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This staff working paper considers the potential cost to the electric utility industry of provisions contained in Title II of S. 1894, amending the Clean Air Act, that would control emissions of sulfur dioxide. The analysis contained in the paper is derived, in part, from an earlier study of the bill preceding the adoption of amendments by the Senate Committee on Environment and Public Works. The paper was prepared in response to requests for information on the benefits and costs of S.1894 from Senators Burdick, Mitchell, Stafford, and Chaffee, and from a group of 32 Senators. Similar requests were received by the Congressional Research Service and the Office of Technology Assessment; these agencies are preparing analyses on other impacts and provisions of the bill.

Marc Chupka of CBO's Natural Resources and Commerce Division wrote this staff working paper under the supervision of Roger C. Dower and Everett M. Ehrlich. Larry Parker of the Congressional Research Service and Robert Freidman of the Office of Technology Assessment provided valuable assistance and comments. The paper was edited by Francis Pierce and typed by Patrica Z. Joy.
 

James F. Blum
Acting Director
March 1988
 
 

The acid rain provisions contained in Title II of S.1894, the "Clean Air Standards Attainment Act of 1987," underwent substantial revision during consideration by the Committee on Environment and Public Works. This staff working paper describes briefly the new provisions applying to sulfur dioxide (SO₂) reductions from electric utilities and, where possible, estimates the effects they would have on utility emissions and costs.¹ A previous staff working paper prepared by the Congressional Budget Office--"Title II of the Proposed Senate Amendments to the Clean Air Act: A Preliminary Economic Analysis"--provided a set of cost estimates for the original bill. Differences from those results are highlighted in this memorandum.

By the year '2000, the SO₂ reduction requirements would raise the annual costs of the electrical utility industry by about $6.2 billion. These costs correspond to annual $62 emission reductions from these sources of 9.7 million tons (compared with 1980 emission levels) and 13.5 million tons (compared with basecase emission levels in the year 2000). The difference is attributable to projected growth in emissions during the 1990s. Compared with the earlier version of the bill, annual utility costs in 2000 would be lower by about $1.7 billion, and emission levels would be higher by 0.7 million tons. These cost and emission estimates, it must be emphasized, only cover the sulfur dioxide reductions from the electric utility industry. Although this represents the bulk of control costs expected under Title II, requirements to reduce SO₂ from industrial sources, and to reduce nitrogen oxides from electric utility and industrial sources, will add to the cost of the bill. Although these topics are not examined in this report, they are included in a forthcoming Congressional Research Service report.

Annual 'costs after the year 2000 cannot be predicted with any precision, but could increase by $1 billion to $3 billion depending on the SO₂ reduction strategies adopted by utilities in the 1990s and the availability of less expensive control options. These estimates depend on several assumptions concerning the responses of states and utilities to the complex requirements of the Committee bill, which are discussed more fully below. Finally, the emerging technologies of SO₂ abatement could contribute to lower costs, but in ways that are difficult to estimate at this time. The types of technologies that would be favored under Title II would be high-percentage-removal retrofit technologies over other emerging retrofit technologies with lower-percentage removal, along with repowering options that could become commercially available over the next two decades. These are discussed in later sections.

This document is available in its entirety in PDF.

1. The potential benefits of acid rain controls are not evaluated here. They are addressed in a forthcoming analysis being prepared by the Congressional Research Service.