Efficient Emission Fees in the U.S. Electricity Sector

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Date

Oct. 1, 2002

Authors

H. Spencer Banzhaf, Dallas Burtraw, and Karen Palmer

Publication

Working Paper

Reading time

1 minute

This paper provides new estimates of efficient emission fees for sulfur dioxide (SO2) and nitrogen oxides (NOX) emissions in the U.S. electricity sector. The estimates are obtained by coupling a detailed simulation model of the U.S. electricity markets with an integrated assessment model that links changes in emissions with atmospheric transport, environmental endpoints, and valuation of impacts. Efficient fees are found by comparing incremental benefits with emission levels. National quantity caps that are equivalent to these fees also are computed, and found to approximate caps under consideration in the current multi-pollutant debate in the U.S. Congress and the recent proposals from the Bush administration for the electricity industry. We also explore whether regional differentiation of caps on different pollutants is likely to enhance efficiency.

Topics

Authors

H. Spencer Banzhaf

Dallas Burtraw

Darius Gaskins Senior Fellow

Dallas Burtraw is the Darius Gaskins Senior Fellow at RFF. Burtraw’s research includes analysis of the distributional and regional consequences of climate policy and the evolution of electricity markets, including renewables integration.

Karen Palmer

Senior Fellow; Director, Electric Power Program

Karen Palmer is a senior fellow at Resources for the Future and an expert on the economics of environmental, climate and public utility regulation of the electric power sector.

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