Spillovers from Climate Policy

28 Pages Posted: 12 Jul 2010 Last revised: 5 Sep 2010

See all articles by Stephen P. Holland

Stephen P. Holland

University of California, Berkeley - Energy Institute; University of North Carolina (UNC) at Greensboro - Bryan School of Business & Economics

Date Written: July 2010


Climate policy spillovers can be either positive or negative since firms change their production processes in response to climate policies, which may either increase or decrease emissions of other pollutants. Understanding these ancillary benefits or costs has important implications for climate policy design, modeling, and benefit-cost analysis. This paper shows how spillovers can be decomposed into output effects (which have ancillary benefits) and substitution effects (which may have ancillary benefits or ancillary costs). The ambiguous net effect highlights the importance of polluters' responses to climate policy. I then test for climate policy spillovers in electricity power generation. The estimates are consistent with ancillary benefits from climate policy arising primarily from reductions in output (primarily at older plants) rather than from changes in emissions rates.

Suggested Citation

Holland, Stephen P., Spillovers from Climate Policy (July 2010). NBER Working Paper No. w16158. Available at SSRN: https://ssrn.com/abstract=1636136

Stephen P. Holland (Contact Author)

University of California, Berkeley - Energy Institute ( email )

310 Barrows Hall
Berkeley, CA 94720
United States

University of North Carolina (UNC) at Greensboro - Bryan School of Business & Economics ( email )

401 Bryan Building
Greensboro, NC 27402-6179
United States

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