Sulfur Dioxide Compliance of a Regulated Utility

Don Fullerton (), Shaun P. McDermott and Jonathan P. Caulkins

No 5542, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Electric utilities can reduce sulfur dioxide emissions through a variety of strategies such as adding scrubbers, switching to low- sulfur coal, or shifting output between generating plants with different emissions. The cost of achieving a given emission target can be minimized using a market for emission allowances, as under the Clean Air Act Amendments of 1990, if firms with high abatement costs buy allowances while those with low abatement costs reduce emissions and sell allowances. However, public utility commissions regulate which costs can be passed to customers. Previous theoretical work has analyzed effects of regulations on a utility's choice between permits and a single continuous `abatement technology.' Here, we consider three abatement technologies and the discrete choices among them. Our numerical model uses market and engineering information on permit prices, scrubber cost and sulfur removal efficiency, alternative fuel costs and sulfur content, plus generating plant costs and efficiency. Using illustrative sets of parameters, we find that regulatory rules could more than double the cost of sulfur dioxide compliance.

JEL-codes: D6 H23 (search for similar items in EconPapers)
Date: 1996-04
Note: PE
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Published as Journal of Environmental Economics and Management, Vol. 34, no. 1(September 1997): 32-53.

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Journal Article: Sulfur Dioxide Compliance of a Regulated Utility (1997)
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