Journal of Political Economy Vol. 124 No. 1 2016

Market-Based Emissions Regulation and Industry Dynamics

Meredith Fowlie^1,2,3,4; Mar Reguant²; Stephen P. Ryan^2,5

¹ Executive Office of the President · ² National Bureau of Economic Research · ³ University of California Office of the President · ⁴ University of California, Berkeley · ⁵ The University of Texas at Austin

Abstract

We assess the static and dynamic implications of alternative market-based policies limiting greenhouse gas emissions in the US cement industry. Our results highlight two countervailing market distortions. First, emissions regulation exacerbates distortions associated with the exercise of market power in the domestic cement market. Second, emissions “leakage” in trade-exposed markets offsets domestic emissions reductions. Taken together, these forces can result in social welfare losses under policy regimes that fully internalize the emissions externality. Market-based policies that incorporate design features to mitigate the exercise of market power and emissions leakage deliver welfare gains when damages from carbon emissions are high.

DOI

10.1086/684484

Volume

124

Issue

1

Pages

249-302

Language

en

Sources

bibtex:phds-export.bib openalex crossref

Cite

APA 7 MLA 9 Chicago (author–date) Harvard Elsevier Harvard (JFE, JBF…) The Accounting Review Academy of Management American Marketing Association INFORMS (Management Science) Copy citation Copied ✓