Chapter 2 Review of Related Literature: ENVIRONMENTAL EFFECTS OF FOSSIL FUEL POWER PLANTS

 

A growing number of scientific researchers and political leaders have urged prompt conservation of fossil fuels by investing immediately in energy-efficient vehicles, machinery, and structures and by gradually shifting to alternative sources of energy.

This argument, although drawn from recent research on the economics of technology, offers important lessons to the environmental and resource economist. Fossil fuel conservation would postpone the historical moment when widespread commercial adoption of a replacement energy technology must occur. This postponement, in turn, would permit society to assemble a more extensive portfolio of potential replacement technologies that have already completed their pre-commercial phases of development. Hence, comparisons of input costs, social implications, and environmental hazards associated with the various options could be made, at least in principle, prior to commercialization of, and possibly irreversible commitment to, a particular replacement technology. Having time to compare and assess potential candidates to replace fossil fuels is especially important since, as Georgescu Roegen (1971) has wisely observed, not all technologies that are feasible to operate in the short run are also viable in the long run.

            This chapter discusses the effects of fossil fuel power plants, or simply the burning of fossil fuels to our environment.  It indicates here the many disadvantages of using such substances like its bad effects on human health, animal life and our ozone layer.  However, the actions being taken to prevent these effects are also shed light in this paper through the programs of the Environment Protection Agency.

Background of the Literature

Environmental protection requirements imposed on fossil-fuel electric power generators by the United States Environmental Protection Agency (EPA) are subject to ongoing review because this is the industry most responsible for conventional air pollutant emissions and is a significant source category of hazardous air pollutants (Reitze, 2002). Fossil fuels are used to generate about 68% of the electricity in the United States; coal is used to generate about 44% of the electricity (U.S. Dep't of Energy, 2001).  In 1998, electric utilities emitted 67.2% of the nation's S[O.sub.2], 24.9% of N[O.sub.x], and about 10.6% of the small particulate (P[M.sub.10]) emissions (U.S. Environmental protection Agency, 2000).

Most important environmental impacts caused by energy sources are global climate change and acid rain – both of which have the origin in the combustion of fossil fuels and lead to global or transboundary effects. (Falk, 2000). Combustion of fossil fuels contributes around 80 percent to total world-wide anthropogenic CO2 emissions. Since the industrial revolution, humans have been adding huge quantities of greenhouse gases, especially carbon dioxide (CO2) to the atmosphere. More greenhouse gases means that more heat is trapped, which causes global warming. By burning coal, oil and natural gas increases atmospheric concentrations of these gases. Over the past century, increases in industry, transportation, and electricity production have increased gas concentrations in the atmosphere faster than natural processes can remove them leading to human-caused warming of the globe (Falk, 2000).

Moreover, sixty-seven hazardous air pollutants potentially are emitted from fossil-fueled electric power generating plants, and EPA predicts a 30% increase in these emissions by the year 2010 (US Environmental Protection Agency, 1998). In addition, about 40% of C[O.sub.2] from United States sources comes from electric power industry (utilities and nonutilities combined), (US Environmental Protection Agency, 2001) and domestic C[O.sub.2] emissions increased by 2.5% in 2000, which is a significant increase from the 1.3% average annual growth from 1990 to 2000 (Bologna, 2001).

The United States's emissions of C[O.sub.2] are responsible for an estimated 25% of the world's C[O.sub.2] emissions from fossil-fuel burning and cement manufacturing (United Nations Programme, 2001). Moreover, increases in generating capacity are projected to increase C[O.sub.2] from the electricity sector by 14 to 38% by 2007 from the 1998 level. In 1999, coal was used to generate 52.8% of the electricity generated in the United States; petroleum was used to produce 2.56%; and natural gas was used to produce 10.78% (US Department of Energy, 2001).

