Implementing a time- and location-differentiated cap-and-trade program : flexible nitrogen oxide abatement from power plants in the eastern United States
Author(s)Martin, Katherine C
Massachusetts Institute of Technology. Technology, Management, and Policy Program.
David H. Marks, A. Denny Ellerman, Paul L. Joskow and Kenneth A. Oye.
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Studies suggest that timing and location of emissions can change the amount of ozone formed from a given amount of nitrogen oxide (NOx) by a factor of five (Mauzerall et al. 2005). Yet existing NOx cap-and-trade programs require stationary sources in the Eastern U.S. to reduce emissions without reference to timing or location. This work is part of a larger study on whether a NOx cap-and-trade program that differentiates across emissions by time and location could reduce ozone concentrations more cost-effectively than simple aggregate reductions in the NOx cap in the Eastern United States. To gauge possible gains relative to existing regulations, this work examines compliance data from coal power plants in 2002 and 2005 to estimate the effectiveness of existing un-differentiated regulations. It finds that some plant operators chose to remain under aggregated caps by emitting less NOx during early summer months when effects on ozone formation are low and emitting more NOx during late summer months when effects on ozone formation are great. This behavior was at once individually rational, environmentally damaging, and perfectly legal. To evaluate potential challenges to implementation, the study assesses the technical feasibility and the distributional effects of spatially and temporally differentiated regulatory systems. * Are power plants in the Eastern U.S. technically capable of reducing NOx emissions in response to incentives that changed in time and by location given network constraints? To address these questions, this work used a zonal model based on an abstract network graph and optimal power flow simulations to estimate potential short-term NOx reductions and associated costs from redispatch of power plants in the original Pennsylvania-New Jersey-Maryland (PJM) power system.(cont.) Both methods estimated that power plants could respond with hourly NOx reductions of between 15 and 30% and that network constraints had little effect. * Are the distributional effects of a differentiated regulation likely to motivate and/or enable legal challenges that could undercut such a program? The distributional effects of differentiated regulation would depend on the timing and locations of reductions, and legal challenges could constrain implementation. But the inability of un-differentiated regulations to fully solve ozone problems, combined with scientific and economic justifications, and the ability of power plants to respond, justify further inquiry into the feasibility of differentiation.
Thesis (Ph. D.)--Massachusetts Institute of Technology, Engineering Systems Division, Technology, Management, and Policy Program, 2007.MIT Dewey Library copy: issued in leaves.Also issued printed in leaves.Includes bibliographical references (p. 197-206).
DepartmentMassachusetts Institute of Technology. Technology, Management, and Policy Program.
Massachusetts Institute of Technology
Technology, Management, and Policy Program.