May 1998
Executive Summary (html format)
Implementation and Costs of Title IV
Changes in Emissions, Concentrations, and Deposition
Benefits of Emission Reductions
Reductions to Prevent Adverse Ecological Effects
Effectiveness of Title IV: A Market-Based Approach
About the National Science and Technology Council:
President Clinton established the National Science and Technology Council (NSTC) by Executive Order on November 23, 1993. This cabinet-level council is the principal means for the President to coordinate science, space, and technology policies across the federal government. The NSTC acts as a "virtual" agency for science and technology to coordinate the diverse parts of the federal research and development enterprise. The NSTC is chaired by the President. Membership consists of the Vice President, Advisor to the President on Science and Technology, cabinet secretaries and agency heads with significant science and technology responsibilities, and other White House officials.
An important objective of the NSTC is to establish clear national
goals for federal science and technology investments in areas
ranging from information technologies, environment and natural
resources, and health research, to improving transportation systems
and strengthening fundamental research. The NSTC prepares research
and development strategies that are coordinated across federal
agencies to form an investment package that is aimed at accomplishing
multiple national goals. To obtain additional information regarding
the NSTC, contact the NSTC Executive Secretariat at 202-456-6100.
About the National Acid Precipitation Assessment Program:
The National Acid Precipitation Assessment Program (NAPAP) is a cooperative federal program first authorized in the Acid Precipitation Act of 1980 to coordinate acid rain research and report the findings to Congress. The research, monitoring, and assessment efforts by NAPAP and others in the 1980's culminated in Title IV of the 1990 Clean Air Act Amendments, also known as the Acid Deposition Control Program. In a bold new approach to environmental regulation, Title IV included provisions for the use of market-based incentives for controlling electric utility emissions of sulfur dioxide. Title IX of the Amendments reauthorized NAPAP to conduct acid rain research and monitoring and periodically assess the costs, benefits and effectiveness of Title IV. The NAPAP member agencies are the U.S. Environmental Protection Agency, U.S. Department of Energy, U.S. Department of Agriculture, U.S. Department of Interior, National Aeronautics and Space Administration, and the National Oceanic and Atmospheric Administration. This report presents NAPAP's first attempt at assessing Title IV.
In 1997, NAPAP began to operate under the auspices of the Committee on Environment and Natural Resources (CENR) of the National Science and Technology Council. NAPAP's goal is to provide credible technical findings to inform the public decision process. To ensure the goal is efficiently met, NAPAP coordinates its activities through the Air Quality Research Subcommittee of the CENR.
In Title IV of the 1990 Clean Air Act Amendments, Congress set out to decrease the adverse effects of acid deposition through reductions in annual emissions of sulfur dioxide (SO2) and nitrogen oxides (NOx) from utilities burning fossil fuels. The legislation called for placing a cap on utility emissions to achieve a total reduction of 10 million tons of SO2 emissions below 1980 levels by 2010. In combination with reductions under Title I (compliance with National Ambient Air Quality Standards) and Title II (mobile sources), Title IV will contribute to the overall 2-million ton reduction of NOx emissions from 1980 levels.
In contrast to the typical command-and-control approach to regulation, Congress adopted a market-based control strategy for SO2. Emission reduction goals were established with time allowed to achieve these goals through flexible compliance methods, including an innovative SO2 emission allowance trading and banking program. The SO2 reductions were to be implemented in two phases: Phase I, began January 1, 1995; and Phase II will begin January 1, 2000. Phase I affects the highest-emitting electric generating units and those units choosing to comply early, and Phase II will include the remaining electric generating units.
The Act mandated the interagency National Acid Precipitation Assessment Program (NAPAP) to continue the coordination of federal acid rain research and monitoring. In addition, Congress asked NAPAP to evaluate the costs, benefits, and effectiveness of Title IV and to assess what further reductions in deposition rates are needed to prevent adverse ecological effects. This report to Congress is the first in a series of quadrennial integrated assessments of Title IV. The major goal of NAPAP's integrated assessment is to provide structured, technical information in a format that enables decision makers to evaluate the effectiveness of current public policy and that provides a sound science base for future policy decisions.
