International Energy Outlook 2004
Environmental Issues and World Energy Use
In the coming decades, responses to environmental issues could affect patterns
of energy use around the world. Actions to limit greenhouse gas emissions could alter
the level and composition of energy-related carbon dioxide emissions by energy source.
Two major environmental issues, global climate change and local or regional air pollution, could affect energy use throughout the world in the coming decades. Current and future policies and regulations designed to limit energy-related emissions of airborne pollutants, are likely to affect the composition and growth of global energy use. Future policy actions to limit anthropogenic (human-caused) carbon dioxide emissions as a means of reducing the potential impacts of climate change could also have significant energy implications.
This chapter focuses on concerns about the local environmental and air quality impacts of mobile and stationary energy consumption, which have resulted in increasingly stringent regulation of air pollutants such as lead, sulfur oxides, nitrogen oxides,16 particulate matter, and volatile organic compounds. Some countries are also considering ways to limit emissions of mercury from electric power generation to avoid the possible contamination of land surfaces, rivers, lakes, and oceans.
Global Outlook for Carbon Dioxide Emissions
The International Energy Outlook 2004 (IEO2004) projects emissions of energy-related carbon dioxide, which, as noted above, account for the majority of global anthropogenic carbon dioxide emissions. Based on expectations of regional economic growth and dependence on fossil energy in the IEO2004 reference case, global carbon dioxide emissions are expected to grow more rapidly over the projection period than they did during the 1990s. A projected increase in fossil fuel consumption, particularly in developing countries, is largely responsible for the expectation of fast-paced growth in carbon dioxide emissions. Because economic growth rates and population growth in the developing world are expected to be higher than in the industrialized world, accompanied by rising standards of living and fast-paced growth in energy-intensive industries, the developing nations account for the largest share of the projected increase in world energy use. Emissions are projected to grow most rapidly in China, the country expected to have the highest rate of growth in per capita income and fossil fuel use over the forecast period.
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In 2001, carbon dioxide emissions from industrialized countries were 49 percent of the global total, followed by developing countries at 38 percent and the EE/FSU at 13 percent. In 2025, industrialized countries are projected to account for 42 percent of world carbon dioxide emissions, developing countries 46 percent, and the EE/FSU at 12 percent. The IEO2004 projections suggest that carbon dioxide emissions from developing countries could surpass those from industrialized countries between 2015 and 2020 (Figure 72).
In the industrialized world, almost one-half of energy-related carbon dioxide emissions in 2001 came from oil use, followed by coal at 31 percent (Figure 73). Over the forecast period, oil is projected to remain the primary source of carbon dioxide emissions in industrialized countries because of its continued importance in the transportation sector, where there are currently few economical alternatives. Natural gas use and associated emissions also are projected to increase, particularly for electricity generation. By 2025, the share of natural-gas-related emissions is expected to be 24 percent.
In the transitional economies of the EE/FSU region, 40 percent of energy-related carbon dioxide emissions comes from natural gas combustion. Coal production and consumption in the EE/FSU declined as a result of economic reforms and industry restructuring during the 1990s, bringing about an increase in the natural gas share of the energy and emissions mix during the period. Assuming the availability of sufficient capital for investment, further development of the vast natural gas reserves in Russia and the Caspian Sea region is expected to result in the continued displacement of coal by natural gas. Oil consumption is also projected to increase in the FSU, particularly for transportation and power generation, as Soviet-era nuclear reactors are retired in the coming years. As a result, both natural gas and oil are projected to account for increasing shares of the region’s total carbon dioxide emissions, to 48 percent and 28 percent, respectively, in 2025.
With further restructuring of the coal mining industries in Poland and the Czech Republic, declines in coal production and consumption are expected to continue. Natural gas consumption is expected to double in Eastern European countries, in part because of the strict environmental standards required for membership in the European Union (EU). As a result of the projected changes in the energy mix, carbon dioxide intensity is expected to decline in Eastern Europe more than in any other region over the forecast period. Improvements in carbon dioxide intensity are expected to offset some of the growth in total energy consumption, but annual carbon dioxide emissions in Eastern Europe still are expected to increase by about 0.9 percent per year from 2001 to 2025.
Compared with most of the industrialized countries, a much larger share of energy consumption in developing countries (particularly in Africa and Asia) comes from biomass, which includes wood, charcoal, animal waste, and agricultural residues (see discussion on "Noncommercial Biomass Energy Use in Developing Countries"). Because data on biomass use in developing nations are often sparse or inadequate, IEO2004 does not include the combustion of biomass fuels in its coverage of current or projected energy consumption, except for the United States; however, net emissions of carbon dioxide from biomass combustion are expected to be in balance in the long run with carbon sequestration by growing biomass and, therefore, are not included in the EIA estimates of greenhouse gas emissions.
Of the fossil fuels, oil and coal currently account for the majority of total energy-related carbon dioxide emissions in the developing world, and they are projected to remain the dominant sources of emissions throughout the forecast period. China and India are expected to continue to rely heavily on domestic coal supplies for electricity generation and industrial activities. Most other developing regions are expected to continue to depend on oil to meet the majority of their energy needs, especially in light of the projected increase in transportation energy demand.
Future levels of energy-related carbon dioxide emissions in many countries are likely to differ significantly from IEO2004 projections if measures to mitigate greenhouse gas emissions are enacted, such as those outlined under the Kyoto Protocol of the United Nations Framework Convention on Climate Change (UNFCCC). The Kyoto Protocol, which calls for limitations on greenhouse gas emissions (including carbon dioxide) for developed countries and some countries with economies in transition, could have profound effects on the future fuel use of countries that ratify the protocol. Because the Kyoto Protocol has not yet come into force, the IEO2004 projections do not reflect the potential effects of the treaty or of any other proposed climate change policy measures.
Issues in Energy-Related Greenhouse Gas Emissions Policy
International Climate Change Negotiations
The global community’s effort to address climate change has taken place largely under the auspices of the UNFCCC, which was adopted in May 1992 at the first Earth Summit held in Rio de Janeiro, Brazil, and entered into force in March 1994. The ultimate objective of the UNFCCC is the “stabilization of greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system” [1]. The global community reaffirmed its commitment to the principles of the Framework Convention at the second Earth Summit held in Johannesburg, South Africa, in August 2002.
