Econ 101 Analysis of Cap & Trade

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  1. Thanks for writing this out - much more cogent than my first attempt.

    The one thing I'm not sure it captures fully is the interaction with existing low-carbon energy technologies (as opposed to future innovations). The demand for total energy is inelastic in the short term, but the demand for carbon-based energy is probably more elastic because as prices climb higher, broader swathes of existing low-emission technologies (wind, solar, nuclear, etc.) become economically viable.


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