Community Research and Development Information Service - CORDIS

Working paper, model Comparison Part 3: Model structures. Input for crosscutting papers. TranSust Working Paper, 2004

The project focused on three issues, which were identified as key elements for improving the capabilities of current models to deal with the concept of sustainability:
- Modelling the type and causes for technological change.
The transition to sustainable economic structures requires investment activities, which cause the kind of technological change that is considered as being compatible with sustainability. We aim both for a better understanding of the interaction between investment and technological change and the long run consequences for economic activity.

- Developing measures of welfare, which are based, not only on flow variables (as GDP or consumption) but also include the relevant stocks.
It is the phenomenon of extreme events, as flooding and storms, which reminds that measuring the welfare of an economy just by flow variables misses the losses of capital that are triggered by catastrophic events. In addition we recognize that it is the services generated by flows and stocks that are the actual indicators relevant for measuring economic welfare.

- Emphasizing the interaction between flows and stocks and their potential for substitution.

After having identified the concept of welfare generating services, e.g. mobility, housing or information, we investigate the drivers that determine the ratio and relationship between the stocks and flow variables.

The project approaches these objectives by preparing a set of crosscutting papers. A standardized questionnaire was created to which all partners provided inputs.

The questionnaire was organized along the following issues:
- Technical progress
In the very-long run it is the deliberate choice of type and magnitude of technological innovation that determines economic welfare and climate relevant emissions.

- Revenue recycling and the labour market
Environmental taxes and charges are investigated in their impact on economic activity and emissions when various tax recycling regimes are applied.

- The role of energy prices for assessing the costs of climate policies
The linkage between energy prices and international climate policies generates multiple feedbacks via the global markets for fossil fuels.

- Measuring the cost of climate policies: Interpretation issues
Communication failures about a variety of different cost concepts might be considered as a major reason for disagreements in the design of climate policy.

- Carbon capture and storage (CCS) and renewable energy technologies
The interaction of technologies for renewable energy and the technology option for carbon capture and storage need a careful integration into the currently available models.

- E3-models for sustainability impact analysis: Status quo and prospects
The role of currently available models is investigated for providing quantitative indicators suitable for Sustainability Impact Assessment (SIA).

- Stocks and flows
The longer the time horizon for policy analyses, the more important is the role of a wide range of capital stocks for generating economic welfare and greenhouse gas mitigation.

- Welfare measures, consumption and environmental quality
For the groups of aggregated neoclassical growth models, disaggregated CGE models and disaggregated macroeconomic models the advantages and shortcomings of measuring economic welfare and environmental quality are compared.

- GDP and emissions effects from carbon taxes
For a wide range of models their reaction with respect to different carbon tax intensities and tax recycling options are analyzed.

The model by model results of this questionnaire are laid down in this cross-cutting paper and made available on the project website.

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