Economic evaluation of air pollution reduction of phase I power plants in West Virginia: An output distance function approach
Date of Graduation
Chambers College of Business and Economics
Jerald J. Fletcher.
Air pollutants from coal-fired power plants are nonmarket environmental bads. Title IV of the 1990 Clean Air Act Amendments (CAAA) sets the stage for the dirtiest power plants to reduce emissions of SO2 and NO x in two phases. Title IV allocates plants SO2 allowances as a variation of "pollution rights" based on averaged historical emission levels and allows free-trade of allowances. This is the world's first large scale pollutant trading market. Trading allows for improved efficiency, flexibility, and reduced pollution.;This study employs the output distance function approach to evaluate the pollution reduction behavior and efficiency of West Virginia power plants. The output distance function only needs input and output data of the electricity production process to estimate virtual or shadow values of outputs including those of nonmarket goods. Sixteen West Virginia power plants were selected for the study and 1995-1999 input and output data collected for three pollutants, SO2, NOx, and CO2. Estimates of the shadow values of SO2, NOx, and CO2 reveal inverse relationships between estimated abatement cost and the emission rate for each pollutant. The evaluation is performed on the shadow values of SO2 and NOx for each plant for each year and each plant's five-year average level against the corresponding estimated shadow value and emission rate.;The cap-and-trade program for SO2 is fully implemented under the designated provisions of Title IV of the 1990 CAAA. A plant with three units that installed "scrubbers" has the lowest emission rate of SO2 and the highest estimate of abatement cost of SO2. A plant that didn't take control measures has the highest emission rate and lowest abatement cost. The same patterns are observed in NOx as well. The estimates of CO2 indicated relatively low virtual abatement costs compared to SO2 and NOx and a relatively high emission rate. Even though there are no current regulations that effect CO2 emissions in the U.S., these results are indicative of the costs of marginal reductions. As a group, these estimates represent the total cost estimate if emissions of all three pollutants were required to be reduced. West Virginia power plants actively participated in the SO2 allowance trading market during Phase I.
Li, Huilan, "Economic evaluation of air pollution reduction of phase I power plants in West Virginia: An output distance function approach" (2006). Graduate Theses, Dissertations, and Problem Reports. 2506.