 Tradable performance standards in a dynamic contextResource and Energy Economics, 2023, vol. 73, issue C Abstract: Many sectors of the economy that are targets of emissions reduction policy exhibit price-responsive demand, long-lived capital, capacity constraints, and foresighted decision-making. I explore how these features affect the efficiency and dynamics of tradable performance standards (TPS) using analytical and numerical equilibrium models. While I show these dynamic considerations alone do not lead to conflicts with existing theory on the overall efficiency and cost-effectiveness of the TPS relative to a first-best policy, they do affect the transition path and steady state. Most notably, under all but the smallest discount rates, the TPS can lead to a more cost-effective post-transition steady state than the equivalent emissions cap. Given the intergenerational transition that comes with decarbonization, this result suggests some classes of present and future consumers may prefer a TPS to an emissions cap. Keywords: Tradable performance standards; Output-based rebating; Emissions intensity standard; Emissions cap; Investment; Dynamic complementarity problem; Electricity (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:resene:v:73:y:2023:i:c:s0928765523000283 DOI: 10.1016/j.reseneeco.2023.101373 Access Statistics for this article Resource and Energy Economics is currently edited by J. F. Shogren and S. Smulders More articles in Resource and Energy Economics from Elsevier |
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