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An Innovative Trading Approach for Mercury Waste Management - Shastri, Diwekar,Mehrotra 2011

An Innovative Trading Approach for Mercury Waste Management - Shastri, Diwekar,Mehrotra 2011

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This work proposes an innovative approach of watershed level mercury trading for sustainable management of mercury pollution. An optimization based decision-making framework has been developed to optimize the selection of mercury treatment technologies by industries in a watershed in the presence of nonlinearity and uncertainty in technology cost models. The impact of the regulation on technology selection by industries, often ignored in existing trading literature, has been quantified. A particularly novel contribution of this framework is the consideration of health care cost as an objective. The application of the framework to the Savannah River watershed case study in US emphasizes the importance of health care cost while evaluating the benefits of trading. Nonlinearity and uncertainty in the cost models is shown to significantly affect technology selection. The ecological perspective of innovation comes from the proposal of using water body liming to mitigate mercury bioaccumulation and concerns of mercury hotspots.
This work proposes an innovative approach of watershed level mercury trading for sustainable management of mercury pollution. An optimization based decision-making framework has been developed to optimize the selection of mercury treatment technologies by industries in a watershed in the presence of nonlinearity and uncertainty in technology cost models. The impact of the regulation on technology selection by industries, often ignored in existing trading literature, has been quantified. A particularly novel contribution of this framework is the consideration of health care cost as an objective. The application of the framework to the Savannah River watershed case study in US emphasizes the importance of health care cost while evaluating the benefits of trading. Nonlinearity and uncertainty in the cost models is shown to significantly affect technology selection. The ecological perspective of innovation comes from the proposal of using water body liming to mitigate mercury bioaccumulation and concerns of mercury hotspots.

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Published by: International Journal of Innovation Science on Apr 17, 2011
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Volume 3 · Number 1 · 20119
 An Innovative Trading Approach for MercuryWaste Management
 Yogendra Shastri
†, *
, Urmila Diwekar 
and Sanjay Mehrotra
Vishwamitra Research InstituteCenter for Uncertain Systems: Tools for Optimization and Management (CUSTOM)368 56
th
Street, Clarendon Hill, IL– 60514.
Department of Industrial Engineering and Management SciencesNorthwestern University2145 North Sheridan Road, Evanston, IL– 60208.
 ABSTRACT
This work proposes an innovative approach of watershed level mercury trading for sustainable management of mercury pollution. An optimization based decision-makingframework has been developed to optimize the selection of mercury treatmenttechnologies by industries in a watershed in the presence of nonlinearity and uncertaintyin technology cost models. The impact of the regulation on technology selection byindustries, often ignored in existing trading literature, has been quantified. Aparticularlynovel contribution of this framework is the consideration of health care cost as anobjective. The application of the framework to the Savannah River watershed case studyin US emphasizes the importance of health care cost while evaluating the benefits of trading. Nonlinearity and uncertainty in the cost models is shown to significantly affecttechnology selection. The ecological perspective of innovation comes from the proposalof using water body liming to mitigate mercury bioaccumulation and concerns of mercury hotspots.
1. INTRODUCTION
Mercury has been recognized as a global threat to human health, aquatic and terrestrial biota, and thewhole ecosystem. Consequently, sustainable management of mercury pollution is an importantscientific and regulatory challenge [1, 2]. This task is challenging due to the complex mercury cycling,which includes majority emissions in the air followed by dry and wet deposition leading tobioaccumulation in aquatic food webs [3]. Innovative approach is therefore necessary to mitigatemercury pollution. Such an approach should be based on science of mercury fate and transportation.This work proposes pollutant (mercury) trading as a management alternative at the industrial sector level to balance the economic and ecological objectives, and formulates an optimization baseddecision making framework in the form of a mixed integer linear programming (MILP) problem. Thelinear deterministic formulation is then extended to incorporate nonlinearity and uncertainty in themodel to study their impact on optimal decisions. Atruly sustainable solution also accounts for thesocial dimension of the problem at hand, such as the adverse health impact due to mercury exposure.This is also often the most challenging aspect of sustainable management. This work proposes a novelapproach to calculate the health care costs associated with mercury discharge and uses it to comparethe efficiency of the trading approach over the traditional end of pipe treatment approach. Thisapproach of formulating multi-objective optimization problems in pollutant trading is particularlyinnovative in this field. The usefulness of the proposed model is illustrated by applying it to theSavannah River watershed mercury waste management case study. Since the creation of hotspots in awatershed is one of the concerns related to pollutant trading, this work proposes to use water bodyliming for pH control in order to mitigate the creation of mercury hot-spots after trading has beenimplemented.The article is arranged into several sections. The next section gives a brief overview of pollutanttrading and outlines the proposed approach. The following section presents the different optimizationmodel formulations. The case study details and the results are presented in the next two sections. The
* Current affiliation: Energy Biosciences Institute, University of Illinois at Urbana-Champaign
 
