Abstract: Several recent studies have used simulation models to quantify the potential effects of recent environmental regulations on power plants, including the Mercury and Air Toxics Standards (MATS), one of the US Environmental Protection Agency’s most expensive regulations. These studies have produced inconsistent results about the effects on the industry, making general conclusions difficult. We attempt to reconcile these differences by representing the variety of assumptions in these studies within a common modeling platform. We find that the assumptions, and their differences from the way MATS will be implemented, make a substantial impact on projected retirement of coal-fired capacity and generation, investments that are required, and emissions reductions. Almost uniformly, the actual regulation, when examined in its final form and in isolation, provides more flexibility than is represented in most models. We find this leads to a smaller impact on the composition of the electricity generating fleet than most studies have predicted.

Abstract: Using individual travel diary data collected before and after the rail transit coverage expansion in urban Beijing, this paper estimates the impact of rail accessibility improvement on the usage of rail transit, automobiles, buses, walking, and bicycling, measured as percent distance traveled by each mode in an individual trip. My results indicate that the average rail transit usage significantly increased, by 98.3% for commuters residing in the zones where the distances to the nearest station decreased because of the expansion, relative to commuters in the zones where the distances did not change. I also find that auto usage significantly decreased, by 19.8%, while the impact on bus usage was small and not statistically significant. Average walking and bicycling distance (combined) increased by 11.8%, indicating that walking and bicycling are complements to urban rail transit, instead of substitutes. Furthermore, I find that estimated changes in auto usage and rail transit usage vary significantly with auto ownership and income.

Abstract: Carbon markets are substantial and they are expanding. There are many lessons from experiences over the past eight years: fewer free allowances, better management of market-sensitive information, and a recognition that trading systems require adjustments that have consequences for market participants and market confidence. Moreover, the emerging international architecture features separate emissions trading systems serving distinct jurisdictions. These programs are complemented by a variety of other types of policies alongside the carbon markets. This sits in sharp contrast to the integrated global trading architecture envisioned 15 years ago by the designers of the Kyoto Protocol and raises a suite of new questions. In this new architecture, jurisdictions with emissions trading have to decide how, whether, and when to link with one another, and policymakers overseeing carbon markets must confront how to measure the comparability of efforts among markets and relative to a variety of other policy approaches.

Abstract: Several different economic models have been applied to try to understand how new regulations by the U.S. Environmental Protection Agency (EPA) could impact coal-fired generation in the United States as well as the electricity system as a whole. This paper provides an overview of many of the key studies and the models used to analyze the potential impacts of EPA’s rules. The regulations surveyed include the Cross-State Air Pollution Rule (CSAPR), the Mercury and Air Toxics Standards (MATS), the proposed Clean Water Act (CWA) Section 316(b) rule, and the proposed Coal Combustion Residuals (CCR) rule. The models generally agree that these regulations will result in coal plant retirements, though there is far less agreement on how much generation may retire. Assumptions about the price of natural gas and the expected stringency of regulations play a key role in determining modeling results. The models provide useful guidance for policymakers when considering the potential impact of EPA regulation.

Abstract: This paper explores the policy options available to the United States for regulating greenhouse gas emissions from aircraft under existing law: the Clean Air Act (CAA). Europe has unilaterally and controversially moved to include aviation emissions in its Emissions Trading System. The United States can, however, allow its airlines to escape this requirement by imposing “equivalent” regulation. U.S. aviation emissions rules could also have significant environmental benefits and would limit domestic emissions beyond the reach of the European Union. With new legislation unlikely, the CAA is the only plausible vehicle for such regulation. Title II Part B of the CAA does grant EPA broad regulatory authority over aviation emissions, though this authority has not been used aggressively. EPA could impose meaningful aviation GHG limits and, by using performance standards, give airlines incentives to creatively comply. It might further be possible to allow some forms of emissions trading, though the law is unclear. Emissions by foreign airlines in the United States could be covered under the act, though international law might impose barriers.

Abstract: To help inform pollution control policies in the Indian electricity sector we estimate the health damages associated with particulate matter, sulfur dioxide (SO2), and nitrogen oxides (NOx) from individual coal-fired power plants. We calculate the damages per ton of pollutant for each of 89 plants and compute total damages in 2008, by pollutant, for 63 plants. We estimate health damages by combining data on power plant emissions of particulate matter, SO2 and NOx with reduced-form intake fraction models that link emissions to changes in population-weighted ambient concentrations of fine particles. Concentration-response functions for fine particles from Pope et al. (2002) are used to estimate premature cardiopulmonary deaths associated with air emissions for persons 30 and older. Our results suggest that 75 percent of premature deaths are associated with fine particles that result from SO2 emissions. After characterizing the distribution of premature mortality across plants we calculate the health benefits and cost-per-life saved of the flue-gas desulfurization unit installed at the Dahanu power plant in Maharashtra and the health benefits of coal washing at the Rihand power plant in Uttar Pradesh.

