Interim Report of the Committee on Changes in New Source Review Programs for Stationary Sources of Air Pollutants (2005) / Chapter Skim
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5 Analytic Methods for Assessing Effects of New Source Review Rule Changes
5 Analytic Methods for Assessing Effects of New Source Review Rule Changes
Pages 134-169
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From page 134... ...
recent changes to the New Source Review (NSR) rules.
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METHODS FOR ASSESSING EFFECTS OF RULE CHANGES 135 the alternative methods available and the selection of a particular one depends on the methods' accuracy in representing responses to regulatory incentives and constraints, their sensitivity to the particular regulatory changes being assessed, and their ability to accurately estimate the outcomes of interest in the assessment. Different indicators can be used to assess magnitudes and trends in pollution prevention and control, energy efficiency, emissions, air quality, and health effects (e.g., NRC 1999; Esty 2001; Hayward 2004)
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136 CHANGES IN NEW SOURCE REVIEW PROGRAMS TABLE 5-1 Possible Indicators for Assessing the Outcomes of Interest Outcome Possible Indicators to Assess Outcome Pollution · Innovation in new technologies control o Expenditures for research and development o Inventions and patents · Implementation of new technologies o Adoption by industry and utilities · Improvements in use ("learning by doing") o Performance histories for selected technologies Pollution · Innovation, implementation, and improvements in industrial prevention processes to be less polluting (source o Expenditures for research and development reduction)
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METHODS FOR ASSESSING EFFECTS OF RULE CHANGES 137 because different approaches are likely to be required for different industries, and because a final choice of methods has not been made. Furthermore, it is important to understand the general assumptions of each approach so that their practical and theoretical limitations are clear.
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138 CHANGES IN NEW SOURCE REVIEW PROGRAMS Assessments of firm behavior in response to regulation can be based on anecdotal reports, directed case studies, surveys of multiple firms, and conceptual economic models. Anecdotal reports, case studies, and surveys have been done by EPA and specific state, environmental, and industry groups to address some of the issues concerning the likely impact of the NSR rules and rule changes.
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METHODS FOR ASSESSING EFFECTS OF RULE CHANGES 139 Hamilton 1995; Curcio and Wolf 1996; Anton et al.
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140 CHANGES IN NEW SOURCE REVIEW PROGRAMS tion uc Prod of r) NSR eay Cost ($/ y liti M2 M3 Fac New Facility?
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METHODS FOR ASSESSING EFFECTS OF RULE CHANGES 141 Other maintenance and alteration activities shown on the figure are also possible -- opponents of the NSR rule changes fear that they would encourage more of the changes denoted as M3 and M4, resulting in higher emissions (regardless of whether they yield cost savings to the firm, although presumably, the cost-saving maintenance and alteration activities in M4 are more likely than those in M3)
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142 CHANGES IN NEW SOURCE REVIEW PROGRAMS sented. A simple model of firms' behavior typically has the following structure: · Decision variablse: quantities of inputs to production that are used, including fuel, labor, capital, and pollution control equipment.
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METHODS FOR ASSESSING EFFECTS OF RULE CHANGES 143 constraint takes the form of a requirement that firms hold sufficient allowances to cover their annual or seasonal emissions of a particular pollutant. All these requirements impose costs on the firms that will influence the trade-offs that they make when determining how to produce their product and how much pollution to emit.
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144 CHANGES IN NEW SOURCE REVIEW PROGRAMS firm does not face the regulation until it takes a particular action. If a firm builds a new facility, then it knows that facility will be subject to NSR and possibly even stricter requirements (depending on where the facility is located)
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METHODS FOR ASSESSING EFFECTS OF RULE CHANGES 145 vestments. At the same time, by lowering the costs of making modifications to existing plants, the rule change could encourage more firms to choose the modification option rather than invest in new, cleaner facilities.
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146 CHANGES IN NEW SOURCE REVIEW PROGRAMS emissions levels are estimated jointly with the total cost function. From the estimated cost function, they derived an equation for the marginal costs of emission reduction and used it to identify the efficient level of emission reduction at each plant and to solve for the market price of SO2 allowance prices under Title IV.
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METHODS FOR ASSESSING EFFECTS OF RULE CHANGES 147 corporate average fuel economy (CAFE) standards2 on turnover of the automobile fleet and found that applying tighter standards to new cars reduces the rate of turnover of the existing automobile fleet.
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148 CHANGES IN NEW SOURCE REVIEW PROGRAMS product or for the ratio of emissions to a particular product. In reality, energy consumption and emissions at specific facilities can be a complex function of site conditions, feedstocks, process configurations, designs of each process area, operating practices, and maintenance, among others.
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, an SO2 control strategy (e.g., the use of a low-sulfur fuel and/or postcombustion FGD) , a steam cycle (including heat exchangers, steam drums, steam turbines, and condensers)
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150 CHANGES IN NEW SOURCE REVIEW PROGRAMS production facilities are often included as a part of a life-cycle environment assessment for a given product or industry. Assessment of Sector-Wide Response General Framework for Sectoral Assessments The response of a full industrial sector to regulation can be estimated with generalizations of the tools used for individual firms, including anecdotal reports and representative case studies or surveys.
