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Leakage from sub-national climate policy: The case of Californias capandtrade program

Justin Caron, Sebastian Rausch, and Niven Winchester
Authors registered in the RePEc Author Service: Sebastian Rausch, Justin Caron and Niven Winchester ()

The Energy Journal, 2015, vol. Volume 36, issue Number 2

Abstract: With federal policies to curb carbon emissions stagnating in the U.S., California is taking action alone. Sub-national policies can lead to high rates of emissions leakage to other regions as state-level economies are closely connected, including integration of electricity markets. Using a calibrated general equilibrium model, we estimate that California's cap-and-trade program without restrictions on imported electricity increases out-of-state emissions by 45% of the domestic reduction. When imported electricity is included in the cap and "resource shuffling" is banned, as set out in California's legislation, emissions reductions in electricity exporting states partially offset leakage elsewhere and overall leakage is 9%.

JEL-codes: F0 (search for similar items in EconPapers)
Date: 2015
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