IDEAS home Printed from https://ideas.repec.org/p/mee/wpaper/0905.html
   My bibliography  Save this paper

The Cost of Climate Policy in the United States

Author

Listed:
  • Sergey Paltsev
  • John M. Reilly
  • Henry D. Jacoby
  • Jennifer F. Morris

Abstract

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.

Suggested Citation

  • Sergey Paltsev & John M. Reilly & Henry D. Jacoby & Jennifer F. Morris, 2009. "The Cost of Climate Policy in the United States," Working Papers 0905, Massachusetts Institute of Technology, Center for Energy and Environmental Policy Research.
  • Handle: RePEc:mee:wpaper:0905
    as

    Download full text from publisher

    File URL: http://tisiphone.mit.edu/RePEc/mee/wpaper/2009-005.pdf
    Download Restriction: no

    Citations

    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. The Cost of Climate Policy in the United States
      by Ariel Goldring in Free Market Mojo on 2010-01-18 15:18:35

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:mee:wpaper:0905. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sharmila Ganguly). General contact details of provider: http://edirc.repec.org/data/cemitus.html .

    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.

    We have no references for this item. You can help adding them by using 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.

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.