What do SO[sub 2] emissions cost Allowance prices and externality adders

Journal Article · Thu Dec 01 04:00:00 EST 1994 · Journal of Energy Engineering; (United States)

DOI:https://doi.org/10.1061/(ASCE)0733-9402(1994)120:3(122)· OSTI ID:6877188

Hobbs, B F ^[1]

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1. Case Western Reserve Univ., Cleveland, OH (United States)

Several states require electric utilities to include estimates of external environmental costs ( adders'') in economic comparisons of conservation and supply alternatives by electric utilities. What are these costs when emissions are subject to a tradeable allowance system, as SO[sub 2] emissions by US utilities are In the simplest case, the social cost of additional emissions at a location then equals: (1) The allowance price plus (2) the external cost of those emissions minus the external costs avoided because emissions at other locations decrease. Emissions elsewhere must decrease because the total number of allowances is fixed. Since allowances are an internal cost, the appropriate adder is just the second quantity. Its value can be positive or negative. If negative, this implies that the local state regulatory commission should encourage emissions in it jurisdiction because they cause less damage then if emitted elsewhere. The general results is unaffected by the presence of local emission restrictions. However, if other jurisdictions also impose adders, the social cost expression becomes more complex.

• OSTI ID: 6877188
• Journal Information: Journal of Energy Engineering; (United States), Journal Name: Journal of Energy Engineering; (United States) Vol. 120:3; ISSN JLEED9; ISSN 0733-9402
• Country of Publication: United States
• Language: English

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