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At What Cost do We Reduce Pollution? Shadow Prices of SO2, Emissions

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  • John R. Swinton

Abstract

The U. S. EPA's infant market for SO2 emissions has the potential for improving the cost effectiveness of reducing acid rain pollutants. If the market works as planned, over time one should see the cost of reducing additional amounts of sulfur dioxide converge across plants. The results of the study described here demonstrate that before the market opened marginal abatement costs varied wildly across plants. This work provides estimates of the shadow price of SO2 abatement using the output distance function approach for Illinois, Minnesota and Wisconsin coal-burning electric plants. The results demonstrate that the coal-burning electric plants with the highest emissions rates are also the plants with the lowest marginal abatement costs, a fact that may explain lower-than-expected prices in the new market for allowances. The data include information about plants with installed scrubber capital allowing for an investigation of the effect of scrubber capital on marginal abatement costs.

Suggested Citation

  • John R. Swinton, 1998. "At What Cost do We Reduce Pollution? Shadow Prices of SO2, Emissions," The Energy Journal, , vol. 19(4), pages 63-83, October.
    • Handle: RePEc:sae:enejou:v:19:y:1998:i:4:p:63-83
    DOI: 10.5547/ISSN0195-6574-EJ-Vol19-No4-3
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    References listed on IDEAS

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    1. Thomas H. Tietenberg, 1980. "Transferable Discharge Permits and the Control of Stationary Source Air Pollution: A Survey and Synthesis," Land Economics, University of Wisconsin Press, vol. 56(4), pages 391-416.
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