Interpreting tradable credit prices in overlapping vehicle regulations

A-Tier
Journal: Journal of Environmental Economics and Management
Year: 2021
Volume: 109
Issue: C

Authors (2)

Score contribution per author:

2.011 = (α=2.01 / 2 authors) × 2.0x A-tier

α: calibrated so average coauthorship-adjusted count equals average raw count

Abstract

Prices of tradable credits in environmental regulations reveal information about abatement costs. This information guides regulatory assessments and future changes to the regulations. When regulations overlap, however, simple interpretations of credit prices no longer hold. We derive formulas for interpreting the value of credit prices for three overlapping regulations for passenger vehicles: corporate average fuel economy (CAFE) standards, greenhouse gas (GHG) standards, and zero emissions vehicle (ZEV) programs. Our assessment reveals that the marginal costs of reducing GHGs from conventional gasoline vehicles are virtually equal to the sum of CAFE and GHG credit prices, since each policy regulates emissions/fuel use in nearly the same way. We calculate that marginal costs ranged between $8 and $16 per ton of carbon dioxide in 2017. In contrast, marginal costs of selling one additional ZEV were $6,000 to $11,000 in 2017, which are higher than the ZEV credit price. This difference is because selling an additional ZEV yields compliance cost savings under the CAFE and GHG programs.

Technical Details

RePEc Handle
repec:eee:jeeman:v:109:y:2021:i:c:s0095069621000796
Journal Field
Environment
Author Count
2
Added to Database
2026-01-26