Reducing pollutants from electricity generation helps economy, study finds

by Armando Duke

June 20, 2005 New York - Reducing pollutant emissions from electricity generation will bring critical economic benefits of more than $1.7 billion per year to New York State by 2010. These benefits far outweigh costs to residents, according to a new study conducted by researchers at Resources for the Future (RFF), and funded by the New York State Energy Research and Development Authority (NYSERDA).

"Reducing Emissions from the Electricity Sector: The Costs and Benefits Nationwide and in the Empire State," projects benefits to the nation in excess of $14 billion by 2020, even after accounting for the costs associated with technologies designed to reduce emissions of sulfur dioxide, nitrogen oxide, and mercury . Moreover, the report, released today by NYSERDA, finds that benefits dramatically exceed costs for all scenarios analyzed, including a variety of policy options addressing the three pollutants.

Researchers analyzed the emission levels proposed under the U.S. Environmental Protection Agency (EPA)'s Clean Air Interstate Rule and Clean Air Mercury Rule, as well as variations of the policies, to determine how they compared in protecting the environment and public health of the nation in general, and New York State in particular. Studies on emissions of sulfur dioxide, nitrogen oxides, and mercury found that new EPA policies for these pollutants produce greater benefits when they include limitations on summertime emissions of nitrogen oxides, a component included in the final rule. Estimated benefits are based on a calculation of expected improvements in human health resulting from changes in particulate matter and ozone concentrations, which are thought to capture the most important benefits.

Peter R. Smith, President of NYSERDA said, "This report supports New York State's position that additional cuts in emissions from power plants are cost effective when the benefits of improved health are considered." "The emission reduction levels proposed by the EPA certainly bring substantial gains," commented Karen Palmer, Senior Fellow at RFF and an author of the report. "However, we can still do better. Our study shows even greater benefits could be achieved through sulfur dioxide emissions reductions beyond the EPA's current requirements."

The authors caution against taking economic advice on mercury emissions targets from the report, because their assessment did not reflect all of the potential benefits from mercury reductions. "A more precise accounting of the benefits of reduced mercury emissions could sway the recommendation," noted Palmer. "Those results could indicate that more stringent mercury controls than what the EPA currently supports would be advisable."

The authors found the effct of policies on the mix of fuel used to supply electricity is modest at the national level and in New York, under emission reduction scenarios similar to the EPA's final rules. However, at tighter levels of mercury control than the EPA's rule, the regulatory approach would have an effect on fuel choice. "If preserving a role for coal-fired generation is an important policy goal, then a maximum achievable control technology approach may be preferred to a trading approach as the way to achieve tighter mercury targets," said Palmer.

"Consumers bear most of the regulation cost under all of the scenarios we examined, although under the EPA rules, producers also bear substantial cost by 2020," Palmer added. "Producers actually benefit when emission allowance trading is used to achieve a strict cap on mercury emissions."

Nationally, the electricity sector accounts for roughly 68 percent of national sulfur dioxide emissions, 22 percent of nitrogen oxides, 40 percent of mercury, and 40 percent of carbon dioxide. These pollutants contribute to acid rain, fine particulate concentrations in the atmosphere, ground-level ozone, global warming, and neurological and other health problems. Effects of sulfur dioxide and nitrogen oxides are particularly strong in New York and the northeast, which are downwind of many coal-fired generators located in the mid-Atlantic and Ohio Valley.