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

Abstract

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.

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

References

Bataille

Jaccard

Nyboer

Rivers

(2006). “Towards General Equilibrium in a Technology-rich Model with Empirically Estimated Behavioral Parameters.” The Energy Journal 27(Hybrid Modeling of Energy-Environment Policies: Reconciling Bottom-up and Top-down): 93112.

DeCanio

S.J.

(2003). Economic Models of Climate Change: A Critique. New York: Palgrave Macmillan.

Energy Information Administration (2009). “An Updated Annual Energy Outlook 2009 Reference Case Reflecting Provisions of the American Recovery and Reinvestment Act and Recent Changes in the Economic Outlook.” April. Accessed at http://www.eia.doe.gov/oiaf/servicerpt/stimulus/in-dex.html.

Energy Modeling Forum (EMF) (2010). “EMF 25 Scenario Design.” Stanford University, Stanford, CA. Document available online at http://emf.stanford.edu/files/res/2372/25design2.pdf.

Grubb

Kohler

Anderson

(2002). “Induced Technical Change in Energy and Environmental Modeling: Analytic Approaches and Policy Implications.” Annual Review of Energy and the Environment 27: 271-308.

Jaccard

(2009). “Combining Top Down and Bottom Up in Energy Economy Models.” In J. Evans and L.C. Hunt, eds., International Handbook on the Economics of Energy. Cheltenham, UK and Northampton, MA, USA: Edward Elgar. pp. 311-331.

Jaffe

A.B.

Newell

R.G.

Stavins

R.N.

(1999). “Energy-efficient Technologies and Climate Change Policies: Issues and Evidence.” Resources for the Future, Climate Issue Brief no. 19, December.

Jaffe

A.B.

Stavins

R.N.

(1994). “The Energy-efficiency Gap: What Does It Mean?” Energy Policy 22: 804-810.

Laitner

J.A.

DeCanio

S.J.

Koomey

J.G.

Sanstad

A.H.

(2003). “Room for Improvement: Increasing the Value of Energy Modeling for Policy Analysis.” Utilities Policy 11: 87-94.

10.

Loschel

(2002). “Technological Change in Economic Models of Environmental Policy: A Survey.” Ecological Economics 43: 105-126.

11.

Lovins

Krause

Bach

(1981). Least-Cost Energy: Solving the CO2 Problem.

12.

Andover, Mass.: Brick House Publishing.

13.

Lovins

A.B.

(1977). Soft Energy Paths: Toward a Durable Peace. San Francisco: Friends of the Earth International; Cambridge, Mass.: Ballinger Publishing.

14.

McKinsey (2009). “Unlocking Energy Efficiency in the U.S. Economy.” July. Accessed at http://www.mckinsey.com/clientservice/electricpowernaturalgas/us_energy_efficiency/.

15.

McKinsey (2007). “Reducing U.S. Greenhouse Gas Emissions: How Much at What Cost?” December. Accessed at http://www.mckinsey.com/clientservice/ccsi/greenhousegas.asp.

16.

Sutherland

R.J.

(1991). “Market Barriers to Energy-efficiency Investments.” The Energy Journal 12(3): 15-34.