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Tradable Credit Markets for Intensity Standards

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  • Rudik, Ivan

Abstract

Many environmental standards are expressed in terms of intensity rather than absolute levels. In some cases, intensity standards are associated with tradable credit markets to mitigate the firms’ compliance costs. I develop a jurisdictional model of credit trading under an intensity standard, framed in terms of a Renewable Portfolio Standard for electric utilities. I find that jurisdictions of firms with high costs of compliance may actually be better off by not allowing inter-jurisdictional credit trading. Counterintuitively, increasing the stringency of the intensity standard under credit trading can have the opposite of the intended effect and decrease renewable electricity generation.

Suggested Citation

  • Rudik, Ivan, 2016. "Tradable Credit Markets for Intensity Standards," ISU General Staff Papers 201602020800001013, Iowa State University, Department of Economics.
    • Handle: RePEc:isu:genstf:201602020800001013
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    Cited by:

    1. Jed J. Cohen & Levan Elbakidze & Randall Jackson, 2022. "Interstate protectionism: the case of solar renewable energy credits," American Journal of Agricultural Economics, John Wiley & Sons, vol. 104(2), pages 717-738, March.
    2. Wang, Ge & Zhang, Qi & Li, Yan & Mclellan, Benjamin C. & Pan, Xunzhang, 2019. "Corrective regulations on renewable energy certificates trading: Pursuing an equity-efficiency trade-off," Energy Economics, Elsevier, vol. 80(C), pages 970-982.

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    More about this item

    JEL classification:

    • H70 - Public Economics - - State and Local Government; Intergovernmental Relations - - - General
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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