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U.S. Emissions Trading Markets for SO2 and NOx

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  • Burtraw, Dallas

    ()
    (Resources for the Future)

  • Szambelan, Sarah Jo

Abstract

The U.S. Clean Air Act Amendments of 1990 initiated the first large experiment in the use of market-based regulation to control environmental problems with the introduction of an emissions trading program for sulfur dioxide emissions. Later that decade the second large trading program began for control of nitrogen oxide emissions. Although these programs are widely viewed as successful, their development and the emergence of associated environmental markets took various turns that provide lessons for the development of new markets, including markets for greenhouse gas emissions. This paper reviews the history of these programs and provides a glimpse of their future given the introduction of new regulations affecting multiple pollutants and given the expected implementation of climate policy.

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Bibliographic Info

Paper provided by Resources For the Future in its series Discussion Papers with number dp-09-40.

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Date of creation: 15 Oct 2009
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Handle: RePEc:rff:dpaper:dp-09-40

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Related research

Keywords: market-based regulation; Clean Air Act; electricity generation; air pollution; sulfur dioxide; nitrogen oxides;

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References

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  1. Coggins, Jay S. & Swinton, John R., 1996. "The Price of Pollution: A Dual Approach to Valuing SO2Allowances," Journal of Environmental Economics and Management, Elsevier, vol. 30(1), pages 58-72, January.
  2. Popp, David, 2004. "ENTICE: endogenous technological change in the DICE model of global warming," Journal of Environmental Economics and Management, Elsevier, vol. 48(1), pages 742-768, July.
  3. Burtraw, Dallas & Palmer, Karen & Kahn, Danny, 2009. "A Symmetric Safety Valve," Discussion Papers dp-09-06, Resources For the Future.
  4. Stephen P. Holland & Michael Moore, 2008. "When to Pollute, When to Abate? Intertemporal Permit Use in the Los Angeles NOx Market," NBER Working Papers 14254, National Bureau of Economic Research, Inc.
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  6. Meredith Fowlie & Stephen P. Holland & Erin T. Mansur, 2009. "What Do Emissions Markets Deliver and to Whom? Evidence from Southern California's NOx Trading Program," NBER Working Papers 15082, National Bureau of Economic Research, Inc.
  7. John R. Swinton, 2002. "The Potential for Cost Savings in the Sulfur Dioxide Allowance Market: Empirical Evidence from Florida," Land Economics, University of Wisconsin Press, vol. 78(3), pages 390-404.
  8. Ellerman, A. Denny & Montero, Juan-Pablo, 1998. "The Declining Trend in Sulfur Dioxide Emissions: Implications for Allowance Prices," Journal of Environmental Economics and Management, Elsevier, vol. 36(1), pages 26-45, July.
  9. Joshua Linn, 2008. "Technological Modifications in the Nitrogen Oxides Tradable Permit Program," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 153-176.
  10. Bohi, Douglas R., 1994. "Utilities and state regulators are failing to take advantage of emission allowance trading," The Electricity Journal, Elsevier, vol. 7(2), pages 20-27, March.
  11. Dallas Burtraw & Alan Krupnick & Erin Mansur & David Austin & Deirdre Farrell, 1998. "Costs And Benefits Of Reducing Air Pollutants Related To Acid Rain," Contemporary Economic Policy, Western Economic Association International, vol. 16(4), pages 379-400, October.
  12. Ellerman,A. Denny & Joskow,Paul L. & Schmalensee,Richard & Montero,Juan-Pablo & Bailey,Elizabeth M., 2005. "Markets for Clean Air," Cambridge Books, Cambridge University Press, number 9780521023894.
    • Ellerman,A. Denny & Joskow,Paul L. & Schmalensee,Richard & Montero,Juan-Pablo & Bailey,Elizabeth M., 2000. "Markets for Clean Air," Cambridge Books, Cambridge University Press, number 9780521660839.
  13. Joskow, Paul L & Schmalensee, Richard & Bailey, Elizabeth M, 1998. "The Market for Sulfur Dioxide Emissions," American Economic Review, American Economic Association, vol. 88(4), pages 669-85, September.
