When prices for emissions allowances collapsed in Europe’s carbon market a year after trading began, critics said the collapse proved a regulatory product couldn’t be traded internationally. Sure...
A Multi-Pollutant Strategy
An integrated approach could prove more effective for controlling emissions.
Multi-pollutant analyses have demonstrated that proper placement of particulate controls, flue gas desulfurization (FGD) for SO 2, and selective catalytic reduction (SCR) for NOx dramatically could lower mercury emissions from generation units using coal, especially bituminous coals. There is a substantial mercury co-benefit to be derived from the application of this set of advanced control technologies.
Lesson 5: Cap and trade can work, but it is not the only regulatory tool. The Acid Rain Program and NOx Budget Program have reduced SO 2 and NOx emissions faster and at far lower costs than anticipated, yielding wide-ranging health and environmental improvements. Four benefits of cap-and-trade programs in particular stand out as we consider future applications:
• Certainty: A cap-and-trade program can deliver regulatory certainty for the power sector coupled with environmental certainty that reductions will be achieved and sustained. Litigation has disrupted this certainty for CAIR (note that litigation often disrupts reductions under conventional command-and-control regulations). The clear requirements and incentives for early reductions under CAIR led many companies to comply early and many state regulators to rely on it for improving air quality. In 2007, SO 2 emissions in the CAIR states had been reduced nearly 1.2 million tons from 2005 levels to 8.17 million tons (below emission levels required by the Title IV cap). Additionally, EPA estimates that approximately $3.8 billion worth of SO 2 controls and nearly $1 billion of NOx controls were installed in CAIR states in 2006 and 2007. 18
• Reduced costs: Cap-and-trade programs have demonstrated that control with cap and trade costs a good deal less than more prescriptive command-and-control regulations. EPA demonstrated this with CAPI and it since has become an accepted attribute of the cap-and-trade approach. Many other researchers have come to similar conclusions. 19
• Innovation: Since trading places a direct economic value on emission reductions, it provides a reward for innovations that result in more efficient pollution-reducing technologies. Acid Rain Program implementation has been accompanied by reduced costs, improved performance of pollution-control technologies (including improved FGD), and greater fuel flexibility (seen in increased utilization of low sulfur coal and more recently, low NOx producing coals), which has led to lower than expected overall program compliance costs.
• Broad distribution of large emissions reductions: Implementation of the Acid Rain and NOx Budget Programs has demonstrated that large emission reductions under cap-and-trade programs are spread over a broad area. Further, the greatest reductions tend to occur in areas of greatest emissions, where reductions are most needed. This can be seen in the two trading programs covering SO 2 emissions (see Figure 3) . This pattern of reduction repeatedly has appeared in all the analysis EPA and others have performed for various sets of pollutants over the last 14 years.
Despite these advantages, it is important to remember that emissions trading is only one tool of several provided by the Clean Air Act to pursue air quality goals. In cases where local concentrations of emissions do raise concerns, local governments have authority under the CAA’s local protections (source-specific limits) to ensure adequate local controls