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The objective of the environment module is to represent the effect of environmental policy on the EU economy and on the state of the environment.
Compared to other currently available models, the aim of the introduction of a environment module is to improve the analysis in the following four directions:
* Integrated analysis of environmental and energy objectives on a European scale, e.g. energy security versus clean air.
* Representation of a larger set of environmental policy instruments at different levels: standards, taxes, tradable permits; international, national, sectoral.
* Integrated analysis of different environmental problems: simultaneous analysis of global warming and acid rain policy.
* Comparative evaluation of source and receptor oriented: damage valuation versus uniform emission reductions.
The environmental sub-model focuses on three important environmental problems:
* Global warming through CO2 emissions
* Problems related to the deposition of acidifying emissions
* Ambient air quality linked to acidifying emissions and ozone concentration.
Hence, we consider energy-related emissions of CO2, NOx, SO2, VOC and particulate, which are the main source of air pollution. Combustion processes almost exclusively generate the pollutants. Regarding the problem of global
warming, CO2 is responsible for more than 60% of the radiate forcing (IPCC, 1990). In a later stage other GHGs (CH4, CFC, N2O) will be introduced in the model.
Figure 16: Flow chart of the environmental module
[[File:16 Flow chart of the environmental module.jpg]]
The environment module contains three components:
* a “behavioural” component, which represents the effects of different policy instruments on the behaviour of the economic agents; e.g. additive (end-of-pipe) and integrated (substitution) abatement;
* a “state of the environment” module, which uses all emission information and translates it into deposition, air-concentration and damage data. This component was constructed on the basis of information available from different sources, but mainly from the EC-project ExternE. There is at this stage no feedback from the state of the environment to the behavioural part of the model;
* a “policy-support component”, which includes representation of policy instruments related to environmental policy, such as taxation, tradable pollution permits and global constraint emissions; through policy instruments, emissions may influence on the behaviour of economic agents as formulated in the model.
Emission factors and other data related to the pollutants (CO2, NOx, SO2, VOC and PM) are differentiated by country, sector, fuel, and type of durable good (e.g. cars, heating systems). The links to inputs to production or consumption only concern the use and conversion of energy. Non-energy sources of emissions, like refinery and other processing are treated separately.
To be able to evaluate excise taxes on energy, the energy content of fuels and electricity is also considered.
For private consumption the major links between energy inputs and consuming durable goods are specified as follows: cars and gasoline; heating systems and oil; coal, gas and electricity; electrical appliances and electricity.
The model covers three explicitly specified mechanisms of emission reduction:
* End-of-pipe abatement (where appropriate technologies are available),
* Substitution between fuels and/or between energy and non-energy inputs, and
* Emission reduction caused by sectoral and/or consumption restructuring.
The explicit formulation of a cost function in the supply side of the GEM-E3 model eases the representation of the effects of emission or energy based environmental policy instruments on economic behaviour. The costs induced by the environmental policy instruments act on top of production input costs. Derived demand for intermediate goods is derived from the unit cost function that takes these environmental costs into account. Similarly the demand of households for consumption categories is derived from the expenditure function, which is derived from utility maximisation. Hence, the environment-related policy instruments convey effects on prices and volumes of equilibrium.
The model takes into account the transboundary effects of emissions through transport coefficients, relating the emissions in one country to the deposition/concentration in other countries. For secondary pollutants as the tropospheric ozone, this formulation needs to consider the relation between the emission of primary pollutants (NOx emissions and VOC emissions for ozone) and the level of concentration of the secondary pollutants.
Damage estimates are computed for each country and for the EU as a whole, making the distinction between global warming, health damages and others. The data for damages per unit of emission, deposition or concentration and per person as well as their monetary valuation are based on the ExternE project of the EC Joule programme.

Latest revision as of 11:58, 25 October 2016

Model Documentation - GEM-E3

Corresponding documentation
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Model information
Model link
Institution Institute of Communication And Computer Systems (ICCS), Greece, https://www.iccs.gr/en/.
Solution concept General equilibrium (closed economy)
Solution method Optimization
Anticipation
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