Modeling Economywide versus Sectoral Climate Policies Using Combined Aggregate-Sectoral Models

Dallas Burtraw, William Pizer, Winston Harrington, James Sanchirico (jsanchirico@ucdavis.edu) and Richard Newell

RFF Working Paper Series from Resources for the Future

Abstract: Economic analyses of climate change policies frequently focus on reductions of energy-related carbon dioxide emissions via market-based, economywide policies. The current course of environment and energy policy debate in the United States, however, suggests an alternative outcome: inefficiently designed and/or sector-based 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 emissions reductions. We find that excluding a limited number of sectors from an economywide policy does not significantly raise costs. Focusing policy solely on the electricity and transportation sectors doubles costs, however, and using nonmarket policies can raise costs by a factor of 10. These results are driven in part by, and are sensitive to, our modeling of preexisting tax distortions.

Keywords: carbon; carbon dioxide; climate change; climate policy; general equilibrium (search for similar items in EconPapers)
JEL-codes: D58 D61 Q25 Q48 (search for similar items in EconPapers)
Date: 2005-04-20
New Economics Papers: this item is included in nep-ene and nep-env
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Working Paper: Modeling Economywide versus Sectoral Climate Policies Using Combined Aggregate-Sectoral Models (2005)
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