Cutting Carbon Emissions Laser Talk

Question:  How well does the carbon price cut emissions?

Answer:  Reducing emissions is the goal of any climate policy, and putting a price on carbon is the single most powerful tool to achieve that. Predicting how a given policy will affect carbon emissions is done through energy system modeling, a subject of intense study and refinement in recent years. [1]

After the Energy Innovation and Carbon Dividend Act was introduced in 2019, [2] two leading groups – Columbia’s Center on Global Energy Policy (CGEP) [3] and Resources for the Future (RFF) [4] – evaluated it using their respective models.

After studying these reports, CCL has concluded that the GH-E3 model used by RFF [5] delivers the more realistic results. When the numbers are adjusted to the basis recently declared by the U.S. government for future targets, the RFF numbers show that if the policy goes into effect in 2022, emissions should drop 52 percent by 2030 and 61 percent by 2035.

The CGEP modeled emission cuts came out weaker at 37-38 percent over the same period, but an extensive 2018 study [6] comparing 11 different energy system models supports the choice of RFF’s model. Of the 11 models studied, the RFF model was close to the middle of the pack in emission reduction, while the NEMS model used by CGEP came in dead last. Furthermore, CGEP analysts acknowledge the NEMS model’s inability to recognize some of the ways carbon pricing can reduce emissions. [7,8]

Energy systems models are essential tools for understanding what to expect from a climate policy. State-of-the-art modeling from RFF shows that a carbon fee policy like the Energy Innovation and Carbon Dividend Act is an indispensable component to achieve our national climate goals.

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1. Subramanian, A., T. Gundersen, and T.A. Adams II. “Modeling and Simulation of Energy Systems: A Review.” Processes 6:238 (23 Nov 2018).
2. “H.R.763 – The Energy Innovation and Carbon Dividend Act of 2019.” Congress.gov (29 Jan 2019).
3. Kaufman, N. et al. “An Assessment of the Energy Innovation and Carbon Dividend Act.” Columbia | SIPA Center on Global Energy Policy (6 Nov 2019).
4. Hafstead, M. “Carbon Pricing Calculator.” Resources for the Future (10 Aug 2020).
5. Goulder, L.H. and M.A.C. Hafstead. “A Numerical General Equilibrium Model for Evaluating U.S. Energy and Environmental Policies.” Resources for the Future (Oct 2013). This model is also referred to as the “GH-E3” model.
6. McFarland, J.R. et al. “Overview of the EMF 32 Study on U.S. Carbon Tax Scenarios.” Climate Change Economics 9:1 (20 Mar 2018).
7. Kaufman, N., M. Obeiter, and E. Krause. “Putting a Price on Carbon: Reducing Emissions.” World Resources Institute Issue Brief (13 Jan 2016).
8. Excerpts from reference 7: “… a carbon price is likely to be more effective at reducing emissions than the model predicts … theory and historical evidence tell us that the breadth of incentives provided by a carbon price would lead to additional emissions reductions that are typically not predicted in model forecasts.”

This page was created on 05/08/21 at 15:30 CDT.