Upstream versus Downstream Implementation of Climate Policy
This chapter examines the tradeoffs of regulating upstream (e.g., coal, natural gas, and refined petroleum product producers) versus regulating downstream (e.g., direct sources of greenhouse gases (GHG)). In general, regulating at the source provides polluters with incentives to choose among more opportunities to abate pollution. This chapter develops a simple theoretical model that shows why this added flexibility achieves the lowest overall costs. I broaden the theory to incorporate several reasons why these potential gains from trade may not be realized--transactions costs, leakage, and offsets--in the context of selecting the vertical segment of regulation.
|Date of creation:||Jun 2010|
|Date of revision:|
|Publication status:||published as Upstream versus Downstream Implementation of Climate Policy , Erin T. Mansur. in The Design and Implementation of U.S. Climate Policy , Fullerton and Wolfram. 2012|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
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