BelMod: a multi-sector, inter-regional general equilibrium model for Belgium

The main objective of the dissertation is to develop a dynamic, inter-regional, and multi-sector general equilibrium model of the Belgian economy capable of analysing issues related to the environment, energy, fiscal policies and accounting for distributive effects between household groups. The dissertation focuses on BelMod, a computable general equilibrium model (CGE). BelMod is intended to act as an analytical and quantitative support for decision-making in the energy/environment field and fiscal policies. The tool would be in evaluating ex-ante the cost and benefit of different policies to be implemented. The winners and the losers may easily be identified. BelMod also aims at filling the gaps left by the other models currently used in Belgium, in particular by explicit bottom-up modelling of the three Belgian regions (Brussels, Flanders, Wallonia) in the full integrated framework, by further disaggregating the production and consumption blocks, by distinguishing different types of households to study the distributional effects of environmental and fiscal policies. The effect of let’s say, carbon tax, may affect branches of activities, markets and institutions differently over time and space. Under the “Burden Sharing Agreement”, Belgium committed to reduce its greenhouse gas emissions by 7.5 % by 2008-2012 from the 1990 level. Therefore the efficient way of dealing with this issue requires an analytical tool which can take into account the interactions between institutional agents (regional governments, community’s governments, central government, households, firms and rest of the world), their behaviour and the time horizon. The most adequate tool to do so is the general equilibrium model. A CGE model such as BelMod requires a consistent, detailed and well structured database in the form of a social accounting matrix (SAM). A SAM is a square matrix which takes into account the production, consumption, revenues, expenditures and transactions of institutions at a given period of time. The reference year for our SAM is 2003. The SAM we built contains sixty two (62) branches of activity, sixty nine (69) commodities, three (3) regional governments, the French Community, the Central Government, the capital accounts and the Rest of the World. Finally, to illustrate the capabilities of the model we provide two scenario analyses. In the first policy scenario, we simulate the introduction of a carbon tax at 20 euro per ton of CO2 emissions in 2013-2020 and 30 euro per ton of CO2 emissions in 2021-2050. In the second policy scenario, we simulate a linear and gradual increase of the crude oil price to 150 US dollars per barrel in 2050. The increase starts in 2008 and the target (150 US dollars) is reached in 2050.