RT Journal Article SR Electronic T1 Hedging in Coal Contracts under the Acid Rain Program JF Land Economics JO Land Econ FD University of Wisconsin Press SP 561 OP 570 DO 10.3368/le.88.3.561 VO 88 IS 3 A1 Lange, Ian YR 2012 UL http://le.uwpress.org/content/88/3/561.abstract AB Tradable permit schemes introduce uncertainty into the cost of regulatory compliance due to the permits’ uncertain price. Regulated firms can hedge this uncertainty through their contracts for fuel procurement. Data on coal contracts are used to estimate how the option not to be delivered higher-sulfur coal is priced. Results show that under a tradable permit scheme, coal prices are reduced for an increase in the sulfur bound controlling for reductions in price due to higher delivered sulfur content. (JEL Q48, Q53)