REMI Model Summary
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Summary of “The Economic, Climate, Fiscal, Power, and Demographic Impact of a National Fee-and-Dividend Carbon Tax” By REMI and Synapse Summary by Danny Richter, Ph.D. About the study: Citizens' Climate Education Corporation (CCEC) and Citizens' Climate Lobby (CCL) contracted a third party, Regional Economic Modeling, Inc. (REMI) to do a nation-wide study on the impact of its Fee and Dividend (FAD) policy . The policy modeled is not a p erfect representation of F AD (most obviously, F AD begins at $15 per ton whereas the study began at $10 per ton), but it is quite close, and accounts for the impact FAD's border tariff adjustment would have on the US economy. REMI used three models to do the study: (1) The Regional Energy Deployment System (ReEDS) built by the National Renewable Energy Laboratory and run by Synapse Energy Economics; (2) the Carbon Analysis T ool (CA T); an enhancement of the open-source CT AM model and populated by data from the US Energy Information Administration (EIA); and (3) REMI PI+, a proprietary dynamic model of subnational units of the United States’ economy whose methodology and equations are peer-reviewed and available to the pu blic. Output included impacts on 160 industries, nationally and regionally for the 9 “U.S. Census” regions commonly grouped together in a number of federal data sources and in the energy market forecasts from the EIA. Model results were able to estimate the effects of the policy on GDP, personal income, employment, prices, carbon dioxide emissions, mortality due to NOx and SOx emissions, revenues, monthly dividend amount, energy generation capacity by technology, energy generation by type, investment in power, population, and economic migration on bo th a regional and national level. Income and employment figures for each of 160 industry categories considered are included. These 160 industries encompass the entire e conomy. The results are all relative to a baseline case where there is no carbon tax (modeled by using the exact same set-up, with a $0/ton valu e for the carbon tax). In o ther words, all three models were run two times. Both times, the set-up was identical except for on e thing: the price of carbon was either $0 from 2016-2035, or was $10 per ton in 2016 and increased by $10 every year after that. Why should we trust REMI? CCL hired REMI because we are committed to quality data free of ideological taint that you might get from some think tanks. As its name suggests, REMI models regional economics. It does this well. Dr. George T reyz founded REMI in 1980, after working as an academic with Nobel Prize-winner Lawrence Klein and other pioneers in the field of econometric modeling. REMI's modeling products grew from Dr. T reyz's work on one of the first regional macroeconomic models ever created: the Massachusetts Economic Policy Analysis (MEP A) model. Close links to the upper echelons of academia have persisted throughout REMI's 3+ decad es of experience, resulting in several academic publications in journals such as the American Economic Review , the Review of Economics and Statistics, and the Journal of Regional Science .
Transcript of REMI Model Summary
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Summary of “The Economic, Climate, Fiscal, Power,
and Demographic Impact of a National
FeeandDi!idend Car"on Ta#$ %y &E'I and Synapse
Summary by Danny Richter, Ph.D.
("out the study)
Citizens' Climate Education Corporation (CCEC) and Citizens' Climate Lobby (CCL)contracted a third party, Reional Economic !odelin, "nc. (RE!") to do a nation#$ide study on the
impact o% its &ee and Diidend (&D) policy. he policy modeled is not a per%ect representation o%&D (most obiously, &D beins at *+ per ton $hereas the study bean at *+- per ton), but it isuite close, and accounts %or the impact &D's border tari%% ad/ustment $ould hae on the 0Seconomy. RE!" used three models to do the study1 (+) he Reional Enery Deployment System(ReEDS) built by the 2ational Rene$able Enery Laboratory and run by Synapse Enery Economics3(4) the Carbon nalysis ool (C)3 an enhancement o% the open#source C! model and populated by data %rom the 0S Enery "n%ormation dministration (E")3 and (5) RE!" P"6, a proprietarydynamic model o% subnational units o% the 0nited States7 economy $hose methodoloy and euationsare peer#reie$ed and aailable to the public. 8utput included impacts on +9- industries, nationallyand reionally %or the : ;0.S. Census< reions commonly rouped toether in a number o% %ederal datasources and in the enery mar=et %orecasts %rom the E".
