Estimating bounds on the economy-wide effects of the CEF policy scenarios

The Scenarios for a Clean Energy Future study relied primarily on "bottom-u p" technology-based methods to estimate costs associated with its scenarios . These methods, however, do not allow for calculation of economy-wide or g eneral equilibrium effects of the policies considered. We propose and apply a means of combining the bottom-up estimates with estimates of the costs a ssociated with a carbon charge obtained from computable general equilibrium models. Our approach is based on the concept of production inefficiency: t he economy lies within its production frontier with respect to the provisio n of energy services. The CEF technology policies are interpreted as moving the economy toward its frontier as well as moving the frontier outward, wh ile the carbon charge induces a substitution effect along the frontier. Thi s perspective allows a synthesis of the two sets of calculations. (C) 2001 Published by Elsevier Science Ltd.