• Environmental and Resource Economics Review
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• v.20 no.4
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• pp.689-733
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• 2011

This study evaluates a novel scheme to trade sulfur dioxide emission permits subject to non-uniform rates. These rates are based on generators' marginal costs of compliance with environmental policy in a hypothesized least social-cost solution. This scheme is compared against the existing trading program used by the U.S. Environmental Protection Agency, featuring permits tradable one for one. Both policies are modeled to yield identical aggregate emissions. A numerical partial-equilibrium model of the U.S. energy industry is used to infer sulfur dioxide concentrations and health damages, as well as producer and consumer surplus, under the two policies. Regional pollution levels are found to vary across the two policies significantly. The system of exchange rates is estimated to outperform the uniform-trading scheme by $2.2 billion in industry profits and $2.1 billion in health damages, but to reduce consumer surplus by $6.7 billion. Paradoxically, exchange rates are thus estimated to lower total welfare by $2.5 billion. This is due to conceptual mechanism-design problems, as well as empirical issues.

• Environmental and Resource Economics Review
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• v.10 no.1
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• pp.65-93
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• 2001

This study provides allocation methods and transaction instances of introducing pilot projects of $SO_2$ emission trading that recently rises as an scheme for effective emission regulation to internalizing environmental externalities. The emissions caps that is the total endowment of $SO_2$ emission permits are calculated in each emission plant by considering methods for distributing those permits-by giving them away or by selling them at auction. The method adopted in this study has several defects in application of the reality. However, this study may have contributions to cognize the importance of, allowance trading among the participants and to firstly design the allocations of emission permits for each plant using real emission data.

• Environmental and Resource Economics Review
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• v.18 no.3
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• pp.393-430
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• 2009

This study uses a computable partial-equilibrium model of the U.S. energy industry to evaluate sulfur dioxide concentrations under two environmental policies. The policies, generator-level emission caps and tradable allowances, are selected to yield identical aggregate emissions. Regional concentrations are found to vary across the two policies significantly. These variations translate into different losses for individual states, and, nationwide, to differences of hundreds of millions of dollars in aggregate health damages. Emission caps outperform allowances by $452 million. Caps favor the southwestern, south-central and southeastern states, where they deliver $840 million lower damages than the other policies, while they deliver $390 million higher damages In northern and northeastern states.

• Environmental and Resource Economics Review
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• v.19 no.4
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• pp.915-961
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• 2010

This study is concerned with health damages from $SO_2$ under different assumptions on the relationship between air concentrations and their marginal health impacts. $SO_2$ concentration profiles resulting under emission caps, and a system of tradable emission allowances are compared. Using slopes and curvatures of the health response function consistent with evidence in medical literature, emission caps are shown to lead to lower aggregate damages under all considered parameters, an advantage of $26~452 million. The benefit of emission caps over tradable allowances increases with the curvature of the response function, but falls with its slope. The advantage of emission caps in terms of environmental damages is never overturned completely for the considered functional forms. The marginal damage function would have to be steeper than what the current medical evidence suggests for price instruments to outperform emission caps in terms of aggregate damages. With other welfare consequences included-emission abatement costs, consumer and producer surpluses, and government revenue-emission caps always lead to a $3.7~4.1 billion greater measure of social welfare.

• Environmental and Resource Economics Review
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• v.10 no.2
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• pp.173-216
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• 2001

We compare impacts of different $CO_2$ abatement mechanisms using a CGE model. Focus is on the way the tradable permits are initially distributed for emissions trading, namely auction and grandfathering. For three major energy consuming industries (basic chemical, iron & steel and electricity) in Korea, emissions trading is clearly superior to individual $CO_2$ abatement, but auction and grandfathering show somewhat different patterns of impact. We show that depending on how the government uses the revenue from permit auction, auction may be preferable to grandfathering.