Policy Uncertainty in the Market for Coal Electricity: The Case of Air Toxics Standards
Gautam Gowrisankaran,
Ashley Langer and
Wendan Zhang
Journal of Political Economy, 2025, vol. 133, issue 6, 1757 - 1795
Abstract:
Government policy uncertainty affects irreversible decisions including technology adoption and exit. This paper quantifies uncertainty surrounding the Mercury and Air Toxics Standards (MATS). We estimate a dynamic oligopoly model for coal-fired electricity generators that recovers generators’ beliefs regarding future MATS enforcement. We develop the approximate belief oligopoly equilibrium concept, where players understand that their decisions impact aggregate market states. MATS enforcement created substantial uncertainty: the perceived enforcement probability dropped to 43%. Resolving uncertainty early would increase profits by $1.39 billion but also increase pollution costs by $0.652–$1.776 billion. Had exit been unlikely, resolving uncertainty early would have decreased pollution.
Date: 2025
References: Add references at CitEc
Citations:
Downloads: (external link)
http://dx.doi.org/10.1086/734779 (application/pdf)
http://dx.doi.org/10.1086/734779 (text/html)
Access to the online full text or PDF requires a subscription.
Related works:
Working Paper: Policy Uncertainty in the Market for Coal Electricity: The Case of Air Toxics Standards (2022) 
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:ucp:jpolec:doi:10.1086/734779
Access Statistics for this article
More articles in Journal of Political Economy from University of Chicago Press
Bibliographic data for series maintained by Journals Division ().