[go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/p/nbr/nberwo/17386.html
   My bibliography  Save this paper

Some Inconvenient Truths About Climate Change Policy: The Distributional Impacts of Transportation Policies

Author

Listed:
  • Stephen P. Holland
  • Jonathan E. Hughes
  • Christopher R. Knittel
  • Nathan C. Parker
Abstract
Instead of efficiently pricing greenhouse gases, policy makers have favored measures that implicitly or explicitly subsidize low carbon fuels. We simulate a transportation-sector cap & trade program (CAT) and three policies currently in use: ethanol subsidies, a renewable fuel standard (RFS), and a low carbon fuel standard (LCFS). Our simulations confirm that the alternatives to CAT are quite costly-2.5 to 4 times more expensive. We provide evidence that the persistence of these alternatives in spite of their higher costs lies in the political economy of carbon policy. The alternatives to CAT exhibit a feature that make them amenable to adoption-a right skewed distribution of gains and losses where many counties have small losses, but a smaller share of counties gain considerably-as much as $6,800 per capita, per year. We correlate our estimates of gains from CAT and the RFS with Congressional voting on the Waxman-Markey cap & trade bill, H.R. 2454. Because Waxman-Markey (WM) would weaken the RFS, House members likely viewed the two policies as competitors. Conditional on a district's CAT gains, increases in a district's RFS gains are associated with decreases in the likelihood of voting for WM. Furthermore, we show that campaign contributions are correlated with a district's gains under each policy and that these contributions are correlated with a Member's vote on WM.

Suggested Citation

  • Stephen P. Holland & Jonathan E. Hughes & Christopher R. Knittel & Nathan C. Parker, 2011. "Some Inconvenient Truths About Climate Change Policy: The Distributional Impacts of Transportation Policies," NBER Working Papers 17386, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:17386
    Note: EEE IO POL
    as

