Combination of Equilibrium Models and Hybrid Life Cycle–Input-Output Analysis to Predict the Environmental Impacts of Energy Policy Scenarios

Nowadays, many countries adopt an active agenda to mitigate the impact of greenhouse gas emissions by moving towards less polluting energy generation technologies. The environmental costs, directly or indirectly generated to achieve such a challenging objective, remain however largely underexplored. Until now, research has focused either on pure economic approaches such as computable general equilibrium (CGE) and partial equilibrium (PE) models, or on (physical) energy supply scenarios. These latter could be used to evaluate the environmental impacts of various energy saving or cleaner technologies via life cycle assessment (LCA) methodology. These modelling efforts have, however, been pursued in isolation, without exploring the possible complementarities and synergies. In this study, we have undertaken a practical combination of these approaches into a common framework: on the one hand, by coupling a CGE with a PE model, and, on the other hand, by linking the outcomes from the coupling with a hybrid input-output-process based life cycle inventory. The methodological framework aimed at assessing the environmental consequences of two energy policy scenarios in Luxembourg between 2010 and 2025. The study highlights the potential of coupling CGE and PE models but also the related methodological difficulties (e.g. small number of available technologies in Luxembourg, intrinsic limitations of the two approaches, etc.). The assessment shows both environmental synergies and trade-offs due to the implementation of energy policies. For example, despite the changes in technologies towards the reduction of greenhouse gas emissions, only marginal improvements are observed in the climate change mitigation scenario as compared to the business-as-usual. The energy related production and imports are indeed expected to increase over time and represent a large contribution to the country’s impacts. Interestingly, side effects on other impacts than climate change or fossil resource depletion (e.g. ionising radiation and water depletion) may also occur mainly due to the use of nuclear energy in neighbouring countries.