Using a Free Permit Rule to Forecast the Marginal Abatement Cost of Proposed Climate Policy
Kyle C. Meng
American Economic Review, 2017, vol. 107, issue 3, 748-84
This paper develops a method for forecasting the marginal abatement cost (MAC) of climate policy using three features of the failed Waxman-Markey bill. First, the MAC is revealed by the price of traded permits. Second, the permit price is estimated using a regression discontinuity design (RDD) comparing stock returns of firms on either side of the policy's free permit cutoff rule. Third, because Waxman-Markey was never implemented, I extend the RDD approach to incorporate prediction market prices which normalize estimates by policy realization probabilities. A final bounding analysis recovers a MAC range of $5 to $19 per ton CO2e.
JEL-codes: G12 G14 Q52 Q54 Q58 (search for similar items in EconPapers)
Note: DOI: 10.1257/aer.20150781
References: View references in EconPapers View complete reference list from CitEc
Citations Track citations by RSS feed
Downloads: (external link)
https://www.aeaweb.org/articles/attachments?retrie ... KuDJkDHYnia_Sh1GbTyL (application/pdf)
https://www.aeaweb.org/articles/attachments?retrie ... 22CU5ASNZniCDPrELrSP (application/zip)
Access to full text is restricted to AEA members and institutional subscribers.
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:aea:aecrev:v:107:y:2017:i:3:p:748-84
Ordering information: This journal article can be ordered from
Access Statistics for this article
American Economic Review is currently edited by Esther Duflo
More articles in American Economic Review from American Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Michael P. Albert ().