Baseline Forecasting for Population Ageing and Greenhouse Gas Emissions in Taiwan: A Dynamic CGE Analysis

Rising life expectancy and dwindling fertility rates in Taiwan over the past few decades may lead to a negative population growth as well as accelerated aging trend. Together, they are leading to a large and enduring impact on carbon emissions trajectories following changes in the aggregate mix of goods and services consumed and produced. The main purpose of this study is to quantify the impact of population aging on carbon dioxide (CO2) emissions baseline using GEMTEE (General Equilibrium Model for Taiwanese Economy and Environment), which is a dynamic, multi-sectoral CGE model with an endogenous population module. This study incorporates both direct and indirect effects of demographic transition on carbon emissions through the labor market dynamics and energy substitution mechanism to enhance the forecasting performances of GHGs emissions and macroeconomic variables. Our long-term projections for 2060 indicate that (a) a 36% of population decline by 2060 as compared to 2012 will lead to a steady-state annual growth of 0.24% in real GDP by 2060; (b) carbon emissions would fall by 74.4%, from 4.375 billion tons in 2012 to 1.119 billion tones by 2060; and (c) sectors such as residential, education services, and transportation sectors will decline more dramatically than the other sectors. Thus, failure to account for the demographic changes will distort the baseline projections of carbon emissions and in turn affect the institution of domestic regulation and international negotiations.