Abstract:Discussion papers are research materials circulated by their authors for purposes of information and discussion. They have not necessarily undergone formal peer review.
“…To represent the very-short-run, where output prices cannot be changed but input prices rise and profits fall, the effect of a carbon tax is computed using a method that explicitly recognizes that some fuel inputs are not combusted but converted to other products and hence should not be subject to the CO 2 price. The details of our methodology are given in Adkins et al (2010) (EIA 2006), and the I-O value totals. Process emissions from cement production, limestone consumption, and natural gas production, together accounting for 87 percent of the total 104 million tons of CO 2 from process emissions in 2008, are also included.…”
Section: Implementation: Data and Model Constructionmentioning
confidence: 99%
“…The changes in industry prices reported here are essentially derived by computing the carbon content of the commodity inputs, adjusting for non-combustion uses. The involves computing a modified "Leontief inverse" as explained in Appendix A of Adkins et al (2010). 15 For the very-short-run and short-run time horizons, the effects on costs is given by the value of each intermediate input and the change in input prices due to the carbon price.…”
Section: Effects On Costs: Very-short-run Horizonmentioning
confidence: 99%
“…15 For the very-short-run and short-run time horizons, the effects on costs is given by the value of each intermediate input and the change in input prices due to the carbon price. The details are given in equation A21 in Appendix A of Adkins et al (2010). 16 While not labeled as an EITE in the interagency report, we include it in our calculations of EITE averages.…”
Section: Effects On Costs: Very-short-run Horizonmentioning
confidence: 99%
“…19 Looking first at the bottom row, which gives the weighted average results for the EITEs plus petroleum refining sectors, we see that the imposition of a 18 As noted in Section III, to determine the sales response, we estimated the elasticity of demand for each industry using the 29-sector, multi-region global model. These elasticities are given in Table B1 in Adkins et al (2010). 19 We define profits as the gross return to capital -i.e.…”
Section: Effects On Output: Very-short-run and Short-run Horizonsmentioning
confidence: 99%
“…sales revenue plus any applicable rebates, minus purchases of intermediate inputs and labor costs. See Appendix A in Adkins et al (2010).…”
Section: Effects On Output: Very-short-run and Short-run Horizonsmentioning
The effects of a carbon price on U.S. industries are likely to change over time as firms and customers gradually adjust to new prices. The effects will also depend on offsetting policies to compensate losers and the number of countries implementing comparable policies. We examine the effects of a $15/ton CO 2 price, including Waxman-Markey-type allocations, on a disaggregated set of industries, over four time horizons-the very-short-, short-, medium-, and long-runs-distinguished by the ability of firms to raise output prices, change their input mix, and reallocate capital. We find that if firms cannot pass on higher costs, the loss in profits in a number of energy-intensive trade-exposed (EITE) industries will be substantial. When output prices can rise to reflect higher energy costs, the reduction in profits is substantially smaller, and the offsetting policies in H.R. 2454 reduce output and profit losses even more. Over the medium-and long-terms, however, when more adjustments occur, the impact on output is more varied due to general equilibrium effects. We find that the use of the output-based rebates and other allocations in H.R. 2454 can substantially offset the output losses over all four time frames considered. Trade or "competitiveness" effects from the carbon price explain a significant portion of the fall in output for EITE sectors, but in absolute terms the trade impacts are modest and can be reduced or even reversed with the subsidies. The subsidies are less effective, however, in preventing emissions leakage to countries not adopting carbon policies. Roughly half of U.S. trade-related leakage to nonpolicy countries can be explained by changes in the volume of trade and the other half by higher emissions intensities induced by lower world fuel prices.
