The integration of energy policy models

Abstract In this paper we present an integrated model for the assessment of alternative U.S. energy policies, based on the Inter-Industry Model constructed by Hudson and Jorgenson and the Natural Gas Model constructed by MacAvoy and Pindyck. We first present the Inter-Industry Model and an outline of the computational techniques employed in implementing the model. We then describe the Natural Gas Model and the details of its implementation. We next present a methodology for integrating energy policy models. The methodology imposes certain consistency requirements on alternative models of the same phenomena. We apply this methodology to the incorporation of exploration and development and wellhead price regulation of natural gas into the integrated energy policy model. Finally, we present four policy simulations with the integrated model. These simulations are the four possible combinations of quotas on oil imports versus no quotas and phased deregulation of the price of natural gas versus no deregulation. Our simulation results support a policy of phased deregulation with no restrictions on oil imports.

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