INTRODUCTION

This appendix presents the econometric analysis of the effect of Title IV on emissions and heat input, on which much of the discussion in Chapter 5 is based. Panel data regression techniques are applied to a large data sample, including more than Phase I units alone and more years than 1995–97, to account for the most important factors determining SO2 emissions. Three factors are particularly important.

• Title IV can be expected to reduce SO2 emissions through a reduction in the emission rate as well as through a change in dispatch among units. Some of the effect may have taken place even prior to 1995.

• The greater availability of low-sulfur PRB coals throughout 1995, 1996, and 1997, due to further reductions in rail rates or contract expirations, has to be considered.

• Changes in electricity demand are a natural cause of fluctuations in heat input and emissions.

The model presented here is not intended to be a structural model of the electricity-generating sector to be used for testing the effect of a variety of economic and regulatory factors, as well as for forecasting. Rather, the model is tuned to answer a specific question, namely, the amount of SO2 abatement that can be attributed to Title IV.

This appendix is organized as follows. The next sections describe the database; introduce the econometric model and describe its features; present the results; address the effect of Title IV on utilization; and draw conclusions.