Deck 12: Improving Air Quality: Controlling Stationary Sources

Question 1

The Acid Rain Program (ARP) was defined in Title II of the Clean Air Act Amendments of 1990.

Answer 1

False

Question 2

Relative to mobile sources, stationary sources are bigger emitters of sulfur oxides.

Answer 2

True

Question 3

Under a bubble policy, a facility is allowed to measure its emissions as an average of all releases from that facility.

Answer 3

True

Question 4

Major sources of SO₂ emissions are automobiles and other mobile sources.

Question 5

NO_X contributes both to acid rain and to the formation of ground-level ozone.

Question 6

Of the two major pollutants responsible for acid rain, sulfur dioxide (SO₂) is the more significant.

Question 7

RECLAIM is a California trading program that used trading credits in a regional market for sulfur oxide and nitrogen oxide.

Question 8

Stationary source emissions are controlled primarily through the use of technology-based standards.

Question 9

China's acid rain problem is relatively minor because it is among the lowest consumers of coal in the world.

Question 10

Acidic compounds are formed from a chemical reaction in the earth's atmosphere, involving sulfur dioxide, nitrogen oxide, water vapor, and oxidants.

Question 11

According to the Clean Air Act, the newly GHG emissions standards on mobile sources triggered regulatory requirements for stationary sources.

Question 12

The Clean Air Interstate Rule (CAIR) included an annual SO₂ trading program.

Question 13

Because NO_X readily moves across state borders, a series of interstate collaborations formed over time to address the problem, but none established a trading program.

Question 14

Emissions limits applicable to new and modified stationary sources are known as New Source Performance Standards (NSPS).

Question 15

Two new NO_X cap-and-trade programs were launched under the Clean Air Interstate Rule (CAIR).

Question 16

Technology-based standards used to control new sources are more lenient than those used to control existing stationary sources.

Question 17

Emissions limits used for nonattainment areas are more stringent than those used for PSD areas.

Question 18

Under the Acid Rain Program (ARP) as initially outlined in the CAAA of 1990, a cap-and-trade allowance program was established for both SO₂ and NO_X.

Question 19

Acid rain is a local pollution problem.

Question 20

Under the cap-and-trade program established under Title IV of the Clean Air Act Amendments of 1990, a permanent annual cap for SO₂ was set and tradeable SO₂ allowances were issued to stationary sources.

Question 21

New Source Performance Standards (NSPS)

A) were revoked by the Clean Air Act Amendments of 1990
B) are applicable to new and modified stationary sources
C) are performance-based standards defined by the EPA
D) are more lenient than emissions limits for existing sources
E) none of the above

Question 22

RECLAIM refers to

A) one of the first state-level trading programs, which was developed in California
B) a federal program for stationary sources to earn credits for reducing pollution
C) a national program to refurbish older, polluting refineries
D) the claiming of SO₂ allowances that have been banked in a prior period

Question 23

Primary sources of SO₂ emissions are

A) fossil-fuel burning power plants and refineries
B) heavy-duty trucks and buses
C) light-duty trucks and automobiles
D) commercial aircraft

Question 24

Which of the following is INCORRECT?

A) Emissions limits in PSD areas are more stringent than those in nonattainment areas
B) New Source Performance Standards are technology-based and defined by the EPA
C) Emissions limits for existing sources are more lenient than for new sources
D) Technology-based standards used to control stationary sources are applied uniformly

Question 25

The uniformity of technology-based standards is the characteristic that allows them to achieve cost-effectiveness.

Question 26

PSD areas

A) were defined recently by an Executive Order issued by President Obama
B) are those areas defined as 'polluting source designated'
C) face more lenient emissions standards than nonattainment regions
D) are no longer recognized in U.S. policy
E) none of the above

Question 27

Acidic deposition arises when

A) VOCs mix with carbon dioxide in the atmosphere and fall to earth as rain or snow
B) carbon monoxide and sulfur dioxide combine to form acidic deposits
C) sulfur and nitrogen oxides mix with other particles and fall to earth as rain, snow, or fog
D) carbon dioxide and nitrogen oxides combine and reach the earth in precipitation

Question 28

Stationary source emissions currently are controlled primarily by

A) performance-based limits
B) technology-based standards
C) the bubble policy
D) the OTC NO_X Budget Program

Question 29

In an allowance market, buyers will purchase allowances as long as the price is higher than their MAC, which results in a cost-effective solution.

Question 30

According to the cost-effectiveness criterion, trading of SO₂ allowances under the CAA should continue as long as MSB_abatement > MSC_abatement.

