Modelling Sustainable Development

Modelling Sustainable Development

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

This insightful book explores the issue of sustainable development in its more operative and applied sense. Although a great deal of research has addressed potential interpretations and definitions of sustainable development, much of this work is too abstract to offer policy-makers and researchers the feasible and effective guidelines they require. This book redresses the balance.

Chapter 14: Policy Analysis Based on Computable Equilibrium (PACE)

Christoph Böhringer, Andreas Löschel and Thomas F. Rutherford

Subjects: economics and finance, environmental economics, environment, environmental economics


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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