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Climate Change, Energy Demand and Market Power in a General Equilibrium Model of the World Economy

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  • Roson, Roberto
  • Bosello, Francesco
  • De Cian, Enrica

Abstract

Future energy demand will be affected by changes in prices and income, but also by other factors, like temperature levels. This paper draws upon an econometric study, disentangling the contribution of temperature in the determination of the annual regional demand for energy goods. Combining estimates of temperature elasticities with scenarios of future climate change, it is possible to assess variations in energy demand induced (directly) by the global warming. We use this information to simulate a change in the demand structure of households in a CGE model of the world economy, in a set of assessment exercises. The changing demand structure triggers a structural adjustment process, influencing trade flows, regional competitiveness of industries and regions, and welfare. We also consider the possible existence of imperfect competition in the energy markets, analyzing the impact of changes in energy demand with an alternative model version, in which energy industries are modeled as Cournot oligopolies

Suggested Citation

  • Roson, Roberto & Bosello, Francesco & De Cian, Enrica, 2007. "Climate Change, Energy Demand and Market Power in a General Equilibrium Model of the World Economy," International Energy Markets Working Papers 9095, Fondazione Eni Enrico Mattei (FEEM).
    • Handle: RePEc:ags:feemie:9095
    DOI: 10.22004/ag.econ.9095
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    References listed on IDEAS

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    1. Maria Berrittella & Andrea Bigano & Roberto Roson & Richard S.J. Tol, 2004. "A General Equilibrium Analysis Of Climate Change Impacts On Tourism," Working Papers FNU-49, Research unit Sustainability and Global Change, Hamburg University, revised Nov 2004.
    2. Roberto Roson, 2006. "Introducing Imperfect Competition in CGE Models: Technical Aspects and Implications," Computational Economics, Springer;Society for Computational Economics, vol. 28(1), pages 29-49, August.
    3. Azam, Jean-Paul & Dia, Magueye, 2004. "Pro-Poor Growth in Senegal," IDEI Working Papers 325, Institut d'Économie Industrielle (IDEI), Toulouse.
    4. Enrica De Cian & Elisa Lanzi & Roberto Roson, 2007. "The Impact of Temperature Change on Energy Demand: A Dynamic Panel Analysis," Working Papers 2007.46, Fondazione Eni Enrico Mattei.
    5. Bosello, Francesco & Roson, Roberto & Tol, Richard S.J., 2006. "Economy-wide estimates of the implications of climate change: Human health," Ecological Economics, Elsevier, vol. 58(3), pages 579-591, June.
    6. Francesco Bosello & Roberto Roson & Richard Tol, 2007. "Economy-wide Estimates of the Implications of Climate Change: Sea Level Rise," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 37(3), pages 549-571, July.
    7. Bigano, Andrea & Bosello, Francesco & Marano, Giuseppe, 2006. "Energy Demand and Temperature: A Dynamic Panel Analysis," International Energy Markets Working Papers 12117, Fondazione Eni Enrico Mattei (FEEM).
    8. Joaquim Oliveira Martins & Stefano Scarpetta & Dirk Pilat, 1996. "Mark-Up Ratios in Manufacturing Industries: Estimates for 14 OECD Countries," OECD Economics Department Working Papers 162, OECD Publishing.
    9. Roberto Roson & Calzadilla Alvaro & Pauli Francesco, 2005. "Climate Change and Extreme Events: an Assessment of Economic Implications," Computing in Economics and Finance 2005 49, Society for Computational Economics.
    10. Maria Berrittella & Katrin Rehdanz & Arjen Y. Hoekstra & Roberto Roson & Richard S.J. Tol, 2006. "The Economic Impact Of Restricted Water Supply: A Computable General Equilibrium Analysis," Working Papers FNU-93, Research unit Sustainability and Global Change, Hamburg University, revised Jul 2006.
    11. Pardo, Angel & Meneu, Vicente & Valor, Enric, 2002. "Temperature and seasonality influences on Spanish electricity load," Energy Economics, Elsevier, vol. 24(1), pages 55-70, January.
    12. Burniaux, Jean-Marc & Truong Truong, 2002. "GTAP-E: An Energy-Environmental Version of the GTAP Model," GTAP Technical Papers 923, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
    13. Burniaux, Jean-March & Truong, Truong P., 2002. "Gtap-E: An Energy-Environmental Version Of The Gtap Model," Technical Papers 28705, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    14. Hertel, Thomas, 1997. "Global Trade Analysis: Modeling and applications," GTAP Books, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University, number 7685, December.
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    Cited by:

    1. Camille Gonseth & Philippe Thalmann & Marc Vielle, 2017. "Impacts of Global Warming on Energy Use for Heating and Cooling with Full Rebound Effects in Switzerland," Swiss Journal of Economics and Statistics, Springer;Swiss Society of Economics and Statistics, vol. 153(4), pages 341-369, October.
    2. Michetti, Melania & Rosa, Renato, 2012. "Afforestation and timber management compliance strategies in climate policy. A computable general equilibrium analysis," Ecological Economics, Elsevier, vol. 77(C), pages 139-148.
    3. Karen Fisher-Vanden & Ian Sue Wing & Elisa Lanzi & David Popp, 2013. "Modeling climate change feedbacks and adaptation responses: recent approaches and shortcomings," Climatic Change, Springer, vol. 117(3), pages 481-495, April.
    4. Philippidis, G. & Resano, H. & Sanjuan, A.I. & Bourne, M. & Kitou, E., 2012. "Shifting Armington Trade Preferences: A re-examination of the Mercosur-EU negotiations," Conference papers 332171, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.

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    More about this item

    Keywords

    Resource /Energy Economics and Policy;

    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • F18 - International Economics - - Trade - - - Trade and Environment
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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