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Local Solutions to Global Problems: Policy Choice and Regulatory Jurisdiction

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  • James Bushnell
  • Carla Peterman
  • Catherine Wolfram

Abstract

This paper considers the efficiency of various types of environmental regulations when they are applied locally to pollutants whose damages extend outside the jurisdiction of the local regulator. We draw on examples from state- and city-level efforts to address climate change by enacting policies to reduce greenhouse gases. While previous work has noted the possibility for leakage, whereby the polluting sources move outside the jurisdiction of the regulation in order to escape it, we note an additional problem 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 and reshuffling problems are most pronounced with more flexible or market-based regulations. We conclude that localities may have the most effect on global pollutants when they enact efficiency standards or targeted subsidies.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 13472.

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Date of creation: Oct 2007
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Publication status: published as James Bushnell & Carla Peterman & Catherine Wolfram, 2008. "Local Solutions to Global Problems: Climate Change Policies and Regulatory Jurisdiction," Review of Environmental Economics and Policy, Oxford University Press for Association of Environmental and Resource Economists, vol. 2(2), pages 175-193, Summer.
Handle: RePEc:nbr:nberwo:13472

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  1. Aldy, Joseph & Barrett, Scott & Stavins, Robert, 2003. "Thirteen Plus One: A Comparison of Global Climate Policy Architectures," Working Paper Series rwp03-012, Harvard University, John F. Kennedy School of Government.
  2. Randy Becker & Vernon Henderson, 2000. "Effects of Air Quality Regulations on Polluting Industries," Journal of Political Economy, University of Chicago Press, vol. 108(2), pages 379-421, April.
  3. Bushnell, James & Wolfram, Catherine, 2008. "Electricity Markets," Staff General Research Papers 31547, Iowa State University, Department of Economics.
  4. Stephen P. Holland & Jonathan E. Hughes & Christopher R. Knittel, 2009. "Greenhouse Gas Reductions under Low Carbon Fuel Standards?," American Economic Journal: Economic Policy, American Economic Association, vol. 1(1), pages 106-46, February.
  5. Robert N. Stavins, 1998. "What Can We Learn from the Grand Policy Experiment? Lessons from SO2 Allowance Trading," Journal of Economic Perspectives, American Economic Association, vol. 12(3), pages 69-88, Summer.
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Cited by:
  1. Sanya, Carley, 2010. "Decarbonization of the U.S. electricity sector: Are state energy policy portfolios the solution?," MPRA Paper 28256, University Library of Munich, Germany, revised 18 Jun 2010.
  2. Carley, Sanya, 2011. "Decarbonization of the U.S. electricity sector: Are state energy policy portfolios the solution?," Energy Economics, Elsevier, vol. 33(5), pages 1004-1023, September.

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