Strategic Policy Choice in State-Level Regulation: The EPA's Clean Power Plan

James Bushnell, Stephen Holland, Jonathan Hughes () and Christopher Knittel

American Economic Journal: Economic Policy, 2017, vol. 9, issue 2, 57-90

Abstract: The EPA's Clean Power Plan sets goals for CO2 emissions rate reductions by 2030 that vary substantially across states. States can choose the regulatory mechanism they use and whether or not to join with other states in implementing their goals. We analyze incentives to adopt rate standards versus cap-and-trade with theory and simulation. We show conditions where adoption of inefficient rate standards is a dominant strategy from both consumers' and generators' perspectives. Numerical simulations of the western electricity system highlight incentives for uncoordinated policies that lower welfare and increase emissions relative to coordination.

JEL-codes: H76 Q53 Q54 Q58 (search for similar items in EconPapers)
Date: 2017
Note: DOI: 10.1257/pol.20150237
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Citations: View citations in EconPapers (22)

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Working Paper: Strategic Policy Choice in State-Level Regulation: The EPA's Clean Power Plan (2015)
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