Greenhouse Gas Reductions under Low Carbon Fuel Standards? | Zendy

Stephen P. Holland | Zendy; Jonathan E. Hughes | Zendy; Christopher R. Knittel | Zendy

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Greenhouse Gas Reductions under Low Carbon Fuel Standards?

Author(s) -

Stephen P. Holland,

Jonathan E. Hughes,

Christopher R. Knittel

Publication year - 2009

Publication title -

american economic journal economic policy

Language(s) - English

Resource type - Journals

SCImago Journal Rank - 7.868

H-Index - 62

eISSN - 1945-7731

pISSN - 1945-774X

DOI - 10.1257/pol.1.1.106

Subject(s) - tonne , greenhouse gas , carbon fibers , gasoline , environmental science , limiting , production (economics) , natural resource economics , waste management , environmental engineering , economics , engineering , mathematics , algorithm , mechanical engineering , ecology , composite number , biology , macroeconomics

A low carbon fuel standard (LCFS) seeks to reduce greenhouse gas emissions by limiting the carbon intensity of fuels. We show this decreases high carbon fuel production but increases low carbon fuel production, possibly increasing net carbon emissions. The LCFS cannot be efficient, and the best LCFS may be nonbinding. We simulate a national LCFS on gasoline and ethanol. For a broad parameter range, emissions decrease, energy prices increase, abatement costs are large ($80 - $760 billion annually), and average abatement costs are large ($307 - $2,272 per CO2 metric ton). A cost effective policy has much lower average abatement costs ($60 - $868). (JEL Q54, Q58)

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