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Integrating Bottom-Up into Top-Down: A Mixed Complementarity Approach

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  • Böhringer, Christoph
  • Rutherford, Thomas F.

Abstract

We motivate the formulation of market equilibria as a mixed complementarity problem (MCP) in order to bridge the gap between bottom-up energy system models and top-down general equilibrium models for energy policy analysis. Our objective is primarily pedagogic. We first lay out that the MCP approach provides an explicit representation of weak inequalities and complementarity between decision variables and market equilibrium conditions. This permits us to combine bottom-up technological details and top-down economic richness in a single mathematical format. We then provide a stylized example of how to integrate bottom-up features into a top-down modeling framework along with worked examples and computer programs which illustrate our approach.

Suggested Citation

  • Böhringer, Christoph & Rutherford, Thomas F., 2005. "Integrating Bottom-Up into Top-Down: A Mixed Complementarity Approach," ZEW Discussion Papers 05-28, ZEW - Leibniz Centre for European Economic Research.
    • Handle: RePEc:zbw:zewdip:4271
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    References listed on IDEAS

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    4. Messner, Sabine & Schrattenholzer, Leo, 2000. "MESSAGE–MACRO: linking an energy supply model with a macroeconomic module and solving it iteratively," Energy, Elsevier, vol. 25(3), pages 267-282.
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    3. Xavier Labandeira, Pedro Linares and Miguel Rodriguez, 2009. "An Integrated Approach to Simulate the impacts of Carbon Emissions Trading Schemes," The Energy Journal, International Association for Energy Economics, vol. 0(Special I).
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    More about this item

    Keywords

    Energy Policy; Computable General Equilibrium; Bottom-Up; Top-Down;
    All these keywords.

    JEL classification:

    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis

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