A two-period model of emission abatement and allowance banking under uncertainty
This paper deals with the effects of uncertainty and risk aversion on market outcomes for SO{sub 2} emission allowance prices and on electric utility compliance choices. The 1990 Clean Air Act Amendments (CAAA) provide about twice as many SO{sub 2} allowances to be issued per year in Phase I (1995--1999) than in Phase II. Also, considering the scrubber incentives in Phase I, there is likely to be substantial emission banking for use in Phase II. Allowance prices may increase over time at a rate less than the return on alternative investments with allowances being banked only by risk averse electric utilities. Speculators are likely to be willing to set allowances in forward markets, which will lower current market prices of allowances relative to a situation with only risk averse utilities in the market. The Argonne Utility Simulation Model (ARGUS2) is being revised to incorporate the provisions of the CAAA acid rain title and to simulate SO{sub 2} allowance prices, compliance choices, capacity expansion, system dispatch, fuel use, and emissions using a unit level data base and alternative scenario assumptions.
- Research Organization:
- Argonne National Lab., IL (United States)
- Sponsoring Organization:
- USDOE, Washington, DC (United States)
- DOE Contract Number:
- W-31109-ENG-38
- OSTI ID:
- 10107356
- Report Number(s):
- ANL/CP-74902; CONF-9110303-1; ON: DE92004134
- Resource Relation:
- Conference: 21. annual Illinois Economic Association (IEA) meeting,Chicago, IL (United States),11-12 Oct 1991; Other Information: PBD: [1991]
- Country of Publication:
- United States
- Language:
- English
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