Sensitivity of Modeling Results to Technological and Regional Details: The Case of Italy's Carbon Mitigation Policy

38 Pages Posted: 6 Apr 2017

See all articles by Gabriele Standardi

Gabriele Standardi

Fondazione Eni Enrico Mattei

Yiyong Cai

Government of the Commonwealth of Australia - CSIRO (Commonwealth Scientific and Industrial Research Organisation); Australian National University (ANU) - Centre for Applied Macroeconomic Analysis (CAMA)

Sonia Yeh

University of California, Davis - Institute of Transportation Studies

Date Written: April 6, 2017

Abstract

Model differences in technological and geographical scales are common, but their contributions to uncertainties have not been systematically quantified in the climate policy literature. This paper carries out a systematic assessment on the sensitivity of Computable General Equilibrium models to technological and geographical scales in evaluating the economic impacts of carbon mitigation policies. Taking Italy as an example, we find that the estimation for carbon price and the economic cost of a de-carbonization pathway by means of a model with technological and regional details can be lower than a model without such details by up to 40%. Additionally, the effect of representing regional details appears to be far more important than the effect of representing the details of electricity technology in both the estimated carbon prices and the estimated economic impacts. Our results for Italy highlight the importance of modeling uncertainties of these two key assumptions, which should be appropriately acknowledged when applying CGE models for policy impact assessment. Our conclusions can be generalized to different countries and policy scenarios not in terms of absolute numbers but in terms of economic explanations. In particular, intra-national trade and the sub-national sectoral/technological specialization are important variables for understanding the economic dynamics behind these outcomes.

Keywords: Computable General Equilibrium, Carbon Mitigation Policy, Sensitivity, Technology, Sub-national regions

JEL Classification: C68, Q5, Q55

Suggested Citation

Standardi, Gabriele and Cai, Yiyong and Yeh, Sonia, Sensitivity of Modeling Results to Technological and Regional Details: The Case of Italy's Carbon Mitigation Policy (April 6, 2017). FEEM Working Paper No. 19.2017, Available at SSRN: https://ssrn.com/abstract=2947614 or http://dx.doi.org/10.2139/ssrn.2947614

Gabriele Standardi (Contact Author)

Fondazione Eni Enrico Mattei ( email )

Corso Magenta 63
20123 Milan
Italy

Yiyong Cai

Government of the Commonwealth of Australia - CSIRO (Commonwealth Scientific and Industrial Research Organisation) ( email )

41 Boggo Rd
Dutton Park, Queensland
Australia

Australian National University (ANU) - Centre for Applied Macroeconomic Analysis (CAMA) ( email )

ANU College of Business and Economics
Canberra, Australian Capital Territory 0200
Australia

Sonia Yeh

University of California, Davis - Institute of Transportation Studies ( email )

One Shields Avenue
Apt 153
Davis, CA 95616
United States

HOME PAGE: http://steps.ucdavis.edu/People/slyeh

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