The implementation arm of the UNFCCC is the Kyoto Protocol, which was developed in December 1997 at the Third Conference of the Parties (COP-3). The terms of the Kyoto Protocol call for Annex I countries (including most of the industrialized countries) to reduce their overall greenhouse gas emissions by at least 5 percent below 1990 levels over the 2008 to 2012 period.17 Quantified emissions reduction targets are differentiated by country (Table 17). The most recent COP meeting, COP-9, was held in Milan, Italy, in December 2003 (see discussion on "COP-9 Climate Change Negotiations in Milan, Italy").
To achieve their emissions reduction targets, Annex I countries can implement domestic emission reduction measures or international “flexible mechanisms.” The Kyoto Protocol includes the use of three “flexible mechanisms” (sometimes called “Kyoto mechanisms” or “market-based mechanisms”) to help countries achieve their targets by allowing markets to determine the most cost-efficient way to reduce global greenhouse gas emissions.
- International emissions trading allows Annex I countries to transfer some of their allowable emissions to other Annex I countries, beginning in 2008, for the cost of an emission credit. For example, an Annex I country that reduces its 2010 greenhouse gas emissions level by 10 million metric tons carbon dioxide more than needed to meet its target level can sell the “surplus” emission reductions to other Annex I countries.
- Joint implementation (JI) allows Annex I countries, through governments or other legal entities, to invest in emission reduction or sink enhancement projects in other Annex I countries, gain credit for those “foreign” emissions reductions, and then apply the credits toward their own national emission reduction commitments.
- The clean development mechanism (CDM) is similar to joint implementation but the emissions reductions can occur in non-Annex I countries.
The Kyoto targets refer to overall greenhouse gas emission levels, which encompass emissions of carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons, and sulfur hexafluoride. Hence, a country may opt for a small reduction of carbon dioxide emissions and a relatively greater reduction of other greenhouse gas emissions, or vice versa, in order to meet its Kyoto obligation. Currently, carbon dioxide emissions account for the majority of greenhouse gas emissions in most Annex I countries, followed by methane and nitrous oxide [2].
Different emissions may have notably different impacts on the atmosphere. Global warming potentials (GWPs) are used to compare the abilities of different greenhouse gases to trap heat in the atmosphere. GWPs are based on the radiative efficiency (heat-absorbing ability) of each gas relative to that of carbon dioxide. The IPCC is the generally accepted authority on GWPs for key greenhouse gases. In the latest IPCC assessment, published in 2001, the GWP of hydrofluorocarbon 23 is about 12,000 times that of carbon dioxide; thus, reducing emissions of hydrofluorocarbon 23 by a small amount would have a much larger impact than reducing emissions of carbon dioxide by the same amount.
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The Kyoto Protocol will enter into force 90 days after it has been ratified by at least 55 Parties to the UNFCCC, including a representation of Annex I countries accounting for at least 55 percent of the total 1990 carbon dioxide emissions from the Annex I group. By the end of 2003, 119 countries and the European Union18 had ratified the Protocol, including Canada, China, India, Japan, Mexico, New Zealand, and South Korea. A total of 31 Annex I countries, representing 44.2 percent of total 1990 carbon dioxide emissions, have signed on to the treaty (Figure 74) [3]. Two major Annex I countries, Australia and the United States, have announced that they will not adopt the Kyoto Protocol, leaving Russia as the deciding factor for entry into force. With its 17.4 percent of 1990 Annex I carbon dioxide emissions, Russia’s ratification would bring the total to 61.6 percent and enable the Kyoto Protocol to enter into force—regardless of the American and Australian decisions not to participate. Although Russia’s President Vladimir Putin has announced Russia’s intention to ratify the treaty, recent statements by his economic advisors suggest otherwise. Further clarification of Russia’s position is unlikely until well after its March 2004 presidential and legislative elections.
A few Kyoto Protocol issues remain unresolved, some of which can be finalized only when the Protocol has entered into force. They include targets and procedures for subsequent commitment periods and the issue of technology transfer between countries to enable more rapid emissions reductions. Other unresolved issues include the accounting rules for carbon sink projects, and whether the consequences for noncompliance in meeting national emission reduction targets should be legally binding.
Although the Kyoto Protocol is not yet in force, many governments have been trying to reduce greenhouse gas emissions through a variety of domestic and international policies. Policies target all areas of energy use in industry, energy production, transportation, and buildings (Table 18).
The IEO2004 reference case projections indicate that energy-related carbon dioxide emissions from the entire Annex I group of countries will exceed the group’s 1990 emissions level in 2010. In addition, although energy-related carbon dioxide emissions from the group of transitional Annex I countries decreased significantly between 1990 and 2000 as a result of economic and political crises in the EE/FSU, they showed an increase from 2000 to 2001 and are projected to continue increasing over the forecast period. The combined Kyoto Protocol reduction target for the transitional Annex I countries is 10 percent below their projected 2010 baseline emissions.
Greenhouse Gas Emissions Trading
At COP-7 in Marrakech, it was established that international emissions trading under the Kyoto Protocol could start in 2008. In advance of any international emissions trading under the Protocol, however, some Annex I parties have established or are in the process of establishing their own internal greenhouse gas emissions trading programs. The economic rationale behind emissions trading is to reduce the costs associated with achieving a set reduction in greenhouse gases. Trading works by encouraging the covered participants with low-cost options to reduce their emission levels to below their allotted share and to make the surplus reductions available to participants whose reduction options are more costly.
One framework for emissions trading is “cap and trade,” whereby a regulatory authority would establish a permanent cap on aggregate emissions for a group of emitters. The cap could, for example, be set at a fraction of the historic emissions from the group of participants. The cap would be divided into a set number of allowances, each of which would give the holder the right to emit a specified quantity of the regulated pollutant in a given compliance period. In the case of greenhouse gas emissions, each allowance could grant the holder the right to emit 1 metric ton of carbon dioxide. Once distributed among the participants, the allowances could be bought, sold, or (possibly) banked for future use. At the end of each compliance period, each participant would be required to hold allowances equal to its actual emissions or else face a penalty. Although it has not been used to achieve a mandatory large-scale reduction of greenhouse gas emissions, the cap and trade system has been used successfully in the United States since the 1990s to achieve reductions in stationary-source emissions of sulfur dioxide. In the late 1980s, New Zealand introduced an individual transferable quota system for managing fisheries, setting a total allowable catch and allocating tradable shares to individual fishermen. The system has since been emulated in more than 75 countries [4].
