Designing environmental policy: lessons from the regulation of mercury emissions |
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Authors: | Ted Gayer Robert W Hahn |
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Institution: | (1) Public Policy Institute, Georgetown University, 3520 Prospect Street, NW, 4th Floor, Washington, D.C. 20007, USA;(2) AEI-Brookings Joint Center, 1150 17th Street, NW, Washington, D.C. 20036, USA |
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Abstract: | In its waning days, the Clinton administration decided that it was appropriate to regulate mercury emissions from power plants.
The incoming Bush administration had to decide how best to regulate these emissions. The Bush administration offered two approaches
for regulating mercury emissions from power plants. The first was to establish uniform emission rates across utilities, as
mandated by the 1990 Amendments. The second was to establish a cap on mercury emissions while allowing emissions trading in
order to reduce the cost of achieving the goal. This paper presents the first cost-benefit analysis of this issue that takes
account of IQ benefits. We find that the benefits of the mercury regulation are likely to fall short of the cost. This assessment
is based on a number of assumptions that are highly uncertain. The finding of negative net benefits is robust to many, though
not all, reasonable variations in the model assumptions. We also find that the emissions trading proposal is roughly $15 billion
less expensive than the command-and-control proposal.
Mr. Gayer is associate professor of public policy at Georgetown University and a visiting scholar at the American Enterprise
Institute. Mr. Hahn is co-founder and executive director of the American Enterprise Institute-Brookings Joint Center for Regulatory
Studies and a scholar at AEI. We would like to thank Mary Jo Krolewski, Leonard Levin, Joel Schwartz, Anne Smith, Nik Wada,
and Chris Whipple for helpful comments and Jordan Connors, Laura Goodman and Molly Wells for valuable research assistance.
The views expressed in this paper represent those of the authors and do not necessarily represent the views of the institutions
with which they are affiliated. |
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Keywords: | Regulation Cost-benefit analysis Environmental economics |
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