The macroeconomic cost of catastrophic pollinator declines

We develop a computable general equilibrium (CGE) approach to assess the macroeconomic impacts of productivity shocks due to catastrophic losses of pollination ecosystem services at global and regional scales. In most regions, producers of pollinator dependent crops end up benefiting because direct output losses are outweighed by increased prices, while non-agricultural sectors experience large adverse indirect impacts, resulting in overall losses whose magnitudes vary substantially. By comparison, partial equilibrium analyses tend to overstate the costs to agricultural producers, understate aggregate economy-wide losses, and overstate the impacts on consumers' welfare. Our results suggest an upper bound on global willingness to pay for agricultural pollination services of $127–$152 billion

A Forward Looking Version of the MIT Emissions Prediction and Policy Analysis (EPPA) Model

Abstract and PDF report are also available on the MIT Joint Program on the Science and Policy of Global Change website (http://globalchange.mit.edu/).This paper documents a forward looking multi-regional general equilibrium model developed from the latest version of the recursive-dynamic MIT Emissions Prediction and Policy Analysis (EPPA) model. The model represents full inter-temporal optimization (perfect foresight), which makes it possible to better address economic and policy issues such as borrowing and banking of GHG allowances, efficiency implications of environmental tax recycling, endogenous depletion of fossil resources, international capital flows, and optimal emissions abatement paths among others. It was designed with the flexibility to represent different aggregations of countries and regions, different horizon lengths, as well as the ability to accommodate different assumptions about the economy, in terms of economic growth, foreign trade closure, labor leisure choice, taxes on primary factors, vintaging of capital and data calibration. The forward-looking dynamic model provides a complementary tool for policy analyses, to assess the robustness of results from the recursive EPPA model, and to illustrate important differences in results that are driven by the perfect foresight behavior. We present some applications of the model that include the reference case and its comparison with the recursive EPPA version, as well as some greenhouse gas mitigation cases where we explore economic impacts with and without inter-temporal trade of permits.This research was supported by the U.S Department of Energy, U.S. Environmental Protection Agency, U.S. National Science Foundation, U.S. National Aeronautics and Space Administration, U.S. National Oceanographic and Atmospheric Administration; and the Industry and Foundation Sponsors of the MIT Joint Program on the Science and Policy of Global Change: Alstom Power (USA), American Electric Power (USA), A.P. Møller-Maersk (Denmark), Cargill (USA), Chevron Corporation (USA), CONCAWE & EUROPIA (EU), DaimlerChrysler AG (USA), Duke Energy (USA), Electric Power Research Institute (USA), Electricité de France, Enel (Italy), Eni (Italy), Exelon Power (USA), ExxonMobil Corporation (USA), Ford Motor Company (USA), General Motors (USA), Iberdrola Generacion (Spain), J-Power (Japan), Merril Lynch (USA), Murphy Oil Corporation (USA), Norway Ministry of Petroleum and Energy, Oglethorpe Power Corporation (USA), RWE Power (Germany), Schlumberger (USA),Shell Petroleum (Netherlands/UK), Southern Company (USA), StatoilHydro (Norway), Tennessee Valley Authority (USA), Tokyo Electric Power Company (Japan), Total (France), G. Unger Vetlesen Foundation (USA)

Economics of irrigation water management : a literature survey with focus on partial and general equilibrium models

Water policy is an important topic on the agenda of the international community, and efficiency and equity in the allocation of water have emerged as important factors to be considered. Water pricing can be used to mitigate both the quantity and quality dimensions of water scarcity. This paper reviews partial equilibrium models and general equilibrium models that are relevant to irrigation water management issues. The most widely discussed issues in these models are water markets and water pricing. The interrelationships between economic, cultural, social, and political aspects that are related to water policy make it difficult to provide a comprehensive policy analysis. General equilibrium models of irrigation water management allow incorporation of both the irrigation sector and the other sectors in the economy and analysis of policies affecting each of them and the interaction between them. In addition to being able to address sector and household specifications, production factors, time horizon, pricing policies, and institutions such as water markets, general equilibrium models allow the analysis of the impact of water policies on equity and poverty alleviation. The authors conclude that, although there has been a significant increase in efforts to analyzewater related problems, analytical and empirical research in the field is still deficient and more effort is needed to address them.Environmental Economics&Policies,Water Supply and Sanitation Governance and Institutions,Town Water Supply and Sanitation,Water Supply and Systems,Water Conservation

