Moving to Markets in Environmental Regulation: Lessons from Twenty Years of Experience

By Jody Freeman; Charles D. Kolstad | Go to book overview

8
Cost Savings from Allowance Trading in
the 1990 Clean Air Act: Estimates from a
Choice-Based Model

Nathaniel O. Keohane


INTRODUCTION

Title IV of the Clean Air Act of 1990 represented a major innovation in environmental policy in the United States. Before 1990, clean air regulations for electric power plants in the United States were exclusively prescriptive in nature—requiring individual units to meet strict performance standards or even install particular abatement technologies. Title IV took a much different tack: It instituted a market for sulfur dioxide (SO2) emissions. Utilities affected by the regulation were allocated a certain number of allowances, with each allowance representing one ton of SO2 emissions. Utilities that reduced their emissions could sell their excess allowances to other utilities or bank them for future use.

Economists have long asserted the virtues of such market-based environmental policies over traditional prescriptive or command-and-control regulation, such as performance or technology standards. In theory, market-based instruments are cost-effective: That is, they can achieve a given level of abatement for the least possible total cost.1 Title IV offers the first major test of how a market-based instrument can perform in practice.

Overall, this grand policy experiment (Stavins 1999) has been overwhelmingly successful to date. After a slow start, allowance trading has been vigorous. The utilities' ability to bank allowances, meanwhile, led to deeper than expected cuts in emissions during Phase I with concomitant environmental benefits.2 Surprisingly, however, a consensus has yet to emerge on the actual cost savings realized from the allowance market. Expectations of cost savings certainly ran high before the program began. Studies done in the early 1990s by the General Accounting Office and by the Environmental Protection Agency (EPA) anticipated cost savings

-194-

Notes for this page

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items
Notes
Cite this page

Cited page

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Note: primary sources have slightly different requirements for citation. Please see these guidelines for more information.

Cited page

Bookmark this page
Moving to Markets in Environmental Regulation: Lessons from Twenty Years of Experience
Table of contents

Table of contents

Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this book

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen
Items saved from this book
  • Bookmarks
  • Highlights & Notes
  • Citations
/ 488

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Search by... Author
    Show... All Results Primary Sources Peer-reviewed

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.