Socio-economic drivers - EPPA: Difference between revisions

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The socio-economic drivers of EPPA include: 1) exogenous factors, which consist of projections for labor endowment growth, factor-augmented productivity growth, energy productivity growth, and natural resource assets. For each region, it is assumed that the labor endowment increases proportionally to population growth. Since expectations or projections for the baseline economic growth are often in terms of GDP rather than underlying factors such as labor, land, capital, energy productivity, or resource availabilities, model developers have included a feature that automatically calibrates an additional Hick’s neutral adjustment on top of any biased growth to match a pre-specified GDP growth rate; and 2) endogenous factors, which encompass savings, investment, and fossil fuel resource depletion. Savings and consumption are aggregated in a Leontief approach in the household’s utility function. All savings are used as investment, which meets the demand for capital goods. The capital is divided into a malleable portion with all new investment malleable, and a vintaged non-malleable portion. Capital is region specific, and vintaged capital is sector specific <ref>Chen, Y.-H. H., S. Paltsev, J. Reilly, J. Morris and M. Babiker (2016). Long-term economic modeling for climate change assessment. Economic Modeling, 52, 867–883.</ref>.
The key socio-economic driver of EPPA is the Hick’s neutral productivity growth, which is calibrated to match a baseline GDP growth trajectory under 1) a set of exogenously given factors, including labor endowment growth, which is assumed to increase proportionally to the population growth and autonomous energy efficiency improvement (AEEI), and 2) a set of factors determined by the model dynamics, which encompass savings, investment, fossil fuel resource depletion, and the evolution of technology specific factor for each backstop technology. While the Hick’s neutral productivity levels are held constant across scenarios, changes in prices and model dynamics will determine levels of variables such as resource allocations, sectoral outputs and GDP <ref>Chen, Y.-H. H., S. Paltsev, J. Reilly, J. Morris and M. Babiker (2016). Long-term economic modeling for climate change assessment. Economic Modeling, 52, 867–883.</ref>.
 


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Latest revision as of 17:59, 11 July 2022

The key socio-economic driver of EPPA is the Hick’s neutral productivity growth, which is calibrated to match a baseline GDP growth trajectory under 1) a set of exogenously given factors, including labor endowment growth, which is assumed to increase proportionally to the population growth and autonomous energy efficiency improvement (AEEI), and 2) a set of factors determined by the model dynamics, which encompass savings, investment, fossil fuel resource depletion, and the evolution of technology specific factor for each backstop technology. While the Hick’s neutral productivity levels are held constant across scenarios, changes in prices and model dynamics will determine levels of variables such as resource allocations, sectoral outputs and GDP [1].

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Model Documentation - EPPA

Corresponding documentation
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Model information
Model link
Institution Massachusetts Institute of Technology (MIT), USA, https://globalchange.mit.edu/.
Solution concept General equilibrium (closed economy)
Solution method Optimization
Anticipation
  1. ↑ Chen, Y.-H. H., S. Paltsev, J. Reilly, J. Morris and M. Babiker (2016). Long-term economic modeling for climate change assessment. Economic Modeling, 52, 867–883.
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