concept of water body liming as a management option is briefly discussed next. The article provides asummary and important conclusions in the end.
2. PROPOSED APPROACH FOR POLLUTANTTRADING
Pollutant trading is a market based approach which aims to achieve the same or better environmental performance with respect to pollution management at a lower overall cost. Therelative success of this approach for air pollutants [4, 5, 6, 7], including the USEPAissued federalrule in 2005 allowing cap and trade policy to reduce mercury emissions from coal-fired power plants, has encouraged the introduction of watershed based pollutant trading [8, 9]. Trading isbased on the fact that different firms in a watershed can face very different marginal costs to controlthe emission of the same pollutant. Trading program allows facilities facing higher pollutioncontrol costs to meet their regulatory obligations by purchasing environmentally equivalent (or superior) pollution reductions credits from another source at a lower cost. Facilities reducingpollutant discharge more than the required limit get credits for it which can be traded to another firm to gain monetary benefits or banked for future use, if that is a possibility. Some of theimportant parameters affecting the economics of trading include the trading ratio (how many unitsof pollutant reduction a source must purchase to receive credit for one unit of load reduction),transaction costs (expenses for trading participants that occur only as a result of trading), and thenumber of participants [8, 9].The primary stakeholders in pollutant trading are: the polluters (industries) and the regulatoryauthority (which also represents the interests of the society). Since the primary motivation behind theconcept of trading is to reduce the compliance cost for polluters, considerable focus has been given onunderstanding the economic implications of trading [10, 11, 12, 13]. However, work on the actualimplementation of trading and its effect on industry decisions has been limited. Most of the literature,such as Hung & Shaw [14], considers marginal treatment costs for the industries to study the economicimplications. Industries, however, cannot always decide using marginal costs since technologyselection decisions can significantly alter their capital investments. This introduces discontinuity andintegrality in the abatement costs which need to be captured in the trading mechanism. From thepolluter’s perspective, therefore, decisions such as if and how much to trade and which technology toimplement from a set of alternatives become difficult.From a regulatory perspective, trading is currently practiced mostly in a decentralized manner,where the role of the regulatory authority is restricted to setting up the basic trading mechanism (suchas trading ratio) and overseeing the appropriateness of the trades. However, to balance theconventional economic goals of trading with environmental and social goals, the role of regulatoryagency will be paramount [15]. The regulatory authorities (policy makers) must also consider industry capabilities and limitations, and leverage the regulatory tools to achieve this balance.Moreover, Oates et al. [16] and Atkinson & Tietenberg [17] have highlighted the importance of including emission level differences while comparing trading with the traditional command andcontrol approaches.These issues call for the formulation of an integrated decision making framework, which is the maincontribution of the presented work. Use of systems theory based optimization technique offers a way toachieve this, where the cost minimization objective can be achieved while incorporating the watershedand pollutant specific details using constraints. Modeling is an important aspect for such an approach.Simplified linear models, while being computationally advantageous, may lead to gross qualitative andquantitative errors in the results. Nonlinear models on the other hand typically provide more accuraterepresentation but result in computationally challenging problems. Inclusion of uncertainty, desirable for a robust solution, is also governed by a trade-off between accuracy and computational simplicity.Consequently, this work elaborates on these issues by performing a comparative study of the impact of various models on the framework and the optimal decisions. The next section describes the optimizationmodel formulations.
 3. TRADING OPTIMIZATION PROBLEM FORMULATION
The formulation considers that a TMDL(Total Maximum Daily Load) regulation has already beendeveloped by the state in consultation with USEPA. This translates into a specific load allocationfor each point source. Consider a set of point sources (PS
i
),
i
= 1,…,
 N 
, disposing pollutant
10An Innovative Trading Approach for Mercury Waste ManagementInternational Journal of 
Innovation Science
 
