NEMESIS/ETC: New Econometric Model for Environment and Strategies Implementation for Sustainable development / Endogenous Technical Change, for European Commission, DG Environment
Recent results of theoretical and empirical modelling suggest that recognising the endogenous nature of technological change (ETC) modifies the impact on both environment and economy of environmental policies. With an analysis of ETC a new perspective is given on the potential importance of environmental policy instruments. Models with ETC have only recently emerged as the appropriate way to address sustainability questions; for this reason they require major developments to allow for a proper analysis of environmental policies and technological transitions. The project will develop new insights for technological change in different families of applied models: econometric, general equilibrium and technico-economic ones. From one part in developing and achieving an econometric model with endogenous technical progress, and in reviewing and comparing different approaches with general equilibrium models in order to develop a new method grounded on top down and bottom up analysis. The project will use different approaches in order to develop insights into how to realise technological transformation towards non carbon emitting production and growth: endogenous technical progress in econometric models, in applied general equilibrium ones, bottom up technological approach... The study will be illustrated by case studies. The Commission did finance building of the Econometric NEMESIS model, which treats 17 EU regions and 30 sectors, with common classification, definition and methodology with equation estimates and results capable of European level aggregation. The NEMESIS model is built on the former E3ME model Database, which showed some weaknesses, it needs an improvement of the database. This improvement will allow a re-estimation of the model, and then the model will be ready for energy policies utilization. But nowadays the economic mechanisms of neo-keynesian model are no longer in compliance with the new macro-economic synthesis, moreover ETC mechanisms must be incorporated. For this reason the supply side of the model must be adaptated. The model needs also some modifications in order to catch some new insights of energy policies. A first objective of this proposition is to improve the NEMESIS model, to adapt it to energy case studies and to treat these case studies: a general one, abatement of CO2 emissions for all agents, and a more specific one focused on electricity production sectors which represent an important part of the CO2 emissions. A second objective, taking account of the existing work already achieved in technico-economic and Applied General Equilibrium (DEMETER, WARM, RDICE, etc...) to analyse the robustness of policy recommendations with detailed comparison of results of different models, then to use them to elaborate an analysis of environmental policies and to provide lessons for policy making on promoting technologies that do not emit carbon dioxide.
Project coordinator
Centrale Recherche S.A/ Lab ERASME (France)
Partners
- Bureau Fédéral du Plan
- Chambre de Commerce et d’Industrie de Paris
- E3MLab/ Institute of Communications and Computer System
- CESI
- Vrije Universiteit
- Fondazione Eni Enrico Mattei
- Universität Hamburg
