Accounting for Climate and Air Quality Damages in Future US Electricity Generation Scenarios

The EPA-MARKAL model of the U.S. electricity sector is used to examine how imposing emissions fees based on estimated health and environmental damages might change electricity generation. Fees are imposed on life-cycle emissions of SO2, nitrogen oxides (NOx), particulate matter, and greenhouse gases (GHG) from 2015 through 2055. Changes in electricity production, fuel type, emissions controls, and emissions produced under various fees are examined. A shift in fuels used for electricity production results from $30/ton CO2-equivalent GHG fees or from criteria pollutant fees set at the higher-end of the range of published damage estimates, but not from criteria pollutant fees based on low or midrange damage estimates. With midrange criteria pollutant fees assessed, SO2 and NOx emissions are lower than the business as usual case (by 52% and 10%, respectively), with larger differences in the western U.S. than in the eastern U.S. GHG emissions are not significantly impacted by midrange criteria pollutant fees alone; conversely, with only GHG fees, NOx emissions are reduced by up to 11%, yet SO2 emissions are slightly higher than in the business as usual case. Therefore, fees on both GHG and criteria pollutants may be needed to achieve significant reductions in both sets of pollutants.