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The Potential for Cost Savings in the Sulfur Dioxide Allowance Market: Empirical Evidence from Florida

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  • John R. Swinton

Abstract

Since the passage of the 1990 Clean Air Act Amendments, researchers have hastened to appraise the new market for sulfur dioxide (SO2) emission allowances. As the EPA’s program moves into its second phase, some analysts question whether large enough savings are available to induce widespread market participation. This study calculates the shadow prices of emission reductions for power plants that serve Florida and compares the actions of utility owners to the actions predicted by the shadow prices. The evidence suggests that plant owners have not taken full advantage of the opportunities the allowance market has provided to date.

Suggested Citation

  • 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.
  • Handle: RePEc:uwp:landec:v:78:y:2002:i:3:p:390-404
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    References listed on IDEAS

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    1. John R. Swinton, 1998. "At What Cost do We Reduce Pollution? Shadow Prices of SO2 Emissions," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 63-83.
    2. Montgomery, W. David, 1972. "Markets in licenses and efficient pollution control programs," Journal of Economic Theory, Elsevier, vol. 5(3), pages 395-418, December.
    3. Hahn, Robert W. & May, Carol A., 1994. "The behavior of the allowance market: Theory and evidence," The Electricity Journal, Elsevier, vol. 7(2), pages 28-37, March.
    4. Krupnick, Alan J. & Oates, Wallace E. & Van De Verg, Eric, 1983. "On marketable air-pollution permits: The case for a system of pollution offsets," Journal of Environmental Economics and Management, Elsevier, vol. 10(3), pages 233-247, September.
    5. Hahn, Robert W, 1989. "Economic Prescriptions for Environmental Problems: How the Patient Followed the Doctor's Orders," Journal of Economic Perspectives, American Economic Association, vol. 3(2), pages 95-114, Spring.
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    Citations

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    Cited by:

    1. Mohamed Amine Boutaba, 2009. "Investigating efficiency in the U.S sulfur dioxide permit market," Economics Bulletin, AccessEcon, vol. 29(2), pages 1308-1319.
    2. repec:ind:nipfwp:03 is not listed on IDEAS
    3. repec:npf:wpaper:17 is not listed on IDEAS
    4. repec:wsi:ccexxx:v:03:y:2012:i:04:n:s2010007812500182 is not listed on IDEAS
    5. 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.
    6. Kumar, Surender, 2003. "Productivity and profitability changes in the U.S. electric power plants during SO2 trading regime," Working Papers 03/3, National Institute of Public Finance and Policy.
    7. Lee, Sang-choon & Oh, Dong-hyun & Lee, Jeong-dong, 2014. "A new approach to measuring shadow price: Reconciling engineering and economic perspectives," Energy Economics, Elsevier, vol. 46(C), pages 66-77.
    8. Rezek, Jon P. & Campbell, Randall C., 2007. "Cost estimates for multiple pollutants: A maximum entropy approach," Energy Economics, Elsevier, vol. 29(3), pages 503-519, May.
    9. Burtraw, Dallas & Szambelan, Sarah Jo, 2009. "U.S. Emissions Trading Markets for SO2 and NOx," Discussion Papers dp-09-40, Resources For the Future.
    10. M. Murty & Surender Kumar & Kishore Dhavala, 2007. "Measuring environmental efficiency of industry: a case study of thermal power generation in India," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 38(1), pages 31-50, September.
    11. repec:npf:wpaper:03 is not listed on IDEAS
    12. repec:eee:enepol:v:106:y:2017:i:c:p:129-137 is not listed on IDEAS
    13. Park, Hojeong & Lim, Jaekyu, 2009. "Valuation of marginal CO2 abatement options for electric power plants in Korea," Energy Policy, Elsevier, vol. 37(5), pages 1834-1841, May.
    14. repec:ind:nipfwp:17 is not listed on IDEAS
    15. William M. Shobe & Dallas Burtraw, 2012. "Rethinking Environmental Federalism In A Warming World," Climate Change Economics (CCE), World Scientific Publishing Co. Pte. Ltd., vol. 3(04), pages 1-33.
    16. He, Xiaoping, 2015. "Regional differences in China's CO2 abatement cost," Energy Policy, Elsevier, vol. 80(C), pages 145-152.
    17. John Swinton, 2004. "Phase I Completed: An Empirical Assessment of the 1990 CAAA," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 27(3), pages 227-246, March.
    18. Chan, H. Ron & Chupp, B. Andrew & Cropper, Maureen & Muller, Nicholas Z., 2015. "The Net Benefits of the Acid Rain Program: What Can We Learn from the Grand Policy Experiment?," Discussion Papers dp-15-25, Resources For the Future.
    19. repec:eee:jeeman:v:88:y:2018:i:c:p:180-209 is not listed on IDEAS
    20. Zhou, P. & Zhou, X. & Fan, L.W., 2014. "On estimating shadow prices of undesirable outputs with efficiency models: A literature review," Applied Energy, Elsevier, vol. 130(C), pages 799-806.
    21. Nicolas Riedinger & Erwan Hauvuy, 2005. "Une estimation du coût dabattement de la pollution atmosphérique pour les entreprises françaises," Économie et Prévision, Programme National Persée, vol. 168(2), pages 63-75.
    22. Myunghun, Lee, 2011. "Potential cost savings from internal/external CO2 emissions trading in the Korean electric power industry," Energy Policy, Elsevier, vol. 39(10), pages 6162-6167, October.
    23. repec:eee:enepol:v:107:y:2017:i:c:p:337-344 is not listed on IDEAS
    24. Limin Du & Aoife Hanley & Chu Wei, 2015. "Marginal Abatement Costs of Carbon Dioxide Emissions in China: A Parametric Analysis," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 61(2), pages 191-216, June.

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    JEL classification:

    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General

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