Question 31

Under the national Acid Rain Program (ARP)

A) two phases were defined that began in 1980
B) a cap-and-trade program was defined only for SO₂
C) a cap-and-trade program was defined for both SO₂ and NO_X
D) the EPA issued emission allowances that could be used or banked, but not traded

Question 32

The GHG permitting requirements

A) are applicable to both mobile and stationary sources
B) will not be in force until 2016
C) are part of the New Source Review requirements
D) all of the above

Question 33

The dual-control approach refers to

A) dual trading programs, one for sulfur dioxide and one for nitrogen oxides
B) different standards used in PSD areas versus nonattainment areas
C) the netting program and the offset program
D) state control of existing sources and federal control of new or modified sources

Question 34

According to the dual-control approach, states set abatement levels for existing stationary sources below the EPA-administered standard for new sources. The "new source bias" associated with this approach is that

A) firms have an incentive to shut down their businesses
B) states have an economic motive to set very stringent standards for existing sources
C) firms have an incentive not to start new construction and instead remain in older, existing facilities
D) the EPA has an incentive to set lenient standards for new sources

Question 35

Consider the following two statements to answer this question: (1) The bubble policy allows a facility to measure its emissions as an average of all emission points from that facility.
(2) Netting was developed as a trading program to control emissions in PSD areas.

A) (1) is true and (2) is false
B) both (1) and (2) are false
C) (1) is false and (2) is true
D) both (1) and (2) are true

Question 36

The Clean Air Interstate Rule (CAIR)

A) established three trading programs, one for SO₂ and two for NO_X
B) was enacted under the Obama Administration
C) set emissions limits without any accompanying trading program
D) all of the above
E) none of the above

Question 37

Because of the dual-control approach, emissions limits tend to be more stringent for newer facilities, creating a bias against building newer, and hence cleaner, facilities.

Question 38

According to the newly established GHG regulations, new or modified stationary sources of GHGs

A) would immediately face stringent emissions limits, regardless of their contribution to GHG emissions
B) would be subject to the New Source Review requirements
C) are required to eliminate all GHG emissions
D) none of the above

Question 39

Which of the following are among the effects of exposure to SO₂ and NO_X?

A) visibility impairment
B) acidification of surface waters
C) forest damage
D) all of the above

Question 40

Overall, empirical studies fail to support the claim that command-and-control policy is more costly to implement than more flexible approaches.

Question 41

Based on available information about the annual auctions for SO₂ allowances

A) only the largest electric utilities are allowed to bid
B) allowance prices have been much higher than predicted
C) allowance prices are unrelated to energy prices
D) prices of SO₂ allowances are lower than originally anticipated

Question 42

Suppose Michigan's NO_X abatement standard for existing (E) sources is 4 units and the EPA's standard for new (N) sources is 10 units and that MAC_E = 1.8A_E and MAC_N = 1.2A_N. To meet the same combined abatement level of 14 but in a cost-effective manner, the standards for each should be

A) A_E = 7; A_N = 7
B) A_E = 4.8; A_N = 7.2
C) A_E = 5.6; A_N = 8.4
D) none of the above

Question 43

Suppose the Clean Air Act calls for a rise in NO₂ abatement (A) from 50 to 60 percent and that the MSC (in millions) is MSC = 12 + 0.8A, where A is measured in percent. Then, the incremental cost of this policy change is

A) $8 million
B) $40 million
C) $560 million
D) $500 million

Question 44

Suppose that there are only two stationary sources in a given air quality region. The first source has been in existence for several years, while the second source is new. The following functions represent marginal abatement costs (MAC) for each polluting source:
MAC_EX = 10.0 + 0.7A _EX, MAC_N = 9.2 + 0.5A _N,
where A_EX is the percentage abatement level for the existing source, and A_N is the percentage abatement level for the new source.
Assume that the aggregate abatement standard (i.e., for the region as a whole) is set at 40 percent and that the two firms' current abatement levels are A_EX = 10 and A_N = 30.
Explain why the current abatement levels for the two sources do not achieve cost effectiveness.

Question 45

The cost-effective solution is:

A) Ax = 15; Ay = 15
B) Ax = 9; Ay = 4.5
C) Ax = 10; Ay = 20
D) none of the above

Question 46

Using the labels on the graph below, the total cost for both firms at the cost-effective solution is ________, and the excess cost from using the uniform standard is___________

A) ABCGH; CGH
B) ACH; CGH
C) ACDEH; CDE
D) ACH; CDE

Question 47

Suppose that there are only two stationary sources in a given air quality region. The first source has been in existence for several years, while the second source is new. The following functions represent marginal abatement costs (MAC) for each polluting source:
MAC_EX = 10.0 + 0.7A _EX, MAC_N = 9.2 + 0.5A _N,
where A_EX is the percentage abatement level for the existing source, and A_N is the percentage abatement level for the new source.
Assume that the aggregate abatement standard (i.e., for the region as a whole) is set at 40 percent and that the two firms' current abatement levels are A_EX = 10 and A_N = 30.

-Find the cost effective allocation of abatement across the two sources that also satisfies the 40 percent aggregate abatement level. Support with calculations.