Distributional Impacts of a U.S. Greenhouse Gas Policy: A General Equilibrium Analysis of Carbon Pricing

Abstract and PDF report are also available on the MIT Joint Program on the Science and Policy of Global Change website (http://globalchange.mit.edu/).We develop a new model of the U.S., the U.S. Regional Energy Policy (USREP) model that is resolved for large states and regions of the U.S. and by income class and apply the model to investigate a $15 per ton CO2 equivalent price on greenhouse gas emissions. Previous estimates of distributional impacts of carbon pricing have been done outside of the model simulation and have been based on energy expenditure patterns of households in different regions and of different income levels. By estimating distributional effects within the economic model, we include the effects of changes in capital returns and wages on distribution and find that the effects are significant and work against the expenditure effects. We find the following: First, while results based only on energy expenditure have shown carbon pricing to be regressive we find the full distributional effect to be neutral or slightly progressive. This demonstrates the importance of tracing through all economic impacts and not just focusing on spending side impacts. Second, the ultimate impact of such a policy on households depends on how allowances, or the revenue raised from auctioning them, is used. Free distribution to firms would be highly regressive, benefiting higher income households and forcing lower income households to bear the full cost of the policy and what amounts to a transfer of wealth to higher income households. Lump sum distribution through equal-sized household rebates would make lower income households absolutely better off while shifting the costs to higher income households. Schemes that would cut taxes are generally slightly regressive but improve somewhat the overall efficiency of the program. Third, proposed legislation would distribute allowances to local distribution companies (electricity and natural gas distributors) and public utility commissions would then determine how the value of those allowances was used. A significant risk in such a plan is that distribution to households might be perceived as lowering utility rates That reduced the efficiency of the policy we examined by 40 percent. Finally, the states on the coasts bear little cost or can benefit because of the distribution of allowance revenue while mid-America and southern states bear the highest costs. This regional pattern reflects energy consumption and energy production difference among states. Use of allowance revenue to cut taxes generally exacerbates these regional differences because coastal states are also generally higher income states, and those with higher incomes benefit more from tax cuts.MIT Joint Program on the Science and Policy of Global Change through a combination of government, industry, and foundation funding, the MIT Energy Initiative, and additional support for this work from a coalition of industrial sponsors

Directed Technical Change and Climate Policy

Abstract in HTML and technical report in PDF available on the Massachusetts Institute of Technology Joint Program on the Science and Policy of Global Change website (http://mit.edu/globalchange/www/).This paper studies the cost effectiveness of climate policy if there are technology externalities. For this purpose, we develop a forward-looking CGE model that captures empirical links between CO2 emissions associated with energy use, directed technical change and the economy. We find the cost-effective climate policy to include a combination of R&D subsidies and CO2 emission constraints, although R&D subsidies raise the shadow value of the CO2 constraint (i.e. CO2 price) because of a strong rebound effect from stimulating innovation. Furthermore, we find that CO2 constraints differentiated toward CO2-intensive sectors are more cost effective than constraints that generate uniform CO2 prices among sectors. Differentiated CO2 prices, through technical change and concomitant technology externalities, encourage growth in the non-CO2 intensive sectors and discourage growth in CO2-intensive sectors. Thus, it is cost effective to let the latter bear relatively more of the abatement burden. This result is robust to whether emission constraints, R&D subsidies or combinations of both are used to reduce CO2 emissions