  14. Parry, Ian & Pizer, William & Fischer, Carolyn, 1998. "Instrument Choice for Environmental Protection When Technological Innovation is Endogenous," Discussion Papers dp-99-04, Resources For the Future.
  15. Schennach, Susanne M., 2000. "The Economics of Pollution Permit Banking in the Context of Title IV of the 1990 Clean Air Act Amendments," Journal of Environmental Economics and Management, Elsevier, vol. 40(3), pages 189-210, November.
  16. H. Spencer Banzhaf & Dallas Burtraw & David Evans & Alan Krupnick, 2006. "Valuation of Natural Resource Improvements in the Adirondacks," Land Economics, University of Wisconsin Press, vol. 82(3), pages 445-464.
  17. Burtraw, Dallas & Palmer, Karen & Bharvirkar, Ranjit & Paul, Anthony, 2001. "Cost-Effective Reduction of NOx Emissions from Electricity Generation," Discussion Papers dp-00-55-rev, Resources For the Future.
  18. Don Fullerton & Shaun P. McDermott & Jonathan P. Caulkins, 1996. "Sulfur Dioxide Compliance of a Regulated Utility," NBER Working Papers 5542, National Bureau of Economic Research, Inc.
  19. Juan-Pablo Montero, 1999. "Voluntary Compliance with Market-Based Environmental Policy: Evidence from the U.S. Acid Rain Program," Journal of Political Economy, University of Chicago Press, vol. 107(5), pages 998-1033, October.
  20. 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.
  21. Richard Schmalensee & Paul L. Joskow & A. Denny Ellerman & Juan Pablo Montero & Elizabeth M. Bailey, 1998. "An Interim Evaluation of Sulfur Dioxide Emissions Trading," Journal of Economic Perspectives, American Economic Association, vol. 12(3), pages 53-68, Summer.
  22. Arimura, Toshi H., 2002. "An Empirical Study of the SO2 Allowance Market: Effects of PUC Regulations," Journal of Environmental Economics and Management, Elsevier, vol. 44(2), pages 271-289, September.
  23. Stavins, Robert, 2007. "A U.S. Cap-and-Trade System to Address Global Climate Change," Working Paper Series rwp07-052, Harvard University, John F. Kennedy School of Government.
  24. Burtraw, Dallas & Palmer, Karen & Krupnick, Alan & Evans, David & Toth, Russell, 2005. "Economics of Pollution Trading for SO2 and NOx," Discussion Papers dp-05-05, Resources For the Future.
  25. Winebrake, James J. & Bernstein, Mark A. & Farrell, Alex E., 1995. "Estimating the impacts of restrictions on utility participation in the SO2 allowance market," The Electricity Journal, Elsevier, vol. 8(4), pages 50-54, May.
  26. Milliman, Scott R. & Prince, Raymond, 1992. "Firm incentives to promote technological change in pollution control: Reply," Journal of Environmental Economics and Management, Elsevier, vol. 22(3), pages 292-296, May.
  27. Nathaniel O. Keohane, 2003. "What Did the Market Buy? Cost Savings Under the U. S. Tradeable Permits Program for Sulfur Dioxide," Yale School of Management Working Papers ysm437, Yale School of Management.
  28. Nelson, Randy A & Tietenberg, Tom & Donihue, Michael R, 1993. "Differential Environmental Regulation: Effects on Electric Utility Capital Turnover and Emissions," The Review of Economics and Statistics, MIT Press, vol. 75(2), pages 368-73, May.
  29. Burtraw, Dallas & Palmer, Karen, 2005. "The Environmental Impacts of Electricity Restructuring: Looking Back and Looking Forward," Discussion Papers dp-05-07, Resources For the Future.
  30. 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.
  31. Bohi, Douglas R. & Burtraw, Dallas, 1997. "SO2 allowance trading: How do expectations and experience measure up?," The Electricity Journal, Elsevier, vol. 10(7), pages 67-75.
  32. Michael Ari Prager & Thomas H. Klier & Richard H. Mattoon, 1996. "A mixed bag: assessment of market performance and firm trading behavior in the NOx RECLAIM program," Working Paper Series, Regional Economic Issues WP-96-12, Federal Reserve Bank of Chicago.
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Citations

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Cited by:
  1. Stowe, Robert C & Stavins, Robert Norman & Chan, Gabriel Angelo & Sweeney, Richard Leonard, 2012. "The SO2 Allowance Trading System and the Clean Air Act Amendments of 1990: Reflections on Twenty Years of Policy Innovation," Scholarly Articles 8160721, Harvard Kennedy School of Government.
  2. Richard Schmalensee & Robert N. Stavins, 2012. "The SO2 Allowance Trading System: The Ironic History of a Grand Policy Experiment," Working Papers 2012.60, Fondazione Eni Enrico Mattei.
  3. Naughton, Helen Tammela, 2010. "Globalization and Emissions in Europe," MPRA Paper 27684, University Library of Munich, Germany.

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