01 Sep 2014 - 01 Apr 2016
energy, energy policy, energy security, Infrastructure, energy and climate change, Other Regions, Research

Dynamic CGE model for analysis of energy policy

Project description:

In the coming decades energy sector in Poland will undergo substantial transition towards low carbon usage which will have a preponderant impact on the economy. Several modernisation scenarios for energy policy are currently being discussed and not yet concluded. The main objective of this project is to provide a new insight into economics of this modernisation agenda by creating tailored modelling tool for energy policy impact assessment.

General Objectives of the Project:

The project aims at:
1. Providing identification and assessment of direct and indirect effects resulting from implementation of three main alternative scenarios of modernization of energy sector on the Polish economy within two coming decades (until 2035). Those scenarios assume, in different proportions, increasing use of nuclear energy, renewable sources and natural gas in exchange for reduction of carbon.
2. Developing a specific analytical tool – dynamic Computable General Equilibrium (CGE) model – dedicated for country-wide analysis of energy policy. The model will simulate the economic effects of sector regulations and new policy targets within each scenario, by accounting for complex set of linkages between energy sector and other parts of economy.

Project Structure and Involvement of CASE:

CASE will be responsible for the completion of the following tasks:

•    Preparing literature review and building general structure of the model;
•    Data collection;
•    Estimation and calibration;
•    Elaboration of scenarios for the energy sector CASE;
•    Simulations and scenario analysis for Poland's energy sector in time scope 2015-2050.

Project Output:

The choice of energy scenario will have a fundamental multidimensional influence on the entire economy as: new sub-industries create demand for labour and various inputs in many industries and deliver output in form of a new source of energy, which, depending on the volume and price, will change the competitiveness of the whole economy. Evolving energy mix in Poland’s economy will create a new equilibrium in all sectors and branches and lead to different structures of investment, output and distribution of income among households, producers and government. The proposed project aims at providing this knowledge.

Currently there is no appropriate research tool which can accommodate complex structure of different energy sources and wide linkages of the energy sector to assess economy-wide impacts of energy policy in longer horizon for Poland. By creating such tool, this project will close an important scientific gap and allow for a proper verification of several quantifiable hypotheses related to the economic efficiency of different scenarios, which are until now discussed and reasoned only speculatively. The proposed research tool will contain the state-of-art elements from the theoretical and empirical CGE literature. It will also go beyond by introducing and implementing imperfectly competitive oligopolistic market structures into the modelling of energy subsectors equilibrium.

Sponsor: Narodowe Centrum Nauki (NCN)

Partners: University of Warsaw