The US allowance trading program for sulfur dioxide: An update after the first year of compliance
- Massachusetts Institute of Technology, Cambridge, MA (United States)
In the last years we have witnessed a significant increase in the attention given by policy makers to market-based environmental policy instruments in place of the more traditional command-and-control instruments. The SO{sub 2} allowance trading program under Title IV of the 1990 Clean Air Act Amendments (CAAA) constitutes the largest experiment in the use of tradeable permits ever implemented. Since the passage of the CAAA in November 1990, questions have been raised about the functioning of the allowance market, the effect of state regulatory action (or inaction), the cost-effectiveness of electric utilities` compliance strategies, and more importantly, whether the program will achieve the intended savings in control costs. This paper provides a comprehensive analysis addressing these issues based on actual data after the first year of compliance - which is 1995. In general, we find that the electric utilities are choosing cost-effective compliance strategies and that a market for allowances has evolved and developed. We base this conclusion on empirical analyses of aspects such as the SO{sub 2} emissions reductions, individual compliance strategies and costs, the dynamics of coal markets, and the extent of trading and banking.
- OSTI ID:
- 617835
- Report Number(s):
- CONF-970145--
- Country of Publication:
- United States
- Language:
- English
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