Research
EI @ Haas Working Paper WP-220 Abstract
WP-220: Stephen P. Holland, Jonathan E. Hughes, Christopher R. Knittel, Nathan C. Parker, "Some Inconvenient Truths About Climate Change Policy: The Distributional Impacts of Transportation Policies" Full Paper
Abstract:
Instead of efficiently pricing greenhouse gases, policy makers have favored measures that implicitly or explicitly subsidize low carbon fuels. We simulate a transportation-sector cap & trade
program (CAT) and three policies currently in use: ethanol subsidies, a renewable fuel standard
(RFS), and a low carbon fuel standard (LCFS). Our simulations confirm that the alternatives to
CAT are quite costly - 2.5 to 4 times more expensive. We provide evidence that the persistence
of these alternatives in spite of their higher costs lies in the political economy of carbon policy. The alternatives to CAT exhibit a feature that make them amenable to adoption - a right
skewed distribution of gains and losses where many counties have small losses, but a smaller
share of counties gain considerably - as much as $6,800 per capita, per year. We correlate our
estimates of gains from CAT and the RFS with Congressional voting on the Waxman-Markey
cap & trade bill, H.R. 2454. Because Waxman-Markey (WM) would weaken the RFS, House
members likely viewed the two policies as competitors. Conditional on a district's CAT gains,
increases in a district's RFS gains are associated with decreases in the likelihood of voting for
WM. Furthermore, we show that campaign contributions are correlated with a district's gains
under each policy and that these contributions are correlated with a Member's vote on WM.
