The overarching question imparting urgency to this exploration is: Can U.S.-Russian contention in cyberspace cause the two nuclear superpowers to stumble into war? In considering this question we were constantly reminded of recent comments by a prominent U.S. arms control expert: At least as dangerous as the risk of an actual cyberattack, he observed, is cyber operations’ “blurring of the line between peace and war.” Or, as Nye wrote, “in the cyber realm, the difference between a weapon and a non-weapon may come down to a single line of code, or simply the intent of a computer program’s user.”
Fischer's talk will draw on the findings of her forthcoming paper, "Overlapping Policies with Tradable Performance Standards: Insights from Emissions Trading in China," co-authored with Lawrence H. Goulder (Stanford University) and Chenfei Qu (Tsinghua University).
Jurisdictions that rely on carbon markets for emissions control often utilize other policies as well, including policies to support renewable energy, improve energy efficiency, or achieve other goals for the low-carbon transition. The overlap of policies leads to economic interactions, and the ultimate impact of the overlap can be quite different from what one might judge from simply adding up the potential impacts of the individual policies. Prior literature has focused on the interplay between such interventions and cap-and-trade (CAT) systems, where emissions are fixed by regulation but prices respond. However, more jurisdictions are turning to alternative forms of emissions markets like tradable performance standards (TPS), for which both emissions and prices are flexible and the significance of policy interactions is less well understood. This paper contrasts results from overlapping policies under CAT with those under a growing range of TPS, including uniform standards, where all producers of the product receive the same per-unit benchmark, and differentiated ones like “emitter intensity standards” (EIS), in which non-emitting sources are excluded and higher-emitting sources may also receive higher benchmarks. Theory demonstrates these differences: while an overlapping subsidy to renewable energy always increases total output, under CAT it has no effect on emissions, it increases emissions under a uniform TPS, and it decreases emissions under an EIS. Absent other market failures, the subsidy to clean producers can improve the efficiency of the EIS regulation, while it raises costs under CAT. “Double-counting” strategies that tax embodied carbon for consumers would distort a CAT system but can offset some of the distortions of upstream standards. Such interactions are important for evaluating the welfare consequences of policy combinations. A numerical model calibrated to the Chinese economy and policy context illustrates these effects.
Carolyn Fischer is Research Manager of the Sustainability and Infrastructure Team in the Development Research Group of the World Bank. Her research addresses issues of technical change, trade, and emissions leakage in environmental policy instrument design. She was previously appointed professor of environmental economics at Vrije Universiteit Amsterdam, held the Canada 150 Research Chair in Climate Economics, Innovation and Policy at University of Ottawa, and was the Marks Visiting Professor at Gothenburg University. She enjoys research fellow affiliations with Resources for the Future and the CESifo Research Network. She has served on the boards of both the American and European Associations of Environmental and Resource Economists, as well as expert advisory councils for research institutes in Europe and in North America, and is co-editor of Environmental and Resource Economics. She earned her Ph.D. in Economics from the University of Michigan, Ann Arbor.