Output and attribute-based carbon regulation under uncertainty

Ryan Kellogg

Journal of Public Economics, 2020, vol. 190, issue C

Abstract: Output-based carbon regulations—such as fuel economy standards and the rate-based standards in the Clean Power Plan—create well-known incentives to inefficiently increase output. Similar distortions are created by attribute-based regulations. This paper demonstrates that, despite these distortions, output and attribute-based standards can always yield strictly greater expected welfare than “flat” emission standards given uncertainty in demand for output (or attributes), assuming locally constant marginal damages. For fuel economy standards, the welfare-maximizing amount of attribute or mileage-basing is likely small relative to current policy. For the electricity sector, however, an intensity standard may yield greater expected welfare than a flat standard.

Keywords: Uncertainty; Regulation; Carbon; Intensity standards (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (3)

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Related works:
Working Paper: Output and Attribute-Based Carbon Regulation Under Uncertainty (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:pubeco:v:190:y:2020:i:c:s0047272720301109

DOI: 10.1016/j.jpubeco.2020.104246

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