Economics Working Papers

Publication Date

3-2017

Number

17041

Abstract

Renewable fuel mandates are popular policy mechanisms to reduce greenhouse gas emissions from transportation fuels. We study the effects and effciency of two policies, a renewable share mandate and a carbon intensity standard, with and without a cost containment mechanism. Using both a theory model of a regulated fuel industry and a numerical model of the U.S. fuel market, we show that an optimally set mandate leads to only modest welfare gains over business as usual. However, the effciency of both policies substantially increases when combined optimally with a cost containment mechanism.

JEL Classification

H23, Q42, Q54, Q58

Version History

Original Release Date: March 2017

Departments

Department of Economics, Iowa State University

File Format

application/pdf

Length

32 pages

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