The cost of climate policy in the United States

By S. Paltsev, J. Reilly, H. Jacoby, Jennifer Morris. 2009

120 citations recorded by the source corpus.

We consider the cost of meeting emissions reduction targets consistent with a G8 proposal of a 50 percent global reduction in emissions by 2050, and an Obama Administration proposal of an 80 percent reduction over this period. We apply the MIT Emissions Prediction and Policy Analysis (EPPA), modeling these two policy scenarios if met by applying a national cap-and-trade system, and compare results with an earlier EPPA analysis of reductions of this stringency. We also test results to alternative assumptions about program coverage, banking behavior, and cost of technology in the electric power sector. Two main messages emerge from the exercise. First, technology uncertainties have a huge effect on the generation mix but only a moderate effect on the emissions price and welfare cost of achieving the assumed targets. Measured in terms of changes in economic welfare, the economic cost of 80 percent reduction by 2050 is in the range of 2 to 3% by 2050, with CO2 prices between $48 and $67 in 2015 rising to between $190 and $266 by 2050. Second, implementation matters. When an idealized economy-wide cap-and-trade is replaced by coverage omitting some sectors, or if the credibility of long-term target is weak (limiting banking behavior) prices and welfare costs change substantially.

Subfields: Economics and Econometrics, Global and Planetary Change, Renewable Energy, Sustainability and the Environment

View Paper: https://www.semanticscholar.org/paper/1052a6bb7399eacb65867b41ebefbe087ab08b43

How researchers see this paper

The researchers whose trusted networks rank it highest, strongest advocate first. Every researcher gets a different order.

In Economics and Econometrics

In Global and Planetary Change

In Renewable Energy, Sustainability and the Environment

Citations in the corpus

CO2 emissions, nuclear energy, renewable energy and economic growth in the US (2010, background): “Unlike in the past, there are now some concrete proposals within the US to build new nuclear energy plants, and the prospects of expanding renewable energy are also looking more viable than assumed earlier (Paltsev et al., 2009).”
Is There Really a Green Paradox? (2012, unknown): “Keywords: Green Ramsey model, carbon tax, renewables, exhaustible resources, global warming, development, growth, intergenerational inequality aversion, second best, Green Paradox JEL codes: D90, E13, Q30, Q42, Q54 Revised 21 June 2012 ___________________ * Useful comments from Tony Venables,…”
Combining Policies for Renewable Energy: Is the Whole Less than the Sum of its Parts? (2010, result): “It also compares these findings with existing theoretical analysis of the isolated effects of single RES-E policies to underline the complex nature of policy overlaps.19 18 See Morris (2009), McGuiness and Ellerman (2008), and Paltsev et al. (2009).”