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2002-03 Seminars


Multipollutant Emissions Reduction and CO2 Control: The Costs of Regulatory Uncertainty

Tim Johnson

Engineering and Public Policy, Carnegie Mellon University
tjohnson@andrew.cmu.edu

Abstract

Tighter controls on electric sector SO2, NOX, mercury, and fine particulate emissions would impose cost and performance penalties that, in turn, influence technology choices. Stricter regulation of conventional pollutants, for instance, could accelerate retirement of existing coal plants and favor investment in new gas units and renewable energy sources. The advent of a CO2 control regime could have similar effects. Important interactions between the reduction of criteria pollutants and CO2, however, may lead to the opposite outcome - especially if the latter is achieved via carbon capture and sequestration (CCS).

While proposed CCS technologies would increase capital and operating costs, they also decrease conventional pollutant emissions (post-combustion amine coal plant retrofits are perhaps the sole exception, with higher NOX emissions on a per-kWh basis). As a result, the costs of CCS technologies are likely to be less for electric power plants that must meet stronger criteria pollutant control standards than for those that do not, and plausible scenarios of more stringent environmental regulation could
accelerate the adoption of CCS technologies.

The timing and integration of any new criteria pollutant and CO2 regulations, however, will affect the extent to which technological synergies lower control costs. More stringent reductions in SO2 and NOX, for instance, if required in the near future, might lead the electric power industry onto a technology path that would be suboptimal should higher-than-anticipated reductions in CO2 emissions be necessary, say, a decade or two later. Technology choices made on this basis ("lock-in") could yield higher emission control costs should assumptions about either be in error and stranded costs become significant. Path dependencies and the costs of regulatory uncertainty therefore deserve further analysis.

The work to be described extends the capacity planning and dispatch model I developed for my EPP Ph.D. dissertation to examine CCS in a multipollutant framework, once again focusing on a regional electricity market (the MAAC NERC region). In particular, I have adopted a value of information framework to examine optimal technology paths and the costs of regulatory uncertainty under a variety of emission control regimes.