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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," RFF Working Paper Series dp-95-30-rev, Resources for the Future.
    • Handle: RePEc:rff:dpaper:dp-95-30-rev
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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.
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    Cited by:

    1. Acemoglu, Daron & Rafey, Will, 2023. "Mirage on the horizon: Geoengineering and carbon taxation without commitment," Journal of Public Economics, Elsevier, vol. 219(C).
    2. 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.
    3. Zoé A Hamstead & Todd K BenDor, 2010. "Overcompliance in Water Quality Trading Programs: Findings from a Qualitative Case Study in North Carolina," Environment and Planning C, , vol. 28(1), pages 1-17, February.
    4. 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.
    5. repec:hum:wpaper:sfb649dp2006-076 is not listed on IDEAS
    6. Saveyn Bert & Van Regemorter Denise, 2007. "Environmental Policy in a Federal State - A Regional CGE Analysis of the NEC Directive in Belgium," Energy, Transport and Environment Working Papers Series ete0701, KU Leuven, Department of Economics - Research Group Energy, Transport and Environment.
    7. 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.
    8. 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.
    9. Marc Gronwald & Janina Ketterer & Stefan Trück, 2011. "The Dependence Structure between Carbon Emission Allowances and Financial Markets - A Copula Analysis," CESifo Working Paper Series 3418, CESifo.
    10. Hahn, Robert W., 2000. "The Impact of Economics on Environmental Policy," Journal of Environmental Economics and Management, Elsevier, vol. 39(3), pages 375-399, May.
    11. 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, pages 1-23.
    12. Toman, Michael & Powell, Mark & Lile, Ron, 1998. "Implementing the Clean Development Mechanism: Lessons from U.S. Private-Sector Participation in Activities Implemented Jointly," RFF Working Paper Series dp-99-08, Resources for the Future.
    13. Powell, Mark R. & Lile, Ronald D. & Toman, Michael, 1997. "Assessing the Constraints and Opportunities for Private-Sector Participation in Activities Implemented Jointly: Two Case Studies from the US Initiative for Joint Implementation," Discussion Papers 10555, Resources for the Future.
    14. Michael R. Moore & Elizabeth B. Maclin & David W. Kershner, 2001. "Testing Theories of Agency Behavior: Evidence from Hydropower Project Relicensing Decisions of the Federal Energy Regulatory Commission," Land Economics, University of Wisconsin Press, vol. 77(3), pages 423-442.
    15. Borak, Szymon & Härdle, Wolfgang Karl & Trück, Stefan & Weron, Rafał, 2006. "Convenience yields for CO2 emission allowance futures contracts," SFB 649 Discussion Papers 2006-076, Humboldt University Berlin, Collaborative Research Center 649: Economic Risk.
    16. Benz, Eva & Trück, Stefan, 2009. "Modeling the price dynamics of CO2 emission allowances," Energy Economics, Elsevier, vol. 31(1), pages 4-15, January.
    17. Fritz Rahmeyer, 1999. "Klimaschutz durch Steuern oder Lizenzen," Discussion Paper Series 183, Universitaet Augsburg, Institute for Economics.
    18. Karen Palmer & Wallace E. Oates & Paul R. Portney & Karen Palmer & Wallace E. Oates & Paul R. Portney, 2004. "Tightening Environmental Standards: The Benefit-Cost or the No-Cost Paradigm?," Chapters, in: Environmental Policy and Fiscal Federalism, chapter 3, pages 53-66, Edward Elgar Publishing.
    19. Sandoff, Anders & Schaad, Gabriela, 2009. "Does EU ETS lead to emission reductions through trade? The case of the Swedish emissions trading sector participants," Energy Policy, Elsevier, vol. 37(10), pages 3967-3977, October.
    20. 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.
    21. Boutabba, Mohamed Amine & Beaumais, Olivier & Lardic, Sandrine, 2012. "Permit price dynamics in the U.S. SO2 trading program: A cointegration approach," Energy Economics, Elsevier, vol. 34(3), pages 714-722.

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