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Dynamic (GTAP) model and baseline for energy and environment issues

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  • Niemi, Janne

Abstract

Dynamic CGE models are widely used in research on long-term energy and climate policies. Whilst a range of models exist, their emphasis is clearly on energy products. For a more general evaluation of energy and climate related policies on e.g. evolution of production structures, in combination with changes in macroeconomic characteristics, like aging population and increased labour skill levels, the GTAP data and Dynamic Model provide an appealing tool. However, the latter does not take into account the special characteristics of the energy products and the policy instruments such as emission trade. This paper presents a modified version of the dynamic GTAP-model and a long-run baseline, constructed particularly for analysis of energy and environment issues. The model incorporates CO2 emissions accounting and trading, as well as substitution between alternative forms of energy following the principles introduced in the GTAP-E model. The baseline includes, apart from the standard macroeconomic projections, assessments of new technologies enhancing energy use and production. Some example simulations illustrating the effects of alternative growth assumptions using the model and baseline are also given. The additional model features are implemented in a manner that allows flexibility with regard to sector and region aggregation and the sets of energy commodities. Whilst the basic principle builds primarily on the solutions incorporated in the GTAP-E model, changes are made to the defining of additional sets and, more importantly, to the treatment of emissions trade participation. This is required to enable gradual extension of trading area and flexible simulation of alternative policy options. An attempt is also made to extend the energy commodities to alternative sources, especially biofuel, as GTAP data provides an excellent framework for analysing the topical issues related to energy and food supply. The macroeconomic variables for a long-run baseline, reaching up to year 2050, are compiled from various international sources and calibrated. These variables include projections for population, skilled and unskilled labour force, and total factor productivity. In addition, with help of energy technology systems models, estimates are produced for increase in energy efficiency and for technological change enhancing energy production.

Suggested Citation

  • Niemi, Janne, 2009. "Dynamic (GTAP) model and baseline for energy and environment issues," Conference papers 331856, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
  • Handle: RePEc:ags:pugtwp:331856
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    References listed on IDEAS

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    1. McDougall, Robert A., 1999. "Entropy Theory and RAS are Friends," Working papers 283439, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    2. Golan, Amos & Judge, George & Robinson, Sherman, 1994. "Recovering Information from Incomplete or Partial Multisectoral Economic Data," The Review of Economics and Statistics, MIT Press, vol. 76(3), pages 541-549, August.
    3. Sherman Robinson & Andrea Cattaneo & Moataz El-Said, 2001. "Updating and Estimating a Social Accounting Matrix Using Cross Entropy Methods," Economic Systems Research, Taylor & Francis Journals, vol. 13(1), pages 47-64.
    4. McDougall, Robert, 1999. "Entropy Theory and RAS are Friends," GTAP Working Papers 300, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
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