Regional macroeconomic assessment of the Pennsylvania Climate Action Plan

Abstract

The Pennsylvania Climate Action Plan (CAP) is the culmination of a formal stakeholder process to specify policies and measures to mitigate emissions of greenhouse gases (GHGs). The implementation of technical and behavioural mitigation options will require changes in the way businesses and government operate, and the way households conduct their daily lives. An important question is whether the sum of all of these microeconomic changes and their interactions will be a stimulus to or a drain on the economy as whole. We apply the Regional Economic Models, Inc. Policy Insight Plus (REMI PI+) model in an innovative manner to analyse the impacts of major GHG mitigation options at the macroeconomic level in Pennsylvania for the policy horizon of 2009–2020. Our results indicate that the net impacts on the state's economy will be significantly positive. We also develop a reduced form econometric model based on the results and subject it to rigorous statistical testing. This is the first time an independent validation of this kind has been applied to the REMI Model in order to verify its simulation results. Resumen. El Plan de Acción sobre el Clima, en Pensilvania, es la culminación de un proceso formal de partes interesadas para definir políticas y medidas para mitigar las emisiones de gases de efecto invernadero (GEI). La implementación de opciones de mitigación técnicas y de comportamiento requerirán cambios en el modo de operar de las empresas y el gobierno, y en que los hogares actúan de manera cotidiana. Una pregunta importante es si la suma de todos estos cambios microeconómicos y sus interacciones serán un estímulo o una carga para la economía en su conjunto. Aplicamos el modelo REMI Policy Insight Plus (Regional Economic Models, Inc. PI+) de manera innovadora para analizar los impactos de las principales opciones de mitigación de GEI a nivel macroeconómico en Pensilvania para el horizonte de políticas 2009‐2020. Nuestros resultados indican que los impactos netos en la economía de este estado serán significativamente positivos. Desarrollamos asimismo un modelo econométrico de formato reducido basado en los resultados y lo sometimos a pruebas estadísticas rigurosas. Ésta es la primera vez que se realiza una validación independiente de este tipo al Modelo REMI para verificar los resultados de su simulación.

Intergovernmental climate change mitigation policies: theory and outcomes

“…This step involves the selection of appropriate variables and policy levers in the REMI PI + model to simulate the policy's changes. For further information, please see previous applications of the model to assess climate policy impacts (Miller et al 2010;Rose and Wei 2012;Rose et al 2011) and the online appendix of the Supplementary Material linked to this article.…”

“…Each modelling approach has its own strengths and weaknesses (see, e.g. Rose and Miernyk 1989; Partridge and Rickman 2010). After careful consideration of modelling criteria, such as accuracy, transparency, manageability and cost, we chose the REMI Policy Insight Plus (PI + ) modelling software (REMI 2009) to evaluate the macroeconomic impacts to the US from implementing the 23 GHG mitigation super-options across the states.…”

“…Further, it is comparable to CGE models in terms of analytical power and accuracy. This builds on our methodology developed in the analysis of the macroeconomic impacts of climate action plans in several major states (Rose and Wei 2009, 2012; Miller et al 2010; Rose et al, 2011, 2012; Wei and Rose 2011). More details on the REMI model can be found in the online appendix of the Supplementary Material linked to this article.…”

Distributional Impacts of Greenhouse Gas Emissions Trading: Alternative Allocation and Recycling Strategies in California

“…The REMI PI + model is superior to the others reviewed in terms of its forecasting ability and is comparable to CGE models in terms of analytical power and accuracy. Moreover, the research team has developed a methodology for applying the model successfully in aggregate analyses in the states of Florida, Pennsylvania, Michigan, and New Mexico (Rose and Wei forthcoming; Rose, Wei, and Dormady 2011; Miller, Wei, and Rose 2010; Rose, Wei, and Miller 2010).…”

Developing and Assessing Investment Options for Economic, Energy, and Climate Security Gains in the United States

“…To provide the critical GDP and employment results CCS has developed a Macroeconomic Screening Tool, which is derived from applications of the full Regional Economic Models Inc., (REMI) Policy Insight Plus (PI+) Model for four US state climate action plans (see, e.g., [10]- [13]). This tool provides fast and inexpensive predictions of impacts on employment and GDP for both energy and non-energy sector policies as an aide to policy selection and design.…”