Tradable permit system for PM_2.5 emissions from residential and industrial sources

Highlights

• Residential wood combustion can be a major source of air pollution in urban areas.

• Wood smoke pollution can be reduced by changing to more efficient heating devices.

• Public or private programs for wood heater replacement have social benefits.

• Industrial facilities can compensate emission by replacing residential wood heaters.

• Wood heater replacement is more cost-effective than abatement technologies.

Abstract

Residential wood combustion is a significant source of air pollution in urban areas of many countries with cold weather and low cost of firewood. These conditions worsen in urban areas where atmospheric emissions from industrial activities are present. This study addresses this problem and extends the existing literature to develop an optimization model that simulates a system of tradable permits for fine particulate matter emissions, which includes different options to reduce emissions for both industrial and residential sources. Results show that replacing wood heaters in urban areas is highly desirable from an economic and environmental perspective regardless if the expenses originate from each household, public programs or emission compensation mechanisms from the industrial sector.

Introduction

Several studies have estimated that wood combustion can be a major source of air pollution during the winter months in cold regions where firewood is easily available, including Scandinavian countries (Hedberg et al., 2002, Glasius et al., 2006), North America (Allen et al., 2011; Ries et al., 2009), New Zealand (Wang and Shooter, 2002) and Australia (Keywood et al., 2000). Residential wood combustion is also a major source of air pollution in urban areas of south-central Chile (Hedberg et al., 2005, Schueftan and González, 2013).

In order to address this issue in developed countries, strategies have been oriented to restrict the use of wood heaters, to regulate the moisture content of the wood, to certify heaters, to ban the use of uncertified wood heaters, to promote voluntary heater replacement programs, and to conduct environmental education and outreach. However, in developing countries like Chile, there are not many resources for all wood heater replacement programs considering that in many cities of south-central Chile the penetration of wood heaters in urban homes varies from 44% to 97% (Source: based on CASEN Survey). Banning wood heaters is not a feasible option from a social prospective since many households are low income and firewood is a low cost alternative for home heating. In addition, many household do not have enough resources to purchase more efficient wood heaters or to switch to a cleaner fuel.

In the Concepción Metropolitan Area of south-central Chile, which is composed of ten districts¹; the main atmospheric emissions come from residential wood burning and industrial activities. According to the Chilean Ministry of Environment, residential wood burning and industrial activities contribute to 72.5% and 19.2% of the total emissions of fine particulate matter, PM_2.5 (Particulate matter with aerodynamic diameter ≤ 2.5 μm), respectively; the rest of the emissions are from vehicles and other sources, including fugitive windblown dust and biogenic emissions.

The approach typically used to reduce pollutant emissions from industrial sources are “command and control” regulations, which due to the heterogeneity of costs between emission sources, these approaches do not generate cost-effective solutions (Stavins, 2003).

Research on economic instruments applied to industrial activities is extensive, but limited to residential wood burning. Kandlikar et al. (2011) analyzed the impacts of replacing old wood and coal heating devices, to cleaner wood heaters, or by switching to other types of fuel. Their results show that it is possible to obtain important benefits from improving air quality and decreasing indoor pollution. Chávez et al. (2011) examined the role of income distribution in policy-making that would allow controlling air pollution from residential wood burning. According to these authors, consumption taxes and subsidies for cleaner wood stoves should be differentiated according to the income of households, where households with a higher income level should take the greater burden of these policies.

This study contributes to the existing literature in which developing an optimization model where the costs of various options for reducing PM_2.5 emissions are evaluated, for both residential and industrial sources. Furthermore, this study evaluates whether incorporating residential sources for compensation mechanism of industrial emissions would help to reduce PM_2.5 emissions at a lower cost than when only industrial sources are regulated. This could be an attractive alternative, in terms of costs, in order to meet the reduction targets set by the regulator authority and to facilitate replacement of current wood heaters in households with economic constraints.