The added value from adopting a CGE approach to analyse changes in environmental trade balances
The application of multi-region environmental input-output (IO) analysis to the problem of accounting for emissions generation (and/or resource use) under different accounting principles has become increasingly common in the ecological and environmental economics literature in particular, with applications at the international and interregional subnational level. However, while environmental IO analysis is invaluable in accounting for pollution flows in the single time period that the accounts relate to, it is limited when the focus is on modelling the impacts of any marginal change in activity. This is because a conventional demand-driven IO model assumes an entirely passive supply-side in the economy (i.e. all supply is infinitely elastic) and is further restricted by the assumption of universal Leontief (fixed proportions) technology implied by the use of the A and multiplier matrices. Where analysis of marginal changes in activity is required, extension from an IO accounting framework to a more flexible interregional computable general equilibrium (CGE) approach, where behavioural relationships can be modelled in a more realistic and theory-consistent manner, is appropriate. Our argument is illustrated by comparing the results of introducing a positive demand stimulus in the UK economy using IO and CGE interregional models of Scotland and the rest of the UK. In the case of the latter, we demonstrate how more theory consistent modelling of both demand and supply side behaviour at the regional and national levels effect model results, including the impact on the interregional CO2 â€˜trade balanceâ€™.
|Date of creation:||Jan 2009|
|Date of revision:|
|Contact details of provider:|| Postal: Sir William Duncan Building, 130 Rottenrow, Glasgow G4 0GE|
Phone: +44 (0)141 548 3842
Fax: +44 (0)141 548 4445
Web page: http://www.strath.ac.uk/economics/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Wiedmann, Thomas & Lenzen, Manfred & Turner, Karen & Barrett, John, 2007. "Examining the global environmental impact of regional consumption activities -- Part 2: Review of input-output models for the assessment of environmental impacts embodied in trade," Ecological Economics, Elsevier, vol. 61(1), pages 15-26, February.
- Mark D. Partridge & Dan S. Rickman, 1998. "Regional Computable General Equilibrium Modeling: A Survey and Critical Appraisal," International Regional Science Review, , vol. 21(3), pages 205-248, December.
- Leontief, Wassily, 1970. "Environmental Repercussions and the Economic Structure: An Input-Output Approach," The Review of Economics and Statistics, MIT Press, vol. 52(3), pages 262-71, August.
- Gillespie, Gary & McGregor, Peter G. & Swales, J. Kim & Yin, Yan Ping, 1999. "A Computable General Equilibrium Approach to the Ex Post Evaluation of Regional Development Agency Policies," ERSA conference papers ersa99pa260, European Regional Science Association.
- Druckman, A. & Bradley, P. & Papathanasopoulou, E. & Jackson, T., 2008. "Measuring progress towards carbon reduction in the UK," Ecological Economics, Elsevier, vol. 66(4), pages 594-604, July.
- McGregor, Peter G. & Swales, J. Kim & Turner, Karen, 2008. "The CO2 'trade balance' between Scotland and the rest of the UK: Performing a multi-region environmental input-output analysis with limited data," Ecological Economics, Elsevier, vol. 66(4), pages 662-673, July.
- Allan, Grant & Hanley, Nick & McGregor, Peter & Swales, Kim & Turner, Karen, 2007. "The impact of increased efficiency in the industrial use of energy: A computable general equilibrium analysis for the United Kingdom," Energy Economics, Elsevier, vol. 29(4), pages 779-798, July.
- Mark Partridge & Dan Rickman, 2010.
"Computable General Equilibrium (CGE) Modelling for Regional Economic Development Analysis,"
Taylor & Francis Journals, vol. 44(10), pages 1311-1328.
- Mark D. Partridge & Dan S. Rickman, 2007. "CGE Modeling for Regional Economic Development Analysis," Economics Working Paper Series 0706, Oklahoma State University, Department of Economics and Legal Studies in Business.
- Heinz Welsch, 1996. "Recycling of carbon/energy taxes and the labor market," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 8(2), pages 141-155, September.
- Louis Beuuséjour & Gordon Lenjosek & Michael Smart, 1995. "A CGE Approach to Modelling Carbon Dioxide Emissions Control in Canada and the United States," The World Economy, Wiley Blackwell, vol. 18(3), pages 457-488, 05.
- Hanley, Nick D. & McGregor, Peter G. & Swales, J. Kim & Turner, Karen, 2006. "The impact of a stimulus to energy efficiency on the economy and the environment: A regional computable general equilibrium analysis," Renewable Energy, Elsevier, vol. 31(2), pages 161-171.
- Turner, Karen & Lenzen, Manfred & Wiedmann, Thomas & Barrett, John, 2007. "Examining the global environmental impact of regional consumption activities -- Part 1: A technical note on combining input-output and ecological footprint analysis," Ecological Economics, Elsevier, vol. 62(1), pages 37-44, April.
- Grant J. Allan & Nicholas D. Hanley & Peter G. Mcgregor & J. Kim Swales & Karen R. Turner, 2007. "Augmenting the Input-Output Framework for 'Common Pool' Resources: Operationalising the Full Leontief Environmental Model," Economic Systems Research, Taylor & Francis Journals, vol. 19(1), pages 1-22.
- Munksgaard, Jesper & Pedersen, Klaus Alsted, 2001. "CO2 accounts for open economies: producer or consumer responsibility?," Energy Policy, Elsevier, vol. 29(4), pages 327-334, March.
- Michelle Gilmartin & Kim Swales & Karen Turner, 2008. "A Comparison of Results From MRIO and Interregional Computable General Equilibrium (CGE) Analyses of the Impacts of a Positive Demand Shock on the â€˜CO2 Trade Balanceâ€™ Between Scotland and the Rest," Working Papers 0808, University of Strathclyde Business School, Department of Economics.
- Hanley, Nick & McGregor, Peter G. & Swales, J. Kim & Turner, Karen, 2009. "Do increases in energy efficiency improve environmental quality and sustainability?," Ecological Economics, Elsevier, vol. 68(3), pages 692-709, January.
- Karlsson, Charlie & Johansson, Börje, 2006. "Regional Development and Knowledge," Working Paper Series in Economics and Institutions of Innovation 76, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies.
When requesting a correction, please mention this item's handle: RePEc:str:wpaper:0903. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Kirsty Hall)
If references are entirely missing, you can add them using this form.