EconPapers    
Economics at your fingertips  
 

Measuring and Mitigating Leakage Risk

Mar Reguant and Meredith Fowlie
Additional contact information
Mar Reguant: Northwestern University
Meredith Fowlie: UC Berkeley

No 383, 2017 Meeting Papers from Society for Economic Dynamics

Abstract: When a policy regulating greenhouse gas emissions applies to only a subset of emitting sources (i.e. the policy is ``incomplete"), a policy-induced shift in economic activity to exempt (or less stringently regulated) sources can substantially undermine policy effectiveness via emissions ``leakage". Under existing climate change policies, output-based rebating of compliance costs is the preferred means of mitigating this leakage risk. These implicit production subsidies have potentially significant implications for both economic efficiency and the distribution of policy impacts, so it is important to carefully target this leakage mitigation to those industries truly at leakage risk. We provide a theoretically sound basis for deriving industry-specific, output-based subsidies under different policy objective functions and market structures. Key components include industry-level measures of emissions intensity, industry-level measures of import and export intensity, and industry-level measures of how domestic output, import flows, and export flows respond to changes in relative energy prices. Using rich transaction and firm-level data from the U.S. Census, we estimate these components and calibrate industry-specific, output-based subsidies for manufacturing sectors in the United States. We assess the efficiency and distributional implications of implementing a domestic carbon policy with and without these leakage mitigation provisions.

Date: 2017
New Economics Papers: this item is included in nep-ene and nep-env
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
https://economicdynamics.org/meetpapers/2017/paper_383.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:red:sed017:383

Access Statistics for this paper

More papers in 2017 Meeting Papers from Society for Economic Dynamics Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA. Contact information at EDIRC.
Bibliographic data for series maintained by Christian Zimmermann ().

 
Page updated 2020-02-19
Handle: RePEc:red:sed017:383