NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Grischa Perino

University of Hamburg
Welckerstr. 8
20354 Hamburg
Germany

E-Mail: EmailAddress: hidden: you can email any NBER-related person as first underscore last at nber dot org
Institutional Affiliation: University of Hamburg

NBER Working Papers and Publications

March 2019Understanding Overlapping Policies: Internal Carbon Leakage and the Punctured Waterbed
with Robert A. Ritz, Arthur van Benthem: w25643
We present an integrated framework to understand the emissions impact of unilateral overlapping policies within a carbon-pricing system. "Internal carbon leakage" captures emissions displacement within the system (e.g., due to greater product imports from a neighbouring country). The waterbed effect captures the policy's interaction with the system's overall emissions cap. Current market rules in the reformed EU ETS, California's carbon market and RGGI feature "punctured" waterbeds that allow overlapping policies to affect aggregate emissions. We present simple formulae to estimate internal carbon leakage for different types of policy such as a carbon price floor (perhaps with a border tax adjustment), an energy efficiency program, and renewables support. The sign and magnitude of the clim...
 
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