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Distributional and efficiency impacts of clean and renewable energy standards for electricity

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  • Rausch, Sebastian
  • Mowers, Matthew

Abstract

We examine the efficiency and distributional impacts of greenhouse gas policies directed toward the electricity sector in a model that links a “top-down” general equilibrium representation of the U.S. economy with a “bottom-up” electricity-sector dispatch and capacity expansion model. Our modeling framework features a high spatial and temporal resolution of electricity supply and demand, including renewable energy resources and generating technologies, while representing CO2 abatement options in non-electric sectors as well as economy-wide interactions. We find that clean and renewable energy standards entail substantial efficiency costs compared to a carbon pricing policy such as a cap-and-trade program or a carbon tax, and that these policies are regressive across the income distribution. The geographical distribution of cost is characterized by high burdens for regions that depend on non-qualifying generation fuels, primarily coal. Regions with abundant hydro power and wind resources, and a relatively clean generation mix in the absence of policy, are among the least impacted. An important shortcoming of energy standards vis-à-vis a carbon pricing policy is that no revenue is generated that can be used to alter unintended distributional consequences.

Suggested Citation

  • Rausch, Sebastian & Mowers, Matthew, 2014. "Distributional and efficiency impacts of clean and renewable energy standards for electricity," Resource and Energy Economics, Elsevier, vol. 36(2), pages 556-585.
  • Handle: RePEc:eee:resene:v:36:y:2014:i:2:p:556-585
    DOI: 10.1016/j.reseneeco.2013.09.001
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    References listed on IDEAS

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    Keywords

    Climate policy; Renewable energy; Electricity; Clean energy standards; Top-down; Bottom-up; General equilibrium modeling;

    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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