For years economists have urged policymakers to use market-based approaches such as cap-and-trade programs or emission taxes to control pollution. The SO2 allowance market created by Title IV of the 1990 U.S. Clean Air Act Amendments (CAAA) presents the first real test of the wisdom of...

Emissions of nitrogen oxides (NOx ) contribute to formation of particulate matter and ozone, and also to acidification of the environment. The electricity sector is responsible for about 20% of NOx emissions in the United States, and the sector has been the target of both prescriptive...

Policies to cap emissions of carbon dioxide (CO2), such as the recently announced agreement among seven northeastern states, are expected to have important effects on the electricity industry and on the market value of firms that own electricity generation assets. The economics literature finds...

In its guidance on National Allocation Plans (NAPs), the European Commission has discouraged Member States from adopting allocation methodologies that would provide incentives to firms affecting their compliance behavior. The purpose is to promote economic efficiency and to prevent strategic...

Cap-and-trade programs for air emissions have become the widely accepted, preferred approach to cost-effective pollution reduction. One of the important design questions in a trading program is how to initially distribute the emissions allowances. Under the Acid Rain program created by Title IV...

The Regional Greenhouse Gas Initiative (RGGI) is an effort by nine Northeast and Mid-Atlantic states to develop a regional, mandatory, market-based cap-and-trade program to reduce greenhouse gas (GHG) emissions from the electricity sector. The initiative is expected to lead to an increase in the...

Policies to cap emissions of carbon dioxide (CO2) in the U.S. economy could pose significant costs on the electricity sector, which contributes roughly 40 percent of total CO2 emissions in the U.S. Using a detailed simulation model of the electricity sector, we evaluate alternative ways that...

For years economists have urged policymakers to use market-based approaches such as cap-and-trade programs or emission taxes to control pollution. The SO2 allowance market created by Title IV of the 1990 U.S. Clean Air Act Amendments represents the first real test of the wisdom of economists’...

The U.S. Clean Air Act Amendments of 1990 initiated the first large experiment in the use of market-based regulation to control environmental problems with the introduction of an emissions trading program for sulfur dioxide emissions. Later that decade the second large trading program began for...

Efforts to limit cumulative emissions over the next century may be partially thwarted by the responses of fossil fuel suppliers. Current price-cost margins for major reserves are ample, leaving scope for significant price reductions if climate policies reduce demand for fossil fuels through...