Climate policy works through incentives — a high enough carbon price and generous enough subsidy together bend sector emissions down faster than either alone.
emissions ~ baseline * exp(-tax * elasticity) * (1 - subsidy_effect)
- Grid resolution — sectors/regions the policy model is evaluated across.
- Subsidy coverage — share of clean-energy investment covered by government subsidy.
- Carbon tax level — price per tonne of CO2 charged to emitters.
- Policy compliance — how effectively the tax and subsidy are actually enforced and taken up.
Carbon-pricing schemes from the EU ETS to British Columbia's carbon tax show emissions elasticity to price exactly like this field's response curve.