“…To represent the very-short-run, where output prices cannot be changed but input prices rise and profits fall, the effect of a carbon tax is computed using a method that explicitly recognizes that some fuel inputs are not combusted but converted to other products and hence should not be subject to the CO 2 price. The details of our methodology are given in Adkins et al (2010) (EIA 2006), and the I-O value totals. Process emissions from cement production, limestone consumption, and natural gas production, together accounting for 87 percent of the total 104 million tons of CO 2 from process emissions in 2008, are also included.…”
Section: Implementation: Data and Model Constructionmentioning
confidence: 99%
“…The changes in industry prices reported here are essentially derived by computing the carbon content of the commodity inputs, adjusting for non-combustion uses. The involves computing a modified "Leontief inverse" as explained in Appendix A of Adkins et al (2010). 15 For the very-short-run and short-run time horizons, the effects on costs is given by the value of each intermediate input and the change in input prices due to the carbon price.…”
Section: Effects On Costs: Very-short-run Horizonmentioning
confidence: 99%
“…15 For the very-short-run and short-run time horizons, the effects on costs is given by the value of each intermediate input and the change in input prices due to the carbon price. The details are given in equation A21 in Appendix A of Adkins et al (2010). 16 While not labeled as an EITE in the interagency report, we include it in our calculations of EITE averages.…”
Section: Effects On Costs: Very-short-run Horizonmentioning
confidence: 99%
“…19 Looking first at the bottom row, which gives the weighted average results for the EITEs plus petroleum refining sectors, we see that the imposition of a 18 As noted in Section III, to determine the sales response, we estimated the elasticity of demand for each industry using the 29-sector, multi-region global model. These elasticities are given in Table B1 in Adkins et al (2010). 19 We define profits as the gross return to capital -i.e.…”
Section: Effects On Output: Very-short-run and Short-run Horizonsmentioning
confidence: 99%
“…sales revenue plus any applicable rebates, minus purchases of intermediate inputs and labor costs. See Appendix A in Adkins et al (2010).…”
Section: Effects On Output: Very-short-run and Short-run Horizonsmentioning
The effects of a carbon price on U.S. industries are likely to change over time as firms and customers gradually adjust to new prices. The effects will also depend on offsetting policies to compensate losers and the number of countries implementing comparable policies. We examine the effects of a $15/ton CO 2 price, including Waxman-Markey-type allocations, on a disaggregated set of industries, over four time horizons-the very-short-, short-, medium-, and long-runs-distinguished by the ability of firms to raise output prices, change their input mix, and reallocate capital. We find that if firms cannot pass on higher costs, the loss in profits in a number of energy-intensive trade-exposed (EITE) industries will be substantial. When output prices can rise to reflect higher energy costs, the reduction in profits is substantially smaller, and the offsetting policies in H.R. 2454 reduce output and profit losses even more. Over the medium-and long-terms, however, when more adjustments occur, the impact on output is more varied due to general equilibrium effects. We find that the use of the output-based rebates and other allocations in H.R. 2454 can substantially offset the output losses over all four time frames considered. Trade or "competitiveness" effects from the carbon price explain a significant portion of the fall in output for EITE sectors, but in absolute terms the trade impacts are modest and can be reduced or even reversed with the subsidies. The subsidies are less effective, however, in preventing emissions leakage to countries not adopting carbon policies. Roughly half of U.S. trade-related leakage to nonpolicy countries can be explained by changes in the volume of trade and the other half by higher emissions intensities induced by lower world fuel prices.
Debate about the relationship between environmental limits and economic growth has been taking place for several decades. These arguments have re-emerged with greater intensity following advances in the understanding of the economics of climate change, increases in resource and oil prices and the re-emergence of the discussion about "peak oil". The economic pessimism created by the great recession of 2008-2012 has also put the spotlight back on the prospects for economic growth. This chapter provides a conceptual and synthetic analysis of the relationship between economic growth and environmental limits, including those imposed by climate change. It explores two related questions. Will environmental limits, including limits on the climate system, slow or even halt economic growth? If not, how will the nature of economic growth have to alter? It is concluded that continued economic growth is feasible and desirable, although not without significant changes in its characteristics. These changes need to involve ultimately the reduction of the rate of material output, with continued growth in value being generated by expansion in the 'intellectual economy'.
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