Unintended Consequences from Nested State & Federal Regulations: The Case of the Pavley Greenhouse-Gas-per-Mile Limits

Lawrence Goulder (), Mark Jacobsen and Arthur van Benthem ()
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Lawrence Goulder: Stanford Environmental and Energy Policy Analysis Center, Stanford University
Mark Jacobsen: University of California San Diego
Arthur van Benthem: Department of Economics, Stanford University

No 08-049, Discussion Papers from Stanford Institute for Economic Policy Research

Abstract: Fourteen U.S. states recently pledged to adopt limits on greenhouse gases (GHGs) per mile of light-duty automobiles. Previous analyses predicted that these limits will yield significant reductions in GHGs. However, these studies did not consider critical factors that imply different results. This paper develops a multi-period numerical simulation model that accounts for these factors in assessing the impact of the proposed GHG-per-mile standards on U.S. gasoline consumption and GHG emissions. We find that while the state-level initiative would reduce significantly the emissions associated with new cars in the adopting states, it would give rise to very significant offsetting increases (“leakage”) elsewhere, in both new and used car markets. Because of interactions with the federal CAFE standard, technology spillovers mitigate leakage only slightly. In the most plausible scenarios considered, the leakage is around 70 percent. Correspondingly, the cost per gallon saved under the GHG-per-mile limits is about 72 percent higher than for an equivalent increase in the federal CAFE standard.

Keywords: greenhouse gases; environmental regulations; renewable energy; cars (search for similar items in EconPapers)
JEL-codes: Q38 (search for similar items in EconPapers)
Date: 2009-08
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Citations: View citations in EconPapers (15)

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