Evaluation of the Regional Greenhouse Gas Initiative : econometric insight using the Difference-in-Difference method

Details

Supervisors

Vandenberghe, Vincent

Faculty

Faculté des sciences économiques, sociales, politiques et de communication

Degree label

Master [120] en sciences économiques, orientation générale

Abstract

Climate change is a prevalent concern nowadays and that is why many environmental policies have emerged. The aim of our paper is to assess the overall efficiency of one of them: The Regional Greenhouse Gas Initiative involving nine states of the Mid-Atlantic and North-Eastern region in the United States. The policy has the primary purpose of reducing CO2 emissions in the energy sector of covered states through a cap-and-trade system. In order to estimate the net effect of the policy, our empirical strategy is to estimate a Difference-in-Difference regression. This is done by analyzing a comprehensive database concerning environmental indicators of power plants in the United States: The Emissions and Generation Resource Integrated Database. Our findings indicate that, even if the Regional Greenhouse Gas Initiative has met its stated purpose of reducing the carbon emissions rate for covered power plants, the estimations remain relatively low and the causes unclear. Additionally, while an anticipation effect is observable, no improvement over time has been identified. Lastly, we do not detect any leakages or spillovers effects whereas there is risk that consumers have partly borne the compliance burden. As a result, it highlights the complexity of setting a binding cap and designing a policy that has no negative repercussions.