Greening the Economy with New Markets: System Dynamics Simulations of Energy and Environmental Markets

摘要

The paper draws lessons from previous applications of system dynamics to newly created markets dealing with energy and the environment. The examples include markets for renewable certificates and wholesale electricity generation. The previous studies show that system dynamics studies stand alone in aiding our understanding of the volatility that could be expected from newly created markets. The biggest environmental challenge of our century is the excessive accumulation of greenhouse gases in the atmosphere and the threat of rapid climate change. Substantial reductions in carbon dioxide (CO2) emissions are required if the world is to avoid dangerous anthropogenic interference with the climate system. Countries around the world are experimenting with a combination of green stimulus spending, regulations and market incentives to reduce their CO2 emissions. This paper focuses on the design of carbon markets to put a price on the emissions. The paper reviews the recent proposals in the USA and their unfortunate tendency to rely on massive use of offsets. The paper concludes with a discussion and simulation of Cap and Dividend, a dramatic new proposal to lower emissions in the USA.