Technology strategies for low-carbon economic growth: a general equilibrium assessment

This paper investigates the potential for developing countries to mitigate greenhouse gas emissions without slowing their expected economic growth. A theoretical frame- work is developed that unifies bottom-up marginal abatement cost curves and partial equilibrium techno-economic simulation modeling with computational general equilibrium (CGE) modeling. The framework is then applied to engineering assessments of energy efficiency technology deployments in Armenia and Georgia. The results facilitate incorporation of bottom-up technology detail on energy-efficiency improvements into a CGE simulation of the economy-wide economic costs and mitigation benefits of technology deployment policies. Low-carbon growth trajectories are feasible in both countries, enabling reductions of up to 4 percent of baseline emissions while generating slight increases in GDP (1 percent in Armenia and 0.2 percent in Georgia). The results demonstrate how MAC curves can paint a misleading picture of the true potential for both abatement and economic growth when technological improvements operate within a system of general equilibrium interactions, but also highlight how using their underlying data to identify technology options with high opportunity cost elasticities of productivity improvement can lead to more accurate assessments of the macroeconomic consequences of technology strategies for low-carbon growth.http://documents.worldbank.org/curated/en/279241468256026769/Technology-strategies-for-low-carbon-economic-growth-a-general-equilibrium-assessmentPublished versio

RANGELAND FIRES IN NORTHERN NEVADA: AN APPLICATION OF COMPUTABLE GENERAL EQUILIBRIUM MODELING

Resource /Energy Economics and Policy,

COMPUTABLE GENERAL EQUILIBRIUM MODELING OF RANGELAND FIRES IN NORTHERN NEVADA

Resource /Energy Economics and Policy,

Measuring Welfare Loss Caused by Air Pollution in Europe: A CGE Analysis

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/).To evaluate the socio-economic impacts of air pollution, we develop an integrated approach based on computable general equilibrium (CGE). Applying our approach to Europe shows that even there, where air quality is relatively high compared with other parts of the world, health-related damages caused by air pollution are substantial. We estimate that in 2005, air pollution in Europe caused a consumption loss of around 220 billion Euro (year 2000 prices, around 3 percent of consumption level) and a social welfare loss of around 370 billion Euro, measured as the sum of lost consumption and leisure (around 2 percent of welfare level). In addition, we estimated that a set of 2020-targeting air quality improvement policy scenarios, which are proposed in the 2005 CAFE program, would bring 18 European countries as a whole a welfare gain of 37 to 49 billion Euro (year 2000 prices) in year 2020 alone.This study received support from the MIT Joint Program on the Science and Policy of Global Change, which is funded by a consortium of government, industry and foundation sponsors

SECTORAL EFFECTS OF A WORLD OIL PRICE SHOCK: ECONOMYWIDE LINKAGES TO THE AGRICULTURAL SECTOR

The effects of a world oil price shock on U.S. agriculture are analyzed in an economywide environment. We use an input-output model to analyze the direct and indirect cost linkages between energy and other sectors of the economy. Then, to allow sectoral output adjustment and the effects on the U.S. current account, we use the U.S. Department of Agricultural/Economic Research Service Computable General Equilibrium (CGE) model to analyze the sectoral effects under three different macro adjustment scenarios. The effects on agriculture are not limited to the direct and indirect energy costs and government support programs for agricultural also matter.Agricultural Finance, Resource /Energy Economics and Policy,

The Synthesis of Bottom-Up and Top-Down Approaches to Climate Policy Modeling: Electric Power Technologies and the Cost of Limiting U.S. CO2 Emissions

In the U.S., the bulk of CO2 abatement induced by carbon taxes comes from electric power. This paper incorporates technology detail into the electricity sector of a computable general equilibrium model of the U.S. economy to characterize electric power’s technological margins of adjustment to carbon taxes and to elucidate their general equilibrium effects. Compared to the top-down production function representation of the electricity sector, the technology-rich bottom-up specification produces less abatement at a higher welfare cost, suggesting that bottom-up models do not necessarily generate lower costs of abatement than top-down models. This result is shown to be sensitive to the elasticity with which technologies’ generating capacities adjust to relative prices

