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Mandating green: On the Design of Renewable Fuel Policies and Cost Containment Mechanisms

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  • Lade, Gabriel E
  • Lawell, C-Y Cynthia Lin

Abstract

Policymakers typically favor renewable fuel mandates over taxes and cap and trade programs to reduce greenhouse gas emissions from the transportation sector. Because of delays in the development of commercially viable renewable fuels and important constraints on their use and distribution, fuel mandates are susceptible to sudden increases in compliance costs as policies become more stringent. The authors study the effects and efficiency of two fuel mandates, a renewable share mandate and a carbon intensity standard, as well as the effects of two cost containment provisions, a credit window price and a renewable fuel multiplier. The authors show using a numerical model of the US fuel market that when the mandates are set optimally, they can lead to modest efficiency gains over business as usual; however, when combined optimally with a credit window price, the efficiency of both mandates increases substantially. In contrast, optimally combining a mandate with a renewable fuel multiplier that indirectly relaxes the standard results in only modest efficiency gains over the optimal mandates alone. View the NCST Project Webpage

Suggested Citation

  • Lade, Gabriel E & Lawell, C-Y Cynthia Lin, 2015. "Mandating green: On the Design of Renewable Fuel Policies and Cost Containment Mechanisms," Institute of Transportation Studies, Working Paper Series qt5zj382t4, Institute of Transportation Studies, UC Davis.
  • Handle: RePEc:cdl:itsdav:qt5zj382t4
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    References listed on IDEAS

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    Cited by:

    1. Lade, Gabriel E. & Lin Lawell, C.-Y. Cynthia, 2015. "The design and economics of low carbon fuel standards," Research in Transportation Economics, Elsevier, vol. 52(C), pages 91-99.
    2. Lade, Gabriel E. & Lin, C.-Y. Cynthia & Smith, Aaron, 2015. "Ex Post Costs and Renewable Identification Number (RIN) Prices under the Renewable Fuel Standard," Discussion Papers dp-15-22, Resources For the Future.
    3. Lade, Gabriel & Lin, C.-Y. Cynthia & Smith, Aaron, 2014. "Policy Uncertainty under Market-Based Regulations: Evidence from the Renewable Fuel Standard," 2014 Annual Meeting, July 27-29, 2014, Minneapolis, Minnesota 170673, Agricultural and Applied Economics Association.
    4. Yeh, Sonia & Witcover, Julie & Lade, Gabriel E. & Sperling, Daniel, 2016. "A review of low carbon fuel policies: Principles, program status and future directions," Energy Policy, Elsevier, vol. 97(C), pages 220-234.
    5. Gabriel E Lade & C -Y Cynthia Lin Lawell & Aaron Smith, 2018. "Policy Shocks and Market-Based Regulations: Evidence from the Renewable Fuel Standard," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 100(3), pages 707-731.
    6. Scheitrum, Daniel, 2017. "Renewable Natural Gas as a Solution to Climate Goals: Response to California's Low Carbon Fuel Standard," MPRA Paper 77193, University Library of Munich, Germany.

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