TY  - BOOK
AU  - Goulder,Lawrence H.
AU  - Hafstead,Marc A.C.
AU  - Williams,Roberton C,III
ED  - National Bureau of Economic Research.
TI  - General Equilibrium Impacts of a Federal Clean Energy Standard
T2  - NBER working paper series
PY  - 2014///
CY  - Cambridge, Mass.
PB  - National Bureau of Economic Research
N1  - January 2014; Hardcopy version available to institutional subscribers
N2  - Economists have tended to view cap and trade (or, more generally, emissions pricing) as more cost-effective than a clean energy standard (CES) for the purpose of reducing greenhouse gas emissions associated with electricity generation. This stems in part from the finding that, in terms of cost-effectiveness, a CES relies too much on emissions abatement through the channel of fuel-switching and too little on the channel of reduced electricity demand; Recent research reveals, however, that the CES has an advantage over cap and trade in a different dimension. In a realistic economy with prior taxes on factors of production, the adverse "tax-interaction effect" is smaller under the CES than under the equivalent cap-and-trade program. This raises the possibility that the CES might not suffer an overall disadvantage relative to cap and trade on cost-effectiveness grounds; This paper employs analytical and numerical general equilibrium models to assess the relative cost-effectiveness of the CES and an electricity-sector cap-and-trade program. These models reveal that a well-designed CES can be more cost-effective than cap and trade when relatively minor reductions in emissions are called for. Numerical simulations indicate that the cost-effectiveness of the CES is sensitive to what is deemed "clean" electricity. To achieve maximal cost-effectiveness, the CES must offer significant credit to electricity generated from natural gas
UR  - https://www.nber.org/papers/w19847
UR  - http://dx.doi.org/10.3386/w19847
ER  -