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Policy Innovation Impacts on Scrubber Electricity Usage

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  • Ian Lange
  • Allen Bellas

Abstract

The introduction of scrubbers as a means of controlling sulfur dioxide pollution from stationary sources coincided with the implementation of the Clean Air Act of 1970. Since that time, there have been many policy changes affecting the electricity generation industry. These changes may be characterized as moving from direct regulation toward market-based incentives, both in deregulation or restructuring of power markets and adoption of market-based environmental regulation. These changes provide natural experiments for investigating whether the form of regulation can alter the rate of technological progress. Previous literature (Popp 2003, Lange and Bellas 2005) is mixed on whether advancements as a result of the switch to market-based environmental incentives have led to lower costs. This paper extends this literature by analyzing changes in scrubbers’ use of electricity (also known as parasitic load) in relation to regulatory policy regimes. Results show that restructured electricity markets have led to a considerable (30-45%) decrease in parasitic load. Conversely, the change to a cap-and-trade system for sulfur dioxide has not led to a decrease.

Suggested Citation

  • Ian Lange & Allen Bellas, 2006. "Policy Innovation Impacts on Scrubber Electricity Usage," NCEE Working Paper Series 200601, National Center for Environmental Economics, U.S. Environmental Protection Agency, revised Apr 2006.
    • Handle: RePEc:nev:wpaper:wp200601
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    File URL: https://www.epa.gov/environmental-economics/working-paper-policy-innovation-impacts-scrubber-electricity-usage
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    References listed on IDEAS

    as
    1. David M. Newbery & Michael G. Pollitt, 1997. "The Restructuring and Privatisation of Britain's CEGB—Was It Worth It?," Journal of Industrial Economics, Wiley Blackwell, vol. 45(3), pages 269-303, September.
    2. Bellas, Allen S., 1998. "Empirical evidence of advances in scrubber technology," Resource and Energy Economics, Elsevier, vol. 20(4), pages 327-343, December.
    3. Kira R. Fabrizio & Nancy L. Rose & Catherine D. Wolfram, 2007. "Do Markets Reduce Costs? Assessing the Impact of Regulatory Restructuring on US Electric Generation Efficiency," American Economic Review, American Economic Association, vol. 97(4), pages 1250-1277, September.
    4. Karl Markiewicz & Nancy L. Rose & Catherine Wolfram, 2004. "Does Competition Reduce Costs? Assessing the Impact of Regulatory Restructuring on U.S. Electric Generation Efficiency," Working Papers EP67, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
    5. David Popp, 2003. "Pollution control innovations and the Clean Air Act of 1990," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 22(4), pages 641-660.
    6. Milliman, Scott R. & Prince, Raymond, 1989. "Firm incentives to promote technological change in pollution control," Journal of Environmental Economics and Management, Elsevier, vol. 17(3), pages 247-265, November.
    7. Downing, Paul B. & White, Lawrence J., 1986. "Innovation in pollution control," Journal of Environmental Economics and Management, Elsevier, vol. 13(1), pages 18-29, March.
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