An enduring issue in environmental regulation is whether to clean up
existing “old” plants or in some manner to bring in new “clean” plants to
replace the old. In this paper, a unit-level data base of emissions by nearly
2000 electric generating units from 1985 through 2002 is used to analyze
the contribution of these two factors in accomplishing the significant
reduction of sulfur dioxide emissions from these sources in the United
States. The effect on SO2 emissions of the new natural-gas-fired, combinedcycle
capacity that has been introduced since 1998 is also examined. The
results indicate that cleaning up the old plants has made by far the greater
contribution to reducing SO2 emissions, and that this contribution has been
especially large since the introduction of the SO2 cap-and-trade program in
1995. The new natural-gas-fired, combined cycle units have displaced
conventional generation that would have emitted about 800,000 tons of SO2;
however, the effect has not been to reduce total SO2 emissions since the 9.0
million ton cap is unchanged, but to reduce the quantity of abatement
required of other units in meeting the cap and thereby the cost of doing so.