Impacts of market-based environmental and generation policy on scrubber electricity usage

The introduction of scrubbers as a means of controlling sulfur dioxide (SO2) emissions from stationary sources coincided with the implementation of the Clean Air Act of 1970. Since that time, there have been many policy changes affecting the electricity generation industry. These changes can be characterized as moving from direct regulation toward market-based incentives, both in deregulation or restructuring of power markets and adoption of market-based environmental regulation. These changes provide natural experiments for investigating whether the form of regulation can alter the rate of technological progress. This paper analyzes changes in scrubbers' use of electricity (also known as parasitic load) in relation to regulatory policy regimes. Results show that restructured electricity markets led to innovations that reduced parasitic load considerably (35-45%). Conversely, the change to a cap-and-trade system for SO2 has not led to similar reductions.