20211209-IMF-Modeling_the_U.S._Climate_Agenda_Macro-Climate_Trade-offs_and_Considerations_37页_1mb

Modeling the U.S. Climate Agenda: Macro-Climate Trade-offs and Considerations

This paper analyzes the U.S. climate policy agenda, focusing on the effectiveness of subsidies versus carbon pricing, the economic and environmental trade-offs of decarbonizing the power sector, and the labor market impacts.

Key Findings:

1. Subsidies Alone Are Inefficient: Relying solely on subsidies for clean energy results in high fiscal costs and does not effectively reduce emissions. Even moderate carbon taxes significantly lower fiscal costs and are more efficient. R&D subsidies may have long-term benefits but do not replace explicit carbon pricing.

2. Early Power Sector Decarbonization: Prematurely transitioning to non-fossil fuels in the power sector (aiming for 90% non-fossil fuel by 2035) reduces emissions faster but incurs higher short-term economic costs. Delaying decarbonization increases cumulative emissions, worsening environmental outcomes. Early action reduces long-term fiscal and GDP costs.

3. Role of Regulation vs. Carbon Tax: Regulations (e.g., renewable portfolio standards) can drive decarbonization but are less efficient than carbon taxes, which better target emissions. Carbon taxes simplify administration and exploit complementary environmental and economic co-benefits.

4. Labor Displacement and Social Costs: Green transitions cause significant labor reallocation, with temporary job losses concentrated in fossil fuel-dependent sectors. Supportive fiscal policies are necessary to cushion these effects and facilitate labor movement to new sectors.

Policy Recommendations:

• Explicit carbon pricing should be combined with subsidies for greater effectiveness and lower fiscal costs.
• Decarbonization of the power sector should proceed as early as possible to align with climate goals and reduce long-term economic burdens.
• Labor market impacts must be addressed through targeted interventions, including skills retraining and geographic support.

The analysis underscores the importance of integrated policy approaches, considering both environmental and economic trade-offs.