Browsing by Subject "Cap-and-trade"
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Item Essays in environmental regulation and firm dynamics(2011-05) Dardati, Evangelina Alejandra; Corbae, DeanIn this dissertation, I study the effect of environmental regulation on firm behavior. In the first chapter, I use a dynamic model to quantify the effects on exit, entry, investment and welfare of different allocation schemes of a cap-and-trade program. I focus on allocation rules regarding closing plants and new entrants. I calibrate the model with data from the US power plants and perform two policy experiments: first I quantify the effects of the introduction of a cap-and-trade program; second, I do a counterfactual where I switch the allocation rule and study the effect on the new equilibrium and welfare. In the second chapter of this dissertation, I ask whether multinational firms are harmful for a host country environment. I use plant-level data from Chile and find empirical evidence that multinational are cleaner than domestic plants. Based on the trade literature, I build a model where I add environmental regulation and a technology choice. The model proposes a new explanation of why multinationals firms might be cleaner than their domestic peers. I get policy implications from the model and test them with the data. In the third chapter, I study the relation between free permit allocation in a cap-and-trade program and financial constraints. I use the change in the permit prices and the heterogeneity in permit allocation to identify financial constraints for the investor-owned utilities in the electricity sector.Item Internalizing the carbon externality : greenhouse gas mitigation’s financial impact on electric utilities and their customers(2010-05) Woodward, James T. (James Terence), 1982-; Groat, Charles G.; Boske, Leigh B.Social, political, and economic trends suggest that the United States may soon join other United Nations Framework Convention on Climate Change (UNFCCC) countries in drafting substantive, national climate change policy. After providing a brief overview of past and present climate action taken both nationally and internationally, this paper explores different economic solutions to address the externalities of fossil fuel emissions. Alternatives include command-and-control regulation, a carbon tax, and a cap-and-trade program. Several factors, including domestic political anti-tax sentiment, suggest that a cap-and-trade framework is the most promising market-based alternative to reduce carbon emissions within the United States’s electricity sector. Case studies focus on the power generation components of four Texas utilities: Austin Energy, CPS Energy of San Antonio, NRG Energy, and Luminant and assess cap-and-trade’s ramifications on electricity prices. Utilities would seek to pass through to customers in the form of higher electricity prices up to 100 percent of expenses incurred from mitigating greenhouse gas (GHG) emissions. Three primary factors will determine how a given carbon dioxide cap-and-trade allowance price will affect the electricity price charged by utilities: the carbon intensity of the generation fuel mix, whether the wholesale electricity market is regulated or competitive, and whether greenhouse gas allowances are auctioned or grandfathered to covered entities. Consumer elasticity would determine resulting demand for the higher priced energy. Relatively inelastic electricity consumption could cause electricity sector customers to incur financial losses approximately eight times larger than producers by the year 2020 under a mature cap-and-trade framework. Furthermore, evidence suggests market-based GHG reduction tools such as a cap-and-trade schema alone are not sufficient to decarbonize the electricity generation sector. Without complementary regulatory policies that mandate transition to clean energy sources, cap-and-trade will only succeed in redistributing the opportunity cost associated with the carbon externality.