Full Title: Interpreting Tradable Credit Prices in Overlapping Vehicle Regulations
Author(s): Benjamin Leard and Virginia McConnell
Publisher(s): Resources for the Future (RFF)
Publication Date: April 13, 2020
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The rapid transformation of the US transportation sector is partly due to three policies that aim to reduce greenhouse gas emissions from light duty vehicles: the federal corporate average fuel economy (CAFE) and greenhouse gas (GHG) standards and the state-level zero-emissions vehicle (ZEV) mandates. Each policy includes a credit-trading program to reduce compliance costs for manufacturers and to allow flexibility for meeting the separate requirements. The prices of these credits can indicate the cost of reducing GHG emissions, either through fuel economy improvements or the sale of zero-emissions vehicles.
This study examines the effects of these overlapping regulations on manufacturer behavior and infers the resulting relationship between credit prices and the costs of emission reductions.