Spillovers from Climate Policy

Climate policy spillovers can be either positive or negative since firms change their production processes in response to climate policies, which may either increase or decrease emissions of other pollutants. Understanding these ancillary benefits or costs has important implications for climate policy design, modeling, and benefit-cost analysis. This paper shows how spillovers can be decomposed into output effects (which have ancillary benefits) and substitution effects (which may have ancillary benefits or ancillary costs). The ambiguous net effect highlights the importance of polluters' responses to climate policy. I then test for climate policy spillovers in electricity power generation. The estimates are consistent with ancillary benefits from climate policy arising primarily from reductions in output (primarily at older plants) rather than from changes in emissions rates.

Taxes and Trading versus Intensity Standards: Second-Best Environmental Policies with Incomplete Regulation (Leakage) or Market Power

This paper investigates whether an emissions tax (equivalent to an emissions cap) maximizes social welfare (defined as the sum of consumer and producer surplus) in the presence of incomplete regulation (leakage) or market power by analyzing an intensity standard regulating emissions per unit of output. With no other market failures, an intensity standard indeed yields lower welfare, although combining it with a consumption tax eliminates this discrepancy. For incomplete regulation, I show that under certain conditions an intensity standard can yield higher welfare than any emissions tax (including the optimal emissions tax). This result persists even with the addition of a consumption tax, which ameliorates output distortions and can sometimes help the intensity standard attain the first best (when an emissions tax/consumption tax combination cannot). Comparing intensity standards to output-based updating shows that the latter yields higher welfare because of its additional flexibility. Finally, I show that with market power an intensity standard can yield higher welfare than the optimal emissions tax. The intuition of these results is relatively straightforward. The weakness of an intensity standard is that it relies more on substitution effects than output effects to reduce emissions. With incomplete regulation or market power, this disadvantage may be helpful since leakage may offset gains from reducing output and since market power already inefficiently reduces output.

CADILLAC DESERT REVISITED: PROPERTY RIGHTS, PUBLIC POLICY, AND WATER-RESOURCE DEPLETION IN THE AMERICAN WEST

This is a revised copy of Staff Paper 200-48Land Economics/Use, Resource /Energy Economics and Policy,

Should we ban gasoline cars?

As electric vehicles become commercially viable, they have the potential to yield dramatic reductions in air pollution. The UK plans to have no gasoline vehicles by 2030, Norway by 2025, and California by 2035. But what is the best policy to achieve that? Is banning an effective option? Stephen P. Holland, Erin T. Mansur, and Andrew J. Yates provide a framework for assessing costs and benefits, elucidating key unknown parameters, and designing effective policies to discourage the use of gasoline

The Distance to the M31 Globular Cluster System

The distance to the centroid of the M31 globular cluster system is determined by fitting theoretical isochrones to the observed red-giant branches of fourteen globular clusters in M31. The mean true distance modulus of the M31 globular clusters is found to be 24.47 +/- 0.07 mag. This is consistent with distance modulii for M31 that have been obtained using other distance indicators.Comment: 11 pages, 2 postscript figures, uses aaspp4.sty, to be published in the May 1998 Astronomical Journa

What Do Emissions Markets Deliver and to Whom? Evidence from Southern California's NOx Trading Program

A perceived advantage of cap-and-trade programs over more prescriptive environmental regulation is that enhanced compliance flexibility and cost effectiveness can make more stringent emissions reductions politically feasible. However, increased compliance flexibility can also result in an inequitable distribution of pollution. We investigate these issues in the context of Southern California's RECLAIM program. We match facilities in RECLAIM with similar California facilities also located in non-attainment areas. Our results indicate that emissions fell approximately 24 percent, on average, at RECLAIM facilities relative to our counterfactual. Furthermore, we find that observed changes in emissions do not vary significantly with neighborhood demographic characteristics.

Some Inconvenient Truths About Climate Change Policy: The Distributional Impacts of Transportation Policies

Instead of efficiently pricing greenhouse gases, policy makers have favored measures that implicitly or explicitly subsidize low carbon fuels. We simulate a transportation-sector cap & trade program (CAT) and three policies currently in use: ethanol subsidies, a renewable fuel standard (RFS), and a low carbon fuel standard (LCFS). Our simulations confirm that the alternatives to CAT are quite costly—2.5 to 4 times more expensive. We provide evidence that the persistence of these alternatives in spite of their higher costs lies in the political economy of carbon policy. The alternatives to CAT exhibit a feature that make them amenable to adoption|a right skewed distribution of gains and losses where many counties have small losses, but a smaller share of counties gain considerably—as much as $6,800 per capita, per year. We correlate our estimates of gains from CAT and the RFS with Congressional voting on the Waxman-Markey cap & trade bill, H.R. 2454. Because Waxman-Markey (WM) would weaken the RFS, House members likely viewed the two policies as competitors. Conditional on a district's CAT gains, increases in a district's RFS gains are associated with decreases in the likelihood of voting for WM. Furthermore, we show that campaign contributions are correlated with a district's gains under each policy and that these contributions are correlated with a Member's vote on WM.Institute of Transportation Studies at UC Davi

Strategic Policy Choice in State-Level Regulation: The EPA's Clean Power Plan

The EPA's Clean Power Plan sets goals for CO₂ emissions rate reductions by 2030 that vary substantially across states. States can choose the regulatory mechanism they use and whether or not to join with other states in implementing their goals. We analyze incentives to adopt rate standards versus cap-and-trade with theory and simulation. We show conditions where adoption of inefficient rate standards is a dominant strategy from both consumers' and generators' perspectives. Numerical simulations of the western electricity system highlight incentives for uncoordinated policies that lower welfare and increase emissions relative to coordination

Are There Environmental Benefits from Driving Electric Vehicles? The Importance of Local Factors

We combine a theoretical discrete-choice model of vehicle purchases, an econometric analysis of electricity emissions, and the AP2 air pollution model to estimate the geographic variation in the environmental benefits from driving electric vehicles. The second-best electric vehicle purchase subsidy ranges from $2,785 in California to -$4,964 in North Dakota, with a mean of -$1,095. Ninety percent of local environmental externalities from driving electric vehicles in one state are exported to others, implying they may be subsidized locally, even when the environmental benefits are negative overall. Geographically differentiated subsidies can reduce deadweight loss, but only modestly