Climate Policy

The energy sector is facing unprecedented challenges, with the global Covid-19 pandemic complicating an already challenging transition toward a low-carbon future. One of the key elements in addressing both the current pandemic and climate change is with forward-looking collaborations in technology development and innovation—which have long been a hallmark of MIT’s approach to problem solving.

Scaling up low-carbon energy: Economic, geopolitical, and environmental impacts

Today Russia’s economy depends heavily upon its abundant fossil fuel resources. Russia is one of the world’s largest exporters of fossil fuels, and a number of its key exporting industries—including metals, chemicals and fertilizers—draw on fossil resources. The nation also consumes fossil fuels at a relatively high rate; it’s the world’s fourth largest emitter of carbon dioxide.

Decarbonize and diversify
Will using newer input-output data for general equilibrium modeling provide a better estimate for the CO2 mitigation cost?

Summary: Large-scale economy-wide equilibrium models are widely used for assessing energy or climate policies. As different models often produce diversified outcomes for similar policies, researchers have been trying to understand reasons behind this observation, including cost assumptions for mitigation options, model structure, policy design, and timing. In this study, we focus on analyzing how updating the input-output database of a CGE model could inadvertently change the model output, which has not been carefully examined but could also be an important source that accounts for variations in simulation results of distinct models.

To answer the research question, we provide an analytical framework that elucidates how using a database with a higher energy price raises the CO2 mitigation cost when the substitution between inputs is relatively limited in the short-run, or when the price hike is considered as temporary. We also provide a numerical example for the analysis, and propose an adjustment that could, under the same percentage reduction in emissions, address the concerns of using the input-output data with prices for fossil fuels and their consumption levels deviating from a more sustainable state.

Impacts of climate change policies worldwide on the Russian economy

Abstract: Because the Russian economy relies heavily on exports of fossil fuels, the primary source of human-induced greenhouse gas (GHG) emissions, it may be adversely impacted by Paris Agreement-based climate policies that target reductions in GHG emissions. Applying the MIT Economic Projection and Policy Analysis (EPPA) model to assess the impacts on the Russian economy of the efforts of the main importers of Russian fossil fuels to follow the global goals of the Paris Agreement, we project that climate-related actions outside of Russia will lower the country’s GDP growth rate by about one-half of a percentage point. The Paris Agreement is also expected to raise Russia’s risks of facing market barriers for its exports of energy-intensive goods, and of falling behind in the development of low-carbon energy technologies that most of the world is increasingly adopting.  

Key policy insights:

  • Regardless of its domestic emissions reduction efforts, Russia will not be able to sustain its current trajectory of fossil fuel export-based development due to climate policies worldwide.
  • To address the challenge of climate-related energy transition, Russia needs a new comprehensive development strategy that accounts for the post-Paris Agreement global energy landscape.
  • The key elements of such a strategy include diversification of the economy, moving to low-carbon energy sources, and investing in human capital development.
  • Our diversification scenarios show that redistribution of income from the energy sector to the development of human capital would benefit the economy.
  • The largest impact of investment re-orientation from the fossil fuel sector would be on manufacturing, services, agriculture and food production.

Pages

Subscribe to Climate Policy