The SO<sub>2</sub>Allowance Trading System: The Ironic History of a Grand Policy Experiment

Schmalensee, Richard; Stavins, Robert N.

doi:10.1257/jep.27.1.103

Cited by 193 publications

(85 citation statements)

References 46 publications

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“…36 Under strictly binding caps, RE does not reduce emissions per se, but instead alleviates the need to reduce emissions elsewhere in order to achieve the cap. In support of our assumption of non-binding caps, in 2013, the largest regional SO2 and NOx cap-andtrade program (CAIR) was non-binding (EPA 2013b; Schmalensee et al 2013). It is possible that some more localized cap-andtrade programs were binding in 2013; however, the geographic extent of these programs was limited, so will not substantially bias our results.…”

Section: Resultssupporting

confidence: 54%

Retrospective Analysis of the Benefits and Impacts of U.S. Renewable Portfolio Standards

Wiser

Barbose

Heeter

et al. 2016

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PREFACEThis is one report in a series that explores the costs, benefits, and other impacts of state renewable portfolio standards (RPS), both retrospectively and prospectively. The terminology applied in this series does not align precisely with the traditional concepts of costs and benefits, but rather is a function of how RPS programs have often been evaluated in practice. In particular, this analysis series evaluates RPS programs in terms of the following:• RPS compliance costs represent the incremental cost of meeting RPS compliance obligations, from the perspective of the utility or other load-serving entity, compared to the costs that would have been borne in the absence of the RPS. RPS compliance costs may be negative, if the renewable electricity used for RPS compliance is less expensive to the utility than the alternatives.• Benefits, as analyzed in this report series, consist specifically of environmental benefits that accrue to society at large, rather than to individual utilities. In theory, such benefits may be negative, representing net environmental costs, if the renewable electricity used for RPS compliance leads to more harmful environmental impacts than it avoids.• Other impacts, in the form of resource transfers from one market participant or segment to another, are also evaluated. These other impacts may also entail net costs or benefits to society at large, but our analyses focus only on the gross impacts, not the net cost or benefit. This report, the second in the series, analyzes historical benefits and impacts of all state RPS policies, in aggregate, employing a consistent and well-vetted set of methods and data sets. The analysis focuses on three specific benefits: greenhouse gas emissions, air pollution, and water use. It also analyzes three other impacts: gross job additions, wholesale electricity market price suppression, and natural gas price suppression. These are an important subset, but by no means a comprehensive set, of all possible effects associated with RPS policies. These benefits and impacts are also subject to many uncertainties, which are described and, to the extent possible, quantified within the report.The present report is intended to help policymakers, RPS administrators, and other decision-makers gauge the potential significance of a number of key benefits and impacts from state RPS programs. By noting limitations, caveats, and uncertainties in these results, the report also seeks to highlight important methodological considerations to evaluating RPS benefits and impacts. This report does not, however, provide a complete picture, and comparable information on both the costs and benefits, as well as other impacts, are ultimately needed to inform decision-making. To that end, a third report in this series is planned for the coming year to evaluate the future costs, benefits, and other impacts of state RPS policies, under both current policies and possible revisions. A prior study ) and subsequent update in this report series found that RPS compliance costs over the 2...

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Section: Resultssupporting

confidence: 54%

Retrospective Analysis of the Benefits and Impacts of U.S. Renewable Portfolio Standards

Wiser

Barbose

Heeter

et al. 2016

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“…Every year to date, the program's supply of compliance instruments has been greater than total emissions regulated under the program (see figure 5) -a condition that, when persistent, is known as overallocation or oversupply [15]. Overallocation conditions have weakened other cap-and-trade programs, causing low market prices that neither drive significant emission reductions nor reflect the marginal cost of reducing pollution in line with policy goals [16,17]. Although quarterly WCI auctions to date have offered many millions of allowances for sale beyond what is needed to cover regulated parties' near-term emissions, market participants have purchased excess allowances, which they can hold or 'bank' for future use subject to certain holding limits [18].…”

Section: Introductionmentioning

confidence: 99%

Tracking banking in the Western Climate Initiative cap-and-trade program

Cullenward

Inman

Mastrandrea

2019

Environ. Res. Lett.