Emissions trading could also be based on concepts other than cap and trade. For example, a “credit-based” emissions trading system would include both capped and non-capped industries and entities that would trade voluntarily created, permanent emission reduction credits legally recognized by a regulator. This system would allow entities with emissions increases to obtain offsetting reductions from other entities. Other trading variants include “baseline” emissions trading systems, which would allow entities to reduce emissions below a “business-as-usual” level and then trade the emission reductions. “Rate-based” emissions trading would focus on emissions per unit of output rather than absolute emissions, allowing entities that improved their efficiency beyond target levels to trade the excess improvement with other entities. Some trading systems combine two or more methods to regulate different sectors more efficiently.
In 2003, the European Parliament and the Council of Ministers agreed on a directive establishing a scheme for trading of greenhouse gas emission allowances [5]. The cap and trade system will include all member states from 2005 forward but give member states the right to exempt individual sectors, activities, or installations until 2008 if comparable emission reductions are already being undertaken. In the first compliance period at least 95 percent of the allowances will be free; by the second compliance period, at least 90 percent of the allowances will be free. The first trial phase of the trading scheme will run from 2005 through 2007, regulating carbon dioxide emissions from all heat and electricity generators with more than 20 megawatts of rated thermal input capacity and from all refineries, coke ovens, iron and steel production processes, pulp and paper plants, and mineral industry installations. The proposal requires operators of such installations to hold permits as a condition for emitting greenhouse gases. Regulations can be changed and renegotiated for the second phase of the scheme, which will be concurrent with the first compliance period under the Kyoto Protocol (2008-2012). Each subsequent EU emissions trading phase will last for 5 years.
The EU member states will determine the quantity of allowances to be issued in each phase. Noncompliance sanctions will be applied to any installation that does not have enough allowances to cover actual emissions each year. The allowances, which will be tradable across the entire EU, can be banked from year to year within each phase and across phases if individual member states decide to do so.
The EU proposal is designed to be compatible with international emissions trading under the Kyoto framework; however, any other agreements recognizing third countries’ emission trading schemes must be subject to ratification of the Protocol, effectively excluding participation by non-Kyoto countries (such as Australia and the United States). Moreover, the proposal is open to the use of the Kyoto Protocol’s joint implementation and clean development mechanisms, perhaps as early as the first phase, although the use of carbon “sinks” or nuclear projects may be excluded. In conjunction with the introduction of the EU trading program, several EU member countries, including Denmark, France, Germany, Ireland, the Netherlands, and the United Kingdom, are considering development of their own national trading programs. Outside the EU, Japan and Slovakia have also announced that they intend to establish trading systems.
Currently, Denmark is the only country that has instituted a mandatory cap and trade system to reduce carbon dioxide emissions from electricity producers [6]. The program began in 2001 with a cap of 22 million metric tons of carbon dioxide, which is to be lowered by 1 million metric tons each year during the 3-year life of the program. The cap and trade system applies only to companies that emit at least 100,000 metric tons of carbon dioxide. Eight companies, which emit more than 90 percent of the carbon dioxide from electricity generation in Denmark, are required to participate in the trading scheme. Allowances under the system were allocated on the basis of each firm’s fuel consumption and actual emissions during the 1994-1998 period, excluding emissions from purchased power.
In 2001 and 2002, the average price of traded allowances under the Danish system was lower than the noncompliance penalty tax, giving companies an incentive to trade for allowances rather than simply paying the penalty [7]. As of late 2002, however, the number of allowances available for trading was too small to permit active trading. As a result, companies have relied on bilateral negotiations to establish contracts for the sale and purchase of allowances [8]. If the program is extended, its allowances are likely to be compatible with the proposed EU trading scheme.
The compatibility of the EU proposal with the United Kingdom’s voluntary emissions trading program, which entered into effect in April 2002, is more questionable. The programs differ in several respects, including rules for participation, generation of allowances, and sectoral coverage. Under the British program, any company can opt to enter the trading scheme by negotiating energy efficiency targets or absolute emission reduction targets in return for incentive payments offered by the government. Companies can report on direct emissions and indirect emissions from imported energy and will earn tradable allowances for carbon dioxide reductions computed against their targets.
Also in contrast to the EU proposal, the U.K. scheme is based on voluntary targets, includes all six Protocol gases, and excludes combined heat and power generators, except for emissions from electricity that is generated and used on-site [9]. The scheme completed its first year of trading in December 2002, and reports show that 31 of the 32 remaining participants achieved their targets. Over 5 years, the scheme is expected to reduce carbon dioxide emissions by nearly 4 million metric tons [10].
In anticipation of entry into force of the Kyoto Protocol, private firms and national governments have started investing in greenhouse gas reduction projects and trading in greenhouse gas offset credits, contributing to the emergence of a nascent market in the credits. Since 1996, carbon transactions amounting to 375 million metric tons of carbon dioxide reductions have been recorded [11]. Major market drivers include the U.K. emissions trading scheme, the World Bank’s Prototype Carbon Fund, the upcoming EU emissions trading program, and the Dutch government’s programs to procure joint implementation and clean development mechanism credits. Emissions reductions purchased by the Prototype Carbon Fund average about $5 per metric ton carbon dioxide, and credits purchased by the Dutch government average just less than $7 per metric ton [12]. Prices in the U.K. emissions trading system have varied from $22 per metric ton in September 2002 to about $5 per metric ton in early 2003 [13].19
In general, the focus in the market is shifting from North America toward Europe, largely because of the U.S. decision not to ratify the Kyoto Protocol, the startup of the U.K. emissions trading system, and the upcoming European-wide trading scheme. Emissions trading activity in the United States could increase, however, following the December 12, 2003, opening of trading on the Chicago Climate Exchange (CCX). The CCX is a voluntary cap and trade program in which participating members will be able to buy and sell greenhouse gas credits to assist in achieving their voluntary emission reduction commitments.
