The recent stall at the federal level in enacting policies  to reduce greenhouse gas (GHG) emissions gives impetus to an inquiry into alternatives.  This paper develops and applies a conceptual framework for three categories of mitigation policies based on the level of competition versus cooperation between local, state and federal authorities.  Enabling and funding policies are more cooperative when conditions of interdependence exist between state and federal governments.  In contrast, federal performance standards and cap and trade systems can introduce significant competition between levels of government.  Next we identify the types of actions by federal, state and local governments necessary to implement a comprehensive suite of 23 aggregate mitigation policies developed by over 1500 stakeholders in 16 states (Peterson et al., 2010).  These policies, if fully scaled to the national level, could reduce U.S. GHG emissions by over 3 billion metric tons of carbon dioxide equivalents by the year 2020. 

We then perform simulations of the economic impacts of the 23 policies at the national level adapting the REMI Macroeconometric Model, building on our methodology developed for and applied at the state level (Rose and Wei, 2012; Rose et al., 2011).  The methodology carefully links direct cost estimates and key characteristics of individual mitigation options to key drivers and policy variables of the model.  This includes considerations of investment stimulus and displacement, cost increases, spending from cost savings, the role of fiscal incentives, and private and public financing.  The model then factors in elements of factor substitution, price increases, productivity effects and international competitiveness.  The input data are obtained from climate action plans of key, representative states such as Florida, Michigan, Minnesota, North Carolina, Oregon, and Pennsylvania. We find that, while federal policies are projected to lead to job losses, significant employment gains could arise from the policy options that are primarily implemented at the state and local levels.  This stems greatly from the direct cost- saving features of energy-efficiency and land-use mitigation options.

We contend that, in many cases, climate policy enactment needs to be an explicit exercise in coordination of shared authority between levels of government. National legislation to reduce GHG should recognize and build on existing state and local level authority and expertise.  Policy coordination will relieve sources of intergovernmental conflict, lead to cost-effective use of resources in both public and private sectors, increase positive aggregate economic impacts, and thus increase the probability of adoption and implementation of GHG mitigation.

References:

Peterson, T., Wennberg, J., Rose, A., and Wei, D.  2010.  Impacts of Comprehensive Climate and Energy Policy Options on the U.S. Economy.  Johns Hopkins University, Baltimore, MD.

Rose, A. and D. Wei.  2012.  “Macroeconomic Impacts of the Florida Energy and Climate Change Action Plan, Climate Policy 12(1):  50-69.

Rose, A., D. Wei, and N. Dormady.  2011.  “Regional Macroeconomic Assessment of the Pennsylvania Climate Action Plan,” Regional Science Policy and Practice 3(4):  357-79.