Summary of Significant Findings
The first years that affected utilities were required to comply with the SO2 and NOx emission reduction programs were 1995 and 1996, respectively. Although utilities have significantly reduced their emissions, observable responses in the environment are not yet expected, mostly due to inherent time lags between changes in emissions and responses by sensitive receptors, especially within ecosystems. Weather variability and its impact on dispersion, transport, and deposition of pollution contribute to the uncertainty in identifying a response of ambient air concentrations and visibility to emission reductions. However, much can be learned from what has occurred in the first two years of implementation of Title IV. The most significant, policy-relevant findings of the assessment follow.
Compliance Costs
The market-based approach has reduced compliance costs for utilities below those of a command-and-control approach. Costs are below what was expected due to a multitude of factors, including lower costs for low-sulfur coal, railroad deregulation, technological innovation, and lower capital and operating costs for scrubbers.
Compliance Requirements
All affected utilities have fulfilled the compliance requirements of Title IV. In the first two annual reconciliations of allowances and emissions, SO2 allowances matched or exceeded SO2 emissions.
Allowance trading
This unique aspect of Title IV, has been successful both in terms of the volume of trades and in its effectiveness in keeping compliance costs down. Economic analysis shows the market of SO2 emission allowances is functioning, liquid, and effective and can serve as a model for other air pollution control programs.
Sulfur Dioxide Emissions
All of the Acid Deposition Control Program's first phase goals for sulfur dioxide (SO2) were fully or substantially achieved in 1995. In the first year of compliance (1995), SO2 emissions for Phase I electric utility units were 39% (3.4 million tons) below the 1995 allowable level specified under Title IV (see footnote). Most of this reduction occurred in the Midwest.
Sulfate Concentrations
In response to SO2 emission reductions in 1995, statistically significant reductions in the acidity (represented by hydrogen ion content) of and sulfate concentrations in precipitation were reported at deposition monitoring sites in the Midwest, Mid-Atlantic, and Northeast United States. However, there was no evidence of statistically significant decreases in nitrate concentrations in precipitation in 1995; NOx reductions under Title IV were not required until 1996 (see footnote).
Aquatic Ecosystems
It is too early to determine whether changes in aquatic ecosystems have resulted from Title IV emission reductions. But over the last 15 years, lakes and streams throughout many areas of the United States have experienced decreases in sulfate concentrations in response to decreased emissions and deposition of sulfur. For example, there is evidence of recovery from acidification in New England lakes. In contrast, the majority of Adirondack lakes have remained fairly constant while the sensitive Adirondack lakes have continued to acidify. In 1995, EPA reported to Congress that additional reductions in sulfur and nitrogen deposition would be required to fully recover sensitive Adirondack lakes.
Forest Ecosystems
Sulfur and nitrogen deposition have caused adverse impacts on certain highly sensitive forest ecosystems in the United States. High-elevation spruce-fir forests in the eastern United States are the most sensitive. Most forest ecosystems in the East, South, and West are not currently known to be adversely impacted by sulfur and nitrogen deposition. However, if deposition levels are not reduced in areas where they are presently high, adverse effects may develop in more forests due to chronic, multiple decade exposure.
Leaching of Soil Nutrients
The gradual leaching of soil nutrients from sustained inputs of acid deposition could eventually impede forest nutrition and growth in several areas. Potential risk depends on numerous factors, including rate of cation deposition, soil cation reserves, age of forest, weathering rates, species composition, and disturbance history. Recent reductions in sulfur deposition should result in some near-term improvements in sensitive forests. Large improvements will occur at varying rates, depending on the factors listed above.
