IDEAS home Printed from https://ideas.repec.org/a/aea/aecrev/v100y2010i3p837-69.html
   My bibliography  Save this article

Emissions Trading, Electricity Restructuring, and Investment in Pollution Abatement

Author

Listed:
  • Meredith Fowlie

Abstract

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)

Suggested Citation

  • Meredith Fowlie, 2010. "Emissions Trading, Electricity Restructuring, and Investment in Pollution Abatement," American Economic Review, American Economic Association, vol. 100(3), pages 837-869, June.
    • Handle: RePEc:aea:aecrev:v:100:y:2010:i:3:p:837-69
    Note: DOI: 10.1257/aer.100.3.837
    as

    Download full text from publisher

    File URL: http://www.aeaweb.org/articles.php?doi=10.1257/aer.100.3.837
    Download Restriction: no
    File URL: http://www.aeaweb.org/aer/data/june2010/20061121_data.zip
    Download Restriction: Access to full text is restricted to AEA members and institutional subscribers.
    ---><---

    References listed on IDEAS

    as
    1. Krupnick, Alan & McConnell, Virginia & Stoessell, Terrell & Cannon, Matthew & Batz, Michael, 2000. "Cost-Effective NOx Control in the Eastern United States," RFF Working Paper Series dp-00-18, Resources for the Future.
    2. Bhat, Chandra R., 1998. "Accommodating variations in responsiveness to level-of-service measures in travel mode choice modeling," Transportation Research Part A: Policy and Practice, Elsevier, vol. 32(7), pages 495-507, September.
    3. Joskow, Paul L, 1974. "Inflation and Environmental Concern: Structural Change in the Process of Public Utility Price Regulation," Journal of Law and Economics, University of Chicago Press, vol. 17(2), pages 291-327, October.
    4. Train,Kenneth E., 2009. "Discrete Choice Methods with Simulation," Cambridge Books, Cambridge University Press, number 9780521766555.
    5. Ando, Amy Whritenour & Palmer, Karen L., 1998. "Getting on the Map: The Political Economy of State-Level Electricity Restructuring," Discussion Papers 10643, Resources for the Future.
    6. Brownstone, David & Train, Kenneth, 1998. "Forecasting new product penetration with flexible substitution patterns," Journal of Econometrics, Elsevier, vol. 89(1-2), pages 109-129, November.
    7. Fullerton, Don & McDermott, Shaun P. & Caulkins, Jonathan P., 1997. "Sulfur Dioxide Compliance of a Regulated Utility," Journal of Environmental Economics and Management, Elsevier, vol. 34(1), pages 32-53, September.
    8. Coogins Jay S. & Smith Vincent H., 1993. "Some Welfare Effects of Emission Allowance Trading in a Twice-Regulated Industry," Journal of Environmental Economics and Management, Elsevier, vol. 25(3), pages 275-297, November.
    9. Louis Anthony Cox Jr. & Weihsueh A. Chiu & David M. Hassenzahl & Daniel M. Kammen, 2000. "Response," Risk Analysis, John Wiley & Sons, vol. 20(3), pages 295-296, June.
    10. Elizabeth E. Bailey & John C. Malone, 1970. "Resource Allocation and the Regulated Firm," Bell Journal of Economics, The RAND Corporation, vol. 1(1), pages 129-142, Spring.
    11. Hoetker, Glenn, 2004. "Confounded Coefficients: Accurately Comparing Logit and Probit Coefficients across Groups," Working Papers 03-0100, University of Illinois at Urbana-Champaign, College of Business.
    12. 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.
    13. Robert M. Spann, 1974. "Rate of Return Regulation and Efficiency in Production: An Empirical Test of the Averch-Johnson Thesis," Bell Journal of Economics, The RAND Corporation, vol. 5(1), pages 38-52, Spring.
    14. David F. Layton & Gardner Brown, 2000. "Heterogeneous Preferences Regarding Global Climate Change," The Review of Economics and Statistics, MIT Press, vol. 82(4), pages 616-624, November.
    15. Leon Courville, 1974. "Regulation and Efficiency in the Electric Utility Industry," Bell Journal of Economics, The RAND Corporation, vol. 5(1), pages 53-74, Spring.
    16. Daniel McFadden & Kenneth Train, 2000. "Mixed MNL models for discrete response," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 15(5), pages 447-470.
    17. 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.
    18. David Hensher & William Greene, 2003. "The Mixed Logit model: The state of practice," Transportation, Springer, vol. 30(2), pages 133-176, May.
    19. Bohi, Douglas R. & Burtraw, Dallas, 1992. "Utility investment behavior and the emission trading market," Resources and Energy, Elsevier, vol. 14(1-2), pages 129-153, April.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Fowlie, Meredith, 2005. "Emissions Trading, Electricity Industry Restructuring and Investment in Pollution Abatement," 2005 Annual meeting, July 24-27, Providence, RI 19265, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    2. Siikamaki, Juha & Layton, David F., 2007. "Discrete choice survey experiments: A comparison using flexible methods," Journal of Environmental Economics and Management, Elsevier, vol. 53(1), pages 122-139, January.
