Regulatory jurisdiction and policy coordination

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Journal Title
Journal ISSN
Volume Title
A1 Alkuperäisartikkeli tieteellisessä aikakauslehdessä
Date
2022-03-04
Major/Subject
Mcode
Degree programme
Language
en
Pages
16
Series
Journal of the Operational Research Society
Abstract
This study discusses important aspects of policy modeling based on a leader-follower game of policymakers. We specifically investigate non-cooperation between policymakers and the jurisdictional scope of regulation via bi-level programming. Performance-based environmental policy under the Clean Power Plan in the United States is chosen for our analysis. We argue that the cooperation of policymakers is welfare enhancing. Somewhat counterintuitively, full coordination among policymakers renders performance-based environmental policy redundant. We also find that distinct state-by-state regulation yields higher social welfare than broader regional regulation. This is because power producers can participate in a single power market even under state-by-state environmental regulation and arbitrage away the CO2 price differences by adjusting their generation across states. Numerical examples implemented for a stylized test network illustrate the theoretical findings.
Description
Keywords
bi-level modeling, leader–follower game, OR in environment and climate change, performance-based policy, power market
Other note
Citation
Tanaka , M , Chen , Y & Siddiqui , A S 2022 , ' Regulatory jurisdiction and policy coordination : A bi-level modeling approach for performance-based environmental policy ' , Journal of the Operational Research Society , vol. 73 , no. 3 , pp. 509-524 . https://doi.org/10.1080/01605682.2020.1843980