Assessing the Economic Impacts of Climate Change. An Updated CGE Point of View

The present research describes a climate change integrated impact assessment exercise, whose economic evaluation is based on a CGE approach and modeling effort. Input to the CGE model comes from a wide although still partial set of up-to-date bottom-up impact studies. Estimates indicate that a temperature increase of 1.92°C compared to pre-industrial levels in 2050 could lead to global GDP losses of approximately 0.5% compared to a hypothetical scenario where no climate change is assumed to occur. Northern Europe is expected to benefit from the evaluated temperature increase (+0.18%), while Southern and Eastern Europe are expected to suffer from the climate change scenario under analysis (-0.15% and -0.21% respectively). Most vulnerable countries are the less developed regions, such as South Asia, South-East Asia, North Africa and Sub-Saharan Africa. In these regions the most exposed sector is agriculture, and the impact on crop productivity is by far the most important source of damages. It is worth noting that the general equilibrium estimates tend to be lower, in absolute terms, than the bottom-up, partial equilibrium estimates. The difference is to be attributed to the effect of market-driven adaptation. This partly reduces the direct impacts of temperature increases, leading to lower damage estimates. Nonetheless these remain positive and substantive in some regions. Accordingly, market-driven adaptation cannot be the solution to the climate change problem.Computable General Equilibrium Modeling, Impact Assessment, Climate Change

Economic, Environmental and International Trade Effects of the EU Directive on Energy Tax Harmonization

In October 2003, the European Union introduced a Directive which widens the scope of the EU's minimum taxation system from mineral oils to all energy products including coal, natural gas and electricity. It aims at reducing distortions that currently exist between Member States as well as between energy products. In addition, it increases previous minimum tax rates and thus the incentive to use energy more efficiently. The Directive will lead to changes in the energy tax schemes in a number of countries, in particular some southern Member Countries (Greece, Spain, Portugal) and most of the Eastern European EU candidate countries. In this paper, we analyze the effects of the EU energy tax harmonization with GTAP-E, a computable general equilibrium model. Particular focus is placed on the Eastern European countries which became new members of the EU in May 2004. We investigate the effects of the tax harmonization on overall economic growth and sectoral development. Special attention is paid to international trade in order to analyze if competitiveness concerns which have been forwarded in the context of energy taxation are valid. Furthermore, the effect on energy consumption and emissions and thus the contribution to the EU's climate change targets is analyzed.

Agricultural trade liberalization and poverty in Brazil:

"This paper addresses the potential effects of a world agricultural trade liberalization scenario on poverty and regional income distribution in Brazil, using an interregional applied general equilibrium (AGE) and microsimulation model of Brazil, tailored for income distribution and poverty analysis. The model distinguishes 10 different labor types and 270 different household expenditure patterns. Income can originate from 41 different production activities (which produce 52 commodities), located in 27 states in the country. The AGE model is linked to a microsimulation model that includes 112,055 Brazilian households and 263,938 adults. The scenario is generated from a previous run of the MIRAGE model, which assesses the likely impacts of a Doha Development Agenda agreement, based on the draft on agriculture by Crawford Falconer and the draft on nonagricultural market access by Don Stephenson. The results of this global scenario are transmitted to the Brazilian model. Poverty and income distribution indexes are computed over the entire sample of households and persons, before and after the introduction of policy shocks. Model results show that the simulated trade policy shocks have positive effects on poverty and income distribution in Brazil. The simulated effects on poverty and income distribution are positive in aggregate, with benefits concentrated in the poorest households. The results, however, differ across the Brazilian territory, worsening in some important states, where the poverty and inequality indicators increase. The gains in agriculture are found to benefit all the agents involved, from workers to small producers to large farmers, rejecting the idea that just large farmers would gain." from authors' abstractEconomic integration, Poverty, Income distribution, Globalization, Markets, trade,

Modeling the Environmental and Socio-Economic Impacts of Biofuels

This paper provides a general overview of the social, environmental, and economical issues related to biofuels and a review of economic modeling of biofuels. The increasing importance of biofuels is driven primarily by government policies since currently available biofuels are generally not economically viable in the absence of fiscal incentives or high oil prices. Also the environmental impacts of biofuels as an alternative to fossil fuels are quite ambiguous. The literature review of the most recent economic models dealing with biofuels and their economic impacts provides a distinction between structural and reduced form models. The discussion of structural models centers primarily on computable general equilibrium models. The review of reduced models is structured toward the time series analysis approach to the dependencies between prices of biofuels, prices of agricultural commodities used for the biofuel production and prices of the fossil fuels.Biofuels; Ethanol; Biodiesel; Prices; Time-series