Simulation tests on GEM-E3
General equilibrium models are commonly used to quantify the implications of alternative economic policies (e.g. change in tax rates, imposition of import tariffs etc.) on economic growth, competitiveness and employment. In recent years, they are increasingly employed to study the macro-economic and sectoral impacts of climate change mitigation policies and measures, as climate change constitutes one of the most important global policy challenges [1]. General equilibrium integrated assessment models (IAMs) are complex modeling tools that are able to measure the cost of alternative energy and climate policies, while integrating other policy priorities, such as innovation through investments in R&D, economic development, enhancement of industrial competitiveness in global markets, uptake of low carbon technologies and security of energy and food supply. The results of IAMs are of great interest to international climate policy makers for evaluating longâ€term climate policy targets and their relation to shortâ€term action. Within the SIMPATIC project, E3M-Lab focused on studying endogenous growth and innovation arising from policies and activities related to GHG emission abatement. Towards this end, the GEM-E3-RD model has been significantly expanded in order to explicitly identify technologies and sectors that are expected to play a key role in meeting ambitious GHG reduction targets [3]. The main modeling improvements concern: <ul style="text-align: justify;"> <li>The bottom-up representation of the energy system and GHG emissions reduction options, especially with regard to power generation technologies, energy efficiency investments, detailed representation of the transport sector (including mobility electrification and deployment of biofuels) and energy demand for households</li> <li>The separate representation of the most important clean energy producing industrial sectors and their global trade using bottom-up data derived from various sources</li> <li>Endogenous representation of R&D expenditures realised by each production sector</li> <li>Endogenous learning by doing: “experience†curves have been explicitly introduced in GEME3-RD, in which productivity improvements of clean energy producing sectors depend on their cumulative production</li> <li>Endogenous learning by research mechanism, which links productivity improvements with the accumulated knowledge R&D stock</li> <li>Incorporation of knowledge depreciation rates and inter-regional spillovers for low and zero carbon technologies</li> </ul> The bottom-up representation of the energy system, the distinct modeling of the clean energy producing sectors and the incorporation of endogenous learning mechanisms[1] in the GEM-E3-RD model represent a considerable challenge because they must be embedded within the rigorous specification of the general equilibrium context. The development of a comprehensive integrated assessment modelling framework that encompasses the multi market equilibrium of CGE models with a consistent bottom-up representation of energy demand and supply, power generation structure and technological dynamics constitutes a long-standing challenge for the modelling community. Recently, there is a growing interest in evaluation/ validation and diagnosing the behaviour of integrated assessment energy-economy models. Kriegler et al [12] propose a diagnostic scheme that can be applied to a wide range of models to identify model behaviour patterns in a series of exogenously determined carbon price scenarios. It is important to note that the objective of diagnostic analysis conducted in [12] is not to capture policy implications in any detail but rather to try to characterize the model response to single policy signals (such as carbon price). Schwanitz [13] sets up a general framework for model evaluation and compares model behaviour with stylized patterns observed in historical data (e.g. Kaldor facts). The objective of the current report is to present the simulation runs performed in order to illustrate the properties of the enhanced version of the GEME3-RD model. Modelling developments implemented in GEME3-RD are tested with analytical shocks on a series of exogenous assumptions/policy instruments (e.g. carbon price of the EU-28 region, change in learning by doing and learning by research rate assumptions, different assumptions for Armington elasticities). Model runs are also performed by deactivating the new endogenous R&D mechanisms incorporated in GEME3-RD in order to examine the impact of the adopted specification on model results. In contrast to policy experiments usually conducted by Integrated Assessment Models [11, 15], diagnostic simulations do not aim to capture the policy dimension in detail but rather try to characterize the GEME3-RD model response to single policy signals in a way that illustrates the underlying causeâ€effect chain. The objective of running stylized simulation tests is to establish confidence in the main properties and behavior of the GEME3-RD model, to test the robustness of model results in response to single policy signals and to inform modellers and policy makers about the model behaviour in sophisticated policy applications. The remainder of the report is structured as follows: Section two introduces briefly the main characteristics and improvements of the GEME3-RD model performed in the context of the SIMPATIC project. Section three, the report includes a brief specification of the reference scenario constructed using the new enhanced version of the GEME3-RD model. Section four provides the description of the set of shocks considered in the study. Sections 5-8 analyse the macro-economic, climate and technological implications of the alternative shocks examined. Section nine concludes.
Authors: | Karkatsoulis, Panagiotis ; Fragkos, Panagiotis ; Kouvaritakis, Nikos ; Paroussos, Leonidas ; Capros, Pantelis |
---|---|
Institutions: | Bruegel |
Saved in:
Saved in favorites
Similar items by person
-
Modification of GEM-E3 technological innovation module
Karkatsoulis, Panagiotis,
-
Policy assessment with NEMESIS and GEM-E3 in the state of the art modelling
Fougeyrollas, Arnaud,
-
Prospects for Energy Supply and Demand in the Southern Mediterranean : Scenarios for 2010–30
Fragkos, Panagiotis, (2012)
- More ...