Geoscience Reference
In-Depth Information
Automotive fuel effi ciency is just one of many regulatory interven-
tions that are used to reduce energy or CO
2
emissions. Can we general-
ize from that case to ask about the effectiveness of programs that use
targeted regulations?
This topic has been studied intensively by energy economists. Table
12 provides a partial list of the cost effectiveness of different regulatory
rics. The fi rst is the effect, which is defi ned as how much a given regula-
tion would contribute to achieving the U.S. benchmark climate-change
which is the deadweight loss effi ciency measure discussed above.
Start with the bottom row, showing the gold standard for minimum
cost—a program of universal cap and trade or carbon tax. Calculations
show that they would both have an average cost of $12 per ton of CO
2
reduction of attaining the benchmark U.S. emissions-reduction goal.
The remaining policies are ranked from least costly to most costly. As Ta-
ble 12 shows, and as is consistent with the economic theory discussed
above, the other policies are all more expensive and less effective than
the ideal policies, assuming no other market failures. As we noted
Table 12.
Effects and costs of alternative regulatory and tax policies. A study
by a team at Resources for the Future examined the cost-effectiveness of
different policies in reducing CO
2
emissions. Note how much more the
indirect approaches cost compared to the direct and effi cient approaches.
Effect (as % of
2010 -2030 emissions)
Cost
($ per ton of CO
2
)
Policy
Gasoline tax
1.8
40
Building codes
0.1
51
Tighter auto standards
0.6
85
Liquid natural gas trucks
1.5
85
Weatherization tax credits
0.3
255
Federal interest subsidy
0.0
71,075
Cap and trade/Carbon tax
10.2
12