Abstract: Implementation of new environmental regulations in the electricity industry has triggered concerns about system reliability. We find these regulations are unlikely to create the shock to the system as some worry. They lead to little change in generation capacity. The large costs associated with investments in pollution control technologies are partially offset by a decrease in the cost burden associated with tradable emissions allowances. The combined effects contribute to a 1 percent increase in retail electricity prices and a decrease in producer profits of about $3–$5 billion in 2020. Though it varies across scenarios and regions, over the simulation horizon, consumers pay approximately 70 percent of total costs. In 2020, for example, total annual costs are between $6.6 billion and $7.1 billion. The investment in pollution controls leads to substantial reductions in emissions of mercury and sulfur dioxide.

Abstract: The confluence of several pending environmental rulemakings will require billions of dollars of investment across the industry and changes in the operation of facilities. These changes may lead to retirement of some facilities, and there has been much debate about their potential effects on electricity reliability. Only very exceptional circumstances would trigger supply disruptions; however, the changes may affect electricity prices, the generation mix, and industry revenues. Coincident with these new rules, expectations about natural gas prices and future electricity demand growth are changing in ways that also will have substantial effects on the industry. This paper addresses these two sets of issues using a detailed simulation model of the U.S. electricity market. The findings suggest that recent downward adjustments in natural gas prices and electricty demand projections have a substantially larger impact on electricity prices and generation mix than do the new environmental rules.

Abstract: In the past two decades, rapid population and economic growth on the U.S.–Mexico border has spurred a dramatic increase in electricity demand. In response, American energy multinationals have built power plants just south of the border that export most of their electricity to the United States. This development has stirred considerable controversy because these plants effectively skirt U.S. environmental air pollution regulations in a severely degraded international airshed. Yet to our knowledge, this concern has not been subjected to rigorous scrutiny. This paper uses a suite of air dispersion, health impacts, and valuation models to assess the human health damages in the United States and Mexico caused by air emissions from two power-exporting plants in Mexicali, Baja California. We find that these emissions have limited but nontrivial health impacts, mostly by exacerbating particulate pollution in the United States, and we value these damages at more than half a million dollars per year. These findings demonstrate that power-exporting plants can have cross-border health effects and bolster the case for systematically evaluating their environmental impacts.

Abstract: In the past two decades, rapid population and economic growth on the U.S.–Mexico border has spurred a dramatic increase in electricity demand. In response, American energy multinationals have built power plants just south of the border that export most of their electricity to the United States. This development has stirred considerable controversy because these plants effectively skirt U.S. environmental air pollution regulations in a severely degraded international airshed. Yet to our knowledge, this concern has not been subjected to rigorous scrutiny. This paper uses a suite of air dispersion, health impacts, and valuation models to assess the human health damages in the United States and Mexico caused by air emissions from two power-exporting plants in Mexicali, Baja California. We find that these emissions have limited but nontrivial health impacts, mostly by exacerbating particulate pollution in the United States, and we value these damages at more than half a million dollars per year. These findings demonstrate that power-exporting plants can have cross-border health effects and bolster the case for systematically evaluating their environmental impacts.

Abstract: In their recent paper, “Efficient Pollution Regulation: Getting the Prices Right” (henceforth, EPR), Muller and Mendelsohn describe a broader, more appealing concept of efficiency that incorporates information on damages caused by emissions from specific sources: “The science and economics related to pollution control”, they write, “have advanced to the point where regulations can now move from cost-effectiveness to efficiency.” We argue that despite the appeal of the EPR solution, its conclusion that source-specific marginal damage estimates are ready for use in regulations is simply incompatible with the empirical evidence presented in EPR. In particular, we explore the implications of the EPR finding of negative marginal damages from NOx emissions for many heavily populated counties. The associated nonconvexities, we show, imply that the source-specific trading ratios that EPR advocates lead to unattractive outcomes not likely to be efficient. We also discuss how the EPR assumption that the regulators know damages with certainty oversimplifies key aspects of efficient air pollution regulation.

Abstract: Because conventional command-and-control environmental regulation often performs poorly in developing countries, policymakers are increasingly experimenting with alternatives, including state-sponsored voluntary regulatory programs that provide incentives, but not mandates, for pollution control. Although the literature on this trend is quite thin, research in industrialized countries suggests that voluntary programs are sometimes ineffective because they mainly attract relatively clean participants seeking to free-ride on unrelated pollution control investments. We use plant-level data on more than 60,000 facilities to identify the drivers of participation in the Clean Industry Program, Mexico’s flagship voluntary regulatory initiative. Our results suggest that the threat of regulatory sanctions drives participation in the program. Therefore, the program does appear to attract relatively dirty firms. We also find that plants that sold their goods in overseas markets and to government suppliers, used imported inputs, were relatively large, and were in certain sectors and states were more likely to participate in the program, all other things equal.