Name: Mitigation, Adaptation, and New Technologies Applied General Equilibrium at the World Bank (MANAGE-WB)
Type: CGE
Institution: World Bank
Documentation: GTAP documentation and user guide
Geographic coverage: Single country (global)
Description: MANAGE-WB is a single-country recursive dynamic CGE model that can capture country- and sectorspecific physical and transition risks associated with climate change. The model is calibrated to social accounting matrices, and integration with the Global Trade Analysis Project (GTAP) provides coverage for around 140 countries across 80 sectors and with specifics on power generation, greenhouse gas emissions, and land use. It stochastically assesses climate change damages for 15 damage vectors and is mindful of resource constraints.
Questions to be answered/variables considered: Variables considered include fiscal outcomes, standard national accounts indicators, distributional effects via welfare metrics for different household groups, sectoral outputs and prices, employment, and wages, as well as greenhouse gas inventories (including non-CO2 process emissions), air pollution, and land cover change. Questions it can help answer concern the identification of policies that support development and long-term climate outcomes and short-term actions that avoid costly “traps” and long-term policy reversals; the level of taxation and/or public and private investment needed to meet development and climate objectives; sustainable and realistic financing options; revenue recycling schemes post subsidy reform; and quantification of cost-effective interventions and the economy’s vulnerability to climate risks and resource limitations.
Strengths:
- The model provides a rich depiction of mitigation strategies, which allows for feedback loops with detailed sector models, e.g., energy system, transportation, agricultural, and climate change damage models. Rich sectoral detail and robust micro-foundations also enable modeling of structural change.
- It contains a sensitivity and stochastic module to assess climate damages, including those from extreme climate events.
- It supports Monte Carlo experiments.
Limitations:
- The model clears markets in each time period (one year), limiting its suitability for analyzing shocks that take more than one year to resolve. This is not a serious shortcoming for slow-moving effects such as gradual temperature rise or changes in rainfall patterns.
- Like other macroeconomic models, MANAGE-WB uses smooth functional forms to characterize technology. Rapid development of new sectors requires external-to-the-model information.
- Monetary policy, rational expectations, and nominal rigidities are not generally modeled.
- By default, the model depends on estimates of elasticities of substitution estimated by GTAP, which may not be suitable for the country in question. The most important elasticities are usually re-estimated at the country level, yet many retain their default value.
Assumptions: The model makes neoclassical assumptions, including market clearing and flexible prices.
Use: The model can be used for standard macroeconomic policy analysis, for climate analysis, and to evaluate the climate impacts of policies without an explicit climate focus. It supports macroeconomic projections and simulations. More practically, MANAGE-WB has been employed in 14 country-specific climate-focused macroeconomic analyses, and eight other climate-focused country studies are currently underway.
Development/lessons/challenges: MANAGE-WB is currently being linked with INVEST natural capital models to quantify the impact of policy and changes of ecosystem services globally. Further areas of work include improving the depiction of the labor market (including from a gender perspective), endogenous technological change, and monetary policy