Modeling Climate Change Policies in Canada and the U.S.: An Update

Abstract

In a report to the IETC in 2007, we described the set of CIMS models that would be used to simulate different climate policies in both the United States and Canada. This report will describe the various policies simulated in the two countries and describe the major results. Various climate change policy runs were simulated for the both the Canadian and U. S. economies: a U. S. equivalent carbon price of $60 and $120 implemented either slowly or rapidly define the slow-shallow, slow-deep, fast shallow, and fast-deep scenarios. And in addition, various other parameters were varied to see how sensitive the results were to changes in elasticities and underlying production costs. Trade in energy products (crude, refined petroleum products, natural gas and electricity) between Canada, the U. S., and Rest-of-World (ROW) required the solution of a complex set of 52 equations for each time period. This trade model will be described and sensitivity of the trade results to Armington elasticities reported. One interesting result is that there is “leakage” of emissions when Canada engages in carbon reduction policies and the U. S. does not such that the reduction of Canadian emissions is offset by higher U. S. emissions.