containing waste water to a common water body or a watershed. The various point source specificparameters are:
 D
i
= Discharge quantity of polluted water from PS
i
[volume/year]
c
i
= Current pollutant concentration in discharge water from PS
i
[mass/volume]
red 
i
= Desired pollutant quantity reduction in discharge of PS
i
[mass/year]
 P
i
= Treatment cost incurred by PS
i
to reduce pollution when trading is not possible.Every point source (PS) has the option of trading or implementing a particular waste reductiontechnology. Let
 j
= 1,…,
 M
be the set of waste reduction technologies available to the point sources. Thetechnology specific parameters are:
 f 
 j
(
 j
, D
i
) = Cost function for total plant cost for technology
 j
[$]
q
 j
= Pollution reduction possible from the implementation of technology
 j
[mass/volume]where,
 j
is the set of design parameters of technology
 j
. Trading is possible between all point sources.For simplicity, a single trading policy exists between all possible pairs of point sources, and a singletrading ratio
r
and transaction fee
 F
(in $/mass) is applicable to all the trades. The objective of themodel is to achieve the desired TMDLat the
minimum overall cost
. Let
b
ij
be the binary variablerepresenting point source-technology correlation. The variable is 1 when PS
i
installs technology
 j
, and0 otherwise. Let
t
ik 
(mass/year) be the amount of pollutant traded by PS
i
with PS
, i.e. PS
i
pays PS
to take care of its own pollution. All the parameters are on annual basis.
 3.1 Deterministic Model
The basic optimization model which assumes that all the information is deterministically known isformulated as:Objective:(1)Constraints:(2)(3)(4)The objective function gives the sum of the technology implementation costs for all point sources.Although each PS will also spend or gain from practicing trading, expense for one PS in a watershedis earning for one or more PS in the same watershed. As a result, for the complete watershed, tradingdoes not contribute to the cost objective. The first set of constraints eliminates trading within the samePS. The second set of constraints ensures that all the regulations are satisfied, with or without trading.The trading ratio
r
is usually set higher than 1 to account for data uncertainty and provide a buffer [8].Consequently, the PS accepting additional discharge reduction responsibility has to reduce thepollutant by an amount equal to the actual quantity traded (
t
ki
) times the trading ratio, as shown in Eq.3. The last constraint ensures that the expenses incurred by each PS with trading are not more thatthose without trading. Since participation in trading is voluntary, a polluter will participate in tradingonly if there is a financial incentive, which is modeled by this constraint. The problem given by Eqs.1-4 is a mixed integer linear/nonlinear programming problem. The decision variables in the problem
 PbfDFtti
iijjjii N ki N 
× +      =
= =
(,),
φ 
11
1
,,
 N 
 j M
=
1
redqDbtrti
ijiiji N ki N  j M
× × + =
= ==
111
1,,
ti
ii
= =
01,,
Minimize
i1N
 fDb
 jjiij j M
(,)
φ 
×
==
1
Shastri, Diwekar and Mehrotra11Volume 3 · Number 1 · 2011

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