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American Economic Journal: Economic Policy: Vol. 1 No. 2 (August 2009)

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Incomplete Environmental Regulation, Imperfect Competition, and Emissions Leakage

Article Citation

Fowlie, Meredith L. 2009. "Incomplete Environmental Regulation, Imperfect Competition, and Emissions Leakage." American Economic Journal: Economic Policy, 1(2): 72-112.

DOI: 10.1257/pol.1.2.72

Abstract

Environmental regulation of industrial pollution is often incomplete; regulations apply to only a subset of facilities contributing to a pollution problem. Policymakers are increasingly concerned about the emissions leakage that may occur if unregulated production can be easily substituted for regulated production. This paper analyzes emissions leakage in an incompletely regulated and imperfectly competitive industry. The analytical model is used to simulate outcomes under incomplete, market-based regulation of carbon dioxide emissions in California's electricity sector. Regulation that exempts out-of-state producers achieves approximately one-third of the total emissions reductions achieved under complete regulation at more than twice the cost per ton. (JEL L94, Q53, Q58)

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Authors

Fowlie, Meredith L. (U MI)

JEL Classifications

L94: Electric Utilities
Q53: Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
Q58: Environmental Economics: Government Policy

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