Voluntary Compliance with Market-Based Environmental Policy: Evidence from the U.S. Acid Rain Program

Posted: 17 Nov 1999

See all articles by Juan-Pablo Montero

Juan-Pablo Montero

Massachusetts Institute of Technology (MIT) - Center for Energy and Environmental Policy Research (CEEPR); Pontifical Catholic University of Chile - Institute of Economics

Abstract

The U.S. Acid Rain Program implemented a nationwide market for electric utilities' sulfur dioxide (SO2) emissions and included voluntary compliance possibilities for nonaffected sources. I observe significant voluntary participation 'albeit with small impact on the SO2 market' mostly from sources with counterfactual emissions below their allowance allocations. An ex post analysis suggests that costs from the resulting higher emissions outweigh savings from shifts in emissions reductions from high-cost affected sources to low-cost nonaffected sources. Further, utilities' voluntary participation is well explained by economic variables, which provides new evidence of cost-effective compliance strategies and low transaction costs.

JEL Classification: Q25, Q28

Suggested Citation

Montero, Juan-Pablo, Voluntary Compliance with Market-Based Environmental Policy: Evidence from the U.S. Acid Rain Program. Available at SSRN: https://ssrn.com/abstract=184524

Juan-Pablo Montero (Contact Author)

Massachusetts Institute of Technology (MIT) - Center for Energy and Environmental Policy Research (CEEPR) ( email )

One Amherst Street, E40-279
Cambridge, MA 02142
United States
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HOME PAGE: http://www.mit.edu/people/jpmonter

Pontifical Catholic University of Chile - Institute of Economics ( email )

Vicuna Mackenna 4860
Santiago
Chile
+56 2 686 4322 (Phone)
+56 2 686 6472 (Fax)

HOME PAGE: http://www.mit.edu/people/jpmonter

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