Fondazione Eni Enrico Mattei The Economic Consequences of Climate Change: a CGE Approach Roberto Roson Università CaFoscari, ICTP and FEEM CGE Workshop, Trieste, December 2003

Fondazione Eni Enrico Mattei Existence of CGE modelling team within the EEE programme Illustration of non-conventional use of CGE models Presentation of alternative modelling tools and approaches Motivation

Fondazione Eni Enrico Mattei Integrated Assessment Models Myth and Reality

Fondazione Eni Enrico Mattei the description of the world economic structure is often too simplistic: limited number of industries (sometimes only one good, available for both consumption and investment), poor or absent description of international trade and capital flows. the multi-dimensional nature of the impact of the climate change on the economic systems is disregarded. This is usually accommodated by specific ad-hoc relationships, making a certain fraction of potential income melting away as temperature increases Are CGEs better? Inadequacy of Current IAM Models

Fondazione Eni Enrico Mattei Pseudo-Calibration Impact Analysis Strategy: A two-stages procedure

Fondazione Eni Enrico Mattei Obtain long-run estimates of endowments stocks (G-cubed, IMAGE, etc.) and other variables Shock the GTAP 1997 calibration equilibrium (2010, 2030, 2050) What is GTAP? A consortium, a data-set, a model (a book?) The Pseudo-calibration

Fondazione Eni Enrico Mattei Impact Analysis

Fondazione Eni Enrico Mattei How to build a simulation experiment (simplified illustrative example)

Fondazione Eni Enrico Mattei A Piece of Code !< Variables and base flows associated with private consumption >! Variable (all,i,TRAD_COMM)(all,s,REG) ppd(i,s) # price of domestic i to private households in s #; Variable (orig_level=VDPM)(all,i,TRAD_COMM)(all,s,REG) qpd(i,s) # private hhld demand for domestic i in region s #; Coefficient (ge 0)(all,i,TRAD_COMM)(all,r,REG) VDPA(i,r) # private consumption expenditure on domestic i in r #; Update (all,i,TRAD_COMM)(all,r,REG) VDPA(i,r) = ppd(i,r) * qpd(i,r); Read VDPA from file GTAPDATA header "VDPA"; Coefficient (ge 0)(all,i,TRAD_COMM)(all,r,REG) VDPM(i,r) # private consumption expenditure on domestic i in r #; Update (all,i,TRAD_COMM)(all,r,REG) VDPM(i,r) = pm(i,r) * qpd(i,r); Read VDPM from file GTAPDATA header "VDPM";

Fondazione Eni Enrico Mattei A Command File !________________________________num.cmf __________________________________ ! This GEMPACK command file simulates a numeraire shock in gtap.tab. !__________________________________________________________________________ ! ! Original (i.e. pre-simulation) data files ! Auxiliary files = gtap-ex ; File GTAPSETS = sets.har; File GTAPPARM = default.prm; File GTAPDATA = basedata.har; ! ! Equations file information ! Equations File = gtap-ex ; Model = GTAP-ex ; Version = 1 ; Identifier = gtap-e extended by RR ; ! ! basic closure exogenous pop psaveslack pfactwld AND MANY OTHERS… Rest Endogenous ;

Fondazione Eni Enrico Mattei ! ! Shock ! Shock qo(ENDW_COMM,REG) = uniform 50; ! ! Solution method ! Method = Johansen ; ! Verbal Description = Model GTAP-EX + + Experiment NUM: numeraire shock + + Solution Method: Johansen ; ! ! Output File Specification (they are experiment dependent) ! Solution File = gexnum ; ! ! Updated (i.e. post-simulation) data files ! Updated file GTAPDATA = gexnum.upd; ! Save Environment File GTAPEX ; ! ! Options ! Extrapolation accuracy file = YES ; CPU = yes ; NDS = yes ; ! Do no displays. ! !__________________________End of file________________________

Fondazione Eni Enrico Mattei Early Results: Sea Level Rise