Abstract

In a Computable General Equilibrium (CGE) setting, we show how the cost of a carbon policy for anĀ open economy depends on the assumptions made about future exogenous structural changes. ForĀ dynamic CGE models, we propose an analytical framework derived from static CGE models andĀ associate structural changes with the construction of a non-stationary dynamic Social AccountingĀ Matrix (SAM). Such matrices are benchmark scenarios that embed the modelers view on howĀ technologies and preferences should evolve. These benchmark scenarios must be replicable and relevantĀ (by matching what the modeler regards as plausible). To combine these two properties and produceĀ alternative benchmark scenarios, we use partial parameter adjustments and general equilibrium computation. We produce three alternative benchmark scenarios that differ in terms of energyĀ efficiency gains and structural shift in GDP. For each benchmark scenario, we then simulate the GDPĀ deviation induced by a shock on carbon price. We show the dependence of the simulated GDP lossesĀ and terms of trade response on the benchmark scenario considered

Authors: Olivier Durant-Lasserve, Axel Pierru and Yves SmeersĀ 

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Durand-Lasserve, Olivier
Energy Macro & Microeconomics
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Pierru, Axel
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