Econonomics of Energy and Environmental Policy

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Macroeconomic Impacts of the California Global Warming Solutions Act on the Southern California Economy

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We evaluate the potential regional macroeconomic impacts of a set of ten greenhouse gas mitigation policy options intended to enable the Southern California Association of Governments to comply with the State's greenhouse gas reduction targets. The Regional Economic Models, Inc. Policy Insight Plus Model, was applied in the analysis by carefully linking technical and microeconomic aspects of each mitigation option to the workings of the regional economy. We took into account key considerations, such as how investment in mitigation options would displace ordinary private business investment and the time-phasing of renewable electricity generation. Our results indicate that the combined ten mitigation policy options could create an annual average employment gain of 21 thousand jobs over the entire planning period from now to 2035, but could also have a negative net present value impact of $17 billion in regional GDP. In the paper, we explain this and other anomalies. Sensitivity analyses of key assumptions and parameters for the Renewable Portfolio Standard indicate that the results are robust. They also provide policy-makers with insights into how to improve the macroeconomic impact of this major policy option.
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JEL Codes:E17: General Aggregative Models: Forecasting and Simulation: Models and Applications, L94: Electric Utilities, R11: Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

Keywords: Climate change mitigation policies, Regional macroeconomic impacts, Renewable portfolio standard, Southern California region economy

DOI: 10.5547/2160-5890.3.1.dwei

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Published in Volume 3, Number 2 of The Quarterly Journal of the IAEE's Energy Economics Education Foundation.


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