A perceived advantage of cap-and-trade programs over more prescriptive environmental regulation is that enhanced compliance flexibility and cost effectiveness can make more stringent emissions reductions politically feasible. However, increased compliance flexibility can also result in an...

This paper examines how much carbon emissions from the electricity industry would decrease in response to a carbon price. We show how both carbon prices and cheap natural gas reduce, in a nearly identical manner, the historic cost advantage of coal-fired power plants. The shale revolution has...