Vertical Targeting and Leakage in Carbon Policy
AbstractThis paper examines the intersection between two aspects of climate policy design. The first is the point of regulation: should it be placed on pollution sources, carbon-rich inputs, or consumers? The second aspect concerns the external effects of a local climate policy. Leakage occurs when partial regulation results in an increase in emissions in unregulated parts of the economy. Our model demonstrates how directly regulating polluters can increase foreign emissions while indirect regulation (either upstream or downstream of the pollution source) will decrease foreign emissions. The net effect on combined domestic and foreign emissions will depend on market elasticities.
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Bibliographic InfoArticle provided by American Economic Association in its journal American Economic Review.
Volume (Year): 101 (2011)
Issue (Month): 3 (May)
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- Don Fullerton & Catherine Wolfram, 2011. "Introduction and Summary to "The Design and Implementation of U.S. Climate Policy"," NBER Chapters, in: The Design and Implementation of U.S. Climate Policy, pages 1-17 National Bureau of Economic Research, Inc.
- Don Fullerton & Catherine Wolfram, 2011. "The Design and Implementation of U.S. Climate Policy: An Introduction," NBER Working Papers 17499, National Bureau of Economic Research, Inc.
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