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Computing Game-theoretic equilibria in GTAP: Optimising regional climate change policies

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  • Wiskich, Tony

Abstract

This paper outlines an approach to modelling strategic behaviour in the Global Trade Analysis Project’s computable general equilibrium model GTAP-E. This modelling innovation has been motivated by the desire to compute game-theoretic equilibria for climate policy analysis to gain insights into the potential outcomes of international climate change negotiations and optimal burden sharing arrangements. Demonstrations of the model applied under a permit trading regime and independent carbon taxation are given. The demonstrations show that, for the same value placed on emissions abatement, an international permit trading scheme results in a higher payoff for all regions. We also find that, for the same level of abatement, optimal differential carbon taxes lead to a significantly lower total welfare loss than uniform taxes imposed under international permit trading, due to pre-existing taxes. The technique can be applied more broadly to any numerical optimization of GEMPACK models.

Suggested Citation

  • Wiskich, Tony, 2010. "Computing Game-theoretic equilibria in GTAP: Optimising regional climate change policies," Conference papers 331995, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    • Handle: RePEc:ags:pugtwp:331995
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    File URL: https://ageconsearch.umn.edu/record/331995/files/4684.pdf
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    References listed on IDEAS

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    1. Prajit K. Dutta, 1999. "Strategies and Games: Theory and Practice," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262041693, December.
    2. Amani Elobeid & Simla Tokgoz, 2008. "Removing Distortions in the U.S. Ethanol Market: What Does It Imply for the United States and Brazil?," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 90(4), pages 918-932.
    3. Elobeid, Amani & Tokgoz, Simla, 2008. "AJAE Appendix for “Removing Distortions in the U.S. Ethanol Market: What Does It Imply for the United States and Brazil?”," American Journal of Agricultural Economics APPENDICES, Agricultural and Applied Economics Association, vol. 90(4), pages 1-30, February.
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