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Spillovers from Climate Policy

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  • Stephen P. Holland

Abstract

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.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 16158.

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Date of creation: Jul 2010
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Publication status: published as Spillovers from Climate Policy to Other Pollutants , Stephen P. Holland. in The Design and Implementation of U.S. Climate Policy , Fullerton and Wolfram. 2012
Handle: RePEc:nbr:nberwo:16158

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  1. Elbakidze, Levan & McCarl, Bruce A., 2004. "Should We Consider the Co-Benefits of Agricultural GHG Offsets?," Choices, Agricultural and Applied Economics Association, Agricultural and Applied Economics Association, vol. 19(3).
  2. Sébastien Dessus & David O'Connor, 2003. "Climate Policy without Tears CGE-Based Ancillary Benefits Estimates for Chile," Environmental & Resource Economics, European Association of Environmental and Resource Economists, European Association of Environmental and Resource Economists, vol. 25(3), pages 287-317, July.
  3. Britt Groosman & Nicholas Z. Muller & Erin O’Neill, 2009. "The Ancillary Benefits from Climate Policy in the United States," Middlebury College Working Paper Series, Middlebury College, Department of Economics 0920, Middlebury College, Department of Economics.
  4. Hongli Feng & Catherine L. Kling & Philip W. Gassman, 2004. "Carbon Sequestration, Co-Benefits, and Conservation Programs," Center for Agricultural and Rural Development (CARD) Publications 04-wp379, Center for Agricultural and Rural Development (CARD) at Iowa State University.
  5. Stephen P. Holland & Erin T. Mansur, 2008. "Is Real-Time Pricing Green? The Environmental Impacts of Electricity Demand Variance," The Review of Economics and Statistics, MIT Press, vol. 90(3), pages 550-561, August.
  6. Andrew J. Plantinga & JunJie Wu, 2003. "Co-Benefits from Carbon Sequestration in Forests: Evaluating Reductions in Agricultural Externalities from an Afforestation Policy in Wisconsin," Land Economics, University of Wisconsin Press, vol. 79(1), pages 74-85.
  7. Dudek, Dan & Golub, Alexander & Strukova, Elena, 2003. "Ancillary Benefits of Reducing Greenhouse Gas Emissions in Transitional Economies," World Development, Elsevier, Elsevier, vol. 31(10), pages 1759-1769, October.
  8. Michael Greenstone, 2003. "Estimating Regulation-Induced Substitution: The Effect of the Clean Air Act on Water and Ground Pollution," American Economic Review, American Economic Association, American Economic Association, vol. 93(2), pages 442-448, May.
  9. Stephen P. Holland, 2009. "Taxes and Trading versus Intensity Standards: Second-Best Environmental Policies with Incomplete Regulation (Leakage) or Market Power," NBER Working Papers 15262, National Bureau of Economic Research, Inc.
  10. Steven L. Puller, 2007. "Pricing and Firm Conduct in California's Deregulated Electricity Market," The Review of Economics and Statistics, MIT Press, vol. 89(1), pages 75-87, February.
  11. Burtraw, Dallas & Krupnick, Alan & Palmer, Karen & Paul, Anthony & Toman, Michael & Bloyd, Cary, 2003. "Ancillary benefits of reduced air pollution in the US from moderate greenhouse gas mitigation policies in the electricity sector," Journal of Environmental Economics and Management, Elsevier, vol. 45(3), pages 650-673, May.
  12. Schneider, Uwe A. & Kumar, Pushpam, 2008. "Greenhouse Gas Mitigation through Agriculture," Choices, Agricultural and Applied Economics Association, Agricultural and Applied Economics Association, vol. 23(1).
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Cited by:
  1. Ambec, Stefan & Coria, Jessica, 2011. "Prices vs Quantities with Multiple Pollutants," Working Papers in Economics, University of Gothenburg, Department of Economics 517, University of Gothenburg, Department of Economics.
  2. Atkinson, Robert D. & Hackler, Darrene, 2010. "Economic Doctrines and Approaches to Climate Change Policy," MPRA Paper 29718, University Library of Munich, Germany.
  3. James Boyce & Manuel Pastor, 2012. "Cooling the Planet, Clearing the Air: Climate Policy, Carbon Pricing, and Co-Benefits," Published Studies, Political Economy Research Institute, University of Massachusetts at Amherst cooling_the_planet_sept20, Political Economy Research Institute, University of Massachusetts at Amherst.
  4. Stephen P. Holland, 2011. "Spillovers from Climate Policy to Other Pollutants," NBER Chapters, in: The Design and Implementation of U.S. Climate Policy, pages 79-90 National Bureau of Economic Research, Inc.

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