NEMS is able to model many policies currently under consideration because it has a fairly detailed transportation module embedded in the system—as workshop participants noted, the transportation sector is often treated separately, and thus models must account for, among other things, specific fuel economy requirements. NEMS’s modularity also allows its managers to work on particular modules as specific programs (e.g., CAFE standards) are modified. IGEM has a rich and detailed tax structure, which allows it to examine a variety of revenue recycling schemes and alternatives to a particular climate policy.
Tom Kram noted that in the Netherlands, MNP is receiving questions about economic impacts on low income groups; the Netherlands Economic Bureau no longer has a detailed sectoral model that might help analyze this, and so currently MNP is unable to assess specific impacts. He also noted that clients are interested in understanding the side benefits of taking action to reduce emissions, and that is represented in terms of import reductions and human health benefits as compared to direct costs (Figure 2).
When considering targeted use for allowance values, Dallas Burtraw suggested that much more work is needed to examine incentives in the second-best construct. There will be administrative costs, free riders, and missed opportunities in efficiency programs, and he wondered whether or not there are insights into effective mechanism design to incentivize investment in efficiency. On the role of state and local governments, he noted that most analyses are not sufficiently considering the impact of these subnational policies and practices. Issues ranging from local land use ordinances to the Regional Greenhouse Gas Initiative (RGGI) will undoubtedly influence the kinds of action taken on the ground. He also noted that incidence analysis is important, and that his model finds, for example, that the way in which allowance values are recycled largely determines who bears the burden of the program. In other