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Validating energy-oriented CGE models

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  • Beckman, Jayson
  • Hertel, Thomas
  • Tyner, Wallace

Abstract

Although CGE models have received heavy usage -- particularly in the analysis of broad-based policies relating to energy, climate and trade, they are often criticized as being insufficiently validated. Key parameters are often not econometrically estimated, and the performance of the model as a whole is rarely checked against historical outcomes. As a consequence, questions frequently arise as to how much faith one can put in CGE results. In this paper, we employ a novel approach to the validation of a widely utilized global CGE model -- GTAP-E. By comparing the variance of model-generated petroleum price distributions - driven by historical demand and supply shocks to the model - with observed five-year moving average price distributions, we conclude that energy demand in GTAP-E is far too price-elastic over this medium run time frame. After incorporating the latest econometric estimates of energy demand and supply elasticities, we revisit the validation question and find the model to perform more satisfactorily. As a further check, we compare a deterministic global general equilibrium simulation, based on historical realizations over the five year period: 2001-2006, during which petroleum prices rose sharply, along with growing global energy demands. As anticipated by the stochastic simulations, the revised model parameters perform much better than the original GTAP-E parameters in this global, general equilibrium context.

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Bibliographic Info

Article provided by Elsevier in its journal Energy Economics.

Volume (Year): 33 (2011)
Issue (Month): 5 (September)
Pages: 799-806

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Handle: RePEc:eee:eneeco:v:33:y:2011:i:5:p:799-806

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Web page: http://www.elsevier.com/locate/eneco

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Keywords: Energy Model validation GTAP-E;

References

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Citations

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Cited by:
  1. Alessandro Antimiani & Valeria Costantini & Chiara Martini & Luca Salvatici, 2011. "Cooperative and non-cooperative solutions to carbon leakage," Departmental Working Papers of Economics - University 'Roma Tre' 0136, Department of Economics - University Roma Tre.
  2. Janda, Karel & Kristoufek, Ladislav & Zilberman, David, 2011. "Biofuels: review of policies and impacts," CUDARE Working Paper Series 1119, University of California at Berkeley, Department of Agricultural and Resource Economics and Policy.
  3. Antimiani Alessandro & Valeria Costantini & Anil Markandya & Chiara Martini & Alessandro Palma & Maria Cristina Tommasino, 2014. "A dynamic CGE modelling approach for analyzing trade-offs in climate change policy options: the case of Green Climate Fund," SEEDS Working Papers 1614, SEEDS, Sustainability Environmental Economics and Dynamics Studies, revised Jun 2014.
  4. Costantini, Valeria & D'Amato, Alessio & Martini, Chiara & Tommasino, Maria Cristina & Valentini, Edilio & Zoli, Mariangela, 2013. "Taxing international emissions trading," Energy Economics, Elsevier, vol. 40(C), pages 609-621.
  5. Hertel, Thomas, 2013. "Global Applied General Equilibrium Analysis Using the Global Trade Analysis Project Framework," Handbook of Computable General Equilibrium Modeling, Elsevier.
  6. Kristoufek, Ladislav & Janda, Karel & Zilberman, David, 2012. "Relationship Between Prices of Food, Fuel and Biofuel," 131st Seminar, September 18-19, 2012, Prague, Czech Republic 135793, European Association of Agricultural Economists.
  7. Enrica De Cian & Ramiro Parrado, 2012. "Technology Spillovers Embodied in International Trade: Intertemporal, regional and sectoral effects in a global CGE," Working Papers 2012.27, Fondazione Eni Enrico Mattei.
  8. Kristoufek, Ladislav & Janda, Karel & Zilberman, David, 2012. "Correlations between biofuels and related commodities before and during the food crisis: A taxonomy perspective," Energy Economics, Elsevier, vol. 34(5), pages 1380-1391.
  9. Rada, Nicholas E. & Rosen, Stacey & Beckman, Jayson, 2013. "Evaluating Agricultural Productivity’s Impact on Food Security," Proceedings Issues, 2013: Productivity and Its Impacts on Global Trade, June 2-4, 2013. Seville, Spain 152265, International Agricultural Trade Research Consortium.
  10. Karel Janda & Ladislav Kristoufek & David Zilberman, 2011. "Modeling the Environmental and Socio-Economic Impacts of Biofuels," Working Papers IES 2011/33, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Oct 2011.
  11. Barkhordar, Zahra A. & Saboohi, Yadollah, 2013. "Assessing alternative options for allocating oil revenue in Iran," Energy Policy, Elsevier, vol. 63(C), pages 1207-1216.
  12. Ladislav Krištoufek & Karel Janda & David Zilberman, 2012. "Correlations between biofuels and related commodities: A taxonomy perspective," Working Papers IES 2012/15, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Jun 2012.
  13. Parrado, Ramiro & De Cian, Enrica, 2014. "Technology spillovers embodied in international trade: Intertemporal, regional and sectoral effects in a global CGE framework," Energy Economics, Elsevier, vol. 41(C), pages 76-89.
  14. Serra, Teresa & Zilberman, David, 2013. "Biofuel-related price transmission literature: A review," Energy Economics, Elsevier, vol. 37(C), pages 141-151.

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