Full Title: Expanding the Toolkit: The Potential Role for an Emissions Containment Reserve in RGGI
Author(s): Dallas Burtraw, Charles Holt, Karen Palmer, Anthony Paul, and William Shobe
Publisher(s): Resources For the Future
Publication Date: August 1, 2017
Full Text: Download Resource
Description (excerpt):
Since the Regional Greenhouse Gas Initiative (RGGI) launched in 2009, low allowance prices have been frequent and precipitated important design adjustments at the first program review. As a part of the ongoing 2016 program review, RGGI is considering a new provision, known as an emissions containment reserve (ECR), that would incorporate a minimum price for specified quantities of allowances under the cap and thereby introduce steps into the allowance supply function. This report uses simulation modeling and economic experiments to explore the implications of introducing an ECR and varying its design parameters. Whenever the ECR is in effect it allows advantageous changes in the demand for emissions allowances to be shared between the economy and the environment. From a behavioral perspective, we find the ECR does not hinder price discovery in allowance markets.