The Market for Sulfur Dioxide Emissions

Paul Joskow, Richard Schmalensee and Elizabeth M Bailey

American Economic Review, 1998, vol. 88, issue 4, 669-85

Abstract: The 1990 Clean Air Act Amendments initiated the first large-scale use of the tradable permit approach to pollution control. The theoretical case for this approach rests on the assumption of an efficient market for emission rights. The authors' empirical analysis shows that the emission rights market created by the 1990 Amendments had become reasonably efficient by mid-1994. They also show that the auctions specified in the Amendments to jump-start trading had become a small part of the overall market. Finally, the authors demonstrate that the strategic bidding behavior discussed in the literature has had no effect on market prices. Copyright 1998 by American Economic Association.

Date: 1998
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