Energy Regulation: Leakage, Emissions, and Spillovers
Paper Session
Tuesday, Jan. 5, 2021 3:45 PM - 5:45 PM (EST)
- Chair: Juan Carlos Suárez Serrato, Duke University
Regulating Conglomerates in China: Evidence from an Energy Conservation Program
Abstract
How does energy regulation affect production and energy use within conglomerates? We study the effects of a large program aimed at reducing energy utilization of large Chinese companies. We conduct a difference-in-differences analysis that compares firms across sharp size-based criteria for regulation. Directly regulated firms experience declines in both production output and energy usage, but regulated firms do not see increases in energy efficiency. Using detailed data on business registrations, we link regulated firms to non-regulated firms that are part of the same conglomerate. We identify large spillovers across cross-owned non-regulated firms, which see increases in both output and energy utilization. We then use a calibrated model where conglomerates reallocate production across related firms to study the aggregate effects of the policy on allocative efficiency and energy consumption. Within conglomerate spillovers counter the direct effects on energy conservation of regulated firms and lead conglomerates to allocate resources to less productive and potentially less energy efficient firms.On the Design of a Border Carbon Adjustment When Firms are Heterogeneous
Abstract
We consider the design of a border carbon adjustment when emissions intensities vary significantly across firms. Economists have advocated for the use of border adjustments (BA) to mitigate emissions leakage under incomplete carbon pricing. The simplest BA design penalizes all imports of an emissions-intensive commodity at the same emissions rate. California has been experimenting with an alternative approach which allows exporting firms to pay a lower tax if they can demonstrate that their emissions intensity falls below a pre-specifiedbenchmark level. One advantage of this firm-level differentiation is that it provides exporting firms with an incentive to reduce their emissions intensity. A disadvantage is that reductions in the emissions-intensity of imports may be achieved by a reallocation -- or "reshuffling" -- of foreign production, versus real reductions in foreign emissions . We investigate this trade-off in the context of the California electricity market which provides a rare real-world example of how border adjustments are being used to mitigate emissions leakage.The Environmental Impact of Special Economic Zones
Abstract
From the late 1970s onwards, the Special Economic Zone (SEZ) experiment spurred extraordinary regional economic growth in China and lifted millions out of poverty. To what extent were the welfare gains from this extraordinary growth offset by environmental and health costs? We exploit the progressive rollout of SEZs across China to estimate the impact of the agglomeration of manufacturing in industrial zones on air quality and child mortality. Using remote sensing data from 1980 to 2013, county-level child mortality data from 1996 to 2012, and taking into account regional wind patterns, we find that SEZs led to higher levels of particulate matter and sulphur dioxide in down-wind counties and subsequently raised under-5 child mortality rates in those counties, resulting in 34,200 additional under-5 child deaths between 1996 to 2012. The spillovers from SEZs to nearby counties increase in the geographic density of nearby SEZs and frequency spent downwind from a SEZ.Discussant(s)
Hanming Fang
,
University of Pennsylvania
Shaoda Wang
,
University of Chicago
James Bushnell
,
University of California-Davis
Matthew Kahn
,
Johns Hopkins University
JEL Classifications
- Q4 - Energy