EMF OP 52 Modeling Energy Markets and Climate Change Policy

This article will discuss various economic models of energy supply and demand that have been used for global climate change policy analysis. Although these models are quite diverse in their structure and focus, all systems determine market-clearing equilibrium prices that balance production and consumption levels for different fuel types. This comparison focuses on the energy supply and demand adjustments that significantly influence the costs of various strategies for limiting carbon emissions, although the models also incorporate reduced-form representation of the climatic effects that determine the benefits of abatement.