Modeling economy-wide vs sectoral climate policies using combined aggregate-sectoral models
Abstract
Economic analyses of climate change policies frequently focus on reductions of energy-related
carbon dioxide emissions via market-based, economy-wide policies. The current course
of environment and energy policy debate in the United States, however, suggests an
alternative outcome: sector-based and/or inefficiently designed policies. This paper
uses a collection of specialized, sector-based models in conjunction with a computable
general equilibrium model of the economy to examine and compare these policies at
an aggregate level. We examine the relative cost of different policies designed to
achieve the same quantity of emission reductions. We find that excluding a limited
number of sectors from an economy-wide policy does not significantly raise costs.
Focusing policy solely on the electricity and transportation sectors doubles costs,
however, and using non-market policies can raise cost by a factor of ten. These results
are driven in part by, and are sensitive to, our modeling of pre-existing tax distortions.
Copyright © 2006 by the IAEE. All rights reserved.
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https://hdl.handle.net/10161/10266Collections
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Richard G. Newell
Adjunct Professor
Dr. Richard G. Newell is the President and CEO of Resources for the Future (RFF),
an independent, nonprofit research institution that improves environmental, energy,
and natural resource decisions through impartial economic research and policy engagement.
From 2009 to 2011, he served as the administrator of the US Energy Information Administration,
the agency responsible for official US government energy statistics and analysis.
Dr. Newell is an adjunct professor at Duke University, where he
Billy Pizer
Research Professor in the Sanford School of Public Policy
Billy Pizer joined the faculty of the Sanford School of Public Policy at Duke University
in the fall of 2011. He also was appointed a faculty fellow in the Nicholas Institute
for Environmental Policy Solutions, a nonpartisan institute at Duke that focuses on
finding solutions to some of the nation's most pressing environmental challenges.
His current research examines how we value the future benefits of climate change mitigation,
how environmental regulation and climate policy can af
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