RGGI Cost Benefit Analysis Subgroup Dwayne Breger MA Division of Energy Resources Economic Modeling Overview

Scope/Objectives Analysis of the state and regional economic impacts of the CO 2 cap-and-trade program and policy options. Evaluate co-benefits of air pollution emission changes that result from CO 2 program. Evaluate impact of CO 2 program on energy efficiency and renewable energy sectors. Cost-Benefit Analysis Subgroup

SWG has selected REMI Policy Insight as modeling tool NESCAUM will serve as Modeling Agent for RGGI MA DOER will provide modeling services to NESCAUM REMI will prepare a 12-state/region 53-sector model with input/output for each state and full region REMI Modeling Plan integrated with IPM Modeling –I/O data linkage –Policy Simulations follow IPM scenarios Economic Model Selection

Basic Economic Blocks in REMI Structure Population & Labor Supply Output Labor & Capital Demand Wages, Prices, & Profits Market Shares

Personal Income Gross State Product Employment, by sectors Imports/Exports – between RGGI states, and between RGGI region and outside Demographic changes Industry sector consumption/production Health Expenditures Sample Output from REMI

Integration of Energy and Economic Modeling Energy Model IPM * Model Economic Model REMI Policy Insight Existing Power Plants Transmission Constraints Demand Projections Fuel Price Projections New Plant Costs Electricity Prices Fuel Use Air Emissions New Plant Location & Investment Gross State Products Personal Income Employment Industry Sector Prod/Cons Health Costs Air Quality Analysis * Integrated Planning Model, ICF Consulting, Inc.

REMI Input Interface w/ IPM Key Energy Sector Outputs Electric Energy Prices wholesale (IPM) to retail (REMI) New Capacity Construction / Investment Fuel Consumption

REMI Modeling Key Scenarios Scenarios follow IPM Model Scenarios Benchmark and Reference Scenarios CO 2 Cap Level Policy, Structure, Flexibility Scenarios Model Rule Scenarios

Benchmark/Reference Scenarios Establish REMI Benchmark Scenario (economic projections w/o policies) –Compare/Calibrate REMI Results w/ IPM Energy/capacity growth ↔ economic growth Wholesale energy prices ↔ retail energy prices Establish Reference Policy Scenarios –Use output from IPM Reference Policy Scenarios

Policy Scenarios Economic projections with outputs from IPM Scenarios (compare economic impacts relative to reference scenario) –Cap Size –Flexibility Mechanisms –Model Rule –Allocation Strategies

Schedule for REMI Scenarios