Air Pollution Externalities and Possible Solutions

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Introduction

Public utility is the infrastructure that provides and performs public service subjected to government regulation that covers energy, telecommunications, and water industries. Public utility commissions and regulating bodies oversee operations and performances of privately owned electric, natural gas, water, railroad, telecommunications, rail transit, and passenger transportation organizations.

According to the Public Utility Research Center (PURC), the growing consensus for the successful development of utility infrastructure depends primarily on the provision and adoption of proper public policies effectively implemented (2007). As such, regulatory apparatus must be in place to provide stability, protect consumers against abuse of service providers and political opportunists, as well as encourage service providers for efficient operations.

Policy on utilities is focused on regulating processes such as the introduction and facilitation of healthy competition, provision of incentives to best performers in the industry, as well as the involvement of stakeholders. This is considered normative work and describes the regulatory issues as market power, abuse or opportunism, as well as control on information.

This paper will try to focus on air pollution or excess carbon dioxide emission caused by the electricity industry, provide possible solutions to focus on nuclear power, and provide its advantages and disadvantages compared to coal-burning power plants. Substantial information shall also be presented about regulation and social policy.

Discussion

In order to fully integrate public utility, power generation, policy and use of nuclear power in light of the growing concerns on the depletion of natural forms of energy as well as degradation of the environment as its most immediate and hazardous effects, this paper will provide an overview and background on current practices, regulations, utility market reforms, development of regulation, air pollution, and finally on nuclear power understanding. Within the context of nuclear power, challenges, advantages and disadvantages shall be discussed together with current regulation and the future of nuclear power.

Regulation and Social Policy

The reasons that utility regulation is needed are due to control market power, encourage healthy competition, as well as stabilize markets. In addition, governments also believe that operators tend to focus on their own perception of what is advantageous on their part without due consideration to the rest of the stakeholders: consumers, the environment, and the government system. In some countries, this problem was solved through its own governments providing their own utility service. However, state-owned utility services are manipulated for political reasons if not for corrupt practices, source of cash flow for other activities, or for gaining hard currency thereby leading to poor service quality that would make consumers suffer, and then, the demand for public and private involvement (PURC, 2007).

Utility Market Reforms

The developed world has formed state-owned monopolies to address utility services. It soon became apparent that government-run utility services are inefficient and of low quality. Problems include:

• Excessive number of employees or nepotism and political patronage practices
• Prioritize provision to powerful groups or power elites leaving marginalized citizens un-served
• Services that earn subsidize other non-profitable projects or departments
• Non-commercially viable charges (PURC, 2007).

Other identified problems include the practice of keeping prices low thereby requiring government subsidy to finance not only operations but also investments and other costs. This further leads to poor service quality as the effect of underinvestment. Where the utility is profitable, it serves as a cash cow to finance other government functions. By the 1980s, policymakers started supporting privately-owned service providers as they are presumed to be subject to less political pressure as compared to government-owned enterprises.

Aside from the political opportunism avoided, an open market will also lead to competitiveness, thereby encouraging service quality, lower cost for consumers, aside from profit motivation. In the private sectors’ aim to supply demand, they also deploy infrastructure, offer competitive prices and innovate among themselves as consumers afford to pay value for quality service. “As part of this trend, countries began to introduce competition wherever possible and developed utility regulatory agencies that would enforce concession or licensing agreements and regulate prices,” (PURC, 2007).

It was suggested that market reform varies across sectors and countries as liberalization and privatization are introduced. Under energy, restructuring and privatization were the prevalent reforms. Restructuring separates competitive generating companies from monopoly transmission and distribution.

Governments establish regulatory agencies to improve sector performance. They focus on controlling market power and facilitating healthy competition. Additional roles include ensuring service availability, expansion, attracting capital, initiation of competition to encourage best practices, licensing agreements and regulating prices (PURC, 2007).

Development of Regulation

Improving sector performance is the main goal of regulation. This is usually measured in terms of net consumer surplus, the availability and expansion of service, cost-efficient infrastructure, affordable prices of services, widening of range of services offered, quality and success of innovation.

