Description |
1 online resource (45 pages) : illustrations |
Series |
NBER working paper series ; no. 21259 |
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Working paper series (National Bureau of Economic Research) ; no. 21259.
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Summary |
Flexibility in environmental regulations can lead to reduced costs if it allows additional abatement from lower cost sources or if policy tailoring and experimentation across states increases regulatory efficiency. The EPA's 2014 Clean Power Plan, which implements greenhouse gas regulation of power plants under the Clean Air Act, allows substantial regulatory flexibility. The Clean Power Plan sets state-level 2030 goals for emissions rates (in lbs CO2 per MWh) with substantial variation in the goals across states. The Clean Power Plan allows states considerable flexibility in attaining these goals. In particular, states can choose whether to implement the rate standards goals or equivalent mass-based goals (i.e., emissions cap and trade, CAT). Moreover, states can choose whether or not to join with other states in implementing their goals. We analyze incentives to adopt inefficient rate standards versus efficient CAT standards using both analytical and simulation models. We have five main results. First, we theoretically show that industry supply can be efficient under both CAT regulation and rate-based regulation. However, under rate-based standards the carbon price must equal the social cost of carbon and the rate standard must be equal across all the states. Second, we illustrate important differences in the incentives of a unified coalition of states and the incentives of a single state. Third, our simulation results show that when states fail to coordinate on a policy, the merit order can be "scrambled" quite dramatically leading to significant inefficiencies. Fourth, the Nash equilibrium of a game between coastal and inland western states is an inefficient policy for consumers and an uncoordinated policy for generators. Finally, we show that how new plants are treated under the Clean Power Plan has large effects on the scale and location of entry |
Notes |
"June 2015." |
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Includes online appendix (41 pages) |
Bibliography |
Includes bibliographical references (pages 34-35) |
Notes |
Online resource; title from http://www.nber.org/papers/w21259 viewed June 17, 2015 |
Subject |
United States. Clean Air Act.
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SUBJECT |
Clean Air Act (United States) fast (OCoLC)fst01358693 |
Subject |
Environmental policy -- Economic aspects -- United States
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Greenhouse gas mitigation -- Government policy -- United States
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Environmental policy -- Economic aspects.
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Greenhouse gas mitigation -- Government policy.
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Climate Natural Disasters and Their Management Global Warming.
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Government Policy.
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Industry Studies: Transportation and Utilities.
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Regulation and Industrial Policy.
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United States.
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Form |
Electronic book
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Author |
Holland, Stephen P., author.
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Hughes, Jonathan E., author.
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Knittel, Christopher R., author.
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National Bureau of Economic Research, publisher.
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