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METHODS FOR ASSESSING EFFECTS OF RULE CHANGES 151 changes on demand so that, for instance, demand increases stimulated by lower prices could also consume and assimilate some of the increased production. In the case of inputs, market clearing ensures that the aggregate demand by the sector for fuel or emissions allowances, for example, is consistent with the amount available.
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152 CHANGES IN NEW SOURCE REVIEW PROGRAMS analyses is to project these shifts in a way consistent with the operation of the sector's input and output markets. However, sectoral assessments do not attempt to trace the effects of a policy change throughout all sectors of the economy.
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METHODS FOR ASSESSING EFFECTS OF RULE CHANGES 153 noitcu odrP Technologically D feasible ofts B /yr) Cor ($ C A cto Technologically Production Sel infeasible possibility frontier taoT Total Sector Emissions (tons/yr)
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154 CHANGES IN NEW SOURCE REVIEW PROGRAMS future response of the sector is consistent with market clearing, and there are obvious dangers in the form of motivational and other biases. There are two general sorts of sectoral simulation models (Andrews 1995)
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METHODS FOR ASSESSING EFFECTS OF RULE CHANGES 155 On the other hand, bottom-up models have two weaknesses. The first is their detailed data needs.
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156 CHANGES IN NEW SOURCE REVIEW PROGRAMS · Constraints: what values of the variables are feasible: -- For each location and time period: o Generation plus net imports must equal quantity demanded. o Generation and transmission quantities must be equal to or less than capacities.
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METHODS FOR ASSESSING EFFECTS OF RULE CHANGES 157 Examples of national models that have been used to assess possible effects of NSR rule changes include EPA's Integrated Planning Model (IPM)
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Gollop and Roberts (1983, 1985) estimated firm-level cost functions and marginal abatement costs for coal-fired utilities to study the effect of SO2 regulation on productivity growth in the electricity sector as well as the regional effects of these regulations on the industry.
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METHODS FOR ASSESSING EFFECTS OF RULE CHANGES 159 lationship between nonattainment status and measures of economic activity, including employment, investment, and shipments for plants in polluting industries. He found that plants in nonattainment counties have lower employment, lower shipments, and lower total capital stock than analogous plants located in attainment areas, but the size of these effects is relatively small.
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160 CHANGES IN NEW SOURCE REVIEW PROGRAMS modify their production levels or product designs in response to regulation or other incentives, the effects of these decisions ripple through the economy and affect other industries, including those that provide their inputs, those that use their products, quantities shipped, and associated emissions. These indirect or ripple effects can be important.
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METHODS FOR ASSESSING EFFECTS OF RULE CHANGES 161 impacts. Environmental impacts include factors such as resource depletion, acidification, eutrophication, global warming, human toxicity, freshwater aquatic toxicity, marine aquatic ecotoxicity, terrestrial toxicity, ozone layer depletion, tropospheric ozone creation, and radiation.
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162 CHANGES IN NEW SOURCE REVIEW PROGRAMS with information on emission rates, CGE models can be used to look at the effect of the regulatory changes on direct emissions from regulated sectors and indirect effects on other sectors. CGE models have been implemented primarily at the scale of national economies and have been applied most frequently in the realm of environmental evaluation to address issues related to carbon control for climate change assessment, although national assessments have also been conducted for elements of the CAA (Jorgenson and Wilcoxen 1990a,b, 1993a,b; Manne et al.
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METHODS FOR ASSESSING EFFECTS OF RULE CHANGES 163 changes, beginning with the relationship between changing plant emissions and ambient air pollution, followed by personal exposure, and then human health effects. Engineering, econometric, chemical, atmospheric, biomedical, and sociological theories and data are needed to inform these relations, but available empirical information is generally insufficient to the task.
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164 CHANGES IN NEW SOURCE REVIEW PROGRAMS tially, it is important to estimate where and when emission changes occur as well as the seasonal variations in these changes. Assessments of the effects of changes in the NSR rules depend on estimating impacts of emission changes on ambient concentrations of primarily emitted pollutants such as SO2, carbon monoxide, and large or fine primary particles (PM10 and PM2.5, respectively)
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METHODS FOR ASSESSING EFFECTS OF RULE CHANGES 165 1999) , uncertainty beyond that of primary pollutant fate and transport should be anticipated.
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166 CHANGES IN NEW SOURCE REVIEW PROGRAMS people generally spend most of their time indoors, many individual factors will influence the relationship between personal exposure and ambient concentrations. However, to understand the impacts of changes in NSR, we are concerned with personal exposures to air pollutants of ambient origin.
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METHODS FOR ASSESSING EFFECTS OF RULE CHANGES 167 has been considered a reasonable approach but is only one of many candidate options (NRC 2002)
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168 CHANGES IN NEW SOURCE REVIEW PROGRAMS inputs to models can be quantified based upon statistical analysis of empirical data, the encoding of expert judgment in the form of probability distributions, or a combination of both. As an example, Bayesian methods provide an effective way to document assumptions; link information and expert opinion; guide analyses of complex, multilevel, nonlinear systems; ensure that all relevant uncertainties are incorporated and reported; and structure sensitivity analyses.
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METHODS FOR ASSESSING EFFECTS OF RULE CHANGES 169 sponses of individual facilities to be aggregated to the entire industrial sector. Long-term simulations with these models could allow a first assessment of how changes in NSR rules might affect technology adoption and emission trends.
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