    3. Campbell, Danny & Hutchinson, W. George & Scarpa, Riccardo, 2006. "Using Discrete Choice Experiments to Derive Individual-Specific WTP Estimates for Landscape Improvements under Agri-Environmental Schemes: Evidence from the Rural Environment Protection Scheme in Irel," Sustainability Indicators and Environmental Valuation Working Papers 12220, Fondazione Eni Enrico Mattei (FEEM).
    4. Campbell, Danny, 2007. "Combining mixed logit models and random effects models to identify the determinants of willingness to pay for rural landscape improvements," 81st Annual Conference, April 2-4, 2007, Reading University, UK 7975, Agricultural Economics Society.
    5. Danny Campbell & George Hutchinson & Riccardo Scarpa, 2006. "Using mixed logit models to derive individual-specific WTP estimates for landscape improvements under agri-environmental schemes: evidence from the Rural Environment Protection Scheme in Ireland," Working Papers 0607, Rural Economy and Development Programme,Teagasc.
    6. repec:rre:publsh:v:38:y:2008:i:3:p:395-415 is not listed on IDEAS
    7. Wuyang Hu & Michele M. Veeman & Wiktor L. Adamowicz, 2005. "Labelling Genetically Modified Food: Heterogeneous Consumer Preferences and the Value of Information," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 53(1), pages 83-102, March.
    8. Danny Campbell & George Hutchinson & Riccardo Scarpa, 2006. "Integrating landscape improvement indices and discrete choice experiments: evidence from the Rural Environment Protection Scheme in Ireland," Working Papers 0609, Rural Economy and Development Programme,Teagasc.
    9. Don Fullerton & Li Gan & Miwa Hattori, 2015. "A model to evaluate vehicle emission incentive policies in Japan," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 17(1), pages 79-108, January.
    10. Frick, Bernd & Barros, Carlos Pestana & Prinz, Joachim, 2010. "Analysing head coach dismissals in the German "Bundesliga" with a mixed logit approach," European Journal of Operational Research, Elsevier, vol. 200(1), pages 151-159, January.
    11. Carlos Barros, 2012. "Sustainable Tourism in Inhambane-Mozambique," CEsA Working Papers 105, CEsA - Centre for African and Development Studies.
    12. Bernard Fortin & Nicolas Jacquemet & Bruce Shearer, 2008. "Policy Analysis in Health-Services Market: Accounting for Quality and Quantity," Annals of Economics and Statistics, GENES, issue 91-92, pages 293-319.
    13. Robert W. Hahn & Robert N. Stavins, 2011. "The Effect of Allowance Allocations on Cap-and-Trade System Performance," Journal of Law and Economics, University of Chicago Press, vol. 54(S4), pages 267-294.
    14. Deka, Devajyoti & Carnegie, Jon, 2021. "Predicting transit mode choice of New Jersey workers commuting to New York City from a stated preference survey," Journal of Transport Geography, Elsevier, vol. 91(C).
    15. Stephane Hess & John W. Polak, 2004. "An analysis of parking behaviour using discrete choice models calibrated on SP datasets," ERSA conference papers ersa04p60, European Regional Science Association.
    16. Mariel, Petr & Ayala, Amaya de & Hoyos, David & Abdullah, Sabah, 2013. "Selecting random parameters in discrete choice experiment for environmental valuation: A simulation experiment," Journal of choice modelling, Elsevier, vol. 7(C), pages 44-57.
    17. Hess, Stephane & Bierlaire, Michel & Polak, John W., 2005. "Estimation of value of travel-time savings using mixed logit models," Transportation Research Part A: Policy and Practice, Elsevier, vol. 39(2-3), pages 221-236.
    18. Longzhong Shi & Xuan Chen & Bo Chen, 2023. "Covid‐19‐tested food labels," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 71(2), pages 203-230, June.
    19. Haghani, Milad & Sarvi, Majid & Shahhoseini, Zahra, 2015. "Accommodating taste heterogeneity and desired substitution pattern in exit choices of pedestrian crowd evacuees using a mixed nested logit model," Journal of choice modelling, Elsevier, vol. 16(C), pages 58-68.
    20. Bliemer, Michiel C.J. & Rose, John M., 2010. "Construction of experimental designs for mixed logit models allowing for correlation across choice observations," Transportation Research Part B: Methodological, Elsevier, vol. 44(6), pages 720-734, July.
    21. Hotaling, Chelsea & Bird, Stephen & Heintzelman, Martin D., 2021. "Willingness to pay for microgrids to enhance community resilience," Energy Policy, Elsevier, vol. 154(C).

    More about this item

    JEL classification:

    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • L98 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Government Policy
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

    Lists

    This item is featured on the following reading lists, Wikipedia, or ReplicationWiki pages:
    1. Emissions Trading, Electricity Restructuring, and Investment in Pollution Abatement (AER 2010) in ReplicationWiki

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:aea:aecrev:v:100:y:2010:i:3:p:837-69. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Michael P. Albert (email available below). General contact details of provider: https://edirc.repec.org/data/aeaaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.