IDEAS home Printed from https://ideas.repec.org/a/aen/journl/2003v24-01-a03.html
   My bibliography  Save this article

Modeling the Cost of Climate Policy: Distinguishing Between Alternative Cost Definitions and Long-Run Cost Dynamics

Author

Listed:
  • Mark K. Jaccard
  • John Nyboer
  • Crhis Bataille
  • Bryn Sadownik

Abstract

Interest groups and experts debate the cost of greenhouse gas (GHG) reduction, and policy-makers do not know whom to believe. The confusion stems from differing definitions of costs and divergent assumptions about key uncertainties, especially the role of policy in influencing the long-run evolution of technologies and consumer preferences. Analysis could be more helpful to policy-makers by combining technological explicitness with behavioral realism in hybrid models. With such a model, we demonstrate how GHG reduction cost estimates vary depending on whether the analyst focuses just on the financial costs of technologies or combines this with other relevant components of consumer and business preferences, such as option value and consumers' surplus. We also show how this type of model can allow policy-makers to explore the uncertain relationship between policies and the evolution of technologies and preferences, which are critical factors in the long-run cost dynamics of GHG emission reduction. We explore these generic methodological issues with a case study of GHG reduction costs in Canada.

Suggested Citation

  • Mark K. Jaccard & John Nyboer & Crhis Bataille & Bryn Sadownik, 2003. "Modeling the Cost of Climate Policy: Distinguishing Between Alternative Cost Definitions and Long-Run Cost Dynamics," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 49-73.
    • Handle: RePEc:aen:journl:2003v24-01-a03
    as

