Escape from Third-Best: Rating Emissions for Intensity Standards

Lemoine, Derek

doi:10.1007/s10640-016-0006-6

Cited by 17 publications

(8 citation statements)

References 35 publications

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“…Giving a larger credit to gas than its emissions would suggest boosts efficiency because it offsets that preexisting distortion. This result is broadly similar to Lemoine's (2013) result that welfare-maximizing intensity ratings do not always reflect actual emissions intensities due to market interactions, though that paper does not consider interactions with tax distortions. higher distortionary costs per dollar raised than do taxes on labor income.…”

Section: Sensitivity Analysissupporting

confidence: 78%

General Equilibrium Impacts of a Federal Clean Energy Standard

Goulder

Hafstead

Williams

2016

American Economic Journal: Economic Policy

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Economists have tended to view emissions pricing (e.g., cap and trade or a carbon tax) as the most cost-effective approach to reducing greenhouse gas emissions. This paper offers a different view. Employing analytical and numerically solved general equilibrium models, it provides plausible conditions under which a more conventional form of regulation-namely, the use of a clean energy standard (CES)-is more cost-effective. The models reveal that the CES distorts factor markets less because it is a smaller implicit tax on factors of production. This advantage more than offsets the disadvantages of the CES when minor emissions reductions are involved. (JEL H23, Q42, Q48, Q54, Q58) T here is little or no near-term prospect for any pricing of US carbon emissions (a carbon tax or tradable permits) at the federal level. But climate policy in the United States is advancing, often through a different type of instrument: intensity standards.At present, 29 states and the District of Colombia seek to control carbon emissions through a renewable portfolio standard (RPS), a form of intensity standard. An RPS imposes a floor on the share of electricity purchased by electric utilities that comes from sources deemed renewable (for example, electricity from wind farms or solar panels). It thus aims to give a boost to renewable-sourced electricity.Federal-level programs involving intensity standards have been proposed as well. Former senator Jeff Bingaman (D-NM) sponsored the Clean Energy Standard Act of 2012, which called for a nationwide Clean Energy Standard (CES). A CES is similar to an RPS, establishing a floor for the ratio of "clean" electricity (electricity whose production involves relatively low emissions) to total electricity. Typically the CES promotes a wider range of electricity sources by incorporating nuclear-generated

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Section: Sensitivity Analysissupporting

confidence: 78%

General Equilibrium Impacts of a Federal Clean Energy Standard

Goulder

Hafstead

Williams

2016

American Economic Journal: Economic Policy

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“…The remaining states 7 Theoretically, an RPS is a second-best instrument for attaining both the emission reduction and increased renewable generation goals. As an intensity standard, an RPS simultaneously subsidizes renewables and taxes nonrenewables (Helfand, 1991;Holland et al, 2009;Lemoine, 2016). But, the renewable subsidy and non-renewable tax are decided by only one instrument: the minimum percentage of renewables.…”

Section: Rps Policies and Rec Tradingmentioning

confidence: 99%

External Impacts of Local Energy Policy: The Case of Renewable Portfolio Standards

Hollingsworth¹,

Rudik²

2019

Journal of the Association of Environmental and Resource Econom

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Renewable portfolio standards (RPSs) are state level policies that require in-state electricity providers to procure a minimum percentage of electricity sales from renewable sources. Using theoretical and empirical models, we show how RPSs induce out-of-state emissions reductions through interstate trade of the credits used for RPS compliance. When one state passes an RPS, it increases demand for credits sold by firms in other (potentially non-RPS) states. We find evidence that increasing a state's RPS decreases coal generation and increases wind generation in outside states through this tradable credit channel. We perform a welfare simulation to evaluate the aggregate benefits of the reductions in local coal-fired pollutants induced by RPSs. Our estimates suggest that a 1 percentage point increase a state's RPS results in up to $100 million in gross benefits towards the United States as a whole. However, there is substantial heterogeneity in the total benefits caused by increases in different states' RPSs.

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“…Lemoine (2013) shows that the efficiency of an LCFS may increase if a regulator optimally sets both the fuel standard and fuels' CI factors. He extends the model in Holland et al (2009) to a multi-fuel setting where a regulator is uncertain about fuel CIs, and shows the welfare maximizing CI levels do not always correspond to the regulator's true expected value.…”

Section: Market Effects and Efficient Low-carbon Fuel Standardsmentioning

confidence: 99%

The design and economics of low carbon fuel standards

Lade

Lawell

2015

Research in Transportation Economics

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Low carbon fuel standards (LCFS) are increasingly common policy tools used to decrease emissions and increase the penetration of renewable energy technologies in the transportation sector. In this paper, we discuss important design elements of the policy, and provide a background on prominent policies that are currently enacted or proposed. The economics of an LCFS are presented using a simple conceptual model, and the economic literature on the policy is reviewed. Important opportunities to build on the extant literature are identified, including studying the role of low carbon fuel standards in spurring technical change, and the interaction of the policy with other federal and state transportation policies. AbstractLow-carbon fuel standards (LCFS) are increasingly common policy tools used to decrease emissions and increase the penetration of renewable energy technologies in the transportation sector. In this paper, we discuss important design elements of the policy, and provide a background on prominent policies that are currently enacted or proposed. The economics of an LCFS are presented using a simple conceptual model, and the economic literature on the policy is reviewed. Important opportunities to build on the extant literature are identified, including studying the role of low carbon fuel standards in spurring technical change, and the interaction of the policy with other federal and state transportation policies.JEL Codes: H23; Q40; Q50

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Escape from Third-Best: Rating Emissions for Intensity Standards

Cited by 17 publications

References 35 publications

General Equilibrium Impacts of a Federal Clean Energy Standard

General Equilibrium Impacts of a Federal Clean Energy Standard

External Impacts of Local Energy Policy: The Case of Renewable Portfolio Standards

The design and economics of low carbon fuel standards

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