Climate Change, Energy Demand and Market Power in a General Equilibrium Model of the World Economy
FEEM Working Paper No. 71.2007
Department of Economics, University Ca' Foscari of Venice Research Paper No. 09-09
17 Pages Posted: 16 Jul 2007
There are 2 versions of this paper
Climate Change, Energy Demand and Market Power in a General Equilibrium Model of the World Economy
Climate Change, Energy Demand and Market Power in a General Equilibrium Model of the World Economy
Date Written: July 2007
Abstract
Future energy demand will be affected by changes in prices and income, but also by other factors, like temperature levels. This paper draws upon an econometric study, disentangling the contribution of temperature in the determination of the annual regional demand for energy goods. Combining estimates of temperature elasticities with scenarios of future climate change, it is possible to assess variations in energy demand induced (directly) by the global warming. We use this information to simulate a change in the demand structure of households in a CGE model of the world economy, in a set of assessment exercises. The changing demand structure triggers a structural adjustment process, influencing trade flows, regional competitiveness of industries and regions, and welfare. We also consider the possible existence of imperfect competition in the energy markets, analyzing the impact of changes in energy demand with an alternative model version, in which energy industries are modeled as Cournot oligopolies.
Keywords: Climate Change, Energy, Computable General Equilibrium Models, Imperfect Competition
JEL Classification: D58, F12, Q43, Q54
Suggested Citation: Suggested Citation
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