Abatement of Conventional Pollutants from Energy Use
Many countries currently have policies or regulations in place that limit energy-related emissions other than carbon dioxide. Energy-related air pollutants that have received particular attention include nitrogen oxides, sulfur dioxide, lead, particulate matter, and volatile organic compounds, because of their contribution to ozone and smog formation, acid rain, and various human health problems (Table 19). Moreover, in some countries regulation of mercury emissions associated with energy combustion has recently become an issue. Countries also regulate the management of spent fuel from nuclear power generation facilities, but none of the countries with active nuclear power programs has yet established a permanent disposal system for highly radioactive waste. How countries limit energy-related emissions by legislation and/or regulation can have significant impacts on energy technology choices and energy use.
Regulated air pollutants can be attributed to a mix of mobile and stationary energy uses. Nitrogen oxide emissions come from high-temperature combustion processes, such as those that occur in motor vehicles and power plants; road transportation is generally the single largest source. Sulfur dioxide is formed during the burning of high-sulfur fuels for electricity generation, metal smelting, refining, and other industrial processes; coal-fired power plants account for the preponderance of sulfur dioxide emissions. Volatile organic compounds are emitted from a variety of sources, including motor vehicles, chemical plants, refineries, factories, consumer products, and other industrial sources. Particulate matter can be emitted directly or can be formed indirectly in the atmosphere: “primary” particles, such as dust from roads or elemental carbon (soot) from wood combustion, are emitted directly into the atmosphere; “secondary” particles are formed in the atmosphere from primary gaseous emissions. Emissions of lead usually originate from motor vehicles that burn leaded gasoline. Emissions of mercury can be attributed to coal-fired boilers, municipal waste combustors, medical waste incinerators, and manufacturing processes that use mercury as an ingredient or raw material. Coal-fired boilers contribute the largest share of mercury emissions [14].
With the tightening of emissions limits on combustion plants during the 1990s, sulfur dioxide emissions declined in many industrialized countries. In Europe, the shift from coal to natural gas for electricity production (most notably, in the United Kingdom and Germany) also contributed to a reduction in the region’s sulfur dioxide emissions. Many industrialized countries (including Japan, the United States, and the EU) have scheduled further restrictions on sulfur dioxide emissions from stationary sources to take effect over the next 10 years.
With the decrease in atmospheric concentrations of sulfur dioxide in industrialized countries, attention has shifted to ozone, nitrogen oxides, and particulates. Despite the imposition of emissions regulations, nitrogen oxide emissions rose during the 1990s in many industrialized countries as a result of continued increases in consumption of transportation fuels. In Europe, however, the decrease in coal-fired electricity generation and the introduction of catalytic converters on vehicles led to a gradual drop in nitrogen oxide emissions [15]. In contrast to the generally rising trend in nitrogen oxide emissions, emissions of volatile organic compounds have declined [16]. To continue combating ground-level ozone formation, several countries plan to tighten emissions standards for new vehicles over the coming years (Table 20). Limits on the sulfur content of gasoline and diesel fuel also are being imposed in order to ensure the effectiveness of emission control technologies used to meet new vehicle standards (Table 21).
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The harmful effects of lead, especially for children, have been well established over the past three decades. As recently as 1990 leaded gasoline represented 57 percent of the global gasoline market, but as of January 1, 2004, although it was being sold in 73 countries, it accounted for less than 10 percent of the global market [17]. Most of the countries where leaded gasoline is still used are in Africa and the FSU, and a few are in the Middle East and Latin America (Figure 75). In countries that have not yet switched to unleaded fuel, leaded gasoline is a major source of lead pollution in urban areas, often accounting for more than 90 percent of atmospheric lead emissions [18] (see discussion on "Leaded Gasoline: The Global Phaseout").
Over the past several decades, many nations have begun to evaluate the potential adverse effects of mercury on human health and the environment. Although mercury is an element that occurs naturally throughout the world, exposure to mercury is dangerous for people and animals because their bodies neither break down nor readily excrete the metal. Mercury is a bioconcentrator: over time, mercury in the blood of animals at low trophic levels will be passed on to predators at higher trophic levels.20 Swordfish, salmon, fish-eating birds, and seals are among the animals most affected by the bioconcentration of mercury. Although mercury exists both onshore and in the marine environment, predators in the marine ecosystem often have higher concentrations of mercury because there are more trophic levels in the aquatic ecosystem, and thus more opportunities for bioconcentration [19].
Mercury emissions from energy use have recently become an area of particular concern in the industrialized countries. Major anthropogenic sources of mercury emissions include stationary energy combustion, nonferrous metal production, pig iron and steel production, cement production, oil and gas processing, and waste disposal. Of these, only electricity generation, municipal solid waste combustion, and oil and gas processing are related to energy use. In the past, regulation of energy-related mercury has focused on municipal solid waste combustion; however, coal-fired boilers account for the largest remaining share of energy-related mercury emissions, and countries that rely heavily on coal-fired power generation are beginning to consider limits on mercury emissions from power plants [20] (see discussion on "Controlling Emissions of Mercury from Energy Use").
Regional Status of Environmental Policies
Many countries around the world have enacted policies aimed at protecting the environment. In this section, environmental policies in a number of different countries are reviewed. The reviews are not intended to constitute an exhaustive list of environmental policies or countries but rather a sample of the programs that have been instituted around the world. This year, for the first time, discussions of environmental policies in Chile and Hungary are included in this section.
United States
The Clean Air Act of 1970 (CAA) is the comprehensive Federal law that regulates air emissions from stationary and mobile sources in the United States. It authorizes the U.S. Environmental Protection Agency (EPA) to establish National Ambient Air Quality Standards (NAAQS) to protect public health and the environment. The goal of the CAA was to set and achieve NAAQS in every State by 1975. The setting of maximum pollutant standards was coupled with directions for the development of State implementation plans (SIPs) for the regulation of emissions from local industrial sources. The CAA was amended in 1977 primarily to set new goals (dates) for the attainment of NAAQS, because many areas had failed to meet the deadlines for reducing airborne concentrations of the six “criteria pollutants” (carbon monoxide, lead, sulfur dioxide, nitrogen dioxide, ground-level ozone, and particulate matter).
