Local Solutions to Global Problems: Policy Choice and Regulatory Jurisdiction

38 Pages Posted: 5 Oct 2007 Last revised: 10 Dec 2007

See all articles by James Bushnell

James Bushnell

University of California - Energy Institute; University of California, Berkeley - Department of Industrial Engineering & Operations Research (IEOR)

Carla Peterman

University of California, Berkeley

Catherine D. Wolfram

University of California, Berkeley - Economic Analysis & Policy Group; National Bureau of Economic Research (NBER)

Date Written: October 2007

Abstract

This paper considers the efficiency of various types of environmental regulations when they are applied locally to pollutants whose damages extend outside the jurisdiction of the local regulator. We draw on examples from state- and city-level efforts to address climate change by enacting policies to reduce greenhouse gases. While previous work has noted the possibility for leakage, whereby the polluting sources move outside the jurisdiction of the regulation in order to escape it, we note an additional problem when policies are targeted downstream at consumers of goods whose production creates pollution. Specifically, we show how consumer-based policies can be circumvented by a simple reshuffling of who is buying from whom. We argue that the leakage and reshuffling problems are most pronounced with more flexible or market-based regulations. We conclude that localities may have the most effect on global pollutants when they enact efficiency standards or targeted subsidies.

Suggested Citation

Bushnell, James B. and Peterman, Carla and Wolfram, Catherine D., Local Solutions to Global Problems: Policy Choice and Regulatory Jurisdiction (October 2007). NBER Working Paper No. w13472, Available at SSRN: https://ssrn.com/abstract=1019472

James B. Bushnell (Contact Author)

University of California - Energy Institute ( email )

Berkeley, CA 94720
United States

University of California, Berkeley - Department of Industrial Engineering & Operations Research (IEOR)

IEOR Department
4135 Etcheverry Hall
Berkeley, CA 94720
United States

Carla Peterman

University of California, Berkeley ( email )

310 Barrows Hall
Berkeley, CA 94720
United States

Catherine D. Wolfram

University of California, Berkeley - Economic Analysis & Policy Group ( email )

Berkeley, CA 94720
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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