Energy Efficiency

, Volume 12, Issue 2, pp 463–481 | Cite as

Carbon pricing and energy efficiency: pathways to deep decarbonization of the US electric sector

  • Marilyn A. BrownEmail author
  • Yufei Li
Original Article


Despite the commitment of the Paris agreement to pursue efforts to limit end-of-century global warming to 1.5°C above pre-industrial levels, few have studied mitigation pathways consistent with such a demanding goal. This paper uses a fully integrated engineering- economic model of the U.S. energy system, to explore the ability of the U.S. electricity sector to operate within a budget of 44 gigatons of CO2 (GtCO2) between 2016 and 2040 - almost 20 percent less than projected. Our modeling results suggest that carbon taxes coupled with strong energy-efficiency policies would produce synergistic effects that could meet deep decarbonization goals. Combining energy-efficiency initiatives with a $10/tCO2 tax rising to $27/tCO2 in 2040 (in $2013) would achieve the U.S. electric sector's carbon budget with a net savings to the U.S. economy. A $20/tCO2 tax rising to $53/tCO2 in 2040 would also stay below this budget, but it would cost more if not coupled with strong energy efficiency. U.S. regionswillwin or lose depending on their generationmix and how carbon tax revenues are recycled.


Carbon pricing Deep decarbonization Clean energy transition Energy efficiency Carbon tax recycling 



The valuable comments of three anonymous reviewers are greatly appreciated. Many colleagues and stakeholders contributed meaningfully to the development of this paper’s scenarios and the presentation of results, including Melissa Lapsa (Oak Ridge National Laboratory), Luis Martinez, Katie Southworth, and Starla Yeh (Natural Resources Defense Council), Joe Kruger (Resources for the Future), Charles Rossmann (Southern Company), Joe Hoagland (Tennessee Valley Authority), Meredith Wingate (Energy Foundation), Etan Gumerman, Brian Murray, David Hoppock, and Martin Ross (Duke University’s Nicholas Institute), and Dan Matisoff, Emanuele Massetti, Alice Favero, Gyungwon Kim, and Anmol Soni (Georgia Tech’s Climate and Energy Policy Lab). In addition, Laura Martin, Jeff Jones, and Erin Boedecker of the US Energy Information Administration and John Cymbalsky, Colin Cunliff, Erin Boyd, and Aaron Bergman of the US Department of Energy provided helpful advice on several key NEMS modeling issues. Last but not least, Liz Hyman provided excellent assistance with our graphics.

Funding information

This research received support from the Brook Byers Institute of Sustainable Systems at the Georgia Institute of Technology.

Compliance with ethical standards

Conflict of interest

The authors declare that they have no conflict of interest.

Supplementary material

12053_2018_9686_MOESM1_ESM.docx (393 kb)
ESM 1 (DOCX 393 kb)


