Ian Lange

Technological Change for Sulfur Dioxide Scrubbers under Market-Based Regulation

The 1990 Clean Air Act Amendments (CAAA) introduced tradable permits for controlling sulfur dioxide (SO2) emissions from coal-burning power plants and forced scrubbers to compete with other SO2 abatement options. While the flexibility of permits reduced overall compliance costs, a secondary benefit would exist if there were resulting advances in scrubber technology. A hedonic model is used to estimate the effect of changing regulatory regimes on scrubber costs. While scrubbers installed under the 1990 CAAA are cheaper to purchase and operate than older scrubbers, these cost reductions seem to be a one-time drop rather than a continual decline. (JEL Q52, Q55)

Evidence of Innovation and Diffusion Under Tradable Permit Programs

There have been five large tradable permit programs (US Acid Rain Program, US Nitrogen Budget Program, Los Angeles Regional Clean Air Management Program, EU Emissions Trading Scheme, and the US Lead Phase Down) in effect long enough to have potentially yielded data to test whether the program altered the rate of innovation and/or diffusion of abatement technology. This paper is an overview of the literature concerning empirical evidence (or lack thereof) of innovation by the firms that comprise the industries affected by these tradable permit programs. We briefly discuss the methods used to determine technological advance and then more thoroughly review existing studies examining advances in pollution control technology under permit programs. Finally, some overarching observations are presented.

The 1990 Clean Air Act and the Implicit Price of Sulfur in Coal

Abstract Prior to implementation of the 1990 Clean Air Act Amendments (CAAA), many estimates of the marginal cost of SO2 abatement were provided to guide policy makers. Numerous studies estimated the marginal cost of abatement to be between

Mandate a man to fish: Technological advance in cooling systems at U.S. thermal electric plants

250 and

Technological Advance in Cooling Systems at U.S. Power Plants

760 per ton, though permits initially traded well below

Hedging in Coal Contracts under the Acid Rain Program

200 and remained below

Voluntary Programs to Encourage Diffusion: The Case of the Combined Heat-and-Power Partnership

220 until 2004. We use a fixed effects estimator and a hedonic price model of coal purchases in order to determine the implicit price of sulfur. Data on contract coal purchases are divided into regulatory regimes based on when the contract was signed or re-negotiated. We find that purchases by Phase I plants made under contracts signed or re-negotiated after the passage of the 1990 CAAA show an implicit price of SO2 of approximately

Did state regulation of power plants cause an increase in pollution exportation

50 per ton, an amount much closer to the eventual permit price. The implicit market price of sulfur seems to have revealed better information than did the calculations of industry experts.

Efficiency and environmental impacts of electricity restructuring on coal-fired power plants

Steam-based electrical generating plants use large quantities of water for cooling. The potential environmental impacts of water cooling systems have resulted in their inclusion in the Clean Water Acts (CWA) Sections 316(a), related to thermal discharges and 316(b), related to cooling water intake. The CWA mandates a technological standard for water cooling systems. This analysis examines how the performance-adjusted rates of thermal emissions and water withdrawals for cooling units have changed over their vintage and how these rates of change were impacted by imposition of the CWA. Though technology standards are believed to hinder technological progress, results show that progress occurred for cooling systems installed after the CWA and no progress occurred previous to it.

Should We Be Worried About the Green Paradox? Announcement Effects of the Acid Rain Program

Prior to adoption of the 1972 Clean Water Act (CWA) most U.S. power plants used once-through cooling water systems that discharged large quantities of warm water. This resulted in significant amounts of thermal pollution in neighboring bodies of water. The CWA essentially mandated recirculating systems for new facilities. This paper investigates whether there was technological advance in cooling systems, which we define as reductions in performance-adjusted costs, and how these advances are related to imposition of the CWA. Results suggest that the performance-adjusted cost of installing a recirculating cooling system was falling prior to implementation of the CWA but rose thereafter. This is consistent with the theoretical work suggesting that command and control regulation offers poor incentives for advances in pollution control technology.