An empirical study of the SO2 allowance market: Effects of PUC regulations

Toshi H. Arimura*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

38 Citations (Scopus)


This paper investigates electric utility behavior under the SO2 allowance market in Phase I. The probit model shows that cost recovery rules promoted high sulfur coal usage for utilities located in states with coal mines. A simulation shows that protecting these local coal industry increased high sulfur coal usage by 50%. Another finding is that the uncertainty of PUC regulations pushed utilities from the allowance market toward fuel switching/blending. Since the second effect was stronger than the first, the overall PUC regulations contributed to an unexpectedly low allowance price at the beginning of Phase I.

Original languageEnglish
Pages (from-to)271-289
Number of pages19
JournalJournal of Environmental Economics and Management
Issue number2
Publication statusPublished - 2002 Sept
Externally publishedYes

ASJC Scopus subject areas

  • Economics and Econometrics
  • Management, Monitoring, Policy and Law


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