Cap and trade climate policy and U.S. economic adjustments

The Inter-temporal General Equilibrium Model (IGEM) explores the pathways through which modest climate policies affect the U.S. economy. Emphasis is on the mechanisms of adjustment. The economy-wide losses associated with these schemes are small with the energy sectors, particularly coal, hardest hit. The availability of lower cost offsets substantially reduces these losses arguing for allowing all verifiable, permanent and incremental options to compete as sources of abatement. A more inelastic trade-off between consumption and leisure also dramatically reduces policy costs. The presence of induced technical change (ITC) yields a small but measurable reduction in overall costs, particularly, for households. All rights reserved, Elsevier