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Cost Savings sans Allowance Trades? Evaluating the SO2 Emission Trading Program to Date

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  • Burtraw, Dallas

    () (Resources for the Future)

Abstract

Title IV of the 1990 amendments to the Clean Air Act initiated a historic experiment in incentive-based environmental regulation through the use of tradable allowances for emission of sulfur dioxide by electric generating facilities. To date, relatively little allowance trading has taken place; however, the costs of compliance have been much less than anticipated. The purpose of this paper is to address the apparent paradox that the allowance trading program may not require (very much) trading to be successful. Title IV represented two great steps forward in environmental regulation: first a move toward performance standards and second formal allowance trading. The first step has been sufficient to date for improving dynamic efficiency and achieving relative cost-effectiveness.

Suggested Citation

  • 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.
  • Handle: RePEc:rff:dpaper:dp-95-30-rev
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    File URL: http://www.rff.org/RFF/documents/RFF-DP-95-30-REV.pdf
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    References listed on IDEAS

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    1. Rose, Kenneth, 1995. "Twelve common myths of allowance trading: Improving the level of discussion," The Electricity Journal, Elsevier, vol. 8(4), pages 64-69, May.
    2. Winebrake, James J. & Bernstein, Mark A. & Farrell, Alex E., 1995. "Estimating the impacts of restrictions on utility participation in the SO2 allowance market," The Electricity Journal, Elsevier, vol. 8(4), pages 50-54, May.
    3. Cason Timothy N., 1993. "Seller Incentive Properties of EPA's Emission Trading Auction," Journal of Environmental Economics and Management, Elsevier, vol. 25(2), pages 177-195, September.
    4. Kaslow, Thomas W. & Pindyck, Robert S., 1994. "Valuing flexibility in utility planning," The Electricity Journal, Elsevier, vol. 7(2), pages 60-65, March.
    5. Bohi, Douglas R., 1994. "Utilities and state regulators are failing to take advantage of emission allowance trading," The Electricity Journal, Elsevier, vol. 7(2), pages 20-27, March.
    6. 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.
    7. Stavins Robert N., 1995. "Transaction Costs and Tradeable Permits," Journal of Environmental Economics and Management, Elsevier, vol. 29(2), pages 133-148, September.
    8. Chao, Hung-Po & Wilson, Robert, 1993. "Option Value of Emission Allowances," Journal of Regulatory Economics, Springer, vol. 5(3), pages 233-249, September.
    9. 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.
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    Cited by:

    1. Schwarze, Reimund & Zapfel, Peter, 1998. "Sulfur allowance trading and the regional clean air incentives market: How similar are the programs really?," MPRA Paper 52751, University Library of Munich, Germany, revised 02 Nov 1999.
    2. Toman, Michael A. & Withagen, Cees, 2000. "Accumulative pollution, "clean technology," and policy design," Resource and Energy Economics, Elsevier, pages 367-384.
    3. Denise VAN REGEMORTER & Bert SAVEYN, "undated". "Environmental Policy in a Federal State: A Regional CGE Analysis of the NEC Directive in Belgium," Regional and Urban Modeling 284100045, EcoMod.
    4. Paul Leiby & Jonathan Rubin, 2001. "Intertemporal Permit Trading for the Control of Greenhouse Gas Emissions," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 19(3), pages 229-256, July.
    5. Reimund Schwarze & Peter Zapfel, 2000. "Sulfur Allowance Trading and the Regional Clean Air Incentives Market: A Comparative Design Analysis of two Major Cap-and-Trade Permit Programs?," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 17(3), pages 279-298, November.
    6. Curtis Carlson & Dallas Burtraw & Maureen Cropper & Karen L. Palmer, 2000. "Sulfur Dioxide Control by Electric Utilities: What Are the Gains from Trade?," Journal of Political Economy, University of Chicago Press, vol. 108(6), pages 1292-1326, December.
    7. Abeygunawardena, P & Barba, Ricardo, 2000. "Emission Trading as a Tool for Environmental Management," Sri Lankan Journal of Agricultural Economics, Sri Lanka Agricultural Economics Association (SAEA), vol. 3.
    8. Toman, Michael & Powell, Mark & Lile, Ron, 1998. "Implementing the Clean Development Mechanism: Lessons from U.S. Private-Sector Participation in Activities Implemented Jointly," Discussion Papers dp-99-08, Resources For the Future.
    9. Fullerton, Don & McDermott, Shaun P. & Caulkins, Jonathan P., 1997. "Sulfur Dioxide Compliance of a Regulated Utility," Journal of Environmental Economics and Management, Elsevier, vol. 34(1), pages 32-53, September.
    10. Toman, Michael & Powell, Mark & Lile, Ron, 1997. "Assessing the Constraints and Opportunities for Private Sector Participation in Activities Implemented Jointly: Two Case Studies From the U.S. Initiative for Joint Implementation," Discussion Papers dp-97-38-rev, Resources For the Future.

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