Incomplete Environmental Regulation, Imperfect Competition, and Emissions Leakage
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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In electricity, the risk of carbon leakage through import substitution is generally low except in jurisdictions with significant cross-border interconnection capacity and trade, such as California.
“In electricity, only tradeable through wires, the risk of leakage through import substitution is generally low except in jurisdictions with significant cross-border interconnection capacity and trade such as California (28, 40).”
From Carbon Leakage, Consumption, and Trade (2022) · cites this paper as [40]
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References 43 · Cited by 176
- Authors
- Fowlie, M. L.
- Affiliations
- University of Michigan (US)
- Corresponding author
- Fowlie, Meredith L
- Venue
- American Economic Journal: Economic Policy
- Publisher
- American Economic Association
- Published
- 2009-07-01
- Volume
- 1
- Issue
- 2
- Pages
- 72-112
- ISSN
- 1945-7731 (ISSN-L)
- 1945-774X
- OpenAlex
- W3021587578
- Cited by
- 176
- References
- 43
- Citations by year
- 2026: 4 · 2025: 10 · 2024: 13 · 2023: 10 · 2022: 14 · 2021: 10 · 2020: 11 · 2019: 11 · 2018: 11 · 2017: 10 · 2016: 4 · 2015: 12 · 2014: 14 · 2013: 12 · 2012: 12
- FWCI
- 21.70
- Type
- journal article
- Language
- en
- Open access
- closed
- Locations
- American Economic Journal Economic Policy (publishedVersion)
- RePEc: Research Papers in Economics (submittedVersion)
- Topics
- Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Climate Change Policy and Economics
- Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Energy, Environment, Economic Growth
- Social Sciences › Business, Management and Accounting › Strategy and Management › Regulation and Compliance Studies
- Keywords
- emissions leakage, imperfect competition, industrial pollution, CO2 emissions, electric utilities, market-based regulation, California, emission reduction costs
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