Transcript Lecture 8 part 1

EC 936 ECONOMIC POLICY MODELLING
LECTURE 8:
CGE MODELS
OF
CLIMATE CHANGE
POLICY ISSUES
• Environmental impact of economic growth
• Environmental impact of liberalization policies
• Global warming and the cost of greenhouse gas
emissions control
• Tradable permits for CO2
• Carbon tax policies
• Deforestation and reforestation
• Environmental standards legislation/regulation
• Double dividends?
SOCIAL ACCOUNTING APPROACH
• SAMEA (SAM with Environmental Accounts)
• Standard SAM (expressed in monetary units)
linked to:
• EA (expressed in physical units)
– Additional rows displaying environmental
inputs consumed as resources
– Additional columns displaying discharge of
emissions and pollutants to the environment
COST-BENEFIT OF SAMEA
• Diagnostic tool for evaluating impact of policies
and growth patterns on environmental outcomes
• Adaptable to different environmental contexts
• Multiplier analysis the core mechanism of
analysis
• Multiplier decomposition a la Pyatt-Round
• Fix price, fixed coefficients model; no
substitution effects
APPLICATION OF SAMEA MODEL TO SPAIN
(MORILLA et al, 2007)
WHY CGE MODELS?
• General vs partial equilibrium analysis
• Counterfactual modeling
• Decomposition of complex array of
simultaneous influences (exogenous as
well as policy decisions)
• Simulation exercises
• Evaluation of key parameters
ECONOMIC MODELS OF CLIMATE
POLICIES
• Early 70s: first models mainly build by natural scientists
focusing on GHG
• Late 70s: first economic models
• Toronto Climate Conference in 1988
• Late 80s/early 90s first CGE models, analysis of CO2
taxes
• CGE modeling of climate policies took off in the 90s
– More powerful software to handle larger models
– GTAP Energy
– GAMS codes for standard models available (Rutherford)
• The Kyoto Protocol
JORGENSON & WILCOXEN, 1990
• For USA only; 35 industrial sectors, 672
household types, labor, capital, energy,
materials
• Parameters estimated for 1947-1987 data
• Dynamic; until 2050
• Experiments:
- Freeze emissions at 1990 or 2000 level
- Cut emission in 2080 to 80% of 1990 level
WHALLEY & WIGGLE, 1990
• 6 regions: EU, North America, Japan, other
OECD, Oil exporters, ROW
• 4 resources: carbon/non-carbon energy
resources, sector-specific factors in energy
intensive manufactures, other primary factors
• 5 products: carbon/non-carbon energy,
composite energy, energy intensive goods, other
goods
• Period 1990 - 2030
• Experiments:
– reduce carbon emissions by 50 % rel. to benchmarks
by producer, consumer or internationally levied tax
MORE RECENT MODELS I
(Peterson)
MORE RECENT MODELS II
(Peterson)
CLIMATE CHANGE MODELS
BASIC MAPPING OF CLIMATE CHANGE
GTAP-E MODELS
(Roson et al)
• Use extended GTAP model incorporating
greenhouse-gas emissions to evaluate probable
path of greenhouse gases on:
– Tourism (2006)
– Coastal inundation/erosion (2007)
– Human health (2006)
• Constructs base snapshots for 2010, 2030, 2050
with and without climate change effects
Source: Roson (2003)
CGE MODEL OF SEA LEVEL RISE
(Bosello, Roson and Tol, 2007)
• Calibrates model to 2010, 2030, 2050 by setting
population, capital, natural resources and productivity
(endogenous→exogenous)
• Shocks system by reducing stock of land according to
predictions of Global Vulnerability Assessment database
– Without any investment in protection against rising sea levels
(reduction in land)
– With capital investments in dikes and flood barriers (no reduction
in land, but increase in investment expenditure)
Source: Bosello, Roson & Tol (2007)
ADDING A DYNAMIC COMPONENT
(Eboli, Parrado, Roson, 2010)
• ICES (Inter-temporal Computable Equilibrium System)—
extension of GTAP-E which incorporates capital and
international debt accumulation as endogenous factors
to simulate growth in combination with exogenously
determined growth in labour, land and natural resources.
• Essentially an escalator model—calibrated to a new
benchmark at annual intervals to establish a baseline
global growth forecast
• Model is then shocked with new exogenous variables,
such as land loss due to sea level rise and a new series
of benchmark equilibria are generated
Source: Eboli, Parrado, Roson (2010)