American Economic Review: Vol. 104 No. 5 (May 2014)

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The Costs and Consequences of Clean Air Act Regulation of CO2 from Power Plants

Article Citation

Burtraw, Dallas, Josh Linn, Karen Palmer, and Anthony Paul. 2014. "The Costs and Consequences of Clean Air Act Regulation of CO2 from Power Plants." American Economic Review, 104(5): 557-62.

DOI: 10.1257/aer.104.5.557

Abstract

US climate policy is unfolding under the Clean Air Act. Mobile source and construction permitting regulations are in place. Most important, EPA and the states will determine the form and stringency of the regulations for power plants. Various approaches would create an implicit price on emitting greenhouse gases and create valuable assets that would be distributed differently among electricity producers, consumers, and the government. We compare a tradable performance standard with several cap-and-trade policies. Distributing asset values to fossil-fueled producers and consumers has small effects on average electricity prices but imposes greater social cost than a revenue-raising policy.

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Authors

Burtraw, Dallas (Resources for the Future, Washington, DC)
Linn, Josh (Resources for the Future, Washington, DC)
Palmer, Karen (Resources for the Future, Washington, DC)
Paul, Anthony (Resources for the Future, Washington, DC)

JEL Classifications

L51: Economics of Regulation
L94: Electric Utilities
L98: Industry Studies: Utilities and Transportation: Government Policy
Q41: Energy: Demand and Supply; Prices
Q48: Energy: Government Policy
Q54: Climate; Natural Disasters; Global Warming
Q58: Environmental Economics: Government Policy


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