Market-Based Emissions Regulation and Industry Dynamics

By M. Fowlie, Mar Reguant, Stephen Ryan. Journal of Political Economy, 2016

339 citations recorded by the source corpus.

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.

Subfields: Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/89edc4f4e974015f01484fd09feeb1849b0835b0

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Citations in the corpus

• Technologies and policies to decarbonize global industry: Review and assessment of mitigation drivers through 2070 (2020, background): “Portland cement industry found that a carbon price of $60/ton CO2 with all permits auctioned (effectively, a carbon tax) would reduce domestic emissions by almost 1000 Mt CO2 and would increase foreign emissions by about 200 Mt, a leakage rate of slightly over 20% [248].”