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  • December 1992 (Revised September 1995)
  • Exercise

Negotiation Exercise on Tradeable Pollution Allowances: General Background Information

By: Willis M. Emmons III
  • Format:Print
  • | Pages:2
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Abstract

Designed to teach students about the trade-offs faced by firms exploring alternative approaches to complying with pollution control regulations. The setting is the U.S. electric utility industry in 1993. In accordance with the provisions of the 1990 Clean Air Act, coal-burning utilities must lower their emissions of SO2 (sulfur dioxide) significantly by 1995, and then reduce their emissions by an additional 50% by the year 2000. In this stylized negotiation each utility has the option of complying with the regulations through one of three methods: 1) by installing pollution control equipment ("scrubbers"); 2) by substituting high-sulfur coal; and/or 3) by purchasing tradeable SO2 allowances from other firms that overcomply with the emission control legislation. Not only must each utility reduce its emissions by a different amount, but the costs faced by each firm with respect to scrubbing and fuel switching differ as well. Also, assumptions relating to the state regulatory environment differ across negotiating groups. Negotiations take place in groups of four utilities, and separate scenarios are available for three distinct groups. (See Supplements.)

Keywords

Negotiation; Pollutants; Laws and Statutes; Governing Rules, Regulations, and Reforms; Governance Compliance; Utilities Industry; United States

Citation

Emmons, Willis M., III. "Negotiation Exercise on Tradeable Pollution Allowances: General Background Information." Harvard Business School Exercise 793-072, December 1992. (Revised September 1995.)
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About The Author

Willis M. Emmons

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More from the Author
  • MassMEDIC: The Massachusetts Medical Device Industry Council By: Willis M. Emmons III, Michael E. Porter and Spencer Wallace
  • Centre Suisse d'Electronique et de Microtechnique (CSEM) By: Michael E. Porter, Willis M. Emmons III and Christian Fenner
  • Asociacion Colombiana de Industrias Plasticas (Acoplasticos) By: Michael E. Porter and Willis M. Emmons III
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