TY - JOUR AU - Goulder,Lawrence H. AU - Jacobsen,Mark R. AU - Benthem,Arthur A. van TI - Unintended Consequences from Nested State & Federal Regulations: The Case of the Pavley Greenhouse-Gas-per-Mile Limits JF - National Bureau of Economic Research Working Paper Series VL - No. 15337 PY - 2009 Y2 - September 2009 UR - http://www.nber.org/papers/w15337 L1 - http://www.nber.org/papers/w15337.pdf N1 - Author contact info: Lawrence H. Goulder Department of Economics Landau Economics Building 328 Stanford University Stanford, CA 94305 Tel: 650/723-3706 Fax: 650/725-5702 E-Mail: goulder@stanford.edu Mark R. Jacobsen Department of Economics, 0508 University of California, San Diego 9500 Gilman Drive La Jolla, CA 92093 Tel: 858/822-7767 Fax: 858/534-7040 E-Mail: m3jacobs@ucsd.edu Arthur van Benthem The Wharton School University of Pennsylvania 3010 Steinberg Hall - Dietrich Hall 3620 Locust Walk Philadelphia, PA 19104 Tel: 215/898-3013 Fax: 215/898-7635 E-Mail: arthurv@wharton.upenn.edu AB - 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. ER -