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Modeling Efficiency Standards and a Carbon Tax: Simulations for the U.S. using a Hybrid Approach

Analysts using a bottom-up approach have argued that a large potential exists for improving energy efficiency profitably or at a low cost, while top-down modelers tend to find that it is more expensive to meet energy conservation and greenhouse gas (GHG) reduction goals. Hybrid energy-economy models have been developed that combine characteristics of these divergent approaches in order to help resolve disputes about costs, and test a range of policy approaches. Ideally, such models are technologically explicit, take into account the behavior of businesses and consumers, and incorporate macroeconomic feedbacks. In this study, we use a hybrid model to simulate the impact of end-use energy efficiency standards and an economy-wide carbon tax on GHG emissions and energy consumption in the U.S. to the year 2050. Our results indicate that policies must target abatement opportunities beyond end-use energy efficiency in order to achieve deep GHG emissions reductions in a cost-effective manner.

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Energy Specializations: Energy Modeling – Energy Data, Modeling, and Policy Analysis; Energy Efficiency; Energy Modeling – Other; Energy and the Environment – Policy and Regulation

JEL Codes:
E61 - Policy Objectives; Policy Designs and Consistency; Policy Coordination
Q55 - Environmental Economics: Technological Innovation
C59 - Econometric Modeling: Other
E60 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook: General

DOI: 10.5547/ISSN0195-6574-EJ-Vol32-SI1-4

Published in Volume 32, Special Issue of The Quarterly Journal of the IAEE's Energy Economics Education Foundation.