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Model Simulations of Resource Use Scenarios for Europe. WWWforEurope Deliverable No. 5

Author

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  • Kurt Kratena
  • Mark Sommer

    (Austrian Institute of Economic Research)

Abstract

This paper describes the introduction of biophysical constraints into a disaggregated dynamic New Keynesian (DYNK) model using the example of different resource use scenarios for Europe, derived from global UNEP scenarios. The DYNK model covers 59 industries and five income groups of households and has features similar to a DSGE model (e.g., QUEST). The model solution converges towards a long-run full employment equilibrium, but exhibits short-run institutional rigidities (imperfect credit and capital markets, wage bargaining). The DYNK model links physical energy and material flow data to production and consumption activities. Different sources of technical change are modelled at the disaggregate level: TFP, factor-bias and material efficiency in production and energy efficiency in private consumption. These components of technical change drive – together with relative prices – economic growth and resource use and therefore decoupling. A scenario of modest resource use reduction (per capita) is implemented by shifting the bias of technological change from labour and capital saving to energy and resource saving. As one example for a scenario of radical reduction of resource use per capita, the radical reduction of energy demand and greenhouse gas emissions is analysed. The results show the various interlinkages between different categories of material flows, which lead to co-benefits of policies. Further policy options are discussed (re-use and recycling of material in key industries, structural change in agriculture) and shall be analysed in a follow-up of this paper.

Suggested Citation

  • Kurt Kratena & Mark Sommer, 2014. "Model Simulations of Resource Use Scenarios for Europe. WWWforEurope Deliverable No. 5," WIFO Studies, WIFO, number 47503, April.
    • Handle: RePEc:wfo:wstudy:47503
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    References listed on IDEAS

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    Cited by:

    1. Marina Fischer-Kowalski & Dominik Wiedenhofer, 2014. "An Optimal Policy Mix for Resource Use. WWWforEurope Policy Brief No. 5," WIFO Studies, WIFO, number 47505, February.
    2. Dominik Wiedenhofer & Marina Fischer-Kowalski, 2015. "Achieving Absolute Decoupling? Comparing Biophysical Scenarios and Macro-economic Modelling Results. WWWforEurope Working Paper No. 86," WIFO Studies, WIFO, number 57895, February.
    3. Mark Sommer & Ina Meyer & Kurt Kratena, 2018. "Neue Energieszenarien 2050 für Österreich," WIFO Monatsberichte (monthly reports), WIFO, vol. 91(5), pages 375-385, May.
    4. Li Yang & Ya Gao, 2024. "Marketization of Energy Resources in China: An Environmental CGE Analysis," Sustainability, MDPI, vol. 16(4), pages 1-25, February.

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