The Clean Air Act Amendments of 1990 (CAAA90) addressed continuing problems associated with air emissions, including acid rain, ground level ozone, and visibility. Title IV of CAAA90, the Acid Rain Program, regulates both sulfur dioxide and nitrogen oxides. The program sets a goal of reducing annual sulfur dioxide emissions by 10 million tons below 1980 levels and annual nitrogen oxide emissions by 2 million tons below 1980 levels. In the United States in 2000, about 70 percent of annual sulfur dioxide emissions and 23 percent of nitrogen oxide emissions are produced from the burning of fossil fuels to generate electricity.
The Acid Rain Program specifies a two-phase reduction in emissions from fossil-fired electric power plants greater than 25 megawatts capacity and from all new power plants. Phase I was completed in 1999. Phase II of the program, which began in January 2000, lowered the total allowable level of sulfur dioxide emissions from all electricity generators, capping annual U.S. emissions at 8.95 million tons by 2010.21 The sulfur dioxide regulations include a highly successful market-based regulatory program, which allows individual plant operators to reduce their emissions through any combination of strategies, including installation of scrubbers, switching to low-sulfur fuels, and trading and banking of emissions allowances. This cap and trade approach, which allows emitters to choose the most cost-effective means for limiting sulfur dioxide emissions, has led to a 24-percent decrease in sulfur dioxide emissions between 1992 and 2001 [21].
Specifications for reducing nitrogen oxide emissions under the Acid Rain Program also call for a two-phase approach. Phase I, beginning in 1995, aimed to reduce emissions from coal-fired electric power plants by more than 400,000 tons per year. Phase II, which began in 2000, aimed for a reduction of more than 2 million short tons per year. Unlike the sulfur dioxide reduction program, the nitrogen oxide program does not use an emissions cap and trade program. Rather, the EPA has set emission limits by boiler type. A coal-fired power plant can meet the requirements in three ways: (1) meet the standard annual emission limit for each boiler, (2) average the emissions rates of two or more boilers, or (3) apply for a less stringent alternative emission limit and use appropriate emission control technology [22].
The EPA has also taken two actions to address the effects of interstate transport of nitrogen oxide emissions on downwind ozone nonattainment areas. In 1998, the EPA finalized the “Nitrogen Oxides SIP Call” rules, which require 22 States22 and the District of Columbia to revise their SIPs to control summertime nitrogen oxide emissions. The SIP Call involves a cap and trade program to reduce summertime emissions of nitrogen oxides to target levels beginning in summer 2003 [23].23 After several court challenges, three States24 were removed from the program, and the compliance date was moved to summer 2004. A similar program in the northeastern States, the NOx Budget Program, has been reducing emissions through a cap and trade system since 1995. In 2002, States participating in the NOx Budget Program had reduced their emissions of nitrogen oxides to 60 percent below 1990 levels [24].
In December 2003, the EPA released a proposal for regulations controlling both sulfur dioxide and nitrogen oxides in 29 eastern States and the District of Columbia.25 The Interstate Air Quality proposal would reduce sulfur dioxide emissions within the regulated region by 3.6 million tons in 2010 (a cut of approximately 40 percent from current levels) and by another 2 million tons per year when the rules are fully implemented (a total cut of approximately 70 percent from current levels). Annual nitrogen oxide emissions would be cut by 1.5 million tons in 2010 and 1.8 million tons in 2015 (a reduction of approximately 65 percent from current levels). Emissions of both pollutants would be permanently capped. The EPA is accepting public comment on the Interstate Air Quality proposal, and issuance of a final rule is planned for 2005 [25].
Also in December 2003, the EPA proposed a Utility Mercury Reductions rule. When implemented, it will be the first U.S. regulatory program to control mercury emissions from electricity generators. The proposed rule, using a cap and trade system, would cut mercury emissions by 70 percent after 2018, when Phase II is implemented and allowances banked before 2018 have been exhausted. The EPA is seeking comments on two proposals to reduce mercury emissions, one based on MACT and another based on a cap and trade system. The MACT approach would reduce annual mercury emissions by 14 tons (29 percent) by 2007 [26].
In addition to the EPA programs and initiatives discussed above, several legislative proposals introduced recently in the U.S. Congress are aimed at simultaneous reductions of multiple emissions, including sulfur dioxide, nitrogen oxides, mercury, and/or carbon dioxide (see box above).
Canada
In Canada, emissions from stationary sources are regulated under the Thermal Power Generation Emissions National Guidelines for New Stationary Sources of the 1993 Canadian Environmental Protection Act (CEPA). In January 2003, the emission guidelines for new sources of electricity generation were updated, tightening emissions limits for sulfur dioxide, nitrogen oxide, and particulate matter from new coal-, oil-, and natural-gas-fired steam-electric power plants [27]. The new targets would lower sulfur dioxide emissions by 75 percent, nitrogen oxide emissions by 60 percent, and emissions of particulate matter by 80 percent. With these requirements, the long-term emission performance of all fossil-fired generation is targeted to approach that of natural gas.
Additional efforts to abate sulfur dioxide emissions have focused on the seven easternmost provinces, where smog levels are on the rise and acid rain is a concern.26 The Eastern Canada Acid Rain Program placed a region-wide cap on sulfur dioxide emissions at 2.3 million metric tons per year for 1994, mostly by restricting emissions from large industrial facilities. Recently, new measures at provincial levels were enacted to reduce nitrogen oxide emissions. Starting in 2007, fossil-fueled power plants in central and southern Ontario will face an annual cap of 39,000 tons, and emissions from plants in southern Quebec will be capped at 5,000 tons.
Addressing the problems of acid rain and ground-level ozone in Canada has required cooperation with the United States, given the transboundary flow of air pollutants between the two countries. The Canada-U.S. Air Quality Agreement, signed in 1991, has been amended to include additional pollutants over the past 13 years. In December 2000, one such annex set a target of cutting ozone in the U.S./Canada transboundary region by 43 percent by 2010 [28]. The agreement was seen as a major step toward harmonizing air quality standards for stationary and mobile sources, and negotiators have begun discussing its expansion to cover other pollutants.
