March 6, 2011

General Equilibrium, Electricity Generation Technologies and the Cost of Carbon Abatement

by Lanz, B., and S. Rausch

- Electricity generation is a major contributor to carbon dioxide emissions, and a key determinant of abatement costs. Ex-ante assessments of carbon policies mainly rely on either of two modeling paradigms: (i) partial equilibrium models of the electricity sector that use bottom-up engineering data on generation technology costs, and (ii) multi-sector general equilibrium models that represent economic activities with smooth top-down aggregate production functions. In this paper, we examine the structural assumptions of these numerical techniques using a suite of models sharing common technological features and calibrated to the same benchmark data.

Lanz, B., and S. Rausch (2011). "General Equilibrium, Electricity Generation Technologies and the Cost of Carbon Abatement." MIT Joint Program Report Series, Report No. 194, Feb 2011.