Regulators implement policies for attracting capital to the sector and increase investment. This in turn will generate government revenues in the form of licensing and concessions. With competition ineffectiveness and development of innovation initiated by the regulatory bodies, there is improved provision of service as well as more affordable rates offered. The market competition also increases rates of a license issued as well as provision of incentives for operators for them to become efficient and provide universal access to services. It is proposed that in the lack of stability and unviable commercial tariffs for investors, regulation has failed (PURC, 2007).

The three main issues that define a utility regulator’s role are:

• Sector of coverage
• Their role in relation to ministers or various government departments
• Their role to other regulatory agencies such as those in charge of the competition.

In some governments, regulatory agencies are sector-specific while in others, they apply multi-regulatory agencies. The duties of regulatory agencies are:

• Settings standards
• Regulate prices
• Assure quality service
• Monitor performances of service providers
• License
• Handle consumer complaints
• Advice policy-makers
• Monitor market competition
• Settle industry disputes (PURC, 2007).

Regulatory instruments used are also varied. Some countries issue licenses with a set of conditions the service provider need to abide. Some countries enter contracts with operators. These contracts may be as concessions or franchises.

There are service and supply contracts where products, technical, or management services are provided by the operators. In this instance, it is the government that owns the assets. On the other hand, concessions have the government lease or provide the build-operate-transfer scheme wherein the operator owns or is responsible for the assets for an agreed period of time. Privatization has the government divest and develop new enterprises and is often used in build-own-operate systems with the private sector owning the assets until it decides to retire or sell.

In all of these, many countries require legislation to authorize the government to enter into these types of agreements with contractors, or even in the issuance of licenses or concessions. Within the contract, licenses or concessions are the governing details between the private operator and the government’s duties, rights, and obligations. Under privatization, legislation is almost always required which also governs the parties’ duties, rights, and obligations. In all forms of operation or ownership, many countries rely on statutes and laws to define the roles and responsibilities of utility operators (PURC, 2007).

Energy Challenges

To address the energy problem growing in an international scale, the MIT (2003) proposed four options:

• “Increase the efficiency in electricity generation and use;
• Expand use of renewable energy sources such as wind, solar, biomass, and geothermal;
• Capture carbon dioxide emissions at fossil-fuelled (especially coal) electric generating plants and permanently sequester the carbon; and
• Increase use of nuclear power,” (p 11).

All of the above proposals currently do not hold water as two of them could be considered inevitable if not too generalized, while sequestering carbon is still a limited technology that needs to come out in the open market. By including nuclear power, and a premise that, “we shall likely need all of these options and accordingly it would be a mistake at this time to exclude any of these four options from an overall carbon emissions management strategy,” the MIT (2003, p 1) proposal begs to be considered seriously.

Government and Corporate Cooperation

Environmental policies already brought in substantial improvements in air, water and natural environment quality in the past 25 years. Major and multinational corporations, in answer to growing calls for sourcing and post-consumption responsibility, have taken initiatives and innovations in managing their environmental impacts that have reduced their costs, increased their efficiency, lowered their liabilities, as well as enhanced their competitiveness.

This is coupled with the reduction of pollution, resources conservations, and elimination or reduction of wastes. It is further suggested that significant improvement in environmental quality that encompasses natural resources will be influenced by the widespread adoption of pollution prevention practices and sound conservation of resources, more than “stringent regulation of end-of-pipe emissions,“ (Rondinelli and Berry, 2000, p 168).

American corporations and multinational enterprises have adopted proactive environmental management systems since the 1980s as the US passed legislation mandating not only commitment but compliance with environmental regulations. They need to go well beyond cleaning up wastes but prevent pollution from the source until such time that they view environmental protection as a necessary and integral part of total quality management. As such, business strategies in cost reduction, improved efficiency, effective competition as well as product and services innovation and development have been integrated into the overall business system (Rondinelli and Berry, 2000).

