WP-2003-009
Lessons from Phase 2 Compliance with the U.S. Acid Rain Program
A. Denny Ellerman
May 2003
This paper provides preliminary answers to four questions concerning the behavior
of agents operating under the SO2 Allowance Trading Program that could not
be adequately answered until several years' data on compliance behavior in
the final Phase II could be observed. The four questions are:
- How is abatement distributed geographically when all fossil-fuel-fired
electricity generating units are included?
- Will agents draw down the accumulated Phase I bank, as expected and more
or less efficiently, during Phase II?
- Is there any evidence that the failure to endow new generating units with
allowances constitutes a barrier to entry?
- What can be said about the cost of the SO2 Allowance Trading Program in
Phase II when all units are included and when it is fully phased in?
