Enforcing Emissions Trading Programs

Stranlund, John K.; Chávez, Carlos; Field, Barry C.

doi:10.1111/j.1541-0072.2002.tb02151.x

Cited by 45 publications

(24 citation statements)

References 19 publications

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“…To conservatively evaluate the benefits of performance-based or market-based control policies, we assume on-board continuous emissions monitoring systems are installed only on ships claiming more reductions than required by the SECA regulation, usually by installing an EGCS. We estimate that total annual costs of such a monitoring system are ∼$172,000 per unit based on the information from existing SO2 trading programs (56,57). Results show that under Scenario 4 in Table 2, our best estimate of the value of the variables, total annual savings for the performance-based policy over prescriptive policy 1 are ∼$1 million and are ∼$30 million for market-based policy over performance-based policy.…”

Section: Discussionmentioning

confidence: 99%

Cost-Effectiveness of Reducing Sulfur Emissions from Ships

Wang

Corbett

Winebrake

2007

Environ. Sci. Technol.

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We model cost-effectiveness of control strategies for reducing SO 2 emissions from U.S. foreign commerce ships traveling in existing European or hypothetical U.S. West Coast SO x Emission Control Areas (SECAs) under international maritime regulations. Variation among marginal costs of control for individual ships choosing between fuel-switching and aftertreatment reveals cost-saving potential of economic incentive instruments. Compared to regulations prescribing low sulfur fuels, a performance-based policy can save up to $260 million for these ships with 80% more emission reductions than required because least-cost options on some individual ships outperform standards. Optimal simulation of a market-based SO 2 control policy for ∼4,700 U.S. foreign commerce ships traveling in the SECAs in 2002 shows that SECA emissions control targets can be achieved by scrubbing exhaust gas of one out of ten ships with annual savings up to $480 million over performancebased policy. A market-based policy could save the fleet ∼$63 million annually under our best-estimate scenario. Spatial evaluation of ship emissions reductions shows that marketbased instruments can reduce more SO 2 closer to land while being more cost-effective for the fleet. Results suggest that combining performance requirements with market-based instruments can most effectively control SO 2 emissions from ships.

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Section: Discussionmentioning

confidence: 99%

Cost-Effectiveness of Reducing Sulfur Emissions from Ships

Wang

Corbett

Winebrake

2007

Environ. Sci. Technol.

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“…Policy analysts usually point to two features of the SO 2 program to explain its success in inducing and maintaining near-perfect compliance (e.g., Swift 2001;Stranlund et al 2002;US EPA 2003b). First, should a source fail to hold sufficient allowances to cover its emissions in a compliance period it is automatically assessed a financial penalty, the unit value of which has always been many times higher than going allowance prices.…”

Section: Introductionmentioning

confidence: 99%

Enforcing Emissions Trading when Emissions Permits are Bankable

2005

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We propose enforcement strategies for emissions trading programs with bankable emissions permits that guarantee complete compliance with minimal enforcement costs. Our strategies emphasize imperfect monitoring supported by a high unit penalty for reporting violations, and tying this penalty directly to equilibrium permit prices. This approach is quite different from several existing enforcement strategies that emphasize high unit penalties for emissions in excess of permit holdings. Our analysis suggests that a high penalty for excess emissions cannot be used to conserve monitoring effort, and that it may actually increase the amount of monitoring necessary to maintain compliance.

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“…Some programs have achieved such high rates of compliance that there is simply is not enough variation in compliance decisions to conduct meaningful econometric analyses. For example, the enforcement strategies of the Sulfur Dioxide Allowance Trading program and the RECLAIM program of southern California were clearly designed to achieve very high rates of compliance, and have been largely successful in doing so (Stranlund, Chavez, and Field 2002). Other emissions permit markets have not yet fully developed.…”

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confidence: 99%

A laboratory investigation of compliance behavior under tradable emissions rights: Implications for targeted enforcement

Murphy

Stranlund

2007

Journal of Environmental Economics and Management

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Abstract:This paper uses laboratory experiments to test the theoretical observations that both the violations of competitive risk-neutral firms and the marginal effectiveness of increased enforcement across firms are independent of differences in their abatement costs and their initial allocations of permits. This conclusion has important implications for enforcing emissions trading programs because it suggests that regulators have no justification for targeting their enforcement effort based on firm-level characteristics. Consistent with the theory, we find that subjects' violations were independent of parametric differences in their abatement costs. However, those subjects that were predicted to buy permits tended to have higher violation levels than those who were predicted to sell permits. Despite this, we find no statistically significant evidence that the marginal effectiveness of enforcement depends on any firmspecific characteristic. We also examine the determinants of compliance behavior under fixed emissions standards. As expected, we find significant differences between compliance behavior under fixed standards and emissions trading programs. Abstract: This paper uses laboratory experiments to test the theoretical observations that both the violations of competitive risk-neutral firms and the marginal effectiveness of increased enforcement across firms are independent of differences in their abatement costs and their initial allocations of permits. This conclusion has important implications for enforcing emissions trading programs because it suggests that regulators have no justification for targeting their enforcement effort based on firm-level characteristics. Consistent with the theory, we find that subjects' violations were independent of parametric differences in their abatement costs. However, those subjects that were predicted to buy permits tended to have higher violation levels than those who were predicted to sell permits. Despite this, we find no statistically significant evidence that the marginal effectiveness of enforcement depends on any firm-specific characteristic. We also examine the determinants of compliance behavior under fixed emissions standards. As expected, we find significant differences between compliance behavior under fixed standards and emissions trading programs.

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Enforcing Emissions Trading Programs

Cited by 45 publications

References 19 publications

Cost-Effectiveness of Reducing Sulfur Emissions from Ships

Cost-Effectiveness of Reducing Sulfur Emissions from Ships

Enforcing Emissions Trading when Emissions Permits are Bankable

A laboratory investigation of compliance behavior under tradable emissions rights: Implications for targeted enforcement

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