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Using a Free Permit Rule to Forecast the Marginal Abatement Cost of Proposed Climate Policy / Kyle C. Meng.
- Format:
- Book
- Author/Creator:
- Meng, Kyle C.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w22255.
- NBER working paper series no. w22255
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2016.
- Summary:
- This paper develops a method for forecasting the marginal abatement cost (MAC) of climate policy using three features of the failed Waxman-Markey bill. First, the MAC is revealed by the price of traded permits. Second, the permit price is estimated using a regression discontinuity design (RDD) comparing stock returns of firms on either side of the policy's free permit cutoff rule. Third, because Waxman-Markey was never implemented, I extend the RDD approach to incorporate prediction market prices which normalize estimates by policy realization probabilities. A final bounding analysis recovers a MAC range of $5 to $19 per ton CO2e.
- Notes:
- Print version record
- May 2016.
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