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Implications of Updating the Input-output Database of a Computable General Equilibrium Model on Emissions Mitigation Policy Analyses

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  • Hong, Wei-Hong
  • Chai, Hui-Chih
  • Chen, Y.-H. Henry
  • Reilly, John
  • Paltsev, Sergey

Abstract

In this study, we provide a critical evaluation about how updating the input-output data of an energy economic computable generation equilibrium (CGE) model can affect policy results, an assessment that is rarely done in existing literature if any. Specifically, we will explore how datasets with different fossil energy cost shares affect results of policy simulations that aim at reducing CO2 emissions. We prove analytically that a sudden fossil fuel price surge that provides little time for adjustment through input substitution can lead to a higher CO2 mitigation cost, and the finding is demonstrated empirically in a full scale CGE model for a base year with lower fossil fuel prices contrasted with results from a base year when fossil fuel prices had spiked. We then propose an adjustment to resolve the issues of using input-output data that embed sudden fossil fuel price hikes.

Suggested Citation

  • Hong, Wei-Hong & Chai, Hui-Chih & Chen, Y.-H. Henry & Reilly, John & Paltsev, Sergey, 2019. "Implications of Updating the Input-output Database of a Computable General Equilibrium Model on Emissions Mitigation Policy Analyses," Conference papers 333019, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    • Handle: RePEc:ags:pugtwp:333019
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    References listed on IDEAS

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    1. Rutherford, Thomas F, 1999. "Applied General Equilibrium Modeling with MPSGE as a GAMS Subsystem: An Overview of the Modeling Framework and Syntax," Computational Economics, Springer;Society for Computational Economics, vol. 14(1-2), pages 1-46, October.
    2. Jeffrey C Peters, 2016. "The GTAP-Power Data Base: Disaggregating the Electricity Sector in the GTAP Data Base," Journal of Global Economic Analysis, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University, vol. 1(1), pages 209-250, June.
    3. Chai, Hui-Chih & Hong, Wei-Hong & Chen, Y.-H. Henry, 2017. "The Economic Projection and Policy Analysis Model for Taiwan: A Global Computable General Equilibrium Analysis," Conference papers 332889, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    4. Marcel P. Timmer & Erik Dietzenbacher & Bart Los & Robert Stehrer & Gaaitzen J. Vries, 2015. "An Illustrated User Guide to the World Input–Output Database: the Case of Global Automotive Production," Review of International Economics, Wiley Blackwell, vol. 23(3), pages 575-605, August.
    5. Rutherford, Thomas F., 1995. "Extension of GAMS for complementarity problems arising in applied economic analysis," Journal of Economic Dynamics and Control, Elsevier, vol. 19(8), pages 1299-1324, November.
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