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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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    References listed on IDEAS

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    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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