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Policy Effectiveness in Energy Conservation and Emission Reduction

In an effort to compare the effectiveness of possible policy options to tackle a range of energy and environmental issues, we employ an integrated assessment model which couples a technology-rich bottom-up model of the U.S. electricity sector with a fully dynamic forward-looking general equilibrium model of the U.S. economy. The model provides a unique and consistent modeling framework for energy and environmental policy analysis. The results from the model show that a carbon tax would be the most cost-effective tool for lowering carbon dioxide emissions, and an energy tax would most cost-effectively lower total energy consumption. Though energy efficiency standards are found to be the least cost-effective at reducing energy usage or mitigating carbon emissions, their appeal is likely to rest on assumptions about specific market failures or on political factors.

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Energy Specializations: Energy Efficiency; Energy and the Environment – Policy and Regulation; Energy and the Environment – Other

JEL Codes:
Q55 - Environmental Economics: Technological Innovation
E60 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook: General
Q59 - Environmental Economics: Other

DOI: 10.5547/ISSN0195-6574-EJ-Vol32-SI1-9

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