How can computable general equilibrium models serve low-carbon policy? A systematic review

Abstract

Computable general equilibrium (CGE) models have been widely employed in economic, social, and environmental impact assessments for low-carbon policies. As net-zero transition has become a global trend, it is crucial to conduct a systematic review of how CGE models serve low-carbon policies. This review examined 1002 studies published between 2001 and 2021, revealing the application of CGE models in low-carbon policy analysis by researchers in 51 countries, including the United States, China, Western Europe, Japan, and Australia, while studies in Latin America, Central Asia and Eastern Europe are limited. Climate targets, carbon pricing, and energy policy are the main policy focuses of CGE analysis, while land policy, demand-side actions, and several other policies are less studied. In addition, CGE analysis generally focuses on the economic impacts of carbon reduction, with a growing amount of attention on social and environmental consequences. The structure, database, and model coupling techniques of CGE models are becoming more complex in order to serve the increasingly multifaceted and diverse policy study purposes. This study provides a comprehensive overview of the research trends of CGE studies on low-carbon policies, thus improving our understanding on low-carbon policies, multiple impacts, and CGE models. We also identify the gaps and potential cutting-edge techniques of current low-carbon policy research. Future work should improve the capacity of CGE models to simulate actual “second-best” policies, provide feedback of complex impacts on policy optimization, and enhance dynamic mechanisms on structural change.

WITHDRAWN: Net of subsidies as a driver to tackle the negative impact of capital income tax on economic growth: A dynamic CGE application to CEMAC countries

“…firstly, it takes into account the consumption changes; secondly, it integrates the household's income level and thirdly, it accounts for the evolution of the market prices of commodities. In this framework, An et al (2023) think that, GDP could be an additional welfare instrument. Thus, an indirect tax increase on local commodities leads to a welfare improvement in all the CEMAC countries, except the Republic of Congo both in the sort and long terms.…”

“…to answer this question, this study employs a dynamic Computable General Equilibrium model. Among the macroeconomic models, it has the advantage of facilitating the evaluation of various macroeconomic impacts whether broadly or in the sectors of the economy (An et al, 2023).…”

“…in a static model with two sectors and two factors of production. CGEs are popular for their effectiveness in capturing the macroeconomic impacts of an ex-ante policy(An et al, 2023) including, GDP, households' welfare, sectoral impacts, price of commodities, private and public demand for commodities, factors of production, consumption, income and savings of agents, exports and imports etc. The model used in this study is very closed to the work ofHosoe et al (2010).…”

The Impact of Carbon Emission Trading on Renewable Energy: A Comparative Analysis Based on the CGE Model

“…It reflects the relationship between quantity and price and the relationship among governments, residents, enterprises, and international activities [41]. It encompasses two markets in this macro-environment: the commodity market and the factor market [42,43]. The main buyers are residents, governments, and enterprises in the commodity market, corresponding to final consumption and intermediate input.…”