The impact of trading on the costs and benefits of the Acid Rain Program

Hei Sing Chan, B. Andrew Chupp, Maureen L. Cropper, Nicholas Z. Muller

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Abstract We quantify the cost savings from the Acid Rain Program (ARP) by comparing compliance costs for 761 coal-fired generating units under the ARP with compliance costs under a counterfactual uniform performance standard (UPS) that would have achieved the same aggregate emissions in 2002. In 2002, we find compliance costs to be $200 million (1995$) lower and health damages to be $170 million (1995$) lower under the ARP. We also compare health damages associated with observed SO2 emissions from all ARP units in 2002 with damages from a no-trade counterfactual. Damages under the ARP are $2.1 billion (1995$) higher than under the no-trade scenario, reflecting allowance transfers from units in the western US to units in the eastern US with larger exposed populations.
Original languageEnglish
Pages (from-to)180-209
Number of pages30
JournalJournal of Environmental Economics and Management
Early online date8 Dec 2017
Publication statusPublished - Mar 2018


  • Q51
  • Q52
  • Q58
  • Sulfur dioxide
  • Acid rain
  • Performance standards
  • Health effects
  • Pollution permits
  • Cap and trade


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