  1. Arent, D., Tol, R. S. J., Faust, E., Hella, J. P., Kumar, S., Strzepek, K. M., Toth, F. L., & Yan, D. (2014). Key economic sectors and services. In C. B. Field, V. R. Barros, D. J. Dokken, K. J. Mach, M. D. Mastrandrea, T. E. Bilir, M. Chatterjee, K. L. Ebi, Y. O. Estrada, R. C. Genova, B. Girma, E. S. Kissel, A. N. Levy, S. MacCracken, P. R. Mastrandrea, & L. L. White (Eds.), Climate change 2014: impacts, adaptation, and vulnerability. Part A: global and sectoral aspects (pp. 659–708). Cambridge: Cambridge University Press.Google Scholar
  2. Arora, V., Daniels, D., Mead, I., & Tarver, R. (2018). EMF32 results from NEMS: revenue recycling. Climate Change Economics, 9(1) (14 pages)), 1840014.CrossRefGoogle Scholar
  3. Bailey and Bookbinder (2017). A winning trade, Climate Leadership Council,
  4. Baumol, W. J., & Oates, W. E. (1988). The theory of environmental policy (2nd ed.). Cambridge: Cambridge University Press.CrossRefGoogle Scholar
  5. Beck, M., Rivers, N., Wigle, R., & Yonezawa, H. (2015). Carbon tax and revenue recycling: impacts on households in British Columbia. Resource and Energy Economics, 41, 40–69. Scholar
  6. Bianco, Nicholas, Litz, F., Meek, K., and Gasper, R., 2013. Can the U.S. get there from here? Using existing federal laws and state action to reduce greenhouse gas emissions, World Resources Institute, (
  7. Bradley, M. J., & Associates LLC. (2016). EPA’s Clean Power Plan: summary of IPM modeling results. Boston: M.J. Bradley & Associates LLC.Google Scholar
  8. Brown, M. A. and B. K. Sovacool. (2014). Climate change and global energy security: technology and policy options, MIT Press.Google Scholar
  9. Brown, M. A., & Wang, Y. (2017). Energy-efficiency skeptics and advocates: the debate heats up as the stakes rise. Energy Efficiency, 10(5), 1155–1173 Scholar
  10. Brown, M. A., Levine, M. D., Short, W., & Koomey, J. G. (2001). Scenarios for a clean energy future. Energy Policy, 29, 1179–1196.CrossRefGoogle Scholar
  11. Brown, M.A., Matt Cox, and Rodrigo Cortes, 2010. Transforming industrial energy efficiency, The Bridge (Washington, DC: National Academy of Engineering), Fall, pp. 22–30.Google Scholar
  12. Brown, M.A., Cox, M., Sun, X. (2012). Making buildings part of the climate solution by pricing carbon efficiently, July 2012 working paper #69.
  13. Brown, Marilyn A., Gyungwon Kim, and Alexander M. Smith. (2016). The Clean Power Plan and Beyond, School of Public Policy, Georgia Institute of Technology, working paper #89,
  14. Brown, M. A., Smith, A., Kim, G., & Southworth, K. (2017). Exploring the impact of energy efficiency as a carbon mitigation strategy in the U.S. Energy Policy, 109, 249–259.CrossRefGoogle Scholar
  15. Burtraw, D., R. Sweeney & M. Walls. (2008). The incidence of U.S. climate policy: where you sit depends on where you stand
  16. Callan, T., Lyons, S., Scott, S., Tol, R. S. J., & Verde, S. (2009). The distributional implications of a carbon tax in Ireland. Energy Policy, 37, 407–412. Scholar
  17. Carbon Pricing Leadership Coalition (2017). Report of the high-level commission on carbon prices. Available at
  18. Chamberlain, A. (2009). Who pays for climate policy? New estimates of the household burden and economic impact of a U.S. cap-and-trade system
  19. Chen, Y., & Hafstead M.A.C. (2016). Using a carbon tax to meet U.S. international carbon pledges, Resources for the Future,
  20. Chesney, M., Gheyssens, J., Pana, A.C., and Taschini L. (2016). Environmental finance and investments (Springer), Second edition.Google Scholar
  21. Cox, M., Brown, M. A., & Sun, X. (2013). Energy benchmarking of commercial buildings: a low-cost pathway for urban sustainability. Environmental Research Letters, 8(3), 1–12 Scholar
  22. Dinan, T., & Rogers, D. L. (2002). Distributional effects of carbon allowance trading: how government decisions determine winners and losers. National Tax Journal, 55(2), 199–221.CrossRefGoogle Scholar
  23. Drehobl, A., Ross L. (2016). Lifting the high energy burden in America’s largest cities: how energy efficiency can improve low-income and underserved communities, American Council for an Energy-Efficiency Economy.Google Scholar
  24. Energy Information Administration (USEIA). (2017). Annual energy outlook, 2017. Washington, DC: Energy Information Administration.Google Scholar
  25. Enkvist, P. A., Dinkel, J., & Lin, C. (2010). Impact of the financial crisis on carbon economics: version 2.1 of the global greenhouse gas abatement cost curve. McKinsey & Company, 374.Google Scholar
  26. Feldstein, M., Halstead T., Gregory Mankiw N. (2017). A conservative case for climate action, Feb. 8, 2017, NY Times
  27. Goulder, L., & Parry, I. W. H. (2008). Instrument choice in environmental policy. Review of Environmental Economics and Policy, 2, 152–174.CrossRefGoogle Scholar
  28. Grainger, C. A. & C. D. Kolstad. (2010). Who pays a price on carbon? Environmental & Resource Economics. European Association of Environmental and Resource Economists 46: 359–376.Google Scholar
  29. Hanson, D. A., & Laitner, J. A. S. (2004). An investment analysis of policies that increase investments in advanced energy-efficient/low-carbon technologies. Energy Economics, 26(4), 739–755.CrossRefGoogle Scholar
  30. Hausker, K., Meek K., Gasper R., Aden N.,& Obeiter M. 2014. Delivering on the U.S. climate commitment (World Resources Institute working paper).Google Scholar
