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Dynamic CGE-model with heterogeneous forest biomass: Applications to climate policy

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Abstract

This study introduces a framework for modeling a renewable forest biomass stock interacting with economic sectors in a competitive economy. The equilibrium is formulated as a mixed complementary problem (which explicitly represents weak inequalities and complementary among decision variables and equilibrium conditions). The complementarity format permits detailed modeling of the growth and harvest of a biomass stock together with a second-best characterization of the overall economy. First the complementarity features of economic equilibrium and its integration with an ecological representation of the biomass are provided. Then a stylized numerical example of a dynamic computable general equilibrium model is presented. Finally, illustrative applications of the model for gauging the likely effects of environmental subsidies and taxes intended to promote increases CO2 storage in forest biomass are given, the results are discussed.

Suggested Citation

  • Furtenback, Örjan, 2011. "Dynamic CGE-model with heterogeneous forest biomass: Applications to climate policy," CERE Working Papers 2011:10, CERE - the Center for Environmental and Resource Economics.
  • Handle: RePEc:hhs:slucer:2011_010
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    File URL: http://www-sekon.slu.se/~gbost/CERE_WP2011-10.pdf
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    Keywords

    Dynamic CGE; Ecosystem modeling; Inter-temporal optimization; Infinite-horizon equilibrium;

    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • Q26 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Recreational Aspects of Natural Resources

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