Emissions Abating Technology Adoption Under the SO2 Permit Market: A Social Networks Approach

Social Computing (SocialCom), 2013 ASE/IEEE International Conference, pp.744-749

6 Pages Posted: 27 Jan 2014

See all articles by Bernardo Creamer

Bernardo Creamer

Universidad de las Americas

Germán G. Creamer

Stevens Institute of Technology, School of Business; Columbia University - Department of Computer Science

Date Written: September 8-14, 2013

Abstract

SO2, sulfur dioxide, emissions generated by electric power plants account for a large proportion of the total emissions in the U.S.A. In 2008, electricity generation caused nearly 7.9 million tons of SO2 emissions out of a total of 9.5 million tons. The negative side effects of SO2 emissions have been thoroughly evaluated, especially health deterioration issues caused by acid rain and other unwanted impacts that generate significant social costs. In response to these effects, the U.S. Congress passed the Clear Air Act (CAA) in the 1970s to cut down SO2 among other emissions. The CAA Amendments (CAAA) of 1990 created a competitive cap-and-trade market for SO2 allowances that lowered overall emission levels. This paper builds a social network among the different states of U.S.A. based on the trade of coal during the period 1990 to 2005 to evaluate the factors that affect the decision of coal burning electric power firms to adopt emission abating technology. In particular, these companies follow one or a combination of these strategies to comply with the CAAA emission restrictions: 1) paying the new costs of emissions and continuing business as usual, 2) using higher quality inputs (lower sulfur coal) that generate less pollution, or 3) upgrading their processes and equipment to lower emissions. The main factors explored are prices and quantities of low and high sulfur coal, SO2 allowances prices, and the operation and maintenance cost of abating technology (flue-gas desulfurization (FGDs) or scrubbers). This paper concludes that firms respond to the imposition of pollution control regulations by selecting a strategy that simultaneously control emissions and minimize costs. The firms reduce their pollutions using higher quality inputs (sub-bituminous coal), investing in new emission abating technology or a combination of both approaches. The longitudinal social network analysis shows that the dynamic of the fuel network where there is an increasing adoption of technology by most of the states may explain, jointly with the reduction of gas prices, the collapse of the allowance market for SO2 after 2005.

Keywords: Computational economics; energy economics; environmental economics; social networks; technological change

JEL Classification: O13, O33, Q41, Q42, C63

Suggested Citation

Creamer, Bernardo and Creamer, Germán G., Emissions Abating Technology Adoption Under the SO2 Permit Market: A Social Networks Approach (September 8-14, 2013). Social Computing (SocialCom), 2013 ASE/IEEE International Conference, pp.744-749, Available at SSRN: https://ssrn.com/abstract=2385395 or http://dx.doi.org/10.2139/ssrn.2385395

Bernardo Creamer

Universidad de las Americas ( email )

de los colimes, Av. De los Granados
Colimes
Quito, Pichincha 170137
Ecuador

HOME PAGE: http://www.udla.edu.ec/

Germán G. Creamer (Contact Author)

Stevens Institute of Technology, School of Business ( email )

1 Castle Point on Hudson
Hoboken, NJ 07030
United States
2012168986 (Phone)

HOME PAGE: http://www.creamer-co.com

Columbia University - Department of Computer Science ( email )

New York, NY 10027
United States

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