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The impact of climate policy on fossil fuel consumption: Evidence from the Regional Greenhouse Gas Initiative (RGGI)

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  • Yan, Jingchi

Abstract

Climate policies such as carbon taxes or cap-and-trade programs are increasingly used to reduce emissions. In the United States, the Regional Greenhouse Gas Initiative (RGGI) cap-and-trade program is used to reduce emissions. In this paper, I use detailed state-level data to estimate the impact of RGGI on coal and natural gas consumption in the electric-power industry. I find the program directly caused coal and natural gas phase-outs within regulated states. Specifically, the program decreased coal and natural gas consumption for electricity generation by 73% and 30%, respectively, within regulated states. However, in nearby, un-regulated states, I find an increase in natural-gas consumption of 237% and a decrease in coal consumption of 7%. As a result, the program reduced carbon dioxide emissions by 4.8 million tons annually in regulated states, but increased carbon dioxide emissions by 3.5 million tons in unregulated states. I also find the program decreased the efficiency of coal-fired and gas-fired plants, which reduces the program's effectiveness for lowering emissions. However, overall, the program reduced carbon dioxide emissions by 1.3 million tons per year.

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  • Yan, Jingchi, 2021. "The impact of climate policy on fossil fuel consumption: Evidence from the Regional Greenhouse Gas Initiative (RGGI)," Energy Economics, Elsevier, vol. 100(C).
    • Handle: RePEc:eee:eneeco:v:100:y:2021:i:c:s0140988321002395
    DOI: 10.1016/j.eneco.2021.105333
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    References listed on IDEAS

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    Cited by:

    1. Hao-Ran Wang & Tian-Tian Feng & Yan Li & Hui-Min Zhang & Jia-Jie Kong, 2022. "What Is the Policy Effect of Coupling the Green Hydrogen Market, National Carbon Trading Market and Electricity Market?," Sustainability, MDPI, vol. 14(21), pages 1-21, October.
    2. Kramer, Niklas & Lessmann, Christian, 2023. "The Effects of Carbon Trading: Evidence from California’s ETS," MPRA Paper 116796, University Library of Munich, Germany.
    3. Kasper Vrolijk & Misato Sato, 2023. "Quasi-Experimental Evidence on Carbon Pricing," The World Bank Research Observer, World Bank, vol. 38(2), pages 213-248.
    4. Vrolijk, Kasper & Sato, Misato, 2023. "Quasi-experimental evidence on carbon pricing," LSE Research Online Documents on Economics 118404, London School of Economics and Political Science, LSE Library.
    5. Zhu, Lin & Liao, Hua & Burke, Paul J., 2023. "Household fuel transitions have substantially contributed to child mortality reductions in China," World Development, Elsevier, vol. 164(C).

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    More about this item

    Keywords

    Cap-and-trade; Emissions; Fossil fuel consumption; Leakage; Efficiency;
    All these keywords.

    JEL classification:

    • P18 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Energy; Environment
    • 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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