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Rethinking Downstream Regulation: California's Opportunity to Engage Households in Reducing Greenhouse Gases

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  • Niemeier, Debbie A.
  • Gould, Gregory
  • Karner, Alex
  • Hixson, Mark
  • Bachmann, Brooke
  • Okma, Carrie
  • Lang, Ziv
  • Heres Del Valle, David

Abstract

With the passage of the Global Warming Solutions Act of 2006 (AB32), California has begun an ambitious journey to reduce in-state GHG emissions to 1990 levels by 2020. Under the direction of executive order S-20-06, a mandated Market Advisory Committee (MAC) charged with studying market-based mechanisms to reduce GHG emissions, including cap and trade systems, has recommended taking an “upstream” approach to GHG emissions regulation, arguing that upstream regulation will reduce administrative costs because there are fewer agents. In this paper, we argue that, the total costs to society of a GHG cap and trade scheme can be minimized though downstream regulation, rather than the widely proposed upstream approach. We propose a household carbon trading system with four major components: a state allocation to households, household-to-household trading, households to utility company credit transfers, and utility companies to government credit transfers. The proposed system can also be considered more equitable than carbon taxes and upstream cap and trade systems to control GHG emissions from residential energy use and is consistent with AB32.

Suggested Citation

  • Niemeier, Debbie A. & Gould, Gregory & Karner, Alex & Hixson, Mark & Bachmann, Brooke & Okma, Carrie & Lang, Ziv & Heres Del Valle, David, 2008. "Rethinking Downstream Regulation: California's Opportunity to Engage Households in Reducing Greenhouse Gases," Institute of Transportation Studies, Working Paper Series qt2ct0n1xv, Institute of Transportation Studies, UC Davis.
    • Handle: RePEc:cdl:itsdav:qt2ct0n1xv
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    2. Hobbs, Benjamin F. & Bushnell, James & Wolak, Frank A., 2010. "Upstream vs. downstream CO2 trading: A comparison for the electricity context," Energy Policy, Elsevier, vol. 38(7), pages 3632-3643, July.
    3. Bristow, Abigail L. & Wardman, Mark & Zanni, Alberto M. & Chintakayala, Phani K., 2010. "Public acceptability of personal carbon trading and carbon tax," Ecological Economics, Elsevier, vol. 69(9), pages 1824-1837, July.
    4. Wojciech Kopczuk & Justin Marion & Erich Muehlegger & Joel Slemrod, 2016. "Does Tax-Collection Invariance Hold? Evasion and the Pass-Through of State Diesel Taxes," American Economic Journal: Economic Policy, American Economic Association, vol. 8(2), pages 251-286, May.
    5. An, Kangxin & Zhang, Shihui & Huang, Hai & Liu, Yuan & Cai, Wenjia & Wang, Can, 2021. "Socioeconomic impacts of household participation in emission trading scheme: A Computable General Equilibrium-based case study," Applied Energy, Elsevier, vol. 288(C).
    6. Schwanen, Tim & Banister, David & Anable, Jillian, 2011. "Scientific research about climate change mitigation in transport: A critical review," Transportation Research Part A: Policy and Practice, Elsevier, vol. 45(10), pages 993-1006.
    7. Anna-Katharina Kothe & Alexander Kuptel & Roman Seidl, 2021. "Simulating Personal Carbon Trading (PCT) with an Agent-Based Model (ABM): Investigating Adaptive Reduction Rates and Path Dependence," Energies, MDPI, vol. 14(22), pages 1-15, November.
    8. Fabio Bothner, 2021. "Personal Carbon Trading—Lost in the Policy Primeval Soup?," Sustainability, MDPI, vol. 13(8), pages 1-16, April.
    9. Lei Gong & Tianxu Wang & Tian Lei & Qin Luo & Zhu Han & Yihong Mo, 2023. "Daily Travel Mode Choice Considering Carbon Credit Incentive (CCI)—An Application of the Integrated Choice and Latent Variable (ICLV) Model," Sustainability, MDPI, vol. 15(20), pages 1-16, October.
    10. Fawcett, Tina, 2010. "Personal carbon trading: A policy ahead of its time?," Energy Policy, Elsevier, vol. 38(11), pages 6868-6876, November.
    11. Uusitalo, V. & Huttunen, A. & Kareinen, E. & von Wright, T. & Valjakka, M. & Pitkänen, A. & Levänen, J., 2022. "Using personal carbon trading to reduce mobility emissions: A pilot in the Finnish city of Lahti," Transport Policy, Elsevier, vol. 126(C), pages 177-187.
    12. Edwin Woerdman & Jan Willem Bolderdijk, 2017. "Emissions trading for households? A behavioral law and economics perspective," European Journal of Law and Economics, Springer, vol. 44(3), pages 553-578, December.
    13. Soria-Lara, Julio A. & Banister, David, 2017. "Dynamic participation processes for policy packaging in transport backcasting studies," Transport Policy, Elsevier, vol. 58(C), pages 19-30.
    14. Hickman, Robin & Saxena, Sharad & Banister, David & Ashiru, Olu, 2012. "Examining transport futures with scenario analysis and MCA," Transportation Research Part A: Policy and Practice, Elsevier, vol. 46(3), pages 560-575.
    15. Wadud, Zia, 2011. "Personal tradable carbon permits for road transport: Why, why not and who wins?," Transportation Research Part A: Policy and Practice, Elsevier, vol. 45(10), pages 1052-1065.
    16. McNamara, David & Caulfield, Brian, 2011. "Measuring the potential implications of introducing a cap and share scheme in Ireland to reduce green house gas emissions," Transport Policy, Elsevier, vol. 18(4), pages 579-586, August.
    17. Starkey, Richard, 2012. "Personal carbon trading: A critical survey," Ecological Economics, Elsevier, vol. 73(C), pages 7-18.
    18. Xiaoyuan Qi & Ying Han & Baoling Jin, 2023. "Evolutionary game equilibrium in the downstream carbon market: Evidence from the household size in China," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(5), pages 2814-2834, July.

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