The use of natural gas is projected to increase, coal use will increase more slowly, and petroleum use is expected to continue to decrease (US Department of Energy, 2001). Most of the nation's coal-burning plants were constructed between 1950 and 1980, and these plants are the nation's most significant stationary source of air pollution (Swift, 2000). New electric power plants almost always use gas-fired turbines because such plants are less expensive to construct, have a higher thermal efficiency, and produce far less pollution. This offsets the need for gas, which is more expensive than coal (US Department of Energy, 2000). 

In 2001, there were more than five thousand electric power planks in the United States (Reitze, 2002). However, the field is dominated by a small number of investor-owned and publicly-owned utilities. In 1995, investor-owned utilities accounted for more than 75% of retail electric power sales and revenues. Ten companies accounted for 32.61% of the revenue from investor-owned electric utilities, over $53 billion dollars. Publicly-owned electric utilities accounted for about one-eighth of the revenue from electric power sales; nearly half of the publicly-owned generation sales came from ten utilities. Because the electric power industry is such an important stationary air emissions source, and because it represents the most cost effective target for major reductions of N[O.sub.x] and S[O.sub.2] emissions, much of the CAA program for stationary sources is aimed at controlling this industry (Parker  and Blodgett, 2001).

 

Review of the Literature

The burning of fossil fuels has a number of potential undesirable effects: high levels of urban air pollution; acid rain that damages forests, lakes, and crops; and changes in global climate. Exposure to high levels of particulates in urban air causes hundreds of thousands of premature deaths and millions of cases of respiratory illness worldwide (World Bank 1994; 1997c; WHO 1997).

The reason most commonly given in support of fossil fuel conservation is the need to prevent future global climate change. The World Resources Institute [1992, 2-7], for instance, argues that fossil fuels provide about 95 percent of the commercial energy used in the world economy. Combustion of those fuels constitutes the largest source of emissions of climate-altering greenhouse gases. Most scientists agree that such emissions cannot be continued indefinitely at current or increasing levels without causing devastating effects on ecosystems and on people (WRI, 1992).

It is now widely acknowledged that the depletion of geological stocks of fossil hydrocarbons will eventually force the global economy to shift to an alternative energy technology (England, 1994). Several transitional strategies have been proposed to facilitate the historic shift from fossil fuels to their eventual replacement(s). The World Resources Institute 11992, 22!, for example, emphasizes the immediate potential for increased energy efficiency. They asserted that there is no lack of technological opportunity for more efficient energy use in the United States and other OECD countries.

Meadows et al. [1992, 74] also reflect this point of view. The Worldwatch Institute, on the other hand, has recently proposed natural gas as a relatively benign substitute for oil and coal during the next two decades, especially in light of a substantial increase in global proven reserves of natural gas during recent years [Flavin 1992, 28].

At any moment in time, then, the alternative energy technologies that might replace fossil fuels are suspended between their known historical records and their uncertain future possibilities. Some are at an early stage of their technological evolution, awaiting fundamental advances in science, mathematics, computing, and laboratory instrumentation. Others are at the later stage of prototype testing and have begun to attract the attention of innovation-minded entrepreneurs and venture capitalists (England, 1994).

The locus of environmental policy is increasingly situated at the state level (Ptoski and Woods, 2002). In clean air policy, states conduct the bulk of the enforcement actions, operate an extensive network of air monitoring stations, and have adopted pollution standards that often exceed the U.S. Environmental Protection Agency's (USEPA) minimum criteria (Ptoski and Woods, 2002). However, state environmental programs are not uniform, particularly in air pollution regulation. Some states have adopted more stringent air quality standards, others have developed more rigorous enforcement regimes, while still others have cultivated reputations for technical policy expertise. Analysts attempting to explain differences in state environmental programs have developed a standard set of tools of inquiry that they have employed both to measure the vigor, or "greenness," of state environmental programs and to explain why states adopt differing policy programs (Ptoski and Woods, 2002).

Thus, the electric power industry is changing rapidly. Two laws--the Public Utility Regulatory Policy Act of 1978 (PURPA) (24) and the Energy Policy Act of 1992 (EPAct) (25)--started the move toward increased competition in the electric power industry. EPAct removed constraints on ownership of electric power generator facilities and encouraged competition in the wholesale electric power business (Reitze, 2002).

