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Technology Assumptions and Climate Policy: The Interrelated Effects of U.S. Electricity and Transport Policy

Abstract:
Although economists prefer a unique, economy-wide carbon price, climate policies are likely to continue to combine technology-and sector-specific regulations with, at best, some degree of carbon pricing. A hybrid energy-economy model that combines technological details with partial macro-economic feedbacks offers a means of estimating the likely effects of this kind of policy mix, especially under different scenarios of technological innovation. We applied such a model, called CIMS-US, in a model comparison project directed by the Energy Modeling Forum at Stanford University (EMF 24) and present here the interrelated effects of policies focused separately on electricity and transportation. We find that technological innovation encouraged by transportation regulation can inadvertently increase emissions from electricity generation and ethanol production to the extent that abatement from the regulation itself is effectively neutralized. When, however, regulation of electricity generation is combined with transportation policy or there is economy-wide carbon pricing, substantial abatement occurs. Keywords: Climate policy, U.S., Electricity, Transport, Technological change

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DOI: 10.5547/01956574.35.SI1.5

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Published in Volume 35, Special Issue of The Quarterly Journal of the IAEE's Energy Economics Education Foundation.