Stochastic Emissions Projection Tool (SEPT)

The Stochastic Emissions Projection Tool (SEPT) is a simple reduced-form model used to project emissions paths through 2050 with and without emissions pricing. The projection tool, calibrated to the E3 CGE model, uniquely considers the uncertainty in both annual and cumulative emissions given an emissions pricing path by introducing trend uncertainty in the growth rates in GDP and emissions intensity (emissions per unit of GDP), cyclical uncertainty in GDP and emissions intensity, and uncertainty in the elasticity of emissions intensity with respect to the emissions price. The tool is used to quantify the level of emissions uncertainty under carbon taxes and to evaluate automatic Tax Adjustment Mechanisms – mechanisms designed to automatically increase the tax rate if emissions are too high relative to an expected emissions path. The model is currently calibrated to project US national emissions, but can be easily calibrated to project emissions from other countries or regions within the US.