Kyoto and Mañana : A Computable General Equilibrium (CGE) analysis of Spanish greenhouse gas targets to 2020

Bourne, Michael
Feijoo Bello, María Luisa (dir.)

Universidad de Zaragoza, ECON, 2013
Análisis Económico department, Fundamentos del Análisis Económico area

Máster Universitario en Investigación en Economía

Abstract: Employing a recursive dynamic computable general equilibrium (CGE) model of the Spanish economy, this study explicitly aims to characterise the potential impact of Kyoto and European Union environmental policy targets on the Spanish economy up to 2020, with a particular focus on the agricultural sector. The model code is modified to characterise the emissions trading scheme (ETS), emissions quotas and carbon taxes, whilst emissions reductions are applied to all six registered greenhouse gases (GHGs). As extensions to this work, the study attempts to integrate both the use of ‘Marginal Abatement Cost’ (MAC) curves for potential emissions reductions within the agricultural sector, and econometric estimates of the effects of global warming on land productivity in Spain. The study includes a ‘no action’ baseline (with 2007 as the benchmark year), in which GHGs are not restricted in any sector of the economy. This is compared to an ‘emissions stabilisation’ scenario, in which the European Union’s Emissions Trading Scheme (EU ETS) is implemented, and all of Spain’s commitments under Kyoto, and various pieces of EU climate change legislation, are met. Under this scenario, the policy-induced price rises of polluting inputs and processes determine the allocation of emissions reductions amongst the various industries in the economy. Given the agricultural focus of the study, the modelling of emissions response in this sector is further enhanced by the inclusion of MAC curves. These map out an endogenous technological response to price rises, and the extent to which the emissions coefficient (e.g. N2O per Kg of fertiliser applied, or CH4 per head of cattle) can be reduced, such that the same quantity of input emits a smaller amount of GHGs. A flexible functional form is used to calibrate the MAC curves to data from the IIASA’s GAINS model, which includes potential emissions reductions, and associated costs, of all major technological advances in agriculture currently underway, or potentially viable. This greatly aids our ability to explore the distribution of the burden of emissions reductions across the agricultural sector. A further feature of the model is that both the ‘no action’ baseline and the ‘emissions stabilisation’ scenario include estimates of their impacts on land productivity. Data on projected temperatures associated with the two emissions pathways came from the ClimateCost project. In addition, historical data on temperatures and yields in the various regions of Spain, was used to econometrically estimate the responsiveness of land productivity in the production of different crops, to temperature changes. These two combined give an estimate of how yields in Spain are likely to respond to the emissions levels resulting from the two different scenarios. Preliminary results suggest that the emissions policy causes small falls in real GDP and employment relative to the baseline, and a rise in the consumer price index. Agricultural emissions must meet their ‘diffuse sector’ target of a 10% fall on 2005 levels by 2020. The land productivity declines in the ‘no action’ baseline increase the pressure on productive land in Spain (already at close to its limit), and drive the need for increased use of other inputs. Further, the results allow us to see, under a single reduction target for all agricultural emissions, which industries will bear the brunt of the reductions, and which will find it more difficult/costly to mitigate. Analysis of this kind is likely to be of great interest in the design of policies specifying how the aggregate emissions targets are to be met.

Free keyword(s): greenhouse gas ; climate change ; computable general equilibrium models
Tipo de Trabajo Académico: Trabajo Fin de Master
Notas: Con la colaboración de Sonia Quiroga y Zaire Fernandez-Haddad, de la Universidad de Alcalá, y George Philippidis, del Centro de Investigación y Tecnologia Agroalimentaria (CITA).

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Academic Works > Trabajos Académicos por Centro > facultad-de-economia-y-empresa
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