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

48 Pages Posted: 15 Sep 2009 Last revised: 13 Oct 2009

See all articles by Lawrence H. Goulder

Lawrence H. Goulder

Stanford University - Department of Economics; National Bureau of Economic Research (NBER); Resources for the Future

Mark R. Jacobsen

University of California, San Diego (UCSD) - Department of Economics; Stanford University

Arthur van Benthem

University of Pennsylvania - Business & Public Policy Department

Multiple version iconThere are 2 versions of this paper

Date Written: September 2009

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.

Suggested Citation

Goulder, Lawrence H. and Jacobsen, Mark R. and van Benthem, Arthur, Unintended Consequences from Nested State & Federal Regulations: the Case of the Pavley Greenhouse-Gas-Per-Mile Limits (September 2009). NBER Working Paper No. w15337. Available at SSRN: https://ssrn.com/abstract=1472275

Lawrence H. Goulder (Contact Author)

Stanford University - Department of Economics ( email )

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Mark R. Jacobsen

University of California, San Diego (UCSD) - Department of Economics ( email )

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Stanford University ( email )

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Arthur Van Benthem

University of Pennsylvania - Business & Public Policy Department ( email )

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United States
215-898-3013 (Phone)

HOME PAGE: http://bepp.wharton.upenn.edu/profile/21174/

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