Cost-effective reduction of NOx emissions from electricity generation

This paper analyzes the benefits and costs of policies to reduce NOx, emiss ions from electricity generation in the United States. Because emissions of NOx, contribute to the high concentration of atmospheric ozone in the east ern states associated with health hazards, the U.S. Environmental Protectio n Agency (EPA) has called on eastern states to formulate state implementati on plans (SIPs) for reducing NOx, emissions. Our analysis considers three N Ox, reduction scenarios: a summer seasonal cap in the eastern states covere d by EPA's NOx SIP Call, an annual cap in the same SIP Call region, and a n ational annual cap. All scenarios allow for emissions trading. Although EPA 's current policy is to implement a seasonal cap in the SIP Call region, th is analysis indicates that an annual cap in the SIP Call region would yield about $400 million more in net benefits (benefits less costs) than would a seasonal policy, based on particulate-related health effects only. An annu al cap in the SIP Call region is also the policy that is most likely to ach ieve benefits in excess of costs. Consideration of omissions from this acco unting, including the potential benefits from reductions in ozone concentra tions, strengthens the finding that an annual program offers greater net be nefits than does a seasonal program.