Distributional and Efficiency Impacts of Clean and Renewable Energy Standards for Electricity

Joint Program Report
Distributional and Efficiency Impacts of Clean and Renewable Energy Standards for Electricity
Rausch, S. and M. Mowers (2012)
Joint Program Report Series, 46 pages

Report 225 [Download]

Abstract/Summary:

We examine the efficiency and distributional impacts of greenhouse gas policies directed toward the electricity sector in a model that links a “top-down” general equilibrium representation of the U.S. economy with a “bottom-up” electricity-sector dispatch and capacity expansion model. Our modeling framework features a high spatial and temporal resolution of electricity supply and demand, including renewable energy resources and generating technologies, while representing CO2 abatement options in non-electric sectors as well as economy-wide interactions. We find that clean and renewable energy standards entail substantial efficiency costs compared to an economy-wide carbon pricing policy such as a cap-and-trade program or a carbon tax, and that these policies are regressive across the income distribution. The geographical distribution of cost is characterized by high burdens for regions that depend on non-qualifying generation fuels, primarily coal. Regions with abundant hydro power and wind resources, and a relatively clean generation mix in the absence of policy, are among the least impacted. An important shortcoming of energy standards vis-à-vis a first-best carbon pricing policy is that no revenue is generated that can be used to alter unintended distributional consequences.

Report Summary
 

Citation:

Rausch, S. and M. Mowers (2012): Distributional and Efficiency Impacts of Clean and Renewable Energy Standards for Electricity. Joint Program Report Series Report 225, 46 pages (http://globalchange.mit.edu/publication/15778)
  • Joint Program Report
Distributional and Efficiency Impacts of Clean and Renewable Energy Standards for Electricity

Rausch, S. and M. Mowers

Report 

225
46 pages
2016

Abstract/Summary: 

We examine the efficiency and distributional impacts of greenhouse gas policies directed toward the electricity sector in a model that links a “top-down” general equilibrium representation of the U.S. economy with a “bottom-up” electricity-sector dispatch and capacity expansion model. Our modeling framework features a high spatial and temporal resolution of electricity supply and demand, including renewable energy resources and generating technologies, while representing CO2 abatement options in non-electric sectors as well as economy-wide interactions. We find that clean and renewable energy standards entail substantial efficiency costs compared to an economy-wide carbon pricing policy such as a cap-and-trade program or a carbon tax, and that these policies are regressive across the income distribution. The geographical distribution of cost is characterized by high burdens for regions that depend on non-qualifying generation fuels, primarily coal. Regions with abundant hydro power and wind resources, and a relatively clean generation mix in the absence of policy, are among the least impacted. An important shortcoming of energy standards vis-à-vis a first-best carbon pricing policy is that no revenue is generated that can be used to alter unintended distributional consequences.

Report Summary