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California Industry Impacts of a Statewide Carbon Pricing Policy with Output-Based Rebates

  • Morgenstern, Richard

    ()

    (Resources for the Future)

  • Moore, Eric

    ()

    (Resources for the Future)

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    This study estimates the impacts on a disaggregated set of California industries of introducing a carbon pricing policy within the state.. Two time horizons are considered, the “very short run” and the “short run”. To limit adverse impacts on the state’s energy-intensive and trade-exposed (EITE) industries, we develop illustrative policy options involving free allowance allocations of emissions permits to particular industries and limited border adjustments on coal, natural gas, crude oil, and refined petroleum product imports, as well as on electricity. Overall, we find relatively small impacts on energy-intensive industries with the rebates in place. The average reduction in EITE output is 0.4 percent. There is, however, considerable variation in impacts among the EITE industries. We also find that the ability to pass on costs, as assumed in the short run case, dramatically reduces adverse profit impacts to less than 1.5 percent in most cases, regardless of the rebate scenario. Based on national-level modeling done outside of this study, we estimate that over the long term, the average EITE output losses with the rebates in place would be expected to be somewhat smaller than the results reported here.

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    File URL: http://www.rff.org/RFF/documents/RFF-DP-11-05.pdf
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    Paper provided by Resources For the Future in its series Discussion Papers with number dp-11-05.

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    Date of creation: 24 Feb 2011
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    Handle: RePEc:rff:dpaper:dp-11-05
    Contact details of provider: Web page: http://www.rff.org

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    1. Christopher Knittel & Daniel Sperling, 2006. "Evidence of a Shift in the Short-Run Price Elasticity of Gasoline Demand," Working Papers 625, University of California, Davis, Department of Economics.
    2. Ha, Soo Junga & Turner, Karen & Hewings, Geoffrey, 2008. "Econometric Estimation of Armington import elasticities for regional CGE models of the Chicago and Illinois economies," SIRE Discussion Papers 2008-37, Scottish Institute for Research in Economics (SIRE).
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