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Modeling Low Climate Stabilization with E3MG:1 Towards a ‘New Economics’ Approach to Simulating Energy-Environment-Economy System Dynamics

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  • Terry Barker
  • S. Åžerban Scrieciu

Abstract

The literature on climate stabilization modeling largely refers to either energy-system or inter-temporal computable general equilibrium/optimal growth models. We contribute with a different perspective by deploying a large-scale macro-econometric hybrid simulation model of the global energy-environment-economy (E3MG) adopting a “New Economics†approach. We use E3MG to assess the implications of a low-stabilization target of 400ppm CO2 equivalent by 2100, assuming both fiscal instruments and regulation. We assert that if governments adopt more stringent climate targets for rapid and early decarbonization, such actions are likely to induce more investment and increased technological change in favor of low-carbon alternatives. Contrary to the conventional view on the economics of climate change, a transition towards a low-carbon society as modeled with E3MG leads to macroeconomic benefits, especially in conditions of unemployment, with GDP slightly above a reference scenario, depending on use of tax or auction revenues. In addition, more stringent action can lead to higher benefits.

Suggested Citation

  • Terry Barker & S. Åžerban Scrieciu, 2010. "Modeling Low Climate Stabilization with E3MG:1 Towards a ‘New Economics’ Approach to Simulating Energy-Environment-Economy System Dynamics," The Energy Journal, , vol. 31(1_suppl), pages 137-164, June.
    • Handle: RePEc:sae:enejou:v:31:y:2010:i:1_suppl:p:137-164
    DOI: 10.5547/ISSN0195-6574-EJ-Vol31-NoSI-6
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    References listed on IDEAS

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    1. McFarland, J. R. & Reilly, J. M. & Herzog, H. J., 2004. "Representing energy technologies in top-down economic models using bottom-up information," Energy Economics, Elsevier, vol. 26(4), pages 685-707, July.
    2. Ottmar Edenhofer , Brigitte Knopf, Terry Barker, Lavinia Baumstark, Elie Bellevrat, Bertrand Chateau, Patrick Criqui, Morna Isaac, Alban Kitous, Socrates Kypreos, Marian Leimbach, Kai Lessmann, Bertra, 2010. "The Economics of Low Stabilization: Model Comparison of Mitigation Strategies and Costs," The Energy Journal, International Association for Energy Economics, vol. 0(Special I).
    3. Terry Barker, Haoran Pan, Jonathan Kohler, Rachel Warren, and Sarah Winne, 2006. "Decarbonizing the Global Economy with Induced Technological Change: Scenarios to 2100 using E3MG," The Energy Journal, International Association for Energy Economics, vol. 0(Special I), pages 241-258.
    4. Terry Barker & Sebastian de-Ramon, 2006. "Testing the representative agent assumption: the distribution of parameters in a large-scale model of the EU 1972-1998," Applied Economics Letters, Taylor & Francis Journals, vol. 13(6), pages 395-398.
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