Three Future Scenarios for Greenhouse-Gas Emissions by Region in Australia

MMRF-Green is a bottoms-up model of the economies of Australia’s six states and two territories. It models each region as an economy in its own right, with region-specific prices, region-specific consumers, region-specific industries, and so on. This theoretical structure is supported by a database containing explicit representations of intra-regional, inter-regional and international trade flows based on regional input-output data developed at the Centre of Policy Studies. Each solution of MMRF-Green produces pictures of Australia’s regions at a high level of detail for a particular year. The model can also produce a sequence of annual solutions, linked together by ensuring, for example, that the quantities of opening capital stocks in any year equal the quantities of closing stocks in the previous year. This allows the model to make forecasts for the regional economies at a high level of detail over periods of policy relevance (say up to 10 years). The starting point for these forecasts is a set of scenarios for the macro economy supplied by a specialist-forecasting agency. The role of MMRF-Green is to forecast a microeconomic picture consistent with the macroeconomic scenarios and other inputs. The objective of this paper is to describe the latest set of forecasts for energy use and greenhouse-gas emissions derived from the model. These forecasts have been made for the Australian Greenhouse Office (AGO), which is the sponsor of the work. Three scenarios are reported and discussed. Most attention is given to the central case, which is our preferred scenario. The other two cases are upper and lower scenarios that provide plausible ranges for the forecast values of critical variables.