Results

Preference Parameter Estimates

Comparison to Pew Estimate

Implications for Emissions

Emissions Damage Estimates

Implications for Welfare

Implications for Welfare

Distributional Implications of ACESA Under Perfect Targeting

Distributional Implications of ACESA Under Equal Targeting

Efficiency Implications of Federal Policy Under Alternative Allocation

Rules

Change in Scientific Welfare under ACESA: $14.7; Under PT: $12.5

Would ACESA Have Passed the US Senate?

• No, it would have secured 50 votes, but needed 60 for passage.

Conclusions

• Average implied external damages per legislative district are $0.07 per ton CO2e.

• From the perspective of implied external costs, state policy (with offsets and trading) is less distortionary (welfare loss of $1.9 billion) than federal policy (welfare loss of $47.1 billion), although both lower welfare.

• Welfare for climate believers is unchanged under federal policy and declines under state policy strategically, climate believers should prefer federal action to address climate change.

• State policy that does not permit offsets or trading is likely to results in considerably

Conclusions

• While implied preferences determine the policies that emerge in the model, in terms of the scientific external costs of climate change, both policies improve welfare, with federal policy leading to a welfare gain of $14.7 billion and state policy to a welfare gain of $4.4 billion.

• Imperfect targeting is critical for securing the passage of federal climate policy.

• IT allows for fence-sitting legislators to be brought on board, and since they are correlated to no voters, ensures that no voters receive a majority of permits and softens their welfare loss.

• Rules that equally allocate permits or carbon tax revenue are not likely to achieve electoral success.

Conclusions

• Perfect targeting would lead to an optimal policy that achieves a far more stringent cap.

• This would be more considerably distortionary from the perspective of implied external costs, causing an implied welfare loss of $88.9 billion.

• This would even cause a small decline in the scientific welfare gains from $14.7 billion under imperfect targeting to $12.5 billion under the optimal cap with perfect targeting.

• This highlights the critical importance of accounting for how implied preferences determine policy choices, and how those critically impact the scientific welfare estimates of those policies.

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