Pricing carbon in the U.S.: A model-based analysis of power-sector-only approaches

摘要

One proposed climate policy is a "power-sector-only" approachthat would focus exclusively on controlling carbon dioxide emis-sions from electricity generation. This paper uses an intertemporalcomputable general equilibrium model of the world economycalled G-Cubed to compare a power-sector-only climate policy withtwo alternative economy-wide measures that either: (1) place thesame price on carbon or (2) achieve the same cumulative emissionsreduction as the program limited to the power sector. We find thatthe power-sector-only approach requires a carbon price to elec-tric utilities that is almost twice the economy-wide carbon pricethat would achieve the same cumulative emissions. In addition, wefind that the power-sector-only policy does not produce offsettingincreases in emissions in other sectors or other countries. Rather,we find that domestic carbon emissions outside the power sectorfall slightly relative to baseline as higher electricity prices slowoverall economic activity. Global emissions leakage is negligible ratesas the price of oil in other currencies changes little. All three poli-cies reduce investment in the capital-intensive energy sector, whichlowers imports of durable goods and strengthens the U.S. terms oftrade