Market-based emissions regulation and industry dynamics

Meredith Fowlie, Mar Reguant, Stephen P. Ryan

Research output: Contribution to journalArticle

42 Scopus citations

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.

Original languageEnglish (US)
Pages (from-to)249-302
Number of pages54
JournalJournal of Political Economy
Volume124
Issue number1
DOIs
StatePublished - Feb 2016

ASJC Scopus subject areas

  • Economics and Econometrics

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