NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Belts and Suspenders: Interactions Among Climate Policy Regulations

Arik Levinson

NBER Working Paper No. 16109
Issued in June 2010
NBER Program(s):   EEE

With few exceptions, economic analyses of "cap-and-trade" permit trading mechanisms for climate change mitigation have been based on first-best scenarios without pre-existing distortions or regulations. The reason is obvious: interactions between permit trading and other regulations will be complex. However, climate policy proposed for the U.S. will certainly interact with existing laws, and will also likely include additional regulatory changes with their own sets of interactions. Major bills introduced in the U.S. Congress have included both permit trading and traditional command and control regulations – a combination sometimes called "belts and suspenders." This paper discusses interactions between these instruments, and begins to lay out a framework for thinking about them systematically. The most important determinant of how the two types of instruments interact involves whether or not the cap-and-trade permit price would induce more or less abatement than mandated by the traditional standards alone. Moreover, economists' experience predicting the costs of environmental regulations suggests we are more likely to overestimate the costs of cap-and-trade, and therefore the price of carbon permits, than we are to overestimate the costs of a traditional regulatory standard, and that therefore the regulatory standards will likely reduce the cost-effectiveness benefits of cap-and-trade.

download in pdf format
   (214 K)

email paper

This paper is available as PDF (214 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w16109

Published: Belts and Suspenders: Interactions among Climate Policy Regulations, Arik Levinson. in The Design and Implementation of U.S. Climate Policy, Fullerton and Wolfram. 2012

Users who downloaded this paper also downloaded these:
Goulder and Stavins w16123 Interactions between State and Federal Climate Change Policies
Mansur w16116 Upstream versus Downstream Implementation of Climate Policy
Deschenes w16111 Climate Policy and Labor Markets
Sigman w16121 Monitoring and Enforcement of Climate Policy
Davis w16114 Evaluating the Slow Adoption of Energy Efficient Investments: Are Renters Less Likely to Have Energy Efficient Appliances?
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us