Nitrogen
Nitrogen deposition can significantly degrade forest ecosystems, especially in areas where nitrogen levels are already high and the soil has reached or is approaching saturation. However, some nitrogen-deficient forests may experience increased growth rates in response to continued elevated nitrogen deposition.
Materials and Cultural Resources
For materials and cultural resources, dry deposition (the deposition of particles and gases between rain events) is now considered to be more damaging to stone than wet deposition (the deposition of particles and gases during rain events).
Visibility
Due to uncertainties generated by meteorological variability and other factors, the linkage between reduced sulfate concentrations and improved visibility is difficult to ascertain without long-term data. Nevertheless, based on the assumption that sulfate significantly contributes to visibility-reducing particles in the eastern United States, reduced SO2 emissions are expected to reduce sulfate concentrations and, in turn, their contribution to haze.
Human Health
Reduction in sulfur and nitrogen emissions is expected to reduce fine-particulate sulfate and nitrate concentrations. Indications from epidemiological studies of an association between ambient particles with human health end points suggest decreased emissions could lead to reductions in premature mortality and morbidity from cardiovascular and respiratory causes.
Economic Benefits
Some evidence suggests that quantifiable economic benefits could be relatively large in the areas of human health and visibility. The magnitude of potential benefits from these two areas alone could exceed the costs of complying with Title IV. Ecosystem (nonuse) benefits are expected to be large, but reasonable estimates are not attainable at this time.
An Efficient Approach with Remaining Questions
NAPAP looked at only the obvious costs incurred by utilities to comply with Title IV and only the primary benefits that could be valued using existing data and methodologies. Neither social costs nor social benefits were included in this analysis. Therefore, the reader should be cautioned against attempting to derive a net societal benefit from the information included in this assessment. Nonetheless, much can be learned from the first two years of implementation of this unique emission reduction program.
Title IV is a good example of the efficiency of a market-based approach to environmental regulation and illustrates cooperative implementation of an emission allowance and trading program by the U.S. Environmental Protection Agency and the utility industry. The accumulated evidence through the end of 1996 strongly suggests the effectiveness of Title IV is unprecedented in keeping emission control costs low while attempting to reduce potential damage from acid deposition to ecosystems, materials, visibility, and human health. A well-designed, market-based system may have clear environmental benefits when compared to a more traditional method of regulation, as has been seen with Title IV, where trading lowered costs and led to early emission reductions.
Extrapolation of what has been achieved so far in the efforts to reduce acid rain at low cost should also be made with caution. The most valued feature of Title IV--a utility's flexibility of compliance methods--is also the least predictable feature. Utility units have pursued a variety of compliance options, including scrubber installation, fuel switching, energy efficiency, and allowance trading. The allowance market has given some sources the incentive to overcontrol their SO2 emissions and bank their allowances for use in future years. Other sources have deferred control by acquiring allowances from sources that have overcontrolled their emissions.
In the aggregate, utilities may choose to comply differently in the future from their 1995 compliance methods. Their choices in 1995 led to an early reduction of SO2 emissions, nationally. Continuation of this early reduction throughout Phase I is expected but is not yet known. In theory, use of a national emissions trading program to deal with a regional air quality problem could cause some areas of the country to experience higher emission (or deposition) levels than would have occurred with no trading. However, preliminary studies based on actual emissions data along with emission and atmospheric modeling projections strongly indicate that this is not the case. Furthermore, all of the human health, surface water, and welfare benefits of compliance choices will not be fully realized for many years because of the inherently long response times in most of these systems.
Although the results from the first two years of implementation of Title IV have exceeded expectations, a number of important environmental and economic questions about the program will demand attention in the coming years. For example, will the year-to-year variability in, and geographic distribution of, emissions allowed by the flexible market-based approach have any noticeable environmental effect? What will surface water monitoring data reveal about the long-term impacts on aquatic ecosystems? How will the emissions trading market change as utilities approach the tighter emission limits in the year 2000? These questions and many others must be addressed in future years in order to assess the full range of impacts from the implementation of Title IV.