Impacts of Market-based Climate Change Policy on the US Iron and Steel Industry

Market-based climate change policy instruments have frequently been proposed as efficient means to stimulate industrial energy efficiency improvements and to reduce carbon emissions. This paper presents an assessment of the impacts that energy taxes and policies that increase cost of carbon may have on energy use and emission profiles of the US iron and steel industry. Time series data and engineering information are combined to endogenously specify changes in technologies, fuel mix, and production processes within a dynamic computer model. The results of the model indicate that energy taxes are likely to shift a slightly larger share of production to the electric arc furnace route and reduce total energy use more than combarable climate change policies that raise costs of carbon. However, both energy taxes and costs of carbon will result in a similar decrease in carbon emissions when compared to the absence of those policies.