CO2 emissions leakage in the power system under Regional Greenhouse Gas policy

A number of states in the United States have taken collaborative actions to control for greenhouse gas (GHG) emissions from state governmental level. The effort by the western and the eastern states is called the Western Regional Climate Action Initiative and Regional Greenhouse Gas Initiative (RGGI), respectively. RGGI is a collaboration by 9 states in the northeast United States targeted at regional CO₂ emissions. This paper proposes an analytical tractable model to illustrate the conditions under which the CO₂ leakage would occur.