Effects of Acid Rain Regulations on Production of Eastern Coals of Varying Sulfur Content

We analyze the effects of the EPA’s Acid Rain Program on county-level production of coals of varying sulfur content in the Appalachian and Illinois basins, controlling for Powder River Basin production, proximity of power plants to mines, and scrubber installation. Using a thirty-year panel data set, we find that during the Acid Rain Program coal sulfur content positively affected mine closure and negatively affected production in most coal-producing counties, with the greatest effect from 1995-2000. Estimated effects of power plant flue gas desulfurization equipment installation are substantial, and depend on coal sulfur content, scrubber unit size, and distance from the mines. The estimated elasticity of coal mine output to sulfur allowance price varies widely by coal sulfur content and is negative only for mines producing coals above the 77th percentile in sulfur content. Our results complement previous studies of regulatory effectiveness, limiting the degree to which reductions in acid rain may be attributed to market rather than regulatory factors.