@techreport{NBERw15337,
 title = "Unintended Consequences from Nested State & Federal Regulations:  The Case of the Pavley Greenhouse-Gas-per-Mile Limits",
 author = "Lawrence H. Goulder and Mark R. Jacobsen and Arthur A. van Benthem",
 institution = "National Bureau of Economic Research",
 type = "Working Paper",
 series = "Working Paper Series",
 number = "15337",
 year = "2009",
 month = "September",
 URL = "http://www.nber.org/papers/w15337",
 abstract = {Fourteen U.S. states recently pledged to adopt limits on greenhouse gases (GHGs) per mile of light-duty automobiles.  Previous analyses predicted this action would significantly reduce emissions from new cars in these states, but ignored possible offsetting emissions increases from policy-induced adjustments in new car markets in other (non-adopting) states and in the used car market.

Such offsets (or “leakage”) reflect the fact that the state-level effort interacts with the national corporate average fuel economy (CAFE) standard:  the state-level initiative effectively loosens the national standard and gives automakers scope to profitably increase sales of high-emissions automobiles in non-adopting states.  In addition, although the state-level effort may well spur the invention of fuel- and emissions-saving technologies, interactions with the federal CAFE standard limit the nationwide emissions reductions from such advances.  Using a multi-period numerical simulation model, we find that 70-80 percent of the emissions reductions from new cars in adopting states are offset by emissions leakage.

This research examines a particular instance of a general issue of policy significance – namely, problems from “nested” federal and state environmental regulations.  Such nesting implies that similar leakage difficulties are likely to arise under several newly proposed state-level initiatives.},
}