Leakage from sub-national climate policy: The case of California's cap–and–trade program

Journal Article
Leakage from sub-national climate policy: The case of California's cap–and–trade program
Caron, J., S. Rausch and N. Winchester (2014)
Energy Journal, 36(2): 167-190 (doi:10.5547/01956574.36.2.8)

Abstract/Summary:

With federal policies to curb carbon emissions stagnating in the U.S., California is taking action alone. Sub-national policies can lead to high rates of emissions leakage to other regions as state-level economies are closely connected, including integration of electricity markets. Using a calibrated general equilibrium model, we estimate that California's cap-and-trade program without restrictions on imported electricity increases out-of-state emissions by 45% of the domestic reduction. When imported electricity is included in the cap and "resource shuffling" is banned, as set out in California's legislation, emissions reductions in electricity exporting states partially offset leakage elsewhere and overall leakage is 9%.

© 2014 International Association for Energy Economics

Citation:

Caron, J., S. Rausch and N. Winchester (2014): Leakage from sub-national climate policy: The case of California's cap–and–trade program. Energy Journal, 36(2): 167-190 (doi:10.5547/01956574.36.2.8) (http://www.iaee.org/en/publications/ejarticle.aspx?id=2612)
  • Journal Article
Leakage from sub-national climate policy: The case of California's cap–and–trade program

Caron, J., S. Rausch and N. Winchester

36(2): 167-190 (doi:10.5547/01956574.36.2.8)

Abstract/Summary: 

With federal policies to curb carbon emissions stagnating in the U.S., California is taking action alone. Sub-national policies can lead to high rates of emissions leakage to other regions as state-level economies are closely connected, including integration of electricity markets. Using a calibrated general equilibrium model, we estimate that California's cap-and-trade program without restrictions on imported electricity increases out-of-state emissions by 45% of the domestic reduction. When imported electricity is included in the cap and "resource shuffling" is banned, as set out in California's legislation, emissions reductions in electricity exporting states partially offset leakage elsewhere and overall leakage is 9%.

© 2014 International Association for Energy Economics

Supersedes: 

Leakage from Sub-national Climate Initiatives: The Case of California