Evolutionary macroeconomic assessment of employment and innovation impacts of climate policy packages

Climate policy has been mainly studied with economic models that assume representative, rational agents. Such policy aims, though, at changing carbon-intensive consumption and production patterns driven by bounded rationality and other-regarding preferences, such as status and imitation. To examine climate policy under such alternative behavioral assumptions, we develop a model tool by adapting an existing general-purpose macroeconomic multi-agent model. The resulting tool allows testing various climate policies in terms of combined climate and economic performance. The model is particularly suitable to address the distributional impacts of climate policies, not only because populations of many agents are included, but also as these are composed of different classes of households. The approach accounts for two types of innovations, which improve either the carbon or labor intensity of production. We simulate policy scenarios with distinct combinations of carbon taxation, a reduction of labor taxes, subsidies for green innovation, a price subsidy to consumers for less carbon-intensive products, and green government procurement. The results show pronounced differences with those obtained by rational-agent model studies. It turns out that a supply-oriented subsidy for green innovation, funded by the revenues of a carbon tax, results in a significant reduction of carbon emissions without causing negative effects on em ployment. On the contrary, demand-oriented subsidies for adopting greener technologies, funded in the same manner, result in either none or considerably less re- duction of carbon emissions and may even lead to higher unemployment. Our study also contributes insight on a potential double dividend of shifting taxes from labor to carbon

Testing innovation, employment and distributional impacts of climate policy packages in a macro-evolutionary systems setting

Climate policy has been mainly studied with economic models that assume representative, rational agents. However, it aims at changing behavior associated with carbon-intensive goods that are often subject to bounded rationality and social preferences, such as status and imitation. Here we use a macroeconomic multi-agent model with such features to test the effect of various policies on both environmental and economic performance. The model is particularly suitable to address distributional impacts of climate policies, not only because populations of many agents are included, but also as these are composed of different classes of households driven by specific motivations. We simulate various policy scenarios, combining in different ways a carbon tax, a reduction of labor taxes, subsidies for green innovation, a price subsidy to consumers for less carbon-intensive products, and green government procurement. The results show pronounced differences with those obtained by rational-agent model studies. It turns out that demand-oriented subsidies lead to lower unemployment and higher output, but perform less well in terms of carbon emissions. The supply-oriented subsidy for green innovation results in a significant reduction of carbon emissions with a slight reduction of unemployment.Series: WWWforEurop

A review of agent-based modelling of climate-energy policy

Unidad de excelencia María de Maeztu CEX2019-000940-MAltres ajuts: Russian Science Foundation. Grant Number: 19-18-00262Agent-based models (ABMs) have recently seen much application to the field of climate mitigation policies. They offer a more realistic description of micro behaviour than traditional climate policy models by allowing for agent heterogeneity, bounded rationality and non-market interactions over social networks. This enables the analysis of a broader spectrum of policies. Here, we review 61 ABM studies addressing climate-energy policy aimed at emissions reduction, product and technology diffusion, and energy conservation. This covers a broad set of instruments of climate policy, ranging from carbon taxation and emissions trading through adoption subsidies to information provision tools such as smart meters and eco-labels. Our treatment pays specific attention to behavioural assumptions and the structure of social networks. We offer suggestions for future research with ABMs to answer neglected policy question

A Climate-Change Policy Induced Shift from Innovations in Energy Production to Energy Savings

We develop an endogenous growth model with capital, labor and energy as production factors and three productivity variables that measure accumulated innovations for energy production, energy savings, and neutral growth. All markets are complete and perfect, except for research, for which we assume that the marginal social value exceeds marginal costs by factor four. The model constants are calibrated so that the model reproduces the relevant trends over the 1970-2000 period. The model contains a simple climate module, and is used to assess the impact of Induced Technological Change (ITC) for a policy that aims at a maximum level of atmospheric CO2 concentration (450 ppmv). ITC is shown to reduce the required carbon tax by about a factor 2, and to reduce costs of such a policy by about factor 10. Numerical simulations show that knowledge accumulation shifts from energy production to energy saving technology.Induced technological change, Environmental taxes, Partial equilibrium

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

Cultural landscapes and behavioral transformations:An agent-based model for the simulation and discussion of alternative landscape futures in East Lesvos, Greece

Agricultural intensification and abandonment have been identified as two of the more prominent and polarizing drivers of landscape change in Europe. These transitions may induce deterioration in landscape functioning and character, particularly in cultural landscapes demonstrative of evolving human-environment dynamics that have sustained environmental benefits through time. Cultural and behavioral motives are important root influences to such landscape transitions, yet efforts to address landscape degradation are often hampered by a failure to account for the heterogeneous decision-making nature of its agents of change and the inherent complexity of socio-ecological systems. Novel techniques are required to further disentangle responses to multi-level drivers and discuss alternative landscape development trajectories. Agent-based models constructed by means of participatory approaches present increasingly applied tools in this context. This study sought to capture and model the future perspectives emerging from presently occurring farming discourses in the region of Gera (Lesvos, Greece), characterized by persistent abandonment of its traditionally managed olive plantations. We constructed an agent-based model iteratively in collaboration with the local farming community and experts in landscape research. Empirical findings informed the model through the construction of a farmer typology, revealing a heavy reliance of the farming community upon sectorial profitability, prevalent cultural farming motives and emerging landscape initiatives. The model examined the de-coupled role of agricultural profitability and landscapes initiatives in shaping the behavior of land managers, mapping alternative landscape futures over a period of 25 years. Model results illustrate both increased profitability and action by landscape initiatives are required to reverse abandonment trends within the simulated time frame. The hypothesized ability of landscape initiatives to maintain and promote a cultural drive amongst adhering farmers is crucial for securing behavioral transformations towards professionalism. This study confirmed agent-based modelling to be intuitively received by stakeholders who significantly contributed to model structure refinement and the rejection of a status quo scenario

Simulating the Effects of a Green Payment Program on the Diffusion Rate of a Conservation Technology

The decision to adopt a potentially profitable but unfamiliar conservation technology is cast in a multi-period Bayesian framework. Specifically, dairy farmers who are both risk-averse and susceptible to peer group influence progressively learn about the true impact of adopting reduced phosphorus dairy diets on their income distributions as they repeatedly experiment with this new technology. Empirically calibrated simulations are used to examine the effects of a voluntary green payment program on the rate of technological diffusion. Results suggest that (a) green payments can accelerate learning and produce significant, permanent changes in behavior relatively quickly and for a reasonable cost; (b) shorter contracts offering larger incentives may be more cost-effective when learning plays an important role in behavioral change; and (c) unknown prior beliefs can reduce the efficacy of a green payment program, implying efforts to verify these priors or to ensure against them by increasing the payment level may be worthwhile.Environmental Economics and Policy,