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Abstract

This paper measures the impact of the 1990 Clean Air Act Amendment on productivity and output of US coal-fired boilers. The Act led to power units adopting a number of different pollution abating strategies, one of which was an input change to lower SO2 emitting coal. A key feature is that each boiler is designed to burn a particular variety of coal, with significant deviations from the targeted coal characteristics resulting in productivity loss. The main innovation of the paper is to quantify the effect that switching to cleaner coal had on productivity and output. With data spanning over fifteen years, I incorporate the effect of this deviation directly into a production function to explicitly quantify the resulting productivity loss. Estimated output losses range from 0% to more than 6%, varying across regions, over time, and mainly depending on the proximity of generating units to low-sulfur sources.

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