Environment quality improved with these legislations and environmental regulations as air pollution was significantly reduced during the 1980s and 1990s. Between 1998 and 1997, carbon monoxide emission decreased by 25 percent, volatile organic compound or VOCs by 20 percent, sulfur dioxide by 12 percent, and lead by 44 percent as reported by the United States Environmental Protection Agency (1998). In fact, these occurred when vehicle miles traveled increased by 127% with the national population expanded by 31%. Regulations, however, are still perceived as wanting.

EPA cannot regulate industrial operations effectively nor provide adequate incentives for innovative actions of corporations that performed better than what was mandated. According to Rondinelli and Berry (2000), “Public policies at the national, state and local levels do not yet reflect the new trends in corporate environmental management,” (p 169). The EAP for instance is lacking a comprehensive policy to improve environmental quality. There is a lack of encouragement as well as a reward for corporate environmental systems where a cleaner environment is concerned and it has also been noted that there is a decline in marginal returns in environmental quality in the United States (Rondinelli and Berry, 2000). This is further discussed when it comes to supporting carbon-free nuclear power.

Air Pollution

Air pollution is a growing concern as smog, greenhouse effect, acid rain, and even home-generated pollutants fill the air. Burnt fuel for energy is one of the major causes of air pollution. This process releases small particles called black carbon pollution and is from burning fuels in automobiles, homes, and industries. Other types of air pollutants are called noxious gases such as sulfur dioxide, carbon monoxide, nitrogen oxide, and other chemical vapors that react with other chemicals in the atmosphere to form smog or acid rain (LBNL, 2009).

Air pollution can cause long-term and short-term health damages such as asthma, heart and lung diseases. The duration of exposure, as well as the concentration of pollutants in the air, also determines the extent of damage to groups or individuals’ health. Some short-term health damages include eye, nose, skin, or throat irritation, upper respiratory infections such as pneumonia or bronchitis, nausea, headaches, and allergic reactions.

In 1952, about four thousand people died in London in the “Smog Disaster” (LBNL, 2009). Long-term health damages include chronic respiratory diseases, lung cancer, heart diseases ad complications. In the United States, it is estimated that some 500,000 individuals die prematurely each year due to cigarette smoking alone. This is on top of healthcare costs, human welfare impacts, and lost productivity (LBNL, 2009).

Large-scale greenhouse gas emissions with an estimated hundreds of billions of tonnes of carbon dioxide expected to be released within the next 50 years will accelerate global warming. Electricity generated from fossil fuels, specifically natural gas and coal is a major contributor to the emission of carbon dioxide.

Nuclear Power

With the growing concern not only on the depletion of natural forms of energy but also with the quality of air, the use of nuclear power has been proposed to address not only energy requirements but also to significantly reduce carbon emissions. It was proposed that by 2050, with a projected 1000 billion watts of worldwide nuclear generation, 1.8 billion tonnes of carbon emission could be avoided annually.

Nuclear power supplied 20% of the United States as well as 17% of the world’s electricity consumption. The increase of nuclear electricity generating capacity at only 5% worldwide by 2020 as electricity requirement soars at 75% (MIT 2004) widens the gap of supply and demand, as well as a seemingly stagnant growth on the part of nuclear power.

Current Challenges

A study conducted by the Massachusetts Institute of Technology (MIT) in 2003 indicated the following major issues that nuclear energy needs to address:

