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Macroeconomic Consistency issues in E3 Modeling: The Continued Fable of the Elephant and the Rabbit

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  • Frederic Ghersi and Jean-Charles Hourcade

Abstract

Starting from a short presentation of the limits of using conventional production functions to hybridize energy-economy relationships, this paper presents a methodology aiming at a better integration of bottom-up policy scenarios in a top-down static general equilibrium framework. Along the lines of AhmadÕs innovation possibility curve, the methodology consists in implementing top-down envelopes of production and demand functions, whose variable point elasticities of substitution provide a flexible interface for calibration on any bottom-up expertise. Numerical experiments assessing the impact of a rising carbon tax on the global 2030 economy compare the application of this methodology to that of two standard CES-based approaches. Results confirm that, in case of large departures from reference scenarios or of strong convexities in bottom-up results, the use of conventional CES production and utility functions may lead to a significant bias in cost assessment.

Suggested Citation

  • Frederic Ghersi and Jean-Charles Hourcade, 2006. "Macroeconomic Consistency issues in E3 Modeling: The Continued Fable of the Elephant and the Rabbit," The Energy Journal, International Association for Energy Economics, vol. 0(Special I), pages 39-62.
  • Handle: RePEc:aen:journl:2006se_jaccard-a03
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    References listed on IDEAS

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    Cited by:

    1. repec:dau:papers:123456789/13160 is not listed on IDEAS
    2. Ruben Bibas & Aurélie Méjean, 2012. "Bioenergy and CO2 Sequestration: Climate Policies Beyond Technological Constraints," Working Papers 2012.88, Fondazione Eni Enrico Mattei.
    3. Emmanuel Combet & Frédéric Ghersi & Jean Charles Hourcade, 2009. "Taxe carbone, une mesure socialement régressive ? Vrais problèmes et faux débats," CIRED Working Papers hal-00866409, HAL.
    4. Frederic Gonand, 2014. "Dynamic Impacts on Growth and Intergenerational Effects of Energy Transition in a Time of Fiscal Consolidation," Working Papers 1401, Chaire Economie du climat.
    5. Pierre Besson & Nina Kousnetzoff, 2009. "Les impacts économiques du changement climatique : enjeux de modélisation," Working Papers 2009-36, CEPII research center.
    6. repec:dau:papers:123456789/12507 is not listed on IDEAS
    7. Emmanuel Combet & Frédéric Ghersi & Jean-Charles Hourcade & Camille Thubin, 2010. "La fiscalité carbone au risque des enjeux d’équité," Revue Française d'Économie, Programme National Persée, vol. 25(2), pages 59-91.
    8. Xavier Labandeira, Pedro Linares and Miguel Rodriguez, 2009. "An Integrated Approach to Simulate the impacts of Carbon Emissions Trading Schemes," The Energy Journal, International Association for Energy Economics, vol. 0(Special I).
    9. Pablo Pintos & Pedro Linares, 2016. "Assessing the EU ETS with an Integrated Model," Working Papers 01-2016, Economics for Energy.
    10. Jean-Charles Hourcade & Michael Grubb & Aurélie Méjean, 2015. "The 'Dark Matter' in the Search for Sustainable Growth: Energy, Innovation and the Financially Paradoxical Role of Climate Confidence," Post-Print hal-01646242, HAL.
    11. Emmanuel Combet & Frédéric Ghersi & Jean Charles Hourcade & Daniel Théry, 2010. "Carbon Tax and Equity : The Importance of Policy Design," Post-Print halshs-00692516, HAL.
    12. Emmanuel Combet & Frédéric Ghersi & Jean Charles Hourcade & Daniel Théry, 2009. "Need a Carbon Tax be Socially Regressive ? True Challenges and Wrong Debates," CIRED Working Papers hal-00866410, HAL.
    13. Rodrigues, Renato & Linares, Pedro, 2014. "Electricity load level detail in computational general equilibrium – Part I – Data and calibration," Energy Economics, Elsevier, vol. 46(C), pages 258-266.
    14. Frédéric Ghersi & Emmanuel Combet & Jean Charles Hourcade & Camille Thubin, 2010. "Économie d'une fiscalité carbone en France - Rapport d'étude réalisée avec le soutien de l'ADEME et de la CFDT‐IRES," Post-Print halshs-00458205, HAL.
    15. Ruben Bibas & Aurélie Méjean, 2012. "Negative emissions and ambitious climate policies in a second best world: A general equilibrium assessment of technology options in the electricity sector," EcoMod2012 4569, EcoMod.
    16. Gonand, Frédéric & Jouvet, Pierre-André, 2015. "The “second dividend” and the demographic structure," Journal of Environmental Economics and Management, Elsevier, vol. 72(C), pages 71-97.
    17. Santamaría, Alberto & Linares, Pedro & Pintos, Pablo, 2014. "The effects of carbon prices and anti-leakage policies on selected industrial sectors in Spain – Cement, steel and oil refining," Energy Policy, Elsevier, vol. 65(C), pages 708-717.
    18. Frédéric Gonand, 2017. "Dynamic Impacts on Growth and Intergenerational Effects of Energy Transition in a Time of Fiscal Consolidation," Working Papers hal-01521866, HAL.
    19. Bibas, Ruben & Méjean, Aurélie & Hamdi-Cherif, Meriem, 2015. "Energy efficiency policies and the timing of action: An assessment of climate mitigation costs," Technological Forecasting and Social Change, Elsevier, vol. 90(PA), pages 137-152.
    20. Ruben Bibas & Aurélie Méjean, 2014. "Potential and limitations of bioenergy for low carbon transitions," Climatic Change, Springer, vol. 123(3), pages 731-761, April.

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    JEL classification:

    • F0 - International Economics - - General

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