Cost Heterogeneity and the Potential Savings from Market-Based Policies
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Policy makers and analysts are often faced with situations where it is unclear whether market-based instruments hold real promise of reducing costs, relative to conventional uniform standards. We develop analytic expressions that can be employed with modest amounts of information to estimate the potential cost savings associated with market-based policies, with an application to the environmental policy realm. These simple formulae can identify instruments that merit more detailed investigation. We illustrate the use of these results with an application to nitrogen oxides control by electric utilities in the United States.
Published Version (Please cite this version)10.1023/A:1021879330491
Publication InfoNewell, Richard G; & Stavins, Robert N (2003). Cost Heterogeneity and the Potential Savings from Market-Based Policies. Journal of Regulatory Economics, 23(1). pp. 43-59. 10.1023/A:1021879330491. Retrieved from https://hdl.handle.net/10161/6757.
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Dr. Richard G. Newell is the President and CEO of Resources for the Future (RFF), an independent, nonprofit research institution that improves environmental, energy, and natural resource decisions through impartial economic research and policy engagement. From 2009 to 2011, he served as the administrator of the US Energy Information Administration, the agency responsible for official US government energy statistics and analysis. Dr. Newell is an adjunct professor at Duke University, where he