Phase I completed: An empirical assessment of the 1990 CAAA

With the conclusion of Phase I trading of SO2 allowances, the EPA declared the allowance trading policy to be a success. The time had come to include cap-and-trade programs in the arsenal of effective policy tools. In terms of reducing atmospheric emissions of sulfur dioxide, the program appears to be successful. It is not clear, however, whether or not the program has minimized the cost of achieving the emission reductions. The measure of the true success of a market-based incentive program, however, has yet to be quantified: Has the program resulted in converging marginal abatement costs across participant plants? In this study I report the shadow prices of Phase I power plants from 1994 to 1998 and determine that there are more costs to be saved within the ambitious public policy experiment