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Nicholas Institute for Environmental Policy Solutions
September 2007

A Path to Greenhouse Gas Reductions in the United States: Economic Modeling of Interim National Targets

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A Path to Greenhouse Gas Reductions in the United States: Economic Modeling of Interim National Targets
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This study employs a computable general equilibrium model of the U.S. integrated into the global economy (ADAGE) and a detailed model of the U.S. energy sector (NI-NEMS) to examine the broad and deep economic implications of interim-term greenhouse gas cap-and-trade programs across sectors and regions of the U.S. economy over time. Interim target scenarios hold U.S. emissions to either 1990 or 2005 levels in the year 2020. These 2020 emission targes are in the range of those now being considered by the U.S. Congress, though several of the Congressional proposals call for continued cuts beyond 2020. This study therefore provides abounding assessment of the initial pathway to greenhouse gas reductions, one which can provide a first order assessment of "economic harm" and provides a platform for guaging implications of longer term cuts should they be applied. Results suggest rather modest macroeconomic impacts on the U.S. economy of greenhouse gas targets considered, though impacts tend to be concentrated, as expected, in the more energy intensive sectors.