An Interim Evaluation of Sulfur Dioxide Emissions Trading

Schmalensee, Richard; Joskow, Paul L.; Ellerman, A. Denny; Montero, Juan‐Pablo; Bailey, Elizabeth M.

doi:10.1257/jep.12.3.53

Cited by 386 publications

(138 citation statements)

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“…Examples of new policy "packages" in many areas, from welfare policy to natural resource ones exist only historically, reflecting times before which there was no previous history of a policy response to a perceived policy problem. For example, the United States (US) Clean Air Act (CAA) (first enacted in 1970) was the first major federal air pollution legislation in the US that established the very first national benchmark for ambient sulfur dioxide (SO2) (Libecap, 2005;Schmalensee, Joskow, Ellerman, Montero, & Bailey, 1998).…”

Section: Developing a Spectrum Of Design And Non-design Activities: Tmentioning

confidence: 99%

Policy Design and Non-Design: Towards a Spectrum of Policy Formulation Types

Howlett

Mukherjee

2014

SSRN Journal

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Public policies are the result of efforts made by governments to alter aspects of behaviour-both that of their own agents and of society at large-in order to carry out some end or purpose. They are comprised of arrangements of policy goals and policy means matched through some decision-making process. These policy-making efforts can be more, or less, systematic in attempting to match ends and means in a logical fashion or can result from much less systematic processes. "Policy design" implies a knowledge-based process in which the choice of means or mechanisms through which policy goals are given effect follows a logical process of inference from known or learned relationships between means and outcomes. This includes both design in which means are selected in accordance with experience and knowledge and that in which principles and relationships are incorrectly or only partially articulated or understood. Policy decisions can be careful and deliberate in attempting to best resolve a problem or can be highly contingent and driven by situational logics. Decisions stemming from bargaining or opportunism can also be distinguished from those which result from careful analysis and assessment. This article considers both modes and formulates a spectrum of policy formulation types between "design" and "non-design" which helps clarify the nature of each type and the likelihood of each unfolding.

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Section: Developing a Spectrum Of Design And Non-design Activities: Tmentioning

confidence: 99%

Policy Design and Non-Design: Towards a Spectrum of Policy Formulation Types

Howlett

Mukherjee

2014

SSRN Journal

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“…Overall, however, less adoption of new FGD systems occurred during trading than had been expected during trading preparation, in part because emissions sources used FGD systems dating back to the 1970s to a greater extent than predicted (28,29). This result disappointed the FGD industry, which had anticipated that the improved cost and performance of its systems (which emerged from technical advances made during traditional environmental regulation, particularly process chemistry developments that greatly increased system reliability; see refs.…”

Section: Resultsmentioning

confidence: 99%

Innovation under cap-and-trade programs

Taylor

2012

Proc. Natl. Acad. Sci. U.S.A.

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Policies incentivizing the private sector to reach its innovative potential in "clean" technologies are likely to play a key role in achieving climate stabilization. This article explores the relationship between innovation and cap-and-trade programs (CTPs)-the world's most prominent climate policy instrument-through empirical evidence drawn from successful CTPs for sulfur dioxide and nitrogen oxide control. The article shows that before trading began for these CTPs, analysts overestimated the value of allowances in a pattern suggestive of the frequent a priori overestimation of the compliance costs of regulation. When lower-thanexpected allowance prices were observed, in part because of the unexpected range of abatement approaches used in the lead-up to trading, emissions sources chose to bank allowances in significant numbers and reassess abatement approaches going forward. In addition, commercially oriented inventive activity declined for emissions-reducing technologies with a wide range of costs and technical characteristics, dropping from peaks before the establishment of CTPs to nadirs a few years into trading. This finding is consistent with innovators deciding during trading that their research and development investments should be reduced, based on assessments of future market conditions under the relevant CTPs. The article concludes with a discussion of the results and their implications for innovation and climate policy.climate change | emissions trading | technological change | invention | clean technology F acilitating innovation in "clean" technologies may be the key to achieving climate change stabilization without dampening economic productivity. Theory and experience indicate, however, that the private sector-apt to be the most significant source of this innovation-will not reach its full innovative potential without well-considered public policies. The pollution market failure involved in greenhouse gas (GHG) emissions implies that the development of emissions-reducing technologies will have less private value than the societal optimum. The market failure associated with innovators' difficulty in fully appropriating returns to research and development (R&D) investments-because of imitation and spillover, for example-implies that private incentives to innovate in clean technologies will be suboptimal. Another drag on private sector innovation stems from the trouble that capital markets and firms regularly have in predicting the risks and rewards of R&D investments, which can have uncertain outcomes and lengthy payback periods. Finally, there are significant challenges involved in displacing existing "dirty" technologies, which benefit from cost and performance advantages that accrue through the use of a technology over time, as well as from network externalities and the human reluctance to abandon sunk costs.Addressing the pollution market failure should spur demand for clean technology and related private sector innovation (see ref. 1 for an introduction to policies exerting a "demand-pull" on ...

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“…An important exception was Buchanan and Tullock (1975) who hypothesized that the capture of this value was the reason that emission sources preferred 2 The SO 2 trading program is by far the most studied of the U.S. programs. The standard reference is Ellerman et al (2000) and useful shorter summaries are provided by Stavins (1998), Schmalensee et al (1998), Ellerman (2004, and Burtraw and Palmer (2004). Harrison (2004) provides a good summary of the RECLAIM programs.…”

Section: The Evolution Of Allowance Allocationmentioning

confidence: 99%