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The Welfare Consequences of Mixed Environmental Policy Instruments with Voluntary Provision
Author(s) -
Jin Yaran
Publication year - 2019
Publication title -
the journal of industrial economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.93
H-Index - 77
eISSN - 1467-6451
pISSN - 0022-1821
DOI - 10.1111/joie.12208
Subject(s) - counterfactual thinking , redistribution (election) , welfare , economics , turnover , electricity , public economics , pareto principle , business , microeconomics , operations management , engineering , market economy , philosophy , electrical engineering , management , epistemology , politics , political science , law
This article evaluates the welfare consequences of a mixed regulatory framework with a voluntary cap‐and‐trade program and intensity standards using data from the Texas electricity industry. I construct and estimate a structural model of the compliance choices of power generating units to recover their abatement costs. Then I simulate for the counterfactual equilibrium under a mandatory cap‐and‐trade regulation. Results show that the mixed policy framework mainly benefits generating units with small capacity and high abatement costs. However, a mandatory cap‐and‐trade regulation with redistribution policies could bring in substantial Pareto improvement.