Long-Run Effects of Post-Kyoto Policies: Applying a Fully Dynamic CGE Model with Heterogeneous Capital

CER-ETH - Center of Economic Research at ETH Zurich, Working Paper No. 10/129

23 Pages Posted: 18 Apr 2010

See all articles by Lucas Bretschger

Lucas Bretschger

ETH Zürich - CER-ETH - Center of Economic Research at ETH Zurich

Roger Ramer

ETH Zürich - CER-ETH - Center of Economic Research at ETH Zurich

Florentine Schwark

ETH Zürich - CER-ETH - Center of Economic Research at ETH Zurich

Date Written: April 1, 2010

Abstract

The paper develops a new type of CGE model to predict the effects of carbon policies on consumption, welfare, and sectoral development in the long run. Growth is fully endogenous, based on increasing specialization in capital varieties, and specific in each sector of the economy. The benchmark scenario is calculated based on the endogenous gains from specialization which carry over to policy simulation. Applying the model to the Swiss economy we find that a carbon policy following the Copenhagen Accord entails a moderate but not negligible welfare loss compared to development without any negative effects of climate change. Energy extensive as well as capital and knowledge intensive sectors profit in the form of increased growth rates.

Keywords: Carbon policy, CGE models, energy and endogenous growth, heterogeneous capital

JEL Classification: Q54, C63, O41, Q43, Q56

Suggested Citation

Bretschger, Lucas and Ramer, Roger and Schwark, Florentine, Long-Run Effects of Post-Kyoto Policies: Applying a Fully Dynamic CGE Model with Heterogeneous Capital (April 1, 2010). CER-ETH - Center of Economic Research at ETH Zurich, Working Paper No. 10/129, Available at SSRN: https://ssrn.com/abstract=1590948 or http://dx.doi.org/10.2139/ssrn.1590948

Lucas Bretschger (Contact Author)

ETH Zürich - CER-ETH - Center of Economic Research at ETH Zurich ( email )

Zürichbergstrasse 18
Zurich, 8092
Switzerland

Roger Ramer

ETH Zürich - CER-ETH - Center of Economic Research at ETH Zurich ( email )

Zürichbergstrasse 18
Zurich, 8092
Switzerland

Florentine Schwark

ETH Zürich - CER-ETH - Center of Economic Research at ETH Zurich ( email )

Zürichbergstrasse 18
Zurich, 8092
Switzerland

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