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    Escape from Third-Best: Rating Emissions for Intensity Standards

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    eare_ratings_lcfs_2016-01-07.pdf
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    Description:
    Final Accepted Manuscript
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    Author
    Lemoine, Derek cc
    Affiliation
    Univ Arizona, Dept Econ, Eller Coll Management
    Issue Date
    2017-08
    Keywords
    Externality
    Emission
    Intensity
    Rating
    Second-best
    Ethanol
    
    Metadata
    Show full item record
    Publisher
    SPRINGER
    Citation
    Lemoine, D. Environ Resource Econ (2017) 67: 789. https://doi.org/10.1007/s10640-016-0006-6
    Journal
    ENVIRONMENTAL & RESOURCE ECONOMICS
    Rights
    © Springer Science+Business Media Dordrecht 2016.
    Collection Information
    This item from the UA Faculty Publications collection is made available by the University of Arizona with support from the University of Arizona Libraries. If you have questions, please contact us at repository@u.library.arizona.edu.
    Abstract
    An increasingly common type of environmental policy instrument regulates the carbon intensity of transportation and electricity markets. In order to extend the policy's scope beyond point-of-use emissions, regulators assign each potential fuel an emission intensity rating for use in calculating compliance. I show that welfare-maximizing ratings do not generally coincide with the best estimates of actual emissions. In fact, the regulator can achieve a higher level of welfare by properly selecting the emission ratings than possible by selecting only the level of the standard. Moreover, a fuel's optimal rating can actually decrease when its estimated emission intensity increases. Numerical simulations of the California Low-Carbon Fuel Standard suggest that when recent scientific information increased the estimated emissions from conventional ethanol, regulators should have lowered ethanol's rating (making it appear less emission-intensive) so that the fuel market would clear with a lower quantity.
    Note
    12 month embargo; published online: 24 February 2016
    ISSN
    0924-6460
    1573-1502
    DOI
    10.1007/s10640-016-0006-6
    Version
    Final accepted manuscript
    Additional Links
    http://link.springer.com/10.1007/s10640-016-0006-6
    ae974a485f413a2113503eed53cd6c53
    10.1007/s10640-016-0006-6
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