The influence of CO₂ pricing on NOx emissions programs

Electricity generating units (EGUs) are major emitters of both nitrogen oxides (NOx) and CO₂, and cap-and-trade programs are either currently used or proposed as management strategies for both pollutants. Emission cap and trade programs for these two pollutants have generally been considered independently, but since each EGU will have a characteristic NOx to CO₂ emission ratio, these programs are inherently connected. This thesis examines the extent to which CO₂ emission pricing and NOx emission markets are likely to influence each other, using Texas as a case study. The relationship is first demonstrated with a simple scenario of four power plants, followed by a second scenario accounting for the largest 34 plants in Texas. The analysis demonstrates that future CO₂ pricing will cause NOx emissions markets to be inefficient at reducing emissions through changes in the dispatching order. There will also exist a greater potential for NOx price spikes. Two plausible alternatives to this problem are suggested: a temporally- and spatially-variable NOx program, or increased emphasis on retrofitting the existing fleet of power plants for NOx reduction.