SO2 Emission Permits Tradable under Exchange Rates: U.S. Case

다국어 초록 (Multilingual Abstract)

This study evaluates a novel scheme to trade sulfur dioxide emission permits subject to non-uniform rates. These rates are based on generators’ marginal costs of compliance with environmental policy in a hypothesized least social-cost solution. This scheme is compared against the existing trading program used by the U.S. Environmental Protection Agency, featuring permits tradable one for one. Both policies are modeled to yield identical aggregate emissions. A numerical partial-equilibrium model of the U.S. energy industry is used to infer sulfur dioxide concentrations and health damages, as well as producer and consumer surplus, under the two policies. Regional pollution levels are found to vary across the two policies significantly. The system of exchange rates is estimated to outperform the uniform-trading scheme by $2.2 billion in industry profits and $2.1 billion in health damages, but to reduce consumer surplus by $6.7 billion. Paradoxically, exchange rates are thus estimated to lower total welfare by $2.5 billion. This is due to conceptual mechanism-design problems, as well as empirical issues.

참고문헌 (Reference)

1 Cason, T. N, "Transactions Costs in Tradable Permit Markets : An Experimental Study of Pollution Market Designs" 23 (23): 145-165, 2003

2 Forsund, F. R, "Trading Sulfur Emissions in Europe, In Economic Aspects of Air Pollution Control" Kluwer Academic Publishers 1994

3 Tietenberg, T. H, "Tradable Permit Approaches to Pollution Control : Faustian Bargain or Paradise Regained?, In Property Rights, Economics and the Environment" JAI Press 2000

4 Haas, H, "The Total Cost Effects of the Binding PhaseⅡ Title Ⅳ SO2 Permit Market" Michigan State University 1999

5 Paul, A, "The RFF Haiku Electricity Market Model" Resources for the Future Policy Report 2002

6 Finus, M, "The Oslo Protocol on Sulfur Reduction : The Great Leap Forward" 87 : 2031-2048, 2003

7 Joskow, P. L., "The Market for Sulfur Dioxide Emissions" 88 (88): 669-685, 1998

8 De Cara, S, "The Global Warming Potential Paradox : Implications for the Design of Climate Policy, In The Design of Climate Policy" MIT Press 359-385, 2008

9 Atkinson, S. E, "The Empirical Properties of Two Classes of Designs for Transferable Discharge Permit Markets" 9 : 1982

10 Shadbegian, R, "The 1990 Clean Air Act Amendments : Who Got Cleaner Air–and Who Paid For It" University of Massachusetts working paper 2004

11 Rezek, J, "Spatial Impacts of Tradable Permit Markets : The Case of Sulfur Dioxide Emissions" Mississippi State University Working Paper 2003

12 Vladimir Hlasny, "SO2 Concentrations and Health Damages under Alternative US-EPA Policies" 한국환경경제학회 18 (18): 393-430, 2009

13 Vladimir Hlasny, "Regulation of Utility Industries in the United States" VDM Verlag Dr. Mueller e.K. 2008

14 Hlasny, V., "Regional Impacts of the U.S. Environmental Protection Agency’s SO2 Policy" 18 (18): 169-183, 2010

15 United Nations Economic Commission for Europe (UNECE 1999), "Protocol to the 1979 Convention on Long-Range Transboundary Air Pollution (CLRTAP) to Abate Acidification, Eutrophication and Ground-Level Ozone"

16 Farrow, R. S, "Pollution Trading in Water Quality Limited Areas : Use of Benefits Assessment and Cost-Effective Trading Ratios" 81 (81): 191-205, 2005

17 Rodriguez, F, "On the Use of Exchange Rates as Trading Rules in a Bilateral System of Transferable Discharge Permits" 15 : 2000

18 Krupnick, A. J, "On Marketable Air Pollution Permits : The Case for a System of Pollution Offsets" 10 : 1983

19 Liao, C. N, "Modelling a Mixed System of Air Pollution Fee" 51 : 475-490, 2007

20 Montgomery, D. W, "Markets in Licenses and Efficient Pollution Control Programs" 5 : 1972

21 Ellerman, A. D, "Markets for Clean Air : The U.S. Acid Rain Program" Cambridge University Press 2000

22 McGartland, A. M, "Marketable Permits for the Prevention of Environmental Deterioration" 12 : 1985

23 Atkinson, S. E, "Market Failure in Incentive-Based Regulation : The Case of Emissions Trading" 13 : 1991

24 Burtraw, D, "Improving Efficiency in Bilateral Emission Trading" 11 (11): 19-33, 1998

25 Environmental Protection Agency, "Human Health Benefits from Sulfate Reductions under Title Ⅳ of the 1990 Clean Air Act Amendments" 1997

26 Environmental Protection Agency, "Human Health Benefits from Sulfate Reductions under Title Ⅳ of the 1990 Clean Air Act Amendments" EPA Online 1995

27 Vladimir Hlasny, "Environmental Policy Comparison under Various Potential Forms of Health Response Function" 한국환경경제학회 19 (19): 915-961, 2010

28 Klaassen, G. A. J, "Emission Trading in Europe with an Exchange Rate" 4 : 305-330, 1994

29 Forsund, F. R, "Efficiency Gains Under Exchange-Rate Emission Trading" 12 : 403-423, 1998

30 Hung, M. F, "A Trading-Ratio System for Trading Water Pollution Discharge Permits" 49 (49): 83-102, 2005