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Federal Coal Program Reform, the Clean Power Plan, and the Interaction of Upstream and Downstream Climate Policies†

Federal Coal Program Reform, the Clean Power Plan, and the Interaction of Upstream and Downstream... AbstractCan supply-side environmental policies that limit the extraction of fossil fuels reduce CO2 emissions? This paper studies interactions between a specific supply-side policy—a carbon surcharge on federal coal royalties—and regulation of emissions from the power sector under the Clean Air Act. Estimates from a detailed dynamic model of the power sector suggest that, absent new downstream regulation, a royalty surcharge equal to the social cost of carbon would generate three-quarters of the emissions reductions originally projected for the Clean Power Plan (CPP), with an average abatement cost roughly equal to the social cost of carbon. Were the CPP in place, the royalty surcharge would reduce emissions by reducing leakage and causing the CPP to be nonbinding in some scenarios. (JEL Q35, Q38, Q48, Q54, Q58) http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png American Economic Journal: Economic Policy American Economic Association

Federal Coal Program Reform, the Clean Power Plan, and the Interaction of Upstream and Downstream Climate Policies†

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Publisher
American Economic Association
Copyright
Copyright © 2020 © American Economic Association
ISSN
1945-7731
DOI
10.1257/pol.20160246
Publisher site
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Abstract

AbstractCan supply-side environmental policies that limit the extraction of fossil fuels reduce CO2 emissions? This paper studies interactions between a specific supply-side policy—a carbon surcharge on federal coal royalties—and regulation of emissions from the power sector under the Clean Air Act. Estimates from a detailed dynamic model of the power sector suggest that, absent new downstream regulation, a royalty surcharge equal to the social cost of carbon would generate three-quarters of the emissions reductions originally projected for the Clean Power Plan (CPP), with an average abatement cost roughly equal to the social cost of carbon. Were the CPP in place, the royalty surcharge would reduce emissions by reducing leakage and causing the CPP to be nonbinding in some scenarios. (JEL Q35, Q38, Q48, Q54, Q58)

Journal

American Economic Journal: Economic Policy – American Economic Association

Published: Feb 1, 2020

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