Sulfur Dioxide Compliance of a Regulated Utility
Electric utilities can reduce sulfur dioxide emissions through a variety of strategies such as adding scrubbers, switching to low- sulfur coal, or shifting output between generating plants with different emissions. The cost of achieving a given emission target can be minimized using a market for emission allowances, as under the Clean Air Act Amendments of 1990, if firms with high abatement costs buy allowances while those with low abatement costs reduce emissions and sell allowances. However, public utility commissions regulate which costs can be passed to customers. Previous theoretical work has analyzed effects of regulations on a utility's choice between permits and a single continuous `abatement technology.' Here, we consider three abatement technologies and the discrete choices among them. Our numerical model uses market and engineering information on permit prices, scrubber cost and sulfur removal efficiency, alternative fuel costs and sulfur content, plus generating plant costs and efficiency. Using illustrative sets of parameters, we find that regulatory rules could more than double the cost of sulfur dioxide compliance.
|Date of creation:||Apr 1996|
|Date of revision:|
|Publication status:||published as Journal of Environmental Economics and Management, Vol. 34, no. 1(September 1997): 32-53.|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
Web page: http://www.nber.org
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Robert W. Hahn, 1984. "Market Power and Transferable Property Rights," The Quarterly Journal of Economics, Oxford University Press, vol. 99(4), pages 753-765.
- Douglas R. Bohi & Dallas Burtraw, 1991. "Avoiding regulatory gridlock in the acid rain program," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 10(4), pages 676-684.
- Keeler, Andrew G., 1991. "Noncompliant firms in transferable discharge permit markets: Some extensions," Journal of Environmental Economics and Management, Elsevier, vol. 21(2), pages 180-189, September.
- Paul L. Joskow, 2006. "Incentive Regulation for Electricity Networks," CESifo DICE Report, Ifo Institute for Economic Research at the University of Munich, vol. 4(2), pages 3-9, 07.
- Karen Palmer & Alan Krupnick & Hadi Dowlatabadi & Stuart Siegel, 1995. "Social Costing of Electricity in Maryland: Effects on Pollution, Investment, and Prices," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 1-26.
- Stavins Robert N., 1995. "Transaction Costs and Tradeable Permits," Journal of Environmental Economics and Management, Elsevier, vol. 29(2), pages 133-148, September.
- 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.
- Coggins, Jay S. & Swinton, John R., 1996.
"The Price of Pollution: A Dual Approach to Valuing SO2Allowances,"
Journal of Environmental Economics and Management,
Elsevier, vol. 30(1), pages 58-72, January.
- JAY S. COGGINS & John R. Swinton, 1994. "The Price of Pollution: A Dual Approach to Valuing SO2 Allowances," Wisconsin-Madison Agricultural and Applied Economics Staff Papers 378, Wisconsin-Madison Agricultural and Applied Economics Department.
- Misiolek, Walter S. & Elder, Harold W., 1989. "Exclusionary manipulation of markets for pollution rights," Journal of Environmental Economics and Management, Elsevier, vol. 16(2), pages 156-166, March.
- 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.
- Burtraw, Dallas, 1995. "Cost Savings sans Allowance Trades? Evaluating the SO2 Emission Trading Program to Date," Discussion Papers dp-95-30-rev, Resources For the Future.
- Winebrake, James J. & Farrell, Alexander E. & Bernstein, Mark A., 1995. "The clean air act's sulfur dioxide emissions market: Estimating the costs of regulatory and legislative intervention," Resource and Energy Economics, Elsevier, vol. 17(3), pages 239-260, November.
- 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.
When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:5542. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.