Research shows how the Clean Power Plan could reduce local pollution as well as greenhouse gases

September 22, 2017

Research shows how the Clean Power Plan could reduce local pollution as well as greenhouse gases

IGPA scholar’s research on ‘multiple pollutants’ accepted for publication in the Journal of Environmental Economics and Management

Authors

Debate about putting a price on emissions of carbon dioxide and other greenhouse gases has been distracted by political denials that climate change is even happening, or that it is caused by humans. Yet existing U.S. policies are already improving urban air quality and saving lives by controlling emissions of local pollutants like sulfur dioxide, nitrous oxides, and other particulate matter.

Now, new research by IGPA climate policy expert Don Fullerton and his co-author, Dan Karney of the University of Ohio, is making key connections between those different emissions, since they are all caused by burning fossil fuels to make electricity. This research will soon be published by a top academic publication, the Journal of Envionmental Economics and Management.

“The point of our paper is to sort out connections between multiple pollutants under different kinds of circumstances, since a tax or other control on one pollutant might increase or decrease the other pollutant,” Fullerton said. “One documented example is that disposal costs for liquid chemical wastes can lead to more air emissions; another example is that the Clean Air Act has been found to increase water pollution.”

So Fullerton and Karney build a general mathematical and computer model of any two pollutants, where each may be controlled by a different policy.  Each one may face a tax on emissions that allows polluters to choose the quantity, or by a cap-and-trade permit policy that fixes the quantity of emissions and allows the market to determine the price. They focus on the example of electric power plants that face a new tax on carbon dioxide that can make them want to change emissions of sulfur dioxide, and they find several important results.

“First of all, the effect of a carbon tax on sulfur dioxide depends on whether that other pollutant is already subject to a tax or permit policy,” Fullerton said. “With a binding sulfur permit quantity, then a carbon tax cannot affect local air quality through changes in sulfur dioxide.”

The U.S. has indeed had permits on sulfur emissions, but that permit policy is no longer binding. Second, the existence of tax or permit policy on the other pollutant could change how the carbon tax affects carbon dioxide emissions. Third, even if the carbon tax reduces the other pollutant, that reduction may or may not improve welfare, depending on whether the other pollutant is already over-regulated. Fourth, the tax on carbon in the electricity sector could affect both carbon and sulfur dioxide emissions in the other non-electricity sector.

Once these various possibilities are clarified, the authors then model the specifics of U.S. electricity production and the likely event that a carbon tax would induce less use of coal and therefore less emissions of both carbon dioxide and sulfur dioxide. They use existing estimates of the social cost of carbon and of the health damages from sulfur dioxide, and they plug all these numbers into the computer calculation to find effects on U.S. economic welfare.

“The bottom line is that while a carbon policy like the Clean Power Plan would have benefits from reducing carbon dioxide and climate change, its co-benefits from reducing sulfur dioxide are even larger, Fullerton said. “Thus, regardless of whether the U.S. participates in a multinational agreement to reduce carbon emissions, the Clean Power Plan can pay for itself by the health benefits of improved local air quality.”

The study will be published in a forthcoming edition of the Journal of Environmental Economics and Management. It is available online at https://doi.org/10.1016/j.jeem.2017.08.003 , or http://www.sciencedirect.com/science/article/pii/S0095069617305764

 

 

 


Research Area: Economic Policy

Policy Initiative: Climate Policy

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