Going Nuclear for Climate Mitigation and Energy Systems Modeling of Carbon Dioxide and Air Pollution Taxes

The consumption of energy in the United States (U.S.) results in the emission of both carbon dioxide (CO2), which damages the atmosphere, and local air pollutants
(LAP), which causes damage to human health and the environment. In this thesis, I assess the efficacy of different policy strategies focusing on the abatement of CO2, LAP, and both simultaneously. The thesis begins by examining whether preserving existing nuclear plants is a cost-effective means for avoiding CO2 emissions. Following the nuclear analysis, I broaden the scope of my work to include all
sectors of the U.S. energy system. Using the Environmental Protection Agency’s TIMES model, I simulate energy-system taxes on CO2 as well as on LAPs, including sulfur
dioxide (SO2), nitrogen oxides (NOx), and particulate matter 2.5 micro-meters in diameter and below (PM2.5). Additionally, I compare the efficacy of LAP tax scenarios at a
national and regional level. Across Chapters 3-4, I compare total emissions across multiple simulated tax scenarios to a business as usual scenario. Additionally, using
integrated assessment reduced complexity models, I estimate damages from CO2 and LAPs emissions across these scenarios. To measure the efficiency of tax scenarios in this thesis, I model the net-benefits compared to BAU across multiple environmental policies. In Chapter 2, I examine whether preserving existing U.S. nuclear power plants is a cost-effective strategy to avoid CO2 emissions. I perform a Monte Carlo-based analysis to determine the break-even price of electricity that each U.S. nuclear plant must receive in order to avoid financial loses between 2015 and 2040. Subsequently, I model nuclear power plant revenue under four separate future prices of electricity. Under the lowest electric price trajectory, my modeled results suggest that nuclear power plants would require a subsidy in order to break-even. Under the low electric price scenario, assuming natural gas combined-cycle power plants would replace nuclear power plants, I estimate the median cost of avoided CO2 emissions to range from $18-$30 per metric ton of avoided CO2 for multi-reactor plants, and $47-$97 per metric ton of avoided CO2 for single reactor plants (2014$). In Chapter 3, I simulate business as usual as well as two CO2 tax policies from 2015 to 2030 on the United States energy system, using the TIMES optimization model. I
find limited near-term decarbonization opportunities outside of the power generation sector, which results in substantial and enduring CO2 tax revenue through 2030. Second,
because the social cost of carbon, and therefore the optimal CO2 tax, is uncertain, I perform analysis comparing the deadweight loss associated with picking the wrong, nonoptimal CO2 tax. Due to the convex nature of the CO2 abatement cost curve implicit in the TIMES model, I find that it is more efficient to tax high when the social cost of
carbon is low, versus taxing low when the social cost of carbon is high. Additionally, I quantify the co-benefits of LAP emissions reductions that occur under both CO2 tax
policies. In Chapter 4, I use energy system and integrated assessment models for air pollution to estimate the consequences of LAP and CO2 policy on technology choice,
emissions, and pollution damages in the U.S. economy. Chapter 4 explores various combinations of policies targeting just CO2, just LAPs, and both types of pollutants
simultaneously. One goal is to assess whether simultaneous tax policies on both LAPs and CO2 are needed or whether significant spillovers merit control of only LAPs or CO2.
I find substantial spillovers across policies, that a scenario taxing both CO2 and LAPs simultaneously produces the highest net-benefits, as opposed to scenarios that target
either CO2 or LAPs, and that the timing of taxes is important with regard to technology lock-in in the electric sector.
Also in Chapter 4, I simulate national and regional taxes levied on the emission of LAPs from the U.S. energy system. I estimate the efficiency gains, relative to BAU, from
taxation of LAPs under two systems: in one scenario taxes are set to the emission weighted average marginal damage on a national level and the other employs a 9-region
taxation system on SO2, NOx, and PM2.5, where the regions are defined according to U.S. census regions. I find that both national and regional taxes induce substantial and nearly
identical reductions in the emissions of SO2, NOx, and PM2.5. Importantly, across regions and sectors, there is not a substantial difference in emissions between the national and regional tax scenarios. As a result, the modeled welfare gains stemming from policy differentiation are minimal. It is important to note that the lack of an increase in net benefits
between the national and regional tax scenarios is likely due to the lack of additional abatement options built into TIMES, which does not allow additional regional abatement in many sectors, regardless of whether there is a substantial tax increase.