Sulfur Dioxide Compliance of a Regulated Utility
AbstractElectric utilities can reduce sulfur dioxide emissions through a variety of strategies such as adding scrubbers, switching to low- sulfur coal, or shifting output between generating plants with different emissions. The cost of achieving a given emission target can be minimized using a market for emission allowances, as under the Clean Air Act Amendments of 1990, if firms with high abatement costs buy allowances while those with low abatement costs reduce emissions and sell allowances. However, public utility commissions regulate which costs can be passed to customers. Previous theoretical work has analyzed effects of regulations on a utility's choice between permits and a single continuous `abatement technology.' Here, we consider three abatement technologies and the discrete choices among them. Our numerical model uses market and engineering information on permit prices, scrubber cost and sulfur removal efficiency, alternative fuel costs and sulfur content, plus generating plant costs and efficiency. Using illustrative sets of parameters, we find that regulatory rules could more than double the cost of sulfur dioxide compliance.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 5542.
Date of creation: Apr 1996
Date of revision:
Publication status: published as Journal of Environmental Economics and Management, Vol. 34, no. 1(September 1997): 32-53.
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Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
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Other versions of this item:
- H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
- D6 - Microeconomics - - Welfare Economics
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