The Economic Impact Of EPA SO2 Standards On The U.S. Coal Industry ? Introduction

The imposition of non-market regulations, such as the proposed SO2 standards for coal combustion, will typically lead to less efficient (thus more costly) production in a free enterprise system. For the coal industry these increased costs will occur in several ways, among which are mining less accessible low sulfur reserves and transporting low sulfur coal to distant markets. There are, of course, social benefits of reducing the S02 emissions from the use of high sulfur coal. The social benefits include decreased health risks, reduced damages to property, and certain unmeasurable benefits associated with the aesthetic appeal of clean air. Proponents of Federal S02 standards argue that the benefits gained from reduced emissions will exceed the costs borne by the coal industry and society in general in meeting the regulations. The purpose of this paper is to investigate the degree to which costs of meeting future energy demands from coal will change under different sulfur standards. No attempt is made to estimate the benefits of imposing regulations. Specifically, the impact of SO2 standards on the private costs of meeting regional coal demands, the competitive positions of the nation's major coal producing regions, the degree to which strip mining as opposed to underground mining will be feasible, the amount of coal being processed, and the amount of coal transported over major rail routes will be analyzed.