The Role of the Uncertain Formof Health Responses to SO2 Concentrations

摘要

This paper evaluates the sensitivity of the net benefits of the SO2 regulation and the choice of the environmentalpolicy in the US to the form of the health damage function. A computable model of the electricityindustry developed in this paper determines plants’ production, participation in energy trade, SO2 emissionsand SO2 abatement as functions of the regulatory policy. Firms’ emission levels are constrained by the environmentalregulation, and the trade of electricity is constrained by the pipeline capacity and the state regulation.State regulator either allows free, competitive trade of electricity, or regulates utilities as natural monopolieswith limited ability to trade. The model uses electricity generation and cost data for individual generators fromthe Energy Information Administration’s and the Environmental Protection Agency’s databases.Five established types of environmental policy are compared in their effect on the aggregate health damagesand abatement costs: emission caps, state-level pollution caps, emission tax, allowance trading, and exchangerates on the allowance trade. The model derives the emission levels in the trading equilibrium, and the healtheffects of the resultant ambient concentrations of SO2, when the marginal health damages are increasing inemissions. The critical values for the slope and curvature of the damage function are found at which alternativepolicies dominate the existing system of marketable allowances in the net benefits achieved.