Modelling developments linked to the implementation of Nationally Determined Contributions (NDCs)

A recent article estimates the macroeconomic impacts on the European Union’s economy of different EU decarbonisation pathways towards a below 2oC climate stabilisation. Researchers at COPPE/UFRJ have developed a new household income disaggregation method for the TEA model and will use it to assess the heterogeneous effects of introducing different schemes of carbon trading on income distribution in Brazil.

Another recent article in Climactic Change estimates the macroeconomic impacts for the European Union’s economy of the different EU decarbonisation pathways towards a below 2oC climate stabilisation. The research team uses two soft-linked models: the energy system PRIMES model and the hybrid general equilibrium GEM-E3 model. The PRIMES model projects energy demand, supply, market prices, and system costs and investment in the EU with Member State level detail up to 2050. GEM-E3 models macroeconomic and sectoral impacts of the interconnections of the environment, the economy, and the energy systems. The model also takes into account the climate action of other major emitters. The results show that the transition to low carbon requires transformations in all production and consumption patterns and the energy system, but also that the transition is possible with the existing technology portfolio. Up to 2030, the energy supply sector leads in emission reductions, and the transport sector takes the lead in 2050. The scenarios show that the transformation process is capital-intensive, and this will have an impact on poverty and inequality. The article is of particular interest to policy makers as the assessed scenarios feature European Commission policies “Clean Energy for all Europeans” linked to the “2030 Climate and Energy Framework” and the EU NDC.

A new multiple household income method to disaggregate the single representative agent of a chosen region (Brazil) is available for the Total Economy Assessment (TEA) model. The TEA model is a global recursive dynamic CGE model developed at the COPPE/UFRJ in Brazil. The regional household is disaggregated by income deciles, according to a micro-dataset from the Pesquisa de Orçamentos Familiares 2008-2009 (POF), Brazil’s nationally representative household survey of income and expenditure. To rescale income and expenditure, the researchers perform a mapping of the 13,255 commodities in POF into the 10 sectors of the EMF36 sectoral aggregation, assuming that each sector only produces one commodity. The expenditure structure obtained from POF is adjusted to fit the Global Trade Analysis Project (GTAP) sectors. In the TEA model, income from each production factor (capital, labour) and transfers are distributed according to the share for each household decile obtained in POF. No results are available yet of the study, but the researchers are developing simulation scenarios in line with the 36th round of the Energy Modelling Forum (EMF36) – Carbon Pricing after Paris (CarPri). EMF36 focuses on the analysis of climate policy scenarios relevant for the implementation of the Paris agreement. EMF36 includes scenarios related to the NDCs and additional efforts (e.g., 2°C targets), where policy instruments – carbon pricing, in particular – are introduced to meet emission reduction requirements. In addition to the core scenarios, the modelling groups participating in the EMF36 are encouraged to present papers on the impacts of the core scenarios on households of a particular region. The COPPE/UFRJ modelling team will use the newly developed income disaggregation method to assess the heterogeneous effects of introducing different schemes of carbon trading on the income distribution in Brazil. While most such applications rely on static national models, there are few studies that apply this method on global recursive dynamic CGE models.