Title IV of the 1990 Clean Air Act Amendments (CAAA) introduced market-based incentives for controlling sulfur dioxide (SO2) emissions from coal burning power plants. Previous regulation under the 1977 CAAA had effectively required the use of scrubbers, but only by new power plants. The 1990...

The Clean Air Act of 1990 initiated a tradable permit program for emissions of sulfur dioxide from coal-fired power plants. One effect of this policy was a large increase in the consumption of low-sulfur bituminous coal by coal-fired power plants. However, low-sulfur bituminous coal is also the...

Changes in climate policy have large influence on businesses. Firms anticipate and respond to such changes, but what if they have already engaged in a longterm relationship with other firms or customers at the time of policy change? For example, coal supply to power stations is typically based...

Policy shocks affect the rent distribution in long-term contracts, which can lead to such contracts being renegotiated. We seek an understanding of what aspects of contract design, in the face of a substantial policy shock, affect the propensity to renegotiate. We test our hypotheses using data...

Tradable permit schemes introduce uncertainty into the cost of regulatory compliance due to the permits’ uncertain price. Regulated firms can hedge this uncertainty through their contracts for fuel procurement. Data on coal contracts are used to estimate how the option not to be delivered...

This paper presents the first empirical test of the green paradox hypothesis, according to which well-intended but imperfectly implemented policies may lead to detrimental environmental outcomes due to supply side responses. We use the introduction of the Acid Rain Program in the U.S. as a case...