Efficient Pollution Regulation: Getting the Prices Right

2009 ◽  
Vol 99 (5) ◽  
pp. 1714-1739 ◽  
Author(s):  
Nicholas Z. Muller ◽  
Robert Mendelsohn
Keyword(s):  
Air Pollution ◽  
Sulfur Dioxide ◽  
Power Plants ◽  
Environmental Regulations ◽  
Welfare Gain ◽  
Abatement Costs ◽  
Pollution Regulation ◽  
Marginal Abatement Costs ◽  
Allowance Trading ◽  
Trading Program

This paper argues for efficient environmental regulations that equate the marginal damage of pollution to marginal abatement costs across space. The paper estimates the source-specific marginal damages of air pollution and calculates the welfare gain from making the current sulfur dioxide allowance trading program for power plants more efficient. The savings from using trading ratios based on marginal damages are between $310 and $940 million per year. The potential savings from setting aggregate emissions efficiently and from including more sources of air pollution are many times higher. (JEL H23, Q53, Q58)

scholarly journals Sacred Cars? Cost-Effective Regulation of Stationary and Nonstationary Pollution Sources

2012 ◽  
Vol 4 (1) ◽  
pp. 98-126 ◽  
Author(s):  
Meredith Fowlie ◽  
Christopher R Knittel ◽  
Catherine Wolfram
Keyword(s):  
Marginal Cost ◽  
Power Plants ◽  
Environmental Regulations ◽  
Cost Effective ◽  
The United States ◽  
Air Pollutant ◽  
Practical Reasons ◽  
Mobile Source ◽  
Abatement Costs ◽  
Marginal Abatement Costs

For political and practical reasons, environmental regulations sometimes treat point-source polluters, such as power plants, differently from mobile-source polluters, such as vehicles. This paper measures the extent of this regulatory asymmetry in the case of nitrogen oxides (NOx), the most recalcitrant criteria air pollutant in the United States. We find significant differences in marginal abatement costs across source types: the marginal cost of reducing NOx from cars is less than half the marginal cost of reducing NOx from power plants. Our results measure the possible efficiency gains and distributional implications associated with increasing the sectoral scope of environmental regulations.(JEL Q53, Q58, R41)

scholarly journals What Can We Learn from the Grand Policy Experiment? Lessons from SO2 Allowance Trading

1998 ◽  
Vol 12 (3) ◽  
pp. 69-88 ◽  
Author(s):  
Robert N Stavins
Keyword(s):  
Political Economy ◽  
Sulfur Dioxide ◽  
Acid Rain ◽  
Clean Air Act ◽  
Design And Implementation ◽  
Allowance Trading ◽  
Clean Air ◽  
Policy Experiment ◽  
And Performance ◽  
Trading Program

The most ambitious application ever attempted of a market-based approach to environmental protection has been for the control of acid rain under the Clean Air Act amendments of 1990, which established a sulfur dioxide allowance trading program. This essay identifies lessons that can be learned from this grand experiment in economically oriented environmental policy. The author examines positive political economy lessons, asking why this system was adopted from acid-rain control in 1990, and he considers normative lessons that can be learned from the program's structure and performance, focusing on lessons for the design and implementation of future systems.

scholarly journals Costs of inefficient regulation: Evidence from the Bakken

2020 ◽  
Author(s):  
Gabriel Lade ◽  
Ivan Rudik
Keyword(s):  
North Dakota ◽  
Lower Cost ◽  
Public Lands ◽  
Abatement Cost ◽  
Marginal Abatement Cost ◽  
Royalty Rate ◽  
Abatement Costs ◽  
Pollution Regulation ◽  
Marginal Abatement Costs ◽  
Cost Curves

Efficient pollution regulation equalizes marginal abatement costs across sources. We study a new flaring regulation in North Dakota and document its efficiency. We attribute most of the observed flaring reductions at new wells in the state since late 2014 to the regulation. We construct firm-specific marginal abatement cost curves and find that the same quantity of flaring reductions could have been achieved at 44% lower cost by taxing flared gas instead of imposing firm-specific requirements. Taxing flared gas at the existing public lands royalty rate would achieve 99% of the flaring reductions at 46% lower cost.

The Sulfur Dioxide Allowance-Trading Program in the USA: Recent Developments and Lessons to be Learned

1998 ◽  
Vol 16 (3) ◽  
pp. 341-361 ◽  
Author(s):  
B Hansjürgens
Keyword(s):  
Sulfur Dioxide ◽  
Emission Trading ◽  
Tradeable Permits ◽  
Trading Market ◽  
The Us ◽  
Allowance Trading ◽  
Recent Developments ◽  
The Usa ◽  
Trading Program ◽  
Quality Policy

The US Allowance Trading Program, which is an emission-trading program for sulfur dioxide, was put into effect on 1 January 1995. It is the first comprehensive attempt in US air-quality policy to practice the idea of emission trading. More than two years after its implementation, the allowance market offers the unique opportunity of evaluating the efficiency of tradeable-permit markets on a practical basis, rather than a solely theoretical one. The author analyzes the recent developments in the allowance-trading market and alternative ‘explanations’ used in attempts to explain low trading activity and low allowance prices. The author concludes that the present allowance price will prove to be equal to the abatement costs; the allowance-trading program is not only ecologically effective but is also economically efficient; and it plays an important role in the development of future tradeable-permits markets.

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