    Download full text from publisher

    File URL: http://www.nber.org/papers/w17386.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Michael I. Cragg & Yuyu Zhou & Kevin Gurney & Matthew E. Kahn, 2013. "Carbon Geography: The Political Economy Of Congressional Support For Legislation Intended To Mitigate Greenhouse Gas Production," Economic Inquiry, Western Economic Association International, vol. 51(2), pages 1640-1650, April.
    2. Wright, Gavin, 1974. "The Political Economy of New Deal Spending: An Econometric Analysis," The Review of Economics and Statistics, MIT Press, vol. 56(1), pages 30-38, February.
    3. Hansen, LeRoy, 2007. "Conservation Reserve Program: Environmental Benefits Update," Agricultural and Resource Economics Review, Cambridge University Press, vol. 36(2), pages 267-280, October.
    4. Tol, Richard S. J., 2008. "The Social Cost of Carbon: Trends, Outliers and Catastrophes," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 2, pages 1-22.
    5. Michael J. Roberts & Wolfram Schlenker, 2013. "Identifying Supply and Demand Elasticities of Agricultural Commodities: Implications for the US Ethanol Mandate," American Economic Review, American Economic Association, vol. 103(6), pages 2265-2295, October.
    6. Christopher R. Knittel, 2006. "The Adoption Of State Electricity Regulation: The Role Of Interest Groups," Journal of Industrial Economics, Wiley Blackwell, vol. 54(2), pages 201-222, June.
    7. Searchinger, Timothy & Heimlich, Ralph & Houghton, R. A. & Dong, Fengxia & Elobeid, Amani & Fabiosa, Jacinto F. & Tokgoz, Simla & Hayes, Dermot J. & Yu, Hun-Hsiang, 2008. "Use of U.S. Croplands for Biofuels Increases Greenhouse Gases Through Emissions from Land-Use Change," Staff General Research Papers Archive 12881, Iowa State University, Department of Economics.
    8. Gallagher, Paul W. & Brubaker, Heather & Shapouri, Hosein, 2005. "Plant size: Capital cost relationships in the dry mill ethanol industry," ISU General Staff Papers 200506010700001442, Iowa State University, Department of Economics.
    9. Alberto Salvo & Cristian Huse, 2011. "Is Arbitrage Tying the Price of Ethanol to that of Gasoline? Evidence from the Uptake of Flexible-Fuel Technology," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 119-148.
    10. Anderson, Soren T. & Kellogg, Ryan & Sallee, James M., 2013. "What do consumers believe about future gasoline prices?," Journal of Environmental Economics and Management, Elsevier, vol. 66(3), pages 383-403.
    11. Seltzer, Andrew J, 1995. "The Political Economy of the Fair Labor Standards Act of 1938," Journal of Political Economy, University of Chicago Press, vol. 103(6), pages 1302-1342, December.
    12. Anderson, Soren T., 2012. "The demand for ethanol as a gasoline substitute," Journal of Environmental Economics and Management, Elsevier, vol. 63(2), pages 151-168.
    13. Randall S. Kroszner & Philip E. Strahan, 1999. "What Drives Deregulation? Economics and Politics of the Relaxation of Bank Branching Restrictions," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 114(4), pages 1437-1467.
    14. Stephen P. Holland, 2009. "Taxes and Trading versus Intensity Standards: Second-Best Environmental Policies with Incomplete Regulation (Leakage) or Market Power," NBER Working Papers 15262, National Bureau of Economic Research, Inc.
    15. Gardner Bruce, 2007. "Fuel Ethanol Subsidies and Farm Price Support," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 5(2), pages 1-22, December.
    16. Stephen P. Holland & Jonathan E. Hughes & Christopher R. Knittel, 2009. "Greenhouse Gas Reductions under Low Carbon Fuel Standards?," American Economic Journal: Economic Policy, American Economic Association, vol. 1(1), pages 106-146, February.
    17. Gary S. Becker, 1983. "A Theory of Competition Among Pressure Groups for Political Influence," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 98(3), pages 371-400.
    18. Adam J. Liska & Haishun S. Yang & Virgil R. Bremer & Terry J. Klopfenstein & Daniel T. Walters & Galen E. Erickson & Kenneth G. Cassman, 2009. "Improvements in Life Cycle Energy Efficiency and Greenhouse Gas Emissions of Corn‐Ethanol," Journal of Industrial Ecology, Yale University, vol. 13(1), pages 58-74, February.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Stephen P. Holland & Jonathan E. Hughes & Christopher R. Knittel & Nathan C. Parker, 2013. "Unintended Consequences of Transportation Carbon Policies: Land-Use, Emissions, and Innovation," NBER Working Papers 19636, National Bureau of Economic Research, Inc.
    2. Paulo Henrique Hoeckel & Augusto Mussi Alvim & José Pedro Pontes & João Dias, 2023. "The Ethanol Market and Its Relation to the Price of Agricultural Commodities," Energies, MDPI, vol. 16(6), pages 1-18, March.
    3. Christiane Baumeister & Reinhard Ellwanger & Lutz Kilian, 2016. "Did the Renewable Fuel Standard Shift Market Expectations of the Price of Ethanol?," CESifo Working Paper Series 6282, CESifo.
    4. Crago, Christine Lasco & Khanna, Madhu, 2014. "Carbon abatement in the fuel market with biofuels: Implications for second best policies," Journal of Environmental Economics and Management, Elsevier, vol. 67(2), pages 89-103.
    5. JunJie Wu & Christian Langpap, 2015. "The Price and Welfare Effects of Biofuel Mandates and Subsidies," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 62(1), pages 35-57, September.
    6. Moschini, GianCarlo & Cui, Jingbo & Lapan, Harvey E., 2012. "Economics of Biofuels: An Overview of Policies, Impacts and Prospects," Bio-based and Applied Economics Journal, Italian Association of Agricultural and Applied Economics (AIEAA), vol. 1(3), pages 1-28, December.
    7. Derek Lemoine, 2017. "Escape from Third-Best: Rating Emissions for Intensity Standards," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 67(4), pages 789-821, August.
    8. Holland, Stephen P., 2012. "Emissions taxes versus intensity standards: Second-best environmental policies with incomplete regulation," Journal of Environmental Economics and Management, Elsevier, vol. 63(3), pages 375-387.
    9. Bielen, David A. & Newell, Richard G. & Pizer, William A., 2018. "Who did the ethanol tax credit benefit? An event analysis of subsidy incidence," Journal of Public Economics, Elsevier, vol. 161(C), pages 1-14.
    10. Condon, Nicole & Klemick, Heather & Wolverton, Ann, 2015. "Impacts of ethanol policy on corn prices: A review and meta-analysis of recent evidence," Food Policy, Elsevier, vol. 51(C), pages 63-73.
    11. Gabriel E Lade & C -Y Cynthia Lin Lawell & Aaron Smith, 2018. "Policy Shocks and Market-Based Regulations: Evidence from the Renewable Fuel Standard," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 100(3), pages 707-731.
    12. Dong Hee Suh & Charles B. Moss, 2017. "Dynamic adjustment of ethanol demand to crude oil prices: implications for mandated ethanol usage," Empirical Economics, Springer, vol. 52(4), pages 1587-1607, June.
    13. Anderson, Soren T., 2012. "The demand for ethanol as a gasoline substitute," Journal of Environmental Economics and Management, Elsevier, vol. 63(2), pages 151-168.
    14. Cui, Jingbo, 2012. "Three essays on biofuel, environmental economics, and international trade," ISU General Staff Papers 201201010800003311, Iowa State University, Department of Economics.
    15. Salvo, Alberto, 2018. "Flexible fuel vehicles, less flexible minded consumers: Price information experiments at the pump," Journal of Environmental Economics and Management, Elsevier, vol. 92(C), pages 194-221.
    16. Salvo, Alberto & Huse, Cristian, 2013. "Build it, but will they come? Evidence from consumer choice between gasoline and sugarcane ethanol," Journal of Environmental Economics and Management, Elsevier, vol. 66(2), pages 251-279.
    17. Deniz Igan & Prachi Mishra & Thierry Tressel, 2012. "A Fistful of Dollars: Lobbying and the Financial Crisis," NBER Macroeconomics Annual, University of Chicago Press, vol. 26(1), pages 195-230.
    18. Efraim Benmelech & Tobias J. Moskowitz, 2010. "The Political Economy of Financial Regulation: Evidence from U.S. State Usury Laws in the 19th Century," Journal of Finance, American Finance Association, vol. 65(3), pages 1029-1073, June.
    19. Rhode, Paul W. & Snyder, Jr., James M. & Strumpf, Koleman, 2018. "The arsenal of democracy: Production and politics during WWII," Journal of Public Economics, Elsevier, vol. 166(C), pages 145-161.
    20. Mathias Reynaert, 2021. "Abatement Strategies and the Cost of Environmental Regulation: Emission Standards on the European Car Market," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 88(1), pages 454-488.

    More about this item

    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents
    • K0 - Law and Economics - - General
    • K2 - Law and Economics - - Regulation and Business Law
    • L5 - Industrial Organization - - Regulation and Industrial Policy
    • L7 - Industrial Organization - - Industry Studies: Primary Products and Construction
    • L9 - Industrial Organization - - Industry Studies: Transportation and Utilities

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:17386. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/nberrus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.