Conference Agenda
Overview and details of the sessions of this conference. Please select a date or location to show only sessions at that day or location. Please select a single session for detailed view (with abstracts and downloads if available).
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Daily Overview |
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Environmental Policy 1 Location: B128 Session Chair: Manuel Estay, Universidad de Concepción | |
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Rethinking Linking: Effects of Cap-and-Trade Integration on Equilibrium Emissions and Welfare University of California -- Berkeley, United States of America Conventional economic reasoning suggests that linking cap-and-trade programs creates efficiency gains by lowering costs while holding emissions constant. When cap-and-trade programs have price floors or ceilings, however, linking may increase emissions and decrease welfare. I investigate this phenomenon within California and Québec, where cap-and-trade linkage increased emissions by 17.5 million tons CO2e and reduced welfare by $331 million annually -- an outcome that was ex-ante foreseeable. A reformed linked market could have remained emissions-neutral while instead increasing welfare by up to $32 million annually. I argue that political and institutional frictions prevented such reforms from being implemented and propose that policy makers prioritized cutting emissions cheaply over equating marginal damages and benefits. Given these constraints, linking with trading ratios remains incentive-compatible and recovers over three-fifths of potential emissions-neutral welfare gains. | |