This is a Free article. You will receive access to the full text.

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

Free Article

Abstract:
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%.

Download Executive Summary Download PDF

Energy Specializations: Energy and the Environment; Energy and the Environment – Climate Change and Greenhouse Gases; Energy and the Environment – Policy and Regulation; Energy and the Economy

JEL Codes: Q41: Energy: Demand and Supply; Prices, Q40: Energy: General, Q54: Climate; Natural Disasters and Their Management; Global Warming, Q31: Nonrenewable Resources and Conservation: Demand and Supply; Prices, Q35: Hydrocarbon Resources

Keywords: Climate policy, Cap-and-trade, California, Electricity imports, Resource shuffling, Computable general equilibrium, State-level climate policy, Border effect

DOI: 10.5547/01956574.36.2.8

References: Reference information is available for this article. Join IAEE, log in, or purchase the article to view reference data.

Published in Volume 36, Number 2 of the bi-monthly journal of the IAEE's Energy Economics Education Foundation.

 

© 2023 International Association for Energy Economics | Privacy Policy | Return Policy