Environmental Regulations, Producer Responses, and Secondary Benefits: Carbon Dioxide Reductions Under the Acid Rain Program

Kenneth Rødseth () and Eirik Romstad

Environmental & Resource Economics, 2014, vol. 59, issue 1, 135 pages

Abstract: This paper derives a production analysis framework for modeling secondary benefits from environmental regulation, i.e. induced changes in yet unregulated pollutants. We emphasize the various ways in which the producers can respond to environmental regulations, and evaluate them in terms of their costs and their generation of secondary benefits. An application on the US electricity sector illustrates our main point: In our case, abatement technologies that reduce regulated emissions while leaving the plants’ unregulated emissions unchanged appear to be among the least costly producer responses to the existing sulfur and nitrogen regulations, but at the expense of limited secondary reductions in carbon dioxide emissions. This finding raises questions about the magnitude of the much debated secondary benefits from future regulations on carbon dioxide emissions, since similar abatement technologies are currently being developed for carbon dioxide. With new environmental issues emerging over time, our findings suggest that regulators should signal the possibilities of new regulations on connected pollutants to producers. Such information may be relevant for producers when choosing current abatement strategies—with minor cost increases to deal with today’s issues, overall compliance costs for near-future environmental problems may be lowered. Copyright Springer Science+Business Media Dordrecht 2014

Keywords: Abatement costs; Data envelopment analysis; Environmental regulation; Materials balance; Multiple pollutants; Secondary benefits (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (16)

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DOI: 10.1007/s10640-013-9720-5

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