!odel results $ere able to estimate the e%%ects o% the policy on >DP, personal income,employment, prices, carbon dio?ide emissions, mortality due to 28? and S8? emissions, reenues,monthly diidend amount, enery eneration capacity by technoloy, enery eneration by type,inestment in po$er, population, and economic miration on both a reional and national leel. "ncomeand employment %iures %or each o% +9- industry cateories considered are included. hese +9-industries encompass the entire economy.
he results are all relatie to a baseline case $here there is no carbon ta? (modeled by usin thee?act same set#up, $ith a *-@ton alue %or the carbon ta?). "n other $ords, all three models $ere runt$o times. Aoth times, the set#up $as identical e?cept %or one thin1 the price o% carbon $as either *-%rom 4-+9#4-5, or $as *+- per ton in 4-+9 and increased by *+- eery year a%ter that.
*hy should we trust &E'I+CCL hired RE!" because $e are committed to uality data %ree o% ideoloical taint that youmiht et %rom some thin= tan=s. s its name suests, RE!" models reional economics. "t does this$ell. Dr. >eore reyz %ounded RE!" in +:B-, a%ter $or=in as an academic $ith 2obel Prize#$innerLa$rence lein and other pioneers in the %ield o% econometric modelin. RE!"'s modelin productsre$ %rom Dr. reyz's $or= on one o% the %irst reional macroeconomic models eer created1 the!assachusetts Economic Policy nalysis (!EP) model. Close lin=s to the upper echelons o%academia hae persisted throuhout RE!"'s 56 decades o% e?perience, resultin in seeral academic publications in /ournals such as the American Economic Review, the Review of Economics and
Statistics, and the Journal of Regional Science.
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his e?perience and e?pertise is $hy priate and public entities %rom all across the politicalspectrum hae entrusted RE!" to do their analyses, and paid them $ell %or that e?pertise. hese %ormerclients include, but are not limited to1 the merican >as ssociation (>), the 2uclear Enery"nstitute (2E"), the 2ational &ederation o% "ndependent Ausiness (2&"A), the 2ational Educationssociation (2E), the "nternational Arotherhood o% eamsters, Aooz llen amilton, E (%ormerlyErnst and oun), PFC (%ormerly Price Faterhouse Coopers), and "C& "nternational. Li=e CCL and
CCEC, RE!" is truly nonpartisan."n that same spirit, CCL and CCEC did not attempt to in%luence the outcome o% the report in any$ay. "n %act, $e $ere e?cited $hen $e sa$ that not all the results $ere positie %or eery reion, because that spea=s to the interity o% the analysis. 8ur %irst priority is a liable $orld, and $e can't etthere $ithout an honest and clear#eyed ie$ o% the %acts.
Study ighlights)
• C84 emissions decline 55G
a%ter only +- years, and 4Ga%ter 4- relatie to baseline.
(&iure +)• 2ational employment increases
by 4.+ million /obs a%ter +-years, and 4.B million a%ter 4-years. his is more than a +Gincrease in total 0S employment$e don't et $ithout a carbonta?H (&iure 4)
• +5,--- lies are saed annually
a%ter +- years, $ith acumulatie 44I,--- merican
lies saed oer 4- years.(&iure 5)
• *I-#*B billion increase in >DP %rom 4-4- on, $ith a cumulatie increase in national >DP due
to &D o% *+.5I trillion.
• Size o% monthly diidend %or a %amily o% J $ith t$o adults in 4-4 K *4BB, and in 4-5 K *5:9.
nnually, this is *5,J9 per %amily o% J in 4-4 (*++4 per capita##children et diidend).
• Electricity prices pea= in 4-49, then start to decrease.
