Forschungs- & Entwicklungsinformationsdienst der Gemeinschaft - CORDIS

The general equilibrium modelling project for energy, economy, environment

The project addressed the complex interactions between the processes of energy production and consumption, the economy, and the environment through the development of the general equilibrium model, GEM-E3. The model integrates micro-economic behaviour into a consistent macro-economic framework to assess structural effects and medium, long-term implications of policy.

The model was built around a detailed Social Accounting Matrix which is calibrated to reflect all major aspects of public finance and taxation and can put emphasis on particular policy instruments. The GEM-E3 general equilibrium model empirically formulated three types of policy instruments and mechanisms to represent economy-environment interactions: taxation for environmental purposes; pollution permits, which act as constraints on emissions of activities at a single country or at the European level; emission reductions targets, which influence the derived demand for input factors. An extensive amount of work was devoted to developing the model infrastructure. The GEM-E3 takes into account the new energy technology issues directly at the aggregate level or indirectly through energy models. It also takes into account the environmental costs, according to new technologies and energy-environment policies. The results of GEM-E3 include projections of full input-output tables by country, national accounts, employment, capital, monetary and financial flows, balance of payments, public finance and revenues, household consumption, energy use and supply, and atmospheric emissions. The computations of equilibrium is simultaneous for all domestic markets of all 15 European Union (EU) countries and foreign trade links. The project led to the development of GEM-E3, a highly detailed model covering the EU Member States. Subsequent use and extension of the model has taken place, with current efforts focusing on the endogenous representation of technological progress, so as to investigate implications for the energy system and environmental policy. The model has become a very useful tool for policy-makers at the level of the European Commission.

Reported by

National Technical University of Athens
42 Patission Street
10682 Athens
Greece
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