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The impact of climate policy on fossil fuel consumption: Evidence from the Regional Greenhouse Gas Initiative (RGGI)

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  • Yan, Jingchi

Abstract

Climate policies such as carbon taxes or cap-and-trade programs are increasingly used to reduce emissions. In the United States, the Regional Greenhouse Gas Initiative (RGGI) cap-and-trade program is used to reduce emissions. In this paper, I use detailed state-level data to estimate the impact of RGGI on coal and natural gas consumption in the electric-power industry. I find the program directly caused coal and natural gas phase-outs within regulated states. Specifically, the program decreased coal and natural gas consumption for electricity generation by 73% and 30%, respectively, within regulated states. However, in nearby, un-regulated states, I find an increase in natural-gas consumption of 237% and a decrease in coal consumption of 7%. As a result, the program reduced carbon dioxide emissions by 4.8 million tons annually in regulated states, but increased carbon dioxide emissions by 3.5 million tons in unregulated states. I also find the program decreased the efficiency of coal-fired and gas-fired plants, which reduces the program's effectiveness for lowering emissions. However, overall, the program reduced carbon dioxide emissions by 1.3 million tons per year.

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  • Yan, Jingchi, 2021. "The impact of climate policy on fossil fuel consumption: Evidence from the Regional Greenhouse Gas Initiative (RGGI)," Energy Economics, Elsevier, vol. 100(C).
    • Handle: RePEc:eee:eneeco:v:100:y:2021:i:c:s0140988321002395
    DOI: 10.1016/j.eneco.2021.105333
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    References listed on IDEAS

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    More about this item

    Keywords

    Cap-and-trade; Emissions; Fossil fuel consumption; Leakage; Efficiency;
    All these keywords.

    JEL classification:

    • P18 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Energy; Environment
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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