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Efficient Emission Fees in the U.S. Electricity Sector

Author

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  • Banzhaf, H. Spencer
  • Burtraw, Dallas
  • Palmer, Karen L.
Abstract
This paper provides new estimates of efficient emission fees for sulfur dioxide (SO2) and nitrogen oxides (NOX) emissions in the U.S. electricity sector. The estimates are obtained by coupling a detailed simulation model of the U.S. electricity markets with an integrated assessment model that links changes in emissions with atmospheric transport, environmental endpoints, and valuation of impacts. Efficient fees are found by comparing incremental benefits with emission fee levels. National quantity caps that are equivalent to these fees also are computed, and found to approximate caps under consideration in the current multi-pollutant debate in the U.S. Congress and the recent proposals from the Bush administration for the electricity industry. We also explore whether regional differentiation of caps on different pollutants is likely to enhance efficiency.

Suggested Citation

  • Banzhaf, H. Spencer & Burtraw, Dallas & Palmer, Karen L., 2002. "Efficient Emission Fees in the U.S. Electricity Sector," Discussion Papers 10505, Resources for the Future.
    • Handle: RePEc:ags:rffdps:10505
    DOI: 10.22004/ag.econ.10505
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    as
    1. Dallas Burtraw & Karen Palmer & Alan J. Krupnick, 1997. ""Second-Best" Adjustments to Externality Estimates in Electricity Planning with Competition," Land Economics, University of Wisconsin Press, vol. 73(2), pages 224-239.
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    19. Kolstad, Charles D., 1987. "Uniformity versus differentiation in regulating externalities," Journal of Environmental Economics and Management, Elsevier, vol. 14(4), pages 386-399, December.
    20. Burtraw, Dallas & Palmer, Karen & Bharvirkar, Ranjit & Paul, Anthony, 2001. "The Effect of Allowance Allocation on the Cost of Carbon Emission Trading," RFF Working Paper Series dp-01-30-, Resources for the Future.
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    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Matthew J. Kotchen & Michael R. Moore & Frank Lupi & Edward S. Rutherford, 2006. "Environmental Constraints on Hydropower: An Ex Post Benefit-Cost Analysis of Dam Relicensing in Michigan," Land Economics, University of Wisconsin Press, vol. 82(3), pages 384-403.
    2. Burtraw, Dallas & Palmer, Karen & Kahn, Danny, 2010. "A symmetric safety valve," Energy Policy, Elsevier, vol. 38(9), pages 4921-4932, September.
    3. Burtraw, Dallas & Palmer, Karen, 2003. "The Paparazzi Take a Look at a Living Legend: The SO2 Cap-and-Trade Program for Power Plants in the United States," RFF Working Paper Series dp-03-15, Resources for the Future.
    4. Donald N. Dewees, 2008. "Pollution and the Price of Power," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 81-100.
    5. Parry, Ian W. H., 2004. "Are emissions permits regressive?," Journal of Environmental Economics and Management, Elsevier, vol. 47(2), pages 364-387, March.
    6. Banzhaf, H. Spencer & Chupp, B. Andrew, 2012. "Fiscal federalism and interjurisdictional externalities: New results and an application to US Air pollution," Journal of Public Economics, Elsevier, vol. 96(5), pages 449-464.
    7. Ian W.H. Parry, 2005. "Fiscal Interactions and the Costs of Controlling Pollution from Electricity," RAND Journal of Economics, The RAND Corporation, vol. 36(4), pages 849-869, Winter.
    8. Fraas, Art & Lutter, Randall, 2011. "A Comment on “Efficient Pollution Regulation: Getting the Prices Right” by Muller and Mendelsohn," RFF Working Paper Series dp-11-36, Resources for the Future.
    9. Cropper, Maureen & Gamkhar, Shama & Malik, Kabir & Limonov, Alex & Partridge, Ian, 2012. "The Health Effects of Coal Electricity Generation in India," RFF Working Paper Series dp-12-25, Resources for the Future.
    10. Art Fraas & Randall Lutter, 2012. "Efficient Pollution Regulation: Getting the Prices Right: Comment," American Economic Review, American Economic Association, vol. 102(1), pages 602-607, February.
    11. Burtraw, Dallas & Woerman, Matt, 2013. "Economic ideas for a complex climate policy regime," Energy Economics, Elsevier, vol. 40(S1), pages 24-31.
    12. A. Lans Bovenberg & Lawrence H. Goulder & Derek J. Gurney, 2005. "Efficiency Costs of Meeting Industry-Distributional Constraints Under Environmental Permits and Taxes," RAND Journal of Economics, The RAND Corporation, vol. 36(4), pages 950-970, Winter.
    13. Debra Israel, 2007. "Environmental participation in the U.S. sulfur allowance auctions," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 38(3), pages 373-390, November.
    14. Nicholas Z. Muller & Robert Mendelsohn, 2012. "Efficient Pollution Regulation: Getting the Prices Right: Reply," American Economic Review, American Economic Association, vol. 102(1), pages 608-612, February.
    15. Burtraw, Dallas & Palmer, Karen, 2005. "The Environmental Impacts of Electricity Restructuring: Looking Back and Looking Forward," RFF Working Paper Series dp-05-07, Resources for the Future.
    16. Burtraw, Dallas & Palmer, Karen L., 2013. "Mixing It Up: Power Sector Energy and Regional and Regulatory Climate Policies in the Presence of a Carbon Tax," RFF Working Paper Series dp-13-09, Resources for the Future.
    17. Burtraw, Dallas & Palmer, Karen & Shih, Jhih-Shyang, 2005. "Reducing Emissions from the Electricity Sector: The Costs and Benefits Nationwide and for the Empire State," RFF Working Paper Series dp-05-23, Resources for the Future.
    18. He, Qingxin & Lee, Jonathan M., 2014. "Additional market incentives for abatement: An analysis of flue-gas desulfurization by-products," Resource and Energy Economics, Elsevier, vol. 36(2), pages 370-393.
    19. Palmer, Karen & Burtraw, Dallas, 2005. "Cost-effectiveness of renewable electricity policies," Energy Economics, Elsevier, vol. 27(6), pages 873-894, November.
    20. Jonathan I. Levy & Lisa K. Baxter & Joel Schwartz, 2009. "Uncertainty and Variability in Health‐Related Damages from Coal‐Fired Power Plants in the United States," Risk Analysis, John Wiley & Sons, vol. 29(7), pages 1000-1014, July.
    21. Burtraw, Dallas & Evans, David, 2003. "The Evolution of NOx Control Policy for Coal-Fired Power Plants in the United States," RFF Working Paper Series dp-03-23, Resources for the Future.

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    More about this item

    Keywords

    Environmental Economics and Policy;

    JEL classification:

    • Q2 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation
    • Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis

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