    Download full text from publisher

    File URL: http://www.iaee.org/en/publications/ejarticle.aspx?id=1402
    Download Restriction: Access to full text is restricted to IAEE members and subscribers.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Richard S. J. Tol, 1999. "The Marginal Costs of Greenhouse Gas Emissions," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 61-81.
    2. Mark Jaccard & Alison Bailie & John Nyboer, 1996. "CO2 Emission Reduction Costs in the Residential Sector: Behavioral Parameters in a Bottom-Up Simulation Model," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 107-134.
    3. Klinge Jacobsen, Henrik, 1998. "Integrating the bottom-up and top-down approach to energy-economy modelling: the case of Denmark," Energy Economics, Elsevier, vol. 20(4), pages 443-461, September.
    4. Norton, Bryan & Costanza, Robert & Bishop, Richard C., 1998. "The evolution of preferences: Why 'sovereign' preferences may not lead to sustainable policies and what to do about it," Ecological Economics, Elsevier, vol. 24(2-3), pages 193-211, February.
    5. Train, Kenneth, 1985. "Discount rates in consumers' energy-related decisions: A review of the literature," Energy, Elsevier, vol. 10(12), pages 1243-1253.
    6. Peters, Irene & Ackerman, Frank & Bernow, Stephen, 1999. "Economic theory and climate change policy," Energy Policy, Elsevier, vol. 27(9), pages 501-504, September.
    7. Pindyck, Robert S, 1991. "Irreversibility, Uncertainty, and Investment," Journal of Economic Literature, American Economic Association, vol. 29(3), pages 1110-1148, September.
    8. Alan S. Manne & Richard G. Richels, 1994. "The Costs of Stabilizing Global C02 Emissions: A Probabilistic Analysis Based on Expert Judgments," The Energy Journal, , vol. 15(1), pages 31-56, January.
    9. Bunch, David S. & Bradley, Mark & Golob, Thomas F. & Kitamura, Ryuichi & Occhiuzzo, Gareth P., 1993. "Demand for clean-fuel vehicles in California: A discrete-choice stated preference pilot project," Transportation Research Part A: Policy and Practice, Elsevier, vol. 27(3), pages 237-253, May.
    10. Jaccard, Mark & Failing, Lee & Berry, Trent, 1997. "From equipment to infrastructure: community energy management and greenhouse gas emission reduction," Energy Policy, Elsevier, vol. 25(13), pages 1065-1074, November.
    11. Demetrios Papathanasiou and Dennis Anderson, 2001. "Uncertainties in Responding to Climate Change: On the Economic Value of Technology Policies for Reducing Costs and Creating Options," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 79-114.
    12. Kenneth E. Train & Terry Atherton, 1995. "Rebates, Loans, and Customers' Choice of Appliance Efficiency Level: Combining Stated- and Revealed-Preference Data," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 55-70.
    13. Jaccard, Mark & Loulou, Richard & Kanudia, Amit & Nyboer, John & Bailie, Alison & Labriet, Maryse, 2003. "Methodological contrasts in costing greenhouse gas abatement policies: Optimization and simulation modeling of micro-economic effects in Canada," European Journal of Operational Research, Elsevier, vol. 145(1), pages 148-164, February.
    14. Sutherland, Ronald J, 1996. "The economics of energy conservation policy," Energy Policy, Elsevier, vol. 24(4), pages 361-370, April.
    15. Henry D. Jacoby & Ian Sue Wing, 1999. "Adjustment Time, Capital Malleability and Policy Cost," The Energy Journal, International Association for Energy Economics, vol. 0(Special I), pages 73-92.
    16. Grubb, Michael, 1993. "Policy modelling for climate change : The missing models," Energy Policy, Elsevier, vol. 21(3), pages 203-208, March.
    17. Dowlatabadi, Hadi, 1998. "Sensitivity of climate change mitigation estimates to assumptions about technical change," Energy Economics, Elsevier, vol. 20(5-6), pages 473-493, December.
    18. Florentin Krause & Stephen J. DeCanio & J. Andrew Hoerner & Paul Baer, 2002. "Cutting Carbon Emissions At A Profit (Part I): Opportunities For The United States," Contemporary Economic Policy, Western Economic Association International, vol. 20(4), pages 339-365, October.
    19. Koopmans, Carl C. & te Velde, Dirk Willem, 2001. "Bridging the energy efficiency gap: using bottom-up information in a top-down energy demand model," Energy Economics, Elsevier, vol. 23(1), pages 57-75, January.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Jaccard, Mark & Murphy, Rose & Rivers, Nic, 2004. "Energy-environment policy modeling of endogenous technological change with personal vehicles: combining top-down and bottom-up methods," Ecological Economics, Elsevier, vol. 51(1-2), pages 31-46, November.
    2. Nic Rivers & Mark Jaccard, 2005. "Combining Top-Down and Bottom-Up Approaches To Energy-Economy Modeling Using Discrete Choice Methods," The Energy Journal, , vol. 26(1), pages 83-106, January.