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The Western Climate Initiative is a multilateral cap-and-trade program in California and Québec. The California climate regulator has called for cap-and-trade to deliver nearly half of the emission reductions needed to achieve the state’s legally binding limit on greenhouse gas emissions in 2030, making the program the single biggest driver of the state’s post-2020 policy portfolio. However, the program’s supply of compliance instruments has persistently exceeded emissions subject to the program—a condition known as overallocation, which independent studies have projected may continue into the mid-2020s. If market participants purchase and bank excess compliance instruments for future use, they may be able to comply with the program’s regulations while nevertheless emitting significantly in excess of the state’s legally binding 2030 limit. Here, we present methods for tracking observed banking behavior on both an annual and multi-year compliance period basis. By the end of 2018, market participants had already acquired more unused compliance instruments than the regulator anticipated for 2020. The size of the private bank is now comparable to the cumulative mitigation expected from the program over the period 2021 through 2030, raising questions about the program’s ability to achieve its expected reductions. Beyond diagnosing market conditions, banking metrics can also help policymakers design dynamic program reforms that increase program stringency conditional on observed market behavior deviating from expectations.

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“…In this instance, the benefits of wind energy derive not from reduced health and environmental damages but instead from reducing the cost of complying with the air-pollution regulations. Though cap-and-trade programs currently exist in various U.S. regions for both SO 2 and NO x , those programs have not been fully binding in recent years (EPA 2013;Schmalensee and Stavins 2013). Moreover, our assessment of the Study and Baseline Scenarios suggests that the CSAPR caps are unlikely to be strongly binding in the presence of MATS.…”

Section: Methodsmentioning

confidence: 88%

Long-term implications of sustained wind power growth in the United States: Potential benefits and secondary impacts

et al. 2016

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We model scenarios of the U.S. electric sector in which wind generation reaches 10% of end-use electricity demand in 2020, 20% in 2030, and 35% in 2050. As shown in a companion paper, achieving these penetration levels would have significant implications for the wind industry and the broader electric sector. Compared to a baseline that assumes no new wind deployment, under the primary scenario modeled, achieving these penetrations imposes an incremental cost to electricity consumers of less than 1% through 2030. These cost implications, however, should be balanced against the variety of environmental and social implications of such a scenario. Relative to a baseline that assumes no new wind deployment, our analysis shows that the high-penetration wind scenario yields potential greenhouse-gas benefits of $85-$1,230 billion in present-value terms, with a central estimate of $400 billion. Air-pollution-related health benefits are estimated at $52-$272 billion, while annual electricsector water withdrawals and consumption are lower by 15% and 23% in 2050, respectively. We also find that a high-wind-energy future would have implications for the diversity and risk of energy supply, local economic development, and land use and related local impacts on communities and ecosystems; however, these additional impacts may not greatly affect aggregate social welfare owing to their nature, in part, as resource transfers.

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The SO₂Allowance Trading System: The Ironic History of a Grand Policy Experiment

Cited by 193 publications

References 46 publications

Retrospective Analysis of the Benefits and Impacts of U.S. Renewable Portfolio Standards

Retrospective Analysis of the Benefits and Impacts of U.S. Renewable Portfolio Standards

Tracking banking in the Western Climate Initiative cap-and-trade program

Long-term implications of sustained wind power growth in the United States: Potential benefits and secondary impacts

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The SO2Allowance Trading System: The Ironic History of a Grand Policy Experiment

Cited by 193 publications

References 46 publications

Retrospective Analysis of the Benefits and Impacts of U.S. Renewable Portfolio Standards

Retrospective Analysis of the Benefits and Impacts of U.S. Renewable Portfolio Standards

Tracking banking in the Western Climate Initiative cap-and-trade program

Long-term implications of sustained wind power growth in the United States: Potential benefits and secondary impacts

Contact Info

Product

Resources

About

The SO₂Allowance Trading System: The Ironic History of a Grand Policy Experiment