Still your grandfather’s boiler

Notes

Currently R&R with the Journal of the Association of Environmental and Resource Economists (JAERE).

See related presentations at:

• AERE@OSWEET 2023
• AWEEE 2022

Abstract

While vintage differentiation is a highly prominent feature of various regulations, it can induce significant biases. We study these biases in the context of New Source Review—a program within the US Clean Air Act imposing costly sulfur dioxide (SO₂) abatement requirements on new boilers but not existing ones. In particular, we empirically investigate how the differential treatment of coal boilers shaped the generation landscape by affecting unit utilization, retirement, and emissions. Leveraging a novel dataset covering state-level sulfur dioxide regulations for power plants, we show that the differentiation continued to have a strong effect even 30 years after its passage, raising the probability of surviving another year by 1.5 percentage points for grandfathered boilers and increasing their operations by around 800 hours annually. We estimate exempted units would have emitted a third fewer emissions per year, had they been subject to NSR. We run back-of-the-envelope calculations to assess the societal damages associated with the delayed retirements, higher utilization and higher emission rates of the grandfathered boilers. Focusing solely on the additional SO₂ emissions, we estimate annual costs of up to $65 billion associated with the vintage differentiation in New Source Review. Figure 1 presents our estimated timeseries of emissions and damages avoided.

Figure 1. Total sulfur dioxide emissions and damage effects from NSR.

Notes. Back-of-the-envelope estimates for approximately 500 investor-owned-utility, commercial and industrial boilers identified as having enjoyed grandfathering status after the introduction of NSR.