Macroeconomic Analysis - DEFINE

Within IHS' existing hybrid top-down bottom-up general equilibrium model there is already a special focus on the electricity sector: The bottom-up part of the model, which is an integrated partial equilibrium model solved simultaneously with the top-down macroeconomic general equilibrium part, now allows to consider 8 different technologies for electricity production (including fossil and renewable). Scenarios concerning possible future energy mixes, green quotas, CO2-taxes, etc., are already implemented.

1. Elaborations on the General Equilibrium Model (WP1)
Within IHS' existing hybrid top-down bottom-up general equilibrium model there is already a special focus on the electricity sector: The bottom-up part of the model, which is an integrated partial equilibrium model solved simultaneously with the top-down macroeconomic general equilibrium part, now allows to consider 8 different technologies for electricity production (including fossil and renewable). Scenarios concerning possible future energy mixes, green quotas, CO2-taxes, etc., are already implemented.

Objectives

• Extension of the existing top-down bottom up dynamic computable general equilibrium (CGE) model to a core model
  

• Detailed depiction of the technological components and economic structures of the electricity and traffic sector
  

• Hard-linked combined setting or
  

• Soft-linked decomposed iterative approach
  

Task 1.1: Implementation of a detailed traffic sector in the CGE
In order to meet a detailed and realistic characterisation of consumer choices within the traffic and transportation system, the Social Account Matrix (SAM) will be restructered in terms of sectoral aggregation and household consumption. This involves a lot of data collection work. Then the traffic sector will be disaggregated into subsectors.
Consumer behaviour will be displayed in a special nesting structure, representing the different consumer classes' preferences for consumption goods. The main problem we face here is the lack of elasticities, especially those concerning mobility. These elasticities will therefore be estimated in the course of the micro simulations carried out in the work-package 'Microdata' (WP3 and WP8).
To be able to differentiate between people from different income classes, rural or urban areas and with diverging preferences a further disaggragation concerning the model's representative agent will be conducted. An adequate integration of a detailed description of a househould consumption and mobility patterns and the appropriate treatment of technological possibilities and circumstances concerning electromobility during this phase of model development are of crucial importance. In this way it is possible not only to estimate the households’ willingness to pay, but also to assess the economic impacts of a possible shift in mobility to electromobility.

Task 1.2: Extension of the electricity sector
The existing technological bottom-up electricity partial equilibrium part of the model will be further disaggregated. The possible depth of this disaggregation will be subject to research done in this part of the WP, but it is a great concern to reach a degree of detail to depict the firm or power plant level of each technology.

2. Completion of General Equilibrium Model & Application (WP6)

Objectives

• Integration of the model parts developed in WP1
  

• Calibration of the combined model developed in WP1
  

• Implementation of the scenarios developed by UBA and OEI in the Scenario Part
  

• Validation of the model in accordance with the newly implemented scenario tools
  

• Applications are conducted according to the scenarios developed in the Scenario Part
  

Includes a calibration of the hybrid general equilibrium model, the implementation of the scenarios developed in WP4 in the model and an application of the model, i.e. simulations for Austria and Germany.

Task 6.1: Combining the work of WP1 in one model framework
This task involves combining the top-down part (traffic sector) with the bottom-up part (electricity sector). The prosperous research area of smart grids will also be a role here.

Task 6.2: Implementation of real world data
By adding real world data to the model and combining it with some programming and data adaptation work we will reach the model core. This will result in knowledge i.e. of the structures of the economic sectors, preferences of the agents, technologies and at last the mechanics of the connections between these model blocks will represent realistic economic interaction patterns equipped with recent, scientifically arrenged data.

Task 6.3: Implementation of the scenarios of UBA and OEI
The scenario building work of UBA will be accompanied by a constant flow of information exchange with the modelling unit at IHS. In an anticipating manner the implementation of the developed scenarios in the CGE-model will be reduced to merely a technical programming task.

Task 6.4: Validation of the model
The validation of the model is a continuous process, which ensures that the model is programmed correctly, the algorithms have been implemented properly and the model does not contain errors or bugs. With each newly implemented scenario tool, all other already existing scenario instruments are sensitively checked for distortions. The ultimate aim of the model validation is to make the model usefull. Therefore it should address the right problem, provide accurate information about the system being modeled and should be used in scenario settings.

Task 6.5: Applications are operated
The applications of the developed model scenarios for Austria and Germany are carried out and the validation process is completed. The results will be presented in a final workshop.