To comply with State Implementation Plant requirements, fossil-fuel electric power generating plants have to meet the CAA requirements applicable to stationary sources, but due to the large portion of stationary source emissions attributable to the electric power industry, there are provisions in the CAA aimed primarily at this industry. Moreover, because of the size of most electric power plants, the more stringent requirements imposed on major sources usually are applicable.

The 684 coal-fired electric power plants in the United States emit trace amounts of sixty-seven air toxics,  (Clean Air Act, 2000) according to a 1998 EPA report. Of the thirty-three chemicals listed for control under EPA's Urban Air Toxics Strategy, most are emitted from fossil-fuel electric generating plants US Environmental Protection Agency, 1998). According to EPA (1998), most of the inhalation health risk comes from arsenic and chromium emissions, but the agency also is concerned about mercury and dioxins emissions. For oil-fired utilities, nickel creates the greatest inhalation risk (EPA, 1998). Mercury emissions are considered the most significant pollutant for multi-pathway analysis because they bioaccumulate in the food web (EPA, 1998). 

To form a picture of carbon use, we need to be able to sum and compare its appearances. One way is to index carbon by the ratio of carbon atoms to hydrogen atoms in the energy sources that contain both of these fuels (Nakicenovic, 1996). Fuelwood has the highest effective carbon content, with about ten carbon atoms per hydrogen atom. If consumed without a compensating growth of biomass, which occurred in the past and still occurs in most developing countries, fuelwood thus produces higher carbon emissions than any of the fossil energy forms. Among fossil energy sources, coal has the highest carbon-to-hydrogen ratio, roughly one to one. Oil has on average one carbon for every two hydrogen atoms, and natural gas, or methane, has a ratio of one to four. Using these types of elemental analyses, we can estimate the total amount of carbon contained in a given supply of an individual fuel or a mix of fuels and compare this amount to energy consumed or associated economic output (Nakicenovic, 1996).

Decarbonization can then be expressed as a product of two factors: 1) carbon emissions per unit of energy consumption (Nakicenovic, 1996); and 2) energy requirements per unit of value added, which is often called energy intensity (Nakicenovic, 1996). The ratio of carbon emissions per unit of primary energy consumed globally has fallen by about 0.3 percent per year since 1860 (Nakicenovic, 1996). The ratio has decreased because those with lower carbon content, such as gas, have continuously replaced high-carbon fuels, such as wood and coal, and also in recent decades by nuclear energy from uranium and hydropower, which contain no carbon (Nakicenovic, 1996).

The major determinants of energy-related carbon emissions can be represented as multiplicative factors in a simple equation. Placing carbon emissions on one side, on the other we have population growth, per capita value added, energy consumption per unit of value added, and carbon emissions per unit of energy consumed (Nakicenovic, 1996). However, their decline is counteracted by rising values for the preceding terms, population and economic activity, resulting in an overall global increase in energy consumption and carbon emissions.

The competitive struggle between the five main sources of primary energy--wood, coal, oil, gas, and nuclear--has proven to be a dynamic and regular process that can be described by relatively simple rules (Nakicenovic, 1996). A glance reveals the dominance of coal as the major energy source between the 1880s and the 1960s after a long period during which fuelwood and other traditional energy sources led. The mature coal economy meshed with the massive expansion of railroads and steamship lines, the growth of steelmaking, and the electrification of factories. During the 1960s, oil assumed a dominant role in conjunction with the development of automotive transport, the petrochemical industry, and markets for home heating oil (Nakicenovic, 1996).

The model of energy substitution projects natural gas (methane) to be the dominant source of energy during the first decades of the next century, although oil should maintain the second largest share until the 2020s (Nakicenovic, 1996). Such an exploratory look requires additional assumptions to describe the later competition of potential new energy sources such as nuclear, solar, and other renewables that have not yet captured sufficient market shares to allow reliable estimation of their penetration rates (Nakicenovic, 1996). This leaves natural gas with the largest share of primary energy for at least the next fifty years. In the past, new sources of energy have emerged from time to time, coinciding with the saturation and subsequent decline of the dominant competitor.

