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Impacts of Market-based Environmental and Generation Policy on Scrubber Electricity Usage

The introduction of scrubbers as a means of controlling sulfur dioxide (SO2) emissions from stationary sources coincided with the implementation of the Clean Air Act of 1970. Since that time, there have been many policy changes affecting the electricity generation industry. These changes can be characterized as moving from direct regulation toward market-based incentives, both in deregulation or restructuring of power markets and adoption of market-based environmental regulation. These changes provide natural experiments for investigating whether the form of regulation can alter the rate of technological progress. This paper analyzes changes in scrubbers� use of electricity (also known as parasitic load) in relation to regulatory policy regimes. Results show that restructured electricity markets led to innovations that reduced parasitic load considerably (35-45%). Conversely, the change to a cap-and-trade system for SO2 has not led to similar reductions.

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Energy Specializations: Coal – Policy and Regulation; Electricity – Generation Technologies; Energy and the Environment – Air Emissions (other than greenhouse gases); Energy and the Environment – Policy and Regulation

JEL Codes:
Q53 - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
Q2 -
Q52 - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects
E60 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook: General

Keywords: Electricity deregulation, SO2 emissions, market-based regulation, cap-and- trade, Scrubbers, coal

DOI: 10.5547/ISSN0195-6574-EJ-Vol29-No2-8

Published in Volume 29, Number 2 of The Quarterly Journal of the IAEE's Energy Economics Education Foundation.