Technological Change for Sulfur Dioxide Scrubbers under Market-Based Regulation

Abstract

The 1990 Clean Air Act Amendments (CAAA) introduced tradable permits for controlling sulfur dioxide (SO₂) emissions from coal-burning power plants and forced scrubbers to compete with other SO₂ abatement options. While the flexibility of permits reduced overall compliance costs, a secondary benefit would exist if there were resulting advances in scrubber technology. A hedonic model is used to estimate the effect of changing regulatory regimes on scrubber costs. While scrubbers installed under the 1990 CAAA are cheaper to purchase and operate than older scrubbers, these cost reductions seem to be a one-time drop rather than a continual decline. (JEL Q52, Q55)