In fact, an energy system of the distant future that relies on electricity and hydrogen as the complementary energy carriers would also advance dematerialization (Nakicenovic, 1996). Hydrogen has the lowest mass of all atoms, and its use would radically reduce the total mass flow associated with energy activities and the resulting emissions. Electricity is free of material emissions, and the only product of appropriate hydrogen combustion is water.

 

It can now be seen that, even if humanity could adapt costlessly to global climate change, accelerating global consumption of fossil fuels would still have an ominous consequence: rapid arrival of the "moment of decision" when widespread commercial adoption of some alternative energy technology would be essential to continued economic activity (England, 1994). A second reason for promoting immediate conservation of fossil fuels is to give humanity more time to construct the social institutions and cultural values that would be compatible with a post-fossil fuel technology, thereby mitigating the social dislocations and conflicts that will inevitably accompany that technological transformation (England, 1994). There is, however, a third reason to pursue fossil fuel conservation, which is rooted in concerns about the present generation: the need to avert increasingly violent wars over control of the world's dwindling stock of unused petroleum (England, 1994).

By 2006-2011, electricity will be purchased and sold in both wholesale and

eligible retail markets by any willing creditworthy participant (Tomain, 2002). Markets will clear with competitive prices. Competitive prices will function so as
 to ration existing supplies efficiently in the short run and to elicit
 adequate technology and infrastructure in the long run, so that there will
 be no involuntary curtailment of service at market prices (Tomain, 2002). Electricity markets will be both transparent and liquid, and market participants will
 have opportunities to hedge risks. Although regulation of monopoly service
 providers will continue, even these monopolies will feel some pressure of
 competitive market forces (Loomis, 1998).

The EPA as the Mitigating Agency for Environment Protection

With the kind of environmental problems outlined above, a government program that will focus in the prevention, restoration and regulation of these environmental nuisances is a required. Thus the Environmental Protection Agency was established to meet these challenges. As such, several programs were instituted that responds on issues covering water, air and land degradation. 

One such program is the EPA’s Clean Energy Programs. It is designed to improve the national foundation of information on Clean Energy by creating networks between the public and private sector, providing technical assistance, and offering recognition of environmental leaders that adopt Clean Energy practices. Moreover, Climate Leaders is a voluntary EPA industry-government partnership that encourages companies to develop long-term comprehensive climate change strategies. Combined Heat and Power (CHP) is one form of distributed generation that produces electricity at the point of use. CHP, or cogeneration, is the sequential production of electricity and thermal energy from a single fuel source. CHP is more efficient, cleaner, and reliable than conventional central power plants. The CHP Partnership is a voluntary program that seeks to reduce the environmental impact of power generation by fostering the use of CHP in the commercial, institutional, and industrial sectors.

As a result, there has been substantial environmental progress over the past several decades (Adler, 2001). Air and water quality, in particular, have improved, while the United States and other nations have reached unprecedented levels of prosperity (Adler, 2001).

However, environmental regulation imposes a large and growing burden on the United States economy (Adler, 2001). In 1999, environmental regulations cost an estimated $206 billion -- over one-quarter of the total federal regulatory burden (Adler, 2001). In late 1999, the EPA's accounted for over ten percent of all new rules in the regulatory pipeline.(17) Of the 137 forthcoming major rules identified by the federal government in October 1999, the EPA accounted for twenty-eight, over twenty percent of the total, and more than any other federal agency (Adler, 2001).

Environmental regulations are certainly costly (Adler, 2001). However, there is no question that the early environmental laws seemed to work well (Meiner, 1993). Beginning in the 1960s, many indicators of environmental quality showed distinct improvement (Portney, 2000). Some of these gains were likely due to the first generation of federal environmental regulation. The rest occurred due to state and local efforts or other extraneous factors (Portney, 2000). The initial generation of environmental policy was effective principally because it was plucking low-hanging fruit; removing lead from gasoline and preventing the disposal of raw sewage in rivers were relatively easy issues to address.

