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The Declining Trend in Sulfur Dioxide Emissions: Implications for Allowance Prices

A. Denny Ellerman and Juan-Pablo Montero

The Journal of Environmental Economics and Management, Vol. 36, No. 1, pp. 26-45 (July 1998)

A. Denny Ellerman and Juan-Pablo Montero, The Journal of Environmental Economics and Management, Vol. 36, No. 1, pp. 26-45 (July 1998). Copyright © 1998 by Academic Press

In this paper, we find that sulfur dioxide (SO2) emissions by electric utilities declined from 1985 to 1993 for reasons largely unrelated to the emission reduction mandate of Title IV of the 1990 Clean Air Act Amendments. The principal reason appears to be the decline in rail rates for low-sulfur western coal delivered to higher-sulfur coal-fired plants in the Midwest. Consequently, there is less sulfur to be removed to meet the Title IV cap on aggregate SO2emissions, and the cost of compliance and price of allowances can be expected to be less than would otherwise have been the case.

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