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Emissions Trading, Electricity Industry Restructuring and Investment in Pollution Abatement

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  • Fowlie, Meredith

Abstract

The NOx State Implementation Plan Call was designed to facilitate cost effective reductions of nitrogen oxides emissions from large stationary sources (primarily electricity generators) through the introduction of an emissions trading program. I investigate the relationship between economic regulation and firms' long-run response to the incentives created by this emissions trading program. I estimate a discrete choice model of the firm's compliance decision, controlling for unit-level variation in compliance costs and using exogenous variation in state-level electricity industry restructuring activity to identify an e¤ect of electricity market regulation on generators' environmental compliance strategy choices. I present evidence that differences in economic regulation across states have resulted in a disproportionate amount of the mandated emissions reductions occurring in more regulated electricity markets. Unfortunately, these are the areas least in need of pollution control.

Suggested Citation

  • 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).
    • Handle: RePEc:ags:aaea05:19265
    DOI: 10.22004/ag.econ.19265
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    Cited by:

    1. Erin T. Mansur, 2007. "Do Oligopolists Pollute Less? Evidence From A Restructured Electricity Market," Journal of Industrial Economics, Wiley Blackwell, vol. 55(4), pages 661-689, December.

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