“Multiple Dividends with Climate Change Policies: Evidence …
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These global and national patterns of GHG emissions show a strong relationship
with the economic activity, to which the role of the energy sector is central. Consequently, the investment in new renewable forms of energy and in the technological
progress improvement could contribute to decoupling emissions from the economic
growth (Kitous et al. 2016; Vandyck and Van Regemorter 2014). Some of these
initiatives through the incentives provided by an appropriate ETR could lead to more
than an environmental dividend for these environmentally small economies.
The challenge is difficult because the phenomenon in hand is new and not well
documented. A scenario of pure uncertainty (in the Knightian sense) arises with
respect to key parameters and causalities. Thus, in each case of study, it is necessary
to address the right questions: How will the economy be affected by CC and by
traditional policy instruments as part of the ETR? How are wages determined? Which
is the degree of capital mobility with respect to the rest of the world? Could an
environmentally small country reap more than one dividend of an ETR? Or could
the adaption decision facing CC be preferred to mitigation policies for a country such
as Argentina? Simulation models, and especially Computable General Equilibrium
ones, seem to be an appropriate instrument to evaluate policies and actions concerning
CC as a target (Wing 2004; Chisari et al. 2012).
Appropriate Tool for Measuring Dividends of CC Policies:
A CGE Model for Argentina
Looking for the conditions under which multiple dividends of the climate change
policy could arise in the case of Argentina, we use a CGE model based on Chisari and
Miller (2015) calibrated to this country in 2006. The programming of this model as
MPSGE makes it tractable to evaluate the key assumptions that constrain the emergence of positive side effects on the economy as a consequence of this environmental
policy.
The following description of the CGE model assumptions is complemented by
Annex A (equations of a simplified version of the model).
Main CGE Model Assumptions
We model the behaviour of a small open economy which faces fixed market prices
for all tradable goods. The small economy assumption is true to Argentina in terms of
both carbon emissions and EGS trade, which would be at the centre of our ETR evaluation. This assumption means that, compared to the rest of the world, Argentina is not
big enough to impact on world prices of commodities; however, its ETR impacts on
domestic prices and, thus, on its relative competitiveness in some markets. Moreover,
95
These global and national patterns of GHG emissions show a strong relationship
with the economic activity, to which the role of the energy sector is central. Consequently, the investment in new renewable forms of energy and in the technological
progress improvement could contribute to decoupling emissions from the economic
growth (Kitous et al. 2016; Vandyck and Van Regemorter 2014). Some of these
initiatives through the incentives provided by an appropriate ETR could lead to more
than an environmental dividend for these environmentally small economies.
The challenge is difficult because the phenomenon in hand is new and not well
documented. A scenario of pure uncertainty (in the Knightian sense) arises with
respect to key parameters and causalities. Thus, in each case of study, it is necessary
to address the right questions: How will the economy be affected by CC and by
traditional policy instruments as part of the ETR? How are wages determined? Which
is the degree of capital mobility with respect to the rest of the world? Could an
environmentally small country reap more than one dividend of an ETR? Or could
the adaption decision facing CC be preferred to mitigation policies for a country such
as Argentina? Simulation models, and especially Computable General Equilibrium
ones, seem to be an appropriate instrument to evaluate policies and actions concerning
CC as a target (Wing 2004; Chisari et al. 2012).
Appropriate Tool for Measuring Dividends of CC Policies:
A CGE Model for Argentina
Looking for the conditions under which multiple dividends of the climate change
policy could arise in the case of Argentina, we use a CGE model based on Chisari and
Miller (2015) calibrated to this country in 2006. The programming of this model as
MPSGE makes it tractable to evaluate the key assumptions that constrain the emergence of positive side effects on the economy as a consequence of this environmental
policy.
The following description of the CGE model assumptions is complemented by
Annex A (equations of a simplified version of the model).
Main CGE Model Assumptions
We model the behaviour of a small open economy which faces fixed market prices
for all tradable goods. The small economy assumption is true to Argentina in terms of
both carbon emissions and EGS trade, which would be at the centre of our ETR evaluation. This assumption means that, compared to the rest of the world, Argentina is not
big enough to impact on world prices of commodities; however, its ETR impacts on
domestic prices and, thus, on its relative competitiveness in some markets. Moreover,