Cutting Carbon, Take Two: A Brief Guide to Federal Electricity‐Sector Climate Policy without Cap‐and‐Trade

Abstract

AbstractThis paper explores federal policies, other than a carbon price, for reducing emissions from the electric power sector. These policies fall into two major categories: policies that encourage the development of non‐ or low‐emitting energy sources, and regulatory policies under existing legal authority (primarily the Clean Air Act). The paper provides an overview of policy options and a few concrete proposals, along with a summary of insights from economists on their advantages and disadvantages. Economists generally disfavor investment subsidies, but comparing other policy options, including regulatory approaches, technology mandates, and production subsidies, is complex. Excluding existing clean generation from incentive policies is tempting but can lead to perverse outcomes.