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Environmental Regulations, Producer Responses, and Secondary Benefits: Carbon Dioxide Reductions Under the Acid Rain Program

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  • Kenneth Rødseth

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  • Eirik Romstad

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Abstract

This paper derives a production analysis framework for modeling secondary benefits from environmental regulation, i.e. induced changes in yet unregulated pollutants. We emphasize the various ways in which the producers can respond to environmental regulations, and evaluate them in terms of their costs and their generation of secondary benefits. An application on the US electricity sector illustrates our main point: In our case, abatement technologies that reduce regulated emissions while leaving the plants’ unregulated emissions unchanged appear to be among the least costly producer responses to the existing sulfur and nitrogen regulations, but at the expense of limited secondary reductions in carbon dioxide emissions. This finding raises questions about the magnitude of the much debated secondary benefits from future regulations on carbon dioxide emissions, since similar abatement technologies are currently being developed for carbon dioxide. With new environmental issues emerging over time, our findings suggest that regulators should signal the possibilities of new regulations on connected pollutants to producers. Such information may be relevant for producers when choosing current abatement strategies—with minor cost increases to deal with today’s issues, overall compliance costs for near-future environmental problems may be lowered. Copyright Springer Science+Business Media Dordrecht 2014

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  • Kenneth Rødseth & Eirik Romstad, 2014. "Environmental Regulations, Producer Responses, and Secondary Benefits: Carbon Dioxide Reductions Under the Acid Rain Program," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 59(1), pages 111-135, September.
  • Handle: RePEc:kap:enreec:v:59:y:2014:i:1:p:111-135
    DOI: 10.1007/s10640-013-9720-5
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Kenneth Løvold Rødseth, 2017. "Axioms of a Polluting Technology: A Materials Balance Approach," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 67(1), pages 1-22, May.
    2. Sueyoshi, Toshiyuki & Yuan, Yan & Goto, Mika, 2017. "A literature study for DEA applied to energy and environment," Energy Economics, Elsevier, vol. 62(C), pages 104-124.
    3. Hampf, Benjamin & Rødseth, Kenneth Løvold, 2014. "Optimal profits under environmental regulation: The benefits from emission intensity averaging," Darmstadt Discussion Papers in Economics 220, Darmstadt University of Technology, Department of Law and Economics.
    4. Benjamin Hampf & Kenneth Løvold Rødseth, 2017. "Optimal profits under environmental regulation: the benefits from emission intensity averaging," Annals of Operations Research, Springer, vol. 255(1), pages 367-390, August.
    5. Hampf, Benjamin & Rødseth, Kenneth Løvold, 2015. "Carbon dioxide emission standards for U.S. power plants: An efficiency analysis perspective," Energy Economics, Elsevier, vol. 50(C), pages 140-153.
    6. Rødseth, Kenneth Løvold, 2016. "Environmental efficiency measurement and the materials balance condition reconsidered," European Journal of Operational Research, Elsevier, vol. 250(1), pages 342-346.
    7. Li, Hai-ling & Zhu, Xue-hong & Chen, Jin-yu & Jiang, Fei-tao, 2019. "Environmental regulations, environmental governance efficiency and the green transformation of China's iron and steel enterprises," Ecological Economics, Elsevier, vol. 165(C), pages 1-1.
    8. Kenneth Løvold Rødseth, 2017. "Environmental regulations and allocative efficiency: application to coal-to-gas substitution in the U.S. electricity sector," Journal of Productivity Analysis, Springer, vol. 47(2), pages 129-142, April.
    9. Hampf, Benjamin & Rødseth, Kenneth Løvold, 2014. "Carbon dioxide emission standards for US power plants: An efficiency analysis perspective," Darmstadt Discussion Papers in Economics 219, Darmstadt University of Technology, Department of Law and Economics.

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