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Economic ideas for a complex climate policy regime

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  • Burtraw, Dallas
  • Woerman, Matt
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    Abstract

    The parsimony of economic theory provides general insights into an otherwise complex world. However, the most straightforward organizing principles from theory have not often taken hold in environmental policy or in the decentralized climate policy regime that is unfolding. One reason is inadequate recognition of a variety of institutions. This paper addresses three ways that the standard model may inadequately anticipate the role of institutions in the actual implementation of climate policy, with a U.S. focus: multilayered authority across jurisdictions, the impressionistic rather than deterministic influence of prices through subsidiary jurisdictions, and the complementary role of prices and regulation in this context. The economic approach is built on the premise that incentives affect behavior. We suggest that an important pathway of influence for economic theory is to infuse incentive-based thinking into the conventional regulatory framework. In a complex policy regime, incentives can be shaped by shadow prices as well as market prices.

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    Bibliographic Info

    Article provided by Elsevier in its journal Energy Economics.

    Volume (Year): 40 (2013)
    Issue (Month): S1 ()
    Pages: S24-S31

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    Handle: RePEc:eee:eneeco:v:40:y:2013:i:s1:p:s24-s31

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    Web page: http://www.elsevier.com/locate/eneco

    Related research

    Keywords: Institutions; Federalism; Subsidiarity; Shadow prices; Incentives; Regulation;

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    References

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    1. Burtraw, Dallas & Palmer, Karen & Banzhaf, H. Spencer, 2002. "Efficient Emission Fees in the U.S. Electricity Sector," Discussion Papers dp-02-45, Resources For the Future.
    2. William Shobe & Dallas Burtraw, 2012. "Rethinking Environmental Federalism in a Warming World," Working Papers 2012-01, Center for Economic and Policy Studies.
    3. Richard Schmalensee & Robert Stavins, 2012. "The SO2 Allowance Trading System: The Ironic History of a Grand Policy Experiment," NBER Working Papers 18306, National Bureau of Economic Research, Inc.
    4. Burtraw, Dallas & Palmer, Karen & Kahn, Danny, 2010. "A symmetric safety valve," Energy Policy, Elsevier, vol. 38(9), pages 4921-4932, September.
    5. Roberton C. Williams III, 2010. "Growing State-Federal Conflicts in Environmental Policy: The Role of Market-Based Regulation," NBER Working Papers 16184, National Bureau of Economic Research, Inc.
    6. Kerr, Suzi & Newell, Richard, 2001. "Policy-Induced Technology Adoption: Evidence from the U.S. Lead Phasedown," Discussion Papers dp-01-14, Resources For the Future.
    7. Burtraw, Dallas & Fraas, Arthur G. & Richardson, Nathan, 2011. "Greenhouse Gas Regulation under the Clean Air Act: A Guide for Economists," Discussion Papers dp-11-08, Resources For the Future.
    8. Portney, Paul R, 1990. "Economics and the Clean Air Act," Journal of Economic Perspectives, American Economic Association, vol. 4(4), pages 173-81, Fall.
    9. Nicholas Z. Muller & Robert Mendelsohn, 2009. "Efficient Pollution Regulation: Getting the Prices Right," American Economic Review, American Economic Association, vol. 99(5), pages 1714-39, December.
    10. Cameron Hepburn, 2010. "Environmental policy, government, and the market," Oxford Review of Economic Policy, Oxford University Press, vol. 26(2), pages 117-136, Summer.
    11. Dalia Patino-Echeverri & Dallas Burtraw & Karen Palmer, 2013. "Flexible mandates for investment in new technology," Journal of Regulatory Economics, Springer, vol. 44(2), pages 121-155, October.
    12. Gruenspecht, Howard K, 1982. "Differentiated Regulation: The Case of Auto Emissions Standards," American Economic Review, American Economic Association, vol. 72(2), pages 328-31, May.
    13. Burtraw, Dallas & Woerman, Matt & Paul, Anthony, 2012. "Retail electricity price savings from compliance flexibility in GHG standards for stationary sources," Energy Policy, Elsevier, vol. 42(C), pages 67-77.
    14. Michael Hanemann, 2010. "Cap-and-trade: a sufficient or necessary condition for emission reduction?," Oxford Review of Economic Policy, Oxford University Press, vol. 26(2), pages 225-252, Summer.
    15. Richardson, Nathan & Fraas, Arthur G., 2013. "Comparing the Clean Air Act and a Carbon Price," Discussion Papers dp-13-13, Resources For the Future.
    16. Lawrence H. Goulder & Robert N. Stavins, 2011. "Challenges from State-Federal Interactions in US Climate Change Policy," American Economic Review, American Economic Association, vol. 101(3), pages 253-57, May.
    17. Jonathan Levine & Aseem Inam, 2004. "The Market for Transportation-Land Use Integration: Do Developers Want Smarter Growth than Regulations Allow?," Transportation, Springer, vol. 31(4), pages 409-427, November.
    18. Salant, Stephen W & Henderson, Dale W, 1978. "Market Anticipations of Government Policies and the Price of Gold," Journal of Political Economy, University of Chicago Press, vol. 86(4), pages 627-48, August.
    19. Burtraw, Dallas & Woerman, Matt, 2012. "US Status on Climate Change Mitigation," Discussion Papers dp-12-48, Resources For the Future.
    20. Pearce, David, 2006. "The political economy of an energy tax: The United Kingdom's Climate Change Levy," Energy Economics, Elsevier, vol. 28(2), pages 149-158, March.
    21. Dallas Burtraw & Art Fraas & Nathan Richardson, 2011. "Policy Monitor--Greenhouse Gas Regulation under the Clean Air Act: A Guide for Economists," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 5(2), pages 293-313, Summer.
    22. Nelson, Randy A & Tietenberg, Tom & Donihue, Michael R, 1993. "Differential Environmental Regulation: Effects on Electric Utility Capital Turnover and Emissions," The Review of Economics and Statistics, MIT Press, vol. 75(2), pages 368-73, May.
    23. Dallas Burtraw & Alan Krupnick & Erin Mansur & David Austin & Deirdre Farrell, 1998. "Costs And Benefits Of Reducing Air Pollutants Related To Acid Rain," Contemporary Economic Policy, Western Economic Association International, vol. 16(4), pages 379-400, October.
    24. Maloney, Michael T & Brady, Gordon L, 1988. "Capital Turnover and Marketable Pollution Rights," Journal of Law and Economics, University of Chicago Press, vol. 31(1), pages 203-26, April.
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    Cited by:
    1. Burtraw, Dallas & Linn, Joshua & Palmer, Karen & Paul, Anthony, 2014. "The Costs and Consequences of Clean Air Act Regulation of CO2 from Power Plants," Discussion Papers dp-14-01, Resources For the Future.
    2. Michel Damian, 2014. "La politique climatique change enfin de paradigme," Post-Print halshs-00969308, HAL.
    3. Paul, Anthony & Palmer, Karen & Woerman, Matt, 2014. "Designing by Degrees: Flexibility and Cost-Effectiveness in Climate PolicyAbstract: Substantially reducing carbon dioxide (CO2) emissions from electricity production will require a transformation of t," Discussion Papers dp-14-05, Resources For the Future.

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