A Proximate Mirror: Greenhouse Gas Rules and Strategic Behavior Under the US Clean Air Act

Resources for the Future Discussion Paper 15-02

39 Pages Posted: 26 Jun 2015

See all articles by Dallas Burtraw

Dallas Burtraw

Resources for the Future

Karen L. Palmer

Resources for the Future

Sophie Pan

Resources for the Future

Anthony C. Paul

Resources for the Future

Date Written: March 2, 2015

Abstract

The development of climate policy in the United States mirrors international developments, with efforts to initiate a coordinated approach giving way to jurisdictions separately taking actions. The centerpiece of US policy is regulation in the electricity sector that identifies a carbon emissions rate standard (intensity standard) for each state but leaves to states the design of policies, including potentially the use of technology policies, emissions rate averaging, or cap and trade. Differences in policies among states within the same power market could promote predatory behavior resulting in a geographic shift in generation and investment in new resources. This paper examines the coordination problem using a detailed partial equilibrium model of operations and investment. We demonstrate that leading jurisdictions have available a rich set of design options that can protect them against strategic predation and, in fact, give them opportunities to proactively advance climate goals, to the economic detriment of laggards.

Keywords: climate policy, efficiency, equity, Clean Air Act, coal, compliance flexibility, regulation, states

JEL Classification: K32, Q54, Q58

Suggested Citation

Burtraw, Dallas and Palmer, Karen and Pan, Sophie and Paul, Anthony C., A Proximate Mirror: Greenhouse Gas Rules and Strategic Behavior Under the US Clean Air Act (March 2, 2015). Resources for the Future Discussion Paper 15-02, Available at SSRN: https://ssrn.com/abstract=2622673 or http://dx.doi.org/10.2139/ssrn.2622673

Dallas Burtraw (Contact Author)

Resources for the Future ( email )

1616 P Street, NW
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202-328-5087 (Phone)

Karen Palmer

Resources for the Future ( email )

1616 P Street, NW
Washington, DC 20036
United States

Sophie Pan

Resources for the Future ( email )

1616 P Street, NW
Washington, DC 20036
United States

Anthony C. Paul

Resources for the Future ( email )

1616 P Street, NW
Washington, DC 20036
United States

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