Designing environmental policy: lessons from the regulation of mercury emissions
AbstractIn its waning days, the Clinton administration decided that it was appropriate to regulate mercury emissions from power plants. The incoming Bush administration had to decide how best to regulate these emissions. The Bush administration offered two approaches for regulating mercury emissions from power plants. The first was to establish uniform emission rates across utilities, as mandated by the 1990 Amendments. The second was to establish a cap on mercury emissions while allowing emissions trading in order to reduce the cost of achieving the goal. This paper presents the first cost-benefit analysis of this issue that takes account of IQ benefits. We find that the benefits of the mercury regulation are likely to fall short of the cost. This assessment is based on a number of assumptions that are highly uncertain. The finding of negative net benefits is robust to many, though not all, reasonable variations in the model assumptions. We also find that the emissions trading proposal is roughly $15 billion less expensive than the command-and-control proposal.
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Bibliographic InfoArticle provided by Springer in its journal Journal of Regulatory Economics.
Volume (Year): 30 (2006)
Issue (Month): 3 (November)
Contact details of provider:
Web page: http://www.springerlink.com/link.asp?id=100298
Regulation; Cost-benefit analysis; Environmental economics; D61; L50; L51; Q52;
Other versions of this item:
- Gayer, Ted & Hahn, Robert W., 2005. "Designing Environmental Policy: Lessons from the Regulation of Mercury Emissions," Working paper 380, Regulation2point0.
- D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
- L50 - Industrial Organization - - Regulation and Industrial Policy - - - General
- L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
- Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Costs; Distributional Effects; Employment Effects
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