May 2, 2014. 11 AM. Firms' behavior under environmental regulation: evidence from Alberta's specified gas emitters regulation. Deepak Rajagopal, UCLA and Indiana University. Sponsored by the Deapartment of Agricultural, Food and Resource Economics.
In the policymaker's toolkit of instruments to reduce greenhouse gas (GHG)-related externalities, emission intensity targets appear a politically more palatable alternative to economist's prescriptions for carbon tax or emission targets. Although emission intensity standards (EIS) and more generally performance standards are common place, they are relatively scarce in the context of GHG emissions. In this paper, we analyze alternative designs of EIS in a multi-sector context and compare them to cost-effective policies. We also perform an empirical analysis assessment of the performance of one particular design of EIS that has been adopted in the Canadian province of Alberta, called the Specified Greenhouse gas Emitters Regulation (SGER). Comparing the EIS to carbon tax we show how the choice of the additional policy parameters of the EIS such as the penalty for non-compliance and the baseline relative to which the level of non-compliance is determined can allow policy-makers to design an EIS to approach cost-effectiveness. Analyzing the compliance data from regulated facilities to estimate the effect of the SGER, we discuss the heterogenous effect on actual onsite emissions, effective emissions,(which refers to emissions net of abatement achieved through the purchase of emission credits, offsets and penalty) and output in the different regulated sectors. Finally, we analyze the compliance strategies of the regulated facilities in different sectors to see if it provides evidence in support of the large literature on engineering estimates of abatement cost of GHG emissions from industrial sources.