Canadian regulation of mobile sources tends to mirror standards in the United States, in line with efforts to create an integrated vehicle manufacturing market in North America. Starting with the 1998 model year, regulations for light-duty vehicles were aligned with the Tier 1 standards of the United States. According to a regulation introduced in January 2003, standards for passenger cars, minivans, pickup trucks, sport utility vehicles, heavy-duty trucks and buses, and motorcycles will be subject to more stringent emissions standards [29].
In 1999, Canada approved a limit of 30 parts per million sulfur content in gasoline, which would take effect by January 1, 2005. The average level of sulfur in Canadian gasoline is currently 150 parts per million. Canada will also require a diesel fuel sulfur cap of 15 parts per million by June 2006, mirroring the U.S. highway diesel regulation.
Mexico
Air pollution in the large cities of Mexico is a serious concern for the country. Mexico City, Guadalajara, and Ciudad Juarez are the most polluted, and Mexico City’s air quality is among the worst in the world. In addition to pollution from industrial sources, the transportation sector is a major source of emissions, accounting for 80 percent of the country’s nitrogen oxide emissions, 40 percent of volatile organic compound emissions, 20 percent of sulfur dioxide, and 35 percent of small particulate matter emissions [30].
In the 1990s, the Mexican government implemented a number of policies that dramatically improved air quality in the Mexico City area. Catalytic converters were required for all new cars beginning in 1991, and leaded gasoline was eliminated by 1997. The government has also reduced the concentration of sulfur in diesel, introduced oxygenates into gasoline, enhanced emissions inspection programs, and introduced LPG and compressed natural gas (CNG) as alternative vehicle fuels. A “No Driving Day” (Hoy No Circula) program, introduced in the greater Mexico City region in 1989, banned 20 percent of registered cars from driving in the city on one workday of each week, rotating the ban based on the last digit of vehicle license plate numbers. The program continued throughout the 1990s but became less effective as people began to acquire two cars to avoid the regulation. In 1999 it was recast to allow cars equipped with emissions control systems equivalent to U.S. Tier 1 limits to drive on any day of the week, and stricter driving limits (No Driving for Two Days) were placed on cars without the updated technology [31].
In addition to transportation, electricity generation from the two power plants in the Mexico City metropolitan area is a major source of air pollution. In 1986 the two plants switched from high-sulfur fuel oil to natural gas, significantly reducing sulfur dioxide emissions in the region. The plant operators have also installed new pollution control technology, improved maintenance programs, and implemented continuous stack monitoring systems [32]. More recently, operators have begun switching generating units in one of the power plants to combined-cycle generation, which will further reduce nitrogen oxide emissions while meeting the growing demand for electricity. Despite the improvements made recently, both power plants near Mexico City are aging, and rising maintenance and administrative costs may limit the extent to which their emissions can be reduced [33].
European Union
In Europe, efforts to limit aggregate emissions of sulfur dioxide, nitrogen oxides, volatile organic compounds, and particulate matter were first coordinated under the 1979 United Nations/European Economic Commission’s Convention on Long-Range Transboundary Air Pollution (CLRTAP), which was drafted after scientists demonstrated the link between sulfur dioxide emissions in continental Europe and the acidification of Scandinavian lakes. Since its entry into force, the Convention has been extended by eight protocols that set emissions limits for a variety of pollutants. The 1999 Gothenburg Protocol calls for national emissions ceilings for sulfur dioxide, nitrogen oxides, volatile organic compounds, and ammonia in 2010.
The establishment of national emission ceilings is a regulatory innovation in air pollution control in the EU, in that the different emissions ceilings are tailored to meet country-specific circumstances and allow member countries flexibility in implementing control measures. As with previous CLRTAP protocols, the Gothenburg Protocol specifies tight limit values for specific emissions sources and requires best available technologies to be used to achieve the emissions reductions. Once the Protocol is fully implemented, Europe’s sulfur emissions should be cut by about 75 percent, nitrogen oxide emissions by almost 50 percent, emissions of volatile organic compounds by about 55 percent, and ammonia emissions by 15 percent from their 1990 levels. As of December 5, 2003, however, only Denmark, Luxembourg, Norway, Romania, the European Community, and Sweden had ratified the Gothenburg Protocol [34].
While CLRTAP addresses both stationary and mobile sources, another EU directive on the Limitation of Emissions of Certain Pollutants into the Air from Large Combustion Plants (Directive 2001/80/EC0) was passed in late 2001 targeting only stationary combustion. This directive amended the Large Combustion Plant Directive of 1988 (Directive 88/609/EEC), which imposed emissions limits for sulfur dioxide, nitrogen oxides, and dust on existing and new power plants with a rated thermal input capacity greater than 50 megawatts. For plants licensed before July 1, 1987, the 1988 directive placed a gradually declining ceiling (cap) on total annual emissions of each pollutant. The ceiling values differed by country. The directive did not stipulate how the emissions reductions were to be achieved, although the general approach used by several European countries has been to require the use of specific emissions control technologies and combustion fuels. All plants licensed after July 1, 1987, faced uniform emissions limit values, which were set according to plant capacity, size, and fuel type.
The new directive was seen as a package deal, along with CLRTAP, toward the development of a comprehensive EU strategy to deal with acidification. The directive takes into account advances in combustion and abatement technologies and reduces the nitrogen oxides limit values for large solid fuel plants from 650 milligrams per cubic meter to 200 milligrams per cubic meter. This limit, which applies to both new and existing plants from 2016 onward, will be a crucial benchmark in the forthcoming negotiations with Eastern European candidate countries hoping to enter the EU. However, existing plants may be exempt from obligations concerning new emissions standards if they are operated for less than 20,000 hours between January 2008 and December 2015. The directive does provide member countries with some flexibility in terms of specifying control technologies but, unlike the U.S. regulatory scheme, does not include provisions for market-based emission reductions, such as allowance trading.
Emissions from motor vehicles have been regulated in Europe since the 1970 Motor Vehicle Directive. The most stringent vehicle emission limits were passed in 1998 and 1999 by Directives 98/69/EC and 99/96/EC. As the law currently stands, all new vehicles must meet the “Euro 3” emissions standards for carbon monoxide, hydrocarbons, and nitrogen oxides by 2000 and 2001, depending on weight class. Between 2005 and 2008, the tighter Euro 4 and Euro 5 standards for new vehicles will take effect. Germany, the Netherlands, Belgium, and the United Kingdom have encouraged the switch to low-sulfur gasoline and diesel by offering tax incentives. Sweden already requires “city diesel” to meet the same sulfur standard (50 parts per million) required by the EU in 2005. The EU recently finalized regulations that include the mandatory introduction of sulfur-free gasoline and diesel fuels, with sulfur levels lower than 10 milligrams per kilogram, by January 1, 2005, and a complete ban on all non-sulfur-free fuels by January 1, 2009 [35]. The implementation of the measure would coincide with the introduction of Euro 4 vehicles in the European market.
