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GTAP-E: An Energy-Environmental Version of the GTAP Model with Emission Trading

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  • Truong P. Truong
  • Claudia Kemfert
  • Jean-Marc Burniaux

Abstract

Energy is an important commodity in many economic activities. Its usage affects the environment via CO2 emissions and the Greenhouse Effect. Modeling the energy-economy-environment-trade linkages is an important objective in applied economic policy analysis. Previously, however, the modeling of these linkages in GTAP has been incomplete. This is because energy substitution, a key factor in this chain of linkages, is absent from the standard model specification. This technical paper remedies this deficiency by incorporating energy substitution into the standard GTAP model. It begins by first reviewing some of the existing approaches to this problem in contemporary CGE models. It then suggests an approach for GTAP which incorporates some of these desirable features of energy substitution. The approach is implemented as an extended version of the GTAP model called GTAP-E. In addition, GTAP-E incorporates carbon emissions from the combustion of fossil fuels and this revised version of GTAP-E provides for a mechanism to trade these emissions internationally as well as domestically. The policy relevance of GTAP-E in the context of the existing debate about climate change is illustrated by some illustrative simulations of the implementation the European emissions trading scheme in 2005. It is hoped that the proposed model will be used by individuals in the GTAP network who may not be themselves energy modelers, but who require a better representation of the energy-economy-environmental linkages than is currently offered in the standard GTAP model.

Suggested Citation

  • Truong P. Truong & Claudia Kemfert & Jean-Marc Burniaux, 2007. "GTAP-E: An Energy-Environmental Version of the GTAP Model with Emission Trading," Discussion Papers of DIW Berlin 668, DIW Berlin, German Institute for Economic Research.
    • Handle: RePEc:diw:diwwpp:dp668
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    Cited by:

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    3. Pérez Domínguez, Ignacio & Britz, Wolfgang & Holm-Müller, Karin, 2009. "Trading schemes for greenhouse gas emissions from European agriculture: A comparative analysis based on different implementation options," Review of Agricultural and Environmental Studies - Revue d'Etudes en Agriculture et Environnement (RAEStud), Institut National de la Recherche Agronomique (INRA), vol. 90(3).
    4. Ge, Jianping & Lei, Yalin, 2017. "Policy options for non-grain bioethanol in China: Insights from an economy-energy-environment CGE model," Energy Policy, Elsevier, vol. 105(C), pages 502-511.
    5. Kamel Almutairi & Greg Thoma & Alvaro Durand-Morat, 2018. "Ex-Ante Analysis of Economic, Social and Environmental Impacts of Large-Scale Renewable and Nuclear Energy Targets for Global Electricity Generation by 2030," Sustainability, MDPI, vol. 10(8), pages 1-25, August.
    6. Beck, Ulrik R. & Kruse-Andersen, Peter K. & Stewart, Louis B., 2023. "Carbon leakage in a small open economy: The importance of international climate policies," Energy Economics, Elsevier, vol. 117(C).
    7. Dissou, Yazid & Karnizova, Lilia, 2016. "Emissions cap or emissions tax? A multi-sector business cycle analysis," Journal of Environmental Economics and Management, Elsevier, vol. 79(C), pages 169-188.
    8. Jensen, Henning Tarp, 2009. "General equilibrium impact evaluation of road sector investment programs in Ghana," Conference papers 331858, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    9. Natalia Gennadyevna Zakharchenko & Olga Valeryevna Dyomina, 2015. "Modelling Energy - Economy Interactions: The Far East Experience," Spatial Economics=Prostranstvennaya Ekonomika, Economic Research Institute, Far Eastern Branch, Russian Academy of Sciences (Khabarovsk, Russia), issue 1, pages 62-90.
    10. Lewis C. King & Jeroen C. J. M. Bergh, 2021. "Potential carbon leakage under the Paris Agreement," Climatic Change, Springer, vol. 165(3), pages 1-19, April.
    11. Thure Traber & Claudia Kemfert, 2007. "Impacts of the German Support for Renewable Energy on Electricity Prices, Emissions and Profits: An Analysis Based on a European Electricity Market Model," Discussion Papers of DIW Berlin 712, DIW Berlin, German Institute for Economic Research.
    12. Diamantis Koutsandreas & Evangelos Spiliotis & Haris Doukas & John Psarras, 2021. "What Is the Macroeconomic Impact of Higher Decarbonization Speeds? The Case of Greece," Energies, MDPI, vol. 14(8), pages 1-19, April.
    13. Yu, Xuewei & Moreno-Cruz, Juan & Crittenden, John C., 2015. "Regional energy rebound effect: The impact of economy-wide and sector level energy efficiency improvement in Georgia, USA," Energy Policy, Elsevier, vol. 87(C), pages 250-259.
    14. Gelan, Ayele U., 2018. "Kuwait's energy subsidy reduction: Examining economic and CO2 emission effects with or without compensation," Energy Economics, Elsevier, vol. 71(C), pages 186-200.

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