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Intertemporal regulatory tasks and responsibilities for greenhouse gas reductions

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  • Jeffrey A. Deason

    (A PhD candidate in public policy at the Goldman School of Public Policy, University of California-Berkeley)

  • Lee S. Friedman

    (Professor of Public Policy at the Goldman School of Public Policy, University of California-Berkeley)

Abstract

Jurisdictions are in the process of establishing regulatory systems to control greenhouse gas emissions. Short-term and sometimes long-term emissions reduction goals are established, as California does for 2020 and 2050, but little attention has yet been focused on annual emissions targets for the intervening years. We develop recommendations for how these annual targets-which we collectively term a “compliance pathway”-can be set, as well as what flexibility sources should have to adjust in light of cost uncertainties. Environmental effectiveness, efficiency, equity, adaptability, and encouraging global participation are appropriate criteria by which these intertemporal policy alternatives should be judged. Limited but useful knowledge about costs leads us to recommend a compliance pathway characterized by increasing incremental reductions along it. This can be approximated by discrete linear segments, which may fit better with global negotiations. Although the above conclusion applies to any long-term GHG regulatory program, many jurisdictions will rely heavily on a cap-and-trade system, and the same pathway recommendation applies to its time schedule of allowances. Furthermore, borrowing constraints in cap-and-trade systems can impose substantial unnecessary costs. To avoid most of these costs, we recommend that sources be allowed early use of limited percentages of allowances intended for future years. We also find that a three-year compliance period can have substantial benefit over a one-year period. © 2010 by the Association for Public Policy Analysis and Management.

Suggested Citation

  • Jeffrey A. Deason & Lee S. Friedman, 2010. "Intertemporal regulatory tasks and responsibilities for greenhouse gas reductions," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 29(4), pages 821-853.
  • Handle: RePEc:wly:jpamgt:v:29:y:2010:i:4:p:821-853
    DOI: 10.1002/pam.20527
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    References listed on IDEAS

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      • Ellerman,A. Denny & Joskow,Paul L. & Schmalensee,Richard & Montero,Juan-Pablo & Bailey,Elizabeth M., 2000. "Markets for Clean Air," Cambridge Books, Cambridge University Press, number 9780521660839.
    4. William D. Nordhaus, 1992. "Lethal Model 2: The Limits to Growth Revisited," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 23(2), pages 1-60.
    5. Goulder, Lawrence H. & Mathai, Koshy, 2000. "Optimal CO2 Abatement in the Presence of Induced Technological Change," Journal of Environmental Economics and Management, Elsevier, vol. 39(1), pages 1-38, January.
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