Carbon Pricing and the Transition from Voluntary to Mandatory Markets

The current national and global call for a coordinated and meaningful response to climate change concerns is certain to shift the United States from several regional and voluntary carbon markets today to a global compulsory market in the near future. In addition to the clear environmental benefits, this changing landscape will result in groups of carbon market "winners" and "losers" – some market segments will gain favor and market share while others will lose economic opportunity. The competitive disadvantage for traditional energy in a carbon-priced world will be a catalyst for market-driven innovations in renewable energy, and sustainable development. There are many opportunities where Austin and Texas stand to gain as larger carbon pricing components are realized. This primer looks to explore the political, economic, and design considerations that will affect the development of the carbon market.IC2 Institut

Making the most of the G8+5 Climate Change Process: Accelerating Structural Change and Technology Diffusion on a Global Scale. CEPS Task Force Reports, 5 June 2008

Under the chairmanship of Gunnar Still, Senior Vice President and Head of Environment Division at ThyssenKrupp, CEPS organized a Task Force to explore possible initiatives within the context of the G8+5 dialogue on tackling climate change. This report identifies a number of concrete measures that could reduce greenhouse gas (GHG) emissions, while at the same time stimulating structural change and technology development and diffusion. It calls for supporting action-based approaches, which are essential to achieve the necessary reductions in GHG emissions, inform the post-2012 negotiations and address the most urgent issues such as surging energy demand and the need for clean energy technologies in emerging economies. An action-based approach can be regarded as a way of integrating targets and timetables, as they are agreed, with consistent and comparable policies and measures. With a view to a long-term climate strategy, this report attempts to present a portfolio of actions that can be implemented and accelerated on a global scale – especially in the G8+5 countries and the EU, and could become a basis on which developed and developing countries can cooperate

An Economic and Life Cycle Analysis of Regional Land Use and Transportation Plans, Research Report 11-25

Travel and emissions models are commonly applied to evaluate the change in passenger and commercial travel and associated greenhouse gas (GHG) emissions from land use and transportation plans. Analyses conducted by the Sacramento Area Council of Governments predict a decline in such travel and emissions from their land use and transportation plan (the “Preferred Blueprint” or PRB scenario) relative to a “Business-As-Usual” scenario (BAU). However, the lifecycle GHG effects due to changes in production and consumption associated with transportation and land use plans are rarely, if ever, conducted. An earlier study conducted by the authors, applied a spatial economic model (Sacramento PECAS) to the PRB plan and found that lower labor, transport, and rental costs increased producer and consumer surplus and production and consumption relative to the BAU. As a result, lifecycle GHG emissions from these upstream economic activities may increase. At the same time, lifecycle GHG emissions associated with the manufacture of construction materials for housing may decline due to a shift in the plan from larger luxury homes to smaller multi-family homes in the plan. To explore the net impact of these opposing GHG impacts, the current study used the economic production and consumption data from the PRB and BAU scenarios as simulated with the Sacramento PECAS model as inputs to estimate the change in lifecycle GHG emissions. The economic input-output lifecycle assessment model is applied to evaluate effects related to changes in economic production and consumption as well as housing construction. This study also builds on the findings from two previous studies, which suggest potential economic incentives for jurisdictional non-compliance with Sustainable Communities Strategies (SCSs) under Senate Bill 375 (also known as the “anti-sprawl” bill). SB 375 does not require local governments to adopt general plans that are consistent with the land use plans included in SCSs, and thus such incentives could jeopardize implementation of SCSs and achievement of GHG goals. In this study, a set of scenarios is simulated with the Sacramento PECAS model, in which multiple jurisdictions partially pursue the BAU at differing rates. The PRB is treated as a straw or example SCS. The scenarios are evaluated to understand how non-conformity may influence the supply of housing by type, and holding other factors constant, the geographic and income distribution of rents, wages, commute costs, and consumer surplus

Potential Economic Consequences of Local Nonconformity to Regional Land Use and Transportation Plans Using a Spatial Economic Model

To achieve the greenhouse gas (GHG) reduction targets that are required by California’s global warming legislation (AB32), the state of California has determined that recent growth trends in vehicle miles traveled (VMT) must be curtailed. In recognition of this, Senate Bill 375 (SB375) requires regional governments to develop land use and transportation plans or Sustainable Community Strategies (SCSs) that will achieve regional GHG targets largely though reduced VMT. Although the bill requires such a plan, it does not require local governments to adopt general plans that conform to this plan. In California, it is local, not regional, governments that have authority over land development decisions. Instead, SB375 relies on democratic participatory processes and relatively modest financial and regulatory incentives for SCS implementation. As a result, it is quite possible that some local governments within a region may decide not to conform to their SCS. In this study, a spatial economic model (PECAS) is applied in the Sacramento region (California, U.S.) to understand what the economic and equity consequences might be to jurisdictions that do and do not implement SCS land use plans in a region. An understanding of these consequences provides insight into jurisdictions’ motivations for compliance and thus, strategies for more effective implementation of SB375

Corporate Average Fuel Economy Standards and the Market for New Vehicles

This paper presents an overview of the economics literature on the effect of Corporate Average Fuel Economy (CAFE) standards on the new vehicle market. Since 1978, CAFE has imposed fuel economy standards for cars and light trucks sold in the U.S. market. This paper reviews the history of the standards, followed by a discussion of the major upcoming changes in implementation and stringency. It describes strategies that firms can use to meet the standards and reviews the CAFE literature as it applies to the new vehicle market. The paper concludes by highlighting areas for future research in light of the upcoming changes to CAFE.CAFE, costs, structural estimation

Pay-at-the-Pump Auto Insurance

PAY-AT-THE-PUMP is a proposal to replace the current insurance system of lump sum payments for automobile insurance by a mechanism whereby motorists pay for their insurance as they buy fuel for their vehicles. PAY-AT-THE-PUMP has several advantages. It reduces insurance cost and cross subsidies and enhances equity. It also benefits the environment, safety, balance of payments, and security. In this paper we study limited but very important issues in the theory and implementation of PAY-AT-THE-PUMP insurance. We address issues of efficiency, subsidy, equity, externalities, safety, insurance cost and cost of insuring the uninsured motorist under a PAY-AT-THE-PUMP regime. We use the insurance industry’s criticisms of mandatory auto insurance as a lens through which we view PAY-AT-THE-PUMP insurance and ask how PAY-AT-THE-PUMP fares by comparison. Finally we address one aspect of insurance that has been neglected in the current debate -- the human dimension of the problem of uninsured motorist and the contribution PAY-AT-THE-PUMP can make to solve this problem.

Instrument Choice in Environmental Policy

We examine the extent to which various environmental policy instruments meet major evaluation criteria, including cost-effectiveness, distributional equity, minimization of risk in the presence of uncertainty, and political feasibility. Instruments considered include emissions taxes, tradable emissions allowances, subsidies for emissions reductions, performance standards, technology mandates, and research and development subsidies. Several themes emerge. First, no single instrument is clearly superior along all the criteria. Second, significant trade-offs arise in the choice of instrument; for example, assuring a reasonable degree of distributional equity often will require a sacrifice of cost-effectiveness. Third, it is possible and sometimes desirable to design hybrid instruments that combine features of various instruments in their “pure” form. Fourth, for many pollution problems, more than one market failure may be involved, which may justify (on efficiency grounds, at least) employing more than one instrument. Finally, potential overlaps and undesirable interactions among environmental policy instruments are sometimes a matter of concern.emissions control instruments, cost-effectiveness, distributional burden, induced innovation