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Local Solutions to Global Problems: Climate Change Policies and Regulatory Jurisdiction

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  • Bushnell, James
  • Peterman, Carla
  • Wolfram, Catherine

Abstract

This article considers the efficacy of various types of environmental regulations when they are applied locally to pollutants, such as greenhouse gases, whose damages extend beyond the jurisdiction of the local regulator. While previous work has noted the possibility for leakage, whereby polluting sources move outside the jurisdiction of the regulation, we identify an additional problem that occurs when policies are targeted downstream, at consumers of goods whose production creates pollution. Specifically, we show how consumer-based policies can be circumvented by a simple reshuffling of who is buying from whom. We argue that the leakage problems are more pronounced with regulations that impose costs on firms than with subsidies that reward production of low-polluting goods. Reshuffling problems are more pronounced when the options for compliance are more flexible, such as with market-based regulations. We conclude that localities may be able to have the greatest impact on global pollutants when they enact relatively inflexible regulations such as efficiency standards or targeted subsidies.�

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Bibliographic Info

Paper provided by Iowa State University, Department of Economics in its series Staff General Research Papers with number 13125.

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Date of creation: 01 Jul 2008
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Publication status: Published in Review of Environmental Economics and Policy, Summer 2008, vol. 2 no. 2, pp. 175-193
Handle: RePEc:isu:genres:13125

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Postal: Iowa State University, Dept. of Economics, 260 Heady Hall, Ames, IA 50011-1070
Phone: +1 515.294.6741
Fax: +1 515.294.0221
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Web page: http://www.econ.iastate.edu
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Cited by:
  1. Bushnell, James & Chen, Yihsu & Zaragoza-Watkins, Matthew, 2014. "Downstream regulation of CO2 emissions in California's electricity sector," Energy Policy, Elsevier, vol. 64(C), pages 313-323.
  2. Eggert, Håkan & Greaker, Mads, 2013. "Promoting Second Generation Biofuels: Does the First Generation Pave the Road?," Discussion Papers dp-13-18-efd, Resources For the Future.
  3. William M. Shobe & Dallas Burtraw, 2012. "Rethinking Environmental Federalism In A Warming World," Climate Change Economics (CCE), World Scientific Publishing Co. Pte. Ltd., vol. 3(04), pages 1250018-1-1.
  4. Christoph Böhringer & Jared C. Carbone & Thomas F. Rutherford, 2011. "Embodied Carbon Tariffs," NBER Working Papers 17376, National Bureau of Economic Research, Inc.
  5. Erin T. Mansur, 2010. "Upstream versus Downstream Implementation of Climate Policy," NBER Working Papers 16116, National Bureau of Economic Research, Inc.
  6. repec:clg:wpaper:2013-24 is not listed on IDEAS
  7. Lawrence Goulder & Mark Jacobsen & Arthur van Benthem, 2009. "Unintended Consequences from Nested State & Federal Regulations: The Case of the Pavley Greenhouse-Gas-per-Mile Limits," Discussion Papers 08-049, Stanford Institute for Economic Policy Research.
  8. Bushnell, James & Chen, Yihsu, 2012. "Allocation and leakage in regional cap-and-trade markets for CO2," Resource and Energy Economics, Elsevier, vol. 34(4), pages 647-668.
  9. Lawrence H. Goulder & Mark R. Jacobsen & Arthur A. van Benthem, 2009. "Unintended Consequences from Nested State & Federal Regulations: The Case of the Pavley Greenhouse-Gas-per-Mile Limits," NBER Working Papers 15337, National Bureau of Economic Research, Inc.
  10. Michel Damian, 2012. "Repenser l'économie du changement climatique," Post-Print halshs-00709929, HAL.
  11. Eggert, Håkan & Greaker, Mads & Potter, Emily, 2011. "Policies for Second Generation Biofuels: Current status and future challenges," Working Papers in Economics 501, University of Gothenburg, Department of Economics.
  12. Hakan Eggert & Mads Greaker, 2014. "Promoting Second Generation Biofuels: Does the First Generation Pave the Road?," Energies, MDPI, Open Access Journal, vol. 7(7), pages 4430-4445, July.

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