Using a Free Permit Rule to Forecast the Marginal Abatement Cost of Proposed Climate Policy

• 成果类型: Article
• 署名作者: Meng, Kyle C.
• 署名单位: University of California System; University of California Santa Barbara; National Bureau of Economic Research
• 刊物名称: AMERICAN ECONOMIC REVIEW
• ISSN/ISSBN: 0002-8282
• DOI: 10.1257/aer.20150781
• 发表日期: 2017
• 页码: 748-784
• 关键词: prediction markets; technical change; temperature; impacts; fluctuations; ECONOMICS; banking

摘要

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 CO(2)e.