The synthesis of bottom-up and top-down approaches to climate policy modeling: Electric power technologies and the cost of limiting US CO2 emissions
✍ Scribed by Ian Sue Wing
- Publisher
- Elsevier Science
- Year
- 2006
- Tongue
- English
- Weight
- 519 KB
- Volume
- 34
- Category
- Article
- ISSN
- 0301-4215
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✦ Synopsis
In the US, the bulk of CO 2 abatement induced by carbon taxes comes from electric power. This paper incorporates technology detail into the electricity sector of a computable general equilibrium model of the US economy to characterize electric power's technological margins of adjustment to carbon taxes and to elucidate their general equilibrium effects. Compared to the top-down production function representation of the electricity sector, the technology-rich hybrid specification produces less abatement at a higher welfare cost, suggesting that bottom-up models do not necessarily generate lower costs of abatement than top-down models. This result is shown to be sensitive to the elasticity with which technologies' generating capacities adjust to relative prices.