As of June 30, 1999, the Environmental Protection Agency ("EPA") claimed to have cleaned up half of the over 1,200 sites on the National Priorities List ("NPL") -- the EPA's official list of the most hazardous waste sites -- yet fewer than 200 had been actually taken off the list (GAO, 1999).

There are two primary obstacles to successful government efforts to promote clean technologies (Goodstein, 1995). First, assuming that government planners are in fact public spirited, they face poor information about the environmental consequences of a given technology as well as future production costs and markets. This suggests a potential for mistakes, which as noted above, may be costly. Second, once given significant power to pick technologies for promotion, government planners will in fact face a variety of political-economic motivations to deviate from serving the general interest (Goodstein, 1995).

The administrative system for environmental policy in the United States is a mix of centralized and decentralized (Lotspeich, 1998). While states have a great deal of independence and primary responsibility for implementation and enforcement, environmental standards typically are determined at the federal level by the EPA (Lotspeich, 1998). A more intrusive approach to regulation of private enterprise in the United States has been noted by several researchers of comparative politics, and in particular by Vogel (1986) for the case of environmental regulation. He asserts that the use of emissions charges has been very limited in the United States, being restricted to wastewater effluents. These charges are administered locally, their primary purpose is to fund treatment plants, and usually they are not tied directly to effluent volumes. As incentive impacts are negligible, these charges don't really represent application of market instruments for pollution control. In keeping with a philosophy contrary to government support of private industry, the only significant subsidy program in U.S. environmental policy has been intergovernmental transfers in the form of federal grants to local governments for the construction of wastewater treatment facilities (Lotspeich, 1998).

In the late 1970s the EPA began to experiment with flexibility in emission standards for air pollutants, and legislation in 1986 formalized procedures for quasi-tradable permit systems referred to as the bubble, offset, netting, and banking provisions (Lotspeich, 1998). Banking allows a firm temporarily to store emission reduction credits, and the other three elements are different applications of tradable permits (Lotspeich, 1998). The offset program allows trades between existing and new sources, while the bubble policy provides for trades among existing sources. The netting program pertains to equipment modifications within a given production facility (Lotspeich, 1998). Several observers argue that these programs are not as successful as they could be. Although their introduction has moved policy toward tradable permit systems, they have been criticized as unduly restrictive and excessively bureaucratic. Trades are subject to extensive regulatory reviews, approval typically takes from 4 to 29 months, and trade brokers have emerged in response to the high cost of trading (Opschoor & Vos, 1989). Of the several thousand offset trades completed by the late 1980s only 100 were at "arm's length" (Dudek & Palmisano, 1988), which suggests that administrative srequirements are biased in favor of internal shifts of abatement responsibility. High transaction costs likely are preventing mutually beneficial trades between separate firms that would reduce overall compliance cost.

Despite limitations on trading, these policies have helped achieve major cost savings. With the flexibility they introduce, firms are less tied to particular control technologies, which is especially important because policy in the United States has been technologically restrictive (Lotspeich, 1998). There also is scope for shifting abatement burdens from high-cost to low-cost sources. The extent to which limited trading is able to exploit the potential cost saving is not known fully, but several studies have indicated that significant reductions in compliance cost have resulted (Dudek & Palmisano, 1988). Hahn & I-lester (1989) estimated over $400 million of savings by the 132 trades that had occurred under the bubble program and as much as several billions of dollars by the thousands of trades carried out under the netting program. Their analysis concluded that the following features are important for success: low levels of political conflict, low information requirements for firms, lessened regulatory delay, security in the property right, and the existence of facilitating institutions that function as a trading infrastructure. These features are basic to economic exchange more generally.

            Activities EPA considers in keeping with the exemption include: monitoring the borrower's business; conducting on-site inspections and audits; and certification of financial information and legal compliance. The underlying proviso is that the borrower remain in "possession and control" of the facility (ABA Banking Journal, 1990).

 

 

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