Cost-effectiveness of climate change policies for the United States

This research project applies a hybrid energy-economy model to compare the cost-effectiveness of different climate change mitigation policies for the United States. Five policies are compared: (1) a technology regulation phasing out coal and natural gas generation, (2) Clean Electricity Standard, (3) Corporate Average Fuel Economy Standard, (4) Vehicles Emissions Standard, (5) economy-wide GHG tax. The cost of these policies is estimated using three different methodologies. The first methodology is the techno-economic cost (TEC) measure, representing a ‘bottom-up’ or engineering costing methodology. The second methodology is the perceived private cost (PPC) measure, representing the ‘top-down’ or economist costing methodology. The third methodology uses the previous two methods to make a “best estimate” of welfare costs, called the expected resource cost. Going by the expected resource cost measure, the study finds an economy-wide GHG tax is a quarter of the cost of two policy scenarios that implement tradable performance standards in the electricity and transportation sectors. For the electricity sector policies, the study finds that the clean electricity standard is 50% less costly than a technology regulation phasing out conventional coal and natural gas generation. For the transportation policies, the study finds that the Vehicle Emissions Standard is 15% less costly than the Corporate Average Fuel Economy Standard.