US Experience with Emissions Trading

Emissionshandel, Vereinigte Staaten, Emissions trading, United States

Sources of Emission Reductions: Evidence for US SO2 Emissions 1985-2002

An enduring issue in environmental regulation is whether to clean up existing "old" plants or in some manner to bring in new "clean" plants to replace the old. In this paper, a unit-level data base of emissions by nearly 2000 electric generating units from 1985 through 2002 is used to analyze the contribution of these two factors in accomplishing the significant reduction of sulfur dioxide emissions from these sources in the United States. The effect on SO2 emissions of the new natural-gas-fired, combined-cycle capacity that has been introduced since 1998 is also examined. The results indicate that cleaning up the old plants has made by far the greater contribution to reducing SO2 emissions, and that this contribution has been especially large since the introduction of the SO2 cap-and-trade program in 1995

Are cap-and-trade programs more environmentally effective than conventional regulation?

This paper considers the evidence and possible reasons that cap-and-trade programs are more effective in meeting environmental objectives than conventional prescriptive regulation. The evidence is based mostly, but not entirely, on the SO2 provisions of the Acid Rain Program and it consists of quicker implementation, accelerated emission reductions, absence of exemptions, and the lack of "hot spots." The paper also notes the trend, evident in the Northeastern NOx Budget Program and the RECLAIM programs, for cap-and-trade regulation to supplant conventional prescriptive regulation even when regulators have ample legal authority to impose the latter. This trend and the better environmental performance of these programs are attributed to the advantages that cap-and-trade programs offer to both pragmatic regulators and regulated entities

The Temporal Efficiency of SO2 Emissions Trading

The Temporal Efficiency of SO2 Emissions Tradin

Lessons from Phase 2 compliance with the U.S. Acid Rain Program

This paper provides preliminary answers to four questions concerning the behavior of agents operating under the SO2 Allowance Trading Program that could not be adequately answered until several years' data on compliance behavior in the final Phase II could be observed. The four questions are: 1. How is abatement distributed geographically when all fossil-fuel-fired electricity generating units are included? 2. Will agents draw down the accumulated Phase I bank, as expected and more or less efficiently, during Phase II? 3. Is there any evidence that the failure to endow new generating units with allowances constitutes a barrier to entry? 4. What can be said about the cost of the SO2 Allowance Trading Program in Phase II when all units are included and when it is fully phased in

New entrant and closure provisions : how do they distort?

As a person whose life began in England and ended in North America and who maintained academic affiliations in the United Kingdom, Canada and the U.S., Campbell Watkins had a fine appreciation for the subtle differences that mark the two sides of the North Atlantic. He embodied the cross-fertilization that trans-Atlantic exchanges imply and I have no doubt that that was one of the reasons the IAEE received so much of his attention and benefited so grandly from it. This essay concerns one of those trans-Atlantic exchanges and one of which Campbell would have enjoyed the irony: An American innovation that goes to Europe and becomes bigger than anything yet seen in North America. The transplant is the cap-and-trade form of emissions trading and the European application is the European Union CO2 Emissions Trading Scheme (EU ETS). More specifically, this paper focuses on a particular feature of the allocation process in the European variant, the endowment of new entrants with allowances and the forfeiture of allowances when facilities are closed

Ex post evaluation of tradable permits : the U.S. SO₂ cap-and-trade program

The U.S. SO2 cap-and-trade program was established as a result of the enactment of the 1990 Clean Air Act Amendments (1990 CAAA) under the authority granted by Title IV, which included several measures to reduce precursor emissions of acid deposition.2 The SO2 component consisted of a two-phase, cap-and-trade program for reducing SO2 emissions from fossil-fuel burning power plants located in the continental forty-eight states of the United States. During Phase I, lasting from 1995 through 1999, electric generating units larger than 100 MWe in generating capacity with an annual average emission rate in 1985 greater than 2.5 pounds of SO2 per million Btu of heat input in 1985 (hereafter, #SO2/mmBtu) were required to reduce emissions to a level that would be, on average, no greater than 2.5 #SO2/mmBtu. In Phase II, beginning in 2000 and continuing indefinitely, the program was expanded to include fossil-fuel electricity generating units greater than 25 MWe, or virtually all fossil-fuel power plants in the United States. Emissions from these affected units are limited, after accounting for any allowances banked from Phase I, to an annual cap of 8.9 million tons, or about half of total electric utility SO2 emissions in the early 1980s. The Phase II cap is equivalent to an Ex Post Evaluation: US SO2 Program 2 average emission rate of 1.2 #SO2/mmBtu, when divided by the mid-1980s level of heat input at fossil-fuel burning power plants.Supported by the MIT Center for Energy and Environmental Policy Research

The EU’s Emissions Trading Scheme: A Prototype Global System?

Abstract and PDF report are also available on the MIT Joint Program on the Science and Policy of Global Change website (http://globalchange.mit.edu/).The European Union's Emission Trading Scheme (EU ETS) is the world's first multinational cap-and-trade system for greenhouse gases. As an agreement between sovereign nations with diverse historical, institutional, and economic circumstances, it can be seen as a prototype for an eventual global climate regime. Interestingly, the problems that are often seen as dooming a global trading system — international financial flows and institutional readiness — haven't appeared in the EU ETS, at least not yet. The more serious problems that emerge from the brief experience of the EU ETS are those of (1) developing a central coordinating organization, (2) devising side benefits to encourage participation, and (3) dealing with the interrelated issues of harmonization, differentiation, and stringency. The pre-existing organizational structure and membership benefits of the European Union provided convenient and almost accidental solutions to the need for a central institution and side benefits, but these solutions will not work on a global scale and there are no obvious substitutes. Furthermore, the EU ETS is only beginning to test the practicality of harmonizing allocations within the trading system, differentiating responsibilities among participants, and increasing the stringency of emissions caps. The trial period of the EU ETS punted on these problems, as was appropriate for a trial period, but they are now being addressed seriously. From a global perspective, the answers that are being worked out in Europe will say a great deal about what will be feasible on a broader, global scale.This study received support from the MIT Joint Program on the Science and Policy of Global Change, which is funded by a consortium of government, industry and foundation sponsors

Analysis of the Bush proposal to reduce the SO₃ cap

This paper evaluates President Bush's recent proposal to reduce the cap on total SO2 emissions using a model of emissions banking that fits the experience so far under Title IV. It provides a brief introduction to emissions banking and reports results concerning the effect of a the proposed reduction of the cap on emissions, abatement costs, and the value of the existing SO2 allowance endowment.Supported by the MIT Center for Energy and Environmental Policy Research