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Environmental Policy Induced Input Substitution? The Case of Coking and Steam Coal

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Paper Number: 2007-10

Document Date: 12/13/2007

Authors: Ian Lange

Subject Areas: Energy; Distributional Effects

Keywords: 1990 Clean Air Act; coke; Input substitution

Abstract: The Clean Air Act of 1990 initiated a tradable permit program for emissions of sulfur dioxide from coal-fired power plants. The effect of this enlightened policy on the coal industry was a large increase in consumption of low-sulfur bituminous and subbituminous coals. Low-sulfur bituminous coal is most attractive to coal-fired power plants as they have higher heat content and require less alteration to the boiler to burn as effectively the coal previously in use. However, low-sulfur bituminous coal is also the ideal coal for coking. The analysis presented here will attempt to determine whether the increased consumption of low-sulfur bituminous coal for electricity generation caused a decrease in the quality and/or quantity of coking coal consumption. Most evidence suggests that the market for coking coal was unaffected, even as the consumption of low-sulfur bituminous coal for electricity generation increased substantially. Implications of potential greenhouse gas regulation on this market are also discussed.

Attachment: 2007-10.pdf (162K, About PDF)

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