Predicting a National Acid Rain Policy

Abstract

Over the last 20 years, the debate among legislators, regulatory officials, manufacturing associations, and environmental groups over an acid rain policy for the United States has yet to be resolved. The high level of disagreement among the knowledgeable participants about the complex nature of the acid rain problem and about appropriate solutions has stalled repeated attempts by the U.S. government to reach a consensus of opinion on which policy option is best. Yet, the outcome of each year’s debate and the resulting policy can dramatically impact the operations of electric power companies and manufacturers of aluminum, steel, and automobiles. Faced with the current impasse, these firms still need to predict which acid rain policy might be adopted so that they can formulate an effective yearly business plan.In this paper, we present an AHP-based model that is designed to help power company decision makers predict a national acid rain policy. We envision our model and the accompanying analysis as forming a decision support template that can be regularly updated by management to gain new insights about acid rain policies under consideration. The results of this modeling exercise can be used by power companies to help plan capital budgeting decisions related to the timing and design of new electric power plants, as well as to specify required “clean air” modifications to plants already in operation.