Hungary
Hungary submitted its application for EU membership in 1994 and signed the EU Ascension Treaty in April 2003. It is expected to become a member of the EU in May 2004. Many of Hungary’s energy and environmental policies have focused on bringing regulations in line with EU standards. For instance, an energy tax and an environmental tax (with air, water, and soil pollution provisions) were introduced in January 2004. The energy tax, which targets only nonresidential entities, is designed to encourage energy-saving practices. The air pollution provision of the environmental tax, beginning at 40 percent of the proposed final tax rate, will also target companies and will be levied on emissions of carbon dioxide, nitrogen oxides, sulfur dioxide, and particulate matter. The rate of the environmental tax will rise each year until it reaches the desired level in 2008. The energy and environment taxes are expected to generate about $50 million in revenue for the Hungarian government [36].
In 1973, Hungary generated more than 65 percent of its electricity from coal-fired power plants, many of which used lignite coal, a relatively low-grade coal with many impurities. As of 2000, however, only about 28 percent of the country’s electric power came from coal-fired power plants, and more than 40 percent came from nuclear facilities. Much of the growth in electricity demand from 1973 to 2000 was met with nuclear and, to a smaller extent, natural-gas-fired generation. The diversity of its fuel mix has helped improve Hungary’s environment, with total sulfur dioxide pollution falling from more than 800,000 tons in 1992 to less than 600,000 tons in 1998 [37]. Although sulfur dioxide emissions have been falling, they are greater, on a per capita basis, than the EU average, probably because of the continued use of lignite for power generation.
Developing Countries
While emissions of sulfur dioxide, nitrogen oxides, and particulate matter have either declined or slowed in most industrialized countries, many developing countries are seeing rapid growth in energy-related pollution. The most pressing problems are growing sulfur dioxide emissions and acid rain from coal-fired power plants and increasing levels of smog and particulate matter in urban areas from both transportation and power generation. To address these environmental problems, many developing countries have introduced regulations targeting motor vehicle use and coal-fired power generation; however, compliance with emissions regulations is often low in developing countries, where funding may be limited and enforcement inadequate [38]. Thus, in the face of strong population growth and economic development, emissions of air pollutants in urban centers of the developing world have increased steadily.
China
Many cities across China suffer from air pollution problems. In 2003, 63 percent of the 330 Chinese cities being monitored had poor air quality [39]. One of the main pollutants is sulfur dioxide, resulting in the formation of acid rain, which now falls on about 30 percent of China’s total land area [40]. About 34 percent (6.6 million tons) of the country’s total sulfur dioxide emissions in 2002 were released from power plants [41]. Because more than 70 percent of China’s electricity comes from coal-fired plants, the country faces a challenge in providing adequate supplies of electricity while trying to reduce sulfur dioxide emissions, particularly near major cities [42]. Given that rolling blackouts were a feature of China’s electricity markets in 2003, the difficulties are sure to mount in the future.
China has implemented a new coal policy, which is expected to reduce sulfur dioxide emissions in 2005 by 10 percent from 2000 levels nationwide and by 20 percent in “control zones” with high pollution, including Beijing, Shanghai, Tianjin, and 197 other cities [43]. The control zones account for only 11.4 percent of China’s land area but for 66 percent of the 20 million tons of sulfur dioxide emitted each year. The new policy increases the pollution levy to 5 yuan (60.4 cents) per ton and requires power companies and large industrial facilities to install desulfurization equipment [44]. Smaller facilities must use low-sulfur coal or cleaner fuel alternatives.
In addition, pilot sulfur dioxide emissions trading programs are underway in Benxi (Liaoning Province) and Nantong (Jiangsu Province), and in early 2002 the State Environmental Protection Administration (SEPA) announced that the provinces of Shandong, Shanxi, Henan, and Jiangsu, the special administrative regions of Macau and Hong Kong, and three cities (Shanghai, Tianjin, and Liuzhou) would pioneer China’s first emissions trading scheme across provincial borders near the end of the decade. Officials hope to establish rules for emissions trading by 2006.
Although point sources are a major source of both sulfur dioxide and particulate matter in China, mobile sources in major cities account for an increasing percentage of the country’s air pollution. For instance, city planners in Shanghai estimate that about 90 percent of the city’s air pollution is from vehicle traffic [45]. The number of vehicles in China has increased considerably in recent years. In Beijing, vehicle ownership has risen from 1 million in 1997 to 2 million in 2003, and during 2003 new vehicles were coming onto Beijing’s roads at a rate of 27,000 per month [46]. The crowd of vehicles on the road has exacerbated traffic to the extent that average rush hour speeds in certain parts of Beijing are less than 7 miles per hour [47].
Shanghai has developed programs to limit the number of drivers in the city, including charging registration fees for new vehicles valued at more than $4,000 [48]; however, Beijing is not prepared to take such measures to limit cars on the roads and instead is building more roads and expanding the public transportation system in the city. In a measure that will help reduce pollution from existing vehicles, cars in Beijing will have to meet European emissions standards as of summer 2004. In an additional effort to reduce air pollution, the Beijing municipal government has converted more than 1,900 municipal buses to liquefied petroleum gas and plans to increase the number to 18,000 by 2008 [49].
Beijing and Shanghai have a strong incentive to improve air quality over the next 5 to 6 years: Beijing will host the 2008 Olympics, and Shanghai will host the 2010 World Expo. Some progress has already been made. In 2003, Beijing had 219 days of “satisfactory” air quality, compared with only 100 in 1998 [50]. Still, the concentration of small particulate matter in Beijing’s air is 65 micrograms per cubic meter higher than China’s national standard of 100 micrograms per cubic meter. In the United States, a value of 165 micrograms per cubic meter would be “code red,” and the EPA would recommend that people reduce heavy or prolonged exertion [51].
