Table 3: Results of the Social Planner’s Model (20% reduction)
|
Year 1 |
Year 2 |
Year 3 |
Year 4 |
Year 5 |
Total | |
|
Estimated Emission Level (ton) |
97,531.8 |
84,505.2 |
82,091.8 |
82,338.6 |
96,995.1 |
443,462.5 |
|
Required NOx reduction (ton) |
39244.4 |
26217.7 |
23804.3 |
24051.1 |
38707.6 |
152,025.1 |
|
Total ERCs issued (ton) |
58287.5 |
58287.5 |
58287.5 |
58287.5 |
58287.5 |
291,437.5 |
|
# of ERCs traded (ton) |
16175.4 |
8538.3 |
12458.5 |
17265.8 |
11100.5 |
65,538.5 |
|
# of unused ERCs (ton) |
0 |
6366 |
3538.6 |
0 |
0 |
9,904.6 |
|
# of buyers in the market |
24 |
25 |
30 |
29 |
28 |
- |
|
# of sellers in the market |
20 |
19 |
14 |
15 |
16 |
- |
|
# of firms with technology adoption |
5 |
5 |
5 |
5 |
5 |
5 |
|
Annual abatement cost (in million) |
4.99 |
4.61 |
4.35 |
4.13 |
3.91 |
21.99 |
emission level by firms, but it was much lower in year-4 and year-5 where 3,600 and
2,200 tons of ERC, respectively, could not be sold. The total abatement cost of the
program was about $14.64 million under this scenario. Since the social planner’s
model assumes perfect information and full cooperation among the firms, this cost
corresponds to the minimum control cost for meeting the required NOx reduction.
When the 20% rule is applied, the results indicate that the total abatement cost
would increase to 22 million (Table 3). However, the total trading volume would be
reduced significantly. Compared with the 10% rule, one more firm (in petroleum
refining industry) would adopt new control technology (which was SCR) . Due to the
higher abatement requirement, excess supply was eliminated except in years two and
three. In the remaining years the market was in an equilibrium condition.
The reason for the discrepancy between the findings of previous permit trading
studies and this study is the existence of fixed costs associated with equipment
11
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