The price of pollution: A dual approach to valuing SO2 allowances

Jay S. Coggins, John R. Swinton

Research output: Contribution to journalArticle

187 Scopus citations

Abstract

Under the 1990 Clean Air Act Amendments, a market-based scheme to reduce U.S. sulfur dioxide emissions takes effect in 1995. Indications are that participation in the market will be light and allowance prices will be lower than was once expected. Using an output distance function approach, for Wisconsin coal-burning utility plants we estimate the shadow price of SO2 abatement, which should approximate the allowance price. The estimated average shadow price is above the prices at which the few observed allowance trades have occurred. Wisconsin's stringent state SO2 legislation may explain a portion of this divergence.

Original languageEnglish (US)
Article number0005
Pages (from-to)58-72
Number of pages15
JournalJournal of Environmental Economics and Management
Volume30
Issue number1
DOIs
StatePublished - Jan 1 1996

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