The structural effects of cap and trade climate policy

The Inter-temporal General Equilibrium Model (IGEM) explores the cost to the U.S. economy of increasingly more stringent cap and trade regimes. The economy-wide losses are small with energy, agriculture, chemicals, high tech manufacturing and trade being most affected. The availability of lower cost...

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Bibliographic Details
Published in:Energy economics 2009-01, Vol.31 (Supp.), p.S244-S253
Main Authors: Goettle, Richard J., Fawcett, Allen A.
Format: Article
Language:English
Subjects:
Allowance prices
Cap and trade
Capital and labor markets
Climate
Climate change
Climate policy
Consumption
Cost analysis
Economic losses
Economics
Emissions trading
Environmental policy
Households
Induced technical change
Recycling
Revenue recycling
Structural analysis
Trade-off
U.S.A
United States
Welfare
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Summary:The Inter-temporal General Equilibrium Model (IGEM) explores the cost to the U.S. economy of increasingly more stringent cap and trade regimes. The economy-wide losses are small with energy, agriculture, chemicals, high tech manufacturing and trade being most affected. The availability of lower cost offsets substantially reduces these economic losses. The economy becomes less capital but more labor intensive. Household welfare losses are smaller for full consumption (goods, services and leisure). A more inelastic trade-off between consumption and leisure dramatically reduces policy costs as do more favorable revenue recycling options. Induced technical change yields a small, measurable reduction in policy costs.
ISSN:0140-9883
1873-6181
DOI:10.1016/j.eneco.2009.06.016