Regulating Carbon Emissions in Electric Utility Plants: Is RGGI More Effective than Voluntary Emission Reduction Initiatives?

• In Event: Public Interests

Abstract

The study reported on here examines whether RGGI (the Regional Greenhouse Gas Initiative) is an effective cap-and-trade regulation for carbon emissions and if the system affects the quality of firms’ climate change disclosures. Using carbon emission data provided by the US Environmental Protection Agency, we find that 193 RGGI-impacted facilities and their matched unregulated control plants significantly reduced carbon emissions in 2011 (post-RGGI) compared to 2008 (pre-RGGI), but in the period from 2011 to 2015 only RGGI plants reduced carbon emissions successfully. Further analysis indicates that RGGI plants significantly improved carbon emission efficiency—measured as carbon emissions volume per megawatt of power generated—over the period 2008 to 2011, while the matched sample group did not significantly improve performance on this metric. These findings suggest that a regulation such as RGGI is more effective in power plants reducing carbon emissions and improving carbon emission efficiency than voluntary initiatives. In terms of firms’ climate change disclosure, though, we did not find evidence that RGGI firms provide more extensive climate change disclosure than control firms. Still, both the RGGI firms and control firms enhanced the quality of climate change disclosures subsequent to the SEC’s 2010 release on climate change reporting.

Authors

• Yu Cong, Morgan State University

• Martin Freedman, Towson University

• Jin Dong Park, Towson University

• A J Stagliano, Saint Joseph University