Tradable Credit Markets for Intensity Standards

Ivan Rudik

ISU General Staff Papers from Iowa State University, Department of Economics

Abstract: Many environmental standards are expressed in terms of intensity rather than absolute levels. In some cases, intensity standards are associated with tradable credit markets to mitigate the firms’ compliance costs. I develop a jurisdictional model of credit trading under an intensity standard, framed in terms of a Renewable Portfolio Standard for electric utilities. I find that jurisdictions of firms with high costs of compliance may actually be better off by not allowing inter-jurisdictional credit trading. Counterintuitively, increasing the stringency of the intensity standard under credit trading can have the opposite of the intended effect and decrease renewable electricity generation.

Date: 2016-02-02
New Economics Papers: this item is included in nep-ene, nep-env, nep-mst and nep-reg
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Journal Article: Tradable credit markets for intensity standards (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:isu:genstf:201602020800001013

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