Unintended consequences from nested state and federal regulations: The case of the Pavley greenhouse-gas-per-mile limits

Abstract

Fourteen U.S. states recently pledged to adopt limits on greenhouse gases (GHGs) per mile of light-duty automobiles. Previous analyses predicted this action would significantly reduce emissions from new cars in these states, but ignored possible offsetting emissions increases from policy-induced adjustments in new car markets in other (non-adopting) states and in the used car market.Such offsets (or "leakage") reflect the fact that the state-level effort interacts with the national corporate average fuel economy (CAFE) standard: the state-level initiative effectively loosens the national standard and gives automakers scope to profitably increase sales of high-emissions automobiles in non-adopting states. In addition, although the state-level effort may well spur the invention of fuel-and emissions-saving technologies, interactions with the federal CAFE standard limit the nationwide emissions reductions from such advances. Using a multi-period numerical simulation model, we find that 70-80 percent of the emissions reductions from new cars in adopting states are offset by emissions leakage.This research examines a particular instance of a general issue of policy significance -namely, problems from "nested" federal and state environmental regulations. Such nesting implies that similar leakage difficulties are likely to arise under several newly proposed state-level initiatives.

Consequential life cycle air emissions externalities for plug-in electric vehicles in the PJM interconnection

“…Summary of findings from sensitivity analysis.PEVs increase overall US damages versus HEVs even in future grid and even with high wind penetration lower damages than HEVs in a future grid and whether controlled charging increases or decreases emissions, and (2) when the effect of US PEV adoption on automaker fleet emissions is accounted for, PEV adoption could increase emissions in all scenarios due to leakage effects in federal fuel economy standards[29,[34][35][36]. The SI includes a discussion about the limitations of the model beyond the scope of the sensitivity analysis.Our results for the recent PJM grid are consistent with those from Tessum et al using the 2007 electricity mix[2]: PEVs have higher damages than gasoline vehicles in the recent grid.…”

Environmental Tax, Polluting Plants’ Strategies and Effectiveness: Evidence from China

“…As areas with loose environmental regulations are often less developed, industrialization caused by the pollution haven effect may benefit the local economy, albeit at the undesired cost of environmental quality. This leakage issue is observed for other environmental regulations on the local scale (Goulder, Jacobsen, & Van Benthem, 2012). In addition, the competitiveness of local industries may be impeded through an artificial increase in production costs.…”

Alternative-fuel-vehicle policy interactions increase U.S. greenhouse gas emissions

“…The federal fleet standard must be satisfied overall regardless of what vehicles are sold in a particular state, so sale of efficient or alternative fuel vehicles in one state may have no net impact on fleet emissions when the CAFE/GHG standard acts as a binding constraint. Goulder and Stavins (2011) and Goulder et al (2012) note that California efforts to increase fleet fuel efficiency within the state lead to "leakage" where emissions gains in California are offset when higheremitting vehicles sold in the rest of the U.S. take up the slack in the CAFE/GHG standard. A Congressional Budget Office report also notes this in the context of electric vehicles, stating that under a CAFE regime, electric vehicle PRE-PRINT Use published version for citation: https://www.sciencedirect.com/science/article/pii/S0965856417311436 sales produce no near-term change in the fleet emission rate (Gecan, 2012) (though they may have long term impact if innovation or adoption of these vehicles leads to most stringent future standards).…”