Economic Strategies to Reduce Acid Deposition Ecological Economic Theory Fall 2003

Externalities of Fossil Fuel Consumption Exploration & Harvesting Processing & Refining Transportation & Distribution Conversion & Market Use Land degradation, accidental spills, CO 2, CH 4, CO, HCs, PM, trace metals, thermal pollution, SO 2, NO X

Acid Deposition Rain, snow, fog, dew, dry particles SO 2 + H 2 0  H 2 SO 4 NO X + H 2 0  HNO 3 Unpolluted precipitation – pH 5.6 Average Vermont precipitation – pH 4.3 – 4.6 From U.S. Environmental Protection Agency’s Clean Air Markets Report

Effects of Acid Deposition Lakes and Streams –Habitat loss –Eutrophication (N only) –Acid toxicity –Al toxicity Forests –Soil acidification –Foliar Ca leaching –Al mobilization –Increased vulnerability to environmental stressors Human health –Inhalation / Respiratory problems –Ozone formation (N only) Aesthetics –Visibility Built capital –Paints –Construction materials –Historical monuments

Acid Deposition Policy Issues Regional Scale Non-localized Crosses borders Multiple sources Uncertainties Destruction vs. Resilience

Economic Strategies that Address Externalities Command and Control Ecological Taxes Tradable permits

Command and Control Set Standards –Emissions –Abatement Impose fines for violations Examples –Japan –China JapanChina Ambient limits sulfur dioxide (ppm) Ambient limits nitrogen oxides 0.02N/A % non-compliance (1999) < 5%33% Value of human life (US $) >> CAC components: Japan vs. China

Environmental Taxes Pigouvian taxes Polluter Pays Double-dividend Income tax  “Green” tax Examples: –Germany –Sweden –Netherlands TaxEvidence of Effectiveness Motor fuelsFuel substitution; increased use economy vehicles; reduced fuel consumption Electricity production Fuel substitution; renewable energy production Motor vehicle use No evidence of effects Industrial emissions Recycling of funds into abatement technologies; incentives for new technologies Summary of European Green taxes

Tradable Permits Set total emissions standard Act within market system Purchase, sell, bank permits Example: United States – 1990 Clean Air Act Amendments Year SO2 emission cap (million tons) NOX emission cap (million tons) Estimated permit cost ($/ton) ???????? Key components of U.S. cap-and-trade policy

Ecological Economics Perspective: Cap-and-Trade Sustainable Scale ??? Equitable Distribution NO Efficient Allocation YES

Recommendations Sustainable Scale Ecological + Human Health Basis Ecological Monitoring Adaptive Management Equitable Distribution Caps on individual permits Regional distribution of impacts No exemptions

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