Incomplete Environmental Regulation, Imperfect Competition, and Emissions Leakage

Meredith L. Fowlie

American Economic Journal: Economic Policy, 2009, vol. 1, issue 2, 72-112

Abstract: Environmental regulation of industrial pollution is often incomplete; regulations apply to only a subset of facilities contributing to a pollution problem. Policymakers are increasingly concerned about the emissions leakage that may occur if unregulated production can be easily substituted for regulated production. This paper analyzes emissions leakage in an incompletely regulated and imperfectly competitive industry. The analytical model is used to simulate outcomes under incomplete, market-based regulation of carbon dioxide emissions in California's electricity sector. Regulation that exempts out-of-state producers achieves approximately one-third of the total emissions reductions achieved under complete regulation at more than twice the cost per ton. (JEL L94, Q53, Q58)

JEL-codes: L94 Q53 Q58 (search for similar items in EconPapers)
Date: 2009
Note: DOI: 10.1257/pol.1.2.72
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Citations: View citations in EconPapers (121)

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