Technology Flexibility and Stringency for Greenhouse Gas Regulations
Resources for the Future DP 13-24
40 Pages Posted: 25 Jul 2013
Date Written: July 23, 2013
The Clean Air Act provides the primary regulatory framework for climate policy in the United States. Tradable performance standards (averaging) emerge as the likely tool to achieve flexibility in the regulation of existing stationary sources. This paper examines the relationship between flexibility and stringency. The metric to compare the stringency of policies is ambiguous. The relevant section of the act is traditionally technology based, suggesting an emissions rate focus. However, a specific emissions rate improvement averaged over a larger set of generators reduces the actual emissions change. A marginal abatement cost criterion to compare policy designs suggests cost-effectiveness across sources. This criterion can quadruple the emissions reductions that are achieved, with net social benefits exceeding $25 billion in 2020, with a 1.3 percent electricity price increase. Under the act, multiple stringency criteria are relevant. EPA should evaluate state implementation plans according to a portfolio of attributes, including effectiveness and cost.
Keywords: climate policy, efficiency, EPA, Clean Air Act, coal, compliance flexibility, regulation
JEL Classification: K32, Q54, Q58
Suggested Citation: Suggested Citation