1. The most important challenge to the use of nuclear energy is cost. Currently, in so-called deregulated markets, the cost of nuclear energy is not considered competitive against coal or natural gas. MIT proposed that “plausible reductions by industry in capital cost, operation and maintenance costs, and construction time could reduce the gap.” Using carbon emission credits, MIT proposed that government enactment could give nuclear power a cost advantage. Nuclear power has higher overall lifetime costs with the lack of carbon tax or equivalent “cap and trade” system to reduce carbon emissions;
2. Safety is next in consideration. MIT (2003) proposed that “Modern reactor designs can achieve a very low risk of serious accidents, but, ‘best practices’ in construction and operation are essential. We know little about the safety of the overall fuel cycle, beyond reactor operation” (p 2). Nevertheless, with the 1979 Three Mile Island and 1986 Chernobyl reactor accidents, nuclear power is seen as dangerous to the safety and the environment aside from its health effects. Fuel cycle accidents in the USA, Russia, and Japan further damaged the image as safe and secure transportation of nuclear materials as well as security of nuclear facilities are highly susceptible to a terrorist attack;
3. Waste is another major issue in nuclear power. “Geological disposal is technically feasible but the execution is yet to be demonstrated or certain. A convincing case has not been made that the long-term waste management benefits of advanced, closed fuel cycles involving reprocessing of spent fuel are outweighed by the short-term risks and costs. Improvement in the open once-through fuel cycle may offer waste management benefits as large as those claimed for the more expensive closed fuel cycles. Radioactive wastes until today have unresolved issues which pose danger to present and future generations,” (p 4).
4. “Proliferation.” MIT (2003, p 2) reported that the current international safeguards regime cannot meet the security problems of the expanded nuclear deployment proposed for the global growth scenario. In fact, the current reprocessing systems used in Europe, Japan and Russia of separating and recycling plutonium still pose risky proliferation. Nuclear power is a high-security risk as misuse of commercial and associated nuclear facilities and operations for nuclear weapons manufacture is very possible. Chemical re-processing of spent fuel to separate weapons-usable plutonium and uranium should be guarded as nuclear power is used internationally (MIT, 2003, p 3).

Due to the above reasons, government involvement in the advancing of nuclear infrastructure and use is very important. While the use of nuclear power meant carbon-free emission, competitiveness, safety and security are bigger concerns.

Focusing on the nuclear electricity growth scenario with the emphasis on cooperation between countries like the US, Japan, Korea, Taiwan, as well as the renewal of European activity, the following is the forecasted growth scenario:

Source: MIT, 2003.

Advantages

If demand is met, a significant amount of carbon is displaced. In 2002, 6,500 million tonnes of carbon was emitted from human activity which is expected to double by 2050. 800 million tonnes gas-fired and 1,800 million tonnes coal-fired generations will be avoided once a 1000 GWe of nuclear power becomes available per annum with the assumption that carbon dioxide is not captured from combustion sources (MIT, 2003).

The MIT (2003) also examined tree representative nuclear fuel cycle deployments as follows:

• “Conventional thermal reactors” – this operates In a once-through mode and discharged spent fuel is directly disposed
• “Thermal reactors with reprocessing” – used in a closed fuel cycle where waste products are separated from unused fissionable material. It is recycled as fuel into reactors. Plutonium is separated from spent fuel, fabricated into mixed plutonium and uranium oxide fuel, then recycled to reactors for one pass.
• “Fast reactors with reprocessing in a balanced closed fuel cycle – the thermal reactors operated worldwide in “once-through” mode. Fast reactors with balanced numbers destroy the actinides separated from the thermal reactor spent fuel. Fast reactors, reprocessing and fuel fabrication facilities are relocated in secure nuclear energy parks in industrial countries (MIT, 2003).

According to MIT (2003), closed fuel cycles lengthen fuel supplies. Uranium resources and price determine the viability of once-through alternatives in global growth. MIT insists that the world-wide supply of uranium ore can support the deployment of 1000 reactors over the next half-century. This is based on their study of currently available information. The once-through cycle has advantages in cost, proliferation, and fuel cycle safety but is dangerous in long-term waste disposal (MIT, 2003).

The two-closed cycle on the other hand is advantageous in long-term aspects of waste disposal, but not cost-effective and has low ratings on short-term waste issues, proliferation risk, and fuel cycle safety. The table of fuel cycle types and ratings below provides an overview:

Source: MIT, 2003.

Disadvantages

Aside from the current infrastructure and processing challenges of nuclear power, public perception is another detriment to the building of new nuclear power plants. In the study where a survey was conducted, it found that a majority of Europeans and Americans oppose the construction of nuclear power plants. The following is an overview of the public attitude about nuclear power plants:

• They are informed by their perceptions of technology instead of politics or demographics of income, education and gender;
• Nuclear waste, safety and costs are viewed negatively
• There is no awareness about the carbon-free emission on nuclear power nor its connection with global warming.