    3. Horne, Matt & Jaccard, Mark & Tiedemann, Ken, 2005. "Improving behavioral realism in hybrid energy-economy models using discrete choice studies of personal transportation decisions," Energy Economics, Elsevier, vol. 27(1), pages 59-77, January.
    4. Rivers, Nic & Jaccard, Mark, 2006. "Useful models for simulating policies to induce technological change," Energy Policy, Elsevier, vol. 34(15), pages 2038-2047, October.
    5. Murphy, Rose & Jaccard, Mark, 2011. "Energy efficiency and the cost of GHG abatement: A comparison of bottom-up and hybrid models for the US," Energy Policy, Elsevier, vol. 39(11), pages 7146-7155.
    6. Axsen, Jonn & Mountain, Dean C. & Jaccard, Mark, 2009. "Combining stated and revealed choice research to simulate the neighbor effect: The case of hybrid-electric vehicles," Resource and Energy Economics, Elsevier, vol. 31(3), pages 221-238, August.
    7. Loschel, Andreas, 2002. "Technological change in economic models of environmental policy: a survey," Ecological Economics, Elsevier, vol. 43(2-3), pages 105-126, December.
    8. Giraudet, Louis-Gaëtan & Guivarch, Céline & Quirion, Philippe, 2012. "Exploring the potential for energy conservation in French households through hybrid modeling," Energy Economics, Elsevier, vol. 34(2), pages 426-445.
    9. Axsen, Jonn & Mountain, Dean C. & Jaccard, Mark, 2009. "Combining stated and revealed choice research to simulate the neighbor effect: The case of hybrid-electric vehicles," Institute of Transportation Studies, Working Paper Series qt02n9j6cv, Institute of Transportation Studies, UC Davis.
    10. Chris Bataille, Mark Jaccard, John Nyboer and Nic Rivers, 2006. "Towards General Equilibrium in a Technology-Rich Model with Empirically Estimated Behavioral Parameters," The Energy Journal, International Association for Energy Economics, vol. 0(Special I), pages 93-112.
    11. Sanstad, Alan H. & DeCanio, Stephen J. & Boyd, Gale A. & Koomey, Jonathan G., 2001. "Estimating bounds on the economy-wide effects of the CEF policy scenarios," Energy Policy, Elsevier, vol. 29(14), pages 1299-1311, November.
    12. Rosendahl, Knut Einar, 2004. "Cost-effective environmental policy: implications of induced technological change," Journal of Environmental Economics and Management, Elsevier, vol. 48(3), pages 1099-1121, November.
    13. DeCarolis, Joseph & Daly, Hannah & Dodds, Paul & Keppo, Ilkka & Li, Francis & McDowall, Will & Pye, Steve & Strachan, Neil & Trutnevyte, Evelina & Usher, Will & Winning, Matthew & Yeh, Sonia & Zeyring, 2017. "Formalizing best practice for energy system optimization modelling," Applied Energy, Elsevier, vol. 194(C), pages 184-198.
    14. Dellink, Rob & van Ierland, Ekko, 2006. "Pollution abatement in the Netherlands: A dynamic applied general equilibrium assessment," Journal of Policy Modeling, Elsevier, vol. 28(2), pages 207-221, February.
    15. Oikonomou, Vlasis & Rietbergen, Martijn & Patel, Martin, 2007. "An ex-ante evaluation of a White Certificates scheme in The Netherlands: A case study for the household sector," Energy Policy, Elsevier, vol. 35(2), pages 1147-1163, February.
    16. Jaccard, Mark & Loulou, Richard & Kanudia, Amit & Nyboer, John & Bailie, Alison & Labriet, Maryse, 2003. "Methodological contrasts in costing greenhouse gas abatement policies: Optimization and simulation modeling of micro-economic effects in Canada," European Journal of Operational Research, Elsevier, vol. 145(1), pages 148-164, February.
    17. Bhowmik, Chiranjib & Bhowmik, Sumit & Ray, Amitava & Pandey, Krishna Murari, 2017. "Optimal green energy planning for sustainable development: A review," Renewable and Sustainable Energy Reviews, Elsevier, vol. 71(C), pages 796-813.
    18. Henrik Klinge Jacobsen, 2000. "Technology Diffusion in Energy-Economy Models: The Case of Danish Vintage Models," The Energy Journal, , vol. 21(1), pages 43-72, January.
    19. O'Malley, Eoin & Scott, Susan & Sorrell, Steve, 2003. "Barriers to Energy Efficiency: Evidence from Selected Sectors," Research Series, Economic and Social Research Institute (ESRI), number PRS47.
    20. Cayla, Jean-Michel & Maïzi, Nadia, 2015. "Integrating household behavior and heterogeneity into the TIMES-Households model," Applied Energy, Elsevier, vol. 139(C), pages 56-67.

    More about this item

    JEL classification:

    • F0 - International Economics - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:aen:journl:2003v24-01-a03. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: David Williams (email available below). General contact details of provider: https://edirc.repec.org/data/iaeeeea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.