Internal carbon leakage: Inclusion threshold effect in the Regional Greenhouse Gas Initiative (RGGI)

초록

Most environmental regulations impose a minimum capacity threshold for emitters to be included in the effectiveness of the regulation to reduce compliance costs. However, such thresholds can create regulatory loopholes. This study examines the internal carbon leakage effect resulting from such inclusion thresholds in the context of the Regional Greenhouse Gas Initiative. Using the triple-difference approach, we measure the policy effects on electric utilities and incorporate the capacity dimension to account for the internal leakage effect of fuel switching. Our results highlight the exaggerated regulatory effect due to the exclusion of smaller emitters from the regulatory scope.

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