US Climate Policy: A critical assessment of intensity standards

The paper evaluates whether intensity standards for energy-intensive and trade-exposed (EITE) industries are an efficient alternative to uniform carbon taxes in the US. Using a computable general equilibrium (CGE) model, the authors find that while lax standards may slightly reduce leakage, stringent standards can actually increase carbon leakage and lead to substantial welfare losses compared to economy-wide emission pricing. The study concludes that intensity standards are primarily driven by political economy considerations rather than economic efficiency.

• Intensity standards for energy-intensive and trade-exposed (EITE) industries may increase carbon leakage rather than decrease it, particularly when the standards are stringent.
• Compared to uniform emission taxing, intensity standards can result in significant welfare losses for the US economy. When standards are set at a 20% reduction level, excess costs range from 40% to 115% of the reference policy cost, increasing up to 8 times the reference cost at a 40% reduction level.
• The economic performance of intensity standards improves when they are tradable across industries, with carbon-based tradable standards being the least costly design among the tested variants.
• While lax intensity standards can reduce output losses for EITE industries compared to a uniform carbon tax, stringent standards can lead to higher output losses for both EITE and non-EITE sectors due to overall economic inefficiency.
• The theoretical and empirical evidence suggests that the use of intensity standards in US climate policy is more likely justified by political economy—specifically the desire of EITE industries to keep regulatory rents internally—than by economic efficiency.

APA

Böhringer, C., Garcia-Muros, X., Gonzalez-Eguino, M., & Rey, L. (2015). US Climate Policy: A critical assessment of intensity standards. Basque Centre for Climate Change. https://www.bc3research.org/h6T8Uy8Nm4gFs0O/201511170351091548092210.pdf

Chicago

Böhringer, Christoph, Xaquin Garcia-Muros, Mikel Gonzalez-Eguino, and Luis Rey. US Climate Policy: A critical assessment of intensity standards. Basque Centre for Climate Change, 2015. https://www.bc3research.org/h6T8Uy8Nm4gFs0O/201511170351091548092210.pdf.

Wikipedia

{{cite report |last1=Böhringer |first1=Christoph |last2=Garcia-Muros |first2=Xaquin |last3=Gonzalez-Eguino |first3=Mikel |last4=Rey |first4=Luis |title=US Climate Policy: A critical assessment of intensity standards |publisher=Basque Centre for Climate Change |date=July 2015 |url=https://www.bc3research.org/h6T8Uy8Nm4gFs0O/201511170351091548092210.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{bhringer2015climate, author = {Böhringer, Christoph and Garcia-Muros, Xaquin and Gonzalez-Eguino, Mikel and Rey, Luis}, title = {{US Climate Policy: A critical assessment of intensity standards}}, institution = {Basque Centre for Climate Change}, year = {2015}, month = jul, url = {https://www.bc3research.org/h6T8Uy8Nm4gFs0O/201511170351091548092210.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }