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Emissions Trading, Electricity Restructuring, and Investment in Pollution Abatement

  • Meredith Fowlie
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    This paper analyzes an emissions trading program that was introduced to reduce smog-causing pollution from large stationary sources. Using variation in state level electricity industry restructuring activity, I identify the effect of economic regulation on pollution permit market outcomes. There are two main findings. First, deregulated plants in restructured electricity markets were less likely to adopt more capital intensive environmental compliance options as compared to regulated or publicly owned plants. Second, as a consequence of heterogeneity in electricity market regulations, a larger share of the permitted pollution is being emitted in states where air quality problems tend to be more severe. (JEL L51, L94, L98, Q53, Q58)

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    File URL: http://www.aeaweb.org/articles.php?doi=10.1257/aer.100.3.837
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    File URL: http://www.aeaweb.org/aer/data/june2010/20061121_data.zip
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    Article provided by American Economic Association in its journal American Economic Review.

    Volume (Year): 100 (2010)
    Issue (Month): 3 (June)
    Pages: 837-69

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    Handle: RePEc:aea:aecrev:v:100:y:2010:i:3:p:837-69
    Note: DOI: 10.1257/aer.100.3.837
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    1. David Hensher & William Greene, 2003. "The Mixed Logit model: The state of practice," Transportation, Springer, vol. 30(2), pages 133-176, May.
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    11. Farrell, Alex & Carter, Robert & Raufer, Roger, 1999. "The NOx Budget: market-based control of tropospheric ozone in the northeastern United States," Resource and Energy Economics, Elsevier, vol. 21(2), pages 103-124, May.
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