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Estimating the Job Impacts of Environmental Regulation
- Anna Belova, Wayne B. Gray, Joshua Linn, Richard D. Morgenstern, William Pizer
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- Journal:
- Journal of Benefit-Cost Analysis / Volume 6 / Issue 2 / Summer 2015
- Published online by Cambridge University Press:
- 19 August 2015, pp. 325-340
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In the face of strong policy interest in the possible regulation–jobs linkage and weak analytical evidence to support a generalizable conclusion, what should a regulatory agency like the Environmental Protection Agency do in a regulatory impact analysis (RIA)? Initially, an RIA should start with a clear concept of what the regulatory agency is trying to estimate. Much of the popular debate is looking for a total job effect. Yet one thing we do know is that, in aggregate, there will not be a net job change unless the economy deviates from its normal rate of full employment. The gist of our literature review suggests that looking to historic data for stable statistical relationships between regulatory spending and job changes, even in a single industry, is tenuous at best. However, the intuition is relatively easy to trace out with certain assumptions: (1) added costs imply added activity that entails added jobs; (2) higher product prices or other regulatory limits imply less production that entails fewer jobs. Taking an average employment rate per dollar of relevant economic activity, coupled with an assumed demand elasticity, these effects can be multiplied out into job changes, although such simple calculations must be tested by validating key assumptions or exploring the estimates sensitivity to alternatives. New estimates by Belova, Gray, Linn and Morgenstern [(2013a). Environmental Regulation And Industry Employment: A Reassessment. Center for Economic Studies, U.S. Census Bureau Discussion Paper, CES 1336, July.] indicate that extending and expanding the widely cited approach by Morgenstern, Pizer and Shih [(2002). Jobs Versus the Environment: An Industry-Level Perspective. Journal of Environmental Economics and Management, 43, 412–436] is unlikely to be successful. Finally, more effort is needed to inform the public about the potential job impacts of new regulations, especially the distinction of these impacts from long-term technological and economic trends.
10 - Addressing competitiveness in US climate policy
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- By Richard D. Morgenstern, Resources for the Future
- Edited by Denis G. Arnold, University of North Carolina, Charlotte
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- Book:
- The Ethics of Global Climate Change
- Published online:
- 11 April 2011
- Print publication:
- 31 March 2011, pp 216-231
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Summary
INTRODUCTION
Mandatory policies to reduce US greenhouse gas (GHG) emissions without full global participation – principally cap-and-trade systems, occasionally carbon taxes, and sometimes standards – are being seriously debated in the US Congress. However, even efficient market-based policies that effectively attach a price to GHG emissions will likely increase production costs for some domestic producers and give rise to competitiveness concerns where those producers compete against foreign suppliers operating in countries where emissions do not carry similar costs. These concerns are likely to be most acute in energy-intensive, trade-exposed manufacturing industries. While the impacts can be mitigated to some extent by the use of offsets or other flexibility mechanisms, it would be virtually impossible to eliminate the disproportionate burdens placed on certain sectors without undermining both the effectiveness and the cost-effectiveness of the policy. As Olson has eloquently argued, the more narrowly focused the adverse impacts of a policy, the more politically difficult it is to sustain.
One of the key questions being asked is this: Why should US firms be disadvantaged relative to overseas competitors to address a global problem? The difficulty, moreover, is not just political: if, in response to a mandatory policy, US production simply shifts abroad to unregulated foreign firms, the resulting emissions “leakage” could vitiate some of the environmental benefits expected from domestic action. As is widely recognized, limiting emissions from the USA and other developed countries will not prevent dangerous interference with the climate system unless key developing countries also control their emissions.
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- Edited by Gilbert E. Metcalf, Tufts University, Massachusetts
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- Book:
- US Energy Tax Policy
- Published online:
- 01 June 2011
- Print publication:
- 06 December 2010, pp 108-112
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Summary
As the Washington policy process grinds forward, it is essential to examine the distributional impacts of efforts to put a price on CO2 emissions. As the authors of this impressive chapter note, questions of “who gets what and who pays” are often more important to legislative victories than the efficiency issues that are traditionally of greatest concern to economists. Rausch and colleagues apply their modeling skills to analyzing the impacts of a national cap-and-trade system of the type contained in the American Clean Energy and Security Act of 2009 (H.R. 2454). They focus on two critical household-level impacts: income class and region.
Most previous analyses have examined distributional effects purely on the basis of the energy expenditures of households. In contrast, Rausch and colleagues employ a general equilibrium framework to trace the effect of a new policy on the cost of all goods and services, and returns to capital and other resources, including labor. The analysis is based on the static MIT U.S. Regional Energy Policy (USREP) model, and represents a first phase toward developing a dynamic model consistent with the MIT's global Emissions Prediction and Policy Analysis (EPPA). This welcome advance offers sectoral detail, production structure, and other key parameters that are similar to EPPA. By restricting their focus to the United States and introducing household heterogeneity in lieu of a representative agent approach, they are able to generate explicit modeling of regions and states within the United States, and multiple household income classes in each region.
