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GTAP Resource #4467

"Deployment of new clean technologies in developing countries in a CGE framework: fostering investments in clean and renewable energy"
by Orecchia, Carlo and Ramiro Parrado

Technological advancements are one of the major drivers of economic growth. Diffusion of new technologies provide the initial impulse for new and alternative production processes that will constitute additional engines for development. In addition, with adequate incentives these new technologies could grow in size and become an important sector within an economy. This is the case of clean and renewable energies which are growing fast not only in the developed world, but also on developing countries. Modeling these kind of processes have proven to be quite a challenge, in particular in a general equilibrium framework. Furthermore, given that computable general equilibrium (CGE) models use data from social accounting matrices (SAM) providing information for the calibration year, it is very difficult to introduce a new sector or technology in SAM where initially it was incipient. This paper describes a methodology to integrate new sectors in a recursive dynamic CGE by modifying the initial SAM and including a new type of investment which cumulates in time allowing the new sector to become mature and take part in the future economy development.

In all CGE models, the base year is of fundamental importance. Broadly speaking, we can think of it as a snapshot of the economic activity carried out in a particular year; this snapshot, or better said, the economic data behind it, is then used to solve the model and make projections or future scenarios. Thus, the future development of sectors that are not present (i.e. zero economic value) in the base year might be very challenging.
To overcome such limitation, we introduced into the ICES model a new form of capital endowment representing a stock of investments in new clean or renewable technologies. These new technological capital can cumulate in time and could be exogenously shocked as well to simulate an additional effort to develop a new sector in the dynamic recursive CGE.
The new p...

Resource Details (Export Citation) GTAP Keywords
Category: 2014 Conference Paper
Status: Published
By/In: Presented at the 17th Annual Conference on Global Economic Analysis, Dakar, Senegal
Date: 2014
Version: 1
Created: Orecchia, C. (4/15/2014)
Updated: Orecchia, C. (4/15/2014)
Visits: 1,954
- Model validation and sensitivity analysis
- Climate change policy
- Technological change
- Africa (Central)
- Africa (West)

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