* Archibald Cox Professor of Law, Harvard Law School. Professor Freeman worked on a number of policy initiatives described in this Article when she served as Counselor for Energy and Climate Change in the White House in 2009-20io. The discussion of these examples is based exclusively on documents available to the public.
This essay offers a comprehensive assessment of the cost savings over the first five years of the allowance trading program. The current study has two methodological advantages over the previous ones. The first is the completeness of the data used. Like the two previous studies, this study estimates scrubber costs from costs reported in survey data, although the current study is able to use cost data from the full five years of Phase I. The data on coal prices used here are much more detailed than that in the other two studies, allowing for plant-level estimates of sulfur premia and counterfactual sulfur content. The second and more significant advantage of the current study is methodological. It employs an econometric model of the abatement choices actually made by utilities to simulate the decisions that would have been made under prescriptive regulation. Thus, abatement costs under counterfactual policies are estimated on the basis of observed behavior under actual policy regimes, rather than on the basis of engineering estimates or least-cost algorithms.
Over the last decade, market-based incentives have become the regulatory tool of choice when trying to solve difficult environmental problems. Evidence of their dominance can be seen in recent proposals for addressing global warming (through an emissions trading scheme in the Kyoto Protocol) and for amending the Clean Air Act (to add a new emissions trading systems for smog precursors and mercury — the Bush administration's “Clear Skies” program). They are widely viewed as more efficient than traditional command and control regulation. This collection of essays takes a critical look at this question, and evaluates whether the promises of market-based regulation have been fulfilled. Contributors put forth the ideas that few regulatory instruments are actually purely market-based, or purely prescriptive, and that both approaches can be systematically undermined by insufficiently careful design and by failures of monitoring and enforcement. All in all, the essays recommend future research that no longer pits one kind of approach against the other, but instead examines their interaction and compatibility. This book should appeal to academics in environmental economics and law, along with policymakers in government agencies and advocates in non-governmental organizations.
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