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Strategic Policy Choice in State-Level Regulation: The EPA's Clean Power Plan

Author

Listed:
  • James B. Bushnell
  • Stephen P. Holland
  • Jonathan E. Hughes
  • Christopher R. Knittel

Abstract

The EPA's Clean Power Plan sets goals for CO2 emissions rate reductions by 2030 that vary substantially across states. States can choose the regulatory mechanism they use and whether or not to join with other states in implementing their goals. We analyze incentives to adopt rate standards versus cap-and-trade with theory and simulation. We show conditions where adoption of inefficient rate standards is a dominant strategy from both consumers' and generators' perspectives. Numerical simulations of the western electricity system highlight incentives for uncoordinated policies that lower welfare and increase emissions relative to coordination.

Suggested Citation

  • James B. Bushnell & Stephen P. Holland & Jonathan E. Hughes & Christopher R. Knittel, 2017. "Strategic Policy Choice in State-Level Regulation: The EPA's Clean Power Plan," American Economic Journal: Economic Policy, American Economic Association, vol. 9(2), pages 57-90, May.
  • Handle: RePEc:aea:aejpol:v:9:y:2017:i:2:p:57-90
    Note: DOI: 10.1257/pol.20150237
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    References listed on IDEAS

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    Cited by:

    1. David M. Newbery & David M. Reiner & Robert A. Ritz, 2018. "When is a carbon price floor desirable?," Working Papers EPRG 1816, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
    2. repec:aea:aejpol:v:9:y:2017:i:2:p:57-90 is not listed on IDEAS
    3. Sam Fankhauser & Frank Jotzo, 2017. "Economic growth and development with low-carbon energy," CCEP Working Papers 1705, Centre for Climate Economics & Policy, Crawford School of Public Policy, The Australian National University.
    4. repec:ucp:jaerec:doi:10.1086/692015 is not listed on IDEAS
    5. repec:eee:jeeman:v:90:y:2018:i:c:p:78-100 is not listed on IDEAS
    6. Todd Gerarden & W. Spencer Reeder & James H. Stock, 2016. "Federal Coal Program Reform, the Clean Power Plan, and the Interaction of Upstream and Downstream Climate Policies," NBER Working Papers 22214, National Bureau of Economic Research, Inc.
    7. Ibanez, Marcela & Blackman, Allen, 2015. "Environmental and Economic Impacts of Growing Certified Organic Coffee in Colombia," Discussion Papers dp-15-02, Resources For the Future.
    8. Tatyana Deryugina & Alexander MacKay & Julian Reif, 2017. "The Long-Run Dynamics of Electricity Demand: Evidence from Municipal Aggregation," NBER Working Papers 23483, National Bureau of Economic Research, Inc.
    9. Dallas Burtraw & Karen Palmer & Anthony Paul & Sophie Pan, 2015. "A Proximate Mirror: Greenhouse Gas Rules and Strategic Behavior Under the US Clean Air Act," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 62(2), pages 217-241, October.
    10. repec:bla:coecpo:v:36:y:2018:i:1:p:149-166 is not listed on IDEAS
    11. Palmer, Karen & Paul, Anthony, 2015. "A Primer on Comprehensive Policy Options for States to Comply with the Clean Power Plan," Discussion Papers dp-15-15, Resources For the Future.
    12. repec:eee:eneeco:v:68:y:2017:i:s1:p:45-56 is not listed on IDEAS
    13. repec:eee:jeeman:v:87:y:2018:i:c:p:1-23 is not listed on IDEAS
    14. repec:eee:eneeco:v:74:y:2018:i:c:p:456-469 is not listed on IDEAS
    15. repec:eco:journ2:2017-02-22 is not listed on IDEAS
    16. Mar Reguant, 2018. "The Efficiency and Sectoral Distributional Implications of Large-Scale Renewable Policies," NBER Working Papers 24398, National Bureau of Economic Research, Inc.
    17. repec:spr:climat:v:151:y:2018:i:2:d:10.1007_s10584-018-2297-9 is not listed on IDEAS
    18. repec:eee:ejores:v:275:y:2019:i:1:p:208-223 is not listed on IDEAS
    19. repec:aen:journl:ej38-5-peters is not listed on IDEAS
    20. James B. Bushnell & Stephen P. Holland & Jonathan E. Hughes & Christopher R. Knittel, 2017. "Strategic Policy Choice in State-Level Regulation: The EPA's Clean Power Plan," American Economic Journal: Economic Policy, American Economic Association, vol. 9(2), pages 57-90, May.
    21. Harrison Fell & Daniel Kaffine & Daniel Steinberg, 2017. "Energy Efficiency and Emissions Intensity Standards," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 4(S1), pages 201-226.
    22. repec:eee:enepol:v:109:y:2017:i:c:p:249-259 is not listed on IDEAS

    More about this item

    JEL classification:

    • H76 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Other Expenditure Categories
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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