Volume 2: Innovative Solutions for Energy Transitions: Part I

Exploring Alternative Specifications of Trade Pricing in Environmental CGE Modelling Li Yingzhu, Su Bin

Abstract

Environmental computable general equilibrium (CGE) models have been widely used to support policy analysis of climate change mitigation and adaptation at different scales. The simulation results highly rely on the model structure, assumptions as well as parameter value inputs. Most single-region CGE models follow the traditional model settings, such as the agent-identical specification for import demand and price taker for exports pricing. This study aims to explore the importance of CGE model specifications on the simulation results and policy implications by means of alternative agent-specific specification for import demand and partial price pass-through for exports price, respectively. Singapore is chosen as the case study as its economic circumstance does not completely support the standard settings. It is found that, under both the carbon tax and border carbon adjustment scenarios, economic performance, emission reduction and average abatement cost vary substantially with different specifications. Policy implications are consequently discussed and compared.

Keywords Environmental CGE model; Carbon pricing; Imports specification; Export pricing; Singapore