Restructuring and the Cost of Reducing NOx Emissions in Electricity Generation

Karen Palmer, Dallas Burtraw, Ranjit Bharvirkar and Anthony Paul

No 10549, Discussion Papers from Resources for the Future

Abstract: We look at the effects of restructuring on three issues: (a) economic surplus and environmental quality, (b) the cost of NOx control policies and who bears the costs, and (c) the cost-effectiveness of a seasonal and an annual NOx cap in the SIP Call region. We find that without the NOx cap, nationwide restructuring leads to higher NOx and carbon emissions from the electricity sector. Adding either a seasonal or an annual NOx cap-and-trade regime in the eastern United States mitigates the increase in NOx emissions but has a much smaller effect on carbon emissions. The out-of-pocket compliance cost associated with achieving a seasonal or an annual NOx cap is moderately higher with nationwide restructuring than without, but the changes in economic surplus are significantly higher. However, the economic benefits of nationwide restructuring more than offset the higher costs of controlling NOx emissions in a more competitive environment. The foregone economic surplus is compared with the benefits resulting from NOx emission reductions using an integrated assessment model of atmospheric transport and valuation of human health effects. We find an annual policy dominates a seasonal policy from a cost effectiveness perspective under limited restructuring, and even more strongly under nationwide restructuring.

Keywords: Environmental; Economics; and; Policy (search for similar items in EconPapers)
Pages: 43
Date: 2001
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Citations: View citations in EconPapers (13)

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Working Paper: Restructuring and Cost of Reducing NOx Emissions in Electricity Generation (2001)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:rffdps:10549

DOI: 10.22004/ag.econ.10549

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