Transitions to a Sustainable Future
The Fondazione Eni Enrico Mattei series on Economics, the Environment and Sustainable Development
Edited by Valentina Bosetti, Reyer Gerlagh and Stefan P. Schleicher
Chapter 14: Policy Analysis Based on Computable Equilibrium (PACE)
Christoph Böhringer, Andreas Löschel and Thomas F. Rutherford 14.1 OVERVIEW PACE (Policy Analysis based on Computable Equilibrium) is a flexible system of computable general equilibrium (CGE) models which integrates the areas of economy, energy and environment. The generic core of PACE is a standard multisector, multiregion CGE framework of global trade and energy use designated to assess major policy initiatives in a world that is increasingly integrated through trade. Departing from the generic core, the various PACE modules allow for the problem-specific analysis of policy interference at different regional and sectoral levels as well as time treatments (static, dynamic-recursive, intertemporal). The different PACE modules account for issue-driven priorities in the representation of details and functional relationships. There is a module that emphasizes discrete technological choice in the energy system thereby featuring a bottom-up representation of alternative electricity supply options. Another module incorporates a detailed description of labor market imperfections and public taxation to trace back the interaction of tax policies and involuntary unemployment (for example due to union-bargaining). Further modules include a disaggregate representation of different household types or overlapping generations in order to allow for more detailed incidence analysis or a vintage approach to car stocks in order to investigate the implications of alternative emission regulation policies for automobile industries. More recently, an integrated assessment module has been added that links a reduced-form representation of climate relationships with a comprehensive intertemporal multisector, multiregion model for the world economy. The PACE modeling system has been primarily used for...
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