Carbon emission regulation of electric utility generating plants: new evidence on differential outcomes from mandated versus voluntary CO2 reduction initiatives

With the 2015 Paris Climate Accords, 196 nations agreed to limit carbon emissions. When, in 2017, then-President Trump announced that the USA would withdraw from the agreement, new/substitute support for carbon-emissions reduction came from individual state initiatives. The Regional Greenhouse Gas Initiative (RGGI) is the most significant of these endeavors. Ten northeastern states agreed to limit carbon emissions from power plants beginning in 2009. In the study reported on here, power plants included in RGGI are matched against similar American power plants that are unregulated with respect to carbon emissions. The objective is to determine how effective the regulation is in reducing emissions. From a public policy perspective, comparing regulatory programs to voluntary abatement attempts will help determine the appropriate route to take for achieving a reduction of GHG emissions. Our findings indicate that RGGI plants significantly reduced their carbon emissions over the study period (2011 to 2015) compared to a matched set of control plants that are not regulated. Of potentially greater importance, carbon emission efficiency of the RGGI plants significantly improved over the period from 2008 (pre-RGGI period) to 2015 (RGGI period), while the matched control plants did not achieve this outcome. The overall results imply that a mandatory regime, such as RGGI, is more effective than are voluntary initiatives in driving electric utility plant owners to take actions regarding their production process that can lead to curtailment of carbon emissions.