General equilibrium impact of an energy-saving policy in the public sector

We analyse a disregarded environmental policy instrument: a switch in government expenditure away from energy (or other natural resources) and toward a composite good which includes energy-saving expenditure. We first develop two variants of an analytical general equilibrium model. A composite good is produced with constant returns to scale, and energy is imported or produced domestically with diminishing returns, yielding a differential rent to its owners. The government purchases energy and composite goods from private firms. Such a policy unambiguously increases employment. It also raises private consumption and welfare under two conditions: (i) it is not too costly and (ii) the initial share of the resource is smaller in public spending than in private consumption, or the difference is small enough. We then run numerically a model featuring both importation and domestic production of energy (oil, gas and electricity), for the OECD as a whole. Simulations show that employment, welfare and private consumption rise. We provide magnitudes for different parameter values.Resource conservation, energy conservation, public spending, employment, general equilibrium, multi-sectors models

Correcting the 'self-trade' issue in the GTAPAgg software - Technical paper

The successive versions of the GTAP databases are provided with GTAPAgg, a programme that computes values of the series of the database for any regional and sectoral aggregation. A 'self-trade' issue arises from the fact that GTAPAgg aggregates the several series concerned with international trade, like any other series, by simply summing them up : the resulting series include a share of exports and imports happening between the aggregated regions, which should rather be treated as economic flows internal to the region resulting from the aggregation process. This paper details a method that aims at solving this shortcoming, and discusses the importance of doing so. A first section puts the research question into context and discusses its likely importance when using GTAP as a calibration dataset for computable general equilibrium modelling. A second section details the analytics of the method proposed to correct the aggregation process, in the broader framework of a programme extending GTAPAgg to the production of national account matrixes in the standard United Nations format. An appendix provides the code of the extended aggregation programme developed.Les versions successives de la base de données GTAP sont livrées avec le programme d'agrégation GTAPAgg. Ce programme calcule les valeurs des séries de la base de données pour tout niveau d'agrégation régional ou sectoriel mais fait une impasse majeure : les valeurs d'importation et d'exportation de l'agrégat de deux zones sont calculées par simple sommation des valeurs de chacune des zones, sans correction de leur commerce bilatéral. Les séries résultant de l'agrégation comportent donc une part d'exportations et d'importations qui s'effectuent entre les régions agrégées, alors qu'elles devraient être traitées comme des échanges économiques internes à la région qui résulte du processus d'agrégation. Cet article expose une méthode qui permet de corriger ce défaut, et discute de l'importance de le faire. Une première section replace la question dans son contexte et examine son importance, en particulier lorsque la base de données GTAP est utilisée pour calibrer des modèles d'équilibre général calculable. Une seconde section expose la méthode proposée pour (i) corriger le processus d'agrégation et (ii) construire un programme d'extension de GTAPAgg qui permet la production de matrices de comptabilités sociales sous le format standard des Nations Unies. Enfin, une annexe présente le code de ce " nouveau " programme d'agrégation

Sectoral Targets for Developing Countries: Combining "Common but Differentiated Responsibilities" with "Meaningful participation"

Although a global cap-and-trade system is seen by many researchers as the most cost-efficient solution to reduce greenhouse gas emissions, developing countries governments refuse to enter into such a system in the short term. Hence, many scholars and stakeholders, including the European Commission, have proposed various types of commitments for developing countries that appear less stringent, such as sectoral approaches. In this paper, we assess such a sectoral approach for developing countries. More precisely, we simulate two policy scenarios in which developed countries continue with Kyoto-type absolute commitments, whereas developing countries adopt an emission trading system limited to electricity generation and linked to developed countries' cap-and-trade system. In a first scenario, CO2 allowances are auctioned by the government, which distributes the auctions receipts lump-sum to households. In a second scenario, the auction receipts are used to reduce taxes on, or to give subsidies to, electricity generation. Our quantitative analysis, led with a hybrid general equilibrium model, shows that such options provide almost as much emission reductions as a global cap-and-trade system. Moreover, in the second sectoral scenario, GDP losses in developing countries are much lower than with a global cap-and-trade system and so is the impact on the electricity price.Sectoral Approach, Sectoral Target

General equilibrium impact of an energy-saving policy in the public sector

International audienceWe analyse a disregarded environmental policy instrument: a switch in government expenditure away from energy (or other natural resources) and toward a composite good which includes energy-saving expenditure. We first develop two variants of an analytical general equilibrium model. A composite good is produced with constant returns to scale, and energy is imported or produced domestically with diminishing returns, yielding a differential rent to its owners. The government purchases energy and composite goods from private firms. Such a policy unambiguously increases employment. It also raises private consumption and welfare under two conditions: (i) it is not too costly and (ii) the initial share of the resource is smaller in public spending than in private consumption, or the difference is small enough. We then run numerically a model featuring both importation and domestic production of energy (oil, gas and electricity), for the OECD as a whole. Simulations show that employment, welfare and private consumption rise. We provide magnitudes for different parameter values

Sectoral Targets for Developing Countries: Combining "Common but differentiated Responsibilities with meaningful Participation"