The study thereby noted that technological developments are needed to lower costs and improve safety and waste problems to help increase public support. Likewise, there is also a need to educate the public about the link between global warming, the use of fossil fuels, and the exigency of low-carbon energy sources (MIT, 2003).

Consequently, the study proposed that the US public does not support nuclear power or the construction of facilities unless costs and technology are improved. The carbon-free energy source presented by nuclear power cannot motivate the support of the public for nuclear use expansion. Below are the comparative costs of nuclear energy, coal and natural gas:

Source: MIT, 2003.

The high cost is emphasized as a major issue when it comes to nuclear power use. The study proposed taxing the carbon emission of other sources of energy in order to leverage costs against nuclear power. As such, the following costing has been generated:

Source: MIT, 2003.

Through this comparison, it was assumed that nuclear power becomes competitive through the “cap and trade” or carbon tax system. This system will become dependent on societal choices on how much carbon dioxide emission should be allowed, technology advancements such as cost and feasibility of large-scale carbon capture and sequestration. The study further urged government action to encourage nuclear power options as the regulation of nuclear power is uncertain and investors are not willing to risk the development of new generation/s of nuclear facilities. To this, the MIT (2003) emphasizes that:

• Government should share in the cost for site banking of plants, certification of new plant designs, as well as combines construction and operation licenses for plants built now or in the future
• Government should promote nuclear power as carbon-free thus the need to mandate federal and state governments to include it in their alternative and renewable energy programs and standard
• Government should subsidize a small set of “first mover” commercial nuclear plants to become experimental sites for cost and regulatory development (MIT, 2003).

Currently, wind energy enjoys a 1.7 cents per kWe-hr tax credit for ten years. For MIT (2003), it proposes a production tax credit of up to $200 per kWe of the construction cost applicable to the 10 “first movers” plants. “This benefit might be paid out at about 1.7 cents per kWe-hr, over a year and a half of full-power plant operation.” The tax credit mechanism offers the highest incentives for projects to be completed. The credit is equivalent to a credit of $70 per avoided metric ton of carbon.

When it comes to safety, the study proposed a global standard that should be followed strictly to avoid further negative public perception. The possibility of a terrorist attack, however, is still highly debatable.

Conclusion

In consideration of the carbon-free emission of nuclear power as well as its potential to provide higher electricity for global demand, it ranks high on alternative energy sources for public utility. The current challenges posed by the Massachusetts Institute of Technology, however, undermine present technology and infrastructure that could arrest a growing if not permanent fear of the public about the hazards and dangers of nuclear energy and its wastes.

The active involvement of the United States government in global military affairs further complicates the possibilities of building nuclear power plants as this would endanger not only plant workers but also the most immediate vicinity as even Pentagon and supposedly highly populated and important centers such as New York were not spared of bombings, infiltration and attacks.

The proposal, however, may need to be fully backed by sustainable and affordable research and technology to fully encourage investment and risk not only from the private but also from the government sector. Until such time that the learned hazards in the Three Mile Island and 1986 Chernobyl reactor accidents were not put to rest, nuclear power will remain marginal advocacy not only among the public but to the US legislation.

Legislation on environment protection and natural resources preservation are already in place to boost the nuclear power stance on public utility as an energy source. Tapping these to align with the proposed pumping up of the nuclear power industry should be considered by advocacy groups as well as legislators to gain investment support as well as public education.

Reference

Lawrence Berkeley National Laboratory’s ELSI Project. “Air Pollution.”. Web.

Massachusetts Institute of Technology. “Future of Nuclear Power.” 2003.

Public Utility Research Center (2007). “Bodies of Knowledge on Infrastructure Regulation.” Web.

Rondinelli, Dennis and Michael Berry (2000). “Corporate Environmental Management and Public Policy: Bridging the Gap.” American Behavioral Scientist, vol. 44: pp. 168 – 187.

United states Environmental Protection Agency (1995). Design for the environment (DfE) current projects. Washington DC.

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