Name: CPAT (Climate Policy Assessment Tool)
Type: Spreadsheet-based “model of models”
Institutions: World Bank; IMF
Documentation: Full methodology; Summary
Geographic coverage: Single country (global; over 200 countries covered)
Description: The model draws on multiple economic models for rapid estimation of the effects of mitigation policies. Its four modules include: (1) a mitigation module (reduced-form macro-energy model), (2) a distribution module (cost-push microsimulation model), (3) an air pollution module (reduced-form air pollution and health model), and (4) a transportation module (reduced-form model relating vehicle fuel price changes to changes in congestion and road accidents/fatalities and their external costs). The model focuses mainly on policies that impact energy costs.
Questions to be answered/variables considered: The model’s output includes impacts on energy production, consumption, trade, and prices; emissions of local and global pollutants, including reductions needed to achieve NDCs; GDP (disaggregated by revenue usage) and economic welfare; revenues (by fuel, sector, and tax instrument); industry incidence; household incidence (by decile, urban versus rural, and horizontal equity); and development co-benefits (local air pollution and health impacts). This allows the assessment of trade-offs (e.g., between efficiency, equity, and administrative burden), and hence tailoring of policy design to each country’s context. The model covers the impacts of direct and indirect carbon pricing and other mitigation policies. This includes carbon taxes, emissions trading systems, fossil fuel subsidy reform, energy price liberalization, electricity and fuel taxes, removals of preferential VAT rates for fuels, energy efficiency and emission rate regulations, feebates, clean technology subsidies, and combinations of these policies (“policy mixes”).
Strengths:
- CPAT incorporates comprehensive country coverage, and multiple sectors and policies, and facilitates the assessment of economic and non-economic outcomes.
- It covers many different trade-offs of climate policies to facilitate rapid policy assessment and design.
Limitations:
- CPAT omits policies targeting the LULUCF (land use, land use change, and forestry) sector.
- It relies on an elasticity-based approach (except in the power sector), which may not capture non-linear responses to sudden or large price changes.
Use: CPAT covers over 200 countries with complete input data, though users have the option to customize data and parameter assumptions. The model is spreadsheet-based, and users primarily interact with a dashboard. It is being made available to governments by both the World Bank and the IMF, and staff from both institutions have used it extensively for climate change mitigation policy analysis.
Development:
- Models with dynamic capital stock for transportation and buildings that have been developed separately for these sectors will be integrated. This will enable better modeling of sectoral policies and can allow quantification of the spillover effects of technology policies on costs due to learning curve effects and the impact of capital vintages on optimal mitigation strategies.
- More refined industry- and activity-specific sectoral models (e.g., for the steel, chemicals, cement, agriculture, and forestry sectors) are being developed
- Economic impacts, policy coverage, and international linkages will be enhanced.
- It is envisioned that CPAT will increasingly accommodate linkages with external models.