International audienceAlthough a global cap-and-trade system is seen by many researchers as the most cost-efficient solution to reduce greenhouse gas (GHG) emissions, the governments of developing countries refuse to enter into such a system in the short term. Many scholars and stakeholders, including the European Commission, have thus proposed various types of commitments for developing countries that appear less stringent, such as sectoral approaches. A macroeconomic assessment of such a sectoral approach is provided for developing countries. Two policy scenarios in particular are assessed, in which developed countries continue with Kyoto-type absolute commitments, while developing countries adopt an emissions trading system limited to electricity generation and linked to developed countries' cap-and-trade systems. In the first scenario, CO2 allowances are auctioned by the government, which distributes its revenues as a lump sum to households. In a second scenario, the auction revenues are used to reduce taxes on, or to give subsidies to, electricity generation. The quantitative analysis, conducted with a hybrid general equilibrium model, shows that such options provide almost as much emissions reduction as a global cap-and-trade system. Moreover, in the second sectoral scenario, GDP losses in developing countries are much lower than with a global cap-and-trade system, as is also the effect on the electricity price.Bien qu'un système mondial de quotas échangeables soit considéré par de nombreux chercheurs comme la solution la plus efficace pour réduire les émissions de gaz à effet de serre, les gouvernements des pays en développement refusent d'entrer dans un tel système à court terme. De nombreux universitaires et d'autres parties prenantes, y compris la Commission européenne, ont de ce fait proposé pour les pays en développement plusieurs types d'engagements qui paraissent moins contraignants, comme les approches sectorielles. Nous fournissons une évaluation macroéconomique d'une telle approche sectorielle appliquée aux pays en développement. Nous examinons en particulier deux scénarios dans lesquels les pays développés maintiennent les engagements absolus de type Kyoto, tandis que les pays en développement adoptent un système d'échange de quotas d'émissions limité à la production d'électricité et lié au système de quotas échangeables des pays développés. Dans le premier scenario, les quotas de CO2 sont mis aux enchères par le gouvernement, qui distribue forfaitairement le produit des enchères aux ménages. Dans le deuxième scenario, les revenus de la vente aux enchères sont utilisés pour réduire les impôts sur la production d'électricité ou pour subventionner cette dernière. L'analyse quantitative présentée, obtenue par un modèle d'équilibre général, montre que ces options apportent presqu'autant de réductions d'émissions qu'un système mondial de plafonnement-échange. De plus, dans le second scenario sectoriel, les pertes de PIB dans les pays en développement sont bien plus faibles qu'avec un système mondial de quotas échangeables et il en est de même de l'impact sur le prix de l'électricité

CO2 emission mitigation and fossil fuel markets: Dynamic and international aspects of climate policies

This paper explores a multi-model scenario ensemble to assess the impacts of idealized and non-idealized climate change stabilization policies on fossil fuel markets. Under idealized conditions climate policies significantly reduce coal use in the short- and long-term. Reductions in oil and gas use are much smaller, particularly until 2030, but revenues decrease much more because oil and gas prices are higher than coal prices. A first deviation from optimal transition pathways is delayed action that relaxes global emission targets until 2030 in accordance with the Copenhagen pledges. Fossil fuel markets revert back to the no-policy case: though coal use increases strongest, revenue gains are higher for oil and gas. To balance the carbon budget over the 21st century, the long-term reallocation of fossil fuels is significantly larger—twice and more—than the short-term distortion. This amplifying effect results from coal lock-in and inter-fuel substitution effects to balance the full-century carbon budget. The second deviation from the optimal transition pathway relaxes the global participation assumption. The result here is less clear-cut across models, as we find carbon leakage effects ranging from positive to negative because trade and substitution patterns of coal, oil, and gas differ across models. In summary, distortions of fossil fuel markets resulting from relaxed short-term global emission targets are more important and less uncertain than the issue of carbon leakage from early mover action

Locked into Copenhagen pledges - Implications of short-term emission targets for the cost and feasibility of long-term climate goals

This paper provides an overview of the AMPERE modeling comparison project with focus on the implications of near-term policies for the costs and attainability of long-term climate objectives. Nine modeling teams participated in the project to explore the consequences of global emissions following the proposed policy stringency of the national pledges from the Copenhagen Accord and Cancún Agreements to 2030. Specific features compared to earlier assessments are the explicit consideration of near-term 2030 emission targets as well as the systematic sensitivity analysis for the availability and potential of mitigation technologies. Our estimates show that a 2030 mitigation effort comparable to the pledges would result in a further “lock-in” of the energy system into fossil fuels and thus impede the required energy transformation to reach low greenhouse-gas stabilization levels (450 ppm CO2e). Major implications include significant increases in mitigation costs, increased risk that low stabilization targets become unattainable, and reduced chances of staying below the proposed temperature change target of 2 °C in case of overshoot. With respect to technologies, we find that following the pledge pathways to 2030 would narrow policy choices, and increases the risks that some currently optional technologies, such as carbon capture and storage (CCS) or the large-scale deployment of bioenergy, will become “a must” by 2030