California Industry Impacts of a Statewide Carbon Pricing Policy with Output-Based Rebates

Richard Morgenstern (morgenstern@rff.org) and Eric Moore (moore@rff.org)
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Richard Morgenstern: Resources for the Future
Eric Moore: Resources for the Future

RFF Working Paper Series from Resources for the Future

Abstract: This study estimates the impacts on a disaggregated set of California industries of introducing a carbon pricing policy within the state.. Two time horizons are considered, the “very short run” and the “short run”. To limit adverse impacts on the state’s energy-intensive and trade-exposed (EITE) industries, we develop illustrative policy options involving free allowance allocations of emissions permits to particular industries and limited border adjustments on coal, natural gas, crude oil, and refined petroleum product imports, as well as on electricity. Overall, we find relatively small impacts on energy-intensive industries with the rebates in place. The average reduction in EITE output is 0.4 percent. There is, however, considerable variation in impacts among the EITE industries. We also find that the ability to pass on costs, as assumed in the short run case, dramatically reduces adverse profit impacts to less than 1.5 percent in most cases, regardless of the rebate scenario. Based on national-level modeling done outside of this study, we estimate that over the long term, the average EITE output losses with the rebates in place would be expected to be somewhat smaller than the results reported here.

Keywords: carbon price; competitiveness; input-output analysis; output-based allocation (search for similar items in EconPapers)
JEL-codes: D22 D57 H23 (search for similar items in EconPapers)
Date: 2011-02-24
New Economics Papers: this item is included in nep-ene and nep-env
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