Market-Based Emissions Regulation and Industry Dynamics
We assess the long-run dynamic implications of market-based regulation of carbon dioxide emissions in the US Portland cement industry. We consider several alternative policy designs, including mechanisms that use production subsidies to partially offset compliance costs and border tax adjustments to...
| Main Authors: | , , |
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| Format: | Working Paper |
| Language: | en_US |
| Published: |
MIT CEEPR
2013
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| Online Access: | http://hdl.handle.net/1721.1/76271 |
| _version_ | 1826198647264509952 |
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| author | Fowlie, Meredith Reguant, Mar Ryan, Stephen P. |
| author_facet | Fowlie, Meredith Reguant, Mar Ryan, Stephen P. |
| author_sort | Fowlie, Meredith |
| collection | MIT |
| description | We assess the long-run dynamic implications of market-based regulation of carbon dioxide emissions in the US Portland cement industry. We consider several alternative policy designs, including mechanisms that use production subsidies to partially offset compliance costs and border tax adjustments to penalize emissions associated with foreign imports. Our results highlight two general countervailing market distortions. First, following Buchanan (1969), reductions in product market surplus and allocative inefficiencies due to market power in the domestic cement market counteract the social benefits of carbon abatement. Second, tradeexposure to unregulated foreign competitors leads to emissions “leakage” which offsets domestic emissions reductions. Taken together, these forces result in social welfare losses under policy regimes that fully internalize the emissions externality. In contrast, market-based policies that incorporate design features to mitigate the exercise of market power and emissions leakage can deliver welfare gains. |
| first_indexed | 2024-09-23T11:08:02Z |
| format | Working Paper |
| id | mit-1721.1/76271 |
| institution | Massachusetts Institute of Technology |
| language | en_US |
| last_indexed | 2024-09-23T11:08:02Z |
| publishDate | 2013 |
| publisher | MIT CEEPR |
| record_format | dspace |
| spelling | mit-1721.1/762712019-04-12T21:31:06Z Market-Based Emissions Regulation and Industry Dynamics Fowlie, Meredith Reguant, Mar Ryan, Stephen P. We assess the long-run dynamic implications of market-based regulation of carbon dioxide emissions in the US Portland cement industry. We consider several alternative policy designs, including mechanisms that use production subsidies to partially offset compliance costs and border tax adjustments to penalize emissions associated with foreign imports. Our results highlight two general countervailing market distortions. First, following Buchanan (1969), reductions in product market surplus and allocative inefficiencies due to market power in the domestic cement market counteract the social benefits of carbon abatement. Second, tradeexposure to unregulated foreign competitors leads to emissions “leakage” which offsets domestic emissions reductions. Taken together, these forces result in social welfare losses under policy regimes that fully internalize the emissions externality. In contrast, market-based policies that incorporate design features to mitigate the exercise of market power and emissions leakage can deliver welfare gains. 2013-01-16T21:58:57Z 2013-01-16T21:58:57Z 2013-01 Working Paper http://hdl.handle.net/1721.1/76271 WP-2013-004 en_US Working Papers;2013-004 An error occurred on the license name. An error occurred getting the license - uri. application/pdf MIT CEEPR |
| spellingShingle | Fowlie, Meredith Reguant, Mar Ryan, Stephen P. Market-Based Emissions Regulation and Industry Dynamics |
| title | Market-Based Emissions Regulation and Industry Dynamics |
| title_full | Market-Based Emissions Regulation and Industry Dynamics |
| title_fullStr | Market-Based Emissions Regulation and Industry Dynamics |
| title_full_unstemmed | Market-Based Emissions Regulation and Industry Dynamics |
| title_short | Market-Based Emissions Regulation and Industry Dynamics |
| title_sort | market based emissions regulation and industry dynamics |
| url | http://hdl.handle.net/1721.1/76271 |
| work_keys_str_mv | AT fowliemeredith marketbasedemissionsregulationandindustrydynamics AT reguantmar marketbasedemissionsregulationandindustrydynamics AT ryanstephenp marketbasedemissionsregulationandindustrydynamics |