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Unintended Consequences from Nested State & Federal Regulations: The Case of the Pavley Greenhouse-Gas-per-Mile Limits

Author Info

  • Lawrence Goulder

    ()

    (Stanford Environmental and Energy Policy Analysis Center, Stanford University)

  • Mark Jacobsen

    (University of California San Diego)

  • Arthur van Benthem

    ()

    (Department of Economics, Stanford University)

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    Abstract

    Fourteen U.S. states recently pledged to adopt limits on greenhouse gases (GHGs) per mile of light-duty automobiles. Previous analyses predicted that these limits will yield significant reductions in GHGs. However, these studies did not consider critical factors that imply different results. This paper develops a multi-period numerical simulation model that accounts for these factors in assessing the impact of the proposed GHG-per-mile standards on U.S. gasoline consumption and GHG emissions. We find that while the state-level initiative would reduce significantly the emissions associated with new cars in the adopting states, it would give rise to very significant offsetting increases (“leakage”) elsewhere, in both new and used car markets. Because of interactions with the federal CAFE standard, technology spillovers mitigate leakage only slightly. In the most plausible scenarios considered, the leakage is around 70 percent. Correspondingly, the cost per gallon saved under the GHG-per-mile limits is about 72 percent higher than for an equivalent increase in the federal CAFE standard.

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    File URL: http://www-siepr.stanford.edu/repec/sip/08-049.pdf
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    Paper provided by Stanford Institute for Economic Policy Research in its series Discussion Papers with number 08-049.

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    Date of creation: Aug 2009
    Date of revision:
    Handle: RePEc:sip:dpaper:08-049
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    Keywords: greenhouse gases; environmental regulations; renewable energy; cars;

    Find related papers by JEL classification:

    • Q38 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Government Policy (includes OPEC Policy)

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    1. Kenneth A. Small & Kurt Van Dender, 2007. "Fuel Efficiency and Motor Vehicle Travel: The Declining Rebound Effect," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 25-52.
    2. Thomas Klier & Joshua Linn, 2012. "New‐vehicle characteristics and the cost of the Corporate Average Fuel Economy standard," RAND Journal of Economics, RAND Corporation, vol. 43(1), pages 186-213, 03.
    3. Felder Stefan & Rutherford Thomas F., 1993. "Unilateral CO2 Reductions and Carbon Leakage: The Consequences of International Trade in Oil and Basic Materials," Journal of Environmental Economics and Management, Elsevier, vol. 25(2), pages 162-176, September.
    4. Lucas W. Davis & Matthew E. Kahn, 2010. "International Trade in Used Vehicles: The Environmental Consequences of NAFTA," American Economic Journal: Economic Policy, American Economic Association, vol. 2(4), pages 58-82, November.
    5. Bento, Antonio M. & Goulder, Lawrence H. & Jacobsen, Mark R. & von Haefen, Roger H., 2007. "Distributional and Efficiency Impacts of Increased U.S. Gasoline Taxes," Working Papers 127021, Cornell University, Department of Applied Economics and Management.
    6. James Bushnell & Carla Peterman & Catherine Wolfram, 2008. "Local Solutions to Global Problems: Climate Change Policies and Regulatory Jurisdiction," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 2(2), pages 175-193, Summer.
    7. Robert W. Hahn, 1995. "An Economic Analysis of Scrappage," RAND Journal of Economics, The RAND Corporation, vol. 26(2), pages 222-242, Summer.
    8. Soren T. Anderson & James M. Sallee, 2011. "Using Loopholes to Reveal the Marginal Cost of Regulation: The Case of Fuel-Economy Standards," American Economic Review, American Economic Association, vol. 101(4), pages 1375-1409, June.
    9. Christopher R. Knittel, 2009. "Automobiles on Steroids: Product Attribute Trade-Offs and Technological Progress in the Automobile Sector," NBER Working Papers 15162, National Bureau of Economic Research, Inc.
    10. Harrington, Winston & McConnell, Virginia & Alberini, Anna, 1998. "Fleet Turnover and Old Car Scrap Policies," Discussion Papers dp-98-23, Resources For the Future.
    11. Barker, Terry & Junankar, Sudhir & Pollitt, Hector & Summerton, Philip, 2007. "Carbon leakage from unilateral Environmental Tax Reforms in Europe, 1995-2005," Energy Policy, Elsevier, vol. 35(12), pages 6281-6292, December.
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    Cited by:

    1. Davis, Lucas, 2009. "International Trade in Used Vehicles: The Environmental Consequences of NAFTA," Department of Economics, Working Paper Series qt98j8m3r6, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
    2. Klier, Thomas & Linn, Joshua, 2013. "Fuel prices and new vehicle fuel economy—Comparing the United States and Western Europe," Journal of Environmental Economics and Management, Elsevier, vol. 66(2), pages 280-300.

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