The Economic Projection and Policy Analysis Model for Taiwan: A Global Computable General Equilibrium Analysis

In this study we build a global computable general equilibrium (CGE) model for Taiwan to analyze climate policy implications on Taiwan’s economy based on the GTAP 9 database, which provides economic data of three reference years that allows us to explore questions including: 1) for a counterfactual simulation, what could be the effects of using economic data with distinct reference years? 2) Based on the same data and sectorial classification, could various model settings result in drastically different simulation outcomes? 3) what would be the implications on Taiwan’s economy when its INDC is carried out as planned? We find that under a global carbon reduction scenario, mitigation costs across regions tend to be higher when using data for the year of 2011, as oppose to cases of using the 2007 and 2004 data, due to increasing energy cost shares over time. Besides, with the same reference year, sectorial aggregation and policy scenario, when comparing our results with those from the CGE component of GTAP9inGAMS, our model shows lower GDP losses for energy exporting counties since our production technologies allow more substitution possibilities among inputs. We also find that when when only Taiwan carries out the reduction target, due to the existence of carbon leakage, the CO2 price is lower and the GDP impact is slightly smaller than the case where emissions reduction becomes a global effort.