Attributing Emissions Reductions of Overlapping Climate Policies: A Shapley Value Approach

• In Event: Environmental Policies at Different Scales, With Overlaps and Confounds: Analytic Solutions?

Abstract

As governments seek to reduce greenhouse gas emissions, achieving the ambitious targets outlined in the Paris Agreement remains a challenge. This difficulty arises in part due to the complexity and interaction of overlapping climate policy instruments, making it challenging to clearly attribute emissions reductions to individual policies. Traditional evaluation methods often fail to adequately account for policy interactions, leading to misattribution and suboptimal policy decisions. 

This study addresses these issues by employing the Shapley value—a concept from cooperative game theory—as a novel method to attribute emissions reductions among overlapping climate policies while accounting for interaction effects. Using California as a case study, this research adapts an established computable general equilibrium model to quantify the contributions of different policies, including carbon pricing mechanisms, renewable portfolio standards, electric vehicle mandates, and fuel efficiency regulations.

The analysis demonstrates that the Shapley value method effectively identifies significant policy interactions and accurately quantifies the marginal contributions of individual instruments. Fixed-price policies such as a carbon tax exhibit high marginal impacts whereas the effectiveness of quantity and intensity-based instruments such as cap-and-trade systems and renewable portfolio standards appear more dependent on interaction effects.

However, the comprehensive evaluation offered by the Shapley value approach comes at a significant computational cost, as the number of necessary simulations grows exponentially with the number of policy instruments. To address this, the study proposes alternative approaches to provide efficient approximations without sacrificing analytical robustness.

The findings have important implications for climate policy portfolio. By clearly identifying the relative effectiveness and interaction dynamics among different policy instruments, policymakers can strategically prioritize and adjust climate policies to enhance overall effectiveness and cost-efficiency. Beyond its immediate application to California, this methodological approach offers broad applicability, providing a valuable framework for integrated policy analysis in diverse jurisdictions seeking to reduce greenhouse gas emissions.

Author

• William A Scott, Simon Fraser University
  Presenting Author