General Equilibrium Impacts of a Federal Clean Energy Standard
American Economic Journal: Economic Policy
vol. 8,
no. 2, May 2016
(pp. 186-218)
Abstract
Economists have tended to view emissions pricing (e.g., cap and trade or a carbon tax) as the most cost-effective approach to reducing greenhouse gas emissions. This paper offers a different view. Employing analytical and numerically solved general equilibrium models, it provides plausible conditions under which a more conventional form of regulation—namely, the use of a clean energy standard (CES)—is more cost-effective. The models reveal that the CES distorts factor markets less because it is a smaller implicit tax on factors of production. This advantage more than offsets the disadvantages of the CES when minor emissions reductions are involved. (JEL H23, Q42, Q48, Q54, Q58)Citation
Goulder, Lawrence H., Marc A. C. Hafstead, and Roberton C. Williams III. 2016. "General Equilibrium Impacts of a Federal Clean Energy Standard." American Economic Journal: Economic Policy, 8 (2): 186-218. DOI: 10.1257/pol.20140011Additional Materials
JEL Classification
- H23 Taxation and Subsidies: Externalities; Redistributive Effects; Environmental Taxes and Subsidies
- Q42 Alternative Energy Sources
- Q48 Energy: Government Policy
- Q54 Climate; Natural Disasters and Their Management; Global Warming
- Q58 Environmental Economics: Government Policy
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