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Why Have Greenhouse Emissions in RGGI States Declined? An Econometric Attribution to Economic, Energy Market and Policy Factors

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  • Brian C. Murray

    (Duke University)

  • Peter T. Maniloff

    () (Division of Economics and Business, Colorado School of Mines)

  • Evan M. Murray

    (Duke University)

Abstract

The Regional Greenhouse Gas Initiative (RGGI) is a consortium of northeastern states that have agreed to limit carbon dioxide emissions from electricity generation through a regional emissions trading program. Since the initiative came into effect in 2009, emissions have dropped precipitously, while the price of emissions allowances has fallen from approximately \$4 per ton to the program floor price of just under \$2.00. We ask why the emission reductions have come so fast and inexpensively, finding that it is due to a combination of factors, including the emissions trading program itself, complementary environmental programs, lower natural gas prices, and possibly some regional spillover effects. We find that the effect of the recession was small compared with other factors. Lower natural gas prices had a substantial impact on regional emissions. Econometric challenges makes it difficult to assign how much of the RGGI reduction is due to the price and how much is due to an overall "regime effect" guiding long-term planning decisions. We also present results consistent with but not dispositive of RGGI emissions reductions being due to policy leakage. But taken together, and compared to emission reduction outcomes in the rest of the U.S., it appears the RGGI program has induced a substantial reduction in the emissions, all else equal.

Suggested Citation

  • Brian C. Murray & Peter T. Maniloff & Evan M. Murray, 2014. "Why Have Greenhouse Emissions in RGGI States Declined? An Econometric Attribution to Economic, Energy Market and Policy Factors," Working Papers 2014-04, Colorado School of Mines, Division of Economics and Business.
  • Handle: RePEc:mns:wpaper:wp201404
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    Cited by:

    1. Maniloff, Peter & Mastromonaco, Ralph, 2017. "The local employment impacts of fracking: A national study," Resource and Energy Economics, Elsevier, vol. 49(C), pages 62-85.
    2. Peter Maniloff & Ralph Mastromonaco, 2014. "The Local Economic Impacts of Hydraulic Fracturing and Determinants of Dutch Disease," Working Papers 2014-08, Colorado School of Mines, Division of Economics and Business.
    3. Yan, Yaxue & Zhang, Xiaoling & Zhang, Jihong & Li, Kai, 2020. "Emissions trading system (ETS) implementation and its collaborative governance effects on air pollution: The China story," Energy Policy, Elsevier, vol. 138(C).
    4. Ling Huang & Yishu Zhou, 2019. "Carbon Prices and Fuel Switching: A Quasi-experiment in Electricity Markets," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 74(1), pages 53-98, September.
    5. Kim, Man-Keun & Kim, Taehoo, 2016. "Estimating impact of regional greenhouse gas initiative on coal to gas switching using synthetic control methods," Energy Economics, Elsevier, vol. 59(C), pages 328-335.
    6. Ora Freedman & Martin Freedman & A. J. Stagliano, 2015. "Assessing CO2 Emissions Reduction: Progress toward the Kyoto Protocol Goals in the European Union," International Journal of Business and Social Research, MIR Center for Socio-Economic Research, vol. 5(11), pages 75-86, November.
    7. Byeongkwan Kang & Kyuhee Jang & Sounghoan Park & Myeong-in Choi & Sehyun Park, 2018. "Energy Storage System Control Algorithm by Operating Target Power to Improve Energy Sustainability of Smart Home," Sustainability, MDPI, Open Access Journal, vol. 10(1), pages 1-16, January.
    8. Benedikt Downar & J├╝rgen Ernstberger & Hannes Rettenbacher & Sebastian Schwenen & Aleksandar Zaklan, 2019. "Fighting Climate Change with Disclosure? The Real Effects of Mandatory Greenhouse Gas Emission Disclosure," Discussion Papers of DIW Berlin 1795, DIW Berlin, German Institute for Economic Research.
    9. Fell, Harrison & Maniloff, Peter, 2018. "Leakage in regional environmental policy: The case of the regional greenhouse gas initiative," Journal of Environmental Economics and Management, Elsevier, vol. 87(C), pages 1-23.
    10. Endre Tvinnereim, 2014. "The bears are right: Why cap-and-trade yields greater emission reductions than expected, and what that means for climate policy," Climatic Change, Springer, vol. 127(3), pages 447-461, December.
    11. Lee, Kangil & Melstrom, Richard T., 2018. "Evidence of increased electricity influx following the regional greenhouse gas initiative," Energy Economics, Elsevier, vol. 76(C), pages 127-135.
    12. Khezr, Peyman & MacKenzie, Ian A., 2018. "Permit market auctions with allowance reserves," International Journal of Industrial Organization, Elsevier, vol. 61(C), pages 283-306.
    13. Mitsutsugu Hamamoto, 2019. "Impact of the Saitama Prefecture Target-Setting Emissions Trading Program on the Adoption of Low-Carbon Technology," RIEEM Discussion Paper Series 1909, Research Institute for Environmental Economics and Management, Waseda University.
    14. Rissman, Jeffrey & Bataille, Chris & Masanet, Eric & Aden, Nate & Morrow, William R. & Zhou, Nan & Elliott, Neal & Dell, Rebecca & Heeren, Niko & Huckestein, Brigitta & Cresko, Joe & Miller, Sabbie A., 2020. "Technologies and policies to decarbonize global industry: Review and assessment of mitigation drivers through 2070," Applied Energy, Elsevier, vol. 266(C).
    15. Huang, Ling & Zhou, Yishu, 2016. "Carbon Prices and Fuel Switching: A Quasi-experiment in Electricity Markets," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 236179, Agricultural and Applied Economics Association.
    16. Chan, Nathan W. & Morrow, John W., 2019. "Unintended consequences of cap-and-trade? Evidence from the Regional Greenhouse Gas Initiative," Energy Economics, Elsevier, vol. 80(C), pages 411-422.

    More about this item

    JEL classification:

    • Q00 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - General
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General
    • 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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