The MIT Emissions Prediction and Policy Analysis (EPPA) Model: Version 4

Abstract in HTML and technical report in PDF available on the Massachusetts Institute of Technology Joint Program on the Science and Policy of Global Change website (http://mit.edu/globalchange/www/).The Emissions Prediction and Policy Analysis (EPPA) model is the part of the MIT Integrated Global Systems Model (IGSM) that represents the human systems. EPPA is a recursive-dynamic multi-regional general equilibrium model of the world economy, which is built on the GTAP dataset and additional data for the greenhouse gas and urban gas emissions. It is designed to develop projections of economic growth and anthropogenic emissions of greenhouse related gases and aerosols. The main purpose of this report is to provide documentation of a new version of EPPA, EPPA version 4. In comparison with EPPA3, it includes greater regional and sectoral detail, a wider range of advanced energy supply technologies, improved capability to represent a variety of different and more realistic climate policies, and enhanced treatment of physical stocks and flows of energy, emissions, and land use to facilitate linkage with the earth system components of the IGSM. Reconsideration of important parameters and assumptions led to some revisions in reference projections of GDP and greenhouse gas emissions. In EPPA4 the global economy grows by 12.5 times from 2000 to 2100 (2.5% per year) compared with an increase of 10.7 times (2.4% per year) in EPPA3. This is one of the important revisions that led to an increase in CO2 emissions to 25.7 GtC in 2100, up from 23 GtC in 2100 projected by EPPA3. There is considerable uncertainty in such projections because of uncertainty in various driving forces. To illustrate this uncertainty we consider scenarios where the global GDP grows 0.5% faster (slower) than the reference rate, and these scenarios result in CO2 emissions in 2100 of 34 (17) GtC. A sample greenhouse gas policy scenario that puts the world economy on a path toward stabilization of atmospheric CO2 at 550 ppmv is also simulated to illustrate the response of EPPA4 to a policy constraint.This research was supported by the U.S Department of Energy, U.S. Environmental Protection Agency, U.S. National Science Foundation, U.S. National Aeronautics and Space Administration, U.S. National Oceanographic and Atmospheric Administration; and the Industry and Foundation Sponsors of the MIT Joint Program on the Science and Policy of Global Change: Alstom Power (France), American Electric Power (USA), BP p.l.c. (UK/USA), Chevron Corporation (USA), CONCAWE (Belgium), DaimlerChrysler AG (Germany), Duke Energy (USA), J-Power (Japan), Electric Power Research Institute (USA), Electricité de France, ExxonMobil Corporation (USA), Ford Motor Company (USA), General Motors (USA), Murphy Oil Corporation (USA), Oglethorpe Power Corporation (USA), RWE Power (Germany), Shell Petroleum (Netherlands/UK), Southern Company (USA), Statoil ASA (Norway), Tennessee Valley Authority (USA), Tokyo Electric Power Company (Japan), Total (France), G. Unger Vetlesen Foundation (USA)

Energy Biased Technical Change: A CGE Analysis

This paper studies energy bias in technical change. For this purpose, we develop a computable general equilibrium model that builds on endogenous growth models. The model explicitly captures links between energy, the rate and direction of technical change, and the economy. We derive the equilibrium determinants of biased technical change and show the importance of feedback in technical change, substitution possibilities between final goods, and general-equilibrium effects for the equilibrium bias. If the feedback effect is strong, or the substitution elasticity large, or both, our model tends to a corner solution in which only technologies are developed that are appropriate for production of non-energy intensive goods.Computable general-equilibrium models, Endogenous technical change, Energy, Environment

The countryside in urbanized Flanders: towards a flexible definition for a dynamic policy

The countryside, the rural area, the open space, … many definitions are used for rural Flanders. Everyone makes its own interpretation of the countryside, considering it as a place for living, working or recreating. The countryside is more than just a geographical area: it is an aggregate of physical, social, economic and cultural functions, strongly interrelated with each other. According to international and European definitions of rural areas there would be almost no rural area in Flanders. These international definitions are all developed to be used for analysis and policy within their specific context. They are not really applicable to Flanders because of the historical specificity of its spatial structure. Flanders is characterized by a giant urbanization pressure on its countryside while internationally rural depopulation is a point of interest. To date, for every single rural policy initiative – like the implementation of the European Rural Development Policy – Flanders used a specifically adapted definition, based on existing data or previously made delineations. To overcome this oversupply of definitions and delineations, the Flemish government funded a research project to obtain a clear and flexible definition of the Flemish countryside and a dynamic method to support Flemish rural policy aims. First, an analysis of the currently used definitions of the countryside in Flanders was made. It is clear that, depending on the perspective or the policy context, another definition of the countryside comes into view. The comparative study showed that, according to the used criteria, the area percentage of Flanders that is rural, varies between 9 and 93 per cent. Second, dynamic sets of criteria were developed, facilitating a flexible definition of the countryside, according to the policy aims concerned. This research part was focused on 6 policy themes, like ‘construction, maintenance and management of local (transport) infrastructures’ and ‘provision of (minimum) services (education, culture, health care, …)’. For each theme a dynamic set of criteria or indicators was constructed. These indicators make it possible to show where a policy theme manifests itself and/or where policy interventions are possible or needed. In this way every set of criteria makes up a new definition of rural Flanders. This method is dynamic; new data or insights can easily be incorporated and new criteria sets can be developed if other policy aims come into view. The developed method can contribute to a more region-oriented and theme-specific rural policy and funding mechanism