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Economic M odels for Energy and Environmental analysis

Economic M odels for Energy and Environmental analysis. CREE/CENSES Model Forum 24. October 2013 Brita Bye. Macroeconomic numerical models at Statistics Norway. Short/medium term macroeconometric models, KVARTS/MODAG Short term forecasting – no emissions modelled

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Economic M odels for Energy and Environmental analysis

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  1. EconomicModels for Energy and Environmentalanalysis CREE/CENSES Model Forum 24. October 2013 Brita Bye

  2. Macroeconomic numerical models at Statistics Norway • Short/medium term macroeconometric models, KVARTS/MODAG • Short term forecasting – no emissions modelled • MODAG used by the Ministry of Finance for the annual National budget (white book). • Emissions of CO2 • Long term computable general equilibrium (CGE) models: MSG model • Regularly used by the Ministry of Finance for long term forecasting and policy analyses (Ministry of Finance, 2013) • Emission forecasting (Kyoto gases, So2, NOx, etc) • KLIMAKUR2020 (2010)

  3. Integrated CGE-models - Background • Multi sectoral, multi-purpose general equilibrium models • Early approach (Johansen, 1960) • Current model, MSG-6, Heide et al (2004) • Resource statistics (Energy and Environment, 1980-ies) • Integrated Economy-Energy-Environment models since 1980-ies • Consistent framework for economic, energy and emission projections, evaluation of e.g. climate policies • Mitigation – not adaptation

  4. The MSG-6 model • Optimising dynamic consumers and producers (detailed modelling) • Production and consumption structures of the Norwegian economy • Public policies, direct and indirect (incl environmental and energy) taxes and transfers • Determines domestic investments, production, consumption, export, import, and wealth accumulation • Reallocations of resources • between industries • from leisure to labour • between consumption and savings • > Measure economic welfare (total discounted utility) effects of different policies

  5. Climate analyses and the MSG6-model: shortcomings • Small, openeconomycharacteristics-> • Exogenousworldmarketprices -> No terms-of-trade effects • Climatepoliciesare regional/global -> Interactionswithothereconomies(EU) and Rest ofthe World • Technologicalchangeareexogenous • Models onlysubstition- and scaleeffectsofclimatepolicies • New technologiesareimportant for climate analyses: • Diffusionofnewclimatetechnologies • Implementation • Absorptionprocesses • Learning effects • Modelingtheinnovationprocessesofnewclimatetechnologies • Research and Development (R&D)

  6. 1 MSG-TECH hybrid top-down/bottom-up 2 SNoW Norway and Rest of the world Three CGE modelsfor climate policy analyses 3ITC Endogenous technological change Incorporate existing and future technologies (different approaches) – Diffusion and innovation Norway in a global perspective

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