India
Urban air quality in India ranks among the world’s poorest [52]. Efforts to improve urban air quality have focused on vehicles, which account for the majority of the country’s air pollution. Emissions limits for gasoline- and diesel-powered vehicles came into force in 1991 and 1992, respectively. Emissions standards for passenger cars and commercial vehicles were tightened in 2000 at levels equivalent to the Euro 1 standards. For the metro areas of Delhi, Mumbai, Chennai, and Kolkata, tighter Euro 2 standards have been required since 2001. In October 2003, the Indian government introduced new standards for automotive fuel and vehicle emissions, including a ban on sales of vehicles that do not meet Euro 3 emissions standards by 2010, a similar but earlier (April 2005) ban in 11 major cities, and a 2010 requirement that new vehicles in those 11 cities (including New Delhi) meet the stringent Euro 4 emissions standards [53].
The measures taken to reduce vehicle emissions in New Delhi have been more controversial. In 1998, India’s Supreme Court mandated a number of measures to improve the city’s air quality. One such measure stipulated that all the city’s buses be run on CNG by March 31, 2001. Compliance was to be achieved either by converting existing diesel engines or by replacing the buses themselves. The conversion of the fleet had not been achieved as the deadline approached, and rather than paralyze the transportation system with a shutdown of bus service, the courts extended the deadline to September 2001 and then to January 2002 [54]. During the additional period, diesel buses could remain on the road if their owners demonstrated that they had placed an order for a replacement or conversion to CNG. Although difficult for many bus owners during the conversion period, the program increased the number of CNG buses in New Delhi from 900 in May 2001 to about 6,800 in mid-2002, an increase of more than 650 percent. One challenge with the swift conversion of the fleet has been a number of safety issues with CNG buses, which the government continues to address.
Buses were not the only vehicles converted to run on CNG. More than 27,000 automobiles and 14,000 other vehicles were also running on CNG by mid-2002 [55]. Many reporters have anecdotally described the improvements in air quality over the 2000-2002 period, during which many diesel vehicles were removed from circulation.
In other cities in India, emissions from diesel buses are eclipsed by those from “auto rickshaws” with 2-stroke and 4-stroke engines. Many rickshaw drivers concoct their own fuel, a mix of kerosene and engine lubricant that releases pollution as the fuel burns. Some cities in India (for instance, Ahmedabad) are looking into the possibility of converting existing auto rickshaws to run on LPG, a much cleaner fuel. The overhead of converting the rickshaws would be difficult for individual owners to finance, even though the lower cost of LPG can save money over the long term. Currently, proponents of the plan are looking for funding to help with the conversion of the 65,000 rickshaws on the streets of Ahmedabad [56].
Although India is a large coal consumer, its Central Pollution Control Board has not set any sulfur dioxide emissions limits for coal-fired power plants, because most of the coal mined in India is low in sulfur content. Coal-fired power plants do not face any nitrogen oxide emissions limits either, although thermal plants fueled by natural gas and naphtha face standards between 50 and 100 parts per million, depending on their capacity. Enforcement of the standards has been recognized as a major problem in India [57].
Chile
Chile’s capital city, Santiago, is among the most polluted in the Western Hemisphere. Santiago, a city of 5.5 million people, is situated between two mountain ranges. In winter (June-August), when prevailing winds off the Southern Pacific Ocean lessen, cool air from the mountains traps polluted air in the city. For at least the past 5 years, Santiago has undergone a number of “environmental pre-emergencies,” in which the concentration of particulate matter in the air exceeded 240 micrograms per cubic meter. (An “environmental emergency” is declared when the concentration of particulate matter reaches 330 micrograms per cubic meter [58].) For example, a pre-emergency was declared in May 2003, when the concentration of particulate matter in the air increased to more than 300 micrograms per cubic meter [59].
When the government declares an environmental pre-emergency, measures to reduce pollution immediately are put into effect. The volume of traffic in the city is limited by banning 60 percent of vehicles without catalytic converter technology from the roads as well as 20 percent of the cars that do have catalytic converters. Additionally, nearly a thousand high-pollution manufacturing plants may also be shut down, a move that could strain the city’s economy if there are a large number of shutdowns each winter [60]. In the United States, a level of 240 micrograms per cubic meter would be considered extremely hazardous, and the EPA would recommend that older adults, children, and persons with chronic illness stay inside, and that all others avoid activity outside [61].
Santiago is pursuing a number of environmental policies designed to reduce the level of particulate matter in the air. One approach seeks to reduce the concentration of pollutants in the air through direct regulation, another program to introduce CNG as a fuel for buses in Santiago, and another to reduce air pollution by changing traffic patterns and increasing the average speed of vehicles in the city during peak hours.
Santiago is reducing direct emissions from both point sources and mobile sources. Fixed emitters were subject to more stringent regulations as of 1998, when the maximum allowable concentration of particle emissions was lowered from 112 micrograms per cubic meter to 56 micrograms per cubic meter [62]. The city is also trying to reduce pollution from mobile sources, especially heavier vehicles that use diesel, by changing the fuel types available in the city. The Santiago region switched to a low-sulfur diesel fuel (300 parts per million sulfur) at the beginning of 2001 and will be reducing the sulfur limit for diesel to 50 parts per million in July 2004.
Over the past 10 years, Santiago has been working on modernizing its bus fleet. In the mid-1990s, Chile’s government bought a number of high-emissions diesel buses from private bus operators in Santiago—a measure that succeeded in removing the most polluting buses from the city’s streets but at considerable expense [63]. More recently, Santiago has worked with the U.S. Department of Energy’s Clean Cities program to switch a number of buses and taxis to CNG [64]. If the process of removing polluting diesel buses from the streets continues, it can make a major contribution toward reducing particulate matter pollution in Santiago.
Santiago has also instituted a number of policies designed to keep more traffic moving freely during peak travel times, which would also reduce emissions of particulate matter. By making some streets one-way during peak times, the city can handle its regular volume of traffic more easily. Although it may serve as a short-term solution, over time the excess road capacity may prove counterproductive, in that will provide an incentive for more people to drive to work [65].
Environmental Issues and World Energy Use Tables
Released: April 2004