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A comparison between emission intensity and emission cap regulations

Kosuke Hirose () and Toshihiro Matsumura ()

Energy Policy, 2020, vol. 137, issue C

Abstract: We revisit command-and-control regulations and compare their efficiency, particularly an emission cap regulation that restricts total emissions and an emission intensity regulation that restricts emissions per unit of output under emission equivalence. We find that in both the most stringent target case, in which the target emissions level is close to zero, and the weakest target case, in which the target emissions level is close to business as usual, the emission intensity regulation yields greater welfare than does the emission cap regulation. However, in the moderate target cases, an emission cap regulation may be better in terms of welfare than an emission cap regulation because the emission intensity regulation causes over-production. Our results suggest that the efficiency of a policy measure depends on the target level of emissions.

Keywords: Near-zero emission industry; Emission cap; Emission intensity; Emission equivalence (search for similar items in EconPapers)
JEL-codes: Q52 L13 L51 (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1016/j.enpol.2019.111115

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