Incorporating Household Transportation Sector into a General Economic Equilibrium Model: Implications for Climate Policy

The transportation sector is responsible for a significant fraction of global anthropogenic emissions. An explicit representation of household transportation technologies, such as internal-combustion engine vehicles, plug-in electric cars, biofuel based vehicles, hydrogen fuel-cell vehicles, is important for quantitative analysis of energy and environmental policy. A methodology for incorporating different household transportation technologies into a computable general equilibrium (CGE) model is presented in this paper. We begin with the basic data that supports CGE models, the Social Accounting Matrix (SAM) that includes the input-output tables of an economy, the use and supply of factors, and the disposition of goods in final consumption. We identify transport-related purchases of the household sector including fuel purchases and disaggregate the data for “own-supplied” transportation service that represents the use of personal automobiles. We then describe our approach to the modeling of improvement in internal-combustion fleet of private automobiles, introduction of plug-in electric vehicles and hydrogen-powered fuel-cell vehicles. We use the MIT Emissions Prediction and Policy Analysis (EPPA) model, a computable general equilibrium model of the world economy, to analyze the expected penetration of different transportation technologies in several scenarios of greenhouse gas emissions control. The effect of introducing of reduced-carbon fuel substitutes, such as biomass fuels, is also explored. In the scenarios for 2010-2100 for the regions of the model we focus on the timing of entry of different household transportation technologies and implications for costs associated with achieving emissions constraints. Availability of low-carbon transportation technology reduces the consumption losses. In the absence of a strong carbon policy, plug-in electric and hydrogen-based cars would not play a significant role unless there is a significant decrease in vehicle cost.