• !a?imum cost#o%#liin increase by 4-5 is +.I#4.G, dependin on reion.
• Real incomes increase by more than *-- per person in 4-4. his increase accounts %or cost
o% liin increases.
• Electricity eneration %rom coal is phased#out by 4-4.
• Aiest employment ains in healthcare, retail, and other serices (e?cludin public
administration). his is because people hae more money in their poc=ets to spend, and theseindustries are most boosted by consumer spendin.
• Reional >ross Product is steady or risin in B o% : reions.
Figure -1 ./S/ C01 emissions under &D (yello$) and $ithout acarbon ta? (blue). &D reduces 0S emissions to 9:G o% +::- leels by4-4, and to -G by 4-5.
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*hy a!en2t Pre!ious Studies Found Such Positi!e Impacts+
he ma/ority o% preious reports considerin a carbon ta? hae not modeled a completely
reenue#neutral carbon ta?, do not enision a policy $ith such an aressie rate o% increase, do nothae the same detail as RE!" can proide, do not consider a +--G diidend, and do not report health bene%its. Fhere reenue#neutrality $as modeled, a ;double#diidend< $as o%ten discoered in $hichcarbon emissions $ere reduced and economic output re$. s these preious studies hae hihlihted,includin a !ay 4-+5 study by the Conressional Audet 8%%ice (CA8), a carbon ta? $ithout reenue#recyclin is a completely di%%erent policy %rom a carbon ta? that does recycle reenue. he t$o policies, reenue#neutral carbon ta? and a carbon ta? $ithout reenue returned, should not be con%usedin terms o% their e%%ect on the economy.
&ailin to consider such a rapid rate o% increase in the carbon ta? has preented preious studies%rom realizin the manitude o% emissions reductions and scale o% economic bene%it reported in thisstudy. 8%ten, this $as because rates o% increase $ere not considered politically %easible. !ost other
models, run by academics or thin= tan=s, do not hae the detail proided by RE!". 8er the past 5decades, RE!"'s reional modelin techniues hae been re%ined, detail has been added, and%unctionality improed. hree decades o% such $or= and re%inement in the priate sector are $hat haeien it an unmatched leel o% detail and reliability di%%icult to replicate.
Despite these di%%erences in conception, the results o% RE!"'s $or= are larely consistent $ith preious studies in terms a bene%it to the economy, industry e%%ects, and emissions reductions. &ore?ample, the !ay 4-+5 CA8 study also stated that a $ell#desined carbon ta? could increase economicoutput and %ound a hypothetical *4- per ton carbon ta? scenario $ould result in an BG reduction inemissions at the national leel. "% held at that leel, RE!"'s model setup $ould hae %ound comparableresults.
Interpreting the &esults) Ta3ehome points
he biest ta=e#home %rom this study is that there is no economic arument aainst &ee andDiidend. "t creates /obs, ro$s the economy, saes lies, and ma=es mericans richer. "t does this$hile also reducin C84 emissions to 9:G o% +::- leels by 4-4, and -G o% +::- leels by 4-5.
&D there%ore sets the ne$ standard %or climate and economic policy. 8ther policies must no$compare their climate and economic impact aainst &D. o be aainst doin anythin is to be aainst /obs, aainst a larer economy, and aainst sain merican lies. Fe =no$ o% no politician $ho $antsto be aainst these thins, and so $e hope that this study $ill clear the $ay to rapid passae o% &D.
Revision 3: June 5, 2014
Figure 11 Thousands of 4o"s created by &D relatie to thecase $ithout a carbon ta?. 8er a million /obs created $ithinJ years, oer 4 million $ithin : years.
Figure 51 Cumulati!e li!es sa!ed %rom aoided emissions by reion under &D. Reion E2C, includin 8hio, "ndiana,!ichian, "llinois, and Fisconsin, has the most lies saed.44I,--- merican lies $ould be saed in 4- years under&D.
