations.
Research Team: Denise Mauzerall and Daniel Tong (post doc)
Interstate transport of ozone (O3) and its precursors can contribute substantially to state-level surface O3 concentrations, making it difficult for some states to meet the National Ambient Air Quality Standards (NAAQS) for O3 by limiting only their own emissions. We analyze the effect of interstate transport on surface O3 in each continental U.S. state in July 1996 using the community multiscale air quality (CMAQ) model which we carefully evaluated in Tong & Mauzerall (2006). By examining the difference between a baseline simulation and perturbation simulations in which each state’s nitrogen oxides (NOx) emissions are removed, we establish for the first time a summertime source-receptor matrix for all 48 continental states. We find that for 16 (20) states at least one neighboring state’s NOx emissions are responsible for a larger increase in monthly mean peak 8 h (all-hour) O3 concentrations than the state’s own emissions (Tong & Mauzerall, 2008). For over 80% of the contiguous states, interstate transport is more important than local emissions for summertime peak O3 concentrations (Tong & Mauzerall, 2008). Our source-receptor matrices indicate that the geographic range of the clean air interstate rule (CAIR) was sufficient to address interstate transport of O3 in most of the states included in the program. However, the exclusion of Texas, which has particularly large NOx emissions, from the CAIR O3 program left emission sources uncontrolled that contribute more than 1 ppbv to the July mean of peak 8 h O3 concentrations of over a dozen states.
Publications
Tong, D.Q. and Mauzerall, D.L., Summertime State-Level Source-Receptor Relationships between Nitrogen Oxide Emissions and Downwind Surface Ozone Concentrations over the Continental United States, Environmental Science & Technology, DOI: 10.1021/es7027636, 2008.
Tong, D.Q., N.Z. Muller, D.L. Mauzerall, R.O. Mendelsohn, “Integrated Assessment of the Spatial Variability of Ozone Impacts from Emissions of Nitrogen Oxides,” Environmental Science and Technology, 40:5, 1395-1400, 2006.
Tong, D. Q., Mauzerall, D. L., “Spatial variability of summertime tropospheric ozone over the continental United States: Implications of an evaluation of the CMAQ model,” Atmospheric Environment, 40, 3041-3056, 2006.
NRC / NAS Committee on Air Quality Management in the United States.
The 3-year, multi-disciplinary National Research Council / National Academy of Science committee was directed by Congress to evaluate the effectiveness of the Clean Air Act's major air quality provisions and to develop scientific and technical recommendations for strengthening the nation’s air quality management system. Our committee’s key recommendations for improving the air quality management system in the United States were to strive to 1) identify and assess more clearly the most significant exposures, risks and uncertainties; 2) take an integrated multi-pollutant approach to controlling emissions of pollutants; 3) take an airshed-based approach by assessing and controlling emissions of important pollutants arising from local, multi-state, national and international sources; and 4) emphasize results over process. Our committee report, entitled Air Quality Management in the United States [2004] (422pp), is presently assisting the Environmental Protection Agency improve our national air quality management system. Our on-going research on state-level source-receptor relationships (described above) and inter-continental transport of air pollutants (described below) are critical for determining appropriate airsheds for air pollution control (recommendation 3).
Publication
National Research Council/National Academies of Science, "Air Quality Management in the United States," (with Chameides, W. L, Greenbaum, D., et al.) National Academy Press, 2004.