Goulder-Hafstead Energy-Environment-Economy (E3) CGE Model

The E3 CGE model is a multi-period, economy-wide general equilibrium model of the United States with international trade.

About the Model

The E3 CGE model is a multi-period, economy-wide general equilibrium model of the United States with international trade. Production is divided into multiple industries, with particular emphasis on energy-related industries such as crude oil extraction, natural gas extraction, coal mining, electric power (represented by four industries), petroleum refining, and natural gas distribution. Energy-related emissions projections are calibrated to match EIA AEO projections by fuel and sector.

The model is unique in its detailed tax treatment, which allows for interactions of environmental policy and pre-existing taxes on capital and labor, and its attention to capital dynamics, which are important for analyzing how policies impact the economy over time. The model predicts how emissions pricing affects national energy-use, carbon dioxide emissions, local air pollution emissions, the macro economy (GDP), industry (profits), and households (welfare).

In Confronting the Climate Challenge: US Policy Options, the model evaluated impacts of carbon taxes, cap-and-trade programs, federal clean energy standards, and increases in the federal gasoline tax.