Name: EMEC (Environmental Medium-Term Economic) model
Type: CGE
Institutions: Sweden (MoF); National Institute of Economic Research (NIER)
Documentation: NIER working paper
Description: The EMEC model is a CGE model of the Swedish economy in the medium- to long-term, capturing the primary interactions between the economy, energy use, and greenhouse gas emissions.
Questions to be answered/variables considered: In general, the long-term impacts of energy and environmental policies on the economy and emission trajectories of several pollutants will be modeled. More specifically, the model aims to determine whether a policy achieves its stated target (at lowest cost), the potential conflicts between targets and policies, and the expected effects on macroeconomic variables.
Strengths:
- The tool provides a holistic specification of the Swedish economy, and permits calibration to the comprehensive system of national and environmental accounts.
- It is well-suited to studying the economy in different states, due to full adjustment to different equilibria.
- It can be used to determine ways to achieve particular climate targets.
Limitations:
- It is less suitable for examining frictions during transitions between equilibria.
- It does not determine an optimal climate target (which is instead a task for IAMs).
- It does not assess the likelihood or feasibility of plausible pathways (which is a task for ESMs).
Assumptions: The model assumes full adjustment of the economy when transitioning from one equilibrium to another.
Use: The model has been used to assess the EU ETS, national energy and CO2 taxes, renewable fuel standards for road-transportation fuels, and the national energy and greenhouse gas projections.
Development/lessons/challenges:
- The model could consider developing more frictions during the transition between equilibria (e.g., via more detailed capital use) and vintages per sector (e.g., sunk costs).
- The model could integrate details from ESMs, e.g., more detailed production technologies and abatement options for the steel and cement industries.
- It is important to integrate insights from ESMs, as assumed abatement costs significantly influence the cost of climate policy implied by the model.
- Model transparency should not be sacrificed for additional detail, as insights into which economic channels produce results may be more valuable than the numerical results themselves.