10 - Metrics for evaluating policy commitments in a fragmented world: the challenges of equity and integrity
- Edited by Joseph E. Aldy, Robert N. Stavins, Harvard University, Massachusetts
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- Book:
- Post-Kyoto International Climate Policy
- Published online:
- 05 June 2012
- Print publication:
- 03 December 2009, pp 300-342
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Executive summary
Despite uncertainties about the nature and stringency of commitments in future climate change agreements, some things are clear: the international negotiations not only will include national targets and timetables, but also will have to take account of diverse policies and measures undertaken by individual nations, including developing countries. The international community will face twin challenges of judging the equity and integrity of various national proposals.
Ex post, determining whether particular policies have been implemented is a relatively simple matter, even though assessing their effectiveness is not always straightforward. Ex ante, however, the integrity of the international process requires at least some evaluation of the policies and measures proposed by individual nations to estimate their likely impacts. The absence of such evaluation may handicap the negotiators in reaching credible agreements.
The current system for reporting national actions to the international community is highly non-uniform and insufficient to understand differences among countries’ policies and their effectiveness. Thus, a first order of business should be the development of a much tighter, narrowly defined set of guidelines designed to reflect genuine differences in activities among nations.
The problem with evaluating equity is that clear metrics are rarely fair, and fair metrics are rarely clear. Certain metrics, like emissions per unit of Gross Domestic Product (GDP), population, or historical emissions, are straightforward to calculate and generally informative but they are imperfect indicators of burden. Other metrics, like emissions reductions or total costs of policies undertaken, are unlikely to be reported reliably. The metric of marginal abatement costs—at least among market-based policies—has the advantage of indicating the cost-effectiveness of the international distribution of effort.
5 - A credible foundation for long-term international cooperation on climate change
- Edited by Joseph E. Aldy, Robert N. Stavins, Harvard University, Massachusetts
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- Book:
- Architectures for Agreement
- Published online:
- 05 June 2012
- Print publication:
- 10 September 2007, pp 185-234
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Summary
The first step toward meaningful progress on climate change is to be realistic about institutions – both about how existing institutions, such as national governments, can be brought to bear on the problem, and also about the prospects for creating powerful new international institutions. It is, in essence, a decision about whether it is more productive to bring existing tools, however imperfect, to bear on the problem or to design new and better tools at the international level. The latter course has attractions, but the risk is that the design process may go on indefinitely – with greenhouse gas emissions rising unchecked – without producing a viable new institution. Such has been the case over the last decade as attention has focused on designing the Kyoto Protocol, an elaborate new international institution without any real precedent that may do nothing to slow emissions.
In this chapter we argue that a better alternative would be to tackle climate change with simpler policies that can be carried out by national governments immediately. As David Victor noted in chapter 4, that process is happening by default already. We discuss key characteristics needed in an effective approach to climate change and argue that prospects for creating a powerful international institution to control greenhouse gas emissions are dim at best. We then outline one policy, an internationally coordinated system of national policies based on a hybrid tradable permit mechanism, that can be implemented with minimal development of new international institutions.
8 - Design issues of a domestic carbon emissions trading system in the USA
- Edited by Bernd Hansjürgens, Martin Luther-Universität Halle-Wittenburg, Germany
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- Book:
- Emissions Trading for Climate Policy
- Published online:
- 22 September 2009
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- 28 July 2005, pp 114-132
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Introduction
As every student of diplomacy knows, broad international agreements are far easier to craft than specific ones, especially when compliance involves potentially costly domestic actions. While committing the United States and more than 150 other nations to the goal of stabilizing atmospheric greenhouse gas (GHG) concentrations at a level that would “prevent dangerous anthropogenic interference with the climate system,” the UN Framework Convention on Climate Change (FCCC) was mostly silent on implementation. The Kyoto Protocol is an attempt to move beyond the convention's general obligations and establish specific reduction targets for industrial nations for an initial accounting period, 2008–12.
Scholars will no doubt continue to debate whether an alternative protocol design, perhaps one starting with more modest emission reductions among a broader group of nations, might ultimately have yielded stronger results. However, neither the limitations of the protocol's architecture, nor even the gaping hole in coverage among industrial nations caused by the withdrawal of the United States from the agreement alters the fact that, once ratified, the Kyoto Protocol is likely to endure for many years as the only functioning international mechanism for achieving near-term emissions reductions.
A glance into the crystal ball suggests we are entering a period of relative quiescence in the international climate policy process. During this period, the focus of attention will likely shift to the domestic actions undertaken in industrial nations.