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EMF WP 12.6: The Transition to Reduced Levels of Carbon Emissions

Working Paper

This document includes:

An Overview of the Short-Term Dynamics Group: A key focus of the Energy Modeling Forum study on global warming mitigation policies (EMF-12) is the potential costs of stabilizing U.S. carbon emissions at the 1990 level or reducing emissions well below the 1990 level. Considerable effort has been devoted to estimating these costs, measured in a variety of ways including the loss in GDP, the change in net social surplus, or the level of a carbon tax needed to achieve a given carbon emissions target. For example, virtually all of the modeling groups participating in EMF-12 estimated the carbon tax required to achieve a 20 percent reduction in carbon emissions from 1990 levels by 2010, and to then maintain this level of emissions beyond 2010. However, most of the initial analyses did not explicitly address the detailed policy implications and trade-offs during the transition period, from 1990 through 2010. This chapter presents the results of the “Short-Term Dynamics” Study Group that was formed to examine in detail the questions and issues associated with this potential transition of the U.S. economy to a lower level or carbon emissions.

A Low-Carbon Energy Economy: The Dynamics of the U.S. Transition: Several models used in the EMF-12 project a pattern of high near-term costs and lower long-term costs of meeting a target of 20% reduction in U.S. carbon emissions by 2010. The dynamics of this transition to a low-carbon U.S. energy economy are examined using one of the EMF-12 models – FOSSIL2. Key factors causing the behavior are identified and the sensitivity of the behavior to these factors is examined. Potential means of reducing the costs of the transition are provided with estimates of the cost reductions.

Reducing CO2 Emissions: Implications of Alternative Paths of Emissions Constraints: Considerable attention has been paid to the costs of stabilizing CO2 emissions in the United States at 1990 levels, and to the costs of achieving a 20% reduction in emissions by 2010. In either case it is typically assumed that CO2 emissions will remain constant in the long-term after 2010. In other words to what extent does the path of the CO2 emissions constraint between 1990 and 2010 matter? To what extent does varying the 20% target reduction or the 2010 target date change the costs and other implications? These questions are associated with what has been termed the “short-term dynamics” of the transition between today’s economy and one in 2010 or beyond in which significant constraints on CO2 emissions (or incentives to reduce CO2 emissions) are in place. This paper reports the results of a set of analyses designed to address these questions. The analyses were carried out using the GEMINI energy-environmental market model developed by the EPA and DFI.

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