General Equilibrium Impacts of a Federal Clean Energy Standard

Lawrence H. Goulder (), Marc Hafstead and Roberton Williams
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Lawrence H. Goulder: Resources for the Future

RFF Working Paper Series from Resources for the Future

Abstract: Economists have tended to view emissions pricing (e.g., cap and trade or a carbon tax) as the most cost-effective approach to reducing greenhouse gas emissions. This paper offers a different view. Employing analytical and numerically solved general equilibrium models, the paper indicates plausible conditions under which a more conventional form of regulation—namely, the use of a clean energy standard (CES)—is more cost-effective. The models reveal that in a realistic economy with prior taxes on factors of production, the CES distorts factor markets less because it is a smaller implicit tax on factors. This advantage more than offsets the disadvantages of the CES when relatively minor reductions in emissions are called for. Numerical simulations indicate that the cost-effectiveness of the CES is sensitive to what is deemed “clean” electricity. To achieve maximal cost-effectiveness, the CES must offer significant credit to electricity generated from natural gas. Classification-JEL: Q58, Q54, H23

Keywords: clean energy standard; intensity standard; emissions pricing; climate (search for similar items in EconPapers)
Date: 2014-02-10
New Economics Papers: this item is included in nep-ene, nep-env and nep-reg
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Citations: View citations in EconPapers (5)

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Related works:
Journal Article: General Equilibrium Impacts of a Federal Clean Energy Standard (2016)
Working Paper: General Equilibrium Impacts of a Federal Clean Energy Standard (2014)
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