  31. Horowitz, J., Cronin, J.-A., Hawkins, H., Konda, L., & Yuskavage, A. (2017). Methodology for analyzing a carbon tax. Washington, DC: Office of Tax Analysis working paper 115.Google Scholar
  32. IEA, & IRENA (2017). Perspectives for energy transition: investment needs for a low-carbon energy system. Available at
  33. International Energy Agency (IEA). (2016). World energy outlook. Paris: International Energy Agency.CrossRefGoogle Scholar
  34. International Panel on Climate Change (IPCC) (2014a). Climate change 2014: synthesis report (eds. Pachauri, R. K. & Meyer, L. A.) (Cambridge Univ. Press, 2014).Google Scholar
  35. International Panel on Climate Change (IPCC). (2014b). Mitigation of climate change. Contribution of Working Group I to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change. Cambridge: Cambridge University Press.Google Scholar
  36. Kallakuri, Chetana, Shruti Vaidyanathan, Meegan Kelly, and Rachel Cluett. 2016. The 2016 International Energy Efficiency Scorecard Report (Washington, DC: American Council for an Energy Efficient Economy), Report E1602.Google Scholar
  37. Laitner, J. A. S., Nadel, S., Sachs, H., Neal Elliott, R., & Khan, S. (2012). The long-term energy efficiency potential: what the evidence suggests. ACEEE Research Report E104. Washington, DC: American Council for an Energy-Efficient Economy.Google Scholar
  38. Lashof, D., Yeh, S., Bryk, D., Carter, S., Doniger, D., Murrow, D., Johnson, L., 2014. Cleaner and cheaper: using the Clean Air Act to sharply reduce carbon pollution from existing power plants, delivering health, environmental, and economic benefits. Washington, DC: Natural Resources Defense Council. Retrieved from 〈〉.
  39. Liu, Y., & Lu, Y. (2015). The economic impact of different carbon tax revenue recycling schemes in China: a model-based scenario analysis. Applied Energy, 141, 96–105. Scholar
  40. Millar, R. J., Fuglestvedt, J. S., Friedlingstein, P., Rogelj, J., Grubb, M. J., Damon Matthews, H., Skeie, R. B., Forster, P. M., Frame, D. J., & Allen, M. R. (2017). Emission budgets and pathways consistent with limiting warming to 1.5°C. Nature Geoscience, 10, 741–747. Scholar
  41. Murray, B., & Rivers, N. (2015). British Columbia’s revenue-neutral carbon tax: a review of the latest grand experiment in environmental policy. Energy Policy, 86, 674–683. Scholar
  42. Pye, S., Li, F. G. N., Price, J., & Fais, B. (2017). Achieving net-zero emissions through the reframing of UK national targets in the post-Paris Agreement era. Nature Energy, 2, 17024.CrossRefGoogle Scholar
  43. Raupach, M. R., Davis, S. J., Peters, G. P., Andrew, R. M., Canadell, J. G., Ciais, P., Friedlingstein, P., Jotzo, F., van Vuuren, D. P., & Le Quere, C. (2014). Sharing a quota on cumulative carbon emissions. Nature Climate Change, 4(10), 873–879.CrossRefGoogle Scholar
  44. Rogelj, J., Luderer, G., Pietzcker, R. C., Kriegler, E., Schaeffer, M., Krey, V., & Riahi, K. (2015). Energy system transformations for limiting end-of-century warming to below 1.5°C. Nature Climate Change, 5, 519–527.CrossRefGoogle Scholar
  45. Shammin, M., & Bullard, C. (2009). Impact of cap-and-trade policies for reducing greenhouse gas emissions on U.S. households. Ecological Economics, 68, 2432–2438.CrossRefGoogle Scholar
  46. Siddiqui, O., & Dincer, I. (2017). Comparative assessment of the environmental impacts of nuclear, wind and hydro-electric power plants in Ontario: a life cycle assessment. Journal of Cleaner Production, 164, 848–860.CrossRefGoogle Scholar
  47. Stern, N. (2007). The economics of climate change: the stern review. Cambridge: Cambridge University Press.CrossRefGoogle Scholar
  48. Thomas, Stefan, Piet Boonekamp, Harry Vreuls, Jean-sébastien Broc, Didier Bosseboeuf, Bruno Lapillonne, and Nicola Labanca. 2012. How to measure the overall energy savings linked to policies and energy services at the national level? Energy Efficiency 5 (1). Dordrecht: Springer Science & Business Media: 19–35.
  49. Tol, R. S. J. (2013). The economic impact of climate change in the 20th and 21st centuries. Climatic Change, 117(4), 795–808 ISSN 0165-0009.CrossRefGoogle Scholar
  50. Tol, R. S. J. (2017). The structure of the climate debate. Energy Policy, 104, 431–438.CrossRefGoogle Scholar
  51. U.S. Environmental Protection Agency (USEPA) (2015a). Regulatory impact analysis for the proposed carbon pollution guidelines for existing power plants and emission standards for modified and reconstructed power plants.Google Scholar
  52. U.S. Environmental Protection Agency (USEPA) (2015b). Carbon pollution emission guidelines for existing stationary sources: electric utility generating units. Report no. EPA-HQ-OAR-2013- 0602.Google Scholar
  53. UNFCCC 2015a. Adoption of the Paris Agreement FCCC/CP/2015/L.9/Rev.1
  54. UNFCCC 2015b. Paris Agreement, Art 2.Google Scholar
  55. USEIA (2015). Assumptions to the Annual Energy Outlook 2015. Washington, DC: U.S. Energy Information Administration. Retrieved Scholar
  56. Wang, Y., & Brown, M. A. (2014). Policy drivers for improving electricity end-use efficiency in the U.S.: an economic-engineering analysis. Energy Efficiency, 7(3), 517–546.CrossRefGoogle Scholar

Copyright information

© Springer Science+Business Media B.V., part of Springer Nature 2018
corrected publication August/2018

Authors and Affiliations

  1. 1.Georgia Institute of TechnologyAtlantaUSA

Personalised recommendations