A Model for Economic Assessment of US Climate Policy

Archive Project
A Model for Economic Assessment of US Climate Policy

Project Leaders:

Focus Areas: 

  • Energy
  • Climate Policy
  • Regional Analysis

This project is developing a model for analyzing potential U.S greenhouse gas policies proposed within the U.S., with a capability to assess impacts on regions, sectors and industries of various combination of mitigation policies and adaptation measures. The effort builds on the existing capability of the MIT Economic Projection and Policy Analysis (EPPA) model, which has been developed by the Program to analyze the global economic consequences of efforts to mitigate greenhouse gases. The EPPA facility is a general equilibrium model of the world economy, with sixteen regional aggregations, one of which is the U.S. However, with the increasing prospect of U.S. action on greenhouse gases, the complexity of policy proposals increases, and questions arise regarding implications of various combination of price and regulatory instruments, possible differentiation of state and federal efforts, and the effects of proposed measures at sub-national levels. Greenhouse gas mitigation proposals will interact with other U.S. energy policies, existing regulatory measures and fiscal structure, and knowing the effects of these interactions can improve policy design. For example, differences in electric utility regulation, or the interaction of CO2 price measures with regulatory systems such as the Corporate Average Fuel Economy (CAFE) standards, can have important implications for policy design. The economic implications for different regions of the country and for households at different income levels can vary widely, influencing the details of national regulatory and price measures imposed for greenhouse gas control. These regional effects can be further influenced by the initiatives of individual states (e.g., California) or combinations of states (e.g., the New England Regional Greenhouse Gas Initiative).

Funding Sources