Panel Paper: A Comparative Analysis of the Macroeconomic Impacts of State Climate Action Plans

Thursday, November 7, 2013 : 3:40 PM
Plaza II (Ritz Carlton)

*Names in bold indicate Presenter

Adam Rose and Dan Wei, University of Southern California
More than thirty states currently have or are developing plans to mitigate greenhouse gas (GHG) emissions.  There has been considerable debate over whether these climate action plans are in fact job creators or job killers.  In this paper, we compare the macroeconomic impact analysis we have done for government agencies in five major states and regions over the past five years:  Florida, Michigan, Pennsylvania, New York, and Southern California.  We trace the evolution of these plans over time and identify how they have broadened to include a larger set of GHG mitigation options and an expanded government support role.  We also perform a sensitivity analysis on our Southern California results with respect to key factors that affect the macroeconomic outcome:  the price of natural gas and the capital and operating costs of renewable electricity generation alternatives.  In essence, we compare the results we obtained using 2012 values of the key variables with results that would have been obtained had the 2008 values continued through 2012.  We refine the Regional Economic Models, Inc., Policy Insight Plus (REMI PI+) Model to perform our analysis.  The REMI model is the most widely used macroeconometric modeling software package in the U.S. and is used by government agencies in nearly every state.  Macroeconometric forecasting models cover the entire economy, typically in a “top-down” manner, based on aggregate relationships such as consumption and investment.  The REMI Model differs in that it includes some key relationships, such as exports, in a bottom-up approach. The Model also brings into play features of input substitution, labor and capital markets, as well as trade with other states or countries, including changes in competitiveness factors.  The microeconomic inputs to the model are provided by expert stakeholder deliberations in each state to identify GHG mitigation options, determine their capabilities to reduce emissions, and estimate the direct cost of their implementation.

Full Paper: