Outline: ChE 150, February 24, 2009

1. Outline: ChE 150, February 24, 2009 • Finish Tradable Permits (simulation) • Recycling

2. Pollution is tied to the economy. manufacture utilization extraction waste - Ce - Cm + Bu - Cw > 0 • Benefit (Bu) scales with GDP • Pollution associated with extraction, manufacture, disposal • Meaning of “zero-waste society” ... “clean technology” ? Pollution: when chemical waste streams exceed environmental capacity and directly affect our well-being: • Dermal • Inhalation • Ingestion

3. Depletion of “good” ozone in stratosphere • Stratosphere: +20 – 50 km, elevated O3 (~10 ppm) • Absorbs harmful UV radiation • CFCs destroy this ozone (Crutzen, Molina, Rowland: Nobel Prize 1995) • Montreal Protocol (1987): dramatically reduced atmospheric ozone materials, energy Human mortality,life-span adjustments Ozone depletingsubstances: CFCs, HCFCs Ozone layer lossincrease in UV products

4. Photochemical Smog: Cause & Effect Chain materials, energy Human & ecologicaldamage fromoxidants NOx and volatile organics Photochemical oxidation reactions products • Ozone is derived from NOx • Irritates lungs, affects vegetation, destroys chlorophyll • Smog VOCs irritate eyes (formaldehyde) • Closely tied to combustion & transportation sectors

5. Acid Rain: Environmental Cause & Effect Chain materials, energy Human & ecologicaldamage fromH+ and metals SO2 and NOxemission to air Acidification rxns& acid deposition products • Sources • non-transportation fuel combustion (~85%) • industry, transportation • Enters humans through inhalation • absorbed into upper respiratory system • swells, constricts airway passages • cause lung disease, cardiovascular disease • Harms fish (aluminum leaching from soil), decreases plant growth

6. Lead persists in the environment, and accumulatesin organisms • Primarily found as particulates, can suspend in air • Sources: gasoline additives (banned 1970, CAA), paint,industrial processes • Enters waterways, uptake by aquatic species • Enters humans through inhalation & ingestion • Target organs: liver, brain • Strong correlation between lead levels and decreased IQ in urban settings.

7. A Clean Freshwater Supply is Vitally Important • Freshwater uses in U.S. • agricultural irrigation (42 %) • electricity generation (38 %) • public supply (11 %) • industry, rural • Pollution Sources • Point sources are specific locations: • Sewar outlets, industrial discharges, ’89 Exxon Valdez • Non-point sources • Urban runoff, pesticides, road runoff • Freshwater can be recharged • evaporation, precipitation : nature’s distillation of water

9. Cost-Benefit Analysis of Pollution MD: Marginal Damage– loss in well being due to extra pollution; WTP to avoid pollut. MAC MD $ MAC: Marginal Abatement Cost– cost of reducing depositions; “end-of-pipe” technology, e.g. flue gas desulphurization a P* is “optimal pollution” b pollution level p* CL:critical load Analysis relies on ability to estimate damages

10. How to reach p* : environmental regulation MAC MD Implement emission Standards: “Command and Control” $ Require “best available technology, not entailing excessive costs” Market based instruments a b p* CL Pigouvian Tax: Tax per unit output (e.g. electricity) equal to the marginalexternal cost, with tax revenue being directed at compensating those harmed or abating environmental damage. All strategies seek to internalize an externality

11. Initial MAC Name of Firm Emissions Curve Erie Hydroelectric 2000 4000-2*E Ontario Electric 2000 8000-4*E Volatile Venture Inc. 2000 10000-5*E Logarithmics 4000 4000-E U of R Power 4000 8000-2*E Coals-R-Us 4000 10000-2.5*E Classroom Game: SO2 Discharge Permits • Divide up in 6 groups - pick names. • Consider the following marginal abatement cost curves: Simulation adopted from A.W. Ando & D. T. J. Ramirez, Univ. Illinois at Urbana-Champaign

12. Scenario 1: Command and Control Each firm is subject to a uniform standard of 1480 tons of SO2 per year. Your firm should calculate and report: 1) Abatement quantity (tons) 2) Cost imposed upon firm ($)

13. Scenario 2: Tradable Discharge Permits, non-facilitated Each firm is provided permits worth 1480 tons of SO2 emission per year. Find other firms to buy or sell with. Report the following -number of permits purchased or sold -the total transaction cost or profit

14. Scenario 3: Tradable Discharge Permits, facilitated Each firm is provided permits worth 1480 tons of SO2 emission per year. Your firm should work through the market facilitator to determine the market price of a permit, and the number of permits your firm will buy or sell.

15. Tradable Discharge Permits: Summary • Approach to reduce pollution in a cost-effective fashion • Firms elect whether or not to abate pollution • Permit can be purchased (from other firms) to allow discharge • Number of permits is set by regulatory agency

16. Who bought, who sold, and why?

17. What is the role of the market facilitator? • What would happen without a facilitator? • Is there another forum for trading? • For programs in the US: • most trading is bilateral • regulatory body approves trades, distributes initial permits, and imposes fines

18. What are the downside of permits? • Many unresolved problems • enforcement • initial allocation of permits • Is there another forum for trading? • For programs in the US: • most trading is bilateral • regulatory body approves trades, distributes initial permits, and imposes fines