Bushnell, James, Chen, Yihsu, and Zaragoza-Watkins, Matthew “Downstream Regulation of CO2 Emissions in California’s Electricity Sector” (January 2013) (Revised version published in Energy Policy, 64: 313-323, January 2014) | WP-236R
This paper examines the implications of alternative forms of cap-and-trade regulations on the California electricity market. Specific focus is given to the implementation of a downstream form of regulation known as the first-deliverer policy. Under this policy, importers (i.e., first-deliverers) of electricity into California are responsible for the emissions associated with the power plants from which the power originated, even if those plants are physically located outside of California. We find that, absent strict non-economic barriers to changing import patterns, such policies are extremely vulnerable to reshuffling of import resources.